Chancellor of the Exchequer John Healey has outlined a suite of measures in the Autumn Budget for the transport and energy sectors.
Calling it a Budget for working people, Healey said it was “built on fiscal discipline” with “clear direction for the future”, which was “backing the innovation of British businesses” – highlighting net zero, AI, employment and devolution.
Healey highlighted how the Office for Budget Responsibility (OBR) said that war in the Middle East was a key driver impacting the economy today. “What we face today are global economic storms”, he said.
He said: “Today, I meet the fiscal rules – the stability rule, that day to day spending must be covered by tax receipts, and the investment rule, that government debt, defined as public sector net financial liabilities, must be falling as a percentage of GDP. This year, for the first time, I must meet these rules in the third year of the forecast, and I do.”
He added that he hopes to “get UK energy costs down in line with Europe”, stating “we remain unshakeably committed to net zero by 2050. This will require deep reform of the energy system.
“For many years, under Conservative governments, policy costs were simply loaded onto household bills through levies. Today, I am putting an end to that. We’ll introduce a new cost control framework to drive down all aspects of energy bills.”
Cost of Charging review
An important announcement for the transport sector, delivered at the same time as the Budget, was the UK Government’s Cost of Charging review, led by Philip New, which called for those who don’t have access to private charging to access domestic energy tariffs from the public charging network.
The review made five recommendations:
- Develop and pilot local tariff ‘porting’ – a solution that could enable drivers to charge at lower powered public chargers near their homes using their domestic energy tariff.
- Provide targeted, time-limited financial support to reduce charging prices for drivers.
- Address the tension between the UK Government’s EV priorities and the electricity network charging and policy levy regimes in Great Britain.
- Implement a certificate trading scheme for renewable electricity used to charge EVs.
- Extend financial support, and provide guidance, for deploying battery energy storage solutions.
Speaking about the Cost of Charging review and Budget, Dr Vicky Edmonds, CEO of EVA England, said:
“Electric cars are already delivering cheaper motoring for many drivers across the UK. But for people who cannot afford the upfront cost or don’t have a driveway to charge at home, those savings are currently out of reach.
“Of course, such complex structural change takes time, so we also welcome the £100m financial support for some households to access cheaper public charging. Equalisation of VAT between domestic and public charging would have been another, welcome interim measure and it is disappointing that we still see no movement from Government on that.”
Clean power
Healey also said he would back hydrogen projects directly from the UK Government, rather than through other means.
Also on clean power generation, he added that the UK Government will only buy and build new projects that can connect to the grid and lower bills, creating cheaper, fastest grid connections through GB Grid, and reduce the “complex web” – “but it won’t happen overnight”, he added.
Domestic electricity
There was also an extension of the 5% VAT cut into Spring and Summer 2027, and 25% of electricity bills for small and medium businesses, going live in April, and backdated for this year.
Healey also spoke on the gas standing charge abolition, which is scheduled for next year or later, also offers an incentive for moving to electricity.
Research foundation Nesta said that the abolition of the gas standing charge supported electrification by reducing the electricity-to-gas price ratio.
Healey said: “Gas standing charges are unfair and outdated so I am scrapping them to give millions of households a bit of breathing space.
Energy secretary Miatta Fahnbulleh, said: “By removing one of the nation’s bugbears – taking standing charges off gas bills, with extra support for those who need it – we’ll give millions of people breathing space.
Fuel duty and AI
He also added that the UK Government is extending the tax cut on fuel duty for another six months, and increasing the mileage rate from 25p to 35p per mile, and making permanent the increase in the standard rate.
Healey also said that the UK Government would be the “first customer” for those British businesses that generating wealth and innovation for the economy, changing the rules on procurement to reflect this ambition.
A new AI data centre plan was announced to ensure that it is used as “secure, safe and working for the British people”, with grid connections needed where they are “critical” and “where necessary, be allowed to build onsite generation while they wait.”
Healey said: “Local areas shouldn’t come cap in hand to build new trams in their areas”, and is introducing Good Growth Funds and incubator capital for areas without Mayors, with £1.5bn in devolved loans for mayoral authorities.
Devolution
He said the devolution of tax revenues would begin next year, with 100% of business rates being retained locally by the end of the decade.
From next year, 20% of business rates will got to Mayors, and from 2028, income tax receipts, and an overnight visitors levy.
These can be invested in local infrastructure, such as the Bakerloo line extension in London, he said. There was also a local apprenticeship fund announced.
Healey said:
“I’m announcing flexible funding to invest in local economies, boosted by a further £1.5bn of devolved loans for mayor authorities, funds that will back projects like the new Black Country metro extension led by the mayor of the West Midlands, or the urban regeneration in Gateshead.
“For the first time, I’m making the commitment that 100% of business rates will be retained locally by the end of the decade.
“So if local leaders help businesses to start and grow, more of the rates they pay will stay in that area. Fom next year 20% of business rates revenues will go to mayors and, from 2028, a share of income tax receipts will go to mayors as well.
“Also, from 2028, mayors and other strategic authorities will have new powers to introduce an overnight visitors levy. Taken together, these are long-term funding streams they can be used to back investment into big local infrastructure, so that more of the money that is raised locally can be invested and spent locally.”
Public charging
Notably absent was any announcement from Healey on a VAT cut for public EV charging to bring it closer to those who are able to charge at home with 0% VAT.
It follows the UK Government appealing a decision by the Tax Tribunal earlier this year that stated public electric vehicle (EV) charging should be set at the lower VAT rate of 5%. Community benefit society Charge My Street won its appeal on whether public electric vehicle (EV) charging should qualify for the reduced 5% VAT rate.
The ruling overturned HMRC’s initial decision requiring charge point operators to charge the full 20% VAT, a rate widely criticised as a barrier to equitable EV adoption – and the foundation stone of the long-running campaign, FairCharge.
On the retention of the 20% VAT rate on EV public charging, Edmund King of The AA said:
“The Chancellor has missed the chance to help accelerate the transition to electric cars by retaining the 20% VAT rate on public charging. Around two fifths of households do not have any form of dedicated off-street parking, and retaining the difference in VAT rates only widens the Pavement Tax.
“Even more so considering that VAT on domestic energy is temporarily held at 0% to 1 July 2027 which is welcome and reduces the cost of home charging.”
Thom Groot, CEO of The Electric Car Scheme, said:
“This budget was very disappointing for working families looking to make greener choices, and the direct impact this has on the clean energy transition.
“Whilst it was positive to see the VAT cut on household electricity extended to July 2027, it was frustrating to be left in the dark and to not get clarity on the continuation of the EV salary sacrifice scheme until at least 2032, which consumers expected. Salary sacrifice is one of the most effective tools the Government has, and it should be protected and extended.
“Households are facing ever-increasing energy costs and other cost-of-living increases, and they are being asked to make significant decisions about their home, or car, often committing to four or five-year leases with uncertainty about the costs in years four and five.
“We are asking the government to urgently provide reassurance for consumers entering into EV salary sacrifice agreements now. The Electric Car Scheme remains committed to working with the government to push new initiatives forward, so that families can benefit from cleaner, cheaper energy through their employer or themselves.”
Mike Vousden, EV Expert at nearly new and used car retailer Motorpoint, said:
“Access to home-charging facilities is still a major barrier for many motorists looking to switch to an EV. Owners who rely on public charging face costs similar to or even higherthan filling up at the pump. That basically removes the most compelling financial and convenience benefit of owning an electric car.
“Cutting the VAT rate for public chargers would have benefitted existing EV owners and given motorists more confidence to swap to an EV.”
Responding to the Budget and publication of the review document, Shane Brennan, chief executive, ChargeUK said:
“Today’s announcements on the cost of EV charging will do serious damage to the EV transition.
“Instead of listening to the call of EV drivers for fairness on VAT the government has slammed the door shut on ending a rank unfairness between at home and out of home charging. An unfairness that even the courts ruled to be illegal earlier this year.
“Meanwhile its cost of public charging review recommendations do not meet the moment – too little, too complex and too slow to make a meaningful difference.
“The industry asked for simple measures to address the foundational cost issues for public charging – VAT, soaring operator standing charges, and renewable fuel credits. The review recommends action on the latter point but overall amounts to warm words and an open ended taskforce not meaningful action.
“Taken alongside extended fuel duty cuts and the potential weakening of EV targets, it paints a picture of a government which is unserious about helping millions of drivers save by switching to electric.
“Hard work will now be required to rebuild trust and confidence across the EV charging sector. We will work urgently to understand how government intends to keep the zero emission transport transition on track.”
RAC senior policy officer Rod Dennis said:
“While drivers may breathe a mild sigh of relief knowing that fuel duty isn’t about to suddenly go up, many are likely to be disappointed the Chancellor didn’t go further to support them – not least as the freeze is only in place until next summer. RAC research published yesterday showed nearly two-in-three regular drivers wanted cuts to duty or VAT on fuel, with a similar proportion now cutting back on other spending because of the high cost of fuel.
“A freeze only avoids making an already difficult situation worse – it doesn’t make filling up any cheaper. And it’s worth remembering that pump prices still soared this summer, despite fuel duty being at this very same reduced rate.
“Drivers will now have to hope for an easing of the international conflicts that have pushed up oil prices and disrupted fuel supplies if pump prices are to come down in a meaningful way.
“RAC research shows high fuel prices are prompting more people to consider going electric. But those who can’t charge at home may be frustrated that VAT wasn’t cut on public charging to make it more affordable. Drivers who rely on public chargers continue to pay the full 20% VAT rate, which is far higher than the 0% currently charged on domestic electricity in Great Britain.
“Reducing VAT on public charging would have been an obvious way for the Government to make the switch more accessible for more people. Instead, following its review of public charging costs, it appears to be exploring a different approach that would allow drivers to use lower-powered public chargers at the same cost as charging at home. We look forward to hearing more details on this.”
Oliver Brighton, CFO, char.gy, said:
“For households without driveways, charging is a street-level service, not a motorway stop. Councils already know where residents need chargers. What they need is the freedom and long-term funding certainty to turn local plans into installations at scale.
“Today’s devolution measures are a welcome opportunity to give local authorities greater flexibility over investment. The new funding arrangements could help councils move beyond piecemeal projects and commit to neighbourhood-wide charging programmes, working with private operators to deliver more quickly and efficiently. The measure of progress is whether someone living on a terraced street can reliably plug in close to home.”
Ben Nelmes, CEO, New AutoMotive, said:
“It is not fair that people who cannot charge their electric car at home must pay significantly more for their electricity. It is good to see the Chancellor taking steps to allow drivers to use their home electricity tariff at their local charge point. It is vital that this work moves at pace to end Britain’s driveway divide.”
Simon Smith, CEO, Voltempo, said:
“This isn’t about asking for more money. It’s about making public investment work harder. Electric trucks can deliver significant savings on running costs, but hauliers can only unlock those benefits if their depots have the power to support them.
“The Depot Charging Scheme is a welcome step, but funding chargers without the infrastructure to run them risks leaving businesses with equipment they cannot use. Government must support the full cost of making depots electric-ready and recognise the reality of grid connection delays. Get that right, and we unlock private investment, cut freight costs and accelerate the shift away from diesel. That’s how you turn a grant into economic growth.”
Tanya Sinclair, CEO, Electric Vehicles UK, said:
“The Chancellor has addressed the immediate pressure on household budgets, but the Government cannot claim to be helping motorists with one hand while making the transition to electric harder and more expensive with the other.
“Electric motoring is already helping drivers escape volatile pump prices, and many more could benefit if the Government tackled the policy barriers keeping public charging unnecessarily expensive, particularly for those without driveways. Meanwhile, the Government is considering weakening the ZEV mandate, a move that would undermine the competition and investment needed to bring more affordable electric cars to market. Ministers should be making it easier and cheaper for drivers to switch, not putting new barriers in their way.”
Matt Galvin, Managing Director of Polestar UK, said:
“Extending the VAT cut on household electricity is good news for drivers who can charge at home, keeping costs to around 7p a mile on a standard tariff and as little as 2.3p off-peak. The £100 Household Energy Payment will also ease the squeeze on household budgets in lower council tax bands in England.
“But for the one in three drivers without a driveway, this Budget is yet another missed opportunity. They are still paying 20 per cent VAT at public chargers, while those charging at home currently pay nothing. Instead of setting out a plan to end this driveway discrimination, the Chancellor is legislating to lock it in. The £100 million for local chargers is a welcome step, but it does nothing to close the tax gap.
“Cutting VAT on public charging to 5 per cent would cost an estimated £140 million a year, roughly a tenth of the £1.36 billion the Government has just found to extend the fuel duty cut. If the Chancellor can find that for petrol and diesel drivers, he can find it for the drivers who have already made the switch. It’s time to end driveway discrimination for good.”
Jess Ralston, energy analyst at the Energy and Climate Intelligence Unit (ECIU):
“This is now the fifth winter where Britons are staring down the barrel of very high energy costs caused by wars in Ukraine and now Iran. The less gas we use, the less exposed we are to the whims of global gas markets.
“With the North Sea’s oil and gas deposits already 90% depleted, if we are going to have a realistic conversation about energy security in this country, we need to be talking about electric heat pumps. Unless we urgently deploy many more of these – and continue to scale up home-grown, low-cost renewables to power them – British households will be facing many more winters of dependence on foreign gas to keep warm.
“Today’s moves to decouple electricity and gas prices is one long-term measure in this Budget that will help to enable this urgently needed shift to electricity, including home heating.”
Andrew Clint, CEO, myenergi, commented:
“Today’s Budget offers welcome but modest breathing space for households and businesses. Consumers and industry will now be looking for more clarity on the long-term direction of energy policy.
“Yesterday’s Warm Homes Loan Scheme launch is more consequential than extending electricity VAT relief. Affordable finance can help households invest in batteries, smart EV charging, solar and energy management that work together to deliver lasting bill savings.
“Today’s measures are a small step forward. Sustained cost-of-living relief will depend on creating the conditions for millions of households to become active participants in a smarter, more resilient energy system.”
Tom Hurst, UK Country Director at Fastned, said:
“This Budget represents a missed opportunity to tackle the ‘driveway divide’. The extension of VAT-free home electricity until July 2027 means those who can’t charge their vehicle at home continue to be unfairly penalised, to the tune of an estimated £270 per year. This makes the switch to electric harder for millions of people.
“It is clear the public agrees. A Fastned survey of 2,000 UK drivers in September found that 70% of drivers said paying extra for not charging at home would make them less likely to buy an EV. This represents a clear barrier on the road to zero-emission transport – one that the Government has the power to remove.”
Dr Vicky Edmonds, CEO of EVA England, said:
“Electric cars are already delivering cheaper motoring for many drivers across the UK. But for people who cannot afford the upfront cost or don’t have a driveway to charge at home, those savings are currently out of reach.
“We therefore strongly welcome and support the recommendations of Philip New, the Chair of the Government’s Cost of Charging review, to deliver a way for drivers who don’t have access to private charging to access their domestic energy tariffs from the public charging network. This will be absolutely necessary if we are to open up electric cars as an option for all driving households.
“Of course such complex structural change takes time, so we also welcome the £100m financial support for some households to access cheaper public charging. Equalisation of VAT between domestic and public charging would have been another, welcome interim measure and it is disappointing that we still see no movement from Government on that.”
Image courtesy of Shutterstock
