Government to splurge £250m on green car bribes

The Government will offer us £5,000 to buy electric cars - although they don't actually exist yet.

Last Updated: 31 Aug 2010

UK drivers will be offered a £5,000 incentive to buy electric or plug-in hybrid cars, the Government said today, as part of a plan to reduce our carbon emissions over the next five years. It’s also set aside a further £20m to pay for charging points, to make sure said vehicles can actually get from one end of the street to the other without running out of juice. But even if you’re convinced that electric cars are the future (and not everyone is), don’t go rushing out your front door just yet – these cars won’t even be going on sale for another two years…

The cash incentive is apparently intended to stop people being put off by the higher up-front costs of new electric vehicles, notably the expensive batteries they need to run. According to Transport Secretary Geoff Hoon, just 0.1% of the UK’s 26m cars are electric, so there is ‘huge untapped potential to reduce emissions’. The UK is supposed to be cutting carbon emissions by 26% by 2020, and with domestic transport accounting for about a third of current levels, the Government has decided to target the car market.

However, the case for electric vehicles isn’t straightforward. Some argue that it just pushes the carbon problem from one place to another – i.e. to the power stations that produce the energy required to manufacture and power these cars. Even now, the UK is likely to have insufficient generating capacity in ten years time, as most of our nuclear power stations are taken out of commission – this would just exacerbate that problem. There are also question marks over the creation and disposal of the lithium-based batteries they use. And since the relative lack of range of electric cars (at least for now) make it unlikely that they’ll be anything more than urban run-arounds, some think the money would be better spent on improving public transport instead.

Apparently, the Government’s also thinking about offering people a £2,000 incentive to trade their old cars in for new ones. A similar scheme has proved wildly popular in Germany and France, massively boosting new car sales, and the Government clearly hopes the additional demand will prop up our manufacturing industry. However, unlike Germany and France, we won’t actually see most of the profits from any extra sales (it’s unlikely that people will trade in their old Fiesta for a new Jag). And then there’s the dubious sustainability argument – why encourage people to trash perfectly good cars, just to promote the sale of new ones?

Generally speaking, Government intervention in markets usually tends to distort fair competition and produce unintended consequences. So we’re not convinced by either of its latest big ideas...

In today's bulletin:
Government to splurge £250m on green car bribes
Darling to announce worst budget deficit in 50 years
UK has the world's worst copyright laws
Brits refuse to mix business with pleasure?
Nick Hood: How Poland plans to stave off recession

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