The Social Market Foundation – a cross-party think tank – has published a paper calling for the UK government to implement a social leasing scheme for low-income households to subsidise the cost of electric vehicles (EVs).
The SMF says its proposed social leasing scheme – modelled on an existing scheme in France – would be less expensive for the government and better targeted than directly subsidising EVs (such as those favoured in the US) to bring their price in line with ICE vehicles. It would allow eligible low-income households to lease an EV for no more than £100 a month for three years, with the government paying the private leasing company the differential.
At the end of the three years, households would have the option to purchase the car for its remaining price or return it to the company. This model is in practice in France, and has successfully supported those at risk of transport poverty, at a modest cost to the state.
| Direct subsidy | Social leasing |
| Scheme: a £5000 grant for used cars | Scheme: low income households pay £100 a month for three years |
| Impact: additional 16,500 EVs on the road | Impact: additional 100,000 EVs on the road |
| Cost: £600 million | Cost: £175 million per year, £520 million if continued |
| Target: wasted on drivers who would have bought an EV without the subsidy | Target: prioritise households with less than £8,000 per person annually, potentially increasing to £18,000 depending on demand. In addition, geographic eligibility should be limited to those households with high driving needs. |
At present, it takes low-income drivers five years to ‘break even’ on an EV purchase, as the reduced operating costs take that long to offset the higher purchase price. A social leasing scheme would unleash demand for EVs and bring low-income families along in the transition to greener transport by bridging the gap between automakers and the market, the SMF said.
Previous SMF research found that five million British people are in transport poverty, with transport costs pushing them below the poverty line. With a properly targeted social leasing scheme, 500,000 people could be brought out of poverty, and more would see significantly reduced their transport costs.
Gideon Salutin, Senior Researcher at Social Market Foundation, said:
EVs can and will be a powerful tool to fight poverty and decrease emissions, but they remain out of reach for those who would benefit most.
Instead of waiting years for EVs to achieve price parity with regular vehicles, the government must be proactive. By reducing upfront costs through a social leasing scheme, we can remain on track for our net zero goals, and help hard-pressed families. Such a scheme would also come at a more modest cost to the state than directly subsidising EVs
Still, it must be noted that EVs are not the only tool at our disposal to ensuring a just green transition. We also need more alternatives, and in particular to improve the availability, reliability and affordability of local public transport services.
