Updated: coalition green-lights electric car grant

The electric car grant has escaped the government’s spending axe.

Transport secretary Philip Hammond confirmed today that motorists will still receive up to £5,000 towards the purchase of an ultra-low-carbon car from January 2011.

The government’s autumn spending review had put the viability of the scheme in doubt, putting companies bidding to run the scheme in limbo. But the government has waived through the incentive ahead of the spending review because it supports the prime minister’s wider promise to oversee “the greenest government ever”.

“The coalition government is absolutely committed to low-carbon growth, tackling climate change and making our energy supply more secure,” transport secretary Philip Hammond said in a statement.

“We are sending a clear signal that Britain is open for business and that we are committed to greening our economy. This will ensure that the UK is a world leader in low-emission vehicles.”

While the government remains committed to reducing the UK’s budget deficit, it also understands the need for certainty for investors who are taking long-term decisions now on where to launch ultra-low-carbon vehicles and where to locate future production, Hammond said.

Nevertheless, the £230m originally allocated to the scheme by the Labour administration in March, has been chopped to £43m.

The consumer grant will reduce the upfront cost of eligible vehicles by 25 per cent, capped at £5,000. Available across the UK, it will be open to both private and business fleet buyers.

The level of the consumer incentive has been agreed until 31 March 2012. The level will be reviewed in January 2012. After taking into consideration a number of key factors, such as the cost of vehicles and the development of the early market, the level will be set for subsequent years.

“We will review the level of the incentive regularly to ensure that the UK remains competitive and taxpayers get value for money,” Hammond said.

The safety and performance criteria of vehicles for subsidy will be published shortly.

Final funding for the Plugged-In Places initiative is separate to this deal and will be decided in the spending review.