Labour will hand drivers cash to buy electric vehicles under plans being considered to help the party stick to a 2030 ban on the sale of new petrol and diesel cars.
Officials are examining ways to tie subsidies and interest-free loans to British jobs and manufacturing amid fears that cheap Chinese models will start flooding the market in order to help Britain meet its net zero target.
It is understood that Labour prepared a package of financial incentives designed to help motorists switch to electric vehicles to be unveiled at its party conference in Liverpool which took place earlier this month.
One proposal at an advanced stage included a universal cash subsidy worth around £1,500 to help people who want to buy an electric car to fund a deposit.
Three-year interest-free loans were also proposed for those taking out personal contract purchase agreements, which allows people to rent cars over a multi-year period, with the option of buying it at the end.
Loan guarantees for people using car finance deals were also considered, as well as extra help for people on low and middle incomes.
However, a split within the party over both the costs and approach of the scheme is understood to have delayed an official announcement.
The shadow Treasury team led by Rachel Reeves is understood to have been the most resistant to subsidies and officials are now exploring ways to link any subsidies to cars made in Britain.
Others have raised concerns that mass government subsidies or guarantees could end up boosting Chinese manufacturers.
Electric vehicles cost significantly more than equivalent petrol or diesel models. Former Labour leader Jeremy Corbyn pledged in 2019 to provide up to £60bn over five years to fund interest-free loans on electric cars.
But soaring debt and high inflation means any subsidy scheme is likely to be on a much smaller scale as Labour focuses on planning reforms to make it easier to build battery gigafactories, as well as infrastructure to support the switch to electric and more support for buyers of second-hand EVs.
Labour has already been forced to scale back plans to borrow £28bn a year to invest in green jobs and industry in an attempt to prove its fiscal credibility.
“We need value for money,” said one Labour source. “We don’t want to end up in a situation where we’re spending taxpayers’ money to subsidise Chinese companies, so we need to make sure that the models that are available are built in Britain.”
Others have warned that Labour’s commitment to no new petrol and diesel cars by 2030 could threaten the survival of the UK car industry.