Solar panels will be about £1,000 cheaper for households to install from April, the chancellor, Rishi Sunak, has announced, with the removal of VAT on green home-upgrade equipment.
Heat pumps and energy efficiency materials will also benefit from the zero rating in a boost for clean energy generation. Heat pump installations will be about £500 cheaper as a result and the cost of installing cavity insulation will fall by about £190 and loft insulation by about £160 for the average household.
But the measure was the only nod towards the need to reduce greenhouse gas emissions in a mini budget that supported fossil fuels through a 5p cut in fuel duty, while doing little to relieve the high cost of energy for most households and businesses. Tellingly, Sunak failed even to mention the term “net zero” in his speech.
Beyond the VAT cut, there was no other help for households seeking to reduce their energy bills through insulation or green energy. A boiler upgrade scheme, already announced, will provide grants of up to £5,000 for heat pumps from April but is likely to benefit only 90,000 households in the next three years.
Yet helping households with energy efficiency was the biggest step the chancellor could have taken to bring down bills, according to green campaigners. Ed Matthew, campaigns director at the thinktank E3G said: “The UK has the most energy-inefficient housing stock in western Europe and action to cut energy demand is the most effective way to bring down energy bills. The cut in VAT for retrofitting homes is welcome – it will boost the industry and make action to decarbonise homes more affordable. What is missing is more financial support for low-income households to insulate their homes.”
The fuel duty cut would mainly benefit wealthy households and drivers of SUVs, said Doug Parr, policy director at Greenpeace UK. “The fuel duty cut gives more money back to the driver of an expensive gas-guzzling SUV than the average punter. It doesn’t provide much help at all to the poorest fifth of the population, over half of whom don’t even have a car,” he said.
As expected, Sunak also refused to place a windfall tax on fossil fuel producers, even though the world’s leading energy authority – the International Energy Agency, a body not noted for its radicalism – recommended such a measure. BP’s chief executive, Bernard Looney, has called his company a “cash machine” owing to the unexpected price rises, and his chief financial officer, Murray Auchincloss, said the company was possibly “getting more cash than we know what to do with”.
Labour has estimated that a windfall tax would raise about £3bn, which could be recycled into helping poorer households with soaring energy bills. But although the tax would fall on companies rather than raising the tax burden for households, and is unlikely to raise the cost of fuel, the chancellor has steadfastly rejected such calls.
Mike Childs, head of policy at Friends of the Earth, said: “It’s astonishing that the chancellor continues to allow fossil-fuel firms to rake in enormous profits while cash-strapped households struggle with their bills. A windfall tax on these companies could have funded energy efficiency and eased the burden on those most affected. The measures introduced today will only scratch the surface of what’s needed to help people save energy.”
Sunak also rejected calls to reduce the price of public transport. According to pre-pandemic estimates, it would take about £3bn to make buses free and doing so would help the poorest, who are most reliant on public transport, as well as cutting car use, greenhouse gas emissions and air pollution. Childs said: “Public transport must be rapidly expanded and made cheaper to encourage more people to leave the car at home, with particular focus on our woefully inadequate rural bus services.”
There is still time for the government to come up with fresh measures to cut energy bills, help the most vulnerable and reduce the UK’s reliance on expensive fossil fuels. Sunak promised that “in the coming weeks” the business secretary, Kwasi Kwarteng, would publish an energy security strategy, focusing on how the UK could ensure a stable energy supply despite shocks such as the soaring gas price, sanctions on Russian oil and gas, and other threats to supply after Russia’s war in Ukraine.
Greenpeace’s Parr said that strategy would need substantial funding to be successful: “We need to see around £10bn of support, part raised by a windfall tax on oil and gas companies, for delivering the help families need to install the clean technologies that will get us off gas. That should include finally fulfilling the full Conservatives’ manifesto pledge of £9.2bn towards energy efficiency, with more support grants available and greater backing to help the industry train up and deploy the tens of thousands of jobs this area offers.”
