Solar panels will cost around £1,000 less for households to install from April, Chancellor of the Exchequer Rishi Sunak has announced, with the removal of VAT on green renovation equipment.
Heat pumps and energy efficiency materials will also benefit from zero rating in a boost for clean energy production. Heat pump installations will cost around £500 less and the cost of installing cavity insulation will drop by around £190 and loft insulation by around £160 for the average household.
But the measure was the only nod to the need to cut greenhouse gas emissions in a mini budget that backed fossil fuels through a 5p fuel tax cut, while doing little to relieve the high cost of energy for most households and businesses. Tellingly, Sunak didn’t even mention the term “net zero” in his speech.
Beyond the VAT reduction, there was no other help for households seeking to reduce their energy bill through insulation or green energy. An already announced boiler upgrade scheme will provide grants of up to £5,000 for heat pumps from April but is only expected to benefit 90,000 households over the next three years.
Still, helping households improve their energy efficiency was the biggest step the Chancellor could have taken to cut bills, environmental campaigners say. Ed Matthew, campaigns director at think tank E3G, said: “The UK has the most energy-intensive housing stock in Western Europe and measures to reduce energy demand are the most effective way to reduce energy bills. The reduction in VAT for home renovations is welcome – it will boost the industry and make home decarbonisation actions more affordable. What is missing is more financial support for low-income households to insulate their homes.
Reducing fuel taxes would mainly benefit wealthy households and SUV drivers, noted Doug Parr, policy director at Greenpeace UK. “Cutting fuel taxes makes more money for the driver of an expensive, gas-guzzling SUV than for the average punter. It doesn’t help the poorest fifth of the population at all, including more than half don’t even have a car,” he said.
As expected, Sunak also refused to impose a windfall tax on fossil fuel producers, even though the world’s top energy authority – the International Energy Agency, a body little known for its radicalism – recommended such a measure. BP chief executive Bernard Looney called his business a “cash machine” due to the unexpected price hikes, and its chief financial officer, Murray Auchincloss, said the company was “maybe getting more money that we don’t know what to do with it.”
Labor has estimated that a windfall tax would raise around £3billion, which could be recycled to help poorer households with rising energy bills. But although the tax would fall on businesses rather than increase the tax burden on households, and is unlikely to increase the cost of fuel, the Chancellor has firmly rejected such calls.
Mike Childs, head of policy at Friends of the Earth, said: ‘It is amazing that the Chancellor is continuing to allow fossil fuel companies to rake in huge profits while cash-strapped households struggle with their bills. A one-off 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 is 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 around £3billion to make buses free and this would help the poorest, who depend most on public transport, as well as reducing car use, emissions of greenhouse gases and air pollution. Childs said: “Public transport must be rapidly expanded and made cheaper to encourage more people to leave their cars at home, with particular emphasis on our woefully inadequate rural bus services.”
There is still time for the government to come up with new 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” Business Secretary Kwasi Kwarteng would publish an energy security strategy, focusing on how the UK can ensure a stable energy supply despite shocks such as the surge in climate change. gas prices, sanctions against Russian oil and gas, and other supply threats as a result of Russia’s war in Ukraine.
Greenpeace’s Parr said the strategy would need substantial funding to be successful: “We need support of around £10 billion, partly raised by a one-off tax on oil and gas companies, to providing the help families need to install the clean technologies that will get us out of gas. This should include finally delivering on the full £9.2billion Tory manifesto commitment to energy efficiency, with more support grants available and greater support to help the industry to train and deploy the tens of thousands of jobs that this region offers.