Households will be able to install solar panels for around 1,000 less starting April, Rishi, the chancellor, has announced. This is in addition to the removal VAT on green home improvement equipment.
The zero rating will benefit heat pumps and energy efficiency products as well as clean energy generation. The average household will see heat pump installations costing 500 less and cavity insulation costs falling by around 190 and loft insulation falling by 160.
The measure was the only acknowledgement of the need to reduce greenhouse gases emissions. It came in a mini budget which supported fossil fuels with a 5p cut to fuel duty but did little to lower the high cost energy for most households or businesses. Sunak did not even mention net zero in the speech.
The VAT cut was the only assistance available to households who want to reduce their energy bills with insulation or green power. Already announced, a boiler upgrade scheme will provide grants up to $5,000 for heat pumps starting in April. However it is expected that only 90,000. households will be able to benefit over the next three years.
According to green campaigners however, the greatest step the chancellor could make to reduce bills was to help households increase their energy efficiency. E3G’s campaigns director Ed Matthew said that the UK has one of the most energy-inefficient homes in western Europe. Action to reduce energy demand is the best way for the UK to lower its energy bills. It is great that there has been a reduction in VAT for retrofitting houses. This will help boost the industry and make decarbonisation more affordable. The only thing missing is financial support for low-income households in order to insulate their homes.
Doug Parr (Policy Director at Greenpeace UK), stated that the fuel duty cut would be most beneficial to SUV drivers and wealthy households. The fuel duty reduction gives more money to the SUV driver who uses more gas than the average person. He said that it doesn’t help the poorest fifth of people, who make up more than half of those without a car.
Sunak, as expected, also refused to impose a windfall tax upon fossil fuel producers, despite the International Energy Agency being the world’s foremost energy authority, which is not known for its radicalism recommending such a tax. Bernard Looney, BPs chief executive has called his company a cash-machine due to unexpected price increases. Murray Auchincloss his chief financial officer said that the company may be receiving more cash than we can handle.
Labour estimates that a windfall tax could raise around 3bn. This money could be used to help poorer households struggling with rising energy bills. The tax would be paid by companies and not households, and it is unlikely to increase fuel prices. However, the chancellor has consistently rejected such requests.
Mike Childs, Head of Policy at Friends of the Earth, stated: It is astonishing that the chancellor allows fossil-fuel companies to rake-in enormous profits while cash-strapped families struggle to pay their bills. A windfall tax for these companies could have funded efficiency and eased the financial burden on the most vulnerable. These measures will not cover all the necessary steps to save energy.
Sunak also refused to lower the cost of public transport. According to pre-pandemic estimates it would take approximately 3bn to make public transport free. This would help the poorest people, who are most dependent upon public transport. It also would reduce car use and greenhouse gas emissions. Childs stated that public transport must be expanded rapidly and made more affordable to encourage people to get out of their cars, with a particular focus on rural bus services which are woefully insufficient.
The government still has plenty of time to develop new measures to cut energy costs, aid the most vulnerable, or reduce the UK’s dependence upon expensive fossil fuels. Sunak promised that Kwasi Kwarteng, the business secretary, would publish an energy security plan in the coming weeks. It will focus on how the UK can maintain a stable supply of energy despite shocks like the soaring gas prices, sanctions on Russian oil, and other threats following Russia’s war in Ukraine.
Greenpeaces Parr stated the strategy would need substantial funding. We need to see approximately 10bn in support, part funded by windfall taxes on oil and natural gas companies, to help families install the clean technologies they need to get off gas. This should include fulfilling the full Conservatives pledge of 9.2bn to energy efficiency. The industry needs more support grants and greater backing to train and deploy the thousands of jobs it offers.