Rachael Reeves has been told that cutting funding for home insulation in the Budget would jeopardize the UK’s climate targets and hurt low-income households in a joint intervention by energy companies, fuel poverty charities and environmental groups.
in message In his letter to the Chancellor, more than 60 groups and companies urged Reeves not to take such a damaging “short-term fix” to cut funding for more energy efficient homes to pay for lower energy bills.
The Guardian revealed this week that Reeves is finalizing a multi-billion pound energy support package which is likely to cut the green levies paid for energy efficiency as she looks to save up to £170 off the average bill.
In particular, the Treasury has been looking at reducing or eliminating the Energy Company Obligation (ECO), which pays to improve energy efficiency for low-income and vulnerable households.
In their letter, dozens of organizations – from Age UK and Citizen Advice to Friends of the Earth – called on the Treasury to reconsider cuts to the ECO programme, saying it would “raise doubts about the ability to meet the UK’s fuel poverty targets and carbon budget”. They also warned it put thousands of jobs at risk in the £20bn energy efficiency and supply chain industry.
“We welcome the news that you plan to take action to reduce household energy bills in the next Budget, which is critical to addressing cost of living challenges and boosting the economy,” the letter said.
“However, it is important that this does not come at the expense of investing in energy efficiency measures and low-carbon technologies, which permanently reduce household bills. While direct bill support provides an immediate means of helping struggling households, decarbonizing homes through cost-effective upgrades is the best way to sustainably address fuel poverty and reduce costs for all bill payers.”
Their warning came after Keir Starmer attended the Cop30 climate conference in Brazil where he said the UK was “already making progress” by showing leadership in tackling climate breakdown and creating green jobs.
Others who signed the letter include Energy UK, the industry body representing Britain’s major energy companies, National Energy Action, Disability Rights UK, Energy Savings Trust and Greenpeace.
In an interview with The Guardian, Darren Jones, the Prime Minister’s first secretary, said he wanted to reassure people that the government would not back away from its commitment to green issues and tackling the climate crisis.
Those consulted on the plans say the Chancellor is particularly looking to reduce or scrap the Economy Standards, under which energy companies help pay for home improvement measures such as insulation and new heating schemes. Last year, the National Audit Office warned Fraud and poor quality In some works completed under the scheme.
If the program is reduced or cut entirely, the Energy Secretary, Ed Miliband, could choose to reallocate funds from the £13bn Warm Homes Scheme, most of which has been allocated to pay for subsidies for electric heat pumps. The government decided last June to protect this scheme, but it is believed that the Finance Minister is willing to reduce it to help reduce bills. The government is separately considering eliminating the 5% value-added tax from electricity bills to reduce costs.
The last time the ECO scheme was scrapped, 10,000 people lost their jobs, and millions of families were left “in draft-exposed homes paying astronomical energy bills” as a result, said James Dyson, a senior researcher at E3G, a non-profit organization that helped coordinate the letter.
He added: “Lowering environmental cooperation standards could lead to the collapse of the entire insulation industry, putting thousands of workers out of work in areas of the country that need good, skilled jobs and removing one of the best ways to permanently reduce energy bills for low-income households. It would also deprive us of a key tool for reducing carbon emissions in this crucial decade for climate action.”
Dara Vyas, chief executive of Energy UK, also criticized the prospect of changes to funding for home insulation and energy efficiency, saying it would be a “short-sighted and disastrous move”.
“We have had ample previous experience of showing how knee-jerk cuts to investment in warmer homes have led to customers paying billions of pounds more on their energy bills, while also damaging supply chains and businesses with knock-on effects on investment and job losses.”
Dr Doug Barr, policy director at Greenpeace UK, said: “Cutting this funding would be the most counterproductive thing the Chancellor could do in his quest to reduce energy costs.
“Government programs are in desperate need of reform with stricter regulations to stop cowboy shoddy work, but cutting them will leave millions of families in fuel poverty in cold, damp homes. These fees should not be cut, they should be paid for through taxes, so those with broader shoulders pay a fairer share.”
Mike Childs, head of science, policy and research at Friends of the Earth, said: “It would be a serious betrayal of struggling households for the Government to reduce the energy company’s mandatory insulation scheme in order to reduce energy bills. We need to make homes warmer and lower energy bills if we are to ease hardship and protect people from harm. The Chancellor must not give with one hand to take with the other.”
A Treasury spokesman said: “We do not comment on speculation about future changes to tax policy outside of financial events. The Budget later this month will build stronger foundations to secure Britain’s future and focus on workers’ priorities: reducing waiting lists, reducing the national debt and lowering the cost of living.”
It was also reported last night that Reeves will announce a raid on tax breaks on pension contributions in a move that could raise up to £2bn a year.
There is currently no limit on how much an employee can pay into their pension before National Insurance pays out, but according to a report in The Times, Reeves is expected to cap the amount that can be sacrificed from someone’s salary without paying National Insurance at £2,000 a year.
The change would mean employees paying 8% on any pension contributions above a certain level, raising concerns the cost could then be passed on to workers.