Hundreds of thousands of homeowners will lose their right to subsidies for eco-friendly heat pumps as a result of government plans to bring down energy bills at the budget, according to sources briefed on the preparations.
Chancellor Rachel Reeves is planning to take energy efficiency levies off bills and fund them through the government's existing warm homes plan. This will restrict heat-pump subsidies to those receiving certain benefits, sharply reducing costs to the government.
Supporters of the change say the subsidies, which can be as high as £7,500, largely went to middle-class households that could have afforded them anyway. However, energy industry experts warn that removing support will slow the transition from gas boilers to cleaner heat pumps.
Sam Alvis, head of energy and environment at the Institute of Public Policy Research, said the urge to get bills down is right but the risk is that cutting support for clean technology will be noticed by those who lose out. Leo Vincent of E3G called the plan a 'disastrous sticking plaster solution' that would let down working families and leave Britain vulnerable to fossil fuel price shocks.
The move is part of a broader effort by Reeves and Prime Minister Keir Starmer to cut energy bills by an average of £170 a year. Other measures include removing 5% VAT on domestic energy bills, saving consumers £86 on average, and cutting levies such as the Energy Company Obligation (ECO).
A government source said existing heat pump subsidies were unaffordable payments to well-off families that could not be justified in a budget focused on alleviating cost of living pressures for poorer people. Reeves is also planning to cap the cycle to work scheme to prevent middle-class voters from buying expensive tax-free bikes.
