Early reports suggest a raid on popular energy efficiency measures and giveaway changes to the Windfall Tax.

Reports in the media suggest that the Government is set to essentially raid the funding for its flagship Warm Homes Plan to pay for energy bill reductions. 

The breakdown of the £13.2bn Warm Homes Plan funding was due to be announced last month and was expected to include additional support for social housing, heat pumps, home upgrade loans and local authority-led retrofit schemes. 

At the Comprehensive Spending Review, the End Fuel Poverty Coalition stressed that this £13.2bn must be addition to the £8.5bn (over five years) budget for existing schemes like the Energy Company Obligation (ECO). The Coalition wrote to Ministers setting out reforms needed to this scheme following a critical National Audit Office report and has in the past called for this to be funded via general taxation.

However, the proposals briefed to the Guardian would effectively substitute parts of the Warm Homes Plan for existing schemes. This would essentially reduce the total £21.7bn energy efficiency pot by 40% over five years, harming the very efforts that would help to bring down bills in the long term and help end the suffering of people living in cold damp homes.

Simon Francis, coordinator of the End Fuel Poverty Coalition, commented: “Any cuts to the Warm Homes Plan or other programmes to improve housing conditions would be a short-sighted act of betrayal by the Chancellor. These electorally popular policies can help bring down energy usage in a safe way and improve the energy efficiency of the homes of people in fuel poverty.

“We obviously understand the urgent need to cut energy bills, but the Chancellor – who previously brought us the Winter Fuel Payment fiasco – appears to be listening to the wrong people. It is entirely possible for the Government to help reduce energy bills, but Ministers need to look in the right place for changes. 

“Given that between a quarter and a third of the average energy bill is profit for different parts of the energy industry, the Chancellor should look at how the Windfall Tax could be improved, rather than giving tax breaks to energy firms as she is being lobbied to do.

“Other ways to bring down bills include addressing electricity pricing and inefficiencies in the market, using public investment to help fund grid upgrades and real reform of standing charges. We would be happy to talk to the Chancellor about our recommendations.”

The industry trade body, Energy UK, has also set out economic reasons why this move could harm efforts to improve cold damp homes.

Annabel Rice, senior political adviser at Green Alliance, said: “If the government is serious about lowering people’s bills for good, they must invest in insulating our homes, not raid schemes that have helped families lower their energy costs to make their sums add up in the budget. 

“We’ve seen more than five different insulation schemes from the government in recent years in England and they show us one thing: stop-start policies confuse homeowners, make jobs in this industry less viable and create uncertainty for investors. With almost nine million families in fuel poverty as winter approaches, it’s time for a fully funded, long term Warm Homes Plan.”

The Warm Homes Plan had been expected to support a wide range of upgrades including insulation, heat pumps, home energy advice, and local council-led retrofit schemes. It was announced as a cornerstone of the UK’s mission to reduce energy demand, support vulnerable households, and cut carbon emissions.

But experts warn that diverting its funds to cover existing schemes will drastically limit its impact, especially for households living in the worst conditions — and risks undermining the Government’s own statutory targets to end fuel poverty by 2030.

The National Pensioners Convention has also warned against cutting the funding for energy efficiency measures. Jan Shortt, General Secretary of the NPC said: “We urge the Chancellor to rethink any cuts she is considering and engage with concerned stakeholders before making decisions that could have a profound impact on the nation’s most vulnerable. We stand ready to work with the government to find fair, effective solutions that protect both the immediate and long-term interests of older people, and all those at risk of fuel poverty.”

A £6 billion corporate tax cut?

Meanwhile, changes to the windfall tax being considered by Rachel Reeves in this month’s budget could see the oil and gas industry handed a £6 billion tax cut, at a time when tax increases for working people are also widely expected.

Proposals drafted by the oil and gas lobby group Offshore Energies UK, which are being considered by the Chancellor, suggest that removing the Energy Profits Levy at the end of this year, as the industry is pushing for, would lead to a tax loss of £6 billion to the UK Treasury over the next decade.

OEUK is calling for the windfall tax to be wound down early and replaced with a new tax regime, estimating it would unlock £40 billion in investment in oil and gas to 2034. Its analysis (on page 14 of OEUK’s proposals) shows that this would result in a £5.8bn reduction in tax receipts over that period. Its claim that total tax receipts out to 2050 would be up as a result of increased investment are speculative, given the high uncertainty around, for example, future oil and gas prices. 

The oil and gas industry has been lobbying hard for months to scrap the windfall tax in order to reduce their tax bill, despite the sector posting billions in profit, and companies like Shell reporting negative UK taxes last year.

In response to the proposed tax cut, Robert Palmer, deputy director of Uplift said: “Oil and gas companies have made billions in recent years while millions of people in the UK have struggled with unaffordable energy bills. Worse, firms have chosen to hand these windfalls to overseas shareholders rather than reinvesting them to support UK jobs. To even be considering scrapping measures to cut household bills while cutting taxes for profiteering oil companies would be deeply unfair.” 

Palmer also called out the poor economics of the proposal and warned Reeves against propping up an industry that is only profitable because of the UK’s generous tax regime.
“The reality is the North Sea is in rapid decline, with most of the gas already burned – and what’s left is increasingly expensive to extract. New drilling is viable only if we hand out even bigger tax breaks to wealthy energy companies, taking money away from public services. Quite apart from the climate impact, it is economic lunacy to continue to allow drilling that would not be viable without the Treasury’s thumb on the scale.”

Simon Francis, coordinator of the End Fuel Poverty Coalition, commented: “Giving tax breaks to fossil fuel giants and failing to collect tax from large corporations while cutting support for those in fuel poverty are short-term acts of weakness by the Chancellor.

“It’s entirely possible to bring down energy bills in a fair way — by improving insulation, reforming electricity pricing, and using public investment to upgrade our grid. Instead, we’re seeing the Government ignore long-term solutions while considering tax cuts to those who need them least.”

The latest data shows that around 12.1 million UK households are struggling with unaffordable energy bills, with 5 million of those in deep fuel poverty — spending over 20% of their income on energy.

Jonathan Bean, campaigner at Fuel Poverty Action, said: “The Government should be focussed on getting homes fixed, and replacing the failed Eco4 scheme with a well-funded home upgrade programme that delivers high quality work and guaranteed bill savings.  We need a bigger investment in retrofit skills and quality control, not a budget cut that ends up in the pockets of the oil and gas giants.”

Image: Rachel Reeves. Source: https://api20170418155059.azure-api.net/photo/GzViho86.jpeg?crop=MCU_3:4&quality=80&download=trueGallery: https://beta.parliament.uk/media/GzViho86. Author: https://en.wikipedia.org/wiki/Chris_McAndrew, licensed under the Creative Commons Attribution 3.0 Unported license.