A third of the funding pledged by the UK government for insulation and installing heat pumps has not yet been spent, analysis has shown, despite the continuing energy bills and cost of living crises.
About £2.1bn remains unspent of the £6.6bn that was supposed to be used between 2020 and 2025 on making buildings more energy efficient and decarbonising heat. The funding is part of the £9.2bn that was promised for such spending in the Conservative general election manifesto of 2019.
Insulating homes and switching from gas to heat pumps would save households money, and ease the cost of living crisis, but most people struggle to meet the upfront costs of such measures without government help.
The government’s failure to spend the cash that was allocated reflects a lack of effective policies on domestic insulation and decarbonisation, according to Juliet Phillips, senior policy adviser at the E3G thinktank.
Three years ago, the green homes grant was announced to fanfare, but the scheme, described as “botched” by a parliamentary committee, was abandoned within six months of its start. This followed similar abortive schemes over the past decade and more. This has made the housing industry reluctant to invest in training people to insulate homes and install heat pumps.
“Years of boom-bust policymaking has left industry decimated,” Phillips said. “There is a need for long-term certainty to build back the confidence needed to plan and invest in skills and supply chains.”
Although ministers have allocated cash to help decarbonise public buildings, and to provide energy efficiency upgrades in social housing and for some people on low incomes, there is currently no nationwide scheme for middle income households.
Last week, a House of Lords committee said the government’s boiler upgrade scheme was “failing to deliver”. The scheme, offering households up to £6,000 to replace current boilers with heat pumps or other low-carbon alternatives in England and Wales, was supposed to be worth £450m but only a third of its annual budget has been spent.
Graham Stuart, climate minister, has previously said that the underspend on the boiler upgrade scheme would not be recycled for heat pump spending, but returned to general Treasury funds.
The take-up of heat pumps in the UK has lagged behind many other European countries, which have been spurred by high gas prices and supply issues following Russia’s invasion of Ukraine.
E3G estimates that £8.7bn will need to be spent in the current parliament to put the UK on track to meet its carbon budgets, set by the Committee on Climate Change in line with the legally binding commitment to reach net zero greenhouse gas emissions by 2050.
Phillips said it was still possible for the government to spend the cash needed before the next general election, which is likely to come late next year, but it would require significant policy shifts. For instance, the current home upgrade grant is focused on the fuel-poor in rural areas of England, but is only available where local authorities have won competitions to access funding pots, creating what E3G terms a “warm homes lottery” across the country.
“Getting on track for UK climate and energy security targets will require a significant step-up from today’s level of investment in energy efficiency and heat pumps,” said Phillips. “Currently, there is a warm homes postcode lottery in the UK – with a need to level up access to skills, support and subsidies.”
She called on the chancellor, Jeremy Hunt, to bring forward new measures in his budget, set for 15 March. “In the global race to spur investment in clean industries, the UK can gain a competitive edge through ramping up long-term support for this vital sector by providing the right set of policies and economic incentives,” she said.
“The forthcoming spring budget provides a platform for the government to launch a decade-long programme to support warmer homes, green industries and good jobs across the whole of the UK.”
A government spokesperson said: “Improving the energy efficiency of homes is important to tackling fuel poverty and reducing emissions, and that’s why we’ve committed £6.6bn this parliament and a further £6bn to 2028 to make buildings more energy efficient.
“The Energy Company Obligation scheme alone has delivered improvements to around 2.4m homes and our £1bn ECO+ scheme is set to boost these efforts later this year, installing measures in households who have previously not been able to access ECO support.”
Philip Dunne, the Conservative MP who chairs parliament’s influential environmental audit committee, said far greater action was needed on insulation.
He said: “We need a national mobilisation on energy efficiency to end the unacceptable levels of heat leaking from homes and buildings. The strong manifesto commitment to spend £9bn on energy efficiency was welcome, but not all of this has been delivered.
“The chancellor’s announcement last year was welcome for £6bn from 2025: but the millions of households now in fuel poverty cannot afford to wait two more winters of delay. Action needs to be taken sooner rather than later. That is why our committee has recently called for some of the money raised from the windfall tax on the extraordinary profits of oil and gas companies to be channelled into energy efficiency upgrades.
“If the right demand signals are sent by Whitehall, the energy efficiency sector can gain the confidence needed to grow green jobs and develop robust supply chains for many years to come.”
Ed Miliband, shadow Secretary of State for climate change and net zero, said: “Over thirteen years, the Conservatives have failed miserably to upgrade Britain’s homes, costing people money on their energy bills.
“From the botched rollout of energy efficiency schemes such as the Green Homes Grant, to the snails pace of installing low carbon heating, the Tories failure on this agenda has undermined Britain’s energy security and kept energy bills high. Labour would upgrade 19 millions homes with our Warm Homes Plan- cutting bills and creating good jobs across Britain.
“Only Labour has a plan to tackle the cost of living crisis now, and a long term plan to cut bills for good by making Britain a clean energy superpower.”
