Chancellor of the Exchequer Rishi Sunak has come under fire after delivering his Spring Statement, which outlines the government’s financial plans.
With the country recovering from the COVID pandemic and coping with conflict in Ukraine, there were fears that a cost of living crisis was looming, especially when it comes to energy and fuel bills.
The energy price cap will increase from 1 April for approximately 22 million customers, and despite calls from the industry to do more to address this issue, Sunak has been criticised for falling short.
Mike Foster, CEO of the Energy and Utilities Alliance (EUA), said: “The Chancellor has clearly not heard the outcry over rocketing energy bills faced by millions. He has done nothing in the Spring Statement to help the vast majority of consumers who face bills doubling this year.
“His VAT cut on solar panels and heat pumps will be welcomed by those who make them and by those who can afford to fit them, but a VAT cut on energy bills would have helped everyone.
“Frankly, consumers waiting to hear good news on their energy bills will be left asking, ‘is that it Chancellor?’”
VAT cut for low carbon technology
One positive from the Statement was the announcement that VAT on energy saving technology like Solar and Heat Pumps, will be reduced from 5% to 0%.
The decision will complement other financial incentives such as the Boiler Upgrade Scheme which will offer grants between £5,000 – £6,000 from 23 May.
Phil Hurley, Chair of the Heat Pump Association said:
“The Spring Statement comes with great news for the heat pump industry and households today. The HPA has been working hard behind the scenes calling for financial incentives to tackle the barriers to heat pump uptake, and the decision to cut VAT from 5% to zero on energy-saving measures is an important step forward. Whilst this decision alone will not be enough to enable all households to access technologies such as heat pumps, we are confident that it will play a role in helping to accelerate the switch to low carbon heat. But we must remember that more steps still need to be taken to support the rollout of heat pumps, including the removal of illogical environmental levies on electricity.”
Responding to the Spring Statement, Ian Rippin, CEO at MCS, said:
“The Chancellor has used the Spring Statement as an opportunity to enhance the home heating revolution by zero rating VAT on renewable technologies for five years.
“This bold move can help support the UK on its net zero journey by using proven renewable technology solutions, such as solar PV and heat pumps, which are ready to be embraced and upscaled now.
“The move will also make solar PV even more accessible and will allow consumers to take advantage of the multiple benefits solar offers including improved energy bills and enhancing property value.
“This is also positive from an installer perspective, as it will simplify the procurement element of the installation process by removing the complex VAT rules. There is still however the need for government and industry to work together to mitigate the current strain on the supply chain to allow installers to source the equipment to support uptake.”
Carl Arntzen, CEO of Worcester Bosch said:
“We welcome the Chancellor’s removal of VAT on heat pumps, solar panels and other energy-efficiency measures. We feel that this will support the needed transition of UK homes towards a net zero future.
“One of the main barriers for consumers looking to install greener heating technology at home is the cost, so the savings this tax relief could bring may help counteract this, whilst contributing to an increased uptake of these types of measures.
“As the more specific details start to appear following today’s initial Spring Statement, it will be interesting to see whether the 5% tax relief is for the products and materials, or, as we would hope, applies to the total cost of installation, as around 60% of the cost of a heat pump installation is on ancillaries and labour.”
Henk van den Berg, Strategic Business Manager, Heating & Renewables Daikin UK, said:
“Given the current pressures being felt by households across the country it was inevitable – and right – that the Chancellor focused his statement on measures to help alleviate the cost-of-living crisis.
“Removing VAT from heat pumps and other green measures is a positive step as it will make it easier for households who want to be more energy efficient. This move will also give the green light to many households contemplating a heat pump under this year’s Boiler Upgrade Scheme.
“However, eliminating the additional levy on electricity pricing, which was indicated in last year’s Heat & Building Strategy, has still not been addressed. This will need to be part of Government policy sooner rather than later.
“In relation to the current cost-of-living crisis, we don’t think it needs to be an either/or situation when it comes to offering ways to help make homes more energy efficient and greener. There is a danger of a narrative taking hold that we can’t decarbonise while helping people with the cost of living at the same time. This simply isn’t true.”