In his Spring Statement, the Chancellor has announced a VAT cut on insulation and energy saving products from 5% to zero, to help home owners to make their properties more energy efficient.
The cut of VAT on energy saving products, such as insulation or solar panels, was the only mention of the housing market in Rishi Sunak’s Spring Statement last week.
The help for homeowners to make their homes more energy efficient was widely welcomed, although some commentators were hoping for more.
However, given the property market is buoyant, with demand high and house prices rising, it is not surprising that not more help was forthcoming.
Instead, the Chancellor focussed on cushioning the impact of the rise in National Insurance Contributions (NICs) by increasing the threshold for paying NIC for workers to £12,570. He also announced a 5p per litre cut on fuel duty for a year, to reduce the effect of high fuel prices and cost of living.
What Is The Government Doing To Make Housing More Energy Efficient?
Even before the hike in energy prices, there were calls for the government to make the housing market greener by encouraging homeowners to make their houses more energy efficient.
While the climate crisis has largely disappeared from the front pages of the news tabloids, in favour of the Russian Invasion of Ukraine and the rising costs of living, the Government has set a target of reducing carbon emissions by 78% by 2035.
With the carbon emissions of homes accounting for 20% of the UK’s total emissions, more energy efficient homes will contribute a big chunk towards this 78% reduction.
So apart from setting this target, what help does the Government offer homeowners to make their homes greener?
Energy Company Obligation
The Energy Company Obligation (ECO) is an initiative to help low-income households to make their homes more energy efficient. Under the scheme, energy suppliers are obliged to help eligible households with improvements, such as loft insulation, cavity wall insulation, boiler replacement or repair.
The bigger energy suppliers have received targets from the UK Government, but they can decide what measures they offer, how much funding they provide and which installer will carry out the work.
So, while energy efficiency improvement through this scheme might be free for some, others might have to pay part of the costs. According to reports, the scheme helps 200,000 homes each year.
However, the Treasury is currently reviewing this scheme, which runs until March 2022, and its future is at the moment unknown.
Smart Export Guarantee
Smart Export Guarantee (SEG) is a Government scheme, where homeowners who produce their own energy through renewable technology, such as solar panels, get paid for the electricity they generate and put back into the grid. It was introduced in January 2020 and replaced the Feed-in Tariff (FIT) scheme.
Big energy companies are required to participate, but eligible homeowners have to sign up to benefit. Also, if their current energy company is not participating, they will have to change energy company to profit from the scheme.
Unlike the FIT scheme, the SEG scheme only pays for the electricity a home puts back into the grid, rather than all the energy it generates. So the new scheme will not make the amounts of money for people the FIT scheme did.
There is no fixed SEG tariff price, each company can decide on how much they will pay. So it pays to shop around.
Renewable Heat Incentive
The Renewable Heat Incentive (RHI) is a government scheme to encourage households and businesses to install renewable heat sources, such as air heat pumps.
The scheme will pay eligible households for the energy they produce for seven years. This is a similar scheme to the FIT scheme and aims at encouraging homeowners to reduce the carbon emissions of their homes.
The current deadline to apply for this scheme is 31 March 2022. It is not yet known if the scheme will be continued after that date.
What Else Could The Government Do?
While these schemes provide an incentive or help for homeowners to make their properties more energy efficient, many organisations believe that the only way to make the housing market green is by making energy efficiency and the use of renewable energy mandatory.
One thing the Government could do, and indeed some commentators think will do, is to ban gas boilers for new homes.
This ban could come in as soon as 2025, some believe. This would mean that new homes can only be built if they are heated by using renewable energy.
Earlier this year, there were also calls to change the Stamp Duty system and link it to the EPC rating of a house. The call came from the Energy Efficiency Infrastructure Group in the form of a letter to Chancellor Rishi Sunak.
The group asked for an Energy Saving Stamp Duty Rebate to encourage homeowners to make their homes more energy efficient.
While the announcement of a VAT cut for energy saving products for homes is a welcome incentive, it is by far not enough, if the UK Government wants to tackle the climate and energy price crisis.