Labour plan to cut funds from heat pump scheme sparks industry backlash

Submission Statement: Labour ministers are facing an industry backlash against plans to cut hundreds of millions of pounds from the government’s Boiler Upgrade Scheme in England and Wales, which provides grants of up to £9,000 to help households switch to heat pumps. 

The energy department is drawing up cuts to various areas of expenditure as it is forced to find £2bn of savings in the next few weeks as part of a Downing Street drive to find extra money for defence spending. 

Potential cuts include not only heat pumps but home insulation grants, support for the nascent hydrogen industry and “carbon capture” schemes.

Sir Keir Starmer, the former prime minister, in June ordered all departments to make a 1 per cent cut to capital spending to pay for the Defence Investment Plan. But he singled out the Department for Energy Security and Net Zero to find an additional £2bn of cuts. 

Miatta Fahnbulleh, the energy secretary, is now under pressure to make savings of £100mn in the current year, £600mn in 2027-28, £700mn in 2028-29 and £600mn in 2029-30. She is considering a raid on the £15bn Warm Homes Plan, a programme to upgrade 5mn homes with insulation, solar panels and low-carbon heating. That would include cutbacks to the £2.7bn Boiler Upgrade Scheme (BUS), which is part of the WHP and includes subsidies for electric heat pumps.  

Industry figures criticised Fahnbulleh’s proposals to cut heat pump subsidies, which were first reported in Politico and the Guardian. 

Heat pumps are critical to cutting energy bills and progressing towards national climate targets, but are not being installed at a fast enough pace, the UK’s independent Climate Change Committee has previously warned.

The pumps are more efficient than fossil-fuel boilers and can run at times when electricity is cheaper, but upfront installation costs are high.

Deploying heat pumps was “critical” for both energy and national security, said Jess Ralston, energy analyst at the Energy and Climate Intelligence Unit.