Business leaders urge government to avoid ‘false choice’ on how to fund expanded domestic energy efficiency scheme

Scores of businesses working in renewables, insulation, and housing have urged Boris Johnson to fund new energy efficiency support through fresh spending commitments, amid fears the Prime Minister is poised to raid existing energy schemes for money to enable increased support for fuel poor households.

Nearly 50 businesses, trade bodies, green groups, and charities have written to the PM today warning against mooted proposals that would require a “false choice” between heat pump grants, energy efficiency upgrade schemes for hospitals, schools, and other public sector buildings, and home insulation schemes, arguing current government energy efficiency schemes for public buildings and the recently launched heat pump grant program should not be cut back to fund fresh measures elsewhere.

The move follows reports last week that Number 10 is considering diverting more than £1bn from existing initiatives – such as the Public Sector Decarbonisation Scheme and the recently-launched £450m Boiler Upgrade Scheme – in order to expand support for tackling fuel poverty in response to soaring energy costs.

Number 10 is reportedly looking at expanding support for installing insulation in fuel poor homes through the Energy Company Obligation (ECO) scheme, the fourth iteration of which was set to come into operation this year but has been set by government delays.

However, the idea prompted widespread anger last week among opposition politicians and environmental campaigners, who argued skimming funds from existing schemes was counterproductive, short-sighted, and amounted to ‘robbing Peter to pay Paul’.

Today’s letter – signed by firms such as Kingfisher, Rockwool UK, the Ecology Building Society, Pure Solar Ltd, and green business membership body the Aldersgate Group – welcomes the expansion of the ECO scheme, but it similarly argues raiding other schemes to pay for doing so is not the answer.

It further warns that shifting funding from elsewhere to pay for expanding ECO rather than raising further investment would the government’s ‘Levelling Up’ agenda, and “severely damaging private investment confidence at a time when we need industry to scale up to saving delivers to households and climate commitments”.

“We warmly welcome reports that the government is looking to expand insulation schemes to support a larger number of households in the wake of soaring energy costs,” states the letter, which has also been signed by E3G, Age UK, the Green Finance Institute, WWF, and the UK Green Building Council.

“We encourage the government to fund this expansion through new public spending commitments, rather than through diverting much-needed funding from schemes supporting critical energy saving measures for public buildings like schools and hospitals,” it added.

Amid rising inflation and living costs, exacerbated by Russia’s war in Ukraine, the UK’s energy price cap is expected to increase significantly once again in October, which the letter estimates will see homes with an EPC energy efficiency rating below ‘C’ pay £916 more per year for heating than the most efficient homes.

However, if energy saving measures such as insulation were installed in every home below a ‘C’ rating in order to bring it up to scratch, it would deliver an aggregate bill saving of £10.6bn each year at today’s prices, according to the coalition behind the letter.

As such, it said a well-designed and expanded ECO scheme could play a key role in helping to cut bills and spurring industry innovation, with a further £1bn funding potentially helping households install measures that could save an average of £342 per year on bills.

But the organizations stress any new ECO funding should come through additional capital investment, rather than by diverting funding away from budgets for existing schemes, noting in particular the huge rise in energy costs also faced by hospitals and schools this year.

The letter also points to the Conservative Party’s manifesto commitment to spend a further £1.4bn on home and public building energy efficiency during the current Parliament that has not yet been fully allocated.

“Now is the time to deliver this commitment and provide additional funding for home insulation, rather than risk placing schools and hospitals under unnecessary additional strain,” it states. “While we strongly welcome indications that the government is looking to support a well-designed ECO Plus for those at risk of fuel poverty, we urge you to avoid forcing a false choice between hospitals, heat pumps, and home insulation.”

The government, which has yet to formally announce the launch of the next phase of the ECO scheme was considering a request for comment at the time of going to press.

But in an interview with BusinessGreen Earlier this month, Energy Minister Lord Callanan insisted the scheme was underway delays in putting its underlying legislation to parliament. “There’s a slight delay in the publication of the statutory instruments implemented but essentially ECO 4 is already being delivered,” he said.

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