After years of painfully high energy bills, diminishing household budgets and stalled investment, this year’s budget, on 26 November, should be the moment when the government finally starts to confront why the UK’s energy system is so expensive. And yet, if recent briefings suggesting that Labour will dramatically scale back the heat pump subsidy for households are to be believed, it is now repeating exactly the same mistakes as its predecessors.
People want relief from painful energy bills. In the long term, electrification is the only way to provide this. In practice, that means switching from gas boilers to heat pumps, shifting from petrol cars to electric vehicles: boosting access to technologies that are modern, cheaper to run, and are already becoming mainstream. At present, our energy system protects the legacy gas-based system, subsidising supply and penalising demand in ways that keep gas artificially cheap and electricity artificially expensive, even when electric technologies cost less to operate.
That is why recent briefings are so alarming. The Treasury is reportedly considering scrapping the energy company obligation (ECO), which is the UK’s only large-scale, long-running scheme that funds home insulation and efficiency upgrades for low-income households. If this cut goes ahead, the warm homes plan is likely to be gutted. Briefings also suggest that the government will impose a new pay-per-mile tax on electric vehicles, as well as introducing the congestion charge for EVs, just as the EV market is starting to boom. We’ll need to wait for the budget to see which of these measures the chancellor, Rachel Reeves, decides to implement. But the fact they have been briefed at all suggests that Downing Street thinks that slashing support for electric technologies is a sensible, cost-saving measure.
This would be even more shortsighted than the previous, Conservative government, whose dedication to cutting “the green crap” has reportedly added £22bn to household energy bills since 2015. It is always the consumer who pays for short-termism: although ministers may announce a temporary bill cut at the budget that cut cannot last, since refusing to tackle the levies and policy costs that make electricity artificially expensive means bills will simply rise again once new levies have been introduced. Energy company EDF predicts that bills are likely to be about 12% higher in 2030 than they are today.
Our politicians would rather do anything than fix these underlying issues, which is somewhat ironic, given prime minister Keir Starmer’s initial promise to end the previous 14 years of “sticking plaster politics”. Take heat pumps. These dramatically reduce the energy required to heat a home, and after years of delay to their rollout and mass adoption, they are finally ready to scale. Households are starting to opt for them over gas boilers, installers are investing in training, staff and equipment to meet rising demand, and manufacturers are expanding production and bringing down costs. Heat pumps use far less energy to deliver the same comfort as gas: their whole purpose is helping households break free from high-cost heating for good. This should be the moment to accelerate on the technology.
Instead, the government is reportedly considering scaling down the only national support mechanism, the boiler upgrade scheme, which provides grants to households to cut the upfront cost of installing a heat pump. Doing so would erode confidence in heat pumps, stall progress and push households back on to higher-cost heating for another decade. It’s much the same story as ECO: cutting this back would leave people colder, poorer and permanently overexposed to volatile fossil fuel prices and inefficient homes.
All these ideas rest on a fundamental misunderstanding that electrification is the cause of high bills or, at best, a luxury the UK cannot afford. Yet supporting electrification is the only true means of escaping high bills. Nearly 40% of a typical electricity bill isn’t energy at all: it’s fixed charges and legacy costs (the full cost of decarbonisation schemes and network upgrades is loaded on to electricity bills, while gas bills are largely shielded from these policy costs, for example. Until these distortions are corrected, electricity will look expensive, even though the technologies that run on it are in fact cheaper to operate.
The government seems ready to weaken the very technologies that depend on electricity in the misguided belief that a temporary cut to energy prices will ease the cost of living crisis long enough to improve polling numbers and avoid more politically difficult choices, such as income tax rises. Yet by the time of the next election, most of the savings delivered by these cuts will have evaporated, and they will all have been for nothing. There is no serious future for affordable British energy that doesn’t accelerate electrification. Tools such as heat pumps and EVs reduce energy use, stabilise bills and give households real control over prices. Weakening them now risks locking Britain into a permanently expensive energy system.
We already know what happens when a government guts insulation and clean energy programmes. It cost households billions in higher bills, and delays the transition to a cheaper and greener energy system. If Labour repeats that mistake, the consequences will be even more severe this time because the UK has already used up its margin for error: bills are higher, homes are less efficient than our European neighbours’ and there is far less fiscal space to bail households out again when prices inevitably rise in future.
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If ministers want lasting bill cuts, not temporary relief, they should stop undermining electrification, fix the system that keeps electricity expensive, and put consumers, not producers, at the centre of Britain’s energy future. Otherwise, we will look back on this budget as the moment that the government blew a gigantic opportunity.
