Resolution Foundation

Heat and Buildings Strategy: A good start to getting our houses in order for net zero

The document outlines how the Government intends to shape the transition around ending our national reliance on gas boilers
Net Zero

The freshly released Heat and Buildings Strategy – the key document in ending our national reliance on gas boilers – attempts to set out how the Government intends to shape this transition in order both to hit our net zero targets, and to do it in a way that works for lower-income families.

By focusing public investment into insulation for low-income and social housing, it has made good on these plans, in the short term at least.

Supporting families on the lowest incomes with building upgrades that will lock in lower energy bills insulates them from the pain associated with future gas price spikes.

Get financial advice and industry news, to you help manage your money

Of course, the ambition falls short of what many campaigners want. But is now really the time to spend taxpayers’ money on insulating the homes of the better off?

There are plenty of other priorities for that money to be spent on. The near-£4bn for upgrading homes and public buildings will give the efficiency industry the multi-year certainty that the Green Homes Grant lacked, pushing investment in training and new skills that should allow the sector to rebuild after years of policy to-and-fro and bring down costs for all.

There is also money for heat pumps, albeit enough to fund just 90,000 upgrades over three years. At first glance this figure seems underwhelming, especially compared with the Government’s own target of 600,000 heat pumps going in homes per year by 2028. Climate Change Committee targets are more ambitious still, at 450,000 heat pumps installed by 2025 and nearly a million a year by the end of this decade.

However, this is seed money for a nascent British industry to make good on its promises to halve the cost of heat pumps inside two years.

Supporting innovation to bring down costs, rather than endless subsidies, is by far the most cost-effective route to decarbonising our homes and ensuring that families of all means can take part in the clean heat transition.

Low-income households have most to gain from cheaper, more stable energy costs. Recent Resolution Foundation research found the lowest income families are set to spend more than 10 per cent of total household budgets on energy once the price cap surges in April.

They have also been least likely to benefit from recent improvements in home energy efficiency. Cutting energy demand at home and shifting to domestically produced renewable energy will reduce the likelihood of testing winters – such as that we are about to endure – becoming regular features in the future.

Decisions on the make-up of energy bills, making heat pumps cheaper to run and removing implicit subsidies for high-carbon gas, will also change household finances. Around a quarter of electricity bills are made up of levies that support clean energy and fund social programmes.

This makes the cost of an increasingly clean fuel artificially high. Moving these away from electricity bills will cut the cost of running a heat pump, although care must be taken over where they end up.

The risk of lower-income families who are unable to afford the shift from gas to electricity shouldering more of these costs would not be fair.

Decarbonising UK homes won’t be done overnight. We’ll still be installing heat pumps and insulating walls in 2049. But government decisions this week appear to be a good start. The main test for the future is ensuring less well-off households benefit from the transition via lower bills, warmer homes and cleaner air.

This article was first published in the I Paper