The Government published the British Energy Security Strategy in April 2022, proposing additional support to improve the energy efficiency of homes1. The measures included removing VAT on installations of energy saving materials, such as insulation and low carbon heating, for the next five years1. The strategy also set out support for retail lenders to offer consumers low-cost finance for energy efficiency measures, an energy advice service to help consumers improve the energy performance of their homes, and a review of the practical planning barriers households can face when installing energy efficiency measures, including in conservation areas and listed buildings, to be completed by the end of 20221.
The strategy followed the Heat and Buildings Strategy and the Net Zero Strategy, both published in October 2021, which set out plans based on improving the Energy Performance Certificate (EPC) rating of buildings1. EPCs rate how energy efficient a building is, with ratings from band A (very efficient) to band G (inefficient)1. Those earlier plans included delivering the Future Homes Standard so that new-build homes in England are "ready for net zero" from 2025; upgrading fuel poor homes in England to EPC band C "where reasonably practicable"; consulting on phasing in higher minimum performance standards to ensure all homes meet EPC band C by 2035, "where cost-effective, practical and affordable"; setting long-term regulatory standards to upgrade privately rented homes to EPC band C by 2028; and considering a long-term regulatory standard to improve social housing to EPC band C, subject to consultation1.
The strategy and the earlier plans were credited with setting high ambitions but criticised for a perceived "limited focus" on energy efficiency measures1. In its annual Progress Report to Parliament, published 29 June 2022, the Climate Change Committee said:
"Sharply rising fuel costs should have given added impetus to improving energy efficiency, yet the necessary programmes are not in place."
The Library briefing records regional differences in the housing stock. In 2019, Yorkshire and the Humber had the lowest proportion of any English region of dwellings in the top three bands (A to C), while the North East had among the highest share in those bands and the smallest proportion in the two lowest bands (F and G)1. In March 2022, the Energy & Climate Intelligence Unit published analysis showing that households in fuel poverty are disproportionately found in the north of England, at one million homes, and the East Midlands, and that these regions have the highest proportion of homes below the Government's EPC target1. The Energy Company Obligation scheme, which started in 2013 and requires energy suppliers to fund heating and insulation measures in homes through a levy on energy bills, had delivered more installations in the three northern regions of England than in any other regions or nations in Great Britain up to March 20221.
Why it matters for households
The VAT removal applies to installations of energy saving materials, so it changes the cost of having insulation or low carbon heating fitted rather than the cost of the energy itself1. The EPC band targets set out in the earlier strategies describe the standard that homes in England are expected to reach over time, with privately rented homes facing a band C standard by 2028 and all homes consulted on for band C by 20351. For a household, the EPC band of a property is a measure of how much energy it takes to heat and light, and therefore of exposure to running costs. The briefing does not report the rates of VAT that applied before the change, the list of materials covered, or the exact date the relief ends.
What happens next
The review of planning barriers for energy efficiency measures, including in conservation areas and listed buildings, was to be completed by the end of 20221. The briefing does not report the outcome of that review.
Sources1 cited
- Energy efficiency of homes in the north of England - House of Commons Library, commonslibrary.parliament.uk