The new Prime Minister Liz Truss has confirmed that green levies that, in part, pay for insulating poorer homes will be moved from bills to general taxation, according to analysis published by the Energy and Climate Intelligence Unit (ECIU)1. The decision was backed by NGOs and the energy industry1.
The ECIU analysis, updated on 8 September 2022 to account for the government announcement on the Energy Price Guarantee, sets out what the shift could mean alongside the freeze. It states that energy prices will be frozen at £2,500 for the average home, and that with bills at that level every pound invested in insulation will effectively be paid back by the end of Q1 2025, based on industry price predictions, a steady gas price in 2024 and the scheme extending beyond the current two-year period1. It adds that the homes themselves will save £600 from their bills1.
The analysis puts the cost of a basic package of measures at as little as £1,000 per home, covering loft insulation, cavity wall insulation and heating controls, or a similar package, enough to move an Energy Performance Certificate band D home, described as the UK average, to band C, the government's target for 20351. Around 10 million properties lack one or both of loft and cavity wall insulation1. The Energy Company Obligation (ECO) has provided energy efficiency retrofit into over 2.3 million homes since 2013, and the energy industry has confirmed it could insulate 500,000 homes this winter and 1 million homes per year from 2023 through a ramping up of the scheme1.
The ECIU warns that if the levy change leads to no significant increase in the rate of insulating homes, which it says has dropped dramatically in the past ten years, many households will be locked into higher bills for years to come1. It cites the IMF as saying that in Europe the UK is being worst hit by the gas crisis because of the poor energy efficiency of our homes and a heavy reliance on gas1.
"The new Prime Minister Liz Truss has confirmed that 'green levies' that, in part, pay for insulating poorer homes will be moved from bills to general taxation"
The figures for bills before and after government intervention are set out in the analysis1:
| Period | Average household bill |
|---|---|
| Ofgem price cap, October 2022 (pre-intervention) | £3,549 |
| Energy Price Guarantee, average home | £2,500 |
| Cornwall Insight forecast, Q1 2023 | £5,387 |
| Cornwall Insight forecast, Q2 2023 | £6,616 |
| Cornwall Insight forecast, Q3 2023 | £5,897 |
| Cornwall Insight forecast, Q4 2023 | £5,887 |
Polling by Opinium for the ECIU, conducted between 30 August and 1 September 2022 among 3,001 GB adults, found 54% of respondents rated energy a top three issue compared with 50% for health, while 28% said they were struggling now with energy bills and a further 47% expected to in the future1. Support for incentives and investment for homeowners and landlords to improve home insulation stood at 82%, against 85% for freezing the price cap and 86% for cash payments and expanding renewables1. Separate ECIU polling of Conservative Party members found 85% support incentives and investment for homeowners and landlords to improve home insulation and energy use1.
Why it matters for households
The policy costs and levies on energy bills are a component of what households pay, and moving the green levies to general taxation changes who funds the insulation element rather than removing the cost. The practical question the analysis raises is whether the money reaches the same purpose at a faster rate: the ECIU states that if the change leads to no significant increase in the rate of insulating homes, many households will be locked into higher bills for years to come1. For a home's energy independence, the fabric of the building is the part that reduces how much gas has to be bought in the first place, and the analysis links the UK's exposure to the gas crisis directly to poor energy efficiency and heavy reliance on gas1. The Energy Price Guarantee freezes the unit price for the average home, but it does not change how much heat a poorly insulated property loses.
What happens next
The analysis states that the scheme would need to extend beyond the current two-year period for the payback calculation to hold, and that industry estimates show prices expected to be above pre-crisis levels for the rest of the decade1. It notes that bills are predicted to be even higher next winter, at £5,887, and not to return to pre-gas crisis levels by the end of the current Parliamentary term in 20241. No further dated steps on the levy transfer itself are set out in the analysis.