What does industry think of the Spring Statement?

VAT on energy saving measures such as solar panels, heat pumps and roof insulation has been slashed to zero from 5 per cent for five years.

In his Spring Statement, Chancellor Rishi Sunak announced measures aimed at mitigating the pressure on household budgets, including cutting the cost of petrol and diesel by 5p, and raising the National Insurance earnings threshold to bring it in line with rate at which income tax starts to be paid.

Reaction to the measures was mixed: perhaps unsurprisingly, those working in heat pumps and solar thermal welcomed the removal of VAT. But others pointed out that this would only benefit those who could afford to have renewable technologies fitted in the first place and did nothing to help households hit hard by the huge hikes in energy costs, due to come into effect next month.

Mike Foster, CEO of the Energy and Utilities Alliance (EUA), said: “The Chancellor has clearly not heard the outcry over rocketing energy bills faced by millions. He has done nothing in the Spring Statement to help the vast majority of consumers who face bills doubling this year.

“His VAT cut on solar panels and heat pumps will be welcomed by those who make them and by those who can afford to fit them, but a VAT cut on energy bills would have helped everyone.”

“Frankly, consumers waiting to hear good news on their energy bills will be left asking, ‘is that it, Chancellor?’”

Adam Scorer, chief executive of charity National Energy Action said the Chancellor “fails to address the catastrophic impact on the poorest of skyrocketing energy bills, which are set to increase next week by around 54 per cent.

“The government must use spring and summer to come up with a real plan ahead of next winter if we are to avoid the worst of cold homes, debt and needless deaths.”

TV consumer journalist Chris Choi said on Twitter: “VAT cut on energy saving measures essentially means you have to spend money to save money.”

Mike Thornton, chief executive of Energy Saving Trust, said: “With millions in fuel poverty and millions more at increasing risk, households are still in need of further emergency measures to tackle the huge energy price rises ahead, going beyond the limited additional support announced today.

“Tackling the cost-of-living and energy crises must go hand in hand with meeting net-zero ambitions and reducing costs in the long term. UK energy bills are already nearly £2.5 billion higher than they would have been had green policies not been scrapped over the past decade.

“It is therefore good news that VAT will be cut to help homeowners install renewables and energy efficiency measures such as heat pumps, solar panels and insulation that will help reduce the UK’s reliance on fossil fuels, as well as help tackle rising fuel bills.

“But the UK government still needs to go further. Instead of cutting fuel duty, the overnment could be investing more in its existing energy efficiency programmes, offering lower energy bills year on year to struggling households and reducing emissions. Improving the energy efficiency of the UK’s most inefficient homes to meet an EPC C rating could reduce energy bills for those homes by an average of £500 a year.”

Carl Arntzen, CEO of Worcester Bosch, said: “We welcome the Chancellor’s removal of VAT on heat pumps, solar panels and other energy-efficiency measures. We feel that this will support the needed transition of UK homes towards a net zero future.

“One of the main barriers for consumers looking to install greener heating technology at home is the cost, so the savings this tax relief could bring may help counteract this, while contributing to an increased uptake of these types of measures.

“As the more specific details start to appear… it will be interesting to see whether the 5 per cent tax relief is for the products and materials, or, as we would hope, applies to the total cost of installation, as around 60 per cent of the cost of a heat pump installation is on ancillaries and labour.”

Henk van den Berg, strategic business manager, Heating & Renewables, at Daikin UK, said: “Removing VAT from heat pumps and other green measures is a positive step as it will make it easier for households who want to be more energy efficient. This move will also give the green light to many households contemplating a heat pump under this year’s Boiler Upgrade Scheme.

“However, eliminating the additional levy on electricity pricing, which was indicated in last year’s Heat & Building Strategy, has still not been addressed. This will need to be part of government policy sooner rather than later.”

Mark Wilkins, technologies and training director at Vaillant, said: “Vaillant welcomes the VAT cut on heat pumps and looks forward to understanding the detail of this initiative, which helps address the consumer barriers to the low-carbon technology.

“Consumers are one of the pivotal pieces of the jigsaw puzzle for achieving decarbonisation in the UK so, any mechanism put in place to increase consumer uptake of mass heat pump deployment, is a positive step towards achieving the UK targets.

“However, we are disappointed in the most recent announcement regarding the Boiler Upgrade Scheme (BUS). The downside to the BUS is that it complicates the installer process and provides a hiatus of up to seven weeks, between the RHI closing on the 31 of March and applications for BUS vouchers opening on 23May.

“While installations commissioned on or after 1 April may be eligible for the BUS, this almost two-month delay has the potential to be hugely damaging within the heating industry, especially to our installers, many of which are SMEs who do not have the available cash flow to wait weeks for reimbursement via an issued voucher.

“In the worst case, the delay to the opening of the BUS may stall installers’ work and affect their livelihoods. Additionally, there is no guarantee that the voucher will be retrospectively granted – this could account for up to £6,000 per job in the seven-week period. If an application is declined, it creates an extremely difficult relationship between homeowner and installer. With the power of consumers on social media, this may be hugely damaging to heat pump installer businesses and may damage their prospects of future work.

“We urge government to review the timeline for the BUS by extending the RHI until the BUS is fully operational, assuring confidence in the scheme and minimising interruption to installers’ work.”