LONDON, 6 March 2024 — Ahead of Chancellor Jeremy Hunt’s Spring Budget on 6 March, UK100 is calling for investment over tax cuts, highlighting that polling continues to show Brits want long-term investment to improve lives and livelihoods, not election giveaways. This comes as the latest statistics show over 3 million UK households are struggling in deepening fuel poverty.

Britain has some of the oldest and draughtiest houses in the UK, almost £1 in every £4 spent on heating bills is wasted on energy inefficiency. But short-term, stop-start national schemes show little sign of addressing the crisis. 

The top-down Great British Insulation Scheme has upgraded only 2,900 homes, falling disastrously short of its 300,000 target. Yet trailblazing local authorities like Leeds and Manchester continue innovating, even in a broken system, on urgent retrofits.

But, as the recent £2.5 billion emergency bailout demonstrated, underfunded local authorities across the country are fire-fighting bankruptcy and desperately trying to keep essential services afloat. UK100 argues any fiscal headroom should be reinvested in public services, including local government efforts to improve household energy efficiency. 

Ministers spent more than £40 billion subsidising energy bills at the height of the energy crisis. With every £1 invested in local action returning £14 through cheaper bills and health and wider social benefits, UK100 argues long-term investment in energy efficiency now will save another hefty bill down the line.

UK100 Chief Executive, Christopher Hammond says:

“The public know that an election is coming up, but they still expect our politicians to be working to fix our long-term problems. Polling shows that when presented the options, they prefer sustained investment in repairing crumbling public services rather than short-term giveaways.

As we go into spring, we mustn’t forget the rising numbers of people in fuel poverty and millions were unable to keep warm over the winter.  Everyone deserves a warm, affordable to run home yet the reality for millions is anything but. The Government spent £40 billion subsidising everyone's energy bills, but it’s unlikely to be able to afford so again and with the right plan they won’t need to. Rather than waiting until we’re again in crisis, the Spring Budget is the chance to accelerate retrofit projects that local leaders can unlock as the fastest, most cost-effective route to delivering warm homes for all.

If the Chancellor insists tax cuts are non-negotiable despite lacking significant public support, these must be narrowly targeted at energy efficiency and removing barriers for ambitious councils leading delivery, Hammond argues.

Specific tax and policy changes proposed by UK100 could include:

• Introducing variable stamp duty rates to incentivise energy efficient homes
• Making permanent the 5% VAT reduction on retrofitting homes
• Lifting restrictions on councils’ ability to set higher new build standards, and implementing recommendations in UK100’s Powers in Place report

Hammond concludes:

“If the Chancellor is determined to cut taxes, they should focus on enabling national and local government to work together to build the warm homes Britain so desperately needs, providing an economic boost and putting money back in people’s pockets not just before an election, but for years to come. Any tax cuts need to be accompanied by the removal of outdated restrictions and reform of failing top-down schemes that are hindering progress. It’s time to trust in local leaders to deliver where Whitehall can’t”

Notes

Variable stamp duty

A system of variable Stamp Duty rates and rebates would see house buyers receive a discount if a property is above a given energy efficiency standard or pay a higher rate if its performance is poor, encouraging new buyers to improve the energy performance of their home in a given period. Parity Projects modelling estimates this mechanism could facilitate around 1.8m whole house retrofits between 2020-2023/24.

Permanent VAT cut on retrofit measures

In order to stimulate demand for retrofit, government could extend the reduced 5% VAT rate to cover all wider extension or renovation works under a certain cost or eligibility ceiling, provided a certain EPC rating was achieved. Contractors could therefore offer reduced quotes for wider works which include energy efficiency, driving a supply-chain led uptake. Assuming current wider renovation rates and spending, Parity Projects modelling estimates this mechanism could facilitate around 2.4m whole house retrofits over four years.

Source: A green stimulus for housing: The macroeconomic impacts of a UK whole house retrofit programme, University of Leeds, Parity Projects and New Economics Foundation

Lifting restrictions on local authorities to set higher energy efficiency standards

The Written Ministerial Statement was issued in December 2023 seeks to restrict the ability of local authorities to set Net Zero housing requirements, it reads:

Any planning policies that propose local energy efficiency standards for buildings that go beyond current or planned buildings regulation should be rejected at examination if they do not have a well-reasoned and robustly costed rationale that ensures:

• That development remains viable, and the impact on housing supply and affordability is considered in accordance with the National Planning Policy Framework.
• The additional requirement is expressed as a percentage uplift of a dwelling’s Target Emissions Rate (TER) calculated using a specified version of the Standard Assessment Procedure (SAP).

UK100’s Powers in Place report

The report examines the powers available to local authorities ahead of the 2023 local elections and concludes that despite the progress made by some trailblazing local authorities, many are still waiting for the government to provide the necessary resources and powers to fully commit to their Net Zero ambitions.

It found that Improving the energy performance and reducing carbon emissions associated with existing buildings is arguably the most important infrastructure challenge for the UK in reaching Net Zero emissions

To overcome the barriers facing local authorities, the report recommends:

• Provide training for the Planning Inspectorate in climate change and Net Zero buildings and planning policy.
• Rapidly introduce zero carbon building standards for all buildings, and apply the proposed “in operation” energy and carbon performance requirement to homes as well as non-domestic buildings.
• Embed a requirement for local planning authorities to prioritise The Climate Change Act in Planning Policy.
• Revise the maximum permitted local authority uplift on Building Regulations in the Planning and Energy Act 2008 and revoke the Written Ministerial Statement of 25th March 2015
• Extend Minimum Energy Efficiency Standards to cover all buildings at the point of sale, change of use, and major renovation or refurbishment.
• Set up long term and flexible funding schemes for landlords, private householders and businesses to enable them to meet improved Energy Performance Certificate requirements.
• Introduce mandatory landlord licensing and a national database of EPCs for tenanted properties: with a requirement to supply information back to local authorities.
• Revise the EPC system to better reflect in-use energy performance and to be appropriate for all different building types.
• Expand research to define a set of measures that are appropriate for all different housing types including traditional buildings, based on evidence from building types across the UK. 
• Support the training providers and the construction industry to rapidly invest in skills and capacity to deliver zero carbon buildings and install appropriate retrofit measures to existing buildings without harming the building fabric.