Poorest will be hit hardest by plans to scrap insulation scheme, warn experts

The poorest in society will pay “the highest price” if the government goes ahead with plans to scrap a scheme that makes low-income homes more energy efficient, experts have warned.

The Energy Company Obligation (ECO) is a £1bn levy on energy bills which helps to pay for installation of energy efficiency measures in low-income households, but reports in The Guardian suggest the government is looking at scrapping it to tackle rising energy costs. 

In April, the energy price cap is expected to rise by around £700 at the same time as new taxes are levied and inflation is driving up the costs of everyday goods. 

The Labour Party has suggested a windfall tax to tackle rising energy bills, but the government has expressed reluctance to take this measure, instead discussing an end to the ECO levy.

Experts have warned, however, that removing the levy would save little money – about £29 on the average bill – while jeopardising the UK’s chance to create a just transition to net zero emissions by 2050. 

Zayn Qureshi, researcher at think tank Localis, said of the reports: “Without any viable alternative to replace the ECO scheme, this seems like a bad move at the worst time when energy bills are skyrocketing, which will be affecting the poorest households the worst.”

He added that “talk of scrapping the ECO gives a strong impression that the government does not have a handle on how to tackle the urgent issue of increasing energy efficiency and tackling fuel poverty”.

The UK has some of the least energy efficient homes in Europe, meaning that they take much longer to retain heat and lose heat quickly, leading to higher energy bills and fuel poverty. 

Around 3.6 million households are estimated to be living in fuel poverty, according to the End Fuel Poverty Coalition, with many forced to make choices between heating and eating. 

The government has pledged to help households move towards cheaper, renewable energy via schemes such as heat pump grants, announced in 2021. 

Heat pumps, however, cannot be installed where homes are below a certain energy efficient rating, meaning that insulation must be installed first.

Research conducted by Localis in October showed that this could leave thousands of households in the north of England without heat pumps, relying on costly, carbon-emitting fossil fuel boilers for longer. 

Previous government measures intended to improve insulation across the country have fallen flat, with the infamous Green Homes Grant scheme closing just nine months after it opened with limited take-up. 

In light of the need to insulate more homes to reduce fuel poverty and mitigate climate impacts, Mike Childs, head of policy at Friends of the Earth said talk of scrapping the ECO was “senseless”. 

“Cuts to funding for energy efficiency have saddled too many people with colossal energy bills,” he said. “Cruelly, this is pushing thousands into fuel poverty during the coldest months of the year. 

“Calls to further rollback cash which helps to make the poorest households warmer are not just senseless, but will cost thousands of people their jobs and keep us exposed to future global gas price hikes,” he said.

Childs was echoed by Qureshi, who said: “The poorest in our society will be paying the highest price if government doesn’t set out and stick with clear and long term policies on improving energy efficiency and helping people out of fuel poverty.”