UK to scrap ‘boiler tax’ after makers raise prices to cover any fines
The UK government is poised to scrap the so-called “boiler tax” after manufacturers hiked the price of new gas boilers to cover the fines they have to pay if new targets to fit eco-friendly heat pumps in homes are missed.
The move, which will disappoint environmentalists, comes several months after Rishi Sunak announced a watering-down of the UK’s net-zero policies, a climbdown that included pushing back the deadline for banning new petrol and diesel cars.
The targets, part of the government’s clean heat strategy, were drawn up to hasten the phasing-out of gas boilers and deliver 600,000 eco-friendly heat pump installations a year by 2028.
This means that from April, manufacturers of fossil fuel boilers face a quota for heat pump installations relative to their gas or oil boiler installations. Companies are required to match, or substitute, 4% of their boiler sales with heat pumps or face a fine of £3,000 for every installation they fall short by.
The Guardian reported last year that lobbyists for the gas boiler industry were trying to delay the new measures. Now Claire Coutinho, who became energy secretary in September, is reportedly minded to scrap the target and fines after concluding that it was bad for consumers.
“Boiler manufacturers have saddled families with indefensible price hikes – this is not right,” a government source told the Sunday Times. “We’re looking again at the policy, and expect manufacturers to do the right thing and remove their price hikes immediately.”
In readiness for the new targets, manufacturers started pushing up prices last year. In September, Worcester Bosch, the UK’s biggest manufacturer, told the Times its prices were going up by as much as £300 because the UK market for heat pumps was not yet at sufficient scale, which meant it was “inevitable” that it would face fines.
A formal decision has not been announced, but according to the report, Coutinho believes ditching the policy may be the only way to get manufacturers to drop their prices again and that the government can still hit its target of 600,000 heat pumps through other schemes and incentives.
“We remain committed to our ambition of installing 600,000 heat pumps a year by 2028,” said a Department for Energy Security and Net Zero spokesperson when approached for comment.
“We want to do this in a way that does not burden consumers, and we’ve increased our heat pump grants by 50% to £7,500 – making it one of the most generous schemes in Europe.
“This pragmatic approach is working, with a nearly 50% increase in people applying in December 2023 compared to the same month in 2022.”