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UK government contemplating reversal of “Boiler Tax” amidst price surge

February 5, 2024

In a potential shift in the UK’s clean energy landscape, the government is considering scrapping the controversial “boiler tax” following manufacturers’ price hikes on new gas boilers.

This increase was an attempt to cover fines imposed if the targets for installing eco-friendly heat pumps in homes are not met.

The decision, likely to disappoint environmentalists, comes months after Rishi Sunak scaled back the country’s net-zero policies, including postponing the deadline for banning new petrol and diesel cars.

The clean heat strategy, a pivotal part of the government’s plan, aims to accelerate the phase-out of gas boilers and achieve 600,000 annual installations of eco-friendly heat pumps by 2028. Starting April, fossil fuel boiler manufacturers will be obligated to match or substitute 4% of their boiler sales with heat pumps. Failure to do so incurs a fine of £3,000 for each installation falling short.

Despite reported lobbying efforts by the gas boiler industry to delay these measures, Energy Secretary Claire Coutinho is reportedly considering abandoning the targets and fines. The rationale behind this potential decision is the belief that the policy adversely affects consumers due to unwarranted price hikes by boiler manufacturers.

A government source shared with the Sunday Times, “Boiler manufacturers have saddled families with indefensible price hikes – this is not right. We’re looking again at the policy, and expect manufacturers to do the right thing and remove their price hikes immediately.”

In anticipation of the upcoming targets, manufacturers raised prices last year. Worcester Bosch, the UK’s largest manufacturer, announced in September that prices were increasing by up to £300 due to the insufficient scale of the UK heat pump market, making fines inevitable.

While a formal decision is pending, Coutinho is leaning towards abandoning the policy, believing it could prompt manufacturers to reduce prices. The government maintains its commitment to the target of 600,000 heat pump installations by 2028 through alternative schemes and increased incentives.

A spokesperson from the Department for Energy Security and Net Zero stated, “We remain committed to our ambition of installing 600,000 heat pumps a year by 2028. 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.” Stay tuned for further updates on this evolving story.