Rishi Sunak blocks green homes plan that would have lowered energy bills

Whitehall officials livid over Treasury’s refusal to fund scheme making properties more energy efficient as cost of living crisis bites

Ben Riley-Smith, Political Editor 5 April 2022 • 9:30pm

Rishi Sunak has made clear for months his concern about the scale of UK borrowing Credit: Justin Tallis/Pool via AP

Plans to spend hundreds of millions of pounds to reduce bills by making homes more energy efficient have been blocked by the Treasury.

The Telegraph can reveal that Number 10 and the Business Secretary’s team were pushing for an expansion of the Energy Company Obligation (Eco) scheme to be included in Thursday’s energy security strategy.

The Eco scheme uses money raised from a levy on energy bills to pay for home energy efficiency improvements for the poorest households.

The proposal was for the Treasury to put in about £200 million a year extra of taxpayer money, so that the £1 billion scheme could be expanded beyond people receiving benefits.

Tens of thousands of households would have benefited and the move would have been championed by the Government as a boost to ease the cost of living crunch.

However, Rishi Sunak is understood to have rejected the calls, as the Treasury stands firm on the spending agreements set out last autumn for the next three years.

‘Treasury doesn’t believe in the plan’

The refusal has left some in Whitehall who are supportive of the scheme livid.

A senior government figure said: “It would have been something that we could say to households: ‘We’re on your side, we want you to reduce your bills.’ But the Treasury doesn’t believe in it.”

The source added that the Treasury had kept removing lines from the energy strategy that had spending implications, despite support from Number 10 and the Department for Business, Energy and Industrial Strategy - calling the situation “ridiculous”.

However, an ally of Mr Sunak countered on Tuesday night, saying: “We have to be scrutinising every extra penny of taxpayer money that is proposed for spending because ultimately, we want to do the Conservative thing and cut taxes for people.”

The energy security strategy, which promises to map out how the UK reaches energy independence, has been delayed for weeks amid wrangling between Number 10 and Number 11 about how ambitious to make new pledges on nuclear power.

Mr Sunak has made clear for months his concern about the scale of UK borrowing and ballooning debt repayments as interest rates rise, creating tensions with a Prime Minister more eager to agree to new spending.

Sections of the document were still being rewritten on Tuesday night, less than 48 hours before it is due to be published.

Expansion in nuclear spending

Kwasi Kwarteng, Boris Johnson, Helen Whately and Tom Samson — Kwasi Kwarteng and Boris Johnson with Helen Whately, the Exchequer Secretary, and Tom Samson, the chief executive of Rolls-Royce SMR, looking at a model of a Rolls-Royce nuclear power plant last month. Nuclear will be a key part of the Government’s strategy Credit: Simon Dawson/No 10 Downing Street

Kwasi Kwarteng, the Business Secretary, talked up the major expansion in nuclear spending, which will be a central aspect of the strategy paper.

He said: “Most of Britain’s nuclear fleet will be decommissioned this decade. We need to replace what we’re losing and go further, from large-scale plants to small modular reactors. In this week’s energy security strategy, we’ll reverse 30 years of drift and take the big decisions to generate more nuclear power.”

The current Eco scheme does not involve public money. It is funded by the levy on energy bills, which is then reinvested by energy suppliers.

The scheme funds measures such as the installation of insulation or the upgrade of an inefficient heating system for some of the country’s poorest households.

To qualify, households need to be on the Warm Home Discount Scheme or be receiving benefits, such as Universal Credit or Housing Benefit.

The Tories pledged to spend £9 billion on improving energy efficiency in its 2019 election manifesto. Measures such as insulation mean that less heat is lost from homes, bringing down bills.

Government funding for insulation was provided in the Green Homes Grant, but that scheme was scrapped in March 2021 after widespread criticism about how it worked.

The proposal being pushed in recent weeks was to expand Eco beyond the poorest families, providing support to tens of thousands more households.

One idea was for the money provided by the Treasury to be split “50-50”, meaning that money invested in insulation by households would be matched up to a certain amount.

The Treasury’s rejection of the proposal fits with its wider approach that the energy strategy should not be a chance to renegotiate spending levels for the coming years.