One-third of UK funding for insulation and heat pumps remains unspent

A third of the funding pledged by the UK government for insulation and installing heat pumps has not yet been spent, analysis has shown, despite the continuing energy bills and cost of living crises.

About £2.1bn remains unspent of the £6.6bn that was supposed to be used between 2020 and 2025 on making buildings more energy efficient and decarbonising heat. The funding is part of the £9.2bn that was promised for such spending in the Conservative general election manifesto of 2019.

Insulating homes and switching from gas to heat pumps would save households money, and ease the cost of living crisis, but most people struggle to meet the upfront costs of such measures without government help.

The government’s failure to spend the cash that was allocated reflects a lack of effective policies on domestic insulation and decarbonisation, according to Juliet Phillips, senior policy adviser at the E3G thinktank.

Three years ago, the green homes grant was announced to fanfare, but the scheme, described as “botched” by a parliamentary committee, was abandoned within six months of its start. This followed similar abortive schemes over the past decade and more. This has made the housing industry reluctant to invest in training people to insulate homes and install heat pumps.

“Years of boom-bust policymaking has left industry decimated,” Phillips said. “There is a need for long-term certainty to build back the confidence needed to plan and invest in skills and supply chains.”

Although ministers have allocated cash to help decarbonise public buildings, and to provide energy efficiency upgrades in social housing and for some people on low incomes, there is currently no nationwide scheme for middle income households.

Last week, a House of Lords committee said the government’s boiler upgrade scheme was “failing to deliver”. The scheme, offering households up to £6,000 to replace current boilers with heat pumps or other low-carbon alternatives in England and Wales, was supposed to be worth £450m but only a third of its annual budget has been spent.

Graham Stuart, climate minister, has previously said that the underspend on the boiler upgrade scheme would not be recycled for heat pump spending, but returned to general Treasury funds.

The take-up of heat pumps in the UK has lagged behind many other European countries, which have been spurred by high gas prices and supply issues following Russia’s invasion of Ukraine.

E3G estimates that £8.7bn will need to be spent in the current parliament to put the UK on track to meet its carbon budgets, set by the Committee on Climate Change in line with the legally binding commitment to reach net zero greenhouse gas emissions by 2050.