UK government considers scrapping ‘Boiler Tax’ amidst Rising costs concerns

In a significant development, the UK government is contemplating the elimination of the much-debated “boiler tax” following a surge in prices by manufacturers of new gas boilers.

The increase in prices is attributed to covering fines imposed on manufacturers for potential non-compliance with the new targets, requiring the installation of eco-friendly heat pumps in homes.

This decision, which may not sit well with environmental advocates, follows Chancellor Rishi Sunak’s earlier announcement of a revision to the UK’s net-zero policies, including a delay in the deadline for prohibiting new petrol and diesel cars.

Part of the government’s clean heat strategy, the targets were formulated to accelerate the phasing-out of gas boilers, aiming for 600,000 annual installations of eco-friendly heat pumps by 2028.

Starting in April, fossil fuel boiler manufacturers will be mandated to achieve a quota for heat pump installations, equivalent to 4% of their gas or oil boiler sales. Failure to meet this requirement will result in a £3,000 fine for each installation shortfall.

Reports surfaced last year about lobbyists from the gas boiler industry attempting to postpone the implementation of these measures. Energy Secretary Claire Coutinho, who assumed office in September, is reportedly considering scrapping the targets and fines, expressing concerns about their impact on consumers.

A government source told the Sunday Times, “Boiler manufacturers have imposed unjustifiable price hikes on families – this is not acceptable. We are revisiting the policy and anticipate manufacturers to rectify their pricing immediately.”

While a formal decision is pending, Coutinho believes that abandoning the policy might be the most effective way to prompt manufacturers to lower their prices. The government asserts that it can still achieve the target of 600,000 heat pump installations through alternative schemes and incentives.

In anticipation of the impending targets, manufacturers initiated price hikes last year. In September, Worcester Bosch, the UK’s largest manufacturer, announced price increases of up to £300, citing the insufficient scale of the UK heat pump market as the reason for the hike and the inevitable fines they would face.

While the Department for Energy Security and Net Zero has not made a formal announcement, a spokesperson stated, “We remain committed to our goal of installing 600,000 heat pumps annually by 2028. We aim to do this without imposing burdens on consumers, having increased our heat pump grants by 50% to £7,500 – one of the most generous schemes in Europe. This pragmatic approach has shown positive results, with nearly a 50% increase in applications in December 2023 compared to the same month in 2022.”