Budget Cuts: £741m removed from heat pump scheme

Chancellor John Healey announced over £3 billion in cuts to the energy department budget on Wednesday.

The funding reduction was designed to finance higher defence spending across the government.

A large portion of the savings came from the boiler upgrade scheme, which received a cut of £741 million.

This program allows households to claim £7,500 toward the cost of installing electric heat pumps.

Currently, about 60,000 heat pumps are fitted in existing homes each year.

The government previously planned to increase annual installations to 250,000 by 2030.

Ministers stated that funding for the scheme will now rise only in line with inflation.

Andrew Sissons, a director at the research charity Nesta, warned that the changes make it very difficult to hit clean heating targets.

He said it is possible that a Labour government will be the first to miss targets signed up to in the current carbon budget.

The heat pump cuts were part of a wider set of reductions to green energy projects.

Healey also announced £250 million in cuts to the warm homes plan and £500 million in cuts to hydrogen schemes.

An additional £200 million was removed from funding for carbon capture and storage technology. Healey specified that future renewable projects will only be approved if they demonstrate cost reductions and grid readiness. Officials said this approach prioritises cost over simply building capacity to meet green targets. Paul Ovenden, a former adviser to Keir Starmer, described the move as picking the bones of Ed Miliband’s project clean. Ovenden noted that Miliband always won arguments against such cuts while he held the energy portfolio. He said that had Miliband not helped oust Starmer and Reeves, he would likely still be in post. Ed Matthew, director of the UK programme at E3G, called the decision frustrating. He stated that the UK is behind many other countries in rolling out heat pumps. Matthew said a sea change in take-up is needed to close that gap. Allies of Energy Secretary Miatta Fahnbulleh and former secretary Ed Miliband defended the government’s stance. They pointed to Healey’s announcement to shift green costs away from bills and onto taxpayers. They argued that this move aligns with the affordability focus championed by both secretaries. Allies also cited plans to change energy markets so electricity prices are no longer tied to gas prices. One source said prioritising cost is not a shift away from the green agenda. A spokesperson for the energy department noted that £110 billion in private-sector investment has been announced over the last two years. The spokesperson said the department has secured enough clean power for over 20 million homes. They affirmed the commitment to meeting the heat pump target and protecting consumers from volatile fossil fuel prices.