Concerns are growing that the government is planning to cut VAT on gas and electricity bills in the Autumn Budget but could once again overlook rural homes on oil heating.
In their letter to the Prime Minister, they argue that this is part of a worrying trend of ignoring the needs of rural households when it comes to home heating.
The Government recently published its carbon delivery plan, outlining its ambition for carbon reduction across all UK sectors. However, the plan did not include specific pathways for rural home decarbonisation. Labour was due to publish its Warm Homes Plan by the end of October, but this has also been delayed, leaving rural communities in limbo.
Discriminating rural homeowners
The letter from the Trade Associations argues that overlooking oil heated homes for a VAT discount would be “unfair and discriminatory”,
The Government’s stated decarbonisation policy is to incentivise households to switch to heat pumps. However, recent government demonstration projects have shown that this could mean upfront costs in excess of £20,000 for rural homes since they tend to be older and in need of more work to enable a heat pump to run efficiently.
This means many households who claim the £7,500 Boiler Upgrade Scheme (BUS) grant would still have to pay thousands more on top. This presents a significant and unfair financial disadvantage for those in oil heated households looking to switch.
UKIFDA and OFTEC have long argued that, in the current cost of living crisis, consumers simply cannot afford these upfront costs. At the same time, the government doesn’t have the fiscal headroom to increase the grant funding available or invest the significant amount of money needed to retrofit the 1.7 million oil heated households through an energy upgrade scheme.
Offering a solution to these challenges, the industry bodies have been urging the government to instead support a renewable liquid fuel solution. A live demonstration project in around 150 homes over three heating seasons has shown all existing oil heating users could make the switch to an initial blend with kerosene with no upfront cost and a drastic reduction in their emissions. Over 1,000 oil heated households have sent letters to their MP in the past month calling on the government to act.
Heating oil is currently exempt from excise duty but a legislative anomaly means renewable heating fuels would face an additional 10 pence per litre in duty. The government is being urged to resolve this inconsistency by removing the duty on renewable heating fuel, which would have no impact on Treasury income.
A message to rural communities
UKIFDA CEO Ken Cronin and OFTEC CEO Paul Rose said: “Once again there’s a feeling rural homes are being overlooked by this government. If the Chancellor cuts VAT for gas and electricity bills in her upcoming Budget but ignores oil heated households, what kind of message does this send to hard-pressed rural communities?
“The delay to the Warm Homes Plan and a failure to come forward with a pragmatic and cost effective approach to decarbonise oil heated homes is part of a troubling pattern of failing to understand the needs of rural homes.
“The government genuinely needs to explore the range of solutions on offer outside of just electrification. We have provided overwhelming evidence that renewable liquid fuels can be delivered with minimal upfront cost to consumers and drastically cut emissions.
“We’ve also shown that there is more than enough fuel for use across the UK’s 1.7 million oil heated homes. The Government now needs to provide some certainty for rural communities who are stuck in limbo.”
For more information visit www.futurereadyfuel.info.
Image provided by UKIFDA / OFTEC