Spending cuts and a changed political landscape. What now for off-grid decarbonisation?
In the face of mounting economic uncertainty, the government has set out its intention to reduce public expenditure and reassess priorities across key policy areas. It’s clearer than ever that achieving net zero, a commitment critical to tackling climate change, must now be pursued with far greater pragmatism and sensitivity to both financial and social realities. The government cannot ignore that the time has come for a genuine rethink on how we decarbonise our homes.
In her recent Spring Statement, the embattled Chancellor Rachel Reeves set out a clear message: government must be more efficient, reduce public expenditure, and focus on growing the economy. Yes, it’s true she set this out at the start of the new Labour government, but what’s different now is the overwhelming economic and political pressure from an economy that remains stubbornly slow on growth and a reduction in spending power.
The chancellor has previously stated that economic growth must take precedence over meeting net zero targets, which has widely been seen as at odds with Ed Miliband’s approach in his department. Her remarks, however, underscore a growing recognition within the Labour Party that the UK’s decarbonisation strategy must be grounded in economic reality and designed to avoid placing undue burden on households and businesses.
‘Net zero by 2050 no longer an achievable goal’
This mood of reassessment is not limited to Labour. Just recently, Conservative Party leader Kemi Badenoch declared that reaching net zero by 2050 is no longer an achievable goal. This is a remarkable admission from a Party that was leading the net zero charge in government less than a year ago. This underscores the changing political landscape and public opinion, something which Reform UK has been able to capitalise on, gaining ground in the polls.
Together, these political signals and economic pressures point to an urgent need for the government to revise its current approach to net zero. This is particularly true when it comes to decarbonising off-grid homes – homes which are represented by dozens of new Labour MPs for the first time. As we know, the main solution being promoted for our sector remains the installation of heat pumps, heavily driven by public funding through the Boiler Upgrade Scheme (BUS).
But while well-intentioned, this strategy is going to cost the government billions of pounds at a time when other government schemes, from health to education, are crying out for more money. An increasing number are likely to question the viability of a political strategy which will see the government reduce funding for welfare and benefits, whilst paying out £7,500 for new heat pump installations.
Focus on heat pumps
Moving beyond government, we’re seeing time and time again how this focus on heat pumps will put substantial costs onto households. The current generous level of government subsidy will only stretch so far, and eventually, households will likely need to pay the full cost of heat pumps if the targets for deployment are to be achieved.
Again, there’s mixed signals from a Labour government telling households they will have to tighten their belts when it comes to government benefit support, but then spend thousands on installing a heat pump.
The current approach also fails to consider the practical constraints facing the heating industry – constraints which are consistently overlooked. The government has been clear that with rising employee national insurance costs, businesses are going to have to cut their cloth accordingly. The vast majority of heating firms are small businesses who are facing increased pressure to keep their books balanced. However, a nationwide transition to heat pumps requires a skilled workforce.
Yes, the government is providing funding through the Heat Pump Training grant but, for many businesses, the current economic uncertainty makes it too much of a risk to dedicate time and money upskilling a workforce into a technology when the market size is unclear. At a time when every penny counts, for many the current uncertainty may be too great to make this investment.
Renewable liquid fuels
With Labour coming up to a year in office, many, even within government, are thinking about how this administration wants to be defined. Historically, Labour has long positioned itself as the party of social justice, committed to supporting lower income households and addressing inequality.
But the economic reality has meant Labour, in their words, has been forced to make difficult spending decisions. So, how does Labour deliver on these core principles, maintain its commitment to fiscal responsibility and transition the off-grid sector onto low carbon heating?
Fortunately, renewable liquid fuels align with all three of these priorities. Hydrotreated Vegetable Oil (HVO) is a practical and low cost solution for government, it’s affordable for consumers and there’s an existing skilled industry and supply chain already in place. If we start with a 20% blend, the fuel could be rolled out very quickly.
The economic and political landscape has shifted. The case for a flexible, more financially sustainable approach to decarbonising home heating has never been stronger. Changing direction is never easy, but for a government under pressure to deliver results while cutting costs, this is an opportunity too good to ignore.
There are very few so called ‘golden eggs’ or quick wins in government, but this is one of them.
Image credit: Malcolm Farrow, OFTEC
