The Budget also confirmed £1.5bn extra capital for the Warm Homes Plan and maintained funding for the Boiler Upgrade Scheme, as latest government figures show near-record BUS applications.
ECO scrapped: relief for bills, concern for insulation progress
The government said ECO would be removed from bills from March 2026, noting the scheme had failed to benefit the majority of low-income households. Delivering the budget, Chancellor Rachel Reeves commented: “It is a failed scheme, so I am scrapping it” – a decision strongly criticised by environmental groups.
Ed Matthew of E3G welcomed lower electricity bills as “a crucial step towards helping people to switch to clean energy” but said this is “overshadowed by the morally indefensible decision to scrap the national home insulation scheme, ECO” describing the move as “sticking plaster politics that undermines the best long-term solution to fuel poverty”, suggesting “It will cost 10,000 jobs and prevent one million families from insulating their homes.”
Others welcomed the proposed reforms as “a reset”. Greg Jackson, CEO of Octopus Energy, argued the scheme had become “too wasteful, adding high costs to everyone’s bills and only delivering meagre savings for recipients”.
Off-grid fairness essential
In the run up to the budget, OFTEC had emphasised the need for any government intervention to be fair to rural, off-grid households.
Speaking on behalf of the industry organisation, Director of Marketing and External Affairs Malcolm Farrow noted that while oil heating currently remains one of the cheapest forms of heating, households “are still grappling with the wider cost of living, so any reduction in their overall energy costs will be welcome.” But he warned that uncertainty over off-grid heating policy is undermining confidence and unhelpful to industry and consumers attempting to plan for the future: “The recent speculation, inconsistency and delay in off-grid policy decisions are unhelpful… That’s why the government needs to urgently publish the Warm Homes Plan.”
With the budget also outlining increased taxation, Malcolm suggested the need for affordable, low carbon heating solutions to maintain the drive to net zero is “more critical than ever”. He welcomed the recent consultation on alternative clean heating, saying renewable liquid fuels could provide a “pragmatic solution” by avoiding the high upfront costs associated with other low-carbon technologies.
Fuel duty rise ends 15 years of freezes
Fuel duty will increase for the first time since 2011, with the Chancellor confirming the reversal of the temporary 5p cut introduced in 2022, when Russia’s invasion of Ukraine triggered oil price spikes. A staged approach begins next September, with duty then rising in line with inflation from April 2027.
The OBR said the freeze – running for 16 consecutive years – will have cost the exchequer a total of £120bn.
EV drivers face new per-mile tax
The planned increase in fuel duty is set to be followed, in 2028, by a new EV road-use levy in proposals laid out in the budget:
- 3p per mile for electric cars
- 1.5p per mile for plug-in hybrids
The OBR estimates this will cost the average EV driver around £250 per year and raise £1.9bn annually by 2030.
The new levy will be accompanied by a £1.5bn increase in support for the EV industry, largely funnelled into extending the Electric Car Grant Scheme. However, Tanya Sinclair, CEO of Electric Vehicles UK, said the Budget “sends mixed signals… the number of EVs using those chargers will grow more slowly with the proposed pay-per-mile charges.”
While analysis shows that EVs will still be around £1,000 per year cheaper to run than petrol cars, industry groups warn the new levy risks dampening EV uptake at a critical point in the market’s transition.
Despite the headline promise of lower electricity bills, many of the Budget’s measures raise as many questions as they answer. Scrapping ECO, reshaping fuel taxation and introducing a new EV charge all signal major changes for households, but without a clear long-term framework.
With uncertainty still surrounding off-grid policy and the transition to cleaner technologies, the industry will be looking to the Warm Homes Plan to deliver the direction that is, so far, missing.
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