Buildings are responsible for around 30 per cent of our national emissions, and I know the Government recognises that upgrading home energy performance is crucial if we are to meet net zero greenhouse gas emissions across the UK economy by 2050. Not only this, but ministers are clear that one of the principal ways in which we can tackle high energy prices in the long-term is to improve the energy efficiency of homes.
Most recently, the Government has announced a new long-term commitment to drive improvements in energy efficiency to bring down bills for households, businesses and the public sector with an ambition to reduce the UK’s final energy consumption from buildings and industry by 15 per cent by 2030 against 2021 levels. New funding worth £6 billion will be made available from 2025 to 2028, in addition to the £6.6 billion provided in this Parliament. To achieve this target, a new Energy Efficiency Taskforce will be charged with delivering energy efficiency across the economy.
I welcome the publication of the Heat and Buildings Strategy, which signals a step change in improving the energy efficiency of our buildings and how we heat them, while also supporting 175,000 green skilled jobs by 2030 and 240,000 green skilled jobs by 2035 while delivering £6 billion additional GVA by 2030.
The strategy announced the Government's ambition that by 2035, no new gas boilers will be sold. All new heating systems installed in UK homes will either use low-carbon technologies, such as electric heat pumps, or will support new technologies like hydrogen-ready boilers, in line with the natural replacement cycle, and once costs of low carbon alternatives have come down.
Furthermore, the Government will invest over £4 billion of new funding for decarbonising heat and buildings from this year to 2025. This includes a new £450 million three-year Boiler Upgrade Scheme which will see households offered and grants of up to £5,000 for low-carbon heating systems, such as a heat pump, so they cost the same as a gas boiler now. I am encouraged that £1.75 billion will be provided for the Social Housing Decarbonisation Scheme and Home Upgrade Grants, with £1.425 billion for Public Sector Decarbonisation which has the aim of reducing emissions from public sector buildings by 75 per cent by 2037.
At the Spring Statement 2022, the Government announced an extension to the VAT relief available for the installation of energy saving materials (ESMs) in homes. This will mean wind and water turbines will be added to the list of ESMs and the complex eligibility conditions will be removed. Moreover, this relief is also being increased further by introducing a zero rate on VAT for the installation of ESMs for the next 5 years. A typical family having roof top solar panels installed will save more than £1,000 in total on installation, and then £300 annually on their energy bills.
In addition, as included in the Clean Growth Strategy, the Government set out its aspiration for as many homes as possible to be Energy Performance Certificate Band C by 2035 where cost effective, affordable and practical, and to reach this standard by 2030 for fuel poor homes. To achieve this, it will need to mobilise up to £65 billion for upgrades, which will put us on a path to net zero, significantly reduce household energy bills, and improve our health and wellbeing. It will also create new opportunities for the energy efficiency sector, currently the largest part of the low carbon and renewable energy economy.
New homes are now expected to emit 31 per cent less CO2 and, in addition, a Future Homes Standard will be introduced in 2025. This will see new build homes future-proofed with low carbon heating and world leading standards of energy efficiency to produce 75-80 per cent less CO2 emissions.
Any decision to modify spending commitments is a matter for the Treasury and careful consideration will be given to any proposed amendments to current tax rates. I understand that the Government keeps all taxes under review. I shall be following any developments on this issue closely, and I will ensure my colleagues at the Treasury are aware of the strength of feeling on this issue.
I note the concern over the disparity between gas and electricity prices involved when heating your home. However, to ensure electric heat pumps will be no more expensive to run than gas boilers, the Government wants to work with energy providers to reduce the price of electricity over the next decade by shifting levies and obligations away from electricity. I understand that a call for evidence will be held on the different options for rebalancing electricity and gas prices and I look forward to the outcome of that in due course. It is also the case that, over time, the cost of heat pumps is set to fall as demand increases.
The Simple Energy Advice website helps consumers identify what financial support may be available to install energy efficiency measures, such as insulation: https://www.simpleenergyadvice.org.uk/grants. The Climate Change Agreements Scheme offers reduced rates of Climate Change Levy worth £255m a year across 53 industrial sectors, in return for businesses meeting energy and/or carbon reduction targets. Businesses are free to meet those targets through any improvements they decide, including improvements to the insulation of their premises.
Households struggling with their bills are eligible for insulation measures, including solid wall insulation, through the Energy Company Obligation (ECO) scheme. Homeowners and those in privately rented homes who are on specific benefits may also be eligible for support towards heating improvements, including oil-fired boiler replacements, through ECO Affordable Warmth.
The Spring Statement 2022 announced the expansion of the ECO to £1 billion per year for 2022-26.The Government is expanding this scheme which will focus on households which are low income and vulnerable, or at risk of fuel poverty, living in inefficient Energy Performance Certificate Band D-G homes, with a greater focus on insulation, making greater improvements to the least energy efficient homes.
Launched in April 2011, the Warm Home Discount is a key Government strategy to tackle this issue. It has helped over 2.2 million low-income and vulnerable households each year with energy costs. The Government plans to increase the Discount by £150 and extend eligibility by one-third to three million vulnerable households. The Government is proposing to reform this scheme which would include measures such as expanding the UK-wide spending to £475 million, in 2020 prices, per year and maintaining support for households on Pension Credit Guarantee Credit.
I know Ministers are aware of the challenges faced by those living off the gas grid and are looking at the best ways to help. An important part of this is the £25 million Central Heating Fund, which will fund the installation of first-time central heating systems in low income homes off the gas grid.
The Renewable Heat Incentive programme supports the installation of renewable heating systems and is primarily designed to offer off-gas households affordable heating alternatives. It compensates for the additional costs of replacing an oil boiler with a renewable heating system.
Different energy suppliers may have different funding offers through their installers, so it is important to shop around for the best quote. Ofgem, which administers the scheme, provides further information about ECO for consumers on its website, including contact details for the energy suppliers.
You may also like to contact the government-funded Energy Saving Advice Service, which can provide independent advice on the full range of energy efficiency support. The number to call is 0300 123 1234.
The Government has decided to move to a 100 per cent Affordable Warmth scheme with the aim of targeting ECO to low income, vulnerable and fuel poor households. While I recognise that the removal of the Carbon Emission Reduction Obligation will result in lower carbon emissions reductions being achieved, there are other policies that address carbon savings in homes and across the economy more widely.
The Decent Homes Standard is a scheme that drives improvements to the quality of social housing. Ministers are in the process of reviewing the scheme to consider whether the standards need to be updated to include energy efficiency of the house and access to green spaces.
Finally, the ECO 4 grant scheme is a vital mechanism in the pursuit of becoming carbon neutral. Over £3.9 billion of new funding over the next 3 year was announced alongside the Heat and Buildings Strategy through the SHDF, HUG and Boiler Upgrade Scheme. ECO has also been expanded to £1 billion over the next 4 years. This will improve an estimated 450,000 of the least energy efficient homes occupied by low income and vulnerable households in Great Britain.