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Chancellor – give back extra VAT to help tackle fuel poverty

George Osborne conference speech

We’re asking George Osborne to pay back the extra £200m VAT revenue gained from energy price hikes. With crucial schemes like Warm Front set to close, wouldn’t this money help those struggling this winter?

Last month, the Prime Minister got energy suppliers and consumer groups together for a summit to help people struggling with their energy bills.

Which? welcomed the government’s attention, but pointed out that this was only the start of tackling rising energy bills.

Government – give something back

This week, we wrote to the Chancellor, ahead of his ‘Autumn Statement’ on 29th November, to ask for a £200m boost in funding to make people’s homes warmer this winter.

Our justification for this call is straightforward. Following the summit, consumer groups committed to do more to help people with simple steps they can take to switch supplier, insulate their homes and save money.

Meanwhile, some energy companies are offering free insulation or promising no further price rises until next summer. Yes, the companies need to go much, much further – but it’s a start.

But what about government? Shouldn’t they also dip into their pockets and help? Especially when the recent energy price-hikes have resulted in an estimated £200m extra going in to the Treasury’s coffers through VAT receipts.

Yes, the government has a huge budget deficit to pay down, but they also have a duty to relieve the pressure on energy bills. After all, consumers tell us that energy prices are their number one financial concern. So rather than simply putting this windfall back into the general pot, shouldn’t they plough it into schemes that will keep bills down?

Invest in energy efficiency

Installing energy efficiency is often the best way to cut your energy bill. The Energy Savings Trust reckons that an un-insulated three bedroom house could save up to £310 a year by insulating the loft and cavity walls. And poorly insulated homes are also responsible for many illnesses and deaths in the UK. Plus, the cost of winter-related disease to the NHS is estimated at £859m each year.

But it’s not always easy to afford these kinds of house improvements. There are government programmes to help people to access free or heavily subsidised insulation. But one of these programmes – Warm Front – is due to end in 2013 despite huge interest – so much that it had to close early to new applications in 2010.

There are thousands of households that have benefited from free or subsidised insulation through Warm Front and other schemes, but thousands more will miss out once the scheme closes. To us, this is the perfect place to pay back some of that extra £200m.

Have you or someone you know had energy efficiency measures installed this way? Do you think that energy efficiency schemes like this from the government are a good way to spend money? And what more do you think the government should do this winter to help?


“the recent energy price-hikes have resulted in an estimated £200m extra going in to the Treasury’s coffers through VAT receipts.”

Nail, head. Same with Train Operating Companies, Bus Companies, ie any privatised public service. We complain about them until we’re blue in the face but whilst they are making money for the government rather than supporting the people, it isn’t going to change.

The City has a far stronger hold over the government than everyone seems to think.

John Symons says:
11 November 2011

Not quite the same, Dean. Private “public” transport companies only make money for the government through Corporation Tax, not VAT.

John Symons says:
11 November 2011

The government should use the £200m to increase current funding of Warm Front and to extend it beyond 2012 or is it 2013 if there is any of this windfall VAT left. The scheme is clearly underfunded if it had to close early in 2010.


No, no and no again to the warmfront idea!

The energy companies and energy saving trust advocate changing a boiler, warmfront do not fit A rated boilers, they charge on average £2500 to fit a new boiler (Source: Energy saving trust, boiler scrappage scheme final report) way above the odds for the boilers the scheme fits.
The outlay for a replacement boiler, even if it achieves the maximum £225 energy bill saving per year, would never be recovered. (Energy saving trust figures: average boiler life is 12 years)
Include the energy companies maintainence monthly payments (British Gas currently start at £13 per month which doesn’t cover the first £50 of parts) and the boiler would be out of working order for more than 4 years before it paid for itself!

I asked British gas why my bills remained the same after fitting an A rated boiler to replace a G rated (30 year old) back boiler, their reply was staggering,

“A new boiler will not use any less gas than an old boiler!”
This was from a senior billing manager!

The warmfront scheme was designed to stimulate more work for the industry and associated industries, revealed by none other than Ed Miliband (then energy secretary) at its media launch.

If the £200 Million is to be reused to help fuel poverty, warmfront is not the way to go.


Without further detail it is difficult to comment on your individual case, but an investigation in Which? magazine last September did show that British Gas boiler installations did cost on average 39% more than an independent installer, so that may have been a contributing factor if your boiler was installed by British Gas? We are surprised though to hear that you have not seen a reduction in your gas bills against a 30 year old G-rated boiler. All new boilers must be A rated (now 90% efficiency or more), whether fitted through Warm Front or otherwise. Which? magazine (September 2010) has recommended that replacing your old boiler with a new, more efficient one does not necessarily make sense on economic grounds alone, but the economics improve as gas prices rise even more, and the intention of Warm Front is to provide financial support for the up front cost.


There are major problems with the warmfront scheme;

* It would not help those trapped in fuel poverty, who already have a working boiler.
British Gas informed me after replacing my boiler and seeing no drop in energy consumption, that a new boiler uses just as much gas as an old boiler.
I’ve asked the Energy saving trust and British Gas why they advocate replacement boilers in light of what British gas have informed me (which tallys with my energy payments) on many occasions, both have refused to answer.
* The warmfront grants were increased from £2700, as the “closed shop” of companies fitting under the scheme were often charging in excess of £500 to the customer and using up the full grant. Warmfront grants have wasted millions on more profits for the installation company Eaga (The founder member just happens to also sit on the board of the Energy saving trust)
* One company group, Eaga (now changing their name to Carillion?), did the majority of installations and now under the “new” company name, will do the majority of maintainence as well, covering the first two years. Local engineers didn’t get a look in on any of the work unless they were able to pay large fees to Eaga, and act as contractors for the company, which drove up job prices. It was common place for the £2700 grant to no longer be enough to pay for a new boiler replacement, when in fact, it should be more than enough to complete a replacement boiler, cavity wall insulation and loft insulation. Rather than look at why it was costing so much, the previous government increased the grant amount.
* The timescales are often horrendous. In one case where application was made and an inspection was promised within 3 months, it took almost 8 months for an appointment to be made, then after inspection, it took over a year for the installation company to actually do the job. The timeframes involved would not help people trapped in fuel poverty this winter, or in many cases, next winter either.

Insulation is one of the few energy saving methods that can be applied quickly and make a difference. Insulation doesn’t rely on percentages of probability from a public/industry funded body (EST) to make a case for it.
This I feel would be a much better use of the £200 Million, rather than have it disappear down the warmfront scheme blackhole.

A combination of a strong energy secretary, government family unit policies, a strong regulator (which needs to start listening and acting on behalf of consumers) are also urgently needed to help people trapped in fuel poverty. Sadly at the moment, there are no signs of any of them.


@Josh Green.
I’m not in the least bit surprised that there has been no reduction in Frugal Ways’ heating bills.

As I posted in some detail on a previous convo that dealt with Boiler replacements and energy saving, my neighbours had their 1978 Glow Worm Space Saver 45 (off the SEDBUCK scale) replaced with a new SEDBUCK A rated boiler (installed by British Gas), and saw their fuel bills more then double rather than decrease.

My 1979 Glow Worm 52B Super, apparently a G on the SEDBUCK scale, used less than £400 of gas in the 12 months to October 29th this year, and that includes the quarter from November 9th to Feb 9th over last Xmas when we all had the terrible winter to contend with. IN the same quarter last winter my neighbours used £600+ on gas, and they, unlike me, have sealed unit uPVC double glazing throughout and cavity wall insulation. (I only have Everest secondary double glazing and no CWI).

I know and fully accept hat you can’t make a direct neighbour-for-neighbour comparison because of there are dozens if not hundreds of variables to take into account, but surely common sense says that in two identically sized, neighbouring, semi-detached houses, one of which is better insulated and has a newer boiler, the heating bills should not be so dramatically different and especially not in favour of the property with the older boiler and lesser insulation? It seems potty to me anyway.

As I posted last spring, BBC Radio 4’s You and Yours had the government representative for energy and two top blokes in the boiler industry on one day last winter and under pressure and constant asking “Will people save money by replacing an old, working boiler?” they all three had to admit in the end that the answer was “NO”.
I refuse point blank to embark on another Which? bashing session, but this issue is another, like SmartMeters and CFL bulbs, where Which? keep on telling us that the modern items will save us money when there is a wealth of evidence and in this case an open admission, on national radio, from the industry that in fact money will not be saved.


@ Frugal Ways – you are not the only person to have had this response from the energy companies, nor from boiler makers. Additionally the EST have written to me telling me (as I’m sure you know from the countless times I’ve mentioned this before) that “All new washing machines will use MORE electricity than older ones”. Although I have not personally communicated with EST about boilers, the details they gave to me about why new washers use more electricity and about how they test and WHAT they test lead me to believe that it’s almost certain that all new boilers use more (or at best the same) gas as older ones and that the EST only test ones which the manufacturers ask them to, so there are likely to be many boilers that use **less** gas than the EST recommended ones, but they have never been put forward for testing.