What does the budget mean for heat pumps? - Yorkshire Heat Pumps

The Chancellor delivered what's been termed a 'steady as you go' budget this week, but for heat pump installers and homeowners and businesses looking to make the move to renewables it spelled uncertainty.

Wednesday's budget has been described as a 'steady as you go' budget with some small 'feel good' positives for people suffering the effects of the current energy crisis.

These include:

• £100 Household Energy Payment for all homes in Council Tax bands A - D
• Extension of the temporary 0% VAT rate on electricity bills through to July 2027
• Removal of standing charges on gas bills as early as 2027 (but likely to be funded by increases in unit costs for gas, thereby benefitting low usage customers and disadvantaging high usage households)

In addition, government backed zero-and-low-interest loans for low-carbon technologies are being introduced (up to £20,000 for an air to water heat pump and £35,000 for a ground source heat pump), through the pre-announced launch of the Warm Homes Loan Scheme.

There had been much speculation in the run up to the budget about the future of the Boiler Upgrade Scheme and whether the grant might be withdrawn altogether or reduced. In the end the BUS grant has survived and continues at a rate of £7,500 for air source and ground source heat pumps, with a temporary uplift to £9,000 through to the end of March 2027 for installations in properties currently using oil or LPG for heating.

However, the annual BUS budget has been frozen at current levels resulting in an overall spending cut of £792 million. If demand for heat pumps should grow (and with the introduction of the Warm Homes Loan Scheme, surely the govenment hopes it will), this could see the budget run out part way through the year leaving installers and customers in a very uncertain position as they plan their installation pipelines and home improvement projects.

In another blow, VAT on heat pumps goes from 0% to 5% in April 2027. Here at Yorkshire Heat Pumps we will be needing to revisit estimates issued to prospective customers who in turn will need to revisit their own budgets. Sadly, in some instances, even if availing themselves of a low-or-no interest loan, they may no longer be able to afford to install a heat pump.

While the government has restated its commitment to achieving Net Zero by 2050, the freezing of the BUS budget and the VAT increase won't make it any easier getting there.