Boiler tax set to be scrapped

Policy could have driven up the cost of boilers by £120
Policy could have driven up the cost of boilers by £120 - Terry Harris /Alamy

The Government is preparing to ditch the so-called boiler tax in an announcement which could come as soon as this week, The Sunday Telegraph understands.

Claire Coutinho, the Energy Secretary, will not be proceeding with the policy, which had been blamed for pushing up gas boiler prices and criticised as a form of “government coercion”.

Under the Clean Heat Market Mechanism, manufacturers would be required to match, or substitute, 4 per cent of their boiler sales with heat pumps or face a fine of £3,000 for every installation they fell short by.

The scheme was due to start in April, with the target rising to 6 per cent from April 2025.

Home heating companies had warned that the plans would force them to increase the price of their boilers by up to £120 – a move criticised by Ms Coutinho.

The Telegraph now understands that the Department for Energy Security and Net Zero (DESNZ) is preparing to announce that it will not be going ahead with the fines for at least the first year of the scheme.

Ministers needed to lay a Statutory Instrument by April to provide the legal powers to enforce the quotas, but this is no longer expected to happen.

Instead, 2024-25 will be treated as a “monitoring year” in which the Government tracks sales of heat pumps relative to boilers.

The move is likely to be welcomed by Conservative MPs on the Right of the party who had criticised the scheme.

Craig Mackinlay, the chair of the Net Zero Scrutiny Group of Tory MPs, wrote to Ms Coutinho in February urging her to “trust your instincts and scrap this harmful policy”, branding the scheme “Government coercion”.

“Consumer choice has to be at the heart of a Conservative, free-market approach to Net Zero,” he said.

Mr Mackinlay claimed that “the targets and central planning inherent in the Clean Heat Market Mechanism” came “straight from the failed socialist playbook of the past”.

“It was the right decision to review this policy,” he said. “We know that there are many siren voices encouraging you to impose the boiler tax. You must resist them and show the public you are on their side.”

While Ms Coutinho is expected to ditch the policy, she is still understood to have concerns about the functioning of the home heating sector, where four companies dominate 90 per cent of the market.

The Energy Secretary has already instructed her department to have conversations with the Competition and Markets Authority about launching an investigation into the market to ensure that competition is not limited and consumers are getting a fair price.

A DESNZ spokesman said: “No decision has yet been made and we remain committed to our ambition of installing 600,000 heat pumps a year by 2028.

“We want to do this in a way that does not burden consumers and we’ve increased our heat pump grants by 50 per cent to £7,500 – making it one of the most generous schemes in Europe.

“This pragmatic approach is working, with a nearly 40 per cent increase in people applying in January 2024 compared to the same month in 2023.”