The Government’s £13bn Warm Homes Plan must focus spending on bill-cutting measures to save £230 for the poorest households

The Government must use the £13 billion assigned to its Warm Homes Plan to deliver energy bill savings – worth £230 per year on average for the poorest households in leaky homes – while using other tools, such as regulations, to keep the decarbonisation of home heating on track, new research published today (Thursday) by the Resolution Foundation finds.

The report No country for cold homes – funded by the European Climate Foundation – finds that the Warm Homes Plan can significantly improve living standards for low-income households, who spend twice as much of family budgets on energy bills (10 per cent for the poorest quintile as opposed to 5 per cent for the richest).

As such, the Plan must balance supporting households occupying leaky homes to bring down their energy bills while also keeping the transition from gas boilers to heat pumps on track. That means funnelling its generous capital budget to measures that provide the biggest impact on bills – such as loft insulation, filling cavity walls and solar panels. This approach would lock in permanent energy bill savings of 14 per cent for those in the poorest fifth of households who live in homes with an EPC rating of D or lower – a figure equivalent to £230 or 2 per cent of disposable incomes.

But while such measures will help households to reduce their carbon emissions, British households will still need to transition to heating their homes with heat pumps if we are to meet our net zero legal obligations. So, the authors advise that the Government must find other ways to keep the transition to low-carbon heating on track, including through regulation of manufacturers, housebuilders and – eventually – consumers.

The Plan also needs to focus on ‘who’ as well as ‘what’. As the report notes, despite a significant pot (£13.2 billion) being assigned to the Plan, there is not enough money to fully upgrade the nearly 13 million English homes that have an EPC rating of D or worse. So, the distribution of state-funded grants should be tightly targeted, with eligibility determined by household incomes rather than alternative approaches based on benefit passporting or geography.

Determining eligibility with an earnings limit of £36,000 would see 97 per cent of the poorest homeowners eligible, compared to 30 per cent for one based on the welfare system and just 27 per cent through an area-based approach. Should the Government wish to tighten eligibility further, previous Resolution Foundation research has recommended assessing household (non-pension) wealth as well as income.

The Foundation also urges the Government to lean on regulations to improve efficiency standards in privately rented homes, excluding landlords from grants in the Plan. This will ensure that tenants will not be left in the cold and that state funding is not spent on those able to cover upgrade costs themselves.

Zachary Leather, Economist at the Resolution Foundation, said:

“It is most welcome that the Government has committed to spending £13.2 billion as part of its Warm Homes Plan to cut bills and emissions, but even this sizeable pot will not be enough to upgrade England’s 13 million leaky homes.

“Taxpayer money spent through the Warm Homes Plan must be well-targeted, focusing on the measures that have the biggest impact on bills and targeting households most likely to struggle with energy costs.

“Ministers should also be bold with regulations that raise the bar on energy efficiency and get the heat pump rollout back on track – ensuring costs are met by the households and companies that can afford them, leaving the Plan’s capital budget laser-focussed on making poorer families’ homes warm, green and in the black.”