‘Archaic’ Treasury rules threaten heat pump rollout

Around one third of the £150 million allocated this year by the government for its flagship home heating upgrade scheme looks set to be clawed back under “archaic” Treasury rules, a leading heat pump sector figure (HPF) has warned.

Energy minister Graham Stuart admitted in an answer to a written parliamentary question last week that any underspend on this year’s £150 million Boiler Upgrade Scheme (BUS) budget cannot be carried over after April.

The government has earmarked £150 million per annum for the scheme, which offers grants of up to £6,000 to households that replace fossil fuel boilers with low carbon alternatives, from 2022 to 2025.

The latest figures from Ofgem show the total value of BUS vouchers issued by the end of January was just £49.7m.

With three months remaining for the first year of the initiative and based on take-up so far, Heat Pump Federation director for growth & external affairs Bean Beanland estimates that around one third of the budget will be left unspent.

“On that run rate, we might get to 65-70% so around a third of the money is going to be clawed back,” Beanland said,

He said that the BUS had been bedevilled by a “massive lack of political support” following its launch last May amid media speculation that cash from the programme would be siphoned off to help pay for other green initiatives, helping to sap consumer confidence in the scheme.

In addition, the full online portal for submitting BUS voucher applications only went live at the end of November.

The combination of these factors meant that the home heating sector had not had an “appropriate chance to spend all the money”, Beanland said. “It’s not overly surprising that things were slow to get going and we’re now beginning to pick up speed, which is good.”

He also criticised Stuart for “giving up” in the face of Treasury rules that stipulate cash unspent at the end of a financial year must be clawed back.

“Through archaic rules within the Treasury, some of that money is now not going to be delivered,” he said.

Beanland added that he didn’t accept that the Treasury would not change its rule that budgets cannot be carried over from one year to another.

“I don’t understand the logic and for someone to say that’s the way we’ve always done things, it’s just not good enough,” he said.

“I don’t accept that things can’t change: it’s either a climate crisis, or it isn’t. If there is, then things have to change and what better place to start than in the heart of government.”

The Treasury’s straightjacket on carried-over spending threatened to cause problems for other programmes, he said: “It’s not just the boiler upgrade scheme, there is a number of other programmes which are going to suffer in this way.”

Pointing to a £1 million retraining scheme for heating engineers that was launched last autumn, he said: “It’s the middle of the heating season. All the technicians that you want to get trained are flat out so why are they going to take time out to retrain. Clearly they’re not so there is a fundamental lack of understanding here.”

The BUS was launched with the intention of kickstarting the UK heat pump market by subsidising the installation of 30,000 of the devices per annum over three years.

Mike Foster, chief executive of the Energy and Utilities Alliance, called for the BUS to be “put down” like a “sick dog”.

He said: “The idea that subsidising 30,000 UK heat pumps would drive down the cost of a global product, with two million sold across the EU last year, is frankly for the birds. Subsidies like this tend to drive up costs; it is technology that slashes them.”