Shapps: Levy likely to be introduced to fund social tariff

Grant Shapps has hinted that any social tariff for low-income households is likely to be paid for via a levy.

Giving evidence to the House of Lords environment and climate change committee yesterday (25 April), the energy secretary revealed that he and Chancellor Jeremy Hunt are likely to consult on the introduction of a social tariff this autumn.

But dismissing a call from Labour peer Lord Whitty for the tariff to be funded through general taxation, he said: “Money has to come from somewhere, whether the taxpayer or the energy user. I imagine that some form of levy will be an integral part of the system.”

The comments come as Utility Week launches a new campaign urging the government to prepare now to protect billpayers next winter – including the need for fresh state funding for targeted support in the short term.

Shapps was also pressed to give more clarity on the government’s timetable for a decision on the future of home heating.

In a recent report on the government’s Boiler Upgrade Scheme (BUS), the committee criticised ministers for sending out “mixed messages” by not ruling out hydrogen as a mass home heating option.

Shapps said he couldn’t give an exact date for when this decision, which has been pencilled in for 2026, will be taken because research is still ongoing into both hydrogen and heat pumps.

“We don’t have all the answers yet about which technologies may end up ruling the roost,” he said.

“To get to the very high numbers, the 600,000 announced before I took over, we have to move a very, very long way.

“Making this as smooth as possible a transition and clarifying whether we expect the country to go to heat pumps or other technologies is incredibly important. We will seek to bring clarity to this as quickly as possible.

“My initial thinking is that by and large heat pumps are likely to deal with quite a large amount of the housing stock. There will be edge cases where other technologies will be required.”

He added that heat pumps would rapidly move from being “quite eccentric”, like electric vehicles were a decade ago, to being “standard”.

Those considering training whether to become a gas boiler or heat pump engineer should opt for the latter, the secretary of state said.

Developing a UK heat pump manufacturing industry is key added.

“I am very, very keen that we don’t displace largely UK boiler manufacturers with imported heat pumps.”

Shapps and his officials were also grilled by the committee about why more than half of the first year’s BUS budget set by the Department for Energy Security and Net Zero (DESNZ) had not been spent.

Ben Rimmington, director general, net zero buildings and Industry at DESNZ, said: “The underspend was not entirely surprising given the (economic) climate we were launching scheme into for a demand led programme. We don’t believe there’s anything wrong with the design of the scheme and we think spending will go up this year and next year.”