Reports claim the Energy Secretary is considering tax changes that would drive up bills for homes with gas boilers while cutting costs for those with heat pumps.
Any move to tax gas more heavily than electricity would effectively see poorer households subsidising the energy bills of wealthier homes, the boss of British Gas has warned.
There have been reports in both The Telegraph and The Sun that Energy Secretary Ed Miliband is mulling over a plan to strip green taxes from electricity and heap more costs on gas usage instead.
Given that heat pumps – which are far more expensive to install – run on electricity, households that can afford them would enjoy lower energy costs compared to those with traditional gas boilers.
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‘An abomination, outrageous and a terrible distortion of the market’
While there is no indication this plan is set to be rolled out as official policy, it has already attracted fierce criticism from the boss of Centrica, which owns British Gas.
Talking to The Telegraph, Chris O’Shea said putting levies on gas bills would mean wealthier people with heat pumps would be subsidised by those poorer people with gas boilers.
“That’s nonsense,” he said.
“I think those of us with the broadest shoulders should help those of us who have the most need.
“To put them on gas bills would be an abomination, outrageous and a terrible distortion of the market.
“It would also be unfair because the people [who have] gas boilers the longest will also be those who can least afford to pay higher bills.
“I have heard the argument that it will encourage more people to use electricity.
"But encouraging people to use subsidised electricity by forcing gas users to pay just doesn’t make any sense.”
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Heat pumps remain costly
Successive Governments have been looking at ways to drive heat pump uptake in a bid to hit ambitious ‘Net Zero’ targets.
However, the high costs involved have proved prohibitive for many households.
Back in January, Energy Secretary Miliband admitted as much when explaining to MPs why the Government was wary of implementing a gas boiler ban.
“I'm very cautious on these questions because we can say to people: 'You need to get a heat pump, not a gas boiler, potentially at some point in the future',” he said.
“But I'm very wary that we're going to stop people having gas boilers at a point when we can't guarantee that heat pumps are going to be cheaper for people.
“My bottom line is that we proceed in a way that means we can say to people: ‘You're going to be better off in making this transition’.
“I do not want to be in a position where I say to people: 'You must go down this road' and then people say to me, rightly: 'Look, you're going to make me worse off'.
“So that's our position on that.”
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loveMONEY comment: double tax relief for the wealthy?
If reports that the Government is considering taxing gas at a higher rate than electricity are true, then it would be sticking to its plan to make heat pumps more affordable compared to gas boilers.
Sadly, it would be doing so by making gas more expensive – a move that would mostly impact lower-income households.
The reality is many simply can’t afford to switch to heat pumps: despite the fact that taxpayers subsidise each installation by up to £7,500, they still cost around £6,000 on average to install.
For millions of people struggling to keep on top of their bills, heat pumps simply aren’t a realistic option.
And that’s before you consider these pumps are only really suitable for homes that already have excellent insulation.
That’s why we've expressed our concerns about the way we're offering subsidies likely to be taken up by wealthier households while many remain in energy poverty.
And, if the Government does strip green taxes from electricity, we could be facing a situation where those with more money enjoyed two subsidies to their energy costs while the poorest households received neither.
Struggling with energy bills? What to do
If your bills are worryingly high, it’s important you take steps to reduce your costs.
From getting off the costly standard energy tariff to switching your boiler to Summer mode, there are plenty of simple, low-cost ways to do so.
If you are willing to put in a little more money and effort, you can also make more substantial reductions to your energy bills.
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