Home Insulation Bears Brunt of Cuts to Labour’s Green Plan

(Bloomberg) -- Britain’s cold and drafty homes remain the most difficult part of net zero to solve, with the opposition Labour Party admitting it needs to drastically scale back the ambition of its home insulation program.

Energy efficiency measures bore the brunt of the cutbacks to Labour’s broader pledge that was torn up on Thursday. Under new plans, leader Keir Starmer earmarked £13.2 billion ($16.7 billion) over five years for green homes, equal to around £2.6 billion a year. Labour, which leads in the polls over Rishi Sunak’s ruling Conservative Party, had assigned £60 billion over ten years as part of a much bigger promise to invest £28 billion annually in green measures.

In comparison, this parliament, the Conservatives allocated £4.7 billion to home upgrades, or around £0.9 billion a year, according to environmental think tank E3G.

UK Government Launches £1 Billion Insulation Plan for Households

Energy efficiency has struggled for more than a decade to attract private investment, despite its ability to help curb emissions, cut energy bills and drive the uptake of heat pumps to replace gas boilers. About 17% of the UK’s emissions comes from buildings, mainly from burning fossil fuels for heating, according the the government’s advisory Climate Change Committee. Tackling poorly insulated homes is crucial for hitting a government target of net zero emissions by 2050.

The government wants to cut emissions from buildings by switching heating away from gas in the coming decades, but that won’t keep energy from going to waste. Even if heat comes from electricity sourced from wind farms, that resource would be better used charging an electric car than seeping out a window.

“By seriously watering down its warm homes plan, the Labour Party has turned its back on the people who most urgently need these essential upgrades – the many millions of low-income households suffering from living in poorly insulated homes,” said Mike Childs, head of Policy at Friends of the Earth.

How to fund the huge program of upgrades needed isn’t a new problem, the UK government under the Conservatives has repeatedly failed to come up with a successful home-insulation program. In 2013, then Prime Minister David Cameron reduced spending on energy efficiency after reportedly demanding departments “cut the green crap.” 

Instead he introduced the Green Deal, which attached the cost of loan repayments onto a property. That was ditched two years later due to low adoption rates, alongside the zero-carbon home standard for new buildings. In 2020, ministers introduced the Green Home Grant, but that was abandoned less than a year later due to administrative problems. In 2022, Liz Truss blocked an energy-saving campaign that was planned to help households reduce power and gas demand.

The UK has one of the least efficient housing stocks in Europe. Refitting homes with green-energy tech is expensive, even with government aid. A common 4-kilowatt roof solar system costs around £6,000 and it could take as many as eight years for buyers to recoup their outlay, according to GreenMatch. An air source heat pump can set households back between £8,000 and £18,000.

“Cutting back programmes to insulate homes means more wasted energy, more imported gas and higher bills,” said Jess Ralston, Energy Analyst at the Energy and Climate Intelligence Unit. “This and any further roll backs from Labour jeopardize this at a time when competition is fierce with countries like the US going full throttle to attract net zero businesses.”

Shadow chancellor Rachel Reeves told BBC Television on Friday it was “absolutely true” that fewer houses will have insulation under Labour’s new plans compared with its previous pledge. “We won’t be able to do things as quickly as we wanted to,” she said.

The Conservatives have “caused huge damage to the economy and we can’t just carry on regardless and say that has no effect on what an incoming Labour government will do,” Reeves added, insisting she would still be Britain’s “first green chancellor.”

(Updates with Rachel Reeves comments in final two paragraphs)

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