A “boiler tax” which would see homeowners paying more as the Government tries to roll out more heat pump installations is reportedly set to be scrapped.
While a final decision is yet to be made, Energy Secretary Claire Coutinho held discussions with officials in recent weeks about scrapping the levy, The Times reports.
A Government source was quoted by the publication saying ministers were “looking again at the policy”.
They are also understood to have accused boiler manufacturers of announcing “indefensible price hikes”.
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Last year, the Government confirmed the Clean Heat Market Mechanism (CHMM) would go ahead, launching in 2024, to incentivise the UK’s heating industry to invest in making heat pumps “an increasingly attractive and affordable choice” for families and ministers.
Following the announcement, boiler manufacturer Worcester Bosch announced the price of all of its gas boilers would rise by £120.
Meanwhile, Vaillant said it was set to charge £95 more, while Baxi also planned a £120 price hike.
Ms Coutinho accused firms of “price gouging”, at the time telling LBC she thought it was “extremely unlikely” manufacturers would miss their heat pump targets and be fined.
Mike Foster, CEO of Energy and Utilities Alliance said: “Boiler manufacturers were obliged to increase their prices to cover the cost of the penalty fines (boiler tax) levied by the government’s Clean Heat Market Mechanism. Without the fines, there is no need to have the price increases.
"If the government formally announce the scrapping of the fines then I expect the boiler manufacturers to respond immediately and announce they are rescinding their price increases.
"Obviously they can’t do so on the basis of media speculation but will do so once any change is official.”
A Department for Energy Security and Net Zero spokesperson said: “We remain committed to our ambition of installing 600,000 heat pumps a year by 2028.
“We want to do this in a way that does not burden consumers and we’ve increased our heat pump grants by 50 per cent to £7,500 - making it one of the most generous schemes in Europe.
"This pragmatic approach is working, with a nearly 50 per cent increase in people applying in December 2023 compared to the same month in 2022.”
A Worcester Bosch spokesperson said: "Worcester Bosch will not benefit in any way and interestingly, neither will market growth for heat pumps as the revenue raised from the fines will go to the Treasury and not be used to grow demand for heat pumps.
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Energy Secretary Claire Coutinho is reportedly considering scrapping the "boiler tax" for missed heat pump installation targets
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"This does, however, support the Government’s overall goal of closing the price gap between a gas boiler and heat pump installation."
A spokesperson for Baxi said: "This levy is not a price increase, but a direct impact of the CHMM on our business, which we will use as payment to the Government for the penalty they award us for not meeting its four per cent target.”
A Vaillant spokesperson said: "There are multiple factors announced by the Government that will impact Vaillant. The current process does not allow manufacturers the full visibility of how many heat pumps sold are MCS registered.
"Given the changing market dynamics and push for heat pump installations generated by CHMM, we in the current circumstances are left with no option but to act."