More than 30,000 jobs at risk if insulation levy cut from fuel bills

More than 30,000 jobs would be put at risk if the government were to scrap the energy bill levy that pays for home insulation improvements for poor households, the industry has warned.

Ministers are mooting an end to the Energy Company Obligation (ECO), a £1bn levy on energy bills that pays for energy efficiency measures for people on low incomes. The energy price cap is expected to rise by about £700 to £2,000 for the average household bill in April, after a surge in gas prices.

The government is reluctant to take major steps such as windfall tax, which the Labour party and others have called for, and the longstanding ECO has been targeted by the Treasury as a way of reducing bills. However, the amounts saved from scrapping it would be small, at about £29 on the average bill.

The Insulation Assurance Authority has written to ministers urging them to keep ECO. The body said the levy added less than 52p a week to the average energy bill but had reduced household energy bills by about £300 a year on average for the 3m homes treated so far.

Nigel Donohue, chief executive of the industry body, said: “ECO has been the backbone in supporting those hit hardest by fuel poverty. We need a long-term solution to end our dependence upon high cost gas and that means we must ramp up energy efficiency investment. Cutting or just suspending ECO would be utterly self-defeating, lead to mass redundancies in the industry and harm the most vulnerable. ECO must be saved.”

He warned that any move to abandon or suspend the measure would be disastrous for jobs. The insulation industry has suffered from government policy reversals over the last decade, when plans for a nationwide “green deal” insulation scheme were first trumpeted from 2010 then abruptly squashed in 2015. That left the ECO as the only remaining insulation programme, until the “green homes grant” was launched in 2020 then scrapped last spring after six months of maladministration.

Experts have said this “stop-start” pattern to government intervention in the market has led to a severe lack of investment, training and skills in insulation, which is proving problematic as the UK has the leakiest homes in Europe.

Previous moves to slash the ECO in the face of high energy prices led to the number of jobs in insulation falling by about half, the IAA said.