Britain will be plunged into an even worse energy crisis in a year’s time without an immediate plan to improve leaky homes and dramatically reduce demand for gas, ministers have been warned.
The UK ranks among the worst in Europe for the energy efficiency of its homes, according to new research outlining an urgent need to reduce the amount of heat being wasted. Experts are warning that while Liz Truss has bought the government time with her £100bn-plus package to cap energy bills, similarly expensive and unsustainable schemes will be needed unless substantial plans are introduced to improve homes and reduce demand.
Truss’s energy package, a measure likely to define her premiership, is already under pressure for a lack of detail. There is further concern that additional help will need to be targeted at the poorest households, while the relatively short-term assistance handed to businesses will also be raised by business groups in the coming weeks.
While Truss pointed to fracking and the expansion of North Sea fossil fuels as a way of increasing the supply of energy, she has already been warned that this will fail to dent prices – while damaging Britain’s commitment to tackling the climate crisis. Instead, she is being urged to copy successful policies in Germany and elsewhere to improve the energy efficiency of the UK’s houses to reduce demand.
Research from the Institute for Government (IfG) found the UK scored worse than countries right across Europe with a range of climates in terms of the energy efficiency of its homes. Citing analysis of a 2020 study, it found that a UK home with an indoor temperature of 20C and an outside temperature of 0C lost on average 3C after five hours – up to three times as much as homes in European countries such as Germany.
The analysis concludes that UK households and businesses “are likely to still be facing high energy bills in the winter of 2023 – quite possibly beyond that”. It adds: “If the government focuses only on short-term financial support, and long-term measures unlikely to have a major impact, it will find itself in an even more difficult position in a year’s time.”
The UK is particularly vulnerable to spikes in the price of gas. More than four-fifths of UK homes are currently still heated by gas boilers, which is much higher than most countries. The UK’s housing stock is also the oldest and least energy efficient in Europe. More than 52% of homes in England were built before 1965 and nearly 20% were built before 1919.
The IfG analysis warns that energy prices are now expected to rise further and stay higher for longer than had been expected earlier in the crisis, with prices potentially remaining as much as four times higher than historic rates into 2025. It means another huge rescue package could be needed unless Truss acts on reducing demand for gas.
Experts believe a serious energy-efficiency programme could have a real impact within a year. The institute pointed to Germany as a success story, where grants, low-interest loans, tax rebates and free expert advice have all been used, resulting in high take-up figures.
“Energy efficiency is a giant hole in Liz Truss’s energy plan,” said Tom Sasse, associate director at the IfG. “Bills have gone through the roof – and show little sign of coming down soon – yet the government has no plan to tackle the fact that we have the draughtiest homes in Europe.
“Borrowing huge sums to freeze energy bills only makes sense if we also have a plan to reduce demand. Announcing a national mission to boost energy efficiency – learning from successes abroad – could make a real difference in reducing the pain coming for households and businesses.”
The costs of Truss’s plan will be unveiled this month in a fiscal statement to be made by the new chancellor, Kwasi Kwarteng. The prime minister has ruled out using a windfall tax on suppliers to fund the scheme, which Labour has demanded. However, there are already calls for the statement to back further help for the poorest households, who face added pressures from inflation.
The Centre for Social Justice, a thinktank with close connections to senior Conservatives, including the former party leader Iain Duncan Smith, is calling for an increase in universal credit to help the group. “Frankly, it’s an injustice not to be using the welfare system in the way that we can to help people,” said Joe Shalam, its policy director. “Universal credit is the way to do that. We saw it deliver during the pandemic. It is one of the most advanced social security systems in the world.”
The Joseph Rowntree Foundation has calculated that, including all government programmes, a gap of around £800 remains that low-income families will have to find this winter. It leaves them at risk of poverty or at the mercy of high-interest loans.
