The Prime Minister has been urged not to exclude rural households that rely on oil heating from a possible cut to VAT on energy bills in the forthcoming Budget.
In a joint letter to the Prime Minister, trade associations OFTEC and UKIFDA warned that government plans to reduce VAT on gas and electricity bills could once again overlook rural communities. They argued such a move would be “unfair and discriminatory” towards households that depend on oil for heating.
The government’s recently published carbon delivery plan set out ambitions for reducing emissions across all sectors but did not include specific measures for rural homes. Labour’s Warm Homes Plan, expected in October, has also been delayed, leaving many in rural areas uncertain about future policy.
Current policy encourages households to switch to heat pumps through the Boiler Upgrade Scheme, which offers grants of up to £7,500. However, trials have shown that in older rural properties, installation can cost more than £20,000 due to the extra work required to make homes suitable. Trade bodies say this leaves many residents unable to afford the transition during the ongoing cost of living crisis, while the government lacks funds to expand support or retrofit all rural properties.
OFTEC and UKIFDA are instead calling for the government to back renewable liquid fuels. A demonstration project involving around 150 homes over three heating seasons showed that existing oil users could move to a blend with kerosene at no upfront cost while significantly cutting emissions. More than 1,000 households have written to MPs urging ministers to act.
Heating oil is exempt from excise duty, but renewable heating fuels currently face a 10 pence per litre charge due to what the associations describe as a “legislative anomaly”. They are urging the Treasury to remove this duty, saying it would not affect public revenues.
OFTEC CEO Paul Rose and UKIFDA CEO Ken Cronin say: “Once again there’s a feeling rural homes are being overlooked by this government. If the Chancellor cuts VAT for gas and electricity bills in her upcoming Budget but ignores oil heated households, what kind of message does this send to hard pressed rural communities?
“The delay to the Warm Homes Plan and a failure to come forward with a pragmatic and cost effective approach to decarbonise oil heated homes is part of a troubling pattern of failing to understand the needs of rural homes.
“The government genuinely needs to explore the range of solutions on offer outside of just electrification. We have provided overwhelming evidence that renewable liquid fuels can be delivered with minimal upfront cost to consumers and drastically cut emissions.
“We’ve also shown that there is more than enough fuel for use across the UK’s 1.7 million oil heated homes. The government now needs to provide some certainty for rural communities who are stuck in limbo.”
For more information visit www.futurereadyfuel.info
