Cuts to home insulation funding threaten UK climate goals

Published: 08 November 2025. The English Chronicle Desk. The English Chronicle Online.

Rachel Reeves has been warned that any decision to cut funding for home insulation at the upcoming budget could imperil the UK’s climate targets while disproportionately affecting low-income households. In a joint intervention, more than 60 organisations, including energy firms, fuel poverty charities, and environmental groups, urged the chancellor not to adopt what they described as a short-term fix that would slash investment in energy-efficient homes to offset a reduction in household energy bills.

The Guardian recently reported that Reeves is preparing a multibillion-pound energy support package, which could include cuts to green levies aimed at improving energy efficiency. The plan is expected to reduce bills for households by as much as £170 on average, but critics argue that slashing long-term green initiatives could undermine the UK’s commitments to both carbon reduction and alleviating fuel poverty.

At the heart of the controversy is the Energy Company Obligation (ECO) programme, which funds home improvements such as insulation and efficient heating systems for low-income and vulnerable households. The Treasury has reportedly been considering reducing or even eliminating the programme, a move that campaigners warn could threaten thousands of jobs in the £20 billion energy efficiency sector.

In a letter to Reeves, organisations including Age UK, Citizens Advice, Friends of the Earth, Energy UK, National Energy Action, Disability Rights UK, the Energy Saving Trust, and Greenpeace urged the government to reconsider the potential cuts. “While direct bill support provides an immediate way to help struggling households, decarbonising homes through cost-effective upgrades is the best way to sustainably address fuel poverty and reduce costs for all billpayers,” the letter said.

The signatories stressed that reducing funding for energy efficiency would not only affect households’ long-term energy costs but also put at risk jobs across the supply chain. James Dyson, senior researcher at E3G, a non-profit organisation that helped coordinate the letter, warned that previous cuts to ECO led to the loss of 10,000 jobs and left millions of families living in draughty homes with high energy bills. “Cutting ECO could collapse the entire insulation industry, putting thousands of working people out of work in areas of the country that need good, skilled jobs and removing one of the best methods of permanently reducing energy bills for low-income families. It would also rob us of a key tool for lowering carbon emissions in this critical decade for climate action,” he said.

Darren Jones, the chief secretary to the prime minister, told the Guardian that the government remains committed to its green agenda and tackling the climate crisis. However, those consulted on the proposed plans indicated that the chancellor may be looking to reduce or eliminate ECO funding to help bring energy bills down, possibly reallocating resources from the £13 billion warm homes plan. Much of this plan is earmarked to subsidise electric heat pumps, which are a key component in decarbonising UK homes. The government is also reportedly considering removing the 5% VAT on electricity bills to further reduce costs for households.

Dhara Vyas, chief executive of Energy UK, described the potential changes as “shortsighted and disastrous,” highlighting previous experiences where cuts to home insulation investment led to higher bills and disruption across supply chains. “We’ve had ample previous experience showing how knee-jerk cuts to investment in warmer homes have resulted in customers paying billions of pounds more on their energy bills, while also damaging supply chains and businesses with knock-on impacts to investment and job losses,” she said.

Environmental advocates also voiced their concerns. Dr Doug Parr, Greenpeace UK’s policy director, stated that slashing ECO funding would be “the most counter-productive thing the chancellor could do in seeking to reduce energy costs.” He added that while government programmes need reform to address substandard work by some installers, cutting the funding entirely would leave millions of households in cold, damp homes, worsening fuel poverty. “These levies should not be cut, but paid for through tax, so those with the broadest shoulders pay a fairer share,” Parr said.

Mike Childs, head of science, policy, and research at Friends of the Earth, echoed the warning. “It would be a serious betrayal of struggling families for the government to cut the mandatory energy company insulation scheme in order to reduce energy bills. We need homes to be made warmer and energy bills to be cut if we’re to ease hardship and shield people from harm. The chancellor mustn’t give with one hand only to take with the other,” he said.

The timing of the warning comes after Labour leader Keir Starmer attended the COP30 climate conference in Brazil, where he emphasised the UK’s commitment to climate leadership and the creation of green jobs. Starmer’s attendance and statements reinforce the argument from campaigners that scaling back funding for home insulation would contradict broader national and international climate commitments.

A HM Treasury spokesperson declined to comment on speculation regarding potential tax and funding changes, stating: “The budget later this month will build stronger foundations to secure Britain’s future and focus on the priorities of working people: cutting waiting lists, cutting the national debt and cutting the cost of living.”

Reports also indicate that Reeves may announce measures affecting pension contributions, potentially capping the amount of salary that employees can sacrifice without paying national insurance at £2,000 per year. This change could raise up to £2 billion annually, prompting concerns that the additional cost could be passed onto workers.

The intervention by more than 60 organisations demonstrates a growing coalition of stakeholders concerned about the social, economic, and environmental consequences of cutting the ECO programme. While immediate reductions in household energy bills may provide short-term relief, experts warn that undermining energy efficiency measures could leave families facing persistently high bills and delay the UK’s progress toward net-zero targets.

The debate highlights the tension between short-term economic relief and long-term sustainability, illustrating the complexities the government faces in balancing immediate cost-of-living pressures with the need for systemic investment in energy efficiency and climate action. As the budget approaches, pressure is mounting on Reeves and the Treasury to ensure that funding cuts do not undermine both environmental objectives and social protections for vulnerable households.