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Industry warns Budget is missed opportunity for UK heating efficiency

Manufacturer Rehema has urged organisations looking to invest in more efficient heating and plant to do so before government terminates ECA tax relief in 2020

Some manufacturers and fuel poverty charities have warned that the 2018 Budget is a missed opportunity to push industry to adopt low carbon approaches to heating amidst the announcement of cuts to a long-standing incentive programme.

Rehema said it was now advising companies planning to invest in improving the energy efficiency of buildings and heating systems to do so before the government terminates its enhanced capital allowances (ECA) scheme in April 2020.

The heating manufacturer’s comments follow the announcement this week of the 2018 Budget by chancellor Philip Hammond that included plans to end the ECA program. The scheme was launched in 2001 to support investment in energy-saving plant or machinery.

Under the latest proposals, the first-year allowance under the ECA that allows 100 per cent of investment costs for equipment included on the Energy Technology List (ETL) and the Water Technology List (WTL) to be written off against taxable income will cease in April 2020. 

An existing annual investment allowance valued at £200,000 would remain in place, according to the Budget.

Rehema product manager Paul Arnold argued that any organisations looking to take advantage of tax relief for ETL products such as boilers and other heading equipment now had a limited time to plan and introduce them.

He said, “The ECA is a popular scheme that has been in place since 2001 to encourage the manufacture and uptake of increasingly energy-efficient products and technologies.”

“Energy efficiency is one of the most cost-effective ways for businesses to improve the energy performance of their buildings. As a large user of energy in a building, heating is frequently a starting place for efficiency measures. And by providing accelerated tax relief on higher energy-efficient equipment, like our own condensing boiler range, the ECA has helped businesses take a whole-life approach to costing for greater long-term energy and emissions savings.”

The manufacturer’s claims are among a number of responses to this week’s Budget that have been critical of the limited level of ongoing financial support for the government’s own low carbon economy plans that have identified transforming heating systems as a major long-term challenge.

Charity National Energy Action (NEA) expressed disappointment with the Budget by criticising the government for a lack of investment support for energy efficient heating technologies. The charity has now called for a reduction in national energy bills to try and curb fuel poverty.

NEA policy and research director Peter Smith said that cuts to fuel bills was one of a number of solutions it was urging government to implement to ensure heating can be affordable for low income households without support for new technology adoption.

 He said, “Living in cold, damp and unhealthy homes continues to cause shocking levels of unnecessary hardship and premature mortality. Improving energy efficiency in homes is the most cost-effective and enduring solution to reduce needless energy costs, eliminate fuel poverty, boost economic growth and safeguard the environment. The potential to unlock these huge benefits was not seized in the Budget.”

ECO amendments

The NEA noted that legislation that underpins the latest iteration of the Energy Company Obligation had been passed in the House of Lords this week, ensuring that at least one government energy efficiency programme would be in place until at least 2022. However, certainty on the future of this scheme is also under question.

Mr Smith said that it would now be down to contractors and energy suppliers to begin to meet their obligations it improve energy efficiency in homes over the winter and beyond. However, he argued that the policy would not be sufficient to meet key statutory targets.

Mr Smith said, “Although NEA doesn’t agree with the loose targeting or level of funding within the new ECO scheme, it’s crucial that the legislation has cleared parliament and there is now no further delay to helping some of the most vulnerable people to heat their homes.

“But we know ECO by itself will not be enough to meet the Government’s own fuel poverty objectives. The budget has clearly not changed or delivered on this challenge, but we will continue to push for such a scheme within the Comprehensive Spending Review.”

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