Insulating UK homes could save the country ‘billions’, assessments show

The UK government is under increasing pressure from political parties and research groups to increase investments in home insulation, as assessments show that it could save billions in energy costs.

The Institute of Public Policy Research (IPPR) has drawn up a 28-year plan - at an annual cost of £7bn - to deliver energy-saving domestic upgrades across the country in a bid to ease the strain on people’s wallets and the environment. They claim the move is “uniquely placed” to become “the cornerstone of the government’s levelling-up strategy in England”. 

The IPPR said that all of England’s 24 million homes need upgrading, putting the country “far behind” its European neighbours, such as Germany and France.

According to the think tank, investing in its proposals for a multibillion-pound retrofitting programme could save average households £430 per year when energy bills are capped at £2,500 this autumn, and sustain more than 1.2 million direct jobs and 1.5 million indirect jobs by 2050.

The scheme could create more than 61,200 new direct roles in the North East, equivalent to more than 5 per cent of the total job market in the region, the IPPR said. This would represent a significantly greater benefit than the boost seen in London, it said, with just short of 139,000 new direct jobs representing slightly over 2 per cent of total employment in the capital.

Other industry and research organisations have also joined this call for further investment into home insulation. A business coalition, the Energy Efficiency Infrastructure Group (EEIG), has urged Chancellor Kwasi Kwarteng to invest £5bn more to insulate UK buildings, while the Energy and Climate Intelligence Unit (ECIU) has said the government’s 2013 decision to cut support for home insulation means 10 million households have missed out on upgrades that would have cut their energy demand.

Had the improvements been made it would have reduced bills, saving the Treasury and taxpayers around £9bn in the first year of the energy price guarantee, which caps household fuel bills to protect against soaring costs, and £18bn over two years if prices stay high, ECIU said.

The UK is currently installing less than a tenth of the measures needed in its “cold, damp and leaky” housing stock to meet its net zero target, it said, with the pace of deployment required only increasing in the face of the “dire” energy price crisis.

According to IPPR, a nationwide retrofitting programme would require measures including setting a date for phasing out the sale of oil and gas boilers; introducing a “one-stop shop” for financial support; launching a “massive national information campaign”, and boosting funding to local authorities to deliver schemes in their areas.

“This report shows that a national retrofit programme can deliver jobs and growth right across the country and deliver levelling up at the same time. It would also lower energy bills, reduce energy demand and our dependence on (Russian President Vladimir) Putin and lessen carbon emissions," said Luke Murphy, associate director for the energy, climate, housing and infrastructure team at the IPPR.

“It’s hard to think of another intervention that could deliver on so many objectives at the same time. It’s time the government acted and invested to upgrade our nation’s homes, making them warmer and more affordable.”

The letter to the Chancellor from the EEIG, which includes the CBI and industry body Energy UK, says efforts to make homes more efficient could save £20bn over the next five years, helping consumers and reducing government borrowing needed to cap energy bills.

The EEIG said £3bn should be invested in a new energy efficiency scheme over the next three years to help insulate up to two million more homes and a further £2bn to “supercharge” existing programmes for low-income households. 

“Energy efficiency is a triple-win for the economy, energy security and boosting Britain’s health," said Sarah Kostense-Winterton, chairman of the EEIG. “The Chancellor has an opportunity to invest to save the public purse billions of pounds through simple energy saving measures which can significantly cut household bills.”

The call for improved home insulation infrastructure is not new. Last month, Labour leader Sir Keir Starmer reiterated his call for a programme to insulate 19 million homes across the country, claiming it would save households an average of £1,000 a year. The initiative was first proposed in September 2021. 

"We need a national mission to insulate homes," he said. "I called for that a year ago now and if the government had done that, we'd have the best part of two million homes insulated."

Earlier this year, Chris Stark, head of the UK's Climate Change Committee, told the BBC he rates government policy on insulation as "very poor".

Britain is frequently described as having some of the oldest and least energy-efficient housing in Europe. Retrofitting - adding insulation to existing homes - can be very expensive. According to Stark, the government isn't doing enough to help fund this costly work.

The government needs to provide "a sharper incentive for most people to make these investments in improving the energy efficiency of the home that they live in," he told BBC News. 

A Business, Energy and Industrial Strategy Department (BEIS) spokesperson said: “We wholeheartedly agree that retrofitting homes provides opportunities for economic growth and will help bring down household energy bills, which is why we are spending £6.6bn in this parliament to improve energy efficiency of homes across the country.

“The majority of our ‘Help to Heat’ support is targeting those on low incomes and vulnerable households, which is benefiting tens of thousands of homes and delivering average savings of £300 a year on energy bills. Huge progress has already been made, with the number of homes with an energy efficiency rating of C or above at 46 per cent and rising, up from just 14 per cent in 2010.”

According to government estimates, 19 million of the UK's 29 million homes are on the bottom rungs of the Energy Performance rankings with a rating of 'D' or below.

In July 2020, the government announced a £3bn package for British homeowners to make their houses more energy efficient and improve insulation efforts. The scheme offered households up to £10,000 to insulate their property, but it underperformed badly. The Public Accounts Committee called it a “slam dunk fail” after it failed to draw applicants and was closed after less than a year.

The UK is currently facing a cost-of-living crisis, with inflation hitting historic levels. The rising prices of energy bills – prompted by the Russian invasion of Ukraine – is the main catalyst of this situation, which could leave as many as 40 per cent of British families facing fuel poverty in the winter.

In order to address the cost-of-living crisis and rising energy prices, new Prime Minister Lis Truss has presented a package that includes freezing energy bills at £2,500. The measure will replace the existing energy price cap set by regulator Ofgem, which was set to increase to £3,549 come October.

“This is the moment to be bold,” Truss told MPs. “We are facing a global energy crisis and there are no cost-free options.”

The plan to freeze energy bills was first proposed by Labour Party leader Keir Starmer earlier this summer. Under Labour’s proposal, the plan would have cost £29bn but would be paid for through an extension of the windfall tax on oil and gas firms. Starmer said Truss’ plan to fund the programme through borrowing is “driven by dogma” and will mean “it’s working people who will pay for that”.