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Green highlights from Spring Statement 2022

The Chancellor’s 2022 Spring Statement in March brought in a limited range of measures to incentivise the purchase of energy efficiency measures amid the growing cost of energy crisis.


The Chancellor’s 2022 Spring Statement in March brought in a limited range of measures to incentivise the purchase of energy efficiency measures amid the growing cost of energy crisis.

VAT on energy saving materials

The headline green announcement was a reduction on VAT on energy saving materials (ESMs) from 5 per cent to zero for the next five years, thereby reducing the costs of improving energy efficiency for households. The reduction covers:

  • Controls for central heating and hot water systems
  • Draught stripping and insulation
  • Solar panels
  • Ground source and air source heat pumps
  • Wind turbines and water turbines
  • Micro combined heat and power units
  • Wood-fuelled boilers.

The cut means a typical domestic rooftop solar PV installation will be around £1,000 cheaper, and heat pump installations around £500 cheaper.

Business rates on green technology

To support the decarbonisation of non-domestic buildings, the Spring Statement also introduced targeted business rates exemptions for eligible plant and machinery used in renewable energy generation and storage, such as solar panels and battery systems. This is expected to save businesses £170 million over the next five years. Eligible heat network installations will also benefit from 100 per cent relief.

Both of these tax reliefs were already set to be introduced from April 2023, but have been brought forward to April 2022.

Fuel duty

In contrast to the roundly welcomed VAT and business rates reliefs, the government has attracted criticism for its decision to cut fuel duty on petrol and diesel by 5p per litre for a year. Experts have pointed out that the move is likely to benefit wealthier people with more polluting, less efficient vehicles the most, rather than those on lower incomes who depend more on public transport.

Sarah Mukherjee, CEO of the Institute for Environmental Management and Assessment (IEMA), said: “While we recognise the need to address the cost of living crisis and the 5p/litre cut in fuel duty, a key medium-term test of the government’s climate change ambition will be whether it invests more in lower carbon transport, including walking and cycling.”

More announcements expected

As already planned, the government will begin a new Boiler Upgrade Scheme (BUS) in May 2022 to encourage domestic and small non-domestic properties to install low carbon heating systems, such as heat pumps, through a £5,000 grant voucher.

However, only around 90,000 households are expected to benefit from the scheme over the next three years, so experts are calling for much more ambitious policy interventions to be included in the government’s forthcoming ‘Energy Security Strategy’.

“Removing VAT on energy efficiency products such as insulation is an immediate boost for families facing soaring gas bills - but there are lots more tools within the Chancellor's grasp for getting off Russian gas and reducing household bills,” commented Jess Ralston, analyst at the Energy and Climate Intelligence Unit (ECUI).

“More announcements are expected in the Prime Minister’s upcoming energy security strategy, and to truly insulate homes from sky-high gas bills in the longer term, more levers will need to be pulled.”

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