Households that rely on gas boilers are set to be hit with a new green levy under plans being prepared by energy secretary, Ed Miliband, with the proceeds used to subsidise heat pumps and other low-carbon technologies. Miliband is expected to reveal a £15 billion “warm homes” programme early in the new year after protracted negotiations with the Treasury. Central to the proposal is a shift in how energy costs are shared, forcing gas users to shoulder a greater share of the burden to make electricity cheaper.
Under plans being discussed within government, a levy of around £30 a year would be added to gas bills. The revenue would be used to reduce electricity prices, making heat pumps which run on electricity appear more affordable compared with traditional gas boilers.
It is estimated that over 23 million homes in the UK have a gas boiler to supply their home heating and hot water as of 2023, and the UK reportedly has the slowest introduction of heat pumps in Europe.
Fewer than 100,000 heat pumps were installed across the UK in 2024, compared with roughly 1.5 million gas boilers, most of them being replacements, but many were still fitted in newly built homes.
Just over one in eight new properties came with a heat pump, meaning gas remains the default option even in modern housing developments.
The government insists the levy would be offset by the removal of other green charges, meaning average gas bills would not rise overall.
Ministers have said that the new fee would be offset by removing a green levy, leaving average gas bills unchanged. Electricity currently costs roughly four times more per unit than gas, discouraging households from switching to electric heating.
By rebalancing prices, they hope to accelerate the transition away from fossil fuels towards renewable power, The Times reported.
However, some have warned that the promised savings may never materialise, particularly after the chancellor Rachel Reeves scrapped the Energy Company Obligation, a £1.3 billion-a-year scheme funded through energy bills that was meant to pay for insulation and cleaner heating systems, and that would have cut gas bills by about £30 a year. .
Labour donor and green entrepreneur Dale Vince said the policy would penalise poorer gas boiler owners, stripping away a discount they were expecting under Reeves’s plans.
Dale Vince told The Times: “It impacts the people that can least afford their bills, let alone dream of a heat pump.
“If you get a government subsidy for a heat pump, you still need to find £7,000 yourself. [The government thinks] if we start putting up the gas bills of everybody, so that a few people can have heat pumps, we’ll make heat pumps more economic. I just think that’s wrong.”
Miliband’s “warm homes” programme is designed to cut emissions and improve efficiency across Britain’s 30 million homes. The scheme is expected to include low or zero-interest loans for solar panels, heat pumps and home batteries, continued heat pump subsidies through the current parliament, grants for low-income households, and funding for councils to develop local energy projects.
A government spokesperson said: “This is speculation. We are investing an additional £1.5 billion into our warm homes plan, taking it to nearly £15 billion — the biggest ever public investment to upgrade homes and tackle fuel poverty ever.
“We are doubling down on support for home upgrades and will set out our plans to help households, and support thousands more clean energy jobs, soon.”
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