Rishi Sunak claims that rowing back on key net zero policies will be saving households money - but is this true? In this blog, we provide cost-benefit analysis of Sunak’s announcements EVs, home energy efficiency and boilers - showing that ultimately families will end up paying thousands more.
Yesterday, Rishi Sunak announced the government would be scrapping a series of key net zero policies related to electric vehicles (EVs) and energy efficiency. Scrapped policies include one that would have forced landlords with inefficient properties to upgrade their homes. Meanwhile, the ban on the sale of new petrol and diesel cars, as well as the ban on fossil fuel boilers, will be pushed back five years to 2035.
For all the Prime Minister’s claims to be saving households money amidst the cost of living squeeze, these policies will actually end up increasing costs for consumers, while building a worse climate for business and the environment.
Delaying electric vehicle adoption means delaying consumer savings
Petrol and diesel cars are expensive to drive, costing the average British household over £5,500 per year in upfront costs, upkeep, fuel, and additional fees. Electric vehicles cost less, as they run on cheaper energy and contain fewer parts that require servicing (like air filters, spark plugs, and mufflers). As a result, most estimates claim households can save 50% on servicing and between 40% and 70% on fuel. According to forthcoming SMF research, that would save urban households £1,000 per year, rising to £1,300 for rural households. In total, we estimate the pivot to EVs could pull over 850,000 households out of poverty.
But this can only be realised if EVs become more widely available. Today, the up-front cost of an EV is £8,000 more expensive than a petrol or diesel car. Over the course of the vehicle’s lifetime these costs are more than offset by fuel and service savings, with customers saving £5,000 to £8,000.
To achieve those savings, though, people need to be able to afford electric cars, which will depend on increased investment and greater supply over a longer period. The zero emission vehicle mandate secured businesses against risks by providing them with a reliable market that incentivised investment. For example, just this summer, Tata Motors announced new EV investments in Somerset and Birmingham. This was already achieving the desired effect, with prices dropping, and one estimate projecting price parity with petrol and diesel vehicles as early as 2027.
Investors no longer feel so certain. As Ford’s UK Chairwoman Lisa Brankin explained, “Our business needs three things from the UK government: ambition, commitment and consistency. A relaxation of 2030 would undermine all three.” Given uncertainty in Britain and high demand elsewhere, manufacturers may prioritise other markets. As a result, EVs are now likely to remain expensive for longer, trapping motorists under the high costs of petrol and diesel vehicles.
Going soft on landlords leaves renters with a £1 billion bill
Rather than looking at innovative means to helping landlords to cover the costs of insulation, the Prime Minister has reneged on his commitment to it altogether.
The gas crisis has shown that even with a highly efficient gas boiler, bills remain high if the fabric of the home is not good enough to retain the heat it produces. For renters this issue is particularly acute, as they have to rely on their landlords to maintain their homes. In the absence of regulation, most landlords do not bother. Citizens Advice report that this year private renters in England and Wales are on track to waste £1.1bn (£220 per household) on energy that leaks out of their walls and windows.
In our research, we have found most landlords sitting on the fence, unwilling to commit to energy efficiency improvements without clarity over their regulatory requirements. Yesterday’s announcement will only encourage them to delay further, and leaves renters to continue to pick up the tab.
Future security of manufacturing jobs in jeopardy?
Separately Sunak’s decision to push back the gas boiler phase out date has serious ramifications for the UK’s heat pump manufacturing opportunity. Domestic manufacturing of heat pumps brings with it the opportunity to develop heat pump models that are smaller, better suited to British homes and potentially cheaper for British consumers. It also could bring job security for those working in gas boiler manufacturing.
As we detail in our upcoming report on the heat pump supply chain, gas boiler manufacturers who operate in the UK are willing and happy to convert some of their assembly lines to manufacture heat pumps in the UK. However, they will only do so once they are assured of their market and the certainty of their investment. Delaying the boiler phase out may mean that by the time the UK market is big enough, the boat for investment will have already sailed, and with it the future security of manufacturing jobs.
On EVs, on energy efficiency, and on boilers, Sunak has missed the opportunity to build good jobs in growing industries and taken savings out of the pocket of British consumers. In the conference, Sunak said “It cannot be right for Westminster to impose such significant costs on working people, especially those who are already struggling to make ends meet.” It’s time he followed his own advice.
