‘Boiler Tax’ Scrapped: Government U-turns On Heat Pump Quotas For Manufacturers

The government could scrap its planned ‘boiler tax’, which imposes fines and quotas on manufacturers, according to a report by The Times.

The government was planning to launch the “Clean Heat Market Mechanism” (CHMM) in April of this year.

Dubbed the ‘boiler tax’, the scheme imposes quotas on heat pump sales for heat pump and boiler manufacturers. Manufacturers will have to substitute 4% of their annual boiler sales for heat pump sales, or face a £3,000 fine for each unit they didn’t sell.

The announcement of the CHMM prompted many manufacturers to raise the prices of their boilers, in anticipation of future fines, as companies such as Worcester Bosch claimed that the government quotas would be impossible to meet. The company was planning to launch a £2,500 heat pump grant to boost sales, though this might now be dropped along with the boiler tax.

In response, energy secretary Claire Coutinho is reportedly considering scrapping the CHMM scheme in a bid to save consumers from having to pay more for a boiler.

The CHMM has not been officially cancelled yet, but it looks likely to be, as a government spokesperson told The Times:

“Boiler manufacturers have saddled families with indefensible price hikes — this is not right. We’re looking again at the policy, and expect manufacturers to do the right thing and remove their price hikes immediately”.

How will scrapping the boiler tax affect prices and installation?

Getting rid of the CHMM might make boiler prices go down, but it might also ensure heat pump costs remain high, as manufacturers will no longer have an incentive to lower heat pump prices to encourage customer uptake.

Schemes from manufacturers to make heat pumps cheaper, such as the £2,500 heat pump cashback plan Worcester-Bosch had planned in a bid to meet the quotas imposed by the CHMM, are now likely to be scrapped.

This new u-turn casts more doubt on whether the government can make good on its Net Zero strategy. It has already backtracked on the gas boiler ban, watering down its target to an 85% phase out by 2035, with no rules in place to stop consumers from buying a gas boiler.

It’s hard to see how the government plans to hit its target of 600,000 heat pump installations a year by 2028 when it keeps removing incentives for people to get one.

According to The Times, the government believes “other schemes and incentives” will be enough, such as the Boiler Upgrade Scheme, which can take £7,500 off the price of a heat pump.

With the number of annual heat pump installations in the UK standing at around 40,000 a year, according to the latest MCS data, uptake needs to increase by 150% in just four years for the government to meet its target.

Extending the Boiler Upgrade scheme is one option, but the grant is only available to homeowners in England and Wales, leaving out Scotland, where the rate of heat pump installation is slower than in the UK average.

A crucial part of encouraging heat pump installation is educating people about the technology, including explaining how heat pumps work, and dispelling common heat pump myths, such as “heat pumps don’t work in cold weather” or “heat pumps are too noisy”.