Homeowners looking to replace their gas boilers with heat pumps could potentially repay the cost of installation through a wage sacrifice scheme, according to Energy Secretary Ed Miliband. The scheme, still under consideration, would allow employees to pay for the installation in monthly instalments taken directly from their pre-tax earnings, providing a tax saving that could reduce the overall cost.
This proposal mirrors wage sacrifice schemes already available for electric vehicles (EVs), which have been credited with boosting EV adoption among drivers. Miliband is reportedly considering an expansion of an existing initiative aimed at easing the financial burden of installing heat pumps, which could help consumers transition to greener heating systems.
High Costs of Heat Pump Installation
Currently, the typical cost of installing an air-source heat pump, the most common type, is around £5,500, even after government grants. This price, according to data from MCS, still represents a significant financial outlay for homeowners.
While the government has yet to officially announce the introduction of a wage sacrifice scheme for heat pumps, they did not rule out the possibility on Monday. It is understood, however, that such a proposal has not been finalized, and no specific plans are in place yet.
Challenges Compared to EV Schemes
Implementing a wage sacrifice scheme for heat pumps may present more challenges than the existing scheme for electric cars. Unlike electric vehicles, heating systems are typically not leased, making the logistics of a salary sacrifice option more complex.
However, the Electric Vehicle Scheme, which currently offers salary sacrifice plans for EVs, provided an example of how the scheme could work for heat pumps. For example, a £14,760 heat pump paid over three years could cost as little as £295 per month with the tax breaks, compared to £410 without them.
Support from Industry Leaders
Thom Groot, CEO of the Electric Vehicle Scheme, welcomed the government’s consideration of extending the wage sacrifice option to heat pumps. He emphasized that the inclusion of renewable technologies like heat pumps would support the government’s net-zero target and stimulate economic growth, a key focus of Labour’s economic policies.
Trevor Hutchings, CEO of the Renewable Energy Association, also supported the idea, pointing to the success of the salary sacrifice scheme for electric vehicles. He argued that extending the policy to renewable technologies such as heat pumps and solar panels could provide a significant boost to the sector. Industry estimates suggest that such a policy could result in 600,000 heat pump installations by 2030.
Government’s Efforts to Promote Heat Pumps
A government spokesperson confirmed that efforts are already underway to help more people install heat pumps. This includes offering grants of up to £7,500 and supporting the development of finance models that could eliminate upfront costs for consumers.
The government is also consulting on expanding the Boiler Upgrade Scheme, which could include new approaches such as heat pump subscriptions, to help households transition to cleaner heating solutions in a way that suits their needs.
In conclusion, while the introduction of a wage sacrifice scheme for heat pumps has not yet been confirmed, it is being seriously considered as a potential tool to make renewable heating systems more accessible and affordable for homeowners.
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