"The Warm Homes Plan is a welcome initiative. However, suddenly yanking £1.3 billion in funding is chaotic, and has created a cliff edge for thousands of low-income households in fuel poverty as well as SMEs employing some 10,000 people."
- Anna Moore - Domma
Britain’s lowest-income households are set to lose £6.5bn in support for upgrading damp, mouldy and draughty homes after the government confirmed the removal of funding traditionally delivered through the green levy on bills.
The change will reduce annual bills by about £48 for all households, including the richest 1%, but industry figures warn it will come at the direct expense of the poorest 1% of the country’s 27 million homes that currently receive benefits from the Energy Company Obligation, known as ECO.
Industry groups argue that the cut will increase government spending and jeopardise thousands of small firms that install insulation and solar panels. Estimates suggest around 10,000 jobs could be at risk, a figure often compared to the workforce at Jaguar Land Rover’s Solihull plant. Until now, major energy suppliers such as British Gas and OVO have funded ECO through the green levy on bills.
Because the levy has been applied at similar levels for households regardless of income, removing it provides the largest relative benefit to high earners, while families with incomes below £31,000 lose access to support that lowers energy bills long term. Housing leaders are now urging ministers to extend the current ECO programme for one year to avoid what they describe as a disorderly collapse in the retrofit sector, which depends heavily on early planning and consistent pipelines of work.
In the Budget announcement, the scheme funding upgrades for low-income households living in cold, inefficient or unsafe homes was closed with immediate effect. Social housing specialists say this decision puts thousands of jobs and hundreds of thousands of households in precarious positions at a time when fuel poverty remains widespread.
Chancellor Rachel Reeves commented on BBC Radio 4’s Today Programme that she aimed to improve conditions for families and children living in cold homes who must choose between heating and eating. However, critics argue that offering a modest bill reduction for wealthier households, while removing vital support for the poorest, risks deepening hardship across many communities.
The Treasury confirmed the ECO scheme’s closure in supporting documents published after the Budget. Industry figures fear the move could destabilise the retrofit supply chain, which is already under pressure, and leave hundreds of thousands of households without upgrades to address damp, mould and heat loss. Many firms say they are now facing significant uncertainty.
ECO is funded by private sector contributions and delivered mostly by small and medium-sized enterprises. The programme currently installs fuel poverty measures in around 5,000 homes per month, equating to roughly 58,000 upgrades each year. It supports approximately £1.3bn in annual energy efficiency improvements for low-income households who experience fuel poverty or health risks from damp, mould and draughts.
Industry calculations indicate that over the span of this parliament, the programme would have channelled £6.5bn into more than 288,000 low-income homes, making it one of the most substantial and effective fuel poverty measures in recent years.
Ministers presented the cut as a “saving” that would reduce energy bills by £150. Analysts dispute this, saying the realistic figure is closer to £48, based on dividing ECO’s £1.3bn annual cost across 27 million households. Although estimates differ, industry leaders agree the change is regressive and does not save taxpayers money. Many firms report immediate disruption to supply chains supporting insulation, ventilation and related retrofit work.
Government plans involve merging the now-closed private-sector-driven ECO scheme with the Warm Homes Plan, a public-sector programme that relies on formal procurement processes. The Warm Homes Plan had been expected to begin in April but has experienced delays, and industry groups argue that ending ECO before its successor is ready creates a significant gap in delivery.
With ECO scheduled to end fully in March 2026 and the Warm Homes Plan not yet operational, there is no equivalent replacement in place. Industry representatives estimate that this withdrawal removes around £5bn in future retrofit funding and places about 222,000 potential retrofit projects at risk. These projects would likely have delivered lower bills and healthier living conditions for many low-income households.
Anna Moore, McKinsey’s former head of UK construction and now founder at Domna, a retrofit firm working with housing associations, social landlords and councils, is calling for a minimum 12-month extension of ECO to provide stability during the transition. She intends to write to the energy secretary, Ed Miliband, urging the government to safeguard funding for low-income households and to coordinate planning across departments.
Joel Pearson, director at Net Zero Renewables, a Newcastle-based solar installer, explained, “We employ and subcontract over 35 skilled individuals, and have helped take more than 200 homes out of fuel poverty through the ECO scheme,” said Joel Pearson, director at Net Zero Renewables. “I would urge Rachel Reeves to think again and to at least extend this existing scheme by a year so we can see an orderly transition and support firms like ours helping to mitigate climate change.”
Lee Rix, managing director at Eco Approach, a Preston installer, commented, “Each year our 150+ staff and supply chain use ECO4 funding to make cold, inefficient homes safer and more affordable for thousands of families in fuel poverty,” noted Lee Rix, managing director at Eco Approach. “With no transition plan, ending ECO4 risks leaving those families abandoned and undermining the workforce that supports them – we urgently need clarity on a successor scheme.”
Anna Moore, CEO and founder at Domna, a retrofit consultancy, said, "It makes sense to streamline grants and increase oversight. The Warm Homes Plan is a welcome initiative. However, suddenly yanking £1.3 billion in funding is chaotic, and has created a cliff edge for thousands of low-income households in fuel poverty as well as SMEs employing some 10,000 people."
"With fuel poverty growing and business under pressure, it beggars belief that a successful scheme funnelling utility firm funding to the poorest households in society should be brutally cut. And for what? To create a few short-term headlines around cutting Net Zero levies."
"This fundamentally goes against Labour’s stated values of wanting to help the poor and to fight climate change. This is not the moment to pull up the ladder. Bridging ECO to the Warm Homes Plan is essential if we are to protect residents, protect jobs and protect progress. Right now, we risk losing the installers, coordinators and surveyors, those SMEs who have built up capability over a decade, and whose expertise we critically need. Companies cannot simply be switched back on later like a light switch and the ramifications of this could massively undermine our wider battles to fight climate change and upgrade our ageing housing stock."
"We need clarity and continuity. Extending ECO by one year allows an orderly transition while the Warm Homes Plan is finalised, piloted and mobilised. Without that extension, the sector falls off a cliff in March 2026 and we will be rebuilding capacity from scratch at exactly the moment the government needs to accelerate delivery."
