Labour plan to insulate 19m homes thrown into doubt over debt fears

Labour says it will also use private sector levies and incentives to help fund the scheme. Photograph: DWImages/Alamy

Labour’s pledge to insulate 19m homes in a decade has been thrown into doubt after the party confirmed it would not spend £6bn a year allocated for the scheme if its fiscal rules did not allow, while the government claimed it would cost twice that.

Labour officials confirmed on Wednesday the party would not spend the full £6bn previously promised for home insulation until later in the parliament, and might not at all if it were to result in rising levels of government debt.

The comments came after a government analysis said fully funding the scheme would cost between £12bn and £15bn a year.

Those figures were called into doubt by Labour, which says it will also use private sector levies and incentives to help fund the scheme. They were also partly disowned by the chancellor, Jeremy Hunt, who admitted in an interview Labour’s scheme might not cost as much as £12bn.

However the lack of detail in Labour’s proposal is another example of how uncertainty around its overall £28bn-a-year green plan continues to plague the opposition party.

Party sources say the spending target is effectively “dead” given the constraints already placed on it and are urging Starmer to say so publicly, but the Labour leader continues to use and defend it in public.

A Labour spokesperson said on Wednesday: “[Our] policy is to ramp up to £6bn, in line with our fiscal rules.” The party has previously said the target would be hit “in the second half of the parliament at the earliest”.

Some senior members of the party believe Labour could spend almost nothing on the scheme in the first year, given it would take time to hire and train the number of specialists required to carry out the scheme.

The Conservatives, however, called into question whether Labour’s spending commitments would be enough to hit its ambitious green targets.

An analysis by civil servants in the energy department but commissioned by Tory ministers showed on Wednesday that even hitting a more modest target of insulating 16m homes would cost at least £12bn a year.

Some experts criticised the government for publishing the analysis as an official document, given its assumptions do not tally with official Labour policy. Nick Macpherson, the former lead civil servant at the Treasury, tweeted: “Over the next 9 months, we will have to tolerate many an ‘official Treasury’ costing of Opposition policy. Since time immemorial, whatever the party in power, these costings have had little if any credibility. Political advisers determine the assumptions. #rubbishinrubbishout.”

Labour, meanwhile, called the analysis “nonsense”, given that it has committed to spending a lower amount, and added that it would find ways to fund the scheme other than simply through central government spending.

A Labour spokesperson said: “Previous policy design has differentiated funding levels by household income and has balanced the cost of policies between exchequer-funded schemes/grants, and supplier obligations … all of which could considerably reduce the burden on the exchequer from delivering this policy.” Another added that the target would be funded with “a mixture of loans and grants”.

One way to pay for the scheme would be to increase the levies on energy suppliers through schemes such as the energy company obligation and the Great British insulation scheme. Critics, however, point out that doing so would be likely to push up customers’ bills.

Another path would be to incentivise banks to offer cheaper mortgages to those who retrofit their houses with insulation.

Labour officials are working on the details of schemes such as the warm homes programme in time for the manifesto launch later this year, with shadow ministers working towards a deadline of this Friday for submitting headline measures.

But with uncertainty still plaguing much of the party’s green agenda, the Conservatives are continuing to attack Starmer’s party, alleging they are planning to use secret tax rises to pay for it.

Rishi Sunak said in prime minister’s questions on Wednesday: “It is now crystal clear they have absolutely no plan. We all know how they are going to fund that gap: more taxes on hard-working people.”