PM warned not to ignore 41,000 oil-heated Devon homes in VAT cut plans

More than 41,000 households in Devon that rely on heating oil could miss out on support with their energy bills if the government proceeds with plans to cut VAT only on gas and electricity in the upcoming Budget, industry leaders have warned.

Across Dartmoor and other rural parts of the county, oil boilers remain the dominant form of home heating because many properties are off the gas grid. On Dartmoor specifically, thousands of homes, often older, stone-built and remote, depend on oil tanks or other off-grid fuels, with electric heating only supplementing oil rather than replacing it due to high running costs and poor insulation.

Trade associations OFTEC and UKIFDA say these households risk being overlooked again after the government delayed its long-awaited Warm Homes Plan, originally due at the end of October. The plan was expected to outline how rural and off-grid homes could transition to greener heating systems, but its postponement has left households in limbo.

With speculation mounting that the Chancellor may instead announce VAT cuts on gas and electricity bills only, the industry groups have written to the Prime Minister warning of a “worrying trend” in which rural homes are being sidelined in national energy policy.

They argue that excluding oil-heated homes from VAT relief would be “unfair and discriminatory,” particularly as rural households face far higher barriers to switching to low-carbon heating.

Government policy currently prioritises heat pumps, but demonstration projects show the cost of installing them in older rural properties can exceed £20,000. Even with the £7,500 Boiler Upgrade Scheme grant, many homeowners on Dartmoor and elsewhere would still face substantial additional costs for insulation upgrades and system adaptations.

Industry leaders say the cost-of-living crisis makes such expenses unrealistic and that the Treasury does not have the fiscal capacity to fund retrofits for the UK’s 1.7 million oil-heated households.

Instead, OFTEC and UKIFDA are urging ministers to support renewable liquid fuels as a more affordable route to decarbonising rural homes. A three-year demonstration project involving 150 properties showed households could switch to a blend of renewable fuel and kerosene at no upfront cost, cutting emissions dramatically.

More than 1,000 oil-heated households have written to their MPs in the past month, calling on the government to adopt the renewable fuel solution.

However, under current legislation, renewable heating fuels face an extra 10 pence per litre in duty, despite traditional heating oil being exempt. Industry groups want the government to remove this “anomaly,” arguing it would not reduce Treasury income but would allow greener fuels to compete fairly.

OFTEC CEO Paul Rose and UKIFDA CEO Ken Cronin said:
"Once again there’s a feeling rural homes are being overlooked by this government. If the Chancellor cuts VAT for gas and electricity bills in her upcoming Budget but ignores oil heated households, what kind of message does this send to hard pressed rural communities?

“The delay to the Warm Homes Plan and a failure to come forward with a pragmatic and cost effective approach to decarbonise oil heated homes is part of a troubling pattern of failing to understand the needs of rural homes.

“The government genuinely needs to explore the range of solutions on offer outside of just electrification. We have provided overwhelming evidence that renewable liquid fuels can be delivered with minimal upfront cost to consumers and drastically cut emissions.

“We’ve also shown that there is more than enough fuel for use across the UK’s 1.7 million oil heated homes. The Government now needs to provide some certainty for rural communities who are stuck in limbo.”

Devon’s rural landscape, particularly remote areas such as Dartmoor, Exmoor fringes and the South Hams, means many homes lack access to mains gas and rely heavily on oil or LPG. Industry leaders warn that unless the government takes their needs into account, the transition to greener heating risks widening the rural-urban divide.

More information is available at www.futurereadyfuel.info