Rishi Sunak confirms he’s delaying ban on new petrol and diesel cars and boosts boiler upgrade scheme
Rishi Sunak has confirmed he will be easing a series of green policies under a “new approach” designed to protect “hard-pressed British families” from “unacceptable costs”.
Delivering a speech from Downing Street, he said he is still committed to reaching net zero by 2050, but the transition can be done in a “fairer and better way”.
Announcing a raft of U-turns, the prime minister confirmed he will delay a ban on the sale of new diesel and petrol cars by five years and a weakening of targets to phase out gas boilers.
He also said a “worrying set of proposals” that had emerged during debates on net zero would be scrapped, including:
- For government to interfere in how many passengers you can have in your car
- To force you to have seven different bins in your home
- To make you change your diet and harm British farmers by taxing meat
- To create new taxes to discourage flying or going on holiday
“Our destiny can be of our own choosing,” Mr Sunak said – while calling for politicians to be “honest” about the costs of green policies on families.
Politics live: Rishi Sunak gives speech from Downing Street
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‘No rights to impose costs on people’
The measures have faced criticism from across the political spectrum as well as from businesses, environmental groups and even former US vice president Al Gore.
Labour accused the prime minister of “dancing to the tune” of net zero-sceptic Tories and said the plans would actually add more costs to households while damaging investor confidence.
Explaining the government’s decision to delay the ban on the sale of new petrol and diesel cars – currently due in 2030 – by five years, Mr Sunak said this would give businesses “more time to prepare”.
He also said people would still be allowed to buy secondhand diesel and petrol cars after that date and this would align the UK’s approach with countries across Europe, Canada and many US states.
In weakening the plan to phase out gas boilers from 2035, Mr Sunak said households would “never” be forced to “rip-out their existing boiler and replace it with a heat pump”.
This will only be required when people are due to change their boiler anyway and there will be an exception for households for whom that will be the hardest.
Mr Sunak also announced an increase to the boiler upgrade scheme, saying rather than banning boilers “before people can afford the alternative” the government is going to “support them to make the switch” to heat pumps.
He said: “The boiler upgrade scheme which gives people cash grants to upgrade their boiler will be increased by 50% to seven and a half thousand pounds.
“There are no strings attached. The money will never need to be repaid.”
Landlord efficiency targets scrapped
Mr Sunak has also scrapped plans to force landlords to upgrade the energy efficiency of their properties, saying some property owners would have been forced to “make expensive upgrades” within two years and that would inevitably impact renters.
“You could be looking at a bill of £8,000, and even if you’re only renting, you’re more than likely to see some of that passed on in higher rents,” he said.
“That’s just wrong, so those plans will be scrapped.”
Despite the “new approach”, the prime minister insisted the UK would meet its international obligations on climate change – such as those made under the Paris Climate Accords.
He went on to defend the UK’s record, arguing the country is “so far ahead” of other countries in the world when it comes to cutting greenhouse gas emissions.
PM wants to portray himself as a leader prepared to take unpopular decisions his predecessors weren’t
For all the rhetoric about democracy and real political change – today’s speech was fundamentally about the Prime Minister giving into the concerns of many in his party about the costs of the green policies set out by Boris Johnson’s government.
Labour see these announcements as projecting fundamental political weakness: 20 points behind in the polls and struggling to meet the majority of his five pledges, Rishi Sunak urgently needs to find a way to connect with voters struggling during the cost of living crisis. He’s keen to win over the right wing Tory backbenchers concerned about the electoral danger of expensive environmental policies like the ULEZ expansion which was widely seen to have cost Labour the Uxbridge by election.
It’s an impression underlined by the hurried way the announcement was made – less than 24 hours after these controversial change in tack was leaked to the media, prompting a huge backlash from business and many in his own party. Making such a key speech in the Downing Street media briefing room – rather than to Parliament, also looks chaotic.
It’s sent the Speaker into a fury, earning a humiliating rebuke. “Ministers are answerable to MPs – we do not have a presidential system here,” Sir Lindsey Hoyle thundered. For a man like Mr Sunak, who prides himself on being a sensible pragmatist – the complete opposite to the cavalier Boris Johnson – it’s surely a criticism that will sting, though it’s hardly unexpected.
The irony is that Rishi Sunak opened his speech by pledging to put the long term interests of the country before the short term political needs of the moment. Climate campaigners, for whom nothing could be more urgent, will surely scoff at this.
But in the framing of his speech – as the first of a series of long term policy decisions in a ‘new kind of politics’ – the Prime Minister and his team are keen to burnish his reputation as a pragmatic reformer, prepared to take the kind of unpopular decisions his predecessors weren’t. Certainly many in his party have been calling for a change in approach, a new bolder strategy to set out a greater distance with Labour – and it seems he has been listening.
The PM’s key arguments – that government shouldn’t impose unnecessary or heavy handed costs on hard working people, and relying on the market to drive change – are a return to classic Conservatism.
But his core argument that the need for action is less urgent than we have previously been led to believe, because of the UK’s success in meeting existing climate targets – is not one which will sit easily with green minded MPs.
And while he spent a key part of the speech concentrating on the importance of green technological innovation, and celebrating the power of the market in delivering progress – that will surely stick in the throat of companies who’ve spent billions getting ready to meet targets which have now been delayed. Many in his own party are concerned about the reputational damage to the UK as a centre of business investment.
He’s well aware that today’s message will be deeply unpopular with some – but promised to ‘meet any resistance’. Many Tory MPs will welcome that more bullish approach; but his promise to deliver ‘pragmatism and not ideology’ is pure Sunak.
The question now is in the hands of voters – do they buy into this argument that the country can reach Net Zero by 2050 without many of the policies designed to get there? Or in the midst of the cost of living crisis – will they be delighted to avoid the cost of paying for them?
‘Act of weakness’
Among the critics, Ed Miliband, Labour’s Shadow Energy Security and Net Zero Secretary, said: “Today is an act of weakness from a desperate, directionless prime minister, dancing to the tune of a small minority of his party. Liz Truss crashed the economy and Rishi Sunak is trashing our economic future.
“Having delivered the worst cost of living crisis in generations, the prime minister today loads more costs onto the British people.”
Lib Dem leader Ed Davey said: “This is a prime minister who simply doesn’t understand and cannot grasp for Britain the opportunities for jobs and our economy of driving forward with action on clean energy.”
There was also criticism from the car industry and energy industry.
Chis Norbury, the chief executive of the E.ON energy firm, said it was a “false argument” that green policies can only come at a cost, arguing they deliver affordable energy while boosting jobs.
He said companies wanting to invest in the UK need “long-term certainty” while communities now risk being condemned to “many more years of living in cold and draughty homes that are expensive to heat”.
Ford cars UK chairwoman Lisa Brankin said: “Our business needs three things from the UK Government: ambition, commitment and consistency. A relaxation of 2030 would undermine all three.”
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Rishi Sunak is asked if his net zero policy climbdowns are a result of him panicking about the next election.
Tory MPs split
The announcement comes after last night’s leak of the plans sparked a major Tory backlash and even a threat of a no confidence letter.
Mr Sunak was due to give the speech later this week but brought it forward following a hastily arranged cabinet meeting this morning.
Commons Speaker Sir Lindsay Hoyle reacted furiously to the announcement not being made to MPs, who are on recess for conferences, expressing his views “in the strongest terms” in a letter to Mr Sunak.
Tory MPs are split, with some seeing the row back on costly green policies as a vote winner and others fearing the impact it will have on business and the climate.
Senior figures who have backed the prime minister include his predecessor Liz Truss, who said: “I welcome the delay on banning the sale of new petrol and diesel cars as well as the delay on the ban on oil and gas boilers. This is particularly important for rural areas.”
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However Boris Johnson, who Ms Truss briefly took over from, said the row back would cause uncertainty for businesses, adding: “We cannot afford to falter now or in any way lose our ambition for this country.”
Mr Johnson’s ally and prominent Tory environmentalist Lord Zac Goldsmith went as far as to demand a general election over the “economically and ecologically illiterate decision”.
The UK’s commitment to reach net zero by 2050 was written into law in 2019.
Climate scientists say urgent cuts are needed to the world’s greenhouse gas emissions if we are to stop temperatures rising to a potentially catastrophic extent.
In the summer, scientists warned extreme heat events were rapidly on the rise due to climate change.
The UK’s benchmark stock index has reached another record high.
The FTSE 100 index of most valuable companies on the London Stock Exchange closed at 8,505.69, breaking the record set last May.
It had already broken its intraday high at 8532.58 on Friday afternoon, meaning it reached a high not seen before during trading hours.
Money blog: Major boost for mortgage holders
The weakened pound has boosted many of the 100 companies forming the top-flight index.
Why is this happening?
Most are not based in the UK, so a less valuable pound means their sterling-priced shares are cheaper to buy for people using other currencies, typically US dollars.
This makes the shares better value, prompting more to be bought. This greater demand has brought up the prices and the FTSE 100.
The pound has been hovering below $1.22 for much of Friday. It’s steadily fallen from being worth $1.34 in late September.
Also spurring the new record are market expectations for more interest rate cuts in 2025, something which would make borrowing cheaper and likely kickstart spending.
What is the FTSE 100?
The index is made up of many mining and international oil and gas companies, as well as household name UK banks and supermarkets.
Familiar to a UK audience are lenders such as Barclays, Natwest, HSBC and Lloyds and supermarket chains Tesco, Marks & Spencer and Sainsbury’s.
Other well-known names include Rolls-Royce, Unilever, easyJet, BT Group and Next.
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FTSE stands for Financial Times Stock Exchange.
If a company’s share price drops significantly it can slip outside of the FTSE 100 and into the larger and more UK-based FTSE 250 index.
The inverse works for the FTSE 250 companies, the 101st to 250th most valuable firms on the London Stock Exchange. If their share price rises significantly they could move into the FTSE 100.
A good close for markets
It’s a good end of the week for markets, entirely reversing the rise in borrowing costs that plagued Chancellor Rachel Reeves for the past ten days.
Fears of long-lasting high borrowing costs drove speculation she would have to cut spending to meet self-imposed fiscal rules to balance the budget and bring down debt by 2030.
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They Treasury tries to calm market nerves late last week
Long-term government borrowing had reached a high not seen since 1998 while the benchmark 10-year cost of government borrowing, as measured by 10-year gilt yields, was at levels last seen around the 2008 financial crisis.
The gilt yield is effectively the interest rate investors demand to lend money to the UK government.
Only the pound has yet to recover the losses incurred during the market turbulence. Without that dropped price, however, the FTSE 100 record may not have happened.
Also acting to reduce sterling value is the chance of more interest rates. Currencies tend to weaken when interest rates are cut.
The International Monetary Fund (IMF) has warned against the prospects of a renewed US-led trade war, just days before Donald Trump prepares to begin his second term in the White House.
The world’s lender of last resort used the latest update to its World Economic Outlook (WEO) to lay out a series of consequences for the global outlook in the event Mr Trump carries out his threat to impose tariffs on all imports into the United States.
Canada, Mexico, and China have been singled out for steeper tariffs that could be announced within hours of Monday’s inauguration.
Mr Trump has been clear he plans to pick up where he left off in 2021 by taxing goods coming into the country, making them more expensive, in a bid to protect US industry and jobs.
He has denied reports that a plan for universal tariffs is set to be watered down, with bond markets recently reflecting higher domestic inflation risks this year as a result.
While not calling out Mr Trump explicitly, the key passage in the IMF’s report nevertheless cautioned: “An intensification of protectionist policies… in the form of a new wave of tariffs, could exacerbate trade tensions, lower investment, reduce market efficiency, distort trade flows, and again disrupt supply chains.
Follow our Money blog: Major boost for mortgage holders
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Trump’s threat of tariffs explained
“Growth could suffer in both the near and medium term, but at varying degrees across economies.”
In Europe, the EU has reason to be particularly worried about the prospect of tariffs, as the bulk of its trade with the US is in goods.
The majority of the UK’s exports are in services rather than physical products.
The IMF’s report also suggested that the US would likely suffer the least in the event that a new wave of tariffs was enacted due to underlying strengths in the world’s largest economy.
Read more: What Trump’s tariffs could mean for rest of the world
The WEO contained a small upgrade to the UK growth forecast for 2025.
It saw output growth of 1.6% this year – an increase on the 1.5% figure it predicted in October.
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What has Trump done since winning?
Economists see public sector investment by the Labour government providing a boost to growth but a more uncertain path for contributions from the private sector given the budget’s £25bn tax raid on businesses.
Business lobby groups have widely warned of a hit to investment, pay and jobs from April as a result, while major employers, such as retailers, have been most explicit on raising prices to recover some of the hit.
Chancellor Rachel Reeves said of the IMF’s update: “The UK is forecast to be the fastest growing major European economy over the next two years and the only G7 economy, apart from the US, to have its growth forecast upgraded for this year.
“I will go further and faster in my mission for growth through intelligent investment and relentless reform, and deliver on our promise to improve living standards in every part of the UK through the Plan for Change.”
Business
Run of bad economic data brings end to market turbulence and interest rate benefits as three Bank cuts expected for 2025
A week of news showing the UK economy is slowing has ironically yielded a positive for mortgage holders and the broader economy itself – borrowing is now expected to become cheaper faster this year.
Traders are now pricing in three interest rate cuts in 2025, according to data from the London Stock Exchange Group.
Earlier this week just two cuts were anticipated. But this changed with the release of new official statistics on contracting retail sales in the crucial Christmas trading month of December.
It firmed up the picture of a slowing economy as shrunken retail sales raise the risk of a small GDP fall during the quarter.
Money blog: Surprise as FTSE 100 soars to new record high
That would mean six months of no economic growth in the second half of 2024, a period that coincides with the tenure of the Labour government, despite its number one priority being economic growth.
Clearer signs of a slackening economy mean an expectation the Bank of England will bring the borrowing cost down by reducing interest rates by 0.25 percentage points at three of their eight meetings in 2025.
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How pints helped bring down inflation
If expectations prove correct by the end of the year the interest rate will be 4%, down from the current 4.75%. Those cuts are forecast to come at the June and September meetings of the Bank’s interest rate-setting Monetary Policy Committee (MPC).
The benefits, however, will not take a year to kick in. Interest rate expectations can filter down to mortgage products on offer.
Despite the Bank of England bringing down the interest rate in November to below 5% the typical mortgage rate on offer for a two-year deal has been around 5.5% since December while the five-year hovered at about 5.3%, according to financial information company Moneyfacts.
The market has come more in line with statements from one of the Bank’s rate-setting MPC members. Professor Alan Taylor on Wednesday made the case for four cuts in 2025.
His comments came after news of lower-than-expected inflation but before GDP data – the standard measure of an economy’s value and everything it produces – came in below forecasts after two months of contraction.
News of more cuts has boosted markets.
The cost of government borrowing came down, ending a bad run for Chancellor Rachel Reeves and the government.
State borrowing costs had risen to decade-long highs putting their handling of the economy under the microscope.
The prospect of more interest rate cuts also contributed to the benchmark UK stock index the FTSE 100 reaching a new intraday high, meaning a level never before seen during trading hours. A depressed pound below $1.22, also contributed to this rise.
Similarly, falling US government borrowing has reduced UK borrowing costs after US inflation figures came in as anticipated.
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