Heat pumps and your bills: what the Labour report actually means

Electricity costs roughly four times as much per kilowatt-hour as gas. That single number is why a leaked Labour report, as reported by The Telegraph, concludes heat pumps will push up household energy bills. For a typical 3-bed semi using a gas boiler, the annual heating bill might be around £800. Swap that for a heat pump on standard variable electricity tariff, and that figure could climb to £1,200 or more.

Why the headline doesn’t tell the full story

The report’s arithmetic is straightforward: a heat pump needs about 3 kWh of electricity to deliver 10 kWh of heat (a coefficient of performance, or CoP, of 3). At current Ofgem price caps, that 3 kWh of electricity costs roughly 75p, while 10 kWh of gas costs about 65p. On paper, the heat pump costs 15% more per unit of heat. But that calculation assumes every home is identical, every heat pump runs at CoP 3, and every household stays on a standard tariff. None of those assumptions hold in the real world.

A modern, well-installed heat pump in a properly insulated 3-bed semi can achieve a seasonal CoP of 3.5 or even 4 during milder months. At CoP 4, the running cost falls below the gas boiler equivalent. The catch is that many UK homes leak heat like sieves. The Energy Saving Trust estimates that a typical semi-detached house loses 35% of its heat through the walls and 25% through the roof. Without draught-proofing, loft insulation, and cavity-wall fill, a heat pump will struggle to hit its design CoP.

Who qualifies, and who doesn’t

The Boiler Upgrade Scheme offers £7,500 off the installation cost for an air-source heat pump, which brings the upfront price down to roughly £2,000–£5,000 after grant. That’s comparable to a new gas boiler installation. But the grant alone doesn’t fix the running-cost problem. Homes with an EPC rating of C or above, typically those built after 2000 or recently retrofitted, are the best candidates. For a draughty Victorian terrace rated EPC E, the heat pump will run harder and longer, pushing bills up.

Yet the report’s authors appear to have modelled the average UK home, which has an EPC rating of D. That’s the pinch point. The government’s own data shows that heat pumps in EPC-D homes cost about 10–15% more to run than gas boilers at current electricity prices. The solution isn’t to abandon heat pumps; it’s to insulate first. The Labour report misses that sequencing entirely.

What this means for your next upgrade decision

If you’re planning a heat pump installation in the next 12 months, the report is a useful warning, not a death sentence. Start with an EPC assessment and a retrofit plan. Install loft insulation (cost typically £300–£600, saving £200–£300 a year on heating) and cavity-wall insulation (£500–£1,500, saving £250–£350 a year). Only then size the heat pump. Pair it with a time-of-use electricity tariff like Octopus Agile or EDF’s GoElectric, which can cut running costs by 20–30% by shifting usage to off-peak hours.

The real policy lever is the electricity-to-gas price ratio. Ofgem and the government have discussed rebalancing network charges to lower electricity costs relative to gas, a move that would instantly make heat pumps cheaper to run than gas boilers. That decision is political, not technical. Until it happens, the arithmetic in the Labour report holds for poorly insulated homes on standard tariffs. For everyone else, the picture is brighter.

Households considering a heat pump should book an EPC assessment first. Eligibility for the Boiler Upgrade Scheme requires the property to have a valid EPC with no outstanding recommendations for loft or cavity-wall insulation. Applications are open now, but the scheme is capped at 50,000 grants per year and typically fills within weeks of each funding round. Don’t wait for the price ratio to change, insulate first, then electrify.