Hundreds of thousands of households will lose access to heat pump subsidies under plans being drawn up by Rachel Reeves for next week’s Budget.

The Guardian reports the chancellor wants to strip green levies off energy bills and fund them through the warm homes plan instead, a move that will sharply restrict who can claim support.

Only households receiving certain benefits or meeting strict low-income criteria will qualify for heat pump grants once the rules change.

Those close to the process say this will cut out middle and higher-income families who currently make up most of the applicants.

Subsidies worth up to £7,500 have helped drive early heat pump uptake. Supporters of the cut say too much cash was flowing to homeowners who could afford upgrades without public money.

Energy experts say the move risks stalling the switch from gas boilers. They warn heat pumps are still far costlier upfront and removing help for mainstream households will slow rollout just as the UK needs to accelerate.

Sam Alvis at the Institute for Public Policy Research backed the drive to cut bills. “The urge to get bills down is the right one, everything should be on the table,” he said. But he warned the fallout for those who lose support will be stark.

Leo Vincent at E3G was far blunter. “If this is really what the government is planning, it is robbing Peter to pay Paul,” he said. He called it “a disastrous sticking plaster ‘solution’ that would let down working families”.

Reeves and the Prime Minister want to cut bills by an average of £170 a year.

Removing 5% VAT from energy bills will deliver around £86 of that. The rest comes from slashing levies such as the Energy Company Obligation.

That levy funds insulation and efficiency upgrades for low-income homes but has been criticised after reports of poor-quality work.

Ministers plan to fold ECO into the warm homes plan to streamline spending and target it more tightly.

Those briefed say this shift means heat pump grants will become an ECO-style benefit only. They also warn insulation budgets will shrink as spending is diverted to solar and battery schemes.

A government source said the current subsidy is an “unaffordable” payment to well-off families.

Ministers believe redirecting it will help ease the cost of living for those who need it most as they brace for political blowback from tax rises.