Labour is set to slash a 'hidden tax' on gas boilers that was introduced as part of the UK's drive towards 'net zero' carbon emissions.

Controversial policies created by the Conservative government would see boilermakers fined if they fail to meet targets for selling heat pumps. Manufacturers have said they would have to increase the price of boilers by at least £120 to cover the cost of the penalties.

The previous government delayed the implementation of the fines - which meant the can was kicked down the road until Labour got into power. Energy Secretary Ed Miliband was widely expected to revive the policy.

However, he is instead reportedly set to slash the penalties by around 80%. Originally, manufacturers would have faced a £5,000 penalty for every target unit missed.

This was reduced it to £3,000 after an outcry from businesses. However, Miliband - amid a growing backlash over Chancellor Rachel Reeves' debut Budget - will reportedly slash the so-called 'boiler tax' even further.

Miliband is still expected to roll out the Clean Heat Market Mechanism, to give the 'tax' its official name. It will tell boiler manufacturers that heat pumps must account for 6 per cent of their sales.

However, industry sources have reportedly been told that Miliband will slash it to just £500. The reduction is said to be an attempt to reduce the risk of 'net zero' costs being passed onto customers.

The change means the 'tax' will add around £20 to the price of a new boiler, rather than £120. The Telegraph   quotes an 'insider' source who claims Miliband's net zero department was worried about the negative publicity the policy was generating.

“They’re absolutely beside themselves at it being called a boiler tax,” said the source. “They’re keen to keep the cost off the consumer for net zero.”

It comes after warnings that Ed Miliband's "ideological" net zero plan will cause house prices to plummet. Campaigners have claimed that plans to build thousands of pylons will cause “untold misery” by wiping tens of thousands from the value of peoples’ homes.

Heat pumps can cost anything up to £18,000 to install - around 12 times the cost of the average £1,500 cost of fitting a new gas boiler. Yet Conservative ministers were calling for 600,000 pumps installed every year by 2028.

The Government's infrastructure chief Sir John Armitt warned of widespread resistance to the plans. He said the only way to make the plan work was to force households to switch by banning gas boilers.