The Green Deals Unhappy Birthday

The Green Deal’s first birthday was marked by widespread calls for reform, says Peter Baber

If a government programme launched with much fanfare ends up getting a measly score of two out of five from the one sector it was meant to benefit a year later, that might seem a fairly damning indictment.

That is indeed what has happened with the government’s Green Deal, through which householders can improve the energy efficiency of their own houses and pay back the money they borrow to fund the scheme through their energy bills.

The scheme was meant to be a huge boon to any small builder who could get through the system to become Green Deal approved and so benefit from what is effectively a captive market.

But a year on from the scheme’s launch, the Federation of Master Builders (FMB) whose members include many such builders, have produced a score card giving the Green Deal just two out of five.
FMB chief executive Brian Berry called on the government to accept that the first year of the initiative had been “underwhelming at best”.

According to figures released at the end of December, 129,842 properties had been assessed for Green Deal projects, yet only 626 plans had gone “live”, so he could have a point. Berry added that such low take-up was putting many of his members off the whole idea of going through the approval process.

Then just a couple of days after the FMB produced its report, in a speech to the Federation of Small Businesses, David Cameron was promising to roll back a huge amount of what he referred to in public as “red tape” – although it was claimed that in private this one-time husky hugger has used the term “green crap”. The Code for Sustainable Homes has already become a victim of this regulation pruning, but was there a chance that the Green Deal might also be quietly dropped amid all the carnage?

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Well no, not if climate change minister Greg Barker is to be believed. In a speech at the launch of the UK Green Building Council’s (UkGBC’s) report into the Green Deal, he said that the deal’s first year had been “very encouraging”, even if “It has not exactly developed in the way we anticipated”. He said research the government had published showed that that 81% of the houses that have been assessed for the Green Deal were in the process of installing or intended to install at least one measure identified.

Claiming that the Green Deal was “the most ambitious home improvement programme since the Second World War”, in a country that has “the oldest, leakiest and most inefficient building stock in Europe”, he added that the government would shortly be unveiling new initiatives to get the programme moving.

The trouble is, the report whose launch he was speaking at does not make for particularly comfortable reading. According to the UKGBC’s policy and public affairs officer Richard Twinn, it was specifically commissioned to look at the whole issue of Green Deal interest rates – currently fixed at between 8% and 10% over 25 years. Such high rates, he said, have been criticised “left, right and centre” as a disincentive for householders to take the Green Deal up. The report, he said, found that the rates were a problem, particularly because the way they are calculated means that the savings achieved often seem unlikely to be more than the cost involved – a crucial hurdle known as the Golden Rule that would-be applicants need to overcome. But even more of an issue, the report claims, is the duration of the loans and the total amount that householders are allowed to borrow. This is often insufficient for the projects they have in mind, says Twinn, which forces them to look elsewhere.

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If they do, the FMB claims they may discover a better deal anyway. It claims that for loans of less than £500 or more than £5,000 it is often cheaper to find a deal on the commercial market.

The organisation also strongly criticises as “vastly insufficient” the £2.9m it says was all the government spent on publicising the scheme when it launched last year.

Twinn agrees that there has been an issue with publicity, but says there is a more urgent issue about incentives. He says: “If you offer cheap finance for a car, that will only get take-up by consumers if they actually want a car in the first place. So to make the scheme a success you need better communication but also structural incentives such as stamp duty to make householders understand and value energy efficiency.”

The UKGBC report suggests lowering the interest rate – although it concedes that taking it down to 4% to 5% would cost the government £300m for every £1bn in Green Deals put together.

The FMB is still lobbying for a reduction in the VAT rate on refurbishments to 5% – something it has been pursuing since at least 2011. It is currently updating its calculations for what this would cost the Treasury, but plans to launch a new report on the issue in March – possibly coinciding with when the parties start putting together their election manifestos. “Reducing the rate has already been mentioned as a policy idea by Labour,” says policy and public affairs manager Sarah McMonagle, “but we have had less success so far with the Tories.”

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Could the economics of sustainable refurbishment become an election issue? We will have to wait and see.

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