The Green Deals Unhappy Birthday

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

A two-out-of-five rating from the one industry that was supposed to benefit a government initiative after a year could sound like a harsh indictment.

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

The initiative was designed to be a major windfall to any small builder who could pass through the system to get Green Deal authorised and thus benefit from what is virtually a captive market.

The Federation of Master Builders (FMB), whose members include many of these builders, has published a score card giving the Green Deal only two out of five stars one year after the program’s debut, however.

“Underwhelming at best,” said FMB chief executive Brian Berry of the first year of the effort.

He may have a point, given that only 626 of the 129,842 properties assessed for Green Deal projects went “live” by the end of December, according to numbers supplied at the time. Berry noted that such poor take-up was putting many of his members off the whole idea of going through the vetting 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already become a victim of this regulation cutting, but was there a chance that the Green Deal may also be discreetly withdrawn among all the carnage?

Well no, not if climate change minister Greg Barker is to be believed. The Green Deal’s first year was “very encouraging,” he remarked at the publication of the UK Green Building Council’s (UkGBC’s) report, even though “It has not exactly developed in the way we anticipated.” According to the government’s research, 81% of the homes assessed for the Green Deal were already implementing or planned to implement at least one of the measures identified..

In a country with “the oldest, leakiest, and most inefficient building stock in Europe,” he called the Green Deal “the most ambitious home improvement programme since the Second World War,” adding that the government would soon disclose additional measures to get the programme rolling.

Unfortunately, the report he was promoting during the event’s debut does not make for pleasant reading. According to the UKGBC’s policy and public affairs officer Richard Twinn, it was particularly commissioned to look at the overall problem of Green Deal interest rates – now fixed at between 8 percent and 10 percent over 25 years. Such exorbitant fees, he noted, have been slammed “left, right and centre” as a disincentive for householders to take the Green Deal up. The investigation, he added, showed that the rates were a concern, particularly because the way they are calculated means that the savings achieved often look unlikely to be larger than the expense involved – a fundamental hurdle known as the Golden Rule that would-be applicants need to cross. A bigger problem, the research contends, is the length of the loans and the overall amount that homeowners can borrow. Because this is frequently insufficient, Twinn argues, they’re left scrambling for an alternative.

The FMB says that if they do, they may find a better price. For loans under £500 and beyond £5,000, it says, the commercial market is frequently less expensive.

The government spent £2.9 million on publicising the programme when it first debuted a year ago, according to the organisation, which it calls “vastly insufficient.”

Twinn acknowledges that exposure has been an issue, but he believes that incentives are a more pressing one. 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 improved information but also structural incentives such as stamp duty to ensure householders understand and appreciate energy efficiency.”

The UKGBC report advises cutting the interest rate – although it recognises that getting it down to 4 percent to 5 percent would cost the government £300m for every £1bn in Green Deals put together.

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The FMB is still pushing for a 5% VAT rate decrease on renovations, a cause it has championed at least since 2011. In the meantime, it is revising its estimates of the Treasury’s financial burden, but it expects to provide a new study on the subject in March, just as political parties begin to draught their election manifestos. “Reducing the rate has already been mentioned as a policy idea by Labour,” says policy and public relations manager Sarah McMonagle, “but we have had less success so far with the Tories.”

Could the economics of sustainable renovation become an election issue? For now, we’ll just have to sit and wait.

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Last Updated on December 29, 2021

Indra-Gupta

Author: Indra Gupta

Indra is an in-house writer with a love of Newcastle United and all things sustainable.

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