Told You So: Red Faces As Green Deal Flops

  • Date: 26/01/13
  • Ian Cowie, The Daily Telegraph

Expect red faces in Whitehall next week about the flop of Green Deal, the Coalition Government’s latest big idea to recycle taxpayers’ money in a bid to improve energy efficiency and save the planet. 

Green Deal loans at unknown interest rates to fund loft insulation have failed to tempt householders

Not content with more than £1bn a year subsidies for wind farms and solar panels, the Department for Energy & Climate Change (DECC) aims to entice householders to run up debts in the hope of cutting fuel bills. It is offering loans up to £10,000 per property to pay for the instalation of loft insulation, double-glazing and the like with the aim that improved energy efficiency will eventually pay for itself.

Unfortunately, nine months after the Green Deal first sprouted, the DECC remains unable to say what rate of interest it will charge or how long the debts will take to repay. Nor has it been able to offer any guidance on when extra spending on fuel efficiency might ‘break even’ and cover its costs by cutting fuel bills. All these factors might be considered vital facts and figures in any rational cost-benefit analysis.

No wonder the new scheme has had a distinctly underwhelming response so far, with just five households registering on DECC’s central log to take out Green Deal loans, as The Daily Telegraph revealed this week. That news came as a blast of cold air to the Coalition Goverment’s grandiose hopes that its flagship energy efficiency policy might be taken up by 14m homeowners.

Government bureaucrats may think they can get away with clever-dick contradictions in terms such as “spend to save” – for the simple reason that they are playing with other people’s money. But ordinary homeowners know that this sort of wishful thinking can easily end in bankruptcy.

More than five years after the credit crisis began, most homebuyers are keen to pay down debts; not run up new ones. That’s why the Office for National Statistics (ONS) household savings ratio has rebounded sharply from being marginally negative in 2008 – in other words, when most Britons were spending more than they earned – to a modest surplus of 7.7pc by the end of last year.

Another reason so many homeowners are wary about the Green Deal is that recent experience with environmental initiatives has taught us not to put too much faith in politicians’ promises. Take, for example, absurdly generous tariffs which the last Labour government offered to pay householders who installed solar energy panels.

These feed-in tariffs were payable on all electricity generated by domestic solar energy systems, whether it was used domestically or sold back to the National Grid. Yes, that’s right the happy homeowners got paid whether they delivered any juice or not.

When the Coalition Government saw what a rotten deal that was for taxpayers, it attempted to unilaterally cut those tariffs in half; reducing payments to 21p per kilowatt hour, rather than the 43.3p Labour promised. Then, last January, the courts ruled that was unlawful before the Government said it would introduce the lower tariffs at a later date anyway.

Last May, the solar panel industry responded by saying that repeatedly changing the rules made financial planning impossible and meant it was “in its death throes”. You can see why householders struggling to stay solvent today would rather steer clear of betting the roof over their heads on such uncertainty.

To be fair to DECC, the aim of improving Britain’s antiquated housing stock is laudable. Like many people, I live in a house that was built two centuries ago and DECC may unveil interest rates and terms next week that look too good to miss.

Even then, as the solar panel feed-in tariffs fiasco demonstrates, there is a substantial risk that the Green Deal goalposts might be moved by a new government elected in little more than two years’ time.

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