The Green Deal has the potential to save people money and slash carbon emissions, it is just a shame the chance has been missed to turn it into an even better deal
First the caveats, the Green Deal could and should have been a lot better.
The numerous flaws afflicting the scheme are well documented and should have been addressed by now. The month-long gap between the end of previous energy efficiency schemes and the launch of the Green Deal and Energy Company Obligation (ECO) led to entirely avoidable job losses. The transition from Warm Front to ECO continues to raise questions over whether fuel-poor households will really be better off. The axing of the consequential improvements rule, erroneously branded a 'conservatory tax', has removed one of the main drivers for early take up of the scheme.
Low levels of public awareness do not bode well for the first few months of the scheme, as does the continued absence of many big brand names from the list of Green Deal service providers. There is a gaping hole in the scheme where measures targeting landlords should be. The practice of charging for Green Deal assessments looks destined to deter customers. And, then, most importantly of all, there is a rate of interest for Green Deal financing that is far, far too high at the current quoted rate of 6.96 per cent.
Labour is well within its rights to point out that when £10,000 borrowed at a rate of interest of 6.9 per cent requires a household to pay back £20,822.16 over 25 years the Green Deal may not always be a good deal. Households fortunate enough to have a bit of capital will simply pay for the work themselves, while those who could benefit from the Green Deal will wonder whether it is worth the hassle of undertaking disruptive building work when high interest will inevitably eat into the energy bill savings they receive.
The most frustrating aspect of the Green Deal for many working across the energy efficiency sector is that all of these issues have been flagged for months and many of them could be easily addressed.
If ministers want to ensure the Green Deal delivers the genuinely transformational effect on the UK's building stock that they keep promising then they should reinstate a consequential improvements rule that has already been successfully piloted by the Conservative-run Uttlesford council in Essex; introduce some proper rules mandating landlords to undertake Green Deal upgrades (being required to spend a few days overseeing improvements to your property that your tenants are ultimately going to pay for is a small price to pay for the sky high rents you continue to charge and the distorting impact you have on the property market); find a way to get more providers offering assessments for free; and make good on hints the Green Investment Bank could be used to subsidise Green Deal financing packages and slash the rate of interest.
I've long thought the model for the Green Deal should have been the Student Loans Company, with its inflation-linked low interest rates designed to ensure people can access the kind of higher education the government deems to be in the national interest. Improving our building stock's energy efficiency is in the national interest too – it will help slash emissions, boost the economy, tackle fuel poverty, create jobs and reduce the need for investment in costly new energy infrastructure – and as such the Green Deal should be supported by a government-backed company that enables low interest rates.
The argument against this can, of course, be summed up in two words: the deficit. But in many ways blocking the formation of such a company is even more short-sighted than the decision to stop the Green Investment Bank from borrowing. Throw some of the Bank of England's quantitatively eased magic money at a Green Deal Financing Company offering low but inflation-linked interest rates and you would be able to simultaneously cut emissions, improve people's lives, boost the economy, and create a rolling revenue stream for the exchequer.
And yet, for all its imperfections, the Green Deal remains one of the most important and potentially transformative environmental programmes introduced by the coalition government.
Ministers were right to realise the only way to deliver a national scale upgrade of our appallingly inefficient building stock is to switch from a grant scheme that could never be sufficiently scaled to a financing model that still promises to deliver households and businesses net savings.
The rates of interest may be higher than people would have liked, but for some households and small businesses they will still represent a good deal, particularly when the government's initial cashback offer is taken into account.
Any BusinessGreen reader who owns their own property or has an amenable landlord should get a Green Deal assessment sooner rather than later, and see what kind of cool green technology they will be able to deploy at no upfront cost. The loan is attached to the property, not you, the work will be carried out by government-approved companies, and the scheme's 'golden rule' should hold, meaning the savings on your energy bill should always be greater than the Green Deal repayments.
Moreover, if you act fast there are cashback repayments on offer that are potentially worth more than £1,000 per household. You can improve the value of your home, make yourself warmer next winter, cut your energy bills and find yourself more than £1,000 better off, all in one swoop.
If you are lucky enough to have the money available to pay for the work yourself then it probably still makes sense to steer clear of the Green Deal and its interest rates. But if you don't, the Green Deal will represent a reasonable deal for most households that is definitely worthy of consideration.
The same thinking applies to businesses, and particularly small businesses, which should investigate how Green Deal providers can improve their offices at no upfront cost, again delivering net savings on energy bills and significant cuts in carbon emissions. Although, it is worth noting that the government's funding for lending scheme means more competitive rates of interest could be available from some banks.
Again, it is important to consider a range of options. But the opportunity is there for businesses to protect themselves against future energy price hikes, improve the workplace environment, install new clean technologies, and all without any capital expenditure. Property companies in particular would be mad not to assess how the scheme can allow them to upgrade their assets in a way that both benefits tenants and sees those same tenants effectively pay for the work.
The government now needs to work hard to get this positive message heard and should consider whether £2m of adverts and PR spin will really prove sufficient at driving high levels of adoption, particularly when too many of the big name brands it hoped to be offering Green Deal services are still maintaining a watching brief.
Ministers are right to declare that today represents a potentially historic turning point in the history of UK property, a turning point when we finally shift from living in the kind of draughty, inefficient homes that we have become sadly accustomed to and start to emulate our snug and sophisticated Scandinavian cousins. In fact, the only major downside to the Green Deal is the knowledge that it could and should have been a great deal.
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