The Green Deal

Jonathan Smith talks us through the pros and cons of the government’s latest green scheme.

So here’s the background – in autumn this year the coalition government makes its housing retrofit scheme available to members of the public. Put simply, the legislation aims to create a system through which people can gain funding to improve the energy performance (reduce the energy consumption) of their household(s).

The scheme is something new to Britain, as it aims to create a funding system that could be of no actual cost to those undertaking it. This will be done by making the loan repayment amount no greater than the annual energy bill savings achieved by implementing the measures, such as insulation, more efficient lighting and/or better performing boilers. This scheme involves both the public and private sector, with private companies surveying the building, offering finance and undertaking the building work.

This is a great idea. For too long governments have overlooked or avoided the challenge of improving our existing housing stock. This system should be accessible and allow people to improve their housing regardless of income, savings or excess disposable income. But, as with many a great headline, there are finer details within this scheme that are less impressive.

Private sector companies will provide Green Deal funding, although some non-profit organisations are also considering involvement. Currently companies can choose the interest rate they charge and I implore the government to ensure these rates do not become a barrier to uptake. Interest rates are a very controllable and highly influential element of the financial arrangement. We need interest rates lower than those of personal loans to give improvements the greatest chance of repaying through their energy savings. This is not a crusade against corporate greed but a call for the government to assist the private sector in charging lower interest rates.

Other areas of the scheme are largely inflexible. The price of building elements, installation work, and the savings made are largely stable. With present day cost savings, and thus payback, being so low for many energy improvements, we need the government and the private sector to work together to ensure the Green Deal schemes are priced correctly.

The finance provider can choose how much interest they charge and, obviously, charging more interest can allow finance providers to make more money. However, the cost of running our homes are about more than making profits for corporate facilitators. We need to look at this as a long-term project. This scheme could not only reduce energy consumption and CO2 production, but could safeguard people against the future rises in energy prices, set to increase by at least 70% by 2020, according to the Department for Energy and Climate Change.

Soon, more people will be spending greater amounts of their income on energy. Incorporating low interest charges into Green Deal schemes will allow members of the public to make positive, energy saving changes to their homes. With The Independent reporting that ‘over 9 million could be living in fuel poverty by 2016’, this is not a time for profit but a time for preparation.

Greater success for the private sector will come if the Government sticks with the scheme, allows it to grow and benefit many households. As energy prices rise, higher savings can be achieved and with this, households can make higher repayments. This allows the private sector to make more significant profits in future years. For now we need the Government and the private sector to assist people in preparing for the glum energy cost future. Fail to prepare, prepare to fail…

Jonathan Smith is a member of the Young Fabians