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Instead of Taxing Home Improvement the Government Should Focus on Making the Green Deal a Good Deal

Posted: 25/04/2012 00:00

Over the past few weeks the government's flagship energy efficiency policy, the Green Deal, has lurched from one setback to the next. On the one side is the Tea Party tendency in the Tory Party - those Tory MPs who don't believe in climate change, or don't think it's worth bothering about. For them, attacking the Green Deal is just another way of undermining efforts to cut our carbon emissions and proves how out of touch they are with families struggling with soaring energy bills.

On the other side are ministers responsible for the Green Deal, who are just as out of touch with ordinary families affected by the cost of living crisis, and don't seem to understand that unless serious improvements are made to the scheme, the public just won't want to take it up. They dismiss anyone who wants to improve the Green Deal, to make it a better deal for the public, as talking down the scheme - when in reality, of course, exactly the opposite is true. The real champions of the Green Deal are those of us who are trying to improve it and make it a good deal.

Labour wants the Green Deal to succeed. We had a pay-as-you-save scheme in our manifesto, and it was the last Labour government who initiated pilot programmes to test the scheme. If done properly, a pay-as-you-save energy efficiency scheme could create jobs, lower bills for families and cut carbon emissions.

Instead of trying to force it on to the public, ministers should focus on improving the Green Deal to make it as attractive as possible, delivers savings for hard-pressed bill payers and offers real incentives so millions of people want to take it up.

And it's not just Labour saying this. In recent months the CBI, Which?, the Federation of Masters Builders, the Construction Products Association, Green Alliance and even the Government's own advisors, the Committee on Climate Change, have warned the Green Deal will fail without significant improvements. Unfortunately, right now it seems that the government isn't in the mood to listen.

Climate Change Minister Greg Barker dismisses anyone who raises concerns as scaremongers. But the reality is that however good the Green Deal looks on paper, the current proposals aren't up to delivering in practice. Changes need to be made. The government should take its head out of the sand, listen to these voices and work with all of us to ensure the scheme delivers the positive outcome we all want to see.

Most importantly consumers need to be offered affordable rates of interest on Green Deal loans. This is absolutely crucial to making the scheme a success. Polling conducted by the Great British Refurb Campaign found that only 7% of homeowners would be interested in taking up the Green Deal if the interest rate is 6% or above.

Yet worryingly a report by environmental think tank E3G says that relying on commercial loans - as the government plans - will mean interest rates as high as 8%. While modelling by London-based home improvement firm, Crystal shows that even with a 5% interest rate, measures taken out under the Green Deal would cost twice as much over the lifetime of a plan, compares with paying for them upfront.

Finance at these kinds of rates won't be attractive to most people, limiting demand and leaving the Green Deal struggling to get off the ground.

One solution is the Green Investment Bank. The government announced last year that one of the priorities for the Bank is to provide support for the Green Deal, but they haven't specified what form that will take. It's vital that any capital made available is used to secure affordable, attractive interest rates for consumers, in order to lower the cost of Green Deal packages.

Also small businesses should be allowed to complete with bigger companies on a level playing field.

Labour's vision for the Green Deal is one where small businesses, co-operatives, local authorities, charities and social enterprises are able to compete alongside the big six and other large companies that want to take part in the scheme.

The proposals in the government's consultation currently restrict full access to the Energy Company Obligation (ECO), which will provide subsidy for energy efficiency measures, to the Big Six energy companies.

These proposals not only limit smaller providers from competing on a level playing field across the whole Green Deal market, they also further entrench the dominance of the big six in our energy market. Labour wants to see the Green Deal open to all types and sizes of providers by allowing equal access to the ECO.

And lastly, extra support for the fuel poor.

While under the last Labour government the number of houses in fuel poverty fell by one million between 1996 and 2009, soaring energy prices since, means more people are at risk of being fuel poverty. Yet despite this the government plans to offer three times as much support to households who can afford to improve their homes than to help those in fuel poverty.

Nick Clegg announced in a recent speech that the government was adopting Labour's proposal to expand the ECO to include homes with hard to treat cavity walls and that the government was considering 'ways to provide more targeted support for the lowest income homes'. A figure of an extra £190 million for this was touted in his speech, but no specifics were confirmed. The ECO is crucial to the success of the Green Deal and ministers urgently need to finalise its design.

Labour believes the funding from the ECO should be split equally between fuel poor homes and hard to treat homes, with a focus on low income hard to treat homes, over able to pay households. This would drive carbon reduction while ensuring that we put those who need help most, first.

With time running out until the Green Deal launches, the government needs to end the uncertainty, stop the infighting and focus instead on developing a credible way to deliver new jobs and lower energy bills.

 

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