It is claimed that 14m homes could benefit. Really?
The climate change minister, Greg Barker makes some startling claims about the government’s Green Deal, launching on Monday. It is the “most ambitious home improvement programme since the second world war”, he says. As many as 14m homes could benefit.
It’s sexy, too. To you and me, energy efficiency is worthy but dull. But not for our climate change tsar, who says we should be flinging open our doors to the new army of home assessors as if they were from Grand Designs. “Don’t think of some bloke in a brown boiler suit – think of Linda Barker. This is going to be the new scatter cushion!” says the eponymous minister.
Is it really? There are a small band of environmentally-conscious householders, whose aims are commendable and whose ethics irreproachable, who will snap up the deal virtually irrespective of its financial expediency. Then there’s the rest of the country, who will ask: “What’s in it for me?”
The answer, sadly, is not much. Firstly, you have to pay for an adviser to visit your home, at a cost of around £100. If they tell you the Green Deal doesn’t work on your property, then that’s £100 wasted.
Worryingly, when we tried to calculate whether the financials of the Green Deal stack up for a typical householder, we found it next to impossible to make it work. The fundamental problem is that, under the scheme, the savings that most people will make from installing, say, a new boiler or loft insulation, simply aren’t high enough to cover the 6.9% annual interest charged on the loan taken out to pay for the improvements.
But let’s say the adviser decides your draughty old home could be insulated at relatively low cost and the amount you have to spend meets the “golden rule” – ie, the savings on your gas and electric bill will more than cover the repayments on the 6.9% loan.
Great! You’re saving money at last! Except that you’re not, really. What happens is that the “loan” is added on to your electricity bill. So you get a shiny new boiler, and you use less gas, but your bill stays roughly the same as the loan costs are added on. Great for the environment – but not a blind bit of difference to your bills.
And then what happens if you want to sell your home in a few years? Will the potential buyer take kindly to the fact that there’s a loan attaching to the property’s electricity bill which they are supposed to take on? My guess is that the buyer will just subtract it from the price they are willing to pay.
There is, though, the £125m government giveaway in the form of cashbacks, such as £270 for a boiler and £650 for solid wall insulation. For those people looking to benefit, it may be about the only real incentive. But knowing how companies tend to behave, what will happen is that the boilers will be overpriced, with buyers conned that because it’s a “Green Deal” giveaway, it’s top value. It’s likely that the cashback will largely end up in the hands of landlords and developers. Meanwhile, there’s precious little in it if you’re a tenant.
How easy it is, though, to carp from the sidelines. To his credit, Barker has launched the first deal like this anywhere in the world. It’s flawed, but its aims are not. So what could be done to make it work?
One obvious solution is to reduce the 6.9% interest rate. If it was interest free it would probably be a huge success, but too much of a burden on the public purse. Considering the government can borrow on the money markets at 2% over 10 years, and most householders can add to their mortgages for as little as 3%, then 6.9% is a silly price to pay.
What worries me is the many unemployed people who have paid to become Green Deal advisers. One training company I looked at tells people how they can build their own business as an adviser and profit from their new skills – as long as they cough up between £1,745 and £2,245. There is a grim echo of the thousands of people who wasted similar amounts training to become Home Information Pack inspectors.