Government must learn from ‘blinkered’ approach to Green Deal, say MPs

Meg Hillier
Meg Hillier

The design and implementation of the Green Deal and the complementary Energy Company Obligation (ECO) put public money at risk and must not be repeated, MPs said today.

A report by the Public Accounts Committee concluded that the take up for the UK government’s household energy efficiency loans scheme was “woefully low” because the scheme was not adequately tested.

The Committee said that the forecast of demand for Green Deal loans was excessively optimistic and “gave a completely misleading picture of the scheme’s prospects to Parliament and other stakeholders”.

The report raises concerns that while taxpayers provided £25 million, more than a third of the initial investment in the Green Deal Finance Company, to cover set-up and operational costs, the Department of Energy and Climate Change (DECC) had no formal role in approving company expenditure or ensuring it achieved value for money.

The Committee also found that the Government lacks the information it needs to measure progress against the objectives of the complementary Energy Company Obligation (ECO) scheme, including its impact on fuel poverty.

DECC implemented the Green Deal and ECO schemes in 2013 to improve household energy efficiency.

It spent £240m setting up and stimulating demand for loans under the Green Deal, which enabled households to take out loans to pay for efficiency measures which they would repay through their energy bill.

ECO resembled previous energy efficiency schemes, with DECC requiring the largest energy suppliers to install measures that save a set level of carbon dioxide (CO2) or reduce bills by March 2017.

While the primary aim was to save CO2, DECC also wanted the schemes to work together to improve ‘harder-to-treat’ properties; stimulate private investment in energy efficiency measures and mitigate the causes of fuel poverty.

Among its recommendations to Government the Committee calls on DECC to ensure policy decisions are “thoroughly tested and based on accurate evidence”, including a robust evaluation of stakeholders’ views.

DECC “should be prepared to pull back on plans if it is clear they are unlikely to be successful and risk taxpayers’ money”, says the Committee, and ensure forecasts laid before Parliament “are clear about the degree of certainty that applies to the numbers used and the likely outcome”.

The Report adds: “The Department of Energy and Climate Change must not leave itself open to accusations of misleading Parliament to achieve its own ends.”

Meg Hillier MP, chair of the Public Accounts Committee, said: “The Government rushed into the Green Deal without proper consideration of concerns about its weaknesses.

“Not enough work went into establishing the scheme’s appeal to households, nor to its implementation, nor to examining the experience of governments setting up similar schemes overseas.

“This blinkered approach resulted in a truly dismal take-up for Green Deal loans and a cost to taxpayers of £17,000 for every loan arranged. Savings in CO2 were minimal.

“Accountability to government of the Green Deal Loan Company—which spent public money on the expectation that it would need to support 3.5 million loans, compared to the 14,000 taken up—was institutionally weak.

“The Government is also unable to measure adequately the success of the Energy Company Obligation.

“There is no doubt householders and taxpayers in general have been ill-served by these schemes and the Government must learn from its mistakes to ensure they are not repeated in this or indeed any other policy areas.”

Rich Twinn, policy advisor at the UK Green Building Council, said: “The Public Accounts Committee report makes clear that implementation of the Green Deal was woefully inadequate. The wildly optimistic forecasts about take up were never realistic, and this point was made strongly by many in the industry at the time.

“Most of all the Green Deal simply didn’t appeal to many of the householders it was trying to attract. The interest rate was unappealing and there was - and still is - a fundamental lack of demand for energy efficiency among homeowners which the scheme did not address. Calls for structural incentives such as stamp duty continually fell on deaf ears, and ultimately it was the taxpayer who lost out.”

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