Green Deal badly designed says House of Commons report

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A report from the House of Commons Public Accounts Committee has drawn attention to a number of failures with the design and implementation of household energy efficiency schemes…

A new report from the House of Commons Public Accounts Committee (PAC) has revealed the Green Deal scheme performed so badly because it was not adequately tested.

Green Deal, the government’s flagship energy efficiency programme, was designed to help householders improve the efficiency of their home via a loan scheme. However, the programme was scrapped last summer amidst significant controversy.

A report from the committee stated uptake for the scheme was “woefully low” due to a lack of testing. Furthermore, it said the forecasted demand for the scheme was “excessively optimistic” and “gave a completely misleading picture of the scheme’s prospects to Parliament and other stakeholders”.

One of the major concerns was while taxpayers provided £25m, which was more than a third of the initial investment in the Green Deal Finance Company, the Department of Energy and Climate change played no formal role in approving company expenditure or ensuring value for money was achieved.

Additionally, it revealed the government lacked the necessary information to measure progress against the objectives of the complementary Energy Company Obligation (ECO) scheme.

The committee recommended the department ensures future policy decisions are “thoroughly tested and based on accurate evidence”. It also said the department “should be prepared to pull back on plans if it is clear they are unlikely to be successful and risk taxpayers’ money”. Additionally, forecasts put to parliament should be “clear about the degree of certainty that applies to the numbers used and the likely outcome”.

The report added: “The Department must not leave itself open to accusations of misleading Parliament to achieve its own ends.”

PAC chair Meg Hillier MP 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.”

Key findings of the report include:

  • The Department of Energy and Climate Change (the Department) implemented the Green Deal in 2013 without adequately testing the design of the scheme with consumers.
  • In practice, householders were not persuaded that energy efficiency measures were worth paying for through the Green Deal and take-up of loans was abysmal.
  • The Department’s forecast that the Green Deal Finance Company would provide loans worth more than £1.1 billion by the end of 2015 was wildly optimistic – the actual figure was £50 million.
  • The finance company has incurred large financial losses as a result of the low demand for green deal loans resulting in the Department writing off some £25 million of the amount it loaned to the company.
  • While the complementary Energy Company Obligation scheme has led to energy efficiency improvements in over 1.4 million homes, the Department does not have the information it needs to measure progress against its objectives.
  • In particular, it cannot tell what impact the schemes have had on reducing fuel poverty.

Caroline Flint MP, a member of the Committee who led questioning during the inquiry, said: “It is clearly desirable to make homes more energy-efficient but the Green Deal in particular was not fit for purpose.

“It is deeply alarming that the expectations for take-up put forward by the Government should be so wide of the mark, especially given the serious concerns raised about the scheme’s design and implementation.

“This, together with its inability to properly evaluate the Energy Company Obligation, paints the picture of a Government hell-bent on implementing a policy regardless of whether it represented value for taxpayers’ money.”

Green Deal was heavily criticised for failing to achieve the government’s ambitions and for costing significantly. The finance company behind the scheme suffered massive losses which led to DECC writing off some £25m of the amount loaned to the company.

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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