Replacing all that ‘green crap’ won’t be an easy task
As most EiBI readers will know, the only nationwide subsidy programme for residential energy efficiency, the Energy Company Obligation (ECO), took a hammering in last month’s Autumn Statement. Its main energy/carbon saving component was cut overnight by 34 per cent.
This occurred in the wake of the Prime Minister’s pledge to reduce environmental levies (“all that green crap,” as the Sun’s front page quoted him as saying), in order to cut domestic fuel bills. Perversely, the only such policy to be cut happened to be the only programme specifically designed to cut fuel bills.
However, the government intends to introduce this April some new schemes, which Energy Secretary Edward Davey maintains will entirely restore the carbon dioxide savings of 2.9m tonnes which the scrapped part of ECO had been set to deliver.
An annual budget of £180m per annum will be available for the next three years to stimulate energy efficiency investment. This works at about £7.50 per household. As the Autumn Statement cuts in the existing energy efficiency programmes are supposed to bring about a cut of £50 in the average household fuel bill, the new programmes will need to be extremely effective to compensate adequately.
‘New’ money sources
Will they be? There are effectively three strands for this “new” money. The first is £30m a year to augment SALIX’s established, and effective, revolving loan programme for the health and education sectors. This is due to restore 0.6m tonnes of the lost carbon dioxide savings. A sensible use of public money. But by definition not relevant to the housing stock.
The second programme will give vouchers worth up to £1,000 available to home buyers for expenditure on “important energy-saving measures”. On the face of it, this just looks like a continuation of the existing cashback scheme, which also compensates for expenditure up to £1,000 on energy-saving measures; the only difference being that under the current scheme those staying put in their homes can qualify, not just those moving. And it has been operating in conjunction with the full ECO expenditure package, not the eviscerated scheme now on offer.
When launching the scheme, Ministers have deliberately drawn attention to the size of these grants being “equivalent to around half the stamp duty on the average house”; the implication being that these are intended to be seen as stamp-duty rebates.
For years, my Association – and many others – has campaigned to use the stamp duty system to reward those that install energy saving measures. We did so in the knowledge that, once such rewards became part of the official conveyancing process, it would be incumbent upon the professionals involved – solicitors, estate agents – to inform their clients about the potential benefits on offer.
I understand that the decision was taken not to make the new vouchers part of the formal stamp duty process for two reasons. The ostensible one was to enable all homebuyers to benefit, even if they are part of that sadly diminished number costing less than the £150,000 when Stamp Duty kicks in. Actually it was because theoretically the ECO ambition is set to be restored to its original level for phase 3, after 2017, when the presumption is that no compensatory measures will be required. Given the willingness to alter a programme halfway through phase 1, only the most gullible would place any confidence in that restoration ever occurring.
Three per cent take-up
So the best chance of making the new cashback scheme work rather better than the current one (where after 60 per cent of its life, only 3 per cent of the money available had been claimed) must be to ensure its integration into the legal purchasing process.
The final scheme is aimed squarely at the 440,000 homes now let out by private landlords which are F or G rated. £30m a year is to be made available to landlords, enough to get such homes upgraded above E ratings. Why higher than E? Because under the Energy Act 2011, all private sector landlords are effectively required to upgrade any F or G rated premises by law by 2018. And it is an established Treasury rule not to fund “deadweight” schemes which give no extra benefit.
As this and the pseudo-stamp duty scheme are required to deliver 1.8 MtC between them, for this one to contribute any additionality to the total, it must only reward landlords who deliver more than the legal minimum.
This month the Government is setting out its detailed proposals for the three schemes. These will need to show how they will compensate in full for the loss of so much of the “green crap” in ECO. I do hope I can be convinced.
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