Green Deal

Introduced in 2013, it was heralded as the biggest programme of housing improvement since the second world war.

As a government-backed scheme, it was set up to provide loans to households to facilitate energy efficiency improvements.

The Green Deal loans gave a source of finance that differed significantly from bank loans or other forms of credit. Rather than the outstanding loan debt being placed on the homeowner or householder, it was placed upon the property and designed to be recouped through future energy bills.

An energy assessment to clarify what energy saving measures were appropriate for the property was required in order to access the funding.

As a safeguard against high energy bills, it was implemented in a way that the loan repayments should never exceed the savings in energy provided by the improvements.

These improvements included such items as new boilers, double glazing, solid wall insulation and solar panels.

The Green Deal loans carried with them interest rates ranging from 7.9% to 10.3% and the loans were intended to spread repayment over 10 to 25 years. There was a one-off loan set up fee of £63 and a £20 annual finance fee.

Following its introduction, the government expected that The Green Deal would be extremely popular. Britain’s housing stock was regarded as the worst in Europe in terms of energy efficiency. And although newer properties were being built with a greater emphasis on incorporating energy efficiency measures, older housing had insulation and heating systems that were woefully inadequate.

Rising energy costs and unstable world economies meant that Britain had to do something to use fuel more efficiently. Rather than address the issues that were compounding rising energy costs, the government sought to push the burden of improving poor housing onto the energy consumer.

However, problems started to arise. Getting an initial energy assessment took time and waiting lists developed. There was confusion in relation to who was authorised to carry out the improvement measures, and how the energy companies could also act as repayment collection agents.

Unscrupulous installers came onto the scene, carrying out improvements prior to assessments, getting householders to pay up front with the promise of obtaining later Green Deal funding.

However, perhaps the biggest concern of most potential Green Deal householders was the fact that although the home improvement measures might see their energy usage fall, it would be many years before they started saving money.

Another problem was that energy usage varied between families due to their own particular behaviours. Perhaps the best way of saving energy was for householders to look at the way they were using energy. As a result, many energy users simply modified their energy usage, cutting back to reduce bills. This of course was and still is, a problem for energy suppliers whose profits started to be affected.

A final problem was that many householders felt that although having an energy efficient home might attract a buyer in the future, having the burden of efficiency measure repayments collected on future bills by a new homeowner might not do.

Faced with disappointing take-up, the Government took the decision to effectively scrap the scheme. In July 2015.

The National Audit Office conducted an independent audit. Its findings, published in April 2016, revealed the Green Deal loan scheme only funded 1% of energy efficient measures. It also found that the scheme saved only negligible amounts of CO2 and that households did not see these loans as an attractive proposition.

It also found that the scheme cost British taxpayers nearly £400m and did not deliver energy or carbon savings.

The few people that did enter the scheme are left with the legacy of outstanding loans continually being collected through their energy bills. Initially, the loans carried penalties for early settlement of the debt.

In May 2014, the Green Deal Finance Company announced that it was cancelling early repayment fees for new loans. For those who entered the scheme prior to that, the loans can be paid off, but will occur a fee if the loan was for a sum greater than £8000 and over more than a 15 yr period. Loans of less than £8000 and for less than 15 yrs do not incur early repayment fees.

Following the decision to close the scheme, the Energy Secretary, Amber Rudd, said she was seeking funding for a new scheme for energy efficiency funding in Autumn 2015. This was then postponed until early this year. That has now been postponed until 2017 at the earliest.

With the prospect of any future energy efficiency projects aimed at homeowners looking doubtful, it is unlikely that those who are able to pay upfront for improvements are likely to be concerned. For those seeking finance, there are many deals that offer a far better package than the Green Deal did with all its complexities.

It may be that with rising concern about the plight of those living in fuel poverty, the Government will continue to focus its projects solely in favour of them.