Why the Green Deal will fail on fuel poverty

Our Policy & Politics blog will from time to time have guest bloggers.  This blog is from former Labour MP Alan Simpson, who now spends some of his time advising Friends of the Earth. The blog is in two parts. Today focussed on the Government's Green Deal and tomorrow's on George Monbiot's criticisms of Feed-in tariffs.

Part one - The Green Deal

We ought to begin by welcoming George Monbiot's critique of Green Deal.

The Government's flagship scheme is an 'Emperor's new clothes' initiative that will do little or nothing to alleviate fuel poverty. The government knows this and has been trailing the scheme round, in the vain hope that someone else will take ownership of it. Even the churches have been approached. It is a game of pass the parcel before the blame hits the fan.

Green Deal marks the first time in decades that Britain has been without any grants-based programme for improving the fabric of UK housing stock. It is also an attempt to sell debt to the poor at a time when the nation is being told that debt is the one thing we cannot afford. Faced with cuts in their wages, benefits and job prospects, I can really see the poor queuing up to acquire more debt.

"Ah, but it will be painless and neutral", replies the government. "The 'Golden Rule' will see to that".

This is the rule which guarantees that repayment levels cannot exceed the savings (in reduced energy consumption) that energy efficiency measures deliver to a person's home. It sounds good in theory, but in practice the costs (and payback times) for different energy efficiency measures limit what would work.

Essentially, measures up to around £1500 - loft and cavity wall insulation, double glazing (maybe), draft proofing and boiler replacement - have a short enough payback period to make them viable ... providing the interest rate on loans is about 2%.

This is where the government has hit a problem. Most private sector partners will not get out of bed for less than 8%.

Rumour has it that the government has negotiated a knock-down rate of 6% interest charges, but it's still hard to see where the public queues will come from. If they can break even on energy savings, loans are more likely to be taken up by the middle classes with savings (earning next to nothing in banks) than by the poor with next to nothing in their pockets.

Big energy companies the problem not the answer

I spent the whole of my 18 years in parliament campaigning on fuel poverty issues. As Chair of the Fuel Poverty group, I ploughed through a succession of government schemes notionally designed to bring an end to fuel poverty. Labour's were more generous than their Tory predecessors', but the succession of schemes were all flawed by an obsession with putting energy companies in the driving seat and by over-centralising and individualising programmes.

Gains, in the early years of falling energy prices, were soon overtaken by the thinness of the housing renewal programme, once energy bills rose. Nothing was ever done to take the successes of area based schemes - the Warm Zones experiments - and make them the national framework.

Energy companies have never been able to identify more than 1 in 5 of their fuel poor customers. For those primarily interested in selling increased consumption, the fuel poor have always been more of a burden than a preoccupation.

George Monbiot was right to say that energy companies are just as disinterested in a system of rising block tariffs (where people pay a higher price per unit of energy the more they consume) as they are in the fuel poor. Selling energy services rather than energy consumption is a market concept with little appeal to big energy, if only because such a market would have tens of thousands of players disrupting the hold of today's energy cartel.

Rising block tariffs may be central to tomorrow's energy markets but, without other measures, they could just as easily hit the fuel-poor. In this sense, it is right to insist we should not be arguing about which party is best at subsidising energy consumption by the fuel poor, when the priority should be to deliver buildings with low energy consumption needs. Doubtless, the government will claim that this is exactly what Green Deal will do. It's just a fib or a fiction.

Germany leads

At a time when the government's big idea runs in search if someone (anyone) to fund it for them Germany has earmarked €1.5bn per year from their EU-ETS receipts to convert over 20 million existing buildings to 'near zero' carbon standards by 2020.

In Monbiot's terms, however, this would also be a regressive policy, since the EU-ETS is also funded from energy bills. This takes us into a more meaningful discussion on the distinction between progressive and regressive measures than George himself allows, and puts his criticism of Friends of the Earth's legal challenge to the government review of the feed-in tariff in a quite different light.

But more on thiat in tomorrow's blog.

Alan Simpson, Advisor to Friends of the Earth