Government action on energy efficiency is failing - can Labour do better?

Sophie Neuburg

09 October 2013

As winter draws closer, millions of households will, again, be wondering how they are going to stay warm over the next few months. Cold homes aren't just about comfort, they can be about life and death: there were 24,000 excess winter deaths in 2011/12, and fuel poverty-related illnesses cost the NHS over £1bn every year.


We need decisive action to tackle the UK's cold homes, which are some of the most inefficient in Europe. However, the government's response is inadequate, and may be about to get much worse.


The only funding currently available to insulate the homes of the fuel poor is the Energy Company Obligation, which forces suppliers collectively to spend around £1.3bn a year on energy efficiency for low-income households and homes that are difficult to insulate.


On current ECO spending levels, insulating the homes of everyone in fuel poverty would take about 32 years. And that doesn't account for a predicted rise in fuel poverty numbers as energy prices continue to increase.


So I'm worried by rumours that energy minister Michael Fallon, threatening to slash environmental additions to energy bills in an ill-advised bid for 'cheap green', may have the Energy Company Obligation as his prime target. The 100,000-plus households who have benefitted from ECO so far will now find it much easier to stay warm this winter, which can only be a good thing.


Adding a paltry 4% to everyone's fuel bill, ECO is a particularly cheap shot. Especially when we all know the real cause of rising bills is the increasing cost of dirty fossil fuels.


What's more, the Government's flagship Green Deal loan scheme for those able to pay for energy efficiency has been about as successful as a soap umbrella. With only 12 live deals since the scheme's launch in January, the government target of 10,000 households by December is looking pretty unachievable.


This is hardly surprising, given the whopping 7-8% interest rates, complicated assessment process, and the difficulties of applying the scheme to private rented housing.


Luckily, the shadow Labour team recognises there is a problem. In the background of their headline-grabbing bills-freeze announcement it seems there has been some serious thinking about energy efficiency.


According to a recent release from Luciana Berger, shadow Climate Change Minister until yesterday's reshuffle, Labour propose to scrap the Green Deal and replace it with a new 'Energy Save' scheme. Energy Save, says Berger, will avoid many of the pitfalls that are widely believed to have put people off the Green Deal.


The shadow DECC team are looking to learn lessons from Germany, where last year 358,367 households (yes, really!) took out low-interest energy efficiency loans for refurbishment and new-builds from the state bank, KfW. Interest rates for these loans are subsidised €1.5bn by the German government.


Labour are also looking to refocus the Energy Company Obligation. Currently, only 40% of the scheme's funding goes to helping those in financial need. Berger argues this figure should be 100%, and I'm inclined to agree. The new proposals also make much of an area based, council-led approach, which is likely to make it more effective, and cheaper to implement.


However, the opposition's new plans for energy efficiency still need some work. Although Berger argues that low interest rates are vital for their new loan scheme, what is conspicuously absent in her piece is any mention of the government subsidy which could make those rates possible. And, to have a real chance of driving change in the able-to-pay market the scheme needs to be accompanied by a wider package of meaningful incentives, such as council tax breaks and reductions in stamp duty.


The current plans to refocus ECO are good as far as they go, but they don't do anything to deal with the basic problem that the amount of money available is completely inadequate.


We believe that the best and fastest way to bring warm homes for all is through a huge, publicly-funded energy efficiency programme. It sounds expensive, but it would be well worth it, and our friends at Energy Bill Revolution have come up with very clever way to do it. The government is currently bringing in £4bn a year in carbon taxes under a scheme called the Carbon Price Floor. If this was directed to funding energy efficiency for households, it could lift millions out of fuel poverty, save the NHS around £1bn per year, and be fantastic for the economy. A recent report from Consumer Futures suggests that a mass energy efficiency scheme would create a fantastic 71,000 jobs by 2015 alone.


If they had any sense, Osborne's Treasury would be going for the idea like a spaniel after a squirrel. The door is wide open for Labour to show them how it's done.

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