Green Deal

Tim Yeo Excerpts

Thursday 22nd January 2015 Westminster Hall

[Mr Tim Yeo (South Suffolk) (Con)]

I welcome you to the Chair, Mr Gray. It is a great pleasure to speak under your chairmanship, and I will endeavour to stay within order. I also welcome my hon. Friend the Member for Wyre and Preston North (Mr Wallace), who will reply to the debate. I have had an apology from the Under-Secretary of State for Energy and Climate Change, my hon. Friend the Member for Hastings and Rye (Amber Rudd), who is out of London today, but I know that my hon. Friend the Member for Wyre and Preston North will be a more than adequate substitute.

My Committee is delighted to have secured this debate. The green deal links directly to the last Westminster Hall debate that we had on one of our reports, just before Christmas, in which we discussed the latest findings of the Intergovernmental Panel on Climate Change. Promoting energy efficiency through schemes such as the green deal is a good way to respond to the challenge of climate change.

I much regret that two of the hon. Members who serve on my Committee and who took part in that debate are not present today, although I am sure they have good reasons for not being here. During that debate, they both questioned the scientific conclusions of the Intergovernmental Panel on Climate Change about the extent to which climate change is taking place. In the context of this debate on the green deal, I would have welcomed their comments on last Friday’s joint announcement from NASA and the US National Oceanic and Atmospheric Administration, which confirmed that 2014 was the warmest year on record, and that 14 of the 15 warmest years on record have occurred since the turn of the century. Only the most determined flat earther could now continue to claim that there is a pause in the trend towards higher temperatures.

The conclusion of the NASA director, Gavin Schmidt, was unequivocal:

“This is the latest in a series of warm years, in a series of warm decades. While the ranking of individual years can be affected by chaotic weather patterns, the long-term trends are attributable to drivers of climate change that right now are dominated by human emissions of greenhouse gases.”

One cannot be much plainer than that, though doubtless my right hon. Friend Lord Lawson, and some other members of the upper House, particularly his henchmen in the Global Warming Policy Foundation, will dismiss NASA as yet another part of the global conspiracy, which apparently exists, of grant-seeking academics and left-leaning politicians who have invented the evidence that climate change is a clear and immediate threat to the conditions of climate stability, which have made it possible for the human species to enjoy phenomenal and possibly unprecedented success—very recently in the context of a planet with a 4-billion year history on which humans have been present for less than 0.001% of the time.

I want to assure my hon. Friend the Member for Wyre and Preston North that the Committee’s comments on the green deal are intended in an entirely constructive manner. The green deal was an ambitious policy, vaulting in its aims. It had and still has my full support and that of my Committee. Increasing the energy efficiency of UK households addresses all three aims of energy policy. It improves security, cuts energy bills and reduces greenhouse gas emissions. It particularly helps the fuel-poor to make their homes warmer and more comfortable, and it improves public health as well. So, energy efficiency is the true “no regrets” policy. The Committee fully supports the Government’s efforts to call quits on cold homes and to stop wasting heat through buildings that are inadequately insulated and inefficiently constructed.

Although we acknowledge that putting a completely new framework in place can take time, the green deal and the energy companies obligation are far from achieving the level of activity seen under previous energy efficiency schemes, so we have to ask: how can the green deal be made to work better? That was why the Committee started a watching brief when the green deal was launched two years ago.

The idea of the green deal is admirably simple. It is intended to help people to make energy efficiency improvements at no up-front cost. The installation costs are attached to the property’s electricity meter and are repaid in instalments through the electricity bill. Who could argue with the golden rule that says that nobody will repay more than they are saving?

My Committee published its first report on this subject in May 2013, and it highlighted areas for concern, particularly about public awareness, access to the green deal, and value for money. Even by the time we published the second report, which is the subject of our debate this afternoon, only 4,000 green deals were in progress. The Committee understands that the green deal plans are only the means to an end, but, in advance, hopes for the green deal were very high. It was promoted as a revolutionary finance mechanism that would empower consumers to make the changes that they needed to their homes.

Of course, we are delighted to see the faster rate of take-up of green deal plans in recent months, but, even as of Christmas, there were less than 9,000 green deal plans in progress nationwide. That makes it impossible to avoid the conclusion that this is a very disappointing outcome in relation to the original hopes—and expectations —for the scope of the green deal.

Our report concluded that the green deal could be improved. We identified three types of barriers that needed to be addressed. First, there are financial barriers. For example, the cost of the interest rate charged is too high. Households that can pass the standard credit checks can obtain cheaper loans elsewhere. Secondly, there are communications barriers. Regrettably, there has been quite widespread mistrust of the scheme. That is partly due to a lack of good communication, and it has been exacerbated by some instances of mis-selling by rogue traders. It has not been helped by a lack of clarity in some of the Government’s statements, and it certainly has not been helped by a shortage in some parts of the country of green deal providers.

Thirdly, we identified behavioural barriers. The attachment of the green deal loan to the property is a difficult concept for many people. They see it as a potential burden—an obstacle—if at some future date they want to sell their home. In light of these identified difficulties, my Committee has suggested three ways in which the green deal could be made more attractive. Above all, we want to see the take-up rate of the green deal substantially increased.

First, we urged the Department of Energy and Climate Change to make the finance package more appealing. We recognise that a subsidised interest rate is not appropriate, but we suggest that the way in which the golden rule is calculated could be reviewed. Perhaps the assumptions in those calculations are too cautious. We also suggested that other incentives should be explored. I have long advocated more radical incentives to kick-start the process of investment in energy efficiency in our built environment. As we all know, in the UK we have a high proportion of older properties.

Interesting evidence was produced by the Committee on Climate Change about changes in the habits of new car buyers. In response to quite modest incentives and differentials in the road tax or vehicle excise duty charged on different types of vehicle, there was a surprisingly large shift towards the purchase of low-consumption vehicles. Even though the cost of running a car might be £2,000 or £3,000 a year, or even £4,000 or £5,000 a year, buyers who think that they can save £200 or £300 a year on the vehicle excise duty are surprisingly influenced by the extent of that saving.

That, to me, suggests a psychology of people liking the idea of putting one over on the taxman—they think they will get a break and they want to get the biggest advantage possible out of it. Therefore, perhaps for a limited period, we should offer incentives that would allow people to get a discount on their council tax or, on commercial premises, a discount on the business rate, if they invest in a way that improves the energy efficiency rating of the property concerned by a certain amount. That might strike a chord with many people and we could see much more investment going into energy efficiency.

Furthermore, the moment at which people move into a new home is the most likely time when they will make improvements and are willing to spend some money on making changes and renovating a property. That is another opportunity. If we were to offer buyers or occupiers some rebate on stamp duty—notwithstanding the considerable improvements that have just been made to it—and they improved the energy rating of their property by a certain amount, perhaps in the first year of occupation, we might again find that that would strike a chord with people.

We need to get people talking about energy efficiency. Most people pay far more attention to advice from a friend, neighbour or family member than they do to anything said in Westminster Hall. If people realised the extent to which they can save money and make their homes warmer and more comfortable through energy efficiency investment, the word will start to spread on the ground. To get the process started, in addition to tweaking the green deal arrangements, I urge the Government—we are probably talking about the new Government after May—to look carefully at the enormous potential of introducing more radical incentives.

The second set of improvements that my Committee urged DECC to make was to streamline the green deal process and to make it quicker—“Green Deal in a day”. At the moment people are deterred by the complexity and length of time involved. We suggested that a centralised go-to website for all energy efficiency measures would be helpful, so that people do not have to search around for different sources of information about what they can do. The third set of improvements that we urged on DECC was to improve access to the green deal, to be more proactive in identifying those households that are most in need and, alongside that, to continue expanding the network of green deal providers. In our view, all such measures would help to achieve a clearer, more consistent and more credible policy.

In conclusion, the Committee supports the Government’s vision for a green deal brand. We agree that a choice of initiatives is needed, which is why we have recommended prioritising communication and restoring trust. We acknowledge the positive changes already made by DECC and the efforts made to engage consumers more effectively. The green deal is truly a “no regrets” policy that can make homes warmer and more comfortable, while also saving money, cutting consumer bills and, crucially, cutting greenhouse gas emissions, but we believe that the Government should be even bolder. They should continue to promote the green deal through long-term planning. Quick fixes will not make much difference.

I look forward to my hon. Friend’s comments when he responds to the debate.

--- Later in debate ---

[Mr Yeo]

I thank my hon. Friend for his reply and for his close study of the two reports that my Committee produced on this subject in the past couple of years. He is absolutely right that the Committee continues strongly to support, without reservation, the concept of the green deal. I assure him that our concerns about its progress are motivated by our wish to see it succeed.

We share the aim of eliminating energy waste. It is a scandal that millions of buildings in this country are still so energy inefficient that a large amount of energy is wasted. A consistent thread running through all our reports is our concern to ensure that the UK achieves the challenging targets we have set for cutting greenhouse gas emissions. Energy efficiency has an enormous part to play in achieving those targets. Our criticisms derive from our disappointment and frustration about the relatively slow progress of the green deal so far. Even the most ardent defender of the coalition’s policy—as my hon. Friend the Minister knows, there are few more ardent defenders of the coalition than me—would not claim that the high hopes about the green deal have yet been fulfilled.

As my hon. Friend the Minister said, progress is much better than it was this time last year. There has been an encouraging acceleration, from a relatively low base, of the take-up of green deal plans and enquiries. I cannot predict what my Committee will do in the next Parliament, because I will not be a member of it, but I would be very surprised indeed if it did not want to continue the watching brief that it adopted towards the green deal in this Parliament. In conclusion, I hope that this time next year another debate will take place on this subject, and that the Minister will be able to report on further substantial progress.

[Mr James Gray (in the Chair)]

We come to the next debate. I ask those who took part in the previous debate, including my hon. Friend the Member for South Suffolk (Mr Yeo)—I was his special adviser many years ago when he was a Minister in the Department for the Environment; he has served with distinction for many years—to leave the Chamber quickly and quietly.