A damning report on serial failures in the Green Deal energy efficiency scheme published today appears to provide an explanation as to why the Dept for Energy (DECC) was suddenly abolished last week by the prime minister without explanation.
It is likely that DECC was axed simply to minimise the political fall-out from today’s highly-critical report by MPs on the Commons’ Public Accounts Committee – published while parliament is on holiday.
Amber Rudd and Andrea Leadsom, the ministers directly accountable (at the time) have been promoted to new jobs in May’s Cabinet, while DECC has been abolished and the ministers now responsible for DECC functions at the newly-enlarged Dept for Business, Energy & Industrial Strategy were not accountable at the time of the Green Deal ‘energy in-efficiency’ scheme.
Failures highlighted by the design and implementation of household energy efficiency schemes put public money at risk and must not be repeated, the Committee of Public Accounts said.
The Commons Committee of MPs said take-up for the Government’s Green Deal loans scheme was “woefully low” because the scheme was not adequately tested.
The forecast of demand for Green Deal loans was excessively optimistic and “gave a completely misleading picture of the scheme’s prospects to Parliament and other stakeholders”, said MPs
Their report raises concerns that while taxpayers provided £25 million – more than a third of the initial investment in the Green Deal Finance Company – to cover set-up and operational costs, the Department of Energy and Climate Change had no formal role in approving company expenditure or ensuring it achieved value for money.
The Committee- whose members include Deirdre Bock, the SNP MP for Leith – also finds the Government lacks the information it needs to measure progress against the objectives of the complementary Energy Company Obligation (ECO) scheme, including its impact on fuel poverty.
The Department implemented the Green Deal and ECO schemes in 2013 to improve household energy efficiency. It spent £240 million setting up and stimulating demand for loans under the Green Deal, which enabled households to take out loans to pay for efficiency measures which they would repay through their energy bill.
ECO resembled previous energy efficiency schemes, with the Department requiring the largest energy suppliers to install measures that save a set level of carbon dioxide (CO2) or reduce bills by March 2017. While the primary aim was to save CO2, the Department also wanted the schemes to work together to improve ‘harder-to-treat’ properties; stimulate private investment in energy efficiency measures and mitigate the causes of fuel poverty.
Labour MP Meg Hillier, Chairman of the PAC, said: “The Government rushed into the Green Deal without proper consideration of concerns about its weaknesses.
“Not enough work went into establishing the scheme’s appeal to households, nor to its implementation, nor to examining the experience of governments setting up similar schemes overseas.
“This blinkered approach resulted in a truly dismal take-up for Green Deal loans and a cost to taxpayers of £17,000 for every loan arranged, while savings in CO2 were minimal.
“Accountability to government of the Green Deal Loan Company – which spent public money on the expectation that it would need to support 3.5 million loans, compared to the 14,000 taken up – was institutionally weak.
“The Government is also unable to measure adequately the success of the Energy Company Obligation.
“There is no doubt householders and taxpayers in general have been ill-served by these schemes and the Government must learn from its mistakes to ensure they are not repeated in this or indeed any other policy areas.”
Former shadow energy minister Caroline Flint MP, a member of the Committee who led questioning during its inquiry, added: “It is clearly desirable to make homes more energy-efficient but the Green Deal in particular was not fit for purpose.”
Rich Twinn, Policy Advisor at the UK Green Building Council, added: “The Public Accounts Committee report makes clear that implementation of the Green Deal was woefully inadequate. The wildly optimistic forecasts about take up were never realistic, and this point was made strongly by many in the industry at the time.
“Most of all the, Green Deal simply didn’t appeal to many of the householders it was trying to attract. The interest rate was unappealing and there was – and still is – a fundamental lack of demand for energy efficiency among homeowners which the scheme did not address. Calls for structural incentives such as stamp duty continually fell on deaf ears, and ultimately it was the taxpayer who lost out.”
Among their recommendations to Government, MPs calls on the Department to ensure policy decisions are “thoroughly tested and based on accurate evidence”, including a robust evaluation of stakeholders’ views.
The Department “should be prepared to pull back on plans if it is clear they are unlikely to be successful and risk taxpayers’ money”, says the Committee, and ensure forecasts laid before Parliament “are clear about the degree of certainty that applies to the numbers used and the likely outcome”.
And the Report adds: “The Department must not leave itself open to accusations of misleading Parliament to achieve its own ends.”
Lies, Damned Lies, and DECC statistics
The Public Accounts Committee report on the DECC Green Deal scheme found;
Householders were not persuaded that energy efficiency measures were worth paying for through the Green Deal and take-up of loans was abysmal.
- The Department’s forecast that the Green Deal Finance Company would provide loans worth more than £1.1 billion by the end of 2015 was wildly optimistic – the actual figure was £50 million.
- The finance company incurred large financial losses as a result of the low demand for green deal loans – resulting in the Department writing off some £25 million of the amount it loaned to the company.
- While the complementary Energy Company Obligation scheme has led to energy efficiency improvements in over 1.4 million homes, the Department does not have the information it needs to measure progress against its objectives.
- In particular, it cannot tell what impact the schemes have had on reducing fuel poverty.