MPs on the Public Accounts Committee say that failures highlighted by the design and implementation of household energy efficiency schemes put public money at risk and cannot be repeated.
The Committee’s report concludes 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, says the Committee, and “gave a completely misleading picture of the scheme’s prospects to Parliament and other stakeholders”.
It 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 also found 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.
Ensure policy decisions are “thoroughly tested and based on accurate evidence”
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.
Among its recommendations to Government the Committee 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”.
The Report adds: “The Department must not leave itself open to accusations of misleading Parliament to achieve its own ends.”
Meg Hillier MP, Chair 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. 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.”
Caroline Flint MP, a member of the Committee who led questioning during its inquiry, said: “It is clearly desirable to make homes more energy-efficient but the Green Deal in particular was not fit for purpose.
“It is deeply alarming that the expectations for take-up put forward by the Government should be so wide of the mark, especially given the serious concerns raised about the scheme’s design and implementation.
“This, together with its inability to properly evaluate the Energy Company Obligation, paints the picture of a Government hell-bent on implementing a policy regardless of whether it represented value for taxpayers’ money.”
The report’s summary outlines how the Department of Energy and Climate Change implemented the Green Deal in 2013 without adequately testing the design of the scheme with consumers.
In practice, 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 has 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.