Writing our new Green Deal Mythbuster guide to explain this potentially powerful scheme, was a frustrating task. Enabling people who can’t afford it, to get double-glazing, underfloor heating, cavity wall insulation and more is great. The problem is explaining it is hellish, as the system is over-complex and couched in the language of debt.
My worry is millions will be put off at the outset because of this, and the scheme, which could help improve our very poorly-insulated UK housing stock, will fall flat. Not good for the environment, or people’s pockets, as it’s the only real way to reduce energy bills long-term.
If you don’t know what it is, do read the Green Deal Mythbuster guide first, as this blog assumes you understand how it works. And when I say ‘writing it’, while I spent many hours on it, MSE Helen S and MSE Jenny did the underlying work â€“ it was a big job between us.
Of course some knocking will take place as it’s seen as a political launch. Even on my Facebook page, when I posted the guide there was real venom already from the majority of respondents about how it worked. Comments like:
I think it’s a load of baloney. You need to have a full house survey done at your own cost before you know if you are eligible for any financial help! Useless if you don’t have money behind you in the first place. I need a new boiler but I won’t be using this scheme. Waste of time and money."
No good, as I understand it, 7% interest? Â£150 just for a survey?"
Okay, so you never pay more than you’re ‘expected’ to save, what happens if the savings don’t stack up? Â£120 for an assessment??!!!"
I think that ‘selling your house’ in the future with a loan attached is a BIG issue and for that reason I wouldn’t touch this deal. I know if I was a potential buyer I’d want it to be ‘my choice’ to be tied in to such a scheme and not to be forced to take it on."
Now, at this point, I should say my view is that the scheme isn’t baloney. It has merit, and should (hopefully) work well for many. Yet there are some innate problems with the way it’s constructed. Some are more psychological than practical, yet that’s still a real concern for getting this thing working.
So I thought it worth quickly bashing out the 10 changes I think could make it more appealing to the general public.
Please read this in the context that I think it’s a good scheme – but with too many hurdles, and there’s not enough Colin Jacksons out there.
- Don’t call it "The Green Deal".
Most people are selfish actors. To interest them, you need to focus on what they gain from it, not the environmental benefit. So call it the "Home Improvement Deal", or even a halfway house: "The Home Efficiency Deal".
Don’t charge upfront for an assessment.
Â£125 million of cashback is being pumped in to get this up and running; yet you will only know if you’re eligible for that by paying a typical Â£125 to get assessed. That’s a huge sum, and more than people are willing to risk.
There has to be a way of factoring the assessment into the cost for people who do get things done. Of course by having a paid-for assessment, you get a self-selecting group of applicants who are less likely to be browsers and more likely to follow through, but I think it cuts too many out.
A detailed pre-application web form (and phone service for those not online) that’s binding could do a similar job â€“ giving both the assessor and home owner an idea if it’s likely to be of benefit to them.
However, at this point, I doubt that will change. So why not divert some of the proposed cashback money into free government assessment vouchers, again with an online pre-assessment first?
Certainly we’d be happy to distribute them from MSE at no cost, eg, 20,000 x Â£100 vouchers. This way, you may actually find you’ve a decent number of people who’ve used the scheme and have good things to say about it. (Of course, again, there should be a pre-apply form so only those who are likely to act get them.)
- Allow it to be repaid when you move home.
Many people fear having a Green Deal loan attached to their house, as it’ll mean no-one will want to buy their house. I think that’s overblown, as these insulation measures in themselves will make the house more attractive and thus more likely to sell. Yet that doesn’t matter â€“ the fear itself is enough to prevent the scheme working.
My suspicion is many new buyers will ask for the remaining Green Deal loan to be taken off the house price. However, it’d be far easier to simply say: "I’ll pay it off" to the new buyer.
This is one reason having redemption penalties on these loans is just so silly. If people could simply use the cash to clear the debt when selling their home â€“ at no extra cost â€“ you’d mitigate this worry somewhat.
The loans should not have interest attached
This was the one thing that made me truly despair when I read the Green Deal proposal. Why on earth make it an interest-charging loan? Many people are rightly debt-averse.
It’s the student loan debacle all over again (once you understand it, it’s not as bad as you thought, but most people don’t get to the point of understanding it).
While these loans are very different from commercial borrowing due to the golden rule that you shouldn’t repay more than you save, that just doesn’t cut it for most. They see the interest figure and say "no loan".
I accept there’s a cost attached to the financing. Yet even learning a trick from the sofa sellers and charging more upfront â€“ so that there’s no interest, just a fixed repayment based on that â€“ would’ve made it easier for people to stomach.
Not allow it to be sold door-to-door
This risks lowering the reputation of any service when it’s sold this way. (In plain terms, sell it door-to-door and it makes many feel it’s dodgy or shoddy.) I know there are rules saying door-to-door Green Deal sales must obey "no cold callers" signs, but still, was it necessary to have it pumped out like this?
One worry is salesmen showing up on the doorstep saying “I’m from the government”.
Standardised maximum pricing
We don’t yet know how the assessors and installers will price, but many are worried they’ll pump up the cost in a way that negates the benefit of the financing in the first place.
As this is a Government scheme, I’d think some form of price regulation on the 50 or so things you can have fitted within the Green Deal scheme, or even fixed prices, would give more confidence that you’re not getting ripped off.
It’s worth remembering one of the new things the Green Deal lets you save on is double-glazing. That industry is haggle central â€“ I’ve heard of cases of people being charged 10% of the original opening price for the same thing. It’s not good for the Green Deal if it falls into the same system.
If interest will be charged â€“ let people know what it is
- Loans shorter than 10 years should be allowed
Cavity wall and loft insulation will pay for themselves in a far shorter period than the effective minimum 10-year loan. So why are people forced to borrow longer? A golden rule of borrowing is to repay as quickly as you can, as it minimises interest.
No early redemption penalties
People should always be allowed to pay off their debts earlier with no charge if they choose to. Full stop. End of.
Centralised information and application
To make this scheme work, it needs to feel official and authoritative. Some form of central call centre to give people official information before passing them onto a selection of reputable firms would give greater confidence (this may be being done, I’m not aware of it though), although I accept it would take some market forces out.
The fact we don’t know the Green Deal interest rates yet, even after the scheme has launched, is ridiculous. Even once we do know them, they will vary with the length and amount of borrowing.
People need to know even before having an assessment what this is likely to be. Firms need to publish their loan rates for different amounts (or do it via an online tool).
OK, those are my 10. Do you agree with all, or most of them? Or do you disagree with some of them, and if so, which ones? And do you have any of your own suggestions? Let me know below.