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10 changes to make the Green Deal work update – have they listened?

10 changes to make the Green Deal work update – have they listened?

10 changes to make the Green Deal work update – have they listened?

The Green Deal is the Government’s flagship home energy efficiency scheme, sadly and also predictably, it has been a rather huge flop. The concept is great – you get money to improve your home, which you then pay for out of the savings on your energy bills. The problem is the system is far too complex and couched in the language of debt.

Around its launch in February 2013, I blogged on why it wouldn’t work and what needed to change to make it work. I sent this to the Government which promised to look at it.

In the last month we’ve seen the launch of Green Deal 2, and yesterday I was on Radio 5 Live debating it with Secretary of State for Energy Ed Davey (download the podcast), so I thought it time to have another look at my recommendations and see if they still hold.

The good news is, about half of them have actually been adopted by the Government, and Ed Davey accepted this directly and said "we’ve been listening to what you and consumers suggested Martin". Listening by politicians is never a bad thing.

Before I start, just a quick message. This blog isn’t intended to put you off the Green Deal. My frustration is it has merit and should help millions, but its structure both psychologically and financially puts many off. Yet I’d still urge you to check it out. If you’re not familiar with how it works or want to see if it’s suitable, do read my Green Deal Mythbuster guide first – as the info below assumes some knowledge.

Here are the ten suggestions I made in early 2013, and updates in purple on whether they’ve been enacted.

  1. 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”.

    Update: SEMI-HURRAH. The scheme’s still called the Green Deal, but the month-old newly relaunched element of the Green Deal is called the "Home Improvement Fund" – a much better name and it’s already been a far more successful launch. It’s effectively a cash giveaway of up to £7,600 per person for certain energy efficiency measures. Demand is up. See our Home Improvement Scheme info for help. On the radio yesterday the Secretary of State directly acknowledged this as a suggestion that originated here.

  2. Don’t charge upfront for an assessment

    £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 £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 – 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 £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).

    Update: Some improvement. There are a few geographic areas where there are free assessment firms. Also, as part of the Home Improvement Scheme if you get two qualifying measures (or solid wall insulation) you can get £100 cashback for the assessment. Overall though this is still a blocker for many people – they worry about one scenario where you could really lose out by paying for an assessment, not qualify for anything, and you don’t get cashback.

  3. 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 – 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 – at no extra cost – you’d mitigate this worry somewhat.

    Update: HURRAH. Two weeks before the scheme was relaunched last month, The Green Deal Finance Company removed the redemption penalties so you can now repay it when you move home.

  4. 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 – so that there’s no interest, just a fixed repayment based on that – would’ve made it easier for people to stomach.

    Update: No change here, sadly. I stick by my view. Making this a ‘debt’ is a bad move and puts off many who would want to do it.

  5. Not allow it to be sold door-to-door
  6. 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".

    Update: This hasn’t been as big a problem as I predicted. I’d still prefer not to have it sold door-to-door but I don’t think it a major issue now.

  7. 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 – 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.

    IMPORTANT UPDATE: For me this is the single biggest problem I hear about with the Green Deal. I am often being told people are being given quotes for work within the Green Deal wrapper at many times the cost of getting it done themselves. Effectively this just puts the Green Deal subsidy into the installers pockets.

    I asked Ed Davey on the radio to install maximum prices for different work, his answer is "we have encouraged more operators so we have competition" (my suspicion is that he probably doesn’t believe this himself but has to follow his coalition partners free market principles).

    This is a bit like saying there is competition for foreign currency at airports. True, there is, but they’re all massively overpriced as they know you’re a captive customer – and you shouldn’t use them. The Green Deal isn’t quite that bad, but it’s certainly far from good. I would strongly repeat that there needs to be price caps or (enforceable) reasonable pricing policies to make this work.

  8. If interest will be charged – let people know what it is

    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).

    Update: Interest rates are now public and typically between 7% APR and 11% APR, which isn’t that cheap compared to the cheapest private debt financing.

  9. 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.

    Update: No real change here. I still think there should be shorter loans available, though it’s not one of the biggest issues.

  10. 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.

    Update: SEMI-HURRAH. They listened, these have been scrapped for all new applicants, though not for those who already have the scheme.

  11. 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.

    Update: SEMI-HURRAH. There is now a central information number. Gov.uk lists the Energy Saving Advice Service on 0300 123 1234, or Home Energy Scotland on 0808 808 2282 where you can call for info, though they don’t pass you on to suppliers directly. There’s also a central search online for assessors, providers and installers.

Come to The Martin Lewis Money Show Roadshow in Manchester and Sheffield

Come to The Martin Lewis Money Show Roadshow in Manchester and Sheffield

The Martin Lewis Money Show Roadshow

Hoorah! ITV has recommissioned a fourth series of my show. It won’t be on for a while yet, but we’re about to start filming. My aim to start with is to get out there and meet people, hear their stories and questions before we even begin to do the set pieces. So we’re starting off with a roadshow and I’d love you to come.

You’re more than welcome to pop along and say hello to me, Saira or just see how we film it. It’s even better still if you’ve got a question, want to tell me how much you’ve saved, or want to join one of my cashmobs. First, though, the dates…

  • Sheffield Roadshow: We’ll be based in the Meadowhall Shopping Centre on Monday 14 and Tuesday 15 July from 11am to 7pm.
  • Manchester Roadshow: We’ll be in the Manchester Arndale on Thursday 17 and Friday 18 July from 11am to 7pm.

What you can take part in…

Do come along, even if you just want to spectate, the more the merrier but there’ll be lots going on. Though be prepared to be filmed, obviously.

  • Ask a MoneySaving question: Anything, be it savings, credit cards, bills, broadband, digital TV, energy, flight delays, PPI, consumer rights, mortgages, deals – if I know about it, I’ll try to help (though it may be busy so be prepared to wait – and TV crews tend to slow things up).
  • Tell us about a big saving you’ve made. I’d also love to see people who’ve made big savings from the info on the show, or from listening to or reading the MoneySaving techniques generally and who want to inspire others or tell their story.
  • Join a cashmob: During the lunchtime and early evening you can join one of my cashmobs (a money flashmob) where I do a five-minute guide on a big MoneySaving subject, telling you how to beat the system.

You can just pop along, but if you want to tell us you’re coming in advance and what you want to talk about, then you should get to the front of the queue quicker, especially if you can only come for a short time. So please email itvmlshow@itv.com.

Special subjects we want to focus on…

There are a few areas we’re looking to major on in the series. If you want to talk about any of these, we’d love you to come along. With these it would be especially great if you emailed itvmlshow@itv.com in advance as we may want you to bring bills, etc, along.

  • Household broadband, digital TV bills.
  • Cutting overdraft or credit card costs.
  • Flight delay reclaiming.
  • Should you repay your mortgage?
  • Childcare costs and vouchers.
  • Should you get a joint account?
  • Car hire abroad.
  • Have you switched energy bills in the last few years?

Looking forward to seeing some of you there.

If a company makes a mistake, that doesn’t make it a monster…

If a company makes a mistake, that doesn't make it a monster…

If a company makes a mistake, that doesn't make it a monster…

If a company makes a mistake, that doesn’t make it a monster…

As it says at the top of the page, MoneySavingExpert.com is here to cut your bills and fight your corner, and we do our best to live up to that promise. As part of that, our forum, Twitter, Facebook and News pages are often filled with individuals who feel they have been horribly mistreated by companies both big and small.

I wanted to take a few minutes to explain my view on these issues. I often hear people who mistakenly believe that we’re here to ‘take down’ companies at any occurrence (sometimes this is said as a compliment, other times by businesses as an insult). Yet that simply isn’t true. I’ve always explained my stance as ‘the adversarial consumer society’ – in other words, a company’s job is to make money, as consumers, our job is to stop them. Yet I don’t believe companies are wrong to do so.

The best analogy I have for this is that as a Man City fan, when we play Man United, I desperately don’t want them to score, but I don’t believe they are wrong for trying to do so.

Looking at what happens when companies have mistreated a consumer is a subset of this. Things fall roughly into one of two bags…

  • When we’re all guns a blazing. If you look through the reclaims section of the site you will see articles about when businesses have systemically, deliberately and occasionally, maliciously mistreated customers. Here they’ve overstepped the line as to what is acceptable, and often the law.

    When that happens we are ‘all guns a blazing’, using all the firepower of our 15 million unique users, combined with media appearances to help people help themselves to get redress from those companies and the money they should never have had to pay out, back into their pocket.

  • When it’s just human error. Most problems with businesses actually tend to happen due to simple human error, or unexpected consequences. When people contact us about those, provided the firm says: "Oh, we are very sorry that was the individual operator" (and we can’t see any systemic problems). Or they say: "We didn’t realise that happened but we will put it right immediately, sorry about that". For me, that is usually it.

    I instruct my editorial and news teams that the latter isn’t really a story (with the odd exception of something that’s genuinely interesting in its own right). Providing the company puts it right, stops it happening again, and puts the individual back into the position they should’ve been in, we don’t cover it. You’d be amazed at how many stories like this we drop.

    I do occasionally note stories in broadcast or print media where you can see it was just an error but they go to town on it anyway, and I always find it uncomfortable so I don’t particularly want MSE to follow that line.

PS. Just to say, this isn’t a blog requesting you to send us your individual complaints. I’m afraid if you do we are nowhere near resourced enough to deal with them from millions of users, so most remain untouched. The main job of MSE is to aim to try and help you do it right in the first place. We aim at prevention more than cure.

Why Wonga should pay £34,334,929,158 to everyone it sent false letters to

Why Wonga should be paying everyone it sent false lawyers' letters to £34,344,929,158 each

Why Wonga should be paying everyone it sent false lawyers' letters to £34,344,929,158 each

This week we’ve had the disgusting news that Wonga, in 2008 – 2010, thuggishly sent letters from fake law firms to scare people who’d defaulted into repaying. The FCA has ordered it to pay £2.6m in compensation, which equates to £50 for each customer affected. Sadly, there was no fine, as at the time these acts were committed, the FCA wasn’t regulating consumer credit.

For full details on this and what to do if you’re affected see the Wonga to pay £2.6m after threatening borrowers with fake lawyers news story and Is it just Wonga? Send us other fake letters campaign.

However, I don’t believe that penalty is enough, so I’ve tried to come up with a back-of-an-envelope formula for it.

It’s worth remembering who the people they threatened with these letters are:

a) They took a payday loan, which while not always, can be an indication of financial desperation.

b) They couldn’t pay that payday loan back, which is an even stronger indication of financial problems.

It’s worth remembering too the rigid and unbreakable link between mental health and debt. Those who have mental health problems are five times more likely to be in crisis debt.

Therefore, I think it’s fair to assume a significant number of the 45,556 people who were bullied in this way may have been vulnerable. They will have had their problems exacerbated and been caused fear or distress; which for me, means this compensation for near-fraudulent misrepresentation is small at £50.

Yet let’s set that as a benchmark.

If you were sent these letters in 2009, that’s when you were due the compensation. As you didn’t get it then, you’ve effectively lent Wonga the money.

So what rate shall we use to calculate what you should be owed now? Surely Wonga’s own representative APR of 5,853% is appropriate.

Here are my calculations…

How £50 compounds at 5,853% APR

After 1 year

£2,926

After 2 years

£171,288

After 3 years

£10,025,489

After 4 years

£586,791,887

After 5 years

£34,344,929,158

This shows after compounding that over five years, on average, people are owed £34,344,929,158 each (ie, £34 billion).  

Of course, if you got your letter in 2010 it wouldn’t have compounded anywhere near as much. You could be owed just a few hundred million quid.

Wonga – stop spending money on marketing yourself as righteous, and be righteous.

Before Wonga tries to pick holes in this, let me say I acknowledge this calculation is not how Wonga actually works.

Their loans are short-term and have set amounts that mean this type of compounding wouldn’t happen – the figure is meaningless. 

Yet my calculation is still correct, based on its official APR. And I don’t feel like being fair to Wonga after the way it’s treated people.

The real point is it may have co-operated with the FCA on this, but £50 isn’t very much for the distress many may have felt.

Wonga – you’ve spent millions on marketing, advertising and lobbying to try to pretend you’re good guys in a bad industry. 

A couple of weeks ago, rather conveniently, your founder and chairman – the man in charge when this all happened – left the company. So in the media interviews yesterday your new MD was able to say "this isn’t about people".  

So instead of paying money to pretend to be righteous, why not actually be righteous? Give these vulnerable people you lied to a far bigger slice of cash.


Related Past Blogs

I predict the first ‘car insurance marketplaces’ will start in September

I predict the first 'car insurance marketplaces' will start in September

I predict the first 'car insurance marketplaces' will start in September

The Competition and Markets Authority has been investigating the insurance market, and within its 12 June proposals – likely to be enacted in September – is a seemingly innocuous clause that could signal a huge change to how people find cheap car and home insurance. It could also signal the death knell for some car insurance cashback.

So let me bash out a quick analysis on what I expect to happen. The key recommendation I am focusing on is this one…

A ban on price parity agreements between price comparison websites and insurers which stop insurers from making their products available to consumers elsewhere more cheaply.”

The mischief this aims to solve is where some big comparison sites have agreed with insurers that their rivals won’t get cheaper prices.

It seems Compare The Market has been the main mover behind this. It’s become the market leader, not on the back of winning the "cheapest prices" game, but because of its marketing, and especially its remarkably successful meerkat toys.

It can keep full margins without price competition between comparison sites. As full margins benefit it, its interest is in keeping all prices homogenous.

What this means for price comparison sites

If this new rule is enacted, as seems almost certain, it’s likely to mean we will see comparison sites negotiating bespoke pricing with individual insurers. So different comparison sites will have different prices – and there will no longer be the relative homogeneity on pricing.

If this happens at the scale I anticipate, it means the big sites will no longer be comparisons in the strictest sense. Instead, they’ll be insurance marketplaces, with their own pricing plans.

In our Cheap Car Insurance and Cheap Home Insurance guides, we already suggest using more than one comparison site. That’s done mainly to broaden coverage (as different comparison sites cover some different insurers at the margins), but from September this is likely to be even stronger, as the insurance marketplaces will need checking in their own right as they’ll have different tariff plans for each insurer.

Of course there’s also the potential that some insurers will decide to offer cheaper pricing "direct" – though the might of the comparison sites will likely stop all but the biggest brands, which are willing to push their marketing hard, from doing this.

The impact on cashback sites

Currently the last element of our car and home insurance solution is, once you’ve found the cheapest provider, to check cashback sites to see if you can get money back.

This is based on the fact that the prices are the same through cashback sites as through comparison sites and going direct. We’ve heard some saying they’ve seen different prices, but when we’ve investigated, we’ve struggled to back this up.

Under the new system, it’s likely the comparison sites will be undercutting cashback sites because of their bigger negotiating power and the fact that cashback site users tend to churn more.

Therefore while you may still get the cashback, the gap between getting the cashback and just getting the cheaper price is likely to narrow.

I’d love your thoughts on this.