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.
- 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 Â£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.
- 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 – 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).
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 Â£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.
- 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.
- 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.
- 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".
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.
- 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.
- If interest will be charged â€“ 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.
- 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.
- 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.
- 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.