Legislation for the Green Deal, the Coalition’s flagship environmental policy, has received final Parliamentary approvals. The ambitious environmental scheme hopes to dramatically reduce the UK’s total greenhouse emissions by tackling the nation’s inefficient housing stock which currently accounts for 43 percent of total UK emissions.
The Green Deal programme will allow bill payers to undertake energy efficiency improvements at no extra cost. To fund the range of measures supported by the Green Deal loans will be taken out and repaid under the ‘Golden Rule’; the expected financial savings must be equal to or greater than the costs attached to the energy bill.
The Guardian has revealed that Government is expecting loans taken out under the scheme to be charged at an interest rate of 7.5 percent. Responding to the news, Caroline Flint, Labour’s Shadow Energy and Climate Change Secretary, has called on Government to work harder to make the Green Deal fairer for consumers. Flint contests that repayment charges could end up more than doubling the cost of original energy efficiency measures. Labour calculates that, with an interest rate of 7.5 percent, a £10,000 Green Deal loan repaid over 25 years would see the consumer having to pay back £22,000 – more than double what they initially borrowed.
Flint added: “If it’s done properly, a pay-as-you-save energy efficiency scheme could cut carbon emissions, create jobs and lower bills for families. But the Green Deal must be a good deal for consumers. The public want a simple and affordable scheme so they can improve their home and cut their energy bills.
“It would be completely unfair if the public are forced to pay hefty penalties for doing the right thing and trying to repay their loans as soon as they can. The Government must come clean about what interest rates will be charged on the Green Deal so hard-pressed bill payers know it will save them money. To make the Green Deal work, ministers should use the Green Investment Bank to provide Green Deal finance at an affordable rate for families and businesses.”
The scheme will allow consumers to borrow up to £10,000 to finance energy efficiency improvements to a property. Speaking to the Guardian, Greg Barker, the Minister for Energy and Climate Change, explained how he hoped £300 million worth of funding designated to support the scheme from the newly-established Green Investment Bank would allow lower interest rates than the expected 6-8 percent.
A DECC spokesperson also defended the interest rate adding: “DECC’s understanding from commercial organisations, such as the Green Deal Finance Company (TGDFC), is that the cost of finance will be around 6-8 percent, which for unsecured lending is a highly competitive rate, far lower than other forms of commercial finance. This compares very well for those on the lowest incomes that often have poor credit ratings and can often only access loans at high, punitive rates. The Green Deal will not be based on an individual's credit rating as it is linked to the property not the occupants.”
The Green Deal is expected to launch in October this year. Currently, DECC is touring the nation with a Green Deal Supply Chain Roadshow to help those interested in getting involved with the scheme find out more about the opportunities available.