The government should fix the flailing Green Homes Grant

The government wants a green recovery that accelerates progress towards its 2050 net-zero emissions target. Ministers have rightly identified housing as a priority: heating and hot water in homes are the UK’s second largest source of emissions when taken together, and the UK’s homes are mostly draughty and inefficient. Progress in both areas has stalled – and, in addition to the pressing environmental reasons, addressing these problems could provide employment opportunities across the UK.

Encouraging demand from consumers and ensuring the right level of supply from businesses requires careful thinking from government. However, in its current form the Green Homes Grant, the government’s flagship announcement, risks joining a long line of policy failures in this area.

The Green Homes Grant risks failing in both its environmental and economic aims

In July, Rishi Sunak announced that £2bn of grants would be distributed as vouchers for homeowners to improve the energy efficiency of their homes, with the Green Homes Grant, intended to support 140,000 jobs, billed as a key plank in the government’s ‘green recovery’.

But the scheme is already beset with problems, starting with its proposed timescale. All work supported by the scheme has to be completed by a government-approved contractor no later than March 2021, with the policy intended to provide a short-term boost to the sector. But there are widespread reports of frustrated applicants unable to find an approved contractor in their area, and concerns within the construction sector that the incredibly tight timeline will make it impossible for firms to meet demand.

The scheme is also complex. The vouchers can be used to cover two-thirds of the cost of a variety of low-carbon heating or energy efficiency improvements, up to the value of £5,000 (or the full cost up to £10,000 for low-income households). The eligible improvements are split into ‘primary’ and ‘secondary’ measures: more expensive installations like cavity wall insulation or biomass boilers are defined as primary; cheaper energy efficiency improvements like double glazing are defined as secondary.

But to get access to help for secondary measures, applicants first have to use vouchers for at least one primary measure – making the scheme potentially unaffordable for some homeowners who would otherwise have taken up the opportunity to make their homes more energy efficient.

Extending the Green Homes Grant would solve some of its immediate problems

Several of the problems with the scheme are directly related to the March deadline. Many contractors are working through backlogs of work built up during the nationwide lockdown. Other firms are not signing up to the scheme or are rejecting available work, having decided that investing in the skills to train employees or hire new ones is not worth the expense if demand dries up after March. The chief executive of TrustMark, one of the bodies responsible for approving contractors for the scheme, has acknowledged that although new contractors are still being added, many companies are “still on the fence” about signing up despite the “massive market spike”. ^[1]

There is currently a significant risk that the government will not be able to give the earmarked £2bn away in the time it has given itself. However, abandoning the scheme and putting the money to other uses would be a mistake given the clear signs of unmet public appetite. There is also no reason to think that the benefits to employment will not still be feasible or welcome in the months after March 2021.

Extending the deadline, or eliminating it, would give firms greater confidence to invest in the skills they need to complete the work, and which the economy needs to improve the UK’s housing stock in the long term. It would also reduce the bottlenecks being reported in some areas of the country, where too many applicants are competing for too few contractors, and thus prevent the scheme from descending into a ‘postcode lottery’. ^[2]

The government needs a long-term approach or it risks repeating past policy flops

The aims of the Green Homes Grant are laudable, but if the government does not address delivery issues then it risks the recurrence of problems that have beset past efforts to decarbonise housing. The Green Deal, the coalition government’s primary energy efficiency scheme, suffered badly from low take up and was ultimately abandoned, as policymakers failed to properly design consumer and market incentives. Industry figures have expressed considerable frustration at government flip-flopping on policy and regulation, which they say makes it hard to invest.

Getting policy right in this area will be difficult. The Committee on Climate Change has said that the UK will not meet its emissions reduction targets without “near complete decarbonisation of the housing stock”. As a recent IfG report argued, this will require long-term efforts from government to shift consumer demand and grow a base of highly skilled suppliers. And getting the UK’s existing housing stock to the government’s target energy efficiency performance rating by 2035 could require up to £65bn of direct investment,^[3] with Sir John Armitt, the chair of the National Infrastructure Commission, arguing that the government needs to instil confidence among private investors by setting out a long-term infrastructure strategy for housing. But the Green Homes Grant is intended as a quick fix, and is too time-limited to provide a significant employment boost. Even in a recession, serial short-term policy measures cannot be a substitute for serious planning.

The UK clearly still has a very long way to go to get the housing sector on track for net zero, but getting the Green Homes Grant right is the obvious place to start. It would be a shame if its efforts fell at the first hurdle.

1. https://www.thisismoney.co.uk/money/bills/article-8850305/Is-green-home-scheme-waste-energy.html 
2. https://www.moneysavingexpert.com/news/2020/10/green-homes-grant-poll/ 
3. https://www.pixie-energy.com/perry-35-65bn-in-capital-investment-will-be-needed-to-achieve-epc-band-c-in-homes-by-2035/