Hand out £10,000 loans to make UK homes greener, say experts

But pay-as-you-save scheme gets lukewarm response from government
Ashley Seager
The Guardian, Thursday 6 August 2009

Homeowners will be able to borrow up to £10,000 to "green" their homes and pay the money back through their council tax bill, under radical proposals drawn up by a government advisory body.
The plans, published today in a report by the UK Green Building Council, flesh out a government proposal aired last month for a pay-as-you-save scheme to improve the efficiency of 7m British homes by 2020.
Britain's housing stock is old and notoriously inefficient in its use of energy. Housing accounts for a quarter of all carbon emissions but the upfront cost of improvements such as solid-wall insulation, low energy boilers and solar panels has been identified as a big barrier to reducing emissions – something the pay-as-you-save scheme aims to address.

The idea is that a homeowner would save more in energy bills than he or she would pay each month to service the loan taken out to green the home. Councils would be used as a conduit for the finance – which would come from banks or pensions funds, or even from a type of "green bond".
Paul King, chief executive of the building council, said: "This innovative proposal would provide the finance to trigger a revolution in household refurbishment, creating thousands of new jobs and significantly cutting emissions. Both government and opposition have voiced their support for the principles of a scheme like this – what's needed is to get on with it."
A significant part of the building council's report is that the local authority would create a "local land charge" on a house though which the money would be repaid. The charge would be levied on the property rather than the owner, so if someone sold their house, the new owner would take over the debt payments.
Local authorities are favoured by the report because council tax has a much lower default rate than energy bills. By reducing the risk that debts do not get paid, the interest rates on the debt could be reduced. The one problem is that a local land charge system would require primary legislation in parliament.
The government, which has been thought to favour using energy companies as a conduit for the pay-as-you-save scheme, gave the report a lukewarm reaction. A Department of Energy and Climate Change (DECC) spokesman said: "We were pleased to offer financial support for this work, which will inform the ongoing development of our comprehensive energy efficiency programmes.
"The government will soon be trialling pay-as-you-save schemes in several hundred homes across the country, and we will also use what we learn from these pilots in our final decision on what form the scheme will take."
But the building council's experts think that people have too little trust in energy companies, and would like big retailers such as B&Q, as well as building firms, to have the opportunity to compete for refurbishment contracts, which should help push down prices to consumers.
All companies would have to have government accreditation to be able to carry out the work.
David Adams of the building council's task group said: "A pay-as-you-save scheme would make it possible for individuals to refurbish their homes using accredited suppliers, with no upfront costs. Industry has the expertise to make our homes more energy efficient and this scheme would create the finance to allow this to happen."