Missing the point on energy bills

This weekend we learned that, as expected, the government will be removing some social and environmental charges from energy bills in the hope of appeasing angry bill-payers. Most people will save £50 or so over the next year. It’s a small victory for enemies of environmental policy and those concerned about the rising cost of living, but it comes at the cost of further delays to the decades-long project of improving Britain’s leaky homes.

If there’s one thing that really can make a difference to your energy bill, it’s the efficiency of your home. To put that £50 in context, lagging your loft will save up to £180 a year, according to the Energy Saving Trust. Cavity wall insulation would save £140. A little draft-proofing will save you a further £50, and installing double glazing will save £170. Solid wall insulation could save as much as £460 a year.

The social levies on our energy bills help to pay for these genuine money-savers for those who couldn’t otherwise afford the up-front costs. The government is undermining the single thing that would make the biggest difference to people’s bills.

What’s particularly ironic is that the scheme that’s being removed from bills is the Energy Companies Obligation, which only came into effect in January 2013. It’s this government’s own scheme, and their web page explaining the measure is titled ‘Helping households to cut their energy bills.’ Here it is below, in case it gets taken down.

Amidst the fretting about levies and excess profits, the obvious solution of energy efficiency has somehow evaporated. What’s bizarre is that everybody would win from a major efficiency drive. We’d have lower bills, warmer homes, and lower carbon emissions all at once, while creating jobs in retrofitting. The only people who’d lose out would be the energy companies, who’d be selling less of their product. There is widespread support for greater energy efficiency, a huge coalition of organisations campaigning for it, and business groups like the CBI know it makes sense from a business point of view.

So what should the government be doing instead? The Green Alliance released a 7-step plan to reduce energy bills last week, and it’s a good place to start:

  1. Political leadership – all parties should be in favour of energy efficiency
  2. Make it a requirement for house owners to improve efficiency as part of renovation. This was in the works, but the media branded it the ‘conservatory tax’, there was a backlash against it from Tory MPs and it was buried. It remains a good idea and one with majority support, and at least one local council does this successfully already.
  3. Set stricter standards for private landlords renting out inefficient homes. There are plans for this already, but it makes the minimum requirement an E rating, from 2018. Since 90% of rented accommodation is E or above already, these targets need to be much more ambitious.
  4. Use financial incentives to reward owner-occupiers for improving the energy rating of their home. This could be done through variable council tax or reductions in stamp duty, creating a direct link between the energy rating of a house and its value.
  5. Simplify the existing Energy Company Obligation, and make it more flexible. The scheme is currently rather bureaucratic and it could be streamlined considerably.
  6. Use development spending to support retrofitting. Renovating housing stock has multiple benefits and can be a driver of economic growth.
  7. Make energy efficiency a health concern too, with strategies to deal with excess winter deaths and fuel poverty.

eco-levy

15 Comments on “Missing the point on energy bills”

  1. Neil December 3, 2013 at 4:53 pm #

    Agreed and according to the Guardain the energy companies are sitting on piles of ECO cash and there is an underspend. Its crazy that people moan about energy prices but don’t want to do anything to cut their bill.

    • DevonChap December 3, 2013 at 10:09 pm #

      You are quite right, It is crazy people don’t do anything to cut their bills. It is also crazy to suggest as Jeremy does that we give an extra financial incentive to people to do what is already in their economic interest.

      To reduce council tax or stamp duty would require a huge project to establish the current energy efficiency of the entire UK housing stock. A much more expensive and invasive process than Council Tax revaluation which ain’t cheap.

      Stamp duty is paid for but the homes buyers so the sellers have little incentive to spend money to reduce someone else’s tax bill.

      But I think encouraging landlords to improve energy efficiency is a good idea, though it will mean higher rents. You have to be honest about that.

      • Jeremy December 4, 2013 at 10:34 am #

        Well, it’s not my suggestion, it’s the Green Alliance and I’m reporting on it, but it’s worth consideration. I have a lot of questions about the council tax idea myself, but there’s more to the stamp duty part – if you undertook efficiency renovations within the first 12 months of buying a new home, you’d get a discount on stamp duty. The logic is that when a house changed hands, it would be renovated in the process.

        No need to undertake a national audit of efficiency, because the survey would be done on the house as part of the Standard Assessment Procedure. Getting people to renovate houses without moving is the tricky bit.

        As for rent, higher rents are not a foregone conclusion, depending on how its done. The best way would be to create mechanisms where the tenants pay for the improvements through the savings in their bills, and it wouldn’t cost the landlords anything.

        • DevonChap December 4, 2013 at 5:01 pm #

          Important piece of terminology. You could not have a ‘discount’ on stamp duty if you undertook energy effiency renovations within the first 12 months. Since you pay stamp duty at the time you bought the house that money would have to be paid back, making it a ‘rebate.’ That would make it a lot messier than the reduced stamp duty for zero carbon homes.

          Given that homeowners seem not to be prepared to pay for efficiency improvements through their bills (The fall in installations with the change to the Green Deal seems to point to this) then it seems unlikely tenants would sign up to something similar?

          • Jeremy December 5, 2013 at 12:37 pm #

            Sure, it could technically be a rebate. There are different ways to set it up, and if a rebate is simplest and works best within existing administrative frameworks, let’s do it that way.

            I think there are other reasons for the failure of the Green Deal to be honest – largely the fact that it’s hugely complicated. It would be different with rented properties. The landlord owns the house and would be legally obliged to improve it, so it’s not up to the tenant to set it up. Ideally they wouldn’t need to be involved, with any payments made just set up through their contracts. But that’s a level of detail that I’m not going to be able to help with.

          • DevonChap December 5, 2013 at 5:31 pm #

            Doesn’t matter if its unfeasible, that is details and you don’t do them?

  2. Jeremy December 5, 2013 at 6:14 pm #

    If I were a contract lawyer or held a portfolio of rental properties, I’d be qualified to say how the detail might work. I have the humility to know when something is outside my expertise.

  3. Paul @ EcoStores December 6, 2013 at 11:12 am #

    It’s a two stream approach needed. The energy companies selling themselves energy at inflated prices so they can sell to us at ‘small margins’ is a con of the first order and needs addressing. The second stream is a much more aggressive intervention needed by the authorities on home insulation. Perhaps, like car tax we have a graduated scale of discounts applied to properties with higher energy efficiency ratings?

  4. coral December 6, 2013 at 11:15 am #

    If the authorities were to reduce VAT on energy saving measures such a triple glazing or ‘A’ rated double glazing it would help

    • Jeremy December 7, 2013 at 11:14 am #

      They already have reduced VAT on some things, such as loft insulation and heat pumps. I’m not sure why double glazing isn’t included in that, that seems like an oversight.

  5. Tegan Tallullah December 9, 2013 at 12:51 pm #

    It’s true, everyone would win from more energy efficiency except the energy companies. Shame they have the government in their back pocket. I was appalled but not at all surprised that Cameron promised to cut the ‘green tax’ as soon as the big six started moaning about it, saying they weren’t even making a big profit. No mention of the legal tax loop 3 of the 6 had previously been using to tuck away millions of the taxpayer’s money. God the energy companies make me so angry…

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  9. Harry @ ecostores June 27, 2014 at 3:05 pm #

    Maybe we should have a graduated discount scale to properties with better energy efficiency ratings like we do with road tax? Any other thoughts?

    Thanks for sharing!

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