Government must ‘heed the lessons’ of the failed Green Homes Grant scheme, say auditors

A scheme intended to boost the energy efficiency of homes while stimulating the economy during the height of the pandemic was rushed, ill-considered and bound to fail, says the National Audit Office (NAO).

The Green Homes Grant was launched in September last year, only 12 weeks after it was announced by chancellor Rishi Sunak. But the short timescale created a fundamental tension between the twin aims of delivering decarbonising home heating and creating a short term-economic boost, according to the auditors. This “was never properly reconciled leading to an overly complex scheme that could not be delivered to a satisfactory level of performance in the time available”, the NAO said in a report today.

Making the situation worse was that the government was preoccupied with Brexit preparations and vaccine procurement, according to the NAO. The Department for Business, Energy and Industrial Strategy (BEIS), which managed the scheme, was still working on the details of contractual obligations even after a contract to administer it was signed, says the report.

A total of 169,012 voucher applications were received before the scheme was wound up in March, a fraction of the 600,000 that were expected to be provided. The closure was a reaction to concerns that the Green Homes Grant was not working as intended.

The report says that a fundamental problem was that homeowners were expected to identify a certified installer and apply for vouchers after identified measures had been fitted, making potential providers reluctant to participate. The application process was not easy, and there were delays in approving and issuing vouchers and paying installers. For those who applied in October, the first full month that the grant operated, the average time from application to issuance was 137 days.

The scheme was originally budgeted at £1.5bn, though only £314m is expected to be spent on the scheme in total, having upgraded 47,500 homes. More than £50m was spent on administration alone, an unusually high proportion that amounts to more than £1,000 per home, the report notes.

It concedes that BEIS made “considerable efforts” to get it working. But in the end, “the rushed delivery and implementation of the scheme has significantly reduced the benefits that might have been achieved, caused frustration for homeowners and installers, and had limited impact on job creation for the longer term,” the NAO wrote.

NAO head Gareth Davies said that, “It is vital that future schemes learn from this experience,” especially considering the role that decarbonising homes must play in reaching net zero. But the report adds that the government ignored the failure of previous energy efficiency schemes when it drew up the Green Homes Grant, most notably the Green Deal, which “have amply illustrated the difficulties of achieving successful delivery in this area”.

A spokesperson for BEIS defended its performance. “As the NAO recognises, the Green Homes Grant voucher scheme was designed as a short-term economic stimulus and was delivered during an ongoing pandemic. Despite this, and challenges with delivery, 99.9% of applications have now been processed, meaning almost 80,000 upgrades to homes. Other parts of the Green Homes Grant are continuing to effectively transform the energy efficiency of local authority housing,” she said.

But shadow business secretary Ed Miliband said the NAO had set out “in stark terms the incompetence and waste that have characterised the flagship policy of the prime minister's efforts to tackle the climate emergency. This was a scheme personally overseen by the business Secretary who must account for the chaotic mismanagement uncovered by the NAO for which consumers and installers have paid the price”.

He added that a “credible home retrofit scheme” is desperately needed to address the UK’s often badly-insulated housing.

Energy and Climate Intelligence analyst Jess Ralston said: “The sheer volume of applications to the Green Homes Grant – 160,000 during a pandemic – showed sky-high desire with more of us than ever looking to make home improvements post-pandemic.

“Locked out by poor administration and delivery, the NAO has delivered a key learning point for the government in anticipation of a replacement scheme: proper preparation prevents poor performance. The upcoming Heat and Buildings Strategy is the obvious stage to show that decision-makers have understood this and are poised to act on buildings ahead of COP; so now all eyes are on the strategy to get a handle on our unhealthy homes.”

Juliet Phillips, Senior Policy Advisor at E3G, agreed: Short-term thinking killed the Green Homes Grant. Now is the time for a long-term infrastructure plan to decarbonise our homes with a grant scheme for insulation and heat pumps at its heart that is built on the NAO’s advice, boosting business and consumer confidence.”

Heat Pumps

The NAO’s report comes as think tank IPPR revealed that the UK is far behind where it should be to meet the Climate Change Committee’s recommended pathway to net zero, in terms of fitting heat pumps and energy efficiency measures to homes.

According to its analysis, heat pumps are being installed at only 6% of the rate needed to be reached by 2028. For cavity wall insulation, the figure is 9% and for loft insulation, 2%. But the worst is for solid wall insulation: the pace of installation must increase 50-fold for it to hit the CCC’s recommended level.

Homes and buildings release around 14% of the UK’s greenhouse gas emissions, though the government’s plans for addressing the problem – the Heat and Buildings Strategy – remains absent due to a conflict within government about its potential electoral consequences.

IPPR proposes that a “big and bold” successor to the Green Homes Grant, which it has dubbed ‘GreenGo’. It would be a “unifying and well-advertised brand” under which grants and zero-interest loans would be delivered for homme retrofits, with £6bn of funding per year from now to 2030. This would be enough to see 650,000 households fitted with heat pumps each year.

Skills academies and a Green Training Fund would accompany the scheme, with new homes built to an “ultra-high energy efficiency” standard by 2023, oil heating eliminated by 2028 and gas heating systems removed by 2033.

Luke Murphy, head of the IPPR Environmental Justice Commission, said: “Ensuring everyone has an affordable, clean and warm home is eminently achievable with the right policy action. The government must not repeat the mistakes of previous green home schemes, and instead go big with a scheme that truly flips the dial on home decarbonisation.

“In its forthcoming Heat and Buildings Strategy, the government must stump up the cash, set robust standards, support skills development, and communicate, communicate, communicate, if the UK is to be successful on the home front on the climate crisis.”

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