Government’s green deal branded a failure as fewer than ten UK homes take out loans offered

Caroline Flint, Shadow Energy Secretary said it looks like people are saying 'no deal' (Susannah Ireland)

The government’s much-vaunted green deal has been branded a failure by critics after it emerged that fewer than ten UK households have taken out the loans offered by the scheme to improve their energy efficiency.

More than 20,000 households have been assessed by green deal representatives since the scheme kicked off in January, but the number who have finalised loans for boilers, insulation and other energy-saving measures so far is thought to be as low as three.

The government is expected to say on Thursday that the number has risen to the "ball park" of 200 as around that number of households which have agreed but not finalised loans come out of the obligatory 14-day “cooling off” period, when they must decide whether to proceed or pull out.

However, even if all 200 finalise their preliminary arrangement, the take-up of green deal loans would be less than 1 per cent of those who have had assessments – typically at a cost to the customer of between £100 and £150.

The low take-up suggests the scheme will struggle to hit Energy Minister Greg Barker’s target of signing up at least 10,000 households by the end of the year in what he has said would be “the biggest home improvement programme since the Second World War”.

Shadow Energy Secretary Caroline Flint said: “The government said that more than 10,000 households would sign up to the green deal this year – but it looks like people are saying ‘no deal’.”

There has been a 97 per cent drop in homes installing cavity wall insulation since the scheme was launched, she added, as previous energy-efficiency schemes the green deal has replaced means this measure is no longer heavily subsidised or free.

Under the green deal customers fund energy saving measures using loans to be repaid over 25 years through their energy bills. The idea is that the resulting savings will more than compensate for the loan repayments.

Mr Barker strenuously denied that the scheme had been a failure and said it was far too early to judge.

“To say it doesn’t work is just a travesty. It’s a new market that is gradually growing and is going to take some time. You can’t say it has been a success or failure over a number of weeks.

“While the number of finance plans is small, more than 5,000 people have taken up the cashback option as people have opted not to wait for the financing to come through,” Mr Barker added.

Under the cashback deal, customers can opt to finance energy-efficiency measures themselves, with the government chipping in some of the money – such as £150 for floor insulation and £270 for a boiler.

Mr Barker said he was “frustrated” that companies had only be able to start offering finance to potential customers a month ago because of “software issues” and delays in “finalising commercial agreements”.

At the moment only four companies are offering the scheme – the best known being British Gas – but that number should increase to about 60 by the end of the year, making it easier for people to access the scheme, he added.

Furthermore, Mr Barker said the aim of the Green Deal was to prompt people to make their houses more energy efficient and that the cash back option played a valuable role in doing that.

However, critics such as Ms Flint said: “The cash back offer was meant to encourage households to take out a green deal package, not to be a giveaway to people who can already afford to improve their homes without signing up to the green deal.”

Barry Gardiner, a Labour MP and chair of the cross-party green deal parliamentary group, said that while the loans may have only become available a month ago, the assessments have been occurring since January, with 18,000 completed by the end of April.

“The fact is people are not taking this up and the scheme is in serious trouble. The people who have already gone through the assessment at the start are the keenest to do it. But they have applied, done the assessment and turned their back on it, so what chance have the rest got? They are not going to give the scheme the word-of-mouth it needs,” Mr Gardiner said.

Critics say the green deal loan scheme is confusing and, with an interest rate of about 7 per cent, not particularly competitive. Some people are also reluctant to take out a 25-year loan that is tied to the property rather than themselves, for fear that it could potentially make it harder to sell their house.

British Gas is currently by far the biggest provider of Green Deal loans and assessments so far. It has carried out 11,000 assessments, which have resulted in 6,000 cashback agreements and one loan. A further 200 are in a cooling off period.

A British Gas spokesman said: "Our Green Deal cashback scheme, which launched in January got off to a great start. Half of the 11,000 people who've had a British Gas Green Deal Assessment chose this route to fund an energy efficiency measure."

Asked if the low take-up of loans so far represented a failure, Mr Barker said: “No. What’s more impressive is that more than 5,000 people think this is so compelling that they have decided to do it themselves” – paying for the work themselves, with help from the cashback scheme.