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The Green Deal Is A Useless, Middle-Class Subsidy


There should be a cast-iron rule for all public policy: it must not discriminate against the poor. No tax or charge should be approved which transfers money from the poor to the rich.

The rule should not even need stating when it comes to green measures. Part of the point of protecting the environment is to defend the interests of all people, including those who have not yet been born. An environmental policy which harms the interests of a society's poorest people offends one of the fundamental tenets of what I believe environmentalism to be. Unfortunately it needs to be stated loudly at the moment, because this simple principle is being trampled by the government, the energy industry and even Friends of the Earth.

On his blog last week, Chris Goodall exposed a series of remarkable and shocking features of the government's new energy policies.

The government's own projections show that its green deal and Energy Company Obligation (ECO) schemes starting later this year, which are supposed to improve the energy efficiency of our homes and help people to cut their energy payments, will lead to higher bills for the poor, but almost no change to the bills of the rich. They will also greatly reduce the amount spent on insulation and energy efficiency while doing almost nothing to address fuel poverty. In sharp contrast to the claims the government has made about these schemes, Goodall shows that most of the poorest 10% of the population will end up "spending a greater fraction of their cash on energy than if the green deal and ECO did not exist."

The current scheme, Cert (which is far from perfect) obliges energy companies to pay out £2.4bn a year, of which 40% goes to vulnerable householders. The ECO will oblige them to pay out only £1.3bn a year, of which 25% goes to help those in fuel poverty. This is not money taken from the government's budget. It comes out of energy bills.

Ideally, these schemes should take from the rich and give to the poor. But it doesn't work like that. At the moment the pricing structure for gas and electricity is both perverse and regressive. You are charged more for the first units you buy than for subsequent units, which means that the rich pay less on average than the poor for every unit they consume. Pre-payment meters, which tend to be used only by the poor, make the problem worse, as the tariffs are often extortionate.

Two other schemes for helping the poor to cut their fuel bills will also be scrapped soon. They are Warm Front, which in 2010-11 provided £345m a year for heating and insulation improvements, and the Community Energy Saving programme, which has been spending £350m across two years on upgrading homes in the poorest areas.

On the other hand, the Warm Home discount scheme, which cuts fuel costs for elderly people on low incomes, will, at £250m a year, be 40% bigger than the programme it replaced. This is a crazy reallocation of resources. Less money is being spent on cutting people's need for fuel, more money is being spent subsidising the excessive fuel that people in leaky homes with inefficient heaters must burn. Why?

Winter fuel payments have also been cut, from £2.7bn to £2.1bn. Cold weather payments have risen, but the budget changes each year according to temperature (it is likely to be very small for this winter). If they are excluded, the total spending to address fuel poverty and winter hardship in the UK has fallen by £1.8bn.

In another post, Goodall shows that if the Cert programme had been allowed to continue, installations of cavity wall insulation would have risen to 800,000 this year. Instead, under the green deal, they will fall to just over 100,000 next year and decline thereafter. The government's own projections show that if there were no programme at all, the results would scarcely differ from those delivered by the green deal. This scheme, in which we were urged to invest such high hopes, turns out to be almost useless.

This is just one of the means by which money is being taken from the poor and given to the rich.

Two years ago, I warned that the feed-in tariff, a tax on energy bills which pays for people to produce their own low-carbon electricity, would be deeply regressive. To install solar electricity, for example, you would need your own roof plus £10,000 or more in cash. If you were lucky enough to possess both these assets, you would be making, at other people's expense, one of the most lucrative of all possible investments. It would give you a state-guaranteed return of 5-8%, fixed for 25 years, which was both index-linked (making a nominal return of 7-10%) and tax free.

Those who angrily denounced my analysis claimed that it could in fact be a progressive scheme, as communities of poorer people could be helped to cash in. They're still claiming it, even though the facts deserted them long ago. Today, Andrew Pendleton of Friends of the Earth insists in the Guardian that there are "countless" examples of community feed-in tariff schemes in the UK.

They're not countless; they've been counted by the energy regulator, Ofgem, in its annual report. There are 403 such schemes, as opposed to 29,265 domestic installations. The community projects have, on average, been larger than the domestic ones, but they still account for only 5% of the total capacity, while private home owners' schemes account for 82%.

(Thanks to Mike Kirwin for pointing me to the Ofgem report).

The feed-in tariff is just what Andrew Pendleton says it isn't: "a middle-class subsidy". No amount of cherry-picking by Friends of the Earth, which throws around figures without providing comparisons, will change that. This group, which is usually a force for good, needs to look long and hard at the social impact of the policies it supports.

The transfer of money from the poor to the middle classes and the rich engineered by the feed-in tariff will do almost nothing to reduce our dependency on fossil fuels. The government's 2050 carbon pathways calculator allows you to choose the most extreme of all possible solar options: using "all suitable roof and façade space" in the UK: a remarkable 9.5 square metres of solar panels per person.

Were we to fund a programme on this scale, it would be likely to bankrupt the United Kingdom, yet, by 2050, it would reduce the amount of energy provided by fossil fuels by a grand total of just 9%.

Offshore wind has the potential to reduce the total use of fossil fuels in the same period by 38%.

I take no pleasure in being vindicated by these figures. I simply feel sick at the thought that yet more opportunities have been lost, yet more money has been squandered and yet more injustice has been done. And it hasn't stopped, not least because of the misconceived lawsuit by Friends of the Earth, SolarCentury and HomeSun.

I should point out that, despite all this stupidity, green measures are by no means the main reason for the rise in our energy bills, nor will they become so. The Committee on Climate Change shows that the average bill for gas and electricity rose by £455 between 2004 and 2010. Of this cost, just £30 was spent on low carbon energy measures, and £45 on improving the energy efficiency of homes (which will reduce overall fuel bills). The rest was accounted for by the rising price of gas, of transmission and distribution and of VAT.

By 2020, the committee says, green measures will add a further £110 to the average gas and electricity bill. Of this, £100 will be spent on low-carbon generation and just £10 on energy efficiency: another indication that the government has got its priorities wrong. The committee points out that more investment in energy efficiency would counteract price inflation to the extent that bills in 2020 would be roughly the same as in 2010.

So renewable power will raise our bills, but by nothing like the amount that hysterical scaremongers such as Christopher Booker, Nigel Lawson and the Taxpayers' Alliance claim. However, we would get a lot more low-carbon energy for our money if the funds were allocated to the most efficient technologies, rather than to populist gimmicks like solar panels.

Here are my suggestions for some Robin Hood measures which would reverse the flow of money from poor to rich:

- Cancel the green deal and ECO programmes and extend and make fairer the schemes they are replacing.

- Invest money only in the low-carbon technologies that give us the best return.

- Reintroduce the obligation on Ofgem to regulate consumer prices.

- Reverse the structure of household energy bills.

Even if we agree on nothing else, can we agree that a policy is not green if it discriminates against the poor?

  

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