Annex A
Letter to Mr John Healey MP, Economic
Secretary to HM Treasury
We trust this letter is somewhat different from
the many proposals you receive for either expending or increasing
Government revenue. Instead we wish to draw your attention to:
(a) what we believe is incorrect targeting
of a major Government initiative;
(b) a very substantial under-rating by Government,
of the aforementioned initiative.
We believe that a re-rating of this initiative
would:
(a) assist in conserving Treasury funds;
(b) assist in highlighting an opportunity
to tax;
(c) contribute positively to the UK's Balance
of Payments position to a highly significant degree, and over
a long period: and in so doing contribute to maintaining the value
of Sterling;
(d) lessen the need for investment in infrastructure
and security of supply, in terms of billions of pounds, and in
land necessary to support that infrastructure; and
(e) highlight huge cost savings for both
householders, and the rest of the economy in terms of usage of
buildings.
Our proposals are contained in the document
attached, which we would request you kindly refer to your economic
advisors for their assessment.
Our interest in this matter is to ensure that
Treasury and Government has maximum knowledge of the advantages
of the Energy White Paper 2003 proposals, so that our industry
may play its full part in assisting Government in meeting the
various objectives which are relevant.
We thank you for your consideration.
We would very much welcome the opportunity of
presenting our contentions to your officials, and to suggest ways
in which the Treasury can guide the whole programme of carbon
reduction, energy efficiency and eradication of fuel poverty—to
the advantage of the UK and with reference to our own industry.
Alan Onslow
Insulated Render & Cladding Association Ltd
Annex B
GOVERNMENT UNDERATES ITS OWN ENERGY WHITE
PAPER STRATEGY
Policy Benefits Not Widely Understood
Otherwise Treasury Would Play a Key Role
PROPOSITION
If the numerous prospective benefits of the
proposed Energy White Paper strategy were fully appreciated Government
would prioritise the strategy with the Treasury playing a leading
role.
WHAT ISSUES
DOES THE
ENERGY WHITE
PAPER EMBRACE?
Main ones are future energy supply, security
of supply, reducing carbon emissions and obviating fuel poverty.
Energy efficiency is relevant, as is cost effectiveness of measures.
Government funds are involved, as well as costs to householders
and the general economy.
ARE BENEFITS
MEASURED CORRECTLY?
Government initiatives, upon which the Energy
White Paper is based, have targets. These targets appear to be
the criteria upon which decisions are formulated. We are unaware
of any overview (or published figures) which is taken to highlight
multiple benefits. We feel this is a grave omission, of disadvantage
to Government, and to the Treasury in particular.
A main initiative is the Energy Efficiency Commitment
(EEC): this targets carbon emissions, almost solely. This is measured
by the combination and make-up of the energy used.
As the UK swings to being an importer of energy
in more significant volumes, out of necessity and not by choice,
EEC1 measurement formula would become inappropriate and misleading.
We make this statement on the basis that there are, and will continue
to be, substantial disadvantages in importing energy rather than
using our own indigenous supplies, if the latter were available
in sufficient volume and at economically acceptable prices.
We are tending to presume that energy imported
will:
— be more costly most of the time;
— may well have a higher carbon content
(than our North Sea supplies);
that this higher carbon content will be expensive
to reduce to a lower level, for distribution and use;
— that such importation will require
huge investment in energy infrastructure, security of supply,
and in requiring greenfield land resources; and
— that growing importation will in
time seriously effect the UK's Balance of Payments position and
affect the value of Sterling.
OUR CONTENTION
Our contention, therefore, is that any decrease
achieved in the UK's demand for energy—achieved by way of
the Energy White Paper strategy—should be judged in simplistic
terms as a direct reduction in importation of energy (and not
in any way a reduction across the board as in the EEC1 formula).
It is, we suggest, quite irrelevant if importation
is currently modest. Once importation occurs, because of necessity,
of more costly energy of perhaps lower quality, then all the disadvantages
of that importation should be costed and calculated for the credit
of the energy efficiency measures outlined in the Energy White
Paper. So, as the EWP strategy proceeds in reducing the UK's use
of energy at the rate of, say, 1% per annum, that means that that
energy saved is represented by an equivalent reduction in importation
in volume terms.
INSULATION IS
THEREFORE UNDER-RATED
The contention detailed above should therefore
result in the value of building fabric insulation being considerably
upgraded (by Government). EEC1 already valued insulation incorrectly
and considerable changes are afoot to address this (in terms of
a lower discount factor, the "social cost of carbon",
the "heat replacement effect", and other factors previously
omitted).
Our trade association represents the external
wall insulation industry which has played a small part in upgrading
UK energy efficiency. We have a major interest in the value of
insulation being adequately recognised. We already suffer from
a lack of recognition—within key energy efficiency programmes—of
the value of external wall insulation in improving the life of
the housing stock by its weatherproofing, visual appearance and
acoustic benefits. To suffer a double undervaluation—within
EEC—is extremely frustrating. Government targets should
ideally be accommodating in crediting the benefits that measures,
chosen for the carbon reduction programme, have in other areas
of Government policy. External wall insulation has such benefits
in upgrading the housing stock—a key Government objective—and,
in particular, assisting "fuel poor" households into
a better quality of life.
RENEWABLE ENERGY
The cost of renewable energy, including subsidies
from Government, should, we contend, be taken into account within
the EEC2 calculation, were the calculation formula to continue
to focus on "the energy mix used". However, we are optimistic
that our contention that calculations should be reoriented to
concentrate on "reducing importation", will prevail.
ANALYSIS
Every £1 of householders, or Government,
spend now on key energy efficiency measures will by 2050:
(1) | Have saved households:
| £8 |
| (2) | Have potentially increased tax revenue by:
| £8 |
| (3) | Have potentially conserved tax revenue by:
| £4 |
| (4) | Have reduced importation of energy by (at domestic retail prices):
| £8 |
| (5) | Have obviated expenditure on energy infrastructure, etc, by:
| 50p |
| (6) | Have reduced carbon emissions at NIL cost:
| — |
| (7) | Have produced side benefits of increased living standards and home comfort, improved condition of property and its value, reduced call on NHS facilities due to unhealthy home conditions, etc:
|
Value
Unknown |
| (8) | Assisted in the maintenance of the value of Sterling by minimising importation of energy:
| Value Unknown |
| |
|
A chart is attached to demonstrate the true advantages of
insulation.
| 
