Written evidence submitted by the Local
Government Association
SUMMARY
The Local Government Association (LGA) believes that
local government is essential for meeting national CO2
reduction targets, national and European Renewables targets, and
improving the green infrastructure of the UK.
Through the Local Government Offer on Climate Change,[16]
the LGA has set out its proposals for a single source of funding
for green infrastructure programmes.
The previous system of time-limited and size-limited
grants has led to the stop-start of programmes, and the inability
for councils to identify local opportunities for reducing carbon
and delivering them.
The LGA asserts that access to streamlined external
funding and revenue-creation programmes on climate change facilitated
by the Green Investment Bank, will enable councils to deliver
against their local carbon reduction delivery plans and drive
carbon reduction and renewables programmes themselves.
1. The significance of any barriers or "market
failures" requiring the establishment of a Green Investment
Bank, and any risks of not getting this done quickly
1.1 A significant challenge to the local government
sector in acting on climate change in the past has been that resources
have been spent chasing small pots of time-limited grant funding,
administered to meet the targets of central government and its
agencies, not the local opportunities available for carbon reduction
or the needs of the people they serve.
1.2 The LGA has long advocated that the suite
of funding pots for energy efficiency, and other carbon reduction
programmes, be brought together into a single pot, originally
called by the LGA in its 2009 "Kyoto to Kettering"[17]
publication a "National Community Energy Fund". As national
policy has developed, we see that there could also be opportunities
to raise funds through the Green Investment Bank as a single source
of funding. Whilst the scope of the Green Investment Bank is still
debated, the LG Group is recommending that funding is available
to councils through the Green Investment Bank, at the rate it
enjoys through prudential borrowing,[18]
for local evidence-based programmes with a good business case
supporting it.
1.3 In 2009, the LGA estimated that there was
around £7 billion available for home energy efficiency programmes,
but this amount was spread over a myriad of funding pots and grants,
making it difficult to councils to access and make the best investment
decisions.
Table 1
LGA (2009) KYOTO TO KETTERING
| Home Energy Efficiency Programmes
| Budget 2008-11 |
| Carbon Emissions Reduction Target* | £,2800 million
|
| Community Energy Saving Programme* | £350 million
|
| Warm Front | £874 million
|
| Decent Homes | £2,200 million
|
| Social Housing Energy Saving Programme |
£84 million |
| Additional energy saving obligation* | £560 million
|
| Total | £6,868 million
|
| Winter Fuel Payments2 | £8,100 million (£2.7 billion per annum
|
* energy supplier/generator obligation
1.4 Past mechanisms for accessing funding has been through
applying for grants with strict criteria, looking to achieve a
certain set of objectives. This is applicable to Government-led
funding, such as the Social Housing Energy Saving Programme[19]
(SHESP) and private-sector led funding, such as the Community
Energy Saving Programme[20]
(CESP). This has meant that councils have had to fold their projects
to meet these national and short-lived objectives, rather than
responding to local needs, opportunities, priorities and best
value for money. The stop-start nature of CERT funding, as energy
suppliers meet their targets early or wait for further direction
from Government, has also made it difficult for local programmes
to maintain continuity and keep valuable jobs in the insulation
sector in place.
1.5 SHESP, whilst providing some funding for social housing
energy efficiency improvements, only gave councils four weeks
to develop their proposals, over the summer holiday period. This
meant that only councils who were prepared, and pre-warned, were
able to benefit. 70% of this funding was given to London Boroughs.
The Local Low Carbon Transition Programme will help councils develop
their local evidence base for future funding, but such ad hoc
funding is not helpful to the sector
1.6 Many programmes, such as the CESP, provide private capital
for local programmes, but require significant match funding. Leading
councils are trying to use of European funding, through programmes
such as ELANA[21] and
the European Investment Bank[22]
(EIB), to provide this match funding for UK green programmes.
A UK-based programme with similar objectives, but routed in national
policy direction, would enable councils to have better access
to such match funding, ensuring the success of these programmes.
1.7 Finding match funding was cited as a barrier by 60% of
respondents to the 2010 LGA Survey of Councils on Climate Change,[23]
and was reported to be the single biggest barrier to the funding
of programmes, with 41% of respondents being concerned that there
would be a decrease in internal funding for climate change in
the next two years.
1.8 As part of a wider LGA campaign, we want to ensure that,
should councils determine that local energy programmes are a good
investment for prudential borrowing, or other forms of borrowing,
there should be no restrictions on them going ahead with this
investment. We understand that the Office of Government Commerce[24]
(OGC) considers prudential borrowing for carbon reduction programmes
as a good use this resource, and it would give confidence to the
sector to have a public statement to this effect.
1.9 Crucial to the success of funding carbon reduction programmes
from a Green Investment Bank is the ability to raise revenue from
these programmes, and hence repay any investment loans. The LGA
welcomes the introduction of the Feed-in Tariff (FiT) and the
ability of councils to sell electricity, as a way to secure borrowing
against an income stream that can be expected from local renewable
energy deployment. We also hope that Government will be able to
progress the Renewable Heat Incentive (RHI), which will further
enable investment in low carbon heat technologies. Securing repayments
through the Green Deal finance package would also allow councils
to generate a small income to help repayment of loans.
2. The objectives and roles the Green Investment Bank should
assume, the areas it should operate (and not operate) in, and
how its lending and investment decisions should balance green
benefits against financial risks
2.1 A key objective of the Green Investment Bank should be
to provide a mechanism for councils to access and raise the funds
to realise their local carbon reduction opportunities, particularly
through infrastructure improvement and development programmes.
These programmes can be based on the carbon reductions they will
generate, as well as value for money and local support and buy-in.
2.2 These investment opportunities will include energy efficiency
improvements of public and private sector buildings in their areas;
energy generation and supply, particularly combined heat and power
(CHP), heat networks, wind power and solar farms; local sustainable
transport initiatives; and reducing waste and energy from waste
plants, particularly Anaerobic Digestion plants. Many of these
opportunities are likely to be of interest to the private sector
and local communities, offering opportunities for local partnerships
and bringing in funding from a range of sources. However, due
to the perceived immaturity of the technology, or long-investment
periods, these projects can be more difficult to raise finance
for, or private sector finance requires significant public sector
investment and support. The Green Investment Bank provides an
opportunity for councils to access capital that supports investment
in local green infrastructure that meets national carbon reduction
objectives.
2.3 The local government sector also needs a consistent approach
to accessing sufficient funds for local carbon reduction programmes
that require significant match funding, particularly where there
is private sector investment.
3. The Green Investment Bank's investment priorities, and
whether and how the bank should support and foster areas where
the UK has emerging green technology strengths; and the funding
and governance structures required to create an effective and
accountable body, including the role of "green bonds"
3.1 The Green Investment Bank's priorities should focus on
small to medium scale programmes that reduce carbon, and are community-back.
It should not only be for large-scale national programmes that
national government is struggling to fund. It should also seek
to support the carbon reduction and green economy objectives emerging
from the Local Enterprise Partnerships.
3.2 For more information on the LG Group's proposals for the
raising of Municipal Bonds to deliver local infrastructure priorities,
go to:
http://www.lga.gov.uk/lga/aio/13757366
3.3 By focusing the Green Investment Bank's support on local
programmes, that cumulatively deliver significant carbon reductions
and save people money, the Bank will be delivering tangible improvements
for people, in their homes and local spaces.
15 October 2010
16
For more information on the Local Government Offer on Climate
Change go to
http://www.lga.gov.uk/lga/core/page.do?pageId=14130080 (last accessed
Oct 2010). Back
17
For more information on the LGA's Publication "From Kyoto
to Kettering" go to:
http://www.lga.gov.uk/lga/aio/2400550 (last accessed Sept 2010). Back
18
For more information on prudential borrowing go to:
http://www.lga.gov.uk/lga/publications/publication-display.do?id=22385
(last accessed Sept 2010). Back
19
The aim of the Social Housing Energy Saving Programme (SHESP)
is to provide additional funding to help social landlords insulate
hard to treat cavity walls that would not otherwise be filled
under the Decent Homes programme. For more information go to:
http://www.homesandcommunities.co.uk/energy-saving-programme (last
accessed Sept 2010). Back
20
The Community Energy Saving Programme is an obligation on the
energy suppliers and generators to improve the energy efficiency
standards, and reduce the fuel bills, of households in hard-to-treat
homes in the areas of lowest income in England. CESP promotes
a "whole house" approach i.e. a package of energy efficiency
measures best suited to the individual property. The programme
is delivered through the development of community-based partnerships
between Local Authorities (LAs), community groups and energy companies,
via a house-by-house, street-by-street approach. For more information
on CESP go to:
http://www.decc.gov.uk/en/content/cms/what_we_do/consumers/saving_energy/cesp/cesp.aspx
(last accessed Sept 2010). Back
21
For more information on ELENA go to: http://ec.europa.eu/energy/intelligent/
(last accessed Sept 2010). Back
22
For more information on the European Investment Bank go to: http://www.eib.org/
(last accessed Sept 2010). Back
23
For more information on the LGA Climate Change Survey go to
http://www.lga.gov.uk/lga/aio/12891259 (last accessed Oct 2010). Back
24
For more information on the Office of Government Commerce, go
to: http://www.ogc.gov.uk/ (last accessed 2010). Back
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