The Climate Change Committee has said that the UK’s legally-binding climate change targets will not be met without the near-complete elimination of greenhouse gas emissions from UK building stock by 2050. Emissions reductions from the UK’s 29 million homes have stalled, which makes a comprehensive programme of home energy efficiency even more urgent. The failure of Government schemes yet to address this challenge adequately is therefore both disappointing and of great concern to the Committee.
Improving the energy efficiency of all homes provides a huge opportunity to develop supply chains and provide jobs across the UK for all levels and skills, helping to deliver the Government’s levelling-up agenda and a sustainable post-covid recovery. Energy efficiency delivers much wider benefits to the population, including lower energy bills and improvements in health, and makes a vital contribution towards achieving net zero.
There is a chronic shortage of skills in the home retrofit sector. The industry has been bruised by stop-start policy and spending decisions and the Government must set long-term targets, with appropriate support mechanisms of multi-year duration, to give businesses certainty and not change the goalposts along the way. The Government’s current energy efficiency ambitions need updating with new minimum energy efficiency standards across all tenures to set the trajectory to drive improvements for every home on a realistic timescale.
The retrofit of the existing housing sector needs much greater focus and is at risk of letting the rest of the economy down on decarbonisation. The task is colossal: in England alone, over ten million owner occupied homes and over three million private rented sector landlords need to upgrade the energy efficiency of their homes to become A, B or C rated by 2035 for the Government’s to achieve its climate aspirations. We consider the Government has significantly underestimated how much decarbonising our homes will cost, and it needs to get a grip on this now, before it is too late. Energy efficiency is an important precursor to low carbon heating and will put us on a least-cost path to net zero. While there are some welcome new policies such as the Home Upgrade Grant, overall policy is piecemeal and not delivering at the scale or pace required. It is also not coherent with policy costs disproportionately added to electricity bills, which is hampering the adoption of low carbon heating options such as heat pumps and support schemes such as the Energy Company Obligation, which only supports the upgrade of one energy efficiency measure at a time.
The Heat and Buildings Strategy must be urgently published. It ought to set out an enduring plan for at least the next decade to give industry and tradespeople time to upskill and give people the right signals to invest in energy efficiency. It must provide a more holistic plan for the sector and deliver on the Government’s manifesto pledges on funding. Not all funding needs to come from central Government, but it needs to show more ambition and set the right frameworks to drive private investment.
New initiatives for owner occupiers are needed as this is where the largest climate benefits are to be made. The Green Homes Grant is welcome, but has been poorly implemented, beset by administrative problems and delays which fundamentally jeopardise delivery of the scheme’s ambition. It is too short term and is now causing damage to the sector. The impact of its botched implementation has had devastating consequences on many of the builders and installers that can do the work, who have been left in limbo as a result of the orders cancelled and time taken to approve applications. It has only achieved ten per cent of its target to improve 600,000 homes in six months. We welcome the Government’s commitment to improve the scheme. It must be urgently overhauled and extended to a multi-annual scheme to provide the financial support to homeowners and build trust within the industry to encourage installers to get accredited and enable companies to hire staff. This needs to be included in the Heat and Buildings Strategy as an urgent priority.
VAT is one of the largest obstacles to homeowners upgrading their homes. We recommend that VAT on the labour element of refurbishment and renovations is reduced to five per cent and the reduced rate of VAT payable on Energy Saving Materials should be reinstated to the previous level of five per cent. The Government also needs to work with the financial sector to ensure awareness and uptake of green financial products and develop more pilots into innovative financing mechanisms alongside stamp duty rebates and low interest loans. The success achieved in Germany through its state-funded low interest loans is on the scale that the UK should be aspiring to and the Government should consider how the National Infrastructure Bank could be used as a vehicle to support homeowners. Advice and support are also essential if people are to be expected to invest in energy efficiency and the Government should build on its advice service to provide more specialist, bespoke advice.
Inaccurate energy performance certificates (EPCs) are doing nothing to improve the value of decarbonised houses and accurately reflect the progress the country is making in improving the energy efficiency of the housing stock. They must be overhauled by revealing not just the fuel cost, but the energy and carbon metrics in its headline rating. We also want to see the eventual replacement of the EPC system with building renovation passports which have the potential to provide much more accurate data on energy usage and provide homeowners with long term renovation strategies which can minimise disruption to their homes. If rolled out across the country, they could be used to unlock green finance and benefit both homeowners and private sector landlords.
Despite the need to make progress in improving energy efficiency of 19 million homes to achieve its net zero objectives, no mention was made of energy efficiency in the Budget statement made by the Chancellor of the Exchequer on 3rd March. This was a missed opportunity to signal improvements planned for the Green Homes Grant and to get back on track to achieve its targets of this key plank of its net zero ambition. We look forward to the publication of the Heat and Buildings Strategy to provide clarity and inspire confidence in the sector.