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Energy efficiency of existing homes: Government Response to the Committee’s Fourth Report of Session 2019–21

Appendix 2: Correspondence between the Department for Business, Energy and Industrial Strategy and the Chair of the Committee on the future of the Green Homes Grant voucher scheme

1. Letter to the Chair of the Committee, Rt Hon Philip Dunne MP, from the Secretary of State for Business, Energy and Industrial Strategy, Rt Hon Kwasi Kwarteng MP, dated 27th March 2021

I am writing to update you on the future of the Local Authority Delivery (LAD) and Voucher elements of the Green Homes Grant Scheme.

We have made great strides over the past year on decarbonising buildings. We set out our ambition and approach through the Prime Minister’s 10 Point Plan for a Green Industrial Revolution and the Energy White Paper. This includes our aim to deploy 600,000 heat pumps a year by 2028 and get as many homes as possible to Energy Performance Certificate Band C by 2035.

The Green Homes Grant Local Authority Delivery Scheme has proved incredibly successful in supporting local authorities to help around 50,000 households in England with an annual income of under £30,000. These households will be able to save hundreds of pounds each year on their energy bills by making their homes more energy efficient. Equally, the Green Homes Grant Voucher Scheme has received more than 96,000 applications, with over 39,000 vouchers having been issued so far.

However, many in Parliament have highlighted that, whilst the Voucher scheme has good potential, it has not been delivering at the rate and scale we had originally hoped. The scheme has faced a number of delivery challenges, which have been exacerbated by the understandable impact of the Covid pandemic.

Since my appointment as Secretary of State two months ago, I have been listening to these concerns and reviewing the Voucher scheme against the other, more successful elements of the Green Homes Grant scheme.

I feel it is important that we take stock and consider our approach. As such, the Voucher scheme will cease taking new applications at 5pm on 31st March. We will refocus efforts and funding on alternative approaches that will maximise delivery of home retrofits for consumers who are most in need and will support the supply chain to keep delivering.

I want to reassure you that all valid applications received up to 5pm on 31st March will be processed and vouchers in the system will continue to be issued, meaning that delivery of installations on the ground will continue over the coming months. This will support jobs in the industry and deliver much needed upgrades to households.

Our commitment to investing in decarbonising our buildings remains unwavering, and we recognise the importance of long-term funding to sustainably grow the installer base and supply chain. To ensure we continue to deliver on our net zero ambitions and support a thriving building retrofit industry, I can announce that the Government will be expanding its funding commitment for both the Local Authority Delivery element of the Green Homes Grant scheme and the Social Housing Decarbonisation Fund, with up to £400m in additional funding across the two schemes through 2021/22 and delivery continuing through 2022/2023.

The Local Authority Delivery element of the scheme has already successfully allocated £500 million of funding across the English regions, to support retrofit measures such as energy efficiency and low carbon heating in around 50,000 low-income households.

Building on that success, I can announce we will be extending the Local Authority Delivery scheme later this year which means that even more low-income households in England will be able to access funding to improve their homes.

In addition to the success of the Local Authority Delivery element of the Green Homes Grant scheme, we have seen an extremely positive response to the initial Social Housing Decarbonisation Fund Demonstrator. This is currently delivering 19 projects across England and Scotland, enabling whole house retrofits to over 2,300 social homes. We will build on this success by increasing the size of the first tranche of funding for the main Social Housing Decarbonisation Fund.

This investment will result in greater carbon savings, warmer and more energy- efficient homes, and reduced bills for households across the country. It will increase demand for insulation and low-carbon heating measures and support our pathway to net zero.

We are committed to giving the sector the confidence to continue to recruit, train and support green jobs. We will continue to bring forward bold measures to cut emissions, investing through a multi-billion-pound package to provide vital upgrades to our housing stock.

Yours ever,

RT HON KWASI KWARTENG MP

Secretary of State for Business, Energy and Industrial Strategy

2. Letter from the Chair of the Committee, Rt Hon Philip Dunne MP, to the the Secretary of State for Business, Energy and Industrial Strategy, Rt Hon Kwasi Kwarteng MP, dated 19th April 2021

Thank you for your letter of Saturday 27th March concerning the future of certain elements of the Green Homes Grant scheme which was launched in July 2020. The Committee considered your letter at its meeting on 14th April.

At that meeting the Committee also reviewed the recommendations for the future of the Green Homes Grant (GHG) voucher scheme made in its report on Energy Efficiency of Existing Homes, published on Monday 22nd March. An embargoed copy of that report was provided to your Department on Friday 19th March.

Paragraph 71 of the report carried the following recommendations:

Closing the Green Homes Grant voucher scheme to new applications

In your letter you state that the Government had decided to cease accepting new applications to the voucher scheme at 5pm on 31st March: this announcement was made on the afternoon of Saturday 27th March, on a recess weekend, fewer than 96 hours before the closure deadline, and just four days after the Minister of State for Business, Energy and Clean Growth had been questioned on the future of the scheme at the Despatch Box and had given no indication that early closure of the scheme to new applications was likely.1

This decision runs directly counter to the letter of the Committee’s recommendation that the voucher scheme “should not be scrapped or quietly wound down”. The Committee finds it curious that in your letter you made no reference to the Committee’s recommendations on the scheme, made in a report to the House which had been available to you and your team for over a week.

In your letter, you referred to the delivery challenges for the scheme, which you claim “have been exacerbated by the understandable impact of the Covid pandemic”. In the evidence it took, including a survey to which over 500 householders responded, the Committee found no evidence that Covid restrictions had had an impact on demand for, or delivery of, the programme. The voucher scheme was intended in part as a stimulus to promote recovery from the economic downturn in the sector during the pandemic: it is highly regrettable that the issues with scheme delivery have in many cases negated its potential economic benefits.

Alternative approaches

You have stated that you plan to “refocus efforts and funding on alternative approaches that will maximise the delivery of home retrofits to customers who are most in need and will support the supply chain to keep delivering”, and state that “a thriving building retrofit industry” will be supported through increased funding and an extended timescale for the Local Authority Delivery element of the Green Homes Grant scheme and for the Social Housing Decarbonisation Fund.

While this commitment is welcome, the funding for the elements of the Green Homes Grant which are to continue will only grow those elements of the installer base and supply chain which are geared to contracting with local authorities and other social landlords. And, as the Committee has pointed out in its report, the local authority delivery model is likely to be effective only in those areas where authorities have the resources and capacity to make effective bid for funds. Without measures to ensure consistent delivery across local authorities, a ‘postcode lottery’ is likely to ensue.

Retrofitting owner occupied and privately rented properties

The Committee is deeply concerned about the effect that the cessation of the voucher scheme will have on progress in retrofitting homes in the owner occupied and private rented sectors. Over ten million owner occupied homes and over three million private rented sector landlords in England 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. The voucher scheme, when announced in July 2020, was expected to deliver improvements to up to 600,000 properties in these sectors: it appears that, even if all applications are accepted, fewer than 100,000 properties will now be improved under the scheme.

As matters stand, there is at present no current government-funded scheme to which owner occupiers or private landlords can apply for support to retrofit their properties, and the scheme’s potential to stimulate increased capacity in energy efficiency retrofit SMEs which cater to owner occupiers and private landlords has been severely curtailed.

Without a well-functioning, multiannual programme of measures to encourage owner occupiers and private landlords into retrofitting their properties, it is difficult to see how these sectors can make the energy efficiency contributions necessary to realise the Government’s net zero ambitions. We look forward to examining how the forthcoming Heat and Buildings Strategy will fill what appears to be a worrying gap, and what provision might be made for a multiannual programme in the next Spending Review.

Demonstrating a credible strategy for building decarbonisation, as repeatedly recommended by the Climate Change Committee, will provide greater assurance that net zero targets can be met. It is therefore crucial that a strategy, and a plan for delivery, are in place as soon as possible, and ideally before COP26 in Glasgow in November.

In total, £1.82 billion was allocated to the voucher scheme: £1.5 billion for 2020/21 and a further £320 million for 2021/22. It would be helpful to the Committee, and to the public, for the Department to provide an assurance that the funds originally allocated for the voucher scheme in 2020/21, together with the funds made available for 2021/22 at Spending Review 2020, will be fully available for payment to applicants seeking to redeem their vouchers following the completion of work on their properties, so that each of the applications received by 5pm on 31st March will, if approved, be eligible to receive up to the maximum grant payment originally envisaged.

Responding to the Committee’s report

In the normal course of events the Government would be expected to provide a response to the Committee’s report within two months of its publication. In view of the Government’s immediate rejection of a key recommendation in that report, the Committee has asked me to request a full explanation, by return, as to what account was taken of its recommendations before the decision was taken to close the scheme to new applications.

The Committee will of course wish to examine the Government’s response to its report closely. Given the Government’s actions following the publication of the report, you will appreciate the importance to the Committee of receiving a response to its recommendations rather sooner than within the customary two months.

I am copying this letter to Lord Callanan; to the COP President Designate, Rt Hon Alok Sharma MP; and to the Chancellor of the Exchequer, Rt Hon Rishi Sunak MP, and the Exchequer Secretary to the Treasury, Kemi Badenoch MP.

Yours sincerely,

Rt Hon Philip Dunne MP

Chairman of the Environmental Audit Committee

3. Letter from the Minister for Climate Change and Corporate Responsibility, Lord Callanan, to the Chair of the Committee, Rt Hon Philip Dunne MP, dated 30th April 2021

Thank you for your letter of 19th April, concerning the EAC’s recommendations on the Green Homes Grant Voucher scheme. As always, I found the Committee’s report and recommendations helpful.

I recognise the reasons why the Committee recommended the scheme should be extended—however, ultimately the decision before us was whether to continue with a scheme beset by challenges or, redirect taxpayer funding to alternative efforts to decarbonise our housing stock. On balance, my judgement was that it would be more beneficial overall to close the voucher portion of the Green Homes Grant scheme but reform and expand its more successful Local Authority Delivery element. This was to protect the taxpayer and the supply chain by committing funding to a delivery mechanism already proven to be effective. In this way, we have continued this Government’s policy of the decarbonisation of as many homes as possible whilst, at the same time, protecting the supply chain and the taxpayer.

The Committee has rightly signposted the need for long-term certainty for the energy efficiency industry if we are to be successful in decarbonising our building stock. Some of this is necessarily about certainty of funding. In that context, I believe we have made an excellent start with the other schemes that were launched alongside the Green Homes Grant, including the Social Housing Decarbonisation Fund and the Public Sector Decarbonisation Scheme. We have also recently committed to increasing the Energy Company Obligation to £1 billion per year from 2022. I agree that we need to look further ahead, for instance through the commitments made as part of the 2019 Conservative Manifesto. This included £2.5 billion for Home Upgrade Grants to upgrade some of the worst homes in England, and a £3.8 billion Social Housing Decarbonisation Fund over a 10-year period to improve the energy performance of social rented homes, on the pathway to Net Zero 2050. The Government is planning to publish a Heat and Buildings Strategy shortly, which will set out the approach we will take, both in terms of action over the coming decade and our longer-term strategic approach to 2050, for reducing emissions from buildings. These actions include the deployment of energy efficiency measures and low carbon heating as part of an ambitious programme of work required to enable key strategic decisions on how we achieve the mass transition to low-carbon heat and set us on a path to decarbonising all homes and buildings.

As you will know, the Green Homes Grant scheme is comprised of more than the voucher scheme alone; it includes an element delivered by local authorities. The Local Authority Delivery element of the scheme has already successfully allocated £500 million of funding across the English regions, to support retrofit measures which improve energy efficiency and increase low carbon heating in circa 50,000 low-income households. Local Authorities are able to deliver support to any low-income households in England, regardless of their tenure. This includes private landlords with low-income tenants. As under the voucher scheme landlords can access up to £5,000 of grant funding and must make a minimum 33% of the cost of upgrades. Our commitment to invest in decarbonising our buildings remains unwavering, and we recognise the importance of long-term funding to sustainably grow the installer base and supply chain. As such, £300 million of new funding will be made available to Local Authorities through an extension of the Local Authority Delivery and through additional support for social housing. We have seen an extremely positive response to the initial Social Housing Decarbonisation Fund Demonstrator. We will build on this success by increasing the size of the first tranche of funding for the main Social Housing Decarbonisation Fund. This is new funding for the 2021/22 financial year, because that is the fiscal envelope we are currently working within.

You raised concerns surrounding a postcode lottery in your letter. Phase 1 of the Local Authority Delivery scheme was designed to make use of existing capacity within local authorities (LAs), and covers 225 LAs. This LA coverage represents 16.5m (70%) of the 23m homes in England. Phase 2 was specifically designed to bring in more LAs, including those that were unable to apply for phase 1 due to lack of experience with energy efficiency programmes, through a different delivery model. This will see the five Local Energy Hubs in England, which were created as part of the Government’s Local Energy Programme to act as regional centres of excellence and to support local areas in their efforts, acting as the funding coordinators, helping those LAs without the existing infrastructure, procurement frameworks or expertise to access the scheme and to derive its benefits. We will continue to prioritise local authority take up as we design phase 3.

On your point regarding the allocated funding for the Green Homes Grant Voucher Scheme, the scheme was allocated £320 million for the 2021/22 financial year in total funding. This was not additional to the £1.5 billion allocated for the 2020/21 financial year, which was intended for use in that year only.2

The committee has mentioned that your survey of households did not find any evidence that Covid, and the measures taken to contain it, were having an effect on consumer appetite to have work done. However, there is other survey data, like that from the ONS,3 which has a broader sample, that suggests Covid was not an insignificant factor. We recognise that the impact of Covid was one of a number of factors contributing to the difficult situation which I describe above.

This new investment will result in greater carbon savings, warmer and more energy-efficient homes, and reduced bills for many households across England. We will continue to bring forward bold measures to cut emissions, investing through our multi-billion-pound package of measures to provide the vital upgrades to our housing stock. This is key to supporting our pathway to net zero and increasing demand for insulation and low-carbon heating measures across the country, thereby maintaining our commitment to the sector to have the confidence to continue to recruit, train and support green jobs.

Yours sincerely,

Lord Callanan

Minister for Climate Change and Corporate Responsibility

Department for Business, Energy and Industrial Strategy



Published: 13 May 2021 Site information    Accessibility statement