Green Deal could have 'little value' to contractors

Published:  07 June, 2011

An industry body has warned that the government's Green Deal could have little value to contractors if few householders take up the loans.

The Green Deal is meant to see millions of households borrow up to £10,000 to improve the energy efficiency of their home.

Climate change minister Greg Barker outlined new measures last week, including an advice line and independent body the United Kingdom Accreditation Service, to ensure installers meet standards of quality and assurance.

However, how the money will be repaid and whether consumers, already under pressure from rising household bills, will be willing to take on the debt is unclear.

Although big name retailers such as B&Q, Marks & Spencer and Tesco are apparently on board to offer the package, several organisations have doubts that the scheme will work.

The Confederation of British Industry said: "Without public understanding and enthusiasm for the scheme at its launch it will be difficult to attract the initial investment."

The structure of repayments could prove unattractive, according to environmental think tank E3G. "There is a significant gap between projected returns and the cost of borrowing, even at government rates," it said.

The government has stated that the plan will not be like a typical bank loan and will have no bearing on credit scores, but if it is repaid at a commercial interest rate this could prove unpopular. In order to bridge the gap certain subsidies will need to be put in place first, as they have been in Germany and the Netherlands, it said.

David Symons at consultancy WSP Environment & Energy said: "The final package will need to be easy for homeowners to understand, and also for energy companies to run. Householders will need to be confident that the Green Deal Code genuinely provides fair financing terms and that they won't be caught out by the small print."