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Two weeks ago, the Government reported progress on a part of its flagship Green Deal scheme - the catchily entitled Green Deal Home Improvement Fund (or GDHIF for short). The Government reported that of the total £120m budget, £43m had been spent in the first six weeks and over £50m worth of vouchers had been applied for[i]. The government said it would pay attention to budget uptake and continue to report. Just one week later, the Government announced that the GDHIF was closed with immediate effect. The reason - the entire remainder of the budget, some £60 million, had been spent in just two days[ii]. That is an astonishing 29 fold increase in uptake.
So what happened? It seems that a large number of applications for funds were made speculatively by companies on behalf of unknowing householders. All a Green Deal installer needs is their reference number and an Energy Performance Certificate number which can be obtained from the Landmark register. There is no need for the homeowner's approval.
It looks like companies have speculative applications so that they can approach a homeowner and say that they already have a grant of £6,000 to help them improve their home. Of course, the homeowner can refuse and so there is a real likelihood that all the money that has been claimed will not get spent.
The criticism that has been levelled at the government for creating a stopstart policy preventing the establishment of a stable, sustainable industry may be vey misplaced. The trigger of the stop-start seems to be that some companies figured out a clever way to block book the budget for themselves. Whilst they may feel very pleased with their ingenuity these companies are fuelling a growing problem: The erosion of trust between government and industry.
When the intent of a policy gets abused as seems to be the case with the GDHIF, the inevitable result is that Government will become more wary of industry and seek to design policy with ever increasing safeguards. Those safeguards translate into administrative bureaucracy and cost for industry, Government and taxpayers, with more checks and more evidence. The result? Less investment is made for greater cost.
Of course, those that took advantage of the loophole may say 'we have done nothing wrong, we have acted within the law'. But, it feels rather similar to the companies who say they pay the legally required amount of tax. Those who seek to squeeze the most out of policy risk are doing their own industry a disservice. It is all too easy to point the finger of blame at government but as we increasingly rely on policy solutions to correct market failures, especially for energy efficiency investments, perhaps on this occasion the industry needs to look at itself.