NAO: DECC's flagship Green Deal lacked targets, wasn't tested and didn't take evidence into account

National Audit Office (NAO) report finds that each loan given out under the Department of Energy and Climate Change's Green Deal cost government £17,000, and flags poor use of evidence and testing when the scheme was designed 

By Suzannah Brecknell

14 Apr 2016

The Department of Energy and Climate Change (DECC) failed to “fully integrate” evidence into its design of its now-abandoned Green Deal scheme, the National Audit Office (NAO) has found, which may have contributed to slow take up for the scheme. 

The Green Deal was launched in 2013, part of the coalition government's plan to improve the energy efficiency of UK housing stock. It enabled householders to borrow money and pay for measures such as loft or cavity-wall insulation. Around 14,000 loans were taken out under the scheme before it was effectively stopped due to low demand in summer 2015. 

An NAO investigation published today says this means that each loan given out has cost the government around £17,000 when you factor in both money given to the Green Deal Finance Comapny, and that spent on trying to stimulate demand for the scheme. A DECC spokesperson said the department had taken action on the points raised by the public spending watchdog.

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The report also says that DECC now believes that most of the carbon savings attributed to Green Deal measures would probably have been made anyway as a result of other energy efficiency policies. 

Success measures "not clear" 

DECC should have used consumer insights to ensure that “the Green Deal was a sufficiently attractive proposition to generate consumer demand," according to the report. 

Although the department did use evidence from a 2011 consumer survey, consultations and lessons of pervious locally run schemes, the NAO found it did not “fully integrate” these findings into its policy.

For example, the survey showed that consumers responded well to non-financial benefits such as having a warmer home, but initial marketing focused only on saving money.  

The department also chose not to test the final design of the scheme with consumers, despite advice from consultants that it should not rely on consumer surveys to forecast uptake. 

The NAO is also critical of the department’s failure to set out clear success measures for the scheme, pointing out that a target of improving one million homes by March 2015 was set seven months after the launch of the Green Deal and the Energy Company Obligation (ECO) scheme which was meant to work alongside it. 

The NAO notes that as well as arguing it would be hard to set "meaningful expectations" for these new schemes, DECC did not want to set targets because it viewed its role as creating market conditions which would allow companies to find the best way of meeting objectives. The department “was concerned that government intervention would have risked influencing how the market operated, increasing inefficiency,” says the report. 

"Lack of consistency"

The report goes on to say that "clear success criteria" are important even where departments hope to achieve policy outcomes through market rather than government action. 

It says: "Assessing performance against expectations helps departments to respond if the market mechanism is not delivering public policy objectives, and identify the remedy required.” 

The NAO also suggests that changes to the ECO and Green Deal schemes may have hampered the long-term policy objective of improving energy efficiency of the UK housing stock. For example, changes to ECO reduced demand for Green Deal finance, and the decision to effectively halt the Green Deal “risks financial losses to small businesses that have invested in training, accreditation and in the finance company”. 

“The lack of consistency in the department’s actions on household energy efficiency has created uncertainty with its main stakeholders," the report says, "which could increase the long-term cost of improving the housing stock." 
A DECC spokesperson said: "Government is clear about the need to have firm financial controls in place to protect consumers, which is why we took action last July to address the issues in this report – stopping funding to the Green Deal Finance Company and setting up an independent review of the energy efficiency sector. 

“We are now designing a new scheme that will help make even more homes warmer and bring people’s bills down.”

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