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Raising standards cutting bills

16 June 2014

Raising standards, cutting bills - Healthy homes: a costed proposal to end fuel poverty through higher standards and fairer funding [ 1.5 mb]

Summary

Investment in home energy improvements must be a priority for future Government spending, whatever the source of funds. There could not be a better investment opportunity: jobs and economic growth at both the local and national level; reduced pressure on health services; improved energy security and reduced carbon emissions; and most importantly affordable fuel bills and warm, healthy homes for all consumers.

‘Raising standards, cutting bills’ outlines a costed proposal for ending fuel poverty and providing help to all consumers to improve the energy standards of their homes. It also advocates a major overhaul of Britain’s energy efficiency programmes so that they better meet consumers’ needs.

The report proposes providing free grants up to a maximum of £10,000 to all low income households and low or zero per cent loans to all other households to cover the cost of improving the energy efficiency standards of their homes.

The research assesses the cost and impact of improving the homes of low income households to three minimum energy efficiency standards, as measured on the Energy Performance Certificate (EPC) scale; where homes with a rating of EPC G have the worst standards and those rated EPC A have the highest. The research assesses the cost of improving homes to EPC D (the average standard of all homes), to EPC C and to EPC B (building regulations require homes built today to meet a minimum standard of EPC B).

Households living in homes rated below EPC D face risks to their health due to the difficulty in keeping their homes warm. Those living in homes rated EPC B or above benefit from both warm homes and affordable fuel bills; these homes are in effect ‘fuel poverty proofed’.

The research found that it would cost £500 million per annum (pa) to improve homes to EPC D by 2020, assuming a 2015 start date. Thus, a modest outlay would end the scandal of low income households living in dangerously cold homes in a relatively short time period. However, a more ambitious budget of £2 billion pa would enable the homes of all low income households in England to be improved to EPC C by 2025, while £2.8 billion pa is sufficient to improve homes as close as possible, given technical limitations, to EPC B by 2030.

The research then assessed the cost of improving the homes of ‘middle/higher’ income households to EPC C by providing low or zero interest loans over a ten year period. The research found that would cost £1,312 per household to provide 2 per cent loans or £1,938 to provide zero per cent loans.

The research assessed what might be achieved with fixed annual budgets. An annual budget of £3 billion pa  would fund home improvements sufficient to reach EPC C of 410,000 low income households and 840,000 (2 per cent loans) or 580,000 (0 per cent loans) ‘middle/higher income’ households. Thus, by 2025 the vast majority of low income households in England would live in warm, comfortable homes with a rating of at least EPC C. This would represent a major stride towards eradicating fuel poverty in England.

Finally, the research assessed potential sources of funds for an ambitious energy efficiency and fuel poverty programme. For example, nearly half of the funds for a £3bn pa programme could come from the regulation of rented housing, existing fuel company programmes and from ‘allowable solutions – funds provided by private developers to offset a regulatory requirement from 2016 onwards to build zero carbon homes. Government expenditure would be required to provide the remaining funds. The Government may wish to consider linking its contribution to a secure long-term revenue stream, such as that provided by carbon taxes. This would provide long-term certainty to the energy efficiency industry and encourage investment by reducing risk.