National Energy Foundation supports letter to PM on ECO

28th October 2013

The National Energy Foundation is one of more than 50 of the UK’s leading companies and professional institutes operating in the built environment who are warning the Prime Minister not to scale back the so-called green levies on energy bills, especially the Energy Company Obligation (ECO) scheme.

Dear Prime Minister

As you are well aware, the rising cost of energy is a major issue. In fact, according to recent market research by the UK Green Building Council, energy bills are now the single most worrying expense for British households. However, we are concerned about your recent statement “We need to roll back some of the green regulations and charges that are putting up bills.”

Using less energy by improving the efficiency of our housing stock is the only sure way to protect households against rising bills in the long term. A key component of so-called green levies is the Energy Company Obligation (ECO) scheme, which is specifically designed to improve the energy efficiency of vulnerable and low income households and ‘hard to treat’ properties, such as those with solid-walls. If ECO was in any way rolled back it would have the perverse effect of increasing energy bills for these consumers, with severe consequences for jobs in what should be a growth sector of the economy.

The cost of ECO could be reduced if the Government’s flagship green policy, the Green Deal, was delivering. Simply put, the greater the contribution that can be made to retrofit costs by the Green Deal, the less is required of ECO, and the lower the charge levied on all bills. We strongly believe that one of the best ways to encourage uptake of energy efficiency measures and increase demand for the Green Deal is to provide a new financial incentive for householders, based around Stamp Duty.

There are a number of ways of designing such a scheme, but in essence, more energy efficient homes would attract a slightly lower level of Stamp Duty, in much the same way as a more efficient car attracts a lower level of car tax – which has been remarkably successful in shifting consumer buying behaviour. Importantly, people carrying out energy efficiency work after a home purchase would be able to claim a rebate on some of their tax. It would help ensure that homebuyers consider the efficiency of the property they are buying, which can have a huge impact on their future energy bills.

With the housing market recovering and the number of sales rising, the Treasury is likely to see an increase in revenue raised through Stamp Duty by around £2billion over the next year or so. The incentive scheme could be designed using a small proportion of this without having an impact on the Government’s fiscal commitments.

Yours sincerely,

John Walker, Chairman, National Energy Foundation