Cameron hears Green Deal concerns

The Green Deal has been under scrutiny in Downing Street this afternoon after warnings that it is liable to fail.

The Cabinet Office interviewed critics of the scheme and reported their concerns to the Prime Minister, Deputy Prime Minister and Energy Secretary.

The Deal - to insulate the UK's aged housing stock - is designed to save carbon emissions, keep people warm, and make energy affordable.

But critics say it won't give enough help to the fuel poor.

They say this is a scandal after the recent warning that the number of people unable to afford their energy bills is likely to rise to 8.5 million.

They also warn the Deal may waste £2-3bn of people's energy bills.

A Downing Street spokesman said the meeting was routine, adding: "The Deputy Prime Minister and Prime Minister are fully committed to [the Green Deal]."

But he said many issues over the scheme, due to launch in the Autumn, were still to be resolved. This will come as a relief to the many critics of the Deal.

The Green Deal is split into two parts. The larger part relies on householders voluntarily taking pay-as-you-save loans to cut energy bills through home insulation. The private sector is supposed to deliver the improvements.

The other part of the programme, known as ECO, will subsidise people to insulate their homes if they can't do it without help. This will be funded through a £1.3bn-a-year charge against all of our energy bills.

But there is a dispute over the priorities.

The government says most lofts and cavity walls are already insulated under previous schemes so it wants to offer grants on much more expensive solid wall insulation.

Solid walls will ultimately have to be made warmer if the UK housing stock meets expectations for reducing carbon emissions. But it is thought that at first this expensive and disruptive option will be mostly taken up by affluent households.

Critics say it makes no sense to insulate solid walls at approximately £7,500 a home when you can insulate lofts of the "fuel poor" for £500 a home.

They also argue that the ECO subsidies scheme will force low-income families to pay extra on their fuel bills to subsidise solid wall insulation for more wealthy homes.

Complaints have been so widespread that a Cabinet Office team was detailed to interview the critics, who estimate that by pushing money towards solid walls rather than lofts the government could waste between £2bn and £3bn of energy bill payers' money in coming years.

"It is crazy if the Green Deal fails to ensure that all the homes in the country at least have adequate loft insulation," said Andrew Warren of the Association for Conservation of Energy, an industry lobby group.

"Loft insulation and cavity wall insulation are the basic first steps in terms of effectiveness. Treating solid walls is a very much more expensive option that'll have to be paid for by the energy consumers whose bills will be funding the Green Deal.

"The number of people in fuel poverty is rising. If you get the policy right you can tackle fuel poverty by getting everyone's lofts and cavity walls insulated."

This was a common criticism when the government opened the Green Deal to consultation at Christmas, and ministers have shifted ground since.

In April, the Deputy Prime Minister Nick Clegg promised that of the £1.3bn ECO subsidies, at least £540m should save energy in the worst-off homes. He said: "Each year this money will help 180,000 of the poorest households make their homes cheaper to heat for good."

But this doesn't go far enough for the critics, who are baffled by the Department of Energy and Climate Change's (Decc) assertion that it is time to focus on solid walls because almost all lofts and cavity walls are already done.

A recent Decc document shows that only 60% of homes (14.1 million out of 23.3 million) currently have an adequate insulation blanket of at least 125mm.

Ron Campbell of the charity National Energy Action told BBC News: "There is no question - all of the resources under ECO should be devoted to programmes related to poverty.

"We were constantly reassured that funding under ECO would be significantly higher than government funding in previous years but this is untrue. Expenditure on fuel poverty programmes is half of what it was."

The pay-as-you-save side of the Green Deal is also wobbling because few people in the energy sector believe it will deliver the savings in energy and carbon needed for UK climate change targets. Buildings are responsible for more than 40% of UK emissions.

The Cabinet Office team has been told that the Chancellor should nudge people into the Green Deal by changing Stamp Duty to reward householders who have insulated their homes, or punish those who haven't.

The government hope that the energy firms will promote the Deal to householders. But energy conservation is a notorious hassle and critics say it'll need a huge national public campaign.

A Green Alliance report compared the Green Deal with the recent digital TV switchover and concluded: "There is a huge risk that the government's current plans for communications won't deliver the levels of take-up needed to make sure the Green Deal (is) a success." The author, Faye Scott, says the scheme needs strong, trusted national branding.

But I understand that the International Energy Agency has warned that many people won't participate in the scheme because they don't trust the energy firms after rows over high prices and mis-selling of products.

The government insists that insulation schemes offered under the Green Deal should follow the so-called Golden Rule that the improvements must be paid back during the agreed loan period.

A trial in Sutton in South East London suggested that bills were reduced by between £170 and £270 a year. Press reports said that under that trial, 25% of improvements did not meet the Golden Rule.

Sutton Council told BBC New that the households in question were informed that their investments would not pay back in time but had opted to go ahead with them anyway because they felt that energy bills would go up in future, they wanted to improve comfort in the home, or they were willing to invest in energy-saving to protect the environment.