The £125 Million Green Deal Kick Start Will Do More Harm Than Good

Another week and another knee jerk reaction from The Department of Energy and Climate Change (DECC). Faced with the prospect that take up of Green Deal home improvements could be as low as 1.5% DECC – which would much prefer to be just plain DE – has panicked and promised to throw £125 million at householders in an attempt to ‘kick start’ the program. However, after the solar PV debacle, the last thing the home improvement industry needs is another ‘kicking.’

Like the feed in tariff subsidised solar PV program this kick start is another limited offer with DECC reserving the right to pull the plug after the first £40 million is spent. Once again we will see one of the spikes in demand that are so corrosive to the construction industry. With crowds of householders frantically waving pound notes at them companies will have no option but attempt to meet the artificially created demand. As with the PV solar they will need to offer over the top rates to installation workers. This drives up labour costs for other companies in the secondary construction industry – making companies that survive without government less viable. As well, UK material suppliers will not be able to cope with the sudden increase in demand. This opens up the market to overseas companies who otherwise would have been unable establish themselves in the UK.

The £125 million spend – or more likely £40 million splash – is a political manoeuvre. DECC cannot afford to have the Green Deal turn into another rock the Conservative Party can throw at their leader, David Cameron. As well, DECC’s own boss, the Liberal Democrat energy secretary Ed Davey, could find himself and the Green Deal, in a vulnerable position if Conservative activists use the Green Deal to disrupt the coalition. And the Green Deal is open to criticism not only from the right, who see it as merely a stick to beat the energy providers with, but also from the left who regard it as little more that a way to tax households in fuel poverty to fund the pensions of the middle class.

What we are seeing is another case of tactics that undermine strategy. Something that is also clear from DECC’s latest technology initiative to fund electrical energy storage research. This is another ‘Dragon’s Den’ style spectacular: designed more to scare the energy providers than produce any working solutions. DECC’s obsession with ‘Entrepreneurs’ serves only to fragment funding to the point where it becomes wholly ineffective:-

Limits Of The Entrepreneurial Economy

At the sharp end of all this political manoeuvring is the construction sector, in particular secondary building companies. Most of these companies are sensible enough not to be tempted by DECC’s soft rug. It has learned the hard way that the two hands gripping the rug belong to a government department with the attention span of a ferret on Prozac.

The danger of knee jerk reactions is that more often than not the knee cap ends up in someone’s groin. If you are in the construction industry cross your legs now.

Peter Kruger

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