Reduce VAT on energy saving improvements?

With the economy very much ‘on the edge’ and looking likely to fall into recession again, our leaders are suggesting various ways of stimulating the economy. It seems likely that some form of quantitive easing will be used again, but how about being a bit more intelligent with it rather than just printing money?

The suggestion that the Government should reduce VAT to 5% for all energy-saving measures installed in homes and businesses under its “green deal” scheme, makes total sense to me.

More than two dozen organisations have called for an across-the-board 5% VAT rate for the green deal, instead of 20%, which they say is needed to ensure take-up of the programme to reduce carbon emissions from buildings and cut fuel bills.

The demand which has come just as the Government is finalising the green deal, has come from groups including the British Property Federation, the UK Green Building Council, environmental charity WWF and the Royal Institution of Chartered Surveyors. The green deal scheme will cover the upfront costs of a range of energy efficiency measures in homes, such as insulation, energy-efficient boilers and small-scale renewables, with homeowners paying back the money through savings on their bills.

But the groups warn the Government must do more to make energy-saving packages attractive to householders, making the green deal more affordable in order for it to be a success. A lower rate of VAT would also make it easier to meet the so-called “golden rule” in which repayments must be lower than the savings consumers make on their bills as a result of the new measures.

There is no doubt something needs to be done to attract people to energy-saving measures, recent research has shown some people can’t be bothered to add insulation to their roofs and walls despite guaranteed savings. Perhaps this would act as the catalyst?

 

Renewables funding issues

We are living in difficult times, money is tight and everyone is tightening their belts (even at No10 if my colleague Tim Garratt’s experience there last night is anything to go by), but during this period in our history we still need to be pushing forwards in all areas – and that has to include renewables. But there appears to be a problem with funding, despite the banks telling us all they are out in the market for lending….

The Romney scheme

There is nothing like a high-profile scheme to help push something into the public consciousness and a scheme near Windsor Castle ( in the River Thames at Romney Weir) which will supply it with hydroelectric energy, has to be good! But, due to a funding issue it will be running Dutch-made turbines instead of UK sourced ones.

The problem? The company, Southeast Power Engineering, who has just tied up a deal with the Queen to provide hydroelectric “green” energy to Windsor Castle, cannot find a bank willing to lend the money to build the necessary turbines in the UK. They have been forced to bring in screw turbines from the Netherlands. The turbines cost £700,000 and weigh 40 tonnes.

They had got a local company that would be willing to build the turbines, but were unable to obtain the financial support needed to build this Archimedes-type pump for the first time in the UK (despite it being a proven technology).

So, this is an opportunity lost for both producing work for UK companies and getting positive PR for a scheme of this type. What is even more worrying is that the company also has a number of other schemes in the works;

They are talking to the Duke of Devonshire about using a similar scheme to turn water from the river Derwent into electricity for Chatsworth in Derbyshire. The house still has original turbines in the basement that date back to 1884 but Southeast Power Engineering hope to bring in a new system that would reintroduce carbon neutral power.

They also have a series of similar schemes in development on the Thames and Avon rivers that would allow homes and businesses to move away from a reliance on gas or coal-fired electricity – so exactly the type of business that should be receiving support from Government and Banks in this financial climate.

The Government plan to set up the green investment bank is taking too long, and rumours abound that the partly state-owned lenders such as Royal Bank of Scotland are still concentrating on oil and gas rather than on green schemes.

There is talk about further quantitive easing being required to help the economy – rather than just printing money how about spending it on supporting schemes like this?