The Green Deal was set up to help homeowners make improvements to their property so their house could be more energy-efficient, saving them money in the long run.
However, the Public Accounts Committee (PAC) has published their findings on why only 14,000 people took up Green Deal loans, despite the excitement and drive towards the initiative and the £240 million investment behind it.
As a result, MPs described the initiative as “abysmal” due to its catalogue of failures in both design and management.
PAC concluded that the project, which was designed so households could take out loans to enable them to get energy-saving measures installed in their properties – such as boiler repairs in Bradford – failed because it was not adequately tested.
Meg Hillier MP, chair of the PAC, said: “The government rushed into the Green Deal without proper consideration of concerns about its weaknesses.”
She added there was not enough research into whether the scheme was appealing to households, how it would be implemented, or how other governments overseas had set up similar initiatives in the past.
Ms Hillier noted that every loan arranged cost the taxpayer £17,000, while savings of carbon dioxide was “minimal”.
“The government must learn from its mistakes to ensure they are not repeated in this or indeed any other policy areas,” the MP recommended.
Despite the government hoping £1.1 billion worth of loans would be taken out by UK households, in reality only £50 million was borrowed.
The report blamed the interest rate of between seven and ten per cent and the fact there was a lot of paperwork to do as the reasons why so few people were attracted to the product.
The Department for Energy and Climate Change (DECC), which set up the Green Deal, was also found to have ignored warnings from MPs that the initiative would fail to appeal to many households.
The Green Deal was established to encourage households to adopt energy-friendly measures and make improvements that could significantly reduce energy consumption, such as by installing double-glazing, solar panels, heat pumps, draught-proofing measures, cavity wall or loft insulation.
However, the PAC report showed most of the take-ups of the loan were for boiler replacements, something that households are most likely to have done without the financial assistance if their central heating system was not working. While some probably chose to replace old boilers for more energy-efficient products and save themselves money in the long run, others may have simply used the loan to get a new one once theirs was no longer useable.
Overall, there have been huge financial losses as a result of the Green Deal, with DECC having to write off the £25 million it had loaned to the Green Deal Finance Company.
The newly formed Department of Business, Energy and Industrial Strategy (BEIS) has since said the lessons from this failure “will help us to develop simpler, better value for money policies, targeting people who need support most”.