Retrofit: A National Plan
The independent think tank the New Economic Foundation has made some bold suggestions to help the wonks and mandarins in central government work out a way to pay for retrofit in the UK.
A common problem in business and economics reporting is when poor journalism uses lazy metaphors to describe the way the country funds itself.
Let's be clear. Councils don't get evicted when they get an S114 notice for bankruptcy. Central government debt is not like a credit card balance which will result in international bailiff teams arriving at Dover.
So this refreshing detail in the report comes as a head bath for anyone who has a basic understanding of economics and is keen to understand how we can actually afford to fund retrofit in the United Kingdom.
Retrofit Is About Equality
A system of procurement that exists and is driven by economics that award contracts to the lowest bidder won't give people great outcomes. It will produce shoddy work. The report authors propose the national retrofit strategy should be fixed to the quality of the outcomes;
"We argue that a successful Warm Homes Plan requires stable, needs-based funding and a robust local delivery model. Rather than relying on competitive bidding, a needsbased funding system should provide long-term, predictable financial support for local authorities to lead retrofit initiatives."
The report correctly identifies that the pace of retrofit targets set by the previous administration are too short. That a 10 year strategy schedule could be an optimum length of time to lock in local investment and enable fuel poverty be remedied faster in the medium by locking in local investment schemes, creating stability in supply chain and resilience in local skills hubs.
But it's the recommendation about lending that really hits the mark.
The 'able to pay' term bandied around by policy experts ignores the will of the people. A more common term being used in retrofit companies in the front line of the retrofitting sector is the definition of homeowners who are those who are 'willing to pay'.
We spoke off the record to one company executive in a pivotal role in national retrofitting technology company. She earns above the median wage, owns her own house and doesn't qualify for local council assistance for upgrades. With over £10,000 of hard earned savings in the bank, she is torn by the idea of getting a heat pump in her home and having to part fund the installation with the limited savings she has.
Julia Angwin
The Infamous 'Tiger Mom Tax' Story Which Economists Use To Illustrate 'Willing To Pay' Gone Wrong
In the NEF report this sort of 'able to pay' consumer who currently is not 'willing to pay' could be encouraged by the recommendation;
"Launch low- or zero-interest loans through the UK Infrastructure Bank, now the National Wealth Fund (NWF), allowing middle-income households to access affordable financing for home upgrades."
This sort of stimulus has a triple benefit for the UK's retrofit sector.
Reducing borrowing costs to enable retrofits in middle income households provides them with choices about how to engage with home improvements. And they become active participants in the transformation process.
Local retrofit suppliers and installers gain a credible income stream enabling them to increase their turnover and the boost to business will encourage job creation.
Increased demand for retrofit materials will demand more production and this creates a demand and supply stimulus with the inevitable reduction in costs as volumes of production deliver economies of scale.
The reason why many households in the squeezed middle don't want to spend on the retrofit of their homes is because the value of the spend is not immediately clear. And it's a visceral friction point seeing the fuel poor getting help, knowing in your heart they need it - but wishing your home could be a tiny bit warmer, cheaper to run and more comfortable. So making this transition more affordable is not just vital, it's critical.
A Credible Plan Baldrick
Change needs firm leadership. Strong leadership. So here's a way of understanding why the NEF plan works.
No plan survives contact with the enemy. Every soldier get's told in basic training. So having a plan based on a mission principle, providing desired outcomes works.
It enables junior commanders to carry on regardless, as their illustrious commanders are scythed down in the opening volleys of artillery and drone attack.
Experienced corporals and sergeants, the backbone of any infantry unit, drive forward. Relentlessly, remorseless and ruthless in their determination to achieve the outcome.
The NEF report recommends the establishment of a crack team of professionals with the ability to coordinate efforts, deliver guidance and administer efficient delivery of the Warm Homes Plan. If you can find them. And you need them. You should call the National Homes Upgrade Unit.
Getting The Balance - Delivery
The NEF report does identify the key facts and figures regarding the ECO4 and GBIS schemes (succesess and failures). The report tries to re-align the pendulum swinging between fabric measures and heat pump roll out to focus on the inner workings of local institution led delivery models;
"We believe that a sustainable energy efficiency policy needs more than long-term finance and policy certainty; it also needs a local delivery framework that can fully capture the multiple co-benefits of energy efficiency."
A more efficient policy of national guidance with local action could enhance the great work that is already being conducted by local authorities.
The equivalent level of national and local coordination has not been seen since the town gas switch in the last century, but it is, as proven by the response to Covid, it is possible to harness national will, political leadership and local action.
Local Government Are Acknowledged As Critical To Transformation
Value For Money VfM Principles
It's essential that if you believe in the basis of equality. You read in detail the proposals in the NEF report. It identifies these key principles which could create a 'starting gun' effect on the British economy.
• VfM Principle 1: Use retrofit to boost the incomes of the fuel poor, considering both funding and bill savings.
• VfM Principle 2: End competitive funding and replace it with needs-based funding.
• VfM Principle 3: Provide long-term funding to reduce inflationary impacts and enable better planning.
• VfM Principle 4: Design grants and financing to enable area-based retrofit.
• VfM Principle 5: Build local government capacity and expertise to support deliverability.
• VfM Principle 6: Combine decent homes and decarbonisation budgets, giving local authorities and social housing providers finance and capacity to deliver.
• VfM Principle 7: Use low- or zero-interest lending to households as part of a package to stimulate activity in the non-fuel poor.
• VfM Principle 8: Link debt to properties to make repayments affordable.
• VfM Principle 9: Move beyond disclosures to align finance with government’s missions.
The National Homes Upgrade Unit
Piecemeal approaches to the national retrofit problem are not working. The proposed National Homes Upgrade Unit has a terrible name but at least it removes the word retrofit (which homeowners react to like marmite).
With careful, strategic control, replacing the vacuum in retrofit leadership could be a lever not just for economic change but life changing outcomes for homeowners.
National policy needs a national coordination strategy and the race has started to net zero, we've got horses, riders and no one actually running the race.
"Considering the poor financial reality of many local authorities and a highly dispersed and reduced technical capacity to deliver such a large programme, our proposed blueprint will necessarily take time to bear fruit. However, accelerating existing schemes, investing in training and upskilling, and reforming regulations, planning, and the retail end of the energy market will all be critical enabling factors alongside the local delivery framework."
The planning included in the report is not a perfect solution but it's one of the best researched credible plans proposed.
If you want to read how the numbers are crunched. Read the full report today.
