Mr Osborne’s lack of energy

By Josh Robson: Head of Public Affairs (Knauf Insulation Northern Europe)

Energy efficiency was in the Chancellor’s statement, but the gritty realism needed to tackle issues that the UK faces sits unused in the wings.

On the same day that George Osborne introduced plans to increase the projected budget surplus in 2020-21 – with the Government taking in more than it spends – the Office for National Statistics announced that 44,900 preventable deaths took place last winter. This is more than double the previous year; it is the highest number for half a decade.

Warmer, more comfortable homes have been repeatedly shown to reduce the risk of illness and preventable deaths in winter, but an early view of policy does not suggest a serious attempt to change this picture. We have a three part story: the mediocre, the bad and the risky. The question is what can the Department for Energy and Climate Change (DECC) do with what they have been given?

The mediocre

A five year commitment has been made for the next obligation on energy suppliers, and it is good that the period set out will take the next round of discussions over how to best meet the 2030 fuel poverty target out of the election cycle. A ‘new’ £295 million has been earmarked to improve public sector buildings, which is sensible. These are elements that loosely fit industry requests for a clearer, longer term framework to gauge investment decisions against. But – in real terms, for real people – this policy framework is a stark, dramatic cut in funding for programmes that help vulnerable families.

Despite other big ticket spending commitments, the cut in aspiration to make homes warmer means that four out of five of the households helped during the last Parliament would miss out under new plans.

As the number of avoidable deaths last winter shows, cold weather illnesses have a real impact on wider spending for health and social care. With the greater level of devolution also present in this budget, this is likely to hit the budgets of local councils and health budgets the hardest. It will do this at a time when – although some is offset by wider measures – the central Government grant will see a cut of 56% by 2020.

The bad

The review itself has a clear narrative: Lower household bills! Opportunities for home ownership! Protecting Britain’s national security! Values and aspiration: all used to divide up public spending into digestible chunks. These broad brush statements appeal to a sense of independence, highlighting the need for a collective national approach to issues like ‘security’, bolstering ideas of ‘personal freedom’,  and the need for ‘lower bills’. But comforting political concepts will not change facts without the backing of concrete action, clear plans and sensible policy.

Energy efficiency stands effectively alongside any technology used to generate electricity or heat our homes; solar, gas, even coal. Insulation keeps your home cosy in winter and it lowers your bills by helping you to use less energy. Switching can save you money, but if your home is inefficient you will still pay too much. And – if you live in a cold home – the risk of illness is higher.

It is these gritty facts that make it a false economy to place warm homes on a separate footing to the growing challenges that the NHS and social care face over the next five years. It is these same facts that make it vital for sensible control of the UK’s demand for gas to be considered alongside supply side infrastructure discussions. Neither of which were recognised fully.

The risky

We have a gas deficit and without clear action, that will grow. See our latest animation showing why action is needed.

This spending round intends to create security. But cuts to the very same energy supplier obligations that were so effective at reducing the UK gas deficit by 30% between 2005 and 2013 take effect at exactly the same time infrastructure commitments are being made to build more gas power stations. This means there is an inevitable risk that our exposure to international gas markets – and the volatile prices, and supply uncertainty that they bring – will actually increase over the next 10 years. This equals higher gas prices and more frequent shutdown warnings for energy intensive businesses, not less as one may expect. (Further reading: blog from Steven Heath Gas crunch? A solvable infrastructure challenge)

So the question that will need to be answered over the coming months by wider government policy is how to make sure that the direction set by the spending review does not undermine wider policy goals. This is the challenge that the DECC now needs to step up to meet.

Now what?

The Energy Department needs to build stronger relationships in government if real energy security, climate goals and results for consumers are to be achieved. This means fostering an even closer working relationship with the Department for Communities and Local Government to address energy efficiency in the private rented sector. A real market for those who are able to pay for their own improvements needs to be developed with clear sensible engagement with banks and a broader set of workable incentives to help drive uptake of efficiency, such as sensible use of revenue neutral changes to stamp duty as suggested by Policy Exchange, need to be integrated in to wider reforms.

Most fundamental of all, in a period where UK infrastructure is key, industry and DECC must also work together to fully engage with the new Infrastructure Commission. Without an adequate assessment of the demand side of the energy equation – and our growing gas deficit – wider gains and improvements they are hoping to make risk being cancelled out.


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