On the eve of the Chancellor of the Exchequer’s annual Budget speech…15 March 2016
On the eve of the Chancellor of the Exchequer’s annual Budget speech, non-executive Director, Alison Vipond, shares her thoughts on what he could do to promote energy efficiency …
A big part of energy policy is energy efficiency. The energy we avoid using is really important. A recent report by think-tank Policy Exchange argues that, rather than treating energy efficiency in isolation, policies should aim to embed energy efficiency into the housing market and house prices. It calls for Stamp Duty to be linked to the energy performance of the house, to create an incentive to purchase a more energy efficient home. The report also suggests offering a rebate if energy improvements are made within 12 months of purchasing the house. This would not only help reduce energy bills but is also one of the cheapest ways to cut carbon emissions.
In their proposal a home buyer purchasing a house worth £220,000 (the median average house price in the UK) would see a £500 reduction in Stamp Duty costs. Inefficient properties would, conversely, see a rise in Stamp Duty costs: a £220,000 property with a poor energy efficiency rating would see Stamp Duty rise from £1,900 to £2,470. Since it isn’t paid on properties which cost below £125,000 there would be no impact on lower value properties at all. The report says the reforms should be gradually phased in and that the adjustment in Stamp Duty would be no more or less than £2,500 regardless of the value of the property.
It estimates that as many as 270,000 households a year could be encouraged to undertake energy efficiency improvements based on the policy, which would be a big step to helping the Government to meet the COP21 commitments agreed in Paris last year. So the Chancellor has a great opportunity to both reduce energy bills while cutting carbon emissions.
Interestingly, the report also suggested affordability calculations made by mortgage lenders should consider how much a property will cost to heat. This makes a lot of sense to us – we already do this! We also adjust the price of our mortgages to reflect a property’s climate impact and we’d like to see other lenders doing the same.
Policy Exchange’s ‘Efficient Energy Policy’ report can be found at: https://policyexchange.org.uk/publication/efficient-energy-policy/