Tax should be lowered by up to £5,000, according to Policy Exchange report, which says the government is doing far too little to cut energy waste
The stamp duty paid on energy efficient homes should be up to £5,000 less than on leaky, hard-to-heat homes, according to a new report that says the government is doing far too little to cut energy waste.
The report is from the thinktank Policy Exchange, which is close to the government, and is likely to be taken seriously. It estimates the stamp duty change would lead to 270,000 households a year improving their energy efficiency.
“Improving home energy efficiency can save households money, as well as substantially reducing their carbon emissions,” said Richard Howard, author of the report, and a former chief economist for the crown estate. “Policies which link property values more closely to energy performance could kickstart an energy efficiency revolution in this country.”
The report heavily criticises ministers, who have cut back energy efficiency programmes which are widely seen as the cheapest way to cut energy bills and meet carbon targets. “The UK still has amongst the least efficient housing stock and highest rates of fuel poverty in Europe,” it states.
The government aims to improve the insulation of 1m homes this parliament, far fewer than the 4.5m in the last parliament. It has also abandoned the failed green geal programme, which was meant to reach millions of homes with unique loans but only taken up by 16,000 households. “This leaves a major policy gap,” says the report.
The Policy Exchange proposal is to lower the stamp duty on energy efficiency homes while increasing it by the same amount on inefficient homes, meaning the tax taken by the government remains the same overall.
For example, someone buying a house worth £220,000 – the average UK house price – would see a £500 reduction for a well-insulated property, but £500 more for a draughty one, a difference of £1,000. Policy Exchange says the difference in stamp duty should be capped at £5,000 for multi-million pound properties. People buying the lowest cost homes would not be affected as stamp duty is not paid on properties under £125,000.
“The government could nudge people into making improvements to the efficiency of their home, which would not only add a premium to their property but would also reduce their energy bills,” said Howard.
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The report also suggests affordability calculations made by mortgage lenders should include how much a property will cost to heat, meaning more efficient properties would be eligible for bigger loans.
“We think stamp duty differentials would be effective,” said Garry Felgate, at the Association for the Conservation of Energy. “It is particularly powerful as it establishes a link at purchase between energy efficiency and value. We believe that a viable alternative is a similar system of differentials for council tax: the more efficient you make you home the lower your council tax bill.”
The report says: “There is huge potential to improve domestic energy efficiency. Research shows that a more ambitious approach to energy efficiency could deliver carbon savings of 24m tonnes of carbon dioxide a year by 2030 – equivalent to taking more than 10 million cars off the road – and save households of £8.6bn a year in energy costs.”
A government spokesperson said: “This government is serious about helping vulnerable people heat their homes and keeping energy bills low – that is why we are requiring energy companies to improve the energy efficiency of over 200,000 homes per year, helping to tackle the root cause of fuel poverty while delivering on the government’s pledge to insulate 1m homes over the parliament.”
Another report published on Wednesday indicates that a roll-out of energy storage technology could save energy customers £50 a year, as well as cutting emissions on improving energy security. Energy storage technologies, from liquid air to big batteries, are developing rapidly and can store excess renewable energy and cut the need to build new power stations and lines.
The report was written by the Carbon Trust and Imperial College London and commissioned by Decc and three of the UK’s big six energy energy companies. A spokesman for one, SSE, said: “The report shows that, with the correct market structures, price signals and policy certainty, projects such as SSE’s proposed pumped storage scheme at Coire Glas can make a valuable contribution to society.”
