The Tories in opposition were very keen on their ‘Green Deal’ for making existing housing stock energy efficient. It formed the cornerstone of their pledge when the Coalition formed to be the ‘greenest government ever’. It had its big full launch today, with new loans available for homeowners to insulate their properties and pay back the money through their energy bills.

The only problem is that the Green Deal isn’t quite the big all-singing all-dancing deal the government envisaged. The idea was that big businesses would lead the way in providing the scheme, but one of the leading retailers who expressed initial interest in the scheme, Marks and Spencer, isn’t involved. Sources tell me that the retailer decided the government’s offer wasn’t worth its while, although the company’s official line is as follows:

‘We are not a green deal provider but are monitoring the scheme’s progress. Through our energy business, M&S Energy, we already offer home insulation and renewable energy solutions and we’re always looking at ways to develop the business.’

One of the big barriers for consumers is, unsurprisingly, the cost of the loans. The not-for-profit Green Deal Finance Company will charge consumers interest rates of 6.92 per cent, along with a £75-120 assessment fee, £63 set-up charge and a £20 annual fee (although a cashback scheme for early adopters aims to make this a little less daunting). Other green deal providers could charge interest of up to 9 per cent.

With interest rates higher than a mortgage, the deal is considerably less attractive than it could be. Another deterrent is the way the loans remain tied to the home when the owner leaves, which was, back in the days of the green deal’s conception, considered a good thing as only the person benefitting from the improvements would pay, but polling suggests that the idea of an additional debt attached to a house puts off possible new buyers. Sellers wishing to pay off the loan early will incur heavy penalties. The Great British Refurb Campaign found that 41 per cent of people would either decide against buying a property with a green deal loan attached to it, or seek independent advice. Only 7 per cent said they would be comfortable buying a house with such a loan on it.

One mercy is that this is a consumer-led scheme. In 2010, just a few months before the general election, Labour had launched plans for its own ‘Warm Homes’ programme, aimed at private and social-rented housing. The cost would have been £19 billion, funded by the energy companies, and at the time there were fears this would impact on all consumers’ bills. The cost of the Green Deal is funded by the savings in the energy bill of the individual who chose the improvements, and a ‘golden rule’ of the scheme is that the cost won’t outweigh the savings. But Labour’s Luciana Berger is warning today that ‘the reality for most people will be that the Green Deal ends up costing them more than they save’.

Assessments for the scheme started back in October. But there wasn’t a great rush: there have only been five so far. According to Greg Barker, though, there have been hundreds of applications today. Either way, this is clearly off to a slow-burning start.

Tags: Energy, Green Deal, Greg Barker, UK politics