A fiscal stimulus that cuts energy bills, saves the planet, protects jobs and raises revenue? Yes it is possible.
Back in 2009, in the pre-budget report, then chancellor Alistair Darling announced the UK’s first boiler scrappage scheme. It was modelled on the very successful car scrappage scheme that had worked to help protect jobs in the UK car industry following the 2008 financial crisis. Ahead of the PBR later this month, the Heating and Hotwater Industry Council, a division of the SBGI energy and utility trade association, has called on George Osborne to reinstate a boiler scrappage scheme in England (yes, you guessed right, Scotland still has the scheme in operation).
Arguably, the boiler scrappage scheme proved to be the most successful energy saving initiative in the last 10 years, not including those enforced by legislation. According to the Energy Saving Trust, consumers who replaced their old, inefficient ‘G’ rated boilers with an ‘A’ rated replacement and fitted heating controls saved an average of £290 from their annual energy bill. This cash is then available to spend in other parts of the economy. In addition, for every new installation, 1.5 tonnes of carbon dioxide are saved. The boiler scrappage scheme saw nearly 120,000 boilers being replaced, in total the greenhouse gas saving is the equivalent of taking every car off our roads for four days.
So the intervention saves consumers cash and helps tackle climate change, both virtuous but there is more.
The boost in production, sales and fitting helped to protect the 150,000 jobs in the sector. The UK boiler makers are not only highly skilled manufacturing companies, they are net exporters too. With uncertainty hitting consumers in the European mainland as well as the UK, supporting hi-tech manufacturing exporters seems a sensible policy course.
So the boiler scheme cut energy bills, reduced greenhouse gas emissions, and helped safeguard jobs, but the subsidy (a £400 discount voucher) is surely unaffordable in today’s climate of public spending austerity?
The evidence tells a very different story. Fitting a new boiler under the scrappage scheme attracts VAT. For every £1 paid out in vouchers, an additional £1.25 will be received in VAT revenue for the treasury. The scheme is a revenue earner for George Osborne.
In the debate about the state of public finances, of dire warnings on global economic growth, of unease if not outright scepticism towards how green the coalition government actually is, we have a shovel-ready proposal that has proved its worth. If David Cameron is really rolling up his sleeves to boost economic growth, he could do a lot worse than copy what Alistair Darling did to old boilers!
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Mike Foster is chief executive of the trade association SBGI and was the MP for Worcester from 1997 – 2010
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Phot: s_p_a_c_e_m_a_n