This week it was revealed that the First Minister has been personally involved in discussions with large financial interests in London to try to secure ‘investment’ in retrofitting Scotland’s housing stock to bring it up to an acceptable level for thermal efficiency (how much heat they leak).
But what does this mean, how could it work and what are the implications?
First of all, the word ‘invest’ has become abused to the limits of its meaning. ‘Investment’ (and in particular ‘inward investment’) now tends not to mean ‘taking a risk by spending money now to create productive activity which will return that money and more in the future’.
Rather, ‘investment’ now just means ‘income’, and it is often a synonym for ‘privatise’. In the past, if you sold two of your children to an unscrupulous foreign chimney sweep it would not be considered a successful investment opportunity realised, but that is how Scotland has been behaving towards its own national assets.
So how do you invest in retrofitting houses for thermal efficiency? This is the problem – you don’t, because you can’t. There is no way around this point; the return from retrofitting a house is not financial. There is some financial gain (in reduced heating costs), but it is fairly small in relation to the cost of retrofitting.
The other gains are social and environmental. People’s health improves because their living environment improves. People’s quality of live increases because they are in warmer homes without drafts, trapped moisture, leaks, pollution and high bills. And of course the world’s race towards climate disaster is slowed as we stop pouring heat (almost all provided by burning gas and oil) out our roofs, windows and the gaps in our building fabric.
There is no way round this; retrofitting buildings is expensive. In fact Scotland should have taken action on this many, many years ago by increasing its building standards in line with what has happened in the Germanic and Nordic countries, but was beholden to the powerful lobby group Homes for Scotland which represents the big bulk housing development corporations.
But it didn’t so we need to do it now. And because it is labour- and resource-intensive and takes time, it costs money. The Scottish Government thinks this will be in the order of £30 billion. If that is to include replacing heating, Common Weal believes this is an underestimate, probably half the total real-world cost.
Governments across the UK have been utterly duplicitous on this. They will not level with householders on what this means, because it means one of two things. Either this will be paid collectively through progressive taxation or instead the cost will be passed onto the householder. To brace you for the reality of this, Common Weal estimates that this will average about £25,000 per household.
Either of these routes has the same basic outcome – retrofit costs significantly more to achieve because private sector profit margins have to be added into the total cost
But that is an average – some houses will require no retrofit at all and some will cost much more than £25,000 to complete. And by definition the houses which will require the biggest investment are often the poorest households, with more affluent households having already taken advantage of grant schemes to retrofit their own houses.
So if it is expensive and does not have a direct resultant revenue scheme, how can private investment be secured to ‘invest’ in it? The most important thing we learned was that Scotland’s First Minister has basically ruled out the ‘paid through progressive tax’ approach. She suggests that there must be ‘some’ contribution from the public sector but that it needs private money.
So what gets private investment into retrofit? The only means of achieving that is to artificially manufacture a financial revenue for private investors. There are two ways that could be done. The first would be for the Scottish Government to subsidise private investment directly, in effect to pay the interest directly to financial interests.
But the more likely route is simply to create a captive market of homeowners obliged to pay both the capital cost of retrofit and also the interest on the private loans supplied to enable them to do it.
Either of these routes has the same basic outcome – retrofit costs significantly more to achieve because private sector profit margins have to be added into the total cost. And because enormous bills will then be imposed on households (but will fall entirely inequitably, often on people who have no real chance of repaying it), the pressure will be to delay and to minimise.
Delay means more hand-wringing, less insulating. Minimisation means that we increase the theramal efficiency – but not enough. Achieving Band D or even C thermal performance is not ambitious enough in many cases.
This is a right-wing vision of the future for Scotland’s homes. It rejects the efficiency of collective provision, the low borrowing costs available to the public sector and the social equity that comes from funding from progressive taxation.
Instead we appear to be facing unaffordably and unnecessarily high bills falling on people not based on their ability to pay but based on the historical inability to afford your own retrofitting (or to secure high-quality housing).
The only real winner in this, as so often is the case with Scottish Government policy, is the financiers.