Families could lose thousands of pounds thanks to a government scheme aimed at cutting bills by making homes energy efficient. MPs will today vote on the Green Deal offering loans of up to £10,000 to households for improvements like loft insulation, but Labour says families face paying more than twice that.
Loan repayments will be taken from the home’s energy bills over 25 years, so that if people move after borrowing the money, they will no longer have to pay.
Ministers claim homes will only be eligible for the scheme if monthly repayments are less than energy bill savings.
But Labour say high interest rates of between six to eight per cent will make a mockery of this government pledge.
Energy Secretary Ed Davey has already admitted Green Deal interest rates could be 7.5%, meaning a £22,000 repayment on a £10,000 loan over 25 years.
That is the equivalent of around £900 a year, just under three quarters of an average home’s £1,310 annual energy bill.
Families who try to repay loans early will face heavy penalties.
Labour claim it is very unlikely household energy bills could be slashed enough to make the scheme worthwhile.
Caroline Flint, Shadow Energy and Climate Change Secretary, said: “The public want a simple and affordable scheme, so they can improve their home and cut their energy bills.
“It would be completely unfair if the public are forced to pay hefty penalties. The Government must come clean about interest rates.
“Done properly, a pay-as-you-save energy efficiency scheme could cut carbon emissions, create jobs and lower bills for families.
“But the Green Deal must be a good deal for consumers.”
A spokeswoman for Lib Dem Mr Davey hit back at Labour’s claims, saying the scheme would help poor families with bad credit ratings save money.
She said: “Labour are spreading scare stories when it will help everybody.”