By Paul Homewood
h/t Philip Bratby
I’m not quite sure why the BBC’s Environmental Analyst is reporting on economic matters!
Needless to say, it is yet another totally uncritical puff piece.
Making people’s homes cosy is the cheapest way to create jobs as the UK prepares to fight recession, a report says.
Its authors say a job insulating homes would be much cheaper than creating a road maintenance job, for example.
Jobs in building roads are more costly to create, as the work is heavily mechanised.
The figures will be sent to the Treasury, which is reviewing a package of job stimulus measures for July.
The report’s authors say a job in home insulation can be created for £59,000 – that’s far less than a road maintenance job, which is estimated by the government to be more than £250,000.
Those figures include retrofitting 10 homes with insulation, and the road surface laid by a worker.
The report comes from a coalition of charities, businesses and pressure groups known as the Energy Efficiency Infrastructure Group (EEIG).
Their aim is to upgrade the UK’s aged housing stock.
They say home insulation would create jobs in all areas of the UK as well as supporting the government’s aim of net zero carbon emissions by 2050.
Green jobs
It would also have other benefits. It would cut local pollution; reduce bills to release cash back into the economy; and lower the costs of sickness caused by draughty homes.
The document estimates that 40,000 jobs could be created by the government in insulation over the next two years, and 150,000 by 2030.
https://www.bbc.co.uk/news/business-52999337
Needless to say, the EEIG is largely a group of vested interests. But what Harrabin ignores is that somebody will have to pay for this largesse.
At £59,000 a job, 40,000 jobs will cost £2.4bn a year, rising to £8.8bn by 2030.
To compare with road maintenance workers is ludicrous. It is all about the economic return. Infrastructure spending, including roads, is always subject to rigorous cost benefit analysis by the Treasury, and new road building projects will have a very clear economic benefit.
In any event, the idea that we should avoid building roads because it involves mechanisation is the economics of the luddite madhouse. As Milton Friedman once commented, after asking why a canal was being dug with shovels instead of tractors:
“Oh, I thought you were trying to build a canal. If it’s jobs you want, then you should give these workers spoons, not shovels.”
So, what benefit will all of this insulation bring? Put another way, would the energy savings be enough to persuade householders to fund the cost themselves? The failure of the government’s Green Deal suggests not.
According to the BBC report, each £59,000 job should insulate 10 homes a year, so £5900 each.
The EEIG report claims annual savings of £7.5bn by 2030:
However, a closer look shows that this claimed saving does not relate purely to insulation. Instead the saving is based on a whole range of energy efficiency options, notably heat pumps which account for half of the saving. (This energy saving does not reflect the capital cost of installing heat pumps, nor does it seem to take account of the fact that natural gas is about a fifth of the price of electricity).
Other factors also account for energy savings, including lighting, controls, behaviour, appliances and boilers.
The EEIG’s calculations come from 2018 study by Rosenow et al, from which the chart below comes:
At best, energy savings due to “fabric” are not much above 10% of energy bills, and if the insulation is done on a cost-effective basis, the saving comes down to about 5%.
Even at the 10% level, this only equates to about £130 per home. This does not seem unreasonable, given that average heating costs for those with gas central heating is probably in the region of about £400 a year.
But the comparison does not end there, as these fabric improvements include include a whole range of items, such as double glazing, solid wall and floor insulation, the cost of which would put them well beyond a budget of £5900.
Given a budget of £5900, I doubt whether annual savings would even be as much as £100, making the outlay totally uneconomic.
In terms of the macro economics, while getting unemployed back to work may have attractions in the short term, in the long run the plan would act as a brake on the national economy, simply drawing money, labour and resources away from more productive uses.
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June 11, 2020 at 07:36AM
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