Letter to Chancellor of the Exchequer

by | Sep 16, 2021

In September, the Green Finance Institute convened organisations from the UK’s financial sector in support of an incentive to support housing retrofit, sending a letter to Chancellor of the Exchequer, Rt Hon Rishi Sunak MP, calling for an energy-adjusted Stamp Duty Land Tax (SDLT) to drive demand for energy efficiency works and further support the UK’s green home finance market.

Dear Chancellor of the Exchequer,

Re: A fiscal measure to drive demand for retrofitting and support the UK’s green home finance market

The finance sector stands ready to reaffirm the UK as the pre-eminent market for green finance. Alongside your announcement of a world-first Green Savings Bond we, the top UK mortgage lending institutions, believe that more can be done to give the public an opportunity to do their part. One of the biggest near-term opportunities is in greening the mortgage market and in doing so delivering on the build back better agenda. The UK finance sector is ready to fund the widescale decarbonisation of UK buildings, with over 16 mortgage lenders launching a green mortgage product since 2018. However, the limiting factor to market growth remains the extremely low levels of demand for retrofits.

As homes are responsible for 23% of the UK’s total emissions1 , structural reform of the housing market, where energy performance is reflected in property prices, is essential to drive demand for energy efficiency improvements and crowd-in private finance. Grant schemes have an important role to play, but on their own cannot be relied on to create and sustain a thriving retrofit market. That is why we are writing to encourage you to consider the introduction of a fiscal incentive to stimulate demand for energy efficient homes and galvanise the UK’s green home finance market – an energy-adjusted Stamp Duty Land Tax (SDLT).

An energy-adjusted SDLT provides a long-term structural driver that can embed energy efficiency, low carbon heating and climate resilience in the decision-making process of homebuyers. This will drive a value differential in the property market in favour of homes with better energy and emissions performance, creating an additional incentive for homeowners to retrofit their property. Importantly, an SDLT incentive can be designed to be revenue neutral to HM Treasury and structured to ensure that this continues, irrespective of how fast the housing stock’s energy efficiency improves. Further information on the policy and economic impact of this fiscal measure is available in a recent report by the UKGBC2. Grants would still be available for those unable to pay and with this added measure the Government’s net-zero targets are more achievable, as is bridging the £250 billion investment gap1.

As financial institutions who actively fund the UK’s housing market, we recognise the opportunities an energy- adjusted SDLT offers – both to support domestic market growth and global leadership in green home finance. In the near term, an SDLT incentive will galvanise demand for retrofitting and build confidence amongst lenders to innovate green financial products. Over the long term, the trend towards energy efficient homes will embed a sustainable price differential, reduce the systemic risk to financial services from stranded assets, and establish a world-leading green home finance market that can be exported globally.

While an energy-adjusted SDLT is not a ‘magic green bullet’ and needs to form part of a comprehensive policy and funding landscape, it does represent a powerful driver of sustained consumer demand for energy performance improvements. We, the financial services sector, are primed and ready to fund this increased demand and, with the UK Government hosting COP26 this year, the time to act is now.

Yours sincerely,
Rhian-Mari Thomas CEO
Green Finance Institute

Damian Thompson

Group Managing Director, Retail Finance

Aldermore Bank

Thomas Crane

General Counsel and Secretary

Coventry Building Society

Paul Ellis

Chief Executive

Ecology Building Society

Rhian-Mari Thomas


Green Finance Institute

James Hewitson

Head of Wealth Management & Insurance


Vim Maru

Group Director, Retail Bank

Lloyds Banking Group

Dawn Gunter

Chief Operating Officer

Monmouthsire Building Society

David Lindberg

CEO, Retail Banking

NatWest Group