Mayors used to get their money from government as a scatter of separate grants, each with its own application and its own deadline. Seven of them now get a single Integrated Settlement instead: one lump of money covering several areas at once, agreed for several years and split into a handful of budgets. One of those budgets comes with a catch.

Every pound of retrofit money has to be spent trying to get something fitted to a house. It will pay nothing for the work of understanding how households decide and what gets in their way, designing different ways in, and testing which ones work.

Two kinds of money

Each budget arrives in two parts:

  • capital - which pays for the kit and the work of installing/building it.

  • revenue - which pays for the rest, research and evaluation among it.

A mayor can normally convert up to a tenth of a budget's capital into revenue.

However, retrofit has unique constraints. The policy document sets that out that retrofit is all capital and no revenue, and Greater Manchester's grant letter names buildings retrofit as the one exception to that conversion. It simply carries the rules of the schemes it replaced.

Fifteen per cent, and what it buys

The Warm Homes: Local Grant does allow a council spend up to fifteen per cent of the grant on everything around the works. It sounds promising, 15% is a bigger number than a tenth after all, but there is considerably less freedom.

Revenue budgets allow the flex to fund research and experimentation. Whereas the fifteen per cent stays capital, and all of it has to go on delivering the scheme as designed.

The guidance confirms that capital can be spent on project management, finding and recruiting residents, marketing and targeting. Training retrofit coordinators, property surveys, and aftercare so households know how to use what has been fitted.

That is a real budget, and some of it looks a lot like understanding residents. But every item on the list is still a delivery lever. It is all based on the assumption that current policy levers just need delivering at scale. Pull them harder and, in theory, more homes get done.

Nothing exists to find out why the household next door said no, or whether pulling harder was ever going to work on that street.

What the money will not buy

In May the Treasury added a Test and Learn annex to the Magenta Book, its own guidance on evaluation. It tells departments to test the riskiest assumptions before scaling, to run tight feedback loops between delivery and analysis, to tailor solutions to the needs of different places, and to stop what is not working rather than over-commit to it. The retrofit settlement pays for none of that.

The delivery teams we work with in Combined Authorities, through the Retrofit Policy Lab, are not short of ideas: innovative repayment mechanisms involving council tax, low barrier journeys to begin household electrification, and solving the logistical challenges faced by families with young children who cannot have builders in the house for months.

There is no real way to treat any of these ideas as a hypothesis: run the new approach alongside the current one, with enough households behind each to see which one people take up, stop the one that loses while there is still money to move, and write down what happened so the next authority starts from the answer rather than the beginning.

That is the comparison the Magenta Book asks for, and it is the part the fifteen per cent will not reach.

What the gap costs

The Warm Homes Plan puts up around £15bn over the Parliament, with more than £5bn of it aimed at low-income and fuel-poor households. The targets are up to five million homes upgraded and up to a million families out of fuel poverty by 2030.

Those low-income, fuel-poor households have the least slack of anyone: the least money to top up a grant, the least room to take four months of disruption, and the most to lose if the scheme is written in a form they cannot use.

There is also a group the low-income schemes leave under served. Preliminary analysis from the Lab, with the University of Leeds, puts around 2.5 million households in what it calls the missing middle: roughly one in five people in owner-occupied Britain, overwhelmingly families with children, earning too much to qualify for those schemes and too little to fund a retrofit alone. National schemes draw a single income line, and a single pensioner and a family of four on the same income land on the same side of it.

The Plan does have an offer for them: £7,500 towards a heat pump, and a cheap loan for the rest. That assumes what stops them is the price of borrowing.

The relational research behind the Lab says otherwise. Lucie Middlemiss and Mark Davis at Leeds, with their co-authors, argue that energy demand has to be understood through people's relationships and circumstances rather than as individuals weighing cost against saving.

In practice that means trust, timing, disruption and whatever else is going on in a household's life. People match a big project to an inheritance, a pension lump sum or a house move, not to an interest rate, and households who will not borrow are not waiting for cheaper credit. Whether a grant and a loan reaches 2.5 million of them is a real question, and the settlement gives a mayor no way to ask it.

Not testing costs money too. An approach designed around a national average will reach the people who are easiest to reach, and the offers declined, the assessments that lead nowhere and the homes left cold are all costs. They are simply costs nobody writes down.

The current devolved money will cover a council trying the same thing again. It will not cover a council working out why the first attempt failed, which is the only thing that stops it happening a third time.

All of this rests on assumptions that look reasonable and that nobody is funded to test in the places where they have to work.

Asking for place-based delivery while funding no place-based discovery leaves mayors accountable for a design they had no way to test.

What happens in the autumn

The National Audit Office reported on 1 July that some mayors think the targets they are measured against are still shaped too heavily by what Whitehall wants. A white paper is due this autumn, and ministers have promised more freedom to move money around inside the settlements straight away. Andy Burnham ran Greater Manchester through the first year of its Integrated Settlement and now runs the government deciding what the next ones contain. Nobody has said whether that will lift the retrofit exception.

Either of two changes would do it:

  1. Bring retrofit inside the same freedom as everything else, or

  2. devolve a small amount of revenue alongside it for designing and testing, judged on what a place learned rather than what it fitted.

Devolution was supposed to buy more than heat pumps. Greater Manchester can buy those perfectly well, and so can Whitehall. It was supposed to buy the thing a national scheme has no way of asking: what the people on one street will take up, and why the street next to it says no.

That is what an innovation lab is for. We run the Retrofit Policy Lab with partners at the universities of Leeds and York, and two years in, the missing middle is the sort of thing it turns up. No delivery budget would have found it, because no delivery budget was looking.

We want to be doing that work, and we would like a lot more of it done by other people too. A network of place-based experiments and research, sharing and compounded insights.

Retrofit gives up its answers only to teams who are allowed to try something, measure it honestly and publish what happened, including the times it does not work. The Treasury has now written that down as guidance. The white paper this autumn needs to enable this work, at scale.

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