A report from the National Audit Office (NAO) assessing the government’s Energy Company Obligation (ECO) scheme said the failures were down to “poor-quality installations, weak government oversight and inadequate audit and monitoring”.
The ECO scheme was created by the Department for Energy Security and Net Zero (DESNZ) and administered by Ofgem to fund the installation of energy-efficiency measures in homes.
However, 98% of the 23,000 homes with external wall insulation fitted and 9,000-13,000 – or 29% – of homes with internal insulation need remediation due to poor work, the NAO found. Further, a small proportion of these installations pose “immediate health and safety risks”, such as exposed live electric cables and insufficient ventilation for the gas boiler.
It said an under-skilled workforce, uncertainty around standards and businesses cutting corners may have resulted in these faulty installations.
The NAO added that DESNZ set up a consumer protection system for the scheme in 2021, which included the appointment of TrustMark as its quality scheme. However, issues with the quality of installations were not raised until October last year, following media reports on individual cases of bad mould in homes.
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The NAO said some installers were also able to “game” the system due to poor oversight, and businesses are estimated to have falsified claims for ECO installations in between 5,600 and 16,500 homes, potentially claiming between £56m and £165m from energy suppliers.
The NAO said there was not enough data to determine the level of fraud committed through the scheme.
Once aware of the problems, DESNZ and Ofgem asked certification bodies and scheme providers to suspend installers, informed affected households, and made immediate changes to the consumer protection system.
There are currently two ECO schemes operating: ECO4, which runs from April 2022 to March 2026 and is under consultation to be extended by 6-9 months, and the Great British Insulation Scheme (GBIS), with broader eligibility, which runs from March 2023 to March 2026.
The NAO has recommended that DESNZ details how and when faulty installations can be repaired and reform the consumer protection system.
DESNZ will also apply lessons learned to future schemes, such as the Warm Homes Plan.
The NAO has also suggested that DESNZ takes clear responsibility for schemes even when they are funded through consumers’ electricity bills, and clarifies its approach to repairing installations. It also recommends publishing annual reports on the level of fraud and non-compliance in each retrofit scheme.
Gareth Davies, head of the NAO, said: “ECO and other such schemes are important to help reduce fuel poverty and meet the government’s ambitions for energy efficiency.
“But clear failures in the design and set-up of ECO and in the consumer protection system have led to poor-quality installations, as well as suspected fraud.
“DESNZ must now ensure that businesses meet their obligations to repair all affected homes as quickly as possible. It must also reform the system so that this cannot happen again.”
The government must act ‘urgently’
Responding to the report, Paula Higgins, CEO of the HomeOwners Alliance, said the findings were “an absolute disgrace”.
She added: “Once again, public money has been used to fund cowboy builders, leaving homeowners with damp, mouldy and unsafe homes. The National Audit Office report lays bare how weak oversight and a broken consumer protection system have failed the very people these schemes were meant to help.
“It’s yet more evidence that the government must act urgently to regulate and license builders and installers – something we have long campaigned for. Without proper regulation, homeowners will never have the confidence to invest their hard-earned money in improving their homes.”
She said the TrustMark model was “not working” as its system of sub-licensing scheme providers and “fragmented oversight” had failed.
Higgins added: “We fear this is only the tip of the iceberg. External and internal wall insulation account for just 8% of installations under these schemes, leaving 92% still unexamined. We urge the government to take action on these other measures – and in particular to look at spray foam insulation, which extends beyond government-endorsed schemes. We continue to hear alarming stories of homeowners left with unmortgageable properties due to shoddy installation and weak oversight. Despite writing to ministers twice, we have received no meaningful response. Unless swift action is taken, this risks becoming the next major scandal.
“In the meantime, we are deeply concerned for the stress and upheaval this will cause affected homeowners.”
