In its report, the Public Accounts Committee (PAC) said there were failures in the quality of insulation installation carried out through the Energy Company Obligation (ECO) and there were “serious failings at every level”.
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.
There are two initiatives, the ECO4, which runs from April 2022 to March 2026, and the Great British Insulation Scheme, which runs from March 2023 to March 2026.
Last year, the National Audit Office (NAO) found that 98% of external and 29% of internal wall insulation installed up until January last year was defective and caused “immediate health and safety risks”.
It said the scheme was designed in a way that exposed it to both poor-quality work and fraud, while neither senior officials nor the DESNZ gave it enough attention to determine whether the scheme was working for at least two years.
The new-build energy advantage
Sponsored by Halifax Intermediaries
The committee said this poor oversight meant senior leaders assumed the quality assurance system was working when it was not. It added that organisations were mainly focused on their own tasks rather than the protection of consumers, because the system was “too layered, fragmented and complicated”.
Households exposed to costs
Ministers said households should not have to pay to remediate these issues, but the PAC’s report has warned there was no assurance that the costs would be covered. This is because the original installer is liable for fixing issues, and costs are covered up to £20,000 by guarantee if they fail to do so or cease trading.
However, the report found that some costs exceed the guarantee cap and uncovered cases of damage worth over £250,000. The PAC said it was unsure that the original installers and guarantee providers would be able to withstand the scale of claims.
The committee said the government should reassure households that there is a plan to cover the cost of repairs, particularly now that the ECO scheme has ended.
The end of the scheme was announced at the end of last year, with no levies on consumer bills from April 2026. However, the DESNZ has not formally confirmed whether it would extend the period for suppliers to meet their existing obligations beyond March.
The PAC said the government may be “overconfident” in expecting existing arrangements to identify fault insulation.
Trustmark was enlisted to audit affected homes within 15 months of November 2025, but by mid-September and almost a year since the problems were revealed, less than 10% of impacted homes have been identified and remedied.
The committee said the health and safety risks meant the government should identify these homes quickly and recommended scaling up its programme to carry out these repairs faster.
Fraud found in the ECO scheme
There was also evidence of fraud, and the PAC has recommended that the government refer this to the Serious Fraud Office (SFO).
The committee said the level of fraud involved was likely to be underestimated, as no organisation in the scheme was solely responsible for tackling fraud or had the data to do this.
Some 38 installers – or 81% of the external wall insulation market – were suspended, and after undertakings to fix installations, 22 have been reinstated.
The PAC believes that the level of fraud is significantly higher than £6.7m, or the 1.75% of the scheme value that has been discovered.
The committee said that the recent Warm Homes Plan announcement meant more energy-efficiency installations would take place, and it was necessary that this should come with the proper oversight of quality that was not present during the ECO scheme.
Too slow to act
The report said that given installations started in 2022 and problems were not identified until late 2024, various organisations, including TrustMark and the government, were “far too slow to act”.
TrustMark said it should have realised the risk involved in the scheme sooner, while the United Kingdom Accreditation Service (UKAS), which accredits the retrofit installer certification bodies, apologised for its “role within the system”.
The ‘most catastrophic fiasco’
Sir Geoffrey Clifton-Brown, chair of the PAC, said: “I have served on the Public Accounts Committee for 12 years. In all that time, a 98% failure rate in a public sector initiative amounts to the most catastrophic fiasco that I have seen on this committee.”
He said the project was “doomed to failure from the start”, adding: “Government behaved inexplicably in redesigning a similar scheme, which was working reasonably well, into a highly complex number of organisations with siloed responsibilities, which did not respond to failures anything like quickly enough to prevent damage being done to people’s homes.”
Clifton-Brown said: “Potentially thousands of people are now living with health and safety risks in their homes, and despite government’s protestations, we have nowhere near enough assurance that they are not financially exposed to unaffordable bills to repair the defective works.
“All involved in the system must now move at far greater pace to make good. The public’s confidence will have rightly been shaken in retrofit schemes given what has happened, and government now has a self-inflicted job of work on its hands to restore faith in the action required to bring down bills and reduce emissions.
“Finally – this committee’s remit is financial scrutiny. We are not a law enforcement body. The sheer levels of non-compliance found here make it clear to us that these matters should be referred to the Serious Fraud Office, and our report recommends as such.”
