Failing fixtures and fraud: Government energy schemes slammed in new report

Almost all external wall insulation and a third of internal wall insulation fitted under Government-funded schemes will need replacing, it was revealed today. 

A damning report from the National Audit Office reveals tens of thousands of homes will need repairs to correct failed installations likely to cause dangerous damp and mould, which were funded by the Government’s ECO and Great British Insulation Scheme (GBIS).  

It also highlights suspicions over fraud within the ECO scheme, with evidence some retrofit businesses have been overclaiming for work.  

The revelations raise serious questions over the Government’s proposals to introduce new Minimum Energy Efficiency Standards (MEES) in the private rented sector in the next two to four years – not least as they identify an under skilled workforce, confusion over standards and corner-cutting as reasons for the catastrophic failures. 

What are the funding schemes involved? 

The Great British Insulation Scheme (GBIS) is a government-backed initiative designed to improve the energy efficiency of homes - particularly those with lower energy performance ratings, focussing on insulation upgrades - with ECO offering grants for low-income and vulnerable households. 

The funding schemes are administered by the Department for Energy Security and Net Zero (DESNZ) and delivered by energy companies and TrustMark, a government-endorsed quality scheme. 

What does the report say?  

The report reveals that:  

• DESNZ and Ofgem believe that nearly all external wall insulation and around a third of internal wall insulation fitted under ECO4 and the Great British Insulation Scheme (GBIS) have major issues requiring  remediation. This totals up to 36,000 homes.

• There are no specific requirements on energy suppliers when it comes the quality of the retrofitting they are paying for.  

• Whilst other domestic retrofit measures and schemes can 'occasionally 'fail to meet quality standards, DESNZ believes they do not have the same 'serious and systemic' failures as ECO4 and GBIS external and internal wall insulation. 

• In 2021, DESNZ introduced a new consumer protection and quality assurance system  for ECO that failed to warn of significant issues with external and internal wall insulation until late 2024.  

The report says possible explanations as to why so many installations were carried out to such a poor standard include:  

• An under-skilled workforce, with work being subcontracted to individuals and firms who are not competent or certified.

• Uncertainty over which standards apply to which jobs.  

• Businesses ‘cutting corners’ when undertaking design and installation work. 

It says the failings are down to: “poor-quality installations, weak government oversight and inadequate audit and monitoring, which the Department for Energy Security and Net Zero (DESNZ) believes has led to tens of thousands of households needing repair work to correct major issues that will cause problems such as damp and mould.” 

The costs

Remediation costs vary between £250 and £18,000 per property, depending on the scale of damage. In extreme cases, repair costs have reached £250,000 due to severe damp, mould, or structural rot. 

Ofgem estimates that up to 16,500 homes may have been subject to false or exaggerated claims, worth up to £165 million. 

Shambolic 

NRLA chief executive Ben Beadle said: “This shambolic state of affairs is something that should never have been allowed to happen and it is horrifying to think that these failures, some of which have been flagged as urgent health and safety risks, have been facilitated and funded by government-backed schemes. 

“Looking to the future, this flags just how unworkable the government’s MEES proposals are in their current form. There are currently 2.5 million homes in England and Wales that will likely fall below the proposed minimum C rating. 

“There is also a shortfall of 250,000 skilled tradespeople. 

“It simply isn’t possible for the high-quality improvement works needed to be carried out in the timeframes outlined - currently 2028 for new tenancies and 2030 for existing ones – not least at a time when remedial works are needed on hundreds of thousands of homes.  

“The Government needs to go back to the drawing board and come up with fair, workable proposals and revised timescales that will give landlords the confidence to know that the work they are paying for will meet robust and clearly communicated standards.” 

What happens now? 

The National Audit Office (NAO) has now recommended DESNZ sets out how and when affected households can have faulty installations repaired, and reforms the consumer protection system to prevent it happening again.

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.” 

Minister for Energy Consumers Martin McCluskey said: “Today’s report shows unacceptable, systemic failings in the installation of solid wall insulation in these schemes, which have directly affected tens of thousands of families. 

“Having inherited a flawed system of oversight and regulation established by the previous government, this Government has taken decisive action to protect households and ensure all poor installations of solid wall insulation are fixed at no cost to the consumer. 

“People should not be expected to navigate a complex web of organisations when they want to improve their homes - and with this Government, they won’t. 

“We are fixing the broken system the last Government left by introducing comprehensive reforms to make this process clear and straightforward, and in the rare cases where things go wrong, there will be clear lines of accountability, so consumers are guaranteed to get any problems fixed quickly.” 

More information 

To read more about the Government's proposals on the introducion of new Minimum Energy Efficiency Standards - and the NRLA's calls - click here.

To read the National Audit Office report in full click here.