PAC report: Green Homes Grant scheme “underperformed badly”

In a report published today the Public Accounts Committee says the Green Homes Grant Voucher Scheme “underperformed badly”, upgrading only about 47,500 homes out of the 600,000 originally envisaged and delivering a small fraction of the expected jobs. The project accounted for just £314 million of its original £1.5 billion budget, and £50 million of that was administration costs - more than £1,000 per home upgraded.

The PAC is also “not convinced that BEIS has fully acknowledged the scale of its failures with this scheme”. The scheme’s failure “continues government’s troubled record of energy efficiency initiatives and risks damaging the Department’s future efforts to harness both consumer and industry action to deliver Government’s net zero commitments”.

The Scheme was implemented as an urgent response to the COVID-19 crisis, aiming to support jobs at a time of significant risk for the economy while also reducing carbon emissions from homes – but the 12-week timescale to implement it was unrealistic and BEIS proceeded with it despite its own Projects and Investment Committee rejecting its business case.

The result was “a scheme with poor design and troubled implementation”. By August 2021, 52% of homeowners’ voucher applications were rejected or withdrawn, and 46% of installer applications failed. The Scheme’s primary aim was to support jobs but its design and duration limited its impact on employment, and its abrupt closure may have in fact led to redundancies.

Dame Meg Hillier MP, Chair of the Public Accounts Committee said:  “It cost the taxpayer £50 million just to administer the pointlessly rushed through Green Homes Grant scheme, which delivered a small fraction of its objectives, either in environmental benefits or the promised new jobs. We heard it can take 48 months - 4 years - to train the specialists required to implement key parts of a scheme that was dreamed up to be rolled out in 12 weeks. It was never going to work at this time, in this way, and that should have been blindingly obvious to the Department. That it was not is a serious worry. I am afraid there is no escaping the conclusion that this scheme was a slam dunk fail.

“We will need this massive, step change in the way our homes and public buildings are heated, but the way this was devised and run was just a terrible waste of money and opportunity at a time when we can least afford it.”

PAC report conclusions and recommendations

9. The Department’s failure to deliver a viable scheme has damaged confidence in its efforts to improve energy efficiency in private domestic homes. Government has previously implemented a number of energy efficiency schemes aimed at private domestic housing, for example The Green Deal and the Renewable Heat Incentive, and all have operated for varying timescales. This fragmented, stop-go activity has hindered stable long-term progress towards Government’s energy efficiency ambitions. The Green Homes Grant Voucher Scheme’s initially announced duration of only six months limited the number of installers who were willing to register for the Scheme, and its abrupt closure in March 2021 had significant negative impacts on some participating installers. Whilst the Department’s officials acknowledged the failure of the Scheme, it largely attributed this to the failings of the scheme administrator. We are not convinced that officials fully acknowledged the breadth and scale of what went wrong, which included a whole host of design and implementation issues. This contrasts with one of their Ministers who, in our view, more readily acknowledged the multiple causes of the Scheme’s difficulties in evidence to the Environmental Audit Committee. 

Recommendation: The Department needs to regain the confidence of consumers and industry if it is to realise the ambitions set out in the recently published Heat and Buildings Strategy. Alongside its Treasury Minute response to this report, the Department should: 

• set out the measures it will use to assess whether consumers are indeed opting to install measures to decarbonise their homes at a rate consistent with delivery of net zero; whether the supplier market is building its capacity quickly enough to match likely demand and, in particular whether sufficient steps are being taken to trainthe number of skilled workers that will be needed to install these measures;  
• spell out the interim milestones by which future progress should be judged; and    
• commit to reporting not only what has been done but also measures of what still needs to be done to deliver net zero, for example the number of homes in the UK yet to meet the expected insulation and heating standards. 

10. Despite clear warning signs, the Department proceeded with an unrealistic implementation timescale for the Green Homes Grant Voucher Scheme.The Department had twelve weeks to set up the Scheme from announcement to launch. It was confident this was possible based on previous schemes, and felt the pace was necessary due to the need to boost jobs at a time of economic risk and to start installations before winter. However, this limited timeframe put immense constraints on design, consultation and procurement, at a time when the Department’s own delivery capacity in terms of personnel and skills was under strain as it responded to the impact of Covid-19, for example supporting vaccine procurement, the various business loan schemes, as well as its other building decarbonisation schemes. This Committee has previously highlighted that Government should be willing to halt schemes when they are not ready for implementation. However, here the Department proceeded despite its own assessment, and that of the Infrastructure and Projects Authority, that the Scheme was high risk, and after its Projects and Investment Committee rejected the Scheme’s Full Business Case just prior to launch. The Accounting Officer’s decision to proceed was partly due to reasoning the Scheme would likely achieve value for money even if it did not spend its full budget. We question whether this justification was sufficient, given Managing Public Money principles require consideration of a programme’s feasibility, as well as its potential value for money. 

Recommendation: The Department should: 

• set out how it will improve its approach to testing and assuring the readiness of new programmes; and 
• where the Department is unable to take these actions, consider requesting a Ministerial Direction, bearing in mind its obligations under Managing Public Money to have regard for the feasibility of what is being proposed.

11. The Scheme’s design was overly complex and did not sufficiently address the needs of consumers and installers. The Department acknowledges that consumers and installers faced a poor customer experience when using the Scheme. There were delays to applications being processed, and by August 2021, 52% of voucher applications were eventually rejected or withdrawn, while 46% of installer applications failed. These high attrition rates were substantially the result of the Scheme’s complex design, with applications having to meet complicated requirements to be approved. Homeowners also struggled to find registered installers as many installers were unwilling to gain the necessary certification for a scheme lasting only six months. The Department should have consulted more deeply to understand the challenges that consumers and industry would face, and how it might address barriers to participation. The final administration costs are expected to be just over £50 million, 16% of the total Scheme spend, amounting to more than £1,000 per home upgraded. The Department states that these high costs were due to the need to account for the failings of the Scheme administrator, even though this figure includes a reduction of the contractor’s fee for their poor performance. A scheme of less complexity would have had administration costs more proportionate to the number of successful voucher applications. 

Recommendation: The Department should set out what steps it is taking to: 

• secure meaningful engagement with potential consumers in the design of new programmes and minimise the risk that the scheme design proves to be unworkable;
• ensure that the costs of administration are proportionate to the delivery of outcomes and the amount of public money at stake.

12. The creation of jobs was a priority for the Scheme, but the Department failed to maximise its impact on employment.The Scheme’s objectives of creating jobs and reducing carbon emissions were at times conflicting. The Department chose to prioritise measures under the Scheme which promised higher carbon savings. However, this limited the number of jobs that could be created, as often energy efficiency measures which required skills that were quicker for installers to recruit and train, or where there were larger supply chains, were not as accessible under the Scheme. Heat Pump installations, for example, were encouraged under the six-month Scheme but it can take much longer than that just to learn how to install them. The Department originally envisaged that the Scheme would support up to 82,500 jobs over 6 months, but its modelling now indicates that the Scheme will have supported 5,600 jobs over 12 months. We are sceptical whether these modelled figures are accurate, as they are not based on concrete evidence of the actual number of jobs supported, and also do not take into account the negative effects reported by installers from the Scheme’s sudden closure. The Department is confident that installers were able to find work through its other energy efficiency schemes once the Scheme closed, however evidence submitted by industry indicates that these schemes were often not accessible to smaller installation companies, and some firms had to make staff redundant as a result of the Scheme’s difficulties and its abrupt closure.  

Recommendations: In planning and implementing the new Boiler Upgrade Scheme, the Department should engage closely with potential suppliers to properly understand the challenges they may face to scale up, including training sufficient numbers of appropriately skilled workers, and ensure the availability of suppliers across the country. 

If the Department sets an objective to create jobs it should put in place robust processes for measuring the number of jobs actually created rather than just rely on estimates derived from economic modelling. 

13. The Department appointed a contractor without properly understanding whether it could deliver. The Department undertook a rapid procurement for a grant administrator, who would develop a digital voucher application system for the Scheme. None of the bidders for the contract thought it was possible to fully implement a digital system in time for the launch, and so the Department launched a complex scheme without an IT platform that had been fully developed and tested. The Department’s chosen grant administrator, ICF Consulting Services Ltd (ICF), subsequently struggled to implement the voucher application system, leading to greater amounts of manual processing being needed for applications, contributing to the delays in processing vouchers. The Department felt its procurement process was run successfully overall, despite appointing a contractor which could not deliver the system it wanted. Whereas other bidders thought fully implementing a system would take at least 15 weeks, ICF thought it could do it in six and a half weeks. It was unclear why the Department did not challenge ICF further as to why it felt it could deliver substantially faster than the other bidders. The Department recognised it should have had a better technical understanding of ICF’s proposed digital solution, which could have prevented some of the issues experienced subsequently. This was despite a specialist Cabinet Office review of the low-cost bid recommending the Department obtain a more detailed understanding of the proposed solution, which the Department did not do.

Recommendation: In its Treasury Minute response, the Department should set out how it will improve the technical scrutiny of bids during its procurements, to better assure the capability of suppliers and the practical feasibility of their proposals, particularly where a bidder is promising considerably more than others. 

14. The Department has persistently failed to learn lessons from previous energy efficiency schemes. The Committee has seen a number of domestic energy efficiency schemes which have failed to achieve their ambitions, including the Green Deal and the Renewable Heat Incentive. These both featured poor uptake by consumers due to their complex scheme design, and the Green Deal scheme also carried a disproportionately high administrative cost per home upgraded. The Department stated that the design of the Green Homes Grant Voucher Scheme did reflect lessons from previous schemes, particularly in its attempt to ensure value for money in delivering carbon impacts whilst minimising poor quality workmanship and fraud. Nonetheless, we are concerned that despite the Department retaining personnel with experience of previous initiatives, the Green Homes Grant Voucher Scheme suffered from many of the same issues that we have seen before. This calls into question how the Department maintains and uses its corporate memory, and whether it is truly learning lessons from the delivery of these schemes.

Recommendation: The Department should set out in its Treasury Minute response how it is embedding lessons learned from this scheme and previous schemes, and how it will ensure these are applied to future energy efficiency initiatives.