Abject failure of government insulation scheme leaves households financially exposed, PAC warns
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- Some left unprotected from paying to fix issues left by home
retrofit scheme which failed at every level and left 30,000+
properties with defects - Serious Fraud Office should be called in
to investigate the extent of fraud involved in poor quality
installations Households left with defective homes by
government's failed energy efficiency installation initiative may
still be exposed to unaffordable repair bills. In a new report on
the catastrophic scheme which...Request free trial
- Some left unprotected from paying to fix issues left by home retrofit scheme which failed at every level and left 30,000+ properties with defects - Serious Fraud Office should be called in to investigate the extent of fraud involved in poor quality installations Households left with defective homes by government's failed energy efficiency installation initiative may still be exposed to unaffordable repair bills. In a new report on the catastrophic scheme which left more than 30,000 homes with defects, the Public Accounts Committee (PAC) finds a system with serious failings at every level. The National Audit Office found last year that 98% of external and 29% of internal wall insulation installed up to mid-January '25 were defective, leaving immediate health and safety risks. Given the likely role of fraud that the PAC has found in the poor-quality installations, the report also takes the unusual step of recommending government refer the issue to the Serious Fraud Office (SFO). The failures in quality of insulation installation under the Energy Company Obligation (ECO) are clear. Ministers said in the aftermath of these findings that no household should have to pay to fix these issues, but the PAC's report warns that households do not have real assurance that they will be covered. This is due to the fact that the original installer is liable for fixing issues, with costs up to £20k covered by guarantee if they fail to do so or cease to trade. However, costs will sometimes exceed the guarantee cap; the PAC is aware of cases with damage worth over £250k, and is sceptical that the original installers and guarantee providers will be able to withstand the potential scale of claims. The report calls on government to live up to the assurances that the Committee was given that there will be a credible plan for how it will ensure that no household will need to pay for the repairs - especially in light of the announcement last year ending ECO, after which the retrofit market may not be big enough to ensure enough installers remain viable businesses able to complete the works. TrustMark, the government-endorsed quality scheme, has an ambition to audit all relevant homes within 15 months of Nov '25. The report finds that, by mid-Sept '25 and nearly a year after the problems emerged, less than 10% of the estimated 30k homes affected had been found and fixed. The PAC fears government may be overconfident in expecting existing arrangements to identify faulty insulation are adequate. Given how vital it is for residents to fix these severe issues as soon as possible, as health and safety risks are immediate and the likelihood of damage occurring increases with time, the report calls on government to articulate how it will scale up its find-and-fix programme and deliver it in a much shorter timeframe. The report further finds that it is likely that the known levels of fraud involved in ECO are a significant underestimate. No single overall organisation in the system had overall responsibility for tackling fraud, or the data to make it effectively able to do so. Installations worth 1.75% of the scheme value have been identified as fraudulent by Ofgem, but given the high levels of non-compliance in the scheme, the PAC suspects the true level of fraud to be much higher. The report recommends that the Department should refer the matter to the Serious Fraud Office to investigate the extent of fraud across ECO, in order that criminals may be brought to justice. The PAC's inquiry establishes a picture of clear systemic failure. Virtually no attention was paid to it by senior officials at the Department for Energy Security & Net Zero (DESNZ), who took two years to recognise the scale of the problems. This very poor overall supervision led to many avoidable faulty installations. Its system of quality assurance and consumer protection was overly complicated to the point of being almost bound to fail. When it comes to the expert organisations within this system, TrustMark accepted it should have realised the levels of risk involved much sooner, and the United Kingdom Accreditation Service* apologised for its role. The PAC notes that it is not good enough for organisations holding so much expertise and knowledge to say they delivered on their specific responsibilities and instead blame the system of which they were a key part. The PAC notes that the recent announcement of Warm Homes Initiative is likely to lead to scaling up of other energy efficiency installations such as solar panels. It is vital that this is accompanied by a proper oversight of quality, that was so lacking here. Sir Geoffrey Clifton-Brown, Chair of the Public Accounts Committee, said: “I have served on the Public Accounts Committee for twelve 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. Indeed, our report finds the project was doomed to failure from the start. 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. “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.” *Notes to editors TrustMark is a private not-for-profit company which acts as a government-endorsed quality scheme for energy efficiency retrofits. The United Kingdom Accreditation Service (UKAS), a private not-for‑profit company, is the UK national accreditation body. It accredits the ‘certification bodies' that certify that installers meet the required installation quality standards. PAC report conclusions and recommendations A clear and catastrophic failure with external and internal wall insulation installations under ECO4 and GBIS has left more than 30,000 homes with defects. The Department estimates that 98% of external wall insulation and 29% of internal wall insulation installed under the schemes up to mid-January 2025 have major issues that need remediation. Within this, 6% and 2% respectively have defects that pose immediate health and safety risks, such as inadequate ventilation. The remaining installations have defects that will negatively affect the insulation's performance, and which often create the risk of water ingress or condensation, and subsequently mould. Between 32,000 and 35,000 homes fitted with insulation up to mid-January 2025 are likely to be affected, with an unquantified number of faulty installations since. The Department intended for these schemes to reduce fuel poverty and improve energy efficiency, but instead some of the most disadvantaged households are at risk of living in unsafe, damp or mouldy homes due to the schemes, and experiencing stress, poor mental health and financial costs as a result. Recommendation 1. The Department should not allow any more external or internal wall insulation to be installed through its retrofit schemes unless it can ensure that every new project will be supervised and checked by someone who is independent, competent and accountable. Nearly one year after the problems emerged, around 3,000 homes with defects had been found and fixed out of the more than 30,000 homes estimate to be affected. TrustMark, the government-endorsed quality scheme, did not notify the Department of high levels of faulty installations of external wall insulation until October 2024, more than two years after the start of ECO4 in April 2022. It highlighted similar concerns with internal wall insulation in November 2024. By mid-September 2025, nearly one year later, less than 10% of the estimated total number of affected homes had been found and fixed. TrustMark will oversee the programme to find and fix the remaining homes with faulty external wall insulation, of which it estimates there are around 20,000 as of November 2025. It expects to have audited all relevant homes (providing access is granted) within 15 months of when we took evidence in November 2025. TrustMark and the retrofit sector face a serious challenge in scaling-up audit activities at the pace necessary to meet these timescales. The Department plans to identify faulty internal wall insulation through existing audit processes, but we fear it may be overconfident in expecting this approach to be adequate. It is vital that the remaining homes with defects are found and fixed as soon as possible. As waiting times increase, the likelihood of damage occurring increases, and there are immediate health and safety risks that need urgent attention. Recommendation 2.
Households do not have real assurance the government will protect them from unaffordable bills when the original installer or guarantees do not cover the cost of repairs. Ministers have stated that no household should have to pay to fix the issues. The original installer is liable for fixing the installation and costs up to £20,000 should be covered by a guarantee when the installer has ceased to trade or fails to remediate. This process leaves some households unprotected. Remediation costs will sometimes exceed the guarantee cap. It should normally cost between £250 and £18,000 per home to correct the installation, but in the worst case we are aware of it cost over £250,000 to fix the defects and resultant damage. We are sceptical that the original installers and the guarantee providers will be able to withstand the potential scale of claims. Households have not yet claimed on guarantees in large numbers, but not all installers are complying with the remediation process, and some company directors are closing and restarting their businesses to avoid remediation responsibilities. The Department plans to bring ECO partners together to find bespoke solutions for the "very small number" of households it anticipates will not be sufficiently covered under standard processes. We find neither the Department's proposed solution nor its downplaying of the likely scale of the problem at all credible. Since we took evidence in November 2025, the government has announced that it will end ECO. There will be no additional obligation beyond the existing ECO4 and GBIS targets and no levy on bills from April 2026, although the Department is yet to confirm whether it will extend the period for suppliers to meet their existing ECO4 obligations beyond March 2026. We are concerned there may not be a big enough retrofit market once ECO ends to ensure enough installers remain viable businesses able to complete the remediation. Recommendation 3. Given the urgency of this matter, the Department should write to the Committee within two weeks of this report:
The Department's senior officials took two years to recognise the scale of the problems, which led to many faulty installations that could have been avoided. This is unacceptable and demonstrates very poor overall supervision. The Department acted in October 2024 when TrustMark informed it of analysis indicating high levels of non-compliance with quality standards in external wall insulation. TrustMark only developed the analytical capabilities for interrogating its data and producing this kind of analysis in the latter half of 2024 - prior to this it did not have the resources or systems to oversee what was happening on the ground. The Department should have done the due diligence on this before Trustmark were appointed to this role, However, the Department had access to other information that should have alerted it to the potential issues much earlier given that the ECO4 scheme started in April 2022. For example, TrustMark told us it had been sharing the results of its audits with the Department from 2022 and that when it started to identify the increased risk from 2023 into 2024, it undertook more audits to better understand the level of risk. The Department's failure to take minutes of its meetings with TrustMark meant it was unable to defend its position that it had not been alerted sooner. The Department also had risks to quality, assessments and standards on its programme risk register since November 2022 but did not take any proactive steps to prevent the risks materialising in the first place or escalate the risks appropriately. The Department gave the scheme virtually no senior level attention and should have carried out far more investigations much sooner. Its poor oversight of ECO4 and GBIS meant that senior leaders had assumed the quality assurance system was working when it was not. Recommendation 4. The Department should review its risk management and internal escalation systems so that issues identified within specific schemes are escalated swiftly and appropriately. This should apply equally to schemes funded through consumer levies as well as those directly funded by the taxpayer. The Department's system of quality assurance and consumer protection was far too complicated, and organisations within it focused too much on their own tasks rather than whether the system was protecting consumers. The ECO schemes and the retrofit quality assurance and consumer protection system combine to make a system that is too layered, fragmented and complicated. The Department accepts there were "serious failings at every level" and the system "has not provided the protection that consumers deserve". Responsibilities were unclear and organisations focussed on their individual roles within the complex system, rather than taking a step back to critically assess the system and identify risks and design flaws. For example, none of the expert organisations involved spotted that the move from a single-measure to multi-measure scheme would add delivery complications and therefore risk. TrustMark accepts it should have realised much sooner that the system design under-estimated the level of risk involved. The United Kingdom Accreditation Service (UKAS), which accredits the retrofit installer certification bodies, apologises for its "role within the system". We welcome the organisations accepting some responsibility, but it is not good enough for organisations holding so much expertise and knowledge to say they delivered on their specific responsibilities and instead blame the system of which they were a key part. Recommendation 5. The Department should publish an annual report to Parliament on all its retrofit schemes, their level of non-compliance and estimated fraud, and whether or not the schemes are working as intended. The Department did not give the risk of fraud appropriate priority, and it is likely that the known levels of fraud are a significant under-statement of the true level of fraud. No single organisation has overall responsibility for preventing and detecting fraud on ECO4 and GBIS. The Department did not carry out a fraud risk assessment during the design of ECO4 and the ownership of some known fraud risks was agreed only in October 2025. Ofgem's role in relation to fraud is limited to progressing counter-fraud investigations where allegations have been made. Yet no organisation is responsible for pro-actively looking for fraud, nor holds all the data it would require to do so effectively. Ofgem has identified installations worth 1.75% of the scheme value as fraudulent but, given the above, we suspect the true level of fraud to be much higher and above the Departments tolerance threshold of 2%. If the Department had paid more attention to preventing and detecting fraud, it would likely have avoided some of the poor quality installations too. We suggest that the Serious Fraud Office should look at this case. Recommendation 6.
The serious failings to protect consumers on these schemes risk undermining confidence in all the Department's retrofit schemes.The Department believes it is rebuilding confidence through the steps it has taken to date, such as suspending 38 installer businesses, implementing a "robust" reinstatement process, and requiring retrofit coordinators to visit each site in person. We are extremely sceptical that the changes so far are sufficient, especially given the low level of remediation that has taken place to date. For example, there is still no requirement for the retrofit coordinator to be independent of the installer, so the person who is meant to check the retrofit has been completed to the correct standard can be appointed by the installer they are assessing. The Department needs to make further changes before it can be confident there will be no more faulty installations under the current system. Since we took evidence in November 2025, the government announced that it would not continue ECO after the current schemes end, but that it would continue to invest in tackling fuel poverty through its Warm Homes Plan. It is vital, given the Departments strong statement that in the last resort it will stand by householders to ensure their homes are remediated that high priority is given to this pledge even after the scheme ends. The Department accepts that wholesale reform of the system is ultimately required to ensure customer protection and restore the public's confidence in retrofits. It intends to deliver this reform in line with three principles: the system must be simpler and clearer; there must be stronger central oversight; and there must be clear accountability, redress and remediation when things go wrong. The public have a right to expect that where work is funded by government grant that the government effectively guarantee the work will be done correctly and put right if not. Recommendation 7.
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