Thousands of homes fitted with insulation under a flagship government scheme now need major remedial work, or risk damp and mould, the public spending watchdog has warned.
A damning report by the National Audit Office (NAO) said “clear failures” in the Energy Company Obligation (ECO) scheme to tackle fuel poverty and pollution had led to low quality installations and even potential fraud.
It blamed incompetent subcontractors and weak monitoring and government oversight for the issues, which in extreme cases could cause fires.
Fuel poverty campaigners warned the system had “let cowboys through the front door”, saying it must be fixed to bring down energy bills and keep people warm.
Almost all homes – some 98%, affecting 22,000 to 23,000 properties – fitted with external wall insulation under the ECO are affected, the NAO said.
A further 29% of homes with internal wall insulation – around 9,000 to 13,000 dwellings – also face major issues that need fixing.
A small percentage of homes – 6% with external insulation and 2% with internal – put people in immediate danger, such as poor ventilation that could cause carbon monoxide poisoning, and electrical safety issues that could start fires.
ECO is a scheme that obliges energy companies to pay for energy efficiency measures in vulnerable households out of consumer bills.
Gareth Davies, head of the NAO, said ECO is “important to help reduce fuel poverty and meet the government’s ambitions for energy efficiency”.
But “clear failures in the design and set-up” had led to “poor-quality installations, as well as suspected fraud”, he added.
‘Gaming the system’
The report says the reason things had gone so badly wrong could be down to work being subcontracted to individuals and firms who are not competent or certified, uncertainty over standards, and businesses “cutting corners” or “gaming the system”.
The energy regulator Ofgem last year estimated businesses had falsified claims for ECO installations in between 5,600 and 16,500 homes.
That means they could have claimed between £56m and £165m from energy suppliers – ultimately paid for by bill-payers.
More than 20,000 homes are said to be affected. File pic: iStock
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Martin McCluskey, the government minister for energy consumers, criticised the “unacceptable, systemic failings” that had affected thousands of families.
He added: “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.”
The government urged households to take up the free audit that will be offered in a forthcoming letter, and said installers would be forced to remedy the issues free of charge.
However, insulation has the potential to vastly improve homes, analysts pointed out.
Jess Ralston from energy think tank ECIU said: “The majority of households that have benefitted from insulation schemes have lower bills and warmer, healthy homes, particularly during the early years of the gas crisis when the UK’s poor quality housing stock was one of the reasons we were so badly hit compared to other European countries.”
Simon Francis, co-ordinator of the End Fuel Poverty Coalition, said: “Insulation and ventilation, when done properly, are among the safest and most effective ways to bring down energy bills and keep people warm.”
But the report had revealed a “system that has let cowboys through the front door, leaving thousands of victims living in misery and undermining public trust”.
Sue Davies, Which? head of consumer protection policy, called it “a damning indictment of a failed scheme, where poor oversight has allowed rogue traders to cause huge damage to people’s homes and lives”.
She said the government must take swift action to rectify the damage, as well as ensuring “there is no repeat of this scandal by putting in place robust consumer protections and effective oversight”.
