The Public Accounts Committee said that the ‘level of non-compliance’ by installers on government-funded external and internal wall insulation schemes should be investigated for fraud, and that the government’s current response was ‘not credible’.
The PAC writes
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The Energy Company Obligation (ECO) intends to tackle fuel poverty. It obligates energy suppliers to achieve a minimum level of energy bill savings for households by funding the installation of energy efficiency measures in homes with poor energy efficiency ratings. Roles and responsibilities in delivering ECO are shared across government and a wide range of private sector organisations.
There are currently two ECO schemes: ECO4 and the Great British Insulation Scheme (GBIS). ECO4 focuses on multi-measure retrofits, in contrast with the single-measure retrofits offered under previous ECO schemes and GBIS. In 2021, the Department for Energy Security & Net Zero (the Department) introduced a new quality assurance and consumer protection system for retrofits, including higher standards that consider multi-measure retrofits in the context of the whole home.
However, a clear and catastrophic failure with the quality of installations of external and internal wall insulation in ECO4 and GBIS has left over 30,000 homes with defects. Of external cladding installed up to mid-January 2025, an estimated 98% (approximately 22,000 to 23,000) homes had defects requiring remediation, as does 29% of internal wall insulation. The Permanent Secretary told us that there were ‘serious failings at every level of the system that are systemic.’ The Department did not oversee these schemes in the way it should have done. These installations must be fixed to address immediate health and safety risks and correct defects that reduce the insulation’s performance, often creating the risk of water ingress, condensation and mould. This is the worst rate of failure we have seen in the Chair’s approximately twelve years on the Committee. Given that installations begin in 2022, the various organisations including Trustmark and government were far too slow to act.
Nearly one year after the problems emerged in October 2024, around 3,000 (out of more than 30,000) homes with major issues had been found and fixed. The Department expects all external wall insulation installed under the schemes will have been audited through its ‘find-and-fix’ programme within 15 months of when we took evidence in November 2025. This will require a serious scale-up of the work to check and fix homes. The Department plans to identify internal wall insulation defects through existing audit processes, rather than a comprehensive audit of all homes. We fear this approach may not be adequate.
We are concerned that households do not have sufficient assurance that the government will protect them from unaffordable repair bills. Ministers have been clear that no household should have to pay to fix the issues. The Department is relying on the defects being fixed by the original installer or being funded by installer guarantees, and it does not have a credible plan for how it will meet this commitment when this standard remediation process fails to fully cover the cost of repairs, but the Department is clear that no households should have to pay.
The Department designed the schemes in a way that exposes it to both poor quality work and fraud. It accepts there have been failures at every level of the system it designed. There was virtually no attention from senior officials and the Department did not know whether the scheme as a whole was or was not working for at least two years. The different organisations involved focussed on their own roles within the schemes, rather than taking a step back to critically assess the system and identify risks and design flaws. We were told that 38 installers or 81% of the external wall insulation market had been suspended. Following undertakings that they would fix their installations, 22 installers have been re-instated. Ultimately, the Department designed a system that is too fragmented and complicated–it was almost bound to fail. It is not clear to us why the government entirely redesigned the scheme when the previous one appears to have worked reasonably well.
As a result, schemes that were designed to reduce fuel poverty and improve energy efficiency have instead left some of the most disadvantaged households living in cold, damp or unsafe conditions and experiencing stress, poor mental health and financial costs as they seek repair. The Department must ensure that the faulty installations already in people’s homes are fixed as soon as possible to eliminate risks, minimise the extent of damage due to damp and mould, and to ensure that people do not suffer as a result of these schemes. As the Department considers the future of retrofit schemes in Great Britain, it must also reform the system to ensure consumers are truly protected and to restore the public’s confidence in retrofits. Ofgem stated that, so far, they have rejected installations worth £6.7 million and have identified 1.75% of the value of the scheme as fraudulent which is just below the Department’s tolerance threshold for fraud of 2%. We think it is inconceivable that with the high level of non-compliance the level of fraud will not be higher, and we think that the Serious Fraud Office should consider this matter.
Conclusions and recommendations
1. 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
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.
2. 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.1 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
a. In its Treasury Minute response, the Department should set out how it plans to scale-up its find-and-fix programme to meet the 15-month ambition and how it will find all the faulty internal wall insulation.
b. Given the severity of the issue for residents of affected homes, the Department should be seeking to deliver the find-and-fix programme within a much shorter timeframe and should update the Committee in writing every six months on progress with the programme and the rate of remediation of all external and internal faults in its Treasury Minutes.
3. 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
Given the urgency of this matter, the Department should write to the Committee within two weeks of this report:
a. with a credible plan for how it will ensure that no household will need to pay for the repairs—including for how many households it expects it will need to intervene to ensure their homes are repaired at no cost to them—how it will speed up the process for resolving disputes involving guarantees, and how it will ensure bespoke arrangements are agreed and implemented swiftly for repairs where costs exceed £20,000;
b. to confirm that it is now working with Companies House and The Insolvency Service to reduce the risk of incompetent and dishonest company directors closing and re-starting their businesses; and
c. to check that similar failings are not occurring in relation to other energy schemes.
4. 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
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.
5. 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
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.
6. 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
a. Given the likely role of fraud in the poor quality installations, the Department should refer the issue to the Serious Fraud Office to investigate the extent of fraud across ECO and bring criminals to justice.
b. HM Treasury should extend its requirement in Managing Public Money for a Fraud Risk Assessment on all new major areas of public spend to include levy-funded schemes instigated by the government, such as ECO.
c. In future schemes, the Department should ensure that one body is responsible for fraud prevention and detection at the system level, enabled by counter-fraud activities of and data from other organisations in the system.
d. HM Treasury should amend its guidance in Managing Public Money to recommend public bodies design fraud out of all new schemes as far as is sensible, and have one body responsible for fraud prevention and detection at the system level, enabled by counter-fraud activities of and data from other organisations in the system.
7. 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
a. The Department should give high priority to ensuring—and indeed should guarantee that within a reasonable period as defined by the Department and communicated to the Committee in the Treasury Minute response—all defective homes are remediated even after the current scheme has ended.
b. The Department should reform its system of consumer protection in a way that rebuilds the public’s confidence in retrofits. This should address the issues highlighted by the ECO failures.
c. The Department should ensure that, in all future schemes, those tasked with checking the quality of design and installation are entirely independent from those doing the design and installation, are accountable, and have the resources and competency to carry out this role.
See also
- IHBC NewsBlog on IHBC’s 2025 Parliamentary Briefing launches research-led ‘5 Commitments to Help Heritage Skills in Conservation’… From Crafts in Crisis to Rubbish in Retrofit
- BBC: https://www.bbc.co.uk/news/articles/c8011kkdn5jo
- Sky: https://news.sky.com/story/how-home-upgrade-scheme-went-from-fairytale-to-worst-experience-of-my-life-13497801
