Members of parliament have called for the Serious Fraud Office to investigate the UK’s home insulation sector, after thousands of householders suffered ruined homes, big financial losses and months of disruption from the “clear and catastrophic failure” of two Conservative government schemes.
More than 30,000 households were left with defects, some of them severe, including mould, water ingress and damage to the fabric of walls, with about 3,000 dwellings so badly damaged they presented immediate health and safety risks to occupants.
Households that had external cladding installed – numbering about 23,000 – bore the worst of the damage, with 98% damaged and in need of repair, alongside 29% of the homes fitted with internal wall insulation.
The schemes, called Eco4 and the Great British Insulation Scheme, were begun and mostly ran under the last Conservative government. The overarching energy company obligation, of which both schemes were part, has since been scrapped by Labour, and a new initiative – the warm homes plan, announced this week – will take over, funding the installation of solar panels and heat pumps as well as insulation.
In a report into the scandal published on Friday, the public accounts committee of MPs recommended an investigation into Eco4 by the Serious Fraud Office, and an overhaul of the way government handles home insulation. Geoffrey Clifton-Brown, chair of the committee, said: “[This] amounts to the most catastrophic fiasco that I have seen on this committee. The project was doomed to failure from the start.”
He blamed the way the scheme had been operated, with responsibility shared among several organisations that did not communicate effectively, and a failure to act when the problems started to emerge.
Clifton-Brown said: “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. The public’s confidence will have rightly been shaken in retrofit schemes given what has happened.”
The MPs said that Eco4 resulted in “the worst rate of failure we have seen in the chair’s approximately 12 years on the committee”, and blamed the Department for Energy Security and Net Zero, and other government agencies, for being “far too slow to act”.
Labour now faces additional bills to remedy the homes of those affected. Despite a “find and fix” strategy, only about 3,000 homes had been repaired by last October, when the National Audit Office examined the problem. Jonathan Bean, spokesperson for the charity Fuel Poverty Action, said: “Ministers need to focus on fixing the already damaged homes and ending the suffering of tens of thousands of often vulnerable people who live in them. Victims of botched retrofits are sick of vague promises – what they want is a public inquiry into this scandal and a guarantee their homes will be fixed.”
Under the Eco4 scheme, vulnerable people and those on low incomes were supposed to receive subsidised home insulation, paid for through additions to everyone’s energy bills.
Work done by insulation companies should have been covered by guarantees, but some firms have since folded, leaving householders struggling to have the damage made good. The committee found one case in which repairs cost more than £250,000; though most bills were far lower, from £250 to about £18,000.
In its warm homes plan, the government has also cut the target for heat pump installations from 600,000 a year to 450,000. One expert told the Guardian this could put the UK off track to meet its statutory carbon emission reduction targets.
The government rejected this conclusion. A spokesperson said: “We have set a fully realisable target for heat pump installations, supported by the necessary funding and enabling policies. We will set out our seventh carbon budget by June 2026, in line with our statutory duties.”
Martin McCluskey, minister for energy consumers, said: “We inherited a broken system from the previous government. It was not fit for purpose and had multiple points of failure. We are cleaning up this mess.
“Every household with external wall insulation installed under these two schemes are being audited, at no cost to the consumer. And we have been clear that no household should be asked to pay any money to put things right.
“Of all non-compliant properties found to date, over 50% have been remediated. We have also taken the decision to end the Eco4 scheme and instead put more investment through local authorities, which have a significantly better record of delivery.
“We are reforming the system of consumer protection to better protect people. We will establish a new Warm Homes Agency, bringing in a single system for retrofit work to provide stronger, formal government oversight and driving up quality.”
