Thousands of homes at risk of mould and damp after botched eco insulation, watchdog finds
A government-backed scheme to fit homes with external wall insulation has left thousands of households worse off by exposing them to damp, mold and other serious health hazards, the spending watchdog has found.
The National Audit Office (NAO) has said almost all homes fitted with insulation under the government’s Energy Company Obligation (ECO) scheme have major problems to be fixed due to weak government oversight.
Tens of thousands of households that should have benefited from the scheme designed to improve energy efficiency and reduce home costs are now waiting for repairs due to inadequate work.
The report found that approximately 98 percent of homes with external wall insulation installed under the government program (approximately 22,000 to 23,000 homes) had significant problems such as damp and mold that would cause problems and require work to fix.
The report said that 9,000 to 13,000 homes with interior insulation (about 29 percent of which had measures in place) also had significant problems that needed to be fixed.
A small percentage of installations (6 percent in the case of external insulation and 2 percent in the case of internal insulation) have problems that pose immediate health and safety risks, such as inadequate ventilation that can lead to carbon monoxide poisoning and electrical safety issues that can cause fires.
In response to the NAO’s findings, anti-fuel poverty campaigners warned that the system was “allowing cowboys through the front door” and called for this to be fixed to reduce energy bills and keep people warm.
NAO said the reason for the large number of low-quality installations under the program, where energy efficiency measures are covered from consumer bills, could be due to subcontracting to incompetent companies and individuals, businesses cutting corners and uncertainty over standards.
Although the Department for Energy Security and Net Zero (DESNZ) introduced a new consumer protection system in 2021, which included the appointment of TrustMark for the scheme, it failed to alert the department to significant issues with installation quality until October 2024.
The NAO said the ECO scheme had weak government oversight, an overly complex consumer protection system, funding arrangements for TrustMark that limited its ability to keep analytical systems fully operational until the second half of 2024, and inadequate auditing and monitoring.
In addition, Ofgem estimated in November 2024 that businesses had falsified claims for ECO installations in 5,600 to 16,500 homes, potentially claiming between £56 million and £165 million from energy suppliers and ultimately bill payers.
The NAO said DESNZ and Ofgem took action after TrustMark flagged issues including removing worst-performing installers and contacting potentially affected homes.
He called on the government to take responsibility for schemes such as ECO, even if they are funded by consumer bills, and clarify its approach to repairing faulty insulation, as well as its upcoming warm homes scheme.
The watchdog said DESNZ should also reform customer protection measures and publish annual data on fraud and non-compliance for renewal plans.
NAO chief executive Gareth Davies said: “ECO and other similar schemes are important to help reduce fuel poverty and meet the Government’s targets on energy efficiency.
“However, obvious errors in the design and installation of ECO and the consumer protection system led to poor quality installations and suspicions of fraud.
“DESNZ must now ensure businesses meet their obligations to repair all affected homes as quickly as possible. It also needs to reform the system to prevent this from happening again.”
Simon Francis, co-ordinator of the End Fuel Poverty Coalition, said: “The NAO report reveals a system that allows cowboys through the front door, leaving thousands of victims in misery and undermining public confidence in efforts to tackle the cold damp housing crisis facing many households.”
“We no longer need to abandon the system, we need to fix it,” he insisted, calling for the warm homes scheme to ensure quality, properly trained installers, independent inspections and rapid remediation if things go wrong.
Minister for Energy Consumers Martin McCluskey said: “Today’s report shows unacceptable, systemic failures to install solid wall insulation in these schemes which directly impact tens of thousands of families.”
He said the government was taking “decisive action” to protect households and ensure all poor solid wall insulation installations were repaired at no cost to the consumer.
“We are fixing the broken system left by the last government by implementing sweeping reforms to make this process clear and understandable, and in the rare cases where things go wrong, there will be clear lines of responsibility so consumers are guaranteed to have any problems resolved quickly,” Mr McCluskey said.
