It was meant to be a flagship policy, a national drive to make homes warmer, greener and cheaper to run. Instead, tens of thousands of households are now living with damp, mould and rot after government-backed insulation schemes went badly wrong.
A new report by the National Audit Office (NAO) has revealed that 98% of homes fitted with external wall insulation under the Energy Company Obligation (ECO4) and Great British Insulation Scheme need remedial work. Nearly a third of homes with internal insulation have similar problems.
For many families, what began as an energy-efficiency upgrade has become a health hazard.
A fix that made things worse
External wall insulation is designed to keep heat in and bills down. But when poorly installed, it traps moisture instead, turning walls into breeding grounds for mould. According to the BBC, homeowners have been left with peeling paint, crumbling plaster and, in some cases, serious respiratory problems.
The NAO found that over 1,000 homes now pose an immediate health and safety risk, with issues such as blocked boiler vents and exposed wiring. Behind those figures are real people, many on low incomes or disability benefits, who trusted that a government scheme would make their homes safer, not sicker.
How did it go so wrong?
The ECO programme was designed to tackle fuel poverty and reduce emissions by obligating energy suppliers to fund home upgrades. The government expected £280 million in annual energy bill savings from the scheme. But instead of savings, thousands of households have ended up paying the price for weak oversight, fragmented accountability, and suspected fraud.
The NAO says installers “gamed the system”, switching certification bodies to avoid tougher audits. Some firms overclaimed for work, while others were simply unqualified to do the job. Ofgem now estimates up to 16,500 homes may have been falsely logged as insulated, potentially costing between £56 million and £165 million.
Even the government’s own consumer protection framework, introduced in 2021 and overseen by TrustMark, failed to detect widespread quality problems until late 2024, long after reports of mouldy walls had hit the press.
Lessons not yet learned
The Department for Energy Security and Net Zero (DESNZ) now faces the challenge of ensuring affected homes are repaired — and that the system itself is reformed. The NAO has urged the government to take clear responsibility for its retrofit schemes, to report annually on fraud and compliance, and to clarify how repairs will be funded and managed.
Energy Minister Martin McCluskey has called the findings “unacceptable, systemic failings” and promised that repairs will be carried out at no cost to consumers. But for those already living with damp, illness and financial strain, that promise may feel like too little, too late.
A test of trust
Schemes like ECO matter. They exist to cut bills, fight fuel poverty and move the UK closer to net zero. But good intentions mean little without rigorous standards, skilled workers and clear lines of accountability.
The insulation scandal is more than a policy failure — it’s a breach of public trust. And until that trust is rebuilt, every promise of a “greener, fairer” home will be met with understandable scepticism.
