Almost £500m in taxpayer funding is being quietly pumped into a failed green scheme linked to fraud and shoddy workmanship.
The additional funding will be used to compensate energy companies who have overspent on the Energy Company Obligation (ECO) 4 scheme, but fuel poverty charities argue no more public money should be spent until “systemic failures” are solved.
Tens of thousands of households are dealing with problems including damp, mould and faulty heating systems due to shoddy workmanship carried out by ECO4 installers.
At least £165m is believed to have been fraudulently claimed by cowboy firms under ECO4, which has provided grants for insulation, heat pumps and solar panels since 2022.
The i Paper has revealed how companies were able to milk money out of the scheme by forging signatures and lying on forms.
Companies as far away as Pakistan were able to sign off on building projects under the system, which has been criticisied for its lack of regulatory oversight.
ECO4 projects are paid for by energy companies who raise the money via a levy on customer bills. The budget for the scheme was £1.5bn between 2022 and 2026.
At last Autumn’s Budget, Rachel Reeves announced she was scrapping ECO4, and replacing it with a new scheme called the Warm Homes Programme.
However, the Government is now changing the rules to allow taxpayer funding to be spent on ECO4 as energy companies have spent beyond their £1.5bn budget.
According to the Government, this overspend is due to a variety of factors including inflation. However, DESNZ refused to tell The i Paper whether it calculated the overall cost of fraud and defective work.
Households across the country have been left dealing with issues including damp, mould and faulty heating systems following ECO4 installations (Source: Supplied)It will be the first time taxpayer, instead of billpayer, money has been used on ECO4.
The Government has said that without the money from Treasury, Ofgem would be legally required to increase energy bills to compensate firms for their overspend.
However, charities supporting households dealing with botched ECO4 upgrades say ministers should stop funding the scheme and prioritise supporting victims of bothched upgrades.
“It is shocking that the Government is planning to give the energy firms and contractors even more money for ECO4, to help cover up the widespread fraud and failures,” said Jonathan Bean from Fuel Poverty Action.
“Any money should be spent on fixing damaged homes and helping victims.”
The End Fuel Poverty coalition, an alliance of more than 100 groups including Age UK, Mencap, local authorities and trade unions, has opposed the Government’s decision to allow taxpayer to be spent on ECO4.
“Any move to reimburse energy suppliers for ECO4 activity without first resolving systemic failures in quality assurance, remediation and accountability would be inappropriate and risk further harm to fuel poor households,” they said in response to the Government’s consultation on the decision.
Campaigners say any additional funding for ECO4 should be prioritised on fixing the problems in peoples’ homes.
The Government estimates up to 35,000 homes have been fitted with faulty insulation, while an unknown number of people are dealing with faulty heat pumps or general damage to their home.
Ministers have said no households will be out of pocket to fix these problems, but only 4,600 homes had been fixed by November last year and DESNZ has refused to provide a more up-to-date figure.
The Government is relying on the original contractors to fix their shoddy workmanship, but many of these companies have now gone into administration.
Homeowners should also be covered by a £20,000 guarantee, but many were not given the appropriate paperwork or are facing damage that goes beyond this limit.
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Sir Geoffrey Clifton-Brown, chair of the Public Accounts Committee, which has investigated ECO4, said he is “sceptical” these problems will be fixed at no cost to homeowners.
“I’m really concerned that there will be people out there who’ve got a real serious defect in their home, and the Government hasn’t managed to make sure what was installed wrongly has been put right,” he said.
DESNZ has refused to say exactly how much taxpayer money will be spent on ECO4, however £428m from the Warm Homes Programme has been allocated to “other programmes”, which is believed to mean ECO4.
“Government should have stopped the catastrophic Eco4 scheme in 2024, instead it gave in to industry lobbying and extended it to December 2026. This means billions more spent, more homes damaged, and more lives ruined,” Bean said.
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