Damning NAO report into the Green Homes Voucher Scheme

This week the National Audit Office (“NAO”) has published a damning report into the Government’s failed Green Homes Grant Voucher Scheme. The scheme was originally announced in July 2020, as part of the UK’s “green recovery” from the pandemic, with £1.5 billion funding being made available for home improvements designed to reduce energy consumption and hence emissions.

“In establishing the Green Homes Grant Voucher Scheme, the Department worked at an ambitious pace to deliver a scheme which would contribute to this long-term aim while delivering a short-term economic boost. However, the tension between these two key aims and the short delivery time was never properly reconciled leading to an overly complex scheme that could not be delivered to a satisfactory level of performance in the time available.

Should all current applications be processed, the scheme will have upgraded an expected 47,500 homes, at a cost to the taxpayer of about £314 million. Of this, £50.5 million is for programme management and administrative expenses, amounting to more than £1,000 per home upgraded. Despite the Department’s considerable efforts, the rushed delivery and implementation of the scheme has significantly reduced the benefits that might have been achieved, caused frustration for homeowners and installers, and had limited impact on job creation for the longer term.”
– National Audit Office

Under the scheme omeowners could apply for up to £5,000 funding (£10,000 for low income households) to install energy efficiency improvements and low carbon heat measures in their homes. They were expected to identify a certified installer and apply for vouchers with the installer receiving the grant funding once they had fitted the measure. The scheme was planned to run between September 2020 and March 2021, and expected to support up to 82,500 jobs over six months and enable up to 600,000 households to save up to £600 on their energy bills.

The scheme opened to applications from the public in September 2020, and in November the Government announced it would be extended from March 2021 to March 2022. However, at around the same time, evidence began to emerge that the scheme was not issuing as many vouchers as expected with homeowners and installers beginning to raise concerns.

Some homeowners complained that it was difficult to find an installer; that the application process was hard to use; and that there were delays in approving and issuing vouchers. Installers complained that there were significant hold-ups in the system causing delays to their payments. In March 2021, the Government announced it would close the scheme to applicants as originally planned at the end of March 2021.

Description of the scheme

Homeowners could apply for a grant of £5,000 (£10,000 for low income households) for the installation of home improvements, covering labour and materials costs and VAT. Each installation had to include at least one “primary measure”, which included:

• solid wall insulation (internal or external)
• cavity wall insulation
• under-floor insulation (solid floor, suspended floor)
• loft insulation
• flat roof insulation
• pitched roof insulation
• room in roof insulation
• insulating a park home

Low carbon heating measures were also covered by the voucher:

• air source heat pumps
• ground source heat pumps
• solar thermal (liquid filled flat plate or evacuated tube collector)
• biomass boilers
• hybrid heat pumps

In addition to at least one primary measure, the voucher could be used to help cover the cost of any of the following secondary measures, although the value of secondary measures could not exceed the value of primary measures under any single voucher:

• draught proofing
• hot water tank insulation
• double or triple glazing (where replacing single glazing)
• secondary glazing (in addition to single glazing)
• external energy efficient replacement doors (replacing single glazed doors, or doors installed before 2002)

Vouchers could not be used to repair secondary measures that were already installed in a property, nor could they be used to remove or replace existing measures. Vouchers for eligible doors were limited to a maximum contribution of £1,000 per door which could be averaged across all the doors on an application. Certain heating controls and insulation measures were also included such as hot water tank thermostats, hot water tank insulation, and heating controls, but new gas boilers were not covered. New build domestic properties and non-domestic properties (such as shops and offices) were not eligible.

A troubled scheme that struggled to deliver benefit

The scheme delivered neither the expected number of installations nor the expected number of jobs. The original expectation was that the scheme would deliver energy efficiency measures in 600,000 homes and support up to 82,500 jobs over six months. Up to 31 March 2021, vouchers totalling £35.9 million were paid out, with a further £256 million expected to be paid once all installations are fully completed. A total of £314 million is expected to be spent overall, out of the £1.5 billion funding available, of which £50.5 million was on programme management and administration. The Government has forecast that the scheme will eventually support efficiency measures in 47,500 homes with 5,600 jobs being supported over 12 months.

By 31 March 2021, the Government had received 169,012 voucher applications, corresponding to 113,738 homes, compared with its modelled figure of 600,000 homes. But both homeowners and installers reported problems with the operation of the scheme, making more than 3,000 complaints between October 2020 to April 2021:

• Delays in issuing and paying vouchers: homeowners were required to fulfil various requirements for a voucher application to be approved, including using only certified installers and providing installation quotations which would be checked to ensure they were appropriately priced. Installers had to provide documentation and verifications once works had been completed.

These requirements were complicated and difficult for both homeowners and installers to get right first time. By 6 August 52% of voucher applications where a decision had been made had been either withdrawn by the homeowner or rejected by the administrator after addressing outstanding queries with applicants.

• Difficulties in finding certified installers: to ensure quality workmanship and consumer protection only installers who were both registered with TrustMark and certified to work to Publicly Available Standards or the Microgeneration Certification Scheme were allowed to participate.

Some installers were reluctant to invest in gaining such accreditation in the expected six-month timescale of the scheme. By 30 September, there were 880 potential installers registered with TrustMark, but by 6 November only 248 of these had registered to participate in the scheme.

A report last November by the Environmental Audit Committee  found that 86% of homeowners had had a poor experience with the process, citing complex paperwork and poor administration, and nearly 75% found it difficult to find a registered contractor. Installers also faced difficulties. According to MCS (the Microgeneration Certification Scheme), some installers were owed as much as £20,000 by the scheme administrator, with it taking an estimated 40 days on average for installers to be paid. Since many installers were small businesses with fewer than 20 staff this caused real hardship.

The scheme focused on measures that would provide the biggest impact in terms of reducing carbon through primary measures, such as insulation and low-carbon heat installations, giving less priority to secondary measures such as installing energy-efficient doors or windows.

The Government argued that focusing on primary measures would have the biggest carbon impact and reduce the potential for paying for smaller measures which people would choose to install themselves without support. But there was a risk that the market for many primary measures would take time to adapt as companies took on and trained new staff – some of the secondary measures such as window and door replacement had established, larger-scale supply chains requiring less specialist skills, and might have been able to scale-up and create jobs more quickly.

The BEIS Investment Committee had rejected the business case citing concerns that the digital system for the scheme had not been fully developed and tested, and that spending the full £1.5 billion by March 2021 might not be feasible. The BEIS Accounting Officer, however, approved the scheme noting that its low fixed costs meant it would provide value for money even if the funding was not fully spent.

Because of the short timeframe for implementation and to reduce the risk of a legal challenge, the Government decided to rely on the Crown Commercial Services Framework – a standard government contract with a limited number of pre-assessed suppliers – to procure a supplier who would administer the system. The framework’s standard contract terms were adopted which did not provide for financial incentives for timely processing of voucher applications.

The tight timeframes also made it difficult to set out clear contractual obligations – with some terms needing to be agreed after the contract was awarded, and many bidders thought that the three weeks between the intended contract start and scheme launch would not be enough. This meant that once the contract was awarded the supplier was allowed to process applications manually, and in fact the system the Government had hoped to see developed was not in place by the time the scheme closed.

The Government appointed ICF as the supplier, but rejected its system in early November, and began to use its contractual levers to try to improve the performance of the contractor, including instructing it to implement a rectification plan. ICF informed the NAO that, in its opinion, the Government’s requirements were complex, not sufficiently clear, and in some instances changed from the procurement stage.

A new scheme is needed to support de-carbonisation of homes

While the design and implementation of the Green Homes Grant Voucher Scheme was clearly very poor, the concept is a good one, and a new scheme should be designed. A major failing not mentioned by the NAO was the failure to use any quantifiable metric for determining the most appropriate installations for any given property. This brings me back to my previous arguments about the need to reform the Energy Performance Certificate (“EPC”) and to tie such schemes in with a reformed EPC.

The reforms I would like to see centre around actual measurements of the heat losses from homes, rather than theoretical calculations which ignore the condition of the building. It’s all very well for Government schemes to identify “primary” measures, but if a home has broken or poorly fitting windows, the heat losses from that would dwarf any losses from measures such as solid wall insulation. These issues could be easily fixed without the risk of adverse effects such as damp and mould from moisture bridging.

“The Green Homes Grant was an opportunity to create thousands of decent jobs in making our homes warmer and greener – but at the current rate, it would take two centuries to reach all English homes. Local councils have shown they can retrofit more homes – and faster than private companies,”
– Frances O’Grady, General Secretary of the TUC

Any new scheme should also replace the Energy Company Obligation. There is really no benefit to forcing energy suppliers to intermediate in the process of home improvements, and these schemes could be better administered at local government level, where local conditions can be properly accommodated (such as the differences between rural and urban settings).

“We need a new Green Home Grant made available without delay. A new, reformed scheme, properly thought through and adapted to serve the whole country, is required if the Government is serious about embarking on a journey to net-zero carbon emissions.

More than 800,000 rural homes are heated by oil and will need to transition to cleaner sources of power in coming years, such as heat pumps. But the Energy Saving Trust estimates that it costs £19,000 to install one pump, with the annual bill saving of using the technology just £20 a year. If Government does not help bring about a green transition for rural communities – which so often are first to suffer the impacts of climate change in this country – then we risk it never happening at all,”
– Mark Bridgeman, President of the Country Land & Business Association

The Government has long seen measures such as lagging hot water tanks as the low-hanging fruit, but it consistently ignores the other low-hanging fruit of fixing what is broken in a home before moving on to more advanced and potentially invasive measures. Without understanding the origins of heat losses in an actual home, it is very difficult to determine the appropriate actions to reduce those losses, and hence to reduce energy consumption and emissions.

Forcing householders into expensive yet ineffective measures will bring further disrepute to these initiatives and undermine consumer engagement. It’s time to go back to the drawing board and do this properly.