Miliband’s ambitious Warm Homes Plan arrives with the public and industry’s confidence in retrofit at a low ebb

Ed Miliband is probably wishing that his flagship energy efficiency policy had landed at a more auspicious moment.

It was not ideal, after all, to announce a £15bn investment in the retrofit industry just a week before the public accounts committee (PAC) urged the Serious Fraud Office to launch a probe into that very same sector.

Of course, the scandal around the Energy Company Obligation (ECO) 4 scheme is not fresh news, with the NAO publishing its bombshell report on the matter last October, and the Department for Energy Security and Net Zero (DESNZ) had its own share of responsibility, having repeatedly delayed the release of the plan.

But, however unfortunate the coincidence of the release of the Warm Homes Plan and PAC chair Geoffrey Clifton-Brown’s intervention, it does draw to attention the particular difficulty that Miliband’s department faces in delivering its ambitious plans. 

In Clifton-Brown’s words, the public’s confidence will have “rightly been shaken in retrofit schemes”. After all, the NAO found that 98% of homes given external wall insulation (EWS) under ECO4 and the Great British Insulation Scheme would require repair work. More than 30,000 homes in total across the two schemes were left with defects and the report also uncovered evidence of fraud, with businesses estimated to have falsified claims for installations in up to 16,500 homes.

It should be said that failure rates for retrofit measures other than EWS were much lower, but the NAO report was undeniably humiliating for civil servants and gave the Treasury an alibi to cut funding for ECO in last year’s Budget without any temporary scheme to replace it. 

Scrapping an embarrassing scheme to save billpayers a few quid might seem like a win-win for the government. But the abrupt end of ECO has put the whole retrofit sector in jeopardy – responsible installers and cowboys alike – and could ultimately lead to a repeat of the shoddy work that has come in for such criticism.

Speaking to Building before the publication of the plan, installers said that, while ECO was still operational until 31 March, the tap had effectively been turned off already. Not a government grant in the traditional sense, ECO required large energy suppliers to fund energy efficiency measures or face fines. These companies were usually able to carry a chunk of their expected spend from one iteration of the scheme to the next in order to smooth out delivery.

“Now that there’s no expectation of an eco extension, a lot of utilities […] are turning off the tap,” claimed Anna Moore, chief executive of retrofit firm Domna. “That cliff edge has probably already been reached.”

While Domna is relatively diversified, some of the businesses it works with felt the impact overnight. One such firm, Moore said, let half a dozen people go and came to Domna asking for a loan.

“When there’s a stop-start, a little shop of 20 people or so can’t absorb four months of no cashflow – they go under,” she said.

It is largely accepted among installers that ECO4 was not fit for purpose, but many argued that there should be an extension of the scheme under a stripped back model, focused on single and double measures, that had been successful in previous iterations of the scheme. Any lingering hope that such a “carry-on” scheme would be included in the Warm Homes Plan was not to be realised.

The plan in and of itself, when it came, was very much as expected, and very much welcomed. There was the anticipated move towards low-carbon technologies, with a universal offer of low or zero-interest loans for all households to cover the cost of solar panel installation, batteries and heat pumps. It is hoped this will triple the number of homes with solar panels by 2030.

For low-income households, a public investment of £5bn will provide tailored packages of upgrades free of charge, while a wider programme for all households will offer a £7,500 universal grant for heat pumps.

The plan also includes the creation of a new Warm Homes Agency to bring together existing functions from across the regulator and other government arms-length bodies.

All of this has largely been popular. Gary Lawson, managing director at Sustainable Building Services, said the emphasis on tailored property interventions and large-scale social housing delivery was “particularly encouraging”, while James Hardy, director and head of sustainability at Turner & Townsend, said the creation of the agency would help to address the “current fragmented landscape [which] has too often created uncertainty for consumers and industry alike”.

But what concerns many in the industry is not the plan itself, but how long it will be before money gets out of the door – and what shape the sector will be in by the time that happens. This is made all the more challenging by the fact that the Warm Homes Plan marks a shift to a greater role for government from the largely private sector operation of ECO. 

“If we’re shifting towards a government-administered programme, procurement needs to be fast, easy, transparent, not sclerotic,” says Moore, noting that other publicly-administered schemes have seen significant delays in getting funding out of the door. 

This emphasis on a reliable timeline for getting things moving was repeated across the board in public responses to the plan. Federation of Master Builders chief executive Brian Berry said for it to succeed industry needed “a genuinely stable pipeline”, while Deepika Singhal, head of ESG and sustainability at consultancy Hollis, said a “clear and accountable timetable is urgently needed”.

The longer it takes for the Warm Homes Plan’s £15bn to actually start being spent, the more the industry is likely to lose capacity – which runs the risk of a repeat of scandals of the past.

“Without the continuation of work, we are going to end up with what we have had in the past, where there is no funding, and all of a sudden there is a chunk of cash and a whole load of cowboys come out of the woodwork and see it as an opportunity – then deliver it badly and shut up shop,” said Nigel Donohue, group chief executive of the Installation Assurance Authority.

David Barnes, Chartered Institute of Building head of policy and public affairs, said much the same, commenting: “Historically, issues with schemes have arisen when industry has not been engaged, while stop-start approaches and sudden funding withdrawals have further stunted progress and confidence.” 

The scale of DESNZ’s ambition with the Warm Homes Plan is laudable, but Miliband’s department is starting in a tricky spot. The scandal around the ECO scheme and its subsequent cancellation mean the plan has arrived at a low ebb in confidence both among consumers and installers. The success of the plan will therefore rely on it being able to raise both simultaneously.

Given how long it took to be published, one has to assume that a huge amount of work went into crafting the Warm Homes Plan. But ministers and civil servants will surely now be realising that the hard work on delivering Labour’s retrofit revolution is only just beginning.