Source · Select Committees · Public Accounts Committee
Recommendation 36
36
Rejected
Fraud likely contributes to high defect levels; Department enhancing fraud detection efforts.
Recommendation
We pushed Ofgem and the Department on what they were doing to actively look for fraud, and highlighted that fraud is likely contributing to the high level of defects on external and internal wall insulation.85 Written evidence submitted by members of the Green Homes Group (Ashden, Centre for Sustainable Energy, Citizens Advice, E3G, Friends of the Earth and Greenpeace) reported that people have experienced fraud and intentional bad practice as part of their faulty retrofits.86 The Department assured us that it is “bringing together the parties that might have information that would allow Ofgem to identify cases of potential fraud.” It explained that it is working to make sure data about households—such as their likely eligibility for schemes—can be shared across the system. It also told us that TrustMark had introduced different software systems that enable it to identify potentially fraudulent installations from the data it holds.87 Addressing current issues and reforming the system for the future
Government Response Summary
The government disagrees with referring the issue of fraud to the Serious Fraud Office, stating that Ofgem already has the responsibility to explore suspected fraud cases and make referrals to relevant bodies.
Government Response
Rejected
HM Government
Rejected
6. PAC conclusion: The Department did not give the risk of fraud appropriate priority, and it is likely that the known levels of fraud are a significant under- statement of the true level of fraud. 6a. PAC recommendation: Given the likely role of fraud in the poor-quality installations, the Department should refer the issue to the Serious Fraud Office to investigate the extent of fraud across ECO and bring criminals to justice. 6.1 The government disagrees with the Committee’s recommendation. 6.2 Ofgem, as scheme administrator for ECO4 and GBIS, has the responsibility for exploring cases of suspected fraud for the purpose of approving or rejecting measures submitted by energy suppliers. It can and does make referrals to relevant bodies including the Serious Fraud Office where appropriate. Therefore, this recommendation relates to an existing ongoing responsibility of the regulator. 6.3 The department is aware that, as part of the administration of ECO4 and GBIS, referrals have been made to the Serious Fraud Office. It would not be appropriate for the government to comment on this any further at this time. 6.4 The role of the Serious Fraud Office is to investigate and prosecute specific cases of serious or complex fraud, bribery or corruption. It is not a regulator, nor does it conduct market reviews. As a matter of policy, the Serious Fraud Office does not comment on referrals and it neither confirms nor denies investigations until doing so would not prejudice law enforcement activity. 6.5 The department, Ofgem and law enforcement partners such as the Serious Fraud Office will continue to engage and work closely together. 6.6 Cross-government data is now used operationally to improve prevention and detection of fraud. TrustMark has developed tools to make good use of its data to identify risk factors thereby highlighting potential issues earlier. 6b. PAC recommendation: HM Treasury should extend its requirement in Managing Public Money for a Fraud Risk Assessment on all new major areas of public spend to include levy-funded schemes instigated by the government, such as ECO. 6.7 The government agrees with the Committee’s recommendation. Target implementation date: Spring 2026 6.8 The source of funds (be it general taxation, dedicated levy or other income) is not a factor in determining whether public money should be subject to the rules set out in Managing Public Money. As such, the requirement for a Fraud Risk Assessment for new major areas of public spend already applies to levy-funded schemes instigated by central government bodies. Nevertheless, the government recognises the benefit in making this explicit. To avoid the need to wait for the next update of Managing Public Money, the Treasury Officer of Accounts will issue a Dear Accounting Officer letter to clarify this before Summer 2026. 6c. PAC recommendation: In future schemes, the Department should ensure that one body is responsible for fraud prevention and detection at the system level, enabled by counter-fraud activities of and data from other organisations in the system. 6.9 The government agrees with the Committee’s recommendation. Target implementation date: Summer 2028 6.10 The department notes the potential benefits with the suggestion of having one body responsible for fraud prevention and detection at the system level for government-run schemes. The Warm Homes Plan outlines the department’s commitment to reform the consumer protection system for government retrofit programmes. This system will be simpler with stronger government oversight. The department expects to consult on the details of these plans and therefore does not wish to prejudice that consultation. 6.11 The Warm Homes Agency is stated as having oversight of this future reformed consumer protection system, enabled by data-led insights and analysis. Data sharing and exchange between relevant bodies will be fundamental to verifying the details of all retrofit work, assuring that standards have been met, and detecting any possible fraud. By having data joined up across the system, fraud may be detected at any point, and potentially by a number of different bodies, and shared with the relevant body responsible for investigation or enforcement. 6.12 As set out in the Warm Homes Plan, the department’s strategy is to reduce fraud in government retrofit schemes throughout, from the initial scheme design through all aspects of operational delivery and oversight. It is not enough to rely on retrospective enforcement. The department will prioritise deterrence and prevention, before harm is done. The department also recognises the need for consumer protection for the wider market that does not necessarily benefit from government subsidy but is still contributing towards net zero and energy efficiency outcomes. When future schemes are designed, the department will incorporate lessons learned from ECO4 which include having clearly assigned owners for fraud risks and strong system oversight. 6