The government is to spend just 20% of the £1.5 billion initially allocated to its Green Homes Grant scheme, with millions of the total expenditures also being spent on administration costs.
Estimates made by the Department for Business, Energy and Industrial Strategy (BEIS) state that over £1,000 per retrofit is to spent on admin costs, a new report published by government watchdog the National Audit Office (NAO) has revealed, which is also anticipating just £314 million of the £1.5 billion originally allocated for the voucher segment of the scheme will be spent.
Of this total, £50.5 million will be on administration.
It comes as part of a wider report into the scheme – which closed to new applications in March 2021 following a raft of administrative problems - with an aim of identifying lessons for future schemes.
The NAO found that HM Treasury gave BEIS an “over-ambitious” 12 week timescale to design the scheme, consult with stakeholders and procure an administrator. It said that BEIS accepted that delivering the scheme within this timescale posed a high risk, but judged that it was justified by the need to support businesses in the wake of COVID-19.
The report detailed how BEIS’ accounting officer approved the launch of the scheme despite the department’s Investment Committee rejecting the business case, having cited concerns that the digital system had not yet been fully developed and tested and that spending the full £1.5 billion available by March 2021 might not been feasible.
Indeed, the scheme now hasn’t delivered the expected number of installations, nor supported the expected number of jobs. According to estimates from BEIS based on the 169,012 applications made by 31 March 2021, only 47,500 homes will receive low carbon installations, falling short of the original 600,000 goal.
There was, however, high public interest, with there being 557,417 unique page views of the Simple Energy Advice Green Homes Grant Voucher Scheme web page, which BEIS encouraged homeowners to access for advice.
This is despite a BEIS spokesperson telling Current in February 2021 that there was a “reluctance on the part of the public to welcome tradespeople into their homes” due to the pandemic, a claim that the Heat Pump Federation's Bean Beanland refuted, stating there were “no reports at all of the mainstream domestic market where homeowners are saying installers can’t come in because of COVID-19”.
Issues with the scheme were largely centred on delays in payments to installers and issuing of vouchers to homeowners. This was widely discussed at the time, with many installers reporting in January they had not been paid while members were waiting for months to be issued vouchers, with the average time to issue a voucher to homeowners who applied in October 2020 was being 137 days.
From October 2020 to April 2021, over 3,000 complaints were made to BEIS and the scheme administrator, the NAO found, with the average time to issue a voucher to homeowners who applied in October 2020 being 137 days.
By the end of March 2021, £22.5 million had been paid out to installers and £13.4 million had been allocated for work completed. As of August 2021, £82.7 million was paid out to installers in 2021-22.
The NAO stated that BEIS didn’t accept the system that administrator ICF delivered in early November as meeting its requirements and began to use its contractual levers to try and improve the performance of the contractor, including instructing it to implement a rectification plan.
Conversely, ICF informed the NAO that in its view, BEIS’ requirements for the system were complex, not sufficiently clear and in some instances changed from the procurement stage, which hindered its ability to develop a solution and process applications in a timely manner.
BEIS made the decision to shutter the scheme on 31 March 2021 following ICF not meeting a 24 March rectification plan deadline, with the department judging that the scheme’s performance was unlikely to improve further.
The department should take the learnings of the Green Homes Grant and apply them to future schemes, the NAO said. Specifically, it should set out by the end of 2021 how its various home energy efficiency schemes fit with its overall plans for decarbonisation, setting out timescales in a more detailed and longer-term plan, which will help to promote interest in future schemes from consumers and installers.
It should also engage with the installer market on the proposed design of any future scheme and base its planning on a realistic assessment of how long it will take the different segments of the market to mobilise the skills and capacity to meet demand across all parts of the country.
This recommendation comes after the NAO found that BEIS only consulted with installers after the scheme was announced, with this limiting the opportunities to include installer views in the scheme design.
BEIS should also test from the start what is being expected of householders and installers when designing new schemes, with an aim of simplifying processes and enabling all parties to complete stages right first time as far as possible.