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The insulation industry has been given incentives to cut corners under current government schemes and this could continue under the Green Deal, the Office of Fair Trading has warned.

A report on the insulation industry by the OFT found that the installers sometimes used cheaper insulation materials for complex specialist jobs leading to damp in homes.

It said that respondents to its call for evidence on the industry had said energy companies were incentivised to commission large volumes of insulation under the Carbon Emission Reduction Target (CERT) and Community Energy Savings Programme (CESP) schemes, but not necessarily quality insulation.

The OFT said it was worried that the schemes鈥� replacement, the Energy Company Obligation (ECO), might continue to create similar perverse incentives.

However, it added that the Green Deal regulatory framework, which the government is currently putting in place, should mitigate such risks under that scheme.

The OFT also raised concerns that the monitoring of installations did not take into account the amount of time it could take for problems to appear.

It recommended: 鈥淭he Department of Energy and Climate Change (DECC) should make sure that one body has clear responsibility for monitoring installations in the longer term, so as to ensure that structural issues are picked up - for example cavity wall insulation being installed in inappropriate properties, causing damp.鈥�

鈥淲e recognise that this would create additional monitoring cost, but this might be balanced by carrying out a smaller overall number of assessments,鈥� it added.

It also recommended that the Green Deal monitoring body be given the power to publish failure rates of installations which individuals firms had done.