Campaigners warn over new energy efficiency scheme

Mr Osborne said the scheme would help to cut an average of £30 a year from the bills of 24 million households.

The new scheme will run for five years from 2017.

But Citizens Advice has warned fewer poorer households will get help with insulating their homes.

Its chief executive Gillian Guy said, "Making homes more energy efficient is key to achieving long-term savings on energy bills so it is important the remaining budget is spent on those who really need it."

"Today's reduction will also make it difficult for government to tackle fuel poverty by 2030."

The scheme replaces the Energy Company Obligation known as ECO.

ECO required suppliers to provide energy efficiency measures to vulnerable households. It was launched in 2013 and cost energy suppliers £1.3bn.

Energy companies recovered that additional cost by adding about £30 to household energy bills.

With the extra funding, suppliers provided measures such as cavity wall insulation to some of the poorest households.

By March this year, it had resulted in 1.47 million home efficiency measures being installed according to the energy regulator, Ofgem.

The details of the chancellor's new scheme have yet to be released, but it will target 200,000 homes a year or one million during this parliament.

On Wednesday, Mr Osborne said homes that receive energy efficiency measures could cut up to £300 off annual energy bills, but campaigners say fewer homes will receive help.

Reaction

Shadow energy secretary Lisa Nandy said the new scheme would leave millions of families with bigger bills.

"Its extraordinary that the chancellor has announced huge cuts to home insulation on the very same day we discovered that thousands of people died last winter because of the scandal of cold homes.

"By slashing investment in energy efficiency yet again millions of families will be left paying more for their energy bills and people will suffer."

Fuel Poverty Action, which describes itself as a grass roots campaign against high energy bills, said that the replacement of ECO announced in the Spending Review "amounts to a real terms cut for the vital funded insulation for fuel poor households".

In a statement, the organisation said: "The reality is that by refusing to take insulating homes seriously the government are locking the fuel poor into cold homes for decades to come because it is poorly insulated homes which mean millions of people have such high bills".

Campaigners say up to £2bn a year is needed to alleviate fuel poverty. The think-tank Policy Exchange has put the annual figure at £1.2bn.

Richard Howard, head of environment and energy at Policy Exchange, said that if the new scheme was focused solely on fuel poverty reduction, then this would represent an increase in spending on fuel poverty compared with the current ECO model, despite the lower budget.

"However, this still would meet only half of the estimated £1.2bn per annum required in order to achieve fuel poverty reduction targets," he said.

Savings

According to the Spending Review document, the £30 a year saving is the net impact of a series of measures.

In 2017, the new energy efficiency scheme will save households £32 a year.

Cuts to renewable subsidies (the Renewable Obligation and Feed-in Tariffs) will save another £2.

But plans to exempt Energy Intensive Users from the cost of renewables will add about £5 a year to domestic energy bills.

The net impact of these measures is an approximate saving of £30.

By John Moylan