There will be further cuts to government schemes designed to encourage low-carbon energy and greater efficiency, the chancellor said on Wednesday.
George Osborne announced that the charge suppliers must levy on customers to help pay for efficiency measures, such as insulation, will be reduced.
He said the move would lower customer bills, saving an average of £30 a year for 24m households. But it is also the latest sign that he is prioritising affordability over attempts to cut emissions.
Labour argued it would end up hurting those who benefited from the energy saving measures the scheme paid for.
Greenpeace, the environmental campaign group, said: “This is particularly bad news — this is the fund that should be helping people keep their homes warm over the winter.”
The move was announced on the same day that official statistics were published showing the number of excess winter deaths rose by 151 per cent last winter to 43,900.
The decision to cut the scheme, known as the “energy company obligation”, was one of a series of measures announced by the chancellor aimed at reducing the costs of the government’s renewable energy schemes.
They included caps on the amount of money that can be spent to encourage renewable heating and exempting heavy industries from certain green taxes.
The renewable heat incentive, which was designed to encourage forms of heating such as burning wood pellets and heat pumps, will now be capped at £1.2bn by 2020/21, saving the government an estimated £690m.
Meanwhile energy intensive industries, such as steel, will be exempted from 85 per cent of the costs of renewables policies, the chancellor said. This formalises the previous arrangement, which made industries pay the levies, but then compensated them.
Karl Koehler, chief executive of European operations at Tata steel — one of several steel companies that recently announced major job cuts — called the move “welcome but marginal in the current business environment”.
Others said the measures did not go far enough. Roy Rickhuss of Community, the steelworkers’ union, said: “Yet again the chancellor has failed to fully understand the crisis facing the steel industry.”
These measures followed a series of cuts to subsidies for renewable electricity generators, including onshore wind and solar farms. The renewables industry has warned that the UK will miss its emissions targets as a result.
Amber Rudd, the energy secretary, has insisted this will not happen. However, meeting the targets will also be more challenging because of Wednesday’s announcement that ministers are axing plans to hand £1bn to companies to develop carbon capture and storage.
Other technologies will be supported, however, with a new £250m fund to help develop schemes such as small modular nuclear reactors.
The chancellor also announced that the energy department’s daily budget would be cut by 22 per cent as part of the spending review of all departmental budgets for the next five years.