Major energy suppliers will raise less under the “green levy” as ministers move to cut rising fuel bills for households.

The move will cause outrage among insulation suppliers who have been campaigning hard to keep the levy.

The Government said it will be “reducing the cost of the Energy Company Obligation (ECO), an insulation scheme delivered by major energy suppliers.

“This will result in £30-£35 off bills, on average, next year.”

Ministers are hoping to counter industry fury over watering down of the scheme with a package of energy efficiency measures worth £540m over the next three years.

These are:

• In future, when people buy a new home, they could get up to £1000 from the Government to spend on important energy-saving measures – equivalent to half the stamp duty on the average house – or up to £4000 for particularly expensive measures. The scheme will be available to all people moving house including those who don’t pay stamp duty, helping around 60,000 homes a year.
• Government will also introduce a scheme to support private landlords in improving the energy efficiency of their properties, which will improve around 15,000 of the least energy efficient rental properties each year for three years. Together, the homebuyers and private rental schemes will be worth £450 million over three years.
• £90 million over three years will be spent improving the energy efficiency of schools, hospitals and other public sector buildings.

Paul King, Chief Executive of the UK Green Building Council, said: “Make no mistake, this is bad news for people who cannot afford to heat their homes, especially if they live in solid walled properties, and bad news for thousands of construction industry workers who may well be joining the dole queue this Christmas.

“It remains perverse that the Prime Minister is attempting to reduce energy bills by slashing the very scheme that is designed to bring them down for good.”