Take out home loans to pay for insulation, minister tells families reeling under credit crunch

Hard-pressed families were yesterday urged by a Government minister to take out home loans to pay for loft and wall insulation.

Phil Woolas claimed homeowners were well placed to 'borrow against' their properties for energy-saving home improvements, in another setback for Gordon Brown's £1billion fuel package.

Mr Woolas's suggestion is unlikely to win over struggling householders hit by soaring food and fuel bills, falling house prices and tighter lending conditions.

It also emerged yesterday that taxpayers will foot part of energy companies' £910million bill for lagging homes because the firms can offset the costs against corporation tax.

Under the package, all low-income and pensioner households are to get free loft and wall insulation. Others will be entitled to a half-price discount but will have to make up the shortfall from their own pocket.

When asked how struggling families might raise the funds to pay the balance of the work, the Environment Minister said: 'The people who want to invest in their homes have got an asset to borrow against.

'If you are an existing homeowner, it is easier to borrow against this energy efficiency initiative because the payback period is so good.'

But the Tories and the LibDems seized on his comments to accuse the Government of being out of touch with voters.

Shadow work and pensions spokesman Chris Grayling said: 'Comments like this just come across as arrogant and remote from real life.'

LibDem treasury spokesman Vince Cable said the Government 'does not seem to have realised there is a credit crunch going on, which is why people can no longer borrow'.

The Treasury confirmed that the fuel package would cost power firms substantially less than the £910million headline figure over the next three years because some costs can be written off against corporation tax at 28 per cent.

Government officials insisted that the aim of the scheme was to help households, not to overcharge businesses.

Mr Woolas's comments seem to run counter to Mr Brown's promise of free or discounted insulation for all

A spokesman said: 'We took into account all of the associated impacts of the package, including impacts on tax receipts.'

However, the revelation is certain to further anger unions and Labour MPs who will step up demands for a windfall tax at the Labour Party conference, which begins a week today.

They accuse Mr Brown of going soft on the energy companies who have posted huge profits, while gas bills have risen an average of 31 per cent this year and electricity has gone up 22 per cent.

Other proposals announced by the Prime Minister yesterday include action to ensure customers with pre-payment meters are not being ripped off, the freezing of tariffs for 500,000 of the worst-off households and an increase in emergency cold weather payments from £8.50 to £25 a week if there is a severe winter.

Critics have warned that the package offers no immediate help to the 5.4million people in fuel poverty.