It planned to do this through its Warm Front subsidy scheme, which was given £800 million to provide free insulation and heaters to fuel poor households throughout the country.
But many expect Warm Front's budget to drop by as much as 33 per cent - effectively meaning that the government's fuel poverty targets will not be reached by 2010.
As a result of this, Andrew Warren, chief executive of the Association for the Conservation of Energy has written to new secretary of state for the Department for the Environment, Food and Rural Affairs (Defra) Hilary Benn, threatening the government with legal action should it cut its Warm Front budget.
A spokesman for Defra said that no decision had yet been made on budgets, adding that the department remained "determined" to tackle fuel poverty.
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