Gordon Brown was hoping that he could convince the power firms to offer bigger discounts to their poorest customers, but now it seems the best he is going to get is help with energy efficiency funding, and even this could eat into investments planned for alternative fuels.

Originally Brown had wanted to see cash help, which would have been worth around £100 to households struggling with rising fuel bills, but now a less ambitious deal involving a three-year energy efficiency programme is being considered.

“It looks as if the government has surrendered to blackmail by the big foreign-owned energy firms,” said Liberal Democrat leader Nick Clegg.

Yesterday, the Prime Minister’s spokesman declined to discuss the details of negotiations between the government and the industry, describing them only as “constructive”. He also said that the proposal for a windfall tax on energy company’s’ “excessive” profits was still under consideration.

Association of Electricity Producers spokeswoman Laura Schmidt said a windfall tax could be really damaging to the relationship between the government and the very companies that are expected to invest billions into the UK’s power industry, calling it a short term measure and describing it as “very bad way of addressing the fuel poverty issue.”

While David Porter, the association’s Chief Executive said, “the electricity companies would lose money which they need for new power stations; a retrospective tax could also damage the electricity investments of pension funds and the UK could be down-graded as a suitable place to invest.

“The impact of higher energy bills is a problem, but, in today’s volatile political environment, we need to think more carefully about how we solve it. A windfall tax would be neither just, nor sensible. It would also send out a very negative signal to investors.”

© Fair Investment Company Ltd