AMBITIOUS plans to insulate 50,000 draughty North-East homes - and cut household energy bills - are hanging by a thread after a Government U-turn.

Council chiefs are poised to dramatically downgrade the £200m project after funding was slashed in what has been dubbed a "dirty deal with the energy companies".

Energy efficiency improvements, including replacement boilers, loft and wall insulation, double glazing and under floor heating, were due to be installed in around 50,000 homes.

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And the project also promised a jobs boom, creating and safeguarding up to 575 jobs with British Gas and its supply chain, including many apprenticeships.

The areas in line to benefit included:

  • Darlington - 1,500 homes
  • Gateshead - 3,450 homes
  • Newcastle - 2,000 homes
  • South Tyneside - 1,100 homes

But the 'Warm Up North' project has hit trouble because of David Cameron's controversial decision, last December, to remove some so-called 'green levies' from energy bills.

Under fierce pressure after Labour's pledge to freeze bills, the prime minister was reported to have ordered aides to "get rid of all the green crap".

As a result, the energy company obligation (ECO), an insulation scheme delivered by major energy suppliers, was cut back, taking £30 to £35 off bills.

However, Labour has now uncovered 46 schemes around the country - including the one in the North-East - which will be scrapped or scaled back, as a result.

A spokesman for Warm Up North said: "The potential implications of changes to ECO are being reassessed by the regional partnership.

"A view on the future direction of the programme, and its delivery mechanism, is not likely to be confirmed until the full detail of changes to ECO are known and implemented."

The project started last September as part of the much-criticised 'Green Deal', allowing the cost to be repaid through the household's energy bills.

Embarrassingly for Energy Secretary Ed Davey, it was launched after he visited the region in 2012 - to urge it to get behind the Green Deal.

Across the UK, at least 54,000 homes will not now be insulated, according to freedom of information responses from 146 local authorities.

The cutbacks were condemned by Caroline Flint, Labour's energy spokeswoman, who said: "Thousands of households will be left in the cold because of the Government's dirty deal with the energy companies.

"The best way to cut people's energy bills is to invest in insulation and save the energy that escapes through our windows, walls and rooftops.

"But, instead of making the energy companies honour their obligations, David Cameron has let them off the hook."

But the department of energy and climate change (DECC) defended the changes to ECO, which will now run until 2017, instead of finishing next year.

A spokesman said: "Those changes will ensure that energy efficiency measures are more effectively targeted at homes which will benefit most."