Windfarm subsidy faces huge cut

Treasury officials are drawing up plans for swingeing cuts in state support for onshore wind-farms, it was claimed last night. This is a dramatic move that threatens to undermine David Cameron's claim to lead the greenest government ever.

The Chancellor, George Osborne, has demanded a 25 per cent cut in a subsidy regime that is worth some £400m a year to the industry, according to a report in The Observer.

The cost-cutting move is believed to have opened up a split with Ed Davey, the Liberal Democrat Energy Secretary, whose party has a long-standing commitment to developing the renewable energy market.

But the veteran Tory MP Tim Yeo, who is chairman of the Energy and Climate Change Select Committee, complained that Mr Davey's department was being stifled by Treasury demands.

He said: "This is an example of where the Department of Energy and Climate Change's attempts to stimulate renewable energy are being hamp-ered by Treasury intervention.

"The way to deal with this – and realise the savings the Treasury wants to achieve – is to have more onshore renewable energy, which requires lower levels of subsidy, and less offshore, which requires more. We need to change the balance."

Claims of a Treasury move against onshore subsidies will improve Mr Osborne's standing among his own MPs, which has been flagging in recent weeks following a string of U-turns on his Budget announcements. In February, more than 100 Tory backbenchers wrote to the Prime Minister demanding cuts to the multimillion-pound public subsidies for wind-farms, which they see as evidence of too much Lib Dem influence.

Chris Heaton-Harris, a Tory MP who led the backbench campaign for cuts, told The Observer he was greatly encouraged by the suggestions that Mr Osborne had listened to his colleagues.

"I want to see a dramatic cut," he said, arguing that onshore wind power was expensive compared with gas and that it would drive up fuel poverty.

But Juliet Davenport, chief executive of the renewable electricity supplier Good Energy, said the move was "a reckless act of political opportunism" designed to boost Mr Osborne's popularity among his own MPs.

Gordon Edge, policy director at the industry group RenewableUK, said: "It is crackers to kill dead the deployment of the cheapest renewable technology if you genuinely are worried about the cost."