Taxpayers will be asked to contribute to the biggest home improvement programme since the Second World War after the Government failed to gain enough private support.
The Times has learnt that ministers want the publicly funded Green Investment Bank to help to fund their own energy-saving programme after banks refused to provide any loans.
A consortium of big energy companies, banks, construction companies and law firms appointed by the Government to find funding for the scheme will meet officials from the Green Investment Bank next week about securing an initial £300 million loan.
Negotiations to finalise the terms have already begun and the funds are expected to be secured in May.
Ed Davey, the Energy Secretary, has quietly given his full backing to the plan. The Government had originally been confident that banks and financial institutions would provide the loans, but they have refused owing to concerns that households would not pay them back.
One Whitehall source said: “Senior officials in the energy department have finally admitted that the programme won’t get off the ground without Green Investment Bank funding. Private sector banks simply won’t back the loans when the levels of demand are unclear and there is no track record on repayment defaults. If this £300 million is secured, this will be a lifeline for the programme.“ Under the voluntary programme — called the Green Deal and due to begin in the autumn — householders will be able to take out loans for energy-efficiency measures, such as cavity wall or loft insulation. The intention is that the energy saved will lead to lower bills, which will more than cover the cost of the repayments. If the homeowner moves, the new occupants will pay off the remainder of the loan.