The future of the Government's flagship Green Deal programme hangs in the balance after an intensifying tax dispute with the European Commission.
Brussels bureaucrats have warned Whitehall to overhaul the tax rules regarding energy-saving materials or face the prospect of massive fines at the European Court of Justice.
Currently, the UK Treasury levies a reduced rate of five per cent VAT for insulation materials for walls, ceilings, floors and water tanks. However, the full 20 per cent rate of VAT still applies to energy efficient windows and doors.