The Government will not reach its target to eradicate fuel poverty by 2010, according to a damning report by its own advisers. The Fuel Poverty Advisory Group (FPAG) declared that the complacency of the Government and Ofgem, the industry regulator, despite higher prices than necessary from energy companies is startling.

The FPAG says that it is completely taken aback by the savagery of cuts made to Warm Front, the Government's programme to improve energy efficiency in vulnerable homes, where spending is being reduced by 25 per cent. It adds that higher prices paid by households using prepayment meters, who pay as much as £255 a year more than those paying by direct debit, are beyond its wildest nightmares and it urges Ofgem and the Government to take action.

Fuel poverty is defined as a household that spends more than 10 per cent of its income on fuel bills. Recent energy price rises have pushed the number of fuel-poor households to three million - the highest level for nearly a decade.

The Government faces statutory targets to eradicate fuel poverty among vulnerable households in England by 2010, and all households in England by 2016. But the FPAG's report says that the Government's own policies have made it impossible to meet the 2010 target.

Currently, energy suppliers do very little to help their most vulnerable customers, spending 0.11 per cent of their £24 billion turnover on such measures, according to Energywatch, the industry watchdog. Only one in fifteen fuel-poor households is on a social tariff. These tariffs offer the cheapest deals to the most vulnerable customers. British Gas has 280,000 vulnerable customers on social tariffs, out of a customer base of approximately 12 million, saving these people £98 a year. Npower offers help to 2,557 customers out of a customer base of approximately five million.

Campaigners were hoping that Alistair Darling would use last month's Budget to force energy suppliers into doing more to protect vulnerable customers. In the end, the Chancellor only called for lower energy prices for the five million customers on prepayment meters and for energy suppliers to increase spending on social tariffs from £50 million to £150 million.

Jenny Saunders, of National Energy Action, the charity, says that Mr Darling should have gone farther. “We are urging the Chancellor not to leave decisions on fairer social tariffs to the discretion of suppliers,” she says. “Legislation needs to be put in place to protect vulnerable customers immediately and a clear framework is needed for the companies to work to.”

In the Budget Mr Darling also made a one-off increase to the 2008-09 winter fuel payment for the over-60s, but the FPAG says that this money should have been targeted at the poor, rather than across the board, and that it would have been better spent on Warm Front grants to improve energy efficiency in homes.

The Cert scheme introduced by the Government this month has also been criticised. The Government claims that Cert, which stands for carbon emissions reduction target, is forcing suppliers to spend £3 billion of their profits on energy efficiency measures. However, Ofgem says that this money is actually coming from an additional £38 a year on every household bill from April 1.

An Ofgem report states: “In 2008 a customer using gas and electricity will pay £38 towards the Cert programme.” And with about 26 million households in Britain, £38 each over three years amounts to approximately £3 billion.

Ms Saunders says: “The Government must be upfront about who is footing the bill for increases in energy efficiency measures, as it is consumers, rich or poor, who are facing a £114 addition to their fuel bills over the next three years. Cert is a step in the wrong direction in terms of fairness for low-income households.”

Despite these setbacks, campaigners are urging the Government not to abandon the targets altogether and to press on with recommendations made by the FPAG. Ms Saunders adds: “The Government's only chance of meeting its 2016 fuel poverty target is to follow the advice given by its own advisory group.”

In the meantime, if you are living in fuel poverty, contact your supplier and check if you are eligible for help with bills or home insulation.

British Gas customers in fuel poverty, including those using pre-payment meters, may be eligible for its Essentials tariff, which allows customers to benefit from its direct debit rates. For further information, call 0845 8502207. Its Winter Warmer initiative also gives up to £90 winter credit and free loft and cavity insulation to customers in receipt of the pension credit as well as disability or attendance allowance. To check if you qualify, call 0845 6760674.

Fuel-poor E.ON customers may be eligible for help under its CaringEnergy scheme, which provides cavity wall and loft insulation and low-energy lightbulbs. To find out more, call 0800 0511480.

The Energy Assist social tariff from EDF Energy allows 50,000 fuel-poor customers to save up to £159 a year. You must be on income support or the pension credit to be eligible. Call 0800 0962270.

Also remember the Government's Warm Front scheme, which allows for a grant of up to £2,700 (or £4,000 with oil-fired central heating) to make homes more energy-efficient. Householders aged over 60, or those with children under 16 and in receipt of certain benefits, are eligible. To find out if you qualify for a Warm Front grant or other government benefits, call 0800 0729006.

The Fuel Poverty Advisory Group's key recommendations

Warm Front annual expenditure in the 2008-11 period should be restored to at least its 2007-08 level of £350 million. This could be done easily if the Government discontinued winter fuel payments for higher-rate taxpayers, freeing up more than £200 million a year.

There should be a real drive to secure the installation of low-cost, pay-as-you-go smart meters, which could provide a sustainable lower-cost solution for many low-income customers.

The energy companies appear to have increased their prices by considerably more than their costs. Ofgem should protect the interests of customers more tenaciously and should give greater priority to the interests of low-income customers.

There should be more drive by the Government to ensure that benefit take-up is increased. In particular, there are opportunities for automating the take-up of council tax benefits for those in receipt of other benefits or tax credits.

A concerted effort across government is needed to meet the 2016 target, and this requires a proper framework and also a cross-government strategy and business plan.

Information on households should, with appropriate safeguards, be shared with local authorities and energy companies to help to reach those in need. The Department for Work and Pensions, in particular, should do more to share information about vulnerable households.

Water poverty' on the rise

About 12 per cent of people living in England and Wales will be in “water poverty” by 2010, according to the Consumer Council for Water (CCWater), the industry watchdog.

Water poverty is defined as when your water bill costs 3 per cent or more of your income. Water bills will rise by an average of 5.8 per cent this month, increasing the average annual bill from £312 to £330. In the South West, which has the highest charges, nearly a third of customers could struggle to afford their water by 2010.

Annual price increases are agreed by Ofwat, the industry regulator, to give water companies funding to invest in water quality, leakage, customer service and the environment. But Yve Buckland, of CCWater, says: “Water bills are rising but customers cannot always see recognisable benefits in return for these higher water prices.”

This week Ofwat proposed fining Severn Trent Water £35.8 million for misreporting its poor customer service. Among other things, the water company lied to Ofwat about how many complaints it received and how swiftly complaints are handled.

Severn Trent Water is also facing prosecution by the Government's Serious Fraud Office for misreporting its water leakage levels in 2001 and 2002.

Case Study

Barbara Knight spends 12.5 per cent of her income on her energy bills and is therefore one of the three million people living in fuel poverty.

The 70-year-old widow recently switched from British Gas to Atlantic and has not yet faced an increase in prices this year. She says: “I know that the big six suppliers have all increased prices recently, and I am dreading Atlantic doing the same. I receive £800 a month from my pension, and £100 of this goes on my energy bills and another £140 on council tax. I would really struggle to pay any higher bills.”

Two years ago Mrs Knight contacted Warm Front to find out if she was eligible for any help in making her home more energy-efficient. She had her 20-year-old boiler replaced, draft-excluding placed round all the doors and low-energy light bulbs fitted - all free of charge.

“Warm Front was absolutely brilliant,” she says. “That is exactly the sort of help that the Government should be giving: looking at long-term solutions to a home's energy efficiency. It is absolutely dreadful that they are reducing spending on this scheme.”