Many households are without central heating

The Warm Front scheme aims to improve energy efficiency in elderly and low-income homes in England by insulating lofts and installing new boilers.

Contractors have been told to plan for cuts of up to 15% from April - partly because the department responsible, Defra, has to offset the huge costs of foot-and-mouth disease.

The government insists it remains on target to help as many households as originally planned.

But the Association for the Conservation of Energy says at least 40,000 less homes than expected will get grants.

There will be more people who will get ill, and more people who die in their homes Association for the Conservation of Energy

"There will be more people during next winter who will remain cold... there will be more people who will get ill, and more people who die in their homes," said spokesman Andrew Warren.

The government's own fuel poverty advisory group warned on Tuesday that its target of eradicating fuel poverty by 2016 would be missed unless funding was increased by about 50%.

Chairman Peter Lehman told BBC Radio 4's Today programme: "A lot of progress has been made, but significantly more resources will be needed over coming years."

WHAT IS FUEL POVERTY? Fuel poverty is defined as a household which spends at least 10% of its income on energy bills

Environment Minister Lord Whitty told Today the department was facing "budget difficulties", although no final decision on funding had yet been made.

But he denied fewer poor households would be helped to keep their homes warm, saying Warm Front's budget was on target for the coming year.

"We will be on trend, albeit with a reduced budget compared with last year which was an exaggerated budget because of the slowness of the programme starting in the first year."

He said Warm Front was only one of several schemes.

"You have to look at the totality of measures - we've got the Warm Front programme, we've got measures which are delivered by local authorities, we've got the measures delivered by energy companies.

"In total there will be more activity, not less, this coming year."

WARM FRONT SCHEME Householders on benefits with children under 16 can apply for up to �1,500 in grants Those over 60 on benefits are eligible for up to �2,500 for improvements 400,000 households helped 2000-2002, says Defra Campaigners say 40,000 homes could be hit by the 2003 cuts

The Warm Front scheme would reach its target of treating 600,000 homes, before it ended in 2004, he insisted.

The government would then help decide what scheme should replace it and how much money would be needed.

"In total, there will be more activity on energy efficiency and on improving the homes of the fuel poor, so in total, we will be delivering a better situation for those who are in fuel poverty."

Under the Warm Front scheme, householders on benefits with children under 16 can apply for up to �1,500 in grants while those over 60 are eligible for up to �2,500 for improvements.