A £1 billion package to help struggling households cope with soaring fuel prices has been unveiled.

Prime Minister Gordon Brown promised that the aid programme would be funded by energy suppliers and producers.

He said all low-income and pensioner households would get free loft and cavity insulation while everybody else would be entitled to half-price energy-saving measures.

He said there would be "immediate help for those who need it most" but stressed that the moves were focused on reducing energy consumption.

But in the event of "severe" weather this winter, cold weather payments will increase from £8.50 to £25 a week.

"Our objective is nothing less than a sea-change in energy efficiency and consumption, at the same time as helping the most vulnerable households this winter," said Mr Brown.

But Mervyn Kohler, special adviser at Help the Aged, said: "Enhancing home insulation is a step in the right direction, but older people need help right now as the winter months approach.

"Individual changes which have been flagged by the Prime Minister are sensible and move in the right direction, but they are too little, too modest and will take too long to address the urgent plight of many pensioners today."

Friends of the Earth's greener homes campaigner Dave Timms said: "Energy efficiency is the long-term solution to the scourge of fuel poverty, but today's proposal lacks ambition and funding and falls well short of the urgent action that is desperately required.

"Ministers are still failing in their legal duty to end fuel poverty. This is why Friends of the Earth and Help the Aged are taking the Government to the High Court next month to force it to keep its promise."

There would also be action to ensure that households on pre-payment meters do not face higher tariffs.

Ministers are also meeting banks to increase the take-up of direct debits to pay energy bills and make savings of between £100 to £150 a year.

But Martin Lewis, founder of financial website MoneySavingExpert.com, warned that encouraging people to pay their energy bills by direct debit could make people worse off in the short term.

He said: "The big problem that millions of people face with direct debit is that the level is set by the energy company and can be set completely independently of the rate they are actually being charged.

"People paying by direct debit can suddenly find themselves paying more even though their rate is cheaper, if their direct debit is set too high.

Gas and electricity watchdog energywatch criticised the Government's response to the growing fuel poverty crisis as being "too little too late".

Allan Asher, energywatch chief executive, said: "The lack of political will to tackle fuel poverty is not just disappointing, it approaches negligence.

"While Government has now woken up to the scale of the challenge and is becoming alert to the need for some action, the sense of urgency is lacking. The elements that are sensible and welcome are sadly overshadowed by what is lacking."

Paul Kenny, general secretary of the GMB union, said: "It is clear there will be no windfall tax, but there is a glimmer that the Government might take action on prices."

Mr Kenny called on the Government to give powers to energy regulator Ofgem to set prices, describing the organisation as a "toothless tiger".

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