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The insulation industry has been thrown a lifeline by the government after it said it would widen its Energy Company Obligation (ECO) scheme to include hard to treat cavity wall insulation.

The ECO will work alongside the Green Deal to tackle energy efficiency in hard to treat and low income households. But the original proposals, unveiled last year, prohibited ECO funding being used for loft and cavity wall insulation for fears it would crowd-out use of the Green Deal.

But the Department for Energy and Climate Change (DECC) has now nnounced that this would be relaxed with ECO funding available for hard to treat cavity walls. DECC said it expected 3.2m buildings with cavity walls to fall within this category.

Mel Starrs, associate director at PRP architects, said: 鈥淚t will help the insulation industry. It鈥檚 better than it was yesterday.鈥�

However, Andrew Warren, director of the Association for the Conservation of Energy, said: 鈥淚 think it鈥檚 a move in the right direction but there are still going to be huge worries about the transition in 2013 leading to a decline in the basic insulation measures in British homes.鈥�

He pointed out that this would fall short of redressing the 70% reduction in cavity wall insulation predicted in the government鈥檚 impact assessment of its Green Deal plans.

The government also announced that a total of 拢540m of the ECOs 拢1.3bn funding envelope would be targeted at low income households.