Warm Front, the Government's flagship fuel poverty scheme, has come under attack for squandering public money, with contractors accused of charging high prices for poor standards of workmanship.

Times Money has been inundated with complaints about the scheme, which gives grants of up to £2,700 to make the most vulnerable households energy-efficient. Readers have reported paying more than £3,000 in top-up fees - required when the cost exceeds the maximum grant - for boilers that do not work.

Warm Front was also criticised last week in a National Audit Office (NAO) report for “inefficient targeting of resources”.

Mervyn Kohler, of Help the Aged, says: “We are receiving thousands of complaints about Warm Front. Not only are customers being let down, but there also appears to be little accountability over how public money is spent. The organisation is unfit for purpose in its current form.”

The Government has poured almost £2.4 billion into Warm Front to help the 5.4 million households in fuel poverty, where one tenth or more of income goes on fuel bills. It relies on a contractor, eaga, to administer the scheme and manage the 139 sub-contractors responsible for installing heating and insulation systems.

But many customers complain that they have to agree to eaga's choice of supplier and equipment to obtain the grant, even if the boiler selected is unsuitable or the work appears to be overpriced. Many also say that complaints about unsatisfactory work can take months to resolve.

Times Money reader Malcolm Field, 56, applied to Warm Front for a new boiler on behalf of his 80-year-old mother. The total cost was £3,300, so his mother was asked to pay a top-up fee of £600. Mr Field, who lives in Chertsey, Surrey, says: “The contractor took more than a week to fit the boiler and its work was appalling. We called it out six times because the system failed. Eventually, 18 months later, a new pump was fitted and it now seems to work. My brother was a plumber and says that the work should not have come to more than £1,500. These contractors are lining their pockets with the Government's and pensioners' money.”

So far 1.8 million households have used Warm Front. However, some people have been deterred from applying because they cannot choose their contractor. Peter Williams, 63, of Epping, Essex, needed a new boiler and is eligible for a Warm Front grant, but he decided not to apply because he would have no control over the work.

He says: “I could see from pictures on the Warm Front website that the quality of work is poor. The contractors have the right to do the job as they wish and the householder has no control over them. A better approach would be to allow customers to specify what they want and choose a contractor from an approved list.”

The NAO report stated that while the amount charged for the most common work - loft and cavity wall insulation - appeared to be competitive, the cost for gas and oil boiler replacements is “at the higher end of the range”. About a quarter of all Warm Front customers must pay a top-up fee averaging £581, according to the NAO.

Over the past three years 22,000 people either withdrew from the scheme or put their applications on hold, probably because they could not cover the cost. Those that went ahead could expect to wait about three months to have a heating system installed.

Gordon Lishman, of Age Concern, says: “Warm Front is supposed to be aimed at the most vulnerable, such as those on the pension credit, so it should be no surprise that many are unable to proceed with work because they can't afford the top-up fees.”

The Government has spent about £1.4 billion on the scheme already and expects to spend a further £974 million over the next three years. But critics say that not only is the money being used inefficiently, it is also not reaching people who need help most.

The NAO says that 57 per cent of households in fuel poverty do not claim the relevant benefits to qualify for the scheme, while nearly 75 per cent of those that do qualify are not necessarily in fuel poverty.

Households must receive certain benefits, such as income support, pension credit or disability living allowance, to qualify for a Warm Front grant. Some families that claim the working tax credit and child tax credit may also be eligible.

Mr Lishman says: “Not only did the report reveal underfunding to Warm Front, it also outlined the complete failure to get money to the people who need it most. Targeting of the grants must be improved and the maximum grant must be raised to ensure that it covers the work needed.”

Warm Front has been the biggest part of the Government's fuel poverty strategy since it was introduced in 2000. The package of insulation and heating measures that can be installed include loft and cavity wall insulation, draught proofing, gas, electric or oil central heating and hot-water tank insulation. However, many measures are not included in the scheme, particularly those needed to treat old, stone-built houses.

Patricia Farrell, a 67-year-old pensioner from Worthing, West Sussex, applied to Warm Front and found that the scheme was unable to help. She says: “I live in a chalet-style bungalow and Warm Front was unable to help me with the type of boarding required to insulate my home. You can see, especially in the snow, that the property is leaking heat through the roof. The upstairs is so cold that we cannot use it during the winter.”

Mr Kohler adds: “Warm Front is a vitally important scheme but its design, funding and management needs to be looked at urgently. The reality is that in these freezing weather conditions millions of older people are living in cold, energy-inefficient houses and are afraid to turn up their heating because of the cost. The scheme in its current form and at the current funding level is not working. Vulnerable people at risk this winter cannot afford for this failure to continue.”

The Government's contract management arrangements for Warm Front also attracted criticism in the NAO report, which stated that the Government needs to ensure that there are sufficiently experienced and qualified officials in place to manage each contract.

The Government says that it is reviewing “all aspects of Warm Front”. Joan Ruddock, the Energy and Climate Change Minister, who is responsible for Warm Front, admitted that improvements are needed. She said: “We have hired an independent troubleshooter to review the existing contract. There is a strong case for raising the grant levels, which I am investigating urgently, along with the need to expand Warm Front to include new, low-carbon technologies. We are also looking at the issue of improved targeting, as well as opening up the scheme to greater competition.”

Meanwhile, a spokesman for eaga said: “Warm Front is assisting more than 1,000 households across England every day, helping to make their homes warmer and more affordable to heat. Given the size and scale of the scheme, we accept that mistakes can happen on occasion, but these are very much in the minority and the vast majority of Warm Front customers are satisfied with the service that they receive. Where service levels do fall short of our high standards we will put things right.”

Case study - Eight visits and system still not fixed

Terence Dagley, above, had his oil-fired boiler replaced by Warm Front in December 2007. The work cost £7,110 and he paid a top-up fee of £3,481.

The 69-year-old lives in a cottage in Droitwich, Worcestershire. He qualified for the grant because he has leukaemia and claims disability living allowance.

He says: “I was in a nursing home for two weeks when Warm Front came to install the boiler. When I got home, the place was a complete tip. They had bulldozed over my flower beds and drilled massive holes in my oak floorboards.

“The boiler never worked properly - I cannot get the temperature in my living room above seventeen degrees. The contractor has been back eight times and has still not managed to fix it. These cowboys have been an absolute nightmare.”

A Warm Front spokesman said: “Providing the highest level of customer service is extremely important to us, which is why we have contacted Mr Dagley and launched a thorough investigation. Wherever there is any evidence of service failure we will apologise and put right any mistakes.”