Row erupts over George Osborne's plan for 25 per cent cuts in onshore wind farms subsidy

A Cabinet row has erupted over a plan by the Chancellor George Osborne to cut the subsidy for onshore wind farms by up to 25 per cent.

Liberal Democrats have accused Mr Osborne of “playing politics” in an attempt to rebuild his reputation amongst Conservative MPs after his trouble-hit Budget in March.

Nick Clegg and Ed Davey, the Lib Dem Energy and Climate Change Secretary, are fighting Treasury demands for the £400m-a-year subsidy to be cut by between 20 and 25 per cent. The Lib Dems will support a limited reduction but argue that a big cut would put billions of pounds of investment in “green energy” at risk.

Tory MPs have welcomed Mr Osborne’s drive to wean David Cameron off the environmental agenda he championed before the 2010 election, backing ther Chancellor's argument that the economic picture has changed. More than 100 Tory backbenchers have called for the wind farm subsidies to be reduced.

A Lib Dem source told The Independent: “This is not the time to play politics. The most important thing is to give investors certainty. Many of the companies who want to invest in onshore wind also invest in offshore wind, on which Britain is a world leader, so the impact of a cut would go much wider. We are talking about billions of pounds of investment and thousands of jobs. ”

Lib Dems argue that a cut in subsidies of about 10 per cent is in line with the evidence of what the industry could stand. But Mr Osborne is determined to go further in order to keep down householders’ energy bills, which fund the subsidy.

Mr Davey is due to announce shortly the subsidies for renewable energy for the 2013-2017 period. But the rift between the Coalition parties means the issue may have to be resolved by the “Quad” of senior ministers – Mr Cameron, Mr Osborne, Mr Clegg and Danny Alexander, the Lib Dem Chief Treasury Secretary.

Yesterday Mr Clegg insisted his party is not “addicted” to subsidising wind farms but argued that the payments were vital to get the industry off the ground. He said: “In the early stages of these technologies, a bit of support from the taxpayer goes a long way. If you want to get those new renewable technologies going, you need a bit of support in those early years."

The Deputy Prime Minister argued that green energy should be regarded as an opportunity rather than a threat. "The key thing is are we prepared as a government and a country to really commit ourselves to being a powerhouse in the race to become a clean sustainable green economy,” he said.

But he insisted: “I don't think subsidies are something which are sort of chiselled in stone. We all accept that over time you want to move to an environment where lots of different ways of producing energy in a clean non-carbon way do not rely on taxpayer subsidies.”

There are 3,000 turbines in Britain and a further 4,500 are planned.