Ministers are under pressure to restore funding to a flagship £1.5bn environmental scheme to upgrade domestic properties in England after the government quietly cut an estimated £1bn from the initiative, claiming a lack of take-up.

The Green Homes Grant was introduced last year by Chancellor Rishi Sunak as an important initiative to create more “green jobs”, and is due to run until March 2022.

But earlier this month, the government signalled it would pull most of the funding, blaming low demand related to the coronavirus pandemic. The scheme was intended to help homeowners improve the efficiency of their properties by fitting insulation and low carbon heating.

Two bodies representing installers of low-carbon heating systems have refuted those claims, instead blaming the administration of the scheme, which allows homeowners to claim up to £10,000 towards the work.

This has led to problems for customers trying to get hold of the government voucher needed to enter the scheme, as well as delays in paying installers once the work has been completed.

MCS and Solar UK said they had been told there were 100,000 applications made under the Green Homes Grant since it was launched last year but only 20,000 vouchers issued. The government said applications were closer to 75,000 and pointed out that it had issued over £100m worth of vouchers for home upgrades.

“There has been considerable homeowner demand but this is being stifled by a scheme that is extremely slow at issuing vouchers,” said Ian Rippin, chief executive of MCS, which certifies low-carbon products and installations.

Rippin said the initiative was “over-engineered, requiring multiple checks before a completed installation can be processed for payment”.

One MCS installer recently received an email reply from the government, seen by the Financial Times, that blamed delays with issuing vouchers on a “high volume of applicants”. Last week, the business department issued a statement that blamed low uptake on a “reluctance on the part of the public to welcome tradespeople into their homes during the pandemic”.

Separately, the Environmental Audit Committee will on Wednesday call for an overhaul and “multiyear” extension to the scheme. The recommendation is part of a report to ensure the UK economy rebounds from the pandemic. Other recommendations included reducing value added tax on green goods and services.

In a survey of companies by the two trades bodies, over a third of the 190 respondents warned that delays to payments under the voucher scheme were threatening the viability of their businesses.

Some companies were owed as much as £20,000 and MCS said it estimated it was taking on average 40 days to pay installers, many of which are small businesses with a maximum of 20 staff.

“The evidence that there is no demand isn’t really born out,” said Chris Hewett, chief executive of Solar Energy UK, who called on ministers to fix the problems urgently and extend the initiative until the next election, scheduled for 2024.

Ministers awarded the contract to administer the Green Homes Grant to ICF, a US consultancy, which declined to comment and referred all questions to the business department.

The government did not address the specific issues raised but said it was committed to “building back better and greener from the pandemic”.