Gordon Brown last night signalled that he had quashed proposals for a windfall tax on energy firms to fund an increase in winter fuel payments, outlining instead his support for a major new package of domestic energy efficiency measures.

Speaking at a dinner for the Scottish CBI, the prime minister told business leaders that there would be no "short-term gimmicks or giveaways" to counter rising energy prices.

He added that instead, the government's new package of energy measures to be unveiled next week would focus on longer term measures and "careful interventions" designed to bring down bills permanently, such as a significant increase in energy firms insulation programmes.

The move sparked fierce criticism from union leaders and some Labour backbenchers, more than100 of whom had signed a petition calling for a windfall tax on energy firms' profits.

Number 10 is understood to have held private talks with the big six energy companies about a windfall tax, but has backed away from the idea after the energy firms argued that such a move would harm investor confidence and undermine their ability to deliver on the government's plans for them to invest up to £100bn in renewable energy over the next 12 years.

However, this line of argument was attacked yesterday, after new research commissioned by the Local Government Association (LGA) found that rather than investing all of their increased profits in bolstering renewable and energy efficiency programmes, the big six suppliers increased shareholder dividend payouts by 19 per cent last year.

Meanwhile, Brown also announced the go ahead for one of the UK's largest offshore wind farms to date, announcing planning consent for the 500MW Dubbon Sands project off the coast of Cumbria.

The approval for the 139 turbine project came on the same day as business secretary John Hutton also gave the green light to a 150MW 30MW wind turbine near to Walney Island.

"These wind farms demonstrate our commitment to dramatically increase the amount of energy we generate from renewable sources," Hutton said. "West of Duddon Sands will be one of the three largest wind farms approved to date and will help provide a significant contribution towards our renewable energy targets."

The approvals were welcomed by Chris Tomlinson, Director of Programme Strategy at the British Wind Energy Association (BWEA), who hailed them as the culmination of a "summer of consents" that has seen a record 2,000MW of approved projects since May. The moves provide further evidence that the government is making good on its commitment earlier this year to ramp up wind energy capacity and address many of the planning bottlenecks that have afflicted the industry in recent years.