£3bn funding for green bank

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The Government's claims to be the "greenest ever" came under fire today as plans for a new bank to drive low carbon investment fell short of campaigners' hopes.

In the Budget, Chancellor George Osborne said the new green investment bank would have £3 billion in public funding - but will not be able to borrow until 2015, subject to overall targets on debt reduction being met.

In addition to the £1 billion of funding already announced for the bank, which will start operations a year early in 2012, £2 billion would be made available from asset sales.

And £15 billion of private sector investment would be raised during the life of this Parliament, he said.

But Ingrid Holmes, from sustainable development campaigners E3G warned that preventing the bank from borrowing for four years was like "buying a powerful car but being forced to drive it around with the hand brake on".

Friends of the Earth executive director Andy Atkins went further, accusing the Treasury of sneaking round the back of what should have been a vehicle to drive economic recovery - and siphoning off the fuel just as the rest of the Government was starting up the ignition.

The setting up of the Government-backed institution has been dogged by disagreement within Whitehall about whether it should be a bank able to raise its own capital, amid concerns its borrowing could undermine efforts to cut the deficit.

Apart from the announcement on the Green Investment Bank, which it is hoped will leverage billions of pounds in private finance to fund clean energy and low-carbon projects, environmental groups said there was little in the way of green measures.

The Chancellor did announce a carbon floor price to increase the amount of money electricity generators pay for their pollution, to spark investment in green energy, which analysts warned would lead to rises in energy bills.

But buried elsewhere in the Budget documents were changes to the plans to ensure all new homes are "zero-carbon" by 2016, reducing the amount of energy use in the home which would be covered by the rules.

Executive director of Greenpeace John Sauven said: "The Prime Minister claimed he would lead the greenest government ever, but George Osborne and his officials have crafted a Budget that sabotages that ambition.

"There's almost nothing in this Budget to protect the environment and spark a clean-tech jobs boom."

But Energy and Climate Change Secretary Chris Huhne insisted there was a clear, long-term signal to energy investors in the Budget.

"A Green Investment Bank with substantially more capital and borrowing capacity and a stronger, more stable carbon price put investment in green energy technologies at the heart of the coalition's strategy for sustainable, balanced economic growth," he said.