Green Bank’s borrowing powers still hang in the balance

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Last-minute negotiations are still taking place ahead of the Budget between the Treasury and ministers over whether the Government's £1bn new "green bank" will have to wait until 2014 before it is allowed to borrow additional capital.

There is a long-running dispute between the Treasury and government departments about whether the new bank, being set up to back low-carbon and clean-energy projects, should be granted borrowing powers to raise new capital through "green bonds". The Chancellor, George Osborne, who supports the bank, is worried that if it is given immediate powers to borrow, the Office for National Statistics will classify it as part of the public sector. This would undermine the deficit-reduction strategy.

Instead, the Treasury argues that a decision on borrowing should be delayed until 2014, or that powers could be granted in principle, but not allowed until the end of this Parliament.

A statement is expected in Wednesday's Budget.

The City financier Bob Wigley, who wrote the green-fund report, said yesterday: "These are highly intelligent people. I'm sure it will work out."

Meanwhile, in a pre-Budget warning, the Tobacco Manufacturers' Association has urged the Government not to increase duties on tobacco, because, it says, price rises will lead to more smuggling.