Fledgling Green Bank dogged by fears over borrowing

It is hoped the promised bank will leverage billions of pounds in private finance to fund clean energy and low-carbon projects.

But the setting up of the Government-backed institution has been dogged by disagreement within Whitehall about whether or not it should be a bank able to raise its own capital, amid concerns its borrowing could undermine efforts to cut the deficit.

Ahead of tomorrow’s Budget, Ed Matthew, director of campaign group Transform UK, said he expected the Treasury to announce that the bank would be able to borrow – but not until 2015.

He said the bank was due to be up and running by September 2012, and urged the Government to set a cap on borrowing when it is first operational rather than imposing a delay on its ability to raise capital.

“The power to borrow is what gives the Green Investment Bank the ability to leverage in the private investment required to spark low-carbon growth and de-carbonise our energy system.

“If they clip the wings of the Green Bank so it can’t fly, where is the growth going to come from? Are they going to magic it out of thin air?

“We are in a clean-tech race with the rest of the world and the Treasury seems determined to lose,” he warned.

Earlier this month, the Environmental Audit Committee called for the institution to be a “real bank” and not just another fund for distributing Government money.

MPs said the bank must be able to raise private finance to plug the multi-billion pound gap in investment needed to drive the shift towards green technology.

Green Party MP Caroline Lucas said: “Although the Treasury may agree in principle that the Green Investment Bank can borrow eventually, to stop it borrowing for four years means it will be merely a fund for that time.

“To clip the Green Investment Bank’s wings at exactly the time it needs to fly would be daft. It would put growth and low-carbon budgets in serious jeopardy.”