The chancellor must devote a far larger slice of the economic stimulus spending to green measures, or risk the UK falling behind the US and Europe in the race to build the low-carbon economy of the future, a group of MPs and businesses has warned.

Most of the £535m in the pre-Budget report package that was said to be directed towards spending on green measures, such as home insulation, was not new money but spending already earmarked for such measures and brought forward by a few years, an influential select committee of MPs will say today.