The Government should channel £30 billion a year into low-carbon measures to create a green “New Deal”, its sustainability watchdog has urged.

The Sustainable Development Commission (SDC) said half of the UK’s stimulus package, which should total four per cent of GDP, should go on boosting renewable energy and green transport, redesigning the national grid and making homes more energy efficient.

Outlining its recommendations for a sustainable stimulus package in the Budget, the SDC also called for low-carbon investments in the public sector and funding to improve green skills.

The SDC said more than half of the £30 billion investment would generate financial returns within a few years, and would create at least 800,000 jobs.

The commission’s chairman Jonathon Porritt said: “Without commitment on this scale, there is every likelihood that the Government’s current low-carbon measures will be totally overwhelmed by business-as-usual stimulus measures.

“An investment strategy of the kind proposed would put us on track to achieving the extremely ambitious targets in the Climate Change Act, would create appropriate incentives for both the private and public sector and would demonstrate the kind of unequivocal leadership that UK citizens are now ready for.”

Tim Jackson, the SDC’s economics commissioner, said: “The government itself has made it clear that there is no high-carbon future, and that the transition to a low-carbon economy is an environmental and economic imperative.

“Only a commitment on this scale will ensure that the recovery will take the UK on to a globally-competitive, low- carbon pathway, rather than reverting to the unsustainable forms of growth which sowed the seeds of the current financial and climate crisis in the first place.”

A spokesman for the Department of Energy and Climate Change acknowledged there was an urgent need for action, as well as “real opportunities” in the low-carbon sector.

The spokesman said Government policies were driving £50 billion of investment in the sector between 2008 and 2011, including £5.8 billion in renewables, £10 billion in energy efficiency programmes, £7.6 billion in the grid and £23 billion on public transport and low- carbon vehicles.

He said: “We agree more needs to be done and we will be outlining further plans in these areas in the summer when we will announce how we intend to meet our carbon budget commitments.”

Meanwhile union leaders have also called on the government to inject a “bold” £25 billion fiscal stimulus into the economy focusing on jobs and green industries.

The TUC wants Alistair Darling to increase the UK’s current stimulus package to 3.25 per cent of GDP in his upcoming Budget, which it claims would create and safeguard one million jobs.

It is calling on Mr Darling to put the major public works programme at the heart of his recovery strategy, including spending £17 billion on green industries to target manufacturing, renewable energy, home insulation, housebuilding and modernising infrastructure.

The cost of inaction would be mass unemployment and an even greater strain on the nation’s finances for decades to come, the TUC warned.

TUC general secretary Brendan Barber called on Mr Darling to place the same “relenting focus” on saving and creating jobs as on the government’s multibillion-pound bailout for the banks. There was still scope within the public finances for a “carefully targeted” additional stimulus, he claimed.

In their submission ahead of the Budget on April 22, unions want to see £6 billion spent on building 100,000 social homes and £5 billion to insulate 10 million homes. The two measures would create 50,000 jobs over two years.

The TUC also wants a £3 billion support package for struggling renewable projects and £1 billion for carbon capture programmes.