A LEADING MP has questioned whether a pension fund for the Environment Agency (EA) should invest millions of pounds in controversial industries - such as fracking - which the government regulator oversees.

Chairman of the Environment, Food and Rural Affairs Select Committee, Anne McIntosh, said she had been intrigued by claims the EA's pension fund, reportedly worth £2.3bn, had been used to invest in Barclays, which in turn is bankrolling Third Energy's attempts to frack in her Thirsk and Malton constituency.

The comments from Miss McIntosh, who clashed with David Cameron earlier this month over concerns the fracking industry is not being sufficiently regulated, followed former Green Party leader Caroline Lucas describing the alleged links between the EA and firms such as Third Energy, as "deeply shocking".

She said: "There is a clear conflict here, which undermines the credibility of the Environment Agency and calls into question its independence and authority."

Anger erupted last month after it was revealed Third Energy would seek permission to start the controversial drilling method to stimulate gas flow from sandstone and shale between 7,000 and 10,000ft deep next to the Flamingo Land theme park, Kirby Misperton, near Pickering.

The conflict of interest claims have further incensed anti-fracking groups, which have vowed to fight Third Energy's scheme to the bitter end.

Chris Redston, of Frack Free Ryedale, said: "It is astonishing to discover the government body that makes decisions on environmental permits for fracking companies is investing so heavily in the same companies that are applying for these permits."

Miss McIntosh, whose constituency contains many of the dozen licences for possible fracking already issued to gas companies in this region, said as a non-departmental government body, the EA had to be seen to be above reproach.

She said: "As the main source of its funding is from the taxpayer, investments made in its pension fund are clearly a matter of public interest.

"The people of Ryedale will have a view as to whether investing in the pension fund by the independent regulator of such an untried and untested source of energy such as deep well fracking of a fossil fuel is either responsible or sustainable."

An EA spokesman said its pension fund was externally managed to ensure there could be no conflict of interest.

He said: “The EA does not hold shares in any listed companies.

"The day-to-day management of the fund and selection of companies is delegated to external fund managers who have no access to information regarding the EA’s regulatory activities.

"The fund operates transparently and is recognised as a global leader in responsible and sustainable investment.”