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The Minister for Climate Change and Industry (Mr Nick Hurd)
It is a great pleasure to serve under your chairmanship, Mr Owen. I sincerely congratulate the hon. Member for Edinburgh West (Michelle Thomson), who represents her constituency in a robustly independent way, on securing the debate. She drew on her clear business experience to frame the debate, set it up in the right way and built on the exchange that we had on the urgent question last week.
However, I must say that when the hon. Lady dismisses commercial confidentiality as a smokescreen, she lapses into political rather than business matters. She knows the reality of the situation, however frustrating that is for the House—and, frankly, for me. I will not be drawn into any discussion about the character or values of any potential preferred bidder, or any of the more sensitive aspects of what is a commercial negotiation that has not concluded. I think she knows that, but let me make that quite clear.
Mr Hurd
May I make a little more progress?
This has been a good, well informed debate. There is clearly disagreement about whether it is right to sell the GIB, and I respect that, but there is clearly common ground—this is worth restating—that the GIB has been a fantastic success story. In fact, exactly that language has been used by Members on both sides of the House. That success has been achieved in very short order by a relatively small group of people who were given a very challenging mandate. That is genuinely impressive. The Government are therefore keen, as I am sure the House is, to place on the record our appreciation of the work of not just the GIB’s senior management team but everyone who works in that organisation. It is particularly important to show our appreciation for the professional approach of the GIB’s staff, because as those who have been in the commercial world know, these kinds of transactions drag on and create uncertainty and anxiety.
The GIB has been a success story. It was set up to accelerate private investment in green infrastructure. It has a fantastic success record of turning every £1 of public money committed into £3 of matched private sector commitments. It has achieved a series of firsts—not least the first ever offshore wind fund, which has now reached final close having raised more than £1 billion of capital, making it the UK’s largest renewable energy fund. There is also agreement that if we do sell the bank—there is disagreement about that—the Government will be responsible for securing best value for taxpayers and getting a deal that we can justify to the public, whose money has been invested in this institution. It is important that Parliament holds the Government firmly to account for that.
I think something has been missed in this debate. There has been a lot of assertion about the motives of any potential preferred bidder or even the motivations of the Government. There has even been the suggestion that this sale represents a sapping of green ambition on the part of the UK Government, but that could not be further from the truth. I meant what I said on the Floor of the House yesterday.
I will come on to the criteria, which we will be very robust in sticking to when it comes to reviewing any proposal before us. However, one of the things that we are looking at most closely when considering a proposal from a preferred bidder is their forward commitment, not only to people—particularly in Edinburgh, which I hope will reassure the hon. and learned Member for Edinburgh South West (Joanna Cherry), in whose constituency the HQ of the bank is located—and to an ongoing institution with a clear identity in the future, but, critically, to forward investment. That is because hon. Members are right: we need more funding and we need more private capital coming into our green infrastructure. That is obvious; every country needs that.
Part of our starting premise, which has not been reflected in this debate at all, and part of the motive for privatisation, is to confront the reality that the GIB, however successful it has been, is constrained at the moment by the framework in which it operates. I do not think that people get up in the morning thinking, “Thank God I’m working for an instrument of public policy”—I do not think that is quite how people see things—but they are constrained in what they can do by state aid rules and the number of restrictions that come from being a public sector organisation. We feel that this organisation, when liberated from all that, can do more and we want it to do more. We need to be reassured by any future owner that they share that vision, are committed to it and are prepared to back up that commitment. That will not be just the evaluation of Ministers or officials in Government—
Mr Hurd
I will just finish this point. I want to reassure Scottish Members of Parliament, and I have already told the hon. and learned Member for Edinburgh South West this in our meeting, that when it comes to making any final judgment we will be led by the judgment of the chairman—Lord Smith of Kelvin, who is highly respected—and the board about the credibility and integrity of future commitments made by a bidder, and the degree to which they can be bound into contractual arrangements.
Mary Creagh
I thank the Minister for his generosity in giving way and I apologise to colleagues and to you, Mr Owen, for turning up late; I was anxious to listen to the opening speeches in the education debate.
I echo what the Minister has said about the patience of the staff, who have been undergoing this process for 18 months amid considerable uncertainty. Am I right to infer from the point that he has just made about the good will of the potential purchaser that there are potentially some issues around that? Can he say when he became aware of the fact that these various other new companies had been set up by the GIB just before Christmas? There has been a little bit of confusion, with Ministers first saying that they did not know about those new companies and then saying that they had been established to “facilitate the privatisation” of the bank. Is that normal behaviour? It does not strike me as normal at all.
Mr Hurd
Regarding the first point, the conversations with the preferred bidder about their future commitment are ongoing. That just reflects the fact that we take that matter very seriously. This is not a case, as I think was suggested, of the Government simply wanting to raise some money, getting the bank off the balance sheet and then off into the hills we go. The issue of the future commitment of any new owner to future investment that will help us to move further and faster along in the transition to the low-carbon economy—a transition that is central to the industrial strategy—is a very important part of the consideration of the bid. That is why, working through Lord Smith and the board, we are taking time to look each other in the eye and say, “Is this enough?” That is the situation we are in.
On restructuring, I think I was pretty clear when answering the last parliamentary question. We agreed some reorganisation in partnership with the GIB to facilitate private capital into certain assets. I make the point—which, again, is a point of principle and needs to be asserted—that there was almost a suggestion during the urgent question debate that the GIB should somehow not be free to sell anything or to bring in private capital. That is completely wrong, particularly when the evidence is that there are buyers for assets that are reaching some maturity. Given what the GIB was set up to do, I do not think that it should be in the business of competing with private capital to invest in assets. It serves no policy purpose to hold on to assets that are valuable to others if that money can be recycled into new investments. That is the critical thing.
Lots of assertions have been made about asset stripping. The Government have no interest in selling to an asset stripper. We want to know about investment in the future; it is okay to sell, so long as there is a commitment to reinvest in future. The GIB portfolio—under any ownership, including public ownership—should not be preserved in aspic forever. It has to be a dynamic organisation, and it should be free to realise capital from packaging assets and to do things that a nimble entrepreneurial organisation, which is what it is, should be free to do.
Michelle Thomson
I thank the Minister for his comments, but I need to press him on my specific comment about the risk appetite and the nature and type of projects. I fully accept and understand increased access to capital, but I made a specific point about the risk appetite that I hope the Minister will move on to.
Mr Hurd
I am happy to address that point, because it is important. The hon. Lady needs to reflect on the motivation of anyone wanting to buy the GIB. It is a special organisation; there are other vehicles that people can buy if they simply want to invest in clean energy or strip assets. The GIB was set up for a special purpose. We put in place governance frameworks—the hon. Lady calls it the golden share; we call it the green share—that we think are robust and that Parliament approved.
Why bother if the only intention is to do easy stuff? The GIB has proven that it can do difficult stuff and make a return. We therefore come back to the motivation of a bidder, and to our doing our job in making sure that we test any proposal against the criteria we have set. One of those criteria is about not just the volume of future investment commitment to the UK, but the degree to which any buyer buys into the ethos and purpose of the organisation.
To draw things to a close, the central point is that the Government set out our case for privatisation and set out the criteria—value for money, declassification, but also a desire to see a credible commitment to the ongoing organisation and to increased levels of investment in the UK’s low carbon economy. We ran a competitive process, we received a proposal from a preferred bidder and we are now evaluating that against those criteria. No decision has yet been taken, because this is a very serious decision.
The debate, and the urgent question debate, have been very helpful—not only in sending a message about the importance of getting this right, which had already been received by Government, but, critically, in sending a message to anyone looking to buy the organisation about the importance that Members from both sides attach to getting the transaction right: it must be seen to deliver value for money, but also show a commitment to the ongoing organisation.
Dr Whitehead
The Minister has been very generous in giving way. Before he concludes, will he briefly categorically deny that the story in the Financial Times has any truth in it at all?
Albert Owen (in the Chair)
The hon. Member for Edinburgh West (Michelle Thomson) has one minute to sum up.