Enterprise Bill [HL]
Debate between Lord Barker of Battle and Lord Smith of Kelvin
Lord Smith of Kelvin (CB)
My Lords, before I make my remarks, I must declare a pecuniary interest in the Green Investment Bank, as set out in the register of interests. I am its chair, appointed by the then Business Secretary on its creation in 2012, and subsequently reappointed earlier this year by the current Business Secretary. Despite that interest, I hope that my position both as chair and as a Cross-Bencher without party affiliation will offer the House an opportunity to hear directly about the bank’s current position and its future ambitions.
I have spoken to many noble Lords across the House over the past few weeks and have been very grateful for the time that they have given me. I think we can all agree that the Government’s amendments before us today are unfortunate but they are none the less necessary. In my discussions with noble Lords, I have been struck by the consensus that exists across the Chamber. I have been heartened by the support for the GIB’s mission and our progress over the past three years. I have also been pleased to see broad support for the idea of introducing private capital to the GIB. This consensus is important to us and we do not take it for granted.
Noble Lords have rightly sought assurances that the GIB’s special green mission and values will be protected under new ownership. I share those concerns, as does every member of the board of the bank, and as I believe the Government do. As the Minister explained, the Government are restricted in what they can do to offer cast-iron guarantees because of the guidance from the ONS regarding the classification of the GIB. I think we all share a frustration with this advice.
While the Government are in a difficult position, I am heartened by the constructive approach that they are taking. It is right that we should seek the fullest measures available to secure the GIB’s green approach and I believe that is what the Government have done and will continue to do. It is important that these discussions continue and that the Government take this opportunity to secure all measures to protect the GIB’s green mission. However, that has to happen within the parameters of declassifying the GIB.
I am confident about securing the GIB’s green mission. Let me set out to your Lordships the basis of that confidence. It is based on the logic that investors will be buying into the GIB precisely because they want it to be green, not in spite of it being green. The GIB is a global leader in green investment; investors will be buying, and most likely paying a premium, for that expertise. However, noble Lords and others have made the point that commercial logic is not in itself enough and I believe it is right that we do not rely on that logic alone. We must seek assurances and specific measures to protect the GIB’s green approach. I am confident that the measures which the Government have set out, and others that they continue to consider, will deliver the maximum possible protections.
I conclude, though, with a word of caution over unintended consequences. The biggest risk to the GIB’s green mission would be a failure to secure the capital that it needs to continue investing and growing. I have been told that the GIB has secured additional funding from the Government, as we have just heard, through the recent spending review. That commitment, however, is premised on a part sale of the GIB so it is vital that we are able to start raising capital from new investors. To do that, the Government must be able to proceed with the legislation which they believe will achieve their aim of declassifying the GIB. If we cannot move forward with certainty without delay, I fear that the tremendous success achieved by the GIB so far will be placed under threat. I thank the Minister for taking my intervention.
Lord Barker of Battle (Con)
My Lords, I support this amendment but I do so reluctantly and having thought about it a great deal. Before I go any further, I should draw the attention of the House to my declaration in the register of interests regarding private equity and clean energy, but that is not the reason I wished to speak.
I particularly wanted to speak because as a Minister at the Department of Energy and Climate Change, and more importantly perhaps as a shadow Minister for climate change in 2009, I was intimately involved in the creation of the policy that led to the creation of the Green Investment Bank itself and setting up, in opposition, the Green Investment Bank commission, which did an excellent job. I am delighted and privileged to follow the noble Lord, Lord Smith, who has been an outstanding chair of that institution, created in the previous Government as a result of that policy. I think that the Minister said that the Green Investment Bank was one of the key successes of the term of the coalition Government. I absolutely agree. Perhaps I am slightly partial but I think it will be one of the important, enduring legacies of that term of government.
I therefore looked at this amendment very carefully and was rather puzzled why, having made such a success of this institution, there should be what seems like indecent haste in trying to take it off the public books. But the more I looked into it the more persuaded I was that it was unfortunate but necessary, in the phrase that the noble Lord, Lord Smith, used. In so doing, however, and particularly as we are debating this on the first day of the climate change conference in Paris, COP 21, it is very important that a clear message be sent out: this is not a retreat from the green agenda or a lowering of ambition here in the UK on our commitment to meeting our stringent and ambitious carbon reduction targets, which are implicit and explicit in the Climate Change Act. Far from it—what we are actually doing is recognising that, perhaps unfortunately due to these complex accounting rules, we are being pragmatic and sensible and following a route that will allow this fast-growing institution to continue on its mission to mobilise capital and set it to work in the UK low-carbon sector.
By doing that, we are allowing the GIB not only to raise new equity from new investors—up to £2 billion in the first instance, I believe—but to have access to far greater borrowing. This was a key demand of other political parties and the major green NGOs at the time that the GIB was created, and indeed in the run-up to the general election. A constant refrain from those that had a particular interest and concern with mobilising capital into the green economy has been that the GIB should be given powers to borrow. This legislation will, at last, allow the GIB to spread its wings even further.
Other benefits of the legislation will be to remove state aid constraints, to speed up the GIB’s ability to make quick and prompt investment decisions and to allow it to invest in new sectors. One of the complaints I heard about the GIB was that it was not able to invest in things like low-carbon transport or storage, the latter of which is particularly important now. This will help widen the GIB’s remit. There is protection in the fact that the Government will retain a minority, but nevertheless important, stake. I would be very concerned if there was a proposal to sell that stake completely. That minority share may not enable the Government to dictate the articles of association or to prevent the bank changing its remit, but it sends a very important signal, particularly to foreign investors, that Her Majesty’s Government have skin in the game in the UK’s low-carbon economy.
The most important element of the whole mission of the GIB when we were considering its creation was to demonstrate, at a time when we faced the prospect of almost unprecedented investment in these novel low-carbon technologies, such as offshore wind, energy from waste and other key elements of a successful low-carbon economy, that we would not leave it to the market alone but would harness the power, ingenuity and capital reserves of the market, with government nevertheless as a partner. I would certainly be very concerned if there were to be a complete selling down to 0% of the government stake. However, that is not what this legislation proposes, nor is it what the Minister has proposed from the Dispatch Box. I take a great deal of comfort from the thoughtful way in which the Minister has explained government strategy here. On balance, having come to these amendments rather sceptical about their intention but having looked carefully at them, I am very pleased to be able to support my noble friend.