Enterprise and Regulatory Reform Bill

Lord Oxburgh Excerpts

Tuesday 26th February 2013 Lords Chamber

[Viscount Younger of Leckie]

My Lords, the Government are fully committed to providing the UK Green Investment Bank with the funding it needs to become a successful and enduring green financial institution. In Budget 2011, the Government committed to providing the bank with £3 billion until 2015, and I appreciate the endorsement by my noble friend Lord Teverson of the sufficiency of the initial funding of the bank. This is a significant injection of capital, which would allow the bank to build market confidence and begin mobilising investment in green infrastructure projects. As the noble Lord, Lord Smith of Kelvin, explained in his excellent speech at Second Reading, the bank’s initial priority must be to show the Government and private capital markets that it is a well-run organisation with a good track record, worthy of the injection of more capital or borrowing money from capital markets. The noble Lord, Lord Smith, also made clear that, as chairman of the UK Green Investment Bank, he will approach the Government as a shareholder well before 2015 if he believes that it would be in the company’s long-term interests to borrow, either from Government or from the capital markets, from April 2015.

I believe this is the right approach. The bank will, of course, require additional funding in due course, but it is too early to make commitments about the level and type of funding for the bank from 2015-16 or the precise timing of an application to the Commission in respect of borrowing. We should instead take the necessary steps to ensure that the bank has the confidence of investors and other market players by 2015 and put in place a proper process by which the board can discuss its future funding needs, and how these can best be addressed with its shareholder.

As part of this process we have given a commitment that the Government will seek state aid approval in respect of borrowing from the European Commission before the end of this Parliament. Amendment 10 would go further by setting a statutory timetable for a notification to the European Commission and, subject to this, for permission for the bank to borrow from the capital markets. We do not believe that this is either warranted or wise. The Government should not be committed by statute to making a premature or ill-thought-through application, particularly as this would have cost and resource implications both for the Government and indeed the European Commission.

We should also be clear that the level of bank borrowing will need to be agreed by the Government as part of their future spending plans. We should not be apologetic about this. Any borrowing by the bank would score against the national debt targets and it is essential for sustained growth that the Government maintain tight fiscal discipline. I want to emphasise again, in response to the comments made by my noble friend Lord Teverson, that the Government will consider the full range of funding options for the bank from April 2015, but it is important that we do not run before we can walk. In the light of these points, I hope the noble Lord will agree to withdraw this amendment.

[Lord Oxburgh]

Can I draw the Minister’s attention to the fact that this is not a commitment to borrow? As he is well aware, perception is almost as important as reality in the matter of fundraising. This amendment would send a very clear message to the investment community that the Government are serious about backing this bank.

[Viscount Younger of Leckie]

I thank the noble Lord for his intervention. However, it would put the opportunity to borrow in the Bill, and we do not believe that this is the right thing to do at this stage given that the Green Investment Bank is just starting up. As I said, it needs to be able to walk before it can run.