Green Investment Bank

Alan Whitehead Excerpts

Wednesday 25th January 2017 Westminster Hall

[Dr Alan Whitehead (Southampton, Test) (Lab)]

The Opposition’s position on the sale of the Green Investment Bank is that it should not be sold. The reason for that is at the heart of what the Green Investment Bank is. It is, of course, not a bank. It does not have the full lending and borrowing facilities we would expect in a bank. Indeed, hon. Members may remember that after it was formed the Chancellor imposed conditions on when it might become a bank. It is not a bank: it can be better described as a public policy instrument. That is what it has always been. It is a public policy instrument that, as hon. Members have said, has a particular purpose of using state-backed intervention to overcome market failure, particularly in green investment.

We know that the market failure issue has not been resolved and that green investment, particularly because of the requirement for patient capital and long-term investment as it attempts to ride a number of waves at the same time, continues to be difficult as we hear from reports coming into this country. We also know that investment is essential if we are to move to the next stage of low-carbon investment. The Green Investment Bank, as the public policy instrument to ensure that happens, has been a remarkable success. It continues to be a remarkable success and to do very well what it originally set out to do, which, as hon. Members have said, is not to give grants out to anybody or take companies over but to pull capital in from elsewhere with the back-up of capital from the Green Investment Bank, which is backed in the first place by Government, to immensely enhance the value of the investments that have been secured. In so doing, the Green Investment Bank has, as we know, secured more than £10 billion of capital investment with an input of just over £2 billion of Government-backed money via the Green Investment Bank’s instruments. It does not seem a very wise course of action to sell that public policy instrument, with all the consequences that may arise from that now and for the strategy that we need to adopt for green investment.

The Government have not only decided to sell the Green Investment Bank, but they have decided to make the preferred bidder for the bank a company that does not have anything like that model in its investment arrangements. As hon. Members have mentioned, that particular company appears to have been involved in specific amendments to the arrangements of the Green Investment Bank so that it would be possible to make that bank work in an entirely different way—setting up, in November and December, 10 companies, which would fit neatly in at least four of the major investments that the Green Investment Bank has been involved in—the Galloper, Rampion and Westermost Rough fields, and GIB offshore wind collectively, amounting to a Green Investment Bank total investment of about £1 billion. It would not be a bad start—to be able to take the Green Investment Bank over, flog off half of the assets that have been taken over, get £1 billion back and then move on to the next stage. To the casual observer, that has the potential to be a pretty scandalous forward move to do to the Green Investment Bank exactly what we fear would happen were it to be privatised in that way.

I personally do not go along with Donald Trump’s view of the press, particularly the quality press and the Financial Times and The Sunday Times. This weekend, the statement in The Sunday Times was simply this:

“Ministers are poised to scrap a planned sale of the Green Investment Bank…to Australian investment firm Macquarie, pushing instead for a £3.8bn stock market listing.”

I understand that the Minister cannot and will not mention the word Macquarie, but I wonder whether he would enlighten us by using a different formulation, such as, “No, the Government are not poised to scrap a planned sale of the Green Investment Bank to a preferred bidder, and no, they are not pushing instead for a £3.8 billion stock market listing.” That would be a suitable statement for the Minister to make this afternoon in response to speculation in the press. I would take silence on that formulation as an indication that the Government may be having second thoughts. If they are, I would fully support them, because they would start to be coming into line with the issues that hon. Members have raised this afternoon and at other times.

If those second thoughts included, for example, an initial public offering that was a minority sale of shares, or even a majority sale of shares with a controlling share retained by Government, that would easily overcome the issue that hon. Members have also raised—the arrangements that we know will be inadequate to stop asset-stripping in the way that appears to be lined up for the bank at the moment. Those arrangements are very narrowly based on the memorandum and articles of association of the company, not on the asset possessions of the company, and would have no real effect in the way that I think hon. Members would want.

If the Government were to decide to float shares in an IPO, I guess that would take about two years. That would give the bank a substantial amount of time to do its work, particularly in view of the likely withdrawal of the European Investment Bank, which other hon. Members have mentioned. We ought to remember that the European Investment Bank has actually invested twice as much as the Green Investment Bank over the past few years in green projects that are difficult to invest in. Upon Brexit, the EIB’s investment is likely to fall to between 10% and 0% of its current investment. That is a further reason why the Green Investment Bank is so important to making investments right now.

I have on previous occasions asked the Minister to wink in the Opposition’s direction if he has had a change of heart. Perhaps nothing as flamboyant as that is necessary today, but it would be helpful if he could indicate whether a different route is being considered for the Green Investment Bank so we can discuss its future in a rather less negative way.

[Albert Owen (in the Chair)]

The Minister has a little extra time to respond to the debate. I remind him that if he wishes, he can leave Ms Thomson a couple of minutes to sum up.

--- Later in debate ---

[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]

rose—

[Mr Hurd]

I am happy to give way, if time allows.

[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?

[Mr Hurd]

I am confused about what story the hon. Gentleman is referring to; there have been so many stories. I can say that the Government continue to evaluate a proposal from a preferred bidder and that no decision has been taken.