Bob Stewart
Main Page: Bob Stewart (Conservative - Beckenham)Enterprise Bill [Lords]
Bob Stewart Excerpts
Bob Stewart (Beckenham) (Con)
Would not inoculation, to use the hon. Lady’s word, be guaranteed by the special share the Government intend to operate?
Caroline Lucas
Unfortunately, the special share has no legal underpinning, so we cannot have reassurance about that. In addition, the Government’s overestimation of the ease with which they will sell the bank is a real problem, as I am demonstrating. They have massively overestimated the speed at which they can sell, which I fear will lead to a temptation to asset-strip. My new clause is a simple way of ensuring that that does not happen. I suggest we ensure that anyone buying the bank commits to the full five-year life of round one.
Mary Creagh
I shall speak to amendment 17, which stands in my name and that of my right hon. Friend the Member for Don Valley (Caroline Flint). Before I come on to the substance, I would like to congratulate previous speakers in the debate. The fact that the Government have moved substantially on some of these issues is a testament to the scrutiny provided by the Environmental Audit Committee and the Labour party as the Bill has passed through the House. I put on record my anxiety about the fact that this asset sale was rushed out last Thursday, before the Bill had had a chance to pass through the House, which suggests that we are moving on the basis of a timetable not dictated by the Minister or the market conditions that would achieve the best possible value for a Government asset of this kind, but driven by the Chancellor, who is going to have to make some difficult announcements in his Budget on 16 March.
To meet the climate change targets that were agreed at Paris, we will need billions of pounds of green investment to upgrade the energy and transport infrastructure of the UK. So far, the Green Investment Bank has done a really sterling job in attracting capital to low-carbon infrastructure projects in the UK that might otherwise have struggled to find funding. The Bill allows the Government to sell off the bank. I stress that I am pretty certain that this bank is going to be sold in one piece at one time, with the risk that it will not achieve best value for the taxpayer. I am not opposed to privatisation, if it can be shown that it is the right policy tool to get the job done, but this decision seems to have been rushed through just to get the bank off the Government’s balance sheet.
The Environmental Audit Committee, on which the hon. Member for Brighton, Pavilion (Caroline Lucas) and I both sit, produced a report before Christmas that concluded that the Government took
“the decision to privatise GIB without due transparency …consultation, or proper consideration of alternatives.”
Ministers have simply not yet proven to Parliament that the bank will achieve its aims better in the private sector. The Government have relied heavily on assurances from potential shareholders and executives who stand to benefit personally from the sale.
Amendment 17 would ensure that, if the sale goes ahead, the Green Investment Bank would remain accountable to Parliament and taxpayers by reporting annually on the pay of its top team. The Environmental Audit Committee recommended that the Government undertake proper consultation and evidence gathering before any sale and that protecting the GIB’s green identity should be paramount. While I welcome the Secretary of State’s pledge to protect the bank’s green status with a special share, as the Committee recommended, I am concerned that without locking that in legislation, it may not be secure. I am concerned that the special share will not be worth the paper it is written on in any future sale of the bank and that it will be forgotten because, of course, the bank’s onward sale value is depressed if we are limiting the nature of the activities in which it can invest.
When the bank was established, it was intended by the Government to be an exemplar of transparency in the financial services sector in reporting executive pay. That particularly important point was accepted on a cross-party basis, given the recent banking scandal and the low levels of public trust in bankers and their bonus culture, which rewarded recklessness and persists to this day. It is therefore disappointing that that welcome clarity will not continue under the Minister’s proposals to privatise the bank. Ministers are happy for the bank and its executives to revert to the status of any other bank or fund with minimal reporting of remuneration that is limited to the highest paid member of staff and the chairman of the board. My amendment would commit the Government to providing full disclosure to Parliament of the remuneration of the Green Investment Bank’s senior management and board after privatisation.
This point was hotly disputed and argued by the Minister in Committee, but it is fair to say that the Committee saw a certain irony in her stout defence of allowing Green Investment Bank executives to have the freedoms to increase their pay under the Bill and privatisation, although the Bill simultaneously caps the pay of people working in private sector companies such as Magnox with salaries of around £25,000. That stands in sharp contrast to the salaries of the executive team at the Green Investment Bank, which range—we know this because of the transparency—from £125,000 to £325,000, plus bonuses and benefits.
The bank began in 2012 to invest in green infrastructure projects. It has invested in 58 projects with a total value of more than £10 billion. Last June, as my hon. Friend the Member for Cardiff West (Kevin Brennan) said, the Government announced their decision to privatise the Green Investment Bank. The Bill provides the means to do so by reclassifying it as a private sector organisation so that its finance will not contribute to public sector net debt, and by removing reference to the GIB’s green purposes and identity from the Enterprise and Regulatory Reform Act 2013.
Bob Stewart
It seems to me that the Green Investment Bank has been a success since it was set up by the coalition Government. One reason why it should go into the private sector is to liberate more investment and increase the possibilities.
Mary Creagh
That has indeed been the argument from Ministers. We want the bank to be able to fund more projects, and the hon. Gentleman might say that the Government have called this privatisation a “natural next step”. However, who else supports the move? The Green Investment Bank certainly supports it, and the Government have drawn on that support as a primary motivation for their plans to proceed, but we have not had the same transparency and consultation that accompanied the bank’s establishment.
The Environmental Audit Committee heard in evidence to our inquiry that the Government’s decision was taken
“without due transparency, publication of relevant evidence, consultation, and proper consideration of alternatives.”
The hon. Gentleman will be aware that there are many different ways to raise money. When the GIB was established in 2013, the idea of privatisation so soon after its creation was not discussed. Our Committee also heard that the Government have not presented enough evidence for privatisation, or considered a wide enough range of alternatives to a sell-off.
In their response to the EAC report, the Government claimed that they had undertaken unpublished market testing over the course of two years. In Committee, I asked the Minister for Small Business, Industry and Enterprise whether she would be willing to publish that market testing. She declined, and said that she would not publish the impact assessment either, because there were no regulatory or significant cost impacts of the GIB sale or changes to its pre-existing policy goals. Our Committee disputes that because of the risk to the green purposes of the bank.
What concerns us is that a bank that was set up to invest in green projects is being privatised without consultation or transparency, and that, although it might have more money, it may not retain its laser focus on green purposes following any future sale. We know that when assets are sold—transport assets, for instance—they tend to be sold on by the pension fund or the other establishment that ends up holding them, hence my question to the Minister.
Bob Stewart
I hope that the hon. Lady will forgive me for intervening, given that I was not a member of the Committee. It seems to me that the special purpose of the Green Investment Bank will be maintained through the special share and the special share ownership. Any change to the bank’s original purposes will have to come back to Parliament one way or another.
Mary Creagh
The Minister has said that a report will be presented to Parliament before the bank is finally sold. In Committee, I asked her how the report would be considered by Parliament. I asked if it would be considered on the Committee corridor as part of statutory instrument proceedings and if it would be subject to the affirmative or negative procedure. Will we have a chance to vote on this issue again? The Minister is nodding, so I am sure that she will clarify the position when she responds to the debate.
The Committee had a series of concerns, and I still worry that the bank might be sold on at some future stage as the Bank of America Merrill Lynch Investment Bank. Investment banks are going through a very tricky time, and things are not at all well in their sector. Any purchaser of the GIB will be looking for maximum freedoms so that potential future sale capital receipts can be maximised.
The only robust consultation that the Government can point to, given that they will not publish the market testing and have not carried out an impact assessment, is consultation with the bank itself. They relied heavily on the bank and its executives in evidence and their response in Committee and, of course, those executives stand to benefit from the sale.
Amendment 17 invites the Government to commit themselves to providing Parliament with information on the remuneration of the bank’s senior management and board after privatisation. That information is currently provided in the bank’s annual report. For instance, how much will the executive team who are in charge of the bank stand to gain personally from the privatisation? How objective can their views be if they are to gain personally from the bank’s privatisation?
Anna Soubry
I am not going to give way because I just want to put on the record my thanks to Lord Smith for his letter, which was sent out by my excellent Parliamentary Private Secretary, my hon. Friend the Member for Rugby (Mark Pawsey), to all Members of this House. I hope all hon. Members, on both sides, have had the opportunity to read it, because it could not be clearer about why what the Government have proposed will ensure and protect those green purposes, and why legislation in this area is absolutely not necessary. One reason why we do not want the Opposition’s new clause 4 to be successful and to put this provision into legislation is that we feel the Office for National Statistics will take the view that what we seek to do will not be achieved in this way—the bank will not be off the books—and that is why it is so important that this is done in the way we propose.
Bob Stewart
In support of what my right hon. Friend says, let me read from Lord Smith’s letter. He says:
“We are 100% committed to delivering the full intent of the amendment passed in the Lords. I hope that by committing to implement this plan, and doing so transparently, we can secure the necessary confidence of shareholders, and members of Parliament that a special share solution can be delivered without the need for it to be mandated in legislation.”
Anna Soubry
I am very grateful to my hon. Friend for reading from the letter. Obviously, I am not going to read it out. You will be pleased to hear that, Madam Deputy Speaker, as we would be here for half the afternoon if I did so. I have, however, placed a copy of it in the Library, as it best explains why this new clause is no longer required and why it is so incredibly important that we get the right device to ensure we keep the green principles of the bank.