Enterprise and Regulatory Reform Bill

Caroline Lucas Excerpts

Wednesday 17th October 2012 Commons Chamber

[Mr Wright]

The hon. Gentleman will recall that I mentioned this issue at length in Committee, when he quite rightly probed me on it. I reiterate my answer to the hon. Member for Carmarthen East and Dinefwr (Jonathan Edwards) a few moments ago. There is a conflict here. What is the purpose of the green investment bank: is it to ensure that we have innovative technologies where there is current market failure making it difficult to get investment, or is it to ensure that we do as much as possible to tackle carbon emissions, meet low-carbon targets and so forth? Within that, nuclear could be a source of investment.

[Caroline Lucas (Brighton, Pavilion) (Green)]

rose—

[Mr Wright]

Before I give way, I should declare an interest in that I have a nuclear power station in my constituency. I would quite like another one, and I think that part of that supply chain could be considered by the green investment bank. I would certainly like more clarity on this from the Government.

[Mr Wright]

I shall give way to the hon. Member for Brighton, Pavilion (Caroline Lucas) first, and then to the Minister.

[Caroline Lucas]

To be honest, I do not see this contradiction. Given that nuclear takes so long to get up and running, it is not going to help us to meet our carbon targets fast enough. It also requires Government subsidy, which is why the whole of the EMR—electricity market reform—is being rigged to deal with that. Also, the jobs that we hope the green investment bank will create will surely be jobs that we would like to see here in the UK. If we use the bank to subsidise nuclear, what we are doing is basically subsidising jobs in places like Russia, China and France.

[Mr Wright]

I shall come on to this in a few moments. Because of a huge lack of clarity in the Government’s energy policy—anywhere, but particularly in respect of the renewable energy component—many foreign investors will not view the UK as the destination of choice for investment in any case. We have huge potential to be the market leader for renewable and low-carbon technologies, but I think we are missing a trick when it comes to the scale of ambition and the time scale of the green investment bank. The purpose of the new clause is to probe and challenge the Government to ensure that we make this part of a growth strategy rather than to allow it to happen somewhere in the future in a way that makes it virtually meaningless.

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[Mr Wright]

I agree. The same point was made by the CBI, which concluded in a report produced this summer entitled “The Colour of Growth: Maximising the potential of green business”:

“while business wants to keep up the pace, they are equally clear that the government’s current approach is missing the mark, with policy uncertainty, complexity and the lack of a holistic strategy damaging investment prospects.”

The Government and the Minister—when he is listening—must respond to that. They must provide policy certainty so that investment can be made in the UK.

In Committee, when we discussed the green investment bank and its borrowing powers, I said that we had thought long and hard about the issue. At the time the then Minister, the hon. Member for North Norfolk, said:

“The Government have also committed that the Bank will borrow from April 2015”,

although he then qualified that by using the stock phrase

“subject to public sector net debt falling as a percentage of GDP.”—[Official Report, 12 July 2012; Vol. 548, c. 793W.]

However, given the Government’s failures in relation to its own borrowing targets, that commitment is so far from being achieved as to be virtually meaningless. I would contend that a deficit reduction plan without an accompanying growth and employment programme is no deficit reduction plan at all.

Ours is one of only two G20 countries in recession. In March, the Office for Budget Responsibility reported that the Government might meet their debt target by the skin of their teeth, but since then borrowing figures have been significantly higher than forecast. The deficit is now going up—borrowing is now going up; it has increased by 22% so far this year, as a direct result of this Government’s policies. Citigroup forecasts that the Treasury may have to borrow £48 billion more than it originally forecast by 2015-16, meaning that the Chancellor’s key fiscal target of having public sector net debt falling as a proportion of GDP by 2015 will not be reached. It is widely anticipated that the Chancellor, in his autumn statement to be held in winter, will have to carry out a humiliating climbdown from that important target of his, based largely on his misguided economic policies.

Where does that leave the green investment bank? At a time when our potential as a leading market for green business is under threat, both from intense overseas competition and from uncertainty from this Government, what impact does this failure of fiscal policy by the Chancellor have on this growth area? That is the context behind our amendment 76. We want the green investment bank to be able to provide a stimulus for growth in our economy as soon as possible, but we are equally mindful of the double-dip recession that the Chancellor’s policies have inflicted on the country. Our amendment would ensure that state aid approval on the green investment bank’s borrowing power would be sought and achieved no later than 31 December 2013. What the Minister has said about that is certainly welcome, but what impact will it have? Does it mean that borrowing will take place earlier than 2015? When does he imagine borrowing from the capital markets will be permitted?

Our amendment proposes that the bank must be able to begin borrowing by April 2015 or, if that is not achievable, Parliament must be provided with a clear and alternative date as to when such borrowing may be permitted, based both on OBR forecasts regarding the state of the public finances and on advice from the green investment bank on the need for borrowing powers to achieve its objectives.

[Caroline Lucas]

I wonder why the hon. Gentleman is insisting on that caveat, as the position shared by his Front-Bench colleagues not that long ago was unequivocal in saying that as of June 2015 the bank should be permitted to borrow. The Opposition are now moving away from that position and I simply do not understand why. They are watering down what was there before and is contained in my amendment 89.

[Mr Wright]

My firm policy commitment is to ensure that we have the green investment bank borrowing as soon as possible, as a stimulus to growth. We were mindful of amendments that we tabled in Committee about that, but we also have to consider the appalling financial mess that the Government are dealing with in respect of increased borrowing. Borrowing was going down prior to the general election, but now it is going up. We do not know what the circumstances will be in 2015, so we need to ensure that there can be certainty, based on the imperative to have the green investment bank borrowing from the capital markets as soon as possible while being mindful of the need for rigour and discipline in the public finances.

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[Mr Wright]

Absolutely. I think the hon. Gentleman can go to the toilet now. Recent research has concluded that capital expenditure costs for something as important and significant as offshore wind projects, in which my constituency could play a leading part, could fall by a third in the next decade if a greater proportion of the parts were made in the UK. We need to be mindful of that and the Government must work with business to enhance the supply chain possibilities, opportunities and capabilities in the UK. I suggest to the hon. Gentleman, with the greatest of respect, that that is not happening, largely because of policy uncertainty. That is what amendment 77 is designed to address.

[Caroline Lucas]

The hon. Gentleman is talking passionately about policy certainty, yet his amendment 76 reintroduces uncertainty. I cannot emphasise enough that it is amendment 89 that would ensure that the bank would be able to borrow from 2015. It is actually what the Liberal Democrats agreed at their party conference only a few weeks ago. If the hon. Gentleman wants policy certainty, why will he not support amendment 89?

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[Matthew Hancock]

We have been very clear about our commitment to allow borrowing and will look at how best to bring that clarity, which I am sure will include discussions with my right hon. Friend and others.

On the amendment relating to small and medium-sized enterprises, we are strongly committed to supporting SMEs and, indeed, are already providing major help to them through, for example, the business growth fund and the regional growth fund. I must declare an interest: a family business with which I am not directly connected is involved in energy efficiency matters. I expect the green investment bank already to benefit SMEs in a number of ways. For instance, some of the smaller funds that have already been set up are likely to generate investments for SMEs, provided that their targeted project size is under £30 million. However, I do not think that introducing a statutory basis would help, not least because it would increase the complexity of decision making in the bank, increase uncertainly and could increase the likelihood of judicial review. Therefore, we cannot support the amendment.

With regard to amendment 78, on the question of independent review, we think that parliamentary scrutiny and the normal corporate law requirements will be important. First, Parliament has a vital role in ensuring that the bank remains green. Secondly, Parliament will oversee the Secretary of State. Thirdly, I have no doubt that the Select Committee and the Environmental Audit Committee will look at the bank, and its accounts and reports will be placed before Parliament. However, it is important to be clear that the bank is a Companies Act company and, as such, directors owe duties to the company rather than directly to Parliament. We dealt with new clause 25 earlier in the debate on nuclear power.

Finally, the green purposes are clearly important as they relate to the essence of the green investment bank and to the company’s green objectives. Our goal is to have a broad definition of what is green. We agree that the reduction of greenhouse gas emissions is a vital objective, which is why four of the five priority sectors relate directly to it. The bank will be required to report on greenhouse gas emissions associated with its own activities and the board has agreed that the bank will also report on the greenhouse gas impacts of its own investments.

[Caroline Lucas]

I am grateful to the Minister for giving way, because although we have nearly run out of time—we knew we would when the Government voted for the programme motion—I want to put clearly on the record the fact that unless the bank’s ability to borrow is included in the Bill it risks being nothing more than a fund, which would be a tragedy. I say again that if the Liberal Democrats want to vote in line with their own manifesto and their party policy, agreed scarcely a few weeks ago in Brighton, they should support amendment 89, which I would have loved to push to a vote.

[Matthew Hancock]

The Liberal Democrats and, indeed, the Conservatives are supporting this with £3 billion of Government and taxpayers’ money, and that demonstrates their commitment. However, we need a balance. The new clause would increase again the chance of judicial review. Nevertheless, while we are clear that the overall goal must be carbon emissions, we do not want to rule out other investments, some of which were mentioned by the shadow Minister, and support for wider green measures. We will therefore consider tabling a further Government amendment in the other place to clarify the point that is raised in the new clause.