Green Investment Bank

Caroline Lucas Excerpts

Wednesday 25th January 2017 Westminster Hall

[Michelle Thomson]

I am happy to support my hon. Friend on that point. I also note the valuable work he is doing around Scottish limited partnerships. I hope he has great success in that.

The limited liability partnerships used to date by the GIB may indeed be UK-domiciled and registered for tax purposes, but the point is—we cannot forget this—that if the underlying funds or owners are controlled offshore, the UK taxpayer loses the benefit of that tax take. What level of UK control and benefit will there be after sale? What will be UK-based in the wider supply chain? To what extent will the project management and/or technical experience be based in and benefit the UK?

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

I congratulate the hon. Lady on securing this important debate. In the context of Brexit, and the very likely loss of funding from the European Investment Bank, would she agree that now it makes less sense than ever to be selling off the Green Investment Bank, because it is precisely that kind of bank that can give us the additional benefit of full UK control and fill the gap that will be left by the likely loss of EIB funding?

[Michelle Thomson]

I am extremely happy to acknowledge that point, and I agree; I suspect the hon. Lady may have read the next section of my speech. She has absolutely hit the nail on the head.

I was discussing what reinvestment would be made in the UK economy after any asset sales. How much influence fundamentally would the so-called golden share have if much of the activity is controlled outwith the UK? I am not expecting the Minister to answer all those questions, but they are part of wider consideration of what we are doing when we invest our UK taxpayers’ precious money and build the bank, then sell it without looking under the covers at what is happening as part of the commercial process.

Finally, on the preferred bidder, there are justifiable concerns about the company’s intentions. Concerns have been raised about its approach to refinancing and debt, particularly in former public companies such as Thames Water. Jonathan Maxwell, the chief executive of Sustainable Development Capital, makes a case for his consortium, which includes the state-backed Pension Protection Fund, as the best alternative to meet the Government’s goals for the GIB. Would that be a better fit for our wider concerns about the green agenda and to encourage the growth of green, particularly in the light of the threat that Brexit poses to the wider economy?

The UK Government have used a smokescreen of commercial confidentiality, so that proper scrutiny by this Parliament cannot take place. However, it is the UK taxpayer who provided the capital to set up the bank and who could lose out in a sale, without proper scrutiny. We, the UK taxpayers, currently own the GIB and we, the hon. Members from across the House who represent our constituencies, need to assure ourselves that the sale represents real value at present.

The concerns were succinctly summed up by Nils Pratley, writing for The Guardian:

“But what if Macquarie thinks GIB is worth more dead than alive? What if it pays £2bn for GIB, liquidates most of the assets at a handsome profit and then decides the capital is better deployed elsewhere?”

What assessment has the Minister made of a sale making it more likely for the UK to meet its Paris climate change obligations? If he has made that assessment, will he make it available?

--- Later in debate ---

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

It is a pleasure to serve under your chairmanship, Mr Owen. I thank the hon. Member for Edinburgh West (Michelle Thomson) for securing this important debate. Like her, I am deeply concerned by the way in which the Government are proposing to sell off the Green Investment Bank. It is widely known that the Government’s preferred bidder is the Australia-based firm Macquarie. As has now been well documented, there are serious concerns about Macquarie’s corporate record and its commitment to the GIB’s environmental goals.

Macquarie has admitted rigging the Malaysian foreign exchange markets. It has settled charges in the US for violating underwriting laws related to a China-based coal company. It is currently facing legal action in the US for rigging Australian interest rates. In a separate investigation, it was found to have breached market integrity rules in Australia and to have “systemic deficiencies” in its compliance with financial services laws. Closer to home, its ownership of Thames Water has also been deeply controversial, with £10 billion of offshore debt loaded on the company and a £250 million pension deficit allowed to accumulate while profits were extracted.

Macquarie also has an appalling environmental record, funding fossil fuel extraction projects across the world. From open-cast coal mines in China to fracking here in the UK, it has a track record of supporting climate-wrecking projects. By any measure, Macquarie is unfit to be custodian of the UK Green Investment Bank; if anything, there is a very clear risk that it will destroy it.

The Government have so far refused to respond to those concerns. Instead, we see ample evidence that the Government are not only willing to allow an asset strip, but may have actually helped to facilitate it. With the support of Treasury-owned UK Government investment, 11 subsidiary companies of the GIB were set up presumably to allow Macquarie to asset-strip the UK’s Green Investment Bank. The Minister passed on the opportunity to deny Macquarie’s involvement in those changes in response to a written question I tabled last week.

Meanwhile, the Government continue to point to the creation of a special share as the answer to all our concerns. That is simply not true, as the hon. Member for Edinburgh West set out—we know that the special share will not protect the green purposes of the GIB under an owner such as Macquarie. In response to another written question I tabled, the Government made it clear that the special share will not ensure that individual investments are low-carbon. The special share will not stop asset stripping, will not ensure adequate capital is available for future investment and will not ensure an investment focus here in the UK. To protect the GIB as an enduring institution that is investing here in the UK, we ultimately and simply need the Government to stop this sell-off.

[Callum McCaig (Aberdeen South) (SNP)]

I thank the hon. Lady for giving way, and add my thanks to my hon. Friend the Member for Edinburgh West (Michelle Thomson) for her contribution in securing this debate. The whole basis behind the privatisation is that the market failure has been corrected. I simply do not agree with that. We may have seen progress in the power sector, but in transport and heat we are lagging way behind what we need to be doing to meet our carbon reduction targets. Does the hon. Lady agree that the Green Investment Bank can play a critical role in addressing the market failure that continues to exist in those sectors?

[Caroline Lucas]

I thank the hon. Gentleman for his very informed contribution. He will not be surprised to hear that I entirely agree with him. Anybody who thinks that market failures have been corrected is being extraordinarily complacent. Just a quick scan of the way in which we are not meeting the targets that we have—our climate, environmental and energy-efficiency commitments—would lead people to conclude that market failure remains, and therefore that the need for the Green Investment Bank to be in the public domain remains.

I believe that Ministers have it within their power to cancel the sale and pursue a different path. For the GIB to be properly protected, it should remain wholly owned by the UK Government. That is my bottom line, but if Ministers refuse to do that, various other options are available to them. We know that there was and still is on the table an alternative bid—it is the one that lost out to Macquarie. That bid would help to keep the GIB British, green and growing, so why are Ministers not pursuing it if they do not want to keep the GIB in the public domain?

[Roger Mullin]

Is the hon. Lady aware of, and as concerned as I am about, potential conflicts of interest involved in the Macquarie bid? Macquarie has used PricewaterhouseCoopers both as advisers and as auditors for many years. The senior independent director of the GIB is Tony Poulter, who at the same time is a partner at PWC and the head of PWC’s global infrastructure advisory unit. Does she agree that that is an obvious conflict of interest?

[Caroline Lucas]

I am grateful to the hon. Gentleman for that intervention. I was not aware of that, but as he has now put it on the table, I find yet another reason to be deeply concerned about the Government’s proposals. I thank him for adding that piece to the jigsaw.

There were plenty of options for the Government other than going down the route of flogging the GIB off to Macquarie. I mentioned the other bidder, but the Government could also allow citizens to buy into the Green Investment Bank through green bonds—allowing people up and down the country to own part of this important and dynamic institution. Indeed, there were press reports over the weekend, as the hon. Gentleman will know, about the possibility of an initial public offering. That would at least offer greater protection to the aims of the GIB than the Government’s current plan. Any sense that the sale is the only option on the table must be challenged. There is a range of options on the table. The overriding question has to be why the Government would choose such a damaging option when there are clearly much better ones available.

The launch of the Government’s industrial strategy on Monday gives Ministers another reason to halt the sale. This was the point made very clearly by the hon. Member for Waveney (Peter Aldous). With the UK set to miss its climate targets from the mid-2020s onwards, and renewables investment in the UK set to fall by a dramatic 95% over the next three years, the low-carbon economy should be at the heart of the industrial strategy.

The Department’s welcome new focus on battery technology, energy storage and grid technology could all be supported through finance from the Green Investment Bank. That finance is more important now than ever. We have already discussed briefly how the likely loss of access to funds from the European Investment Bank makes that an even more important role that the GIB can play.

Together, the emissions reduction plan due later this year and the Government’s more active approach to supporting the UK economy mean that it is time for Ministers to ditch the sale and embrace the Green Investment Bank as an important ally in a green industrial strategy. Ministers have rightly been applauded for passing into law the fifth carbon budget and for ratifying the Paris agreement. They would be similarly congratulated and applauded for putting an end to the flogging off of the Green Investment Bank.

[Albert Owen (in the Chair)]

We are in the unusual position of having run out of Back Benchers when I thought that we were going to run over our time. That gives the—