Green Investment Bank

Debate between George Kerevan and George Freeman

Thursday 29th October 2015 Westminster Hall

[George Freeman]

The hon. Gentleman has made his point eloquently. Not surprisingly, I do not agree, and I will explain why. Perhaps I can just say something about the rationale for the move.

Several hon. Members have asked why the Government want to move the Green Investment Bank into private ownership if it is already so successful. One or two said, “If it ain’t broke, don’t fix it.” I want to explain why it ain’t broke, and why we want to allow it to go on and succeed. Moving the bank into private ownership is the natural next step for the company, now it has proved itself to be a successful commercial enterprise making a strong rate of return on its investments. We want it to be able to grow and develop its balance sheet, get access to private capital markets and borrow, none of which it can do at the moment, as a public sector entity. It is because we want it to flourish that we want to give it those freedoms.

[George Kerevan]

Surely it was in the legislation, and in the way the bank was set up, that it could borrow. It is perfectly able to borrow. There is no prohibition on that. It is just that the Treasury does not want that notionally on its books. The bank can legally borrow now.

[George Freeman]

It could indeed. The difference between us is that the level of borrowing needed in this country has been far too high. The Government’s view is that we need to reduce the country’s borrowings, not increase them, and we want to liberate the bank; we want to allow institutions to grow and flourish without saddling the next generation with more public sector debt.

[George Kerevan]

I was merely correcting the Minister, who tried to give the impression that the bank cannot at the moment go to the markets and borrow. It can, and I think that the markets would in due course give it all the money it wanted, because it has been so successful. There is no need to change the legal model to enable the bank to borrow. That is my point.

[George Freeman]

I respect that. The point I am making is that the Government have a strategic commitment to the British people, and it was not the least of the reasons we were returned to office—to get our public debts under control. The hon. Gentleman’s party may take a more cavalier view of public debt, and I respect that, but our view is that we need to get it under control. For that reason, but not only that reason, institutions that can borrow today, thus contributing to exacerbating the public sector debt problem, need to be liberated to get access to the flourishing private capital markets that the Green Investment Bank has played no small part in creating. The figures that I gave earlier on the extent of the global sector are relevant to that.

To complete my comments on the rationale for the decision, I looked this morning at research on market interest, and interest in acquiring a stake in the Green Investment Bank is likely to come from large-scale institutional investors such as UK pension funds, infrastructure private equity funds and sovereign wealth funds—specialist investors with an interest in green infrastructure. The bank has already successfully attracted similar investors into its managed fund for investment in offshore wind. Many of those investors do not currently invest in individual green projects. Allowing them to acquire a stake in the bank will provide a vehicle for them to invest in the area for the first time. That is a part of developing a more active private sector market in renewables and green energy. Through the bank’s portfolio of renewable energy and green infrastructure projects we hope to widen the pool of investor exposure and stakeholders in the sector. The sale of the bank is partly about enabling that new pool of capital to be brought to bear, helping to accelerate investment.