Green Investment Bank

Graham Stuart Excerpts

Thursday 29th October 2015 Westminster Hall

[Graham Stuart (Beverley and Holderness) (Con)]

I beg to move,

That this House has considered the future of the Green Investment Bank.

It is a pleasure to serve under your chairmanship, Mr Crausby. I thank the Backbench Business Committee for awarding the time for this debate. It is good to see that so many colleagues from across the House are present. I thank all the other Members who requested the debate for their support. They are drawn from the Labour party, the Liberal Democrats, the Scottish National party and the Green party—the ultimate rainbow coalition, which reflects the widespread interest in and concern for the Green Investment Bank.

The GIB was a major success story of the 2010 to 2015 Parliament. In 2010, the Government’s Green Investment Bank commission highlighted

“the urgent need for a new public financial institution to unlock the investment needed for Britain to deliver a timely transition to a low carbon economy.”

That investment is focused on the five objectives set out in section 1(1) of the Enterprise and Regulatory Reform Act 2013 and in the bank’s articles of association: the reduction of greenhouse gas emissions; the advancement of efficiency in the use of natural resources; the protection or enhancement of the natural environment; the protection or enhancement of biodiversity; and the promotion of environmental sustainability. Since the bank was established in November 2012, it has delivered on those principles. As of August this year, it had invested in 52 green infrastructure projects; I think that figure was updated to a larger number in the evidence given yesterday to the Environmental Audit Committee.

The GIB has also invested in seven funds in more than 240 locations around the UK, ranging from anaerobic digestion on Teesside to a £241 million stake in the Westermost Rough offshore wind farm and, indeed, new streetlights in Southend. The bank’s chief executive, Shaun Kingsbury, anticipated that by the end of this week it will have committed £2.3 billion of funding as part of wider projects worth a total of £9.8 billion. In other words, the next deal that the GIB does will take to more than £9 billion the total invested in the low-carbon transition that this country has not only said it will deliver but, in the Climate Change Act 2008, set out in law that it must.

Those numbers reflect the assurance, given by Mr Kingsbury to the Environmental Audit Committee in 2013, that the GIB would “crowd in” an additional £3 of private capital for every £1 invested by the bank. Unlocking that level of investment in the green economy is a serious and substantial achievement, topped off by the GIB’s annual report showing that the company moved into profit in 2014-15, albeit marginally. Of course, it takes a long time for the types of projects it funds to come to fruition and for the cash-flow to flow. Nevertheless, the bank is successful—indeed, that very success has led to today’s debate.

In June, the Secretary of State for Business, Innovation and Skills, with whom I had a meeting last week, issued a written statement to the House that said that the Government

“have concluded that the best approach is to move GIB into private ownership subject to ensuring we achieve value for money…It has always been our intention that GIB should leverage the maximum amount of private capital into green sectors for the minimum amount of public money.”—[Official Report, 25 June 2015; vol. 597, c. 27WS.]

I do not think anyone would disagree with that last intention. I understand the Government’s concern to ensure that the GIB can borrow from financial markets and so increase its impact. I should also emphasise that I certainly do not object to privatisation per se; I am a keen champion of the private sector and believe strongly that it can be a force for good in driving quality, efficiency and innovation.

The Green Investment Bank is, though, a special case, and its transfer into private ownership will be more complicated than most. There are important questions that need to be resolved about the move to private ownership and the form that the transfer will take. Those questions centre on the extent to which the market failure identified when the GIB was established has now been corrected and how the Government will ensure that a majority-privatised GIB continues to deliver its green purposes when its ownership and statutes have changed.

This week, the Government introduced amendments to the Enterprise Bill in the Lords that will repeal part 1 of the Enterprise and Regulatory Reform Act 2013, section 3 of which protects the GIB’s articles of association from being altered unless they continue to meet the green objectives mandated in section 1 of the Act, and provides that any change under section 3 must be approved by a resolution of each House of Parliament. The bank’s objectives are delicate. It was clearly felt that legislation had to be put in place at the outset to ensure that protection, even when the bank was owned by the Government. Without it, what assurances can the Minister provide that a future purchaser will continue to focus on providing not simply capital for green or greenish projects but specifically the funding for the kind of novel technologies that the GIB has helped to support to date?

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

I pay tribute to the hon. Gentleman for his role in securing this important debate. Does he agree that it is likely that a profit-maximising Green Investment Bank will be unable to perform precisely that key role of reducing risk in important green sectors in order to crowd in private investment? There is a real risk that if the bank is put into the private sector it will crowd out other investors, rather than crowding them in.

[Graham Stuart]

I am grateful to the hon. Lady for that point. In so far as it was necessary to have a publicly controlled and funded green investment bank in the first place, what has changed so that such a bank can now be transferred to the private sector without ending up simply acting like and emulating all the other banks, even if it has a greater degree of green expertise than most? How do we know that it will continue to play this unique role? That is the nub of what we want to hear from the Minister.

A good deal of the GIB’s success has come in the form of delivering what its CEO has called “financing firsts”. To use Mr Kingsbury’s own words:

“We have taken on complex projects that would otherwise not have gone ahead and we have been innovative, helping new technologies into the financial mainstream.”

The Westermost Rough offshore wind farm I referred to earlier is a particularly good example of that. The GIB took a stake in the project in 2014. The project was unique, in that it was the first large-scale application of the new Siemens 6 MW turbines, which are significantly more efficient and better suited to the marine environment than previous turbines deployed to date. Of course, they had not been used in 2014, so there will have been natural caution about a move to a new technology.

The project will help to drive down the cost of offshore wind, which has already fallen by 11% in the past four years, and also has supply chain benefits—including, not least for me as the MP for Beverley and Holderness, the fact that Siemens will manufacture the turbines in Hull and East Riding. Over the coming years, we hope to see the supply chain develop around that initial investment. Indeed, there is hope that other manufacturers might see the supply chain and combination of specialties in Hull as something worth coming to and investing in.

The project simply would not have taken off if only private investors had been involved. When I spoke to Mr Kingsbury earlier in the week, he talked about the fact that DONG Energy, which was pushing the project, wanted to find a partner—it did not want to take on the responsibility and risk alone. It found a Japanese investor, but the partner company was looking for comfort. The comfort it sought came in the form of the Green Investment Bank’s expertise and particular positioning, which provided the reassurance needed for it to invest. The GIB got involved, negotiated—as Mr Kingsbury would say—high returns for high risk and used its expertise to help and give comfort to both the Japanese investor and DONG. The project then went ahead, with the positive ramifications being not only the lowering of the cost of wind energy but the delivery of investment in my local area and beyond.

Likewise, the GIB has joined Aviva Investors in financing NHS energy centres. A good example of that is the £18 million investment the bank made in the £36 million energy centre project for Cambridge University Hospitals NHS Foundation Trust. That project is emblematic of the market failure affecting the financing of non-domestic energy-efficiency projects. It required the installation of a combined heat and power unit, a biomass boiler, efficient dual-fuel boilers and heat recovery for medical incineration. The project will lead to a saving of £20 million on the hospital’s energy bill over the 25-year project period and an annual reduction of 25,000 tonnes of carbon dioxide.

I know the Secretary of State is confident that the eventual purchaser or purchasers will want to buy the GIB precisely because of its expertise in that kind of work. That is the nub of the Government’s argument. In a helpful briefing earlier this week, Mr Kingsbury told me that he is adamant that the GIB is a marketable proposition precisely because the decision was taken not to use the bank simply to offer cheap Government borrowing to the renewables sector, but to develop specialist teams with deep-sector knowledge that are capable of managing sophisticated and challenging financial deals and negotiating high rates of return, as it did with Westermost Rough. Mr Kingsbury was clear that he believes that makes the bank a great business and an attractive proposition to potential purchasers.

Concerns persist, however, about the fact that in private ownership the GIB may yet come to resemble more conventional competitors, such as Bank of America or Macquarie. I do not want to criticise those institutions in any way, but they are driven by the shareholder value that the hon. Member for Brighton, Pavilion (Caroline Lucas) rightly mentioned, and they come to different decisions, take different approaches and have different team assemblies from those of the Green Investment Bank, which has a very specific brief.

[Kevin Brennan (Cardiff West) (Lab)]

The hon. Gentleman is making a thoughtful presentation on this issue, and he has come to one of the key points. Ministers have responded to questions about the future of the green focus. In his statement, the Secretary of State said that the Government

“also want and expect a privately owned GIB to continue this clear focus on green sectors”.—[Official Report, 15 October 2015; vol. 600, c. 21WS.]

In a written answer to the hon. Member for Brighton, Pavilion (Caroline Lucas), the Minister for Small Business, Industry and Enterprise said:

“The Government wants a privately owned GIB to continue this focus on green sectors”.

Does the hon. Gentleman agree that we need to hear something stronger than that before we can be convinced that that will actually happen when the bank goes into private hands?

[Graham Stuart]

The hon. Gentleman, who has served in Government, will know that even within Government it is not enough to wish that institutions will behave in a certain way. We know that the incentives must be understood. For example, it is necessary to understand how schools will behave—the hon. Gentleman and I have experience of that. It is not enough for people to sign up in name to deliver a certain thing and for politicians to say that they will do it, because they will be moved by the complex sets of incentives in which they find themselves. If we do not understand how those incentives collectively impinge on those institutions, we will not truly understand how the institutions will behave. That is as true for education as it is for a bank.

It is not enough simply to say what we want and what should be aimed for; we have to understand how the framework of incentives for a private owner of the bank will lead them to behave in the way that Ministers and the rest of us want. I am impressed by the chief executive of the Green Investment Bank; I think he is passionate and honest in his belief about where the bank will go. Nevertheless, I want to understand how it will go there.

[John Mc Nally (Falkirk) (SNP)]

Does the hon. Gentleman agree that the assurances that the Scottish Government sought from the Tory Government remain unanswered? We seek assurances because we are still unconvinced that the purpose and direction of the bank will not be lost unless we retain some sort of public sector control.

[Graham Stuart]

I will come to that point on the continuing role of Government in a minute or two. It is not enough to say that something will be privatised. It could be privatised 100%, or it could be privatised 100% with strings attached, whose value we would have to try to estimate in advance—if something is sold 100%, the strings are not normally worth a great deal. Then there is the issue of whether a minority stake is retained and, if so, how it will be used. I will come to that point later, but the hon. Gentleman is right to say that such questions, not least those of the Scottish Government, persist.

[David Mowat (Warrington South) (Con)]

I am listening very carefully to my hon. Friend. Surely the principal factor protecting how the bank will operate is the fact that the green purpose is still in the 2013 Act and the articles of the company. It therefore cannot do anything outside the green purpose. That is set out in the five points that my hon. Friend mentioned, or did I misunderstand his point?

[Graham Stuart]

My hon. Friend is quite right. What happened—given the late tabling of amendments in the House of Lords this week, I think it came as something of a shock to the Government—is that the Office for National Statistics decided that if this place continues to determine the purpose of a supposedly privatised institution, such as this bank, that institution continues to be controlled not by its shareholders but by this place, and it is thus linked to the Government. Therefore, the ONS said that those ties have to be cut.

The nub of the matter is that those statutory guarantees and safeguards are being removed, albeit at the last minute—that was announced recently and will be coming to the House of Lords this week. We are asking how much the remaining wish-fulfilment requests will be worth in the real world of private finance, where people seek the maximum return for their money and often have a fiduciary duty to do so.

The senior directors of E3G—an environmental non-governmental organisation that works in these areas across the world—who were involved in the conception and creation of the bank, have heard worrying views from financiers that the bank may lean towards investing in safe, established technologies. Worse still, it could be attracted to purchases purely because of the virtue of the assets and cash flow that will come forward in due course, rather than because they are going concerns in their current form. It is possible, therefore, that it would be a zombie investment vehicle, rather than a genuine project-developing bank.

Those views were echoed by Bob Wigley, the former chief executive of the Green Investment Bank commission at the recent summit held by the Aldersgate Group. He warned of an “inherent tension” between the GIB’s continuing to invest in novel, more complex projects that are profitable in the long term, and shareholder pressure to maximise short-term returns on high-value investments, given their focus on quarterly performance. Such an outcome would defeat the objectives of the bank. It was and is intended to capitalise new green technologies and to invest in projects that other market operators shy away from. In doing so, it makes strides in environmental protection while simultaneously stimulating economic growth.

I went to the Conference of the Parties in Montreal in 2005, and from there I got involved in an organisation called Globe International, a global legislators’ organisation for a balanced environment. I am chairman of that group. I have been involved in the issue of climate change over the years; when I first came to this place, I was a member of the Environmental Audit Committee. It seems to me that the central challenge in tackling climate change, despite all the complexities, is to drive down the cost curve of clean and green approaches as quickly as possible.

For all the jobs that are created and for all the economic benefits, we cannot do that for free. One of the big challenges is to speed up the reduction in cost and ensure we have the institutions and frameworks to incentivise that. I say that because, for all the complexities around climate change and all the conferences I have been to over the years, I have always thought that we have to get the cost down as quickly as possible.

We have subsidised renewable technologies to try to make up for market failure, and successive Governments have struggled to create a dynamic regime that controls the level of public subsidy while encouraging investment. In that landscape, in which it is so hard to create dynamic frameworks that maximise value for money for the public purse but accept the need to pump-prime and drive the implementation of new technologies and lower costs, the bank is an important component.

On the bank’s next deal, it will have brought in a total of £10 billion into the UK green mix alone, of which less than a quarter has been from the state. To those outside who think the Green Investment Bank is rather arcane or marginal, I say that it is pretty fundamental to meeting the requirements of our industrial strategy and our desire for people to have affordable bills. We have got to ensure that we get it right. I urge the Government to consider how we can guarantee that the balance that I mentioned will be maintained under private ownership. For precisely that reason, I would be grateful if the Minister explained how the transfer will affect the shareholder relationship framework document that sets out the bank’s operating principles and strategic objectives.

Alongside primary legislation, the shareholder relationship framework document is an important safeguard to define the GIB’s role in the green marketplace. Article 3.1 states that the bank shall

“seek to align its activities with HM Government’s green policy objectives”

and

“seek to overcome market failures and improve market effectiveness”.

Article 4 lists the priority policy sectors and is clearly intended to be updated on a rolling basis in line with changing needs. It is hard to see how the SRFD could survive the sale of the Government’s shares. The Department for Business, Innovation and Skills is described in the SRFD as the bank’s “sole shareholder”, and the document as a whole appears designed for precisely that arrangement. It is likely that the SRFD would fall away if BIS ceased to be the sole shareholder. If the SRFD does survive a share disposal, the Government would not be able to protect it if their shareholding dropped below 25% and if the other shareholders or shareholder decided otherwise. If the Government retain a sufficient minority to resist any change to the SRFD, they would still lack the power to update the priority policy sectors that the bank invests in and supports.

How do the Government intend to safeguard the shareholder relationship framework document following a sale—or at least preserve its effect? Do they intend to maintain a significant minority holding in the bank? What assessment have they made of the implications of different sizes of shareholding that they may have going forward? Has any consideration been given to any form of arrangement, contractual or otherwise, to prevent the bank’s core purposes from being distorted or discarded after sale?

Before closing, I want to raise some related issues on which clarity would be helpful. The European fund for strategic investment is a pot of €21 billion of off-balance-sheet capital. That sounds a bit dodgy, but it basically means that it does not go on to national accounts for debt when used, which is quite important given the fiscal retrenchment that this country is going through and the commitments to eliminating debt and moving to surplus and so on.

The capital can be used by EU member states to finance energy and infrastructure projects. While the UK has committed an additional €8.5 billion to the fund, there is currently no effective intermediary within the UK to help British projects access the funds. Would a privatised Green Investment Bank be able to access the EFSI? If the privatised bank is an unsuitable vehicle to access it, will the Minister say what would be and how the UK’s green economy would be able to benefit? It would be a significant missed opportunity if there were no plan in place to ensure that we can leverage off-balance-sheet funds to which the UK is a key contributor. Indeed, if the UK were unable to access the funds, that might alter the whole calculus as to whether we stand to gain or lose by the privatisation of the bank.

While discussing alternative sources of finance, I also want to touch on the potential for the GIB to explore citizen investment. As I explained earlier, the bank has deliberately sought to make itself sustainable by operating a higher risk, higher return model, but one of the bank’s key aims since its inception has also been to accelerate delivery of the UK’s low-carbon future at the lowest possible cost—quite right, too. With that in mind, relatively cheap capital could be available from citizen investors investing via Green Investment Bank bonds. In Germany, such citizen investors are willing to accept lower returns on equity than traditional investment—more like 4% to 6% than 7% to 9%—because their motivations are not solely financial. Given the capital-intensive nature of most low-carbon investments, scaled-up citizen finance has the potential—only the potential—to make the delivery of large-scale infrastructure more affordable.

To get a sense of how important that is, a 2012 study by the Crown Estate showed that every 1% increase in the cost of capital leads to a 6% increase in the lifetime cost of an offshore wind farm. Similar analysis exists for the solar sector. The nature of both is that up-front investment is huge with relatively low costs thereafter to get a return. A huge premium must be paid when funding becomes more expensive for projects that require so much capital up front and there is therefore a huge incentive to secure the lowest possible financing costs for the GIB. Has the Minister considered the idea of encouraging citizen investment in the GIB? Might the Government pursue such a concept?

To conclude, we are at a crossroads when it comes to the development of the Green Investment Bank, with both new opportunities and old dangers presenting themselves. Failure to provide reassurance about the bank’s future role would send negative signals to low-carbon investors, who might feel that they have received a lot of negative signals already. That has the potential to threaten inward investment flows and undermine the low-carbon sector’s contribution to our ongoing economic recovery.

It is essential to get the privatisation process right and to remember that many investors and Governments will be watching how we decide to proceed with the GIB. As we head towards the UN climate summit in Paris this December, we have a responsibility to ensure that the Green Investment Bank remains a world leader in its field and a driver of investment and innovation in cutting-edge, low-carbon technologies.

--- Later in debate ---

[Mr Wright]

I agree with my hon. Friend, although my concerns have changed since the Bill Committee three years ago. Then I was concerned that without sufficient powers to borrow the bank would be only a fund. Now I think that, given the privatisation plans, the Green Investment Bank will become simply another bank, and a very small bank at that, and will therefore lose its distinctiveness, which plays a major part in the leveraging or crowding in of other private sector investment.

[Graham Stuart]

Will the hon. Gentleman give way?

[Mr Wright]

I will mention one point, because it is central to my concerns, then I will certainly give way.

Given that the bank will be small, I am concerned that it will be vulnerable to a takeover by another institution, whose concern for its shareholders would be the pursuit of short-term profits rather than long-term value maximisation. That would be a real danger.

[Graham Stuart]

The bank will not be able to borrow, because it is at too early a stage—it does not have the cash flow to borrow against, so it would not be able to borrow. That is one of the reasons why it either uses the £3 billion—now £3.8 billion—provided by the Government, or gets private equity investment for the long term. Borrowing is probably out of the window, because there is nothing for the bank to borrow against, apart from future cash flow, which people do not normally lend on.

[Mr Wright]

I disagree, because of the bank’s financial track record so far. We are talking about a policy decision by the Chancellor. Throughout the bank’s life to date, he has stopped the ability to borrow. He has said in the past that once overall public debt is falling as a proportion of GDP, the bank might be allowed to borrow. He seems to have changed his tune now. However, based on the bank’s track record, the banks could leverage in further private sector money through borrowing as a means of strengthening its balance sheet.

I have mentioned the risk profile, which is another concern. As I said, the bank turned a profit quickly, which is welcome, but a scaled-up bank could diversify its investments, concentrating to an extent on higher-risk and innovative technologies. In many respects, what the bank has done in the first three years of its life is to invest in important and environmentally sustainable, but commercially lucrative opportunities, such as offshore wind, and in driving down costs by investing in, say, product and process innovation. In the next phase of its life, there is a real opportunity to think about the products and technologies that have not even been invented yet. A traditional market will not consider that unless a state-backed development bank both de-risks and crowds in further investment. In this field, Britain could have first-mover advantage, thanks to investments led by the Green Investment Bank. That would have positive effects for UK prosperity and employment opportunities.

In giving evidence to the Enterprise and Regulatory Reform Bill Committee in June 2012, the CBI told us something that stuck with me: that the bank could encourage

“investment into technologies that are not entirely proven yet, or that will require a little assistance to get going. The Green investment bank is part of helping private sector investment and it could have a role in topping up investment in new technologies.”––[Official Report, Enterprise and Regulatory Reform Public Bill Committee, 19 June 2012; c. 5, Q5.]

I certainly agree, and we are putting that at risk with the Government’s plans. The Government have talked about securing safeguards and reassurances, but they cannot provide them because by sacrificing control and repealing the bank’s green purposes, they will have no input whatever. Clearly no safeguards can match legislation on the statute book.

The repeal sends out entirely the wrong message. The Minister is a decent, good man on a whole range of different matters, and I know that this is not his policy area—he has been cast into the lion’s den—but when he responds to the debate, I would like him to answer this question. If he cannot provide adequate safeguards now and he cannot articulate the criteria for the safeguards that would reassure us, why do the Government expect Parliament to repeal the part of the 2013 Act that provides the green purposes?

The Government have got themselves in a real bind. They want to scale up the bank’s operations, but they do not want it on the balance sheet. They have had conflicts with the Office for National Statistics, which said it was not possible to do anything and retain control without completely repealing part of the legislation.

The Government will have no direction whatever because they had to go for the nuclear option of repealing part 1 of the 2013 Act. They will therefore have no control over what the Green Investment Bank does, which leaves it entirely vulnerable to its private ownership. The strategic direction of the bank could completely alter.

--- Later in debate ---

[George Kerevan]

Having spoken to the chief executive I totally concur. The bank wants the facility to borrow more money. After all, for it to be a bank rather than a fund it will need to be able to think strategically and have funds in place; as we all know, it takes a long while to broker and deliver infrastructure projects. The projects delivered to date have been small scale, so if it wants to step up a quantum it will need large amounts of money in the pipeline. But that is covered in the existing legislation, under which it is allowed to borrow.

The worry on the Treasury’s part, one that I am happy to accommodate, is that if the bank borrows more money, that money will be counted by the various statistical agencies as part of overall debt. But that possibility is absolutely notional. The City is not worried—it supported the creation of the Green Investment Bank and has been backing it; indeed, it would not lend money in the medium term unless it was convinced that the GIB was a sound proposition as a bank. The impact of any loan on public debt will therefore be notional.

The Government—in particular the Treasury, which is driving this agenda—are trying to sell off available assets. Others, such as Channel 4, are in the pipeline. They are doing so to find capital to prove that they can begin to reduce the overall level of debt, which they have not managed to do so far. One accepts that that is the Government’s agenda, but in this case it would mean sacrificing something that the Government themselves have worked to bring about and that is successful. It would be a cheap sacrifice for a minimal impact on the overall debt.

[Graham Stuart]

We may or may not hear from the Minister today about whether there has been an evolution in Government thinking. I am a fiscal hawk and believe in balancing the books. Paying down the debt is a reasonable thing to do with a successful organisation. But when the Government set off on all this, they did not realise they would have to repeal the very statutes that give the bank its focus. There could therefore be a case for saying, “Let’s look at this again. We respect your need to raise money from assets, but maybe we might like to make sure we are not going to lose out here.” It would be a shame to cut off our nose to spite our face.

[George Kerevan]

The hon. Gentleman could not have made the case better. He has more chance of convincing the Chancellor than I have, so I am glad that, even if we achieve nothing else today, we have at least given him a public facility to make that point.

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[George Kerevan]

I absolutely agree. Underlining the achievement of the climate change targets is a vast capital investment in major renewable energy projects. To date, the Green Investment Bank has invested in essentially small pilot projects, but the scale of overall investment needed to meet the climate change objectives is huge.

That brings us to the issue of how we fund major infrastructural investment. Single banks and single funds will not undertake all the risk, so most major investment projects are undertaken by a consortia of capital groups. They do not trust one another. It takes a long while to broker such consortia. That is the fundamental weakness in the market, and it has been exacerbated since 2008, when we had significant bank failure. That has made banks or funds worry about whether they will get their money back—they know what they are doing, but will the other partner really be in a strong position five years down the line?

If we want infrastructure development, energy development and capital investment, we need consortia. We need an honest broker to put the consortia together. That is where the market fails, and that is why many countries have put together some public body that is trusted by everybody, has seen the books and does not provide a full commercial guarantee if there is failure but takes an element of the risk. That is what brings everybody else to the table.

It is not a question of us wanting the Green Investment Bank to be a public body, risking public money. We want it to essentially be an honest broker. That has proven brilliantly successful in the past three years. What we are about to do is what fundamentally destroys the model of the Green Investment Bank: if we weaken the public guarantee behind it and the public involvement in it, it ceases to be an honest broker. It just becomes another player in a crowded field and eventually, because of its small size, it will be snaffled up by some hedge fund and that will be it. The team will go off to do something else.

[Graham Stuart]

That was a rather brilliant exposition of the issue. What the honest broker role is and why it is often some minority investor bringing in all this cash is quite a subtle point. On the subject of market failure, the other aspect is that this particular market, of course, relies on subsidy. It relies on trust of Government, and there is not a lot of that either. People who do not trust one another and who do not trust the Government are therefore given a little bit of solace when they see going into a project Government money that, just like their money, relies on the Government honouring their pledges to pay the subsidy over the period and to not change the rules or lift the carpet out. That is another element that could have more of a knock-on effect than is immediately obvious.

[George Kerevan]

The hon. Gentleman adds immeasurably to my contribution. Trust is a limited commodity, but in a sense, it is about how we add incrementally to get everybody around the table. The chief executive at the Green Investment Bank proved something fundamental by his ability to get people round the table. We are threatening to lose that.

Ultimately, the Government are arguing that we could still protect things by having the articles of association. I look around the room and see many people—my hon. Friend the Member for Coatbridge, Chryston and Bellshill (Philip Boswell), for example—who have worked in major companies in this area. I, on a much smaller scale, have been involved in creating a couple of dozen companies over the past 30 years. Articles of association are meant not to tie a company down. They give a company a general direction, but a coach and horses could be driven through most articles of association I have seen. We cannot rely on that.

We need to keep the primary legislation intact, at least for a period. I would be happy if the Government came back and said, “Give us three or five years, then we will come back and revisit it,” but if they move now and change the primary legislation, the Green Investment Bank as we know it will disappear—maybe not next week and maybe not three years down the line, but within 10 years. This may be of more local interest to SNP Members, but, as one of the people who initiated the campaign to get the Green Investment Bank to Edinburgh, if we remove the legal protection, the headquarters will become a nameplate in Edinburgh and, significantly down the line, it will cease to be in Edinburgh. Indeed, if the Asian Infrastructure Investment Bank is successful, the Green Investment Bank may end up in Hong Kong or Shanghai.

I come to my final point. We might look at the model of how the Treasury is approaching its investment in the Asian Infrastructure Investment Bank if the Treasury wants an out when it comes to dealing with the Green Investment Bank. The British contribution to the funding of the Asian bank is about 3% of the overall capitalisation. The Treasury proposes to put some paid-in capital to the Asian bank and provide the rest as a capital guarantee, which of course is a contingent liability but does not lead to immediate borrowing. The Treasury is desperately trying to promise that we will never have to have that contingency—ever—because the Asian bank will be so successful.

It seems to me that if the Green Investment Bank needs more capital in the next two to five years, a guarantee could be given from the Treasury of that capital. It would be a contingent liability, but that would not impinge on the real level of debt. The Government could look at funding models, if they wanted to keep the present green model, without that impinging on overall debt. I urge the hon. Member for Beverley and Holderness to go back and see whether he can persuade the Treasury to discuss some of those models and bring in some of the people it sent off to help set up the AIIB to see whether there might be a crossover. And with that, I will sit down.

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[Kevin Brennan]

Yes, I agree. I am tempted to quote Kermit the Frog, who said, “It’s not easy bein’ green.” It is not easy, actually—why make it more difficult? That is the problem with the proposal. Everything that my hon. Friend said is absolutely right. There is nothing currently in the proposal that will make any of those things any easier. That is why all of us, in all parts of the House, are asking the Minister to go away and think again about the current proposal with his colleagues.

I do not intend to rehearse, once again, everything that people have said about the success so far of the Green Investment Bank. I remember it as a very embryonic idea when I was in Government, all those many years ago now. It was certainly mentioned by Alistair Darling in one of his Budgets and it was kicking around the Cabinet Office and BIS when I was a Minister in both those Departments during the previous Government. I was very pleased when the coalition Government brought forward proposals, the Bill was passed and the bank was set up and am also pleased about what a good start it has had—how well it has got under way. There have been criticisms about the straitjacket that the Treasury may have put on the Green Investment Bank. Nevertheless, it has genuinely been able to participate in the financing of projects that otherwise would not have taken place and which make a real contribution, as the hon. Member for Beverley and Holderness said at the outset, to meeting our commitments under the Climate Change Act. Essentially, it is a good story.

[Graham Stuart]

It is touching to see the hon. Gentleman paying such tribute to this creation of a Conservative-led, now Conservative, Government, especially because at the end of Labour’s period in power, when he was a Minister, only Luxembourg and Malta had a lower share of renewables as part of their energy mix. I am delighted to say that whatever questions need to be asked about the Green Investment Bank, the record of this Government is a paragon compared with the abject failure of so many years of Labour, sadly.

[Kevin Brennan]

I have known the hon. Gentleman for a long time. All I will say is that he has let himself down slightly by injecting a slight note of partisanship into our proceedings; I knew it would inevitably come. Given the sort of person I am, of course, I would never respond to anything of that kind.

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[Kevin Brennan]

We were indeed, Mr Crausby. All I will say is this. The notion that, had the Conservatives carried on in power after 1997 we would have had a much greener Government than the Labour one, who passed the Climate Change Act 2008, is one that I find slightly difficult to believe. Anyway, without labouring the point too far, I was saying that in my view—

[Graham Stuart]

We have time. Will the hon. Gentleman give way again?

[Kevin Brennan]

I will give way one last time on that point.

[Graham Stuart]

The hon. Gentleman is extremely generous. A little partisanship does not go amiss. It is important to have the perspective that the current Prime Minister, then Leader of the Opposition, was the first major party leader to call for a climate change Act. That same day, the Liberal Democrats followed, and it was only because it felt that it was going to be left behind that Labour joined in. It was thanks to the current Prime Minister that we got the Act, and it is within that framework going forward that we can have confidence that we can meet these challenges. That is why it is so important that Ministers get their policies right.

[Caroline Lucas]

rose—

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[Kevin Brennan]

I will.

[Graham Stuart]

It’s all my fault.

[David Mowat]

It is indeed the fault of my hon. Friend; we can all agree on that at least.

We have the Climate Change Act—no other country in the world has come up with an Act that has also required an 80% reduction. It is also true that the level of carbon emissions in this country is lower than the EU average and one third lower than in Germany. We should be pleased about where we have made progress.

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[Kevin Brennan]

I most certainly will. I am sure that my hon. Friend will lend me his copy so that I can do that as soon as possible. I look forward to receiving it shortly in the post or perhaps by a more green method: he can hand it to me personally.

It is a myth that privatisation is necessary and is the only way the Green Investment Bank could go out and borrow in the marketplace. That could be done, as I understand it, under the current legislation in any case, but because of that financial orthodoxy and the desire, which I understand, for the Government to be able to say what they want to say about their deficit targets, they are extremely reluctant to allow the Green Investment Bank to do it.

As the hon. Member for East Lothian said, in a sense this is a notional concept; it is the sort of debt on the books that really is not of great concern to the City or to the markets. It is part of the obsession of the boffins at the Office for National Statistics that where the Government, in any minor way, have an influence over what an institution such as the Green Investment Bank does, by setting out to limit the types of investment that it makes in any way shape or form, it has to be counted as being in the public sector for the purposes of Government debt.

[Mr Andrew Percy in the Chair]

It is an incredibly esoteric and technical reason for requiring the Green Investment Bank to be privatised even though there is clear evidence of real problems with that process, as we have seen from today’s debate.

The decision to privatise the Green Investment Bank was announced in June. Was it a premature decision? I believe a lot of people thought it was. Many commentators expressed concern at the time. The Government were able at the time at least to give the assurance made by the Secretary of State for Business, Innovation and Skills in his written statement on 25 June, in which he said that he was going to privatise the bank:

“This should bring a number of important benefits, giving GIB greater freedom to operate across a wider range of green sectors in accordance with its green purposes, which are enshrined in legislation.”—[Official Report, 25 June 2015; Vol. 597, c. 27WS.]

A key part of the Secretary of State’s announcement, emphasised in that written statement, was the fact that the green purposes of the Green Investment Bank were protected by the legislation in which its duty to pursue them was enshrined. Obviously, something has gone horribly wrong in the meantime.

The advice from the Office for National Statistics that I referred to earlier has led the Government to say that they intend to repeal the very legislative protection that they prayed in aid when deciding to privatise the bank on 25 June. By October, they had to say, “Do you know what? That is not so important after all. It doesn’t really matter if we repeal all that to make sure that the Green Investment Bank doesn’t appear on the books.” That requires a great deal of thought, scrutiny and debate. I thank the hon. Member for Beverley and Holderness for pointing that out—and, indeed, for ensuring that we are having this debate.

I do not think it is unfair to say that so far, the Government have no answer to the question of how we can ensure that the Green Investment Bank maintains its green purposes. The letter from the Secretary of State for Business, Innovation and Skills of 15 October, in which he announced his intention to repeal the relevant measures in the Enterprise and Regulatory Reform Act 2013, offers no assurance that those green purposes will definitely be maintained. The Secretary of State does say:

“We want to ensure GIB’s green principles continue to underpin its business in future and this will form an important part of our discussions with potential investors.”

That is all very well, and I am sure that potential investors will come along and happily assent to the green purposes of the Green Investment Bank prior to privatisation. That is not the question, however; the question is what happens after privatisation. At that point, when the bank is either fully or partly in the private sector—we do not know the full details of the Government’s proposals for privatisation—how are we to ensure that it maintains its green purposes and does not, as other hon. Members have suggested, simply become yet another bank, albeit a very small bank that can easily be, and is likely to be, gobbled up by somebody else?

Although the Secretary of State says in the letter that the Government want to ensure that the green principles will be maintained, he cannot ensure that they will be. The Government can only entreat; they cannot ensure. We need to hear more about how Ministers will pursue this proposal, and how they will ensure that the green purposes remain if the current proposal is implemented. There has been no answer yet from the Secretary of State or Ministers.

I referred earlier to a written question from the hon. Member for Brighton, Pavilion to the Minister for Small Business, Industry and Enterprise. In response, the Minister repeated that the Government want a privately owned Green Investment Bank to continue the focus on green sectors, but she did not explain in any way, shape or form how the Government can ensure that it does. We need to know more about that, and I would be interested to hear more from the Minister when he responds to the debate. That absolutely central question has to be answered if we are to have any confidence in what is happening. Otherwise, the situation would seem to be a bit of an unholy mess, and we need to know how the Government will unravel it.

I will ask a few other questions, because there will be a reasonable amount of time for the Minister to respond when I have finished my remarks. Will he admit that he cannot guarantee that privatisation will not dilute the green purposes of the Green Investment Bank? Is the Government’s policy simply: “Fingers crossed”? Have the Government discussed or considered the possibility of some form of penalty for the privatised company should it depart from the green purposes currently enshrined in legislation when the legislative guarantees are removed? Can he confirm that the legislative lock on the green purpose is being repealed purely in order to get the Green Investment Bank off the books? Is that the only reason for removing that lock? Can he tell us a bit more about the stake that the Government expect to retain in the Green Investment Bank following privatisation? Some clarity on that would be greatly welcomed by the House and the country.

What about the £1.8 billion that the Government have set aside to fund the Green Investment Bank and its projects, which is yet to be committed? Do the Government intend that £1.8 billion to be committed to green projects as originally intended, or do they intend that money to be taken back into the Treasury during privatisation? If the latter, what will the Treasury do with that money? Will it simply be set aside against the deficit, or will it be used instead for other green projects and priorities? We need some clarity on that, because some of the claims made about the Green Investment Bank will ring pretty hollow if that £1.8 billion is not devoted to the purposes for which it was intended.

Can the Minister give us a ballpark figure for how much the Government expect to raise through the privatisation of the Green Investment Bank? I do not expect him to be precise, because it is impossible to be precise about that, but can he give us some idea of the parameters that we are talking about? How do the Government intend to avoid the sorts of criticisms that they encountered about the lack of value achieved for taxpayers in the privatisation of Royal Mail? I will not put it any more strongly than that, because we have raised the tone of the debate again since the partisan interventions of the hon. Member for Beverley and Holderness; I do not want to lower the tone again or tempt the hon. Gentleman out of his slumber. [Interruption.] He is not asleep; I apologise.

[Graham Stuart]

It is contentment.

[Kevin Brennan]

I do not want to tempt the hon. Gentleman out of his contentment. What advice were Ministers given when the guarantee was first enshrined in legislation? Was there any suggestion at that time that putting the green purpose in legislation might jeopardise any future privatisation? Is it possible that when the bank is privatised and its purposes are widened, its funds might be used to invest in things such as fracking?

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[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.

[Graham Stuart]

Do the Government have any preference, then, as to the number of investors that might come to the Green Investment Bank? He has talked about some taking a stake—perhaps pension funds; but what if a major international bank offered for 100% of the bank, and that was the highest offer? Would they sell to a single institution, and would there then be a danger that that would just be swallowed up in a much larger organisation, so that the purpose of the bank could eventually be diluted?

[George Freeman]

The overriding principle is that we want to ensure that the bank is put on a footing where it has the freedom to operate and is able to raise the necessary capital without being jeopardised by having an investor base that is too fragmented and small to be effective, or too small or too large an interest to be sustainable. Both of those represent risks. We will need to take a view and ensure that we give it the best possible chance to be able to carry on and fulfil its remit. I will say something about its green remit in a minute.

[Graham Stuart]

I know that it is difficult and, I imagine, sometimes commercially sensitive but I would like to press the Minister. Is it the Government’s view that the sale to a very large global bank would be a bad thing? He has described it as a risk. I know that the Government will take a view but do they have a view that they can share with the House today? We are trying to find out what the Government are going to do with this bank.

[George Freeman]

Our view is that we want to give the Green Investment Bank the best possible chance of having a stable and secure future and being able to raise the sort of money that it needs out of the market. Having been an investor myself in much smaller companies, I would say that anyone involved—my hon. Friend is aware of this—will know that there is no perfect shareholder structure. Often having a very small number, particularly if it is one, can create risks of its own. Having far too many small investors can mean that it is a struggle to raise the capital needed. A happy balance will need to be struck, but the judgment will have to give the Green Investment Bank the best chance of fulfilling its remit. I will say something about its green remit in just a moment. My hon. Friend made an important point.

Crucially, the plans are not being imposed by the Government on a reluctant bank. They have the full support of the company and its independent board and chair, Lord Smith of Kelvin, and others. Lord Smith of Kelvin said:

“I welcome this. You can’t keep going back to the Government for more and more money. If we want to build something that is sustainable and durable, we need private capital. This was always going to happen.”

He also said:

“The UK Government led the world in their vision and commitment in setting up the world’s first dedicated green investment bank, so we are delighted to have their support as we enter a new phase and seek additional investors in our business.”

Shaun Kingsbury, the chief executive officer, said:

“That is why I believe the decision announced by the Business Secretary is the right one. It is the option that gives us the best chance of creating the greatest green impact.”

Other important commentators have concurred. Richard Howard, head of environment and policy at the think-tank Policy Exchange, said at the evidence session of the Environmental Audit Committee yesterday that the legislation may not be needed to maintain the green focus, and that if we remove that legislation and allow someone to invest, that investor would come along and invest because they are interested in supporting what the Green Investment Bank is doing. He said that private capital funds have got involved precisely because the bank has a track record in these areas and that they are buying into a pool of expertise in investing in green projects.

The Environmental Audit Committee’s report on green finance in March 2014 said that the Green Investment Bank

“needs to be able to raise significant further private sector capital for investment alongside the Bank’s programmes, and to borrow itself to enlarge the scale of its work…The Government must make an early and clear statement about the Green Investment Bank’s long-term future beyond the 2015–16 horizon of its Spending Review funding settlement”,

which answers one of the points made earlier.

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[Kevin Brennan]

rose—

[Graham Stuart]

rose—

[George Freeman]

I will take these two interventions, and perhaps I can then crack through the questions.

[George Freeman]

I want to take specific advice, but I will write to the hon. Gentleman on whether any constraints are envisaged on what may or may not constitute green investment. My understanding is that we want to give the bank the freedom to invest in a range of different technologies. Indeed, part of the bank’s mission is to be able to catalyse investment in a much wider range of technologies that will be key to building a 21st-century green economy.

[Graham Stuart]

The Government announced that they will privatise the bank so that it can access capital, as the Minister has set out. The letter announcing that privatisation stated that the bank will be guaranteed by the statutes. Those statutes have suddenly gone, and promises have been made to the Treasury. It feels as if the Government machine has already decided to privatise this bank, but the basis on which the Government are privatising the bank has changed. Will it be possible to go back? The Treasury is rightly trying to address the deficit and the debt, but there is a conversation to be had, because the bank is not being privatised on the basis that was originally proposed. There is a risk that this thing will not do what we want it to do. The Climate Change Act 2008 commits us to action, and if that action costs more, we would be back to cutting off our nose to spite our face.

[George Freeman]

My hon. Friend makes a good point, and I know he has raised it with my right hon. Friend, the Secretary of State for Business, Innovation and Skills. It flows from everything I have said that we are determined to ensure that the Green Investment Bank is able to continue being a green investment bank. Given the constraints under which we are operating, we need to be creative in exploring every option. I am open to my hon. Friend’s suggestions about how we might be able to do that in a way that does not compromise the bank’s ability to operate in the way we want.

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[George Freeman]

Well, the shadow Minister should see the list of questions I have been asked, not least by the shadow Minister himself. I will try to answer those questions and, if I fail, the hon. Member for Hartlepool (Mr Wright) can intervene at the end.

I was asked whether the management of the Green Investment Bank would prefer a statutory lock. The chief executive officer allegedly said that he is “agnostic” about privatisation, but he did say that he prefers a statutory lock. He also said that he wants the ability to raise funds from the private sector, and he understands the need to remove the statute and the statutory constraints.

My hon. Friend the Member for Beverley and Holderness asked how the shareholder framework document will change. Clearly, the framework document will need to change as the shareholding changes. When the bank was set up in 2012, the document’s primary purpose was to set out that the bank should operate independently so that the Government could not interfere in its investment decisions and to ensure the bank’s green ethos. Privatisation will further increase that operational independence, but the bank’s green ethos is now entrenched. The Green Investment Bank is what it is, and it is what is in its business plan, which will be a material document in the shareholder subscription round.

My hon. Friend also asked whether the market failures that the bank was set up to address have now improved to such an extent that we no longer feel the bank needs to operate in the same way. He is right that the bank was set up shortly after the banking crisis in the depths of the dark period of 2010, 2011 and 2012, when the economy was moving very slowly, to rectify a lack of long-term liquidity in the market. It is true that long-term funding for infrastructure projects has recovered strongly, as illustrated by the data I gave earlier. There was a lack of specialist green infrastructure investors, particularly at scale, which is what the bank has now become. The bank has helped to support such infrastructure projects, and we intend that the bank will remain a specialist green investor after privatisation. That is what the bank does, and it is what an acquirer will be buying. We want to let the bank off the leash to do more of that.

The hon. Member for Brighton, Pavilion (Caroline Lucas), who is no longer in her place—she gave her apologies—asked whether a profit-maximising bank would be in danger of crowding out investment because it would be just like any other bank. In fact, the Green Investment Bank is already profit maximising; it has turned its first profit. It exists to prove that it is possible to be green and profitable. That is in the bank’s very DNA; we want to show that the green economy is a real economy. That is how we will attract the private sector capital that we need. The GIB’s expertise can do so regardless of whether it is in the private or the public sector, of course, but we want to give it the freedom to raise that money.

The hon. Lady also asked whether other countries are copying us. It is true that we were in the vanguard when the Conservative-led coalition set up the Green Investment Bank, and we have been copied. It is our ambition to be in the vanguard as we take the market forward. We need to raise not just hundreds of millions or billions, but tens of billions—actually, over the next decade or so, we need to raise hundreds of billions—of money for green infrastructure. There is no way that any Government could fund all of it, even if they wanted to. We need to go to the next stage by leading private sector capital into the market.

Several hon. Members, including my hon. Friend the Member for Beverley and Holderness, asked whether the bank cannot raise debt anyway, and whether we had explored all the options. The truth is that equity raising by the bank will effectively score like debt to the public sector once that equity is invested, so this is not just about debt, but about ensuring that the bank has the right financial mix to operate. My hon. Friend also asked about the European fund for strategic investments, a £300 billion pot for capital raising, and whether the bank will still be encouraged and able to access that money.

The Government are aware of the European funding for infrastructure investment, and are examining how best to make use of that facility—my hon. Friend makes a good point. In our view, that does not alter the case for moving the bank into private ownership. We absolutely need to ensure that it can access funding. The Government and devolved Administrations are actively considering, along with other UK institutions, how they can work alongside the bank to maximise the impact for the bank and others of accessing that European funding. The EFSI guarantee can be used by the bank to co-invest in and co-finance with both public and private institutions, so privatising the bank does not in itself preclude benefiting from the European fund.

[Graham Stuart]

For the record, is the Minister saying that the bank’s change from its current status to privatised will have no impact whatever on its ability to access those funds, to which we are contributing so many billions of pounds?

[George Freeman]

I would not want to go as far as to say that it will have no impact. What I am saying is that we are actively ensuring that the bank will still be able to access funds from the EFSI. It may have to do so through consortiums with other parties, in a slightly different way from how it did when it was a state-owned bank.

My hon. Friend asked whether citizens would have the opportunity to invest directly. We are exploring all options as part of the sale. I would point out that the bank is still a very young company that has only just broken even, meaning that it is pretty unlikely to have a sufficient track record to attract much interest from the retail market, but we are obviously keen to grow the level of retail investor exposure into the market as it matures. He and others asked whether we and the bank had considered raising green bonds. Issuing bonds is absolutely one of the things that the bank will be free to do if it chooses. At present, it is prevented from doing so, as it would score against public sector debt in the same way as borrowing.

Several hon. Members have asked why we are repealing the legislation. I have touched on this already, but in order to grow in line with its ambitious green business plan, the bank needs the freedom to borrow and access much larger pools of private capital, and it will have that freedom if it can borrow without affecting public sector net debt. That means getting the bank reclassified as a private enterprise and off the Government’s balance sheet. To do so, we must do two things: sell a majority of the company, and repeal the legislation. Otherwise, the company could still be classified in the public sector, even after a sale.

One or two hon. Members have asked why we cannot just retain the bank in Government ownership and allow it to borrow, citing the statement by my right hon. Friend the Chancellor that as and when debt starts to fall as a percentage of GDP, we can release borrowing restrictions on the economy generally, so why not on the bank? The problem is that, in Government ownership, the bank’s borrowing and capital raising would still count against public sector debt. Equally, it still has to compete for funding, along with all Government expenditure needs and with the pressure on the Exchequer, even as we get the debt under control. In my own field of health, for example, health demand is rising substantially, and we want to liberate the bank from having to fight in the Whitehall corridors in the same way as every other Department in spending rounds.

On top of that, private ownership will give the bank much greater freedom to operate, removing a number of constraints. It is worth pointing out that it was always envisaged that the bank should aim to mobilise maximum private capital, and it fits our strategic policy aim of getting the market to work on tackling green policy challenges. As I said, we have the full support of the management and the CEO of the company.

Let me turn to the important question of how we will protect the bank’s green mission and remit in the absence of the legislative lock. As a key part of any sale discussions, potential investors will be asked to confirm their commitment to the bank’s green values, green mission and green business plan, and set out how they propose to protect them. We envisage that that will involve new shareholders agreeing to various specific things: retaining the green objectives in the bank’s articles of association; ensuring that the bank continues to invest in a way that achieves maximum positive green impact; maintaining the bank’s existing standards for reporting on its green investment performance; and providing independent assurance of that.

We fully expect that, as part of a subscription round based on the bank’s offering to the market, its green business plan with clear long-term investment in a range of sectors and projects will deliver the safeguards that Opposition Members have asked for without the need for legislation that would curtail those freedoms. We are absolutely committed to ensuring that the bank continues with that green mission, and I am happy and open to explore mechanisms suggested by any party for safeguarding the bank’s green remit in a way that does not fall foul of those public control tests.

[Graham Stuart]

On that point, as we all know, when a company goes to market, it depends on the conditions at the time. It is at least feasible that when the bank goes to the market, those who wish to invest on the basis that the Minister is discussing will disappear, leaving those who will simply buy the capital and assets invested and treat the bank as a zombie fund, immediately sacking as many of the staff as possible, running it at a minimal level and calculating a reasonable return. What guarantee can the Government give, if those turn out to be the only buyers around, that they will not stay so committed to privatisation—in order to meet, rightly, the need to sort out the national debt—that they end up giving the bank away to be turned into a zombie fund, not only avoiding innovative green projects but not really developing anything at all?

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[George Freeman]

Proceeds will depend on how big a stake is sold, on the outcome of negotiations with investors about the value of the company and on how the company’s business plan is judged. We will need to be satisfied that any transaction represents value for money for the taxpayer, and fits with the Government’s wider policy interests and with the best interests of the bank. The hon. Gentleman would obviously not expect me to speculate this afternoon on what figure we would expect and thus undermine the process.

Importantly, the hon. Gentleman also asked me about the £1.8 billion of funding that is left. As he has highlighted, the bank can carry on for at least another year, given that it has £1.8 billion—roughly—in reserves; he suggested that after that period it could start recycling capital. The truth is that to grow its business and invest in accordance with its green business plan, the bank will need access to a much greater volume of capital from a wide range of sources.

The hon. Gentleman asked why there was urgency about this process. What we do not want is to get to a point where the bank has no reserves and badly needs capital. Anyone who has raised money knows that the time to raise it is not when there is no choice but to raise it, because money is desperately needed, but when a company is in a strong position, and has a pipeline, assets and a good track record. We think the bank is in that situation now. We are confident that we can attract private capital into the bank because of its track record and because it is operating successfully.

[Graham Stuart]

I am grateful to the Minister for giving way again; he is being very generous with his time. My understanding is that the funding agreement runs out in March next year, and that the steady state activity of the bank for the last couple of years is £700 million to £800 million a year. There is not clarity about what happens from 1 April 2016 onwards, and the bank will have no access to that £1.8 billion; according to my calculations, the reserves were more like £1.5 billion, but whatever the exact figure is, it will be quite a lot of hundreds of millions of pounds. Perhaps the Minister, while answering other questions, might seek advice elsewhere about this issue; I would be grateful if he could respond to me about it. I am interested to know how the bank will be taken care of between its current funding provision running out in March 2016 and whatever date it is sold, and how we ensure that there is not a chilling effect.

[George Freeman]

My hon. Friend makes an important point. A key part of the rationale for proceeding with this move now is that the bank’s momentum—its existing status—is a strength; it is an asset rather than a liability in the context of the bank’s fundraising. So we are actively looking at everything we can do to ensure that clarity about the bank’s status, position and momentum is provided to potential investors. It is not in our interests that there is confusion, and we are addressing that issue.

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[Graham Stuart]

It has been an excellent debate, with involvement from all parts of the House. The COP21 conference will soon take place in Paris, at which the intended nationally determined contributions—the national promises about action on climate change in a domestic context—will be discussed. The INDCs that have been put forward cover 87% of the world’s population and roughly the same percentage of the world’s emissions. We are looking at a world in which we are recognising the need to act, but within that context, we have to ensure that greening our country and doing what is right for the climate and the environment is done at the lowest possible cost to our constituents, many of whom are struggling on low incomes to pay for their heating.

The Green Investment Bank has been a triumph of the past few years and has made an enormous difference—all sides are agreed on that. When the privatisation was announced, it was on the basis of the statutory duties on the bank continuing. I am not saying that it will necessarily be exactly the same—there may still be concerns—but its solace is that the constraints of fighting against schools and hospitals for capital investment, rather than going to the markets in the context of Paris and beyond, mean that it is better to be privatised. One of the vital ingredients of that—namely, the ability for those statutory duties to remain in place—will be gone. My purpose today is not to say that the sell-off is the wrong thing to do, but to ask the Government to think carefully and ensure that the bank delivers, as it has delivered before, and goes forward. The Minister so ably explained to us that that is what the Government would like it to do.

The chief executive of the bank regrets that the statutory duty will be gone. He has said that any contractual duty and any other effort used to hold people to that is not the same as a statutory duty. There are some real issues to look at there. I hope that the bank’s sell-off, which seems to have unstoppable momentum, will not go ahead if on reflection the likelihood is that it will not deliver as we might hope. On such issues as the European fund, if we do not have the mechanisms to bring that money into this country, we could end up exacerbating the problems.

I leave the Minister with something I mentioned earlier, which is the Crown Estate report of a few years ago. A 1% increase in capital costs leads to a 6% through- life increase in the costs of a major energy project, such as an offshore wind farm. That is years and years of higher energy bills for people who can least afford to pay them. If those of us who believe that we have to meet our international obligations are to deliver a greener, cleaner Britain as part of a global compact while retaining people’s confidence and support, we have to do so at the lowest possible cost.

Some may think that privatisation is per se the wrong thing, but we have had thoughtful speeches from all parts of the House. Let us get this matter right. We all agree on how important and useful the bank is, so let us ensure that we do not accidentally lose the benefits it brings, not least in ensuring that we deliver clean energy at the lowest possible cost for our constituents, many of whom struggle to pay their bills. With that, Mr Percy, I finally bring the debate to a close.

Question put and agreed to.

Resolved,

That this House has considered the future of the Green Investment Bank.