Green Investment Bank

Iain Wright Excerpts

Thursday 29th October 2015 Westminster Hall

[Mr Iain Wright (Hartlepool) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Crausby. I thank hon. Members who are present and the Backbench Business Committee for selecting this important topic for discussion. I particularly want to thank the hon. Member for Beverley and Holderness (Graham Stuart), who gave an excellent, thoughtful and skilful speech that got to the heart of the key issues. It is to his credit that he did so in such a balanced manner. The future of the UK Green Investment Bank and the Government’s plans for it to be privatised have not been given sufficient attention, so this opportunity is very welcome. I also welcome the hon. Member for Warrington South (David Mowat). He and I were present at the creation of the Green Investment Bank, because we sat on the Bill Committee of the Enterprise and Regulatory Reform Act 2013, which set it up. We challenged the Government on some of the things to which the hon. Member for Beverley and Holderness referred, such as green purposes and where the bank can invest.

It is probably appropriate when discussing the future of the Green Investment Bank to consider, as the hon. Gentleman did in his opening speech, its status and achievements in its relatively brief life. Most stakeholders would agree that the bank’s first three years have been a success. It has enjoyed broad political consensus, which has allowed it to establish itself quickly and in some depth without risk of political knockabout and the turbulence that that causes. For an organisation barely out of nappies, the bank has proven to be remarkably mature. It already feels like an established and respected part of the financial and public sector architecture. As somebody who supports institutions designed to promote long-term and sustainable growth in competitive sectors, I think it is on a par with the likes of catapult centres, the Automotive Council and the Aerospace Growth Partnership, all of which should be long-standing players in a UK industrial strategy.

The bank was established to address and help to correct market failure and the reluctance of investors to put funds into the low-carbon sector because of risk or the lack of a track record. The bank has provided confidence in what remains a stuttering, albeit fast-evolving new part of the global economy. For example, the bank’s financial services arm has just enjoyed a second close of over £350 million into its offshore wind fund, bringing the fund to a total of £818 million and establishing its credentials as the largest renewable energy fund in the UK.

I am particularly interested in the three-year collaboration agreement between the bank and the Offshore Renewable Energy Catapult, designed to better manage the risks of investing in offshore renewable energy. The hon. Gentleman mentioned Siemens and the work of an offshore wind cluster in Humberside, and I have a similar cluster in Hartlepool and Teesside. Yesterday in the Chamber we were discussing the crisis in the UK steel industry, yet it could be an important component of the offshore wind supply chain, putting the steel industry in our country on a sustainable footing in every sense.

I fully support the comments about the collaboration between the bank and the catapult made by the Minister for Small Business, Industry and Enterprise. She said:

“This collaboration is a very positive step for our offshore wind industry—helping to increase business productivity, encourage green innovation and stimulate long-term growth,”

because it will bring down costs and ensure that the UK’s goal is to be the largest and most innovative and competitive global player in the offshore wind industry.

The hon. Member for Beverley and Holderness alluded to the bank’s projects and the funds invested. To date, the bank has invested in 55 green infrastructure projects and committed about £2.1 billion to the UK economy in the process of leveraging somewhere in the region of £8 billion to £9 billion more widely, as the hon. Gentleman said. After less than three years of operation, the bank has now posted a profit. Combining green credentials in a new, emerging and uncertain sector with a rapid move into profitability is fantastic work—I think we all agree on that. Credit must go to the bank’s leadership, Lord Smith of Kelvin and the chief executive, Shaun Kingsbury, as well as to every member of the bank’s staff, for the great combination of business and investment acumen with a green ethos and a commitment to environmental concerns.

Given that the bank has achieved so much in such a short period of time, the next phase of its life is truly promising—the opportunity to go to a new level of financial scale, which could boost investment in low-carbon technology and assert Britain’s leadership of this modern and exciting part of the global economy. Having established credibility, environmental sustainability and commercial profitability, the bank might look to relax its risk profile to diversify its investment to ensure that it invests in truly innovative technologies.

[Caroline Lucas]

I congratulate the hon. Gentleman on the compelling case that he is making. Does he agree that removing legal protection for the Green Investment Bank’s green credentials would be an economic own goal? Right now we have no real guarantee that the bank’s purposes will remain green, but that is the value added and what makes it so special—that it will focus on such areas. If we lose those purposes, the bank will lose its essence. We therefore need some kind of contractual commitment from prospective buyers that they will keep that focus.

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[Mr Wright]

The hon. Lady pre-empts the rest of my speech. I wanted to start with the glass half full, the positives and the promise; I now come to the buts. I have real concerns about the future of the Green Investment Bank, precisely because of what she has outlined.

As the hon. Member for Beverley and Holderness said in his opening remarks, the Government’s announcement in June of their intention—though they were vague about their plans—to privatise at least part of the bank raised the prospect of a number of risks. I was sufficiently concerned to use my first question on the Floor of the House as Chair of the Select Committee on Business, Innovation and Skills to ask the Secretary of State about his plans for the Green Investment Bank. Moreover, the Government have tabled an amendment to the Enterprise Bill, which is in Committee in the other place, that would repeal fully part 1 of the Enterprise and Regulatory Reform Act 2013, thereby completely removing the green purposes of the bank.

I agree with the hon. Member for Beverley and Holderness that the bank’s resources need to be scaled up and that it should be allowed to borrow. The Environmental Audit Committee report on the Green Investment Bank in the previous Parliament claimed that it was necessary for it to raise extra capital as a real bank can. I fully agree. However, the method proposed by the Government is questionable. In particular, we must ask—as the hon. Member for Brighton, Pavilion (Caroline Lucas) has just asked me—whether any loss of legislative protection for the bank’s green purposes would also mean the loss of safeguards.

I do not think that the Minister will be able to reassure us this afternoon. If the purposes are removed from the statute book, no subsequent private owner can give any such safeguards whatever. I will come back to the Government dilemma over Office for National Statistics classification and ensuring safeguards, but the fact that at the moment the Green Investment Bank can state, on its website and in all its publications, that it is “wholly owned” by Her Majesty’s Government provides confidence and certainty for investors in the low-carbon economy, which remains at an embryonic stage.

Coupled with policy announcements since the general election, such as changes to solar panel feed-in tariffs, onshore wind capability and planning approval, along with other things, it is difficult to avoid the conclusion that the Government are abdicating from any wish to lead in the global low-carbon economy. That is a real tragedy, not only for green issues, but for our future economic and industrial shape and for what modern industry and employment opportunities will look like.

[Kevin Brennan]

As I was explaining to my hon. Friend, I have been reading his 6,000-word speech in Committee on the bank. In discussion of the Bill that set it up, he said that it would not be a green investment bank, but only a fund, if it did not have the ability to borrow. In essence, the Government want, as we all do, the bank to be able to borrow, but that makes no difference. Whether it is in the public or private sector, the bank’s ability to borrow will mean that such borrowing goes on the Government’s books, unless they take the trouble to repeal the essential protection in legislation. As a result, therefore, is the proposal not fundamentally undercut and in need of revisiting?

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[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.

[Caroline Lucas]

I agree with what the hon. Gentleman is saying. Does he think we could learn from some of the European public banks that do not seem to have the same squeamishness about having things off the balance sheet? Banks such as KfW in Germany leverage equity by a factor of 28 and the Portuguese national bank is leveraging by a factor of 17. They seem to have much less horror about having things off-balance sheet. We have had other things off the balance sheet—the CDC is off-balance sheet—so why is there so much horror about that in this country?

[Mr Wright]

I thank the hon. Lady for her remarks. I wonder whether she agrees that, in future, state-backed development banks will be part of a modern, innovative, dynamic economy. The UK is unusual in that we are the only one of the G7 countries without such a financial institution. Ensuring that the state, through a development bank, can drive forward the innovations and technologies of the future is the hallmark of a modern, successful and prosperous economy. It is madness that we are moving away from that model; we need to accelerate towards it and concentrate our efforts.

The bank has achieved so much in such a short period of time and it has the potential to achieve much more if its scale is expanded. The move the Government propose, given the bind they find themselves in, means that the privatisation is fraught with risk. It will compromise Britain’s environmental credentials and any ambition we should rightly have to lead global commercial and industrial opportunities in the new, low-carbon economy.

[Philip Boswell (Coatbridge, Chryston and Bellshill) (SNP)]

rose—

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[Kevin Brennan]

My hon. Friend will not be surprised to learn that I agree with that point. In relation to wave power, we are all very interested to see how the Swansea lagoon project proceeds. That is a very interesting development in the sustainable generation of energy; if it is a success, it could lead to even larger projects, particularly in the part of south Wales that I represent.

[Mr Iain Wright]

I agree with everything that my hon. Friend the Member for Norwich South (Clive Lewis) said. My hon. Friend the Member for Cardiff West (Kevin Brennan) is relatively new to his post. Could I urge him to read the CBI’s “The colour of growth” report? It says that we have a £130 billion share of a global low-carbon marketplace that is worth about £4 trillion. That will rise hugely in terms of the opportunities around the world, but we are slipping down the ranks. We cannot abdicate our leadership on this issue, because our prosperity as well as our environment will suffer. Will my hon. Friend have a look at that report?

[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.

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[George Freeman]

I am coming to that. I have been very generous in giving way. Perhaps I should crack on and then I could answer the points that I keep being asked.

In consultations on the Green Investment Bank in May 2012, Greenpeace said:

“If it’s going to be more than an empty gesture, the bank’s got to have the borrowing powers necessary to support the green shoots of the UK’s renewables industry.”

It recognised that the sector is moving fast.

On the freedom to borrow and to raise capital, by giving the bank access to private funding, we will enable it to grow in accordance with its ambitious green business plan, giving it access to a much greater volume of capital than if it remained in public ownership. I commend that plan to any Members who have not looked at it, as it is a legal document that investors are investing in and will be the subject of all the legal constraints of a company sale. Crucially, it will give the bank much greater freedom to operate, removing a number of constraints that apply to it because it is a Government-owned enterprise, and enabling it to borrow freely on the capital markets without impacting on public sector debt. Hon. Members who take a view that public sector debt is not a national priority or issue will not find that argument compelling. Those of us who believe that that debt is an issue will find it compelling. That is firmly the view of the Conservative party.

In Government ownership, the bank must compete for funding along with all other Government expenditure needs, in a necessarily tight public spending round. We do not want to constrain it because of that. For all those reasons it makes sense for the Green Investment Bank’s investment activity to be funded by private capital where possible and to minimise the need for public funding, which fits with our original strategic policy aim of getting the market to work in tackling green policy challenges. Part of the coalition’s strategic intention was to try to generate, support and de-risk that early green investment market here and globally. As a number of Members have mentioned, the bank has been very successful in that first phase.

I want to touch on the need for repeal of the legislation, which a number of hon. Members have talked about. The reason that we need to repeal the legislation on the bank contained in the Enterprise and Regulatory Reform Act 2013 is so that the company can be reclassified to the private sector rather than remain as a public sector body. That is essential to achieving the benefits of private ownership, including the aim that the bank should be free to borrow and raise capital without affecting public sector debt. It has become apparent that, unless we repeal that legislation, there is a major and uncarryable risk that the bank would remain classified to the public sector, even after a sale, because the legislation will be likely to constitute a continued public sector control over the company’s business. The hon. Member for Cardiff West asked whether this was wise in terms of the drafting of the original legislation that set up the bank. I cannot comment on that because I was not involved in it. Our advice now is very clear. If we want the bank to be able to operate in the way that we do, that piece of legislation needs to be repealed. While the decision was not arrived at lightly in any way, we are clear that it is a necessary step if we are to achieve our aims.

[Mr Iain Wright]

This is a really important point. Given the Government’s determination to move the bank off the public books, does the Minister accept that there are no safeguards whatever to ensure that a privatised Green Investment Bank will continue with the green purposes that are currently enshrined in that legislative lock in the Enterprise and Regulatory Reform Act?

[George Freeman]

I am trying to remember the beginning of the hon. Gentleman’s question. Will I confirm that there are no safeguards? No, I will not confirm that. It will not be set out in legislation in the way that it is at the moment, but there will be a whole series. The shareholder agreement has not been drawn up yet. Despite the earlier comments of the hon. Member for East Lothian (George Kerevan) about articles of association, the funding and raising of subscription moneys for companies like this is a major legal undertaking. The business plan will be a material document in that process. The bank has set out what it is raising money to invest in. That has to be done when money is being raised. That is all subject to incredible legal scrutiny. The investors who are investing in the company have to sign warranties and give undertakings to their own investors that they are investing in what they say they are. Although they will not be set out in legislation, there are a number of safeguards to ensure that the bank will continue to operate in the green investment space.

[George Freeman]

The hon. Gentleman makes an important point about the devolution settlement. I will come to that. I am not ducking it; it is an important point that I will come to.

On the protection of the bank’s green mission and green values, the Government recognise that people will rightly be concerned about whether repealing the legislation means that the bank’s focus on green investment is in any way diluted. Let me be very clear. As the Secretary of State has sought to make clear in his written statements on the matter, the Government’s intention is that, following a sale, the Green Investment Bank should continue to focus on green sectors, mobilising more private capital and further accelerating the transition to a green economy. As somebody said earlier, the clue is in the name on the tin. Green investment is what the Green Investment Bank does and where its value lies, and that will be the basis of its offering and the offer it makes to investors. It is clear from preliminary feedback that potential investors are interested in the Green Investment Bank precisely because of its unique green specialism, business plan and investment track record. We fully expect that potential investors will wish to maintain that focus and will be bound by the prospectus and green business plan that the bank is putting at the heart of that subscription.

As a key part of any sale discussions, potential investors will be asked to confirm their commitment to those values and the plan, and they will be asked to set out how they propose to protect them. The Government envisage that that will involve new shareholders agreeing to retain the specific green objectives in the bank’s articles of association and to ensure that the bank continues to be required to invest in a way that achieves a positive green impact.

The Government also expect that new shareholders will maintain the bank’s existing standards for reporting on its green investment performance and will continue to provide for independent assurance of that reporting. We fully expect that approach to be effective in securing the outcome we want, which is that new shareholders readily commit to maintaining the Green Investment Bank’s green mission and values.

[Mr Iain Wright]

That cannot be reconciled with the Government’s intention to get the Green Investment Bank off the national accounts. The Office for National Statistics has criteria for determining whether an entity is on balance sheet or off balance sheet, and those criteria will include a Government right to control via contractual agreements and via regulation such that a unit cannot diversify its activities. The Minister can say that the Government intend, wish and hope, but does he accept that they are impotent on the future operations of the Green Investment Bank?

[George Freeman]

The hon. Gentleman and I are in violent agreement. Let me make it clear that we will not put in legislation or in regulation—

[Mr Wright]

What about in contract?

[George Freeman]

Let me answer the question. We will not put a binding contract in regulation or legislation, but we will ensure—here is the point—that when the Green Investment Bank goes to raise funds in a subscription round, the subscription agreement and all the legal documentation will be based on the bank’s current mission to be a green investment bank. The bank’s green business plan will be a material document in the context of that funding round, and investors will be investing in that mission, that plan and those values. As I have said, we will build in a series of protections to ensure that the vehicle in which they are investing is clearly committed to that green mission.

I want Members to understand that we have taken legal advice, and in order to comply with state aid and Treasury rules on public sector financing, and in order to give the bank the freedom that we want to give it, it is essential that we do not bind it with statutory, legislative and regulatory instruction but ensure that, in its offering to the market, the intention of the bank is clear. That is the right mechanism for us to ensure the bank’s green mission.

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[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.

[Mr Iain Wright]

Will the Minister give way?

[George Freeman]

I want to crack through. Time is galloping on.

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[George Freeman]

To clarify, I was not suggesting that we have a round table on the subject; I was merely extending an open offer to anybody who has any suggestions, in addition to the safeguards that I have explained, about ways to ensure that we deliver what I set out as the Government’s clear objective, which is to ensure that if the bank is put out for subscription, the subscription makes it clear that the bank exists to deliver its mission. We are all ears, but it must be within the context of the Government’s strategic policy intention of liberating the bank from the constraints of being defined as a public sector asset, and thus liable to Treasury lending requirements.

[Mr Iain Wright]

The Minister talked about agreements. What will be the legal status of the agreements with potential new shareholders of the Green Investment Bank?

[George Freeman]

For any investor entering into a subscription agreement, the parties will be the current owners, the operating company, the bank and the other investors, so the shareholder agreement will be crucial. It is binding in law and if anyone has ever seen a subscription agreement pack, they will know that it is lever-arch files-worth of papers. However, the central point is that all the parties in that agreement come together to agree what they are investing in, and what the objectives and aims of the company are, and that is set out in the articles of association and in the subscription agreement.

We hope that there will be a substantial range of serious investors who are committed to this space and to subscribing investment moneys into the bank’s green investment plan. They are not investing in a casino or any of the things that conspiracy theorists might imagine this thing could go on to be, including a “zombie” handing out money. They are investing in a specific commercial venture, and the directors of the company will have to put a prospectus out to the market, and they will have to warrant it legally themselves, personally as well as in the usual way. So, the subscription process, in and of itself, affords significant protections to us all, as shareholders and parliamentarians.

The issue of the Government’s ambition of retaining a stake in the bank was raised; I am trying, Mr Percy, to deal with all the points that were raised this afternoon. We will consider all options for a sale and we will be guided by the ultimate test of what achieves best value for the UK taxpayer, and what best fits with the strategic intention of allowing the bank to continue to be a leader in the green investment market and to pull in private finance. I am not in a position to commit this afternoon to a particular level or stake; I do not suppose that anyone would expect me to do so. We need the flexibility to do what best achieves that value for money and the best outcome for the bank.

It is important to note that, in any event, the Government’s retaining a stake while also securing declassification would not give Her Majesty’s Government the power to exercise control over the company; it would merely provide a stake in the company. Before anyone asks, the advice we have had has been very clear that retaining special shareholder rights that would enable the Government to veto corporate policy decisions would effectively amount to state control, and would bring us back to the problem that we are trying to get around. The Government could only have the same rights as any other shareholder in the company.

Here come the tickertape answers to some of the questions that have been put. The hon. Member for Cardiff West asked if I could comment on whether the off-balance sheet treatment is the only reason for the repeal of the legislation. It is the central reason why we need to do it; it is a necessary technical step to liberate the company from the constraints that would otherwise apply. The reason for wanting the bank to be able to operate in the private market is broader than that; we want it to access private capital and to be freer to develop in that growing market.

The hon. Gentleman also asked how much we would expect to raise from a sale. He will not be surprised to learn that I am not in a position to tell him today what that figure would be.