Green Investment Bank

Lisa Cameron Excerpts

Thursday 29th October 2015 Westminster Hall

[George Kerevan]

Indeed. The success of the Green Investment Bank has been in creating partnerships and a model of development. We are going to lose that. It is certainly the case—hon. Members on both sides of the House have alluded to this—that the strength of the Green Investment Bank is its staff and the expertise they have built up. Is that safe in the private sector? If a major investment fund in the private sector is looking for staff with the expertise to fund its expansion and its next level of activity, it goes and buys the staff. It can buy them individually, but that is usually more difficult when it comes to investment projects, because investment staff work as teams, rely on one another and build up collective experience. So the investment fund goes and buys the bank or the bit of the bank it needs to move over to its infrastructure development. My worry is that once we take away the public involvement, no matter how experienced and successful the team that runs the Green Investment Bank is, it will simply be snaffled by someone else. That is why we have to, at least in the interim, let the model develop as it is.

I come back to the BIS Committee the other day. The Green Investment Bank was essentially set up to meet a degree of recognised market failure. If that market failure has not been cured in some generic sense, taking the Green Investment Bank out of public ownership, control and involvement means that we go back to where the market failure was. What was the market failure? I want to add a little to what the hon. Member for Beverley and Holderness said. Infrastructure projects and energy projects are, in the main, highly expensive capital projects.

[Dr Lisa Cameron (East Kilbride, Strathaven and Lesmahagow) (SNP)]

Given what my hon. Friend just said, does he share my concerns about the possible impact of this Government move on our ability to meet the sustainable development goals on climate change, which are universal and apply to the United Kingdom?

[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.