Green Investment Bank

Mark Prisk Excerpts

Wednesday 1st February 2012 Commons Chamber

[The Minister of State, Department for Business, Innovation and Skills (Mr Mark Prisk)]

I congratulate the hon. Member for Manchester Central (Tony Lloyd) on securing the debate and commend my hon. Friend the Member for Bury North (Mr Nuttall) and the hon. Member for Blackley and Broughton (Graham Stringer) for speaking about the importance of this institution and making the case for Manchester to be its home. The House notes that Members from across the Greater Manchester conurbation, and indeed elsewhere, have attended the debate to give their support. That is important for the bid and to put forward the case regarding this institution.

I entirely support the argument that Manchester is a city with a strong and notable industrial heritage. I think I am right in saying that it is home to the very first industrial canal and the world’s first railway station. Manchester has not only a long-standing role in the development of key industrial sectors—engineering and chemicals come to mind, and textiles of course, but also the electrical industries—but an important record of innovation. The hon. Member for Manchester Central pointed that out in saying that it is a city used to transformation. That is an important characteristic in this instance.

I have to be careful, as the hon. Gentleman said. Applications closed on Monday, so he will understand that I must desist from making further remarks, positive or otherwise, about this individual case—strongly represented as it has been in tonight’s debate—because I do not want to prejudice the application in a challenging field. I am sure hon. Members will understand that.

What I can say is that, throughout the country, there has been tremendous support for the bank. The hon. Gentleman said that that has involved principally those places that seek to become its home, but it has been good to see how many other areas that did not, in the end, make an application showed genuine interest. Indeed, the proposal has drawn support from across the political divide, as we have seen here this evening. We welcome that support—that enthusiasm—for the institution.

We see the green investment bank as a key component of the transition to a sustainable economy. It should complement other policies and drive growth in the sector, which is already worth more than £116 billion. This country is well placed to seize the benefits of the transition, being already the sixth largest low-carbon economic goods and services market in the world.

As the hon. Gentleman rightly pointed out, we in this country have a wealth of expertise and many leading innovative businesses in this field which are well placed to secure their role in what will become a global market that is already estimated to be worth about £3.2 trillion. There is a wide range of opportunities here. One thinks immediately of wind power, wave and tidal, building technologies and ultra-low-carbon transport. All those have a key role to play in the debate.

We are committed to ensuring that UK businesses are able to seize those opportunities. That is why last summer my Department, the Department of Energy and Climate Change and the Department for Environment, Food and Rural Affairs together published our range of policies to support that transition to the green economy, which has been mentioned in the debate.

The plans will form the basis for an important developing partnership between Government and business, but also universities and local communities, if we are to make this a lasting change. Clearly, low-carbon technologies are new—many are only nascent—so in order to invest the substantial resources required in this area, business needs to be certain that the low-carbon sector is indeed here to stay. We are doing our best, and we have taken some positive steps in providing that certainty. For example, we are committed by law to a 50% reduction in carbon emissions by 2025. We have launched the world’s first incentive scheme for renewable heat, which should increase investment in those technologies by £7.5 billion by the end of this decade. We have announced the green deal, whereby householders, businesses and landlords will be able to improve the energy efficiency of their homes and their business premises at no up-front cost, instead recouping the payments through instalments on bills. We are putting some £200 million into supporting the early take-up of that, so we see that market develop and grow.

Clearly, the transition to a green and growing economy requires unprecedented investment. For example, we think that the energy sector alone will require some £200 billion. To ensure that a lack of sufficient funds does not become a barrier to the scale and pace of the transition, we recognise that we need to go beyond traditional policies. That is why we are establishing the green investment bank, which will be the first of its kind in the world.

Capitalised with £3 billion, the green investment bank will complement other green policies to help to accelerate the provision of essential capital. The bank will build the kind of deep expertise in financial markets and in sustainable technologies and innovations that is vital if we are to take those bright ideas and turn them into commercial ventures. It will be a new and enduring institution, rather than a series of Government interventions, and it will address the areas of under-investment that have persisted in years past.

For the benefit of Members, I will briefly explain the development of the policy and the specific issue of location. As I explained in a previous debate, the green investment bank will need to be approved by the European Commission before we can establish it as a fully independent financial institution. We expect to obtain this approval by early 2013. We recently announced that the Government are to pave the way by making investments in green infrastructure, on commercial terms, from April this year. The investments will be funded from the £775 million allocation for 2012-13 made available in the Budget. The investments will be made by my Department’s UK green investments team and overseen by a new investment committee. As part of this, the Government have made available £100 million for investment in waste infrastructure projects and a further £100 million for investment in the non-domestic energy efficiency sector for the next financial year. We also stand ready to invest in offshore wind projects.

Looking ahead, the green investment bank’s operational remit will be to focus on green infrastructure, which means that our initial priority sectors for investment will include offshore wind power generation; commercial and industrial waste processing and recycling; and support for the green deal. The bank will work towards a double bottom line, which in plain English means that it will achieve a significant green impact but also have to make financial returns.

The essence of the matter we are debating is the location of the bank, which has clearly generated a lot of interest. This is the second such debate I have had the pleasure to respond to; there was another from the other side of the Pennines, but I will say no more on that, given that the majority of Members present are from the Manchester side and I do not wish to spoil the debate’s harmonious nature. Clearly the bank’s location will be crucial to its success. It will not be a vast institution—we think it will employ no more than 50 to 100 full-time equivalent staff—but it is clear, as was apparent in both speeches we heard, that people already recognise the economic value of having the organisation in their community and that it will be a genuine asset to whichever area it is located in.

On 12 December last year the Department published a document setting out the criteria that will be taken into account in deciding on the bank’s location. The criteria are the ability to recruit and retain the specialist staff needed to run the organisation; a location that enables the bank to work closely with other parties involved in deals as well as other investment bodies, project developers and green technology providers; and a location that provides good value for money to ensure that the bank is cost-effective. The document invited interested parties to self-assess their location against those criteria and submit relevant information for consideration. I am pleased to say that the process has been met with a powerful and positive response. Manchester was one of 32 locations across the country that submitted a self-assessment. The closing date for receipt of the assessments was Monday, which is why I am being careful not to make any prejudicial remarks on the case for Manchester, because it is important that this is done in a fair and open manner.

All the submissions will now be reviewed against the criteria set out in the guidance document so that we can best identify the viable options, and a review panel has been established to perform the task. Advice will then be put to the Secretary of State, who will announce his final decision in late February and outline the reasons informing his decision. The submissions will also be published at that point. In that sense, this will be an open and clear process. It will not be needlessly lengthy, but people will be able to look at how we reach the conclusion in a few weeks’ time.

To conclude, we are committed to taking action now to enable the transition to a green and growing economy, and we very much welcome Manchester’s contribution to that aim. We believe that we are firmly on our way to a more sustainable economy, with the policies that we have already put in place, with the strong relationship that we are building with businesses to help them to maximise the opportunities, and with a green investment bank that will be able to address the market failures affecting key infrastructure projects. To that end, I confirm that, along with the bids from other potential locations, Manchester’s application to become home to the green investment bank will be given the most careful consideration.

Question put and agreed to.