Enterprise Bill [ Lords ] (Fifth sitting)

Mary Creagh Excerpts

Tuesday 23rd February 2016 Public Bill Committees

[Kevin Brennan]

Through that intervention the Minister has helpfully shortened the letter that she will have to write to the Committee. With her assurance on the privatisation question, I am happy, at this point, with the promise of correspondence from the Minister, to allow clause stand part to proceed without any intervention on our part.

Question put and agreed to.

Clause 29 accordingly ordered to stand part of the Bill.

Clause 30

Disposal of Crown’s shares in UK Green Investment Bank company

[Mary Creagh (Wakefield) (Lab)]

I beg to move amendment 129, in clause 30, page 48, line 2, at end insert—

“6B Report on remuneration of chair, non-executive directors and executive team

(1) For each year following a disposal of shares held by the Crown in a UK Green Investment Bank company the Secretary of State must lay before Parliament a report on the remuneration of the company’s chair, non-executive directors and executive team by the company.

(2) The report shall include a statement of the framework or broad policy for the remuneration of the above individuals.

(3) The report shall include the value of the following, where applicable, in respect of each individual—

(a) salary or fee;

(b) pension;

(c) other cash or non-cash benefits, including bonus or performance-related payments; and

(d) shareholdings in a UK Green Investment Bank company.”

This amendment would require, following a disposal of shares in a UK Green Investment Bank company, that the Secretary of State report annually on the remuneration of the Chair, non-executive directors and Executive Team of the company.

The UK Green Investment Bank began operating in 2012 as a fully Government-owned bank. It purpose is to invest in viable green infrastructure projects that would not otherwise be able to obtain funding due to market failure, or to stimulate the market. It has invested in 58 projects with a total value of more than £10 billion.

In June 2015, the Government announced plans to privatise the Green Investment Bank and this Bill, introduced in the House of Lords, is the legislative means to do that. The Government’s primary goal is for the Green Investment Bank to be reclassified as a private sector organisation, so that its finance will not contribute to public sector net debt. To achieve that, the Government believe that they must remove reference to the Green Investment Bank’s green purposes and identity from the Enterprise and Regulatory Reform Act 2013.

I am sure that the Minister will argue that a privatised Green Investment Bank will have access to a greater volume of capital and a larger range of sectors. I have just come from a meeting with the Aldersgate Group about the European Commission’s circular economy package, which was published on 2 December. That is a whole new area in which the Green Investment Bank could invest over the next five years and which is set to create 90,000 new green jobs in the UK economy.

The Green Investment Bank supports the move, and the Government have drawn on that support as a primary motivation for their plans to proceed. The Environmental Audit Committee heard in an inquiry that concluded just before Christmas that the Government had not undertaken enough consultation on the decision to privatise the Green Investment Bank. That is often contrasted with the detailed consultation that went into the original formation of the bank, from which, the Committee was told, privatisation so soon after creation was not discussed. The EAC also heard that the Government had not presented enough evidence for privatisation, or considered a wide enough range of alternatives to a sell-off. There are obviously many different ways in which a Government can decide to privatise or part-privatise their assets.

In its response to the EAC report, the Government said that their announcement to privatise had been followed up

“by substantial engagement with stakeholders and the media to explain the case”

for privatisation. The Government also claimed that they had undertaken unpublished market testing over the course of two years. I am interested to hear from the Minister whether she would be willing to publish that market testing.

The Government said that they would not publish an impact assessment because there were no regulatory or significant cost impacts of the sale of the Green Investment Bank or changes to its pre-existing policy goals. We will talk about that later when we come to clause 32.

So the only robust consultation that the Government can point to, if they do not publish the market testing, is that with the Green Investment Bank itself. The Government also relied heavily on the support of the Green Investment Bank and its executives for privatisation in evidence and in response to the Committee.

The amendment that I and my right hon. Friend the Member for Don Valley have tabled invites the Government to commit to providing information to Parliament on the remuneration of the Green Investment Bank’s senior management and board after privatisation. After all, what could they possibly have to hide?

The information set out in our amendment is currently provided in the Green Investment Bank’s annual report. How much will those in charge of the Green Investment Bank stand to gain personally from the privatisation process? How objective can their views be, if they are to gain personally from the bank’s privatisation?

This amendment follows a long series of difficulties with banks that have, by necessity, been taken into public ownership and in which large numbers of senior executives have continued to receive very large bonuses. At a time when people in my constituency have barely seen their pay rise over the past seven years, we do not want employees of a state-owned bank suddenly having a huge payday from the privatisation of this bank.

The Government will continue to act as a minority shareholder in the short term. The Environmental Audit Committee wants that minority shareholding to continue in the longer term, but the Government have implied that that will not happen. As such a shareholder—for the time being—will the Government continue to be represented on the remuneration committees of the privatised banks? As a shareholder, what are their current expectations for remuneration? Does the Minister envisage any change to those expectations post privatisation? With that, I commend the amendment to the Committee.

--- Later in debate ---

[Anna Soubry]

I thought I had made it clear that we have not decided whether we will retain a stake. We do not know whether we will retain a stake at this moment. When it is privatised there is no reason why it should be subject to laws that are different from those that other companies are subject to. When we come to our second debate, which I think is the real bone of contention, or the cause of concern, I will explain what the Government are doing and, most importantly, what the Green Investment Bank’s chair has said about keeping its green credentials.

[Mary Creagh]

The Minister is saying, “Trust us. We’re not sure when we’re going to do it, but sooner rather than later,” but also, “We’re not sure whether we’re going to have a minority share, or when it will be fully viable.” There is a series of uncertainties around the privatisation of the bank, but surely the argument is that this is a bank that was created with taxpayers’ money; it is not one that was private and then taken over by taxpayers, as Lloyd’s and HBOS were. It was created by the people of this country, who have made it clear in no uncertain terms on our constituency doorsteps that they do not want to see bankers coming off with huge bonuses, which is what the risk is.

Chairs can change; they are appointed for three or four-year terms. I have every confidence in Lord Smith, but four years down the line, when it is fully privatised and the City of London is back rolling again, things could change and the pressure on the chair from the bank executives could be very high to double or treble their remuneration, as has happened in other former state privatised assets. I am thinking of QinetiQ, but also of the rolling stock companies that made multimillionaires out of managers who had previously been very happy on British Rail salaries.

[Anna Soubry]

I am afraid that I do not share the hon. Lady’s determination that Government always know best and we cannot trust the private sector to do the right thing. I absolutely do. When we sell the bank off, as I am confident that we will, I do see why it should be subjected to more onerous conditions than are already imposed on companies. It is a worrying feature of Opposition Members that they simply cannot trust people in business to do the right thing. They have to over-process and over-manage; they will not let business get on and do what it knows best.

--- Later in debate ---

[Kevin Brennan]

That was not the Secretary of State’s responsibility, but I am pointing out that being lectured by Government Members on trusting investment bankers might occasionally provoke a response from us. If the hon. Lady does not like that, that is tough.

My right hon. and hon. Friends have made extremely important points about what could happen following privatisation unless better assurances are given by the Government. To complacently say that after privatisation the Government—who, despite what the Minister said, will probably retain a stake in this bank and will almost certainly have some part to play in providing finance to the bank for its green investments—should have no influence over the remuneration of the directors of the bank seems to be a complete abdication of responsibility. I encourage my hon. Friend the Member for Wakefield, should she choose to do so, to press the amendment to a vote.

[Mary Creagh]

This has been a lively debate, which is always a good thing. I take issue with some of what the Minister said. First, we have just had our half-term recess, so Committee Members may have seen the excellent, Oscar-nominated film “The Big Short”, but if any have not seen it, I recommend that they do so as soon as possible to see exactly what was happening in the banking industry in 2007.

[Anna Soubry]

Will the hon. Lady give way?

[Mary Creagh]

I will when I have finished my point. That film demonstrates the mystification of investment. Selena Gomez explaining complicated financial terms, such as CDOs—collateralised debt obligations—is a highlight of the film. Essentially the film showed that a huge financial fraud was perpetrated on people in advanced western democracies through a series of reckless gambles by big banks in both the United States and the United Kingdom, as a result of which taxpayers lost $5 trillion, wiped off the value of stocks, pension funds and investments. In the case of the United States there was massive suffering with the foreclosures epidemic in certain areas. In my view, the Bill is an opportunity for the Government to intervene in the private market, as they are doing in other areas.

[Anna Soubry]

Does the hon. Lady agree that what this amendment seeks to do is not to have any influence over remuneration or otherwise, but to require the privatised Green Investment Bank to write a report.

[Mary Creagh]

If it is such a small deal, I do not understand why the Minister is resisting it so vigorously. I think the Prime Minister once said that sunshine is the best disinfectant. My understanding is that, at the moment, those Green Investment Bank executives are classified as public sector employees and as such cannot earn a greater salary than the Prime Minister of this country. I can 100% guarantee that that will change as soon as the bank is privatised. [Interruption.] This Committee can at least ensure that we find out what is happening. I may come back on Report with stronger amendments.

If the Minister chooses to criticise that, I may reconsider and see whether we want to table something more stringent—perhaps a pay cap. Other clauses of the Bill cap the pay and exit conditions of people in a private company, Magnox—I am sure we have all had plenty of letters from them—and interfere in the workings of private businesses to introduce an apprenticeship levy, which Labour Members support but which many private sector companies are most unhappy about.

[Kevin Brennan]

If there is a fundamental objection to interfering with the pay and conditions of people working in the private sector following privatisation, why are the Government doing that later in the Bill on exit payments?

[Mary Creagh]

Good point, beautifully made. The issue of remuneration is of concern to the Government. This started off as a probing amendment, but I will take it all the way to a Division. It has grown legs. The more the Minister has argued, the more that I think there is something here.

[Hannah Bardell]

Is this not about transparency? This could be a starting point to shine a light and set an example for other organisations and other banks. Fundamentally, lack of transparency has got us where we are today. If we are able to make banks and organisations more transparent, hopefully they will bounce off each other and set examples among themselves.

[Mary Creagh]

Yes, that is an excellent point, although I think those of us who are waiting for transparency from banks will have a long wait. We have been waiting for transparency on gender equality since the Equal Pay Act 1970.

My right hon. Friend the Member for Don Valley spoke about market turbulence and the postponement of the sale of shares in Lloyds. The Chancellor said in January that the share sale would be postponed because of market turbulence. The sell-off of Lloyds shares was scheduled for spring; he has now said that it will come after Easter. Over the past eight weeks, we have seen a bear market, great turbulence in the financial markets, panic selling of crude oil, and oil prices at a 13-year low. We had the news this morning that investment in North sea oil and gas industries has fallen from an average of some £8 billion a year over the past five years to £1 billion this year. These are worrying times for the global economy, and the market is hugely volatile. All bank shares are currently falling in price, whether they are UK bank shares, European bank shares or US bank shares. Whether this is a phased sale or a one-off sale, the Minister has still not committed to giving us the business case and to publishing the impact assessment, which is what the Environmental Audit Committee asked for.

Would the Minister care to intervene and say who is advising her on this, apart from the Green Investment Bank executives? Has she sought any outside firm from the City of London to advise her on the sale, or is it simply the advice of Green Investment Bank executives who potentially stand to gain from the sale? As the Minister is grievously unhappy about this, I will press the amendment to a vote.

Question put, That the amendment be made.

--- Later in debate ---

[Anna Soubry]

As I rise, I am helpfully provided with those very reasons. The clause is a transitional provision relating to the clause 30 provisions on the Green Investment Bank that requires the Government to report to Parliament with details of a proposed sale of the bank before that clause, which repeals and amends parts of the Enterprise and Regulatory Reform Act 2013, can come into force. The report must include details of the type of sale that the Government intend to undertake, the expected timescale and the objectives to be achieved. That will ensure that Parliament is kept informed and demonstrates that we will bring the repeal into force only at the appropriate stage in a transaction process. Like the report in clause 30, this report must also be sent to devolved Ministers. That, in short, is the reasoning behind the clause, which I commend to the Committee.

[Mary Creagh]

I was not going to speak, but having heard from the Minister I think I will. It strikes me that the clause is a blank piece of paper that gives the Secretary of State carte blanche. He or a future Secretary of State may or may not make regulations or a decision to dispose of the share, and then they will lay a report before Parliament to say what type of disposal is intended. That comes back to my Committee’s request that the full impact assessment is published to Parliament. Parliament has not seen an impact assessment of the disposal of the bank or any such detail. Will the report be scrutinised by a Delegated Legislation Committee or will it go through on the nod as one of the remaining orders of the day? I seek clarification from the Minister on what type of scrutiny the House will have of the bank’s disposal.

[Anna Soubry]

I will have to write to the hon. Lady to do that. I apologise; I cannot do that in any other way, but I will do that. It goes without saying that when we get to the next clause, many of the issues that we have already debated will be further debated, and rightly so.

Question put and agreed to.

Clause 31 accordingly ordered to stand part of the Bill.

Ordered, That further consideration be now adjourned. —(Stephen Barclay.)