Green Investment Bank

Philip Boswell Excerpts

Thursday 29th October 2015 Westminster Hall

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

Thank you, Mr Crausby. I also thank the previous speakers for their contributions to the important debate, which highlights the importance of providing capital in renewables. I share many of the concerns expressed by the hon. Member for Hartlepool (Mr Wright), but I will focus on more local issues pertaining to the Green Investment Bank.

The bank in its initial form represented not only a vote in confidence in Scotland, but an investment in the future of our country and its people. Scotland was chosen as the location for the Green Investment Bank for a variety of reasons, the first being that as it was to be located in Edinburgh, which has 11 universities within an hour’s drive, an abundance of academic knowledge and research would be available to it.

It is worth highlighting that Scotland potentially has a wealth of green energy. The Vivid Economics report for the Department for Business, Innovation and Skills in October 2011 emphasised the need to ensure that green economic policies were implemented in practice to unlock financial capital.

The whole point of locating the Green Investment Bank in Edinburgh, and vitally in Scotland, was the need to assist a necessary change in approach to develop low-carbon energy projects. The requirement for a green investment bank is more relevant now than when it was created. The development of green energy will make the economy capable of resisting the volatility associated with commodities, which can create price instability in the energy markets. Promotion of growth for the sake of growth can lead to boom and bust, so what is clearly needed is growth that is sustainable in nature, thereby ensuring longer term economic growth. The investment made by the Green Investment Bank in Edinburgh as a financial centre, with its expertise in asset management together with the factors associated with a highly skilled workforce, is now at risk due to the privatisation agenda.

It could be argued that one of the first acts of the new UK Conservative Government was to privatise the bank. That in and of itself not only creates a degree of market flux and instability, but shows that ideology overrules all other considerations. The Green Investment Bank has been marginalised. Its privatisation runs contrary to the principles of Vince Cable’s period in office at the Department for Business, Innovation and Skills.

[John Mc Nally]

I apologise to the House because earlier on I should have declared an interest in that a relative is associated with a company that represents the Green Investment Bank. Does my hon. Friend acknowledge that Edinburgh in particular was recognised by Vince Cable as a centre of excellence for the development of green energy? That was confirmed yesterday when the bank’s chief executive said that it wishes to keep its headquarters in Edinburgh because of the quality of its staff and their commitment to the green energy programme.

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[Philip Boswell]

I thank my hon. Friend for his intervention. I agree that it is vital not to view the bank in the abstract. Exactly as he said, its set-up was a vote of confidence in Edinburgh as a financial centre of note. In addition, it employs people from Edinburgh.

In respect of future green energy investment, the privatisation as currently outlined is a backward step that fails to recognise why the bank was set up in the first place, namely that mainstream financial institutions have not delivered green energy projects. The privatisation of the Green Investment Bank is cloaked in commercial confidentiality, as is the nature of such financial transactions. Having said that, it was confirmed to me in a ministerial answer that UBS has been advising the Green Investment Bank about the transaction. Though UBS is a highly regarded investment bank, it would be remiss not to state that it has had issues when it comes to adhering to strict financial regulations. This month alone it was fined $17.5 million for failing to comply with Securities and Exchange Commission regulations.

As stated previously, there were particular reasons why Edinburgh was chosen as the location for the Green Investment Bank. An excellent campaign was run by the Edinburgh chamber of commerce, and the bank was established there to build on the already good work undertaken in terms of asset management and the development of a key financial hub. The UK Government must recognise that other financial centres need to grow, not just the City of London. Edinburgh is that second hub.

The future is bright for green investment. One only has to look at the trends in other European countries. Denmark has a history of investing in offshore wind farms, with two pension funds taking a 50% financial stake in them worth $1.1 billion. This year, there has been a €2 billion investment in a Danish renewable energy fund and there is a €16 billion investment by a Dutch healthcare investment fund that aims to increase its green investments by 2019.

UK pension funds need to get active in clean energy, not just for the sake of the environment, but because investment in green energy is expected by many to provide greater returns on investment than fossil fuels. That is highlighted by the fact that there has been divestment from fossil fuels in pension funds throughout Europe. Swedish pension fund Fjärde AP-fonden—the fourth Swedish national fund—worth $40 billion, recently completely divested from fossil fuels. Mats Andersson, its chief executive officer, recently stated:

“We did it because we want to get better returns. There’s a misconception that there’s a conflict between sustainability and long-term investing. We believe it’s a return enhancer.”

I do not necessarily advocate that approach completely, but where financial trend analysis is going is clear. We must protect the future viability of our pension investments and our children’s future.

The hon. Member for Beverley and Holderness (Graham Stuart) spoke about the Green Investment Bank delivering affordable bills. That gives me an in on fuel poverty, which is critical, because one of the bank’s goals is to reduce it. The Scottish Government have designated ending fuel poverty as a clear policy objective—recent statistics have shown that 40% of households in Scotland are considered to be living in fuel poverty—but more must be done at the UK-wide level.

The effects of fuel poverty reach far beyond being unable to keep the heating on. According to a report by Friends of the Earth, children living in cold homes are more than twice as likely to have respiratory problems, and adolescents living in cold homes are five times more likely to have multiple mental health problems, as those living in warm homes. Fuel poverty means that household income that could otherwise be used to purchase healthy, nutritious food is used to pay energy bills. It has far-reaching consequences right down to the ground. This is not just about banking and investment or Government decisions. It affects real people on a day-to-day basis. If we do not get this right, it will have a negative impact on children’s emotional wellbeing and educational attainment.

The combination of mental and physical health problems, poor diet, emotional turmoil and diminished educational attainment caused by fuel poverty is a recipe for condemning people to the cycle of poverty—in essence, they are poor and paying for it. Forty per cent. of households in Scotland face the consequence of fuel poverty every winter. Tackling fuel poverty must therefore be a key factor in any consideration of the growth potential of the Scottish energy industry. Ending fuel poverty goes hand in hand with using fossil fuels more efficiently and moving towards enhanced use of renewable energy.

Scotland has one tenth of Europe’s wave potential and a quarter of its offshore wind and tidal potential. In 2010 the eventual income of direct sales from the North sea’s electricity potential was valued at £14 billion, but if that potential is to be reached, there must be investment. The Green Investment Bank was a leap forward for investing in the future prospects not only of the renewables sector but of the people of this country, as that necessary investment was not being made by the private sector.

[Caroline Lucas]

The hon. Gentleman is making a strong case. Does he agree that there is a real irony that at the same time as we are talking about privatising the Green Investment Bank, many other countries are looking at it as a wonderful model to go forward with? China is particularly interested in following exactly our model. If the UK wants to remain a centre of green finance, it absolutely has to keep this kind of model.

[Philip Boswell]

The hon. Lady is absolutely right. If it’s not broke, why are we fixing it?

Moreover, privatising the Green Investment Bank will put future investment in the vital emerging renewables market in jeopardy. The privatisation is one in a long and growing line of actions taken by the Government which hinder renewable growth and investment. That is not the future that most people in these islands want for themselves and for their children.

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[George Freeman]

No, I do not accept that. The hon. Lady’s party is committed to promoting green technologies and investment, but I do not think her insistence that the sector is in decline will be encouraging for investor sentiment. We all have a duty, whatever our policy differences, to contribute to confidence in the sector.

[Philip Boswell]

The Minister talked about the Government promoting green energy; but there are wind and solar energy subsidy cuts. I was Shell’s contracts lead on the carbon capture project, moving it from Longannet to Peterhead, and with the way things are going I am waiting for a backtracking announcement on that. The Green Investment Bank is a unique British success story, still in its infancy and much admired around the world. Does the Minister agree that privatising it is an exercise in blind ideology, and that it ignores common sense?

[George Freeman]

The hon. Gentleman has made his point eloquently. Not surprisingly, I do not agree, and I will explain why. Perhaps I can just say something about the rationale for the move.

Several hon. Members have asked why the Government want to move the Green Investment Bank into private ownership if it is already so successful. One or two said, “If it ain’t broke, don’t fix it.” I want to explain why it ain’t broke, and why we want to allow it to go on and succeed. Moving the bank into private ownership is the natural next step for the company, now it has proved itself to be a successful commercial enterprise making a strong rate of return on its investments. We want it to be able to grow and develop its balance sheet, get access to private capital markets and borrow, none of which it can do at the moment, as a public sector entity. It is because we want it to flourish that we want to give it those freedoms.