Enterprise Bill [Lords]
Debate between Richard Fuller and Mary Creagh
Mary Creagh
May I develop my arguments? I shall be happy to take further questions a little later.
Following a discussion with my colleagues in the Environmental Audit Committee last week, I wrote to Lord Smith of Kelvin, the chair of the Green Investment Bank, asking for clarification of the proposed remuneration for the bank’s senior executives. Our shareholders—taxpayers—could potentially remain as minority shareholders in the enterprise. I think that as long as the UK taxpayer has even a 1% shareholding in the bank, that should be carried forward. Taxpayers have committed £3.8 billion to the bank, and rather than talking about what a future owner will put into it, let us wait until we see the colour of that future owner’s money.
In that letter, I made it clear that the Environmental Audit Committee could see no reason for increasing remuneration as a result of a change in the bank’s status. We were particularly interested to know the proposed structure both of the management fee that the privatised bank would charge investors, and of any form of profit share or participation rights for management proposed in the offering to new shareholders. We wanted to know the board’s view regarding the quantum and structure of executive profit share incentives. We also sought an assurance from the board and management of their commitment to maintaining the staffing levels that the public purse has funded, to ensure that the bank continues fully and effectively to serve the UK’s needs for investment in green infrastructure.
Lord Smith’s reply to me reassured the Committee that the proposed business plan
“will require the current staff complement with possibly a small number of additions.”
That was reassuring, but less welcome was his response that the information memorandum for investors, which includes projected revenues and costs, including staff costs—this therefore has already been decided and written at board level, and had probably been decided and written when the Minister was in Committee with us—is commercially confidential and cannot be shared.
Richard Fuller
The hon. Lady has special knowledge in this regard, so may I tease out some information from her? She mentioned the £3.8 billion of public money that had been invested at a time of public expenditure reductions in certain areas. What consideration did her Committee give to what valuation would be appropriate when the Government sold the bank? She rightly said that it had constituted an inspiring start by the coalition Government, and that she wanted it to be an exemplar. Do the Government not have a special responsibility to ensure that they let it go into the private sector at the right time?
Mary Creagh
The Committee’s remit was not to second-guess what the Government could or could not get for the bank. I am sure that there are people in the City who are much better able to do that than I am, and I am sure that some Members, certainly Conservative Members, could make a good stab at it.
When I worked with small businesses, it was possible to get multiples of income, but that depends on what is being bought. In this case, what is being bought is an asset book with, it is to be hoped, future revenues from the investments that have been made—as well as what might be described as senior bank management intellectual capital—but what is also being bought is £3.8 billion of Government investment in green projects from which the purchaser will hope to gain revenue and capital streams as, at some point, they are sold off. The situation will also depend on what the purchaser will put into capital projects.
Richard Fuller
The hon. Lady rightly says that there has been a series of investments in the bank, but it would be possible to calculate the net present value of those assets, given certain assumptions. Has her Committee attempted to do that? Such a calculation could provide an evidential base that would enable us to understand whether, if the bank is sold in future, it has been sold on a fair basis.
Mary Creagh
We have not calculated the net present value, but I am sure that it would be quite a simple process and that there will be a number of attempts to calculate it as the sale proceeds. No doubt the Government will wish to let us know whether they think that that has been achieved.