I am happy to be able to speak to my new clause 8, which I would like to press to a vote, but first I wish to associate myself with the shadow Minister’s case in favour of new clause 4, to which I have also put my name.
Essentially, the context of new clause 8 is my dismay at the Government’s determination to push through privatisation of the Green Investment Bank despite concerns expressed by the House of Lords, Members of this House, the Environmental Audit Committee and civil society. Through this and other actions, I fear that the Government have demonstrated that their desire to get the bank off their balance sheet is taking massive precedence over their interest in whether the bank is genuinely contributing to the green economy to the fullest extent possible.
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The EAC, on which I am proud to serve, noted in its report on the future of the bank back in December:
“Whilst we recognise there are potential benefits resulting from an injection of capital, we found that the Government has taken the decision to privatise GIB without due transparency, publication of relevant evidence, consultation, or proper consideration of alternatives. The absence of these steps is likely to lead to the suspicion that the move and its timing are not evidence-based policy.”
Nothing has changed my view since December. The Government are again acting without looking at the evidence. My new clause is therefore intended to ensure that the bank is maintained as a single functioning institution that can continue to invest in the UK’s low-carbon economy at the level planned prior to this deeply regrettable privatisation.
As well as being regrettable, the privatisation will not be easy. The Government say they aim to sell 75% of the bank, which equates to roughly £1.5 billion up front, which is a considerable sum. Indeed, it is huge, even by the standards of the behemoth investment funds. According to Bloomberg New Energy Finance, one of the largest successful green energy sales in 2015 was worth just $688 million. Given that few notable deals even touched the £1 billion mark in 2015, how can the Government be sure of making a sale of £1.5 billion in one round? There is a risk that it will turn out to be fanciful.
In addition, investor confidence in the UK’s green economy is at an all-time low. One need only look at last week’s Energy and Climate Change Committee investor
confidence report to see that. In that context, it is even more unlikely that the Government will sell a majority stake in the bank in one round or that the taxpayer will get value for money on any sale. Furthermore, any equity stake bought would require the buyer to follow through on their equity annually—in other words, to bankroll the bank’s annual business plan—which would mean another £500 million to £600 million a year.
The huge sums involved make it highly likely that come October, the desired 75% will not have been sold. Given the Government’s determination to hold on to only a 25% stake, if that, there is a good chance of the Government saying that they have done what they can but not been able to make the sale, and therefore proceeding to dismantle the bank and sell off its assets. In other words, we could essentially face a fire sale. That is even more likely given that the most attractive parts of the bank are ripe for asset sell-off, particularly the £1 billion offshore wind fund and the £500 million waste to energy fund.
Furthermore, there is a risk of the bank’s owners—the new ones and the Government—not committing to fully funding the bank’s business plan for new investments in the UK’s green economy. It would then become little more than a fund manager, as opposed to a bank driving additional investment in the UK’s green economy. It is really important that the Government do not just sell to any investor. New investors must be committed to maintaining the bank as a going concern, fully funding its business plan, driving the expansion of the UK’s low-carbon economy, addressing market failure to crowd in additional private investment, implementing best-in-class governance, transparency and public accountability standards and facilitating and scaling up citizen investment in the UK’s low-carbon economy.
Quite simply, my new clause is intended to inoculate the bank against the risks that I have described by committing the Government to maintaining its integrity as a single functioning institution with a fully funded business plan, not simply selling off its assets.