My Lords, this is the Government’s only amendment tabled for Committee. It has the effect of repealing Part 1 of the Enterprise and Regulatory Reform Act, which is the legislation controlling the Green Investment Bank. I apologise that this matter has had to be introduced by amendment and that we were not therefore able to debate this issue at Second Reading. Its inclusion in this Bill at this stage is as a result of late developments during our work to introduce private capital into the Green Investment Bank, which we announced in June.
I will explain a bit of the background and set out the rationale behind the amendment. The Green Investment Bank was, I believe, a real success of the last Government. I am sure that the noble Lord, Lord Stoneham, will agree with me on that. Indeed, I hope that all noble Lords will agree.
The Green Investment Bank was set up, in 2012, to mobilise private sector investment in the green economy. It is doing its job remarkably well. So far it has committed £2 billion to 55 green projects and seven funds, alongside £6 billion of additional private investment. So for every £1 that the GIB invests, it is mobilising an additional £3 from the private sector, and it is doing it all on fully commercial terms, showing that green investment can be profitable. It is helping to bring new investment from long-term institutional investors, such as pension funds, into green projects. For example, last month it announced that an additional £355 million
was being committed to its offshore wind subsidiary fund, bringing the total in the fund to £818 million. That is all private sector money, albeit managed by the public GIB.
No doubt your Lordships will ask why the Government want to change something which is already so successful. The simple answer is that government ownership is holding back the GIB’s ambition. All the while it is owned by government, it is limited in what it can do. It is limited in the amount of funding it can access, because it must compete for its funding alongside schools and hospitals, and it may not borrow freely on the capital markets while on the Government’s balance sheet. It is limited in the range of sectors in which it can operate as it is constrained by state aid rules. Moreover, it is limited to operating within the UK all the while it is funded with taxpayers’ money. It is currently undertaking a pilot with the Department of Energy and Climate Change to do some international work, but we believe that it could do more. The GIB has been going from strength to strength, and because of this, its ambitions are beginning to outstrip the supply of capital that the Government can and should provide. Our policy aim is to get the market to work in tackling green policy challenges. Bringing private capital directly into the GIB is the natural next step for the company rather than leaving it to rely on public funds.
The repeal proposed in the amendment is not something that the Government have decided upon lightly, but it has now become apparent that it is a necessary step if we are to move the GIB into private ownership. If the GIB is to enjoy the benefits of private ownership, including having the freedom to borrow and raise capital, it must be declassified from the public sector. If it remains in the public sector, it could not raise equity or debt without impacting public sector net debt. The decision on whether an organisation is classified to the public or private sector is made by the Office for National Statistics on the basis of EU-wide rules. In making its decision, the ONS will look at a number of factors, including any relevant legislation, to determine whether the Government have control over the organisation, so control is the key point. The legislation in the Enterprise and Regulatory Reform Act 2013 is highly likely to constitute government control over the GIB, even if the bank is no longer owned by the Government.
The Government understand that people will be concerned about how the Green Investment Bank will continue its green focus without the statutory lock controlling it. I will not pre-empt those questions as I would like to hear what your Lordships have to say, but I will say now that the Government want and expect the GIB to maintain its clear focus on the green economy, and we are confident that it will do so. Indeed, that is precisely the reason why investors will be buying it.
I will bring my remarks to a close by saying that the GIB’s management and its independent board is fully supportive of the Government’s intention to bring in private capital and understand the need for this repeal. This includes the noble Lord, Lord Smith of Kelvin, who is the chair of the GIB, located of course in Scotland. I hope that your Lordships will be able to support this amendment. I beg to move.
Amendment 53ZA (to Amendment 53)