I beg to move,
That this House has considered the sale of the Green Investment Bank.
It is a pleasure to serve under your chairmanship, Mr Owen; I have not done so previously. I have sought the debate as an independent MP—independent as to party and mind—in the light of considerable concerns raised about the proposed sale of the Green Investment Bank. I must signal my thanks to Macquarie and to the Minister for recent meetings. I look forward to another meeting with the Green Investment Bank tomorrow, and then another with the Business, Energy and Industrial Strategy Committee in the near future. Thanks are also due to the Environmental Audit Committee for the report of December 2015; to the hon. Member for Brighton, Pavilion (Caroline Lucas), who tabled an urgent question; and to members of the quality press, such as Aimee Donnellan, for ensuring that the matter gets the scrutiny it deserves.
The Green Investment Bank is one of our success stories and has supported 30 green energy infrastructure projects up to the end of 2015-16. Profits were up to £9.9 million in the last year, and the bank committed £770 million to transactions during the last 12 months of 2015-16, taking the total capital committed to £2.6 billion. The imperative of a green agenda remains, and our resolve must be increased in the light of President Trump’s threat to step back from previous Paris climate change commitments. Our ambition associated with a green agenda is high, particularly within the Scottish Government, but can the Minister confirm that Macquarie is the preferred bidder, or will he continue with the ridiculous pretence that he cannot mention its name?
Why sell, and why now? I want to make it clear that given my business background I understand why privatisation can be attractive to a business in terms of access to capital and to provide certainty as to future funding. I can also see why being released from state aid rules may be perceived as a benefit. On the other hand, I was struck when a Tory Member commented to me, while the right hon. Member for Tatton (Mr Osborne) was Chancellor of the Exchequer, “If it isn’t screwed down, sell it.” I am also struck by the fact that the Green Investment Bank does not expect to need to borrow until 2018-19.The report of the Environmental Audit Committee quotes evidence from E3G that
“the Government has failed to make a compelling case explaining the rationale behind, or consequences of its decision to sell a majority share of the GIB”.
So why now?
I would like the Minister to confirm whether any financial rewards will be given to the board, executive or senior team on a successful sale of the GIB. Will the
chair, Lord Smith of Kelvin, remain in his post after the sale and, if so, for how long? The model of packaging up elements of a business for sale to release capital is well understood—I regard the use of the term “asset stripping” as somewhat emotive in this case—but the real point is that the UK taxpayer has provided the funds to bring it to where it is today, but it will not be the UK taxpayer who gets the return on investment.
It is clear from other privatisations that the UK taxpayer did not receive the value they should have done; I therefore question whether that can happen with the Green Investment Bank. The New Economics Foundation in its report “We Own It” notes concerns about future profits versus short-term cash in the continued great British sell-off, whether it is a question of losses incurred as a result of the Royal Mail privatisation or Eurostar. Can the Minister confirm whether full value will be obtained for the UK taxpayer on the sale?
I move on to some more specific considerations. The headquarters is currently located in Edinburgh, but it is not just the location of the brass plaque that marks the HQ—it is the functions of governance, legal services, risk and compliance, comms, finance and business development that really determine where that crucial control lies. The jobs associated with those functions tend to be higher quality. I will be monitoring closely to see whether jobs will be maintained and also whether the number will grow and their quality is maintained. Will the Minister confirm what guarantees he has obtained that the HQ will remain in Edinburgh? What assessment has he made of any proposed new structure and any potential impact on the quality of jobs and functions retained in Edinburgh?
State aid rules—the so-called additionality considerations —disallow projects that could be funded under conventional routes. That means that the projects funded tend to carry more risk but, if successful, more reward. I am concerned about the risk appetite of the bank after sale. A business that focuses purely on the bottom line will tend to gravitate towards more vanilla projects, which are easier to package and sell for financial churn but are a loss to the sort of research and innovation that, we are told, the UK Government wants to ensure more of with its new industrial strategy Green Paper. The Minister notes in answers to written questions that the market failure that the inception of the GIB sought to address has now been corrected, but market failure in all areas will not be addressed if encouraging innovation is not at the heart of what the GIB does.
Scale is also a consideration. Will a privatised GIB support smaller projects, such as the specially designed loan to finance a switch to low-energy street lighting in Glasgow? Will Macquarie back that type of small-scale investment? It is only £6.3 million, but will save more than 18,000 tonnes of greenhouse gas emissions over the next 18 years.
What considerations have the UK Government given to an altered risk appetite after sale? Have the UK Government made any assessment of the potential impact?
I would like to consider the issue of protecting the green purpose of the bank. Responding to criticism, and acknowledging that criticism, the UK Government have put in place a so-called golden share with a worthy and notable set of trustees. In theory, that should give us a level of comfort, in that the trustees must agree to any change of purpose as defined by the five green
purposes—but the very purposes themselves carry risk. They are extraordinarily high level; the question has already been asked whether fracking—yes, fracking—could be carried out while still ostensibly meeting the green purpose tests.
I would now like to briefly consider UK control. The GIB has already undertaken a number of its transactions via private equity-type funds.