My Lords, now we get on to one of the core issues around the Green Investment Bank, which is its ability not just to lend its own capital or funds but to be able to multiply them up, perhaps in different ways, and to use that as leverage to enable it to be a bigger investor than it would be from its own resources. Of course, this rather comes back to that cliché of whether the Green Investment Bank is actually a bank or a fund. We know that any corporate plc can borrow money—that is its function—but what it cannot do without going through a further procedure is to borrow it and then lend it out as well, because that gets it into the area of financial services and the Financial Services Authority’s authorisation there.
This amendment seeks to recognise that there is a period during which this bank has £3 billion and has to earn respect through having a track record and credibility in its functions. My noble friend the Minister was absolutely correct on this. That is enough for it to get on with in the first couple of years. Yet we know, through the amount of time that it has taken to get to where we are on the Green Investment Bank, that decisions take a long time. To get state aid takes a long time. To get authorisation under the Financial Services Authority and its successors as they will then be—that may be the Prudential Regulation Authority for a bank—takes a number of years, so we have to prepare by thinking about those issues now. We cannot do that once we get to 2015. In this amendment, we are saying that by 2015 we need to start going through those procedures, many of which will not be in the Bill. Lots of other preparations will need doing as well, apart from state aid, to make sure that by 2015 the bank can
take on extra firepower—I apologise to my noble friend Lord Jenkin if he does not like my using that word.
This is about the bank’s ability to invest and to change the economy; to get this green growth that we want and know to be available; and to deliver jobs, growth and carbon reductions. It will be able to do this only by being able to leverage extra investment, apart from the investment it will have from its co-investors of £3 billion in the first three years. I do not see how it will be able to fulfil its mission and proper function without being able to increase its ability to lend beyond the likely Treasury resources.
I realise and understand entirely the Government’s concern about the public balance sheet and public debt. The Chancellor has said that this borrowing cannot take place until the proportion of debt to GDP has started to decline. It is a fundamental mission of the coalition to do that. However, getting to the fundamental question, I would ask this particularly. When the Green Investment Bank was launched on 28 November, which was last week, I received a statement saying that it will make £3 billion available for green technology and become a valued and integral part of the UK’s financial infrastructure—absolutely. It goes on to say that it is similar to Germany’s own development KfW Bank. We hope so, although the KfW Bank has a €400 billion asset value. The big difference between the two is that the borrowing of the KfW does not appear on the public balance sheets, whereas it is envisaged that the borrowing of the Green Investment Bank, as it is currently structured, will.
5.15 pm
It is important that we explore how we might find our way around this public expenditure constraint and manage it, so that we can move ahead despite that constraint. I would ask my noble friend the Minister what the current advice of the Office for National Statistics is in this area as to whether the activities of the Green Investment Bank will be part of the public balance sheet and what conversations have taken place there. All similar banks and institutions have to perform to European accounting standards—rule 95, I think it is. That is true of KfW and other investment banks, as well as the Green Investment Bank, so I do not understand why we are so constrained in the UK whereas with other European investment banks that is not the case. Why can we not apply standards that others do to that accounting standard? I am not asking for regulatory evasion but for regulatory avoidance in this area as it seems to be completely in the national interest, which is something that we like to defend, particularly within the European Union.
The fundamental part of this amendment asks how we can increase this bank’s investment ability for it to be successful and get the sort of growth that the CBI says is available through the green sector. A key way in which to do that is by borrowing on markets. We cannot wait beyond 2015 to do that. Unless we have an immovable public expenditure constraint—although I would argue that there might be another way of balancing that in other areas, and we have talked
about some alternatives—surely we can find a way to get this bank correctly off the balance sheet as our European competitors are doing. I beg to move.