My Lords, the Green Investment Bank has been one of the great successes of the coalition Government. To quote the words— which I fully endorse—of the Conservative manifesto of 2010,
“we will create Britain’s first Green Investment Bank—which will draw together money currently divided across existing government initiatives, leveraging private sector capital to finance new green technology start-ups”.
Absolutely. It was also in the Liberal Democrat manifesto and, I think, the Labour manifesto. After the Wigley commission, set up by the Conservatives, we all felt that this was an excellent way forward and one that would be successful. The management team at the Green Investment Bank has delivered that well over its first three years.
We on these Benches would prefer that privatisation did not take place quite so quickly. We do not feel that the Government will get its full value at the moment, but we accept that that is the Government’s policy. If the bank does not have proper access to additional private funding, in reality, it will be starved of sufficient future investment by the Treasury. Hence, we want to co-operate strongly with the Government to find a way to ensure that we do not just remove the legislative requirements in the Act, but keep those principles of the bank’s operation not just in its constitution but in the way that it can operate.
We are not happy about the fact that the five principles currently in statute will be put into the mem and arts of the company, because clearly those can be changed by a special resolution of 75% of the shareholders. As my noble friend Lady Kramer said so well, we have no guarantee that the bank will not be purchased just to run it down, make the most of its income stream and use it as an investment for future cash flow. That would be a tragedy for everybody. I am sure that that is not the Government’s intent but at the moment we have no guarantee through legislation that it would not be the case.
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When my noble friend Lord Stoneham and I brought up this matter in Committee on the Enterprise Bill, we were very pleased by the reaction of the Minister’s colleague, the noble Baroness, Lady Neville-Rolfe. She said:
“The heart of the problem is that if we could keep the legislation without prejudicing the bank’s status we would, but the advice we are working on is that we cannot do that”.
That is because of the European standards of 2010 but those standards are vague. Having gone through them and having spoken to the ONS as much as I could, I suspect the Government are being conservative in terms of their operation. Here, my noble friend
Lady Kramer and I want to find a way around this. As she said so well, there is a precedent in terms of the Royal Mail.
Again, the Minister’s colleague, the noble Baroness, Lady Neville-Rolfe, in answer to a question about keeping the newly privatised bank off the public sector balance sheet, said:
“The simple answer on the Royal Mail is that it is regulated because it is designated as a universal service provided by Ofcom; it is not itself controlled by legislation”.—[Official Report, 4/11/15; cols. GC 329-30.]
In our amendment, we found a way to mirror that exactly to take on the noble Baroness’s challenge and provide the same legislative framework as for Royal Mail to make sure that privatisation can take place, as the Government wish it to, but at the same time to keep the organisation off the public accounts so it can borrow. It can then continue its success in the private sector in future but operating on the same principles as at the moment.
An example I have often thought of here is 3i, which was set up by the Bank of England as the Industrial and Commercial Finance Corporation in, I think, the late 1940s or early 1950s. It involved private money from the clearing banks at the time but was very much under the Board of Trade. Its constraints were got rid of in 1983 and since then 3i, as it became known, has moved away from SME investment almost entirely. It now deals primarily with mid-cap companies. I do not think its investors would get out of bed for anything less than a deal of £50 million or £100 million. Indeed, its major businesses and expansion are overseas rather than in the UK. I do not criticise that in any way but it gives a good illustration of how, once the shackles are removed from organisations like that, they can be very successful but their mission creep through shareholders inevitably moves further and further away from the original objectives with which they were set up by the Government. Of course, in that instance the Government have had to set up all sorts of other schemes to allow private—and some public—investment into SMEs.
This is an excellent method by which the Government’s aims can be achieved and the House and Parliament can be assured that the green objectives of the bank will continue to be fulfilled in the very successful way that the team at the Green Investment Bank has done over the last three years.