Songwriters and Composers: Remuneration

Debate between George Freeman and Kevin Brennan

Wednesday 7th December 2022 Westminster Hall

[The Minister for Science, Research and Innovation (George Freeman)]

It is a pleasure to serve under your chairmanship, Mr Hollobone—in the warmth of your chairmanship in this cool room this morning. I congratulate the hon. Member for Cardiff West (Kevin Brennan) on securing the debate and on his ongoing work in this field. I welcome the chance to update him on the progress that has been made and to re-emphasise the message that I gave at the Dispatch Box several months ago before the turmoil of the summer. I want to reiterate the commitment made by my officials, the Government and me to get the issue right and to strike the right balance and continue the pressure that I know he welcomes in trying to secure that.

I am here as Minister for Science, Research and Innovation in the Department for Business, Energy and Industrial Strategy, and as Minister with responsibility for the Intellectual Property Office. I also co-chair the Office for AI with the Department for Digital, Culture, Media and Sport. I am also here as a Member for Parliament and a citizen of this country who is very cognisant and aware, as the hon. Member for Cardiff West has highlighted, of the role of music in our society and our economy. I am the husband of a theatre director, Fiona Laird, who has composed her own music. I have watched her go through the motions as a creator and as a musical theatre director. She composed the music for her recent Royal Shakespeare Company production of “The Merry Wives of Windsor”. We have a friend, a digital entrepreneur in the music scene, who uses the global streaming revolution to get a foothold as a minor artist in this incredible global economy. I therefore have some personal feel for the challenge, and I know how strongly the industry respects the commitment of the hon. Member for Cardiff West to try to get the balance right.

The strengths of the UK music industry are a major part of our economy. It contributed £4 billion to our economy in 2021, and probably more this year. A key component of that is exports. British music brought £2.5 billion into the UK in 2021. It is also a major force for soft power. Next week I will be in Japan making a speech on global science soft power. I suspect the Japanese associate the UK with the Beatles, Ed Sheeran and the fabulous creative artists we saw celebrated in the Jubilee, as well as with our science. They go together as global projections of our values as a democracy and a creative powerhouse in the world.

I absolutely share the hon. Member’s view that songwriters and composers should enjoy a fair share of the value. The challenge is to make sure we get a framework in the UK where that is true—it is a lived experience and reality—without unilaterally moving so hard or fast that we undermine the sector. We must try to establish best practice, which fits with the wider work I am doing on innovation and regulation. This country has an opportunity to set the global standards in many of these sectors, which could then, through our soft power, become international standards. That is how we see this.

The principles of fairness and sustainability underpinned the inquiry by the Digital, Culture, Media and Sport Committee into music streaming, which kicked off so much of this. I want to reassure Members that those principles absolutely underpin the Government’s approach. I will address the issues that the hon. Member has raised and give him the update that he asks for. On streaming, we kicked off a significant piece of work on data, which the Intellectual Property Office has completed. The data gives us a good grasp of what is going on, which is key to fair remuneration. Too often, information that identifies songwriters and composers, along with their works and owners, is incomplete, inaccurate or missing entirely, which means that creators often face delays in being paid, and some are not paid at all. That predominantly affects not rock stars and superstars but the smaller creators on modest incomes, who depend on that data for their livelihoods.

That is why, since the DCMS Committee’s inquiry last year, the IPO has established a working group on metadata, which we have tasked with developing industry-led improvements. These are complex issues and there is no silver bullet, as the hon. Gentleman knows, but the working group has made real progress on a good code of practice on metadata and a two-year roadmap for industry to deliver tangible improvements through education and technical solutions. That output is very close to completion. Since returning to office a month ago, I have asked to see it, so that I can ensure that it reflects the undertakings that I gave to the hon. Gentleman and the House. Officials in the Intellectual Property Office will share it with the music industry more widely very early in the new year to seek final agreement.

Similarly, the IPO has established a working group to develop a code of practice on transparency. That code is also close to completion, and we will be seeking wider industry agreement on that early in the new year, too. I hope and believe that those actions on data and transparency will achieve their aim: real improvements in the fair remuneration of songwriters and composers, and songwriters enjoying more timely and accurate data payments as a result of the improvements in data. Those are key elements of the package.

Let me turn to competition and the distribution of revenues. However good the data is, many feel—the hon. Gentleman made this point very well—that the share of streaming revenues that go to songwriters and publishers, particularly the smaller creatives at the lower end of the pecking order, as it were, is too low. It is key that the remuneration is fair and internationally competitive. Let me break those two points down. As the hon. Gentleman said, the CMA published its final report on the market for music streaming last week. The report was launched after the DCMS Committee and the Government encouraged the CMA to look into this and other claims.

We read the report carefully. As the hon. Gentleman said, it found no suggestion that publishing revenues were being deliberately suppressed by distorted or restricted competition. The report also set out the fact that the overall share of streaming revenues enjoyed by publishers and songwriters increased from 8% in 2008 to 15% in 2021. At the same time, the share enjoyed by the recorded music industry has remained steady. It is true that the publishing share has declined slightly since 2017—from 17% to 15%—but during that time overall publishing revenues paid out by the larger streaming services in the UK have more than doubled. More and more money is being paid out to songwriters and publishers from streaming, which is great. Because songwriters typically enjoy the largest share of publishing royalties—an average royalty rate of 84% in 2021—the vast majority of the publishing share is going to songwriters.

The key point, however, is whether streaming revenues are fairly distributed within the ecosystem. There are still many who feel justifiably that the devil is in the detail. They want to know how that overall number is allocated, and think that we need to do more to ensure that the allocation is fair. The question of how revenues are distributed between artists, songwriters, record labels, publishers and streaming platforms is complex, and we have a responsibility to ensure that any arrangements work for the industry as a whole. There is no perfect solution, but I repeat that there is more that we can do, by working with the industry, to get closer to something that is widely recognised as fairer.

Record labels and publishers each play an important role in supporting and investing in British artists and songwriters. We do not want any unilateral or dramatic reapportionment to undermine the UK sector, but we want to ensure that we do right by the next generation of talent, which we require to feed the whole sector. The Copyright Royalty Board in the US recently laid down that song rights holders should receive around 15% of streaming revenues, which is similar to what we have achieved in the UK. Given that, and given the movement in France, which the hon. Gentleman highlighted, it is interesting that there is a global movement towards ensuring that this growing sector is based on principles of fair remuneration.

I will come on to the changes to copyright law. The DCMS Committee recommended several changes aimed at improving remuneration, including a right to equitable remuneration for streaming, a right to regain ownership of copyright, and a right to renegotiate contracts; those are measures that the hon. Gentleman brought forward in his private Member’s Bill. I made it clear at the time that further consideration of those measures was an active priority, and that remains the case. We have seen some positive action from some in the music industry on remuneration for creators. The three major record labels have agreed to disregard unrecouped advances in older contracts, which means that many artists are now being paid from streaming for the first time. Several independent record labels have announced minimum digital royalty rates in their contracts of 25% or more, even for contracts agreed prior to streaming. There has been some progress and these steps are welcome, but I appreciate that creators want to see more substantial and wide-ranging action on remuneration; that is why, in the coming months, we will be actively considering the evidence from the research, as well as the voluntary action taken by the industry, and weighing up our approach on remuneration.

I will come on to a specific proposal that I am making to bring all of this together, including looking at the text and data-mining issue, which is my next point; it is causing real concern for rights holders. As the hon. Member for Cardiff West was kind enough to say, I was out of office when this reform was announced. In the few short weeks I have been back, I have already met with the DCMS Minister for the creative industries, my hon. Friend the Member for Hornchurch and Upminster (Julia Lopez), to highlight the fact that we must get this right. Of course, the UK wants to be a leader in AI—we are, and we want to continue building on that, but we must not allow that support to undermine our creative industries. My hon. Friend the Member for Hornchurch and Upminster absolutely agrees with me, and we have established a small taskforce of officials between the two Departments to ensure that we get this right. Following that meeting and this debate, I propose to convene a roundtable between DCMS and the Department for Business, Energy and Industrial Strategy of the key voices across the sector to look at the whole issue. It will look at the rate of progress, the report from the Intellectual Property Office and the CMA, and the AI piece to see if we can get a proper settlement that everyone acknowledges would be fair and reflects the principles that we have set out, which—I will repeat again—are absolutely fundamental to our approach.

I believe deeply that, if we get this right, we can establish a Government-supported but industry-led code of conduct that will be respected around the world. It will improve and continue the process by which the industry is improving and ensure that we continue that momentum, so that it does not require private Members’ Bills to keep nudging the industry and we have leadership in setting the standards for fair remuneration that are the envy of the world. As the co-chair of the Office for Artificial Intelligence and Minister with responsibility for the Intellectual Property Office on this issue, I will suggest that my hon. Friend the Member for Hornchurch and Upminster and I convene that roundtable; I will obviously be in touch with the hon. Member for Cardiff West and the DCMS Committee.

In closing, with two minutes on the clock, I will highlight the fact that we believe that there is an opportunity here. The industry has shown willingness to move in the right direction. The Government signal that our preference is not to legislate; our preference is to encourage the industry to move in the right direction but, if we must legislate to get this right, we reserve that right. However, our preference remains to avoid that—not least because we would like to get a quicker solution for the benefit of all those in the industry.

[Kevin Brennan]

I understand what the Minister asked, because we have not discussed it previously, but I do not want the point about composer buyouts to be lost in the discussion. I welcome what the Minister said about convening a roundtable and his continued commitment. We need a discussion at some point about the implication of the increasing trend for composer buyouts.

[George Freeman]

I am grateful to the hon. Gentleman for putting that on the record; I will put it on the record that we will include that in the roundtable discussion. I will pick up the detailed point that he made and write to him on it, because that is part of the mix. I hope that the House and the hon. Member for Cardiff West can see that we are making progress, and I look forward to working with him on this in the months ahead.

Question put and agreed to.

Copyright (Rights and Remuneration of Musicians, etc.) Bill

Debate between George Freeman and Kevin Brennan

Friday 3rd December 2021 Commons Chamber

[George Freeman]

I am grateful to my hon. Friend, a distinguished Back Bencher and former Minister, for raising that point. I myself have had private Members’ Bills, including ten-minute rule Bills, adopted by the Government; I have withdrawn them on the basis of an undertaking from the Minister. I have spoken to the hon. Member for Cardiff West, and obviously I understand that he wants to make his point, but I ask politely at the Dispatch Box, for the record, whether he might be prepared to withdraw the Bill today, work with me on tackling the measures in it, and bring it back in due course if he feels that the measures that I have put in place are inappropriate.

[Kevin Brennan]

I thank the Minister for the approach that he is taking. We have discussed the matter before, but I think that it is important for the Bill to have at least a chance to proceed into Committee. This is a long process, as he says, and the Government control the timetable, so my view is that the Bill is a bus that he could reupholster along the road to make it fit for purpose so we can all agree on it, and that the House should have the opportunity to express its opinion. I know that he understands that.

--- Later in debate ---

[George Freeman]

Yes, I was just coming to that. We have already started work through the CMA, the Intellectual Property Office and the taskforces that I will describe in more detail in a moment. The Secretary of State for Digital, Culture, Media and Sport and the Department for Business, Energy and Industrial Strategy have agreed that we want to get information back within a matter of months and come back to set out the Government’s proposals within a matter of months. We aim to come back with a substantive response in the summer—certainly no later than September. It slightly depends on what we hear, but if we can avoid legislation and solve the problem in some other way, that will be our first instinct. Indeed, I want to make it clear that if we conclude that legislative change is the only way to achieve what the House is looking for, that is very much open to us. However, our instinct is not to rush to introduce a private Member’s Bill to solve the problem, however well intended the measure, but to do the work and come back quickly to the House with a set of proposals. If that suggests that we need to make legislative changes, we are open to doing that.

I shall begin to set out the specifics of that work and what we are doing, and make it clear that the point about fairness that has been made by colleagues across the House sits at the heart of that. We want a fair streaming environment in which the UK music industry can thrive and artists are properly rewarded. Fairness is a broad concept, and one to which we can all sign up, but it has many different aspects in this complicated industry. The Bill proposes a number of specific measures aimed at making the streaming environment fair, which we think is a laudable aim, but it is simply not yet clear that the impact of all those measures has been fully assessed or whether there are others that do not require legislation but which might have a similar impact. We have not ruled out legislation to introduce any of the measures in the Bill or indeed others, should our work suggest them, but we are concerned that interventions such as this made at pace could have—and, indeed, we think would have—significant consequences across the industry, as the correspondence that I have flagged has indicated. We do not want to cause a crisis of confidence in the UK digital music sector, and cause a disinvestment, creating a bigger problem by moving too hastily without taking the chance to listen to all those who have a stake.

We have to get this right in a complex ecosystem and supply chain. The first step is to gather proper evidence from all of those who have concerns before deciding what Government action we will take. If the hon. Member for Cardiff West, a distinguished former Minister, was in my shoes he would be saying something very similar. To that end, we have commissioned research, as I say, into a number of measures from the Competition and Markets Authority and the Intellectual Property Office, and we are liaising with industry stakeholders. We want to work closely with industry and, as it is watching this debate closely, I wish to make it clear that we think that there is a problem. We want to make sure that we get it right, and we want to work with it to get the right measures in place. We would prefer that not to be legislative, but if we cannot find a solution with the industry we hold open that opportunity. We are not saying today that we will not legislate—we will if that is the right thing to do.

In spring this year, we will consider all the evidence that we receive and will think through how we need to respond. That will include consideration of measures on all the elements in the Bill: equitable remuneration, contract adjustment and the right to recapture works, as well as other possible market interventions. I want to make it clear that I am working closely with the Minister for Media, Data and Digital Infrastructure and, indeed, the Secretary of State for Digital, Culture, Media and Sport, who is a distinguished author and has a strong understanding of the issues of royalties, as well as the Secretary of State for Business, Energy and Industrial Strategy. Our aim is simply to ensure that the UK is the best place in the world for musicians to come and practise and find audiences globally, and to harness the benefits of digitalisation, because we have created an ecosystem that is fair, innovative and competitive, both for individual artists and for the UK. To do that, we think that it is right to consider these issues sensibly and properly, as one would expect a Government to do.

This week, I have spoken to about 40 colleagues, and I have probably heard another 40 today. It is great to hear from colleagues from all parts of the House. Even the Scottish nationalists have paid tribute to the Government’s listening on this, which is a nice thing to hear. I attended the Government’s music stakeholder contact group on Wednesday, and heard the views of 11 stakeholders. I am grateful to them and to others who have contacted us this week with their thoughts. I have had a constructive meeting with the hon. Member for Cardiff West, who—I want to pay tribute to him again—is a passionate advocate. We would not be having this debate if it were not for him and colleagues on the Select Committee.

Interestingly, today is the birthday of Ozzy Osbourne, the former lead singer of Black Sabbath, who, through the power of music, overcame learning disabilities and a difficult upbringing to become one of rock’s elder statesmen. That speaks to the power of music, not just to give us all joy but to create opportunities for people who might otherwise struggle. Today is also the anniversary of the release in 1984 of Band Aid’s “Do they know it’s Christmas?”. It is a day that I will never forget, because I played football for 24 hours, listening to that one track. It is ingrained in the very DNA of my subconscious as a result.

This is a good day. I also reflect that this is not the first time that the House has considered the issue. I am old enough to recall Tim, now Lord, Clement-Jones’s Live Music Bill in another place, testing parliamentary support on more than one occasion before the then Government were evidentially satisfied that they could support a version of the Bill becoming the landmark Live Music Act 2012. It is worth recognising that we are not the first group of parliamentarians to consider this issue, but the pandemic has revealed the urgency of our dealing with it. That is why I have given the response that I have. Let me be clear that the Government do not rule out legislation; we are just not prepared to rush to adopt a private Member’s Bill without working with all stakeholders, including the hon. Member for Cardiff West. He may want to force a vote, but I hope that he hears my commitment in good faith to work downstream.

The key is evidence-based policy making—and, Mr Deputy Speaker, you would not expect me, as a science Minister, to believe in anything else. These are far-reaching measures for which the Government must build the evidence base so that we are satisfied that what we propose is right. It is also so that, in terms of transparency, people around the country can see that we have listened to all the stakeholders and taken a balanced view. To intervene now without first doing that would be rash.

The UK music industry is, as many colleagues have said, at the heart of our arts and culture sectors and, from the Beatles to the Rolling Stones and from Ed Sheeran to Stormzy, it is the envy of the world. There are also a whole lot of names who I had not even heard of but who have huge digital followings around the world. It is hard to overestimate the value of the sector.

I will share some statistics that are worth thinking about. In 2018-19—pre-covid—the UK music industry contributed £5.8 billion to the UK economy, up 11% from 2018. That suggests that the industry is in pretty rude health: it is growing and expanding. In 2019, pre-pandemic —this is quite interesting—the median reported income for musicians currently signed to major record companies was £51,000, for musicians signed to independent record labels it was £20,000, and for self-releasing artists it was £13,000.

The challenge that we all face is how we ensure that we create an ecosystem in which those hitherto unknown, often young—but not always young—independent breakthrough artists get the benefits of digitalisation and streaming to help them generate revenue in myriad ways. Sadly, the “Music creators’ earnings in the digital era” report found no evidence that there was ever a time when recorded music was the basis of substantial income for most musicians, even in the 1990s when revenues in the music industry were higher. It is difficult to compare the number of musicians who can earn a living from recorded music in the streaming era with the download or CD eras—let alone the tape era—because of the difficulties in assessing data.

One commitment I want to make to the House today is that we are looking to collect data both in the UK and internationally so that we can make policy on the basis of actual fact about the impact of reforms around the world. Of course, the Americans made reforms recently, and there have been others in other parts of the world. A key part of this dynamic sector is independent labels such as Rough Trade, Domino and Beggars Banquet—there are so many that I could not list them all, and I do not intend to. We want to continue to support them, and when they write to say that they are worried that the Bill—well intended though it is—will undermine them, we are concerned. [Interruption.] I thought that an hon. Member wanted to intervene.

Let me turn to the level of Government support for the sector.

[Kevin Brennan]

claimed to move the closure (Standing Order No. 36).

Oral Answers to Questions

Debate between George Freeman and Kevin Brennan

Tuesday 10th November 2015 Commons Chamber

[George Freeman]

My hon. Friend makes an important point. Lord Maude is overseeing an important review of the way in which UKTI works, to make sure that we are developing a sector focus and a strategic market focus around the world. We are maintaining momentum—and we will improve on it in the years ahead—in order to hit that ambitious target.

[Kevin Brennan (Cardiff West) (Lab)]

The deficit for which this Department is responsible is the trade deficit. The current account measures our ability to pay our way in the world and its deficit recently reached its highest point since the second world war. It is still at 3.6% of GDP. How on earth will refusing to have an industrial strategy help British exporters overcome the failure of this Government’s trade policy?

[George Freeman]

The hon. Gentleman has picked the wrong Minister to talk about industrial strategy, seeing as I lead one of our most successful ones on life sciences. The Secretary of State’s speech yesterday made very clear our commitment to innovation, and this Department, though our investment in science and innovation, is leading in building a long-term economic plan for the science, industries and innovation of tomorrow. The hon. Gentleman can cite trade balance figures all he likes, but the truth is that we are in a global economy and we cannot control the rate at which other economies grow around the world.

Green Investment Bank

Debate between George Freeman and Kevin Brennan

Thursday 29th October 2015 Westminster Hall

[George Freeman]

Our view is that we want to give the Green Investment Bank the best possible chance of having a stable and secure future and being able to raise the sort of money that it needs out of the market. Having been an investor myself in much smaller companies, I would say that anyone involved—my hon. Friend is aware of this—will know that there is no perfect shareholder structure. Often having a very small number, particularly if it is one, can create risks of its own. Having far too many small investors can mean that it is a struggle to raise the capital needed. A happy balance will need to be struck, but the judgment will have to give the Green Investment Bank the best chance of fulfilling its remit. I will say something about its green remit in just a moment. My hon. Friend made an important point.

Crucially, the plans are not being imposed by the Government on a reluctant bank. They have the full support of the company and its independent board and chair, Lord Smith of Kelvin, and others. Lord Smith of Kelvin said:

“I welcome this. You can’t keep going back to the Government for more and more money. If we want to build something that is sustainable and durable, we need private capital. This was always going to happen.”

He also said:

“The UK Government led the world in their vision and commitment in setting up the world’s first dedicated green investment bank, so we are delighted to have their support as we enter a new phase and seek additional investors in our business.”

Shaun Kingsbury, the chief executive officer, said:

“That is why I believe the decision announced by the Business Secretary is the right one. It is the option that gives us the best chance of creating the greatest green impact.”

Other important commentators have concurred. Richard Howard, head of environment and policy at the think-tank Policy Exchange, said at the evidence session of the Environmental Audit Committee yesterday that the legislation may not be needed to maintain the green focus, and that if we remove that legislation and allow someone to invest, that investor would come along and invest because they are interested in supporting what the Green Investment Bank is doing. He said that private capital funds have got involved precisely because the bank has a track record in these areas and that they are buying into a pool of expertise in investing in green projects.

The Environmental Audit Committee’s report on green finance in March 2014 said that the Green Investment Bank

“needs to be able to raise significant further private sector capital for investment alongside the Bank’s programmes, and to borrow itself to enlarge the scale of its work…The Government must make an early and clear statement about the Green Investment Bank’s long-term future beyond the 2015–16 horizon of its Spending Review funding settlement”,

which answers one of the points made earlier.

[Kevin Brennan]

I am grateful to the Minister for giving way. That is all very well but the problem is that is all just opinion. Today, we are seeking more of an assurance that the Minister can guarantee that when the bank is privatised, it will not lose its green focus. Nothing that we have heard so far gives that guarantee. Is he coming to that?

[George Freeman]

I am coming to that. I have been very generous in giving way. Perhaps I should crack on and then I could answer the points that I keep being asked.

In consultations on the Green Investment Bank in May 2012, Greenpeace said:

“If it’s going to be more than an empty gesture, the bank’s got to have the borrowing powers necessary to support the green shoots of the UK’s renewables industry.”

It recognised that the sector is moving fast.

On the freedom to borrow and to raise capital, by giving the bank access to private funding, we will enable it to grow in accordance with its ambitious green business plan, giving it access to a much greater volume of capital than if it remained in public ownership. I commend that plan to any Members who have not looked at it, as it is a legal document that investors are investing in and will be the subject of all the legal constraints of a company sale. Crucially, it will give the bank much greater freedom to operate, removing a number of constraints that apply to it because it is a Government-owned enterprise, and enabling it to borrow freely on the capital markets without impacting on public sector debt. Hon. Members who take a view that public sector debt is not a national priority or issue will not find that argument compelling. Those of us who believe that that debt is an issue will find it compelling. That is firmly the view of the Conservative party.

In Government ownership, the bank must compete for funding along with all other Government expenditure needs, in a necessarily tight public spending round. We do not want to constrain it because of that. For all those reasons it makes sense for the Green Investment Bank’s investment activity to be funded by private capital where possible and to minimise the need for public funding, which fits with our original strategic policy aim of getting the market to work in tackling green policy challenges. Part of the coalition’s strategic intention was to try to generate, support and de-risk that early green investment market here and globally. As a number of Members have mentioned, the bank has been very successful in that first phase.

I want to touch on the need for repeal of the legislation, which a number of hon. Members have talked about. The reason that we need to repeal the legislation on the bank contained in the Enterprise and Regulatory Reform Act 2013 is so that the company can be reclassified to the private sector rather than remain as a public sector body. That is essential to achieving the benefits of private ownership, including the aim that the bank should be free to borrow and raise capital without affecting public sector debt. It has become apparent that, unless we repeal that legislation, there is a major and uncarryable risk that the bank would remain classified to the public sector, even after a sale, because the legislation will be likely to constitute a continued public sector control over the company’s business. The hon. Member for Cardiff West asked whether this was wise in terms of the drafting of the original legislation that set up the bank. I cannot comment on that because I was not involved in it. Our advice now is very clear. If we want the bank to be able to operate in the way that we do, that piece of legislation needs to be repealed. While the decision was not arrived at lightly in any way, we are clear that it is a necessary step if we are to achieve our aims.

--- Later in debate ---

[George Freeman]

Let me answer the question. We will not put a binding contract in regulation or legislation, but we will ensure—here is the point—that when the Green Investment Bank goes to raise funds in a subscription round, the subscription agreement and all the legal documentation will be based on the bank’s current mission to be a green investment bank. The bank’s green business plan will be a material document in the context of that funding round, and investors will be investing in that mission, that plan and those values. As I have said, we will build in a series of protections to ensure that the vehicle in which they are investing is clearly committed to that green mission.

I want Members to understand that we have taken legal advice, and in order to comply with state aid and Treasury rules on public sector financing, and in order to give the bank the freedom that we want to give it, it is essential that we do not bind it with statutory, legislative and regulatory instruction but ensure that, in its offering to the market, the intention of the bank is clear. That is the right mechanism for us to ensure the bank’s green mission.

[Kevin Brennan]

Some might observe that assurances were sought ahead of the Royal Mail privatisation and that those assurances lasted about five minutes after the privatisation happened. Leaving that aside, the initial investors may well come in on the prospectus that the Minister is putting before the House today, but there is nothing to say that that will last for any period of time. Within a pretty short period of time, we could be looking at a very different kind of institution. Can he give us any guarantees about that?

[George Freeman]

I think I have made it clear that I will not commit the Government to giving statutory and legislative guarantees that would constrain the operation of the bank, not because we do not want to see the bank continue doing what it is doing, but because we have been clearly advised that once such guarantees are given, we will not be able to allow the bank to have the freedom that we want it to have or to be able to raise money that does not count towards public sector debt. We have made it clear that we want the bank to continue doing more of what it has been doing, such as investing in green energy and catalysing that market. I do not know whether the hon. Gentleman has seen the bank’s green business plan, which is a clear document. When investors invest in any entity, particularly a bank, the entity has to set out a prospectus and a business plan into which the investors are investing. That document will clearly set out the bank’s green activities. It will be very clear that people will not be investing in a company that can do something outside of that.

[Kevin Brennan]

Fracking?

[George Freeman]

It will be up to the investors and the bank to determine where the green energy market goes in the longer term. None of us in this room is able to predict where the bank should be investing, given the pace of investment. I have seen a number of interesting technologies—hydrogen cells and some of the battery technology are extraordinary stuff—and we want the bank to be free to invest in different sectors.

[Kevin Brennan]

rose—

[Graham Stuart]

rose—

[George Freeman]

I will take these two interventions, and perhaps I can then crack through the questions.

[Kevin Brennan]

I want to ensure that this is on the record. I said “fracking” from a sedentary position, and I think the Minister accepted that it is possible, under the current privatisation plans, that the Green Investment Bank might be involved in investing in fracking projects.

[George Freeman]

I want to take specific advice, but I will write to the hon. Gentleman on whether any constraints are envisaged on what may or may not constitute green investment. My understanding is that we want to give the bank the freedom to invest in a range of different technologies. Indeed, part of the bank’s mission is to be able to catalyse investment in a much wider range of technologies that will be key to building a 21st-century green economy.

--- Later in debate ---

[George Freeman]

I want to crack through. Time is galloping on.

[Kevin Brennan]

You have 43 minutes.

[George Freeman]

Well, the shadow Minister should see the list of questions I have been asked, not least by the shadow Minister himself. I will try to answer those questions and, if I fail, the hon. Member for Hartlepool (Mr Wright) can intervene at the end.

I was asked whether the management of the Green Investment Bank would prefer a statutory lock. The chief executive officer allegedly said that he is “agnostic” about privatisation, but he did say that he prefers a statutory lock. He also said that he wants the ability to raise funds from the private sector, and he understands the need to remove the statute and the statutory constraints.

My hon. Friend the Member for Beverley and Holderness asked how the shareholder framework document will change. Clearly, the framework document will need to change as the shareholding changes. When the bank was set up in 2012, the document’s primary purpose was to set out that the bank should operate independently so that the Government could not interfere in its investment decisions and to ensure the bank’s green ethos. Privatisation will further increase that operational independence, but the bank’s green ethos is now entrenched. The Green Investment Bank is what it is, and it is what is in its business plan, which will be a material document in the shareholder subscription round.

My hon. Friend also asked whether the market failures that the bank was set up to address have now improved to such an extent that we no longer feel the bank needs to operate in the same way. He is right that the bank was set up shortly after the banking crisis in the depths of the dark period of 2010, 2011 and 2012, when the economy was moving very slowly, to rectify a lack of long-term liquidity in the market. It is true that long-term funding for infrastructure projects has recovered strongly, as illustrated by the data I gave earlier. There was a lack of specialist green infrastructure investors, particularly at scale, which is what the bank has now become. The bank has helped to support such infrastructure projects, and we intend that the bank will remain a specialist green investor after privatisation. That is what the bank does, and it is what an acquirer will be buying. We want to let the bank off the leash to do more of that.

The hon. Member for Brighton, Pavilion (Caroline Lucas), who is no longer in her place—she gave her apologies—asked whether a profit-maximising bank would be in danger of crowding out investment because it would be just like any other bank. In fact, the Green Investment Bank is already profit maximising; it has turned its first profit. It exists to prove that it is possible to be green and profitable. That is in the bank’s very DNA; we want to show that the green economy is a real economy. That is how we will attract the private sector capital that we need. The GIB’s expertise can do so regardless of whether it is in the private or the public sector, of course, but we want to give it the freedom to raise that money.

The hon. Lady also asked whether other countries are copying us. It is true that we were in the vanguard when the Conservative-led coalition set up the Green Investment Bank, and we have been copied. It is our ambition to be in the vanguard as we take the market forward. We need to raise not just hundreds of millions or billions, but tens of billions—actually, over the next decade or so, we need to raise hundreds of billions—of money for green infrastructure. There is no way that any Government could fund all of it, even if they wanted to. We need to go to the next stage by leading private sector capital into the market.

Several hon. Members, including my hon. Friend the Member for Beverley and Holderness, asked whether the bank cannot raise debt anyway, and whether we had explored all the options. The truth is that equity raising by the bank will effectively score like debt to the public sector once that equity is invested, so this is not just about debt, but about ensuring that the bank has the right financial mix to operate. My hon. Friend also asked about the European fund for strategic investments, a £300 billion pot for capital raising, and whether the bank will still be encouraged and able to access that money.

The Government are aware of the European funding for infrastructure investment, and are examining how best to make use of that facility—my hon. Friend makes a good point. In our view, that does not alter the case for moving the bank into private ownership. We absolutely need to ensure that it can access funding. The Government and devolved Administrations are actively considering, along with other UK institutions, how they can work alongside the bank to maximise the impact for the bank and others of accessing that European funding. The EFSI guarantee can be used by the bank to co-invest in and co-finance with both public and private institutions, so privatising the bank does not in itself preclude benefiting from the European fund.

--- Later in debate ---

[George Freeman]

For any investor entering into a subscription agreement, the parties will be the current owners, the operating company, the bank and the other investors, so the shareholder agreement will be crucial. It is binding in law and if anyone has ever seen a subscription agreement pack, they will know that it is lever-arch files-worth of papers. However, the central point is that all the parties in that agreement come together to agree what they are investing in, and what the objectives and aims of the company are, and that is set out in the articles of association and in the subscription agreement.

We hope that there will be a substantial range of serious investors who are committed to this space and to subscribing investment moneys into the bank’s green investment plan. They are not investing in a casino or any of the things that conspiracy theorists might imagine this thing could go on to be, including a “zombie” handing out money. They are investing in a specific commercial venture, and the directors of the company will have to put a prospectus out to the market, and they will have to warrant it legally themselves, personally as well as in the usual way. So, the subscription process, in and of itself, affords significant protections to us all, as shareholders and parliamentarians.

The issue of the Government’s ambition of retaining a stake in the bank was raised; I am trying, Mr Percy, to deal with all the points that were raised this afternoon. We will consider all options for a sale and we will be guided by the ultimate test of what achieves best value for the UK taxpayer, and what best fits with the strategic intention of allowing the bank to continue to be a leader in the green investment market and to pull in private finance. I am not in a position to commit this afternoon to a particular level or stake; I do not suppose that anyone would expect me to do so. We need the flexibility to do what best achieves that value for money and the best outcome for the bank.

It is important to note that, in any event, the Government’s retaining a stake while also securing declassification would not give Her Majesty’s Government the power to exercise control over the company; it would merely provide a stake in the company. Before anyone asks, the advice we have had has been very clear that retaining special shareholder rights that would enable the Government to veto corporate policy decisions would effectively amount to state control, and would bring us back to the problem that we are trying to get around. The Government could only have the same rights as any other shareholder in the company.

Here come the tickertape answers to some of the questions that have been put. The hon. Member for Cardiff West asked if I could comment on whether the off-balance sheet treatment is the only reason for the repeal of the legislation. It is the central reason why we need to do it; it is a necessary technical step to liberate the company from the constraints that would otherwise apply. The reason for wanting the bank to be able to operate in the private market is broader than that; we want it to access private capital and to be freer to develop in that growing market.

The hon. Gentleman also asked how much we would expect to raise from a sale. He will not be surprised to learn that I am not in a position to tell him today what that figure would be.

[Kevin Brennan]

Ballpark.

[George Freeman]

Proceeds will depend on how big a stake is sold, on the outcome of negotiations with investors about the value of the company and on how the company’s business plan is judged. We will need to be satisfied that any transaction represents value for money for the taxpayer, and fits with the Government’s wider policy interests and with the best interests of the bank. The hon. Gentleman would obviously not expect me to speculate this afternoon on what figure we would expect and thus undermine the process.

Importantly, the hon. Gentleman also asked me about the £1.8 billion of funding that is left. As he has highlighted, the bank can carry on for at least another year, given that it has £1.8 billion—roughly—in reserves; he suggested that after that period it could start recycling capital. The truth is that to grow its business and invest in accordance with its green business plan, the bank will need access to a much greater volume of capital from a wide range of sources.

The hon. Gentleman asked why there was urgency about this process. What we do not want is to get to a point where the bank has no reserves and badly needs capital. Anyone who has raised money knows that the time to raise it is not when there is no choice but to raise it, because money is desperately needed, but when a company is in a strong position, and has a pipeline, assets and a good track record. We think the bank is in that situation now. We are confident that we can attract private capital into the bank because of its track record and because it is operating successfully.

[George Freeman]

My hon. Friend makes an important point. A key part of the rationale for proceeding with this move now is that the bank’s momentum—its existing status—is a strength; it is an asset rather than a liability in the context of the bank’s fundraising. So we are actively looking at everything we can do to ensure that clarity about the bank’s status, position and momentum is provided to potential investors. It is not in our interests that there is confusion, and we are addressing that issue.

[Kevin Brennan]

I am still not entirely clear what the Minister meant in his answer about the £1.8 billion, in particular whether that money will remain available for use by the Green Investment Bank or is likely to be returned to the Treasury at some point. Could he just make that clear?

[George Freeman]

Yes, I will happily respond to the hon. Gentleman. There is a slight circularity to this process, because we want to ensure that the bank is in the strongest possible position to raise the maximum possible amount. We are currently in discussions with Her Majesty’s Treasury as part of the spending review and as part of preparing what we want to be a highly successful fundraising exercise. So the bank, the Treasury and the Department for Business, Innovation and Skills are in a conversation right now about how best to structure things, so that we maximise the chances of the bank being able to raise money successfully and to continue the momentum with existing projects, because that is a key part of the asset and of the strength of the offering that we want to put to the market.

The hon. Member for Falkirk (John Mc Nally) made an important point about Scotland. We are of course talking to the devolved Administrations; in fact, I understand that my right hon. Friend the Secretary of State is speaking to Scotland’s Deputy First Minister later today. Obviously, I will not pre-empt that conversation, but such conversations are ongoing.

I will wrap up by saying that we have had a really excellent debate this afternoon. Again, I thank my hon. Friend the Member for Beverley and Holderness—