Enterprise and Regulatory Reform Bill

Lord Brooke of Sutton Mandeville Excerpts

Monday 3rd December 2012 Grand Committee

In trying both to eliminate the possibility that private sector organisations could by taking a stake jeopardise the designation of the bank, while leaving themselves some wriggle room so that some time down the track part-ownership of the bank could be sold, the Government may inadvertently have given the impression that the bank is not there for the long term. It would be helpful if the Minister could reaffirm the position as he sees it. I beg to move.

[Lord Brooke of Sutton Mandeville]

My Lords, I have a short technical question for the Minister and, conceivably, for the noble Lord, Lord Stevenson. It is concerned with the final word in Amendment 5: “she”. My recollection is that when we moved to having Secretaries of State as the title of those people who headed departments, it was so that “Secretary of State” in legislation could be interchangeable between departments. My interest is whether if you use the word “she” you run the risk of fracturing that particular arrangement or whether there is a convention contained in the use of the words “Secretary of State” that allows the gender to be circumscribed in that way.

[Lord Marland]

I thank noble Lords, especially the noble Lord, Lord Stevenson of Balmacara, for their words. The Government agree that there must be parliamentary scrutiny of the bank’s statement of objects and particularly in terms of its green purposes as part of the process of designation of the bank. That is why in another place we tabled an amendment to that effect. However, we do not believe that there is a need to separate out the statement by the Secretary of State. I will try to respond to the question asked by my noble friend Lord Brooke on the Secretary of State in a minute because with his years of experience in government—I am playing for time now—he knows far more about this particular thing than I would ever dream of knowing, but I will come to that in a minute.

The Secretary of State is satisfied that the bank’s objectives are consistent with the green purposes because Clause 2(2) already provides that he cannot lay a draft order before Parliament unless he is so satisfied. I am also happy to give noble Lords the commitment that the Government will make available to Peers and to Members of the other House a copy of the bank’s articles of association when the draft order is laid so that all can be made transparent.

The noble Lord, Lord Stevenson, asked about the sale of shares. This Government are committed to not selling the relevant shares but, unfortunately, this Government cannot legislate for a Labour Government, for example, if they wished to sell the shares. I am sure the noble Lord knows that better than I do. It would therefore be wrong to try to impose things on future Governments. We will be in power for a very long time, but just in case we are not, the Opposition may choose to change the law if they come to power.

As a general point on outside investment, one of the things I have noticed as I have travelled the world is the clear desire of international companies to come in alongside the Green Investment Bank as co-investors because the integrity of the board that has been set up, its skills and knowledge and the leadership Britain has shown under this Government and the previous one in terms of green credentials and green expertise has meant that we are seen as a centre of excellence. If the noble Lord, Lord Smith of Kelvin, were standing here, I know he would say that there is huge scope for involving international companies to invest in the bank. I really do not think that that is a problem.

I have no idea what the response to the noble Lord, Lord Brooke, is, so, if I may, for once, I shall request the pleasure of writing to him about something which is not to do with cricket. I hope that with that explanation—

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[Lord Marland]

I am grateful to my noble friend Lord Jenkin of Roding for explaining that. In fact, it coincides with a note that has just been passed to me affirming it. There are two issues, of course. First, our current Secretary of State is a he, and, secondly, we refer to each other as, “My Lords”. I hope that that means I do not have to write to the noble Lord, Lord Brooke, on the subject—although I am always delighted to do so.

[Lord Brooke of Sutton Mandeville]

My Lords, I am most grateful to my noble friend Lord Jenkin of Roding. I was, in fact, previously aware of that. I was raising the question of why the word “she” had suddenly appeared. I did not wish to embarrass the Official Opposition by directing the question at them, so I directed it at my noble friend.

[Lord Stevenson of Balmacara]

My Lords, I agree that this is now a score draw. With that, I beg leave to withdraw the amendment.

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[Lord Teverson]

I had not noted that. Perhaps I should change my whole speech because of it.

The whole area of bonds issuance is important. In fact, it was looked at in some depth by the Environmental Audit Committee in the other place, together with green ISAs. It is a method, which I know the Government and the Treasury are very keen on, to use money from pension schemes in particular to invest in the UK and in areas of quick growth. Although I am sure that my noble friend the Minister will go through the whole question of whether these would be government-guaranteed bonds and the effect that would have on the public accounts, I believe that this is an important area of fundraising. It is one that could, with the length of investment in these sorts of projects, appeal very much to the pension industry and pension funds, which have large amounts of money, as we know, to invest successfully. This would be a good way of moving forward and I am sure that the Government have considered it a great deal.

I would like to ask the Minister whether the Government have thought further about the area of green ISAs and about involving not just fund managers and corporates, as one would do with bonds, but ordinary people to support the purposes of this bank. I note that some 18 million people have ISAs at the moment. That is one in three adults. Some £220 billion is invested by individuals in ISAs, which clearly have all sorts of tax breaks that are attractive to individual savers. Both these financial instruments could really make a difference in terms of the Green Investment Bank and green ISAs. You could get a public and personal commitment to this cause and create extra employment and growth in the UK.

[Lord Brooke of Sutton Mandeville]

My Lords, I have a small technical question. The Official Opposition indicated, in the noble Baroness, Lady Worthington, a clear understanding that it was the Bank of England that was consulted on quantitative easing, but I have a question for my noble friend. If he were so minded as to grant this amendment, would we need a consequential amendment in the context of the reference to the consent of the Treasury in subsection (4)?

[Lord Marland]

I am very grateful for this probing amendment, which goes back to the creative thinking on how we can get more money into the Green Investment Bank. The point is that we have committed to invest £3 billion up to 2015. That is a set figure and we have set out our stall. It has been agreed by the Commission and any change would require state aid, which is a pretty significant process and which would take time. So the allowance of bonds or ISAs, which are incredibly valuable things, will not, I am afraid, be achievable within the timetable up to 2015. For the purposes of clarity, however, we are interested in exploring this—and why would we not be? We will be looking at this and debating it further. Clearly, we are not going to get investment into this bank unless it starts to get a track record, which most bond and ISA investors would want to see. When the bank has its track record up and running, we will carry on with this.

Of course, we would need another amendment in terms of Bank of England quantitative easing and so forth. We would need an awful lot more than that, let us be fair, because it is way beyond my pay grade to start discussing such figures and such immense subjects of finance. I am grateful for the suggestions. We recognise that they are constructive and we would like to carry on the dialogue over time. With that, I hope that the noble Baroness will withdraw her amendment.

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[Baroness Ford]

There are ways of doing it. I do not wish to detain the Committee and perhaps I should have a cup of coffee with the noble Lord to explain; I mean that in a helpful way. Bonds are raised against the cash flows from projects. They are raised against an infrastructure project only if the Government underpin it—hence, PFI.

[Lord Brooke of Sutton Mandeville]

I encourage the Minister to try to turn not a duckling, but a cygnet, into a swan. A cygnet, in banking and legal terms, would have a greater significance than a ducking.

[Lord Stevenson of Balmacara]

Perhaps I may respond. Since I joined your Lordships’ House, I have always been impressed with the noble Lord’s grasp on literature. I am a little surprised that he did not pick up my allusion to the Ugly Duckling.

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[Baroness Worthington]

My Lords, this amendment is designed to try to elicit a few more comments from the Government on where this investment will be targeted—perhaps on the spectrum of entirely safe commercially proven technologies towards the more innovative end of the spectrum. It is prompted by a report about the launch of the bank from the CEO, Shaun Kingsbury, who, I suspect, in an effort to try to begin the process of creating a track record for being a sensible investor, said that only safe and proven technologies would be invested in.

We are not critical of that as it makes sense, but in much of the literature about the setting up of the bank there is a discussion of the desirability of investing in late-stage innovation. We think that is important because it is about ensuring that this bank is doing something that is not currently done in the market: it is addressing a market failure. The balance between investing in already proven technologies and more innovative solutions is crucial to the bank’s identity and to its success. Obviously it should not operate in the realms of risky investment and venture capital investment but it ought to operate in a space that has perhaps been overlooked by traditional investors. In that way, it would be adding value to the existing market.

We have tabled an amendment which is designed to try to tease out this area of the bank’s operations to make the policy much clearer so that there is more transparency. It is worth saying a few words about where late-stage innovation might occur. It is clear that the Government are seeking to create a crowding-in effect rather than a crowding out effect. That is an interesting phrase and one that we should definitely seek to achieve. We do not want to be competing with existing private investments, but beating a path down which other investors can follow. That crowding in is linked with the concept of what is a late-stage innovation. The current list of technologies that the bank will be investing in is broad. There will be room for innovation among those categories that have already been selected, but there are other technologies that are perhaps not on the list, which is slightly regrettable. I mention wave and tidal technologies because that is an area where the UK could have a great potential to lead globally. We have exactly the right geography for these very important technologies, which are not yet commercially viable. We know that the policy is coming and we look forward to contracts for different mechanisms that might bring these technologies on. It would seem a shame to preclude those sorts of technologies from the list that the bank is looking at.

The amendment is asking for further clarity about where the bank will position itself compared with tried and tested technologies and more innovative aspects, which might play more to the UK’s strengths. We would welcome the Minister saying a few words about the bank’s attitude to that. Perhaps he could also talk about wave and tidal technologies as I think those are hugely important for the UK. I beg to move.

[Lord Brooke of Sutton Mandeville]

I assume that the noble Baroness’s proposal is born of previous literature. Could she tell the Grand Committee what proportion has been given to innovative technologies as against existing ones? We are an inventive nation. In other words, what kind of percentage does she envisage will emerge out of this plan?

[Baroness Worthington]

I do not have a number in mind. This is a newly created facility, which we have to explore. As there has not been a previous example of a bank like this being created in the UK, there is no precedent on which to draw. Perhaps we could look overseas. We have had examples cited from Germany; there are similar banks in Portugal, Spain and Holland; and the Australians are in the process of setting up their own investment vehicle. I do not have an answer, but I am sure that, with some study, the department could provide us with some guidelines or some examples from overseas.