Lord Marland
Main Page: Lord Marland (Conservative - Life peer)Enterprise and Regulatory Reform Bill
Lord Marland Excerpts(11 years, 5 months ago)
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Baroness Worthington
My Lords, we should remind ourselves why these green purposes are so important. This bank has been set up in order to facilitate investment into green projects and to help the UK to move to a low carbon economy. The definitions set out in the Bill will be the guiding principles by which the bank operates. The bank could definitely be sold off in the future; there are provisions in the Bill to enable this to happen, so these governing principles are very important and must pass the test of time.
The amendment would introduce two changes to the Government’s proposed wording in Clause 1(1)(b). First, a test of significance would ensure that projects showed a significant advancement in resource efficiency or energy saving. We believe that this is important not because we do not trust the bank but, as I say, because of how it may change and develop in the future. The test of significance would prevent projects qualifying legally for support from the bank which deliver only a very marginal improvement in any project. It is not beyond the imagination to see that under these definitions of purpose you could secure support and funding for a very marginal improvement in the efficiency of a coal-fired boiler, for example. That is not the sort of investment I think the Government are seeking; therefore, this part of the Bill needs tightening for the avoidance of doubt.
It might be argued that this is illogical and that we will not see a bank that is called the Green Investment Bank investing in coal-fired projects. I have an example of how things can go quite illogically wrong when dealing with climate change and greenhouse gases. The global carbon market has an investment facility called the clean development mechanism, under which it is perfectly legal and possible to invest in slightly more efficient coal-fired power stations in India to allow for European coal-fired power stations to carry on emitting. When we get into the world of sustainability, climate change and emissions reduction, things can get a bit illogical. It is important that a lot of attention is paid to these definitions and that we get them right.
The second change proposed in the amendment is to add a specific reference to energy savings. A very strict interpretation of natural resource efficiency might preclude energy efficiency from electricity. Electricity is not a natural resource, it is manmade. Again, we want to make sure, for the avoidance of doubt, that the bank is set up to focus on electricity and energy saving. We know that this is true because, of the five areas identified in the bank’s objects, two are about energy efficiency—one for commercial entities and one to support the Green Deal. They are very important for electricity efficiency, and we are not convinced that the provision fits well with this definition. So we encourage the Government to reconsider the wording of subsection (1)(b) on natural resource efficiency, because we do not think that it does what the Government want it to do.
Finally, I have two questions for the Minister: what is his definition of,
“efficiency in the use of natural resources”?
Secondly, will he undertake to amend the wording to make sure that energy saving, in particular electricity savings, are included under these purposes?
The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Lord Marland)
My Lords, here we go. We have nine days in Committee— I work it out at 36 hours—and what a way to start. What a pleasant surprise it is for me that the noble Baroness, Lady Worthington, is dealing with this amendment. I moved department to get away from her incisive grilling, but it has come back to haunt me. Nevertheless, I welcome very much seeing her opposite me as she is much better looking than the noble Lord, Lord Adonis.
As always, this Bill will leave this House much better for the great interrogation that this House will give it, and I want to say in advance how grateful I am to all noble Lords for the time that they are about to dedicate to this. I also thank the Opposition for their co-operation throughout this process, the officials who are in serried ranks behind me and of course my noble friend Lord Attlee and others who will be in his place and will have to listen to this response.
The noble Baroness poses an extremely reasonable question and I compliment her on her great knowledge in this field, almost unrivalled in many ways. We have obviously had discussions on this issue with the chairman, the noble Lord, Lord Smith of Kelvin, and I would like to read out his views on it from the Second Reading debate because I think that it sets a framework for what we are going to talk about today. He said:
“We know that we are going to be held to very high standards on green issues in both the investments and our own operations. We welcome the requirement to report on carbon emissions and the positive impact that our investments should have on reducing UK emissions. We will go further than the requirements of quoted companies by reporting in detail on our portfolio. We will also take the long-term view and have regard to the work of the Committee on Climate Change. I ask noble Lords for support for the Government's broad definition of ‘green purposes’. Waste and recycling—for example, anaerobic digestion—can have a positive impact, and it would make the Green Investment Bank’s task more difficult if there were changes in our mandate by a narrowing of the green definition”.—[Official Report, 14/11/12; cols. 1528-29.]
I think that I could stand here all night and make a case for this, but I could not do it better than the chairman himself, who has been appointed to run this independent bank. On that basis, I ask the noble Baroness to withdraw her amendment because I think the noble Lord has said everything that needs to be said.
Baroness Worthington
I thank the Minister for his response. I am slightly perplexed as I do not think that the quote from the noble Lord, Lord Smith, really address the questions that I have raised. We would agree with his point about not wanting to narrow the definition. It is important that we give ourselves flexibility, not least because we hope that this bank will be around for a long time. Things will change during the time that it is around and we do not want to overly constrain it. We are suggesting not to narrow the definition but to make it slightly more specific in its wording. I hope that that can be taken on board. If it is narrowing, it is only to add a test of significance, which, I think, is a legally important word that we should not dismiss lightly. So I am happy to withdraw the amendment, but on the basis that perhaps we could think about these two questions a bit more carefully. I beg leave to withdraw the amendment.
Lord Bates
I, too, welcome this amendment but I have some questions about it on which I would like to put down some markers to which I hope the noble Lord, Lord Mitchell, and the Minister will respond. My questions concern the use of the term “SME” and how we define a small and medium-sized enterprise. That definition differs in different parts of the world. For example, the European definition of a small enterprise is one comprising between10 and 50 employees and a medium enterprise is one comprising between 50 and 250 employees. It would be useful to know what definition the noble Lord is using to define small and medium-sized enterprises, particularly when we discuss clauses further down the track. The businesses that I call micro-enterprises, which are defined in European terms as having below 10 employees, are the ones that really need help in accessing finance and are struggling at present. Therefore, it would be helpful if the noble Lord told us the parameters and the definition of enterprise that he is using when he is talking about SMEs.
Secondly, I wonder whether the amendment achieves the ends that the noble Lord, Lord Mitchell, seeks. We are talking here about incredibly capital-intensive investments. I know from one of the first of these businesses that was established in my home area in the north-east of England—an anaerobic digestion plant—that you are talking about a capital investment of £100 million. These are huge sums which would be outside the reach of most businesses. Yet, as a result of the investment through the Green Investment Bank announced just a couple of weeks ago, the project will go ahead and there will be many jobs for micro-enterprises and SMEs in the supply chain, particularly in the construction and operation of that plant.
Those are two questions that I hope that the noble Lord will take as being not at all critical of his amendment, which seeks to help SMEs and have correct in asking for a definition of who it is that we want to help.
Lord Marland
My Lords, of course the Government are very committed to SMEs, and I know that the noble Lord, Lord Mitchell, who I can say lots of nice things about, is a committed and good advocate for their cause. The noble Lord, Lord Bates, put his finger on the pulse—it is about definition. However, I do not want to get too deep into definition, thereby tying the hands of the bank too early on in its endeavours.
It is clear that the great challenge for any Government at the moment is to get the SMEs going. I know this first hand, given that I am not only the Prime Minister’s trade envoy but chairman of UKTI’s Business Ambassadors Group. This is our challenge—the beating heart of Britain—getting the SMEs going. Therefore, in the context of SMEs, we have to look at what the Government are doing as a wider initiative, rather than be tied down. That is why we have established the Funding for Lending scheme, Capital for Enterprise, the Business Growth Fund, the Regional Growth Fund, and the Enterprise Finance Guarantee fund, which has already helped 18,000 SMEs. To a certain extent, it is working, because we have had the highest amount of new businesses established since records began. Some 460,000 start-up businesses have registered at Companies House in the past 12 months.
However, I completely agree that this issue is an enormous challenge. In fact, my noble friend is committed to this cause, as he is on late payments—an issue that is fundamental to SMEs. He tells me that his maiden speech was about late payments and commercial debt. He has a record of support for that case.
The noble Lord, Lord Cotter, has raised this subject a number of times in the Chamber. Therefore, do not get me wrong. The Government are completely committed to helping SMEs. That is why, for example, in procurement—one of the issues that I am involved with in government—we have insisted that 25% of government contracts should go to SMEs. An awful lot of work is going on. I do not want to be too prescriptive in this area of the Green Investment Bank, but it is totally focused on this issue and looks at each opportunity on its merits. Already, the bank’s smaller-scale funds for waste and non-domestic energy efficiency are already delivering investment for SMEs, such as the £8 million announced last week alongside a Teeside-based SME. Work is already going on to support SMEs.
With that in mind, I hope that the noble Lord will agree to withdraw his amendment.
Lord Mitchell
I thank the noble Lord for his statement and, indeed, I thank all noble Lords for their contributions to this debate. I take it as being broadly supportive of what we are trying to do. That will come out in further stages of the Bill, but I take great heart from what is being said.
I want to make two quick points. First, I cannot emphasise enough the importance of certainty, not just for SMEs but in the whole business environment. Certainty must be there. People are making decisions and, in the green area, these decisions are for longer periods than normal, particularly as regards the payback period and the intensity of those decisions. We must be clear on this, and I will address that issue later when I talk about borrowing powers for the bank. Secondly, of course we cannot tie the Government’s hands too much, but a definitive statement in the Bill on the need to invest in SMEs is important. I beg leave to withdraw the amendment.
Lord Teverson
My Lords, before I speak to Amendment 4, I should say that it is a great pleasure to deal with a Minister who understands the area of energy and climate change, which part of this Bill deals with. He knows the area well, so I am sure that our debates this afternoon will be extremely productive. I also welcome the fact that the Green Investment Bank comes at the beginning of the Bill, because it is an important part of making growth really happen in this country.
I also commend the list of green purposes; individually, they are excellent in terms of greenhouse gas emission reductions, natural resources and natural environment, biodiversity and environmental stability. I could not write a better list myself. However, what we are trying to do here is to get absolute clarity over whether this is a list that includes them all or whether you can pick one off for investment, and ignore the rest. I very much interpret this—and I presume that this is how the Bill was drafted by the Government—as a way of ensuring that at least one is met, but not necessarily all the others. To have the whole list as obligatory would be unrealistic.
What I and the other co-sponsors of the amendment are trying to do is to tie it into the climate change elements—the carbon and other greenhouse gas reductions—as being a necessary part of the investment programme. I refer not to individual investments, but to the investment strategy and programme of the bank as a whole. That is why the amendment places a legal duty on the board to assess the impact of the bank’s investment strategy on the Climate Change Act, which is an absolute anchor point for all this work, and a mission of this Government and the previous Government in terms of that global challenge. It is also to ensure that there is a duty on the board to have regard to the advice and reports of the Committee on Climate Change. My noble friend Lord Deben is not here today, but I am sure that he would like the fact that we wish to pay particular attention to this independent body that was set up specifically to advise government in this key area. Furthermore, it is to prevent the board from adopting or amending an investment strategy unless it is satisfied that the implementation of the proposed investment portfolio will increase the likelihood of UK carbon budgets and targets being met.
I apologise to the Minister for the fact that the proposed new clause has so many subsections and is so long, but it anchors the bank and legislation not just to the advice of the Committee on Climate Change and its work but to the real area of greenhouse gas emissions and the Climate Change Act, which has broad consensus of all parties—as it did in the last Parliament and does in this one. I hope that in that way we can ensure that this legislation is absolutely fit for purpose.
My noble friend the Minister mentioned the remarks made by the noble Lord, Lord Smith of Kelvin, at Second Reading. I have huge respect for the noble Lord, Lord Smith, and I commend and congratulate the Government on his appointment; he is exactly the right person to do this. I would just suggest that perhaps post-appointment he might be rather keener to make sure that his board is not inhibited in any way in the decisions that it would like to make. I think that one looks at this in a slightly different way post-appointment, as chair of an organisation, from pre-appointment and as a member of the legislature. It is beholden on us to look independently, from a bird’s-eye view, to make sure that we have our purpose right. I am sure that the noble Lord, Lord Smith of Kelvin, is right in the vast majority of his remarks, but I think that here there is a need for a little more future-proofing of how operations might work, as I am sure that at some point in the long and glorious career of this bank there will be chairmen other than the noble Lord.
Lord Marland
My Lords, I have a sense of deja vu, thinking that I am still in the Department for Energy and Climate Change—where, of course, the Green Investment Bank was largely initiated, so I am extremely keen that it gets off on the right footing for that reason alone. I believe that my noble friend Lord Teverson, who always speaks so eloquently on the subject, actually answered the question that he posed himself. We could not have written a better list if we had tried. My concern is that we would get into definition overkill as we take this Bill through the House.
My noble friend mentioned that the reduction of carbon is not relevant on the individual investments, but it is at the top line. I would respectfully—I emphasise that word for the noble Lord—point out that it is the fundamental investments that will reduce carbon emissions. It is only at the top level—I see the noble Lord, Lord Oxburgh, sagely nodding his head—that you will achieve the carbon reduction. The Government are very heavily committed to this. It is no accident that the noble Lord, Lord Stern, was on the advisory board that set up the bank and that was advising at all levels. As a result of that, the noble Lord, Lord Smith, has made it clear that the bank will have a very high regard—as it should—for the Energy and Climate Change Committee because it is fundamental for the Government and for the future of the business. However, I exercise a word of caution, because there are important activities that are clearly green but do not necessarily reduce greenhouse gas emissions—for example, recycling and improvements in water quality. We would want this bank to invest in such activities, I am sure, but that would not necessarily reduce carbon emissions.
I have not mentioned a judicial review in my line of inquiry because I think it is far more important that this Committee gets this into the right shape rather than for it to be directed by a judicial review. However, the bank’s board has agreed—across the board—that the bank will voluntarily report on greenhouse gas impacts on its investments. This is in addition to the requirement for the bank to report on the greenhouse gas emissions associated with its own activities. So it comes as no surprise to all of us, after discussions with the noble Lords, Lord Adonis and Lord Smith of Kelvin, that it is absolutely at the heart of what the bank is doing. I hope that that gives confidence to noble Lords and I therefore respectfully ask them to withdraw their amendment.
Baroness Worthington
My Lords, I thank the Minister for his response. We do not doubt that many parts of government are fully on board with the need for investments to deliver low carbon economy to meet our Climate Change Act 2008 targets. However, it will not have gone unnoticed that this certainty is not shared by everyone in the Government. Unfortunately, there is an atmosphere of uncertainty about policy and direction of travel. There is a great deal of difference between taking strategy A or strategy B to meet our targets. We could go through a whole host of investments and incremental technologies or incremental shifts in fuels that we use, or we could go down a different path and take a far more innovative and cleaner route. The trajectory of emissions would be very different as a result.
Choices are available and the body that we have created to advise us on that is the Committee on Climate Change. We believe that there will be a great deal of benefit in having closer ties between the Green Investment Bank, which I hope will be a delivery agent and will start to get pounds spent and concrete poured, and the legal structures that we have in place that help us to determine the path that we shall take. That is the purpose of the amendment and I am happy to withdraw it.
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—
Lord Stevenson of Balmacara
Before the noble Lord sits down, I should make it clear that I was agreeing with him, as he has played it back to us, that the present Government cannot tie the hands of future Governments. However, my question was deeper than that. It was: why is there so much in this designation clause about the way in which the shareholding is to be managed going forward? The noble Lord has not dealt with that particular point. That was the purpose of my remarks on this section. We have a situation where currently this is a 100% owned company. The Government have made a great virtue of the fact that that is the case and, indeed, we welcome that. In his latest remarks, the Minister has alluded to the fact that the reason that investment may flow into the bank is precisely because it is owned by the Government and the investor community, for whatever reasons, is supportive of the view that it is the Government leading this that gives them the security and the risk reduction that they are looking for. We may come back to this on a later amendment. So why all this stuff about what happens below a shareholding of 50%? We are told in a later clause that the Government are not able to fund the bank if their own shareholding drops below 50%. Does that imply that there is a plan that we have not been told about, or is it just a precautionary measure in the event that terrible things might happen and other decisions are taken?
Lord Marland
I can deal with that immediately. It is a very good point. We have no current intentions to sell this—I absolutely underline that fact. We have no current intentions to do so during this Parliament as long as we are in power. I hope that that very clear statement satisfies the noble Lord. I readily understand that that has to be clear.
Lord Stevenson of Balmacara
I thank the noble Lord for those additional remarks and for saying earlier in his response that he would lay copies of the articles of association in both Houses when it comes to reviewing the designation process. We look forward to seeing them because they will help considerably.
I am afraid that I cannot respond very positively to the former Secretary of State, the noble Lord, Lord Brooke. I did not pick up this point when I was reading, but I am so completely gender-blind in these matters that I simply read the word as one that described, in a personal way, the Secretary of State for the time being. However, he will have noticed, as we all did, that throughout his response the Minister referred to the Secretary of State as “he”. Perhaps we have a problem that we should all reflect on.
Lord Jenkin of Roding
Perhaps I can help with this question. Since the 1880s, it has been a matter of interpretation of statutes, and I was certainly taught at law school that the male embraces the female. It has therefore always been said that you used the term “he”, which meant, in the appropriate context, “he or she”. The result is that statutes and, presumably, amendments do not need to use the words “he or she” each time. My noble friend will find when he takes advice on this later that it is a well established principle of statutory interpretation, if I may repeat it, that the male embraces the female.
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 Jenkin of Roding
As we are in Committee, I hope that I can say a couple of words about this. The nuclear industry is, of course, building up this fund as part of the Government’s policy to make sure that the liability for decommissioning does not again fall on the taxpayer. It has recognised this, and it follows the same pattern as one has seen increasingly in the offshore oil and gas industry, where funds now have to be put aside so that when the oil rigs are decommissioned, again that does not fall on the taxpayer but is part of the cost that has to be built into the supply of the oil or gas and therefore met by the investor. I think that my noble friend Lord Teverson may be confusing two matters. I use the phrase again: this is a hypothecated fund. It is not like the pension fund. There never was a separate fund for that. It is simply that the pension contributions from, for instance, the teachers’ pension fund have been paid to the Government, and the obligations are met, of course, by the taxpayer out of the fund. There has never been any question of trying to balance the one against the other. This is quite different. This is a fund that is being set up and funded by the industry. It has to be built up while plants are operating—not just when they are commissioned—so that, at the end, when they come to be decommissioned, which may be 50 or 60 years ahead, the fund is there. They have invested in it so the cost will not fall on the taxpayers. It is a separate, hypothecated fund. It may make the green bank look bigger because it will have more money but it cannot do anything with it other than get a rate of interest. My noble friend shakes his head, but if they are going to start investing in green industrial ventures and so on, it seems to me that that would be a breach of trust to those who have built up the fund. It may be that they can hold it and, as it were, guarantee the payment, but the minute that they start investing it themselves, it seems to me that that is risking the whole purpose for which the fund has been set up.
A separate issue is whether there is an alternative method of investing in the Nuclear Liabilities Fund that might get a slightly more realistic rate of interest. That is a separate matter, but it seems to me that to make it part of the loan capital of the UK Green Investment Bank would be a breach of trust, as I suggested, against the firms that are building this up perfectly properly. They agree, they recognise it, and they know that they do not want to go back to the previous position, but they want the fund to be available to finance the decommissioning of the plants when the time comes.
Lord Marland
My Lords, perhaps I can deal with this quite swiftly. Both the ETS and the NLF, the Nuclear Liabilities Fund, reported to me in my previous department so I have a rough idea of what is going on. Let us deal with the EUAs and the ETSs first. I also sit on the government assets committee and we looked at selling some of our EUAs. We drew the conclusion that the price was not right, the market was not big enough and we would not be able to get a substantial figure into the market. However, as the noble Lord, Lord Teverson, rightly says, an opportunity may come along later.
Clause 4 permits financial assistance to be provided in any form,
“as the Secretary of State, with the consent of the Treasury, considers appropriate”.
If we were able to do it and if—that is a big “if”—the Treasury agrees, the Secretary of State could divert funds into it. Amendment 6 permits the Government to use a proportion of revenues from auctioning emission permits to fund the bank. There is already provision within that.
This is creative thinking and I am very grateful to my noble friend for that because he is a great creative thinker. I turn to the Nuclear Liabilities Fund. Clearly, as the noble Lord, Lord Jenkin, quite rightly said, two things are going on here. One is that this is a fund that is committed to nuclear liabilities; it is committed to the nuclear industry and, therefore, it has a range of opportunities in the nuclear industry in which it could invest. The noble Lord, Lord Wigley, referred to Wylfa and other investments in new nuclear. I had discussions with the chairman of the NLF about developing the fund into nuclear investments, including, for example, a MOX plant, which is something that we were committed to when I was in the department and, indeed, new nuclear. That is entirely for the NLF to decide for itself.
The problem I have with the NLF diverting funds here is that this is an investment bank and it is what it says. There is no such thing as a guaranteed investment. Some investments go up and some investments go down and if the NLF lost money, co-venturing with the Green Investment Bank on things that it did not understand, of course the liabilities would not be met. Despite the fact that we may consider it a very boring return on the investment at the moment, it is planned to match some of the liabilities. But I do not want the noble Lord, Lord Teverson, to go away thinking that actually the NLF is enhancing its investments, but think that it has enough on its plate with the nuclear industry.
Therefore, given the commitments that I have made on Clauses 4 and 6, I hope that, despite the fact that two very important points have been raised—and I am grateful to my noble friend Lord Jenkin of Roding, who has expertise in this field—the noble Lord will withdraw the amendment.
Lord Teverson
I thank my noble friend the Minister for his response. I fully accept that the EU ETS money route is not precluded by the Bill as it is, and I suppose that it would be nice to have it on the list as a nudge or a reminder to the Treasury that it was a possible flow. That was all that the amendment did, but it would tie in well with the philosophy of the carbon market and trying to recycle money into helping the greening of the European economy and the UK even more.
Lord Teverson
I read an estimate somewhere of about £1.3 billion a year. But it all depends on the carbon price. That is the key thing, and we do not know that.
Lord Marland
Perhaps I can help. It depends on the market, which is not there at the moment to buy it. We investigated and got a lot lower offer than £6.62 for the price. That is six months ago, and I cannot remember what figures were involved. I am sure that we could invite the Department of Energy and Climate Change to provide some information in the normal course. It depends on a willing buyer and the price at which they are sold.
Baroness Worthington
I have done some back of the envelope calculations, and at about 100 million tonnes it will be in the region of £1 billion or £1.5 billion. That is not an insubstantial amount of money, and it will rise in time, which would mean that the bank’s initial deposit was paid back by those auctions in less than three years. That is an important context for the discussion.
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.
Baroness Worthington
I thank the Minister for his response. A consultation would certainly help to flesh out some of these ideas and may bring forward even more. I would encourage the department to really think about how we can start a creative dialogue about such mechanisms. We have had four in front of us today, which are worthy of discussion. They are big topics in themselves, so a formal process would help us to understand some of the issues.
It slightly worries me when I hear that quantitative easing is above the Minister’s pay grade. We are not doing a marginal thing here; we are talking about investment in UK infrastructure. We have seen government announcements about a £40 billion stimulus of investment into infrastructure. If it is £40 billion, why can only £3 billion of that be put into the Green Investment Bank? We should not treat this as marginal. It should be centre stage in our stimulus package and in getting our economy back on track. That is why £3 billion is not enough and why we need to think about ways of getting it to be a much larger sum. A consultation would be very welcome, thank you. I beg leave to withdraw.
Lord Marland
My Lords, I say to the noble Lord, Lord Mitchell, that handwritten notes such as those that we old fogies use would be useful instead of modern technology. I am grateful to noble Lords for exploring this area. Clearly, those who have been in government and those who have read the papers know that we are in very deep financial straits. This Government have decided to start a bank against all odds, investing £3 billion in it in the next period, which is a tremendous achievement. We have been told to get on with it. We have done so and it is here before you now, with a chairman and chief executive in place who are getting on with it. On that point, I would like to quote what the noble Lord, Lord Smith of Kelvin, has said about the state of affairs. I am very grateful to the noble Baroness, Lady Ford, for her very constructive and practical comments. The noble Lord said:
“We need to show government and private capital markets that we are a well run organisation with a good track record worthy of the injection of more capital or, indeed, borrowing money in capital markets”.—[Official Report, 14/11/12; col. 1529.].
That is absolutely fundamental. No one is going to lend to this bank or provide borrowing unless it can show a track record of prosperity. I can promise noble Lords that if we feel the need to borrow, we will approach the stakeholder well before 2015.
On that point, the Government have given a commitment that we will seek state aid approval from the European Commission in respect of borrowing before the end of this Parliament. The noble Lord, Lord Skidelsky, very appropriately raised this. We have only just got this thing going but already we are starting to move forward. As the noble Lord, Lord Oxburgh, rightly says, it takes a long time to achieve these things in Europe but we are playing that game; indeed, we are ahead of it.
However, I mention a word of caution, as, indeed, did the noble Lord, Lord Smith. I think that the original budget of investing the first £775 million over the next five months will be difficult to achieve. However, I am confident that we can do it. It is not as if there is a whole load of stuff piling up to be invested in at the moment. Of course, we know there are investments out there, but the budget will be difficult to achieve in the first period. That shows that these things take time; it takes time to build up a track record; it takes time to build up confidence in the markets; and it takes time to build up co-investors, which will be the initial endeavour of the bank.
The noble Lord, Lord Teverson, asked about KfW. Rules are rules and the noble Baroness, Lady Ford, mentioned that we cannot do it in this country. I thank her for that. The UK’s boundary for public finance covers the whole of the public sector, including central and local government and public corporations. That reflects the approach of this Government and that of previous Governments. It is not something that we can suddenly do and in this piece of legislation we are not going to change the rules of engagement.
Lord Teverson
This is covered in European accounting standard 95. I do not see why we should put ourselves at a disadvantage in that interpretation compared with other nations within the European Union who are competing for the same capital. That seems to me to be tying our hands behind our back. We could use the example of changing the rules in terms of Lloyds and RBS as regards public balance sheets and how, with those banks, we made exceptions. I accept that this is rather different, but we have a track record that says that we can change things. I do not understand why it is possible for our competitors to be unchallenged by the European Court of Justice or the Commission in terms of state aid where we risk being seen as being subservient rather than proactive. I would not accuse the Minister of this—quite the opposite—but we do ourselves down by appearing to be supine in this area.
Lord Marland
I do not think that it is a question of being supine. This is a government decision that has been made by the coalition of which the noble Lord is a member. There are many things that people do not understand. The noble Lord, Lord Skidelsky, does not understand or agree with some of the policies of this Government, but that is government policy.
Lord Marland
I apologise. It is good that my noble friend understands it, because then he will not disagree with it. That is the way that the Government have set out their stall. We have inherited a very substantial national debt, but not in the same way in which the Germans have inherited the same problems. We have inherited a grave financial situation and, quite rightly, the Treasury decided that it will not enhance that by further borrowing against our balance sheet. The evidence produced by the noble Lord, Lord Smith of Kelvin, would suggest that he does not feel under any pressure in terms of funds at this point. Of course, we must set out our stall, as I have said. We intend to seek European Commission approval for borrowing and we intend to follow that process as soon as possible. I think that is a very good sign and I am delighted that there is some agreement in the room that we are doing that. I invite the noble Lord to withdraw his amendment.
Lord Mitchell
Does the Minister have any thoughts about when this borrowing will come to pass?
Lord Marland
We have made it very clear that it will not come to pass before the end of this Parliament. That is what prudent people do. They say, “I am going to buy something and I am going to spend this amount of money”. We have said that we will spend only that amount of money, but we have said that we will spend $3 billion on this project, which three years ago did not exist.
Lord Teverson
My Lords, I thank my noble friend for going through this. Can I just say what I am not saying? I am not for a minute saying that we should immediately rush into this. I said in my opening address that the bank needed to have a track record and credibility. It needed to prove that it was good at what it does. However, one thing that we all know, whether you have been in business or, as the noble Lord, Lord Oxburgh, said, you are involved in the EU, you have to plan well ahead and start making provisions for the longer term. There is no better time to do that than when you lay down legislation.
I was being very understanding in terms of the debt problem. I am not talking about changing policy: I am talking about testing rules. All Governments try to get around rules, whether you call it PFI, PPP or whatever to get round public sector borrowing ceilings. I accept that. That is one of the reasons that we went into the coalition and I am delighted to have done so. However, that does not mean that we then accept everything that we are told to accept, although I know that that is not in my noble friend’s nature either.
This is fundamental to making this bank work. My noble friend mentioned matched funding. Yes it is true that there is already a considerable leverage, but that is a fund; the Regional Growth Fund does exactly that. That is why this would then be a green growth fund. However, it is not that: it is a Green Investment Bank. That is why, to get to our goal, we all need to find a way around this. This will be a really important area to explore constructively between now and Report. In the mean time, I beg leave to withdraw the amendment.
Lord Marland
I am grateful for that landscape of the new bank and the large elements of agreement from the noble Lord in drawing his conclusion. To cut to the quick, this is obviously about how we are going to attract co-investment. In meetings with the noble Lord, Lord Smith—and with the noble Lord, Lord Adonis, who sadly is not with us but we have discussed this—he was very clear that this will not be a problem, as indeed I am because of a number of countries that I visited. There is a huge market out there. We had the Kuwait Investment Authority over last week, which was celebrating being in the UK for 60 years. It readily indicated that it would like to invest alongside us in the future.
On the timetable, I refer to the noble Baroness, Lady Ford, who indicated that she would agree that this is very much a matter of track record. No fund can set up shop and on day one expect to be deluged with investment, even if the board and chief executive are very well recognised.
Baroness Ford
There are two concepts here and it is important to get clarity. Track record is important for co-investing. The noble Lord, Lord Teverson, is absolutely right. At the moment, we have a green investment fund. The way to get additional leverage from that fund is by co-investing, and there have been lots of good examples in the past 25 years of different types of bodies doing that in the United Kingdom. However, track record is important for co-investing. However good your track record, unless you have established cash flows to sell in terms of a bond or balance sheet with government underpinning, you will not get borrowing. There are two slightly different concepts.
Lord Marland
I could not have put it better myself. In fact, I could not have attempted to put it as well as the noble Baroness did. It is absolutely clear, and it sets a clear mandate. We have already discussed this issue, and it will come up again, but I am confident that there will be co-investment. At this point, I see this as an enabler for co-investment. There are plenty of opportunities for green investment. I therefore invite the noble Lord, Lord Stevenson, to withdraw the amendment.
Lord Stevenson of Balmacara
My Lords, the purpose of the amendment is quite straightforward. I spoke under the last amendment about the need for transparency, accountability, scrutiny and banking ethics, and the importance that these now have, particularly after the last crisis. This is something that should apply to the green bank. It is the first public bank to be created in modern times, but it may not be alone, because we are aware that a British Investment Bank, or whatever it is to be called, is starting up. Therefore, we should be setting precedents for how it should operate as we go forward.
We suggest that the Green Investment Bank has the highest standards of transparency both for the shareholders and the general public, which means that we can have meaningful debate; assessment and scrutiny as to how the bank is being managed; its success in achieving its green purposes; the manner in which it arrives at investment decisions—and all subject to the important point of commercial sensitivities and considerations.
The amendment would ensure that all working papers and studies undertaken in the preparation of the bank’s business plan, as well as all written correspondence exchanged between the Government and the board, were made available on a website that was freely accessible by the public. We do not want to do anything that compromises the bank’s ability to make investments and consider matters of a sensitive and commercial nature; that is why the amendment is couched in those terms, to make sure that a full and frank discussion of views can still take place between the Government and the board, and that the bank can fully undertake its activities. I stress that we want the Green Investment Bank to have the highest possible standards of transparency, accountability and scrutiny to the public and other stakeholders.
It is true that the bank falls under the Companies Act 2006, and is registered at Companies House as a company with proper articles of association and so on, but our concern is not so much with historic reporting, because often these reports can be delayed for six to nine months, but with allowing debate and discussion. A good example of this would be the rules that the Government are putting in place to ensure that inappropriate bonuses and executive pay will be restricted. As the Committee will be aware, this Bill will change the powers of shareholders in deliberations on executive remuneration, although we do not think that it goes far enough, as we will come to later. This amendment will ensure that the bank will be different from other Companies Act companies in the sense that debate about appropriate pay and the Government’s role in that would be flagged up on the website, and there permit a wider debate before the mechanisms proposed in this Bill kick in. I beg to move.
Lord Marland
My Lords, this is an interesting amendment, but of course it goes way beyond the Freedom of Information Act 2000, which permits a great level of self-disclosure and obligations that the bank must apply to because it is wholly owned by the Government. So the information will be readily accessible as to bonuses and all the other things that the noble Lord reasonably requests. It is important that there is transparency in our current world of bonuses and directors’ pay, but we do not want to put an extra burden on an organisation that is already within the Freedom of Information Act. I hope that the noble Lord understands that and will perhaps withdraw his amendment.
Lord Stevenson of Balmacara
My Lords, I do understand that and thank the Minister for pointing out how the Government are approaching this issue. I still regret that in some senses we are not taking advantage of how one could use a more engaged discussion with those who have responsibilities in this area, notably Parliament. Having said that, I will read carefully what the Minister has said. I beg leave to withdraw the amendment.
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.
Lord Marland
I am sure that the noble Baroness would agree that 20% would be a reasonable part of the bank’s investment. That is the right number because, as part of this agreement, the bank is permitted to make 20% of its investment in other sectors, a key one being marine energy, which I know is of great interest to the chairman. It was also of great interest to me in my previous department and is of great interest to the noble Baroness. It uses our great attributes of tides and waves. There is a lot of activity going on there. We have created marine parks, and I see this as a key future. As I said, the bank has 20% of its funds allocated to this area.
This is an interesting probing amendment. But where I would resist movement in this direction, other than giving confidence to the noble Baroness, is that if we start using words like proven technologies, I am not sure that we can create the right definition. We all understand what the noble Baroness means. Going back to the core of what the bank is set up to do, it is to demonstrate the ability to make both a positive return and a green impact. All those areas that the noble Baroness and I know well would certainly fit into this exciting new development. With that, I hope that she will withdraw her amendment.
Lord Stevenson of Balmacara
My Lords, the main aim of this amendment is to firm up how and in what form the Secretary of State must prepare and lay before both Houses of Parliament a report on the activities and investments of the UK Green Investment Bank. The amendment is largely self-explanatory, but it may be for the benefit of the Committee if I raise one general and a couple of specific points.
As I mentioned before, relying on the reports generated under the Companies Act 2006 introduces significant timing problems, as these reports will be generally arranged for an AGM often some months after the year end. A report for Parliament, if it were different, can be much more up to date and therefore more relevant to those who have to discuss it. The focus of Companies Act reports are the stakeholders, mainly in conventional companies. These would be the dispersed institutional and private shareholders and not the public interest represented by Parliament. It is therefore sensible to recognise that, although initially the Crown interest will be the only shareholding interest, that will not be identical with the public interest, and different reporting might therefore be required.
Proposed new paragraphs (a) and (b) in the amendment would give Parliament a feel for the activity that the bank has been undertaking on the ground, and bring the reality of the bank's operations to life. It would be unusual for Companies Act reports to deal with specific investments in this way.
Paragraph (c) would assess the way in which the bank is achieving value for money for its investments, and draw parliamentary attention to value for money and efficiency—again an approach that would not commonly be found in company reports.
Unusually for institutions in the public sector, the bank will have to be familiar with risk in all its forms and across its investments, and the wider economic climate will also need to be referred to as well as the appetite that individual investors will have for risk. This is an important area that we think the report should deal with.
It would be of considerable concern if the Green Investment Bank were to displace investment already available in the market, which we have already touched on in our debate this afternoon. So a specific report in that area would be helpful in understanding how the bank was progressing, and in assessing how successful it was in the marketplace.
The final point brings us back to corporate behaviours, and assisting Parliament to judge whether the bank was addressing concerns on such matters as pay and bonuses and ethical behaviours more generally.
I hope that the Minister will accept that with this amendment we are trying to be helpful. We have some common ground in assisting Parliament in getting material which is better suited to its particular role. I do not think that that will necessarily come out of the companies’ reports and I hope that the amendment will stimulate those who have to prepare them to come up with more appropriate solutions for the reporting that is necessary. I beg to move.
Lord Marland
The noble Lord, Lord Stevenson, probes again—quite reasonably, if I may say so. I just want to make it clear that the Government, as the main shareholder—indeed, the only shareholder—will be holding it to account at every angle. Also, Clause 5 treats the bank as if it were a quoted company. Therefore it is subject to the Companies Act, which imposes three quite important criteria. First it will be required to produce a directors’ remuneration report, about which there will be more later in this Bill. It will be required to publish its annual accounts and reports on a website. It will be required to produce an enhanced business review, under which the directors must report on matters such as main trends and factors likely to affect the company’s business and environmental matters. We believe that that has enhanced transparency, public transparency, in addition to the watchful eye of government in terms of getting return on our investment. I hope that satisfies the noble Lord on what I consider a very important probing amendment.
Lord Stevenson of Balmacara
My Lords, Amendment 15 brings to the attention of the Committee the suggestion that if the reports that are being received by Parliament are those which are mainly being generated within the Companies Act register of reporting requirements, there may be some gaps in terms of independent review. So the main purpose is to require such a review every five years following enactment, and also to have an interim report.
I am sure that the Minister will again argue that the bank will have sufficient to do under the Companies Act, and that, as a public company falling within the Freedom of Information Act, there is already a sufficiency of reporting requirements for the bank. He may argue that requiring any more might be regarded as otiose, but there are some reasons why I think the export report would be of value.
The rationale for setting up the bank is to bridge a gap in understanding between the investor community and those who wish to manufacture, develop and trade in the green technologies. Surely a periodic report of what the bank has been doing and how successful it has been in fulfilling its purposes, a check on its competitiveness and a review of the main trends and factors likely to affect its future performance would help bridge that gap and help improve the sector as a whole, leading to greater investment.
In a similar way the preparation of an external expert report would surely help the bank sharpen its performance and help improve its knowledge and understanding of the sector. It may well be that it has collected the best and the brightest to work within the bank, but, even so, whenever there is an external report, there always is more that is achieved because of the preparation for that reporting requirement than there is perhaps by actually going through the process. So in that sense it would be an assistance to the company itself.
Thirdly, the existence of such a report would surely assist those who would otherwise only be able to rely on the standard output of the bank under the Companies Act. With that, I beg to move.
Lord Marland
My Lords, this is an A+ amendment, without any doubt at all, something that I have never achieved myself. So much was I taken with this amendment that I invited my officials to contact the noble Lord, Lord Smith of Kelvin, as chairman, to consider this because I felt that it was such an A+ amendment, from an A+ man and an A+ male, that it was worthy of consideration. I hope it will satisfy the noble Lord that the noble Lord, Lord Smith of Kelvin, has made it clear that the board will undertake an independent review of its own performance each year from the end of its first full financial year in 2014. I hope that that satisfies what I thought was an excellent amendment, and I encourage the noble Lord to withdraw it.
Lord Stevenson of Balmacara
It is embarrassing to be praised so quickly, and so young. Of course, to be the very best of our universe you now have to go above A+ to A*+, at the risk of suggesting that there might be a further grade to which I might aspire.
Lord Stevenson of Balmacara
I shall play my cards slowly and see how we get on. The simple point that I was going to make was that the answer is exactly as I would like, and this will satisfy us in that respect. It is just a question of what will happen to the report in terms of public arrangements. Perhaps the Minister could reflect on having a further exchange with the chair of the bank to see whether it would be something that could be laid before Parliament. I do not think that it would need a formal discussion or debate, but it would be useful to have it in the Library at least, so that it is available. If he could confirm that at some point, we would be grateful. I beg leave to withdraw the amendment.
Lord Stevenson of Balmacara
This is my last appearance in the Committee on this occasion. I have risked the Minister’s wrath by suggesting that we need to think further about reporting, but I do not think that this one will be as well received—but I will have another go.
The Green Investment Bank is already covered by the Freedom of Information Act, and I accept that. It was discussed in another place, and I have read that discussion. But it stuck in my mind that there were two reasons why we need to revisit it. In the discussion in the other place, the Government said that they believed that the Freedom of Information Act, together with Clauses 5 and 6, ensure that the bank will be subject to appropriate, extensive obligations to disclose information and to report on its activities, which will ensure full transparency and accountability. I accept that, because the bank already qualifies as a publicly owned company under Section 6 of the Freedom of Information Act, which means that it is subject to the disclosure obligations that apply to public authorities. We also accept that, unlike most public authorities, not only is the bank subject to the Freedom of Information Act but it has additional, proactive reporting obligations under the Companies Act 2006, which will be enhanced by Clause 5. However, things may change. We had a discussion earlier on in Committee today at which the remote prospect of changes of ownership in the bank were raised. If those changes of ownership were such that the proportion of the bank owned by a future Government dropped below 50%, I doubt that FOI legislation would still apply. So this is to future-proof something for which there is a particular responsibility. At the moment, it is going to be wholly owned by the Crown, and the sole shareholder is the Government, so it is appropriate that the questions that may be put in terms of FOI will be answered.
This bank is being set up in the wake of the biggest financial crisis the world has seen in modern times. That should, even if for no other reason, mean that we should try to ensure that the new bank should have the highest possible standards of accountability and reporting. I remind the Committee that the Secretary of State, in his examination before the Environmental Audit Committee on 2 February 2011, said:
“As Secretary of State in BIS, my ambition is to … develop and deliver a GIB that is effective and transparent and affordable—those are our key criteria”.
Love or hate the FOI Act, it is here to stay, and is proving very effective in ensuring that the Government respond to legitimate requests for information from citizens of the UK. We should do what we can to promote that view, and we should do nothing which sets up barriers or creates uncertainty about whether information is retrievable or not. In our view, therefore, there should be no objection to recording in the primary legislation that it is quite clear that, as well as the class of institution it is, the bank itself, as long as it is retained, will be subject to FOI. I beg to move.
Lord Marland
My Lords, we have trodden this ground quite a lot so far. I think that the FOI is a very significant and far-reaching incumbence on a company, and on individuals in a country, as we have found out. There will be more later, but as I have said in the past under previous amendments the FOI Act is a very strong regulatory thing. I am not going to play “what if” scenarios, such as what if the bank is sold by a Labour Government in 10 years’ time, or another coalition in five years’ time, because it is our task to operate within the current government schemes and not to tie the hands of future Governments if they wish to carry on with other things. But I totally accept the sentiment and look forward to further debates on the subject. In the light of that, I hope that the noble Lord will withdraw his amendment.
Lord Stevenson of Balmacara
My Lords, I simply note that perhaps in 10 years’ time, when we are on the other side and are debating similar issues, I will remind the noble Lord of those points. However, I beg leave to withdraw the amendment.