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Amendment of the Law

Part of the debate – in the House of Commons at 5:01 pm on 24th March 2011.

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Photo of Mark Lazarowicz Mark Lazarowicz Shadow Minister (International Development) 5:01 pm, 24th March 2011

I was most impressed by the list of businesses that Michael Fallon has recently opened or visited in his constituency. Things could not have been too bad under the Labour Government if there is such vibrant activity, could they?

That aside, given the limited time available I want to concentrate on just one of the issues that I would otherwise have covered: the Budget announcements on the green investment bank. I am pleased that the Minister of State, Department of Energy and Climate Change, Gregory Barker, is in the Chamber alongside Treasury Ministers.

I welcome the fact that the initial capitalisation of the green investment bank will be increased to £3 billion. However, I note that the increase in funding is to come from asset sales, and I would be interested to know how certain we can be that those proceeds will materialise as funding for the bank. As all hon. Members know, such funds can be diverted elsewhere if there are other urgent public finance needs, so I hope for a reassurance that that sum will materialise.

Although £3 billion is clearly better than £1 billion, it is still short of the sums that many say should make up the initial capitalisation of the bank. An Ernst and Young accountant said this morning that the bank should have been granted £4 billion to £6 billion, and I have heard that figure from other sources.

I and others are also concerned that the bank will not be allowed to borrow until 2015, and that it might not be able to borrow at all if the Government are unable to meet their debt reduction targets. The chief executive of the UK Sustainable Investment and Finance Association today said that linking funding of the bank

“to progress on the deficit does not give investors the certainty they need”,

which is worrying.

However, it is not just that the bank will be unable to borrow until 2015. Today’s comments suggest that that reflects a decision on what kind of bank the GIB will be. One commentator said:

“The decision was a victory for the Treasury, which for months had been embroiled in a tussle with green enthusiasts within the government, including climate change secretary Chris Huhne, over the powers the bank should have. It was originally intended much like a private sector institution, funding investments by taking on loans and issuing financial products such as green ISAs and bonds. One by one, these powers were whittled away.”

I hope that that is just press speculation, and I would welcome any ministerial refutation of it. There is a view within the Government that it is not a problem if the green investment bank cannot borrow until 2015, because the projects that will be devolved will be large projects that will take time to get going. I am concerned, however, that if the bank cannot borrow until 2015, it will send the message that it is too closely linked to the Treasury and could have its funding turned on, turned off or even taken back by the Treasury, depending on the wider financial priorities of the Government. Again, I would welcome reassurance from the Government that that is not the case.

Hon. Members will not be surprised to hear my second point: I want to emphasise the case for the green investment bank headquarters to be established in Edinburgh. I say that not just because it serves the interests of my city—although obviously it does—but because I genuinely believe it is the best location in the UK for it to be based. I would argue strongly that its headquarters should not be in London—too much of the financial services industry is concentrated there anyway—and it would certainly be a mistake for it to be run out of the Treasury, as some have suggested. It needs to be outside and independent of the Government.

If the green investment bank is to add to what can be provided by existing financial institutions, and not just be a brass plaque that reads “Green Investment Bank” without doing much that is different from what happens now, it needs to be proactive and to work with the energy and renewables sector, in particular; to work with industry and academics; and to have a good close relationship with financial experts. In my view, Edinburgh has the best combination in the UK of these sectors and skills, and I believe that basing the green investment bank headquarters in Edinburgh would be good not just for Edinburgh and Scotland, but for the north of England and Northern Ireland, and would be a good sign for the renewables and low-carbon sector throughout the UK.

I hope that the Minister can give a decision on Edinburgh in her winding-up speech. However, if she feels that she cannot, as I suspect she might, I hope that the Government will still give serious consideration to the matter. I think the view is shared across political parties that locating the bank’s headquarters in Edinburgh would allow us to make the best of the skills and expertise in many areas.