‘(4) Nothing in subsection (1)(b) shall allow the UK Green Investment Bank to consider investments in high carbon infrastructure projects, or in projects likely to result in a significant increase in greenhouse gas emissions.’.
May I begin by welcoming you to the Chair, Mr Bayley? You missed a right treat last week, but I am sure that, as you say, you will get up to speed as quickly as possible. I know that you take a particular interest in the Green investment bank.
I want to say a few words about how the Opposition will go about considering the Bill line by line. We aim to challenge and to scrutinise as thoroughly as possible, but as reasonably as possible. We will not table amendment after amendment—grinding down the Minister as much as possible—for the sake of it. We hope that we can work with the Government as constructively as possible to ensure the right legislative framework to promote enterprise, facilitate economic growth, protect the rights of employees and, as far as possible, bed into law a more responsible type of capitalism.
I am sure all Committee members will want to engage in such a constructive dialogue. I look forward to contributions not only from Opposition Members, but from Government Members. I particularly look forward to hearing how Government Members will bring together robust and scientific evidence to promote their arguments. In the oral evidence sessions, we heard evidence based on “what a bloke in the pub told me”, which I thought was particularly illuminating.
I am grateful to my hon. Friend for giving way so early in what will be an illuminating and interesting discussion. When I met a friend in the pub last week, he was furious that the Government could only come up with anecdotes to solidify their arguments.
Mr Wright rose—
I should imagine that most hon. Members have met people in their pubs—I certainly know the drinking habits of some Committee members.
My hon. Friends are right to make that important point. On Second Reading and in Committee last week, there was a lot of the “Anecdotes R Us” approach to policy making and embedding in legislation. Certainly when Mr Adrian Beecroft gave evidence, there was not much robust empirical evidence behind some of his recommendations, so we will challenge and scrutinise, but we hope to do that as constructively as possible.
The amendments tabled by me and my hon. Friends have a similar and somewhat simple purpose: to tighten up the language currently employed in clause 1 dealing with the green purposes undertaken by the Green investment bank. In moving the amendments, Mr Bayley, I hope to seek your guidance fairly early on. I hope that we will have a clause stand part debate to ensure that we can debate the nature of what is in clause 1 in wider terms, particularly the nature of what the Green investment bank may or may not be permitted to do. I will confine my remarks to the amendments and focus on them, but I will seek your guidance with regard to clause stand part.
That is very helpful and provides me with a great deal of clarity, Mr Bayley.
As clause 1 currently stands, the Green investment bank may be permitted to invest in just about anything. It has a specific remit to ensure that its activities deal with the green or low carbon economy. The bank’s strategic framework, which the Minister has already referred to, states that the GIB is to conduct its activities in a manner that the Board considers will or is likely to deliver the green impact primarily in the United Kingdom. We agree and we support the Government in that strategic framework. However, the bank is required to fulfil only one of the five criteria in clause 1 to ensure that it satisfies the green test. We believe that subsection (1)(b) could be substantially tightened up. At the moment, it states that one of the green purposes is:
“the advancement of efficiency in the use of natural resources”.
We contend that in theory the Green investment bank could invest in a marginally more efficient gas-fired power station and then claim, quite legitimately, that that investment has fulfilled the green purposes as set out in subsection (1)(b). We do not believe that that is either the purpose or the intent of clause 1. That is why we have tabled amendments 5 and 4. Amendment 5 would strengthen the wording in clause 1(b) to ensure that the bank could consider only investments that led to the acceleration and active promotion of initiatives that would significantly improve energy savings and efficiency.
In a similar vein, amendment 4 states clearly, for the avoidance of any doubt, that investments made, as set out in subsection (1), could not be permitted in high carbon infrastructure projects
“or in projects likely to result in a significant increase in greenhouse gas emissions.”
I thank the shadow Minister for giving way. Will he clarify how the amendments would interact with large-scale carbon capture and storage projects such as the one in Yorkshire and the Humber where we are hoping to bring cluster investment, and where there will be quite a lot of complicated investments in gas power stations and the like? The amendment seems to be a little complicated and will not help Britain to get investment.
I would disagree with the hon. Gentleman. I do not think that it is complicated. If anything, I hope that it would simplify and tighten up the language that is currently in the Bill. When it comes to CCS—I hope to talk about CCS when we come to the clause stand part debate, if I may, Mr Bayley—I certainly think that that is something that the Green investment bank should be considering investing in. That is something in which Britain could play a leading role in the global economy. There is a risk that our competitive advantage is being undermined by the fact that we are not moving with the urgency that we perhaps should.
In presenting evidence to the Committee last week, Dr Gordon Edge, policy director of RenewableUK, Nick Mabey, the chief executive of E3G, and David Powell, an economics campaigner with Friends of the Earth, all stated that the Bill needed an explicit reference to avoiding high carbon investment and, crucially, a link with the Climate Change Act 2008 to provide more long-sighted investments. They stated that there was a need—I hate to use this phrase—to future-proof Green investment bank investments beyond the short term and allow for transformational investments based on the long term and the decades to come. The Minister might respond that it is inconceivable that a vehicle set up and designed to deliver transformational change to the low-carbon economy, which is what the Green investment bank is, would consider an investment in high carbon. However, as the Bill currently stands, that is theoretically possible.
We in the Opposition suspect that our amendments are the sort of things that Ministers have in mind regarding clause 1 anyway. Amendments 5 and 4 are consistent with the spirit and meaning of both the concept of the Green investment bank, which we agree with, and the specifics of clause 1.
The term “high” is a relative one. In terms of tonnes of carbon per kilowatt hour, what sort of figure does the hon. Gentleman think should be in the Bill to define what is high? It is not an absolute measure.
I absolutely agree with the hon. Gentleman. The measure is a subjective one, which is why a key part of the policy is the clear link to the Climate Change Act 2008, which provides a framework for driving down carbon emissions as much as possible.
The amendments would merely clarify the meaning of the Bill.
I want to emphasise the importance of setting out the principles of the Green investment bank. If we start talking about technologies in any way, there is a danger that we will find, sooner or later, that those technologies have been overtaken by new ones. The Bill needs to have the scope for very long-term planning in protecting the environment.
I agree with that. We can discuss that in a clause stand part debate. At the risk of pre-empting the debate to some extent, I do not think the clause should be too prescriptive to ensure that we invest only in certain technologies. However, there are certain things that the Bill, the Green investment bank and the clause should consider as a means of future-proofing and of having a longer term investment framework. A balance certainly has to be struck, and I hope to tease out of the Minister what that appropriate balance is.
As I said, the amendments would merely clarify the purpose of the clause, and I hope that the Minister will demonstrate that he is a good Minister, as I know he is, and that he is in listening mode from the very start of our sittings. I hope that he will put us in a good mood by accepting the amendments.
I add my welcome to you, Mr Bayley, in the Chair. We look forward to your firm control of our proceedings.
I begin with a declaration of interest, which is in the Register of Members’ Financial Interests: my wife is the chief operating officer of the Financial Services Authority—[Interruption.] Well, someone has to earn some money in our household.
I welcome the intention of the hon. Member for Hartlepool to be constructive in opposition. I must say that I am slightly wary that the flattery has begun quite so early. It is tempting—
I intend to treat the amendments on the basis that it is important that we examine the questions before us, and the amendments are good in that regard.
Let me step back to look just at clause 1, and then address the specific issues raised by the amendments. I recognise that unless the debate on amendment 3 goes further, we may want to examine some other parts of the clause in a stand part debate, which I look forward to. Just to give some context to hon. Members, clause 1 sets out five separate statutory green purposes. They are broad green principles which, when read together, set the parameters of the bank’s activity to ensure that it must always be green, even if one day, under a future Government or Parliament, it becomes privately owned.
There is no universal definition or agreement on what amounts to “green” or “green purpose”. Even within the environmental lobby, there is no universal consensus on the matter. Our approach is to outline broad principles that provide a useful overarching framework for the bank’s activity while preserving sufficient breadth of manoeuvre for evolving green priorities to be addressed over time and to allow the bank to exercise its judgment without this being unduly fettered. Clearly, while there is, as the hon. Gentleman suggested, some overlap between the five statutory green purposes, they are firmly recognised as distinct aims that we must work towards in order to facilitate this country’s transition to a green economy.
Subsection (1)(b) relates specifically to the advancement of efficiency in the use of natural resources. I shall explain why I intend to resist both amendments, but first I shall address the rationale behind paragraph (b). The phrase, “the advancement of efficiency in the use of natural resources” is widely recognised, it is an important green aim and it is there to support longer-term environmental sustainability and the transition to a green economy.
We are all aware that natural resources are finite and it is important that they are used carefully in order to protect their use for future generations. Indeed, we want to make sure that this is done with minimal harm to the natural environment and a reduction in greenhouse gases. This reflects the synergies between the individual green purposes set out, but natural resources include a broad range of factors. They encompass water, forestry, fauna, minerals and, of course, fossil fuels. As these finite resources continue to be exploited, here and elsewhere, this green aim will have an increasing importance in the medium and longer terms. We believe that it is essential that there be explicit reference to it in the legislation.
According to the United Nations Environmental Programme the concept is,
“reducing the environmental impact of the consumption and production of goods and services over their full life cycle”.
This concept reflects a focus on fewer impacts from outputs—such as less pollution—and as UNEP makes clear, improving resource efficiency is a necessary component of environmental sustainability.
Amendment 5 proposes the deletion of the words in paragraph (b) and the insertion instead of a new wording focusing on energy savings and energy efficiency. I resist amendment 5 for two reasons. First, it means that the effect of paragraph (b) will be focused much more narrowly on greenhouse gas emissions, which is the intended scope, of course, of subsection (1)(a). This renders the distinction we have sought to achieve between the two nearly redundant. Secondly, it would expressly exclude non-energy natural resources from the scope of the statutory purpose.
Understandably, energy efficiency is regarded as perhaps the foremost challenge at the moment in terms of natural resource efficiency. Given the UK’s current energy mix, most energy efficiency is, of course, currently focused on reducing the consumption of fossil fuels. Gas-powered combined heat and power production is a good example of a technology dedicated to energy efficiency that most people would regard as green. This highlights the importance of including fossil fuels within the definition. However, natural resource efficiency is not simply about energy efficiency or savings—it goes much wider than that.
For example, it includes the reuse and recycling of materials, including metal and plastics recycling. This country currently has a target of recycling some 50% of household waste by 2020 as part of a long-term move that should substantially reduce our dependency on finite resources. If amendment 5 took effect, projects that protect non-energy natural resources—water, forest or fauna and so on—would be excluded from the statutory purpose, and therefore from the legislation. This would mean that clause 1 would no longer expressly recognise the very important issue of the careful preservation and protection of all natural resources. The bank would not be able to invest, under subsection (1)(b), in projects designed to reduce, for example, challenges of water consumption, water management and water storage; or the recycling of natural resources in short supply, such as rare earth metals.
A narrower focus on energy as a result of amendment 5, rather than our proposed definition, would mean that the likely green impact of the project would focus far too narrowly on greenhouse gas reduction.
The Minister is making a strong case. I understand and accept his point about the need for synergies in the five green purposes. However, given what he said, surely the preservation of natural resources would come under subsection (1)(e), the promotion of environmental sustainability?
It is possible, but when we look at expert advice, we can see a significant doubt over that. Issues of water management and preservation, flora and fauna, forestry and so on are sufficiently significant that we need an explicit reference. That is why I think, as the hon. Gentleman says, there is a strong case for broadening the wording beyond just energy.
As the pressure on our water resources, forests, fauna and flora and other natural resources increases in the years to come, the limitation of the amendment will become increasingly clear. We might be condemned for being short-sighted if we adopted it. While I totally understand the wish to explore the issue—the discussion has been helpful—clause 1 should retain the wider concept of the advancement of the efficiency of natural resources as a clear and independent purpose.
Are there any examples that the Minister is concerned about where the advancement of one beam might be contradictory to any of the other goals of the Green investment bank?
One of the dangers of narrowing the scope is that, for example, if we look at the recycling of lithium batteries, it would not fall within the definition proposed, but it would fall within what we already have in the Bill. We must be careful to ensure that we do not unintentionally start narrowing things and pushing things out. Clearly, lithium, as a rare earth material, is an important topic. That is an example of how the clause would operate.
A further example might be energy efficiency, which the amendment talks about. It seems to me that the amendment would apply if we were able to make a coal-fired station move from, say, 25% efficiency to 40% efficiency. That would be within the scope of the amendment, but I cannot think that that is what the Opposition want to do.
I am sure that my hon. Friend is right. I suspect that that is not necessarily the Opposition’s intention with the amendment. I will come on to that, because he raises a good point, which is also pertinent to amendment 4.
Amendment 4 proposes that the bank should not be permitted under subsection (1)(b) to fund high-carbon infrastructure projects or projects that are likely to result in a significant increase in greenhouse gas emissions. Superficially, that feels like an entirely reasonable and understandable ambition, but the reference to high-carbon infrastructure projects is inappropriate for primary legislation, and I will explain why.
Amendment 4 would create an additional test simply on carbon emissions and the use of fossil fuels. We think that that is too narrow and rigid. Here is where we come to the issue of energy production. For example, investments in non-domestic energy efficiency could include some of the leading-edge gas-fired combined heat and power schemes, especially where they are replacing the existing heat-only industrial installations. After all, at the moment, my understanding is that CHP units are able, in some cases, to almost double the energy efficiency of such installations. The danger is that the amendment could prevent that.
If we take the example referred to by the hon. Member for Hartlepool himself of gas-fired power stations, at present, current technology would suggest that we would not expect the bank to invest in a high-efficiency gas power station, because it would not provide a sufficient reduction in carbon emissions over and above those generally available on market terms. However, as many of us are aware, as other technologies develop, particularly carbon capture and storage, that may well change. The problem with narrowing things in primary legislation is that they are unlikely to be future-proof, if I can use that phrase. The danger is that the amendment, as it is written, would rule out such projects.
As my hon. Friend the Member for Stroud rightly pointed out, principles rather than technology should guide us. The fundamental problem with the amendment is that existing technology is constantly changing, and there are technologies around today that 20 years ago we were not aware of at all. That will be the case as the bank develops its role. Our view is that we should be explicit about the aim of reducing greenhouse gasemissions in both paragraph (a) and in the bank’s objects, but then let the bank’s experts base their investment decisions on best practice and technology at the time of the investment. If this was simply something we were going to do for a year or two, we would be able to have an understanding of the environment we are working in. It is not, and we therefore have to be careful that we—to use the phrase—“future-proof”. Perhaps we need to find another phrase, if we can.
By combining operational independence with clear obligations—which we will come to in later clauses—on the bank’s directors, both in statute and company law, to fulfil the green purposes, we believe that we are striking the right balance, ensuring that this is both a green investment bank and one that can endure whatever technologies and new challenges come along. That is why I do not support amendment 4. I think it is well intentioned and has drawn out some important distinctions, but I hope that, on consideration, the hon. Gentleman will withdraw it and amendment 5.
This has been a useful discussion and I recognise that the Opposition wish to operate on the basis of teasing out the details—that is what this should be about—but I hope that, on reflection, the hon. Gentleman will withdraw these amendments. If he will not, I urge the Committee to reject them.
It is very clear from the Minister’s eloquent contribution that the approach he is going to take in the Committee will be the iron fist in the velvet glove. He is going to say, “I recognise the important point that the shadow Ministers have put forward, but I intend to come down like a ton of bricks on any possible amendments”. I think he has made a very strong case on some of the issues and it is important that we understand the synergies contained within the five purposes. I fully appreciate the need to have flexibility and not to be too prescriptive. The Minister emphasised principles over technologies, and we agree with that, but I would have hoped that he would be slightly more accommodating than he has been.
Our purpose was entirely positive when it came to this group of amendments. We believe that, although there is a need to balance flexibility with not tying the Green investment bank’s hands behind its back, we need to ensure that this is a vehicle for providing transformational change in the transition to a green economy. If the Minister will give an undertaking to look at the wording of the objectives, particularly clause 1(1)(b), and tighten it up, I would be happy to withdraw the amendment, but he seems to be very fixed in his approach. Will he go away and look at this and come back on Report?
We must be careful, when devising primary legislation, not to put something that becomes fixed in stone, nor—if we want to ensure that the bank is operationally independent when making investment decisions—should Ministers prejudge individual investments. That is why I am being very cautious, but what always happens with primary legislation is that the directors and those who view a new entity—in this case, the Green investment bank—will look not only at the legislation, but at Parliament’s discussions. They will see the ambition that this should not be an institution which should start to make substantial investments beyond the purposes there. I cannot make a change in primary legislation—that would be inappropriate—but the intent, on the aspirations which the hon. Gentleman talked about, is clear and one which we understand.
That is helpful. I still have a worry that the Minister has not properly addressed. He has argued strongly that the Green investment bank could help provide investment for something like North sea technologies, to ensure that more oil and gas can be extracted from the North sea over the next ten years. There is a strong case that we need oil and gas as part of the energy mix, but I do not think that the Green investment bank is the vehicle to do it. The green purposes as they stand would allow such a short-term energy investment decision, which is high-carbon in its approach. On that basis, I am tempted to test the opinion on the Committee on these amendments.