Green Bank: GIB or GIBberish?
Two key low carbon measures were trumpeted in the budget: both are not quite what they seem on closer examination. We will have a ‘carbon floor price’ which looks more like a straight carbon tax, and will not come in at the price claimed. We’ve also got a Green Investment Bank (GIB) from the Budget.
But just as we’re not sure what the floor price is really going to be, so we’re not sure either whether the GIB is going to be a bank or a fund. The Environmental Audit Select committee recently reported that it was ‘imperative’ that the GIB has the ability to raise funds, issue bonds etc, - in short quack like a duck/trade like a bank if it is to do seriously what has been proposed for it.
In the words of the committee, it wanted the government to ensure it ‘set up a Bank with the potential to deliver the scale of investment required, significantly helping to put us on the path to a low-carbon economy and achieving our challenging emission reduction and renewable energy targets... if the Green Investment Bank were unable to raise private finance there would be little if any prospect of the government meeting those goals’. That is the basic difference between a ‘fund’ and a ‘bank’, even if the fund has set aside for it some fairly large-sounding amounts.
Nnow we know from the Budget that there will be a thing called a Green Investment Bank funded in addition to the £1 billion already allocated to it, by a possible £2 billion additionally from sales of assets when they are identified and take place. This seems like it should be good news; but unfortunately the answer is “yes and no”. The ‘yes’ comes from the headline: the ‘no’ from the small print.
The “Bank” in its proposed incarnation we are told, will be able to raise funds, but not until 2015-16 and even then, not ‘until the target for debt to be falling as a percentage of GDP has been met’ (this can be found on page 33 of the Budget Red Book,). As far as I can see this means that if we get to 2015 and the target has not been met, then there will be no borrowing function for the GIB.
And that date? Haven’t I heard it somewhere before? Ah, yes, it’s coming back to me - fixed term elections, just gone through the House - next election May 2015.
So there we have it. No bank, at least not until after the next election and maybe not then. The Treasury will decide. At the moment what we have is a fund, and it will be for the foreseeable future, but we can call it a Bank if it makes us happy.
A fund is all very well, but as most people will recognise, a fund is a finite pot of money, entirely dependent on how much the Treasury is willing or able to deposit in it. It is a far cry from the muscle of a real Green Investment Bank which is able to independently raise the investment needed to refit the UK with a low-carbon economy, and to create some much-needed green jobs and green growth.
A billion pounds in a pot isn’t of course negligible and we will need to get on and invest it, then hope someone sells something big soon, and that after that the economy comes right. But if some or all of that doesn’t happen I’m afraid that the GIB will turn out to be typical of much of the rest of this Budget: a headline for growth (in this case low-carbon growth) that is belied by the paucity of measures actually to make the headlines happen.
Dr Alan Whitehead is the Labour MP for Southampton Test. You can read more of his thoughts on energy policy on his blog.