11/03/11

By Andrew Holt

The UK could lose out on hundreds of billions of pounds of vital investment in green energy projects if the Government waters down its plans for a Green Investment Bank, MPs from the Environmental Audit Committee report on The Green Investment Bank, warn in a report out today.

Chair of the Environmental Audit Committee, Joan Walley MP, said: "If the Government is serious about being the 'greenest ever', the Chancellor must ensure the Green Investment Bank can do what it says on the tin and raise extra capital like a real bank.

"The UK desperately needs a game-changing injection of private sector investment if we are going to meet our climate change targets and move to a green economy.

"Setting up a Green Investment Bank without the power to borrow would be a bit like trying to buy a house without first getting a mortgage offer. George Osborne has got the deposit, but if he doesn’t allow the Bank to raise extra capital, the sums are going to fall far short of what is needed."

The Coalition Agreement promised to establish a Green Investment Bank and the Chancellor pledged £1 billion to capitalise it in the Spending Review, plus unspecified proceeds from the sale of government assets.

But there have been reports of disagreement within Government as to whether it should be a fully fledged investment ‘bank’ able to borrow money and raise further capital or simply a 'fund'.

If the Office for National Statistics (ONS) classifies the Bank as ‘public sector’ its borrowing could appear on the Government’s balance sheet and so undermine its deficit reduction strategy.

Evidence presented to the Environmental Audit Committee by energy companies, NGOs and financial institutions suggests that between £200 billion and £1 trillion of private sector investment is needed over the next 10-20 years if the UK is to meet its climate change and renewable energy targets.

Accountants Ernst and Young told the inquiry, however, that traditional sources of private sector capital are only likely deliver £50-£80 billion of investment in green infrastructure by 2025 – leaving the UK with a massive investment shortfall.

The report argues that establishing a proper Investment Bank is crucial in order to lever in the unprecedented levels of private sector investment needed.

The MPs recognise the concerns about the Bank’s potential impact on the deficit and urge the Government to start talking immediately with the ONS about maximising the Bank’s impact on investment levels whilst minimising its impact on the deficit.

The Committee considers what the Bank’s priorities should be and concludes that it should concentrate on new fledgling environmental investment where the market has yet to be established.

Chair of the Committee, Joan Walley MP, said: "New nuclear power stations that would be built anyway should not be bankrolled by the Green Investment Bank. It should be used to support fledgling green technologies that are struggling to get off the ground.

"Many new clean energy projects are viable, but can’t find funding because their novelty deems them risky in the eyes of banks and investors.

"A fully fledged Green Investment Bank would be able to kick-start green growth in the UK by offering government backed 'green bonds' that would attract big investors.

"It could also have a role in financing the Green Deal home energy efficiency scheme. The Government needs to clarify whether Green Investment Bank support for new nuclear would constitute a subsidy."

UKSIF has welcomed the Environmental Audit Committee report which calls for a ‘fully fledged’ bank able to borrow money and raise further capital.

The report highlights the urgent need for a robust, fit-for-purpose Green Investment Bank with the ability to raise private capital.

The report reiterates UKSIF’s view that the Bank should have the ability to issue bonds which would offer an effective means for it to raise funds rapidly and at scale from institutional investors.

Last month, UKSIF convened a letter signed by chief executives and other senior figures from major UK investment institutions welcoming the creation of a UK Green Investment Bank and calling for it to have sufficient scale and government support.

Penny Shepherd , UKSIF chief executive, said: “As our investor letter suggested, there is strong investor appetite for a Green Investment Bank able to significantly stimulate the UK’s green economy.

"The Government could miss a vital opportunity to meet climate change and renewable energy targets if it fails to deliver a Green Investment Bank capable of delivering the scale of investment required.”

For the Environmental Audit Committee report go here

Home     More News


Other stories you may find of interest:

David Cameron: Leadership for a better Britain
David Cameron put the Big Society at the heart of his keynote conference speech yesterday, stating: "My driving mission in politics is to build a Big Society, a stronger society." He said: "It starts with families. I want to make this the most family-friendly government the country has ever seen. More childcare. More health visitors. More relationship support. More help with parenting. And for the 120,000 families that are most troubled - and causing the most trouble - a commitment to turn their lives around by the end of this Parliament."

Budget 2011: Sector verdict is broadly positive
The sector has given its verdict on the budget, and there is much positive comment, but this is tempered by some disappointment and criticism. The Chancellor’s budget speech did herald some significant – and in some cases unexpected – changes to the reliefs available for charities and philanthropists. Key measures announced in the Budget include proposals to simplify Gift Aid, encourage wealthy people to give more to charity...

Sector expresses disappointment at 2012 Budget
After last year’s positive Budget for charities, the sector has expressed deep disappointment at the Chancellor George Osborne's 2012 Budget. The CFG described it as a budget for business, CAF warned tax changes could strangle major donations, the Charity Tax Group said it was very concerned about some of the Budget announcements, law firm Withers warned that the Budget could be a significant attack on charity funding, NCVO said this is not “George’s Marvellous Medicine” for the charity sector, NAVCA has warned the budget should have gone further, ACEVO is worried by the cap on tax reliefs, Citizens Advice Scotland has said there is nothing in the Budget to help people struggling and Justice for All said the budget revealed there is no long term plan for the advice sector.