Mar 23 2011
Treasury Clips Wings of Green Investment Bank
By Ed Matthew and Ingrid Holmes
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For Immediate Release – Wednesday 23rd March 2011
Months of speculation over whether the Green Investment Bank will be a proper bank or a fund was ended today when it was revealed in the Budget that the Government will set up the world’s first public green bank with total funding of £3 billion.
Transform UK, the business and civil society alliance that founded the campaign for a Green Investment Bank, spoke to a Senior Minister in Number 10 who confirmed that the Green Investment Bank would be set up in legislation, borrowing powers would be enshrined within its constitution and a shadow Board swiftly set up.
However, in a serious blow to the potential for the Green Investment Bank to drive forward green growth, the Treasury has succeeded in delaying the application of these borrowing powers until at least 2015 and subject to the Government meeting its debt targets.
The power to borrow is what gives the Green Investment Bank its potential to leverage the huge resources held by institutional investors into the low carbon economy. In the UK alone they have assets of £4 Trillion. Seven leading investment companies recently stated in a letter to the Prime Minister that they would be keen to buy Government backed Green Bonds issued by the Green Investment Bank.
The Government announced today that the capitalization of the Green Investment Bank with a total of £3 billion could leverage in £15 billion into the low carbon economy. But with the power to borrow £10 billion they could have leveraged in another £50 billion to spark a clean tech jobs boom.
Ingrid Holmes, a low carbon finance expert from the climate change think tank E3G and one of the UK’s leading policy experts on the Green Investment Bank said:
Confirmation of the world’s first public green bank is a mile stone. But a delay in borrowing means a delay in green growth. It’s a bit like buying a powerful car but being forced to drive it around with the hand brake on. If the Government is really serious about delivering growth then they must take the handbrake off and let the Green Investment Bank borrow from the word go.”
Ed Matthew, Director of Transform UK said:
Allowing the Green Investment Bank to borrow is the key to generating growth and re-booting the UK economy. By delaying this power until the economy has recovered is like a doctor waiting for a seriously ill patient to recover before giving him life saving medicine. Commitment to a set up a proper public green bank is to be strongly welcomed but this decision on borrowing drives a dirty, high carbon truck through the heart of their growth strategy. Green growth is the key to economic recovery.”
For more information please contact:
Ed Matthew, Director, Transform UK, Tel: 07827 157906
Ingrid Holmes, Programme Leader – Low Carbon Finance, E3G
Tel: 07825 829592
Note 1: Ministerial Support for a proper bank with the power to borrow: Chris Huhne, the Secretary of State for Energy & Climate Change said at the end of 2010 that “A bank is a bank. The prime minister has said it is going to be a bank. Everybody knows what a bank is. Ducks quack and banks borrow”. When asked by Joan Walley, a member of the Commons Liaison Committee whether the Green Investment Bank would be a real bank and not a fund , the Prime Minister David Cameron said ‘yes’. Vince Cable, the Secretary of State for Business told the Commons Environmental Audit Committee (EAC) during its Green Investment Bank investigation in February that it would be a real bank with the power to borrow.
Note 2: Support from Parliament for a real bank with the power to borrow: The EAC strongly recommended in its final report launched on 11th March that the bank was a real bank with the power to borrow. They said this was a ‘red line’ and stated that “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”.
Note 3: Support from business and civil society for a real bank with the power to borrow: The campaign for a proper Green Investment Bank with the power to borrow has received huge support from UK business and civil society groups. Over 50 major stakeholders put their name to a national advert calling for a real bank with the power to raise Green Bonds. They included: Axa, Bank of America Merrill Lynch, Jaguar-Land Rover, Pepsico, National Grid, Institute of Civil Engineers, The Climate Group, TUC, Environmental Industries Commission, Renewable Energy Association, Green Building Council, Climate Change Capital, the Aldersgate Group, WWF, Friends of the Earth, E3G and Green Alliance.
Note 4 : George Osborne’s Commitment in 2009 to Green the Treasury in an Opinion published in the Independent on Sunday on Tuesday 24th November 2009: “ Instead of the Treasury blocking green reform, I want a Conservative Treasury to lead the development of the low carbon economy and finance a green recovery….Under a Conservative government, the Treasury will no longer be the cuckoo in the Whitehall nest when it comes to climate change. If I become Chancellor, the Treasury will become a green ally, not a foe.”