All posts from: December 2010
I’m wondering whether the coalition’s rather ambitious claim to be the ‘greenest government ever’ is just a load of hot air. Today, energy and climate change secretary Chris Huhne admitted to The Guardian that the government’s flagship Green Investment Bank may not be quite the leviathan institution we all hoped for. In fact, it might not be a bank at all.
It seems the Treasury, which was actually rather benign towards funding for green projects in October’s spending review, has stuck its oar in over the bank’s setup. Those protecting the nation’s purse strings are worried that the bank’s liabilities would be added to the public balance sheet and are instead in favour of creating a smaller ‘fund’.
This was something that sustainability experts had feared would happen. When George Osborne confirmed he would be setting up the GIB with £1 billion of funding, the sector reacted rather cautiously. The problem was a semantic one: would the bank be a bank or a fund? If it is a fund, warned Tim Yeo, chair of the energy and climate change select committee, then it will have limited power. It will not be able to borrow on money markets, which would mean that the initial £1 billion will swiftly melt along with the polar ice.
Businesses have warned that the bank needs at least £4 to £6 billion of initial investment, but to see just how much it really needs, turn back to the commission that dreamt it up. In July, Bob Wigley, chair of the green investment bank commission, said an investment of £550 billion would be needed by 2020 to ensure the UK’s transition to a low carbon economy. A single fund of £1 billion is just scratching the surface, while a properly-financed bank would be able to raise money from ISAs and a number of other ‘green’ financial products.
Paul King, chief executive of the UK Green Building Council, says: ‘A well-financed dynamic Green Investment Bank would allow the UK to leverage the necessary private sector finance to meet both climate change targets and boost job creation in the construction sector.’
The bank idea isn’t entirely dead though. In his interview, Mr Huhne says the institution could become a bank once the UK’s deficit has been reduced. The plan was always for it to start off small – Vince Cable hinted at this at the Lib Dem conference in September – but the risk is that a delay in setting up a properly-funded bank will delay development of crucial carbon infrastructure and energy efficiency work. Targets for carbon cuts are looming, and we need to get a move on with cutting our emissions as well the budget deficit.