Examination of Witnesses (Question Numbers
80-99)
The Rt Hon Vince Cable MP,
Secretary of State for Business, Innovation and Skills, and The
Rt Hon David Willetts MP, Minister of State for Universities
and Science, Department of Business, Innovation and Skills
26 October 2010
Q80 Margot James:
Thank you, Chairman. The CSR sets out the Department expenditure
limits for the Regional Growth Fund over the review period. Can
you tell us why the resource limits run for three years whereas
the capital limits cover only the two years up to the end of 2013?
Vince Cable: I
cannot give you a precise answer. My understanding is that the
fund is being allocated over a threeyear timeline. It is
a good question; I will try and find out why there is a discrepancy,
if there is one.
Q81 Margot James:
Thank you. We have discussed, as the Chairman says, the RDAs
at some length, but can you confirm whether the Regional Growth
Fund will have any obligations to continue to fund the existing
commitments of RDAs, and will it have any responsibility for covering
any of the wind-up costs associated with RDAs?
Vince Cable: No,
it will not have responsibility for meeting their commitments,
but it may be that the RDAs are working on interesting projects
that will be in the interests of the country and meet the requirements
of the Regional Growth Fund, and they may well inherit them from
the RDAs and take them forward, if they are good projects. That
will be the way it will operate. There is no question of, as
I think you were implying, dumping the legacy costs on the Regional
Growth Fund. That is certainly not the intention.
Q82 Margot James:
Would any exciting projects that the RDAs currently have in train
require the support or the endorsement of any of the successor
LEPs in their area? Would that be a precondition for the Regional
Growth Fund agreeing to such proposals?
Vince Cable: We
do not think that is a precondition. The LEPs will be able to
come forward with proposals of their own, and that is partly one
of the streams of funding that will emanate from the Regional
Growth Fund, but there is no attempt to bind this in any rigid
way.
Margot James: Thank you.
Chair: Can we move on
to the Green Investment Bank, an issue which I know has aroused
some excitement, not least with the Prime Minister. Can I bring
in Luciana Berger to ask some questions?
Q83 Luciana Berger:
Thank you, Chair. We have heard that the Green Investment Bank
is going to have £1 billion of funding, "together
with additional significant proceeds from the sale of Governmentowned
assets". On that particular point about the Governmentowned
assets, what are those public assets that are going to be sold
to help capitalise the Green Investment Bank?
Vince Cable: I
cannot tell you at this stage. There is discussion in Government
about potential asset sales, which are related to the objectives
of the Green Investment Bank, but I cannot tell you what they
are at this stage and I certainly cannot tell you how much they
are worth.
Q84 Luciana Berger:
Are you expecting those assets to be solely from the disposal
of BIS assets?
Vince Cable: No.
They will be across Government.
Q85 Luciana Berger:
The spending review also made reference to the Green Investment
Bank being supported by private sector investment. What commitment
do you have from the private sector to invest in green infrastructure,
in light of the recent announcement by the banks of a £1.5
billion pound business growth fund?
Vince Cable: I
think in the early part of your question you said that you thought
the private sector would be investing in the Green Investment
Bank. That is not the concept we have. It will be launched as
a public bank, and it will invest in particular projects alongside
the private sector. Certainly in the evaluation stage, we talked
extensively to people and institutional investors who are very
keen to involve themselves in infrastructure of an environmentally
beneficial kind. There is an enormous potential investment, which
this Green Investment Bank would co-finance. That would be how
it would operate. There is a potential in the longer term for
the Green Investment Bank to develop in different ways, but at
the moment we're starting in a practical way, with a publicly
funded institution that will co-finance projects with the private
sector.
Q86 Luciana Berger:
The review says that it will catalyse further private sector investment?
Vince Cable: Yes,
that is what I mean.
Q87 Luciana Berger:
I think that is widely been interpreted to mean that that will
bring in some private sector investment from the start.
Vince Cable: Let
us say an offshore wind project, or something of that kind; the
Green Investment Bank would be one of the participants, and it
would hope to leverage in a lot of private capital alongside it.
That is the current concept.
Luciana Berger: Thank
you.
Chair: Can I bring in
Nadhim Zahawi?
Q88 Nadhim Zahawi:
Thank you, Chair. I think this is a very exciting idea, Secretary
of State, and I think you are absolutely right to focus on this,
because you can see ways where the Green Investment Bank can just
tip investment projects over the edge, where investors may feel
the insecurity of a longterm investment—15 years—with
changes of Government and whatever else, and the Green Investment
Bank can take them over and make it a viable investment. I also
applaud its having an independent board and being free from political
interference, because I think this could be crucial, it could
be a new 3i. I hope it will be bigger than just a UK Green Investment
Bank, it could be a global Green Investment Bank. Will it be
able to issue bonds?
Vince Cable: Not
in its early stages. That begs a lot of questions about rating
and so on. We don't have a closed mind about how this institution
could develop. In the first instance, that is not envisaged,
but it could develop in different ways, and while the bank is
actually being established, we will look at different models about
how it could develop that are consistent, among other things,
with sound public finance. That is the key constraint on what
we can do.
Q89 Nadhim Zahawi:
But you are open about it.
Vince Cable: Yes,
we have an open mind as to how it could develop.
Q90 Chair:
Could I just ask, on that subject, when you anticipate the Green
Investment Bank being open for business?
Vince Cable: It
will not open tomorrow.
Chair: We know that.
That's the whole point of the question.
Vince Cable: There
are quite a lot of steps to be gone through. We envisage this
activity taking place certainly within the spending review period,
but whether we are talking about 12 months or 24, it would be
unhelpful for me to make blind guesses. You can envisage yourself
the process of establishing a soundly based public institution
of this kind.
Q91 Chair:
I can anticipate the problems. My understanding is that it is
not likely to be operational before 2014.
Vince Cable: That
may be pessimistic, but I think you are right to say that it will
take some time.
Q92 Chair:
You quoted the offshore wind industry, where potentially we could
be a market leader. We are talking about a twoyear delay
before the bank could be involved, and we should bear in mind
that it could be a very strategic involvement. We could lose
out in potentially becoming a world market leader in the absence
of any alternative support for offshore wind.
Vince Cable: Those
projects are happening anyway, and they are happening quickly.
You will have noticed that in the spending review one of the commitments
was for port development, which will enable that industry to get
off the ground much quicker than it otherwise would. In terms
of the contribution the Green Investment Bank makes, you are quite
right, the world is moving, we need to do this quickly, and we
will do it as quickly as we can, subject to all the necessary
due diligence being done.
Chair: Right. Could I
move to Margot James now, on UKTI, something that seems to have
not been on the CSR radar so far?
Q93 Margot James:
Thank you. If I could directly follow up on that. We are concerned
by the absence of any reference to UKTI in the spending review
so far. I was wondering if you share our concern about that and
whether you have any knowledge of whether the budget for UKTI
is going to be more or less the same as it was in the past, or
less?
Vince Cable: You
are right, it is a crucially important institution, and it is
part of being open to business, attracting inward investment and
promoting exports, particularly in the emerging markets where
we are trying to focus our effort. It does that job very well.
It will have to take some efficiency savings; again, we can share
the details with you when they have been worked through, but we
are very confident that UKTI will be able to absorb these, and
continue to provide a very good service.
Q94 Margot James:
Are you expecting the UKTI to remain under the auspices of your
Department?
Vince Cable: It
is a joint operation with the Foreign Office. It will remain
so.
Margot James: It will
remain joint?
Vince Cable: Yes.
Q95 Margot James:
I wanted to follow up with a question that arose during a visit
to Japan that I returned from yesterday, concerning the RDAs.
The RDAs, as you probably know, had representation over there,
and the intelligence they were able to provide to Japanese inward
investors about the individual regions was greatly valued. I
just wondered whether, given our discussion about RDAs and their
removal, you felt that this was something that the UKTI could
take over on a national basis. I know it is your intention that
inward investment goes up to your Department. Will we have sufficient
focus on the individual needs of regions within UKTI at your Department
level, to replace the expertise that the RDAs held about their
own regions?
Vince Cable: I
think the simple answer is yes. This is something that we have
given a great deal of thought to, because it must not be lost
sight of in the running down of the RDAs and the building up of
the LEPs. It is a twostage operation; there is the work
that the UKTI does in the field—overseas representatives:
they will remain, and it will be part of a national service, as
we said, working with my Department and the Foreign Office. But
then there is the link that you are pointing to, which is supposing
a foreign investor has an interest in the UK, then following it
through at a local level. We will have to ensure that the UKTI
personnel who are based in the UK, of course are not based in
London, they are based out in the field where they can relate
to the needs of particular areas. I would imagine that there
will be some management arrangement with LEPs so that they can
be located in an area and follow these things at local level.
We are conscious of the need to link those two aspects of their
work.
Margot James: Thank you.
Q96 Chair:
Can I come back to the efficiency savings that you mentioned earlier?
Have they been factored into your financial settlement, or if
these efficiency savings are made, will they be recycled within
the Department, or recycled within UKTI? Could you just elaborate
further?
Vince Cable: In
terms of UKTI, they are expected to make efficiency savings, and
they will have a reduction in the amount they have to spend as
a result of that. It is not a ringfenced budget.
Q97 Chair:
There is going to be a reduction in the UKTI budget.
Vince Cable: Yes.
Q98 Chair:
Have you any idea what percentage?
Vince Cable: I
cannot tell you exactly, but I am happy to provide that.
Q99 Chair:
If you could provide that, it would be very helpful indeed. That
concludes our questioning on this particular section.
We would like to go on to education now. First of
all, the education budget, in round terms. What is the profile
of the budget reduction from 2012 to 2015? What are the implications
for the budget of any delay in implementing Browne's recommendations?
Could you give me some idea of what percentage of the teaching
budget the cuts will involve? I believe you said in your introduction
that the figure was 40% of the higher education budget, but as
the teaching budget is considerably less than that—I think
it is £5.1 billion of the £7 billion point
whatever it is—if you are making £2.9 billion
reductions in the budget, a significantly higher proportion must
come from the teaching budget. Could you elaborate on those figures?
David Willetts:
Yes. First of all, on profiling, the exact profile of the efficiency
savings has not yet been agreed. As the Secretary of State said
right at the beginning, having agreed the overall headings, we
are still working through the details, and we'll share them with
this Committee and with the Commons as soon as possible. Clearly,
on the profiling, there is a proposal for a big shift in the way
in which universities are financed. The earliest that that could
come in would be the autumn of 2012—people going to university
then—and it would take three years before you have had the
full effect of every university being financed in the new way.
The savings do accumulate quite significantly towards the latter
half of the spending review timetable. Overall, on your second
question, we have indeed got this figure of a shift in the total
budget from £7.1 billion in 2010-11 to £4.2 billion
in 2014-15. The teaching grant is only one part of that. There
are other significant cost items in there; maintenance support
for students, for example. Again, as we break that down, we will
share with this Committee and the Commons the detailed breakdown.
We aim to produce our usual HEFCE grant letter by Christmas,
which will give the detail about what the teaching grant element
is within that total.
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