Examination of Witnesses (Question Numbers
Rt Hon Dr Vince Cable MP and Skills, and Janice Munday
2 February 2011
Q331 Chair: May I
begin our Select Committee sitting this afternoon, Secretary of
State, by thanking you very much for being able to come here to
give evidence this afternoon? We have tried very hard indeed to
be able to accommodate the business in the House, and we are grateful
to you for rearranging the time to fit with that, in order that
we are not going to be delayed in terms of producing our final
report. We are very much aware of the timetable that we have,
and so we are happy to be able to accommodate you.
I know that you have requested the opportunity to
make a statement at the start. Even though we have a lot of questions,
I think it might just be useful if you did that. Obviously there
are lot of people who are saying that they want to bank on a Green
Investment Bank. There is a lot of media speculation whether or
not Oliver Letwin is going to mediate between BIS and between
the Treasury, and we are very conscious that we had a session
just two weeks ago, when our Treasury Minister came alongand
that was recorded in Private Eyeand I think there
was a sense that there was still a lot of unanswered questions.
So we very much hope that your introductory statement will perhaps
shed a little bit more light on the general direction in which
the Green Investment Bank is going, which will enable us to come
out with the best possible report that we can do. So the floor
Dr Cable: Thank
you, Chair, and thank you for fitting me in. I doubt that I will
be able to answer the questions you have just put to me directly.
But I just want to echo the sentiment I expressed when I wrote
to you, back at the outset of your inquiry in November. We very
much welcome your Committee's input into the design of the financing
remit. We want to work with you, and we want to work with the
private sector and the other stakeholders to get this absolutely
right. As Secretary of State in BIS, my ambition is to keep this
momentum going, to develop and deliver a GIB that is effective
and transparent and affordablethose are our key criteriaand
I am sure your inquiry will help us with that. The underlying
objective is we want to make sure this Government is the greenest
Government there has been. Of course, this is one of many undertakings,
and the Green Investment Bank is there to support economic growth,
on the one hand, but also to make a significant contribution to
environment and carbon reduction.
What has happened since the Budget: we have had an
intensive programme of work, trying to develop the mandate. I
want to stressand this partly reflects your introductory
remarksthat we are still in the design and testing stage.
There are a lot of decisions that still have to be made. We are
keeping a lot of options open, so I am not going to be able to
give you unequivocal answers to a lot of questions. That is not
a wish to be unhelpfullet alone evasivebut it simply
reflects the stage of the work that we are at.
Broadly, we are in this intensive investigative phase
and we want to work quickly. There will be a statement in the
Budget and in May, hopefully, we will come forward with a concrete
business operating model, which comes out of the testing and work
that has taken place. Even when that happens, the long-term path
for the GIB will still be open to a lot of further consideration.
We have issues around state aid; that is possibly a long and testing
process. But our objective from the outset is to create an enduring
institution; we want it to grow and we want to target long-term
infrastructure finances. I want to make it clear that we see this
as being more than a fund; that is a slightly false dichotomy,
I think, between a fund and a bank. What we want to do is to deliver
a range of financial products into the market and reinvest the
Finally, I would like to thank everybody who has
been involved in this debate on the Green Investment Bank. There
have been a variety of views and it has been extremely helpful
to us in this formative stage. Thank you.
Q332 Chair: Thank
you for that. If I could pick up on a couple of things: the timing
and you just mentioned the Budget. I think the most important
thing for our Committee is to have a set of recommendations that
will be part of the design process. If we are serious about pre-legislative
scrutiny, we would like to have a set of proposals and recommendations
that could feed into that before any final decision was made.
So it is with that in mind that we want to get this report completed
very quickly. We have a series of very specific questions thateven
if you are not going to have the answers nowwe want to
know what Treasury and BIS thinking is on all of these; and perhaps,
where there are conflicts, what opportunities there are for those
to be resolved.
I noticed in the debate that was taking place in
the Chamber earlier, the question of nuclear was raised. One of
the issues that came up in our previous evidence sessions is whether
or not the Government would consider that nuclear should be deserving
of subsidy in respect of whatever arrangement the Green Investment
Bank takes. Would you consider nuclear to be within the remit
of the Green Investment Bank?
Dr Cable: We do
not rule out nuclear, but I think it is fair to say it doesn't
totally fit the kind of profile we envisage, certainly in the
early stage. But we certainly do not rule it out. What we do will
operate within the framework that Chris Huhne, as the Secretary
of State for Energy and Climate Change, has set out, namely that
we do not envisage nuclear power being a subsidised industry beyond
the action that is available to all players in the power industry.
So that is the framework within which we have to operate.
Q333 Chair: If you
did not rule out nuclear, and if there were support for nuclear,
it would be at rates that would be better and more generous, so
wouldn't that amount to subsidy?
Dr Cable: As I
say, the commitment the coalition have is not to subsidise nuclear
power, and not to give it subsidies over and above those available
to all other players in the industry. I guess that would act as
a quite serious constraint on its operating within the Green Investment
Bank. There is no subsidy in terms of the Green Investment Bank.
As we will go on to discuss in your questioning, it will operate
where there has been a market failure; for example, to adequately
appreciate risk in the construction and operating stage. If there
was a pure market transaction it would happen anyway, but we certainly
do not envisage subsidy, and I think that would preclude any subsidy
to the nuclear power industries.
Chair: Perhaps we might
return to that.
Q334 Zac Goldsmith:
Thank you for your time. You touched on this briefly in your introduction,
but since the very start there has been a huge amount of speculation
over the extent to which this bank will be a bank able to raise
its own finance, as opposed to a fund. It would be very useful
if we could hear a bit of elaboration from you on that point.
Dr Cable: We do
think it is a false dichotomy. We certainly envisage it being
a lot more than a fund. Certainly the analysis that has been done
so far suggests that there is certainly a scope forand
a need forborrowing over and above any injection from the
Government in our additional allocation and in asset sales. Banks
perform a variety of functions: they lend, they borrow, and this
institution would do the same and it would certainly merit the
label of a Green Investment Bank.
Q335 Zac Goldsmith:
I suppose, regardless of whether it is called a bank or a fund,
the question is whether or not you believe it is crucial that
whatever is created is able to raise its own finance, perhaps
by issuing bonds and so on. In your view, is that a key component
of what the
Dr Cable: That
is what the analysis suggests there is a demand for and which
the Green Investment Bank could serve. Of course any raising of
finance has to operate within our fiscal constraints, and they
are real and we can discuss them in more detail. So there is a
constraint in terms of net national debt, which we have to operate
within. But the premise you start from is that this is a substantial
institution able to raise its own funding in a variety of ways.
That is how we envisage it.
Q336 Zac Goldsmith:
Chris Huhne was reported to have saidI am going to quote
himthat the Green Investment Bank might have to start as
a fund and then morph into a bank once, "fiscal credibility
is completely re-established". It would be useful to know
where that thinking has gone since those comments were reported
to have been made.
Dr Cable: There
is an immediate net debt objective that the Government has, a
key fiscal target, together with deficit reduction, for 2014-2015,
and we have to operate within that. We don't know what the fiscal
position will be subsequently. I think we probably both assume
it will be a lot better than it is now, and this will give a great
deal more scope for institutions of this kind. We think of this
in a long-term sense. It will have to start on a modest scale,
partly because it has to establish its track record and its credibility;
partly because it is operating within borrowing constraints. But
over the long term it could well develop into a very substantial
institution, performing the roles you describe.
Q337 Zac Goldsmith:
Two very brief questions. One of them is: has your department
actively consulted with the ONS, the Office for National Statistics,
seeking advice on how to structure this bank so that it does not
have to appear on the public books or as part of the public sector?
Dr Cable: I think
there is a common ground across Government that we are not trying
to find a way of avoiding identifying public liabilities. If there
are public liabilitieswhether it is borrowing, guarantees
or anything elsethey have to be shown. I said we had three
criteria, one of which is transparency, and that has to be transparency
in relation to public accounts. But as part of the assessment
process, certainly the Treasury, who act as a direct point of
contact here working with the ONS, have been clarifying what our
Q338 Chair: Sorry,
can I just come in? Can I just check, is it a matter then for
Treasury, or has the BIS department been actively discussing this
Dr Cable: There
is no separate departmental interest. There is a Government view
and Government has to operate within ONS guidelines, so it is
not a departmental issue.
Might it help if I explained how we are organising the projects
on the creation of the Green Investment Bank. We are working in
a genuinely cross-departmental way. The project is led out of
BIS, but includes people from the Treasury, from DECC, from DEFRA,
Department for Transport, CLG; all helping to do the work on assessing
the Green Investment Bank. So the question about did BIS or the
Treasury ask the question is slightly artificial. The project
asked the question.
Q339 Chair: Who is
in the driving seat?
Dr Cable: Yes,
we are the lead department, but it is a team effort across Government.
Q340 Zac Goldsmith:
One final question. We have had advice that suggested that were
a failed, or a failing, or a Government-owned bank to be converted
into a Green Investment Bank that in itself would allow the Government
to avoid putting the new liabilities incurred onto the public
books. I accept your previous answer, but it would be interesting
to know whether that is correct or whether or not that has been
Dr Cable: Of course
the two existing semi-state-owned banks are already on Government
accounts, so I guess that is a point you are making. But I think
it would be a very convoluted way of creating the institution
to take banks that certainly do not have this function, and certainly
don't have this responsibility for projects of a very specific
environmentally focused kind. I think it would be putting the
cart before the horse to work with an institution that has no
relevance to our basic objective, simply in order to devise a
way of getting round public spending requirements.
Before we leave this set of questions, may I just be clear about
the issue that relates to what does and does not count as public
sector spending? Is that the basis of some of the discussions
you have been having with ONS?
Dr Cable: There
are two basic public finance issues: there is the initial departmental
expenditure contribution, the £1 billion, and there will
be asset sales, which will gear that up. If the bank borrows and
loses money, then there is a direct revenue loss that has to be
counted in public finances, and the borrowing itselfor
it could be a guaranteecounts against public sector liabilities.
We want to be very clear that that is transparent and on the books.
But it is a judgment made by ONS, in line with European remits,
isn't it? Presumably you would be looking to establish what would
be the most favourable, in terms of how to get the injection of
funding that is needed into the green investments that we need
to be taking.
Dr Cable: Yes,
but I spent a lot of time in the last ParliamentI was our
economic spokesmanfighting to make the ONS independent
of political pressures. The ONS is there to make independent statistical
judgments and as Government we have to respect them.
Q343 Ian Murray:
I just wanted to follow up, if I may, Secretary of State, on Zac
Goldsmith's questioning about RBS and Lloyds. I appreciate that
perhaps you can't turn one of those banks into a Green Investment
Bank, but has there been any discussions with senior management
about trying to change some of their investment profiles to best
support the green industries, at least up until the Green Investment
Bank comes on-stream?
Dr Cable: I think
the simple answer is, no. As you know, the semi-state-owned banks
have a very specific remit, which is to maximise shareholder values
so that eventually they can realise good value for the taxpayer.
In addition to that, the Chancellor and I are talking to them
about improving their net lending and other commitments. To the
best of my knowledge, we have not talked to them about this set
Q344 Dr Whitehead:
In your investigations into the Green Investment Bank investment
structure and how it can work, what work have you been doing looking
at the various international models that are used to run and organise
green investment banks elsewhere in the world; if you are doing
work, are there any particular models that have caught your eye?
Dr Cable: The group
that Janice Munday is leading has obviously looked at other institutions
and seen what lessons we can learn. It is often said that we could
probably learn from the experience of the German KfW and the other
development banks in Europe. But they do start from a different
position in that, to my knowledge, they don't have an explicitly
environmental objective. Many of them were started a long time
ago, and many of themKfW, for examplewere concerned
with channelling large amounts of fairly low-risk capital into
infrastructure, which is a rather different mandate from the way
we see this institution developing. But certainly, we are looking
at them and if there are productive lessons we will learn them.
I don't know whether you wanted to add to that?
There are a number of different models and some of them, for example,
are there largely to lend money to local authorities and do not
lend in the general market. Others are acting as channels for
EIB loans. What it seems is that they are all pretty risk averse,
but then if they are using EIB money that would be consistent
with EIB's lending policy. Most of them are not doing green in
any sense of the word, so we are looking at the examples, but
there is nothing that is as compelling as you were asking about
and as you were inviting us to comment on.
Q345 Dr Whitehead:
We did indeed visit KfW last week as a Committee, and talked to
them about a number of their programmes and operating methods.
In particular, they put much more emphasisand have done
since 2000on loans, among other things, for home energy
efficiency. Those are based, among other things, on the bank underwriting
elements of the interest rate for the loan, through absorbing
subsidies from Government into the bank's loan structure rather
than the grant arrangements that we have historically had in this
country. Have you looked at that particular model of doing things,
as far as green and energy efficiency loans are concerned, and
would that particular model resonate with other things the department
is doing on this matter?
Dr Cable: I think
what you are describing is very close to what DECC is trying to
achieve through the Green Deal, the home energy efficiency. Chris
Huhne and his team have developed a model for doing that, essentially
using the utilities rather than the banks. Certainly, we are very
happy to look at that, but I don't think we would see a close
overlap between the Green Deal and the Green Investment Bank.
They have rather different objectives but, yes, we are all ears
and interested to learn.
Q346 Dr Whitehead:
Do you think the remit of a Green Investment Bankindeed,
as is the case with a number of similar green development banks
abroadmight have freedom to invest in green projects overseas,
rather than just in the UK or would you consider that a Green
Investment Bank ought to be limited to UK-only investments?
Dr Cable: It is
certainly envisaged as being a UK-based institution, lending and
investing in British projects. Maybe at some point in the future
there will be a good argument advanced for doing overseas work,
but that certainly isn't what we envisage. We are not going to
rule that kind of option out, but that certainly isn't how we
envisage it. We envisage investing in the UK.
Q347 Dr Whitehead:
Finally, the KfW themselves have had considerable dealings with
the EU, in particular the memorandum of understanding in 2007
relating to what would be regarded by the EU as loans that would
clearly not infringe state-aid concerns and regulations. Have
you had any discussions with the EU about the extent to which
putting Government capital into a Green Investment Bank would
fall foul of state aid regulations, and whether such a memorandum
could indeed make a clearer path ahead for the Green Investment
Bank in the UK?
Dr Cable: We do
judge that we will have to go through the state aid process. Janice
will say whether contacts have so far been made and, if so, what.
But the reason is this: that these are projects that are not fully
market based, otherwise the Green Investment Bank wouldn't exist.
It is to deal with the market failure, and our understanding is
that that would come within the state aid rules and we would have
to get clearance for its activities. That does not stop the Green
Investment Bank getting off the ground. The state aid process,
as you know from ministerial history, is a long and quite complicated
one. I think it can take 18 months to two years. But in the meantime,
the Green Investment Bank can invest on a pari passu basis with
private investors. So we could make a start but, if it was to
operate on a significantly larger scale, it would require state
aid clearance. I don't know whether we have talked directly to
No, we have not talked directly to the Commission. To have that
sort of detailed discussion we would have to have far more detail
about the products and the terms on which Green Investment Bank
would be investing in the market, and we are not at that stage
yet. We are engaging significant external help to help us with
the work in preparing the case to go to the Commission. It is
a complicated and quite extensive process, so we are gearing up
for it, but we have not started.
Chair: On that point
Q348 Dr Whitehead:
Sorry to interrupt, but could I just clarify therefore that, at
the point where you consider that you will be ready to do this,
the idea of perhaps a memorandum, which is similar to that which
KfW already has, would be on the agenda for that discussion with
Dr Cable: If it
facilitates it, speeds it up and clarifies it that may well be
a good idea. I had not heard it before, but we must reflect on
Chair: On that point,
Q349 Sheryll Murray:
I would have thought that the commitment of £1 billion of
public money would have meant the first thing you would do would
be to go to the European Commission, because you have to get prior
approval before making any loans or any grants using public funds.
I think it was very clear from the Shetland fish quota case a
few years ago, where the UK fell foul of state aid rules, that
this would have happened. I find it very strange that you haven't.
Could you explain your understanding of when you would approach
the European Commission for state aid approval?
Dr Cable: As I
said in my previous answers, my understanding is that it is not
an absolute prohibition. The Green Investment Bank could do pari
passu investments. But when we have a very clear operating business
model, which is what we hope to have roughly in May, we will have
a clear picture of the design of the institution and we will be
in a better position to talk to the Commission. I think rather
than just going there in a very open-ended manner, it is a question
of timing. Is that how we envisage it?
Q350 Sheryll Murray:
So you don't think you need to get prior approval to invest public
money in projects, and you don't have to get prior approval under
the state aid rules?
Dr Cable: There
are obviously limitations, as I have described, but there is not
an absolute fatwa on all Government investment. There are conditions
under which it can happen.
Q351 Zac Goldsmith:
I have a very quick question. The big question for most people
looking at this issue is the scale of this thing you are creating,
and how big a contribution it will make to shifting towards a
low-carbon economy. It seems to me that the dates we have had
are quite confusing. Often we hear that we are going to be hearing
about the structure of the bank sometime in May, but presumably
the scale part of it, the size of this thing, is going to become
clear in the Budget in mid-March. Can you confirm that? Because
if it is, then obviously that will change the timing of our own
report and submission to you.
Dr Cable: I think
the May statement of the operating model is key to all this, because
it will describe a roll-out of the proposal. Essentially, the
timetable is thisand I think you will have already had
thatthat we aim to produce the operating financial model
in May. By the end of the year recruitment of the start-up staff
for next year will have taken place. We would envisage investments
being made for the first group of investments. We are scheduled
to commit the existing Government allocation in 2013-2014. The
bank will build up in scale, and it could well be in the long
termafter this Parliamentthat we are talking about
a very substantial institution. I have read a lot of the public
commentary on this and it is often "big bank versus small
bank" and I don't think that is the issue. It is an evolutionary
process and what is important is that it gets off the ground;
it makes good investments; and builds credibility. When that happens
it will spread and grow and, in the long term, I think it would
be a very major institution indeed.
Working back the other way, we know that there is
enormous demand for infrastructure investment in energy, for example.
A lot of this will be dealt with through the private market by
creating a regulatory asset base for investors. It will not need
the Green Investment Bank, but quite a lot of it will.
Q352 Zac Goldsmith:
So no significant decision will be taken between now and the Budget
announcement by the Chancellor? That is not a significant
Dr Cable: No. We
are still going through the examination and feasibility process.
You see, our difficulty is not being party to those discussions
that are going on inside Government; not knowing where the design
stagethe whole fund/bank, whatever it is going to beis
at. We want to contribute to that aspect of pre-legislative scrutiny
to make sure that the wheels do not come off; that you are not
in a position, perhaps in May, whereby the due process, whatever
that might be, has not been done on the state aid rules, or other
aspects that would be important as to the discussions, which might
be of a very sensitive nature, with the ONS for example. I take
what you say about it being independent, but how are you going
to put out the feelers so that what you come forward with your
prototype design that that is then consistent with the various
ticks that you have to cross? That is what we are having difficulty
Dr Cable: I do
understand your question. On the state aid rules, as I have explained,
we are clear about the criteria that have to be met. I do not
think there is any danger of the wheels coming off there, although
it is going to be a difficult process when it happens. I am not
clear that there is a blockage of information. We have a team
working cross-departmental; we want to engage. Is there anything
you want to add?
I would say that, since October, there has been an extensive programme
of engagement with key people, drilling down into the issues.
So there has been a lot of testing and stress testing of the ideas.
But you can't share with us what those are?
You asked us questions about what the ONS is saying. I have told
you we have talked to the ONS; we have talked to investment bankers;
we have talked to green groups; we have talked to energy companies,
so we have done a lot of discussions about where they are coming
from, what they are looking for.
Q355 Ian Murray:
Before I start my questioning on the setting up of the Green Investment
Bank, it would be wrong of me not to say that it should be set
up in Edinburgh. I am sure that is not going to be a unanimous
decision of this Committee, or indeed in the final report, but
I thought I would just ask in any case.
We have already heard that the Treasury, BIS, DEFRA,
DECC, even the Transport department are involved in the discussions
about this, but which department will lead the monitoring and
scoping of the Green Investment Bank when it is up and running
Dr Cable: We will.
Q356 Ian Murray:
There will be no pressure from the Treasury to deliver financial
Dr Cable: There
will be quite reasonable pressure from the Treasury to make sure
that there is value for money and that there is proper financial
discipline. That is the way the Treasury operates whenever public
money is involved, but that is entirely right.
Q357 Ian Murray:
We heard a few weeks ago that there could be an issue with regards
to the energy market reform and carbon floor price, and where
that fits in the Green Investment Bank. Is there a danger that
those could overtake the goals of what the Green Investment Bank
has been set up to achieve?
Dr Cable: I am
not the person to ask detailed questions about the energy market
reforms, but they are designed to achieve a framework within which
energy utilities will invest. They will invest in the right way
and with a proper account of carbon usage. But that is a parallel.
It is not a competitive process in relation to what we are doing.
Q358 Ian Murray:
Moving on to the time scales that have been spoken about already,
we are looking at some time at the end of 2012 to be fully operational.
In the meantime, how is the Government looking at the co-ordination
and development of green policies while the Green Investment Bank
is coming on-stream?
Dr Cable: There
is a process across Government where we are looking at green projects
as a whole. I think it is called the Green Taskforce. There are
about six or seven different policies through the infrastructure
plan, through the energy market reforms, and of course the Green
Investment Bank is part of that. There is a co-ordination process
in Government, and we will be setting out in a formal way how
these different activities link together. I don't know whether
we have a timetable for that?
No, but it is perhaps worth mentioning that there is separate
work going on in discussions with a number of wind manufacturers
about bringing their manufacture to the UK, so those processes
are all going on separately from this work.
Q359 Ian Murray:
Is there any scope for the Green Investment Bank investing in
EU regional aid policies, particularly with regards to some of
the environmental aspects?
Dr Cable: Are you
talking about co-financing?
Ian Murray: Yes, contributing
to the regional aid in terms of environmental policies and environmental
Dr Cable: I don't
see why not. If the European Union can help gear up projects and
meet the other criteria of the Green Investment Bank, I would
have thought that was very sensible. We are trying to get as much
funding, private and other forms, as possible.
Chair: On that point I
think, Neil, do you have a question?
Neil Carmichael: No, not
really, but on another point.
Chair: Carry on then,
Q360 Ian Murray:
Finally, in terms of the capitalisation. There have been a lot
of discussions in this Committee about the £1 billion seed
capitalisation andcomparatively to some of the studies
that have been donehow small that may be. That then has
a danger of pushing the policies and projects that the Green Investment
Bank supports to be high return in terms of financial return,
rather than high return in terms of what it is trying to achieve,
and there has been some reforming of the Commonwealth Development
Corporation, because they were slipping into that particular problem.
I wonder whether there are there are any mechanisms to stop that
from happening, and what your thoughts are to make sure that it
is going to achieve its goals without just looking for pure financial
return? I suppose the nuclear question at the start is one of
those key aspects of it.
Dr Cable: Yes,
I think the £1 billion is a very large amount of money, but
it is small in relation to the way that this institution will
eventually operate. It will be augmented by assets sales in terms
of equity andas I said in response to Zac Goldsmith earlier
onthere would be borrowing, too, to make it a much more
substantial body. As I said in my introductory statement, it
is not simply a small fund that will be confined in that way,
and I think the dangers you have described are not relevant in
this particular case. It will have a very clear mandate to promote
environmental projects that would not otherwise be met in the
market. Whereas I think the CDC was a rather different case, where
they were operating almost entirely as a market institution.
Q361 Neil Carmichael:
I would just like to know whether the three departments are coalescing
around one model at the moment, or do you have several models
and are they representing the interests of each of the three departments?
Dr Cable: It is
not departmental. There are different models that have been put
to us as different ways of operating: there was the very narrow
fund; there is the wider banking type institution. Some people
have advocated a purely private fund that could be topped up with
some Government money, and we are looking at all of those. These
are not departmental things. The task force is looking at them
all on their merits, and we want to maintain maximum flexibility.
Then, to anticipate the question that might follow on, what we
are thinking about at the moment is a model that is a public sector
institution, but it could evolve or it could spin out into a private
institution in due course, operating on a big scale. That is one
of the models that have been put to us. As I say, it does not
have departmental ownership. It is just one of the ideas out there
and we want to keep that option alive.
Q362 Neil Carmichael:
But you would be the lead department, both in terms of preparing
it and after its launch, so what accountability or links do you
envisage for the Department for Business, Innovation and Skills
with the Green Investment Bank?
Dr Cable: I may
have missed the subtleties of your question, but we do not see
this in terms of different departmental silos and different standpoints.
It is an integrated initiative. We are obviously working very
closely with the Treasury, because it is public money. We are
working very closely with DECC, because we envisage that the main
market for de-risking projects, which would be the first stage
of the operation of the bank, are predominantly energy projects,
things like wind power. But DEFRA are involved because they have
an interest in waste and the Department for Transport, because
of transport projects. So there is a collective interest in this
and we work as a team, there aren't separate visions.
Q363 Neil Carmichael:
What I am driving at is if the Treasury had more influence than,
for example, your department especially, Department of Energy
and Climate Change, then it might be seen more as a fund if the
Treasury were influencing it, rather than a bank, which I think
DECC would prefer, and you would be somewhere in the middle.
Dr Cable: I think
we have passed that stage of the argument. As I said, there are
different models, but as for the idea of a narrow fund, we have
passed that point. We are talking about something more substantial,
which will have a borrowing role and could legitimately be called
Q364 Neil Carmichael:
So that is the direction of travel from now on?
Dr Cable: That
is the direction of travel, yes.
Neil Carmichael: Good.
One last question
Chair: Hold on, because
I think Katy is going to go on to legislation if that is okay.
Q365 Katy Clark:
Yes. At the time of the Queen's speech, the Government indicated
that the Energy Bill might have provisions to create a Green Investment
Bank, but as yet, there is nothing in the Bill. Do you have a
view as to whether legislation is going to be required to create
Dr Cable: It may
well be. Again, Janice can probably talk about the legal dimension
of this. But we don't envisage this being a problem and we would
move very quickly once we have identified a legal need to establish
the basis. I don't think we see any problem with that interfering
with the timetable that I have sketched out.
There are other legislative opportunities and we have a list of
those. The likeliest form is probably a public corporation. But
the question of how much that would need to be done in statute,
and how much could be done by secondary legislation, is not yet
determined, so that is one of the areas that is actively under
review as we do the planning work.
Q366 Katy Clark:
You have already mentioned the Green State Development Bank, KfW,
and I understand it was created with legislation. There is an
argument that, even if legislation is not required, it might solidify
the existence of a Green Investment Bank if it was created by
legislation; that it could not go in a cull of the quangos or
at the whim of a particular Government, it would be more entrenched.
Is that something that you have given any consideration to?
Dr Cable: It is
a good point, and it does tip the balance somewhat in that direction.
As I think Janice has explained, there are a lot of legislative
opportunities. We do not see that as being a problem but I think
the point you make is a valuable one.
Q367 Katy Clark:
On the legal point, is it the case that legislation would be needed
to provide the Green Investment Bank with a state guarantee? Is
that something that you have taken advice on?
Dr Cable: I don't
know the answer to that.
I am not quite sure where the idea of a state guarantee came from.
The mechanism, the functions and the way it is going to operate,
is still something that is under discussion. Guarantees, which
the state stands behind, is one of the options but we have to
find spending cover for that. So that is what we are looking at.
Chair: Sheryll, on that
Q368 Sheryll Murray:
That guarantee came from KfW. It is the way they are set up. I
don't know whether you have spoken to KfW and asked how they were
set up and how they operate. Perhaps you could tell us if you
have had any discussions with them?
We have talked to KfW. We have gone into quite a lot of detail
about its operating model. The evidence we have is that if we
built one on the model of the KfW, it would be scored as part
of the PSND, which is not the case in Germany.
Q369 Peter Aldous:
I am just keen to look at definitions for a minute. How are you
going to define what I would call the green remit for the Green
Investment Bank, and what is your definition of "green"
in the Green Investment Bank?
Dr Cable: We are
talking about projects that serve an environmental purposeyour
Committees, above all, define what that meanswhich would
not happen if the investment were purely left to private sector
activities, so that is what the mission is about. It is helping
to realise those.
Q370 Peter Aldous:
Can I just come back to something you talked about before, the
nuclear option, as such, because when I first read the Wigley
Report, I did not pick up nuclear in that? I am interested
as to when and why nuclear has come into the whole debate.
Dr Cable: I do
not know how, when and why it has come into the debate. Obviously,
it is a zero carbon energy option and no doubt, since we have
made it fairly clear that one of the primary purposes of the bank
is to fund low carbon investment, I am sure people made the obvious
connection. But I have explained that there is a difficulty in
the rather tough view that the Government has taken on subsidy
Q371 Peter Aldous:
As the bank moves forward and looking at the remits, will the
bank's remit prevent it from being used to fund what I might describe
as less green schemes later on? Assuming a success, will you be
able to look again at the definition, do you think?
Dr Cable: We are
not trying to make it less green, that is rather self-defeating.
No, there are
Q372 Chair: Sorry
to interrupt, but isn't it about sequential investment, and what
are your priorities to frontload what it is going to be doing,
which relates to Peter Aldous' question?
Dr Cable: The first
priority for which the analysis we have conducted suggests there
is a real need, there is a gap in the market, are high-risk projects
that have an important environmental aimwind projects would
be a good example of thatthat are not going to happen on
the scale that they should without the investment of an institution
of this kind. There is no doubt that in the future the institution
could develop in a different way. There is a vast unmet demand
at the moment for infrastructure more widely and more or less
green, and that infrastructure is of a different kind from, let
us say, wind farms. There will be an issue about how you deal
with the liquidity problems of those big projects. A lot of them
will happen through the market; they will happen because the right
kinds of incentives have been given for the regulation. There
may be some liquidity support. So far the evidence that has emerged
from the analysis is very mixed on that, as to whether there is
a need for an intervention of that kind. But we think it is possible.
Q373 Martin Caton:
Can we consider the bank's early investment priorities once it
is established? I think it was last weekbut certainly very
recentlywe took evidence from both power companies and
companies involved in other forms of low-carbon technology, and,
understandably, each made the case for going down the path that
they are in involved in. But the Green Investment Bank Commission
seems to have come down on the side of the alternative technologies,
particularly in terms of early investment in energy efficiency,
both in the commercial sector and in the residential sector. Do
you agree with that approach?
Dr Cable: As I
said, I think, it was Alan Whitehead who asked me about energy
efficiency/energy saving projects, and DECC and the Secretary
of State at that department have developed the Green Deal to create
a particular set of incentives in order to achieve those ends.
We had not envisaged the Green Investment Bank being at the heart
of that work. As I say, I am trying to be as flexible and open-minded
as possible and not to rule out options. I am not quite sure how
your proposal would work, but if you are talking about a bundle
of projects that could be
Q374 Martin Caton:
It is not my proposal. It is the Commission's proposal and it
does fit in. You mentioned what Dr Whitehead said. Just on a superficial
look at it, it seems very like the KfW approach, but you talk
Dr Cable: As I
say, we are not ruling that out but it was not one of the first
sets of ideas.
Martin Caton: Can I just
pursue that? The Government, in talking about the Green Deal,
has said that energy saving packages must meet the golden rule;
in other words, that the charge should be exceeded by the value
of the fuel bill savings over the lifetime of the charge. That
seems to me to require a low interest rate to get people to do
that. Again, the obvious provider of low interest money seems
to me to be the Green Investment Bank. So when you say there is
no overlap between the Green Deal and the Green Investment Bank,
I am just suggesting that there is a very strong case that perhaps
there should be.
Dr Cable: We will
have a look at the argument. I remember reading the Wigley material,
but I had not realised the emphasis they had placed on that particular
idea. We are certainly happy to go back and have a look at it.
What was the analysis of the group, Janice?
Can I perhaps mention energy efficiency for business, which is
one where we have done the analysis? What we found is that there
is an unmet demand for energy efficiency in business, and there
appears to be some market failure that is preventing the take-up
of those relatively easy techniques. In terms of looking at the
use of public money, the question is whether the Green Investment
Bank would be the right instrument to tackle that problem, or
whether in fact there are other instruments that would be better
and more effective in using it. I think that is the same thing
on the Green Deal: what is the right instrument for it? So that
is the work we are doing at the moment.
Q375 Martin Caton:
But you are not ruling out a role for the Green Investment Bank?
Dr Cable: No, we
are not ruling it out and the work is being done.
Q376 Chair: This
relates to the very start of our evidence session this afternoon
when we were looking at what the design of it might be. Clearly,
if we have the Energy Bill going through Parliament, we have the
Green Deal and we have the money that is going to be committed
towards energy efficiency in households, which is one of the biggest
areas where investment is needed to meet the carbon emissions
target, surely, if the Government were being cross-cutting, the
opportunities for investment from the Green Deal would be looking
at the amount of money that is needed to complete that work on
a phased basis to meet the carbon emission reductions. What would
it take for you to look at it seriously? Presumably it would require
more than a recommendation from this Committee, because there
is a lot of groundwork that needs to be done between now and May.
Dr Cable: I think,
as Janice has just explained, the group is looking at that option
in terms of energy saving in business. We will pursue it and,
no doubt, DECC could put this forward as one of their priorities.
The priorities that we had identified, where there is the clearest
market failure, are in more substantial projects in the construction
and operating phase and that is where we have identified the biggest
gap. But we are not closing off this option either.
Q377 Dr Whitehead:
Could I press you a little on this, because the process that is
underway at the moment towards the Green Deal is in the Energy
Bill. Therefore, the Green Deal will have a certain time scale
within which it will come into operation. As things stand at the
moment, the sole source of funding for homes under the Green Dealand
the aim is to go for something like 20 million homes, including
hard-to-treat homesis B&Q and Marks & Spencer,
and companies that may invest in the Green Deal on the basis of
the golden rule that Martin Caton has mentioned. If those investments
are undertaken at commercial rates, which those companies will
undoubtedly want to undertake, the high likelihood is that very
little insulation, and certainly no proactive energy efficiency
work, may result. It will not result to very much.
The energy companies' obligation that has been suggested
has no form as yet. Indeed, such an obligation could be tucked
very well into some form of low loan arrangement, and perhaps
a KfW-style Government subsidy underwriting, in a Green Investment
Bank. But if that is not done at an early stage then it may well
be the case that the Green Deal will be dead in the water before
anything rides to its rescue. Do you not thinkon the basis
of that analysisthat there should be an urgent investigation
as to the extent to which a Green Investment Bank might dovetail
in with that process and get going early, rather than when it
is perhaps too late?
Dr Cable: Well,
the point has not been put to us in the way that you have: the
anxiety and the urgency of that problem. I am very happy to talk
to Chris Huhne about that and it is one of the ways in which your
Committee has been very helpful in surfacing these things. I am
very happy to talk to him about it and the officials in their
work will go back and have a look at it. Maybe we have underestimated
the urgency and importance of an intervention that could be made
Chair: I am sure we will
be very interested to have any response from you at the stage
when those discussions have taken place; the first chance for
it to feed back into our report.
Q378 Simon Kirby:
Secretary of State, as one of the two Brighton MPs, it will not
surprise you that I am very interested in all things green and,
in particular, the Green Investment Bank. I feel obliged to ask
you to give serious consideration to locating it in Brighton if
that is at all possible. However, that having been said, I would
like to ask you what I might call the "banking question".
The Government has a programme of banking reforms to stop banks
getting into another financial crisis by taking too many risks.
However, you would expect the Green Investment Bank to go places
where perhaps the normal commercial sector would not go. So does
that mean that you would see the Green Investment Bank operating
within the same governance and the same regulatory framework as
the other banks?
Dr Cable: Of course
it will operate on a commercial basis. But you are quite right
that if it were to take the form of a formal bankand it
could well dothere would be an argument for having it regulated
as a bank through the FSA with the same sets of capital requirements
as other banking institutions. We certainly envisage that as something
that may well be desirable.
Q379 Simon Kirby:
If I may press you on that point: Sir John Vickers, the Chairman
of the Independent Commission on Banking, in a speech last week,
raised the prospect of separating areas of risk so a bank's investment
arm could perhaps be allowed to fail. Does that mean that the
Green Investment Bank could be allowed to fail?
Dr Cable: If it
was a Government institution, then, by definition, it would not.
If it was a purely private bank at some stage in the future, or
if it were to spin off as a private bank, then certainly that
would be the definition of a private bank, would it not? I think
the exercise that Sir John Vickers and the Commission are concerned
with is a rather different one. It is concerned with these very,
very large global banksof which we have three major ones
in the UK and others slightly lesser scalewhich are so
enormous in their scope that they can destabilise the whole economy.
The Commission is looking at how to make them safe. That is a
very different kind of exercise from the risks that would be associated
with an institution of the kind we are talking about.
Simon Kirby: Okay, thank
Q380 Ian Murray:
I should like to press you on risk versus return, which also relates
to Simon's question. Yesterday, the Business, Innovation and Skills
Select Committee heard from the aerospace security and defence
industry, being a world leader in the products and services that
they deliver. Part of that success is down to significant risky
research and development funding that was ploughed into the sector
20 to 25 years ago. If we want to be a world leader in carbon-reduction
technologies and green technologies, there is a real need for
the Green Investment BankI see in my own mindto
plough significant sums of money into the riskiest research and
development in order that we see some of those significant returns,
probably somewhere over the horizon. Is that something the Green
Investment Bank is going to be able to do on the basis of the
responses to Simon with regards to risk and return and the banking
Dr Cable: I may
have misunderstood your question. I do not think it is intended
to invest directly in R&D facilities. A lot of this happens
in any event. As you know, the big car companies are doing a lot
of low-carbon investment and they have the R&D to support
it. Jaguar and Land Rover do a lot of that, Nissan and the rest
of them. Where there is a clear market failure and there is a
public good involved, the Government are putting in money, as
we are continuing to do. I don't think that we envisage the Green
Investment Bank funding research and development facilities of
Q381 Ian Murray:
But research and development will go some way with many major
companies, like Pelamis, which is based in Edinburgh and is developing
the wave worm. It has had to receive quite a significant amount
of public subsidy to be able to do that. In future it could perhaps
go to the Green Investment Bank for additional funding where the
market would not allow it to draw that funding.
Dr Cable: It could
well generate a project that the Green Investment Bank could support,
if it is a good, viable project. That is the kind of high-risk
project that we would be looking at. I do not know the details
of that company.
Q382 Ian Murray:
But not all of that kind of technology is going to be commercially
viable at the stage where they need the financing to be able to
take it forward. That is the issue.
Dr Cable: Yes.
There is a whole gradation of developments from the R&D through
innovation, prototypes and then the commercial side of it and
British institutions and the Scottish Executive can support the
preparatory stages. I think where the Green Investment Bank would
come in is when there is a proper commercial launch of the wave
project that you envisage.
Q383 Neil Carmichael:
Thank you, Secretary of State. You may have answered these questions
already because I was a little bit late, but I want to quickly
ask three: one, are you going to consider joint venture arrangements
for the Green Investment Bank to get involved with or to have
the capacity to go down that track? Second, what about equity
investments; for example, would you countenance that for a large
project? Thirdly, to what extent have you been looking at the
EIB and EBRD in terms of their experience? Of course, they have
a big skills base. That is the rationale behind the kind of investments
that they make.
Dr Cable: We did
have a question earlier on about European development banks and
the lessons that could be learned and the team have been talking
to them. I think we have been over that territory.
Neil Carmichael: Okay,
thank you. The first two questions then.
Dr Cable: Certainly
in terms of equity investment and loan and guarantee insurance,
there are a variety of possible products and all are within range.
Neil Carmichael: So you
would be happy for them to
Dr Cable: The whole
purpose of this is to co-finance projects, whether they are structured
as joint ventures is a more technical financial question. I do
not see a fundamental problem with that.
Neil Carmichael: Excellent.
Q384 Zac Goldsmith:
Quickly on that point: is it conceivable that the bank would ever
be the sole investor or would it all be about co-investment?
Dr Cable: I think
it is unlikely because the whole purpose is to gear the institution
up and maximise; again, we are not ruling these things out but
I think it would be self-defeating if it was the sole investor.
Q385 Simon Wright:
In your joint letter from October, signed by yourself, Justine
Greening and Chris Huhne, you stated that the Government was conducting
detailed product design and market testing of the Green Investment
Bank's interventions and that you were speaking to market about
its design. We have touched on a bit of that today, but I wonder
if you could elaborate on that process and what this market testing
Dr Cable: Janice
has been leading the conversations with all the stakeholders and
all the investigative workmaybe you could just give us
a more ample list of people we have been talking to.
Yes. I went through the list of the departments that were involved.
We have found it immensely useful to be able to draw on the services
of Infrastructure UK and the Shareholder Executive, who have a
great deal of banking experience. So we have had some very deep
and very open and honest discussions with quite a lot of the banking
community, which has been enormously helpful in understanding
how the market is working here and where market interventions
We have done a lot of talking with bankers, with
investment bankers, with people who are designing products, with
insurance companies who are interestedonce there has been
the initial investmentin possibly taking it, selling it
on and packaging it further down the line. We have talked to the
utility companies about what their plans are, what is hampering
their investments, what would be needed to do there. We have talked
to green groups about the scale of the market, what their ambitions
are and what they have seen. We have had enormously wide discussions,
some of which have gone into great detail, which has helped us
to think about product design, and some have been wider discussions
that are helping us in looking at the strategic angle. We have
had discussions according to both elements and rather a lot of
Q386 Simon Wright:
That process has led to some clear, consistent conclusions as
far as you are concerned?
We certainly have conclusions. As the Secretary of State has said,
there are various things stopping significant investment in wind
generation. A lot of that is about the early stage risk, both
in construction and in early operation. We have heard about different
issues around different areas. Energy efficiency take-up in business
is a different issue because that is not a risk; it is about not
seeing the value of it. So, depending on what priorities the Government
might set for its Green Investment Bank, there are different products
that you might use in different market places. But that is the
work we have been doing. What we will now be doing is going much
more into the design of, "Well, if that is what your problem
is, what would you use? Would you use insurance products? Would
you use equity products? When would you use debt?" That means
actually understanding and fully testing that. So that is where
Q387 Simon Wright:
Some of our witnesses have quite simply suggested that you set
something up as quickly as possible, get it going and then it
will evolve to meet the ongoing needs as time goes on. What would
be the problem with doing that?
Dr Cable: We are
not setting it up immediately because you have to have due diligence
and you have to have proper feasibility studies, which is what
we are doing. Certainly we do want to see this operating quickly.
That is why we are talking about staff being appointed by the
end of the year and investments beginning to take place next year.
There are frictions we can't just assume away, like the need for
state aid, and this is going to take time. Yes, we want it to
start, prove itself within a realistic timeframe and it can then
evolve and grow from there.
Q388 Sheryll Murray:
We have already mentioned state aid a few times, but given you
acknowledge that it is going to take a long time, I find it difficult
to understand why you have not approached the Commission already.
Is there any reason why you are holding back from making an approach
to the European Commission?
Dr Cable: Not beyond
wanting to give them a more precise picture of what the operating
model would be. That is the only reason.
Q389 Sheryll Murray:
Because you need prior approval from the Commission before you
can invest that money, unless it is de minimis or unless you are
lending at commercial rates, wouldn't it be best to make an initial
approach and inquiry to find out exactly what you can and can't
do within or without state aid rules?
Dr Cable: Obviously
those conversations have been had at official level. I suspect
they would not be terribly interested in having a completely open-ended
inquiry. They all want more clarity about what this bank will
look like and we are trying to get to a point where there is a
specific proposition to put to them.
Chair: I am going to move
us on. Peter Aldous.
Q390 Peter Aldous:
Thank you, madam Chairman. We have touched on the first part of
my question quite a lot, but one of the key roles, as I see it,
of the GIB will be leveraging in by private sector funds.
Dr Cable: Yes,
that is how we see it.
Q391 Peter Aldous:
Yes. What work have you done, what consultations have you done
with private sector investors to ensure that the format of the
GIB does ensure we maximise that potential?
Dr Cable: That
is the purpose of the conversation the team have been having with
people in the project finance industry and in the utilities, who
are the kind of people who will need this kind of gearing finance.
Q392 Peter Aldous:
Can I then just come on to green ISAs? Are they on the agenda?
Because it strikes me that is a way to leverage in a significant
amount of funds and it is also an opportunity for the public to
take part in the future.
Dr Cable: Yes.
Again, I think that is a longer term proposition. Certainly we
are not envisaging retail finance as a first stage but, as I think
in response to several of your questions, I have suggested an
evolutionary approach. Of course retail finance and green ISAs
are quite an attractive concept, and in the longer term I can
envisage this being part of the mix.
Peter Aldous: All right.
Chair: On that point,
Q393 Simon Wright:
Yes, and, apologies, we keep coming back to the nuclear issue.
In terms of green ISAs being quite attractive, I am sure that
you also recognise that there is a policy debate about whether
or not nuclear is green, but there is also a public perception
issue about whether nuclear is green. If we are to look at the
Green Investment Bank by way of selling those products to the
broader public, do you see that there is going to be a strong
deterrent if, in fact, there is a chance that that will be used
to invest in nuclear industry?
Dr Cable: I think
we have a double hypothetical question here: there might at some
point in the future be retail sales of green ISAs and there might
at some stage in the future be nuclear, and what happens if they
come together? No, I think we are setting out our position on
nuclear. The Secretary of State for Energy and Climate Change
has already done that for youand he is a much better person
to do that than I amand spoken about this being an industry
that we now see as part of the low-carbon story, providing it
doesn't enjoy public subsidy. But I take your point about the
marketability of green ISAs and some people would probably have
ethical or other practical problems.
Q394 Chair: Let us
move on to the issue of research, and funds for low-carbon research.
The Green Investment Bank Commission recommended that the Green
Investment Bank could take over responsibility for administering
some of those funds. Is that something that you anticipate will
be done and is there a timetable for that?
Dr Cable: Well,
we hadn't actually. We can go back and have a look at that but
we are supporting research in institutions like Narec, which have
enjoyed support from my department and we will continue to support
them on their merits. We had not envisaged this being structural
reorganisation. Of course, it depends what kind of bank it is
and how detached it is from Government. If it is a commercial
operation, albeit with a green mandate, it is not totally clear
that that is the best vehicle for allocating research funding,
which currently is decided by the Technology Strategy Board. They
are arm's length from Government but they set priorities and we
have no reason to be dissatisfied with that structure at present.
Q395 Chair: But given
the role of the Green Investment Bank Commission and the recommendations
that it came up with, presumably you have some kind of mechanism
for going through the various recommendations and looking to see
which ones are going to be taken up and developed and incorporated
into this new Green Investment Bank?
Dr Cable: Yes,
and this is what the team will be doing.
If I could help the Committee on this point. The Green Investment
Bank Commission did make a point about the picture on the research
and development money. It probably was not as simple or as clear
as it might be. There is a separate strand of work going on, between
the Secretary of State and Chris Huhne at DECC, to look at this
picture and to see whether it could be simplified. So the question
of whether that, resulting, would then come into the bank will
have to wait until that work is finished, but I think it was pretty
clear to Ministers that that work needed to be done first.
Q396 Chair: We would
not want some kind of limbo land, would we, whereby the future
of that funding was not clear as to where it was going to be in
the future, which I suppose could lead to delays in applications
going through and that funding being available?
Dr Cable: I do
not think there is a limbo. At the moment a lot of low-carbon
research is funded through the TSB, I think quite a high percentage
of its research approvals. It works very well, but we will try
to make sure that there is a properly joined-up approach to answering
Q397 Chair: If I
could just move on; we are almost at the end, but the whole point
of this Committee is to be cross-cutting and to look at one area
of policy and how it affects different departments. We are very
mindful of the fact that the Green Economy Roadmap is going
to be published soon and that obviously DEFRA has a role in that.
Given what you were saying earlier on about the lack of connectivity
between the Green Investment Bank and BIS and the growth agenda,
and given what is going forward in the Energy Bill and the investments
going into households under the golden rule, and so on, what is
the joined-up work that is being done with DEFRA to make sure
that BIS is able to exploit the importance of investing now in
the whole green economy?
Dr Cable: I don't
think there is a lack of joined-up thinking or working. I mean,
I meet frequently with all the relevant Ministers and officials
meet even more frequently. I can't explain the point that two
of you raised earlier, Martin Caton and Alan Whitehead, about
the Green Deal and the link with the Green Investment Bank. We
will certainly pursue that. But as a method of working, there
is a lot of very effective cross-departmental working and interaction
between Ministers; so there is no danger of that not happening.
Q398 Chair: Just
to link up again with public awareness as well, the Carbon Trust
has said that most UK business leaders do not see a business requirement
to become more sustainable. I just wonder what you are doing to
change that perception that many business have and, I suppose,
how that connects to the earlier debate about the growth agenda?
Dr Cable: I think
that is a surprising thing for the Carbon Trust to say. I spend
a lot of time with British businesses, big and small, and I am
pleasantly surprised by the extent to which sustainable environmental
thinking now permeates their long-term planning. To take two examples:
one is the car industry, which hitherto one did not normally see
as a bastion of environmentalism. All the big car companies are
now committed to a low-carbon agenda. New product ranges are coming
through to meet that market demand and, in my experience, senior
executives of the industry are very environmentally minded and
focused on a low- carbon agenda, which is where the industry is
If I take another case, which is steel: I met Tata
representatives in India a couple of weeks ago. Steel is a very
energy-intensive industry but the advances that have been made
in energy saving in the steel industry have been remarkable, and
they are very conscious of the fact that if they are going to
flourish as an industry they have to get on top of the environmental
low-carbon agenda. So I do not accept the premise behind the Carbon
Chair: I am very tempted
to discuss the issue that you have raised relating to low carbon
leakage, which is of particular concern to ceramics manufacturers
in my constituency as well, but I shall desist from that as this
is not the time and place to raise that.
But I think, Simon Wright, you wanted to come in
on skills agenda?
Q399 Simon Wright:
Yes. In March of last year the then Government launched a consultationMeeting
the Low Carbon Skills Challengeand industry is still
warning of a green skills gap. Who is in charge of identifying
and addressing the skills gap? Are there sector skills councils
or is the UK Commission for Employment and Skills being encouraged
to do this work, or is it something that Government itself is
Dr Cable: My department
has overall responsibility for that, both for the skills strategy
in general and, within it, for the low carbon aspects of it. But
the institutions you mentioned, namely UK CES, which as you know,
is an arm's length bodyGovernment supported but private
sector ledis absolutely key, working with the Sector Skills
Council, and we are in regular contact with them. It is a creative
relationship. But in terms of where the buck stops, my department
is responsible for skills and the skills strategy, including the
low carbon part of that.
Q400 Simon Wright:
It was identified in the consultation that low-carbon businesses
can be quite poor at articulating their skills needs. Are you
confident that progress is being made on that point, working with
Dr Cable: Well,
I haven't heard that criticism. I will certainly speak to the
head of UK CES and ask if that is, indeed, a constraint it has
identified. I haven't heard it put that way before.
Q401 Simon Wright:
What is being done to prioritise the provision of the skills that
are needed? I am hoping in my constituency that we will have a
university technical college in energy and issues, but what is
your department doing to make sure that that is a priority?
Dr Cable: I think
the key priority is that it has to be demand led, rather than
us prescribing that X-thousand apprenticeships should occur in
certain fields. It has to be demand led. It has to come up through
the companies. In fact, the proper channel would be through the
Sector Skills Council identifying that need and then coming to
us to discuss how we can support it.
Simon Wright: Thank you.
Q402 Chair: I think
we have just about reached the end, but I am very conscious that
there are very many organisations as per the advertisement, which
I am sure you have seen in today's Guardian, all wanting
to have a Green Investment Bank that will release the funding
of the huge scale that is needed: £4 billion. I am just wondering
whether or not you would you like to make a final statement, because
even now I don't think we are very clear which vehicle BIS is
steering towards when the announcement is made. I just wondered
if there is anything you wanted to say to give reassurance to
the fact that that money for investment will be available when
the final decision is made.
Dr Cable: I saw
that advertisement. I saw it as an encouragement. We also have
ambition. We realise the scale of the environmental task that
we havethe low-carbon agenda. The Green Investment Bank
will have an important part in that, but it has to be done in
a methodical way. We have to go through this proper appraisal
process. We have to operate within Government financing constraints.
But, that said, we want this to be an ambitious body that will
have a variety of financial products, that can borrow, that can
properly be described as a bank and whose long-term prospects
are every bit as ambitious as are conveyed in that advertisement.
Q403 Chair: It's
just that the headline is: "Oliver Letwin could break the
deadlock over the Green Investment Bank". I am still not
quite clear what exactly that deadlock is. Is there anything that
this Committee could do to assist in that?
Dr Cable: I don't
think there is a deadlock.
Chair: You don't think
there is, okay.
Dr Cable: There
is a process, it is a good process and it is getting to an end
result. I speak frequently to Oliver Letwin and I don't think
he seems himself as breaking any deadlock. We are making good
Chair: On behalf of the
Committee, thank you very much for coming along. We very much
hope that our recommendations will assist BIS in getting this
up and running.
Dr Cable: Thank
Chair: Thank you very