The Green Investment Bank - Environmental Audit Committee Contents

Examination of Witnesses (Question Numbers 331-403)

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 along—and that was recorded in Private Eye—and 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 is yours.

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 affordable—those are our key criteria—and 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 stress—and this partly reflects your introductory remarks—that 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 unhelpful—let alone evasive—but 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 proceeds.

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 that—even if you are not going to have the answers now—we 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 for—and a need for—borrowing 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 said—I am going to quote him—that 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 liabilities—whether it is borrowing, guarantees or anything else—they 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 limitations are.

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 with ONS?

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.

Janice Munday: 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?

Janice Munday: BIS.

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 considered.

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.

Q341   Chair: 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 itself—or it could be a guarantee—counts against public sector liabilities. We want to be very clear that that is transparent and on the books.

Q342   Chair: 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 Parliament—I was our economic spokesman—fighting 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 of commitments.

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 them—KfW, for example—were 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?

Janice Munday: 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 emphasis—and have done since 2000—on 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 Bank—indeed, as is the case with a number of similar green development banks abroad—might 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 the Commission?

Janice Munday: 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 the EU?

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 it.

Chair: On that point, Sheryll Murray.

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?

Janice Munday: Yes.

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 this—and I think you will have already had that—that 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 term—after this Parliament—that 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.

Q353   Chair: You see, our difficulty is not being party to those discussions that are going on inside Government; not knowing where the design stage—the whole fund/bank, whatever it is going to be—is 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 understanding.

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?

Janice Munday: 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.

Q354   Chair: But you can't share with us what those are?

Janice Munday: 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.

Chair: Okay.

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 properly?

Dr Cable: We will.

Q356   Ian Murray: There will be no pressure from the Treasury to deliver financial returns.

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?

Janice Munday: 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 projects.

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, Ian.

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 and—comparatively to some of the studies that have been done—how 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 and—as I said in response to Zac Goldsmith earlier on—there 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 a bank.

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 a bank?

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.

Janice Munday: 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.

Janice Munday: 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 point.

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?

Janice Munday: 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 purpose—your Committees, above all, define what that means—which 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 for nuclear.

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 aim—wind projects would be a good example of that—that 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 week—but certainly very recently—we 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 about—

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?

Janice Munday: 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 Deal—and the aim is to go for something like 20 million homes, including hard-to-treat homes—is 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 think—on the basis of that analysis—that 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 here.

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 bank—and it could well do—there 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 banks—of which we have three major ones in the UK and others slightly lesser scale—which 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 you.

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 Bank—I see in my own mind—to 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 code?

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 that kind.

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 involves.

Dr Cable: Janice has been leading the conversations with all the stakeholders and all the investigative work—maybe you could just give us a more ample list of people we have been talking to.

Janice Munday: 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 might work.

We have done a lot of talking with bankers, with investment bankers, with people who are designing products, with insurance companies who are interested—once there has been the initial investment—in 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 them.

Q386   Simon Wright: That process has led to some clear, consistent conclusions as far as you are concerned?

Janice Munday: 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 we are.

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. Thank you.

Chair: On that point, Simon?

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 you—and he is a much better person to do that than I am—and 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.

Janice Munday: 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 your question.

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 heading.

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 Trust question.

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 consultation—Meeting the Low Carbon Skills Challenge—and 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 dealing with?

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 body—Government supported but private sector led—is 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 industry?

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 have—the 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 progress.

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 you.

Chair: Thank you very much indeed.

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