Written evidence submitted by Justine
Greening MP, the Rt Hon Chris Huhne MP,
and the Rt Hon Vince Cable MP |
Thank you for your letters of 22 September regarding
the Government's plans for a Green Investment Bank (GIB).
As part of the Spending Review, the Chancellor announced
that the Government will capitalise a new UK-wide institution
with £1 billion of DEL funding together with significant
additional proceeds from the sale of Government-owned assets.
Funding is subject to final design and the GIB must meet the tests
of effectiveness, affordability and transparency. £250 million
of the allocated funding will be made available on the basis that
the Scottish Executive agrees to the drawdown of funds from the
Scottish Fossil Fuel Levy surplus.
In the coming years, the UK economy will require
significantly higher levels of investment in (particularly
green) infrastructure. These requirements are well above historical
levels, with demand expected to be in the range of £40-50 billion
per annum until 2030.
Of course, not all of this investment will be "green"
and it is anticipated that the significant majority of it will
come from the private sector.
The Government is examining evidence that market
and institutional failures and constraints can limit the availability
of finance needed to deliver the scale and pace of investment
required to deliver Government green growth objectives. Government
will be looking at different models for the how the bank could
operate in future and have as great an impact as possible.
Some of issues can be addressed, at least in part,
by policy measures, such as reforms to the electricity market;
reforms to the climate change levy which provide more certainty
and support to the carbon price; changes to the planning consents
regime; and so on. In other cases, the GIB may have a role in
supporting these policy interventions. And, together, the policy
measures and financial interventions can provide a more efficient
and effective package than either is able to do by itself.
BIS has the lead responsibility for setting up the
GIB, which is a key element of our green growth agenda. The green
economy is, however, a cross-cutting issue and BIS officials are
working closely with officials from Defra, DECC and DfT. HMT
officials are also closely involved, given the need for options
to be fiscally affordable and to provide effective use of public
funds. And Infrastructure UK is helping to ensure the proposals
are consistent with the Government's emerging national infrastructure
We are looking to create an institution which will
make a radical new contribution to financing green infrastructure.
We expect it to have an explicit mandate to tackle risk that the
market currently cannot adequately finance. It will, thereby,
catalyse further private sector investment and facilitate the
entrance of new types of investor into green infrastructure. As
a result, its impact on the finance gap will be many times the
scale of the public contribution.
To be effective, the GIB will make its investment
decisions independent from political control and it will employ
private sector skills and expertise. We are also looking to create
an enduring institution which can re-invest the proceeds from
We are looking to complete our design and testing
work by Spring 2011.
26 October 2010
63 Strategy for National Infrastructure, HMT, March