Green Investment Bank

Written evidence submitted by Unite the Union (GIB 07)

This response is submitted by Unite the union. Unite is the UK’s largest trade union with over 1.5 million members across the private and public sectors. The union’s members work in a range of industries including manufacturing, financial services, print, energy, construction, transport, local government, education, health and not for profit sectors.

Executive summary

· Unite believes government support for investment in low carbon manufacturing is crucial.

· Unite is very concerned about proposals to achieve the necessary investment from the public sector will result in other government funded organisations being reduced or disbanded altogether.

· Unite would like to see a singular analysis of how the workforce for the green investment bank (GIB) is to be created – it is not acceptable for government to assume that workers made redundant in the Carbon Trust will make up the core workforce in the GIB.

· Unite has serious concerns about the proposal for the GIB to be set up as a public private partnership (PPP).

· Unite believes the ability to provide the amount of public investment needed to stimulate growth in the industry must be matched with the appropriate level of investment from industry itself.

· It is vital that government takes the initiative to ensure that confidence in the UK as a place for green investment is not compromised.

· Unite believes one of the most important aspects of the GIB is where value will be added – where jobs will be created, how environmental benefits will be achieved and how much investment will be required to achieve high levels of technological innovation and R&D.

· One of the key barriers to investment is that investors cannot see a sure fire return on their investment under the present regulatory framework.

· Unite believes the proposal not to include small and medium sized enterprises (SMEs) in this investment process is a serious failure to appreciate the important role which SMEs play in the manufacturing production supply chain.

1. Introduction

1.1 Unite welcomes the opportunity to respond to this inquiry. There are clear contradictory elements in what seems to be a worthwhile but nebulous proposal for the implementation of a Green Investment Bank (GIB). However, there is obviously a massive challenge ahead for government regarding meeting the low carbon manufacturing challenge. With an estimated £550 billion of investment required by 2020 to facilitate the investment needed to kick start the UK low carbon emissions programme there clearly needs to be a focus by government on how to achieve this level of investment.

1.2 Unite is clear about the need for investment but is not clear about how this will be achieved successfully in relation to how jobs will be created or retained, how skills and knowledge will be improved with training to meet the new technologies required for low carbon manufacturing and how government is going to achieve all of this while implementing the biggest cuts to public finances since the second world war.

2. Investment strategy

2.1 In a report produced for government, by former investment banker Bob Wigley, proposals state that the proposed bank would need three forms of funding to sustain its ongoing operations. This would include consolidating £185 million a year currently spent on low carbon initiatives through government backed organisations. This proposal would mean dissolving the Carbon Trust and directing £100 million of its funding to the bank. £55 million a year would be taken from the Energy Technologies Institute (ETI) and the Technology Strategy Board would lose the £30 million it currently uses for low carbon strategy programmes.

2.2 Unite is very concerned that government proposals to achieve the necessary investment from the public sector results in other government funded organisations being reduced or disbanded altogether. There are suggestions in the Wigley report [1] that the workers made redundant in the Carbon Trust and other organisations will make up the core workforce in the GIB [2] . Unite has serious reservations about this automatic transfer of staff and whether government has undertaken the necessary skills audit to ensure that the skills of staff in the Carbon Trust whose role is the promotion of carbon neutral manufacturing processes are transferable to those required to work for an investment bank. Unite would also question whether such personnel would necessary want to work for an investment bank.

2.3 There needs to be a singular analysis of what type of workforce is required to manage the bank and how that workforce will be achieved. It is not good enough for government to say that redundant workers will be found new jobs at the GIB when it is clearly not a feasible option.

2.4 Unite acknowledges that all of the organisations mentioned have been undertaking some very worthwhile and successful work in assisting UK companies to achieve their low carbon goals. It is not clear whether this work will be undertaken by any other organisation but seems to be a ‘rob Peter to pay Paul’ scenario – not the best way for government to show its commitment to the low carbon agenda.

2.5 The report has also said that raising public investment income in this way would be coupled with public funding strategies, such as financing for ongoing activities which would include green bonds, green ISAs, a GIB debt fund and a levy on domestic energy bills. Unite is bitterly opposed to any raising of investment funds by effectively levying a tax on domestic energy consumption. At present the UK utility users are seen to be a ‘cash cow’ in a way that has not happened in other European Union (EU) countries which have gone through the same process.

2.6 It is also proposed that there could be initial bank capitalisation and funding via the use of a bank levy or bank bonus tax or the proceeds from the sale of government owned assets such as the channel tunnel and the student loans portfolio. As far as Unite is concerned this is all too tenuous and too late. The strategy for raising investment funds to start the GIB must be made clear and must not compromise people’s jobs or organisations that are already making a positive contribution to the low carbon growth economy. It must also not treat the UK public as a bottomless public purse. Unite would prefer to see a levy on the oil companies to contribute to the funding of the GIB.

3. Public private partnership.

3.1 The proposal that the bank should be a public private partnership (PPP) is very worrying. As far as Unite is concerned any proposals around PPP immediately ring alarm bells. This concern is not born out of ideological antipathy but out of experience in a number of sectors where PPPs are prevalent and where the process seems to end up being public investment for private profit and has not proved to provide value for money.

3.2 There is a huge amount of money to be made in the green technologies and services market. Conservative estimates say the global market is worth more than $3 trillion per annum and the UK has only a 5% share of this market with Germany and France both having at least twice that of the UK. However, Unite believes the ability to provide the amount of public investment needed to stimulate growth in the industry must be matched with the appropriate investment from industry itself.

3.3 It is vital that government takes the initiative to ensure that confidence in the UK as a place for green investment is not compromised. The tangential nature of the GIB, with the former government proposing the bank as a way of stimulating investment into capital projects and the present government clearly seeing it as a way of cutting public sector spending means there is no clear focus and strategy. This must be addressed and a strategic framework produced which outlines to everyone concerned how the GIB will work and what its objectives will be.

3.4 Unite also believes it is the ‘added value’ of the GIB that government should be looking at. Where will the jobs be created? How will the environmental benefits be achieved? And how much investment is going to be needed to achieve high levels of low carbon technological innovation and R&D? What impact will the GIB have on the skills agenda, will there need to be new apprentice and graduate programmes to ensure there are enough highly skilled workers to undertake the jobs in the low carbon economy? All of this must be considered to ensure the bank is fit for purpose and achieves its objectives.

4. Small and medium sized enterprises

4.1 One of the key barriers to investment is that investors cannot see a sure fire return on their investment under the current regulatory framework. The fact that the Wigley report has stated that SMEs will not be included in the investment regime and the GIB will only focus on large energy related capital projects tells Unite all it needs to know about investors looking for a return on their investment, rather than at the ‘added value’ for the UK economy.

4.2 SMEs make up 80% of UK manufacturing and innovation comes predominantly through SMEs as they are in a position to respond quickly and efficiently to the big tier 1 companies in the manufacturing sector which require innovative products and services to enable them to meet demand from their customers.

4.3 Unite believes that for the proposal not to include SMEs in this investment process is a serious failure to appreciate the important role which SMEs play in the production supply chain. Unite has, in previous submissions to government referred many times to the problems that SMEs have with accessing investment capital. The recession has proved to be a crisis point for SMEs in the UK and the financial situation has not improved very much since late 2009. It does not matter how much the banks are told to help SMEs, they do not respond. In the face of this Unite is very concerned that when the big capital energy projects start to be built the supply chain will not be there to support the tier 1 companies concerned because of this lack of investment.

Unite recommendations

· Unite is in favour of government support for investment in low carbon manufacturing products and systems.

· Government must provide a cohesive and strategic investment strategy whereby the private sector can see a long term pipeline of work regarding infrastructure development for the renewable energy sector.

· In a global economy the UK is in competition with many other nation states regarding the production of low carbon products and services, government must provide the right economic framework to encourage inward investment in the industry.

· Government must acknowledge how important the manufacturing sector is in the decision making process around investment and the creation of the GIB.

· Unite would prefer to see a levy on the high profits of energy companies rather than a tax on energy users to fund the GIB.

· The proposed closure of the Carbon Trust and the re-direction of funding from the ETI and the Technology Strategy Board must be reviewed and an analysis of how this vital work will continue.

· Unite believes that PPPs are not good value for money and are a waste of tax payers money, as such there needs to be a re-think of the investment structure of the GIB.

· Government must explain how the GIB will produce the ‘value added’ for the UK manufacturing sector.

· The UK economy must be re-balanced, the only way to do this is for government to invest in the manufacturing sector.

· Unite believes it is of vital importance that an investment strategy for SMEs is included in the objectives of the GIB.

· Unite believes that the proposed levy on banks or a bank bonus tax should be used to part fund the GIB.

13 October 2010