Azara Blog: MPs want to throw money at the so-called Green Investment Bank

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Date published: 2011/03/11

The BBC says:

The UK could lose out on hundreds of billions of pounds in green investment and fail to meet climate change targets if the government compromises on its Green Investment Bank, MPs have warned.

The Environmental Audit Committee said the bank must be free to raise additional capital from investors.

The government has pledged to establish the bank with £1bn of capital to fund clean energy and low-carbon projects.

Concerns are growing the coalition could water down its plans.

These also involve placing unspecified proceeds from the sale of government assets into the bank.

The MPs said there have been reports of disagreement within the government about whether the Green Bank should be a fully-fledged investment bank, with the ability to borrow money and raise capital, or simply a fund.

There are concerns that if the Office for National Statistics classifies the bank as public sector it could undermine the government's deficit reduction strategy, the committee said.
Evidence given to the committee suggests the UK will need to raise between £200bn and £1 trillion over the next 10 to 20 years if it is to meet the government's climate change and renewable energy targets.

Traditional sources of private fundraising are only likely to deliver between £50bn and £80bn, accountants Ernst & Young told the committee.

"A proper green investment bank... is the shot in the arm the UK economy needs," said Ed Matthew of campaign group Transform UK.

"The only cost the Treasury should consider is the cost of failure to unleash this institution's massive potential to re-power our economy."

The previous Labour government committed the UK to reduce its carbon emissions by 80% on 1990 levels by 2050, and for 20% of all electricity consumption to come from renewable energy sources by 2020.

The coalition government has said it backs the targets.

Most scientists agree that without dramatic reductions in carbon emissions, global temperatures will continue rising to dangerous levels.

The direct and indirect impacts of these higher temperatures, research suggests, could cost the global economy hundreds of billions of pounds a year.

Needless to say, the devil will be in the detail. But it is bizarre that MPs (and the other usual suspects, including BBC journalists, it seems) think that because something is called "Green", it is in fact "green". It is not at all obvious that this new "bank" will do anything one way or the other to really help the country or the world, environmentally or otherwise. If the government, or anyone else with political interests rather than economic interests, has any say in how the bank operates, then it can be pretty nearly guaranteed that what it will fund will be politically correct rather than sensible, costing the country billions of pounds.

And depending on how the bank is funded and its liabilities covered, then it is quite possible that the Office for National Statistics should classify the bank as public sector. One of the most ridiculous aspects of the Labour government was that it introduced PFI precisely to hide debt "off balance sheet", something for which the country will be paying through the nose for in the decades to come. That MPs still want to encourage this kind of sham accounting with this new "bank" is not a good sign that they have learned any lessons from the past decade.

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