My former colleague Fiona Harvey revealed last October that Chris Huhne’s plan for a green investment bank was being thwarted by Treasury officials, who wanted it to be more like a fund. Then in December Mr Huhne let the cat out of the bag in public when he admitted that the Treasury had won the battle and the new entity probably wouldn’t have the powers to issue bonds*.
Without leverage, the fund will only have £1bn to spend (plus £1bn from asset sales) rather than the £4-6bn demanded by the renewables industry.
My colleague Beth Rigby writes in this morning’s FT that the Treasury took its stance because it didn’t want the extra liabilities on the national balance sheet.
The other big question someone should ask Huhne – or David Cameron – is why progress on the bank/fund is so incredibly slow. The original £1bn is earmarked for 2013/14. That is more than three years into the current parliament, which ends in 2015. (Meanwhile the other £1bn will come from asset sales which haven’t yet happened).
Funds typically take a long time to examine propositions and allocate funding to projects, which then take years to build. If this was a truly green government, as ministers would like us to think, why is this project moving forward at a snail’s pace?
*UPDATE: One source familiar with the talks tells me that the new bank could still be given the power to issue bonds after all. The big debate, he claims, is whether it will be a “public” or “private” (ie with government stake) entity. The latter would be off-balance sheet, as George Osborne wants. But the latter has various advantages; it would have cheaper finance, it would not be entirely profit-focused and it would have no conflicts of interest.
Jim Pickard
Kiran Stacey