MPs raise questions about Macquarie intentions with GIB
Parliament’s environmental select committee has written to Business Secretary Greg Clark to express its concerns about the sale of the Green Investment Bank (GIB).
Macquarie, nicknamed the ‘Vampire Kangaroo’, last year sold off Thames Water after investors reportedly banked profits in foreign accounts and dramatically cut the amount of taxes paid by the company. And while a ‘golden share’ will be retained by an independent party to protect the bank’s environmental mission, it will not stop a new owner from selling off investments that have already been made – an outcome that former Business Secretary Vince Cable has predicted in a letter to Clark.
Fears have been increased by the creation in November and December of ten new subsidiary companies by the GIB, each holding different GIB assets.
The privatisation process for the sale began in June 2015, when then-Business Secretary Sajid Javid announced that ‘at least a majority’ of shares in the public bank would be sold off to private investors.
Following the announcement, the Environmental Audit Committee, which holds the government to account on its environmental goals and policies, said that the GIB had ‘done a great job of getting capital flowing to the kind of innovative green projects that sometimes struggle to secure financial backing’ and that the decision to privatise the bank had been ‘rushed’. It added that the bank must be kept as a going concern following the sale and recommended that the government retain a minority stake to demonstrate its commitment to the green economy.
The letter to Clark from EAC Chair Mary Creagh MP, sent in December and published by the EAC today (11 January) added to the calls for greater scrutiny over the sale, reading: ‘I would like to know what investigations the government has undertaken to ensure that the bidders will respect the green purposes and long-term future of the bank? In particular, I would like to know how much capital the bidders have committed to invest in the bank over the next three to five years?’
Creagh also asks Clark what mechanisms the government intends to put in place to ensure that the GIB has a ‘robust future’ as a green investment bank and how government plans to make sure that any future owner does not break up the bank.
‘It is essential’, Creagh finishes, ‘that Parliament are informed of the proposed terms of any sale of the bank before it is agreed and that the government sets out any commitments made by the new owners to respect the green purposes of the bank.’
Commenting today on the state of the GIB sale, Creagh said: “The GIB should continue to exist as a low-carbon investor or its sale should not proceed. Ministers have rushed to privatise the bank without consultation or proper consideration of the alternatives.
“Taxpayers do not want to see a repeat of the Royal Mail debacle where public assets were sold at bargain basement prices, and they do not want to see a landmark British institution sold off to an asset stripper.”
A host of other prominent politicians have criticised the decision to sell the bank to Macquarie, including Conservative MP and Former Energy Minister Greg Barker, Liberal Democrat Cable and Scottish Economy Secretary Keith Brown, who said that the privatisation, ‘which [has] been characterised by an unacceptable lack of communication throughout’, has become ‘more of a fragmentation or asset stripping process’.
— Vince Cable (@vincecable) December 20, 2016
— Gregory Barker (@GregBarkerUK) January 9, 2017
Green Party Leader Caroline Lucas has also questioned Macquarie’s ‘deeply regressive approach to environmental issues’ and called on the government to install safeguards into the sale to make sure that it is ‘not sold off in parts’ and has the capital needed to continue funding projects.
Lucas wrote: ‘Despite the constraints placed upon it, the GIB has funded some really exciting and innovative projects. And, in good news, in 2015 it started to make a profit for the taxpayer. In its 2016 annual report, it announced that it was projected to make an annual return of 10 per cent over the coming years…
‘In the wake of the ratification of the Paris Agreement and the upcoming publication of a new industrial strategy, now is the time for Greg Clark and Nick Hurd to save the GIB. A first step would be to ensure there are proper safeguards in place for its sale – but why stop there? Now is not the time to destroy the GIB, it’s time to save it.’
No added protections planned
Following an urgent question by Lucas on the sale of the bank in the House of Commons this afternoon (11 January), Nick Hurd, Minister at the Department for Business, Energy and Industrial Strategy (BEIS), refused to comment on the status of Macquarie as the government’s preferred bidder, and reiterated several times that the sale of the bank was designed to increase its reach and ability to fund green projects.
However, Hurd did not agree that a delay in the sale was needed to confirm protections of the bank’s investments. The minister also swerved a question asking whether a privately-owned could fund shale gas fracking.
Responding to the criticisms made against it in relation to its potential takeover of GIB, Macquarie also issued a brief statement, saying: ‘Macquarie has a substantial and longstanding commitment to the renewable energy and clean technology sectors as a fund and project manager, adviser, financier, and participant in environmental markets.’
More information about the sale of GIB can be found in previous Resource articles.