Flogging a live horse

9th February 2017

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Jennifer McLeod

The government has revealed little detail on the sale of the Green Investment Bank.

Although it is not exactly a bank (it cannot lend or borrow), the GIB has made a success of what it was asked to do. So far it has invested more than £2bn at a reasonable rate of return and attracted more than £8bn of private investment. It is making a profit and the returns are projected to increase in future.

All rosy on the green investment front then? Not exactly. Elements of the government decided it needed to be sold – using the curious argument that the GIB would be better able to do its job of dealing with market failures if it was in the hands of investors who were party to those failures in the first place. A prospectus was issued and the GIB was offered up for sale.

We know that a ‘preferred bidder’ has been chosen and that some ‘safeguards’ on the articles and memoranda of the bank have been put into place to secure the mission of the bank. Around Christmas, the GIB started creating a raft of subsidiary companies that looked like vehicles into which its investments could be floated.

The Green Investment Bank (GIB) has been around since 2012 and tasked to invest in green and low-carbon projects. Purchasing the GIB and getting your money back (or more) by flogging off its carefully crafted assets and deflating its activity makes some sense from a prospective purchaser’s point of view.

Where are we? There has been debate in parliament about the intentions of the government and the wisdom of the proposed sale, and so far ministers have been playing a straight bat, not revealing very much and saying that discussions are continuing with the preferred bidder.

There may be some signs that they are thinking again, with reports emerging that the government may opt for general share flotation, which might be a better solution if a ‘golden share’ is retained that can guarantee the bank’s actual rather than theoretical direction.

However, the best solution is to do nothing. Let the GIB get on with its mission of securing and developing good, low-carbon investment and allow it to roll over its successful investments, when they are up and running, into new programmes.

I am hoping BEIS will review what was in essence a Treasury decision under its former management and keep the GIB working in the public realm. But I’m not holding my breath right now.


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