Has the Treasury shot the Green Bank, and with it, a plan for growth?
As we head for the pre-Budget weekend, rumours abound that the Treasury is turning the silver bullet of the Green Investment Bank into a “quackless duck”. Environment Secretary Chris Huhne spoke confidently about the bank – the famous ‘duck’s quack and banks borrow’ comment. The Business Secretary told the Environmental Audit Committee recently that the Green Investment Bank will be “certainly… a lot more than a fund”. But the Treasury thinks otherwise. The bank’s assets would be counted as public debt. It wants the bank’s funding capacity delayed until 2014. If this is true, it’s further evidence of the lack of a growth strategy.
The GIB announcement will be an acid test of the Government’s promise to be the “greenest ever” . How the GIB appears in the National Accounts will, of course, affect the Government’s management of its fiscal objectives. The ONS test is:
- If a body is deemed to be controlled by government (local or central) or a public corporation, then it will be classified as in the public sector.
- If not, then it will be classified as in the private sector.
This is the heart of the paradox in government thinking. An off-balance sheet institution being hard to control, but and on balance sheet one being impossible to afford. The trade-off politically, is whether the government, and specifically the Treasury, is willing to give away control of the capital investment it has made to a new body established under clear statutory rules and independent governance.
Other countries in Europe have a less robust and less transparent Government accounting system; the development banks that exist in most other countries don’t appear in the Government accounts.
There could, of course, be a ‘temporary and extraordinary’ exclusion of a public sector Green Investment Bank from the strictures of the Fiscal Mandate. For the TUC, the fundamental issue is that the Green Investment Bank is a bank with a green investment purpose and backed by government, to lever in the large sums needed to deliver the hundreds of billions of pounds of required green infrastructure.