Green Bank has small country ambitions. Has the Chancellor got his sums wrong, or did he mis-speak?
The Chancellor claimed today to have boosted the initial capital for the GIB to £3 billion. But his Budget Book tells another story, with table 2.6 apparently committing £1.8 billion to the bank by 2015, not £3 billion. The bank, we are told, will begin operations in 2012/13. Levering in private finance, “should mean that there is in the region of an additional £18 billion of investment in green infrastructure by 2014-15”. That’s a 5:1 leverage ratio. Based on the Budget Book figures, the bank will have £9bn to spend on green infrastructure by April 2014. This is half the £18 billion the Chancellor referred to in his speech.
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It’s confusing, possibly an error. But even so, the small country ambition of the GIB does nothing to end the basic error of imposing deep, rapid and unfair spending cuts on an economy where unemployment is rising and growth faltering.
£110bn of investment in new power generation and transmission assets for electricity is required by 2020. The UK’s liberalised energy market therefore faces the challenge of doubling the investment rate it has achieved over the past decade, in renewables, new nuclear and clean coal and gas. The TUC said in response to the recent electricity markets consultation that finance on this scale calls for a well funded Green Investment Bank. “We need such an institution to match the investment capacity of similar, well established, reputable institutions in France and Germany.” What the Chancellor has announced a small country bank, not empowered to deliver the scale and pace of green investment required. The same authoritarian fiscal policy driving the cuts is stifling green investment.
Energy market reforms should therefore be seen as a prime opportunity to deliver green jobs growth and affordable energy. Yet this Budget seems disconnected from the urgent need to create jobs and provide energy at prices that industry and domestic consumers can afford. Faced with ageing energy assets and challenging climate change targets that require the almost complete decarbonisation of our electricity supply system by 2030. In this context, the GIB is a serious disappointment.