- Committee (1st Day)
- 3:56 pm
- Clause 1: Great British Energy
- Amendment 1
- 1: Clause 1, page 1, line 2, leave out “company” and insert “subsidiary of the National Wealth Fund” Member's explanatory statement This would probe into the relationship between Great British Energy and the National Wealth Fund - formerly the UK Infrastructure Bank.
- My Lords, I am grateful to all noble Lords who are present for this important debate, which deals with an essential topic for the future of our nation: our energy production, security and ownership. I will also speak to Amendments 3 and 5 in my name.Amendment 1 seeks to probe into the relationship between Great British Energy and the National Wealth Fund, which was formerly known as the UK Infra- structure Bank. Amendment 3 seeks to probe into the fact that Great British Energy may be designated a company only if it is wholly owned by the Crown. Amendment 5 would specify that Great British Energy would be owned by the Secretary of State for Energy Security and Net Zero.We cannot discuss this Bill without giving due consideration to Great British Energy’s relationship with the UK Infrastructure Bank. We have not seen an explanation of how this body is different from the UK Infrastructure Bank, which was set up to do the exact same thing that Great British Energy claims it will do. In fact, Great British Energy is almost a duplicate of the UK Infrastructure Bank, which was established to provide loans, equity and guarantees for infrastructure to tackle climate change, funded by £22 billion of taxpayers’ money. Great British Energy seeks to do something extremely similar, or so it claims, but the Bill gives far greater powers to the Secretary of State. I must ask why this is and why taxpayers should be burdened twice.The UK Infrastructure Bank Bill had important accountability and reporting measures which have been removed from this Bill. It had a clear and structured framework for accountability and transparency. It was governed by rules to ensure that taxpayers’ money was used efficiently and was subject to rigorous annual reporting, providing the public with the necessary details on its investments and performance.
- 4:00 pm
- Given all of this, why, then, has Great British Energy been set up to replicate so much of what the UK Infrastructure Bank is already doing? The two institutions overlap in many areas, from providing funding for green energy projects to ensuring that infrastructure investments are scaled up to meet net-zero targets. If we are to create another institution with overlapping responsibilities, we should ask what the real added value is here.
- As I said, the UK Infrastructure Bank was set up with specific checks and balances to prevent the misuse of funds and ensure that the public has visibility into its operations. Great British Energy hands over far greater powers to the Secretary of State, yet there is no explanation of why such sweeping authority is necessary, nor are there are any safeguards to ensure that these powers are not abused or left unchecked. The Secretary of State will therefore have the power to make key decisions without sufficient scrutiny. Again, we must ask: what accountability will there be for the £8.3 billion of taxpayers’ money being handed over? The Bill seems to grant too much discretion without the proper frameworks to hold this body to account.
- If we are to create a new company with such significant powers and such an enormous financial commitment from taxpayers, we must ensure that there are clear and enforceable accountability measures. Otherwise, how can we trust that the British taxpayer will get value for money if we are not putting in place the necessary safeguards and reporting structures to ensure transparency and greater governance?
- I have outlined the similarities between the UK Infrastructure Bank and Great British Energy, and I have highlighted that the UK Infrastructure Bank has far more accountability and reporting measures. Amendment 1 in my name will therefore ensure that Great British Energy is a subsidiary of the UK Infrastructure Bank.
- I will now speak briefly to Amendments 3 and 5 in my name. In Clause 1, page 1, lines 2 to 6, the Bill states that Great British Energy may be designated a company only if it
- “is wholly owned by the Crown”.
- However, this brings to light issues surrounding equity. If Great British Energy were to raise equity, as suggested in Clause 4, “Financial assistance”, it will no longer be wholly owned by the Crown as required by the Bill. Therefore, the Secretary of State will not be able to designate a company as Great British Energy. These two clauses do not align with each other, and the Bill therefore cannot be read as a coherent draft piece of legislation. I hope that the Minister will recognise this confusion that I seek to address in Amendment 3 in my name. Therefore, I look to the Minister to clarify how these two clauses work cohesively alongside each other, and to confirm whether the ownership of Great British Energy, as outlined in Clause 1, is an issue in the drafting of this legislation.
- If the Government’s intention is indeed for Great British Energy to be wholly owned by the Crown, Amendment 5 in my name will specify that Great British Energy will be owned by the Secretary of State in a professional capacity. This amendment seeks to add clarity to the ownership of Great British Energy and will result in both the designation and ownership of Great British Energy to fall under the responsibility of the Secretary of State.
- I am pleased to be able to open this group and look forward to the corresponding debate over the course of today. The designation of a company as Great British Energy and the ownership of the company are central to the Bill and, as such, they should be central to the deliberations of our debate in this place. I beg to move.
- My Lords, I rise to speak to Amendments 4, 6 and 7 in my name. I start by reminding the Committee of my interests as a micro-generator of hydroelectricity.Amendments 4, 6 and 7 are designed to probe—a bit like Amendment 3 in the name of the noble Lord, Lord Offord—whether it might be desirable to allow Great British Energy to accept minority equity finance. I thank the noble Lord, Lord Cameron of Dillington, for his support on this. As these are simply probing amendments, I will try to be brief.As the Bill is currently drafted, Great British Energy can be designated as such only if it is wholly owned by the Crown and will lose its designation automatically if that changes. It follows, therefore, that none of its shares can be owned by another party, and therefore no equity finance could be raised, at least at the Great British Energy level, from parties other than the Crown.I can imagine situations where being able to introduce external capital into GBE could be a good thing. Clearly, I can understand why the Government would wish to retain control, which is why in my amendments I have set a required level of ownership of at least 75% of the issued share capital. Shareholders with more than 25% have the right to block special resolutions; so as long as the Crown controls 75% or more, it would still have full control of the company.In that aspect, Amendments 4, 6 and 7 are more restrictive than Amendment 3 tabled by the noble Lord, Lord Offord of Garvel, although they are probing the same question. Can the Minister explain why the Government feel that they need GBE to be wholly owned and why they would not want the flexibility to raise external equity finance in future, while retaining control?I am also interested to hear the answers to the questions raised by the noble Lord, Lord Offord, on his Amendment 1 on the relationship with the former UK Infrastructure Bank, now called the National Wealth Fund. I see from the letter that the Minister kindly sent us after Second Reading that the activities of GBE will in fact be carried out, at least initially, by the National Wealth Fund,
- My Lords, I support what both my noble friend Lord Offord of Garvel and the noble Lord, Lord Vaux, have said about the confusing overlap between what is now the National Fund Wealth and Great British Energy. I am one of those sad people who look at annual reports and accounts, and I was anxiously waiting for the UK Infrastructure Bank’s reports and accounts, which finally dropped last Monday. Through that, I discovered that it had legally changed its name to the National Wealth Fund two or three weeks ago, although no announcement seems to have been made about that at the time.I agree that Amendment 1 is a very neat way of tucking Great British Energy into a more satisfactory set of governance and oversight arrangements, which we wrestled with when the UK Infrastructure Bank was set up. But my main reason for speaking today is in connection with Amendment 3 in the name of my noble friend Lord Offord of Garvel and Amendments 4, 6 and 7 in the name of the noble Lord, Lord Vaux.I do not support these amendments, because I think the concept of minority stakes in government-controlled companies is a complete nonsense. Over the whole history of nationalised industries and publicly owned corporations and companies, there are relatively few examples of entities in which minorities held equity stakes. The exceptions are normally accidents of history—such as in the case of RBS/NatWest—rather than acts of conscious design.I cannot think of a single good reason to encourage the Government to seek private capital in Great British Energy, as opposed to seeking to leverage private capital alongside public investment in projects that need public involvement to help to de-risk them. Equity is always more expensive than debt, and minority holdings in illiquid shares are even more expensive. The Government do not need to pay that premium. They can borrow money, to the extent that GBE needs it, by issuing government debt. That will be much cheaper than raising equity for GBE, even after the post-Budget bond yield increases.
- My Lords, I added my name to my noble friend Lord Vaux’s Amendments 4, 6 and 7. This was largely because when the Bill went through its stages in the other place, the Government made frequent references to the fact that an essential quality of Great British Energy was that it would be flexible, vibrant, resilient and fleet of foot. These are all good qualities to allow this new company to take advantage of opportunities in the marketplace, maybe even sudden ones when, say, an international investor is looking to throw its weight behind a tidal initiative or a new hydrogen production plant but is looking for a commitment from the UK Government in the form of some investment from GBE.What happens in these circumstances if the Treasury reduces its annual funding for GBE in future or if GBE’s annual budget has already been spent and there is a danger of this vital project going overseas unless GBE invests? Will the opportunity just get missed or, as my thinking goes, should GBE be truly flexible, vibrant, resilient and fleet of foot and be able to go out into the financial marketplace and draw in sufficient funds to promote and thus enable this one-off opportunity?I recognise that, to be effective, GBE must be part of government and yet not part of government. That is why the figure of 75% government ownership is crucial; 24% of outside investment would not prevent the Government remaining in total control and, more importantly, being seen to be in total control, but it could also mean that the private sector could help contribute to the success of GBE.Your Lordships may ask why the private sector cannot just invest in the proposed investment itself. The answer is that by investing in the parent company, GBE, the private sector would be hedging its bets by spreading its risk across the renewable sector generally rather than just putting its money into, say, a hydrogen project or whatever. Furthermore, allowing GBE to attract some outside investment would be a good way of taking some of the risk away from the Treasury.