Osborne tosses £3bn gift to the green elite
We're all in it together. But some are more together than others ...
Something interesting is happening in politics at a quite seismic level, and as usual, the professionals haven't noticed. Let's start with the details.
Last week, Chancellor George Osborne announced a new body that would make loans and issue debt. In a harkback to the 1970s, poorly performing and deeply unprofitable businesses will be the beneficiaries – and investors in them will be rewarded for their poor judgement. So much for moral hazard.
The Chancellor even found an unexpected £775m from the Government's sale of the HS1 rail link to kickstart the venture. £3bn has been pledged: £2bn from the sale of publically-owned assets, and £1bn from taxes. This is a considerable sum that could alternatively be used to pay off the government borrowing, or pay for public services.
Osborne also announced measures to increase the cost of electricity for consumers and business. This has been described as a "suicide note" for British manufacturing. In short, Osborne's measures benefit a small elite at the expense of the many. There are principled reasons to object to these measures across the traditional Left-Right axis. You may wonder why you haven't heard these, particularly, when a small elite benefits from them at a time when the country is being asked to make sacrifices. The phrase "we're all in it together" takes on quite a hollow, even ironic ring.
The body bailing out the basket-cases is a "Green Investment Bank", and the remit was written largely by a group of bankers themselves, called the Green Investment Bank Commission. Led by Bob Wigley, formerly head of Merrill Lynch's European investment side, the Commission included executives of Goldman Sachs, Citibank, and management consultancies Logica and the Oliver Wyman Group. The Commission reported last June, and saw an ambitious role for the new quango:
- Unlocking project finance through equity co-investment, first loss debt and insurance products for low carbon technologies and infrastructure.
- Creating green bonds to access the very large pools of capital held by institutional investors. Such products would fit with the long-term investment horizons of pension funds and life insurance companies and would provide the scale of capital needed to fund the low carbon transformation.
- Selling green ISAs, which would be an important and visible way for retail investors to make a contribution to the funding of green infrastructure.
- And, in light of the recent National Audit Office report entitled "Government funding for developing renewable energy technologies", the GIB should use the potential rationalisation of quangos and their funds to radically improve Government support for low carbon innovation and commercialisation.
Osborne said he wanted to send "a clear, long term signal to energy investors".