Isra-Mart srl:MPs call on government to deliver "real" Green Investment Bank

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The Environmental Audit Committee (EAC) will today wade into the on-going debate over the future structure of the government's proposed Green Investment Bank (GIB), recommending that the institution should operate as a "real bank" capable of borrowing money and raising additional private finance.

The structure of the proposed bank has been the subject of intense debate between the Department of Energy and Climate Change (DECC), the Treasury and the Business Department.

Treasury officials have argued the bank should operate as a simple investment fund on the grounds that any borrowing undertaken by the institution would add to the national deficit. However, Energy and Climate Change Secretary Chris Huhne has engaged in a lengthy stand-off with the Treasury insisting the GIB should operate as a proper bank that is allowed to both borrow and lend money.

The Environmental Audit Committee of MPs will today bolster Huhne's position with a report recommending the GIB be allowed to raise extra capital in addition to the £1bn promised by Chancellor George Osborne in last year's Comprehensive Spending Review.

Speaking to BusinessGreen ahead of the launch of the report, Chair of the Environmental Audit Committee Joan Walley MP said the government had to deliver a "real bank that has the status to raise and lever more money".

She added that as such the bank should be allowed to offer government-backed 'green bonds' that would attract big investors.

Citing evidence that the UK has to raise between £200bn and £1tr of private sector investment over the next 10 to 20 years to meet climate change targets, the Committee concluded that the bank is crucial to "lever in the unprecedented levels of private-sector investment needed".

Walley said there were fears the government focus on deficit reduction could "undermine" the effectiveness of the GIB and urged the Treasury and Department for Business to work with the Office of National Statistics (ONS) to try and identify a way in which the bank could borrow money while minimising the impact on the deficit. "The ONS decides [if borrowing is added to the deficit] and how they make their decision is clear as mud," she said. "We would expected there to be discussions between the Treasury, Business Department and ONS and hope an agreement can be reached."

The report will further crank up pressure on the Treasury to reach a compromise with DECC after the new Carbon Plan released by the government this week set a deadline for the Business Department to deliver an operational GIB by September next year.

In a carefully worded statement, Business Secretary Vince Cable welcomed the committee's report but gave no indication as to whether the institution will be permitted to borrow money.

"We agree with the Committee that the Green Investment Bank should be an enduring bank, which takes investment decisions at arm's length from ministers and be able to reinvest the proceeds from its investments," he said. "We are currently taking both the national deficit and EU State Aid Rules into consideration as we decide the bank's role in a broad range of green infrastructure. We will announce the governance arrangements and business model by the end of May 2011."