Despite my last post, overall, I am warming to the GIB. The accompanying document released with the announcement of the detail of the GIB (here) said all the right things about what the GIB should be doing, and for the first time set out a timetable of how investments were going to be rolled out. And at least we will have £3bn of investment to be getting on with while the bank actually becomes a bank, if you see what I mean.
But there is as ever, a harvest of details to be gleaned from the document. The most striking detail (mentioned only in passing in Vince Cable's statement to the House) is that there is still no clearance, or even understanding from the EU Commission about whether the GIB as it will be constituted, breaks EU state aid.
Indeed, it is not even clear whether the subject of state aid has yet been broached with the EU by the UK government. It certainly hadn't when BIS officials appeared in front of the Environmental Audit Committee (EAC) a few months ago and were asked about progress.
EAC wanted to ask the question because it had received information that when the German investment Bank KfW developed its proposals for supporting energy efficiency improvements in German homes, and engineered the ingenious method of obtaining government underwriting for loans to reduce the interest rates charged, they thoroughly explored the state aid implications with the Commission in advance of proceeding, and had, essentially, obtained an "all clear" before they started.
Not so the GIB apparently. According to the document, we will not know whether the EU will give a similar "all clear" until... well... at least 2012, and this will seriously affect the pattern of investment.
The department will, it is suggested, undertake some "investments" which clearly do not breach state aid rules at an early date, and will subsequently hand them over to the GIB when it gets into the air.
This is then an additional stage of the pupation of the GIB, from furry caterpillar doing bits and pieces with the £775m obtained from the sale of Fast Rail2 to the fabulous soaring butterfly promised after 2015 when it will be able to borrow, produce bonds, act like a bank etc.
Not quite so either, I am afraid. As I previously posted, there was a query about whether the birth of the real GIB would be 2015, as suggested in the official initial announcement, or when the Treasury formula of the target for "debt to be falling as a percentage of GDP has been met" had been achieved. Another piece of uncertainty cleared up in the details document: it's the latter (See chart 3 p.25). Treasury still decides. Or may not. But before that the EU decides. Or may not. Just the sort of clarity that will get the investors pulses racing, I should think.
This post first appeared on Alan's Energy Blog.
Dr Alan Whitehead is the Labour Member of Parliament for Southampton Test.
He is a member of the House of Commons Energy and Climate Change Select Committee, as well as the Environmental Audit Select Committee.
