Enterprise and Regulatory Reform Bill
Item 3 is the second of our two sessions with the cabinet secretary and concerns consideration of the Enterprise and Regulatory Reform Bill legislative consent memorandum. Accompanying the cabinet secretary are Dr Linda Pooley and Stuart Foubister from the Scottish Government. I invite the cabinet secretary to make an opening statement explaining the legislative consent memorandum.
I thank the committee for providing the opportunity to discuss the provisions of the Enterprise and Regulatory Reform Bill. The vast majority of the provisions in the bill are reserved to the United Kingdom Government. However, part 1 makes provision for the Green Investment Bank, and the clauses in that part—other than clause 6, which deals with the laying of documents before the Westminster Parliament—fall within the legislative competence of this Parliament in so far as they extend to Scotland. The provisions in that part allow Her Majesty’s Treasury to give the Green Investment Bank financial assistance as long as it is more than half owned by the Crown and as long as two further conditions are met: first, that the Secretary of State for Business, Innovation and Skills has provided the Green Investment Bank with an operational independence undertaking; and, secondly, that, as the constitution of the Green Investment Bank allows, it engages only in activities that contribute to the achievement of one or more of the green purposes in the UK.
The green purposes of the Green Investment Bank are defined as being the reduction of greenhouse gas emissions; the advancement of efficiency in the use of natural resources; the protection or enhancement of the natural environment; the protection or enhancement of biodiversity; and the promotion of environmental sustainability. Those are areas in which Scotland has considerable policy responsibility and are priority areas for the Scottish Government. Those green purposes complement each other and have a broad reach across the low-carbon agenda. Ministers welcome the fact that they are in the bill and that they will underpin the operational decision making within the institution.
I should also mention briefly that the provisions in the bill that relate to the Green Investment Bank do not control board or other appointments, do not set its location and do not set out any expectations of how it will operate financially in terms of any borrowing powers or financial products that it must offer. Those matters will be dealt with through the corporate governance procedures.
Ministers are content that part 1 will ensure that the Green Investment Bank has a low-carbon focus at the heart of its operation. Furthermore, the Scottish Government believes that the Green Investment Bank will prove to be a beneficial tool in efforts to improve the landscape of investment in our low-carbon economy, and therefore we welcome the initiative. For this purpose, ministers were content to contribute £103 million of the fossil fuel levy moneys to the initial £3 billion capital for the Green Investment Bank. We agreed to that because we were confident that Scotland’s low-carbon sector is at the forefront of demonstrating the economic case for green growth and will be in a position to present investment-ready projects that are suitable for the Green Investment Bank’s support.
The Green Investment Bank potentially will bring much needed investment where market failures have held the sector back. In addition, the announcement in March 2012 that Edinburgh had been chosen as the base for the Green Investment Bank’s headquarters, with the transactions team based in London, was great news for the city and a ringing endorsement of Scotland’s leading place in the UK’s green economy. The manner in which Scottish commercial, academic and civic society—including all parties in the Parliament—came together to support Edinburgh’s bid was evidence of the consensus of opinion that Scotland is well placed to be at the centre of the shift to a low-carbon economy.
Scottish ministers believe, therefore, that it is sensible that the provisions in the bill relating to the establishment of the Green Investment Bank and its green purposes should be considered by the UK Parliament on the basis that there is no evident benefit in separate legislation, which would add unnecessary cost and delay. Therefore, I ask the committee to support the draft legislative consent memorandum that has been laid before it.
Thank you, cabinet secretary. Like all MSPs, I welcome the establishment of the Green Investment Bank in Edinburgh.
I have a couple of questions. I am concerned that, under the bill, the Green Investment Bank will not be able to borrow until debt is falling as a percentage of gross domestic product. That delay and restriction will damage the ability of the Green Investment Bank to leverage investment from the private sector. Has the Scottish Government made any representations to the UK Government on that issue?
Borrowing is an issue that we are materially absorbed in with the UK Government. Our view has been that, in the wider economic debate, there is an argument for a level of discrete borrowing to support capital investment that can support economic growth. That is a core line of argument that this Government has made to the UK Government, given the current economic circumstances.
We are involved in active discussion with the UK Government on the composition and operations of the Green Investment Bank. Borrowing is an issue on which the UK Government has made clear its position, but we would be happy to make those points to the UK Government as part of our wider representations on the importance of having an effective level of borrowing to support capital investment in our economy.
Thank you—that is much appreciated.
There is one other issue that I want to raise. As I understand it, the focus of the GIB will be on offshore wind, non-domestic energy efficiency and waste. Its focus does not seem to include tidal or wave energy. Given that Scotland is leading the world in some of those technologies, that is an opportunity missed. Would the Scottish Government be prepared to raise that issue with the UK Government in the context of the bill?
The UK Government spelled out at the outset the areas of active interest for the GIB: its activities are about encouraging investment in particular sectors. To be fair, although those areas of activity have been set out, they have not been set in stone for all time. There is an explicit acceptance that the areas of focus will develop as the GIB develops its operations.
I am aware of the concern about the marine sector. We must ensure that we put in place effective support for that sector’s development. In my introductory remarks, I mentioned the £103 million of fossil fuel levy money that has gone into the GIB; another £103 million is coming into renewable investments in Scotland, which will add to the £200 million for renewables that has already been budgeted for in the three-year spending review. I suspect that a lot of that will end up going in the direction of the marine sector, as we try to develop the capabilities of new devices and products.
In the context of the finance that is available through those channels and the possibility of other support being available through the Green Investment Bank in the medium, as opposed to the short, term, I think that there is an acceptable way forward for the marine renewables sector. However, we will continue to have dialogue with the UK Government about what the right focus is for the GIB. We want to ensure that the capability and potential of the marine sector in Scotland are fulfilled through the investment programme.
I open out the discussion to other members.
The convener has helpfully covered some of the issues that I had intended to cover, but a concern that WWF raised in a briefing on the bill that it sent to members of the UK Parliament was about
“the advancement of efficiency in the use of natural resources”,
which is the second of the green purposes that is listed for the GIB. WWF’s concern was that it might be used to justify investment by the GIB in the more efficient use of fossil fuel, such as coal, or in nuclear or what WWF would regard as unsustainable biofuels. Rather than express my own opinion on that concern, I invite the cabinet secretary to comment on it.
11:15
I recognise the sensitivity there. It is important not to view the green purposes in compartments—they must be viewed together. The purposes include
“the protection or enhancement of the natural environment”
as well as
“the promotion of environmental sustainability”
and
“the reduction of greenhouse gas emissions”.
I understand the sensitivity of considering that purpose within a compartment but, considered in the round, the green purposes give effective clarity on what would be a reasonable set of activities for the Green Investment Bank to be involved in.
Thank you—that is helpful.
Some of the points that I wanted to raise have been covered. I preface my question by making it clear that agreeing to the LCM on the Green Investment Bank does not imply agreement with other aspects of the Enterprise and Regulatory Reform Bill, which some committee members find offensive and would oppose.
Have you had assurances from the UK Government on whether the headquarters of the bank will remain in Edinburgh in the event of constitutional reform post-2014?
I acknowledge Dr Murray’s point about the scope and extent of the bill. I was clear in my comments that the issues that are at stake for the Scottish Government are those in part 1, which relates to the Green Investment Bank. There is no question of further considerations being applied in that respect.
On Dr Murray’s second point, there have been no discussions with the UK Government on that question.
The committee has to report to Parliament on its views on the LCM. Do members have any particular issues to raise in the report or are they content for it simply to refer people to the Official Report of this evidence session?
Members indicated agreement.
Are members therefore content with the terms of the legislative consent memorandum and content to report accordingly?
Members indicated agreement.
I thank the witnesses for attending and suspend the meeting until 11.25.
11:17
Meeting suspended.
11:24
On resuming—