It looks as if it is heading to be a mickey mouse operation. They will not even get the £1 billion for three years. The FT has been reporting for some time that there is an ongoing massive battle between Chris Huhne and the Treasury. Huhne wants a full investment bank with the ability to issue bonds in the capital markets. The Treasury will not just be scared of counting the liabilities of a GIB, they will not want to be on the hook for the liabilities. Who wins this battle will tell us who has the power in the Coalition. Designing the structure of the bonds would not be easy as most of these big energy infrastructure projects have massive upfront costs and the payoff is at the back-end. That is why they are often not attractive to the private sector and need state involvement. If Huhne wins, the GIB would need a steady steam of revenue to pay the coupon on the bonds. Selling equity in the GIB to the BoE in a form of QE is a good idea and would capitalise them without adding to the national debt. An objection to this is it may contravene EU rules on state aid and might be what the Treasury are getting their knickers in a twist about.

The Green investment bank is a flawed and pointless idea from the get-go.

Green energy projects are hugely cash intensive, and currrently only generate returns thanks to massive government subsidies.

If there were green projects which could generate real returns there would be no need for a green investment bank – the investments would be good enough to stand on their own two feet without a government sponsored bank intervening.

As iis the case, with green projects relying on government money already, why is there the need for another layer of cost in the form of a bank rather than the subsidy jsut going direct?

((not that there should be any subsidy from the simple shopper government anyway….all governments have terrible track records in such fields))

Green energy projects are hugely cash intensive, and currently only generate returns thanks to massive government subsidies.

If there were green projects which could generate real returns there would be no need for a green investment bank – the investments would be good enough to stand on their own two feet without a government sponsored bank intervening.

In which case it would be interesting to see how other countries – in particular Denmark and Germany – have organised investment in green energy. Not that I know the answer.

not that there should be any subsidy from the simple shopper government anyway….all governments have terrible track records in such fields

That’s quite an assertion …

@3 Gastro George

Not sure about Denmark, but the Germans massively subsidise their wind energy industries. They’ve had more than a bit of a shock at the cost – the turbines have produced much less energy than hoped, and the gearboxes have been blowing up after 10 years, as opposed to the 25 years they were hoped to last for. Not a huge surprise that private investment isn’t involved….

…and government procurement and investment *does* have a terrible record. Can you name any infrastructure or procurement that has gone well? I struggle to since WW2. Just in recent past PFI, Astute, Nimrod, NHS computers, olympics to name but a few have come in late and over budget. Even if a few projects have gone well, they are far outweighed by the number of disasters out there.

@Tyler

I think you overstate your case. It’s true that there have been a number of public sector projects in the UK that have massively failed. That’s also true of the private sector. When it comes to “grands projets”, I think the French government, for example, has a much better record. The issue here is management. There’s not that much difference between large projects run by the public or private sector. In the UK, we just suffer from poor management by both public and private sectors.

@ Gastro

I can’t think of a public project that came in under budget and within its deadlines in the UK. Actually thinking back over my history lessons, even the Spitfire was over budget, even if by mid 1940 production was ahead of schedule.

You are correct in saying that management is the problem, but it is significantly better in the private sector because people there are playing with their own money. Public sector officials and politicians are more likely to make grand gestures at taxpayers expense as they don’t personally have to wear the price tag, and often see a direct benefit in vote terms.

Hence simple shopper….but please, if you can give me more athan a small handful of exmaples of government projects going to plan I’ll be happy to hear them.

Actually the Green Investment Bank would be a good idea over the very long term. Haven’t any of you heard the news about peak oil? Probably not by the sounds of the nonsense I’ve read here so far. Using BP oil reserve estimates, at 1% consumption rate per annum, oil is destined to become very scarce by 2046. That’s not that far away in the bigger scheme of things. Without a means to invest in alternatives, no-one in the UK will be ablet to live on 80 kWh/day/per person, or the 250 kWh/day/person that US citizens currently enjoy – should our population growth and gadget growth cause that to happen. This government and its civil servants only plan for 5 to 10 years, so they cannot see 2046 – it’s off their RADAR – a problem for the future generations to solve. The reason is quite simple: democracy allows the very ignorant to elect to the criminally slightly less ignorant. MPs don’t even understand that a 7% growth rate per year amounts to a doubling every 10 years; that exponential growth of any kind MUST be it nature de-value money, life, democratic representation and living standards. That population control is the key to the future; and that Sustainable growth or development are both oxymorons, mathematically impossible.So why would they understand anything about a Green Investment bank? Greedy unprincipled, tax robbing, creams of criminality, well canned and unimpeachable are what makes up our parliament. Add to this that 90% are climate change skeptic in the Tory party Cabinet, and it spells long term disaster.