British Investment Bank Bill

[Katherine West]

British Investment Bank Bill.pdf

Mr Speaker,

I beg to move, that this Bill be read a second time.

At Budget, the now Prime Minister announced that we would consider the case for a new investment bank based on the model of the German KfW. Having considered that case, the Government has decided to legislate to introduce such a bank.

The credit crunch and financial crisis has exposed what we already knew about finance in this country: we invest too little in long-term finance for our small businesses or at too high rates; we take too few risks with promising startups; we under-finance infrastructure with economic and social benefits; we currently have a only small green finance industry that assists us in the transition to a low carbon economy. What we do invest is too focussed on the easy - property - and too focussed on London and the South East.

The new British Investment Bank is a once in a generation opportunity to change that. We considered alternative options - a beefed up loan guarantee scheme, a narrower green or business bank - but considered that they do not fully grasp either the scale of the problem, or the scope of the opportunities that we have.

The new British Investment Bank will be what is called a promotional bank. Its role is - within set objectives - to promote equitable, low cost finance to meet our national economic, social, and environmental objectives. It will be able to do that through direct loans where that is necessary, through loan guarantees, or through schemes co-run with existing banks. That is an important distinction. The British Investment Bank will be able to borrow at far lower rates than any other financial institution. That is a national benefit of the public balance sheet that makes it so effective. It is also important that in doing so, the British Investment Bank keeps to within clear and set objectives and does not  unduly distort what might be well-functioning credit markets. We are trying to address shortcomings here, not getting the taxpayer’s assets involved where they do not need to be. That, Mr Speaker, draws on the successful models across Europe, particularly in Germany.

Over time, the British Investment Bank will build up a significant asset base. Its investments will be a shared prosperity of our United Kingdom, and the legislation vests the shareholding of those assets equitably, with the devolved administrations having both a shareholding in line with population and a role in setting the bank’s objectives in their regions.

Budget 2009 will confirm the initial capitalisation of the bank and initial areas of focus in 2009-10, at which point it can begin making a real contribution to Britain’s recovery from the global recession. This is a policy that will both cushion the blow of the global financial crisis on our economy, and support us to renew and rebuild a more balanced higher wage, fairer, and greener economy.

Mr Speaker, the new British Investment Bank will, I hope, end up being one of the most significant economic policy reforms in a generation, unleashing a step-change in our economy.

More cheap finance for small business and high-potential startups - unleashing the productivity of our entrepreneurs; helping with our ambition of a higher wage economy.

More investment in the regions of England and across the nations of our United Kingdom - building the more balanced economy we so need.

More investment in infrastructure like the trains, railways tramways, bus routes that underpin a strong and fairer economy.

Investment in climate change transition, adaptation and economic development to build the low emission economy that is necessary for our planet’s future: giving the UK the opportunity to be a world leader not only in cutting our emissions, but building the new industries that will build the windfarms, the solar panels, the electric vehicles, that will get us there.

I commend this Bill to this House.

[Macmillan]

Second Reading