Yesterday I heard more about the Green Investment Bank. It will have £3 billion of taxpayers money to invest in green projects.
It is called a bank, but it does not plan to have any deposits. It will not raise money in the wholesale banking markets. Its initial plans are to invest the taxpayers money it receives in green projects with a view to making a profit on the investments. Many of the investments will take the form of loans to greeen projects and companies. It will be in effect a Green Investment Fund, not a bank.
Its idea of leverage is to be a co investor alongside private sector investors, who will help finance larger schemes. Without that it will not do a great deal with just £3bn of investment money in a £1500 bn economy. The fund has not ruled out borrowing some money later to augment its £3bn of taxpayer capital. It is clearly not envisaging anything like the leverage of a typical bank.
I would be interested in your views on whether this is a good way to spend £3bn of taxpayers money? If much of it is routed into green projects by loan finance the rate of return is not going to be that good. There are risks in concentrating investments in one sector. There could also be benefits if the fund managers build up an expertise and are the choice destination for interestign new schemes. Its early choice of schemes including a hospital project and a Council waste disposal project mean some of the revenues of the investments are secured on tax revenues, as well as the investment coming from taxpayers.