Baroness Noakes (Con)

My Lords, I support what both my noble friend Lord Offord of Garvel and the noble Lord, Lord Vaux, have said about the confusing overlap between what is now the National Fund Wealth and Great British Energy. I am one of those sad people who look at annual reports and accounts, and I was anxiously waiting for the UK Infrastructure Bank’s reports and accounts, which finally dropped last Monday. Through that, I discovered that it had legally changed its name to the National Wealth Fund two or three weeks ago, although no announcement seems to have been made about that at the time. I agree that Amendment 1 is a very neat way of tucking Great British Energy into a more satisfactory set of governance and oversight arrangements, which we wrestled with when the UK Infrastructure Bank was set up. But my main reason for speaking today is in connection with Amendment 3 in the name of my noble friend Lord Offord of Garvel and Amendments 4, 6 and 7 in the name of the noble Lord, Lord Vaux. I do not support these amendments, because I think the concept of minority stakes in government-controlled companies is a complete nonsense. Over the whole history of nationalised industries and publicly owned corporations and companies, there are relatively few examples of entities in which minorities held equity stakes. The exceptions are normally accidents of history—such as in the case of RBS/NatWest—rather than acts of conscious design. I cannot think of a single good reason to encourage the Government to seek private capital in Great British Energy, as opposed to seeking to leverage private capital alongside public investment in projects that need public involvement to help to de-risk them. Equity is always more expensive than debt, and minority holdings in illiquid shares are even more expensive. The Government do not need to pay that premium. They can borrow money, to the extent that GBE needs it, by issuing government debt. That will be much cheaper than raising equity for GBE, even after the post-Budget bond yield increases. Equity costs more to raise than debt because it carries more risk than debt. It is the first bit of the capital stack to be wiped out in liquidation—at least, that is what happens in the private sector. But does anybody believe that minority holders would be wiped out if the state decided to liquidate an insolvent Great British Energy? The Secretary of State has so many powers over Great British Energy that in practical terms the Government will find it very difficult, if not impossible, to escape underwriting all the liabilities of Great British Energy, and that includes its minority holdings. If the Government did try to wipe out the minority holdings in a liquidation, I predict a decade or more of shareholder litigation. Having minority holdings can also engage a lot of unnecessary legal problems around protections for minorities that are built into our company law to prevent minorities being treated unfairly. It can raise issues about dividends, which are not normally part of the regime for state-owned enterprises since retained earnings, if there are any—and history tells us that there are not usually any—are generally kept within the public corporation. I am not a fan of state-owned activity, but we should accept it for what it is, which is taxpayer or debt-funded activity, and not try to mimic the real world where equity investors genuinely do take on risk.