Sometimes, democratic government forgets itself. The men and women operating the machinery of the executive need reminding that the state is more powerful than any other institution in the land, and that the sole check on this might is its subservience to the people.
Which is a rather melodramatic way of pointing out that the Department for Business should tell us the fees it is paying for advice on selling a majority stake in the Green Investment Bank (GIB), the three-year-old funding institution that finances everything from offshore wind farms to NHS energy-efficiency projects.
The Government is using Bank of America Merrill Lynch and Herbert Smith Freehills, from the so-called “silver circle” second tier of elite law firms. The GIB has hired UBS bank and Slaughter & May, of the ultra-elite “magic circle”, to help navigate the sale process. Reports suggest that the Government could receive a £1bn-plus windfall while still retaining a 30 per cent slice of the bank.
Asked by Chuka Umunna, the shadow Business Secretary, how much the advisers are getting, Anna Soubry, surely one of the Government’s most wonderfully straight-talking ministers, was forced to answer that this was “commercially confidential”.
This is not to have a go at Ms Soubry – the Business minister probably couldn’t care less if there is criticism over fees, if she feels the advice is worth it. But I do find it odd that the part-privatisation of the GIB, which has invested £2bn of taxpayers’ money in around 50 projects, should be shrouded in any secrecy.
This is not a bank that is too big to fail, or one that is of structural importance to the economy (indeed, since it still can’t borrow from the market and relies on the Treasury for money, it’s not even really a bank). Neither is the GIB a matter of national security – unless you are the type of environmentalist who believes low-carbon energy will safeguard the human race’s survival. And neither is this a defence privatisation, where paranoia over almost any leaked detail would at least be understandable, if not always a credible reason for extreme secrecy.
Also, the Department for Business has revealed the fees paid to advisers on last month’s sale of shares in Royal Mail. The Exchequer earned itself a handsome £750m and handed just one hundredth of 1 per cent – £75,003 – in fees to three banks, including Bank of America Merrill Lynch, and one law firm. They appeared to be accepting token fees in the hope of currying favour with the Government and winning more lucrative work down the line.
Mr Umunna argued: “Given ministers published details of the fees firms advising Royal Mail’s privatisation received, and the unique role of the GIB, it isn’t clear why the same shouldn’t happen here to ensure proper transparency and scrutiny of the sale.”
Of course, there are differences. Royal Mail is further along in its journey to full privatisation, its shares having been first sold on the London Stock Exchange in October 2013. Second, Royal Mail is being sold on the public markets, where rules stipulate transparency, while the GIB is likely to be a discreet sale to one or more institutional investors.
But Mr Umunna is essentially correct that a precedent has been set. Moreover, this is a nascent state company, years away from establishing a track record that would maximise the value of a sale.
The interests of the taxpayer trump whatever notion of “commercial confidentially” the City is bound by. The client, which in this case is the state and therefore all of us, should impose its greater strength and publish the fees.
In all likelihood, there’s no great secret here. It’s not even huge news these days when fees are exorbitant. If the advisers don’t like the state’s demand for openness over costs – and I’m not convinced most of them would be particularly bothered – then there are plenty of other investment banks and lawyers to fill their places.
Admittedly, this is a blustery wind in a very small tea cup, but there are points of principle at stake.
Commercial confidentiality is being used far too widely and must only be cited by ministers in exceptional circumstances; the state must remember it is the client and therefore that advisers’ demands or City practices are subservient to its own. And the public has the right to know where its money is being spent.
Ministers and civil servants must take collective responsibility for remembering all of this. Merely accepting the ways of the City is a form of institutional failure.
MPs can shine some light on the cases for ‘in’ and ‘out’
Several of the recently elected chairs of the House of Commons’ increasingly influential select committees are working together to produce a tome on the impact that leaving the European Union would have on Britain.
Led by the Treasury and foreign affairs committees, their combined efforts could produce the most substantive work yet on whether “Brexit” would help or hurt the UK economy and businesses big and small
Amid the shaky statistics and bogus arguments coming our way before the EU referendum, this work could prove invaluable in helping us decide whether to put the X by “in” or “out”.Reuse content