Committee for Enterprise, Trade and Investment Report on its Consideration of the Legislative Consent Memorandum Concerning the Enterprise and Regulatory Reform Bill

Background

1. The Enterprise and Regulatory Reform (ERR) Bill (Appendix 1) was introduced in the House of Commons on 23^rd May 2012.

2. The LCM, included at Appendix 2, seeks the agreement of the Assembly to the Westminster Parliament considering provisions of the Enterprise and Regulatory Reform Bill dealing with the devolved matters of the UK Green Investment Bank and payments to directors of quoted companies.

3. The Minister for Enterprise, Trade & Investment wrote on 30^th October 2010 to inform the Committee of a Department for Business Innovations and Skills (BIS) review of UK corporate governance (Appendix 3).

4. The Minister wrote again on 6^th September 2012 to inform the Committee of the Department’s intention to seek an LCM to enable BIS to legislate to:

• Ensure that the UK Green Investment Bank Plc engages only in activities that contribute to achieving ‘green purposes’, and remains operationally independent and that these provisions extend to Northern Ireland; and
• Give shareholders of quoted companies greater control over the remuneration of directors.

5. Further background information is contained in the Minister’s Letter of 6^thSeptember 2012 at Appendix 4.

6. The Legislative Consent Memorandum was laid in the Business Office on Monday 24th September 2012. 

Committee Consideration

7. The Department informed the Committee that enacting the above provisions by means of a UK Bill will ensure that the relevant law is updated in Northern Ireland at the same time as it is updated elsewhere in the UK, precluding the development of a legislative gap and the administrative and regulatory difficulties that could follow.

8. The Committee received oral evidence from departmental officials on the Legislative Consent Motion at its meeting on 27^th September 2012.  Key issues discussed included the purpose of including these provisions in an LCM; operational time scale; provisions for voting rights; funding for the Green Investment Bank; and purposes of the Green Investment Bank.  A copy of the Hansard transcript is included at Appendix 5).

9. The Department reported that, in recent years, executive pay in the UK’s largest companies has quadrupled with no correlation to an increase in performance or shareholder returns.  The ERR Bill is intended to enhance shareholder voting rights.  Currently, no company is bound by a shareholder vote on directors’ pay, which is purely advisory.  The Bill will provide for binding voting rights for shareholders on annual pay, performance and exit payments to directors.  The legislation applies only to quoted companies which are listed on the stock exchange. There are currently more than 1,000 in the UK and only two in Northern Ireland.  The Department informed the Committee that industry as a whole is supportive of the provisions for voting rights.

10.  In relation to the Green Investment Bank, the Department reported that the Bank is being established as part of the UK Government’s initiative pursuing the green economic agenda.  The Committee was informed that the novel and long-term nature of green investment infrastructure can often deter private sector investors.  The Green Investment Bank is intended to provide financing for green investment which can produce commercial returns in due course.

11.  Any business from any sector, including agri-food, will be eligible to apply for funding providing it fulfils one of the purposes for which the Bank is being established.  There are five purposes for which funding can be provided.  Namely:

• Greenhouse gas emissions reduction;
• Advancement in efficiency in the use of natural resources;
• Protection or enhancement of the natural environment;
• Protection or enhancement of bio-diversity; and
• Promotion of environmental sustainability.

12.  The Bank will receive initial funding of £3bn from the UK Government and will be given borrowing powers in the future.  The Bank has already been established in shadow form and a number of state aid issues are currently being discussed with the EU Commission.  Provided these issues are resolved, the Green Investment Bank should be operational by the end of 2012.

13.  The purpose of including provisions for the Green Investment Bank in the Bill is to ensure that it adheres to its green purpose; it maintains its operational independence; and that the UK Government can continue to provide funding.  As banking is a reserved matter, an LCM would not normally be required to establish a bank.  However, as environmental policy is a transferred matter, it was considered appropriate to include the LCM in order to be fully assured that Northern Ireland businesses will be able to benefit fully from this additional funding.

14.  Having considered the evidence, the Committee agreed to support DETI in seeking the Assembly’s agreement to the UK Parliament considering provisions of the Enterprise and Regulatory Reform Bill dealing with the devolved matters of the UK Green Investment Bank and payments to directors of quoted companies.

Appendix 1 - Enterprise and Regulatory Reform Bill

Appendix 2 - Legislative Consent Memorandum Enterprise and Regulatory Reform Bill

Appendix 3 - Minister for Enterprise, Trade and Investment to Committee Chairperson 30 October 2010

Appendix 4 - Minister for Enterprise, Trade and Investment to Chairperson 6 September 2012

Appendix 5 - Official Report 27 September 2012