There's more to the Tories' GEM idea than hot air after all

Ben Bland
Last Updated: 11:31pm BST 20/07/2008

When politicians meddle with markets their interventions are often unwelcome, unwarranted and unhelpful.
So when George Osborne, the Conservative Party Shadow Chancellor, said in March that he wanted to launch a "Green Environmental Market" (GEM), he received a sceptical reception from City financiers and insiders at the London Stock Exchange (as well as this column).
The view from the Square Mile was that, with around 50 clean technology companies already listed on Aim, there was really no need to establish a separate green market.

The key question was whether Mr Osborne and his boss David Cameron were genuinely interested in fostering the development of clean tech companies or had merely conjured up GEM in a bid to snatch a few headlines and boost their flagging green credentials.
While some expected GEM to go the same way as Home Secretary Jacqui Smith's suggestion that perpetrators of knife crime visit their victims in hospital (which was confined to the dustbin of failed spin), Mr Osborne may yet prove his critics wrong.
A working group set up by the Tories to discuss their idea has met at least three times since March and is making progress.
"People were sceptical of the initial proposals but there are enough experts on the committee to point the Tories in the right direction and it's looking more encouraging," said one City source.
The committee, which has been organised by Mr Osborne's shadow Treasury team, includes Marcus Stuttard, the LSE's deputy head of Aim, and several other well-established members of the Aim community.
The committee has encouraged the Tories to drop the idea of a separate green market and focus instead on creating a special segment on the LSE's existing markets for clean tech companies.
"What they're looking at now is something that will be more like Techmark [the LSE's main market grouping for technology companies] except that it will offer some tax incentives and will be for both Aim and main market companies," the source explained.
One option the committee is looking at involves bringing in similar tax incentives to those offered to people investing in venture capital trusts, who get income tax relief. However, any changes to the tax provisions are likely to require new legislation and will have to satisfy EU restrictions on state aid. The committee is also grappling with the challenge of how to nail down which companies qualify for inclusion in this green index.
With lucrative tax advantages potentially on offer, companies will be keen to be added to this grouping. Yet there is no clear criteria for defining green companies. While most people think of windfarm operators or fuel cell developers, a number of water companies and waste disposal groups like to describe themselves as "clean tech" businesses.
"It's still a work in progress and the devil will be in the detail but the framework looks quite encouraging," concluded one person close to the committee.