UK Infrastructure Bank Bill [HL]
Wednesday 11th May 2022
(2 years, 6 months ago)
Lords ChamberRead Full debate UK Infrastructure Bank Act 2023 Read Hansard Text
UK Infrastructure Bank Bill [HL]
Tuesday 24th May 2022
(2 years, 6 months ago)
Lords ChamberRead Full debate UK Infrastructure Bank Act 2023 Read Hansard Text
Baroness Penn (Con)
My Lords, it is a great pleasure to open this Second Reading. The UK Infrastructure Bank Bill is the final stage in establishing the UK Infrastructure Bank as an operationally independent and long-lasting institution.
Before I go into the provisions of the Bill, it may be helpful if I provide some context to the bank. In 2018, the National Infrastructure Commission produced the first national infrastructure assessment—NIA—which recommended that a new UK-wide infrastructure bank be established to manage the loss of funding from the European Investment Bank. In 2019, the Government undertook the infrastructure finance review—IFR—consultation, which found support for a new, enduring body to deliver infrastructure finance support tools in line with the NIC’s recommendation.
Responding to the national infrastructure assessment, the Government published the National Infrastructure Strategy in 2020, setting out their plans to bring forward a UK infrastructure bank. A policy design document was produced in spring 2021 and the bank was launched at pace in summer 2021. In the design and set-up of the bank, the Government have delivered three crucial requirements from the original National Infrastructure Commission recommendation.
The first recommendation from the NIC was that the bank should be operationally independent. This is something the Government take very seriously, and which is important to support the bank’s credibility in the market as a long-lasting institution. Respondents to the infrastructure finance review told the Treasury that independence increases efficiency and ensures commercial decision-making. However, the institution needs to operate in line with the Government’s overall infrastructure goals.
One of the reasons we have a Bill today is to protect that operational independence. Noble Lords will note that the bank is already operational but the Government cannot simply sell or dissolve the bank without further legislation. The Government are also unable to change the bank’s objectives without further primary legislation, or its activities or definition of infrastructure without further secondary legislation.
Finally, the Bill also gives the market a clear remit as to the extent of the Government’s powers over the bank. This builds on the bank’s existing operational independence, as set out in its framework document, which provides that the bank has authority to make its own investment decisions within its delegated limits without ministerial approval.
The second recommendation was that the bank should focus on addressing the market failure in economic infrastructure. An assessment from Vivid Economics for the National Infrastructure Commission showed that, in some cases, EIB activity crowded out private investment. Likewise, IFR respondents told us that the private sector would be able to fill some of the lending gap left by the EIB. Therefore, while the bank is designed to take on the role which the EIB previously filled in investing in new green technologies and development, it is not designed to replicate all the previous activities of the European Investment Bank. This is reflected in the two objectives the Government have set for the bank: to tackle climate change and support efforts to meet the net-zero target in 2050, and to support regional and local economic growth.
With regard to the climate change objective, significant public and private investment will be needed to achieve the UK’s infrastructure policy goals, and low-carbon investment will need to be significantly scaled up to deliver net zero. This is highlighted by the fact that the UK’s core infrastructure—power, heat and transport networks—accounts for over two-thirds of UK emissions. Without the bank, the private sector is likely to focus its investment on lower-risk technologies and sectors. The bank can play an important role by crowding in private finance to invest in higher-risk and nascent technologies, and in scaling subsidy-free business models —both of which will be key to transitioning to net zero. Linked to this, the bank’s focus on rapid progress on its net-zero goals overlaps with the Government’s renewed focus on energy security.
On the second objective, to support regional and local economic growth, disparity in infrastructure across the country has been identified as a key driver of economic inequalities. Central to the Government’s ambitions to level up is setting up new institutions boosting productivity, pay, jobs and living standards by growing the private sector and supporting it to deliver opportunities in parts of the country where they are lacking. Without intervention, the private sector is likely to continue to target geographic areas that have historically received higher levels of private capital. Respondents to the IFR highlighted that any government institution in replacement to the EIB should seek to consider regional balance. The bank aims to remedy geographic inequality and drive improvement in long-term productivity across the country by crowding in private capital to areas that have been left behind, strengthening regional and local economies.
Further, the bank responds to the need identified in the levelling up White Paper to boost local decision-making to allow communities to make the improvements that are most needed. An additional source of government-backed finance for local authorities will give local decision-makers increased power in deciding which investments in infrastructure will have the most impact on their local economy.
Finally, on the recommendation to set up the bank at pace, noble Lords will note that the bank was launched in summer last year, less than a year after the Government announced plans for the bank in the National Infrastructure Strategy. Since its launch, the bank has already completed six deals, including financing the UK’s largest operational solar farm in south Wales. The bank has also invested in Teesworks, a £107 million investment in Tees Valley Combined Authority’s project to transform the former Redcar steelworks site to service the offshore wind sector and support around 800 high-quality jobs. The bank will work towards achieving a double bottom line, whereby investments help to achieve its core policy objectives while generating a positive financial return to ensure the financial sustainability of the institution and reduce the burden on the taxpayer.
On the provisions in the Bill itself, we are legislating for the bank to complete its set-up as an operationally independent institution. The Bill is broadly split across three areas: enshrining the bank’s objectives and activities in legislation to provide clarity for the bank and the market as to the bank’s long-term purpose as an enduring institution; providing for financial assistance, including, crucially, giving the bank the power to lend directly to local authorities and the Northern Ireland Executive; and, finally, supporting the bank’s operational independence by setting out clear accountability for how it is to be run, including reporting and board requirements.
First, on the bank’s objectives and functions, Clause 2 sets out in statute the bank’s objectives of tackling climate change and regional and local economic growth, and in doing so provides clarity to the market as to the bank’s policy objectives. I have already set out the rationale for the bank’s two objectives, but it may be worth elaborating slightly when it comes to climate change. I know that questions have been asked as to whether the bank’s objectives allow for investment to improve the UK’s natural capital. The Government undertook a review of the bank’s environmental objectives, which concluded that there is significant scope for the bank to invest in nature-based solutions while achieving the bank’s existing objectives. This was further emphasised in the Treasury’s strategic steer to the bank, which I will come to shortly.
Clause 2 also sets out three activities that the bank can perform to deliver its two objectives. The bank’s activities are: providing a range of financing tools for private sector investment; financing local and mayoral authorities across the UK; and providing an expert advisory service to help local authorities. The bank’s activities also allow for it to invest in mixed-infrastructure projects, such as a transport hub that includes some housing.
Finally, Clause 2 also sets out the definition of “infrastructure” for the bank. The bank has been set up to invest in economic infrastructure, as per the recommendation of the National Infrastructure Commission, as this was where there was greatest need for government-backed lending. The definition of infrastructure has been adapted from that used in previous legislation, but with the social infrastructure aspects of previous definitions removed and the addition of climate change technologies and facilities. This ensures that the bank will be able to invest in a range of economic infrastructure sectors and in emerging new green infrastructure technologies to deliver on its objectives.
Although the bank’s objectives will be able to be amended only through future changes to primary legislation, Clause 2(6) allows for the bank’s activities and definition of infrastructure to be amended via secondary legislation. The Government believe that this strikes the right balance between ensuring long-term clarity on the objectives of the bank while allowing for the possibility that a future Government may wish to change the emphasis of the bank’s activities for policy reasons and may desire to alter the definition of infrastructure to support this change. It also allows for the fact that the bank’s approach may need to evolve to reflect changes in the market for infrastructure. Both these powers are taken under the affirmative procedure, in line with the Delegated Powers and Regulatory Reform Committee’s guidelines, and to allow for parliamentary scrutiny.
Turning to the financial assistance provisions, Clause 5 allows the Treasury to put the bank into funds, including through the National Loans Fund. As I mentioned previously, the bank has been funded with £22 billion of capital initially, and the level of financing for the bank will be reviewed ahead of spring 2024 to ensure that it continues to meet its objectives in the most affordable way. Within the definition of the bank’s activities, the Bill will also, crucially, remove the existing legal barriers that currently prevent the bank lending directly to local authorities.
Finally, I turn to the governance measures in the Bill. Clauses 3 and 4 allow the Treasury to issue a strategic steer and a power of direction respectively. Given that the Government remain accountable to Parliament for the bank and for any element of risk that the activities take, it is right that the Government have some degree of influence over the bank. The Government recently issued their first strategic steer to the bank, in which they set out the expectation that the bank should develop strong relationships with the devolved Administrations and their institutions, for example the Scottish National Investment Bank.
A power of direction is not uncommon in arm’s-length bodies and is not designed to be used often. Where the power is used, statute will require that it follows consultation with the bank’s directors and is published to ensure ministerial accountability for the content of the direction. The legislation for the Bank of England, in the Bank of England Act 1946, and Her Majesty’s Revenue & Customs, in the Commissioners for Revenue and Customs Act 2005, both include a power of direction. This will not interfere with the bank’s day-to-day operations or investment decisions.
With a body in statute, it is important to set out how the governance of the bank will work in practice to ensure transparency and accountability to Parliament. As is usual practice, Clause 6 will ensure that the bank’s annual reports and accounts are published in Parliament. Clause 7 sets out the process for appointing directors and other practical aspects such as the size of the board, which is consistent with similar bodies such as the Bank of England. We also think that it is appropriate to have a statutory review after 10 years, and subsequently at least every seven years, to ensure that the bank is still meeting its objectives. This is set out in Clause 9.
I greatly look forward to the debate we shall now have on Second Reading and hearing the expertise of noble Lords in the Chamber. I beg to move.
Lord Teverson (LD)
My Lords, I declare my interest as a trustee of the Green Purposes Company, which has custodianship of the green share in the Green Investment Bank. I suppose that takes me on to my first questions: what is the purpose of the Bill, and do we on these Benches welcome it? I suppose we sort of do. It is the right thing to do but what an irony, in a way, that it comes after the Green Investment Bank, from 10 years ago, was privatised a few years later and we somehow have to replace it with another bank that has as its major objective the green purposes that were in the Green Investment Bank, which was then in the public sector to deliver net zero by 2050. I correct myself —I think it was 80% at that time.
I am also interested that the Minister was able to say, without any hint of irony, that one of the reasons for the Bill was that the bank was enduring, as if there was a temptation there of Governments—particularly Conservative Governments—to privatise these institutions and they had to save themselves from doing so again and repeating the activity by making sure it was fully embedded in the Bill.
One of the reasons I think there is an opportunity missed here is that as Liberal Democrats we look across the channel at the KfW, the bank in Germany, which has a much broader remit and is so much more successful in that economy, from the Mittelstand of German companies right the way through to a global objective. This is a very small step. One of the things that came back from the Government in the past, when we were a member of the EU, was that we were not able to extend to that degree because of Commission and EU rules and regulations. Now that we are free of that, here we have a very constrained bank that looks at very specific areas. We welcome those areas, and I will take the argument on from there as it is, with its own restricted remit.
One of the things that comes out, and I am sure will be dominant in our conversations and debates in Committee and on Report, is the fact that the Bill rightly identifies climate change and net zero as objective 1. Clearly, we all welcome that. I accept that the Minister has tried to talk around this, but there is another equal emergency: biodiversity and the decline of nature in this country and globally. Although, as she correctly says, the climate change remit can cover certain things, such as nature-based solutions, it seems strange that in this world now we somehow deny the equal importance of the biodiversity emergency and the objective of improving that. That is one of the key things that must happen in the Bill. We need to have that biodiversity crisis of an equal stature. They are interrelated in all sorts of ways. We know and have seen in previous debates, particularly during the passage of the Environment Act here last year, that those two crises are interconnected. You cannot solve one without the other, and we need both to be present in the Bill.
From a much more economic point of view, which I know the Bill is about as well because it is about private as well as public investment, we should not forget the circular economy. I would be very upset and find it strange if the bank did not see as one of its objectives to move the UK from a linear economy to a circular one. It seems clear to me that this ought to be an objective that we have nationally and that the infrastructure bank is able to help to deliver, whether it be local authorities or private companies.
One of the biggest challenges in net zero is energy efficiency—making our economy, from households through to commercial properties and infrastructure, much more energy efficient as time goes on, so that we do not need to build more and more energy generation and can manage demand. I would be interested to understand from the Minister how the bank can be involved in that process in particular. It seems to me to exclude building efficiency, which is one of the malaises of the British economy and our built infrastructure. How can we meet that as well?
Although the Minister mentioned the institution, the National Infrastructure Commission is not mentioned in the four pages of the Bill—it is one of the exclusions. I readily accept that the UK Infrastructure Bank comes out of recommendations from that commission, but it seems very strange to me that the Government have this commission, which I think reports to the Treasury, yet somehow this bank’s direction is driven purely by the Treasury and there seems to be no connection at all with the National Infrastructure Commission. Surely there needs to be some pathway that is obvious and transparent from the recommendations of those reports, which are high quality and well put together, and should be a long-term way of improving our infrastructure investment in this country. There should be a connection somewhere there as well.
The other major issue is risk appetite. One of the things we learned from the Green Investment Bank—which was not perfect—was that, because there was such pressure from the Treasury that it should, if you like, turn a profit and build up its own reserves in the early years, its actual investment was quite conservative. In fact, you could question how much, in its very early days, it substituted the private sector or found the capacity where the private sector would not come in—providing additionality. I am not sure that it did.
Here too, I am far from convinced that the UK Infrastructure Bank will have a motivation to fill the areas that the private sector is not willing to or, indeed—perhaps more importantly—drive forward slightly more risky innovation in infrastructure, zero carbon and nature-based solutions. I think it will be risk-averse, and I would like the Minister to assure me that there will be a reasonable risk appetite. None of us expects the UK Infrastructure Bank to throw money away and be in debt, but we surely want it to be a leader in stimulating innovation moving forward, not just replacing private capital. I would be very interested to hear that. All the Treasury controls will mean that this bank is cautious.
Lastly, I will talk about supervisory boards. I was quite shocked that there was going to be a 10-year review; I cannot imagine that there will not be amendments tabled on that. Reviewing an institution after 10 years is ridiculous; it is two Parliaments and is probably beyond the life of half the Members here in the Chamber —I do not know. I am sorry, I should not have said that—but it is not satisfactory.
One of the things I have since learned through my work with the Green Investment Group, which I congratulate on everything it has achieved recently, is that you need some sort of supervisory board or independent body to check, post investment—I am not talking about investment at committee level—that the bank has met its objectives and remit. It is important that there is scrutiny beyond the Treasury and, of course, very loose scrutiny from Parliament, which does not really work. We will certainly bring that forward as one of our amendments, to make sure that the bank meets its objectives.
In 2012, the Green Investment Bank was legislated for, and 10 years later we are starting again. We on these Benches wish the bank good luck. I would like to understand, as my noble friend Lord Bruce asks, how it ties up with things such as the Scottish investment equivalent. We would be interested to hear that, but we wish it well. It is limited—we hope that it can broaden its remit—but we start again for success, we hope, in infrastructure and for net zero.
Lord Bourne of Aberystwyth (Con)
My Lords, I declare my interests as set out in the register. I am, of course, a member of Peers for the Planet. It is a great pleasure to follow the noble Lord, Lord Teverson. We have been on the legislative barricades on the subject of Cornwall before, but I agree with much of what he said about the Bill, and I will go into that.
First, however, I very much welcome the Bill, although I think it can be strengthened, and I shall be setting out some questions for the Minister. The Bill’s aim, as stated, is to put the infrastructure bank on a statutory footing and to ensure that it is an independent institution. I shall have something to say about that, too. It is a company wholly owned by the Government—a registered company under the Companies Act 2006. It has a dual-track approach, to be entirely fair: it is not just about tackling climate change, although that is central; it is also about supporting local and regional growth. I agree with both aims, which are key. Net zero by 2050 is central to everything we need to do as a Government and a country, and for the bank to have a leadership role in that it is important, as it is on levelling up. To have public sector finance with leverage-in of private sector finance is very valuable.
I very much agree with what the noble Lord, Lord Teverson, said, about the need to address the climate change goal on a broader front—by addressing nature challenges. The Climate Change Committee set those out very clearly in its independent assessment in 2021. We are near an ecological tipping point and we need a nature-positive economy. The report of the Dasgupta review, which the Treasury asked for, is seminal in that regard and much of the principle contained there should be in the Bill, front and centre. A basic difficulty I have with the legislation is that, on the one hand, there is not enough at the front of the Bill and, on the other, we are told that directions are coming forward under Clause 4 from the Treasury, independently of Parliament. We seem to be getting the balance wrong there and I should be interested to hear what the Minister has to say about that.
Moving on, the Bill’s definition of infrastructure under Clause 2(5) is not exclusive but, I think, needs to be more all-encompassing. For example, it includes gas and sewerage but not energy efficiency. Why not? It would be simple to include it and I think we should. We need to accelerate what we are doing on energy efficiency to be anywhere near getting to the net-zero goal in 2050 and I cannot see any compelling argument why it should not be in Clause 2(5). We need more detail on that.
I also press the Minister on the nature of the bank’s objectives and activities. I understand that the objects are set out in the company’s constitution and that can be altered only by primary legislation, as the Bill makes clear—that is absolutely right—and infrastructure can be altered only by an affirmative piece of secondary legislation. I go along with that as well. So far, so good, but Clause 4 allows the Treasury to give a specific or general direction to the bank about how to deliver its objectives. If that were limited to the issue of devolution, to which I will come shortly, all well and good, but I do not think it is. It does not appear to be under the legislation.
What is the interaction between objects, which can be altered only by primary legislation, and directions under Clause 4, which can be altered by the Minister—the Minister, incidentally, who also appoints all the directors? There is double control there, and it seems to me to get the balance wrong, particularly if we are stressing the importance of the bank’s independence, as the Minister rightly did. At the same time, Clause 4 says:
“The Treasury may give a specific or general direction to the Bank about how it is to deliver its objectives.”
As I said, that is the same person who was appointing all its directors. It does not look that independent to me.
I will also ask about the financial capacity. Twenty-two billion pounds sounds like a lot of money; it is made up of equity, debt and guarantees. it is a lot of money, but it does not seem as much when compared with other countries, such as Germany. Are we convinced that £22 billion is sufficient? I am also interested in hearing how that sum was arrived at, what evidence was taken and how that was assessed.
As I said, I am also interested—I am sure other noble Lords will be too—in the territorial extent and application, and the interaction with Wales, Scotland and Northern Ireland. I am pleased that the Government are quite clear that there is a devolved aspect to be dealt with. In fairness, Annexe A in the Explanatory Notes is helpful in that regard, indicating which matters are reserved and which are devolved. Of course, there is inevitably a grey area. This is the physics of it. What is also important is its chemistry: what provision are we making for discussion with the Welsh Government in the Senedd, the Scottish Government in Holyrood and the Northern Ireland Executive in Stormont? I hope that there are some measures which will be taken to ensure that, as a union, we protect all parts of the country in relation, not least, to the levelling-up part of the aims of the bank. I would be grateful if the Minister could indicate how she expects the interplay between the four parts of the United Kingdom to play out.
I have just two more points. First, on any potential conflict between aims, the Government have said—understandably and rightly—that energy security is important. We must look at energy security in terms of the operation of the bank. How does that interplay, though, with the need to ensure that we protect against high-carbon projects? Again, this perhaps comes back to the point of needing something in the legislation about a “do no harm” principle so that we can ensure that both aims are protected and one does not prevail over the other—otherwise, there is danger there.
Finally, I very much approve of the levelling-up part of the agenda in relation to the bank. The headquarters in Leeds is very welcome. It is a much more constructive move than the somewhat childish suggestion that the House of Lords goes to Stoke-on-Trent; it seems much more realistic and in line with what we should be doing. I am pleased about some of the earlier decisions on investment, which seem to be spread in south Wales, Teesside and so on—that, too, is valuable.
I am sure there will be many more points as we go through Committee and Report, but that was an overall view of the objectives and some general questions to my noble friend the Minister.
Lord Thomas of Cwmgiedd (CB)
My Lords, I too welcome this Bill and agree with much of what has been said by the noble Lords, Lord Bourne and Lord Teverson, on two issues: first, the need to clarify the relationship on devolution and, secondly, the broadening of the objectives so that they really do cover environmental aspects beyond climate change. However, other noble Lords are much more expert than me on those matters, so I want to direct my observations to three specific points.
First, to take up a point made by the noble Lord, Lord Bourne, it is very important that we clarify what is meant by “directions” under Clause 4. I welcome the idea of the Bank’s independence. If you are looking after future generations, you must have a body not subject to political pressures. The Climate Change Act, in its balance, has at least provided a mechanism for doing that. What is meant by “directions” and, more specifically, what is meant by a “specific” direction? Does this mean that when the bank wants to invest in a project, it can be told that it must not do it by the Treasury? I very much hope, therefore, that the Minister can clarify this; otherwise one will have to look for some means of defining what is meant by “specific”.
The second point, which again has been touched on, relates to the appointment of directors. I am delighted to see that the Government accept that this Bill, when enacted, will be part of environmental law. The Treasury loves to appoint people with complete discretion—one can see that in the lack of restrictions on whom it can appoint to various boards—but now that we are dealing with environmental law, can Her Majesty’s Treasury not look at the Climate Change Act and the Environment Act and see that the board as a whole needs a range of qualifications? I particularly urge the Minister to have regard to Schedule 1 to the Climate Change Act and Schedule 1 to the Environment Act—I do not want to take up time reading them out —which require the board as a whole to have certain of the qualifications necessary to ensure that it has the expertise to carry out its functions. I do not see how a board that has the twin objectives of dealing with climate change and perhaps broader environmental issues, and the development of regional infrastructure—within that I include development in the devolved nations—can do that without people with specific expertise. It plainly needs financial expertise, but in the case of the non-executive directors, in particular, whom the Treasury can appoint, there should be a model that is consistent with environmental law, not with the Treasury’s general attitude, which is that it loves to control everything. I think it ought to realise that there is now a greater force than it.
Finally, I turn to Clause 8. The Explanatory Notes dryly explain that:
“This clause is intended to ensure that the duties imposed upon the Bank by the Bill are technically enforceable as a matter of law.”
In looking at environmental legislation—this is true in every country in the world—we have long learned that there is an inherent conflict of interest between the short-term and the long-term, and plainly in this Bill there is also a potential conflict of interest between economic development, and climate change and environmental protection. Indeed, this is recognised in paragraph 4.2 of the framework document:
“The Company’s dual objectives of investing in projects to help mitigate and adapt to climate change, and to support regional economic growth across the UK have huge potential synergies. But occasionally these objectives will be in tension with each other, especially in the near term”,
which is a way of the Government conceding, in careful language, that there is an inherent tension in what is to be done by this bank.
Therefore, I return to the point raised by the noble Lord, Lord Teverson: how do we ensure that the bank meets its legal duties? The Explanatory Notes explain that Clause 8 is to do with ensuring that the articles of the company are consistent with what the Bill provides. I find it astonishing that we need a clause for that purpose, bearing in mind the control the Treasury has over the bank, but that is conceded when the notes state:
“It is not envisaged that these provisions will be needed in practice.”
However, we do need these provisions in practice: we need something to ensure that the duties of the bank are not merely aspirational, which is so much of what is said these days, but enforceable.
There are various mechanisms of enforcement. The Climate Change Act contains one; a legal duty enforceable in the courts is another. For example, one could think of giving the Office for Environmental Protection some role in enforcing the obligations of the bank. However, one cannot buy a share in this bank and go to a shareholders’ meeting, and one cannot bring an action as a shareholder against the directors, because there will not be any shareholders. The only people who can enforce this are Parliament—and I shall not make any observations about that—or the Treasury, which has an inherent conflict of interest: the short-term and long-term considerations.
Therefore, I very much hope that we look particularly at Clause 8. It is a very good clause in one sense, but we need to put something in the Bill to ensure that the bank’s duties are not simply aspirational but are actual duties in a legal sense and can be enforced by someone with a motivation to enforce them.
Lord Holmes of Richmond (Con)
My Lords, it is a pleasure to take part in this Second Reading debate and I congratulate the Minister on the manner in which she introduced it.
It is often more helpful to look at the practical to see how something works, rather than what is potentially set out on paper. To that end, I ask my noble friend to give the House some details on the offshore wind deal that the bank did recently. What made this deal unattractive to the market and applicable to the UK Infrastructure Bank? Similarly, what analysis sits behind the proposed crowd-in figure of £18 billion. In many ways, it strikes me as somewhat conservative. Also, what analysis sits behind 20 basis points in terms of advantageous lending? Why is 20 basis points considered the sweet spot to attract people to this vehicle rather than others?
The noble Lord, Lord Teverson, rightly alighted on the question of risk. As other noble Lords have commented, this will be critical to how the bank operates, succeeds and is seen in broader circles. So I ask my noble friend to set out some commentary on the risk appetite of the bank; how will it differ from other existing lenders?
On crowding in, how will the bank enable angel investors and other sources of investment to be drawn into this model, as set against existing models? Similarly, what analysis has been done to ensure that crowding out will not be a feature of this approach?
On operational independence, I ask my noble friend to clarify whether the bank is free to lend and conduct other activities, such as guarantees, at any level and that there will be no Treasury involvement in the quantum of any business or deals the bank does.
As other noble Lords have commented, there is a lot to be said on definitions. Would the Minister not agree that having nature-based solutions in the definitions of infrastructure in the Bill would be a thoroughly good thing, not just in light of Dasgupta and COP, but closer to home? I gently direct her to the recent report on nature-based solutions of your Lordships’ Science and Technology Committee, on which I was privileged to serve.
Finally, could my noble friend confirm that, if the plan is not clear, there is certainly a possibility that the route to privatisation is already seeded in this legislation? To that end, what is the proposed timeline and what would the bank’s book look like at that stage?
We clearly have an infrastructure challenge, and thus opportunity, in this country. If the bank can play a positive role in that, it is all to the good. But does my noble friend not agree that, while economic infrastructure is critical, it fails to achieve a significant part of its objective and transform our nation in the way it might if it is not also firmly and fully tied to social infrastructure?
Baroness Noakes (Con)
My Lords, this Bill is about an organisation which has the Treasury’s fingerprints all over it. The Treasury will control almost every aspect of what the UK Infrastructure Bank will do. It may well have operational independence, whatever that means, but its whole existence is circumscribed by what the Treasury tells it to do. The Bill features a statement of strategic priorities under Clause 3, and directions issued by the Treasury under Clause 5. Outside the Bill, there are already many documents, including an extensive framework document and a strategic steer letter from the Chancellor. The Treasury will appoint most of the board and will have, as one of those non-executive directors, its own representative on the board, who is to be given significant rights beyond those of a normal non-executive director. We should be in no doubt that this body will be the plaything of the Treasury, and it is surprising that its new chairman, for whom I have very high regard, would agree to be its front man.
Noble Lords will know that I am not in favour of a big state. We should not create new public bodies unless there is a clear problem to which existing institutions, both public sector and private sector, could not provide solutions. I am not convinced that this test has been met. I acknowledge that the Treasury has consulted on the creation of the UK Infrastructure Bank but there are always lots of people who want access to money on soft terms, or to pursue their obsessions. They will be the same people telling the Government that £22 billion is not enough.
The green lobby can be relied on to say that the transition to net zero will cost a very large amount of money. Those who used to access the European Investment Bank want similar access to cheap long-term money and they will doubtless say that it is not enough to compensate for what they used to get from the EIB. The mere mention of levelling up is always accompanied by a begging bowl. We should be very wary of those who just want more access to taxpayers’ money. At the end of the day, it is just government expenditure in different clothes.
Noble Lords might have gathered that I do not like this Bill very much, but I am nothing if not a realist. To that end, I will focus on some specific concerns. First, the intention, as set out in the framework document but not in the Bill, is that this so-called bank should achieve additionality, which is expressed in the framework document as prioritising
“investments where there is an undersupply of private sector financing and, by reducing barriers to investment, crowd-in private capital”.
It will not be difficult to crowd in private capital. The UK Infrastructure Bank will sit there with a bit over 40% of its capital in equity form and it will also have access to National Loans Fund debt. That will give it a very low cost of capital compared with proper banks and it would be very surprising if it failed to attract private money to ride in on the back of that. The bigger issue, which has been mentioned by my noble friend Lord Holmes of Richmond, is whether private capital will be crowded out. This is not even mentioned in the various documents that I have seen.
The arbiter of whether there is an undersupply of private sector financing will be the company itself. If the UK Infrastructure Bank gets that judgment wrong, it will take risks and fund propositions which could as easily be delivered by wholly private sector investment. The Economic Affairs Committee, on which I sit with the noble Baroness, Lady Kramer, is conducting an inquiry into the investment required for the transition to net zero. We have had evidence that there is a lot of investment money out there and that the barriers are more about clarity on government policy and on market models. The danger of crowding out is a very real one.
What will the Government do to ensure that the company does not crowd out the private sector? There appears to be no mechanism whereby the private sector can raise issues if they feel that the financial muscle of the UK Infrastructure Bank has been used inappropriately. My noble friend will be aware that if private sector companies want to be crowded into attractive deals, they will be very cautious about complaining too loudly about being crowded out. How will the Government ensure that the private sector is not steamrollered by this new pseudo-bank?
My second concern is the periodic review set out in Clause 9—the noble Lord, Lord Teverson, has already referred to this. I support the need for a review, but the Treasury should not undertake it because, given its very close involvement with the UK Infrastructure Bank, it comes very close to marking its own homework. As the noble Lord suggested, 10 years is just far too long before the first review.
In addition, the review’s scope deals with effectiveness in delivering objectives, but additionality, which I referred to a few minutes ago, is described in the framework document only as an operating principle and not as an objective. That implies that crowding in or out of the private sector will not be covered in a review under Clause 9. We will need to look at Clause 9 in some detail in Committee.
I have two specific questions for my noble friend the Minister. The first concerns the role of the Comptroller and Auditor-General and the National Audit Office. As I understand it, the C&AG has been appointed as the company’s current auditor. The framework agreement is silent as to whether this will continue or, if a commercial audit firm is appointed as the company’s auditor, whether the NAO will continue to have access rights to the company. It is important that the needs of parliamentary scrutiny and accountability are properly set up for all public bodies when they are created, and we have to ensure that the C&AG can examine the economy, efficiency and effectiveness of the way the UK Infrastructure Bank operates at any time. I hope my noble friend will confirm that that is indeed the case for the UK Infrastructure Bank.
My second question is on the interaction between the UK Infrastructure Bank and financial regulators. The framework document refers to the possibility that the company’s activities will be within the scope of the PRA and the FCA. Can my noble friend explain what in practice this is likely to mean? What activities are likely to engage the financial regulators and what are the implications of that? For example, will the company be subject to the rulebooks of the PRA and the FCA?
The Green Investment Bank lasted only a few years before it was sold off to Macquarie. That reflected a sound Conservative principle that the state should not do what the private sector can do equally well or better. In that light, I wish the UK Infrastructure Bank success so that a future Chancellor of the Exchequer can privatise it.
Baroness Young of Old Scone (Lab)
My Lords, I always like following the noble Baroness, Lady Noakes, who I have disagreed with—I was just working it out on the back of an envelope—for 44 years. I declare my interests as chair, vice-president or commissioner of a range of conservation and environmental charities as listed in the register.
I welcome the establishment of the UK Infrastructure Bank and the opportunities it provides for building back better across the UK regions. As many noble Lords have said, the dual mission to enable investment for net zero and for the levelling-up process is good, but I agree entirely with the noble Lord, Lord Teverson, and others that the Bill is lacking, since it fails to task the bank with supporting wider environmental goals, specifically the Government’s environmental flagship target of recovering species by 2030. I call on the Government to add this vital third objective of species recovery to the bank’s objectives in the Bill and to ensure that it is strategically equipped to help deliver the Government’s nature recovery objectives.
Giving the bank a role in broader environmental delivery would also help support the other two objectives that it already has. It is universally recognised internationally and in the UK that climate change and biodiversity decline are two sides of the same coin and need to be tackled in an integrated way; net zero cannot be achieved without fixing biodiversity decline and biodiversity decline cannot be reversed without fixing net zero. Investment in both net zero and biodiversity recovery projects delivers jobs and improvements in the quality of place that are necessary for the levelling-up agenda. The whole thing is inextricably linked, and we need these three objectives to work together.
I will give noble Lords some examples of where biodiversity improvement and climate change action help with the levelling-up agenda. Projects to improve woodland, peatland and parks could not only deliver climate change and biodiversity benefits but support over 16,000 jobs in the 20% of UK constituencies with the worst labour market outcomes, such as Copeland, County Durham, Wolverhampton and Ashfield. Restoring the UK’s coastal environment could result in benefits, both in adaptation and mitigation, worth £50 billion by 2050 and create over 100,000 new jobs. We need all those objectives to be part of the bank’s role. The Bill’s Explanatory Notes mention opportunities for investing in nature, but Explanatory Notes are not enough. This needs to be not just in the background as a hope but in the foreground as a third statutory objective.
The Minister kindly arranged a briefing with the chief executive officer and staff of the bank yesterday, for which I thank her, although I took part from a Costa café at Blackfriars, which was slightly unsatisfactory. At the briefing, we were told that the Treasury did not want to give the bank such a third objective on the grounds that the bank’s task was to fill gaps in the market and at the moment there is no established market in biodiversity delivery. The Minister said there might be a reconsideration of objectives if natural capital markets emerged, but she has just told us that that would require primary legislation—so I put that in the “too difficult” box. We need the objective now. The Bill is clear that the bank will have a role in crowding in private funding, developing markets where they are insufficient and applying covenants and conditions in its lending to help drive markets, so I believe that it should have a statutory role in market development in tackling biodiversity decline as well as climate change.
We also heard about the Treasury’s strategic steer. I must admit that I am slightly nervous about strategic steers from the Treasury. It mentions natural capital and biodiversity, but, if that is important enough to be in a strategic steer, why is it not important enough to be a statutory objective? It is intended that the strategic steer will be revised approximately once per Parliament and will be used by the bank to inform its strategic plan. Steers can alter from time to time and from Government to Government, while statutory objectives are less easy to quietly lose sight of. The bank is due to publish its strategy next month. We will be able to judge from that strategy the proof of the bank’s reflection on the Treasury steer in its commitment to biodiversity. Can the Minister gee up the publication of the strategy a bit to allow the House to judge the effectiveness of the steer process so far, before the House needs to reach a final view on whether such a third statutory objective is vital, as I believe it is? Let us see the strategy and what it says about biodiversity.
We also heard at yesterday’s briefing that the bank already has a principle of doing no net harm to climate change objectives in fulfilling its levelling-up objective. That is another reason why having biodiversity under broader environmental objectives is important. Can the Minister assure us that the bank will have a principle of doing no net harm to biodiversity and the broader environment in pursuing its statutory objectives? It must not fund projects which impede the delivery of the Government’s climate change or biodiversity targets, as enshrined in the Climate Change Act and the Environment Act. I believe that these no net harm principles should be statutory rather than just reliant on Treasury guidance or the bank’s sense of duty, which could evaporate. In the light of all this, should the Bill’s definition of “infrastructure” also be reviewed, as other noble Lords have said, to include nature-based solutions and enable the bank to consider these types of investments as part of its strategy to meet climate change and adaptation goals?
The Bill also raises other questions in my mind. It has already been raised that there is a big hole in the Government’s energy policy and energy security strategy, in the lack of focus and funding on energy efficiency measures, especially the retrofitting of the current housing stock. This is a vital element in meeting the net-zero challenge, but the Bill is absolutely silent on whether the bank will be able to focus on energy efficiency. Can I urge that the bank has a clear role in developing the market and funding for this major retrofit programme, with its significant contribution to jobs and warmer homes, which are also vital for the levelling-up agenda?
Lastly, the Bill requires periodic reviews of the bank, as other noble Lords have said. but the first one is required only
“within 10 years of the Act coming into force”.
That is too long. I would not go as far as the noble Lord, Lord Teverson, and say that I want it reviewed before I die, but noble Lords will kind of get the gist. I know that the bank will need a little time to establish itself and demonstrate impact, but 10 years is a bit of a stretch of the imagination.
I was very interested in the concerns of the noble and learned Lord, Lord Thomas, about the appointment of directors. I must admit that I was a bit concerned that, as far as I can see, none of the current non-executive directors of the bank has an environment or climate change background whatever—so the noble and learned Lord has a point.
In summary, the Government have elsewhere committed to clear objectives for net zero and halting biodiversity decline, as well as to the levelling-up programme. The three are interlinked, with natural capital projects, ecosystem services markets and nature-based solutions all capable of contributing to jobs, improvement in place and social justice. It is illogical that this important bank is tasked with only two of these three interlinked objectives. We should have a greater ambition for it.
Baroness Hayman (CB)
My Lords, it is a pleasure to follow the noble Baroness, Lady Young of Old Scone, and to speak in this debate. I declare my interests as co-chair and a director of Peers for the Planet.
It is also a welcome change to be discussing legislation where we do not have to argue the need to put net zero and the Climate Change Act on the face of the Bill. This is an innovation, and one that I hope will be repeated, but, as the Minister will have understood from the speeches made already today, there is another front opening up: the front of nature recovery and the importance of that being in the Bill. This bank is a central part of the UK’s infrastructure ecosystem and represents an important delivery tool for both levelling up and decarbonising the economy; for helping to scale up the markets for much-needed technology such as battery storage; for supporting new jobs through the circular economy; and, I hope, as others have said, for turbocharging the energy efficiency and retrofit measures that are so necessary, given the dire state of our building stock.
The current objectives set out in the Bill of helping to tackle climate change and promoting regional and economic growth underpin its strategic direction, and the bank’s background documents recognise the “huge potential synergies” between these objectives. But there is, as others have said, another synergy that is not spelled out in the Bill: the key opportunity the bank has to deliver for nature recovery and for the UK to be a world leader in nature-based investment. That investment could be for natural flood management, peatland restoration and repairing coastal habitats; and it could be for projects which protect and enrich our biodiversity, improve our resilience to climate change and provide opportunities, through the employment they give, to address regional inequalities. Ensuring alignment between the objectives of levelling up, tackling climate change and aiding nature recovery would in fact make it easier to achieve the economic growth we all seek.
There have been estimates that agriculture and nature-based investments could generate financial returns of £4 billion a year by 2050. Investors are starting to seize these opportunities, but there is a huge funding gap, estimated by the Green Finance Institute at £56 billion over the next 10 years. This is referenced in the “strategic steer”—a phrase to which I think we will return during the course of the Bill—given to the bank by the Chancellor, which also identifies
“several barriers to finance that need to be addressed for a mature commercial market to develop”.
To bridge this gap, it notes:
“Private sector involvement in the market will need to scale up significantly”.
I hope that UKIB can be part of and help to drive the development of this crucial market, because the work that government has already undertaken firmly underpins the argument that nature should be more clearly embedded within the Bill. In 2020, the Natural Capital Committee called for
“all publicly-funded infrastructure … to invest in maintaining and enhancing natural capital.”
The Treasury-commissioned Dasgupta review echoed this, and the Government’s response committed to embedding environmental considerations and a “nature-positive approach” across infrastructure portfolios. Similarly, there is strong evidence that accelerating the development of nature-based projects through UKIB would make a meaningful difference to economic growth and levelling up, as well as climate adaptation. We have an opportunity to secure greater ambition on nature now by including it on the face of the Bill. We need to recognise the urgent need to respond, most recently articulated by the first monitoring report of the Office for Environmental Protection, which advised the Government:
“Do not delay in making the changes necessary to protect, restore and improve our environment.”
Setting natural capital alongside the existing objectives of climate change action and supporting local economic growth—as well as ensuring a robust approach to these objectives in the operational, transparency and governance provisions of the Bill—would not only serve to implement the recommendations of the Government’s experts; it would set a clear trajectory for the bank and a strong example both domestically and globally that infrastructure can help to deliver a nature-positive future, and in so doing contribute to net-zero targets and the regeneration of UK regions, and bring economic growth to the UK.
The Minister set out in her opening remarks the Treasury’s view that support for nature-based solutions can be delivered through the bank’s existing policy framework without the addition of a specific third objective. Like others who have spoken, I am far from convinced that this is correct, so I look forward to exploring at further stages in the passage of the Bill how we can include tackling biodiversity loss and nature recovery as a clear, mandated objective for the bank. Having listened to other noble Lords, I also look forward to the debates that we shall have on the governance of the bank and the role of the Treasury in ensuring its independence.
We have an opportunity to ensure that the UK Infrastructure Bank will be a world leader in supporting nature’s recovery, a subject on which I heard the Minister’s colleague the noble Lord, Lord Goldsmith, speak eloquently at an event only today. I hope that we will grasp that opportunity; I look forward to future debates, and to strengthening the Bill as it proceeds through the House.
Lord Sarfraz (Con)
My Lords, I agree with all that has been said by noble Lords today and I am grateful to my noble friend the Minister for hosting a very useful briefing yesterday. The bank has made its first six investments, two of which are in infrastructure funds managed by third parties. It would be very helpful to get a sense of how much direct investing, versus fund investing, the bank intends to do. Your Lordships will remember how the CDC—now British International Investment—changed its investment strategy several times between direct investing and fund investing; it would be helpful to understand what lessons the Government have learned from that experience.
There are many specific questions around the bank’s overall investment strategy: deal sizes, deal types, allocation by stage and geography, and value added after investment. All this is be made clear in the bank’s strategic plan, which we have not yet seen and is to be published in June, but I hope that my noble friend will consider sharing more specific detail on the bank’s investment strategy before Committee. For example, the bank has held consultations with over 100 organisations; it would be useful to see a summary of the findings if one is available.
Meanwhile, I have two very specific concerns. The bank’s big strategic objective is to help to tackle climate change. This is a wonderful thing but it is important to be clear what methodology, techniques and standards the bank will use to measure its impact. Perhaps the Minister can address this point.
Secondly, as the noble Lord, Lord Teverson, said, Clause 9 means that it is entirely possible that, in 17 years, the bank’s shareholder will have reviewed its performance only twice. That is just incredible. I do not know of any individual company, foundation or endowment—not anyone—who would conduct such infrequent reviews of their investments. If this was a private bank, its shareholders would demand a lot more in terms of reporting. There is no reason why the Government should not do so as well.
Lord McDonald of Salford (CB)
My Lords, like all noble Lords—with one signal and articulate exception—I too support the establishment of the UK Infrastructure Bank. The Bill to give the bank a statutory basis is part of the essential and, I hope, accelerating effort to put the environment at the heart of everything that the Government do.
The bank has just two strategic objectives. The first is that its investments must help to tackle climate change. I have one point to make—speaking in the middle of the debate, it is not an entirely novel point, but I hope that the Minister will be persuaded by repeated advocacy—but that point needs a strategic context. The context is the massive strain that humankind is putting on the planet where we live.
To expand that context, I cite David Attenborough. A few years ago, he came to address the leadership conference of the Foreign Office. An ambassador asked him what the clearest thing he had learned was, after all his decades of travelling the world and filming nature. Sir David contemplated this, then answered as follows: “It is impossible to exaggerate the impact of humankind on the planet.” He illustrated this with a story from Madagascar. In 1961, he was part of the first expedition to film the indri, the largest lemur in the world. They had to be very patient but, eventually, they got their footage. Sixty years later, two amazing things have happened. First, this shy animal has got completely used to human beings. When guides take you into the mountains now, they whistle and the indri appears for its photo. Simultaneously, people have completely destroyed its environment. The indri is now critically endangered because the mountains it needs to live will not be available to it for much longer.
Although climate change is absolutely vital, I join others such as the noble Baroness, Lady Hayman, in advocating for nature to be on the face of the Bill. Climate change is important but biodiversity loss, plastic in the oceans, air pollution and deforestation are all vital too. Let us put nature and its restoration in the strategic objectives.
Lord Ravensdale (CB)
My Lords, I welcome this Bill. I start by declaring my interests as a project director with Atkins and a director of Peers for the Planet.
To meet the Government’s strategic objectives of net zero and levelling up the UK, large amounts of infrastructure investment will be required. As a simple example, it is estimated that, to decarbonise our electricity system, we will need to install between nine and 12 gigawatts of new capacity every year—more than double what we have managed in recent years. I will concentrate my remarks today on the objectives of the bank, starting with levelling up.
Today marks the opening of the new Elizabeth line. Crossrail is a fantastic engineering achievement, and it will be an enduring tribute to our longest serving monarch. However, it serves to illustrate the gulf in infrastructure investment between the regions. In my home region of the Midlands—I note here that I am co-chair of the Midlands Engine APPG—spending on transport is £289 per head for the east Midlands and £492 in the west Midlands, compared to £882 in London. The Midlands is a region of 11 million people. In order for the Government to level up and meet the aspirations in their White Paper, these disparities will need to be addressed and vast investment funnelled into the regions. We need a Crossrail for the Midlands and north too. That is me with my begging bowl—in response to the noble Baroness, Lady Noakes.
It was very welcome to see the letter from the Chancellor on his strategic steer to the bank, as indeed were the Minister’s opening remarks. This referred specifically to
“the need to end the geographical inequality which is such a striking feature of the UK and it is important that UKIB supports this ambition.”
However, the wording in the Bill that relates to levelling up is somewhat ambiguous, referring only to supporting
“regional and local economic growth.”
My reading of this—perhaps the Minister will correct me—is that it leaves much open to interpretation. Almost any infrastructure investment anywhere in the country could be argued to support economic growth in the region or local area in which it sits. A new transport scheme in London, for example, would meet this criterion by supporting local and regional economic growth in the city.
As the Minister highlighted, the effects of agglomeration work against infrastructure spend outside of the metropolis. The economic return is simply much better in areas that already perform well, so those projects have a much better chance of proceeding. Inequality becomes entrenched and self-fulfilling. That is why the recent reforms to the Green Book were so welcome.
Given that the bank will also be working to address these areas of market failure, it is key that its mission is clear in the Bill. Wording such as “regional developments”, or references to “disadvantaged areas” or “geographical inequality” in this objective, would address this issue. I look forward to hearing from the Minister about it in her summing up and will potentially come back to it in Committee.
Secondly, the bank has an objective of helping to tackle climate change, referring to the Climate Change Act 2008. There are some great synergies between these two objectives, as other noble Lords have already pointed out. I highlight the Midlands Engine’s industry-led Ten Point Plan for Green Growth, which seeks to map out a strategy to level up the region by focusing on our strengths in low-carbon technologies and the natural capital we have in the region.
To strengthen the environmental objective of the bank, there is a great opportunity here for the Government to recognise biodiversity and nature as a specific objective in addition to net zero. To echo what the noble Lord, Lord Teverson, said, placing biodiversity on an equal stature with climate change is absolutely vital. I will not expand on this as it has already been eloquently explained by many other noble Lords. I hope the Minister recognises that this area is important enough to include in the Bill as its own separate objective.
Lord Davies of Brixton (Lab)
My Lords, I thank the Minister, the noble Baroness, Lady Penn, for the helpful meeting yesterday, at which we explored the background to the Bill. Unfortunately, I am still not entirely clear as to why we need this Bill to establish an institution that is already up and running. I still think that, to some extent, it is because of what it looks like: “Look: we’re doing something.” It is legislation as performance. But no harm is being done and we all support the objectives, so why not? That is what I wrote here—until I heard the comments from the noble Baroness, Lady Noakes, who presented quite a convincing case from a rather different perspective.
Lying behind this is this concept of market failure, which has been little explored in this debate. It is not a new concept; we can go back to the 1930s and the Macmillan gap. Governments and their advisers have often come up with this concept that the market is failing and that government needs to establish institutions that will fill the gap. With new objectives, this is just another iteration of quite an old idea.
We have been given some examples of the sort of projects this bank will support. There are several, but the two that stick in my mind are emission-free buses for the West Midlands and, as mentioned earlier, the largest solar farm. I struggle with this. Why are we not doing these anyway? Why does it require this bank to achieve these things, which should be happening? I do not think the Minister or the Government as a whole have really told us or explained what the market failure here is. They just use the phrase market failure without identifying what exactly it is. We are told we have the most effective financial market in the world in the City of London, but it cannot provide Birmingham with emission-free buses or build a solar farm without the Government intervening. That seems a pretty fundamental problem.
This is the result of a period of discussion and debate about infrastructure and how it should be financed, but I really do not feel that what we have here has got to the bottom of the issue. The important point, again to quote the noble Baroness, Lady Noakes, is that this is a creature of the Treasury. However you dress it up, the money will be guaranteed by the Treasury, so it will effectively be gilts. However you describe it and whatever the technical structure, the Government will stand behind the money in this bank, so it is effectively gilts. It is just a way of feeding government money into created structures, and it strikes me as a complicated structure to achieve something relatively straightforward in a planned economy. As the noble Baroness said, it is government expenditure in different clothes.
My particular concern is whether there is some relationship or interface with the plans the Government have for pension funds. Last summer we had a joint letter from the Prime Minister and the Chancellor of the Exchequer. They wrote an open letter to those who look after our £2.6 trillion pension fund industry and said they should be investing more in
“the fruits of UK ingenuity and enterprise”.
They called on UK investors to
“back British success stories, and secure higher returns and better retirements.”
We will come back to this issue; we are promised some legislation or government action on these proposals this summer. What is the relationship between this bank and the money in people’s pension funds? My strong view is that pension funds are there to provide pensions and that if the Government think that infra- structure is required, it is the Government’s job to provide the infrastructure.
Baroness Boycott (CB)
My Lords, it is a pleasure to be part of this debate. I add my voice to those saying that we can no longer see biodiversity as separate from climate change. Everywhere you look, the two are not just different sides of the same coin; they are indeed the same. As we acidify the oceans, we lose the phytoplankton that absorbs carbon, which then affects the whole system. Each thing compounds the other, so while of course it is a fantastic opportunity to deliver some of the Government’s key strategic ambitions, it is incredibly important that delivery on nature is included as one of the bank’s strategic objectives.
The World Economic Forum recently said that global annual investment in nature-based solutions will need to quadruple to avoid the planet’s environment being pushed literally to the point of no return—it will not be able to regenerate. In the UK, we put very little investment into nature-based solutions, which is very unimaginative. We can find good examples but they are small. Most of the Government’s focus is on a few solutions such as tree planting. Wider nature restoration is so underinvested, with just 0.02% of UK GDP spent on restoring nature in 2018-19. Fantastically that, according to Wildlife and Countryside Link, was less than was spent on pothole repairs. Given that roads caused the problem in the first place, this is a bad state of affairs.
Like every other noble Lord in this House, with one exception, I welcome this bank. I am sorry we need it; we should be doing this stuff in the Treasury anyway, as has been promoted by Dasgupta and others. It is very important to see how many co-benefits come from linking up our delivery on tackling climate change and levelling up with delivery on nature. There are jobs and opportunities, and the restoration of all the beauty around us.
The Government’s response to the Dasgupta review, which many noble Lords in this House have debated over the last three years, recognised that
“more needs to be done … if we are to deliver a nature positive future.”
They are committed to
“ensuring economic and financial decision-making, and the systems and institutions that underpin it”.
So it is disappointing that, in view of the catastrophic decline in nature, as highlighted by the OEP, the Government have not taken the opportunity, following their review, to add a third natural capital objective to the bank’s overall objectives. Will the Minister reconsider this decision and help the UKIB to be a world leader in driving investment on this? Certainly, many noble Lords will be tabling amendments on this crucial point.
The Chancellor provided a strategic steer to the bank in March, setting out the detail of the Government’s priorities. He said:
“I’d encourage you to prioritise opportunities that align with the government’s renewed focus on energy security. Examples of relevant opportunities may include helping to bring forward low carbon energy projects that accelerate the UK’s transition to clean energy and improve the energy efficiency of buildings and homes.”
This is great. He also said:
“The Bank should work closely with central government to ensure its activities are complementary to … Net Zero”.
However, the Bill’s definition of infrastructure includes gas and roads, so I am concerned that these projects will be those that are actually funded and that they will cut across many commitments to net zero.
Nature investments have a much higher cost-benefit ratio than traditional infrastructure, with £4.60 returned for every £1 invested in peat-land and £2.80 returned from woodland, as highlighted by Green Alliance. The WWF reports that agriculture and nature-based investments could generate financial returns of £4 billion a year by 2050. Will the Minister consider including natural capital projects within the definition of infrastructure in the Bill? The returns speak for themselves, as does the commitment we need to bring. This is part of levelling up; these are projects in which communities will be involved. They are obviously more complicated to administer, so everything about the structure and directorships of the bank, or the questions of experts on its board, is crucial. If we miss this opportunity, however, we will ultimately fail in our goals towards net zero.
Baroness Bennett of Manor Castle (GP)
My Lords, it is a great pleasure to follow the noble Baroness, Lady Boycott. I declare my membership of Peers for the Planet and my position as vice-president of the Local Government Association.
I start with the irony highlighted by the noble Lord, Lord Teverson. To anyone listening to our debate from the outside, welcome to the see-saw. Today, we have a powerful demonstration of the utter failure of our system of governance. One Government set up the UK Green Investment Bank plc in 2012; a few years later, it is sold off to an Australian investment bank, Macquarie, with an extremely dubious reputation, through a process that the Public Accounts Committee concluded was deeply flawed. Now, we are essentially re-creating that thing that we destroyed a few years ago. We come to this debate having considered earlier today a report on children’s social care, which highlighted that one Government created an extensive network of Sure Start centres. They have now been destroyed and we are looking to re-create something similar again.
We have an archaic, dysfunctional constitution, delivering governance that see-saws between creation and destruction, taking with it jobs, knowledge, skills, institutions and infrastructure. We talk a lot about the failures of the British economy, sometimes blaming British workers. Why do we have a productivity problem? Perhaps we have an extremely unproductive, ineffective system of governance. It is easy to blame individuals but the underlying problem is the structure.
I have focused on that point—some noble Lords may feel that I have laboured it—because the Minister highlighted the problem in her introduction. I wrote down some of the adjectives she used; she said that they are aiming to create something “long lasting”, “long term” and “enduring”. There is a positive point to be made here, because if there is any part of our government structure that can engage in an act of co-creation, see different sides of politics get together and, I hope, agree on something that will endure for the long term through different Governments, weirdly enough, in our constitution, the House of Lords might just be the place where it can be done. I hope and am confident that the Minister will approach Committee and Report in that light.
We have possibly seen a positive sign in getting a perhaps ideologically unlikely alliance between the noble Lord, Lord Davies of Brixton, and the noble Baroness, Lady Noakes, who are both questioning whether we should be creating a bank to do this at all. Like the noble Baroness, Lady Boycott, I would not want to start from here; I would not want to see the Government putting money into all this and seeing all this happen anyway. Given that we do start from where we are, however, we have a chance to try to do something positive. However, I agree with the noble Lord, Lord Bourne of Aberystwyth: £22 billion sounds nice when you say it quickly, but when you look at the goals being set before it and recall that the 2019 Green Party manifesto talked about spending £100 billion a year on tackling the climate emergency, that perhaps sets the scale for what we are talking about here.
Many noble Lords have already covered—I will not go over the same ground—the essential need to write the biodiversity crisis in alongside the climate emergency. I note pretty much total agreement between the noble Baronesses, Lady Young of Old Scone and Lady Hayman, and many others who have made that point. However, as you might expect from a Green, I would like to go much further, because even just focusing on climate and nature does not go nearly far enough. We have clearly identified and documented nine planetary boundaries that we are breaking, and we need to think holistically and systemically in the way set out by the sustainable development goals that our Government and all global Governments have agreed to—to look at this in a complete, holistic way. The Bill might be a place where we can start to do that. More than that, it might be a place where we can start to do doughnut economics.
I come down to some specifics of how we might look at changing the Bill to do this. When I talk about doughnut economics, I am talking about tackling the huge social crises that we face, as well as the environmental crises. Clause 2(3)(b) says that the objectives of the bank are
“to support regional and local economic growth.”
To pick up some points made by the noble Lord, Lord Ravensdale, why are we just talking about growth? Who is the growth for and where are the benefits of that growth going? Surely what we need for levelling up is to tackle poverty and the massive issues of public health—such as the differentials in expected lifespan that we see in different parts of the country—and social infrastructure, as the noble Lord, Lord Holmes of Richmond, who is not currently in his place, said. We need to look at Clause 2(3)(b) and find a way of saying how this delivers for the people of Britain in our most disadvantaged areas. Just saying “growth” does not do that.
Clause 2(5)(a), which I think we will be talking about a great deal, refers to
“water, electricity, gas … or other services”.
Many noble Lords have highlighted the urgent need to conserve energy, home energy efficiency et cetera—we talk about this endlessly. I am not a lawyer but, at a stretch, one could perhaps define “services” as including reducing the demand for those services. None the less, it is clear that we need to write that into the Bill.
More than that, one of the huge issues we face socially at the moment is food security—something which the Government are now increasingly acknowledging. This is where we can really start to join up the social and the environmental. Yesterday, I happened to be at the global conference on biocontrol, which was looking at the ways in which we can use biological knowledge to control pests and diseases of crops, getting away from chemical pesticides. This is an industry which is very much dominated by small and medium enterprises, which are significantly undercapitalised and have huge problems getting through regulatory barriers. That might be a great area for the UK Infrastructure Bank to get involved in. Building up the infrastructure of our agriculture and supporting agroecology meets both environmental and social objectives.
On Clause 2(5)(b), we again come to the point about social and environmental impacts. I do not believe that this new bank should be investing in one new road; new roads are not benefits to people, and they are certainly not benefits to the environment. I can guarantee that there will be an amendment coming from me on that basis.
Coming back to a couple of general points—I warn noble Lords that I will get more radical yet—the noble Lord, Lord Teverson, pointed out that the previous Green Investment Bank rather went for the safe, the money-making and the certain. We must ask the question: is this bank here to make money or to deliver for our society? Here I join with the noble Baroness, Lady Noakes, and the noble Lord, Lord Davies of Brixton, both of whom reflected on the dictatorship of the Treasury. Is this the right department to oversee this bank? This Bill is written for the purposes of levelling-up and for environmental improvement. Why not give joint control of the bank to Defra and the Department for Levelling Up, Housing and Communities? After all, that is what this is supposed to be for—I am not sure what the noble Baroness, Lady Noakes, will think about that; I wait to see her response.
I am not going to get into detail about this, but I note the point made by the noble Lord, Lord Bourne of Aberystwyth, and I very much look forward to the contribution of the noble Lord, Lord Wigley, on the issue of ensuring that this is not yet another imposition from Westminster on the other nations of the UK. Failing a level of control being taken away from the Treasury, I think that the points of the noble and learned Lord, Lord Thomas of Cwmgiedd, about the qualifications of the board were really important.
Finally, on climate considerations, I think that we need to include terminology around renewable electricity in Clause 2(5)(a). It is absolutely crucial that this does not include gas and does not go towards funding fossil-fuel investments. We have seen reports that BEIS is trying to define green investments as including gas as a transitional fuel. But that ignores the fact that we must shift to renewables now—renewables are the cheapest and best option. Fugitive methane means that gas must not be included in the activities of this bank.
Lord Wigley (PC)
My Lords, I am delighted to follow the noble Baroness, Lady Bennett, and I agree with very much of what she said—although it appears I am so predictable that she was projecting what I might raise in my own contribution. However, she put forward some intriguing ideas which I hope we can explore further in Committee.
This is a very thin Bill, but it has significant implications when linked to earlier legislation and to government guidance over the last couple of years. When this legislation reaches the statute book, it is important that we all understand how the infrastructure bank can be best used, in partnership with relevant authorities—devolved and local—and in tandem with their strategies and initiatives. We shall clearly need to examine what opportunities might arise in relation to the central question of climate change and, equally, what dangers may lie in it, partly from having unclear demarcations of responsibility and partly from real differences of objectives and strategies to achieve those objectives, which may relate to the perceived market failures which the noble Lord, Lord Davies of Brixton, mentioned a moment ago.
The bank is flagged up as a replacement for the European Investment Bank. We in Wales secured considerable benefits from the EIB, which helped finance a range of projects, spanning infrastructure projects of the sort which may well fit into this bank’s objectives but also projects in the higher and further education sector and cultural and research projects. I am far from clear from reading the Bill, together with the earlier guidance documents, as to the extent to which this range of activities is one which the Government intend the bank to deliver. Perhaps the Minister could clarify that when she sums up the debate.
I welcome the objectives of the Bill as spelled out in Clause 2(3)(b), namely
“to support regional and local economic growth.”
However, in doing so, what are the responsibilities on the bank to work with the grain of devolved government, regional government and local government, or can the bank launch itself in any part of these islands, following projects that may be totally at odds with the policy of local government in the area? I am aware that UK Infrastructure Bank: Policy Design, published in March 2021, in chapter 5 states explicitly that
“The Bank will operate across the whole of the UK, working closely with public and private sectors to support infrastructure investment in every nation.”
It also states:
“Building strategic relationships with the devolved administrations … will be a priority.”
I assume that our present Bill is intended to build on such sentiments, in line with the statement in that document in the same chapter:
“The UK Government will be engaging with representatives from the devolved administrations in the next phase of the Bank’s design.”
Please can the Minister confirm that the provisions of the Bill before us tonight have been thoroughly discussed with the devolved Administrations, that there is agreement on the content of the Bill, and a meeting of minds as to how its powers will be rolled out and applied in practice within the devolved nations?
The policy design also refers specifically to building a strategic relationship with the Development Bank of Wales. Can the Minister confirm how much work—if any—has actually taken place on this aspect, since so much that we hear places an emphasis on providing loans to local authorities? Is there a full meeting of minds between the Treasury and the Welsh Government on these matters?
In this regard, there may be a danger of unnecessary and unhelpful competition developing between Wales’s development bank on the one hand, which has been given responsibility for many of these functions, and, on the other hand, the infrastructure bank. I hardly need to remind the House that many of the strategic responsibilities within whose framework the UK Infrastructure Bank will work in England have in fact been devolved to Wales and Scotland, and to Northern Ireland when there is a fully functioning Government there. These include roads, planning, water, sewerage, aspects of rail transport, local government and—of course, of central relevance—environmental matters.
Can we be assured that in regard to its activities in Wales, the infrastructure bank will work in tandem with the Welsh Government’s strategic objectives and will neither try to undermine them nor run a competing regime, which would confuse the business sector, local government and the general public? We need clarity as to how the infrastructure bank will work with the devolved nations. Have the Government discussed the Bill’s content with the Welsh and Scottish Governments, and have they reached agreement with them regarding its implications for those two nations?
As always, the devil is in the detail. For example, what on earth is the meaning of Clause 2(5)? It reads—and I am selective in this quotation—
“Infrastructure includes … facilities relating to … other services”.
Okay, I have left out a couple of words, but that is what it says. What does it mean? Those words could mean absolutely everything or nothing. The Government seem to be uncertain about what aspects of infrastructure they intend to come within the remit of the Bill. In Clause 2(6), the Treasury is given the power to change the meaning of “infrastructure” to anything in the wide world it chooses to deem as infrastructure, subject only to a statutory instrument that can so easily be steamrollered through Parliament. For example, if the bank in its wisdom decided to finance a new trunk road—heaven forbid, I hear the noble Baroness, Lady Bennett, saying—which the local authority supported for economic reasons but the Welsh or Scottish Government opposed for environmental reasons, can the Minister give a categoric assurance that the bank cannot ride roughshod over the policy of the devolved authorities? What guarantee can the Minister give that the bank, by making finance available for one set of projects but denying finance for other projects, is not undermining or distorting the power of the devolved Governments to establish their own priorities?
I have a question relating to the vexed issue of the building of reservoirs in Wales, such as when Liverpool drowned the Tryweryn valley in order to get a supply of industrial water which it proceeded to sell, so profiteering from the transaction. Can we have an assurance that the infrastructure bank could never be used to bankroll such a project or be associated with it unless it was agreed by the Welsh Senedd and the relevant local authority? What about housing? Does not housing form an essential part of the economic infrastructure of an area, and certainly of the social infrastructure? Does not the retrofitting of old housing stock play a major role in withstanding climate change? Is this within the purview of the bank? Please can we have clarification on whether the infrastructure bank will be entitled to provide finance for building affordable housing and improving existing housing stock, particularly in rural areas threatened by chequebook invasions of retired people who undermine local people who wish to live in their home area, as happens in Wales, Cornwall and the Lake District? There are so many questions that need to be answered if this Bill is to go forward. I am certainly not opposing this Second Reading, but the Bill needs to be clarified when we move forward to Committee. I look forward to the Minister’s response with interest.
Lord Vaux of Harrowden (CB)
My Lords, I was privileged to be a member of the EU Financial Affairs Sub-Committee when it conducted its inquiry into the impact of Brexit on our membership of the European Investment Bank. One of the key recommendations in our report was that the Government should consult on establishing a UK infrastructure bank to replace our access to EIB finance, so I am delighted that the Government have chosen to do so.
That said, I have some concerns about what the Government are proposing in this Bill. While I am sure that we are all extremely grateful that the Bill does not run to the usual hundreds of pages, it could be improved with a bit more content. I hesitate to use this first sentence after the speech of the noble Lord, Lord Davies, but the principal function of an infrastructure bank should be to correct market failures that prevent a good project obtaining private finance in the market. That might mean the bank taking on new-technology risk, for example, or term risk where a project is longer term than is usually covered by the private sector. It should aim to act as a cornerstone investor, fostering confidence for other investors and facilitating projects that would not otherwise achieve sufficient funding to crowd in private finance, as we heard earlier. There are good examples of this. I think it is generally accepted that the UK offshore wind sector would not be where it is without the EIB investment behind it.
What it should not do, and here I strongly agree with the noble Baroness, Lady Noakes—I hope all this agreement is not going to go to her head—is become a replacement for private sector finance; in effect, competing with and crowding out private sector finance that would otherwise be available. Again, there are examples of this. The EIB’s investment in the Thames sewer is almost certainly an example of it and, frankly, the examples of the investments made so far by the UK Infrastructure Bank do not give an awful lot of confidence at this stage.
It also should not, generally, be the sole financer of a project. To have the credibility to crowd in private sector finance, the UK Infrastructure Bank will need to develop real depth of expertise and due diligence ability—a real strength of the EIB, incidentally. That requires investment. The EIB employs 3,000 full-time staff, including financial professionals, engineers, economists and environmental experts with significant engineering and scientific expertise. If the UK Infrastructure Bank is to succeed, it will need to build similar skills. So, can the Minister provide some information around the resources the bank currently has and what it is intended that it should have?
The effectiveness of the UK Infrastructure Bank should be measured not on how much it has invested, loaned or otherwise provided—anyone can spend money—but on how much private sector finance it has generated or facilitated that would not otherwise have been available, or investments that could not otherwise have been made. That should be specifically included in the review of the bank’s effectiveness and impact in Clause 9. Like others, I agree that 10 years is a ridiculous length of time before the first review.
The UKIB policy design and framework documents issued by the Treasury actually cover the crowding in of private sector finance quite well and, given the comments of the Minister earlier, the Government obviously agree with me on this. Perhaps she could therefore explain why this critical objective is not even mentioned in the Bill, despite the importance given to it. The policy design and framework documents are actually quite good, including six pretty sound operating principles and four related investment principles. Again, these are not mentioned in the Bill. In some cases, they are actually contradicted by the Bill. They appear to have no legal status and could be changed at any time without scrutiny. If I may, I will comment on three of the six operating principles.
The first is:
“Achieving policy objectives via sound banking … whereby investments help to achieve the core policy objectives … whilst generating a positive financial return to ensure the financial sustainability of the institution and to reduce the burden on the taxpayer.”
This is reinforced further in the investment principles. Again, the Bill does not mention this requirement to generate a positive return, and the definition of “financial assistance” is so widely drafted that it would allow grants and other similar funding that has no return. While the EIB also does not have to make a positive return, it has been consistently successful in doing so. I think making that a requirement for the UK Infrastructure Bank would be a very good financial discipline. Whatever is decided in that respect, I think it is important that the financial requirements that apply to the bank are included within the objectives in the Bill, and that any future change to that principle should be subject to parliamentary scrutiny.
The next operating principle I will touch on is:
“Additionality: the Bank will prioritise investments where there is an undersupply of private sector financing and, by reducing barriers to investment, crowd in private capital.”
Again, I have talked to this before: it is not in the Bill and it really should be there as a key objective.
The next one to look at is “Operational Independence”, which the noble Baroness majored on quite strongly in her speech. The bank
“will operate within a strategic framework set out by government but will have operational independence in its day-to-day activity including investment decisions.”
The National Infrastructure Commission stressed the importance of governance to safeguard the operational independence of the institution, and it was also a common thread we heard in evidence to the EU Financial Affairs Sub-Committee when we were doing our inquiry. Private sector finance will not have confidence to co-invest if there is a perception that an investment opportunity, or indeed the institution itself, is subject to the whims of political expediency. That is especially important given the long-term nature of infrastructure investment. But the Bill does not include anything that safeguards the bank’s operational independence. In fact, it actively undermines it. The Bill allows the Treasury to revise or replace its statement of strategic priorities at any time, with no scrutiny or even consultation. Worse still, the Bill allows the Treasury to give specific or general direction—again, at any time—about how the bank is to deliver its objectives, with which the bank must comply. That would allow the Treasury to direct the making of a particular investment, or on particular terms. The only safeguard is that the Treasury must first consult with the directors, who, I again remind noble Lords, are all appointed by the Treasury.
Operational independence means having the ability to refuse to finance government vanity projects. As currently drafted, for example, the Bill would allow the Government to mandate the financing of ludicrous ideas such as the bridge to Northern Ireland, and the bank would have to comply. That is not operational independence in any sense that I understand it. This area of the Bill really needs work.
Those three operating principles, along with the other three—partnership, impact and credibility, and flexibility; the Government’s own principles, not mine—are very important and should be put on a statutory basis in the Bill, with any changes subject to proper scrutiny. Where the Bill contradicts the principles, it should be amended.
I will touch briefly on devolution, as one or two noble Lords have. The bank will operate across the whole UK, which I welcome. However, as usual, the Government have given no role in the Bill to the devolved Governments beyond seeking legislative consent, we are told. Living in Scotland, I am no great fan of the current Scottish Government but devolution is a fact, regardless of one’s views of the Government whom the devolved nations have chosen. It would be appropriate for the devolved Governments to at least be able to appoint non-executive directors to the board to reflect their legitimate interests. Could the Minister comment on that?
I have one last question. I have not been able to find anything that would allow the bank to raise finance externally as loans, bonds or equity. Other similar organisations can raise finance on the capital markets, which has the dual benefit of raising greater capital and introducing valuable private sector disciplines. It would also reduce the scope for government meddling. For example, Germany’s KfW, which we heard about earlier, funds itself almost entirely from the international capital markets, being able to obtain cheap finance because of its AAA rating due to its government backing. The EIB does the same, relying on the backing of member government guarantees. Its subsidiary, the European Investment Fund, has minority private sector ownership. What consideration have the Government given to the UK Infrastructure Bank being able to raise external finance alongside government finance?
As I said at the start, I support the creation of the UK Infrastructure Bank, but we have work to do to ensure that the Bill enables it to be successful.
Lord Sikka (Lab)
My Lords, I am grateful for the opportunity to speak. Since 2012, the Government have handed £695 billion of quantitative easing to speculators. Can the Minister explain why the QE route and the same volume of money are not made available for investment in UK infrastructure? Labour’s 2019 manifesto promised £400 billion over 10 years for investment in clean energy and infrastructure. Germany’s KfW, which has already been mentioned, has assets of €561 billion. In contrast, the funding available to UKIB is basically a pale shadow and seems a token gesture to show that the Government are doing something.
Can the Minister explain how much money each year the bank will spend on infrastructure, directly or through third parties? The capital structure of UKIB is £5 billion equity plus £7 billion debt, although another £10 billion may be provided by guarantees, which will not easily be part of the balance sheet. The Bill offers no rationale for this capital structure. Why does UKIB have to start with debt?
The cost of capital for the Government is always lower than the cost of capital for the private sector, yet UKIB will seek a more expensive £18 billion from the private sector, inevitably raising the cost of capital for some projects and making them unviable. Public bodies will end up effectively guaranteeing future corporate profits, in a kind of mini repeat of the PFI experiment we had for many years. Can the Minister explain why the bank is not entirely funded by the Government, especially as they stand behind the bank and will effectively be its guarantor? Would that not be a simpler capital structure?
The Bill is accompanied by just four pages of what is titled Impact Fact Sheet. On scrutiny, I could see no analysis of its operations or financing, or anything meaningful. In yesterday’s briefing we were told that the bank will be seeking a financial return on each of its projects, but the impact statement provides no clues about what this return means and why a return from infrastructure is desirable. If you are going to measure returns from infrastructure, that would involve measuring things such as social efficiency gains. What meaning do the Government attach to such phrases? There is no explanation given. I urge the Minister to provide a meaningful impact assessment for the Bill.
Baroness Kramer (LD)
My Lords, I was not involved with the creation of the Green Investment Bank, but I did have to sit around a table in 2015 to be lectured by Sajid Javid on why the creation of such a bank was, in the view of the Conservatives, a classic Liberal Democrat mistake. Not only did he sell off the Green Investment Bank but he was very clear that he also intended to sell off the British Business Bank and close down the industrial catalysts. It is interesting to see a Conservative Government today taking credit for a vision for which they had only withering comments not so long ago.
I recognise that the noble Baroness, Lady Noakes, has always been consistent. She did not approve of creating the Green Investment Bank or of a public bank as a mechanism for dealing with market failure. She may be a little disturbed to be joined by the noble Lord, Lord Davies of Brixton, and potentially by the noble Baroness, Lady Bennett of Manor Castle; I suspect a quick stiff drink may be necessary to cope with that new knowledge. However, we are where we are. My party will do everything that it can to make the UK Infrastructure Bank as effective as possible. I agree with the noble Lord, Lord Vaux, that there genuinely is market failure here, and that there is a role to play.
There are a number of areas which I want to explore. The first is not within the legislation but speaks to the issue of how effective this bank can be. It is very small compared with the challenges that we face in climate change and levelling up. In many ways, this replaces not only the Green Investment Bank but the European Investment Bank, and along with the British Business Bank it also has to replace the European Investment Fund. The EIB typically provided more than £5 billion per year of financing for infrastructure in the UK. I am grateful to the noble Lord, Lord Wigley, for testifying that it was effective at delivering infrastructure projects in Wales. The noble Lord, Lord Vaux, referred to its role in offshore wind. I saw quite a number of projects in which investors would co-invest with the EIB. It gave them confidence to go to much longer terms and to do much more subordinated lending, risks that they would not have taken without the engagement of the EIB. The EIF was also putting some half a billion pounds per year into UK equity and VC funds. This new bank has only £22 billion of financial capacity over the next five years, of which £10 billion is guarantees—a far less flexible and useful instrument.
The Government will say that the EIB had a much wider remit than the new bank, but let me say that the need for financing infrastructure development to tackle climate change and levelling up has soared in the time since we left the EU. The markets have failed to deliver on floating offshore wind, EV charging infrastructure, battery storage technology, marine and tidal energy, broadband rollout, carbon storage and capture, insulation —the list goes on. By the Government’s own figures, the OBR has said that we need something in the region of £1.4 trillion of investment by 2050 to deliver the climate change objective, and there is general consensus in the Government that we need something like £50 billion a year in additional private financing investment to achieve just the 2030 target for climate change.
We do not have the figures that we need on the huge additional demands of levelling up, especially for transport improvements across the regions. I thank the noble Lord, Lord Ravensdale, for making the point that we must emphasise the regions as we deal with this Bill. Major transport projects have recently been cancelled, including, ironically, the Leeds leg of HS2. That is now gone, for lack of financing. We have seen many rail electrification schemes cancelled. The noble Lord, Lord Wigley, will be very aware that electrification between Cardiff and Swansea was cancelled, again for reasons of finance.
Let us also talk about the remit. Housing, schools and hospitals are deliberately out of scope, according to the Explanatory Notes. Perhaps the Minister will tell me how the Government intend to achieve regional growth without major financing for housing, schools and hospitals. As so many people have said today, there is no mention of investment in nature, despite the high benefits of investment in agricultural improvement, woodlands and peatlands. We heard a series of helpful speeches on that. My noble friend Lord Teverson talked about the importance of biodiversity being given equal priority to climate change, the two interlinked, strengthened by comments from the noble Lords, Lord Macdonald, Lord Ravensdale and Lord Bourne, who referenced the Dasgupta report, and the noble Baronesses, Lady Young, Lady Hayman and Lady Boycott. I probably have not named everyone in that list.
There is also no mention in the Bill of energy efficiency. I thank the Government for the opportunity yesterday to ask questions of the new bank’s CEO, John Flint. He took the view that the retrofit of buildings, including home insulation, to meet climate change objectives could be included in the bank’s remit, provided the right investment vehicles could be found. I was rather dismayed that he did not seem to have much idea of what on earth those vehicles could be. We must have clarity on that issue and an emphasis on its importance. I hope that the Government will confirm that approach and inject some urgency into the new bank’s activity in this area. We know that to achieve net zero, we must deal with the demand side, including home insulation. This is even more vital given the soaring costs of energy and the cost-of-living crisis. I note that the European Investment Bank has identified energy efficiency as a sector that finds private finance particularly hard to access and is targeting support on the sector.
Of course, resources mean far more than money. We have a dire shortage of skilled workforce in the construction industry and in many aspects of relevant engineering. More than half the medium and small-sized companies in building report that they are struggling to find workers. Construction output has been declining as a consequence. Even R&D in this area is starved.
We no longer have a meaningful industrial strategy. The national infrastructure plan is not statutory and is frequently ignored by the Treasury. Even the Cycling and Walking Investment Strategy is statutory. It is unacceptable that the overall national infrastructure plan is not, particularly in the context of its need to work with the bank. The National Infrastructure Commission and the Construction Leadership Council are both pretty toothless. That must be dealt with. None is referenced in the Bill, although they would seem highly relevant. In other words, we have neither a functional strategy nor a credible delivery mechanism.
It is quite instructive to compare the legislation that created the Green Investment Bank with this legislation to create the infrastructure bank. We have moved from legislation that protected its purpose through use of primary legislation to a Bill riddled with Henry VIII clauses. There was even a clause in the GIB legislation to ensure its operational independence—it was in the Bill. The noble Baroness, Lady Noakes, cut to the chase when she said that this bank is, essentially, the plaything of the Treasury. The Government can by SI change the bank’s activities or the meaning of “infrastructure”—that is extraordinary. The Treasury, not Parliament, sets its priorities. Many noble Lords, including my noble friend Lord Teverson, the noble Lords, Lord Bourne and Lord Vaux, and the noble and learned Lord, Lord Thomas, focused on the Treasury’s ability to provide specific or general directions to the bank on how it is to deliver its objectives and then enforce them by injunction.
If the directors are not Treasury placemen before they are appointed, they become so by law as soon as they are appointed. Claims that this bank has operational independence seem completely inconsistent with the powers that the Treasury is given in the Bill.
Let me close with this. As so many here today have said, the infrastructure bank must be successful in crowding in private financing—and doing it by taking risk that the private sector finds unacceptable, so that it sits beneath that private sector financing. It hopes to mobilise something like £18 billion of private money in its first five years. I have already talked about that being inadequate but my question is: can it really take risks when it has only £4.5 billion in capital and a requirement to generate a commercial rate of return? Certainly in the short term—the first five years—it seems that those two parameters will make it very difficult for it to do something innovative that makes a significant difference.
However, Parliament and the public should be able to assess and react to that progress, or the lack of it. The idea that we will not even see the bank’s strategy until late June, after Committee stage, strikes me as very frustrating. We do not know what criteria it will use, how it will ensure additionality or how it will remedy market failure. It is, as so many have said today, including the noble Lords, Lord Sarfraz and Lord Vaux —speaker after speaker—completely unacceptable that the Treasury need not report to Parliament on the effectiveness or impact of the Bank for 10 years, and after that only every seven years. Frankly, that is disrespectful to Parliament.
We need a significant UK Infrastructure Bank but this Bill will need a great deal of amendment. As I listen to the House today, I suspect it will receive a great deal of amendment.
Lord Tunnicliffe (Lab)
My Lords, I am grateful to the Minister for introducing the Bill. It has received wide-ranging analysis by Members of the House, which I will not comment on directly. Rather dangerously, I think I recently found myself agreeing with the noble Baroness, Lady Noakes, over something. It is good to be on the opposite side again; I feel comfortable.
The Bill formalises not only UKIB’s objectives but a range of accompanying governance arrangements and reporting or review requirements. As we have heard, this process arose from a recommendation by the National Infrastructure Commission in its 2018 baseline report. The bank has been allocated an initial £12 billion in capital and will be able to issue £10 billion of government guarantees, in the hope of unlocking contributions from investors across the private sector. Although this total broadly matches the recommendation of the National Infrastructure Commission, it is, as has been commented on, small compared to the capital available to other national infrastructure banks, particularly that in Germany.
The capital allocated to the bank does not strictly form part of the Bill. Nevertheless, as we accelerate our green transition, there is every possibility that the bank will need additional resources in the future. When responding, can the noble Baroness outline how the level of capitalisation will be kept under review? Will it form part of the Budget process or will there be a separate mechanism? The bank will have to compete with other initiatives for additional funds. It would be interesting to hear the Minister’s view of how this may play out in the coming years.
Given some of the Government’s infrastructure-related decisions in recent years, it was perhaps unsurprising that the commission called for
“a new, operationally independent, UK infrastructure finance institution.”
The privatisation of the Green Investment Bank in 2017 appeared at that time short-sighted. MPs expressed concern then that the Government had not sought stronger assurances about that organisation’s future. At the same time as that sale, Ministers were deciding the nature of the UK’s departure from the EU. Despite the option of an ongoing relationship with the European Investment Bank—the EIB—they opted to leave that framework.
The Government have been clear that UKIB is not designed directly to replicate the work of the EIB. That is fortunate because, at the current level of capitalisation, it is not clear that it could. Between 1973 and 2017, the EIB invested in the region of €165 billion in UK projects. Its due diligence on projects unlocked billions in private finance too. This new bank may not have the capital to match the EIB’s clout or that of Germany’s infrastructure bank, but we hope that it will replicate some of those institutions’ processes, which will provide confidence to private investors.
I am grateful to the Minister for hosting an initial meeting with officials last week, allowing us the opportunity to discuss the Treasury’s hopes for so-called “crowding-in”. Will she comment on the Treasury’s target for external investment? Is she confident that private funds will arrive at the expected rate, particularly in the current economic context? The reviews required under Clause 9 of the Bill would help us keep track of progress but, at present, the first is not due for a period of 10 years. We understand the need for UKIB to ramp up its operations and that the impact of individual investments may not be measurable for some years, but is there not a case for accelerating that timescale? Everybody who has spoken on that issue seems to think there is; I am sure we will discuss that in the coming weeks.
However, the most important debates will focus on the Government’s definition of infrastructure and the scope of the two core objectives. We must get these core components right from the off, including a consideration of whether there should be three objectives. If we do not, the bank will be nowhere near as effective as it needs to be to make a genuine contribution to meeting the 2050 net-zero target. I am sure that we will also discuss UKIB’s operational independence, as mentioned by several noble Lords. It states over and over again that it will be operationally independent, but a number of noble Lords have commented on power of the Treasury to de facto control this bank.
On definition, we generally welcome the range of technologies and facilities included in Clause 2. We note the inclusion of a delegated power to amend the definition of infrastructure and welcome that regulations to update it will be subject to the affirmative procedure. Of course, not everything is included in the definition. The bank’s lending will not, for example, help to address the country’s chronic shortage of new housing. Some will be disappointed by that decision, given the Government’s ongoing failure to deliver a suitable supply of quality, affordable homes where they are needed most. More needs to be done to support first-time buyers and young families, who find property prices climbing far faster than they can save—a situation that will be exacerbated by the cost-of-living crisis.
While housing is not included in UKIB’s remit, it is sensible for its funds to support the rollout of infrastructure associated with residential and other forms of development. If the bank can lower the cost of financing these kinds of projects, that is good news for local authorities and partner organisations as well as the residents who will benefit from new services. However, can the Minister confirm that it is not the intention for this mechanism to replace others, such as the community infrastructure levy, which aim to ensure that developers cover most infrastructure costs arising from their projects?
At first glance, the two objectives outlined in the Bill are sensible. However, as always, the devil is in the detail. The bank itself has acknowledged in a discussion paper that
“occasionally these objectives will be in tension with each other.”
It goes on to say that where an investment is “primarily” focused on growth, it will ensure that it does not do “significant harm” to the climate objective. Does the Minister feel that this safeguard is sufficient?
Although the bank is and should be operationally independent, are the Government satisfied that UKIB will have the expertise needed to make informed decisions, or would the Minister welcome an outside body, such as the Climate Change Committee, having some form of advisory role? It is important that we understand how these potentially competing objectives will interact.
This matters because in the last Session your Lordships’ House debated climate-related amendments to what is now the Subsidy Control Act. Those amendments would have required public authorities to include consideration of climate-related issues in the so-called balance test when deciding whether to grant a subsidy. The Government fiercely resisted them. Given the urgency of the challenge we face, why are they not taking a consistent approach across departments? If we expect applications for finance from UKIB to meet certain green thresholds, why is that not applied to entities seeking taxpayer-funded subsidies from public authorities?
Overall, we welcome this initiative and wish the leadership of the UK Infrastructure Bank well. The institution has the potential to do a lot of good across the UK. However, given the bank’s relatively limited capital, and in the context of wider government policy, we should not kid ourselves that this sets us on course for 2050. We look forward to working with colleagues across your Lordships’ House to strengthen the Bill, and we hope the Minister will approach the process with an open mind.
Baroness Penn (Con)
My Lords, I thank all noble Lords who have contributed to such an interesting and wide-ranging debate. It showed the breadth and depth of the knowledge of this House, but also showed me that I have no chance of addressing all the points raised. I will write a detailed letter to noble Lords who I do not manage to reach.
The only other thing I would say at the outset is that I think there was a broad welcome for the bank and the Bill in the debate, although of course the devil will be in the detail. I am pleased that we were able to have an initial engagement session with my honourable friend the Economic Secretary to the Treasury and the chief executive of the bank, John Flint, yesterday. It is in that spirit of engagement and listening that we want to continue the Bill’s progress through the House.
I turn directly to trying to address as many of the points raised by noble Lords in the debate as possible. I start with the size and remit of the bank. The noble Lords, Lord Teverson, Lord Tunnicliffe and Lord Sikka, the noble Baroness, Lady Kramer, and others noted that the bank is small compared with other institutions and cited the KfW development bank in Germany. This might be the case, but I do not think that UKIB and the KfW are quite the right comparison. The KfW is an institution that has existed since 1948. It might be more appropriate to compare UKIB to similar institutions in Canada and Australia: the Canada Infrastructure Bank, which had an initial capitalisation of around £20 billion, and the Australian CEFC, which was capitalised with 10 billion Australian dollars.
However, as I mentioned in opening, we will undertake a review of the initial capitalisation of the bank ahead of spring 2024, as set out in the policy design document last year. The Government took a conscious decision to have a narrower remit for the bank in line with recommendations from the NIC, to address the point raised by my noble friend Lady Noakes, to avoid the high risk of crowding out funding from the private sector that would otherwise be there. There is a higher risk of that with institutions such as the KfW. It is also unclear how successful those kinds of institutions are at co-investing with the private sector. This is a different beast and has been designed to be so.
Many noble Lords, including the noble Lords, Lord Teverson, Lord Tunnicliffe, Lord Vaux and Lord Davies of Brixton, and my noble friends Lord Holmes and Lady Noakes, expanded this into asking about the risk appetite for the bank, what the market failures are that it seeks to address, the role the bank will have in ensuring additionality and the risk of crowding out, as I have touched on. The noble Lord, Lord Vaux, probably put the role of an infrastructure bank better than I am about to, but the Government see their role as maximising the bank’s impact to focus on intervening where its additionality to the market is greatest, and will limit its exposure to investments that could already be fulfilled by the private sector. The bank will have a higher risk appetite than the market where it sees that policy outcomes that the private sector has not considered can be achieved. However, it will also have to bear in mind the usual value-for-money considerations in doing this.
To try to answer directly the question about market failure from the noble Lord, Lord Davies of Brixton, infrastructure investment is prone to market failure as it is often complex, large, novel and long term, with risks around construction and technological or government policy changes. Based on historical trends, the most significant market failure is that there is a financing gap around new technologies, where there are high levels of risk for the private sector and unproven financial cases. For example, an analysis by Vivid Economics suggested that early-stage support provided for offshore wind through the European Investment Bank and the Green Investment Bank helped to make the sector more attractive to investors and more viable at scale. Looking forward, the UK Infrastructure Bank has the potential to deliver these benefits to scale up other new technologies.
On additionality, based on figures for similar institutions we estimate that the bank will crowd in an additional £18 billion of private finance from £8 billion of UKIB lending. Based on our internal modelling and analysis of comparable institutions—the Green Investment Bank, the European Investment Bank, the Australian Clean Energy Finance Corporation and the Canada Infrastructure Bank—we think that between two and two and a half times is a reasonable estimate. We have not included any additionality for local authority lending and the guarantee function, although we think there is likely to be some. The risk of crowding out, which I have touched on already, will also be considered as part of the review of the bank’s progress and financial performance taking place in 2024.
Also on the bank’s remit, the noble Lord, Lord Tunnicliffe, and the noble Baroness, Lady Kramer, noted their disappointment that housing is not included. Homes England is the first port of call for housing projects, and the bank will work closely with Homes England to ensure that projects can access the appropriate support, and with similar bodies in the devolved Administrations—for example, where there may be a mixed-infrastructure project that involves housing. The noble Baroness, Lady Kramer, also mentioned schools. I assure her that the Government are investing more than £19 billion in education up to 2024-25.
On the specific question from the noble Lord, Lord Tunnicliffe, on the community infrastructure levy, I can confirm that the bank is not a replacement for CIL, which continues to ensure that our communities are served with appropriate social and economic infrastructure through necessary developer contributions.
I turn to a point where it is probably easier to mention the noble Lords who did not raise it than those who did, so I may not try to mention everyone by name: the question of a third objective and natural capital. I assure noble Lords that the Government absolutely agree with the Dasgupta review’s assessment that tackling climate change and nature loss are two sides of the same coin. As I said in my opening remarks, the Government conducted a review specifically to consider the potential of broadening the bank’s objectives to include other areas, such as improving the UK’s natural capital. The review recognised the significant potential for increased use of nature-based and hybrid infrastructure solutions, including for the water sector and greenhouse gas removals, and the opportunities for growth of the ecosystem services market. These opportunities will be important to meet our objective to leverage at least £500 million per annum in private finance for nature’s recovery by 2027 and more than £1 billion per annum by 2030.
Noble Lords will know that, aside from the bank itself, the Government are supporting the growth of these markets in a number of ways. This includes developing high integrity standards and frameworks for ecosystems services markets, allowing investors to participate with confidence; backing the maturation of the woodland carbon code and peatland code through the nature for climate fund and woodland carbon guarantee; designing our new environmental land management schemes for farmers and landowners to support the crowding in of private finance and ensure farmers are better off when they participate in private finance opportunities; and demand-side regulation to grow these markets—for example, mandating biodiversity net gain for development. The projects undertaken through UKIB financing will be subject to those net gain requirements. The nature recovery Green Paper sets out many of the Government’s specific plans in this area. All I can say to noble Lords at this stage is that the Government have considered this very carefully and concluded that the bank is able to invest in natural capital under its existing objectives. However, I am sure that I will hear much more from noble Lords in Committee on this subject.
The noble Lord, Lord Teverson, the noble Baroness, Lady Kramer, my noble friend Lord Bourne and others asked whether energy is excluded or included in the definition of infrastructure. Although the construction of new homes is generally out of scope, projects or technologies that support energy efficiency, including the retrofit of homes and buildings and the decarbonisation of heating in line with the Government’s heat and buildings strategy, are very much in scope. I hope that provides some reassurance.
A number of noble Lords asked about the “do no harm” requirement, which we have set out in the bank’s framework document. The Government are confident that this requirement will deliver the objectives that noble Lords have talked about in terms of having a clear policy not to invest in fossil fuel projects, as set out in the framework document, with some specific exceptions to the policy—for example, carbon capture usage and storage. Those “do no harm” objectives are set out in the framework document and strategic plans, which can be updated without the need for further primary legislation.
The noble and learned Lord, Lord Thomas, made a point about Clause 8 and the Environment Agency. The Treasury is clear that the purpose of the bank is to invest in a way that tackles climate change. That is set out in the Bill, the framework document and further in the strategic steer issued in March. If ever a scenario happened where the bank was carrying out activities not tackling climate change, the Treasury would use its Clause 8 powers or its powers as a shareholder. If the Treasury failed to do so, Parliament could make its voice heard and it would be subject to challenge in the courts, as the noble and learned Lord, Lord Thomas, recognised. I do not agree that the aims of this clause are only aspirational. The bank is also subject to judicial review on anything it does, including compliance with its climate obligations.
The noble Lord, Lord Tunnicliffe, asked about the expertise of external bodies such as the Climate Change Committee. The UK Infrastructure Bank has already worked with a wide range of stakeholders since its launch, including external bodies and market participants. It is keen to use expertise in its decision-making, including appointing its first lead climate adviser, Professor Andy Gouldson, an internationally recognised expert on place-based climate action, as part of its ongoing work to partner with regional and national experts to shape the work of the bank and ensure its long-lasting impact.
The noble Lord, Lord Teverson, asked about the relationship between UKIB and the NIC. The bank is intended to complement the work of the NIC. The NIC will continue to provide an expert assessment of infrastructure needs. Central government will identify the levers that they can use to meet the needs, and UKIB will provide financing to support projects that meet the needs set out by the NIC.
My noble friend Lady Noakes asked about the regulation of the bank. The bank is not regulated by the FCA or the PRA because it will not perform the functions of a bank ordinarily regulated by those institutions. It does not take deposits, it is only investing—for now—in capital provided by the Government, and it does not engage with retail customers. We are committed to reviewing this decision after three years, at which point we will decide whether the bank should seek authorisation or to continue to remain exempt. However, we have set out our expectation that the bank should abide by the highest standards of good practice, governance and conduct, even though it is not authorised under FSMA, and that it should comply with the spirit of the financial services and markets regulation. The bank has recruited with this obligation in mind. It will submit to the Treasury, for approval, how it has interpreted the principles of the senior managers and certification regime and relevant elements of the FCA principles for business.
Lord Teverson (LD)
Can the Minister clarify whether that means that the senior managers of the bank need not be approved in terms of financial regulation—the actual individuals, let alone the institution?
Baroness Penn (Con)
I believe that it means that the bank is not subject to any aspect of the Financial Services and Markets Act and the authorisation under that, but we expect the bank to operate in line with those obligations—for example, on senior management. The decision not to include it in FSMA regulation will be reviewed after a period of time to ensure that this is the right approach for the bank. I have more to say about whether it should have operated under FSMA regulation, and we can get into that in Committee if it is an area of concern.
My noble friend Lord Bourne, the noble and learned Lord, Lord Thomas, and the noble Lord, Lord Vaux, asked about the circumstances in which the power of direction might be used. As I said, it is intended to be used very rarely and only in circumstances where the Government need to take urgent and necessary action—for example, in cases of national security or to help support a business or sector in direct response to an emergency, as the Government did to direct HMRC to establish the furlough scheme during Covid. It is not intended to be used often and is similar to the power the Government have over the Bank of England, which has never been used.
Many noble Lords, including my noble friend Lord Sarfraz, the noble Baronesses, Lady Young of Old Scone and Lady Kramer, and the noble Lords, Lord Teverson and Lord Tunnicliffe, spoke about the review of the bank, required in Clause 9, after 10 years initially and seven years subsequently. This is not the only review or assessment of the effectiveness of the bank to which it will be subject. As I mentioned, ahead of spring 2024, a review of the bank’s capitalisation and effectiveness will take place. We will also undertake a review of the bank as part of the Cabinet Office-led review of ALBs by 2024-25, and the National Audit Office is currently conducting a value-for-money study on the set-up of UKIB which we expect to be published in the coming months. My noble friend Lady Noakes asked about the ongoing role of the Comptroller and Auditor-General and the NAO, and I confirm to her that they will have an ongoing role in scrutinising the bank.
My noble friend Lord Bourne, the noble Lord, Lord Wigley, and others asked about the bank’s relationship with the devolved Administrations. I cannot answer all the points raised by the noble Lord, Lord Wigley, but I can say that we have notified the devolved Administrations of the Bill and have requested legislative consent Motions from the Welsh Parliament, the Scottish Parliament and the Northern Ireland Assembly. We have engaged with the devolved Administrations through the set-up phases of the bank. The bank is already operating across the whole UK and has done its first deal outside England—a digital infrastructure deal in Northern Ireland.
The noble Baronesses, Lady Young of Old Scone and Lady Kramer, and my noble friend Lord Sarfraz asked about the publication of the bank’s strategy. Either before Committee or before we conclude our consideration of the Bill at this end of the Corridor, I will take that question away and see what can be done. I understand that the strategy is due to be published in June; when in June will be quite an important question in terms of the timing.
The noble Lord, Lord Vaux, asked about resources for the bank. UKIB is ensuring that it has the staff and resources to deliver on its objectives, and is recruiting rapidly. The bank will grow to having up to 300 staff.
The noble Lord, Lord Ravensdale, asked how the regional and local economic growth objectives would directly support levelling up. We have chosen not to further define the bank’s objective to support regional and local economic growth in the Bill, but we believe that the policy intent behind the objective is clear. This is given further clarity through the use of the strategic steer, narrowing down regional and local economic growth and encouraging the bank to focus its investments in line with the missions set out in the levelling-up White Paper.
The noble and learned Lord, Lord Thomas, the noble Baroness, Lady Young of Old Scone, and others talked about the need for a wide range of directors on the board, reflecting different skills and the interests of different nations and regions in the United Kingdom. Members of the UKIB board are still being recruited, based on the skills that they can bring to it and based on its mandate and objectives. The recruitment process is extremely thorough and will ensure that the right skills mix is in place for the board.
Before closing, I have a couple of points to make. It is the Government’s hope that this Bill will establish the bank in the market and ensure its longevity. We have already seen at first hand what the bank can do. Its private sector arm has committed to invest around £300 million, which could potentially unlock more than £500 million of private finance across the UK on a broad range of economic infrastructure, including the rollout of broadband to hard-to-reach areas and subsidy-free solar power. Meanwhile, its local authority arm has invested more than £100 million, supporting green bus routes and a green energy hub that will unlock thousands of jobs.
As I said at the outset, the debate we have had today shows the expertise on infrastructure that we have in this House. I look forward to a more forensic look at the Bill in Committee and on Report.
UK Infrastructure Bank Bill [HL]
Tuesday 14th June 2022
(2 years, 5 months ago)
Lords ChamberRead Full debate UK Infrastructure Bank Act 2023 Read Hansard Text Amendment Paper: HL Bill 3-I(a) Amendment for Committee (Supplementary to the Marshalled List) - (13 Jun 2022)
Baroness Noakes
“Regulation(1) In section 22 of the Financial Services and Markets Act 2000 (regulated activities), after subsection (1B) insert—“(1C) An activity is a regulated activity for the purposes of this Act if it is an activity carried out by the UK Infrastructure Bank, a company registered in England and Wales with the company registration number 06816271.”(2) The Bank is to be treated as having been designated as a PRA-regulated activity under section 22A of the Financial Services and Markets Act 2000 (designation of activities requiring prudential regulation by PRA).”
Baroness Noakes (Con)
I am disappointed that so many noble Lords find the content of the UK Infrastructure Bank Bill of so little interest that they are departing this Committee.
The Committee stage of a Bill often starts with an amendment that engages the passions of your Lordships’ House and results in something close to a Second Reading debate. I am sorry to disappoint noble Lords with my rather technocratic Amendment 1, and I hope not to detain the Committee with it for too long.
The amendment seeks to bring the UK Infrastructure Bank within the regulatory ambit of both the Prudential Regulation Authority and the Financial Conduct Authority. When I raised the regulatory status of the bank at Second Reading, my noble friend the Minister told me that it would not carry out any activities that required it to be regulated by the PRA or the FCA; hence it would not be regulated by them. She also said that the Treasury would carry out the FCA’s functions in relation to the senior managers and certification regime instead. I did not find that answer very satisfactory, so I tabled Amendment 1 to probe this further.
I doubt that my amendment is technically correct, given the complex structure of FSMA, and I hope that my noble friend does not feel it necessary to spend a long time telling me about the amendment’s inadequacies: it is a probing amendment. I am keen to explore why the body dealt with in this Bill, which is called a bank and will carry out many activities that proper banks carry out, should be outside the reach of the financial regulators.
While specific activities drive whether an organisation is required to seek authorisation of the PRA or the FCA, once an organisation is within that regulatory scope, a number of broadly based obligations ensue. In particular, regulated firms have to comply with the PRA’s and the FCA’s handbooks, which contain extensive requirements aimed at a huge range of things. The SM&CR, which is dealt with in this group by Amendment 53 from the noble Lord, Lord Teverson, is just one aspect. Others include whistleblowing, risk management, outsourcing, financial crime, and systems and controls. I could go on, but my point is that a financial services body within the ambit of the FCA and the PRA is subject to extensive regulatory supervision, and this will not apply to the UK Infrastructure Bank.
The Minister said that the Treasury would be the regulators in loco for the purposes of the SM&CR, but she said nothing about the other aspects of supervision. For example, who will look at the effectiveness of the bank’s risk management systems or money laundering procedures, which might be particularly relevant given the aim to crowd in investment?
Lord Teverson (LD)
My Lords, I shall speak to Amendment 53 in my name—we go from Amendment 1 right the way to Amendment 53. It is much more restricted than the amendment moved by the noble Baroness, Lady Noakes. I suppose I have been rather defeatist in this amendment, in that I have assumed that the Government will not say thank you to the noble Baroness for her amendment, which I support. I think her speech was absolutely right. This bank should be regulated like any other bank in terms of prudential regulation. If that cannot be the case, we have to ensure that employees of the bank who are making important decisions about taxpayers’ money and the public sector balance sheet are fit and proper persons. The way to do that is to apply the Financial Conduct Authority’s regime for management, which in ancient history I used to know as approved persons. They should keep to the regulations that come from the FCA. If it is impossible for the bank to be regulated in the way that other banks are, it is essential that we as taxpayers and as parliamentarians are confident that those employed by the bank to make those decisions are indeed fit and proper persons. That is the simple cause and reason for my amendment.
Lord Holmes of Richmond (Con)
My Lords, it is pleasure to take part in this first group of amendments on the UK Infrastructure Bank. I support Amendment 1 tabled by my noble friend Lady Noakes. When my noble friend the Minister responds, will she fully explain why the bank would not wish to come under the auspices of the financial regulators—the FCA and the PRA—and why HM Treasury would not want it to do so?
My Amendments 38 and 42 have the same purpose: to underscore in the Bill the bank’s operational independence from HM Treasury. Amendment 38 would put on the face of the Bill that the bank will be able to lend to whatever level and by whatever means it chooses without having to have recourse to HM Treasury. Does the Minister agree that this is implicit in the Bill and that to have this statement in the Bill would make absolute sense?
On Amendment 42, I agree entirely with the point alluded to by my noble friend Lady Noakes. The reason I bring Amendment 42 forward again is to further assert in the Bill that the bank should have the ability to avail itself of the capital markets. Does my noble friend the Minister agree that, again, having this provision in the Bill would clearly underscore the operational independence of the bank, which is espoused in all the briefing notes on the Bill?
Baroness Kramer (LD)
My Lords, this group of amendments addresses two entirely different issues, as the noble Baroness, Lady Noakes, identified. I rather fear that in the minds of the Treasury they are the same issue, which is slightly unfortunate but will probably explain a great deal of our debate today.
I will first address Amendment 42 in the name of the noble Lord, Lord Holmes of Richmond, which I very much support. This would allow the Bank to
“borrow on the international capital markets”,
putting that on the face of the Bill. We have a very small bank set-up here with only £4.2 billion in risk capital, which means that, for years, it will be able to do relatively little and will have to do it in such a way as to get substantial commercial returns to build up its equity base. That will allow it to grow and do rather larger things—but, since this is an important instrument for the whole goal of levelling up, you would think that impact and the need to act rapidly would be at the forefront of the Government’s thinking.
Obviously, being able to go to the international capital markets to access capital in the way that the European Investment Bank and KfW in Germany do—that is very well established—would be important. Also, given that there will be a green purpose to much that the bank does, it is important to note that one of the biggest movers in providing green financing has been the decision of the European Investment Bank as it goes to the capital markets to raise climate and sustainability awareness bonds to jet-propel finance into those markets. It is utterly beyond me to understand why those powers have not been given to the UK Infrastructure Bank; perhaps the Minister will explain.
Almost more importantly, perhaps, I want to address the issues raised by the noble Baroness, Lady Noakes, and the noble Lord, Lord Teverson. I very much support his notion that we must find a way to incorporate the senior managers and certification regime. Frankly, it has been quite a weak straw in the hands of the FCA. I do not want to entertain folks here for too long by going through the instances in which the FCA should have used it but has declined to do so, or has used it very weakly; but at least it is something to make sure we have real responsibility sited where it should be in senior management.
I want to pick up a rather different issue, which was mentioned by the noble Baroness, Lady Noakes, only in passing: whistleblowing. I will talk about this in more depth in the group of amendments beginning with my Amendment 30 about the operational independence of this bank, but when we get later into the Bill we will find that a framework has been established allowing the shareholder—in other words, the Treasury and the Government—to give directions, both specific and general, to the bank. The framework elaborates on that but recognises that the board of directors of the bank may well look at these specific directions and wish to reject them. The grounds that may be given, not in a rejection but a “reservation notice” to the shareholders, include infringement of
“the requirements of propriety or regularity”
or various other things including on “value for money” or “strategic objectives” and so on; we can go into that later. In the two sections that I want to address, a reservation notice can be sent on grounds of infringement of “propriety or regularity”, or of being
“of questionable feasibility or … unethical”.
In that case, the shareholder—the Treasury, or the Government, in effect—can send a notice to the bank overriding its letter of reservation, forcing it to go ahead with the activity, even if it is considered by the bank to be unethical. The bank is supposed to provide a written direction, which, when you first read this, looks as though it will be published. However, very carefully written into the framework is the phrase
“published (unless the Shareholder has directed in writing to the Company that the matter must be kept confidential).”
I think we can guarantee that any direction that is unethical or infringes on propriety will come with an instruction to keep it confidential. At that point, for the public and Parliament to know, we rely on whistle- blowers.
That brings me to the point raised by the noble Baroness, Lady Noakes. First, directors are not covered by the Public Interest Disclosure Act anyway. Senior employees would be, but to have any protection to be able to blow the whistle they would have to go to a regulator to make a protected disclosure. There is no regulator, therefore there is no mechanism for protected disclosure.
I want noble Lords to understand the jeopardy in which those directors or senior executives might find themselves. I suspect they will have been asked to sign some version of a non-disclosure agreement—it has many different names; I always tussle with the Government, because it turns out they have done it under a different name, such as a confidentiality agreement, but it is the same thing. There is even some talk of extending the scope of the Official Secrets Act, which could creep into this as well. I also noticed that the directors—I am sure those who have been appointed are excellent people—really would be taking steps of jeopardy if they blew the whistle, because most are making their careers as advisers to government or as chairs or directors of government-related entities, so they have a great deal of jeopardy at hand.
If this is unregulated, there is no mechanism for disclosure, even where actions within the view of the directors or senior employees of the bank infringe on propriety or are unethical. I would like the Minister to explain why the Government decided that that framework should be in place. I should also like her confirmation of whether there are non-disclosure agreements or their equivalent. If she cannot at this moment, by the time we get to the group beginning with Amendment 30 she will have had the opportunity to consult the Box. It will be a yes or no answer. I am certain we must get an answer either way.
Lord Sharkey (LD)
My Lords, I will ask a brief question about regulation in the sense raised by the noble Baroness, Lady Noakes. Chapter 11 of the framework published by the Treasury says:
“Notwithstanding any exemptions that may apply to the Company, the Shareholder acknowledges that the provision of certain aspects of the Company’s activities may be subject to … the ‘FCA Rules’ or guidance or principles … the ‘PRA Rules’ or guidance or principles and … other applicable laws or regulations.”
Could the Minister help the Committee by saying what these “certain aspects” might be?
Lord Tunnicliffe (Lab)
My Lords, I rise to speak to these amendments, but I will make a general point about my approach to today’s debate. I find myself agreeing with a very high proportion of the amendments. We obviously want to hear from the Minister the extent to which the Government agree with them, but it seems that the issues we will face on Report will be about which of these amendments need to go into the Bill, rather than whether they are intrinsically sensible, which I think most of them are. I even venture into uneasy territory in this group by finding myself almost agreeing with the noble Baroness, Lady Noakes, again. I put it in slightly guarded terms—
Lord Tunnicliffe (Lab)
The noble Baroness should be uncomfortable as well.
UKIB is not an ordinary bank, but strong arguments have been made for subjecting it to at least some of the regulatory measures under the Financial Services and Markets Act. Of course, we will shortly see a new version of that legislation and it is difficult to know exactly what it will look like. Nevertheless, there seems merit in the suggestion made by the noble Lord, Lord Teverson, that UKIB staff should be passed as fit and proper persons. It may be that the Minister is able to offer assurances that that will be the case. If so, perhaps she could write to us and outline the process in more detail.
The noble Lord, Lord Holmes, talked about the bank’s lending and borrowing powers. These are important questions at this early stage of the bank’s existence and, once again, I look forward to the Minister’s response.
Baroness Penn (Con)
My Lords, this first group of amendments all cover the financial aspects of the bank. Amendment 1 in the name of my noble friend Lady Noakes and Amendment 53 in the name of the noble Lord, Lord Teverson—I shall not quibble about the wording of the amendments; I understand their purpose —would subject the UK Infrastructure Bank to all financial services regulation and the senior managers and certification regime in turn. This goes against the exemption that Parliament approved for the bank last year.
The Government’s view is that adopting this position at this stage would create a disproportionate regulatory approach that would unnecessarily add to the cost, complexity and burden of a relatively small and new organisation. Financial services regulation was not intended for public sector institutions with a policy objective. UKIB does not require regulation in the same way as commercial banks. The practice of regulatory exemptions in this way follows precedent for similar institutions operating in the public sector—for example, the European Investment Bank.
It may be helpful to note that even though UKIB has a general exemption from financial services regulation, UKIB’s framework document is clear that, as far as reasonably practicable and as appropriate, UKIB will abide by the principles of the senior managers and certification regime and relevant elements of the FCA’s Principles for Businesses. As part of its compliance framework, UKIB will adopt and implement policies to safeguard itself against fraud, theft, corruption, bribery, insider dealing, market abuse and money laundering. It is therefore important to emphasise that the general FSMA exemption UKIB has been granted already does not mean that UKIB is absolved of all compliance obligations. Rather, the exemption means that UKIB has flexibility to adopt a bespoke approach to its governance that is proportionate to its activities.
Amendments 42 and 38 in the name of my noble friend Lord Holmes of Richmond would increase UKIB’s powers to borrow from international capital markets and give UKIB an unfettered ability to determine its own investment levels without Treasury authorisation respectively. With regards to Amendment 42, I assure my noble friend that UKIB already has these powers under company law.
Further, UKIB has a maximum financial capacity of £22 billion, including an overall borrowing limit of £7 billion. Within this limit, UKIB can borrow up to £1.5 billion a year from either the Debt Management Office or private markets, including international markets, depending on the best value for money and subject to standard approval processes.
Similarly, the spirit of Amendment 38 mirrors the Government’s ambition for the UK Infrastructure Bank: that it should have operational independence in its day-to-day operations and investment activities. The framework document outlines that UKIB has the freedom to set the pricing of its transactions. It is already using this power.
Lord Vaux of Harrowden (CB)
I am sorry to interrupt, and I thank the Minister for giving way. She has referred to the framework document a few times. Can she clarify exactly what its legal status is?
Baroness Penn (Con)
For the sake of the rest of the Committee, it may be worth me answering the noble Lord’s question during a subsequent group. I could make a good attempt now, but I think we will have a lot of discussions about the status of the framework document in the coming hours, so I want to make sure that I give the Committee the absolutely accurate answer. I undertake to do that during this Committee session.
As I was saying, the framework document outlines that UKIB has the freedom to set the pricing of its transactions, and it is already using this power. This is alongside the freedom UKIB has to set the terms and structure of its interventions, subject to delegated authority limits in place to protect the taxpayer for very large investment sizes or novel, contentious or repercussive transaction structures. UKIB can already determine the level of its own investments in line with its capitalisation and annual limits, which are agreed in its framework document. UKIB also already has the power to set the level of its lending rates.
Going any further than the existing freedom UKIB has, as this amendment seeks to do, would not be compatible with its status as a public body and would take it outside the framework through which the Treasury assures Parliament about the appropriate use of public money. With £22 billion of capital, it is right that the Government exercise some spending control to ensure it continues to meet value for money.
I further reassure noble Lords that the Government will review UKIB’s progress and financial performance by spring 2024 to ensure that it has sufficient capital to deliver its ambitions. By that stage, the bank will have closed a broader range of investments and developed a strong pipeline of further projects. I can tell my noble friend and the noble Lord, Lord Teverson, that, as part of this review, the Government will also consider again the question of UKIB’s regulatory position to ensure that it continues to be appropriate.
To give a brief answer to the earlier question about the framework document, it is essentially a memorandum of understanding and does have legal effect in so far as the bank can be accountable to it. I will see whether I can expand on that during discussion of subsequent groups.
I turn to the points raised by the noble Baroness, Lady Kramer. As she suggested, I may come back to her on the specifics when we get to the group beginning with Amendment 30, but I will reassure her now on one point. The Treasury must publish any direction that it gives to the bank. In this regard, what is set out in law in this Bill is the relevant piece of information, versus the framework document. That goes to some level of the discussion we will have when we consider what is set out in the Bill—it is the overriding thing to look at when it comes to UKIB’s operation.
Baroness Kramer (LD)
Perhaps the Minister could clarify one thing for me. As I read the two documents put together, the instruction must be published but not the fact that the bank has looked at it and deemed it to be improper, infringing “propriety” or
“of questionable feasibility, or … unethical”.
In other words, that opinion of the bank can be completely suppressed, as I understand it, by the language of the Bill and of this document. If that is not correct, it would be most helpful if the Minister could tell me.
Baroness Penn (Con)
I will definitely pick up on that further point of detail, which relates closely to the noble Baroness’s question about non-disclosure agreements, to which I will seek to get an answer as we undertake consideration in Committee.
I hope that I have set out why the Government have at this stage taken the approach to the regulation of the bank that they have, but, as I say, it will be kept under review, specifically by 2024. I therefore hope that my noble friend will withdraw her amendment.
Lord Teverson (LD)
I am sorry—perhaps I could intervene very briefly. I find it an interesting explanation from the Minister that they are not going to apply regulation because it is a smaller and younger bank. I suspect that would not apply to any other bank that was founded in the private sector. As the Minister said, the framework document goes through the senior managers and certification regime. But it says, regarding “governance and conduct”:
“This would include, as far as is reasonably practicable and appropriate for the Company, abiding by the principles of the Senior Managers and Certification Regime”.
I understand that, but either you apply it or you do not. You cannot sort of half-think about it. It is one of those things like “You’re either pregnant or you’re not”, or whatever—sorry, that is probably an inappropriate way to put it—so I do not understand how the framework document approaches this. Maybe I have it wrong; as I said, I am used to the old approved persons regime and not up to date on this, but I do not understand it.
Baroness Penn (Con)
I am not sure that I or the noble Lord would actually use the analogy that he did, but I undertake to write to him to clarify that point on the senior managers regime. Coming back to the point about it being a relatively small and young institution, I absolutely take the point that he made about commercial banks being in that position. It is not that element of UKIB alone which has influenced the decision; there are quite a few elements of the nature of UKIB. As the noble Lord, Lord Tunnicliffe, said, it is not a commercial bank in many senses.
Banks and other financial services institutions are typically regulated to ensure two objectives, including that depositors and other investors are properly protected —in particular, retail depositors and investors, which UKIB will not have—and that any systemic risks to the wider financial sector do not materialise. It is the Government’s assessment that these considerations of the FiSMA regulation are not currently a concern for UKIB’s specific context. Beyond it being relatively new and small, it does not take deposits or other investments; it is also guaranteed by the Treasury as its sole shareholder, so it does not present a wider systemic risk.
To confirm the understanding of the noble Baroness, Lady Kramer, although the Treasury is obliged to publish the direction that it issues, the bank is not obliged to say publicly what is in its response to any Clause 4 direction. I will still come back to her on the question of non-disclosure agreements.
Lord Sharkey (LD)
Perhaps I could ask again about which
“certain aspects of the Company’s activities may be subject to”
the FCA and PRA rules, as set out in the framework.
Baroness Penn (Con)
I will endeavour to also get back to the noble Lord during this Committee—but, if I do not, I will include my answer in my letter on his noble friend Lord Teverson’s question about what aspects of the senior managers regime we plan to apply to the bank.
Baroness Kramer (LD)
I am sorry to remain persistent on this, but the Minister just said that the bank is not required to publish its letter of reservations. Is it not correct to say that what the document says is that the shareholder may effectively prohibit the bank from publishing its letter of reservations—so it is a gagging clause? That is what it says in the framework.
Baroness Penn (Con)
In picking up the noble Baroness’s other point, I shall ensure that my response covers that specific point.
Baroness Noakes (Con)
My Lords, before I move on to what I will be doing with my amendment, could I ask one factual question? During my noble friend’s response, she said that the UK Infrastructure Bank had a borrowing limit of £7.5 billion. I understand that the source of that borrowing limit is this framework document. Could she confirm that? If that is the case, I think it is going to make the status of the framework document and its interaction with the statute a very important issue for the conduct of this Committee. The question posed to her by the noble Lord, Lord Vaux, becomes particularly important for us to have a proper understanding. Will she respond on that specific point?
Baroness Penn (Con)
I think that the framework document sets out those limits and they are put in place, as it were, by the Treasury. That is my understanding of that interaction.
Baroness Noakes (Con)
I thank my noble friend for that, I think what we take from that is that the framework document needs to be well-understood in its scope and effect for many aspects of the debates in this Committee.
In relation to my own amendments, I thank all noble Lords who have taken part in this debate. It has raised some important issues, in particular those related to whistleblowing by the noble Baroness, Lady Kramer. I hope that she gets answers to the questions she has raised because they are important.
I had not appreciated that Parliament approved an exemption for the UK Infrastructure Bank last week. My noble friend did not tell me that at Second Reading, but these things pass one by when dealing with financial services regulation. We were asleep on the job when that came up, but now we have this Bill so we have the opportunity to revisit that question.
I say to my noble friend the Minister that I am not entirely convinced by the argument that, because there is no issue of protecting depositors, there is no systemic risk from the UK Infrastructure Bank, and it should therefore be exempt from the panoply of oversight and supervision banks are ordinarily subject to, whether or not they are small banks. We should not dismiss lightly the areas that have been raised: whistleblowing; the senior manager and certification regime; and financial crime. There are some very important issues which would get attention at the moment, if this were not a state-owned bank, from the FCA/PRA. Without that, nobody is looking at them. I do not think that is a very safe way to set up this bank. I hear what my noble friend says about reviewing it in 2024, but there is a question of whether it is sensible to run the risks until 2024. For today, I beg leave to withdraw my amendment.
Lord Tunnicliffe
“(2A) The statement must also outline how the Bank will, when carrying out its activities, balance the objectives under subsection (3), to ensure its activities do not cause environmental harm.”Member's explanatory statement
This amendment is to facilitate a debate around the balancing of UKIB’s objectives, which have the potential to come into conflict.
Lord Tunnicliffe (Lab)
My Lords, before I start to speak to this group, can we clear a piece of housekeeping with the Minister? I would be grateful if she could give us an assurance that, when she writes to one of us, she writes to all of us, unless there is an overwhelming case against it. I take her nod as an affirmative and thank her.
I move Amendment 2 and will speak to my other amendments in this group, Amendments 3, 8 and 20. Amendment 2 was tabled to facilitate a debate around the potentially competitive nature of the bank’s objectives. The bank has acknowledged that the climate and growth objectives are likely to come into conflict. To its credit, it has loosely committed to the “do no harm” principle. However, as we say so often during our consideration of legislation, a verbal or written commitment is not the same as a statutory safeguard.
As I referenced at Second Reading, the Government opted not to include a general climate change provision in the Subsidy Control Act. They wanted to give public authorities maximum flexibility when granting subsidies, even if they cause environmental harms. As we transition to a greener economy, one would hope that investment in and subsidy for polluting technologies will steadily decline, however there are no guarantees. As the front page of the Bill makes clear, this will become environmental law, once enacted. It therefore makes little sense to leave these matters to chance. What message does it send if our environmental law does not properly protect the environment?
Amendment 3 would broaden the bank’s climate objective to bring in the 2030 species abundance target under the Environment Act. As the Dasgupta review made clear, nature and biodiversity are inherently linked to our economic and wider well-being. We support the Government’s decision to include a species abundance target in the Environment Act and look forward to seeing the detail when it is brought forward by Defra. We worked with colleagues across your Lordships’ House to strengthen that target, and we are pleased that Ministers listened. Having set the ambition, we need concerted action to realise it.
There is not only a moral case for green, nature-based investment—those types of projects tend to have a higher cost-benefit ratio than traditional forms of infrastructure. Not only are there headline economic benefits but there are jobs to be created too. Projects to improve our natural environment could have a particularly positive employment effect in some areas with the worst labour market outcomes.
On jobs, I turn to Amendment 8, which would add job creation to the growth objective. The creation of jobs is mentioned as part of UKIB’s second objective in the Chancellor’s letter from 18 March. That document sets out the bank’s strategic steer. It is slightly curious that jobs are mentioned in that document, albeit only twice, but that has not been carried across to the Bill itself. The bank needs to be a force for good in all respects, which means creating highly paid, high-skilled jobs. The Government have long promised an employment Bill to ensure greater protection across the board, but curiously they have been unable to find parliamentary time to deliver on that commitment. The projects funded by the bank will create jobs, but it is not clear what weight, if any, will be given to the terms attached to those roles. I hope that the Minister can confirm that this is the Government’s intention for jobs created through UKIB’s investment—to be well-paid, secure jobs, rather than short-term or zero-hour contracts, with few rights and protections.
Finally, I have tabled Amendment 20, which seeks to expand the definition of infrastructure to include investment in the natural environment and the circular economy. This is a natural partner to several other amendments in this group, and the case for it is self-evident. What in a sense we are trying to do is to expand the two objectives to four; one of those objectives is about net zero, and the second is about levelling up. We want to include the environment and jobs; that way, the objectives will in our view become more balanced. I beg to move.
Baroness Hayman (CB)
My Lords, I declare my interests as set out in the register. As we approach this group, I have added my name to Amendment 2, which has just been so clearly introduced by the noble Lord, Lord Tunnicliffe. I do no more than to reiterate the point that including the “do no harm” requirement in the framework document and strategic plans is not, as the Minister suggested at Second Reading, actually significant. There is scope for conflict between these objectives, and we need to make it crystal clear in the Bill that the bank should not make investments or engaging in other activities that contradict its own objectives or the Government’s wider environmental objectives.
I would like to say my bit on the theme that will go through much of our discussions today about the absolute priority of putting essential policy components in the Bill, rather than any other accompanying document that does not have the force of legislation. We know that, when circumstances change, anything short of primary legislation can be changed or refocused. I hope that the Minister will forgive me if I remind her of our debates over the Financial Services Act. In those discussions, when asking to put things in it, we were assured that the “remit letters” to the PRA and the FCA would
“set ambitious recommendations relating to climate change”.—[Official Report, 24/2/21; col. GC 224.]
Indeed, they did. However, there was significant emphasis adjustment to those recommendations this April in the light of the Government’s focus on domestic oil and gas production in their energy security strategy. I, too, regret that we did not make it clear in the Subsidy Control Bill and it makes me more certain than ever of the virtue of ensuring that what we want is in the Bill.
I have Amendment 4 in this group, and am grateful to the noble Lord, Lord Bourne of Aberystwyth, my noble friend Lord McDonald of Salford and the noble Baroness, Lady Young of Old Scone, for adding their names to it. This amendment, like many others in the group which I generally support, considers the scope and ambition of the UKIB’s objectives. I am afraid I cannot pronounce “UKIB” as one word because, if I do, it comes out sounding like “UKIP” and I then come out in hives. I hope noble Lords will forgive me for continuing to use the initials. The amendment’s objective is to highlight two issues: one is nature and the natural environment—there are several other amendments in this group on that issue—and the other is adaptation. I am extremely glad to see my noble friend Lady Brown of Cambridge in her place and hope we may hear from her on the latter issue.
My amendment uses wording that the Government themselves proposed and passed into the Health and Care Act 2022. I will not compare duties for the NHS with the objectives of the bank further, but it is worth making one point on this matter. For the Health and Care Act, the Government set out an overarching three- pronged approach to their environmental considerations: reducing emissions, achieving environmental targets and adapting to climate change. These are interlocking issues; the Government recognised this and took action to ensure that they were given priority in that Bill. We should do the same here.
On adaptation, in particular, we must recognise that, however effective we are in our pursuit of a zero- carbon world, there is, as the third UK climate change risk assessment said,
“strong evidence that even under low warming scenarios the UK will be subject to a range of significant and costly impacts”.
According to Net Zero Strategy,
“it is essential that the UK’s adaptive capacity is rapidly developed to prepare for”
this. This amendment would address that issue.
The amendment also ensures that the protection and restoration of nature are included in the Bill. The interdependence of the climate change and nature crises has, in theory, long been agreed by the Government, and was confirmed by the Minister at Second Reading. We know that the worst climate outcomes cannot be avoided without a significant expansion in nature restoration. We also know that nature restoration supports levelling up, and regional and economic growth, through improvements to mental and physical health and through the creation of valuable jobs. However, it is also clear that there is a significant funding gap, estimated at around £5.6 billion a year by the Green Finance Institute, which needs to be bridged to achieve the necessary investment.
Lord Bourne of Aberystwyth (Con)
My Lords, it is a great pleasure to follow the noble Baroness, Lady Hayman, and to speak particularly to Amendment 4 in this group. I address the attention of the Committee to my published interests in the register.
I shall make a couple of general points to start with, because it occurred to me that the noble Lord, Lord Tunnicliffe, when speaking to the last group of amendments, was absolutely right when he said there is a great tendency on the part of the Government not to put stuff in the Bill, but rather to say, “Don’t worry, the Treasury will be looking at that”, “The Government will be looking at this”, “There will be a review of this and a review of that”. That ties in with what the noble Baroness, Lady Hayman, just said about the importance of having this firmly in the legislation. We live in febrile times and it is important that some of the key points that have been put forward around the Committee, and certainly were at Second Reading, are put in the legislation.
The second point that struck me very forcibly, made by my noble friend Lady Noakes, was the importance and status of this framework document. That really needs underlining and I encourage the Minister to write to all Members to stress what the nature of this document is. She referred to its legal status. Its legal status is certainly not as strong as that of a Bill and I would be interested to know what the lasting position of this framework document is, how it is to be enforced and so on. That is key to what we are looking at.
In addressing Amendment 4, the key point, as the noble Baroness, Lady Hayman, said, is about extending and clarifying the remit of the bank’s objectives. Many at Second Reading, including the noble Baroness, Lady Young of Old Scone, and the noble Lord, Lord McDonald of Salford, who are also speaking to Amendment 4, were clear about the importance of being explicit about objectives for adapting to actual and predicted impacts of climate change. As was very clearly set out by the noble Baroness, Lady Hayman, the report of the Committee on Climate Change is key in this regard, under Section 56 of the Climate Change Act. The Government have said that they are committed to this; why, then, would they resist putting it in the Bill? If they resist putting it in the Bill, it will inevitably make not just noble Lords but the community and the public in general suspicious, and I think that would be an undesirable outcome.
It is surely integral to the work of tackling the challenge of climate change that we do this. I think we also need to give the sector and the wider world the security of making the importance of the natural world clear in the Bill, following the Dasgupta review, which, again, the Government strongly supported. They commissioned it and supported it; why, then, is it not to be put in the Bill? It is an integral and holistic part of dealing with the challenge of climate change that we also deal with the dangers to the natural environment. That would mean making positive efforts in relation to, for example, peat restoration, tackling coastal erosion, tackling flood management and so on. Why should this not also be in the Bill? I would be interested to hear what my noble friend has to say on this point.
It is important for the financial sector to know that the Government are firmly behind this. At Second Reading, I recall that the noble Baroness, Lady Boycott, who is not in her place at present, reminded us that in 2018-19—the most recent statistics—the UK invested just 0.02% of GDP in restoring nature. That is clearly not good enough for a nation that purports to be in the lead and in many ways is giving a lead internationally on this. We need to do much more. I trust that the Government can match their words with some real action and look at how we can amend this Bill in this very positive way.
Baroness Young of Old Scone (Lab)
My Lords, I declare my interests as chairman, president and vice-president of a range of environmental organisations. I too will speak to Amendment 4, to which I have added my name.
We absolutely must not miss this opportunity to make sure that the bank’s objectives are fully in line with the two biggest global challenges: climate change—mitigation and adaptation—and biodiversity decline. This amendment, as has been outlined, highlights the importance of the bank supporting investments that enable the UK to adapt to the implications of climate change and not just to reduce carbon. There is already enough carbon out there to have significantly influenced the climate—increased storminess; higher temperatures; impacts on human health, crops and the resilience of infrastructure; and flood risks to property, energy generation and distribution networks and transport. Some 85% of all major electricity distribution substations are on the flood plain. At high temperatures, as we already know, roads and rail melt. There are some real practical issues now which the infrastructure bank could get its teeth into.
I have read the successive reports of the Adaptation Committee to the Climate Change Committee, which I was privileged to help establish. I am delighted to see the noble Baroness, Lady Brown, in her place, and I am sure she will talk with huge authority about this. To steal her quote,
“adaptation remains the Cinderella of climate change, still sitting in rags by the stove: under-resourced, underfunded and often ignored.”
It almost makes you weep. Her reports also demonstrate that the gap between the level of risk we face in the UK from climate change impacts and the level of resilience we are developing has widened rather than narrowed. The UK is not in a good place with its readiness for and resilience against the impacts of climate change, and if the world misses its net-zero targets, we will be in an even worse place. The bank has a really valuable job to do in addressing these issues. It must do so, and therefore this should be in its objectives.
As others have said, the bank also needs to embed in its objectives a role in supporting action on the Government’s other key challenge of protection and restoration of natural capital—air, land, water and especially biodiversity—which has been on a steep decline for 50 years, and which the Government have committed to reverse by 2030.
I put the House on notice that I will become a complete bore. Having got my way with the Government yesterday when they announced that they would have a land use strategy, I can now stop banging on about that. My next subject to bang on about is the need to learn the childhood game, if noble Lords remember it, of trying to pat your head and rub your stomach at the same time. We need not just to learn that but to pull off the more difficult task of walking, talking and chewing gum at the same time. Pretty well every government policy and many public institutions should have three sets of objectives for the future: the key role that they play in whatever sphere of life they operate in, the climate change objective, and the natural capital and biodiversity decline objective. We have to become better at walking, talking and chewing gum at the same time.
As we see successive bits of legislation going through, I am sure your Lordships will hear me, the noble Baroness, Lady Hayman, and many others banging on about that need. Remember when you were patting your head and rubbing your stomach: it was difficult but it was doable. We have to learn how to do this—to make sure that every single policy has measures for climate change mitigation and adaptation for biodiversity recovery included in its objectives, equal to the main function that it is there to deliver. This amendment would do that job for the infrastructure bank, and it would enable the bank to work for natural capital as priority infrastructure and as a key factor in screening its lending priorities.
There are several other amendments grouped with Amendment 4—Amendments 2, 3, 5, 15 and 20—which are all variations on the theme of environmental objectives. I personally think that ours is the most all-embracing, elegant and comprehensive, but I am sure there will be a degree of haggling to bring together some combined objective before Report.
Lord McDonald of Salford (CB)
My Lords, I too have put my name to Amendment 4, and I agree with the noble Baroness, Lady Young of Old Scone, that it is the most elegant in this group. At Second Reading, the Minister acknowledged that expanding the objectives of the bank to include biodiversity and the protection, enhancement and restoration of natural capital was the area that most parts of the House were most interested in promoting. More than that, the Minister said that everything that could be launched in the area of biodiversity was completely compatible with the climate change objective of the bank. But as the noble Baroness, Lady Hayman, has reminded us today, this Bill decides the DNA of the bank. So if it is not included on the face of the Bill, biodiversity and the natural environment will be essentially down-prioritised. As the noble Lord, Lord Bourne of Aberystwyth, reminded us, if it is not there, people will think that it is not important. If it is as easily incorporated as the Minister suggested at Second Reading, could we please have this explicitly on the face of the Bill?
Lord Teverson (LD)
My Lords, it is always a pleasure to follow the noble Lord, Lord McDonald, and the contributions he has made to the House and to the International Relations and Defence Committee recently.
I see that two of our right reverend Prelates are present in the Chamber. I thank them for their unity and for their letter to the Times today, which I think was absolutely right. I congratulate them on that unity and that nationally important statement.
One of the things we debated in the Environment Bill—now Act—was whether we should have a statement of the biodiversity emergency in that Bill. At the end of the day, I withdrew my amendment on that, because the Minister pointed out at the time that the Prime Minister had written that there was a biodiversity and nature crisis in this country. Therefore, I find it very difficult to understand, from a government point of view, why we do not have both those crises reflected in this Bill’s objectives. Although they are very different crises, they are absolutely connected, and it is essential to solve them both. If nothing else, this bank must be part of that solution—it must be.
I come back to something that the noble Baroness, Lady Noakes, said at Second Reading that I absolutely agreed with: one of the risks of this bank is that it just substitutes private investment for public sector investment. Relatively, one of the easiest areas for the private sector to invest in—because of all the schemes such as contracts for difference, ROCs in the past, and the incentive for renewable fuels—is clean energy. It is a relatively low-risk area, and we have seen that happen. In fact, it was much riskier when the Green Investment Bank started; now that we have come down the learning curve, it is quite an easy area in which to invest.
Lord Holmes of Richmond (Con)
My Lords, it is a pleasure to take part in this second group and to agree with pretty much everything that has been said so far.
I will speak to Amendment 15 in my name, which seeks simply to insert “nature- based solutions” in the definition of infrastructure in the Bill. For every £1 invested in peatland restoration there is a return of £4.60, and for every £1 invested in woodland there is a return of £2.80. Does my noble friend the Minister agree that in both examples that is a multiple greater than what the bank is seeking to get as set out in its aspirations?
Similarly, as has eloquently been said with regard to climate and nature-based renewal, there is an economic boon to be had if we have nature-based solutions in the Bill for the bank to clearly be able to invest in: some £50 billion for the UK economy by 2050 and, with regard to levelling up, over 100,000 jobs.
Can my noble friend say whether the bank is able to invest in infrastructure—in this instance, nature-based solutions—in UK overseas territories? A number of things can be done there. Just one example is mangrove replanting, which can have a significant impact on addressing the current climate emergency and more impact than some of the projects that can be done alongside in the United Kingdom. Can the bank invest in such infrastructure projects in UK overseas territories?
I gently point my noble friend to a report from your Lordships’ Science and Technology Committee, on which I was lucky to serve, on nature-based solutions. It clearly sets out the advantages to be had from such investments, but also the criticality, has been said across your Lordships’ House. Even if we do everything towards the reduction and eventual eradication of carbon, we must still undertake nature-based solutions. To this end, with the economic, social and environmental benefits to be had, does my noble friend agree that it makes complete sense to have nature-based solutions as part of the definition of infrastructure in the Bill?
Lord Ravensdale (CB)
My Lords, I shall speak to Amendment 6 in my name and start by declaring my interests as a project director and engineer with Atkins, and as a director of Peers for the Planet.
The problem we have, in my view, is that the second objective of the UK investment bank—to support local and regional economic growth—does not provide a clear policy intent for what the bank is to do in relation to levelling up. Getting these objectives right from the start is crucial. As the noble Lord, Lord Tunnicliffe, said at Second Reading,
“the most important debates will focus on the Government’s definition of infrastructure and the scope of the two core objectives. We must get these core components right from the off”—[Official Report, 24/5/22; cols. 824-5.]
As I said at Second Reading, the current wording leaves much open to interpretation. Almost any infrastructure investment anywhere in the country could be argued to support economic growth in the region or local area in which it sits. A new transport scheme in a wealthy area of Sussex, for example, would meet this criterion by supporting local and regional economic growth. There is nothing to clarify that this refers to levelling up, or to economically disadvantaged areas. I listened carefully to what the Minister had to say in response to this at Second Reading—she stated that the policy intent is clear—but I believe the Bill would benefit from setting out in more detail exactly what this goal entails, which I will come to shortly.
I briefly remind noble Lords of the issues we are facing here. The levelling-up White Paper stated:
“The UK has larger geographical differences than many other developed countries on multiple measures, including productivity, pay, educational attainment and health.”
As the Economist put it recently:
“Britain is highly geographically unequal ... It is as if America’s rust belt or the former East Germany were home to half the population.”
As an example, I took a walk through central Derby on Sunday and asked my sons to count the number of empty shop units. We counted 14 over a 200-metre stretch in the city centre, from Iron Gate to Corn Market. The only retail outlets that seemed to be thriving were betting shops—I counted five. This issue is repeated right across the Midlands region. Walking around comparable stretches in London, I see one or two empty units at most. I know the Government get this, and I am looking forward to seeing the Levelling-up and Regeneration Bill come before this House, but it emphasises that we need to make clear what is meant by levelling up in this vital legislation. Although the intent is clear from the Chancellor on his strategic steer to the bank, it needs also to be clear in the legislation. Levelling up is a long-term, generational project, so legislation supporting it must be crystal clear as to what needs to be accomplished. The strategic steer will not set policy intent over the long term; having this clear on the face of the Bill will, as the noble Baroness, Lady Hayman, powerfully argued.
My amendment is straightforward, and I also support Amendment 9 in the name of the right reverend Prelate the Bishop of St Albans and Amendment 7 in the name of the noble Baroness, Lady Bennett, to which I would have added my name had I spotted them in time; they get at the same issues as my amendment. My amendment would strengthen the current wording by referring specifically to reducing
“geographical inequality through supporting regional and local economic growth in areas of economic disadvantage”.
This, I believe, clearly captures the Government’s policy intent for this objective and ensures that the legislation will deliver in the long term for disadvantaged areas, will deliver for the levelling-up agenda, and will make a real difference to the lives of people in those left-behind communities. I would be grateful if the Minister, in her summing up, could expand on how she believes the current wording provides a clear policy intent.
I also strongly support Amendment 4 tabled by the noble Baroness, Lady Hayman. As an example, the UN has called for climate finance to be split equally between efforts to curb and adapt to climate change, but most goes towards mitigation. However, I cannot beat the Cinderella analogy from the noble Baroness, Lady Young of Old Scone. Therefore, it is right that adaption should be split out from the core emissions targets as a specific aim, and I support the words of other noble Lords on why biodiversity should be placed on an equal stature with climate change within the objectives of the bank.
Baroness Bennett of Manor Castle (GP)
My Lords, it is a pleasure to follow the noble Lord, Lord Ravensdale, whom I thank for his expression of support for Amendment 7.
This is quite a large group of amendments addressing quite a narrow area of the Bill, but clearly this is crucially important. We are talking about the objectives of the bank. It is interesting that it has two objectives listed, one of which, looking at the amendments tabled by your Lordships, we clearly feel is too narrow, and the other of which is insufficiently clear. I will not speak at length to the many amendments here addressing and tackling adaptation, biodiversity and the nature crisis, because, as a Green, I do not need to; it has already been so clearly and explicitly said from all sides of the House that it does not need to come from me. We talk about tackling the climate emergency, but we must also tackle the nature crisis. It is a related and equal threat to the security of us all and it must be in the Bill. Also, the reference by the noble Lord, Lord Teverson, to the circular economy is interesting. I get at this in a different way, in terms of demand reduction and resource-use reduction, in the next group, so I will not go into that in depth now.
As the noble Lord, Lord Ravensdale, made clear, the second objective, to support regional and local economic growth, could mean local growth in Kensington and Chelsea or in the Sheffield constituency of Hallam, which a few years ago had the lowest rate of free school meals of any constituency in the country. The Government’s rhetoric and the discussion around this Bill says that this is supposed to be targeting disadvantaged areas, but there is nothing in the Bill which says that. Both our amendments, and the amendment tabled by the right reverend Prelate the Bishop of St Albans, seek to address this. However, mine also has an extra, intentionally radical element in that it takes out “economic growth”. Your Lordships’ House has heard me say before that we cannot have infinite growth on a finite planet and that chasing after growth is a problem. So, even if we target this on the most disadvantaged areas, which certainly need development, is it economic growth per se that they need? Who is the advantage of that growth and wealth going to?
I quote the Nobel prize-winning economist Joseph Stiglitz, who pointed out that if our measures tell us that everything is fine when really it is not, we will become complacent. Despite the increases in GDP, and despite the 2008 crisis being well behind us, everything is not fine. Growth on its own will not solve the problem of levelling up—even growth directed to those areas. We are seeing considerable moves in parts of government towards recognising this.
I note that the Office for National Statistics has a national well-being programme that has 10 broad dimensions which have been shown to matter to people. They are the natural environment; personal well-being; our relationships; health; what we do; where we live; personal finance; the economy; education and skills; and governance. Looking around the world, the EU Council has defined the economy of well-being as putting people and their well-being at the centre of policy and decision-making. I have referred before in your Lordships’ House to the New Zealand Treasury having produced well-being budgets, which operate by guidance under the living standards framework. It is about improving people’s lives, which is what so many areas of our country desperately need.
The Lord Bishop of St Albans
My Lords, I declare my interest as a vice-president of the Local Government Association and president of the Rural Coalition. I shall speak to Amendment 9, which stands in my name, but I also want to give my broad support to Amendments 6 and 7, which also deal with regional inequalities, and to echo the importance of getting biodiversity and nature into the Bill.
It is telling that London, as the most productive region of the UK, receives a larger per capita amount of public spending compared to other regions of the UK. Productivity relies as much on public investment as it does on private investment but, at the same time, it makes sense economically, from a private perspective, to invest in those areas that receive significant public backing, particularly in areas such as transport. The reality is that government transport spending by region remains heavily skewed towards London, at nearly double the UK average. Hence, it certainly holds that public expenditure is a significant contributory factor to productivity, even if other factors, such as economies of scale and private investment, also play their part.
Increasing the UK’s productivity and reducing the productivity gap is the first aim listed in the Government’s 12 missions to level up the UK, but this is not adequately reflected in the UK Infrastructure Bank’s objectives. The second objective, which a number of noble Lords have referred to, is supporting regional and local economic growth. That is an extraordinarily broad objective that allows incredible levels of discretion over where the bank will focus its investment. Supporting infrastructure improvements in some of the wealthiest parts of London to drive local economic growth would fall under the remit of the bank’s activities but that is surely not what the bank is meant to be doing. We need to concentrate investment in specific infrastructure initiatives to boost regional productivity and close the infrastructure gap.
I fear that the integrated rail plan is a good example. It has its priorities absolutely inverted. Better connecting London to Birmingham and Manchester is being given precedence over connecting some of the northern cities to one another. The scrapping of HS3 and the eastern leg of HS2 remains a mistake and, to quote the Mayor of Greater Manchester, is rightly seen as a betrayal of the north. People in deprived or less productive parts of the country are tired of their second-rate infrastructure and the lack of investment in it. The amendment places a clear responsibility on the bank to close the productivity gap between regions of the UK, better to align it with the Government’s levelling-up objectives.
The need to close regional infrastructure gaps does not pertain just to metropolitan areas. It is a crippling issue for rural communities. One thing I shall come back to when we get to the amendment—later today, I hope—is how we want to rural-proof what is going though in legislation. The rural economy is 18% less productive than the national average, and while economies of scale contribute to this, the gap is primarily driven by a failure to engage with rural economies on their own terms.
Poor rural transport infrastructure and digital connectivity are arguably the two biggest factors raised by those trying to sort out the huge gap between urban and rural in this country. The fear is that the UK Infrastructure Bank, as a private company wholly owned by the Treasury, will not be subject to the usual rural-proofing requirements to which all government departments are subject. Rural areas must be adequately considered as viable locations for investment by the UK Infrastructure Bank. By focusing on closing regional productivity gaps, this amendment would ensure that rural areas and underperforming urban areas would receive their fair share of the bank’s finances—money desperately needed to level up.
As this is simply a probing amendment, I am at this stage just listening to the other interesting amendments and I do not particularly want to push this later, but I would be grateful if the Minister could address these concerns. What mechanisms will be hard-coded into the bank’s commitments to prioritise investment in those areas that suffer from poor productivity and need improved infrastructure to meet that first mission statement of Her Majesty’s Government on levelling up?
Baroness Brown of Cambridge (CB)
My Lords, I rise briefly to give general support to the amendments in this group and specifically to support Amendment 4 in the name of my noble friend Lady Hayman and other noble Lords. I declare my interest as chair of the Adaptation Committee of the Climate Change Committee.
I agree with the noble Baroness, Lady Hayman, that it is absolutely critical to include adaptation in the bank’s remit in the Bill. It is only too easy to forget about adaptation, as so much recent, important government policy has done—so much so that in the Adaptation Committee’s advice to government last year on the third climate change risk assessment, we included a table of recent policy and legislation, showing just how frequently opportunities to include adaptation had been missed. It is crucial that we remind everybody to think about this and putting it in the Bill will help make that difference.
The most obvious example I have pointed to recently has been support for such things as the Green Deal as well as for net-zero homes. We are asking people to rip their homes apart to make them net zero but not at the same time supporting them to make the changes that would make them resilient to the future hotter summers that we are going to experience. It would be stupid to do those things separately—to have to refurbish your home twice. We must make sure that adaptation is flagged up in the Bill.
We also need to keep reminding people that, in dealing with climate change, net zero is not enough. Even if we are on a global pathway to net zero by 2050, the temperature will go on rising up to 2050, and we will look back from 2050—well, some of us, such as the noble Lord, Lord Ravensdale, might—and see that every decade between now and then was the hottest on record; so we must make sure that adaptation is a focus of the Bill.
I also strongly agree with the noble Lord, Lord Holmes, that the Bill must recognise nature—the natural environment, our natural capital—as essential infra- structure. The Bill specifically identifies as infrastructure the technology and facilities for removal of greenhouse gases from the atmosphere. The best and cheapest and way to do this is very often a tree. It would be completely perverse to encourage a complex engineered solution in a situation where an investment in nature could deliver.
As the noble Lord, Lord Teverson, said—I strongly agree—investments in nature-based climate solutions, especially those for adaptation, face some of the most difficult barriers and hurdles to secure, so we should absolutely ensure that this important development of the UK Infrastructure Bank enables those critical investments. If I might do a little bit of advertising, I will say that the Adaptation Committee is currently producing a report on the barriers to adaptation investment, which will be published in the autumn. I am sure the UK Infrastructure Bank will be an important part of the solution in overcoming those barriers.
Lord Thomas of Cwmgiedd (CB)
I could not possibly add to or improve on what the noble Baroness, Lady Brown of Cambridge, said in support of Clause 2(3)(a) on the environmental objectives, but I want to say something in support of the amendments from the noble Lord, Lord Ravensdale, and the noble Baroness, Lady Bennett of Manor Castle, because the two must be tied together. If economic development is to be an objective, then it must be to level up. Some evidence is beginning to emerge that it is possible to achieve climate change investment in a way that disadvantages areas of inequality further and yet further. The altering of subsection (3)(b) would make it clear what were the twin objectives—that the objectives are not enriching the citizens of Westminster, of which I am one, Chelsea or other areas of London, and that green investment must be done with the specific object in mind of improving the economic, lifestyle or whole-life benefits of those who live in disadvantaged areas. The bank must keep both objectives in mind.
Lord Teverson (LD)
My Lords, I omitted to declare my interests as chair of the Cornwall and Isles of Scilly Local Nature Partnership and as a director of Aldustria Ltd, which is into battery storage.
Baroness Penn (Con)
My Lords, the Committee’s debate on this group has helped to ensure that we have properly considered the purpose of the bank, particularly around its levelling-up and climate change objectives. I will first address Amendments 3, 4, 5, 15 and 20, which seek, in various forms, to provide additional scope for the bank to pursue natural capital improvement, biodiversity or to deliver environmental improvement plans, by either splitting the climate change objective or adding a third environmental objective.
The bank has a broad mandate, which includes the flexibility to support a wide range of projects to help tackle climate change and support regional and local economic growth—two of the defining missions of this Government. As noble Lords will know, the Government conducted a review, which reported in March following wide engagement with environmental stakeholders and market participants, to consider a potential broadening of the bank’s objectives to include other areas such as improving the UK’s natural capital. Most stakeholders observed that there is already significant scope for intervention in nature-based solutions within UKIB’s existing mandate, particularly through its climate mitigation and adaptation objective, and scope to invest in flood defences, water and wastewater infrastructure.
Therefore, following this review, the Chancellor confirmed in his first non-statutory strategic steer to the bank that natural capital opportunities are in scope of its existing remit and that it should explore early opportunities to support the development of markets for ecosystem services and nature-based solutions within its existing climate and levelling-up objectives. The bank will reflect the contents of this strategic steer in its first strategic plan, which will be published later this month.
Adding a third objective for the bank could dilute its focus. Although projects to deliver nature-based solutions and enhance the UK’s natural capital are within scope for the bank, these projects must link back to its core purpose, which is to deliver economic infrastructure projects. It is an infrastructure bank, and that is why the environmental review landed sensibly on nature-based solutions as a means of delivering the ends of economic infrastructure through natural technology.
The review recognised the significant potential for increased use of nature-based and hybrid infrastructure solutions, including for the water sector and greenhouse gas removals. These opportunities will be important to meet our objective to leverage at least £500 million per annum in private finance for nature’s recovery by 2027 and more than £1 billion per annum by 2030.
However, other steps must be taken to ensure that a successful market is created to finance nature. The review found that the market for nature-based solutions is constrained by multiple barriers, including insufficient scale of projects, lack of proven revenue streams and a lack of data. The bank can help to overcome some of these barriers, but work is also under way by Defra to improve standards and accreditation and to improve early grant funding through the £10 million natural environment investment readiness fund launched in February 2021 and the big nature impact fund, a blended finance vehicle that will help to create a commercial portfolio of projects.
I turn now to the bank’s “do no significant harm” commitment. Amendment 2 from the noble Lord, Lord Tunnicliffe, seeks to raise and firm up the environmental floor for UKIB projects, and Amendment 16 from the noble Baroness, Lady Bennett, seeks to remove fossil fuels from the scope of the bank, as she explained.
With respect to Amendment 2, while there is naturally some risk of the bank’s growth objective coming into conflict with its climate change objective, we believe that this has already been robustly and appropriately covered in the bank’s framework document, which states:
“Where an investment is primarily to support economic growth, the Company will ensure that it does not do significant harm against its climate objective.”
It will be for the bank to decide exactly how to administer this “do no significant harm” clause and how to interpret it when considering individual transactions, and it is already doing this.
On Amendment 16, I say that the “do no significant harm” clause is accompanied by a sensible exclusions list, prohibiting the bank from entering into fossil fuel investments, with a small number of exemptions—for example, for carbon capture, usage and storage, which will significantly reduce emissions over its lifetime. I hope the noble Baroness, Lady Bennett, can see why we need these exemptions and why it would not be appropriate to exclude fossil fuels entirely from the bank’s scope. As a package, it is sensible to keep all these conditions together in the framework document so that they may be kept under review and ensure that the environmental baseline for the organisation is sufficiently high.
Amendments 6, 8 and 9 all seek in some way to add more specificity to the existing objectives. For reasons that I will set out, the Government believe that the current drafting of the Bill is a more appropriate way to deliver against these, although they recognise the policy aims that the amendments seek to deliver. At statutory level, the correct approach is to set out the overarching policy goal and, in this context, phrasing the bank’s objective as one of supporting regional and local growth provides a clear direction for the bank without being overly prescriptive.
We would not want to use language or terms in statute that could result in unintended consequences. For instance, if we adopted the drafting of the noble Lord, Lord Ravensdale, in Amendment 6, terms such as “geographical inequality” and “areas of economic disadvantage” would require detailed and complicated definitions that could change over time or be context dependent. We would not necessarily want to preclude the bank from providing funding in disadvantaged areas of the south-east but, if we adopted the proposed amendment, the bank might be put in difficulty as the south-east as a whole might not qualify as an area of economic disadvantage.
However, all three amendments are addressed in the Chancellor’s first strategic steer to the bank, which states:
“Addressing the deep spatial disparities across and within UK regions is a central ambition of this government. Economic infrastructure connects people, both physically and digitally, to opportunities and the Bank has a key role to play in providing infrastructure finance across the UK and targeting investment to support faster growth in regions with lower levels of productivity … The government’s recently published Levelling Up White Paper (LUWP) outlines the need to end the geographical inequality which is such a striking feature of the UK”,
as noble Lords have noted,
“and it is important that UKIB supports this ambition. Therefore, I would encourage the Bank to target its portfolio of investments towards projects across the UK that deliver against the missions set out in the LUWP”.
Further, the steer is also clear that the economic growth objective should provide “opportunities for new jobs”. I will happily confirm to the noble Lord, Lord Tunnicliffe, that it is the Government’s ambition across the economy to have more high-skilled, better paid and securer jobs. The bank’s investments to date, consistent with its strategic steer, already meet the aims of these amendments. Investments in the Midlands, Northern Ireland and Wales are already helping to boost productivity across the UK and support the creation of good new jobs.
Finally, I turn to Amendments 7 and 10, in the name of the noble Baroness, Lady Bennett, which focus on improving the life outcomes of people in disadvantaged areas, reducing the use of natural resources and emissions and securing the interests of future generations. I would argue that these are consistent with the existing objectives for the bank. In the long run, productivity gains and economic growth are the fundamental source of improvements in prosperity. Productivity is closely linked to incomes and living standards and supports employment. Improvements in productivity also free up money to invest in jobs and support the Government’s ability to spend on public services. The climate change objective will help to secure the interests of future generations by reducing emissions and, as discussed, investing in nature-based solutions.
The Government recognise that protecting and enhancing the natural environment and the biodiversity that underpins it is crucial to supporting sustainable, resilient economies, livelihoods and well-being. We are therefore determined to support the development of private markets that drive investment in projects that restore or enhance our natural environment.
I thought it might be worth touching again on the question from the noble Lord, Lord Vaux, about the framework document, in order to aid our discussion. The framework document is a non-legally binding agreement between the Treasury and UKIB that sets out details of how the bank works that it would not be appropriate to have in statute. Notwithstanding that, it does create some legal force, as UKIB is expected to abide by it and can be judged against it in normal public law ways. It is a public document and there are reputational reasons for UKIB to follow it, and the Treasury can enforce it both as a shareholder in the bank and through the issuing of a direction. Of course, there will be parliamentary scrutiny, given that it is a published document. It can be changed and updated by agreement of both parties, the Treasury and the bank. UKIB’s articles of association are binding in company law and have been filed with Companies House.
Lord Vaux of Harrowden (CB)
The Minister mentioned that it will be subject to parliamentary scrutiny. What will be the mechanism for that?
Baroness Penn (Con)
There are many mechanisms of parliamentary scrutiny that we are subject to every day. There are committee hearings, Questions in the House and many other different routes of parliamentary scrutiny.
To pick up on one final question, from my noble friend Lord Holmes of Richmond, about the bank’s ability to invest in overseas territories, the intention is for UKIB to invest in UK projects; it is not expected that it would invest in UK overseas territories.
I therefore hope, given those explanations, that the noble Lord, Lord Tunnicliffe, will withdraw his amendment and that other noble Lords will not move theirs when they are reached.
Lord Tunnicliffe (Lab)
My Lords, there is a sense of nostalgia. Right at the end, we had the favourite statement you get from Governments in this situation: that it is not appropriate—in other words, “We don’t want to do it, but we haven’t got an explanation why we don’t want to do it.”
This has been a valuable debate which, I hope, goes to the core of what this Bill is about. There was a high level of consensus, and I am hopeful it may grow by the time we get to Report and that an amendment will be generated, somehow magically—perhaps the Minister might consider creating it—that pulls in many of the various streams of this debate, very few of which conflicted. Most of them fitted together in different ways—in some ways, to make something too big to be useful, but certainly somewhere in there is something of the right size to be useful.
It was very interesting that the Minister said that this was a package which will be in the framework document. The fundamental difference coming out of this debate is that the Minister feels it should be a package in a non-binding document, while most of the rest of us think that most of these things should be in the Bill. I hope she will be thinking about how she might face such an amendment. With that, I beg leave to withdraw my amendment.
“(c) to reduce to sustainable levels the United Kingdom's use of natural resources and emissions of non-greenhouse pollutants, and(d) to secure the interests of future generations.”Member's explanatory statement
This amendment inserts additional objectives of the Bank to protect future generations, reduce pollution and reduce natural resource use.
Baroness Bennett of Manor Castle (GP)
My Lords, in moving Amendment 10 I am rather aware from the Minister’s response to the previous group that this may have been grouped differently in her list compared to mine. I am just going to proceed anyway and if she says “I refer you to my previous answer” at the end, I will understand.
Amendment 10 refers to reducing “to sustainable levels” the UK’s
“use of natural resources and emissions of non-greenhouse pollutants”
and to securing “the interests of future generations.” To address the second part first, I am sure many noble Lords will recognise the language there, which is very much inspired by the Private Member’s Bill of the noble Lord, Lord Bird, about protecting the well-being of future generations—and indeed by the progress made in Wales, with its future generations Act. It is perhaps another way of getting towards first do no harm, as we discussed in the previous group of amendments. But more than that, it is making a larger claim: we know that the natural world in the UK is in a parlous state with air pollution, water pollution, et cetera. It is saying that if we are looking after the well-being of future generations, the bank should be investing to improve the state of things, not just to make sure that they do not get any worse.
The first part of this amendment addresses something that your Lordships’ House and the Government really need to get more focused on, which is planetary limits. In the previous group, we started to talk about how we need to add attention to biodiversity, the state of nature and nature-based solutions, tying together those planetary limits which the world is crossing over. Actually, academics are telling us that we have now broken five of the nine planetary boundaries. Three of those are climate, biodiversity and land system change, which we have already covered to some degree, but we have also come to the other two broken planetary limits. These are biogeochemical flows and what is generally known as pollution from novel entities—in general terminology, we might talk there about chemicals. About 350,000 of these are used in the world, which includes pesticides, antibiotics, plastics, industrial chemicals in mining and pharmaceuticals.
The reason for this amendment adding an objective to the bank, so that it starts to address these issues and reduces the harm done by these chemicals is that we—globally and in the UK—are very much exceeding our share of the limits of these things. This amendment is thus supposed to address both biogeochemical flows and the novel chemicals.
Coming briefly to the biogeochemical flows, the rates of nitrate and phosphate use in the UK are both well above the global average and, according to a global footprint report, we must
“Reduce nitrogen and phosphorus use by at least 80%”
—yes, I did say 80. If we are to have a bank that is investing in the kind of economy we have to live within in future, given the planetary limits, it needs to be thinking about not just climate and nature but the damage being done. Here we get to our farming systems, which is why my previous amendment referred to infrastructure that deals with food production. This is overwhelmingly related to that when we come to phosphorus and nitrogen—although sewage plants have their place. We have to look at this as a whole and see that the bank is essentially investing, for shorthand, in a sustainable economy.
The noble Lord, Lord Teverson, had in the previous group an amendment on the circular economy. That is a necessary and essential step forward but it is not a sufficient step, because we have to make sure not only that we are not treating the planet as a dumping ground—mining materials out of the earth and just dumping them—but that we stop mining those materials, or at least vastly reduce the amount we are mining. That is what my first amendment seeks to achieve. If anyone wants to know where my research, particularly around novel entities, comes from, it is from the Stockholm Resilience Centre, published earlier this year in the journal Environmental Science & Technology.
I will address one other point, which very much goes back—as I think we will do several times in this group—to our debates on the Environment Act: reducing resource use. I refer noble Lords to a report that the WWF put out when we were debating the then Environment Bill on the UK’s overseas land-use footprint. That showed that
“between 2016 and 2018, an average annual area of 21.3 million hectares … was required to supply the UK’s demand for the seven commodities”.
When thinking about what the bank is investing in, we cannot be putting further pressure on other parts of the world through that. This is an attempt to bring in a systems-thinking approach.
I come now to the other amendments in my name in this group, which noble Lords may be pleased to hear are both simpler and shorter. The first is Amendment 18. When we look at the way this Bill is written, it is quite surprising that on infrastructure it says
“roads or other forms of transport”.
This seems a rather odd way round for a Bill that is supposed to be addressing the climate emergency. My amendment seeks to take out the word “roads”. I do not believe that the UK Infrastructure Bank should be investing in any new roads. We know that new roads generate more traffic. For the foreseeable future, on the crucial point of keeping the rise in world temperature below 1.5 degrees, roads and traffic are going to generate significant amounts of greenhouse gases, not to mention all the other impacts such as air and noise pollution. If this investment is going into disadvantaged areas, the last thing they need is more air and noise pollution. Electric vehicles also produce air pollution, with a large amount of the pollution they produce being particulate matter pollution from tyres and brakes. Building new roads in disadvantaged areas makes no environmental, social, economic or well-being sense. I have simply sought to take out the word “roads” and insert “mass” transport. That is obviously what the bank should be investing in, for both environmental and social reasons.
My final point is on my Amendment 25, on something that a number of noble Lords raised at Second Reading. The activities of the bank cover a large number of utilities, obviously including electricity and water, et cetera. The Bill talks about “services” but it is not clear whether “services” includes demand reduction and efficiency. The cleanest, greenest energy we can possibly have is the energy we do not need to use. The UK Infrastructure Bank surely has to be investing in reducing the demand for electricity, heating and water use—in these islands water stress is becoming an increasing issue with the reality of climate change and the adaptation issues we were discussing earlier. The Minister may say that the Bill already covers these demand reduction issues, but I feel that it should say explicitly that the bank should be investing in demand reduction of that which it is investing in the generation of. I beg to move.
Lord Holmes of Richmond (Con)
I am pleased to follow the noble Baroness, Lady Bennett, and speak to the amendments in my name in this group. My amendments, grouped under two headings, “environmental restoration” and “human enablement and empowerment”, start with Amendment 13. I think we should have in the Bill that the bank should be prohibited from investing in any projects that are not inclusive by design. What does “inclusive by design” mean? It is simply this: that all users are enabled in whatever that system, infrastructure or structure itself actually is.
I can give a quick example, of where so-called shared space has been laid out across the country, with local authorities using public money to take areas—be that a local piece of public realm, a high street or whatever—which previously were independently accessible by all members of the community. When so-called shared space is put in, kerbs, crossings, road markings and barriers are taken out, and it becomes a free-for-all whereby toddlers and tankers, buses and blind people are somehow able to coexist because of this misguided concept. Public money is being used to take spaces that were previously accessible and make them effectively inaccessible. It is being used effectively to plan out of their local public realm more than one-third of the community. It is critical that in the Bill there is a clear statement of intent that anything that the bank invests in is inclusive by design.
Amendment 19 highlights the critical importance of energy efficiency and security. Much has already been said on energy efficiency, so I shall focus on energy security. There could hardly be a more significant time to make the point of the UK’s need to have greater energy security, and for that to be dramatically enhanced through understanding what it means to have a more local and more environmentally sound supply.
On Amendment 21, there could barely be a more significant piece of infrastructure than clean air. Air in so many parts of this city and other cities across the United Kingdom is actually killing our citizens. If the bank’s objectives are so clearly set as economic, with a capital “E”, clean air fits clearly within that. If we want our citizens, at whatever age or whatever stage they are at, to be fit, happy, healthy and able to develop and deploy all their talents, what they breathe could barely be more significant.
Amendment 22 looks at the UK cash infrastructure. I believe that, for reasons of financial inclusion and resilience, this again should be designated as infrastructure for the purposes of the bank—and perhaps even one stage above that, and designated as critical national infrastructure. For all the arguments around financial inclusion that we ran through in the Financial Services Act 2021—I intend to return to them when the financial services and markets Bill comes to your Lordships’ House—but also for the times in which we live, we need to have resilience in our financial systems. Cash would currently seem to be incredibly significant in providing that resilience, if and when things happen to the digital platforms and systems at local and national level.
Baroness Hayman (CB)
My Lords, I have Amendment 17 in this group, supported by the same cross-party group of noble colleagues as Amendment 4. It is a simple amendment which
“includes ‘energy efficiency’ within the definition of infrastructure.”
Last week, the IEA released new analysis showing that stronger efficiency measures can reduce energy bills, fuel imports and greenhouse gas emissions quickly and significantly. This was a point made by the noble Baroness, Lady Bennett, when speaking to her amendments earlier. In comments accompanying the analysis, the IEA executive director, Dr Fatih Birol, said that
“inexplicably, government and business leaders are failing to sufficiently act on this.”
Indeed, when the UK Government responded to the crisis in costs being experienced throughout the country, they committed £37 billion this year to help households with the cost of living crisis. However, when they implemented a tax on the revenues of oil and gas companies, they failed to announce any new efficiency measures which could help reduce energy demands and bills—in the long term, rather than the short term. It is, therefore, very important that we show a priority for energy efficiency in this Bill.
I will say something a little more broadly about Clause 2(5), dealing with the “technologies and facilities” included in the definition of “infrastructure”. The Government have got themselves into their own problem here. We know that the letter that was sent—the strategic steer—references energy efficiency. It mentions
“the urgent need to improve the energy efficiency of our buildings in the context of high energy prices and the Government’s renewed focus on energy security.”
So they have given us the steer that this is a priority. However, in the Bill, they give a list which does not mention it. As the noble Baroness, Lady Bennett, pointed out, the list includes roads, gas and all sorts of things which might not be in line with the priorities. There is a real problem, which we have all discussed many times, with lists in legislation. Including a list like this implies that these are priorities—although I understand that other things are not excluded by the inclusion of some things in the list—but there is an implicit suggestion that these are the main or important priorities.
The Government really must think about that, as they must also think about the issue which we were discussing earlier about what falls within the framework document and what falls within the Bill. I was not alone in not finding the definition of parliamentary scrutiny for the framework document, which the Minister conjured up for us earlier on, very comforting: it may be scrutiny, but not as I know it in the most rigorous of ways. Of course, we can ask questions about it, but that is not quite what the noble Lord, Lord Vaux, was getting at when he asked his question.
The problem that illustrated is that, within those two objectives of the Bill, when people said that the objective about economic growth could include vanity projects in very rich areas of the country, the Government’s response was, “Yes, it could, but we won’t do it.” When we said that the Government are not explicit about nature, biodiversity and adaptation projects, alongside the net-zero target, they said, “Ah, but don’t worry, because it could include those.” I really think that there is a problem in saying, “Yes, those are the words on the paper, but don’t worry about, because we can sort it all out.” I suspect that a lot of the rest of today, and on Report, will involve wrestling with exactly where that balance between the Bill, the steer that was given and the framework document should come.
Lord Deben (Con)
I do not think we should add too many details, so that the thing becomes a Christmas tree. Although I think I agreed with every suggestion that my noble friend Lord Holmes put forward as a principle, I am not sure that all of them are of equal value in this. However, I think the comments of the noble Baroness, Lady Bennett—she will be pleased, on this occasion, to find we are entirely aligned—are absolutely right. The Climate Change Committee has sought for a very long time to get the Government to take energy efficiency and demand reduction seriously, and there seems to be some utterly inexplicable reason that they can never do this.
I am beginning to think that this is a kind of male thing: they want to build big things—“Nuclear power stations; let’s do that”—instead of doing much simpler things. I am in favour of nuclear power, but the much simpler things are reducing the need to generate, reducing the need to use and understanding that this is as crucial a part of what we are doing as anything else. I hope that, because we have so eminent a female Minister here, she will push against this rather aggressive view of dealing with climate change, which is always to do big things. I think it is because the Government think they get votes for that, whereas with energy efficiency it is very difficult to get people to feel you have done something useful, but we are going to have to do it.
Take the electric motor car. If we are not careful, we will all be driving too much, as I do. What fun and how much better the electric motor car is than anything else, but I have to say that I ought to be careful about how often I use it, because there are resources involved which one ought to think about. If we do not have that attitude throughout, frankly, we will get the infrastructure arrangements wrong. Taking a wider view of infrastructure without thinking about the resources we are using and a reduction, within the infrastructure rules, in the use of those resources, seems to me to misunderstand what we should be doing.
Although I would not want to add all sorts of examples of things we ought to be doing, I want to make it very clear that the last speaker, as so often, got it absolutely right: if we have a list, something as important as this should not be left out, or the answer will be, as it always is, “Well, our priorities are laid down in the Act”. The Government have done that and, really, this is only an auxiliary, an addition. I want it to be central because it actually is central. It is not a question of my inventing it—it is utterly central.
I also want it to be here because this is what the Government’s advisers have said to them again and again. It really is difficult. We saw this yesterday with the so-called food strategy—it is not a strategy at all, of course. I had to ask why the Government have not even addressed the advice of the Climate Change Committee, or half the recommendations of the Dimbleby report. I think the Government have to think much more seriously about the fact that if they have advice and do not intend to do what that advice suggests, that is perfectly all right—they are the Government—but they must explain to their advisers why they do not think that energy efficiency is central to this, when that is the advice that has been consistently given.
Lord Bourne of Aberystwyth (Con)
My Lords, I strongly support what my noble friend Lord Deben just said and shall speak in favour of Amendment 17 on energy efficiency. In addition to the points my noble friend just made about how it is very dangerous to have a list of things but leave out something so central, which the Climate Change Committee has, quite clearly and quite rightly, been calling for in support of other strands of the Bill, it seems to me that this would not only help in fighting climate change but would help in levelling up, help create jobs and help in so many other ways. It is a mystery to me why the Government would want to leave it out.
Furthermore, it is very clear from the Explanatory Notes that the talk is only of economic infrastructure—look at paragraph 34—so the assumption is that, in stressing economic infrastructure, this is not covered. The absence of energy efficiency therefore means that people think that this is not regarded as important by the Government, despite what the Government have said in the strategic steer, which I strongly support. I hope my noble friend will come forward with some compelling reason why this has so far been omitted and will say that it will be included before Report, because it seems to me that the Government, when stating that they are so strongly in support of this could very easily put this right by putting it in the Bill before Report. I hope my noble friend will tell us that she intends to do just that.
Baroness Young of Old Scone (Lab)
My Lords, I also support Amendment 17 in the name of the noble Baroness, Lady Hayman, to which I have put my name. All the arguments have been laid out as to why energy efficiency is important, but I share the amazement of the noble Lord, Lord Deben, that this message does not seem to be getting over to the Government. It is a bit of a no-brainer, really: energy efficiency is vital not only in tackling climate change but as one of the easiest ways of addressing the impact of rising energy prices and strengthening our energy security. We need to urgently accelerate energy efficiency measures in this country. The net-zero carbon strategy had a blind spot about energy efficiency and we really are pussyfooting around.
I am old enough to remember conversion to North Sea gas. It was a splendid programme—admittedly, probably slightly simpler, but not hugely simpler, than making our homes energy efficient. It was a street by street effort; the whole nation went through it at the same time and one spent hours talking about it in the pub. There was a spirit of community cohesion around the whole conversion process and there was an end date that we had to hit, otherwise we were going to blow people up. We need that sort of programme to deal with our cold and leaky homes. We have the coldest and leakiest homes in Europe.
Just to give an example, when the energy price cap rises again in October to hit the £2,800 mark, average households in homes with an EPC of D or worse—about 15.3 million households in this country—will pay nearly £1,000 of that simply because their homes are inefficient. We cannot really continue in that mode. I believe the infrastructure bank has a clear role here.
To give noble Lords the last piece of government inadequacy on this, the Environment and Climate Change Committee of your Lordships’ House took evidence last week from the Minister for Energy, Clean Growth and Climate Change. To be honest, I went home and wept, because there was huge reliance on “We’ll put lots of information into the public domain; you can go to the BEIS website and get lots of help on retrofit, energy efficiency and conversion to cleaner forms of energy”. There was a statement of completely pious hope that households would miraculously see the light and take action. That simply will not be enough.
The infrastructure bank needs to go for it. It needs to get us in the pubs talking about this national mission of a focused and sustained programme for energy efficiency. I share all other noble Lords’ view that the Chancellor’s strategic steer is insufficient. I hope the Minister will rise to the occasion, show that not all of government has a blind spot on energy efficiency and let us have it as one of the definitions of “infrastructure” for the bank.
Lord Teverson (LD)
My Lords, I will briefly speak to my Amendment 11, which is also around energy efficiency but focuses particularly on the built infra- structure in this country, which is what most of us are probably talking about. I have no objection to the broader definition, but I like the specific issue of built infrastructure. The noble Lord, Lord Deben, is absolutely right that big boys’ toys are always the focus; big nuclear is probably the ultimate example of that, although I am quite confident that it will never be built because of financial reasons, apart perhaps from Sizewell C in his back garden.
We have a bad track record in this area; it has not only been ignored but the green homes grant, which finished last year, was described by the Public Accounts Committee at the other end as a “slam dunk fail”. A great opportunity was unfortunately missed. Built infrastructure accounts for some 25% of our emissions nationally, so this is a really straightforward way to make a difference on climate change, which is one of the main objectives of the UK Infrastructure Bank. I reinforce the messages from other Members across the House. I also very much agreed with the noble Baroness, Lady Bennett, on some of the infrastructure, such as roads.
We really need to take advantage of the most cost-effective way of achieving decarbonisation of our economy, through energy efficiency and by taking on the challenge of the built infrastructure in this country, on which the UK Infrastructure Bank can be a major player. It is estimated that we will spend some £37 billion of public money over the coming years on the energy price crisis. That money will all go on standing still; instead, we need to invest money to make sure that those energy bills come down in future and that we decarbonise the economy through energy efficiency. This bank ought to be a major part of that target.
Lord Tunnicliffe (Lab)
My Lords, there is very little in this group that I can object to in principle. We debated the definition of infrastructure at Second Reading, with concerns expressed on all sides that items such as buildings or energy efficiency are not in the Bill. As we are doing this, I took to my own conscience and realised that we have not done the loft—the problem is all the stuff in it. Anyway, by subcontracting that a bit, we got it out.
The noble Baroness, Lady Bennett, raises an interesting point about mass transport in her Amendment 18, while the noble Lord, Lord Holmes, raised a variety of issues including air quality, social infrastructure, data and skills training. I said at Second Reading that it is vital we get the bank’s objectives and definitions of infrastructure correct from the start. That remains my view. The bank will not be effective if its mission statement is ambiguous. However, for that very reason, it is also important that the Bill does not simply become a long shopping list.
I hope the Minister can confirm that the current definitions include—even if not explicitly—many of the initiatives raised by noble Lords. It is inevitable that there will be a composite amendment on Report which once again seeks to embrace many of the important ideas we have discussed in this group. I also hope she will take a number of these suggestions away. It may be suitable for the Government to amend the Bill, but there may be other ways forward.
Baroness Penn (Con)
My Lords, as discussed, the amendments in this group seek to clarify or extend the scope of the bank and are focused predominantly on the Bill’s definition of infrastructure. I apologise to the Committee and the noble Baroness, Lady Bennett, that I did indeed get ahead of myself on the previous group.
First, I will address Amendments 10, 11, 17, 19 and 21, which seek to make explicit reference to technologies and facilities relating to energy efficiency, energy security and clean air. I reassure noble Lords that these technologies are already in scope of the definition of infrastructure in Clause 2. The definition captures all energy efficiency measures, including those related to buildings and homes, and energy security measures that fall in scope of “electricity” and the “provision of heat”. We expect clean air to be captured under “climate change”. The definition, which is non-exhaustive by design to give the bank an appropriate degree of flexibility over the subsectors in which it can invest, would be too long and specific if we were to list every subsection.
It may be helpful to give a little more detail on the genesis of the definition; it is based on a definition used in the UKIM Act 2020 but changed in a couple of ways. It is wider in that it relates to the technologies and facilities connected to infrastructure, giving the bank the flexibility to provide support to assets, networks or new technology. It does not seek to include social infrastructure, which I will come to, which is not the focus of the institution. It clarifies that climate change technologies, such as nature-based solutions, are in scope. That is what we have aimed to do in writing the definition. The noble Baroness, Lady Hayman, said that the implication is that what has been listed are priorities; we have sought to provide clarity where it is needed, not necessarily to assign priority.
I turn to Amendments 18 and 25 in the name of the noble Baroness, Lady Bennett. Amendment 18 seeks to exclude infrastructure investment in private cars. I ask her to wait until the strategic plan is published later this month for further information on the bank’s focus in this regard. I have been assured that noble Lords will see the strategic plan ahead of Report, which is a useful development. As I have said, the definition of infrastructure is based on the precedent of the United Kingdom Internal Market Act 2020 and the Infrastructure (Financial Assistance) Act 2012, and does not have a specific list of exclusions in it. Amendment 25 would include reduction in demand in relation to economic infrastructure in the definition of infrastructure. The bank will invest in clean infrastructure which will, if successful, move demand away from more harmful infrastructure, thereby helping to deliver on the bank’s climate change objective.
Lord Deben (Con)
Could my noble friend assure the Committee that she will look again at the inclusion of the diminishing of demand and energy efficiency, which the Climate Change Committee and others have specifically asked for? I think we in this Committee feel universally that that inclusion is necessary. I am sure there is a way of getting to it; I think we need this in the Bill.
Baroness Penn (Con)
My Lords, I commit to the Committee that I and the Government will listen very carefully to our proceedings today and, of course, to the advice from the noble Lord’s committee and other expert advisers to the Government. On the particular discussion we are having on a number of aspects of this Bill, I think we agree on the aims that we want to achieve. We may disagree on the mechanism of it, but that does not mean that the contributions of this Committee will not be taken into account before we get to Report.
I hope that, with all that in mind, the noble Lord, Lord Teverson—oh, I have skipped ahead. I hope that the noble Baroness, Lady Bennett, will withdraw her amendment and that other noble Lords will not move theirs when they are reached.
Baroness Bennett of Manor Castle (GP)
I thank the Minister for her encouraging, in some respects, response to this rich debate on this important group. I am sure that noble Lords who have flooded into the Chamber for another purpose will be pleased to know that I will not run through all 14 amendments in the group individually.
In welcoming what the Minister said, the Government say that they regard energy conservation and demand reduction as an important part of the bank’s remit. We all find that encouraging, but I am sensing that the broad mood of the Committee, right around these Benches, is that there is still a very strong desire to see that in the Bill.
I also pick up on the point which I guess the Minister made in reference to my amendment on roads. The Minister said—I think I am quoting directly—that “clean air is covered under climate change”. I direct the Minister to the point I made: about half of the particulate matter pollution from vehicles comes from tyres and brakes. That is not a climate change issue but it is very much an air pollution issue, and it needs to be considered.
I have no doubt that we will keep coming back to Amendment 17 on energy efficiency. The noble Baroness, Lady Young of Old Scone, made the important point that this is not just an environmental issue; it is also a poverty reduction issue, and there is a dual benefit from that.
I want to pick up one issue that I think the Minister did not cover, on the points I made about resource use, pollution and novel chemicals. I understand that, as a Treasury Minister, she may not encounter novel chemicals, phosphates and nitrogen cycles on a daily basis. However, I ask her to go and talk to Defra about those issues.
I will return to the whole issue of planetary limits on Report. With expressions of interest around the Committee, I think I will definitely return to the issue of roads on Report. In the meantime, I beg leave to withdraw my amendment.
UK Infrastructure Bank Bill [HL]
Tuesday 14th June 2022
(2 years, 5 months ago)
Lords ChamberRead Full debate UK Infrastructure Bank Act 2023 Read Hansard Text Amendment Paper: HL Bill 3-I(a) Amendment for Committee (Supplementary to the Marshalled List) - (13 Jun 2022)
Baroness Noakes
“(4A) In carrying out its activities under subsection (4), the Bank must ensure that its activities are undertaken only where there is an undersupply of private sector financing in respect of those activities.”
Baroness Noakes (Con)
My Lords, I rise to move Amendment 12 and hope we can pick up a little speed with it. At Second Reading, I raised the issue of the UK Infrastructure Bank’s activities having the effect of crowding out private sector investment. My view is that there can be a role for state-sponsored organisations such as the UK Infrastructure Bank only if there is a market failure which needs to be addressed. The Government appear to agree with this, as the framework document for the bank includes an operating principle that the Bank should
“prioritise investments where there is an undersupply of private sector financing”.
That is, however, only in the framework document; we are coming back to our theme in Committee of what should be in the framework document and what should be in the Bill. It is unsatisfactory for this issue not to be in the Bill. My Amendment 12 is modest, because it states merely that the activities of the bank as specified in Clause 2(4) must be carried out
“only where there is an undersupply of private sector financing”.
I go slightly further than the wording used in the framework document, which refers to prioritising where there is an undersupply of private sector financing, but I believe that the UK Infrastructure Bank should positively avoid those activities which are adequately supplied with private sector finance.
Amendment 14 in the next group, with which I suggested my Amendment 12 be grouped, sticks faithfully to the wording of the framework document and includes the other operating principles, to which we will come. If the Minister prefers the formulation in Amendment 14 when we get to the next group, I certainly would not object, because my priority is to have the issue of crowding out firmly in the Bill. I beg to move.
Lord Vaux of Harrowden (CB)
My Lords, this amendment goes to the core of what the UK Infrastructure Bank should be about, and I am in complete agreement with the noble Baroness, Lady Noakes, about the importance of the crowding out or crowding in of private finance, which was raised by many noble Lords at Second Reading.
I am stepping in to speak on this group because it impinges on the next, in which I have an amendment. The NIC says that the Bank should act as an “anchor investor” and should
“catalyse innovation, support due diligence functions and enable projects of public significance that may not otherwise take off”.
Most of us would agree that if the bank simply competes with or replaces available private finance, then it is a waste of time, damaging, distorts the markets and wastes taxpayers’ money. As the noble Baroness said, it must aim to solve market failures where otherwise good projects cannot be easily financed by the private sector. The Government obviously agree, but have not put this fundamental point anywhere in the Bill.
I support the principle behind the amendment proposed by the noble Baroness, Lady Noakes, but I am not sure that the wording fully captures the crowding-in concept. That may be because the framework document does not do it terribly well either. The amendment and the framework document refer to the bank undertaking its activities only where there is an undersupply of private sector financing. Crowding in happens where private financing is available but the private sector is reluctant to invest, perhaps because of a particular risk. In that situation, we would want the bank to be able to invest, precisely to facilitate the investment of the private sector—to remove the blockage preventing the private sector involvement.
As I said, in the next group, we will come to my Amendment 14, which tries to solve the same problem in a slightly different way by putting the operating principles, which expressly highlight the need for the bank to aim to crowd in private finance, on a statutory basis, but that may not be robust enough for some. The noble Lord, Lord Holmes of Richmond, has proposed Amendment 65, which is also aimed at the same problem, but with only a one-off report at the outset rather than an ongoing obligation, so I think that does not go far enough.
We have different ways to try to achieve the end of ensuring that the bank fulfils its primary purpose of crowding in private sector finance and does not fall into the trap of crowding it out. I am agnostic as to how we achieve it, as long as we get that requirement into the Bill—and that we measure it, which we will come to in a later group. Does the Minister agree that this is a fundamental element and, if so, why is it not in the Bill? If she does not like our wording, could she suggest a different way to achieve it? Would she be happy to meet us to talk it through and try to work out how best to get it in?
Baroness Kramer (LD)
My Lords, I want briefly to join this conversation because, like the noble Baroness, Lady Noakes, and the noble Lord, Lord Vaux, I believe strongly that the purpose of the bank is additionality. It is not to substitute for financing that is available out there, or even to provide it at a freckle below what might otherwise be the market price—although I note that the UK investment bank has to make a commercial return anyway. I think we can help towards that by strengthening the objectives that we discussed earlier, so that it is clear that they focus on those areas which we recognise today are crucial but which are finding it very difficult to access finance. That would be a step forward. I also very much agree with the noble Baroness and the noble Lord that additionality needs, in one way or another, to be in the Bill.
I have one minor caveat, which is that I think it is tricky to craft the language, but that does not mean it is impossible. The reason I say that is that I notice that in the noble Baroness’s amendment, she wants to ensure that the bank carries out its activities only if there is an undersupply. In one of the financings I was deeply involved with, which was one of the very early mobile phone financings in Eastern Europe, we tried to bring in private financing, but until we managed to lock in a commitment from the European Bank for Reconstruction and Development and some KfW money, the private sector was unwilling. Once that kitemark was there, that reassurance that entities which they felt had understanding of both the sector and the potential risk were engaged, private sector money came in. Some of it came in pari passu with the EBRD and KfW. If a person were to look backwards at that transaction, they might say, “Well, wait a minute, private finance was willing to take exactly the same risks that EBRD and KfW were, so, essentially, those two organisations were crowding out private finance”, but the reality was that without their presence, the private money would not come in. So we need to be a little careful about how we frame this, but the underlying principle is crucial.
Lord Tunnicliffe (Lab)
My Lords, I must admit that I do not have a view on this, because it seems to me that if this bank is to be used only when the risk is such that the private sector is not willing to take it, it suddenly involves a definition of the money that the bank will be using and the extent to which it is de facto underwritten by the state. We know that in the past, when Governments have sought to disguise money provided or underwritten by the state, most notably in Network Rail, when a body came along—I think it was Eurostat—and said, “No, I’m sorry, this is a public loan”, the whole basis of that business had to change. I await clarification and hope it meets the test of being capable of being understood by a bear of little brain.
Baroness Penn (Con)
My Lords, I thank my noble friend for her amendment. As she said, it addresses a very important part of the bank’s purpose for being. The Government agree with her intention: the bank has been set up specifically with the purpose of investing where there is an undersupply of private sector finance, and that is why its framework document sets out an investment principle to crowd in significant private capital and an operating principle of additionality. Based on similar institutions both in the UK and internationally, we expect the bank to crowd in £18 billion of private investment, meaning it is expected to support a total of £40 billion of investment in tech infrastructure projects across the UK.
Baroness Kramer (LD)
I have a quick question, the answer to which would be helpful. Unfortunately, we have not seen the strategic plan, which the Minister says will appear before Report. Is she suggesting that if we look at those definitions and they do not meet the standards of additionality that we think appropriate, we will be able to change them, or are we merely taking note?
Baroness Penn (Con)
I am not quite saying that. The Government think that, in this instance, the bank would be well placed to develop and set out its thinking on this, given that, while it is important, there is not necessarily a settled way to measure these things, although there are of course examples of best practice. I am happy to meet my noble friend Lady Noakes and all noble Lords who have an interest in this. I am not predicting that we will solve the problem, but I certainly have no objection to further, more detailed discussion about where we are on the issue. I hope that my noble friend can withdraw her amendment.
Lord Tunnicliffe (Lab)
Perhaps I am confused, but it seems that the bank can produce a soft and appropriate definition, yet in the final analysis that will be examined by the ONS, which will not be soft about it. The ONS will say that this is essentially either a public sector loan or a private sector loan. There will be no greyness there; it will say that A or B is true.
Baroness Penn (Con)
When it comes to the loans from the bank for the accounting purposes and for what is counted as public and private sector, when we discussed it previously, we said that we would expect all financing from loans from UKIB to count as public sector loans and be accounted for on the Government’s balance sheet. I am not seeking to change that position in this discussion. We also had a wider conversation about depending on the nature of that investment. It could draw the whole investment on to the Government’s balance sheet. If I have any of that wrong, I will write to correct it, but I think I am stating our position.
Lord Tunnicliffe (Lab)
My Lords, I would not mind if the Minister wrote again and repeated herself. I might then claw towards understanding.
Baroness Noakes (Con)
My Lords, we have had a short but important debate on this principle. There is nothing fundamentally dividing us on the underlying principle; the issue is how we implement it. I continue to believe that we should search for wording that we can be comfortable with. I accept criticism of the current wording, which I lifted largely from the framework document, and I accept that it is difficult to encompass the shades that you will encounter in real transactions, which often have sequencing involved in them, in determining whether there is an adequate supply or provision of private sector finance.
I am uncomfortable about leaving this simply to the strategic plan, partly because there is no role for Parliament in it. There is a role for the Treasury in relation to conversations with the UK Infrastructure Bank, but not for Parliament. There is a need to understand how best to phrase the principles without getting into the detail—but I accept that the devil will be in the detail in this Bill.
I am very grateful for the offer from my noble friend the Minister of further discussions, which I—and, I suspect, other noble Lords—will be only too keen to take up between now and Report. On that basis, I beg leave to withdraw my amendment.
Lord Vaux of Harrowden
“(4A) In carrying out its activities under subsection (4) the Bank must ensure that its activities are undertaken in compliance with the following Operating Principles—(a) the Bank will work towards achieving a double-bottom line, whereby investments help to achieve the core policy objectives to tackle climate change and support regional and local economic growth, whilst generating a positive financial return to ensure the financial sustainability of the institution and to reduce the burden on the taxpayer;(b) the Bank will operate in partnership with private and public sector institutions and other stakeholders to finance and support infrastructure investment;(c) the Bank will prioritise investments where there is an undersupply of private sector financing and, by reducing barriers to investment, crowd-in private capital;(d) the Bank will be able to provide long-term patient capital through its investments.”Member's explanatory statement
This amendment makes it a requirement that the Operating Principles, as proposed by the Treasury in the UK Infrastructure Bank Framework Document (except for Operational Independence and Flexibility, which are dealt with elsewhere in the Bill) must be followed when the Bank undertakes its activities.
Lord Vaux of Harrowden (CB)
My Lords, I speak to Amendments 14 and 29 in my name. I thank the noble Baroness, Lady Kramer, for her support in these.
Ultimately, these amendments are aimed primarily at strengthening the operational independence of the bank. I explained at Second Reading the importance of the bank being genuinely operationally independent, so I will not repeat those arguments. The Government claim that they agree, and the framework document is clear that the bank should be operationally independent, as is the NIC. However, as drafted, the Bill does not achieve that. In fact, it actively undermines operational independence.
On Second Reading, the noble Baroness, Lady Noakes, referred to the Treasury having its fingers all over the Bill, and that must be right. We have seen the strategic priorities, which include some stuff which can be changed at will. We have the framework document, which can be changed at will and which has no legally binding basis. I am not even sure that it has to be published if it is changed, though maybe I am wrong on that. There are the articles of association, which the only shareholder can change at will. There are no safeguards over the independence of the bank.
Three things are required to ensure that operational independence is a reality. First, the mandate and the parameters within which the bank is allowed to act must be clearly defined—the barriers within which it can operate independently. Secondly, that mandate and those parameters must not be subject to political interference and change without scrutiny on a whim. Finally, the bank must then be able to operate independently without political interference within that mandate and those parameters. If any of those is too weak, you do not have operational independence.
These two amendments are aimed at the first two of those points. The direct meddling in the operations will be dealt with in a later group. Amendments 14 and 29 are aimed at ensuring that the mandate and operating parameters are clear and complete, and are on a statutory basis so cannot be changed on a whim. Amendment 14 brings into the Bill the operating principles that the Government have previously set out in the framework. These are extremely important. You would think that something called an operating principle was precisely the sort of thing that should be on the face of the Bill. These operating principles include the principles that the bank should aim to make a positive return, that it should operate in partnership with the private and public sector when financing investments, and that it should provide long-term finance. Most importantly—here we go back to the discussion that we have just had on crowding in and crowding out—the operating principles state clearly that the bank should aim to ensure that its activities crowd in private investment.
It is extremely important that these four operating principles are part of the mandate—the defined, statutory mandate—under which the bank operates. If they are not included in the Bill, the extent to which the bank is governed by them would not be clear and the Government would be able to change them at any time without scrutiny and, in some cases, without disclosure.
Amendment 14 simply lifts the Government’s own operating principles from the framework document. I have to assume that the Government are happy with them and therefore should not have any great difficulty accepting their inclusion in the Bill. If that is wrong, I would be interested to hear the Minister explain why she thinks that the Government’s own operating principles are inappropriate.
As the debate has gone on, I have become increasingly uneasy. Like the noble Lord, Lord Teverson, was in the first group, I have been rather woefully unambitious with this amendment. We keep hearing, “It’s all right; it’s in the framework document”, or “It’s okay; it will be in the strategic priorities”. But we have also heard that the framework document is a non-binding agreement, which is an interesting concept, subject to scrutiny that is not a definition of scrutiny that many of us have ever heard.
What this really means is that the Treasury can enforce the framework agreement on the bank, but can also change it at any point that it wishes. That is quite the opposite of operating independence. I am beginning to wonder whether we need to bring that framework document into the Bill more widely, on some sort of statutory basis, subject to some form of scrutiny if it is changed. That goes beyond my amendments at the moment. As I say, I have pulled four elements out of the framework document, but I am increasingly of the view that we may need to go further.
Amendment 29 follows on and says that, if the operating principles are to be changed, they need to be subject to parliamentary scrutiny—in this case only secondary legislation, which is of limited value but is better than nothing. I beg to move.
Lord Teverson (LD)
My Lords, as the noble Lord, Lord Vaux, said, I am afraid I am going to offend again in that my amendment is suboptimal. If we are stuck with the level of dependence on the Treasury that there is, I would like to see those directions from the Treasury at least being guided by or having to take notice of the infrastructure commission. This is referred to in the framework document, but also needs to be in the Bill.
Having said that, we are going to have a major debate on governance and independence issues and I suspect that my amendment would be overwhelmed by those points. It is important that there is a major connection between the National Infrastructure Commission and the UK Infrastructure Bank. There needs to be some definite joining up beyond the wish list there may be in the framework document. Exactly as has been said on this before, I like the idea of trying to put it into secondary legislation somehow, but we know that we cannot amend secondary legislation in this House and we rarely reject it. At least any changes going through Grand Committee or whatever is a higher degree of scrutiny and the Government know that.
This amendment is looking for the Minister’s response on how she sees the National Infrastructure Commission practically being taken into account by the Treasury in any directions it makes. This is important, because bodies such as the NIC can go on doing brilliant work but if, at the end of the day, they have no real effect or do not have to be taken notice of, I would rather abolish than keep them. It is an important body, but one that needs to be included in the Bill to make sure that its recommendations are properly taken into consideration.
Lord Thomas of Cwmgiedd (CB)
My Lords, I will speak to Amendment 52, which is essentially to do with accountability and enforceability. One can only make accountable and enforceable something that is clear. I think the statute is elegantly drafted: it is very short, the phrases are chosen with particular objectivity and it reads extremely well.
Moreover, the regulation power is not that extensive and that is to be commended. There is no guidance, which is better still, but an extraordinary feature of this legislative process, to which the noble Lord, Lord Vaux, referred, is the framework document. I tried to look at what the articles of association say, but all that is registered at Companies House is the present status of the bank as a private company. The statute makes provision for the articles of association to say things, and I hope there will at least be a copy of the draft available, but the statute is remarkable in that, as has appeared from the eloquent answers the Minister has given this afternoon, the framework is critical, but is not even referred to in the Bill. That may be a first. It is an extremely important piece of the legislation that is not even referred to in the legislation.
In addition, it is a memorandum of understanding, as I picked up; “memorandum of understanding” is a phrase often used when one does not quite know whether it is legally enforceable or not. On this occasion, the Minister has made it clear that it is in part legally enforceable and in part not. It is profoundly unsatisfactory that the obligations and duties are not set out in an instrument that, first, is brought up to date—as we shall discover later, bits of it are contradictory to the provisions of the Bill—secondly, that we have not seen a draft of and, thirdly, really needs revising. I hate to say this to the hard-pressed civil servants, no doubt reduced in number, who will have to revise this, but it has to be revised. I believe the noble Lord, Lord Vaux, is right: we need to put a provision in the Bill dealing with the framework, because it is integral. It is far more important than the articles of association.
First, we have to get the Bill in a better legal shape, so that all the documents that are necessary for the proper constitution of what is a public bank are properly in the public domain and subject to parliamentary control. Secondly, it is important that there is proper accountability, for both the performance of the bank and the discharge of its duties, and the statute is so elegant in setting out what those duties are.
As the framework document recognises, there is a tension between the various duties the bank has to carry out and the enforcement options, which need to be made very clear. First, the Treasury has a critical role, as the Minister acknowledged at Second Reading. Secondly, there is the question of Parliament. At the moment, there is no proper parliamentary accountability if the base documents that control the bank are not subject to some form of legislative incorporation and scrutiny by this House. Thirdly, there is the position of the courts. From what the Minister said on the previous group, it is clear that, if the bank is not discharging its duties and the Treasury does not tell the bank to do something about it, it becomes enforceable, at the instance of interested parties, in the courts.
The first fundamental area to get right is the legal structure, and it is not right. The second is to make certain we have got the enforcement structure right. We are talking about large sums of public money. More importantly, we are talking about doing something to deal with two of the great crises of the time: climate and environmental change, and trying to bring about better equality between the various parts of our nation.
Baroness Bennett of Manor Castle (GP)
My Lords, I rise to speak to Amendment 68, which appears in my name. We have already had an interesting debate essentially about the operational independence of the bank. Looking around the Chamber, I think there are two noble Lords here who were also in the Schools Bill which we are taking in parallel with this Bill. I was rather struck by the similarity between the two Bills in that a great deal of debate on that Bill focused on what would happen if these powers were given to a Government and then a Government of a hue you did not like came in and exercised them. When I was thinking about that, I was thinking: what if we had a Green Government? Would I want operational independence for the UK Infrastructure Bank? If your Lordships’ House manages to get the objectives right as well as the composition of the board, which we will get to later, I believe we should have operational independence for the UK Infrastructure Bank because democratic control is the issue. As the noble and learned Lord, Lord Thomas, said, this is a public bank, so any steps being taken by the Government in directing it should be subject to full parliamentary scrutiny of a broader and more detailed kind than that which the Minister referred to earlier.
That brings me to my Amendment 68. In responding to some of the earlier debate, the Minister in a way made a point for me because, as the first amendment in this group states, this bank has a double bottom line. Its responsibilities include social justice and the climate emergency. Indeed, under a Green Government I might like to rename it the “Just Transition Bank” because that is essentially what it is setting out to try to do.
The Treasury is the ministry in control of this bank. What does it know about climate, nature, poverty, inequality or regional disparities? The very nature of the Treasury is that it is focused on money and what is called the economy—that mysterious thing outside human existence. What does it know about farming or health, despite the fact that it has a dictatorship over the actions of all the departments that cover them?
My original plan, which I alluded to at Second Reading, was to take the bank out of the Treasury’s hands entirely and put it in the hands of the departments that know about the things that it is supposed to be trying to do. However, the Public Bill Office—and I thank it for its patience and assistance on this—told me that that was, technically, practically impossible. The phrase “A Green Government wouldn’t start here” crossed my lips, but the Public Bill Office came up with Amendment 68, which would ensure that the Treasury fully consults the Secretary of State for Environment, Food and Rural Affairs, the Secretary of State for Energy and Climate Change—I admit to something of a Freudian slip and apologise to your Lordship for the error in this amendment, because proposed new paragraph (b) should, of course, refer to the Secretary of State for BEIS, although whether we should have a department entirely dedicated to tackling the climate emergency is a question to raise on another day—and the Secretary of State for Levelling Up, Housing and Communities.
Lord Teverson (LD)
I support the amendment tabled by the noble Baroness for that very reason. We should have a Department for Energy and Climate Change.
Baroness Bennett of Manor Castle
I thank the noble Lord for his support for my somewhat unintended amendment.
We come back to: what is this bank for and what is the economy for? The bank is supposed to serve the people of this land. The departments that focus on the people and the climate emergency this bank is serving should surely have an explicit statutory role in oversight. I have not been in your Lordships’ House that long, and I cannot count the number of times I have seen a Minister stand at the Dispatch Box and say in response to a question, “Well, I’d love to do that, but the Treasury —” and roll their eyes. That is the way the country is being run, and it needs to change. This could be a small way to step in that direction.
Baroness Noakes (Con)
My Lords, I, too, support a separate Department of Energy and Climate Change, but for a slightly different reason because I think we would then allow BEIS to focus on what it should be doing, which is supporting British industry, productivity and growth in the economy without being distracted by a lot of other stuff.
I want to pick up the point about the extent to which the framework document should be reflected in the Bill. It is quite normal for public sector bodies to have framework documents—they are often called a memorandum of understanding—by their side. That has not been invented just for this organisation. They usually contain a lot of really quite mundane stuff such as following the Green Book and Managing Public Money and a lot of detail about interactions between the sponsoring department and the body. This framework document in many ways goes beyond what you would normally expect to find in such a document, which is why I and others are querying where the balance should be, but I do not think we should look towards importing the whole of the framework document into the Bill or having some kind of approval process because much of it will deal with rather mundane, day-to-day stuff. The problem here is that this framework document has got rather grand and includes things that ought to be within Parliament’s purview. I am sure we will be taking this area forward, and I hope we will have a bit of balance and perspective about ensuring that we do not have statutory overreach.
Baroness Kramer (LD)
My Lords, in his Amendment 14 and the related amendments, which I was pleased to sign, the noble Lord, Lord Vaux, has put operating principles into the Bill, but not operating independence. I understand why, because operating independence is so fundamental to the bank and its integrity, character, nature and how it functions that it falls into a different category from other operating principles, which might change from time to time. If I were told that the operational independence of the bank was a moveable feast in the way that other principles might be, I would be fundamentally shocked. For me, it would undermine the existence and integrity of the bank. I support the amendment that the noble Lord, Lord Vaux, has put in this group because it gives more significance to the operating principles that matter, but I would like in a later group to deal separately with operating independence, which is far more fundamental.
I am not going to spend very long talking about this. Like others, I am persuaded that we need to take some major sections of the framework document and put them in the Bill. I agree with the noble Baroness, Lady Noakes. This is the kind of abuse that we have seen happening with statutory instruments, which used to be really narrow and dealt with regulation and have now begun to encroach widely on policy. In the same way, we have a framework document which ought to be a memorandum of understanding. It is almost a working day-to-day document that exists between two parties so that they do not constantly have to get on the phone to each other to work out what the next step is. However, core characteristics of the bank have been moved into that framework document. I am afraid that I am a cynic and I assume that this is in large part so that it can be changed at will. Nobody has read this out, so I shall so that it is in Hansard. This framework document
“shall be reviewed by the Shareholder and the Company at least every three years and reviewed within six months of the formation of a new government.”
So there is a presumption of change.
“No variation of this Document shall be effective unless it is in writing and agreed by the parties.”
There is no mention of Parliament at all. There is not even a scrutiny mechanism. The document does not even have to be published. We are in the most extraordinary situation of the governance document, which the Minister refers to again and again as the principle underpinning of the key elements of the UK Infrastructure Bank, essentially being outside the purview of Parliament and apparently deliberately so. This is a fundamental problem we have going to have to address.
Lord Tunnicliffe (Lab)
My Lords, I will briefly speak to my Amendment 32 before offering a brief response to the other amendments in this group. I have already raised the subject of jobs, and I am not convinced that the Government are giving this the weight that it deserves. As I mentioned previously, the strategic steer already offered to the bank makes only passing reference to the creation of jobs and no reference to what those roles should look like. There is a significant gap that needs to be closed, and the Treasury’s formal statement of the bank’s strategy priorities is the ideal means of doing that.
I am once again struck by the sensible nature of many of the suggestions made by other amendments in this group. The noble Lord, Lord Vaux, for example, has made a strong case for strengthening the status of the operating principles and for ensuring that any updates to those principles are subject to the affirmative procedure. The noble and learned Lord, Lord Thomas, put the whole thing succinctly by saying that the framework document needs to go into the Bill. I accept that it may not go in wholly, but its essence needs to go in. I commend to the Minister previously present, and to the Minister present now, that we must convey that to government. Let us not have an ugly scrap on Report but try to reach a consensus on this. If we do not get a consensus, those in the Chamber now will make a consensus of it and force it through.
The questions posed by the noble Baroness, Lady Bennett, are also interesting. The investments made by the bank will cut across different departments, and it therefore makes sense for there to be some role for those other bodies. I am not entirely convinced that we need a formal role for these other departments, but this could make governance matters more complicated than they need to be. However, I hope that one of the Ministers present—I cannot keep up—can clearly outline how the cross-cutting nature of the bank’s work will be recognised by the Treasury.
Lord Teverson (LD)
My Lords, I would gently challenge the noble Lord, Lord Tunnicliffe, on jobs. I have long experience in the far south-west—a deprived area that needs levelling up—of European funding, which always had jobs as its major output. The challenge is not normally jobs because, in the sort of areas that need levelling up, the jobs created by employers are normally low-grade jobs, so that is what you get. The real challenge, particularly on a levelling-up agenda in deprived areas, is actually careers, productivity and high-paid jobs. It is very easy to fill in a jobs return on jobs that are not very skilled or high grade, whereas we need to improve and raise the whole base level. I understand exactly what he is trying to get but I think it is a fundamental problem that we look at these issues in relation to grants, funding regimes, loans or other such systems. That is just a comment from my experience in Cornwall and the far south-west.
Baroness Bennett of Manor Castle (GP)
At the risk of ganging up on the noble Lord, Lord Tunnicliffe, which is not my intention, I would add a supplementary comment to his statement. When we talk about job creation, people will say they are building a new supermarket and that it will create 150 new jobs, but there is never any attempt to account for how many jobs will be destroyed by that development. It surely should be about net jobs.
Lord Tunnicliffe (Lab)
I am sorry; I have tried to be consensual in my responses. My understanding from Her Majesty’s Government—though I am beginning to be somewhat doubtful of this—is that, post Brexit, we were going to do things better than Europe did. I have constantly referred to well-paid, important, skilled jobs, wherever possible in my various amendments.
Baroness Kramer (LD)
I will come very quickly to the rescue. Because we are so often together on finance Bills, I can absolutely assure the House that the noble Lord, Lord Tunnicliffe, uses the phrase “well-paid jobs”, as well as “good jobs” and “quality jobs”, very frequently, even if the short-hand today has been just “jobs”.
Viscount Younger of Leckie (Con)
My Lords, perhaps I may be allowed to intervene with a response. I thank all noble Lords who have contributed to this short debate. The baton has been passed to me temporarily.
The amendments in this group broadly focus on the operational aspects of the bank and so clearly my remarks will seek to address those. I start with Amendments 14 and 29 in the name of the noble Lord, Lord Vaux. The approach of the Bill has been to add in what we think is necessary. We do not believe that setting out the details of the operating principles for the bank, which are set out clearly in the framework document, is required in legislation. I am very aware that this takes us back to a key theme of some of the debates today. I was extremely grateful for the views of my noble friend Lady Noakes—if I heard her correctly—supporting the view that we do not want to get into too much detail in this respect, for a very good reason.
Amendment 32, spoken to by the noble Lord, Lord Tunnicliffe, would ensure that the strategic steer includes a reference to the creation of jobs. I am pleased to inform him that, in the strategic steer issued in March, there were two references to job creation. I of course build upon the comments made by my noble friend Lady Penn in an earlier debate, and indeed the noble Lord, Lord Tunnicliffe, has raised the matter just now. I add to what has been said already two examples I would like to give from the strategic steer in respect of job creation.
First, the bank’s framework document explained this objective as supporting growth
“through better connectedness, opportunities for new jobs, and high levels of productivity.”
Secondly, the bank’s existing objectives are to help tackle climate change, as we know, particularly meeting the Government’s net-zero emissions target by 2050, and to support regional and local economic growth through better connectedness, opportunities for new jobs and higher levels of productivity. I think that these comments play reasonably well in answering the questions raised in an earlier debate, particularly by the noble and learned Lord, Lord Thomas, and the noble Lord, Lord Ravensdale, who is not in his place, and link with the levelling-up agenda. The noble Lord, Lord Teverson, and the noble Baroness, Lady Kramer, are absolutely right that our aspiration, and the necessity, is the creation of high-quality jobs. That is essential as part of our levelling-up agenda.
Amendment 39 in the name of the noble Lord, Lord Teverson, seeks to tie any direction given by the Treasury to the National Infrastructure Commission reports. He raised the relationship with the NIC at Second Reading and earlier today, so I hope that I can set that out and reassure him. The bank is intended to complement the work of the NIC. To that extent, there is a definite joining up, as was referred to by the noble Lord and the noble Baroness, Lady Kramer. It is a complementary rather than a duplicative process, and an assessment of the UK’s long-term economic infrastructure needs. Central government will then decide on any policy response to the NIC’s recommendations, and UKIB will consider the case for providing financing to support projects within the economic infrastructure sectors that are within the remit of both the NIC and the bank.
The NIC provides recommendations to the Government which the Government then act on. It would not be appropriate to remove that part of the process. Additionally, the Government do not have to implement the NIC’s recommendations or reports, so we believe that it is not appropriate to put this in legislation.
Perhaps the noble Lords, Lord Teverson and Lord Vaux, are concerned about the Government directing the bank in a way that is not in line with its objective. That rather paraphrases some of the mood of the debate. That is not possible with the drafting of the Bill at the moment. The bank must comply with its objectives and the Government cannot direct the bank to act in a manner that falls outside its statutory objectives.
The noble and learned Lord, Lord Thomas, tabled the characteristically thought-provoking Amendment 52. I hope I can convince him that the clause as drafted is sufficient. Much policy thought has gone into setting up the bank and detailing its objectives—which reflect government policy—and governance provisions, including provisions to allow the Treasury and Parliament to review its performance.
In the unlikely event that the bank breached its duties and agreement could not be reached via more usual engagement, the Treasury would clearly be motivated to use its powers, including under Clause 8, to enforce those duties. If a scenario occurred where the bank was in breach and the Treasury did not enforce for some reason, Questions could be asked in the House or a judicial review could be brought against the bank or the Treasury regarding use of its powers, and, if successful, give rise to mandatory or prohibitory orders.
Finally, to help the noble and learned Lord, I see no reason for Clause 8 ever to come into use. The framework document goes into some detail in Chapter 5 on the usual process for engagement between the bank and the Government, and any issues would be resolved much before the need to injunct the bank.
I turn to Amendment 68 in the name of the noble Baroness, Lady Bennett. She again raised the importance of independence but also focused on oversight. The amendment would allow other departments that she mentioned to have oversight of the bank. I assure her that the infrastructure strategy very much represents the view of the Government collectively, and should the Treasury need to exercise any of its functions, it would not do so in isolation or in silo, to use the language we might know better.
With those explanations, I hope that the noble Lord, Lord Vaux, will see fit to withdraw his amendment.
Lord Vaux of Harrowden (CB)
My Lords, I thank everyone who has taken part in this short and interesting debate. I do not think the noble Viscount will be particularly surprised that I am not entirely satisfied with his response.
I take the point from the noble Baroness, Lady Noakes. She is right: this is not about taking the whole of the document into the Bill or secondary legislation, but there is a balance. This seems to be one of those situations where the Government are creeping things that are really quite fundamental into areas where they do not get parliamentary scrutiny of any sort. That is unacceptable. As was mentioned, we have seen the same with secondary legislation, but this is a whole new element: there is not even secondary legislation scrutiny. The framework document can be changed at any time at will by the Treasury. The stuff that really matters to the bank should be subject to some form of scrutiny and recognised in the Bill. To me, things that are called “operating principles” clearly fit on that side of the balance, but some of the more day-to-day activities that the noble Baroness, Lady Noakes, referred to are fine.
The noble Lord, Lord Tunnicliffe, talked about the need to find consensus on this and finding the balance. That is really important. Perhaps the noble Viscount or the noble Baroness—I am not sure what the collective noun is for the Lords the noble Lord, Lord Tunnicliffe, mentioned—would be prepared to add this to the agenda of the meeting we have agreed to have. This is a really important area where we have to get the balance right. We cannot have a situation where the Government or the Treasury can change at will things of fundamental importance. Assuming they are prepared to meet to discuss and see whether we can find that consensus, I beg leave to withdraw the amendment.
Lord Sharkey
Member's explanatory statement
This would remove the ability of the Treasury to amend provisions in the Act relating to the Bank’s activities or the meaning of infrastructure.
Lord Sharkey (LD)
My Lords, I will speak briefly to all the amendments in the group. They are in my name and variously in the names of the noble Lord, Lord Vaux, and my noble friend Lady Kramer. I am very grateful for their support.
Amendment 28 would remove from Clause 2 the two Henry VIII subsections, subsections (6) and (7). These subsections allow subsections (4) and (5) to be amended without constraint and without meaningful parliamentary scrutiny.
Subsections (4) and (5) are at the heart of the Bill. The first sets out what the bank’s activities are to be; the second sets a non-exhaustive list of infrastructure for the purposes of the Bill. It is entirely proper that these two elements should be in the Bill. Taken together with the bank’s objectives, they set out government policy. Parliament is invited to debate and scrutinise these elements to consider modifying or otherwise amending them, which is what we are in the process of doing now. But we might be wasting our time: no matter what we say, resolve, add, subtract or amend, the Government can override all of it by using the Henry VIII powers in subsections (6) and (7).
The Government can change any the activities in any way and at any time they choose. They can change the meaning of “infrastructure” in any way and at any time they choose. They can do all this without meaningful parliamentary scrutiny. The suggested use of the affirmative procedure is emphatically not meaningful parliamentary scrutiny, and it is self-serving and disingenuous of the Government to pretend it is. Parliament almost never votes down affirmative SIs; it has done so four times in the last 50 years. It obviously cannot amend them. The plain fact is that the policy or policies embodied in the Bill can be changed by the two Henry VIII powers without constraint and without scrutiny by Parliament.
The Treasury’s delegated powers memorandum offers a kind of explanation for the inclusion of these powers, as it is obliged to do. The lead justification is:
“These powers will allow for the possibility that a future government may wish to change the emphasis of the Bank’s activities for policy reasons and may desire to alter the definitions to support this change”,
which is an unprecedentedly generous legislative text. The final justification for the inclusion of the powers is that it is “considered appropriate”—we heard “appropriate” used earlier in the debate—
“for the powers to take this form, as their whole purpose is to enable change to be made to the relevant aspects of the primary legislation for future policy reasons”.
That is exactly why these powers should not be in the Bill. Once again, they attempt to give the Executive power to make policy before they have decided what that policy is.
The memorandum makes it explicit that unspecified, unscrutinised and unscrutinisable changes to critical areas of policy can be made by the Executive. What is the point of discussing the bank’s activities and infrastructure if these can be changed without constraint and without any meaningful parliamentary scrutiny?
In three reports of the 2017-19 Session, the DPRRC considered the test of “appropriateness” for the use of Henry VIII powers. As I just said, the notion of “appropriateness” is the final justification given by the Treasury for the use of these powers. The Hansard Society, which I had the privilege of chairing for some years, summarised the relevant findings of the three DPRRC reports in its April 2022 Compendium of Legislative Standards for Delegating Powers in Primary Legislation. In paragraph 3.11 on page 18, it notes:
“Loosely drawn powers based on the subjective judgement of Ministers, such as the ‘appropriateness’ test, should be circumscribed in favour of a test based on ‘necessity’.”
There is no necessity here and the Government have advanced none.
In his contribution to the debate on the Queen’s Speech, the noble and learned Lord, Lord Judge, spoke forcefully about the need to address the balance of power between the legislature and the Executive, particularly in the use of Henry VIII powers. He concluded his speech by asking
“what is the point of us being here if, when we identify a serious constitutional problem, we never do anything about it except talk? We cannot keep doing that. I just want us to consider the possibility that the next time we have a Henry VIII clause in a Bill that has not been given careful explanation in advance, we chuck it out.”—[Official Report, 12/5/22; col. 130.]
The next line in Hansard reads: “Hear, hear!” This Bill is the next time. Our Amendment 28 would chuck out the Henry VIII powers.
Briefly, Amendments 33 and 34 are both probing amendments and deal with the statement of strategic priorities drawn up by the Treasury. It may be helpful if I deal first with Amendment 34, because this directly concerns whether the Treasury statement is meant to be permissive or directive. In Clause 3(5), the Bill says:
“The Bank must secure that its articles of association provide for the Bank”
to do two things: first,
“to publish and act in accordance with strategic plans which reflect the Treasury’s statement”,
and, secondly,
“to update those plans whenever the Treasury revises or replaces its statement.”
The force of the words “provide for” in the text was not immediately clear. Did it mean that the bank must amend its articles so as to allow the publication of strategic plans and to allow the bank to act in accordance with these plans if it so chose, or did “provide for” really mean “require”? In other words, was this provision enabling and permissive, or was it directive?
I discussed this question in a helpful meeting with the Minister yesterday, and she confirmed that “provide for” in this context was intended to mean “require”. This clarification makes the Treasury’s strategic statement extremely important. It imposes strategic choices on the bank. These strategic choices will determine what the bank actually does; for example, they could decide what weight is given to each of the bank’s two objectives and what weight to give to the bank’s four listed activities.
The Bill requires the Treasury’s strategic statement to be laid before Parliament, but that is the extent of Parliament’s involvement. Parliament will have no opportunity to contribute to the construction of the statement and no means of making productive comment on it. Given that the statement of strategic priorities will largely determine what the bank will actually do, this seems to be missing a trick by keeping Parliament at arm’s length.
It would be easy and, I believe, helpful to hear Parliament’s views on any strategic statement. Our Amendment 33 proposes a way of doing that by having the statement come before Parliament as an SI under the affirmative procedure. There may be other and better ways of involving Parliament that do not seem to trespass on the Treasury’s prerogatives and do not add complexity. The amendment aims simply to gauge the Government’s appetite for the closer involvement of Parliament in the strategic statement process. I beg to move Amendment 28.
Lord Vaux of Harrowden (CB)
My Lords, I will be very brief because the noble Lord, Lord Sharkey, has introduced these amendments eloquently, and I am not sure there is a huge amount to add.
This goes back to what we talked about in the previous group: too much power for the Treasury to change things at will. You cannot have meaningful operational independence if the mandate within which the bank works can be changed without scrutiny and safeguard. The noble Lord, Lord Sharkey, eloquently explained the limitations around the affirmative procedure; we all know about them. Something as fundamental as the basic objectives of the bank should be changed only following proper, full scrutiny using primary legislation. That should not be controversial; it should be fairly straightforward.
Amendment 33 adds an element of scrutiny that is currently missing to the statement of strategic priorities given by the Treasury to the bank. Those priorities are very important. I can understand that it is appropriate that there is some level of flexibility to those strategic priorities, but the idea that they can just be changed at will and filed with Parliament but with no scrutiny, discussion or review just seems wrong. Introducing the affirmative procedure for those makes sense to me.
Lord Davies of Brixton (Lab)
My Lords, I hope the Committee will bear with me; I have taken an interest in the Bill. My interest is narrow: what bearing the Bill has on pension funds. Members of the Committee may not be surprised.
I have raised the issue on a couple of occasions: at the useful meeting we had with the noble Lord the Minister and the noble Baroness, and at Second Reading. On neither occasion did I receive a reply. My question is: how does this organisation fit with the declared intention, expressed by the Prime Minister and the Chancellor of the Exchequer, to see pension funds investing more in infrastructure? Obviously, infrastructure is a good thing, and there is a tendency to feel that the Bill is about infrastructure so it must be a good thing—but in truth the Bill is an empty vessel. We do not know what is in it or where it is going. It is a structure whose purpose and objectives will be revealed in time.
How does this relate to pension funds and the Government’s apparent intention—we are still waiting for them to make clear what they are proposing—to coerce or cajole pension funds to invest in infrastructure? As I say, I raised this at the meeting with the Ministers and at Second Reading. On neither occasion was there any response from the Minister. It just so happens that the day after Second Reading, the chief executive officer of this bank stood up at a meeting of the Pensions and Lifetime Savings Association and expressed what an important initiative this was for pension funds. All I want is a straight answer: what plans do the Government have for the relationship between this bank and their objective to see pension funds investing more in infrastructure? Personally, I am not interested in taking investment advice from the Prime Minister or the Chancellor of the Exchequer, but I think we should be told.
Baroness Kramer (LD)
My Lords, at this stage—I know we are about to take a short break—I just want to summarise where we might be on these constitutional issues, now that this group of amendments has been debated. I think it will be relevant for the Minister to reply on that.
As we learn from this group of amendments, in the Bill the bank is given activities and objectives in primary legislation—but that primary legislation can be changed wholly by statutory instruments. That is the point of a Henry VIII power: primary legislation is overturned by secondary legislation. As my noble friend Lord Sharkey made clear, this can include issues as fundamental as the bank’s activities and even the meaning of infrastructure. It is hard to get more fundamental than that when you are talking about a UK Infrastructure Bank. That is the first point.
Lord Tunnicliffe (Lab)
My Lords, I am grateful to the noble Lord, Lord Sharkey, for tabling and introducing these three amendments on the important matter of parliamentary oversight. I am not inherently opposed to the Treasury’s power to amend the bank’s objectives or the definition of infrastructure. If, as things progress, it becomes obvious that tweaking these would be beneficial, there should be a relatively straightforward mechanism for doing so. However, Amendment 28 gives us the opportunity to probe exactly how the Treasury intends to use the power. Is it simply for the tweaking I have just mentioned, or could the Chancellor suddenly decide to drop the climate change objective altogether? That would be a very different matter, and making such a significant change via regulations—albeit an affirmative SI—would not be acceptable. The other amendments in this group raise related questions, and I look forward to hearing the Minister’s response in due course. It is not Parliament’s role to frustrate the operation of the bank. However, it should be Parliament’s role to debate these important matters as they arise.
Viscount Younger of Leckie (Con)
My Lords, these amendments are all connected to parliamentary scrutiny, particularly in cases where the Bill is creating delegated powers, as the noble Baroness, Lady Kramer, pointed out. I will come on to the specific amendments, but it is worth noting at the outset, bearing in mind her remarks, that the Delegated Powers and Regulatory Reform Committee has found no need to comment—in fact, there has been no comment whatever—on the four delegated powers taken in the Bill. Having said that, I will attempt to reassure her now that, along with previous pledges that a letter will be written on other matters, it may be that we can give more detailed reassurances in writing on these complex but important interrelationship issues concerning the bank and the framework document.
I believe that the intended purpose of Amendment 28 in the name of the noble Lord, Lord Sharkey, is to protect the operational independence of the bank and prevent the Treasury changing the bank’s focus in the future. There may, however, be instances where we need to update the definition of infrastructure or the bank’s functions to ensure that the bank can continue to fulfil its objectives as a long-lasting institution. Let me give an example in which the noble Baroness, Lady Bennett—I see she is in her place—may take some pleasure. New green infrastructure technologies may emerge in the future which we would want explicitly to include in the bank’s definition of infrastructure, to signal to the bank and the market that the bank can invest in these technologies.
Amendments 33 and 34 in the name of the noble Lord, Lord Sharkey, seek to strengthen parliamentary scrutiny of the bank’s strategic priorities and plans, which he outlined eloquently. Amendment 33 would require parliamentary approval for the strategic priorities of the bank, which the Treasury produces, before they come into effect. Although his amendment is certainly well intentioned—I listened very carefully to his remarks, as well as those of the noble Lord, Lord Vaux—I do not believe it is required as the Bill as drafted allows for parliamentary scrutiny of the bank’s strategic priorities by requiring a copy of the statement and any updates to be laid before Parliament.
There is a strong precedent for this already: the Bank of England Financial Policy Committee remit letter, the Financial Conduct Authority remit letter and the Ofwat strategic statements are all laid before, rather than approved by, Parliament. This is an appropriate level of oversight, particularly bearing in mind that the bank is a taxpayer-funded, government-backed institution.
Turning to Amendment 34, I would like to clarify the effect of the clause as drafted. It is necessary to read the clause as a whole, rather than just words in isolation, to interpret its effect:
“The Bank must secure that its articles of association provide for the Bank … to publish and act in accordance with strategic plans which reflect the Treasury’s statement”.
I listened very carefully to the remarks of the noble Lord, Lord Sharkey, and as he rightly said we had a detailed discussion of this issue outside this Chamber. However, in our opinion this is sufficient to ensure that the bank acts in accordance with Treasury steers. The bank’s articles must provide for it to do so, creating both the power and the expectation that it should, and being subject to the usual enforcement controls should it fail to do as provided by its articles. I realise that we may not entirely agree on this issue, but this is the response that I give today.
I listened carefully to the remarks from the noble Lord, Lord Davies of Brixton. I first apologise to him for the fact that I gather he has not had some answers to questions that he posed—I am rather mortified to hear that. I know that I have written a good few letters and I am sure my noble friend Lady Penn has as well, but may we look at which answers have not been given?
I will try to give the noble Lord a response anyway to the points that he raised, which were essentially asking what the bank’s relationship is to pension funds. The National Infrastructure Strategy, which announced the UKIB, also set out how there is a huge opportunity for pension funds to support the UK’s infrastructure ambitions. The bank’s policy design document—its blueprint, if you will—set out how the bank will help to structure deals to attract international investments and unlock capital from institutions such as pension finds. I hope that gives some sort of an answer but, again, I will read Hansard and get some further answers to the noble Lord, Lord Davies, if appropriate.
With that, I would be grateful if the noble Lord, Lord Sharkey, would feel able to withdraw his amendment.
Lord Sharkey (LD)
I thank everybody who has spoken in this short debate. I am of course disappointed that the Minister is disinclined to allow Parliament any meaningful contribution to the Treasury strategy statements. Laying them before Parliament is emphatically not a way of involving Parliament in any meaningful sense. I continue to believe that the bank would benefit from Parliament’s involvement, and we will continue to think of ways that that might be possible and acceptable to the Treasury.
I am even more disappointed by the Government’s insistence on the two Henry VIII clauses remaining in the Bill. The Minister, as I suspected he might, prayed in aid the DPRRC in his defence of the two powers, essentially on the basis that the DPRRC said nothing about them in its report. I would observe that sometimes even Homer nods. In its report of last November the DPRRC said:
“We will always deprecate the use of Henry VIII powers where they appear to have been included in a bill ‘just in case’”.
In this Bill, these two Henry VIII powers are explicitly there just in case—just in case this Government or a future Government want to adopt a different policy.
Between now and Report, we will want to consider how these very broad and unconstrained Henry VIII powers may be limited in scope or sharpened in purpose and application—and consider, of course, whether they should remain in the Bill at all. In the meantime, I beg leave to withdraw Amendment 28.
Baroness Kramer
“(8) The Treasury must lay before Parliament a copy of an undertaking (the “operational independence undertaking”) provided by the Treasury to the Bank for the purpose of facilitating the Bank’s ability to act as its directors consider appropriate in the light of the objects in its articles of association.”Member’s explanatory statement
This amendment would help secure the operational independence of the Bank.
Baroness Kramer (LD)
My Lords, just before we took a break, I tried to give a quick summary of where we were on the relationship between the shareholder—the Treasury and the Government—the UK Infrastructure Bank as a company and Parliament. I will not repeat that sequence, but I think Ministers will have picked up my concern that, at every level, there seems very little role, if any, for Parliament and very little accountability in any form.
For that reason, I drafted Amendment 30. It is not my language; it is language I took from the Green Investment Bank, so we know that it works in law and has a precedent. It might be helpful if I read it into Hansard:
“The Treasury must lay before Parliament a copy of an undertaking (the “operational independence undertaking”) provided by the Treasury to the Bank for the purpose of facilitating the Bank’s ability to act as its directors consider appropriate in the light of the objects in its articles of association.”
I did not include it in my amendment, which I slightly regret, but the relevant Act also says about the Green Investment Bank:
“An order under this section may not be amended or revoked.”
Operational independence is captured in a very emphatic and direct way in that Act. That led to my question, which the Minister will remember from an early meeting: why is operational independence not in the Bill? If I understood the reply—she can correct me if I am wrong —it is because the legal advice was that the other clauses in the Bill would not permit it to be validly included as they contradict it. That is the reading of the summary I gave before the break.
Without operational independence, it will be very hard for the bank to thrive and to have credibility among private investors. I also consider it an underlying principle. As the Government so often make a declaratory statement about operational independence, I do not understand why that is not made much more substantive. Perhaps the Minister could explain why a mere declaration with nothing in place to support it is considered adequate.
At the beginning of Committee today, I also referred to the framework document. I think we have all accepted now that the framework document not only has no standing in law but can be changed at any point by the Government with nothing more than an agreement between the shareholder, in the form of the Treasury and the Government, and the company—that is, the bank. That has to be in writing and agreed between the parties, but there is not even a requirement to publish that change in the framework document.
I also referred to the resolution of disputes between the company and the shareholder. That brings me to the other amendments in my name in this group, which refer to Clause 4, “Directions”, and various consequences related to it. The clause states:
“The Treasury may give a specific or general direction to the Bank about how it is to deliver its objectives. The Bank must comply with a direction. The Treasury must—consult the Bank’s directors before giving a direction, and publish a direction.”
The framework document is quite helpful in taking us down to a more detailed level. When it does that, it talks about the capacity of the board, if it objects to the direction that it has been given, to send a reservation notice in response to instructions from the shareholder that would—and these are the circumstances in which a reservation notice could be given—
“infringe the requirements of propriety or regularity … not represent good value for money for the Exchequer as a whole … be of questionable feasibility or is unethical … be contrary to the Strategic Objectives … result in the directors of the Company being in breach of their legal duties; and/or … not be in the best interests of the Company for any other material and demonstrable reason.”
Some of these are quite eye-opening, such as
“the requirements of propriety or regularity”
and something being of “questionable feasibility or … unethical”, resulting in the directors being
“in breach of their legal duties”.
It also makes it very clear, however, that this could apply to an individual project that the bank sought to fund but on which the shareholder—the Treasury or the Government—decided no. Or it could be the opposite: the bank could decide that it should not fund a project, but the Treasury or the Government decide yes. It is very clear that it applies at that level.
It is hard for me to see how that leads to operational independence in any way, which is why Amendment 30 is crucial. I am not proud, and if there are other ways in which we can achieve it, I would be very happy—but at least it is language that has survived a previous legislative process and supported a bank that was in place for quite a number of years.
I told the Minister at the time that I would use this occasion to try to follow up what looks to me almost like a direction for concealment. As I said, if the bank receives an instruction, it can object with a reservation notice; the shareholder can then override that reservation notice and instruct the bank to go ahead, but it can
“inform the Board who shall undertake the Instructed Matter, without delay”
and
“if asked, explain the Shareholder’s course of action; and … arrange for the existence of the Written Direction or any Oral Direction confirmed in writing to be published (unless the Shareholder has directed in writing to the Company that the matter must be kept confidential).”
That is the clause that particularly troubles me; it is a gagging clause, if ever I saw one.
I also asked the Minister: which executives and non-execs, which members of the board, have signed or are expected to sign non-disclosure agreements—we always get trapped by the name “confidentiality agreements”—or any other kind of agreement that would mean they cannot then go to the media? We have already established that there is no regulator so, without one, if they have signed confidentiality agreements, they have no mechanism and no one to whom they can go to disclose. I am exceedingly troubled by the idea that we have a bank that may be asked to do something that its senior members view as unethical or without propriety—or in fact illegal—under the terms of their duties, but they cannot even speak about it, report it or act in any way. I hope we get some fairly full answers from the Minister on that question, but it is frankly extraordinary.
When you put this whole package together, I cannot see that the current legislation in any way provides for operational independence. It may use the phrase “operational independence”, but that is merely window dressing. I think I have pretty much covered the issues, but I hope other noble Lords will have comments to make in this area. I beg to move.
Lord Vaux of Harrowden (CB)
My Lords, we have had various discussions around operational independence so far, most of which, until now, have addressed the ability of the Treasury to change the mandate within which the bank operates. Clause 4 goes directly to the heart of the Treasury being able to directly meddle in the activities of the bank. It gives the Treasury the right to
“give a specific or general direction to the Bank”,
at any time, and which the board must follow, with the only safeguard being a requirement to discuss it with the board first. As we have heard, it can be pushed through, and any statements of reservation from the board can be hidden. On the face of it, it completely undermines the operational independence of the bank if the Treasury can actually tell it what to do.
The Minister has previously assured us that the Government would only use this ability to direct in rare circumstances, and she has said that there is a precedent for this type of direction clause. However, the Bill does not put any such restrictions on the use of direction—none at all—beyond the fact that it must be within the objectives of the bank. Therefore, those directions could be about whether or not to make a particular investment, or even the terms on which those investments could be made. It would allow the Treasury to insist on the bank financing vanity projects—I used the example of the bridge to Northern Ireland at Second Reading—or even to indulge in pork-barrel politics by directing investment into particular locations for reasons that may not be totally unpolitical.
The bank should not be put into those kinds of positions, and this Bill should not allow that to happen. Frankly, on the precedent argument, I always recoil when I hear, “We did it before”; those precedents were for different organisations and in different circumstances. It is not impossible that we might have actually got it wrong at the time. Just because we have done it before does not mean that we should do it again.
I have given notice of the intention to oppose Clause 4 standing part. I think that the clause is inappropriate, but I can concede that there might be occasions when it might be necessary for the Treasury to be able to direct the bank—I cannot actually think of any specific examples, but I can see that it could be possible. If the Minister can provide good reasons or examples for this right to direct being needed, then I could get comfortable with allowing direction in those clearly defined, limited and restricted circumstances. However, it cannot be right that direction can be given on the current unrestricted and unscrutinised basis. As I have said, that is not operational independence; it is hard to imagine how anything could be less operationally independent.
So please can the Minister explain, quite specifically, why the Government feel that they need this right to direct, and under what real and specific circumstances they can conceive of using it? If so, we can then work around this and try putting some restrictions and safeguards into the Bill to achieve that.
I have also added my name to the four amendments in the name of the noble Baroness, Lady Kramer, which attack the same problem from a different angle: to allow the Treasury to make recommendations to which the bank must have regard, rather than to comply with directions. I would prefer to remove all unnecessary meddling by the Treasury, as it were, but this might be a reasonable compromise. Similarly, the noble Baroness’s Amendment 30 is another important way of trying to get this operational independence well imbedded in the Bill.
Baroness Noakes (Con)
My Lords, as noble Lords know, I criticised the concept of the UK Infrastructure Bank at Second Reading on the basis that it was the Treasury’s plaything and it had the Treasury’s fingerprints all over it. That was against the background of my not really liking public bodies being created to do things that I do not think there is any good reason for. I believe that once we have a public body set up—we accept that there is a reason to create a public body with access to privileged sources of financing—we have an obligation, as government, to put a proper control framework around it to ensure that public money is protected and that we have powers available to us to meet whatever circumstances might arise. So I part company with the two previous noble Lords who have spoken, because I think it is extremely important to have backdrop powers to be used when necessary.
Lord Thomas of Cwmgiedd (CB)
My Lords, I have just three brief observations. The first is that I think the clause of the framework agreement to which the noble Baroness, Lady Kramer, referred is wholly inconsistent with the Bill. The Bill requires the directions to be published; the framework says they can be made confidential. It is plain that the two are inconsistent, and the Bill must prevail. It seems to me that that emphasises the need to go through the framework to actually update it—it is part of the editing process that is needed.
My second observation is that I can see that, to some extent, as the Minister said at Second Reading, there may be circumstances of necessity or urgency. If there are—and, as the noble Lord, Lord Vaux, said, please can we have some illustrations?—those words need to go into this clause, because it seems to me, if I may respectfully agree, that we may need to cut down this power: we cannot use it, as is suggested in article 15, to resolve a dispute. That is not its purpose; its purpose is for something exceptional.
Thirdly, it seems to me that, if those illustrations cannot be provided, then the obvious answer is that it should be a recommendation that should be published. Of course, we all know that if the Government were to publish something sensible for a body like the bank, it would have no option but to comply with it. But it means you give effectiveness to operational independence, but you actually have the steel fist behind the velvet.
Lord Tunnicliffe (Lab)
My Lords, there seem to be ideas all through this Bill, and the drafters have gone to one edge—to take all the power. That is the sense I get from a lot of our discussions tonight. I even had a slight tendency to want to agree with the noble Baroness, Lady Noakes—she should not get carried away; it was very slight. Once again, we have to find the centre to this, which must be something to do with Parliament. I do not have an answer, but I share the concerns. I headed a public body, and I do not remember a clause such as this ever being there; having said that, the Treasury quite openly had a clause under which it could give me directions on achieving things. It did it only once, and the results were so bizarre that it did not do so again.
The amendments tabled by the noble Baroness, Lady Kramer, are incredibly important. Several speakers raised questions about the bank’s operational independence at Second Reading and it is right that we explore the topic in more depth today. In recent weeks, the Chancellor has been quick to point to the independence of another bank—the Bank of England—as justification for a lack of action on the cost of living crisis. Of course, the UK Infrastructure Bank is not dealing with monetary policy. However, if it is acting according to its mandate, why would the Treasury need to intervene? The Government may seek to play this down by claiming the word “direction” is standard terminology, but I think many reasonable observers would be troubled by its connotations. I hope the Minister can provide a meaningful response to the noble Baroness, Lady Kramer, and that we can continue discussing this important matter in the run-up to Report.
My Amendment 36 was put in this group. It has a slightly different intent from that of the noble Baroness, Lady Kramer, and the clause stand part notice of the noble Lord, Lord Vaux, but it does relate to operational independence. This is not intended as an attempt at party-political point-scoring, but in recent times we have witnessed a number of cases and accusations relating to the misapplication of procurement and other regulations. We know that, during the Covid crisis, some Ministers took a personal interest in the awarding of contracts. I am in no way wedded to the form of words used in Amendment 36, but there is room for a prohibition on these kinds of interventions in relation to the bank’s work.
Baroness Penn (Con)
My Lords, as we have heard, these amendments are all connected to the operational independence of the bank or the influence of the Treasury over it. The purpose of Amendment 30 from the noble Baroness, Lady Kramer, as she said, is to protect the operational independence of the bank.
It may be useful for the Committee if I set out why we do not have a clause in the Bill setting out the operational independence of the bank. As a matter of company law, the bank is already operationally independent. It has been operating as such, with its directors having duties to the bank, during the first year of its existence and in making its first seven investments. The Bill sets out the limited circumstances in which the Treasury, as the sole shareholder of the bank, can exercise more direct control over it. One of the main reasons for the Bill, which enshrines the bank’s strategic objectives in statute, is to protect its independence. The Government are not able simply to change its objectives—
Baroness Kramer (LD)
The Minister just mentioned the “limited circumstances” in which the Treasury may give direction. Can she point to those for us? It would be extremely helpful.
Baroness Penn (Con)
I intend to come to some examples, as requested, when I move on to directions.
Baroness Kramer (LD)
To confirm, there is nothing in the Bill that provides a limit; it is just that we will have examples to illustrate a self-denying ordinance—is that correct?
Baroness Penn (Con)
I think the Bill sets out that the Treasury does have the power to issue direction, and it will be published if it is ever used. We have heard about the precedents. Although I know Members of the Committee have different views on the value of that, I thought my noble friend expressed that very well.
To return to the purpose of the Bill, the Government are not simply able to change the objectives or sell the institution without further legislation. The Bill also makes provision for transparency to Parliament and the public around any circumstances in which the Treasury issues directions or statements of strategic priorities to the bank.
Section 172 of the Companies Act also confirms the bank’s independence: it states that the duty of the directors of the bank is to act in the way that is
“most likely to promote the success of the company”
and it requires them to have regard to factors such as the desirability of maintaining a good reputation for the bank, the bank’s impact on the community, the environment, and the need to foster business relationships. A clause setting out that the bank is operationally independent would therefore be unnecessary as that is already the legal default position and has been reflected in the bank’s independence over the first year of its existence, and the process by which it has entered into its initial investments.
Amendment 30 would require the Government to give an operational independence undertaking for the bank. It is, as the noble Baroness noted, a copy of the provision in the Enterprise and Regulatory Reform Act 2013 for the Green Investment Bank. As I have noted, we do not think this is necessary since it is a matter of company law that the bank is already operationally independent, and the Government have been consistent in their statements on this matter.
To respond to the noble Baroness’s point, we believe that the bank’s operational independence is substantive, not a kind of declaratory position, however—
Lord Vaux of Harrowden (CB)
I am just trying to understand more about why the statutory basis of the bank gives it this level of operational independence. I do not think there is anything in the articles which provides that, so where does this come from—I think these were the words the Minister used—as a matter of law?
Baroness Penn (Con)
I think there are two elements to it: the bank is established under the Companies Act 2006, and as a matter of company law is operationally independent, and then, in terms of what this Bill does, the bank—
Baroness Kramer (LD)
I am really confused about why company law would provide operational independence. It would be really helpful if the Minister could address that. I think she just said that it had to behave with proper propriety or reference to its reputation, but that is nothing to do with operational independence.
Baroness Noakes (Con)
Perhaps I could help the noble Baroness: as a matter of company law, shareholders have relatively few powers in relation to how a company is operated on a day-to-day basis. Their powers derive from their ability to pass resolutions, either at annual general meetings or special meetings, but there are no powers within the articles of association, et cetera, for shareholders to intervene, except via the mechanisms of calling general meetings and passing resolutions. Almost by definition, they are not involved in operational matters. I think my noble friend made a fair statement that for a company operating under company law, it is already hard-wired into its structure that shareholders cannot intervene on a day-to-day basis, just because there is no mechanism for them to do so.
Baroness Kramer (LD)
I will just challenge that slightly, because this all goes hand in hand with the direction, which can be specific. We are talking not just about general direction but about specific direction. I am completely unclear that the shareholders of a company could instruct it, for example, to invest in a particular pharmaceutical process to serve a particular customer base. That is entirely within scope; it is equivalent to the language within the Bill.
Baroness Penn (Con)
We absolutely will come on to discuss the power of direction. The basis that we wanted to establish is that the Government have two powers in the Bill: the power of direction and the power to issue a strategic steer. However, setting those aside for one moment, day to day, the bank has its operational independence, and the basis of that is in its establishment as a company subject to company law.
We were debating Amendment 30, which seeks to establish that operational independence in the Bill. The Government believe that that is already provided for in the bank and so does not need to be set out separately in the Bill. However, the noble Baroness is absolutely correct that, if we were to set out in the Bill the operational independence clause that she has taken from previous precedent or somewhere else, we would still need to write into the Bill the two powers that we are going to talk about: the power of direction and the power to issue a strategic steer. Therefore, I absolutely accept that those two powers override in some ways, on those issues where they may be used, the operational independence of the bank.
I was trying to make another point on what this law is doing to strengthen the independence of the bank. As we know, the bank is already up and running. As the noble Baroness quoted from its operational framework, the Government and the Treasury already have the ability to issue it with a strategic steer and with powers of direction. The Bill puts those powers in statute but gives transparency requirements around them. In the establishment of the bank by statute, it is not for the Government to be free to then sell the bank or change it without returning to Parliament. UKIB is a separate legal personality in law, which is what I was trying to establish.
It may be worth moving on to the power of direction. As I said, it is a matter of company law that the bank is already operationally independent, and the Government have been consistent in their statements on this matter. The limited exceptions to this, as set out in the Bill, preserve the Government’s proportionate shareholder rights, which is appropriate for an institution which is in receipt of public funds. As I said to the noble Baroness, I accept that if we were to have such a clause in the Bill, any operational independence undertaken would still need to include the exemptions for the strategic steer and the power of direction.
On Amendments 35, 36, 37, 40 and 41, and the clause stand part objection in the names of the noble Baroness, Lady Kramer, and the noble Lords, Lord Tunnicliffe and Lord Vaux, these would seek to soften or remove the Government’s powers of direction over the bank so that their directions would no longer be binding. I understand that the aim of these amendments is to protect even further the bank’s operational independence. However, it might be helpful if I quickly set out why we have this in the legislation.
The power of direction is one of a small number of exceptions to the bank’s operational independence. It is right that, as a sole shareholder and as the department that must explain the bank’s activities and spend to Parliament, the Treasury exercises limited amounts of control on the bank. Although the Government expect to use this power infrequently, constrained powers of direction are a relatively common feature of similar institutions such as the British Business Bank, HMRC and the Bank of England.
I hope noble Lords will appreciate that the examples are illustrative and intended to set out the circumstances that could potentially justify the use of such a direction in future. There may be aspects of national security where we may need to intervene on specific investments. We may need to direct the bank to invest in a technology that has the potential, if developed, to be particularly beneficial to the environment but may not meet its return on equity targets. That speaks a small amount to a debate we had earlier about the need to meet the double bottom line versus potential further public policy good from taking greater risk than would otherwise be the case. There may be some other emergency scenario where the bank is an appropriate institution to act. It is worth noting that the Department for Business, Energy and Industrial Strategy used a similar power to direct the British Business Bank to organise the Government’s Bounce Back Loan Scheme. Although those are illustrative examples, that final one might demonstrate that it is hard to anticipate all the circumstances in which we may want to use this power. Therefore, setting out greater circumscription of the use of the power is difficult in those circumstances where it is hard to anticipate the unknown of the future.
Should we remove the clause, the Government could still rely on our ability to issue directions as a shareholder and as set out in the framework document. However, crucially, there may be situations where the board could refuse a direction if not in statute, given its obligations under the Companies Act. This would likely lead to unnecessary tensions between the Treasury and the bank, which are best addressed in the way that the Bill provides, by introducing transparency to Parliament and the public over the use of the power of direction.
I committed to coming back to the noble Baroness, Lady Kramer, on issues she raised earlier in Committee. On the use of the power of direction, the Bill sets out clearly the Government’s ability to issue a written direction and the requirement for it to be published. The framework document provides a process that can precede the issuing of a written direction, with a written direction being the final step in a disagreement. As the noble and learned Lord, Lord Thomas, noted, the powers of the Bill to issue a direction take precedence over the framework document with regard to written directions, but I note the noble Baroness’s point about reservation notices. The Government are committed to giving the bank’s board freedom to operate the company in seeking to achieve its strategic objectives. It is not the intention of the Government nor the drafting of the framework document to gag the bank, and I should be happy to discuss the matter further with the noble Baroness ahead of Report.
To pick up the noble Baroness’s point about whistleblowers, UKIB must adhere to the expectations of the corporate governance code, as well as, more broadly, public sector accountability obligations for the conduct and corporate policies that it has as an organisation. This includes having in place a whistleblowing policy. On non-disclosure agreements, or any name they may go by, UKIB is operationally independent but we understand that it has no NDAs in place.
I hope that has answered the noble Baroness’s earlier questions and some of the further questions about operational independence and the Government’s ability to issue a direction to the bank. I therefore hope that she will withdraw Amendment 30.
Baroness Kramer (LD)
I will obviously withdraw in Committee, but I cannot see the harm, only the benefit, of putting operational independence in the Bill, particularly using language that has been well established in a previous Bill. The Minister refers often to precedent. Here is a precedent that I think is quite attractive, and we know that it has been very successful. I see no reason not to make that happen, so that we have not just declarative statements or rely on a very narrow piece of company law. That will be something that we will want to explore.
Moving to the issue of directions, there is some useful language which we might take from the framework document. I see no reason why we should not prohibit disclosures that infringe on the requirements of propriety or regularity, those which are of questionable feasibility or unethical, or that result in the directors of the company being in breach of their legal duties. We could certainly put some constraints on those powers. I was astonished to read in the framework document that it contemplated that directions would indeed fall into all those categories and therefore provide for them. That will be quite interesting. I will be very glad to discuss the issue of gagging orders of various kinds.
Some fruitful ideas that we will want to explore further have come out of this discussion. We always have to take this and all the other constraints that we have discussed in earlier phases of this legislation in context, but I beg leave to withdraw my amendment.
Baroness Noakes
“(1A) The Bank's directors must ensure that the accounts and reports referred to in subsection (1) include a statement of the extent to which the Bank has achieved its objectives as set out in subsection (3) of section 2.”
Baroness Noakes (Con)
My Lords, Amendment 42A amends Clause 6 of the Bill dealing with annual accounts and reports, which is one of my specialist topics. I also speak to Amendment 55 in this group, which is in my name.
Amendment 42A simply requires that the bank’s annual report contain a statement of the extent to which it has achieved its objectives under this Bill. My purpose in tabling this amendment is to ensure that there is an adequate, regular supply of basic information to support parliamentary accountability. The Treasury does not need to rely on formal publications by the bank, it has its own nominee on the board, and it has negotiated its own extensive access rights to information as part of the framework document.
The framework document acknowledges that the bank may give evidence at the Public Accounts Committee or the Treasury Select Committee in the other place and hence envisages the accountability of the bank to Parliament, which must be right. All that my amendment seeks to do is to ensure that there is at least some core, routine, regular information to support that accountability. In passing, I note that the framework document is silent on the role of Select Committees of your Lordships’ House. Can the Minister assure me that there will be no barriers to the bank appearing before one or more of them?
Lord Vaux of Harrowden (CB)
My Lords, I speak to my Amendment 56, which again relates to the crowding out discussions we had earlier. Amendment 55, in the name of the noble Baroness, Lady Noakes—I am pleased we are back on the same side again on this discussion—is aimed similarly, as is the amendment in the name of the noble Lord, Lord Holmes of Richmond, although his is for a one-off report rather than ongoing reporting.
We have already discussed crowding out and crowding in, in some detail. As I have said, if the bank simply ends up becoming a cheaper form of subsidised finance in situations where private finance is already available, we will have failed. The investments it has made so far, including in solar farms, are not terribly encouraging in this respect. Solar farms are easily financed. They are a nice, solid, predictable revenue stream—the perfect thing for private finance—so it is hard to see what benefit the bank brings in such a situation.
To see how effective the bank has been, it is essential that we measure and report on how successful it has been in its fundamental role of being a catalyst to crowd in private sector finance. How much has it crowded in? The amendment from the noble Baroness, Lady Noakes, tries to do this by looking at whether the bank’s activities have been confined to situations where there is an undersupply of private finance. My amendment takes a slightly different approach, requiring an actual assessment or measurement of the amount of private sector finance that the bank has crowded in, and an assessment of the extent to which it has replaced private sector finance that would otherwise have been available.
Looking again at the wording of my amendment, I regret saying that the assessment should be by the Treasury. It would be better if the Treasury did not mark its own homework, but I know we are coming to that later. I am sure the Minister could quibble with the wording, and that it could be worded more elegantly. However we do it, this is a fundamental measure of how successful the bank has been, how effective it is and whether it is a good use of taxpayers’ money. Somehow, within Clause 9, we need to include some measurement of crowding in and crowding out.
The Lord Bishop of St Albans
I declare my interest as president of the Rural Coalition and shall speak to my Amendment 57; I can be fairly brief. This amendment would require the Treasury to rural-proof the bank’s activities as part of its review every seven years. I shall not go over what I said on my earlier amendment as I have already referred to some of the case for rural-proofing. It is very important. It already exists as a tool to ensure that policymakers and analysts assess the effectiveness of their policies across rural areas. All government departments are subject to it, with the aim of embedding the principle that rural communities must be adequately considered when developing policy. The UK Infrastructure Bank ought not to be exempt from this as it is wholly owned by the Treasury.
Even then, the precise nature of the rural-proofing contained in this amendment is far weaker than the guidance to which most government departments are subject. Rather than require rural communities to be suitably considered in investment decisions, this amendment simply places a duty to review any disparate or adverse impacts or discrimination towards rural areas with respect to the bank’s activities. This would offer a framework for the Treasury to judge UKIB’s activities so that rural communities are adequately accounted for as part of its review. If rural-proofing requirements are good enough for the Treasury, they are more than apt to cover UKIB. This amendment would help to reassure rural communities that their concerns will be considered by UKIB and that at a minimum they will not be negatively impacted and will, we hope, be supported by the bank. When the Minister responds, I hope she will be able to offer some reassurance that the activities of the UK Infrastructure Bank are already covered by the current rural-proofing guidance to which the Treasury is subject. If they are not, how will the Government ensure that the bank will be properly rural-proofed in a similar manner to all other government departments?
Lord Holmes of Richmond (Con)
I shall speak to my three amendments in this group, which all concern reporting requirements for the bank. Amendment 64 takes us back to inclusive by design and asks HMT to produce a report within six months on how the bank is achieving it in its investment and to look across the whole of the UK infrastructure and put a plan together for how all of it can be made inclusive. Does the Minister agree that infrastructure investments which are not inclusive would not only fail the public sector equality duty and thousands, potentially millions, of people but should de facto also fail the economic test set for all the bank’s investment?
On Amendment 65, perhaps we should feel positive because crowding out has already encouraged the crowding in of three amendments on this area. My regret on my amendment is that I have put it in the singular rather than suggest the continuous reporting requirement. As other noble Lords have set out, it is a fundamental issue for the bank. To that end, will the Minister reiterate what is said in the blurb on the bank about what multiple can be returned on investments? More than that, as real investments have now been made by the bank, what multiple and what actual level of funds have been crowded into those investments?
Returning to my Amendment 15, I remind my noble friend that, when it comes to nature-based solutions, investments in peat projects return £4.60 to the pound while those in woodland projects return £2.80 to the pound. Does my noble friend the Minister agree that both these levels are above what the bank is setting as its multiple return on investments made?
My final amendment, Amendment 66, is very brief; it simply asks for a report to be placed on the rate of interest that the bank determines to charge. Can my noble friend share some of the detail underpinning the basis points that have been determined at this stage for the bank’s investment level? How will that sit alongside other investment funds, and how will it compare with where previous funding would have come from, such as the Public Works Loan Board, et cetera? How has that interest rate been arrived at? Will a report be placed within six months of the passing of this Act on how it has run in that period?
Baroness Kramer (LD)
My Lords, I will speak first to the generality and then to my amendment in this group. As to the generality, all the proposed changes or enhancements to Clause 9—reviews of the banks, effectiveness and impact—seem significant and important; it is a clause that we definitely need to improve. The two areas that reviews currently have to cover, namely
“the effectiveness of the Bank in delivering its objectives, and … its impact in relation to climate change and regional and local economic growth”,
are interesting, but they have not covered even a small portion of the questions raised on the floor just today. A much more comprehensive review strikes me as exceedingly worth while and something one would anticipate the bank to be eager to deliver.
My Amendment 67 deals with the UK Infrastructure Bank. I admit that it arises from a frustration that the national infrastructure strategy is not on a statutory basis. Our cycling and walking strategy is on a statutory basis but not, apparently, our national infrastructure strategy. It seems important that, if any respect is to be given to that strategy, it should be linked in some way to the work of the UK Infrastructure Bank. Where there are differences, we should at least be aware of them, and that could lead either to the strategy being amended or indeed to a rethink of some of the objectives of the bank.
I am trying to take some steps on what others have described earlier in various ways—to pull together things that seem to cover the same territory, rather than constantly having fragmented reports going in one direction, funding in another and decision-making in another. It seems that the review mechanism may be the lightest-touch way to pull together these various strands and give us a sense of coherence about what is happening with the development of infrastructure in this country.
Lord Tunnicliffe (Lab)
My Lords, we can know whether the bank is meeting its objectives and strategic priorities only if the periodic reviews of its work cover the right areas. We will turn to the timing of the reviews shortly, but the number and range of amendments in this group suggest a scepticism around the current provisions. As I said during an earlier debate, we have no desire for parts of the Bill to resemble a shopping list. However, Clause 9 is currently incredibly high level, to the point where it provides virtually no steer whatever.
At a minimum, I urge the Minister to seriously consider Amendment 56 in the name of the noble Lord, Lord Vaux, and Amendment 67 from the noble Baroness, Lady Kramer. These requirements would add value. I imagine that some of the other amendments in this group, although tabled with the best of intentions, will be covered by other mechanisms, including the bank’s own annual reports. I hope the Minister can clarify that.
Baroness Penn (Con)
My Lords, as we have heard, these amendments all relate to the reporting on the bank and the content of any statutory review of the bank. Amendment 42A, in the name of my noble friend Lady Noakes, seeks to ensure that the bank’s annual accounts and reports will contain a statement on the extent to which the bank has achieved its objectives. I hope I can provide some reassurance that UKIB already has obligations to publish in its strategic plan details of how its strategic objectives are being fulfilled, as well as how its activities meet its operating and investment principles.
There were also a number of amendments detailing what the statutory review of the bank should look into. Amendment 55, from my noble friend Lady Noakes, Amendment 56, from the noble Lord, Lord Vaux, and Amendment 65, from my noble friend Lord Holmes, all relate to the additionality of the bank and how it will work to crowd in private investment, not crowd it out. In response to my noble friend Lord Holmes, I am happy to restate that it is our expectation that the bank will crowd in £18 billion of finance from £8 billion. The evidence to date is that £300 million could have unlocked £500 million of private finance.
As I said previously, how effective the bank has been in meeting its objectives, including additionality, is a really important point and one I would expect the statutory review to look at. I also re-emphasise to noble Lords how seriously additionality is taken by the bank itself. As I mentioned, I would expect to see in the bank’s strategic plan, published later this month, a list of KPIs that it will use to measure its impact. One of those will be on the private finance it has brought in.
On Amendment 57, from the right reverend Prelate the Bishop of St Albans, the bank takes its obligations to providing regional and local economic growth across the UK, including to rural communities, very seriously. As I mentioned, the bank will have a number of KPIs to ensure that it is meeting its objectives and will detail these in its upcoming strategic plan. I appreciate that I have not seen the strategic plan either, but if the right reverend Prelate would like to discuss that further having seen it, I would be very happy to do so.
Amendment 64 is on the review of inclusive infrastructure. The bank carefully considers the impact of its decisions on those sharing protected characteristics, in line with its legal obligations and its strong commitment to promoting fairness. It has a rigorous process in place to ensure that it complies with its legal requirements under the public sector equality duty in the Equality Act 2010. Impacts on protected characteristics are appropriately flagged and assessed before the granting of loans.
Amendment 66 is on reporting of the bank’s lending. The bank can already determine the level of its own investments in line with its capitalisation and annual limits that are agreed in its framework document. The bank will report on its lending in its annual report and accounts, which will be published and laid before Parliament.
Amendment 67, from the noble Baroness, Lady Kramer, suggests that we conduct a review of the bank to ensure it continues to meet the aims of the national infrastructure strategy. I can provide the noble Baroness with some assurance that this is precisely what the Government will do when they review the bank as part of the arm’s-length body review in 2024-25. Further to this, the National Infrastructure Commission will publish its second national infrastructure assessment next year, and the Government will consider future updates to the national infrastructure strategy in view of this assessment. We will continue to ensure that the bank is made aware of how its work can complement the Government’s long-term infrastructure strategy, including through the statutory strategic steers, powers for which are contained in the Bill.
I therefore hope that, at this stage, my noble friend Lady Noakes can withdraw her amendment and that other noble Lords will not move theirs.
Baroness Noakes (Con)
My Lords, I thank my noble friend the Minister for that response. We have had an interesting, short debate. This is rather a varied group of amendments. There is only one link between them, in that they are all about reporting. Apart from that, a lot of different issues are raised—not all of which I will comment on, because they were not covered in my own amendments.
I will deal with the issue of crowding out or crowding in. The noble Lord, Lord Vaux, and my noble friend Lord Holmes of Richmond have a concern around this. My noble friend said that the report under Clause 9 would cover this, but the report under Clause 9 is about how well it has achieved its objectives. The objectives are very clear in Clause 2: to help tackle climate change et cetera, and to support regional and local economic growth. It is not an objective to achieve a crowding in or avoid crowding out. That has been the heart of one of the problems. I hope that when we have our further discussions on crowding in and crowding out, which we have already established that we will have before Report, we can cover this aspect. This is part of the whole problem of how to express the additionality requirement and then how to measure it and report on it. It is part of the same theme, so I will not labour it further now.
My Amendment 42A was about having something in the annual report and accounts on how well the bank is achieving its objectives. I am not at all clear that this is met by what my noble friend said, which was something to do with the strategic plan and the KPIs. Tomorrow I will read carefully in Hansard what she said, because I probably did not concentrate quite as hard as I should have. I do not think she answered the question, and I may well want to return to it either on Report or with her before Report. On that basis, I beg leave to withdraw.
Baroness Kramer
Member’s explanatory statement
This amendment would change the maximum number of board members from fourteen to thirteen.
Baroness Kramer (LD)
My Lords, I recognise that the Clock is moving rapidly, so I will be quite speedy. These amendments are reasonably self-evident. With the amendments that stand in my name here, I have tried to set what seem obvious principles for the way in which a board of directors is set up. That is, as covered by Amendments 43 and 44, to make sure that the total number of board members is an odd number, not an even number. With a board of directors, it is surely appropriate to be as certain as possible that the chair’s casting vote will be used as rarely as possible. Hopefully, decisions will not be so contentious that the board is completely split, but where that happens it is far healthier to have a resolution provided by an odd number of members than to have to look again and again to the chair’s casting vote. It is quite curious that 14 is the proposed number of directors. Now and again, we would find ourselves looking to the chair, and I think that would be genuinely unfortunate. It is not the most important issue in the world, but it seems to me that some decent housekeeping would not hurt here.
I also want to be sure, in Amendment 45, that the majority of board members must be non-executive directors. It does not speak to that in any way and, given that the board can be as small as five, you could easily see a situation in which three of the members were executives and only two were non-execs. It seems a simple principle.
Probably my most significant amendment in this group, on an issue that has been addressed by others, is Amendment 49. We have talked before about the importance of having the right range of skills on the board—people of independence, and people with expertise and knowledge. Amendment 49 simply asks the bank’s chair to keep under review such characteristics and, if he feels that there are gaps, to take steps to address or mitigate those shortcomings.
It is important to put that responsibility on the chair and not just to say, “Well, Treasury will take care of that. The Chancellor of the Exchequer appoints everybody and therefore he will decide what kind of skills are necessary”. We have talked about the operational independence of the bank. Frankly, if the chair cannot even guide what kind of skills he needs to be on his board, we are once again underscoring that there is no operational independence. It seems to me a standard and normal responsibility for a chair, and I simply ask that there be an opportunity for that to happen here.
Lord Vaux of Harrowden (CB)
My Lords, I will be very brief in speaking to my Amendment 46, but first, let me say that I support the amendments in the name of the noble Baroness, Lady Kramer. Frankly, they seem like normal, good practice and it is almost surprising that they are not already in the Bill.
Amendment 46 is very simple. The bank’s activities will cover the whole of the UK, including the devolved nations. I welcome that—it is a really good thing—but while allowing the bank to operate in the devolved nations, the Bill gives absolutely no right at all to the devolved Governments to have any say in how it operates. I would be completely opposed to giving veto rights or anything of that nature, but I do think it would be appropriate to allow them at least some input into the bank’s direction. As someone who lives in Scotland, I am not the world’s greatest fan of the Scottish Government, but devolution is a fact and we have to live with it and work with it. The devolved Governments have perfectly reasonable interests in how investment is directed in their countries.
It seems to me that the easiest way to achieve this is just to allow the devolved Governments to be represented on the board of the bank. Amendment 46 would simply allow the devolved Governments each to appoint a director to the board. That way, they would have the ability to represent their legitimate interests without introducing any veto rights or anything of that nature, which, obviously, we should avoid.
If we want to keep this union together, we need to recognise that the devolved Governments have legitimate interests, and we need to try to work together.
Baroness Bennett of Manor Castle (GP)
My Lords, it is a pleasure to follow the noble Lord, Lord Vaux, and to find myself in broad agreement with him on a number of areas of this Bill, if not always on the details—as with our views on the Scottish Government, which, of course, has Green Ministers among its members.
My amendment is rather similar to his, although perhaps not quite so expansive on the devolved Administrations. It says that
“a director must be appointed”
jointly by
“the governments of Scotland, Wales, and Northern Ireland”.
It specifies two other directors, one of which would be appointed by the Climate Change Committee. I am a little disappointed that the noble Lord, Lord Deben, is not in his place, as I would be interested in his view on that. The third director—there is a deep irony here, and I should point out that I tabled this amendment some 10 days ago—would jointly represent Natural England, Nature Scotland and Natural Resources Wales.
In a sense, this is another way of getting at the issue I was trying to get at earlier. The Treasury does not really have expertise on environmental and social issues and devolution, and the same can be said, often, of bankers. This is an attempt to ensure that the directors really do have that expertise.
However, events have forced me to reflect at this point on the fact that a lot of our earlier discussions were about the operational independence of the bank. It is rather telling that Natural England was, of course, an independent body, and over the last decade it has gradually lost its independence under the hold of Defra. It was deprived of its independent online presence and its own press office in 2012, and in 2018 its former chair, Andrew Sells, confirmed that the body is no longer independent.
It has emerged in the last week—buried deep in a consultative proposal that campaigners have only just uncovered—that the Government are consulting on dismantling Natural England. That has caused a great deal of concern but it is a real demonstration of so many points that noble Lords have been making about how Governments can have structures that are supposed to hold them to account and somehow, through a process over a decade or so, effectively dissolve those structures.
This is an attempt to deal with the issues that the noble Lord, Lord Vaux, has already covered well. I also point to the Second Reading speech from the noble Lord, Lord Wigley. I will not go through it in detail but what he said there was that the bank needs to work with the grain of devolved Governments, regional and local government. Looking at this amendment now, I wonder if I should not also have put “a representative of local government” in it, but that is something to think about for Report.
Lord Thomas of Cwmgiedd (CB)
My Lords, there are obviously different ways of trying to ensure two things. On one, expertise, my long experience of bankers has persuaded me that they are not the right people to be exclusively on this board. One needs someone with the expertise of addressing the objectives of the bank. That is critical. The second is to keep the union together and it is no use saying—I hope that we will not get this from the Minister, who has been so receptive to many points—“Don’t worry, we’ll all do the right thing”. I come from a school where if you all agree on what the right thing is, why do you not write it down?
That is really what I am saying: let us write down that you should have experts in the various areas central to the bank’s objective and make provision for those who live in the devolved nations to feel that the bank is acting in their interests. Here, the question of perception is critical. The idea that the Treasury carries on as before is, to my mind, not apposite in the current time. I would hope that the way in which I have phrased my amendment might be slightly more acceptable to the Treasury in that it would leave it with the decision while giving it objective standards. One can but hope.
Baroness Noakes (Con)
My Lords, I shall make just a couple of comments. I support the noble Baroness, Lady Kramer, on her Amendment 45, which requires there to be a majority of non-executives on the board. My noble friend the Minister will doubtless say that the UK Infrastructure Bank will have to comply with the UK governance code, and therefore it has to have a majority of non-executive directors. But any public body that is set up always has the provision that there is at least a majority of non-executive directors on the board. It would be good practice to replicate that for the appointments here, given that we are dealing with those appointments in statute anyway.
I am not attracted by having odd numbers on the board. If there had been a problem, it would have surfaced in the UK Corporate Governance Code before now. The plain fact is that if there ever is a situation where a board is split, no chairman will use a casting vote to push something through. Boards simply cannot operate on that sort of basis. Normally something is withdrawn, people regroup and compromise is reached. It is just not a problem in practice, so we do not need to reflect it in the Bill.
One thing I really want to do, I am afraid, is to disagree with the noble Lord, Lord Vaux of Harrowden, on giving appointment rights to First Ministers in the devolved Administrations. I completely accept that the devolved Administrations will want to feel involved but I prefer the formulation in the amendment of the noble and learned Lord, Lord Thomas of Cwmgiedd, which is about recognising that a knowledge base is important to have on the board. Another and more normal way of doing it is to have a consultation option available to take the views of the devolved Administrations.
However, it is really important to avoid having representatives on boards. It will destroy the collective nature of the board if you have people parachuted in from outside with their only virtue being that they were a political appointment. It is really important to preserve the nature of the board as being an area—picking up what is in these other amendments—to bring together the skills and experience necessary to have the right decision-making processes.
Lord Tunnicliffe (Lab)
My Lords, I have two interests in this group, having tabled Amendments 48 and 51, but I shall take them out of order as one is general and the other more specific. Amendment 51 is linked to the one tabled by the noble Baroness, Lady Kramer. It seeks to ensure that the bank’s board comprises individuals with knowledge and experience relevant to its objectives.
The second strand of the amendment is arguably more important as it suggests that the board should have knowledge and experience of the nations and regions of the United Kingdom. This is a slightly different proposition from those of the noble Lord, Lord Vaux, and the noble and learned Lord, Lord Thomas. It is vital that the nations of the United Kingdom are properly involved in this process. However, it is equally important that the bank appreciates the very different needs of England’s regions. The Bill sets the objective of achieving regional growth, yet there is no mechanism within it to ensure either a fair split of investment activity across the nations and regions or to address entrenched regional imbalances. Appointing the right board members may not directly address those concerns, but it would at least move things in the right direction.
Returning to the theme of jobs, my Amendment 48 proposes that at least one member of the bank’s board should be a workers’ representative. From previous debates, we know that the Government’s ambition is for jobs created through UKIB funding to be well-paid, secure, and so on. Surely the most effective way of ensuring that the bank supports the right forms of employment is for its board to have somebody with a track record of representing working people.
The Minister will resist the amendment, but in doing so, can she tell me precisely what alternative mechanisms are in place to ensure a voice for workers? I suspect there is none, once again calling into question the Government’s commitment to improving employment practices and rights. Labour wants the bank to be a force for good in all nations and regions of the United Kingdom, creating the highly skilled, secure jobs of the future. The Chancellor talks a good game, but he is falling back on his rhetoric in the Bill. I hope the Minister will reconsider.
Baroness Penn (Con)
My Lords, before turning to the detail of the amendments, I will give a short update on the bank’s recent appointments, as it has recently appointed its first non-executive directors, who all have extensive expertise in the bank’s areas of interest.
These include Bridget Rosewell CBE, who brings experience as a director, policymaker and economist, with roles in the M6toll company, Northumbrian Water Group and Network Rail, among others. Also appointed is Nigel Topping, who will bring a unique mix of experience across manufacturing businesses in the UK regions and industrial transformation to the zero-carbon economy. He was most recently appointed by the Prime Minister as the high-level climate action champion for COP 26, where he launched the Race to Zero and the 2030 climate breakthroughs.
The bank is also ensuring that it recruits the necessary technical expertise, including welcoming its first lead climate advisor, Professor Andy Gouldson, an internationally recognised expert on place-based climate action, who will work with the bank to shape its impact. Noble Lords may also be interested to know that the bank’s chief risk officer, Peter Knott, is a non-executive director at the Scottish National Investment Bank. I have no doubt that the board will be able to act in the interests of the whole United Kingdom when carrying out its duty.
I turn to the detail of Amendments 43, 44 and 45 in the name of the noble Baroness, Lady Kramer. As she said, Amendment 43 would change the maximum number of directors on the bank’s board from 14 to 13. I can see the logic for doing so, to prevent a tie in a board meeting vote. However, as set out in the articles of association and in line with market practice, quorum for board meetings is lower than the total number of directors and, in a scenario where there is a tie, it is the chair of the meeting who takes the deciding vote—again, as is standard market practice. This is set out in paragraph 92 of the bank’s articles of association. Furthermore, reducing the maximum board size to 13 limits the bank’s flexibility to have committees with separate membership. Amendment 44 would require the number of directors to be an odd number—again, with a similar intention to that of Amendment 43. On both these points, as my noble friend Lady Noakes said, there is nothing in the corporate governance code about these matters. The same arguments apply to what would happen in a tie for Amendment 44 as for Amendment 43, with the chair having the ability to cast the deciding vote.
Amendment 45 would require NEDs to hold a majority on the board. This is very sensible, and is in the framework document and the corporate governance code. When drafting this legislation, as we have discussed, we have sought to strike a balance between what is sufficient to be in the framework document and articles of association, and what needs to be in the Bill. The bank will report on compliance with the corporate governance code annually through its report and accounts, which are published in Parliament.
Amendments 46, 47, 48, 50 and 51 are all related to the experience of the board. Amendment 51, in the name of the noble Lord, Lord Tunnicliffe, and Amendment 50, in the name of the noble and learned Lord, Lord Thomas, would ensure that the bank has the right expertise to fulfil its objectives, and has appropriate regional experience. Amendment 46 from the noble Lord, Lord Vaux, is similar, although it allows the devolved Administrations to recommend their own nominee for the board. Amendment 47 from the noble Baroness, Lady Bennett, is a combination of the two, with recommendations on directors coming from the Climate Change Committee, the devolved Administrations, Natural England and relevant devolved bodies.
I understand that these amendments all seek to ensure that the board has adequate representation to meet its objectives. I reassure the Committee that non-executive directors are recruited in line with the guidelines set out by the Office of the Commissioner for Public Appointments and were selected based on the skills that they could bring to the board around UKIB’s mandate and objectives. I understand why the noble Lord, Lord Tunnicliffe, is minded to have a non-executive representative of workers, as set out in Amendment 48, but I hope that he will see with the appointments to date and the process that appointments must go through that this is not necessary.
The Government are committed to ensuring that the bank delivers for all four nations, and the Treasury has engaged with the devolved Administrations throughout the set-up of the bank, and will continue to do so to ensure that the bank delivers for all nations of the UK.
Lord Thomas of Cwmgiedd (CB)
I think that the Minister mentioned the appointment of someone with knowledge of Scotland, but what about Wales and Northern Ireland? Is the Treasury taking active steps to do something about representation on the board from someone with detailed knowledge of Northern Ireland and Wales?
Baroness Penn (Con)
My Lords, I believe that there are a number of different routes by which the bank can ensure that it works closely with the devolved Administrations.
Lord Thomas of Cwmgiedd (CB)
The reason why I asked the question was to do with public confidence from Northern Ireland, Wales and Scotland. That is critical at this stage of keeping the union together. I know that the Minister, who is very helpful on this Bill, may not be able to answer that tonight, but I shall return to this issue with detailed questions on Report, or press an amendment.
Baroness Penn (Con)
I understand the noble and learned Lord’s point, and recognise that I have been given notice that he will return to it at Report. All I was simply going to say was that I understand the point about confidence, which can be achieved in a number of different ways. His amendments suggest one of those, and I was seeking to describe some of the other ways in which UKIB has approached this in collaboration with the devolved Administrations and will continue to do so. I just note that we are seeking legislative consent for relevant aspects of this Bill.
Lord Vaux of Harrowden (CB)
Given that this consultation has been happening with the devolved nations, can the Minister give us some flavour of how that has gone and what the reaction from the devolved nations has been?
Baroness Penn (Con)
My understanding is that it has been very constructive, but perhaps I can write to noble Lords setting out further detail on that.
Amendment 49 in the name of the noble Baroness, Lady Kramer, would ensure that the bank’s chair must keep the board under review to ensure that it continues to perform adequately. I think it goes without saying that I agree with the policy of this, but again believe that it is set out sufficiently within the framework document which largely reflects the requirements of the corporate governance code, against which the bank, as I said before, will publicly report compliance each year. It covers most of these points adequately, particularly in paragraphs 5.5.2 and 5.9.5.
I have committed to write on a number of aspects and know that noble Lords have given notice that they may wish to return to this at Report. With that, I hope that the noble Baroness will be able to withdraw her amendment for now.
Baroness Kramer (LD)
I thank the Minister for her comments. I am slightly alarmed by two things, the first of which is that she sees no reason why the chair should have influence over the shape of the board, so that it should be the responsibility solely of the Treasury and the Government. That troubles me, particularly in the much wider context of operational independence and so many of the other issues we discussed earlier today.
I am very sympathetic to the issues raised by the noble Lord, Lord Vaux, and the noble and learned Lord, Lord Thomas. I think that the noble and learned Lord is exactly right: this is an issue of confidence. I am somewhat surprised that we do not have legislative consent yet, even though we are already in Committee. I wonder if the Minister expects that we will have legislative consent before we get to Report. I have not dealt with many Bills, but legislative consent has always come very early in the process and not at this point in time. I am slightly concerned about that.
Baroness Penn (Con)
Perhaps I can pick that up in the letter. As this is a Lords starter, I believe we might have more time to deliver on legislative consent than when we receive Bills from the Commons—that may be the timetable.
Baroness Kramer (LD)
The Minister makes a good point; I am used to thinking of legislation that starts in the Commons, and therefore legislative consent is in place by the time it gets to the Lords. I hope that this can be very quickly resolved.
Apparently, on the issue of non-executive directors, we have found another item within the framework that we want to consider putting in the Bill. It would be interesting to see that as we get to Report. For now, I am content to withdraw the amendment.
Baroness Noakes
Baroness Noakes (Con)
My Lords, we are in the final lap of Committee. I shall speak also to the three other amendments in this group in my name. Amendments 54 and 58 deal with who should carry out the periodic review of the UK Infrastructure Bank under Clause 9. Clause 9 says that the Treasury must carry out the review, and my two amendments change this to “a person or persons” who are independent of both the Treasury and the bank. At Second Reading, I spoke about how the Treasury was intertwined with the UK Infrastructure Bank and in effect calls all the shots. We have covered that ground again today and I will not repeat any of that now, but all that adds up to a fact of life: that the Treasury is very closely involved in the bank and is not and cannot be a dispassionate observer when it comes to appraising how well the bank has done. The Treasury should not, as I think the noble Lord, Lord Vaux, said earlier, be marking its own homework.
In my view, it is only right that an independent person should be appointed to appraise the effectiveness and impact of the bank. Indeed, it may well be that the effectiveness or impact of the bank has been helped or hindered by the Treasury, and we certainly want to know about that. That would not emerge if the review were carried out by the Treasury. The noble Lord, Lord Teverson, has a more elaborate version of independent review in his Amendment 63, and I look forward to hearing what he has to say on it, but I wonder whether an annual report on performance is getting a bit too much like micro-oversight of the UK Infrastructure Bank.
Turning to Amendments 59 and 62, which address the timing of the Clause 9 reviews, I am grateful for the support of the noble Lord, Lord Vaux of Harrowden, and the noble Baroness, Lady Kramer, respectively, in respect of these amendments. Under Clause 9, the Treasury has up to 10 years to produce its first report and then has to produce reports at not more than seven-year intervals after that. My amendment calls for a first report within four years and Amendment 62 calls for subsequent reports at least every three years. I chose four years as the first period, rather than the three years called for by Amendment 60 in the name of the noble Baroness, Lady Kramer, because I thought that a report after three years of operation would be sensible and would allow a bit of time beyond the three years to actually make the report. But there is no magic in either three or four years: the main point is that 10 years followed by seven years is far too long. I beg to move.
Lord Teverson (LD)
My Lords, when the Green Investment Bank was privatised and we dealt with legislation to do that, we in this House looked at ways in which we could be sure that, with that change of ownership, whatever it would be, it remained true to its constitution, its values and objectives in that private situation. It was subsequently bought by Macquarie, which still owns the Green Investment Bank, now called the Green Investment Group. The Government at the time—I remember going through this with the noble Baroness, Lady Neville-Rolfe—were enlightened enough to set up a green share held by a non-profit organisation called the Green Purposes Company, of which I am a trustee, and therefore I declare my interest in that.
I take the noble Baroness’s point that my amendment is slightly more complicated and maybe slightly more micro, but it is there for a different reason. That company was set up in a similar way to the way described in this amendment, and what we do in the Green Purposes Company is certainly not to act in any way prior to investment—we are not part of any investment committee; we do not get involved in that. What we do, at the end of a year, is to assess whether those investments that have been made by what is now the Green Investment Group comply with its green objectives and the mission of the bank.
With the co-operation of Macquarie, that process has worked very well. As I said, we assess performance against the bank’s objectives and have four meetings a year with senior management—they are optional; we just decided to do that operationally—and then publish a letter in the annual report of the bank, making that assessment of the investment in general. It is a fairly short letter, but it provides total transparency and a completely independent view of whether the bank has met those objectives through its investments during the year.
Having agreed to and implemented this model, we have talked to Treasury officials about it in the past—it has been considered and, I think, welcomed by the Environmental Audit Committee at the other end—and to the Finance Minister John Glen. It is a successful assessment method; it is transparent, tried and tested and is a model laid down by the Government themselves. This is a really good way forward and I would very much like the Minister to consider it as a way that we can make sure there is independent, regular assessment, post investment, of how the bank is performing without getting into too much of the micro area in the report. I agree that, if that was too much part of the reporting structure, it could be onerous and reduce transparency.
Lord Vaux of Harrowden (CB)
My Lords, like I think almost every noble Lord who spoke at Second Reading, I agree that the reporting schedule set out in the Bill is completely unacceptable. In fact, I think it was possibly the only point in the entire Bill on which there was absolute unanimity. Ten years before the first report and then only every seven years thereafter is just too long. I wonder if even the Minister was surprised at the times when she saw the Bill.
I have added my name to Amendment 59, in the name of the noble Baroness, Lady Noakes, which suggests four years before the first report. I understand her point about having three years plus time to get that first report out, and it therefore makes sense that the first one has a bit longer. Others have suggested three years. I cannot too excited about it, to be honest. Ten years and seven years are too long. We need to bring that down.
As I and the noble Baroness mentioned earlier, it is quite inappropriate that the Treasury should be marking its own homework in this respect, so I support her amendments ensuring that the effectiveness reporting is independent.
Baroness Kramer (LD)
My Lords, I will speak very briefly. A couple of the amendments are in my name and I have signed others. I absolutely join the noble Baroness, Lady Noakes, and the noble Lord, Lord Vaux, on whether it is three years or four years. It seems to me that the proposal of the noble Baroness is rather sensible, as three years will have gone by, as she pointed out, before the first report. What are completely unacceptable are the 10-year and seven-year benchmarks. The Minister has heard the arguments over and over. I know she will say that there are many other ways in which we will know what is going on. We will partially, but not in a coherent or holistic way. That is why it is so important that these kinds of holistic reviews should be done properly, appropriately and in a timely fashion.
I stress my support for the points made by the noble Baroness, Lady Noakes, and my noble friend Lord Teverson on their somewhat different proposals for an independent reviewer. Otherwise, the Treasury will be marking its own homework. We have established throughout every part of today’s debate that it can change the objectives through secondary legislation and it sets the strategic priorities. It can provide detailed direction and appoints every member of the board. It is very hard to see any way in which the Treasury’s hand will not have imprinted every aspect of what this bank does.
Lord Tunnicliffe (Lab)
My Lords, yet again, I have to concede that I agree with the noble Baroness, Lady Noakes, on Amendments 54 and 58. I will not labour that further.
The bank could, in time, play a significant role in our fight against climate change, and we very much hope that it will. Given the urgency of the green transition and the Government’s stated commitment to levelling up, carrying out the first review of the bank after 10 years makes no sense. I was pleased to sign Amendment 60, which would bring this forward to three years. However, let me be clear that, like a number of other noble Lords, I am not wedded to any particular number. The noble Baroness, Lady Noakes, may win the day with four years, or we may settle for something else entirely. What has been clear from this short debate is that the current decade is simply not acceptable. There are also some differences of opinion on frequency. Once again, I do not think it matters exactly where it ends up, if, in the end, the result is that we see these documents more frequently than currently envisaged.
Lord Teverson (LD)
Could I just ask the Minister one thing before she replies? Ten years is just ridiculous, so is this the one thing where the Government will say, “Right, we’ve listened to the House and we’ll make it three years. Look, guys, we’ve done the deal”, and then the Bill goes down to the other end? Is that the plot?
Lord Tunnicliffe (Lab)
That is what my original notes envisaged, but I simply could not believe that they are that clever.
Baroness Penn (Con)
My Lords, I hope noble Lords will forgive me if I do not give the game away too far ahead of Report in terms of our approach to listening to all the points raised in Committee.
As we have heard, these amendments all relate to the review clause in the Bill. I understand entirely the aim behind the amendments of ensuring that the bank is appropriately scrutinised and in a timely way, but I can hope valiantly that I can reassure noble Lords both that there will not be a 10-year period before the bank is given scrutiny and by perhaps explaining to them why the 10-year period was selected.
As I have mentioned previously, we have committed in the bank’s policy design document to review the bank’s progress and financial performance by spring 2024 to ensure that it has sufficient capital to deliver its ambitions and, as we noted earlier, also on our regulatory approach to the bank. On top of this, we have a Cabinet Office-led review in 2024-25 on the effectiveness of arm’s-length bodies generally, and as part of this process we will conduct a review of the bank, which will be repeated in 2027-28 and 2030-31.
Baroness Kramer (LD)
Just for clarification, will the Treasury review the bank in that 2024 piece of work? Will it be reviewing itself?
Baroness Penn (Con)
My notes say that it will be a Cabinet Office-led review, but as part of that process we—which I would take to mean the Treasury—will conduct the review. If that is incorrect, I will clarify that.
Taken together, this means that the bank will have been subject to four reviews by the time of our first statutory review. The review in statute is designed to encompass all the elements of the previous reviews and has been chosen to be 10 years after Royal Assent because it allows for a fuller analysis—
Baroness Penn (Con)
I will be happy to go away and check on that point. I think that the intention is that they would be, but I will double-check.
The period of 10 years has been chosen to allow for a fuller analysis of the infrastructure funding that the bank has undertaken and to see the real impact of its investment in the context of delivering against the missions set out in the levelling-up White Paper and the progress towards the Government’s net-zero target.
I will note one further point. As I confirmed at Second Reading to my noble friend Lady Noakes, UKIB will be subject to external audit by the National Audit Office, including on an annual basis as part of the statutory powers of the Comptroller and Auditor-General.
Amendment 63, in the name of the noble Lord, Lord Teverson, seeks to mirror the arrangements of the Green Investment Bank by having a company shadow the bank to ensure that it is meeting its objectives. He is clearly knowledgeable on this subject as he sits on the board of the Green Purposes Company. However, he will note that the Green Investment Bank did not need this function when it was part of government because there were already other routes of accountability, including directly to Parliament in relation to the bank’s use of public money.
This legislation sets out quite clearly the objectives of the bank so, if there is any deviation from that, the Government can compel it to change its course or there will be a challenge in the courts. Further to this, Ministers are accountable to Parliament on the performance of the bank, so I dare say the noble Lord would provide adequate challenge should he think that the bank was not performing against its objectives.
To tidy things up, my noble friend Lady Noakes asked a question on the bank appearing before Lords committees. There is no barrier to that. Indeed, the CEO and the chair of the bank were before the Economic Affairs Committee on 17 May as part of an energy supply session.
I hope that, in laying out those reasonings from the Government at this stage, my noble friend will feel able to withdraw her amendment and that other noble Lords will not move theirs when they are reached.
Baroness Noakes (Con)
My Lords, I expect that my noble friend the Minister knows that she is batting on a rather sticky wicket. While she has valiantly sought to explain her reasonings, I think I can probably speak for the rest of the Committee when I say that we are not wholly convinced by them. I can see no particular point in detaining noble Lords in this Committee much longer other than to say that we have to record that clearly both the independence and the time period of the review are areas that we will need to return to on Report if we do not satisfactorily deal with them before we get to that stage. With that, I beg leave to withdraw the amendment.
UK Infrastructure Bank Bill [HL]
Monday 4th July 2022
(2 years, 4 months ago)
Lords ChamberRead Full debate UK Infrastructure Bank Act 2023 Read Hansard Text Amendment Paper: HL Bill 3-R-I(Rev) Revised marshalled list for Report - (1 Jul 2022)
17:00 - Division on Amendment 6A - Ayes: 182 / Noes: 153 - Amendment 6A agreed.
17:14 - Division on Amendment 12 - Ayes: 172 / Noes: 158 - Amendment 12 agreed.
18:27 - Division on Amendment 21 - Ayes: 73 / Noes: 152 - Amendment 21 disagreed.
Baroness Hayman
“(ii) to adapt to any current or predicted impacts of climate change identified in the most recent report under section 56 of the Climate Change Act 2008, and(iii) to protect, enhance and restore the United Kingdom’s natural capital, including by supporting efforts to meet the targets and improvement plans under Chapter 1 of Part 1 of the Environment Act 2021,”Member's explanatory statement
This amendment clarifies that the Bank’s objective to help tackle climate change includes mitigation of climate change, adaptation to climate change, and the protection and restoration of the UK’s natural capital.
Baroness Hayman (CB)
My Lords, I declare my interest as a director and co-chair of Peers for the Planet.
I thank the Minister for the constructive dialogue that has taken place throughout the passage of the Bill, including the meeting with the bank’s chair and chief executive last week to discuss their new strategic plan and the subsequent letter from the chief executive, which we received today. These meetings have been useful and have provided some comfort that the bank’s leadership, which is obviously of very high quality, has considered and intends to address many of this House’s concerns about issues such as natural capital, climate resilience and how certain types of infrastructure, such as gas and roads, will be treated. It would, however, be extremely helpful if the Minister made clear from the Dispatch Box the position on gas exploration and road building, concerns about which were raised in Committee and in our meeting. Although I know she believes that those concerns are unfounded, it would be helpful to have on the record some of the assurances that we received informally.
I welcome the Government’s amendment on energy efficiency, to which I have added my name. It is a much-needed signal of their recognition of the urgency and importance of making progress in this area. I hope the Minister may have an opportunity to have a word with her noble friend about the Social Housing (Regulation) Bill, where we could do with some movement on the same topic.
Where we have not made progress in making changes to the Bill is on the environmental priorities, including nature-based solutions, the circular economy and adaptation. It is with these issues, about which we spoke at length in Committee, that this group of amendments is concerned. I have tabled Amendments 1 and 6A, while similar related issues are raised in amendments tabled by the noble Lords, Lord Teverson and Lord Holmes of Richmond, and the noble Baronesses, Lady Jones of Whitchurch and Lady Bennett of Manor Castle. My amendments have signatories from all sides of the House, for whose support I am extremely grateful. Indeed, the Minister herself recognised the importance of these issues but simply queried the need to spell them out in the Bill.
Following the Minister’s comments in Committee, my Amendment 1 no longer sets out a third stand-alone objective for the bank, which she indicated would be extremely difficult to do, but is limited to expanding on the climate change objective to clarify exactly what
“to help tackle climate change”
means for the bank in practice, and to reflecting what has been indicated by the Chancellor, the Minister and the bank itself—that is, that resilience and adaptation measures and nature-based solutions absolutely fall within the scope of the climate change objective.
Given the consensus on this, it is hard to understand the argument against including these additional proposed new subsections and making clear that the bank has within its founding objectives a coherent, integrated response to climate change, and sending a clear message to the markets that these are priority areas for market development. We all agree on this, so why do we not make that clear to everyone else out there?
Including nature in the Bill in no way ignores the fact, as has been argued, that the market for nature-based solutions is nascent. What it does provide is a strong signal that the bank recognises that it has a role in developing capacity towards a pipeline of investable projects and will be poised to act—crucially, encouraging others to do the same—when these come to fruition. Moreover, the bank has a role now in helping build and develop these markets, including through taking a nature-positive approach to near-term projects, building internal capacity for future projects and taking a joined-up approach across government-related bodies, including UKRI, the British Business Bank and local authorities, to help seed projects and initiate the local capital and innovation needed to bring those projects to market.
On adaptation, we are told that it is agreed that climate-resilient infrastructure is critical to reaching net zero, and that mitigation and adaptation will be considered together. But even the Climate Change Committee’s most recent progress report last week observed that the UKIB consultation on investment priorities focused on key net-zero infrastructure priorities, but
“has no mention of adaptation.”
Clarity, focus and policy direction are needed.
Amendment 6A, the second tabled in my name, offers an alternative approach to these issues by including the circular economy and nature-based solutions in the definition of infrastructure, by making explicit that the infrastructure solutions set out in the indicative list in Clause 2(5) include those related to the circular economy and nature. As the Minister will have noticed, it mirrors the approach that the Government themselves have taken to energy efficiency.
I have already spoken about the importance of including nature in the Bill. It was generally accepted how important an issue it was in Committee, so I can be brief on this point. It is not in question that nature-based solutions play a role. The bank’s new strategic plan, which is focused on short initial timescales, already provides examples of some of the main near-term opportunities in the water sector for nature-based solutions. Explicitly stating that nature may play a part in infrastructure projects which realise the bank’s objectives would provide the confidence and the clarity needed to give momentum to the development of these solutions.
Similarly, adopting circular economy structures within the definition should be uncontroversial and a signal of how infrastructure projects may be approached. The bank’s strategy already says that it is
“open to financing … circular economy projects.”
A circular economy approach is completely in step with producing positive synergies between the bank’s objectives. Circular economy principles recognise planetary boundaries, promote fairness and reduce overconsumption. It is estimated that circular economy infrastructure could support up to 450,000 jobs by 2035 in reuse, recycling and remanufacturing. Crucially, those jobs would be in occupations and areas suffering higher rates of unemployment.
In our debates, the Minister spoke at length about the need for clarity, but the Bill is Parliament’s only opportunity to be not only clear but explicit about policy priorities. The Government recognised that by proposing their own amendment on energy efficiency. I believe that there is support all around the House for taking exactly the same approach to nature-based solutions and the other issues covered in these amendments. I beg to move.
Lord Teverson (LD)
My Lords, I am pleased to follow the noble Baroness, Lady Hayman. I also welcome the Minister’s and the Government’s change of mind, if you like, on including energy efficiency specifically in the Bill. We all know that the International Energy Agency cried out about developed nations not doing anything about energy efficiency. We also know that it is the cheapest and most effective option: this programme would avoid huge amounts of further capital expenditure. We have not been good at making sure that we pursue that for our housing or building stock.
Having said that, energy efficiency, as measured by output against energy per year, has gradually increased over the years in this economy. This is the silent way of reducing the energy bills that so many of us receive in our inboxes these days—I was going to say through our letterboxes—and I really welcome that. But it is not enough.
I put down an amendment, similar to the noble Baroness’s, on including “biodiversity” and the recovery of nature as an objective. I do not understand why the Government do not find it straightforward to include this, because it accepts that there is a biodiversity emergency. The Treasury in particular produced the fantastic Dasgupta report, which went through the whole area of natural capital, partly covering how we can solve this issue but also clearly painting the challenges. I congratulate the Treasury on having initiated that report but perhaps not quite so much on the follow-up to date. But here is an opportunity to put this into the Bill.
However, if we cannot have this as an objective in the Bill, I very much support Amendment 6A tabled by the noble Baroness, Lady Hayman, which references
“the circular economy, and nature-based solutions”.
This could be a major step for government policy on the circular economy, which was very well described by the noble Baroness. But I get the impression that, out there in the real world, people are enthusiastic about local repair shops and being able to mend the stuff they buy so that they do not have to buy it again, saving money and resources and helping on climate change. So, the circular economy element is equally important.
Of course, nature-based solutions are a natural way—literally—not just for a number of climate change and biodiversity recipes but to help the natural environment in all sorts of ways. They do this more cheaply and, compared to just pouring concrete, have wider effects, as we know, on areas of adaptation like water quality and flooding, which have been so neglected, as the noble Baroness said.
I favour Amendment 9, tabled by the noble Baroness, Lady Bennett. If we saw any UK Infrastructure Bank investment in roads, we would be concerned about its climate change objectives. I also strongly support, and have put my name to, Amendment 11 in the name of the noble Baroness, Lady Jones of Whitchurch. I am sure that she will explain this herself, and I will not remark on it at this stage.
Baroness Bennett of Manor Castle (GP)
My Lords, I rise to speak in particular to my Amendment 9, and I thank the noble Lord, Lord Teverson, for his support. I very much agree that climate change means that we cannot be building new roads, although big issues of air pollution are of course also addressed in this group.
I have to begin, since I do not get the chance to do it very often, by commending the Government on their amendment on energy efficiency. It demonstrates the sentiment of our debate in Committee—and indeed throughout the House and the country—and shows that campaigning really does work. Let us see lots more of it.
Essentially, I agree with everything the noble Baroness, Lady Hayman, and the noble Lord, Lord Teverson, have said, so I will not repeat those points. However, we are increasingly hearing from the Government about the importance of biodiversity and the state of nature. Indeed, I had the pleasure recently of attending an event at the Groundswell Regenerative Agriculture Show & Conference, at which the Government and Members of this House and the other place expressed their concerns and spoke of the importance they place on restoring nature. Surely, the Infrastructure Bank should be explicitly directed to do that.
As the noble Baroness, Lady Hayman, said, we are talking about sending a message to the bank and to the country about the importance of biodiversity in nature, and we can also look to the international stage. We see reports expressing grave concern about the state of the COP 15 biodiversity talks, and the entire nature community is screaming out for leadership in those talks. Clearly, as the chair of COP 26, it should be our responsibility to lead the way. As the noble Baroness said, if the Government are saying, “We already mean this anyway”, what is the harm in including such a provision in the Bill and sending that message out to the international community as well as to the country?
On the circular economy amendment, in Committee I tabled an amendment calling for a reduction in resource use. In the interests of efficiency and time—and given that I was not getting many positive signals from the Government—I did not table it this time, but I think the Government will come back to this issue so that we can make at least some progress on it. Explicit support for a circular economy, which is a necessary but not a sufficient condition, given that we continue to treat the planet as a mine and a dumping ground, is essential in order to see some progress. We will certainly see the other place pushing on the question of resource use.
My Amendment 9 is a modest amendment, and it is perhaps worth making clear what I mean by it. I am very happy if the Government want to look at using different terminology, but I point out that what I mean by “roads” is major stretches of roadway. I do not mean tracks up to new onshore windfarms, government enthusiasm for which we are finally seeing signs of in the media, which is greatly encouraging. If the Government wish to find another form of wording, I point out that, clearly, what I am referring to is major road infrastructure. As the noble Lord, Lord Teverson, said, the climate emergency does not allow that. This issue crosses over with the clean air amendments in this group, and the issues of disadvantage that we are going to discuss in the next one. Broadly speaking, air quality is worst in the poorest, most disadvantaged areas of the country. New roads are the last thing those areas need, as they would make the air quality even worse.
To say that the Infrastructure Bank is not for roads but for mass transport should be considered uncontroversial. It is not my intention to put the amendment to a vote, but this is a debate that will continue in the other place. I commend all these amendments to your Lordships’ House.
Lord Holmes of Richmond (Con)
My Lords, I rise to speak to Amendments 7 and 10 in my name, but before I do I join others in congratulating my noble friend the Minister on tabling the government amendment on energy efficiency. It speaks to an amendment that I and others tabled in Committee, and it is certainly welcome that it will now, rightly, be included in the Bill.
Amendment 7 would insert just three words: “nature-based solutions”. There is a lot in the Bill about climate and carbon, but the reality is, as noble Lords are well aware, whatever we do and must do on that front, we will still be left with a pressing, urgent need for nature-based solutions. As other noble Lords have mentioned, we have “roads” in the Bill. As the noble Baroness, Lady Bennett, has just pointed out, I do not think anybody would necessarily be against roads as a secondary, tertiary or lower-level aspect of an infrastructure project—to get to the shoreline for offshore wind, to give another example. However, that is at best a tertiary part of the bank’s investment, or of that particular infrastructure project, yet it is in the Bill. If “roads” can be there, surely “nature-based solutions” has at least an equal place in the Bill. Would my noble friend consider including “nature-based solutions” and, in exchange, taking “roads” out of the Bill? That would be a thoroughly good thing.
Finally, in similar terms, my Amendment 10 would insert “clean air”—perhaps one of the most significant, precious and essential parts of our infrastructure. Does my noble friend the Minister agree that it would not be difficult or controversial, and that it would be a thoroughly good thing, to have “clean air” on the face of our infrastructure bank Bill?
Lord McDonald of Salford (CB)
My Lords, the House this afternoon represents one of the Prime Minister’s favourite metaphors: a nest of singing birds. Everybody who has spoken agrees with each other; I agree with everything that has already been said, but particularly with what my noble friend Lady Hayman has said. I have added my name to her Amendment 1, and I will make just two additional points to the ones she made.
First, the Government agree that nature, nature recovery and nature-based solutions are important, and they say that all of that is encompassed within the Bill as drafted. But if nature is not mentioned on the face of the Bill, it will always look secondary; it will always nest behind climate. It will not have the same prominence or importance, yet all the facts suggest that the biodiversity crisis is at least as urgent as the climate crisis. These two things, according to the facts and the evidence, deserve to be side by side. If they are not, the bank and others will draw obvious conclusions.
Secondly, the only point I have heard made for why there is resistance to having nature on the face of the Bill is that there are not really any projects ready to go. My answer to that is: so what? This Bill is setting the course for the years ahead. It does not matter that there is not something ready to go in the next few months, because these projects will surely come. One issue that has detained your Lordships’ House time and again over the last year has been water quality and the fact that water companies are dumping sewage hundreds of thousands of times a year into our rivers and the sea. It is easy to imagine a project on water quality that would not really be about climate but would be all about nature. Surely that would deserve to be supported by the UK Infrastructure Bank. So I ask the Minister to reconsider one last time.
Baroness Jones of Whitchurch (Lab)
My Lords, first, I apologise for not attending the earlier stages of the Bill. I was caught out by conflicting diary commitments, but I have been following the debates and the developments around the Bill through all the stages, and my noble colleagues will know of my interest in this issue.
We have been grateful to the Minister for the continued dialogue on the contents of the Bill. However, as we heard today, there remains unfinished and unresolved business, and I am therefore grateful to the noble Baroness, Lady Hayman, and all noble Lords who set out the case for their amendments so clearly; we share their concerns. The number and range of amendments in this group on the environmental priorities demonstrate that there is a feeling across the House on this issue. The noble Lord, Lord McDonald, described it beautifully as a “nest of singing birds”. I concur with that description, because there is a concern that the ministerial responses in Committee simply have not been good enough to embed “nature-based solutions” and the “circular economy” into the bank’s founding legislation. However, we believe that these principles are crucial for the creation of green jobs, for harnessing the best science and technology, and for reshaping the economy away from the damaging fossil fuel mentality that exists at the current time.
Amendments 1 and 3 demonstrate our ongoing concerns about the implementation of the “biodiversity” and “natural capital” commitments of the Environment Act, which, as the noble Lord, Lord Teverson, quite rightly pointed out, were designed to underpin the very compelling evidence in the Dasgupta review. In that report, Dasgupta made it clear that enhancing nature and biodiversity are more than aspirational extras; they lie at the heart of our future economic and social well-being and are fundamental to delivering our climate change commitments. This is why we believe that these principles should be a major driver of the bank’s activities and spelled out in the Bill. As the noble Baroness, Lady Hayman, has made clear, the Chancellor’s strategic steer in March set out that the Government are already calling for the bank to grow natural capital markets through its investment. This Bill seems the proper vehicle to drive that policy through.
I have also added my name to Amendment 6A, which would make it clear that the definition of infrastructure projects should be widened to include “nature-based solutions”, rather than just concrete and metal. I also think that Amendment 9 of the noble Baroness, Lady Bennett, quite rightly challenges the emphasis on “roads”; surely public transport and green energy should be priorities in future. “Nature-based solutions” can be anything from creating natural flood defences to restoring our woodland, peatland and parks. The growing market for investment in nature-based land use is an illustration of its potential for delivering our climate change commitments.
The amendment also embeds the principle of the “circular economy”, putting greater emphasis on our scarce resources through better reuse, repair, recycling and remanufacturing. As noble Lords have said, these are principles to which the Government are already committed but have been slow to implement. Placing these in the Bill would provide the means for drawing in new revenue streams to transform our manufacturing processes. The noble Baroness, Lady Hayman, has already set out a convincing argument for Amendment 6A and—depending on the Minister’s response—if she wishes to test the opinion of the House, we will support her.
We also have our Amendment 11 in this group, which seeks to expand the definition of “harmful pollutants” to include those
“which are not greenhouse gases but”
other forms of “particulate matter”, such as car tyre air dust, which can be just as
“detrimental to air quality and human health.”
Therefore, we think that the case for expanding that definition is vital. I am grateful to the Minister for her discussion with my noble friend Lord Tunnicliffe on this issue, and hope that some of those assurances can be placed on the record today.
As is the case with so many other Bills, there seems to be a significant gap between what the Government say they want to achieve and what they are willing to commit to in legislation. Whether it is biodiversity, air quality, the circular economy or ensuring that infrastructure projects use nature-based solutions, their record of delivery does not match their stated ambitions. There always seems to be a political or legal excuse for delay. All we are doing in these amendments is formalising policy commitments already agreed by the Government, and providing a mechanism for financial support. There is already a review process built into this, but, if we are not rightly ambitious about delivering projects outside the normal investment portfolios, we will find ourselves in the seven-year review stage facing a tally of missed opportunities. This is why it is so important for noble Lords to support the amendments in this group, and I hope that they will.
Baroness Penn (Con)
My Lords, we start Report with a topic that has already been central to our discussion of the UK Infrastructure Bank: its role in investing in nature and the environment. I thank the noble Baroness, Lady Hayman, and all noble Lords who have engaged with the Government on this important topic.
I turn first to Amendments 1 and 3, in the names of the noble Baroness, Lady Hayman, and the noble Lord, Lord Teverson, which seek to add natural capital, biodiversity, wider environmental targets and climate adaptation to the bank’s climate change objective. As we discussed in Committee, nature-based solutions and projects to support climate adaptation are already within scope for the bank. Those who attended the briefing with the bank’s chief executive and chair last Tuesday will have heard that the bank is keen to explore this area. We have given thorough consideration to the question of adding to the bank’s objectives through our environmental review on whether nature-based solutions should be in the objectives. We engaged with a wide range of stakeholders during this review, from think tanks to investors, and we heard from a majority of them that they felt that there was already significant scope for intervention in nature-based solutions within the bank’s existing mandate without adding a third objective.
In considering this question it is important to acknowledge that the bank already has two stretching and broad objectives that are the outcome of significant work, starting from the recommendations of the National Infrastructure Commission and the national infrastructure strategy. Ultimately, the bank is an infrastructure bank, so it should invest in nature as a means of achieving its objectives and to enhance the UK’s infrastructure. The Chancellor made this clear to the bank when he sent it a strategic steer in March this year. The bank’s strategic plan sets out that it will explore opportunities to invest in nature and highlights opportunities to invest in water-related projects, as the noble Baroness, Lady Hayman, mentioned.
While the bank’s scope to invest in nature is already significant, it is important to note that this is not the only, or indeed primary, government intervention to support the market for natural capital projects. I will mention just a few areas. To provide an accredited route for income for nature projects, the Government are backing the maturation of the woodland carbon code and peatland code through the nature for climate fund and woodland carbon guarantee. To create demand for nature projects, we are implementing regulation to grow the market—for example, through mandating biodiversity net gain for development. The nature recovery Green Paper also sets out plans in this area, specifically on ensuring that environmental regulation and regulators, including Natural England, the Environment Agency and Ofwat, are equipped to support the uptake of nature-based solutions and more strategic, landscape-scale approaches to environmental protection and enhancement by industry. To help the market mature from grant support to a more commercial basis, Defra has established the natural environment investment readiness fund of up to £10 million, which will provide grants of up to £100,000 to environmental groups, local authorities, businesses and other organisations to help them to develop nature projects in England to a point where they can attract private investment. Defra is also initiating the big nature impact fund, a blended finance vehicle designed to use public concessionary capital to attract private capital into the fund. The fund will invest in a portfolio of natural capital projects that can generate revenue from ecosystem services to provide a return on investment. These initiatives will support the growth and commercialisation of the natural capital market.
I thank the noble Baroness, Lady Hayman, for her support for the government amendment in my name. I again reassure noble Lords that it was always the Government’s intention that the bank could invest in projects to increase energy efficiency—for example, the retrofitting of homes. In fact, this forms a key aspect of the bank’s strategic plan. However, recognising the points raised in debate on this, I have tabled this amendment to add “energy efficiency” to the non-exhaustive definition of infrastructure in Clause 2 to ensure that it is explicit that the bank can invest in projects to increase energy efficiency.
Amendments 6A, 7, 9, 10 and 11 all seek to make further changes to the definition of infrastructure in the Bill. Amendments 6A and 7 seek to add “nature-based solutions” to the definition of infrastructure. As noble Lords have already heard, the Government are confident and, through our review of the bank’s environmental objectives have sought third-party views to ensure, that the definition we have included covers nature-based solutions. The bank’s strategic plan also makes clear its commitment to supporting the development of a circular economy.
On Amendment 9 in the name of the noble Baroness, Lady Bennett, I hope she has received the letter from John Flint, the bank’s CEO, on this issue. As highlighted in the bank’s strategic plan, we do not anticipate the bank investing much in roads. However, it is important that it has the flexibility to do so under the right circumstances. The bank may, for example, consider supporting local authorities in road upgrades that feature as part of their wider transport infrastructure and transport decarbonisation plans. For example, the bank has already financed the West Midlands Combined Authority’s sprint bus programme, which includes road adaptations such as priority signalling, redesign of junctions and additional bus lanes.
I take this opportunity to comment on the bank’s investment in gas, which the noble Baroness, Lady Hayman, asked about. The bank will not lend or provide other support to projects involving extraction, production, transportation or refining of crude oil, natural gas or thermal coal, with very limited exemptions. These exemptions include projects improving efficiency, health and safety and environmental standards, without substantially increasing the lifetime of assets, for carbon capture and storage or carbon capture, usage and storage where projects will significantly reduce emissions over the lifetime of the asset, or those supporting the decommissioning of existing fossil fuel assets. The bank will not support any fossil fuel-fired power plants unless this is part of an integrated natural gas-fuelled CCS or CCUS generation asset.
Finally, I come to Amendments 10 and 11 tabled by my noble friend Lord Holmes and the noble Baroness, Lady Jones of Whitchurch. This is a difficult area to tackle, so let me set out how the bank considered the wider environment within its policy framework. First, there are investments which, while addressing climate change or growth, can help to improve the environment. Separately, there is a policy framework considering whether and the extent to which the bank’s investments impact environmental factors beyond climate change. With this in mind, I shall set out how the objectives of the bank relate to pollution.
The bank’s objectives are tackling climate change and regional and local economic growth, but not wider pollution. The bank can invest in projects that tackle pollution, but only so long as they also help to achieve its core objectives of tackling climate change or regional and local economic growth. Investments directly into infrastructure to tackle other pollutants that can impact clean air will already be broadly covered by the existing definition of infrastructure and the objectives in the Bill. For example, tyres would fall under transport, in the same way that water pollution is covered by water, and tackling those pollutants is in scope as long as that investment is also tackling climate change and/or facilitating regional and local economic growth. As we have discussed, there are likely to be large numbers of synergies in this area.
I know that there has been interest from Peers in broadening the bank’s definition of infrastructure to ensure that the bank takes into account the wider environmental impacts, beyond climate change, of its investment decisions. Widening the definition of infrastructure in this way is not the best way to achieve this. Instead, the way that wider environmental impacts are dealt with is via the bank’s environmental, social resilience and governance policy. The ESRG policy and framework that the bank is developing will be used to screen projects and provide transparency on its portfolio. Part of this policy will involve collecting data from each investment to meet reporting standards, such as the forthcoming sustainability disclosure requirements, which will include green taxonomy reporting. The objectives of the green taxonomy include pollution prevention and control, which the bank will need to report on for its investments.
More broadly, infrastructure projects are subject to a range of environmental regulations appropriate to their specific type and circumstances. It would not add value to apply these directly to the bank when they already bind the project developers directly. Defra is consulting on new legal targets for air quality, water, waste, and biodiversity, which the Government are required to set under the Environment Act by October this year and which noble Lords will be well aware of.
I hope, therefore, I have provided sufficient reassurance for the noble Baroness, Lady Hayman, to withdraw her Amendment 1 and for other noble Lords not to move the other amendments in this group when they are reached.
Baroness Hayman (CB)
My Lords, I am extremely grateful to all noble Lords who have spoken in this debate. As in Committee, we saw support from all around the House. Unfortunately, the Minister has not completely reassured me. I am grateful for her reassurance on gas and understand the reason for including roads, with caveats, in the infrastructure. I sort of understand not wanting to change the objectives, because of the process she described with consultation and wanting to keep clarity for the two objectives.
What I cannot understand is refusing to include the circular economy and nature-based solutions in the infrastructure. I am afraid her arguments are undermined by the Government’s actions. They keep roads in there even though they need to be caveated and we need reassurances that they will not be a mainstream activity of the bank. However, they tell us that they are absolutely committed to making these an activity for the bank. We know that the Treasury, departments and everyone who talks about these issues understands the connection between nature-based solutions and climate change. They understand that we need to tackle these areas; there is no difference between us. These are not tablets of stone, unlike the objectives—and the Government are seeking the leave of the House to change the objectives on energy efficiency. If they can do it for energy efficiency, why cannot they do it for nature-based solutions and the circular economy?
I rest my case on that issue and will return to it when we come to Amendment 6A. I beg leave to withdraw Amendment 1.
Lord Sharkey
Member’s explanatory statement
This amendment seeks to probe whether the Bank would need to meet both objectives in the exercise of its activities.
Lord Sharkey (LD)
My Lords, Amendment 2 is a probing amendment so I can be very brief. Its purpose is to seek clarity on how the objectives of the bank will work together and to allow the Minister to put that clarification on the record.
We have discussed this informally with the Minister and her officials, and I am grateful for the time they gave us. Our questions were about whether the two basic objectives—tackling climate change and supporting regional and local economic growth—both needed to be met in any project. Is that what “and” means here in the Bill? In her letter to us of last Tuesday, the Minister responded:
“I can confirm that the Bill’s drafting does not mean that a project must meet both those objectives. The Bank can invest in projects which meet only one of these objectives, so long as supporting a project to deliver regional and local economic growth does not do any significant harm against the Bank’s climate objective.”
As far as it goes, that is clear and helpful; I look forward to the Minister putting it on the record in a moment.
However, it raises a couple of other issues. For example, does it work the other way round? Is it permissible to invest in a project to support the bank’s climate objectives as long as it does no significant harm against the bank’s regional and local economic growth objective? I assume that this is the case—I would be grateful for confirmation that it is. What does “significant” mean in these contexts? What criteria will be used to provide a threshold test for significance? Will each project carry an assessment of the harm that pursuing only one objective may cause to the other? Will any such assessments be published along with other details of the project? I look forward to the Minister’s reply and the arrival of complete clarity.
Lord Ravensdale (CB)
My Lords, Amendment 5 is in my name. I declare my interest as a project director working for Atkins and note that I am co-chair of the Midlands Engine APPG. First, I thank my supporters on this amendment; I thank the right reverend Prelate the Bishop of St Albans for all his help in crafting it, and the noble Lord, Lord Tunnicliffe, for his support. My remarks are equally applicable to Amendment 12 in the name of the noble Lord, Lord Tunnicliffe, to which I have added my name.
To briefly reiterate the issue, the current levelling-up objective of the bank, set out in Clause 2, is not clear enough to articulate the levelling-up purpose of the bank in the Bill. Indeed, I would question what the words
“support local and regional economic growth”
really add to the Bill. Almost any conceivable infrastructure investment will meet this objective for the area in which it sits.
As the Minister has previously stated, we have the strategic steer in the form of a letter from the Chancellor, which clearly sets out levelling-up objectives. However, levelling up is a long-term, generational project—as is this bank—and the strategic steer will not bind it in the long term. Ultimately, if nothing is done because of the lack of clarity in the Bill, the bank and the Government may drift away from the levelling-up purpose expressed in the strategic steer and may not undertake the vital work of helping disadvantaged areas in the long term.
This is particularly the case because the effects of agglomeration work against infrastructure spend outside the metropolis. The economic return is simply much better in areas that already perform well, so those projects have a much better chance of proceeding. Inequality becomes entrenched and self-fulfilling. That is why it is so important that, for an infrastructure bank still focused on making a return, levelling-up objectives are clear in the Bill. This can be solved via the simple amendment we have set out. It takes on board feedback from the Minister in Committee to avoid any complicated definitions of disadvantaged areas. It does this by using similar comparative wording to a recent government amendment to the Subsidy Control Act. The amendment would mean that Clause 2(3)(b) read:
“to support regional and local economic growth, with an emphasis on reducing social or economic disadvantages within the United Kingdom.”
I am very grateful to the Minister and her team for meeting me and for their efforts in investigating this issue. I know that the Minister is concerned about legal challenge and whether the wording would cause the bank to be too cautious in its approach, but this wording captures the very fundamentals of levelling up. Given the guidance for the bank in the strategic steer, all its investments should be compliant with the wording in any case, so I do not believe that this would limit the bank in any way.
Amendment 12 provides the same clarity in a slightly different way, by ensuring that the first mission in the levelling-up White Paper—the key mission of relevance for the bank—is written into the bank’s objectives. Ultimately, both amendments address the same issue: we want to be confident that there is some permanence to the bank’s objectives on levelling up and focusing on disadvantaged areas. The strategic steer and a letter to the bank do not offer this permanence, so I hope the Government will agree that something needs to be done to ensure that the bank will deliver in the long term for disadvantaged areas, deliver for the levelling-up agenda and fulfil its potential to make a real difference to the lives of people in those left behind communities all across the country.
Baroness Bennett of Manor Castle (GP)
My Lords, it is a pleasure to follow the noble Lord, Lord Ravensdale. It was particularly useful that he spoke before me because I have taken some of the words that he and his supporters put down in their amendment but made an additional change, taking out the words “economic growth”. But I agree entirely with everything the noble Lord just said about the need to focus on reducing disparities and tackling economic and social disadvantages. As he said, that takes the wording from the Government’s own approach in another place and it would be very hard for the Government to argue against that.
I argued extensively in Committee about why economic growth as a target in its own right has failed and, indeed, is undeliverable, because you cannot have infinite growth on a finite planet. I will not go over those arguments again now, but I think it is very clear from the fact that we are back here again, after an extensive debate in Committee from all sides of your Lordships’ House, simply saying that the bank will work for regional and local growth. As was said in Committee, that could be regional and local growth in Chelsea and the wealthiest 10 wards in the whole country, which is surely not the purpose, and it therefore needs to be clarified in the Bill. As was said in our earlier debate when we were talking about the environment, we have seen acknowledgement of the need to change the Bill already. This is surely another crucial change.
I was pleased to attach my name to Amendment 12 in the name of the noble Lord, Lord Tunnicliffe, and backed by the noble Lord, Lord Ravensdale, and the noble Baroness, Lady Kramer. This is again putting levelling up in the Bill. It is what the Government say the Bill is for. Surely, it has to be specified in it.
Baroness Kramer (LD)
My Lords, I am going to be exceedingly brief because so much has been said which I support. I want to make a couple of comments on Amendment 12 in the name of the noble Lord, Lord Tunnicliffe, and others, that I have been pleased to sign. I want to make a point that I think has not been hit on. It is really important because it signals to those who put together projects and then turn to the investment bank and look for resources and funding that they are going to have to meet tests such as improving productivity and making sure that they are delivering well-paid jobs.
Putting that in the Bill would take it away from being a passive measure by which the bank looks at and decides whether to support projects and moves it into the active category. Those who are going out and investing will look closely at whether they are delivering against those various tests. There is so much that is good in the various amendments within this group—I very much support my colleague on Amendment 2—but I particularly wanted to underscore the message-signalling that is deeply inherent in Amendment 12.
Lord Tunnicliffe (Lab)
My Lords, I am grateful to all noble Lords who have spoken in this important debate. I am particularly grateful to the noble Baroness, Lady Bennett, the noble Lord, Lord Ravensdale, and the right reverend Prelate—who is not present—for their support in tabling Amendments 4 and 5. Those texts are similar in intent to my Amendment 12, and those colleagues made a powerful case for tightening up the bank’s second objective.
I thank the noble Baroness, Lady Kramer, who joined the noble Lord, Lord Ravensdale and the noble Baroness, Lady Bennett, in signing Amendment 12, which I shall turn to now. The Government say their absolute priority is to deliver their levelling-up agenda. Ministers say they will use every tool available to them to ensure left-behind communities can catch up economically, compared to London and the south-east. However, anybody reading the Bill would be hard-pressed to identify that intent. Yes, the bank should be operationally independent from government, but that does not mean it cannot support the levelling-up agenda in its day-to-day work.
Amendment 12 would, in essence, place the first mission from the Government’s recent Levelling Up White Paper in the Bill. The amendment would not prevent the bank from acting in a manner that deviates from that mission. It will be free to invest in climate-related schemes or projects in wealthier parts of the UK; that would remain the bank’s prerogative. However, the amendment would introduce a general requirement for the bank to have regard to the public interest in targeting funds in a manner that will improve productivity, jobs, pay and living standards.
The Government say they want to create good jobs, lift people’s pay and improve life chances. However, at the same time, Ministers are slashing the size of the Civil Service and washing their hands of responsibility for pay negotiations in sectors where the Government have a direct interest. We still await an employment Bill that has been promised for many years. That Bill was not deemed a big enough priority to be included in the Queen’s Speech, meaning many workers will lack important statutory rights.
The aforementioned White Paper mentions that by 2030, the Government want to see the gap between the best and worst performing regions of the UK narrowing. We want to see that gap close, too, but let us be realistic: it will require concerted action, not just warm words.
The year 2030 is not very far away. Let us consider the current economic context: the economy is on the brink of recession and is forecast to flatline in 2023. The cost of living crisis is squeezing household incomes to an extent not seen for decades. There is not a huge amount of time to turn this picture around. If we are to do so, we need urgent action to create secure, well-paid jobs, and the bank can help only if it is explicitly encouraged to do so.
Amendments to the framework document or strategic steer are not enough to target the bank’s mind or provide comfort that the Treasury is sufficiently invested in following through with its stated ambitions. It is regrettable that the Government have not brought forward their own amendment at this stage in proceedings. We have pushed for this in meetings with the Minister but have not succeeded.
We will listen carefully to the Minister’s response today but feel that this is an important issue which deserves to be in the Bill. Unless the noble Baroness is able to commit to an amendment at Third Reading, I am minded to test the opinion of the House when Amendment 12 is called.
Baroness Penn (Con)
My Lords, I will first take Amendment 2 from the noble Lord, Lord Sharkey, which, as he explained, seeks to probe our use of “and” in the activities of the bank to see whether it must meet both objectives or just one. As we discussed previously, the bank’s two objectives—to help tackle climate change and to support regional and local economic growth—are both stand-alone but complementary objectives. I can confirm that the Bill’s drafting does not mean that a project must meet both of those objectives but rather that over the breadth of its activities the bank must meet both.
The bank can invest in projects which meet only one of these objectives, so long as supporting a project to deliver regional and local economic growth does not do any significant harm against the bank’s climate objective. The bank wrote to noble Lords with further detail on the “do no significant harm” policy on Friday.
To address the noble Lord’s two specific questions, there is no reverse or equivalent “do no significant harm” policy for climate change investments with regard to local and regional economic growth. However, in reality we do not consider the bank likely to invest in something harmful to economic growth given the need to crowd in private capital and be additional, in line with its investment principles. The bank will create its own framework for assessing what “do no significant harm” means, drawing on best practice from around the world.
Amendments 4 and 5 from the noble Baroness, Lady Bennett, and the noble Lord, Lord Ravensdale, attempt to define levelling up within the local and economic growth objective of the bank. I reiterate why we have taken the approach that we have. The Bill sets the foundation on which the bank will operate. The specificity of how the bank’s objectives will be achieved will be contained in the framework document and in the strategic steer and strategic plan. This is the appropriate use of primary legislation, which can be a blunt and inflexible tool. Specificity in the Bill must be backed up with detailed and precise drafting, and a number of the aspects which we will discuss today are not easily defined. Failure to do this unnecessarily increases the risk of legal challenges which the bank will face, and that increased risk could result in the bank having a decreased risk appetite for investment.
That is why we have taken the approach we have done with the objectives. We have kept the high-level principles in legislation and supplemented those with additional information in the strategic steer and the framework document. The definition of local and regional economic growth is addressed in the first strategic steer, issued by the Chancellor in March, which stated that a focus on geographic inequality must be a priority for the bank. It also pointed to the Levelling Up White Paper to set out the missions with which the bank should align itself when considering investments. We could not do something like that in the Bill.
Lord Sharkey (LD)
My Lords, I thank the Minister for clarifying and putting on the record how the bank’s two objectives will work together. I beg leave to withdraw my amendment.
Lord Holmes of Richmond
“(4A) Before making any investment decision, the Bank must ensure that the principle of additionality is met.(4B) The principle of additionality is that—(a) all activities make a contribution which is beyond what is available or is otherwise absent from the market,(b) all activities do not crowd out the private sector, and(c) all activities have effects that encourage private sector funding to a multiple specified by regulations made by the Treasury.”
Lord Holmes of Richmond (Con)
My Lords, it is a pleasure to open this group of amendments and to move my Amendment 6. This amendment boils down to just one word, which predates the investment principles of the bank, the objectives of the bank, the strategy of the bank, the framework document of the bank and everything else associated with the bank: additionality. That is the bank’s raison d'être—no additionality, no bank.
As mentioned in the first group of amendments, we have “roads” in the Bill but nothing about additionality. My Amendment 6 would seek to set out exactly what additionality means, how it covers crowding out as well as crowding in, and what multiple Treasury should set on that crowding in.
Government Amendment 23 is purely an amendment to review what the bank has done on crowding in after seven years. It says nothing on crowding out, hence why I support Amendment 24 in the name of my noble friend Lady Noakes, which I will say no more about.
My Amendment 6 covers both the end-point—the review—and the beginning, the mission the bank needs to be on. It is all well and good to have a review at the end of 10 years, or now seven, but without Amendment 6 the review is just the spectre of an individual walking backwards into the future, wringing hands about what the bank has done, either positively in achieving additionality or negatively. Although a review is significant and important, it always arrives a little too late to influence what has just happened.
It is critical that additionality is in the Bill for the benefit of the bank and for the private sector, which would have the confidence to know that the bank would operate to the threshold of additionality, which would have to be achieved or that specific investment would not be entered into. If the Minister cannot accept my amendment, would she commit to meeting with me between Report and Third Reading to look at what we can do to get additionality in the Bill to strengthen the position of the bank, to make projects far more likely to crowd in and not crowd out funding and, ultimately, to benefit everything we are trying to do in this infrastructure space? I beg to move.
Baroness Noakes (Con)
My Lords, I have Amendment 24 in this group, which is an amendment to the Minister’s Amendment 23. It is always rather strange speaking to an amendment to an amendment when the amendment itself has not been spoken to—but I will do my best.
First, I congratulate my noble friend Lord Holmes of Richmond on his Amendment 6. It is well drafted and encompasses what we understand by additionality in the context of the operations of the UKIB. In Committee, it was widely agreed that additionality was so important that it should be in the Bill. I think it was also agreed that the boundary between what is in this Bill and is in other documents outside the Bill, including the framework document which is not even referred to in the Bill, has been set in the wrong place. When I say that the Committee agreed these things, I do not suggest that the Government agreed, but the vast majority of the Committee was aligned on these matters.
The Minister has been generous with her time with noble Lords, and I thank her for the meetings she arranged and for her letter of last week. She gets a gold star for effort, but I am afraid that that is not matched for content. On additionality, my noble friend claimed that the absence of an agreed definition in the Bill could stop it developing over time. That is nonsense. Additionality, as a basic concept, has barely shifted in the many years that I have been involved in public sector matters. The essence of it is about, and always has been about, something that should occur that would not otherwise have occurred but for the particular intervention or action. It is a universal principle that can be adapted to a number of circumstances.
I then suggested to my noble friend the Minister that, rather than try to produce a specific definition, she could put a high-level definition in the Bill and take a Treasury power to issue guidance to UKIB. That too was brushed aside. The Treasury likes to keep stuff in documents, such as the framework document, which it alone controls. I remind noble Lords that, as my noble friend the Minister informed us in Committee, the framework document is not even legally binding.
Nevertheless, I recognised that the Treasury is something of an immovable object on this issue, so I decided that it would be better to pursue the Minister’s offer of a way forward and include additionality issues in the periodic reports which are required by Clause 9. I thought that half a loaf would be better than no loaf, but I have to say that Amendment 23, which my noble friend has tabled, is a serious disappointment. It represents no more than a quarter of a loaf.
Amendment 23 adds an additional reporting requirement to Clause 9 but it is a lop-sided approach to additionality. Its focus is on the extent to which UKIB’s investments in projects have encouraged additional investments in those projects. It therefore will cover the extent to which projects have enabled crowding in, but it does not explicitly cover crowding out, which has always been my biggest concern, because a bank with a high capital ratio and a low cost of capital can easily outcompete private sector financing. I do not believe that if UKIB were to finance the whole of a transaction to the complete exclusion of the private sector in circumstances where 100% private finance could have been obtained, it would be captured by my noble friend’s amendment—it would not come close to being captured by my noble friend’s amendment. Such a transaction would not have encouraged or discouraged private sector finance; it would have bypassed it completely. That is why my Amendment 24 refers to investments having been made by UKIB
“despite an adequate supply of private sector financing”.
My noble friend the Minister will doubtless say that it is not in UKIB’s strategic plan to do transactions without private sector financing. It was never in the strategic plans of the European Investment Bank to crowd out private sector financing, but it did it anyway, in collusion with private sector borrowers, who were quite happy to take soft loans from public sector lenders who were much easier to deal with than hard-nosed real bankers in real banks.
My noble friend the Minister has also referred in correspondence to the impact of the Subsidy Control Act, which became law earlier this year. I have to say that the Act, which refers to subsidy decisions, sits rather uneasily with the practice of doing investment deals in the context of a bank. I accept that at a high level it would apply to UKIB. I just think that the language is very difficult to interpret in the context of what UKIB would do. My main concern is that there would never be an enforcement action against UKIB because the crowded-out private sector financiers are exactly the same people who want to be invited to any crowding-in party. It simply will not be in their interest to try to get the Act enforced against UKIB.
For all these reasons, I am very disappointed that this Bill, which I have never regarded as a shining example of Conservative economic values in any event, is going to ignore the concept of crowding out, which ought to be something dear to any Conservative Government’s heart. I shall not move my amendment when we reach it in the Marshalled List, but I live in hope that there are still some Conservatives in the Treasury who might have a change of heart before this Bill reaches the other place.
Lord Vaux of Harrowden (CB)
My Lords, I rise to speak to Amendment 24 in the name of the noble Baroness, Lady Noakes, to which I have added my name. The noble Baroness has already eloquently explained the rationale for this amendment, so I will try to keep my speech reasonably short.
Like the noble Baroness, I was strongly drawn to Amendment 6 in the name of the noble Lord, Lord Holmes, which would insert the critical additionality principle into the principles of the Bill. That would be the preferable approach, but, like the noble Baroness, Lady Noakes, I have been persuaded, reluctantly, to go along with the Government’s approach of making this something the bank reports on.
That leads me to amendments in the final group about the timing of those reports, which are, at the moment, seven years apart. If this is to be the way we deal with additionality, the report timings need to be shorter.
Baroness Bennett of Manor Castle (GP)
My Lords, it was not my intention to speak on this group but, given that all the non-government speakers have been from the other side of the House, I felt I should offer an argument from this side of the House that is perhaps 180 degrees opposite to that presented by the noble Baroness, Lady Noakes, but, none the less, makes an argument for either Amendment 6 or Amendment 24.
The noble Baroness, Lady Noakes, suggested that she preferred private bankers to public bankers. Private bankers have been left to provide the direction for our economy and society over the past few decades and look where that has got us: we are having to talk from all sides of the House about the urgent need to level up and to tackle poverty, inequality, our climate emergency and the nature crisis. Therefore, we need to make sure that the bank is not crowding out private finance. If it is, it is spending money in the wrong places. It needs to be doing things that are innovative and different from what we have been doing up to now. That is why I encourage either the mover of Amendment 6 or those speaking to Amendment 24 to consider testing the opinion of House, and I offer them Green support.
Baroness Kramer (LD)
My Lords, my motivation here is somewhat different: I want to see the bank move along the risk spectrum. There is a temptation, due to the structure of the bank, for it to stay within the range of fairly safe investments. It has to produce a return and it has a very small risk capital base, but I would like it to maximise that to move along the risk spectrum. I see no other way to accelerate the innovative technologies that we need, or development in disadvantaged areas where people have typically turned their backs, unless the bank is willing to take on that much higher risk profile. The various additionality amendments seem to create that kind of pressure to move UKIB much further down the risk spectrum than it might otherwise feel comfortable in doing, meaning that it therefore does not maximise the opportunities in front of it.
Baroness Penn (Con)
My Lords, I join my noble friend Lady Noakes in applauding Amendment 6 in the name of my noble friend Lord Holmes as a gallant attempt at defining additionality, although I dare say another Peer might draft it differently.
I want to make a more general point about additionality before coming on to the specifics of each amendment in this group. Additionality is a key principle underpinning the bank, and it is something that the Government take very seriously. That is demonstrated by the fact that additionality is one of the bank’s core investment principles, as set out in its framework document and strategic plan. However, following legal advice, the principle is not included in the Bill as there is no single agreed definition of additionality in a financial context that we could appropriately include in the Bill. Approaches to assessing additionality are developing over time and we would not want to stymie that development by creating a statutory definition of additionality at this stage.
While the term “additionality” has been included in previous legislation—for example, the Dormant Assets Act 2022 and the National Lottery Act 2006—additionality in those contexts had a different meaning: of funding projects or activities that the Government would not have otherwise funded. Assessing private sector additionality is more complex because it involves more actors and varied forms of financing. Each deal will have a particular set of circumstances that will indicate the amount of additionality that the bank is bringing. For the bank, as part of that, additionality means ensuring that it both crowds in private finance through its investments and avoids crowding out the market by providing finance that could have come from the private sector.
The bank has set out its approach to assessing and measuring these concepts of additionality in its strategic plan, which was published at the end of June. Currently the bank will assess additionality on a case-by-case basis, assessing the evidence as part of due diligence and monitoring that through a key performance indicator on the levels of private sector finance that it has crowded in. This is a measure commonly used by other organisations such as the OECD.
Crowding out is best assessed through evaluations and medium-term assessments of whether the portfolio of investments has led to crowding out in a particular sector. The bank is developing its thinking on how it will monitor and evaluate its work at both deal and portfolio level, including setting up an independent evaluation.
Further to this, additionality is implicitly covered in the Subsidy Control Act 2022, which of course applies to any subsidies the bank gives. Schedule 1D states:
“Subsidies should not normally compensate for the costs the beneficiary would have funded in the absence of any subsidy.”
Given the protections of the Subsidy Control Act 2022 and the regulatory regime, the difficulty in accurately defining additionality in the Bill, the work the bank is already doing on additionality and, finally, our amendment to the review, I hope my noble friend Lord Holmes will feel able to withdraw his amendment. I must say to my noble friend that the Government do not intend to bring forward any amendments at Third Reading, so I must disappoint him on that front. I should also say that to the noble Lord, Lord Tunnicliffe, in relation to the previous group, if I was not clear on that front.
The amendment in my name to Clause 9, on the statutory review, will ensure that the review of the bank will measure its success in encouraging additional investment. The drafting of the amendment is based on the reference to additionality in the framework document. I should like to provide reassurance that, given that the review will cover crowding in, it necessarily includes the question of whether crowding in did not happen, with the attendant risk of crowding out. This is because additionality is designed to measure genuine additional private finance—in other words, investment that would not have happened otherwise. I would fully expect the independent review to address the question of crowding out under the terms of this drafting.
The bank could act as the sole financer of a private project if it meets the bank’s investment principles and objectives, but it is highly unlikely that the bank, as the sole financer of a private project, would crowd out private investment, as the bank would be the sole investor in very immature or nascent financial markets for a technology only if no other investors were willing to support the project.
The bank’s initial assessment of the technologies, sectors and markets it plans to engage in, as published in its strategic plan, will allow it to focus its investment in areas with a limited risk of crowding out. This will continue to be developed and reviewed. In cases where the bank would act as the sole financer of a private project, it would expect to have a transformational impact on the market and for the market to be able to attract private capital over the medium to long term. This in part speaks to the concern of the noble Baroness, Lady Kramer, about the bank being able to operate along the risk spectrum, as it were, rather than seeking to invest solely in perhaps lower-risk or less innovative projects, given the other demands that it has: making a return on its investments and becoming self-funding.
Given this, I am grateful to my noble friend for her commitment not to move her amendment when it is reached. I hope that, in future, my best efforts produce more than a quarter of a loaf.
Lord Holmes of Richmond (Con)
My Lords, I thank all noble Lords who have spoken on this group, and particularly my noble friend Lady Noakes for bringing forward Amendment 24. I shall summarise what the Minister said: that additionality is pretty much impossible to define, but the bank will definitely do it—so that is good. It is unfortunate that we cannot have that in the drafting of the Bill given that, as I said in opening the group, this is the raison d’être of the bank: its only ultimate purpose is additionality. As other noble Lords have said, not having this could lead to less rather than more, and taxpayers’ money being put to that purpose.
It is desperately disappointing that we cannot have additionality in the Bill. I will withdraw my amendment but, in doing so, I gently, politely and respectfully request that my noble friend the Minister considers not moving government Amendment 23 and working to meld it with my noble friend’s Amendment 24 to come up with something that actually covers both crowding out and crowding in. Certainly, as drafted, government Amendment 23 does not do this. I beg leave to withdraw Amendment 6.
Baroness Hayman
Baroness Hayman (CB)
My Lords, in the earlier debate on this amendment, we heard very powerful arguments for including nature-based solutions and the circular economy in the definition of “infrastructure” in the Bill. The arguments that we heard from the Front Bench were not as strong: the principle was accepted, and we were asked to accept the reassurance that these issues could be included because they were in the framework document or the strategic plan. This is Parliament’s opportunity to say what its priorities are. I believe that there is support for this around the House, and I beg leave to test the opinion of the House.
Baroness Penn
Member's explanatory statement
This amendment would make it clear that energy efficiency, in relation to electricity, gas and the provision of heat, is within the definition of infrastructure.
Lord Tunnicliffe
“(5A) In exercising its functions, the Bank must have regard to the public interest in targeting investment in a manner that—(a) improves productivity, pay, jobs and living standards, and(b) reduces economic disparities between the nations and regions of the United Kingdom.”Member's explanatory statement
This amendment would ensure the Bank has regard to the first mission of the Government’s Levelling Up White Paper when exercising its functions under this Bill.
Lord Sharkey
“(7) Regulations made under the powers set out in subsection (6) are subject to the “super affirmative procedure” as set out in subsections (8) to (15).(8) The Secretary of State must lay before Parliament—(a) a draft of the regulations, and(b) a document which explains the draft regulations.(9) Where a draft of the regulations is laid before Parliament under subsection (8), no statutory instrument containing the regulations may be laid before Parliament until after the expiry of the 30-day period.(10) The Secretary of State must request a committee of either House of Parliament whose remit includes infrastructure, economic growth, finance or climate change to report on the draft regulations within the 30-day period.(11) In preparing a draft statutory instrument containing the regulations, the Secretary of State must take account of—(a) any representations,(b) any resolution of either House of Parliament, and(c) any recommendations of a committee under subsection (10) made within the 30-day period with regard to the draft regulations.(12) If, after the 30-day period, the Secretary of State wishes to make regulations in the terms of the draft or a revised draft, he or she must lay before Parliament a statement—(a) stating whether any representations, resolutions or recommendations were made under subsection (11); (b) giving details of any representations, resolutions or recommendations so made; and(c) explaining any changes made in any revised draft of the regulations.(13) The Secretary of State may make a statutory instrument containing the regulations (whether or not revised) if, after the laying of the statement required under subsection (12), a draft of the instrument has been laid before and approved by a resolution of each House of Parliament.(14) In this section, references to “the 30-day period” in relation to any draft regulations is to the period of 30 days beginning with the day on which the original draft regulations were laid before Parliament.(15) For the purposes of subsection (14) no account is to be taken of any time during which Parliament is dissolved or prorogued or during which either House is adjourned for more than four days.”Member's explanatory statement
This amendment seeks to provide Parliament with the opportunity for enhanced scrutiny of the regulations made under this section.
Lord Sharkey (LD)
My Lords, I shall speak also to Amendment 18. I am very grateful to the noble Lord, Lord Vaux, and my noble friend Lady Kramer for adding their names to both amendments and to the noble Lord, Lord Tunnicliffe, for adding his name to Amendment 18.
The Bill contains Henry VIII powers in Clause 2(6)(a) and (b). These powers would enable the Treasury to amend the activities of the bank and change the definition of infrastructure by regulations subject to the affirmative procedure. There is no constraint, the Treasury has carte blanche: it can add to, subtract from or modify any or all of the bank’s listed activities; it can change what counts as infrastructure by adding, subtracting or modifying. This would enable fundamental changes to be made to the bank’s operations without any meaningful parliamentary scrutiny. The Government have previously asserted, and may do so again today, that the affirmative procedure for SIs constitutes meaningful parliamentary scrutiny, but this is obviously not the case.
In its 2018 report, the Constitution Committee noted:
“Without a genuine risk of defeat, and no amendment possible, Parliament is doing little more than rubber-stamping the Government’s secondary legislation. This is constitutionally unacceptable.”
But there is a way of enhancing scrutiny of secondary legislation. This is the super-affirmative procedure, and our Amendment 13 would replace the affirmative procedure with this super-affirmative procedure. Erskine May, in Part 4, chapter 31.14, characterises this procedure as follows:
“The super-affirmative procedure provides both Houses with opportunities to comment on proposals for secondary legislation and to recommend amendments before orders for affirmative approval are brought forward in their final form … the power to amend the proposed instrument remains with the Minister: the two Houses and their committees can only recommend changes, not make them.”
During the passage of the recent Medicines and Medical Devices Act, the Minister, the noble Baroness, Lady Penn, very helpfully summarised the super-affirmative procedure as follows, saying
“that procedure would require an initial draft of the regulations to be laid before Parliament alongside an explanatory statement and that a committee must be convened to report on those draft regulations within 30 days of publication. Only after a minimum of 30 days following the publication of the initial draft regulations may the Secretary of State lay regulations, accompanied by a further published statement on any changes to the regulations. They must then be debated as normal in both Houses and approved by resolution.”—[Official Report, 19/10/20; col. GC 376.]
It was in that Bill that the House last voted to insert the super-affirmative procedure. There was widespread support from across the House—from Labour, from these Benches, from the Cross Benches and even from two extremely distinguished Conservative Peers. Prior to that, according to the Library, the last recorded insertion was by the Government themselves in October 2017 in what became the Financial Guidance and Claims Act.
When they are not doing it themselves, the Government traditionally put forward any or all of three routine objections to the use of the super-affirmative procedure. The first is that it is unnecessary because the use of the affirmative procedure provides sufficient parliamentary scrutiny. This is obviously untrue. The second routine objection is that the super-affirmative procedure is cumbersome. I take this to mean only that this procedure is more elaborate than the affirmative procedure; which is, of course, the whole point. It is necessarily more elaborate because it provides for actual scrutiny where the affirmative procedure does not. The third routine objection is that it all takes too long. This has force only if there is some imminent deadline, and there is none in this case.
In Committee, the noble Viscount, Lord Younger of Leckie, argued in favour of retaining the Henry VIII powers in Clause 2:
“There may, however, be instances where we need to update the definition of infrastructure or the bank’s functions to ensure that the bank can continue to fulfil its objectives as a long-lasting institution.”
He went on to give an example:
“New green infrastructure technologies may emerge in the future which we would want … to include in the bank’s definition of infrastructure, to signal to the bank and the market that the bank can invest in these technologies.”—[Official Report, 14/6/22; col. 1541.]
I am afraid that this is a very weak argument. The definitions of “infrastructure” in the Bill are not exhaustive, as the Minister has again said this afternoon. The bank could simply decide that it wanted to include new green technology and say so in an official press release. In any case, the Treasury could always direct the bank to include these new technologies and any such direction would be published. As things stand, the Henry VIII powers would enable the Minister to change both the bank’s activities and the definitions of infrastructure without constraint or meaningful parliamentary scrutiny. Our Amendment 13 would restore an element of parliamentary scrutiny; Parliament should not be bypassed.
Lord Thomas of Cwmgiedd (CB)
My Lords, I will speak to two sets of amendments. Before doing so, I thank the noble Lords, Lord Vaux and Lord Wigley, and the noble Baroness, Lady Kramer, for their support in the drafting of the amendments and for co-signing them. They fall into two distinct categories.
The first group, Amendments 14 to 17, relates to Clause 3. They are intended solely to deal with the framework document, about which we have had many discussions today and on various occasions. There is one in existence, but it is now more than a year old. That document needs to be brought in line with the other governing documents of the bank. It seems clear that, if you are to govern a bank properly, effectively and efficiently, its governing documents must be got right.
One of the problems with the framework document is that it is not clear what it is. Is it a very mundane document—I hate to use the word, but I think it is right—that deals with ordinary day-to-day activities or a much more important document, as the Minister suggested earlier in the debate, which might be used to fine-tune the way the bank will work or the objectives it is to be set?
Is it legally binding? Without seeing the document that will operate in the course of the bank’s governance, it is quite impossible to say, unless there is a clause which says that it is not legally binding. If it is not legally binding, unless it deals with day-to-day matters such as meetings, there may be no problem, but which is it?
Is it consistent with the Bill and the clauses that will be inserted into the strategic priorities? The present document is quite clear; it contains provisions that are redundant, such as those relating to the objectives and the appointment of directors, because they have been overtaken. The purpose of this amendment is to press the Government to be clear about what may or may not be an important part of the governance of the bank. I intend to say no more about that group of amendments.
Amendment 21 is a much more important amendment and goes to a constitutional point. Economic development is a devolved issue. It is not a straightforward one, because the government Acts of Scotland, Wales and Northern Ireland contain extensive reservations on aspects of economic development, as one would expect. One would expect that, ordinarily, the Governments of the devolved constituent parts of the United Kingdom and the Government of the United Kingdom would work closely together on so important an institution as the UK Infrastructure Bank. The Bill ought to reflect a properly organised structure, so that there is consultation and the views expressed by the devolved Governments are taken into account on consultation.
It is useful to look to Germany. KfW has one of the most successful track records in the world on the operation of an investment bank; 80% of it is owned by the federal Government and 20% by the Länder. It therefore has an institutional structure.
In the UK—I do not make any point about what has been decided—this is 100% owned by HM Treasury. Given the need for co-operation, particularly with the Welsh development bank and the equivalent development bank in Scotland, we ought to be clearer in the Bill that there should be appropriate consultation on its key features. I accept that the strategic plan put forward by the bank makes some mention of working in co-operation. Indeed, it mentions Wales or the Welsh six times, and Scotland gets a bit more as it is mentioned eight times, but Northern Ireland gets a bit less as it is mentioned only twice. But when one looks at the analysis of what is there, there is nothing of any real substance on which the Governments of the devolved constituent parts of the United Kingdom can get any comfort.
The Bill needs a legislative consent Motion. Another important feature is that we ought to recall the Sewel convention; we ought to be concerned at the number of instances where there is no consent. We are gradually moving away from the concept of “not normally” legislating the areas of devolved matters without the consent of the devolved legislatures. In this area, that is a very important point. Therefore, this amendment is put forward to provide a mechanism for consultation on three critical areas, and this inclusion should check and institutionalise in the Bill a structure for proper consultation in relation to the three most important functions of the Government on it: the ability to amend by regulation; the ability to appoint directors; and the creation of the statement of strategic priorities.
Given the current circumstances—and the real need to hold the union together—I hope that this amendment could be one which the Government would readily accept. Consultation is not going very far. One could put forward a clause which went much further, and I very much hope that the Government will look favourably on this proposed new clause, but I shall listen carefully to what the Minister has to say and, in light of that, consider whether I would seek to test the opinion of the House on this provision.
Lord Sentamu (CB)
My Lords, I have been in your Lordships’ House since 2005 and one of the things that has always surprised me, having come from another part of the Commonwealth, is the way in which secondary legislation—statutory instruments and regulations—has grown like Topsy. Secretary of States are always accountable to Parliament and, if you give power away, some people never want it to be brought back. The Bill is an innovation. The noble Baroness, Lady Kramer, was right that we do not want to simply put things back into the systems of other banks, and this is a risky bank. It will go into areas where hitherto nobody has gone.
I speak only to Amendment 13, which seeks to provide Parliament with the opportunity for enhanced scrutiny of the regulations made under this section. That is all it is doing: Parliament must not just pass a law and allow the Secretary of State the power to make regulations and statutory instruments which then cannot be clearly watched. I have always believed that good law is good law—no one should be frightened of any good law. Therefore, the Secretary of State must not see this affirmative action as a hindrance of their function and their work. No, it is simply enhancing the scrutiny of regulations made under this section. I urge those who tabled this wonderful amendment to stick with it and not just give it away.
Lord Vaux of Harrowden (CB)
My Lords, I have added my name to all the amendments in this group, which cover four separate topics, and I will touch on each of them briefly. First, Amendment 13, which the noble Lord, Lord Sharkey, eloquently explained, aims to introduce a greater level of scrutiny to the use of the Henry VIII power that is included in the Bill. The activities and, in particular, the definition of infrastructure are fundamental to what the bank can do and how it will be measured. It must be right that changes to this are subject to a meaningful level of parliamentary scrutiny and, as the noble Lord clearly explained, the affirmative procedure has sadly become a bit of a sham. Amendment 13 seeks to find an interesting balance between the rubber-stamping of a statutory instrument and full use of primary legislation. I urge the Government to support this, and I would be quite supportive generally of seeing more of this process in Bills more often: we have seen far too many of these Henry VIII clauses, as we have just heard.
Amendments 14, 15, 16 and 17 in the name of the noble and learned Lord, Lord Thomas of Cwmgiedd, to which I have also added my name, are aimed at trying to resolve issues around the framework document that we discussed at length in Committee. As we heard, the framework document is a slightly peculiar animal: it seems to have no real legal status, but it is an important document in how the bank will behave. The consensus around the Chamber in Committee was, I think, that the balance within that is too far towards including elements of principle rather than the day-to-day running of the bank. These amendments do not really address that. All they ask is for the framework document to be updated, and that it should be consistent with the statement of strategic priorities. That seems pretty straightforward and simple.
There are a number of areas where the more recent statement of strategic priorities is inconsistent with the framework document. One example—it is relevant to the discussion we had on the previous group about additionality—is that the strategic priorities expressly do not require local authority investments to achieve additionality, but the framework document does. Perhaps the Minister could explain why. I doubt that she will accept the amendments, but could she at least confirm that the framework document will be updated and that it will be brought into line with the statement of strategic priorities?
Amendment 18 in the name of the noble Lord, Lord Sharkey, addresses the extremely important point raised in Committee, I think by the noble Baroness, Lady Kramer, that as drafted the Bill—in conjunction with all these other governing documents, including the framework document—would require directions given by the Treasury to be published, but would not require situations where the board disagrees with that direction to be published or explained. Indeed, it effectively applies a gagging order, and that cannot be right. This important amendment brings in some essential transparency to that and I wholeheartedly support it.
I agree with the noble and learned Lord, Lord Thomas of Cwmgiedd, that the final amendment in the group is the most important. It introduces a simple requirement to consult the devolved Governments in various situations, and in preparing or changing the statement of strategic priorities. The bank’s activities will cover the whole UK, which I think is a good thing. The Minister has indicated, as does the statement of strategic priorities, that the bank is establishing a good relationship with the devolved Governments, and with the bank’s counterparts in the devolved nations. However, the Bill does not mention this. As someone who lives in Scotland and is a passionate unionist, I am consistently surprised by the fact that legislation that covers the whole UK rarely includes proper consultation requirements. That seems really counterproductive—even dangerous—as not taking proper account of the reasonable views and concerns of the devolved nations further undermines the strength of our union.
It gives ammunition to the nationalists that the Government do not take the devolved Governments seriously. We are heading rapidly towards a break-up of the union if we behave like this. This amendment does not create any veto powers or anything of that nature, which I would strongly disagree with that as you cannot work something if one party has a veto. It just requires consultation and that the reasonable views of the devolved nations be taken into account when setting the strategy or appointing directors.
I urge the Government to accept this. More widely, I urge them to start to be more consultative and include clauses of this nature more generally in Bills that cover the whole of the UK. That will strengthen, not weaken, the union and will ensure that the bank takes actions genuinely in the interests of all parts of the UK. If the noble and learned Lord decides to divide the House on this matter, I certainly will support him.
Baroness Kramer (LD)
My Lords, I have added my name to all the amendments in this group but I will try to be brief. I want to pick up on the point just made by the noble Lord, Lord Vaux. Amendment 21 in the name of the noble and learned Lord, Lord Thomas, deals with consulting devolved Administrations. It ought to be a matter of course that in every Bill where consultation is important, it is in the Bill. It then underscores the constitutional relationship between central government and the devolved Governments. The expectation that it is to be dealt with either in other documents or just off the cuff is, I suspect, one of the reasons we see so much stress and pressure on the union today. It embodies a lack of respect, to be quite frank, and it ought to be a matter of course that we see these arrangements in a Bill.
I will look at the other amendments tabled and so well drafted by the noble and learned Lord, Lord Thomas. On updating the framework document, we have heard of nothing but the importance of that document. On almost every issue we raise, we are told that it does not need to be in the Bill because it is in this absolutely critical document—the framework document—which is actually a document agreed between the Treasury and the bank; it is not even necessarily in the public arena. Yet we can see that it is inconsistent with the Bill as it stands, never mind with the issues that have surfaced in the course of this very complex debate. It is a document that desperately needs to be updated. I know there is a plan to update it by the end of this year but that is completely out of touch with making sure that we have proper, consistent and meaningful arrangements in place for a bank that is already functioning as we stand here today. I very much support those amendments.
I now look at the two amendments from the noble Lord, Lord Sharkey. Amendment 13, so eloquently supported by the noble and right reverend Lord, Lord Sentamu, addresses another fundamental problem that we see in one piece of legislation after another: the wide use of Henry VIII powers to allow secondary legislation—which cannot be amended and, in effect, cannot be rejected—to change primary legislation fundamentally. It almost makes a joke of primary legislation. I know the Government would say that they would not exercise the power widely and it is just a marginal change here or there, but the Bill is already written to allow for marginal changes. The only time when that clause would be relevant would be if fundamental changes were to be made. I would argue that those should come back to Parliament, at least for the level of engagement of a super-affirmative.
I want to speak most to Amendment 18 because I am truly exercised on the issue of transparency. As others have said, the Bill requires the publication of a direction when the Treasury basically decides it is going to tell the bank what it can do. It can give it instructions that are either general or specific. It could say, “Make this loan and do it this way.” That is entirely allowed and there has to be a publication. But what is not that established is that when the bank says no and then is overridden, that information comes into the public arena. When it says no, it says so in a letter of reservation and the kind of issues it can raise are fundamental, such as issues of propriety, issues of ethical behaviour and issues of departing from the fundamental purpose of the bank.
I think we must have an absolute assurance that those will be published so that they are in the public arena. Let me give an example. The Minister has often drawn parallels between this bank and the British Business Bank, which allows me to draw a parallel with the British Business Bank’s decision to accredit Greensill to provide a Covid-related loan. We know, because it is now in the public arena, that when Greensill applied to the British Business Bank for accreditation, various parts of the Government fairly bombarded the British Business Bank with emails. They did not say “accredit it” but kept saying how important it was that they knew the result, asking whether it was done yet and saying that this would be fundamental to the future of steel in the UK and so on. Anyway, as we all know, the British Business Bank did accredit Greensill and, I suspect, regrets the very moment that it did so.
If a direction from the Treasury had been published on that issue, I am sure it would have said: “This direction is intended to make sure that our very important steel industry survives. It is to support jobs. It is to support communities related to the steel industry.” The reservation would have said something very different. I suspect it would have said: “We do not believe that the entity, Greensill, meets our ethical standards. We believe that it is basically an organisation that has got itself into some very unfortunate and potentially unethical arrangements and is on the verge of bankruptcy.” That is why it is important that the reservation notice is published and the conversation does not exist only in the context of the direction. That is why I say to the Minister that we cannot have an arrangement where the bank could, if it wished, publish its reservation notice; it is crucial that it publishes its reservation notice. I argue that on the grounds of the propriety that should surely lie at the heart of all the legislation that we provide in this House.
Lord Morgan (Lab)
My Lords, I rise very briefly to say why—my Whip may not be too happy to hear this—I wish to vote for the amendment from the noble and learned Lord, Lord Thomas of Cwmgiedd, which I know is not the view of my party at present.
I think the distance between central institutions in London, such as the Bank of England, is far too great. We have not really taken account of the mechanics of devolution in our constitutional and legal arrangements. This was shown—very dangerously so—in the Brexit negotiations, when important features of the Welsh economy, notably in agriculture, were not attended to by the Westminster Government. Wales and, I suppose, Scotland were treated in a somewhat colonial fashion and the consequence was that a great deal of ill will was needlessly caused. The noble Lord across the House mentioned difficulties that have arisen in the case of Scotland.
I hope we would accept an amendment that thinks in terms of harmonising the economic strategies in London and the devolved authorities. I speak as one who believes strongly in the union but also in devolution for Wales. I hope very much that the amendment from the noble and learned Lord, Lord Thomas, who is deeply learned in these matters, will be accepted.
Lord Tunnicliffe (Lab)
My Lords, I am grateful to the noble Lord, Lord Sharkey, and the noble and learned Lord, Lord Thomas, for tabling the various amendments in this group. I was pleased to sign Amendment 18, which would increase transparency relating to Treasury directions. The Minister and her officials have offered several helpful assurances on this subject during discussions between Committee and Report. I am grateful for those assurances, but I am not convinced that they go far enough. As with the earlier group on job creation and levelling up, this may be another area where the Treasury leans on the framework document as the preferred way forward. If that is where we end up after the Bill has been considered in another place, so be it, but there is merit in this House taking a view on transparency safeguards today.
Sadly, we have become all too familiar with non-legislative commitments or safeguards being flouted. By strengthening Clause 4, we can at least ensure that the bank will have a voice if there are concerns around the Treasury’s use of its powers. Accordingly, if the noble Lord, Lord Sharkey, divides the House on this issue, he will have our support.
Elsewhere, I appreciate the wish of the noble Lord, Lord Sharkey, to see the regulations under Clause 2 subject to a form of super-affirmative procedure. However, this concern was not raised by your Lordships’ Delegated Powers and Regulatory Reform Committee, and we will of course debate relevant regulations if and when they are brought forward in the future. The noble and learned Lord, Lord Thomas, has tabled a number of amendments in this group, and I hope that the Minister will be able to provide a comprehensive reply.
As with so many other pieces of Whitehall legislation, there is a clear overlap with devolved competence, and the Government will therefore have to seek consent Motions. I have huge sympathy for Amendment 21, which seeks to ensure formal consultation with the devolved authorities in certain circumstances. While the Government will dispute this, they have a poor and arguably worsening record in engaging with colleagues in the devolved nations. However, I am not convinced that an amendment to the Bill would change that, or that Conservative MPs will defy the Whip when the Bill is considered in the Commons. I hope this is an area where the Minister can provide strong, non-legislative commitments. Crucially, the Government must then follow through on them.
The union is at least fragile, and the way these relationships are conducted can add to that fragility. It is crucial on this occasion that the Government do everything they can to overcome the present concerns on this matter.
Baroness Penn (Con)
My Lords, Amendment 13 in the name of the noble Lord, Lord Sharkey, seeks to make the bank’s delegated powers subject to the super-affirmative procedure. As indicated in Erskine May, the super-affirmative procedure has been deployed for secondary legislation where an exceptionally high degree of scrutiny is thought appropriate. This procedure has rarely been considered the appropriate one to prescribe in primary legislation; where it has, the relevant instances have tended to be of a particularly substantive and wide-ranging sort. The noble Lord, Lord Sharkey, gave us an example but I had another: the Legislative and Regulatory Reform Act 2006, where the super-affirmative procedure was used to regulate significant powers under which Ministers could amend legislation to remove regulatory burdens. It cannot be said that amending the bank’s activities or the definition of infrastructure reaches the threshold of requiring the super-affirmative procedure. I have noted comments from noble Lords, but I also draw to their attention the Delegated Powers and Regulatory Reform Committee’s response to the Bill, which stated:
“There is nothing in this Bill which we would wish to draw to the attention of the House.”
On the other amendment from the noble Lord, Lord Sharkey, in this group, Amendment 18 on the power of direction, I recognise that there has been some concern about the wording in the framework document in relation to the issuing of directions. In particular, there were concerns that the Treasury would be able to “gag” the bank. That is clearly not the intention, and I have taken away the wording in section 15 of the framework document to make it clear that Her Majesty’s Treasury is not able to prevent publication of a written direction or any reservation notice in respect of that direction.
It is incumbent on the Treasury to meet its obligation to publish the direction and any associated reservation notice as soon as appropriate. Of course, there can be circumstances in which the publication of a written direction or any associated reservation notice needs to be delayed for reasons of national security or commercial sensitivity. An example of this occurred, in relation to a similar power in a different circumstance, during the sale of British Steel Ltd, where the Secretary of State directed the Permanent Secretary to continue an indemnity with the official receiver but delayed publication during negotiations with Jingye, despite value-for-money uncertainties, as to publish at the time would likely have undermined the rescue deal due to commercial sensitivity concerns. However, I will be clear with the House that if publication of a written direction were to be delayed for reasons of commercial sensitivity or national security, we would ensure that it was sent to the chair of the Public Accounts Committee immediately and on a confidential basis.
I hope that I have addressed the points made by the noble Lord, Lord Sharkey. However, to be absolutely clear, and maybe to go further than I did in our previous discussions, we will amend the framework document to be clear that where a direction is issued, an accompanying reservation notice “must” be published—rather than “may”—and, to further clarify, the content of the direction and reservations must be published rather than the fact of their existence. I hope that that provides further reassurance to noble Lords on that matter.
The amendments to Clause 3 in the name of the noble and learned Lord, Lord Thomas, seek to ensure that the bank’s framework document is updated to reflect any strategic steer, and that any revised framework document will be laid in Parliament. In maintaining the bank’s framework document, the Treasury will follow the guidance set out in Managing Public Money. This guidance states that framework documents should
“be kept up to date as the partnership”—
between a department and its arm’s-length body—
“develops.”
The Treasury will update the bank’s framework document as needed to follow this guidance. As has already been noted, the Treasury is currently reviewing the framework document and will publish a new version once the Bill has passed, which will include changes brought about by this House; for example, the clarification which I mentioned earlier in relation to the bank’s ability to publish a reservation notice if the Treasury subsequently issues the bank with a direction, and, in reference to an earlier debate, the clarification of the second objective in local and regional growth relating to levelling up and regional inequalities.
On the publication of framework documents, Managing Public Money is clear. Any revised framework documents should be published and laid in Parliament. Further, the Chief Secretary to the Treasury laid a Written Ministerial Statement today where he set out that all departments should lay their framework documents in Parliament. This has put the question of publication beyond doubt.
On whether the bank’s framework document should be updated to reflect the content of the strategic steer, I think that in that respect I differ in opinion from the noble and learned Lord, Lord Thomas. Managing Public Money sets out that framework documents should contain information on purpose, governance and accountability, decision-making, and financial management. It does not specify that they should contain information on current policy steers or priorities.
The bank’s framework document and strategic steers fulfil very different purposes; the framework document providing an agreement to govern the relationship between the bank and the Treasury, and the strategic steer providing an opportunity for the Government of the day to provide steers on current priorities and policy emphases. That does not mean that there will never be circumstances in which the framework document is updated. I have already told the House that we will reflect on the wording in the framework document on the regional and local economic growth objective. However, I do not think that the framework document needs updating every time a strategic steer is issued. It should be updated only when necessary, to provide for continuity and to avoid creating unnecessary resource burdens. The noble and learned Lord, Lord Thomas, would be inventing a new process for the framework document, when there is already a process set out in Annex 7.2 of Managing Public Money.
On this, I also refer noble Lords to the strategic steer issued by the Chancellor in March. This provided a steer on priorities for the bank in light of the situation in Ukraine, and the recently concluded environment review, as well as other priorities for the bank to reflect in its first strategic plan. None of this information impacted the high-level framework under which the bank operates, as set out in the framework document, and therefore a mandatory update to the framework document would have been unnecessary. However, the strategic steer must be reflected in the bank’s strategic plans. This is provided for in the Bill.
Amendment 21 seeks to bring a consultation process on the use of some of the powers in the Bill with the devolved Administrations. I appreciate the intent, but this will cut directly across the negotiations that we are having with the devolved Administrations on the legislative consent process. This was brought up in Committee and I explained then that the normal practice is to bring forward any amendments required for a legislative consent Motion in the second House, which for this Bill would be the Commons. It would not be appropriate to accept this amendment until we have begun those negotiations with the devolved Administrations in earnest.
I hope that I can reassure noble Lords by saying that we have begun those discussions with the devolved Administrations in a positive fashion. Engagement with the devolved Administrations on the set-up of the bank was also positive. They all support the establishment of a national infrastructure bank. The bank has also been developing its own relationships with the devolved Administrations and their respective institutions, such as the Scottish National Investment Bank. The bank has now also completed deals in all four nations.
The tone and tenor of the bank’s relationships with the devolved Administrations and their respective institutions, and the way that the bank has gone about its business so far, give noble Lords in this House quite a bit of reassurance, I hope, about the collaborative approach that the bank has taken so far and intends to take in future. Therefore, I hope that the noble Lord, Lord Sharkey, feels able to withdraw Amendment 13.
Lord Sharkey (LD)
I thank the Minister for her response and thank all other noble Lords who spoke to Amendment 13. I detect a chillier wind from my right than I would have liked. Under those circumstances I can only repeat that the House will not have a substantive opportunity to scrutinise these important things. I regret that. The loss of both parliamentary authority and the ability to scrutinise what comes before us is a critical issue, which I have no doubt we will come back to in future Bills. In the meantime, I beg leave to withdraw Amendment 13.
Lord Tunnicliffe
“(ba) at any time, the Bank has at least one non-executive director who is a representative of workers;”Member's explanatory statement
This amendment ensures that the Bank’s board would have at least one workers’ representative at any time.
Lord Tunnicliffe (Lab)
My Lords, in Committee we had a wide-ranging debate about the bank’s board and whether the Bill should include requirements about its composition, expertise, and so on. Responding, the Minister said that she could understand my temptation to have a workers’ representative on the board but asserted that it was not necessary for several reasons.
During our very helpful follow-up discussions, we have discussed the various processes being followed by the bank as it constitutes its board. I have been assured that my concerns will be dealt with in due course, though it is not clear exactly how and when. I have therefore re-tabled the amendment that I tabled in Committee to give the Treasury another opportunity to explain the position. If it were the Labour Party setting up this institution, we would ensure that the board contained at least one non-executive director responsible for representing the views of workers. Having those views aired would improve the quality of jobs created through the bank’s investments.
I will not pre-empt the noble and learned Lord, Lord Thomas, in relation to his Amendment 20, but it is fair to say that there is genuine concern across Your Lordships’ House when it comes to the effectiveness of this board. I hope that the Minister can offer a degree of reassurance today and perhaps commit to providing updates on the bank’s appointments, as and when they are confirmed. I beg to move.
Lord Thomas of Cwmgiedd (CB)
My Lords, I will speak briefly to Amendment 20. I traversed the reasons for this amendment at Second Reading. I traversed them again in Committee. I need not weary your Lordships by traversing them a third time. The points are obvious.
Enlightened departments have now agreed to put into Bills qualifications for the boards of important institutions. One sees that in the Climate Change Act and the Environment Act. It is a great pity that the Treasury is not an enlightened department. It should have a little more humility and appreciate that if you are to run something as important and, ideally, successful as an infrastructure bank, you ought to tick off the qualifications of the board as a whole. I have listed what they should be; they are drawn very carefully from the Climate Change Act and the Environment Act and adapted to ensure what I spoke about earlier; namely, that you have people who come from the devolved nations or who have a knowledge of the devolved nations. This is another way of dealing with the point.
However, having made those arguments, which are obvious and ought to be accepted, I fear that the Treasury is obdurate on this point. I just hope that in due course there will be a more humble and less entrenched view than its omniscient view about its capacity to do everything without some statutory guidance.
Lord Vaux of Harrowden (CB)
My Lords, briefly, I support Amendment 20 in the name of the noble and learned Lord, Lord Thomas. It is self-evident that the bank’s board should have the experience and skills that the noble and learned Lord proposes in his amendment, rather than just being Treasury placemen. The success or failure of the bank in achieving its objectives will depend entirely on the experience of the people running it, so I urge the Minister to accept this very common-sense amendment.
Baroness Bennett of Manor Castle (GP)
My Lords, I offer Green group support for Amendment 20, to which we would have attached our name had there been space.
In Committee, I suggested that the bank should not be in the hands of the Treasury at all. I got some expressions of interest but not enough support to bring it back on Report. However, it is clear that we need systems thinking, as I often say in your Lordships’ House. We need an approach that looks beyond the narrow growth in GDP to something broader and more holistic. This amendment is a step towards achieving that.
Baroness Penn (Con)
My Lords, I speak on this group with some trepidation; I hope I do not show the lack of humility that the noble and learned Lord, Lord Thomas, has accused my department of. I will stand up for the Treasury: in my dealings with this group of public servants, they have been bright and suitably humble, trying to work in the best interests of the country.
I will take the amendments in reverse order. The amendment tabled by the noble and learned Lord, Lord Thomas, as he explained, seeks to ensure that the bank’s board has the necessary expertise to deliver on its objectives. He is right to focus on the importance of the bank’s board in steering this nascent institution to deliver on its two wide-ranging objectives across the whole of the UK.
I reassure noble Lords that the bank’s board already contains a wealth of experience in infrastructure finance, policy-making, economics and green investments, across the public and private sectors. Collectively, its members have worked at similar national organisations, such as the Canada Infrastructure Bank, the UK Green Investment Bank and UK Export Finance, as well as leading financial services firms and central government departments. John Flint, the bank’s CEO, was chief executive of HSBC, and Annie Ropar was the CFO at the Canada Infrastructure Bank. So, in its infant form, it has already attracted some high-quality individuals to work there.
The bank’s non-executive directors were recruited in line with the guidelines set out by the Office of the Commissioner for Public Appointments, and were selected based on the skills they could bring to the board to deliver on the bank’s mandate. These appointments could be audited by OCPA in due course. OCPA’s guidelines include a principle of merit, which means
“providing Ministers with a choice of high quality candidates, drawn from a strong, diverse field, whose skills, experiences and qualities have been judged to meet the needs of the public body or statutory office in question.”
As I have said in previous groups, in drafting this Bill, we are seeking to create a high-level framework within which the bank can operate, while providing for the longevity of its objectives. Therefore, given that appointments are already recruited in line with OCPA’s guidelines, which we expect OCPA to review and which include a principle of merit, I do not think it is necessary to add greater specificity to the Bill on this point. Including these provisions could be overburdensome and prevent the bank and Treasury hiring the most appropriate people for the roles.
I spoke about the recent appointments in Committee, so do not propose to do so in detail again, but I would be very surprised if the noble and learned Lord, Lord Thomas, could find much fault with the appointees. He has also expressed an interest in the representation of the devolved Administrations and, as he spoke about on the previous group, in making sure that the board and the bank command the confidence of all four nations in the UK. As I said to him before and will happily say again, commanding that confidence is central to how the bank has gone about its business. The skills of the board will adequately represent the needs of all four nations, although, as I said on the previous group, specifics in that area are not necessarily a discussion for now, as they are part of the process of legislative consent. I therefore hope that the noble and learned Lord does not move his amendment when it is reached.
The amendment of the noble Lord, Lord Tunnicliffe, seeks to ensure that the bank always has a representative of the workers on its board. The UK Corporate Governance Code already states that a company should have one or a combination of a director appointed from the workforce, a formal workforce advisory panel or a designated non-executive director to facilitate engagement with the workforce. It also states that, if the board has not chosen one or more of these methods, it should explain what alternative arrangements are in place and why.
I give the noble Lord my absolute reassurance that the bank will comply with the UK Corporate Governance Code; however, as I have said, it is a nascent institution, with its board appointments made and the non-executive directors joining only recently. The bank has not yet had the opportunity to determine how it will meet this specific provision. It is currently establishing its governance and will report on its progress in its annual report and accounts. The noble Lord can expect an update there.
Lord Tunnicliffe (Lab)
Before the noble Baroness sits down, could she find a device—a statement or something—to advise us on when that process has been completed and in what form that requirement has been met?
Baroness Penn (Con)
I am happy to write to the noble Lord to set out those anticipated timelines. The annual report and accounts are published and laid before Parliament so, between those two pieces of information, I will endeavour to cover this for the noble Lord. If we reach the annual report and accounts and are not in a position to do so, I will pick this up again then and ensure that I get back in touch.
Lord Tunnicliffe (Lab)
My Lords, I thank all noble Lords who have participated in this debate, and I thank the noble Baroness for her assurances on my specific point. I hope that it is seen through and that the result is not that the bank explains that it is not following the code, for some reason. This is an alternative, but one that I would deeply regret if it were chosen. With that, I beg leave to withdraw my amendment.
Lord Thomas of Cwmgiedd
“Consultation with devolved governments(1) Before exercising the powers of the Treasury under section 2(6), the Treasury must consult the Northern Ireland departments, the Scottish Ministers and the Welsh Ministers and take account of any views expressed in the consultation.(2) Before preparing a statement of strategic priorities under section 3(1) and before exercising the powers under section 3(3) to revise or replace the statement, the Treasury must consult the Northern Ireland departments, the Scottish Ministers and the Welsh Ministers and take account of any views expressed in the consultation.(3) Before exercising the powers of the Chancellor of the Exchequer under section 7, the Chancellor of the Exchequer must consult the First Minister of Scotland, the First Minister of Wales and the Northern Ireland Executive and take account of the views expressed in the consultation.”Member's explanatory statement
This amendment provides for there to be consultation with the devolved governments in relation to amendments of the Act under clause 2(6), the statement of strategic priorities under clause 3(1) and 3(3), and the appointment of directors by the Chancellor of the Exchequer under clause 7.
Lord Thomas of Cwmgiedd (CB)
My Lords, I listened very carefully to what the Minister said but, in view of the great constitutional importance of ensuring that we put this into Bills and my wish to put down a marker on this point for the future, I would like to test the opinion of the House.
Baroness Penn
Member's explanatory statement
This amendment (and the others to clause 9 in the Minister’s name) would require: reviews to be carried out by an independent person; the reviews to include consideration of “additionality”, or the extent to which the Bank’s investments encourage additional investment by the private sector; the independent person to give reports to the Treasury; the Treasury to publish those reports. The time limit for completing the first review would be 7 (rather than 10) years.
Baroness Penn (Con)
My Lords, I turn to Clause 9 of the Bill, on the statutory review. We had an extensive debate on this in Committee and, reflecting on that debate, the Government have tabled several amendments to this clause.
On the timing of the review, in Committee I set out the rationale for the first statutory review of the bank taking place after 10 years. This was for two reasons: first, to ensure that we could accurately measure the effect of the bank’s long-term investments and, secondly, to ensure that we do not overburden the bank with constant reviews. As I have previously noted, the Treasury is currently undertaking a review of the bank’s framework document and will undertake a review by spring 2024 of the bank’s capitalisation. The bank will also be subject to frequent Cabinet Office-sponsored arm’s-length body reviews, which should be conducted by an independent person.
However, I understand the strength of feeling in the House and, for this reason, I tabled an amendment to shorten the timescale for the first statutory review. Bringing forward the initial review to take place no later than seven years after Royal Assent will mean that the first statutory review will be conducted in 2029. This fits neatly with the timing of the levelling-up missions, which the bank’s work will support, that are due to be achieved by 2030.
I turn to my other amendments to Clause 9. I heard concerns in Committee that the Treasury would, in these reviews, be marking its own homework. That was not the intention, and so I have brought forward an amendment to clarify that the Treasury will appoint an independent reviewer to conduct the review. Noble Lords will, I hope, be further reassured that the Cabinet Office-sponsored reviews, as I have just noted, will have a recommendation that they be conducted by an independent reviewer too. I hope noble Lords are content with these amendments. I beg to move.
Lord Vaux of Harrowden (CB)
My Lords, I rise to speak to my Amendments 30 and 32. I am grateful to the noble Baronesses, Lady Noakes, Lady Kramer and Lady Bennett of Manor Castle, for their support. In fact, I think I may have achieved a world first in getting the noble Baronesses, Lady Noakes and Lady Bennett, to sign the same amendments. I hope, therefore that the Minister might take note of this extraordinary event and take the amendments seriously.
First, I thank the Minister for her amendments in this group, and for listening to and acting on the concerns that were raised by noble Lords as the Bill has proceeded. Her amendments are very welcome, especially those that deal with the issue that was previously raised about the Treasury marking its own homework. Having an independent person carry out the review is an important step. I also welcome the reduction of the period before the first review from 10 years to seven years. I think everyone agreed that 10 years was way too long, but even after that change, there will still be a review only every seven years, which I still think is too long. Amendments 30 and 32 would reduce this to every five years.
The argument in favour of the longer period seems to be that infrastructure investment is long-term, which it is, and therefore it will take a longer period before the success of the bank can be evaluated. I think this rather misses the point. Although it is true that the success of a particular investment may take more than seven years—indeed, it might be 20 or 30—to become clear, the review should be covering how effectively the bank has performed in making investments. Is it making enough investments, are they appropriate, are they in the appropriate parts of the country and, importantly, do they meet the additionality principle and, as we discussed earlier, the crowding-out problem? We do not need to wait until the investments themselves reach maturity to be able to see how well or badly the bank is performing in making investments.
Baroness Kramer (LD)
My Lords, I will be very brief. I thank the Minister, particularly, for establishing that the review will be carried out by an independent body. That is absolutely crucial; we really could not have had the Treasury marking its own homework. That is now going to be established on the face of the Bill.
In terms of the review period, I am totally with the noble Lord, Lord Vaux, on this one. I add one reason to the many powerful arguments that he made. The two issues that this bank is set to address, climate change and levelling up, have a great deal of urgency behind them. Therefore, the decisions that the bank makes in its early days, even if they have a long tail to them, will be crucial. If that direction needs to be changed, the bank needs to know that that is Parliament’s view before we get to seven years out, at which point, particularly around climate change, it will be far too late to change a direction that is not meeting the needs of our climate change agenda. So, particularly for this bank, because it is tied to very specific objectives, a much earlier review phase is crucial.
I join the noble Lord, Lord Vaux, in being interested in how the Minister will lay out these other reviews that are meant to fill that gap. Why should we be having partial reviews that partially fill parts of the gap, rather than the comprehensive reviews on impact that could be managed under various amendments before the House today?
Lord Tunnicliffe (Lab)
My Lords, although I see an attraction in a higher frequency than the Government are proposing, equally, I think that, in many ways, even five years is too long. I take comfort in what I hope to hear from the Minister: that we will have much of the information we need to come to a judgment about the success, and effectiveness—crowding in and all those issues—annually in the report. Her assurance on that matter is crucial, but I have confidence that she will be able to give it.
Baroness Penn (Con)
My Lords, as I have said, I have listened to the concerns of the House around Clause 9, and it is for that reason that I have sought a compromise and tabled the government amendments to this clause, as I outlined earlier.
On the shortened timescale proposed by the noble Lords, Lord Vaux and Lord Tunnicliffe, and others, I have already set out the rationale for why the Government have gone for seven years. To reassure noble Lords on their questions about needing more regular information, quite rightly, on how the bank is performing, the bank’s strategic plan set out a whole range of KPIs that it will be assessed against, including additionality, to address the point made by the noble Lord, Lord Vaux. Those KPIs will be reported on in the annual report and in the updates to the strategic plan in future.
So more regular information will be provided on the progress of the bank, not just through the statutory review. In addition to the other reviews that I mentioned in my opening speech, there is currently a review by the National Audit Office looking at the set-up of the bank. As I said in Committee in response to my noble friend Lady Noakes, the bank is also subject to reports and investigations by Select Committees of both Houses and has already come to give evidence before those committees. I reassure noble Lords that the statutory review is not the only avenue through which the work of the bank will be scrutinised. There will be ongoing scrutiny through several different avenues, including in its annual report and accounts, which will judge its progress against many KPIs. With that, I beg to move.
Baroness Penn
Member’s explanatory statement
See the explanatory statement for the Minister’s first amendment to clause 9.
Baroness Penn
“(1A) After each review, the independent person must—(a) prepare a report of the review, and(b) submit the report to the Treasury.”Member’s explanatory statement
See the explanatory statement for the Minister’s first amendment to clause 9.
Member’s explanatory statement
See the explanatory statement for the Minister’s first amendment to clause 9.
Member’s explanatory statement
See the explanatory statement for the Minister’s first amendment to clause 9.
Member’s explanatory statement
See the explanatory statement for the Minister’s first amendment to clause 9.
Member’s explanatory statement
See the explanatory statement for the Minister’s first amendment to clause 9.
Baroness Penn
Member’s explanatory statement
See the explanatory statement for the Minister’s first amendment to clause 9.
Baroness Penn
“(5) In this section, references to an “independent person” are to a person who appears to the Chancellor of the Exchequer to be independent of—(a) the Treasury, and(b) the Bank.”Member’s explanatory statement
See the explanatory statement for the Minister’s first amendment to clause 9.
UK Infrastructure Bank Bill [HL]
Monday 11th July 2022
(2 years, 4 months ago)
Lords ChamberRead Full debate UK Infrastructure Bank Act 2023 Read Hansard Text Amendment Paper: HL Bill 3-R-I(Rev) Revised marshalled list for Report - (1 Jul 2022)
Baroness Penn
That the Bill be now read a third time.
Relevant document: 2nd Report from the Delegated Powers Committee
Baroness Penn (Con)
My Lords, before we progress with Third Reading, I shall make a very brief statement on legislative consent in relation to the Bill. My officials have worked closely with their counterparts in the devolved Administrations throughout the set-up of the bank and the passage of this Bill. All three Administrations have welcomed the establishment of a national infrastructure bank. The bank has also been developing its own relationship with the devolved Administrations and their institutions—for example, the Scottish National Investment Bank. I am pleased that the bank has now completed a deal in all four nations of the UK. We continue to discuss the requirements for legislative consent with the devolved Administrations, and I am grateful for their continued engagement on this. I beg to move that the Bill be read a third time.
Lord Tunnicliffe (Lab)
My Lords, much has happened since last week’s Report stage, when your Lordships passed two sensible amendments. These changes would considerably strengthen the Bill’s climate and levelling-up credentials, ensuring greater external support for the bank and its work.
The Prime Minister has rightly said that the business of government must go on over the coming weeks and months. In that spirit, I hope that the Treasury will reconsider its opposition to these amendments. This will ensure that the next Prime Minister gets a stronger Bill on the statute books. If Ministers, whether the current crop or their successors, do not like the current wording, they are welcome to change it. However, simply overturning the amendments would show poor judgment. The economic picture has become gloomier, while dealing with the climate and biodiversity crisis is ever more pressing. Through this revised Bill, the bank can play an important role in both battles, supporting the creation of good jobs and doing more to protect nature. When one of the many leadership hopefuls assumes the office of Prime Minister, these issues must be at the front of their mind.
Until then, I thank the noble Baroness, Lady Penn, and the noble Viscount, Lord Younger of Leckie, for taking this Bill through its Lords stages. They have been ably supported by a range of Treasury officials, to whom I am also grateful. I am even more grateful to my Labour Party policy adviser, Dan Stevens, for his invaluable advice and help.
In the meantime, I wish the bank well as it continues to find its feet and comes to its initial investment.
Baroness Kramer (LD)
My Lords, obviously my colleagues and I support the creation of the UK Infrastructure Bank. We regret that it does not have the genuine operational independence that was a clear statutory characteristic of the Green Investment Bank, which was sold off by this Government as soon as the coalition ended, but we are where we are.
The work of this House has improved the Bill significantly. The Government amended it to provide absolute clarity on the UKIB’s role in supporting investment in energy efficiency; we thank the Minister for that. Noble Lords from all sides of the House also supported further changes to establish that the bank’s objectives extend to nature-based solutions in a circular economy. I hope that the Government will not attempt to reverse these meaningful improvements.
However, the Bill has followed what has become a consistent government thrust: diminishing Parliament and enhancing the power of the Executive; I will not repeat all our previous arguments about Henry VIII powers and the power of direction. The Government have promised to amend the framework document by the end of the year to assure us that not only the directions, including their content, but any objections made by the bank to such directions, including letters of reservation, will be made public. This transparency is vital; I thank the Minister personally for making sure that we got a meaningful response to this issue with a commitment not just to removing the gagging clauses originally in the framework document but to ensuring full transparency through the publication of the relevant documents.
I thank the Minister and her team for their openness and willingness to meet. I thank Peers around this House who worked together to get improvement—they are too many to name—but I believe that the Government’s nightmare is an amendment in the name of the noble Baroness, Lady Noakes, supported by the noble Lords, Lord Tunnicliffe and Lord Vaux, the noble Baroness, Lady Bennett, and me.
Last of all, I thank my own ranks. I thank Sarah Pughe and Mo Souidi in the Whips’ Office, who provided us with organisation and backing. I thank my noble friends Lord Sharkey and Lord Teverson, who brought their particular and extensive expertise to bear on this Bill; they have earned and enjoy the respect of this House.
Baroness Penn (Con)
My Lords, I thank all noble Lords for their constructive approach to each stage of this Bill. In particular, I thank the noble Lord, Lord Tunnicliffe, and the noble Baroness, Lady Kramer.
The level of scrutiny and debate on the Bill demonstrates the importance of the bank’s mission and has served to demonstrate once again the expertise of this House on topics from corporate governance through to the definition of infrastructure and our target for tackling climate change. Although this is a short Bill—something that may be welcomed—it is an important one given the bank’s potential to deliver a step change in tackling climate change and supporting levelling up through supporting the development of high-quality infrastructure across the whole of the UK.
I am therefore pleased to see the Bill progress towards becoming law, supporting the bank to become a fully-fledged, operationally independent institution able to deliver on its mandate as agreed by this House. I thank noble Lords on all Benches for working constructively on this both during debates and in the many separate discussions that I have had on this Bill.
Finally, I recognise the work of the parliamentary counsel in drafting this Bill and in supporting its passage so far. I also thank the House staff, the excellent Bill team, and my noble friend Lord Younger for his support. I am not alone in this House in looking forward to seeing the impact of the bank’s investments in improving the vital infrastructure of this country. I beg to move.
UK Infrastructure Bank Bill [Lords]
Tuesday 1st November 2022
(2 years ago)
Commons ChamberRead Full debate UK Infrastructure Bank Act 2023 Read Hansard Text Watch Debate Read Debate Ministerial Extracts Amendment Paper: HL Bill 3-R-I(Rev) Revised marshalled list for Report - (1 Jul 2022)
The Chief Secretary to the Treasury (John Glen)
I beg to move, That the Bill be now read a Second time.
The UK Infrastructure Bank Bill will finalise the bank’s set-up and ensure that it is a long-lasting, enduring institution. The Bill will set out its objectives to tackle climate change and support regional and local economic growth in legislation, as well as giving the bank a full range of spending and lending powers, so that it can benefit communities across the country and help the UK achieve its net zero goals. The bank is already having an impact. Since summer 2021, when the UK Infrastructure Bank became operational, 10 deals worth close to £1.1 billion have been done, including providing financing for a new £500 million fund that could double the amount of subsidy-free solar power in the UK.
This is a Bill for the whole UK. Thanks to £22 billion-worth of capacity, the bank will be able to support infrastructure investment and the levelling up of the whole UK. The bank represents a step change in the Government’s ability to crowd in private sector capital and to address the economic and climate challenges the country faces. The UKIB will focus on prioritising investments where there is an under-supply of private sector financing, which we expect will unlock a further £18 billion of investment.
Before I go on, I would like to thank my noble Friend Baroness Penn for her work in bringing the Bill through the other place. The Bill has already undergone thorough scrutiny, as Members would expect, and I look forward to discussing it further today and in Committee in a few weeks’ time.
It is worth remembering why we set up the UKIB. Four years ago, the National Infrastructure Commission published its national infrastructure assessment. It recommended that the UK create its own domestic bank if funding for economic infrastructure was to be lost from the European Investment Bank. As Members will recall, the UK did lose its EIB funding, worth around £5 billion a year. However, I would like to be clear that this is not intended to be and is not a direct replacement for the EIB funding, which, given its very broad remit, at times crowded out private sector funding. There was widespread consensus that we would need to bring forward plans for the UKIB, which we did, and I pay tribute to my right hon. Friend the Member for Hereford and South Herefordshire (Jesse Norman), who played an instrumental role in bringing those plans to fruition.
When establishing the bank, we were cognisant of three specific recommendations from the NIC. First, that there would be governance to safeguard the operational independence of the bank. We will come on to it later, but one of the key purposes of the Bill is to protect exactly that. It will make it impossible for the Government to simply dissolve or sell the bank without further legislation. We will also be unable to alter its core objectives on climate change and regional and local economic growth.
Secondly, the bank should provide finance to economic infrastructure in cases of market and co-ordination failures, catalysing innovation. We all know that infra- structure projects take a long time and cost a lot of money, and I want to see more private investment in such projects. Often, however, the private sector does not provide enough finance to emerging innovative technologies that have a higher risk profile—for example, net zero technologies or those that are in areas of the UK that do not historically get financing.
John Redwood (Wokingham) (Con)
Can the Chief Secretary explain why the bank is investing in a very expensive cable electricity link between the United Kingdom and Germany, given that we are in the same time zone and have similar weather, and both countries are chronically short of electricity capacity? It does not sound like a good idea to me.
John Glen
I will not be able to comment on specific investments. As I said, a series of investments have been made in the last 12 months, and I would be happy to correspond with my right hon. Friend and put him in touch with the bank so that the logic behind that decision can be explored with him.
Richard Fuller (North East Bedfordshire) (Con)
May I broaden out the question the Chief Secretary has just answered? Can he explain the oversight of the bank? There will be a report after a certain number of years, but will it be regulatory oversight, oversight by Parliament or oversight by the Treasury?
John Glen
I am grateful to my hon. Friend for the work that he did in the Treasury in recent months as my successor as Economic Secretary.
The board of the bank has been filled over the summer so that the right expertise has come in to oversee the investments and metrics for success. They will be accountable through normal processes and accountable to Parliament. Indeed, the chairman and chief executive of the bank have made themselves available to Parliament through the process of this legislation, and I attended meetings with them earlier this year with Members of the House of Lords. I know that they are willing to be scrutinised on the logic of their evolving processes and remit so that they can capture the wisdom of this House and the other place.
With regard to the climate change objectives, significant public and private investment will be needed to achieve the UK’s infrastructure policy goals, and low-carbon investment will need to be significantly scaled up to deliver net zero. That is highlighted by the fact that the UK’s core infrastructure—power, heat and transport networks—account for more than two thirds of UK emissions. Without the bank, the private sector is likely to focus its investment on lower-risk technologies and sectors, and we will not achieve regional and local economic growth without better infrastructure in every region of the country.
Disparity in infrastructure across the country has been identified as a key driver of economic inequalities, and central to the Government’s ambitions to level up is setting up new institutions boosting productivity, pay, jobs and living standards. The bank will help to grow the private sector and support it to deliver opportunities in parts of the country where they are lacking. Without intervention, the private sector is likely to continue to target geographic areas that have historically received higher levels of private capital. Targeted advice, support and challenge from the bank can help raise ambition and boost the capability of regional and local government as they tackle complex infrastructure projects.
Finally, the NIC recommended that the bank be set up in 2021. As I have already mentioned, the bank has been operational since last summer and has £22 billion of capacity. The bank is also operating across the UK and has already invested in each of our four nations. I am pleased that each Government have supported the bank, and discussions for a legislative consent motion are progressing well.
In that context, I come to the provisions of the Bill. It will complete the setting up of the bank as an operationally independent institution. It is a short Bill of 11 clauses, broadly split across three areas. First, the Bill enshrines the bank’s objectives and activities in legislation to provide clarity for the bank and the market on the bank’s long-term purpose. That is covered in clause 2, which includes the bank’s core objectives; its activities, including providing finance for the private sector and public authorities; and a definition of infrastructure.
The definition of infrastructure is inclusive and based on existing definitions in the Infrastructure (Financial Assistance) Act 2012 and the United Kingdom Internal Market Act 2020. Crucially, given the bank’s scope, we have focused the definition on economic infrastructure. As a result of the Bill’s passage through the Lords, we included energy efficiency in the definition to clearly signal policy intent. I am sure that we will discuss that further in this debate and in Committee.
I highlight that we have taken a power to amend the activities and definition of infrastructure to allow the bank to keep pace with an innovative market. We have not, however, taken the same power to amend the bank’s objectives. That is vital in providing clarity to the market and to ensure that the bank is not fundamentally changed without further primary legislation.
Secondly, the Bill will allow the bank to provide financial assistance to the private and public sector including, crucially, giving the bank the power to lend directly to local authorities in Great Britain and to the Northern Ireland Executive. That is covered under the bank’s activities in clause 2 and further defined in clause 10 and clause 5, which allows the Treasury to put the bank into funds.
It is important to note that the bank will be able to lend directly to each UK nation, including their local authorities. In the case of Northern Ireland, we have designed the bank to be able to lend directly to local authorities and the Northern Ireland Executive. That accounts for the fact that the Northern Ireland Executive hold responsibility for most capital infrastructure projects that would be the responsibility of local authorities in the rest of the United Kingdom. As I said at the beginning of my remarks, this is a Bill for the whole UK.
Richard Fuller
One of the objectives is that the bank should make a positive financial return. Can my right hon. Friend explain to the House why that is not in the Bill?
John Glen
I would be very happy to look into that matter and respond to my hon. Friend at the end. It is probably deemed to be unnecessary, but I will give absolute clarity, or the Exchequer Secretary will when he closes.
Thirdly, the Bill supports the operational independence of the bank by setting out clear governance and accountability in how it will be run. That is covered by the remaining clauses, including board requirements in clause 8, reporting requirements in clause 6, a review of the bank that will also look into its additionality in clause 9, and the ability for the Treasury to issue a strategic steer in clause 3 or a direction in clause 4.
Although the bank is still in its infancy, it is already taking a leading role in the clean infrastructure market. Over time, we expect the bank to catalyse new markets of infrastructure by crowding in private capital to help meet our climate change ambitions and level up across the UK. In much the same way that the EIB helped to catalyse the offshore wind market, where the UK is now a global leader, the UKIB will help to catalyse the infrastructure markets and technologies of the future.
Indeed, the Bill will be at the heart of our focus on our long-term energy security. It will help the Government to deliver more renewables, including more offshore wind. I have no doubt that the bank will grow to be a sophisticated and adaptive tool, which will allow the Government to quickly place capital behind the projects that this country needs. I reiterate to hon. Members on both sides of the House and to the wider public that we have designed the bank to endure and be a long-lasting institution that will deliver the long-term priorities on which we all depend. I greatly look forward to this afternoon’s debate and to drawing on the expertise of hon. Members on both sides of the House.
James Murray (Ealing North) (Lab/Co-op)
I will set out the views of the Opposition. We will not oppose the Bill today, as it seeks to put the UK Infrastructure Bank, which has been operating on an interim basis since June 2021, as we heard, on a statutory footing. We support the establishment and strengthening of the bank, and we want the new institution to play its part in tackling climate change and supporting regional and local economic growth.
The need for economic growth is central to the challenges our country is facing today, and it comes after 12 years of low growth under the Conservatives. During the last Labour Government, despite the global financial crisis, the economy grew by 2.1% a year. Since 2010, however, the Tories have grown the economy by just 1.5% a year. The outlook under the Tories now is even worse, with growth forecast to be the worst in the G7 over the next two years. As the previous Chancellor recently admitted, under the Conservatives we have been stuck in a “vicious cycle of stagnation”.
That stagnation in our economy has seen real wages fall and the tax burden rise for working people in this country. Even before the disastrous mini-Budget, working people were paying the price for the Conservatives’ record of failure on the economy. What the then Chancellor announced on 23 September poured petrol on the fire, as Ministers unleashed a discredited and reckless economic approach on the British public. Trickle-down economics, unfunded tax cuts and an ideological slashing of protections for workers and the environment—no wonder the former Prime Minister and Chancellor were removed from office so quickly, and no wonder the current Chancellor has had to U-turn on almost every measure. The truth is that this economic crisis was created in Downing Street. The damage has been done, and working people will be paying the price for years to come.
Part of the reason for the Conservatives’ failure to grow the economy as it could have been growing over the last decade has been their failure to invest in the infrastructure our country needs. As we look ahead to the coming decade, investment in our country’s response to the climate emergency could not be more critical, both to protect the environment and to grow the economy.
That is why Labour’s green prosperity plan is so important. Under our plan, we would invest in wind, solar and nuclear power to make our electricity system zero-carbon by 2030, we would insulate 19 million homes across the country, bringing down carbon emissions and people’s home energy bills, and we would invest in new jobs in industries of the future, from electric vehicles to clean steel.
We recognise that the UK Infrastructure Bank can play an important role in supporting essential investment. We therefore welcome the fact that one of its objectives, set out in clause 2 of the Bill, is to help tackle climate change. But setting up the bank is not enough on its own; we need a Government who will drive forward the agenda of green investment that we need. Sadly, the Government’s record makes it clear that they will fail to rise to that challenge.
There is evidence of that failure littered throughout the past 12 years. Ten years ago, the Government set up the Green Investment Bank. Five years later, they sold it off to a private equity group. The Public Accounts Committee said that the bank had
“failed to live up to original ambitions”.
The Committee was clear that, in selling it off, the Government had been focused on
“how much money could be gained from the sale over the continued delivery of GIB’s green objective.”
Supporters of the current Prime Minister on the Conservative Benches may remember that, two years ago, the then Chancellor published a video on his YouTube channel titled: “Rishi Explains: Green Home Grants”. In that video, the now Prime Minister excitedly announced that the brand-new green homes grant scheme was open for applications. However, I was not able to find any videos of him explaining why the green homes grant scheme closed six months later and saw £1 billion cut from its budget. Although he seems to have forgotten to make a video explaining that, the Environmental Audit Committee was happy to set out its views. In its report, “Energy Efficiency of Existing Homes,” it concluded that the scheme had been
“rushed in conception and poorly implemented”
and described its administration as “nothing short of disastrous”.
Richard Fuller
The Opposition spokesman talks about the importance of sticking with plans and of permanence. That is quite right; this is infrastructure, which lasts a long time. Will he therefore use this opportunity on the Floor of the House to give the assurance that, should Labour form a Government in the near future, it will make no changes to the objectives listed in the Bill?
James Murray
It would be a strange parliamentary procedure for the Opposition to commit to a Bill that has not even passed into law yet; let us see what happens in Committee and on Report and what the Government do, and indeed what we inherit when we become the next Government if we win the next election. So much has changed over the last few weeks; we do not know exactly what we are going to inherit and it is not sensible to make commitments now. We will set them out in our own time ahead of the next election.
Of course, the Government’s record of failure over the last 12 years continues to this day. In January, the Government pledged £l00 million to help Britishvolt, a UK battery start-up company, to build its planned battery gigafactory in Blyth, but when Britishvolt faced a critical hurdle yesterday and needed to access some of that funding, the Government refused. If the Government are not prepared to back a British business investing in green technologies and new jobs in Blyth, what on earth are they doing? When this money was announced, the then Business Secretary said the new factory was
“exactly what levelling up looks like.”
It turns out he may have been right, as this is exactly what levelling up looks like under this Government: broken promises, a record of failure, and a Government unable to deliver the investment and jobs we need.
The truth is that the Government and the newly appointed Prime Minister have a record of failure on investing in green infrastructure for our country and our economy. So, while we welcome the new UK Infrastructure Bank and its focus on tackling climate change, we know that no matter how well it plays its part, the British people need a Government with an effective plan to make the investment in the jobs, homes and energy supplies of the future a reality.
I have focused so far on the first of the UK Infrastructure Bank objectives set out in this legislation: helping to tackle climate change. The second of the two objectives in the legislation is also critical for the bank’s success, and is described as being
“to support regional and local economic growth.”
We firmly support that objective, and we want to see all parts of the country benefit from investment in green jobs of the future, along with improved rail and other transport services, and other essential modern infrastructure, including broadband. But when it comes to supporting economic growth across the country—“levelling up” as the Government used to call it—we know that words ring hollow unless people see change. That is why clause 2(6) is so important, as it seeks to make sure the bank has regard to the first mission of the Government’s “Levelling Up” White Paper when exercising its functions under this Bill. We have heard rumours that the Government may seek to remove this new requirement from the Bill now that it is back in the Commons. I am sure the Minister will agree that doing so would make it clear the Government have abandoned their commitment to levelling up, so I urge him in his closing remarks to confirm that this requirement will remain in the Bill.
Finally, along with doing all it can to help tackle the climate crisis and to support economic growth, we believe that the UK Infrastructure Bank must also play its part in helping create good-quality jobs with decent pay and conditions. All businesses and bodies receiving public money from the UK Infrastructure Bank must have a plan to create those good jobs with decent conditions, and there must be tough contractual sanctions to make sure those commitments are honoured. To make sure the bank keeps that focus on good jobs at the heart of its approach, there must be a worker representative on its board.
After 12 years of low growth from the Conservatives, there is a vital need to invest in the infrastructure of the future. We need to invest across the country in new transport, new digital infrastructure, new sources of energy that are sustainable and secure, and new high-quality jobs with decent pay. That is why we support the establishment of the UK Infrastructure Bank and this Bill’s aim of putting it on a statutory footing.
We will of course press Ministers in the Commons Committee and Report stages to improve this legislation, and, as well as seeking changes from Ministers, we will defend changes made in the Lords that we believe have improved the Bill. Alongside the insertion of levelling up targets that I have mentioned, we welcome the amendment that changed the definition of “infrastructure” to refer to the circular economy, nature-based solutions and energy efficiency. We further support those amendments that strengthened requirements on the Government to have a more regular and meaningful review of the bank’s effectiveness and impact.
However, even if we succeed in strengthening this Bill and the operation of the bank, we know the country needs far more from its Government. We need a Government who will use this bank as part of a far more ambitious plan to grow the economy, to make the transition to net-zero, and to create jobs and industries in all parts of the country.
The record of this Government to invest in greener homes, energy, and jobs is one of failure. The latest so-called “growth plan” from the Conservatives crashed the economy, and their newly appointed Prime Minister is doomed to fail, as he is trapped so tightly by a need to put his party first, leaving the country second. The truth is we need a fresh start to face the challenges of the future, and the sooner the British people get the chance to have their say, the better.
Richard Fuller (North East Bedfordshire) (Con)
It is a pleasure to welcome this sensible Bill, which puts the operations of the UK Infrastructure Bank on a statutory footing. It is pleasing that the Opposition will support the Bill, but it was somewhat worrying to hear the Opposition spokesperson, the hon. Member for Ealing North (James Murray) say that the Labour party was not committed to its objectives. That will send a worrying signal to investors in infrastructure, who want to see a long-term view from both sides of the House on the plan for UK infrastructure. Perhaps he might clarify in his closing speech that Labour will commit today to make no changes whatsoever to the Bill’s objectives. It would be helpful for him to make that indication.
It is right that amendments were made to the Bill in the House of Lords to include issues to do with the circular economy and nature-based solutions. That will broaden its aspect and applicability.
In opening, my right hon. Friend the Minister referred to the European Investment Bank. It is true that the UK used to benefit significantly from investment funds coming from the EIB, but those really came to a close in 2016-17 and, as that was five or six years ago, we should be honest about the need to get the bank moving. I am not trying to push for quicker movement, but this is an opportunity to start getting to the £5 billion or £8 billion that the UK Investment Bank said was its objective in its strategic plan this summer.
I turn to crowding in, which is one of the three parts of the bank’s “triple bottom line”, as it calls it. That is absolutely the right thing. There is plenty more that we can do, and I know that the Government are focused on that. With Solvency 2 and pension fund money being made available for more infrastructure expenditure, will the Minister update the House on the Government’s thinking about that?
The City of London and the Government have made tremendous strides in promoting green finance and London as a centre for that. Again, it would be useful to hear an update from the Minister on the UK’s leadership position, which the bank could play a significant part in helping us to deliver.
One of the most important parts of the 2019 review of infrastructure finance was about how the Government can provide a reliable delivery pipeline. That means that they are clear about the projects that they wish to promote and have a timetable that paces them out over a number of years. The National Infrastructure Commission can—it does not always—do a good job of that. Perhaps we will hear more about that in the near future.
I return to the point that I put to the Minister about another part of the triple bottom line: generating
“a positive financial return”—
which it says is
“in line with the Bank’s financial framework.”
Perhaps that is the answer to why it is not in the Bill, but it would be helpful to have a little more transparency about what the financial framework would be and how it will be brought to the House for some regulatory oversight. Will that be through hearings of the Treasury Committee or other reports that may be made to the House from time to time?
That is an important factor in the UK Investment Bank’s goals and the role that it can play in helping the UK to achieve net zero. Let us be frank: when, I think, four or five years ago, the House committed to achieving net zero in a certain timeframe, there was no price tag attached. It was the biggest commitment ever made without a price tag attached for the British taxpayer. The UK Investment Bank can play a role in making sure that that price tag gets smaller and smaller. In fact, one objective the UK Infrastructure Bank says it wishes to focus on is the transition to subsidy-free models. That is absolutely essential to some key aspects of how we achieve net zero, in particular the decarbonising of home heat where we will need to attract private sector capital and long-term, patient capital. We will need the Government, through the UK Infrastructure Bank, to provide some catholic investment and, most importantly, the product structures that enable drawing in of that capital behind the most effective way, while also being able to show how we get out of the taxpayer funding it all. We cannot afford to make unfunded pledges again and again on not only this generation of taxpayers, but on future generations of taxpayers. That is why I am particularly keen on pressing the Minister and, should I be fortunate enough to sit on the Public Bill Committee, investigating further—[Interruption.] I guess that is a straight no, Mr Deputy Speaker—how we can ensure that the commitments to a positive financial return and to transitioning from subsidy-free models are given more weight in the structure of the UK Infrastructure Bank.
Finally, I draw the attention of those on the Treasury Bench to clause 4, on the power of direction. This is a familiar topic, I think, in various parts of the Treasury at the moment. I would be interested if in his winding-up speech the Minister provided us with a little more of his thoughts. There was a debate on that in the other place. It might be helpful if the Minister updated us on what further thinking there has been on the power of direction.
This is a very sensible Bill. It confirms what is already the case and I am sure it will go through the House with very great speed.
Mr Deputy Speaker (Mr Nigel Evans)
The Whip on duty has made a note of your enthusiastic application to sit on the Committee.
Stewart Hosie (Dundee East) (SNP)
On what has just been said, the issues relating to the power of direction in clause 4 and the steer that can be given on the strategic priorities by the Treasury deserve to be explored in a little more detail. When I see words like
“the Government will not normally”
and I think about what the Government do not normally do in relation to Scotland, I think the hon. Member for North East Bedfordshire (Richard Fuller) is right to be slightly anxious.
However, I give the UK Infrastructure Bank and the Bill a broad welcome. Taking the Bill at face value, there is nothing to criticise in its objectives of helping to tackle climate change and supporting the efforts to meet the UK Government’s 2050 targets. Nor is there anything to criticise in the objective to support regional and local economic growth. What I would point out, however, is that—the Minister alluded to this—the delivery of support to facilitate local and regional growth is provided in Scotland by the Scottish Government, local government and other agencies, and that the green targets in Scotland, for example the earlier net zero target, are also set independently in Scotland. It is therefore important that the UKIB supports the devolved Governments’ objectives and does not, even inadvertently, end up working against them. That is important, because Scotland has its own infrastructure investment plan, our own global capital investment plan and our own national strategy for economic transformation that provides the framework for the Scottish Government’s policy priorities.
There is—I am sure the Minister is aware of this—clearly an overlap between the strategic objectives of the UK Infrastructure Bank and the Scottish National Investment Bank, particularly in the context of tackling climate change and supporting regional economic growth. The UKIB’s aims include:
“to help tackle climate change”
and
“to support regional and local economic growth”.
The Scottish National Investment Bank’s aims include:
“investing in inclusive and sustainable economic growth”
and
“investing to promote environmental wellbeing”.
To ensure that both banks meet their goals and deliver the maximum impact for the people of Scotland, and in line with the objectives being set in the Bill, it is essential that the two banks are able to work together to identify and support appropriate infrastructure projects in Scotland. It is also vital that Scottish interests are appropriately represented and that there is an awareness of the Scottish economic context and the Scottish Government’s policy goals. To ensure that there is alignment between both of the bank’s aims, there should be an administrative mechanism, such as a memorandum of understanding, between the UK Infrastructure Bank and the Scottish National Investment Bank to ensure that policy alignment is maintained. I fear that, unless we have such a mechanism, UKIB’s aims might be undermined and there will ultimately be a risk that it will not deliver fully on its objectives.
It is also vital that the creation of UKIB is not seen as an excuse to reduce further the Scottish or any other departmental or devolved Administration budget. We have already had a £1.7 billion real-terms cut since last December. However, I welcome the Bill and its strategic objectives, including tackling climate change, but it is vital that the Scottish Government’s more ambitious climate targets are reflected either in the Bill or in the way in which the bank operates.
My next point is on the bank’s activities, which are clearly described in clause 2 as
“providing financial assistance to projects wholly or mainly relating to infrastructure”
and
“providing loans to relevant public authorities”—
and so on. That is broadly welcome, as is the description of infrastructure underpinning the “circular economy”—not least because the Scottish Government are introducing a circular economy Bill to advance a zero-waste and circular economy by increasing reuse and recycling rates and improving waste and recycling services. It is important that the investment bank can therefore fund existing bodies such as non-governmental organisations, think tanks and other agencies that are already specialists in their fields. Let us take, for example, the Scottish Institute for Remanufacturing at the University of Strathclyde, which enables industry to become part of the circular economy. To date, the Scottish Institute for Remanufacturing has committed substantial sums to support Scottish remanufacturing to become part of the circular economy.
I also particularly welcome the express inclusion of railways, including rolling stock, in the description of infrastructure. However—this is a very narrow point—I was at a loss as to why there was no specific reference to electrified rail or carbon-neutral rolling stock. That may be implicit in the Bill’s intentions, but it would nevertheless have been helpful to see it.
On strategic priorities and plans, the Bill states:
“The Treasury must prepare a statement of strategic priorities…The Treasury must comply with subsection (1)…The Treasury may revise or replace the statement…The Treasury must lay a copy…before Parliament…The Bank must…act in accordance with strategic plans which reflect the Treasury’s statement”.
I can well understand why the Treasury would be intimately involved in the creation and the nuts and bolts of setting up a bank, but I am at a bit of a loss as to why devolved Administrations, other agencies, the Department for Business, Energy and Industrial Strategy, the Department for Environment, Food and Rural Affairs and even those responsible for levelling up have no specified role in setting out the bank’s strategic priorities.
My final point is that, sadly, as has been mentioned, we have been here before with the Green investment bank. The Minister said twice in his opening remarks that he wanted the bank to be long-lasting and to endure, and I agree entirely. However, the way in which the Bill is drafted fails to provide the certainty that many of us would like about its future. The Treasury has too much power over the investment bank’s functions and there are few safeguards to ensure that the bank is not sold off to a private company. It is vital that the Bill contains more of an assurance that UKIB will not meet the same fate as the green investment bank: it was privatised and is now owned by the Macquarie Group. The Green Investment Group, as it is now known, carries out extremely valuable work, but it is vital that the new investment bank is not set up at public expense and public risk only to be sold off later. I am sure that right hon. and hon. Members will recall that when it became clear that the old green investment bank was to be privatised, the decision was described as reckless. This is what was said at the time:
“The Green Investment Bank is not just the government’s most lauded innovation in the war against climate change. It has kept investment in the real economy going at a time when bank lending had fallen to an all-time low. It has played a critical role in supporting the UK economic recovery.”
I would like the UK Investment Bank to be long-lasting and to endure. The last thing we would like to see is the public purse and public risk being used to establish an institution that is then privatised, no doubt with some Minister hoping for preference later and a seat on the board. That is not what our party considers the circular economy.
Sarah Olney (Richmond Park) (LD)
I welcome the Chief Secretary back to the Dispatch Box; it is genuinely a pleasure to see him back. It is quite ironic that we are here today to discuss setting up or reinstating something that was previously working well, because that rather mirrors his career. As has been mentioned, we had a green investment bank—it was a Liberal Democrat creation during the coalition Government years—and what we are really doing is setting it up again. It was sold off to the private sector, as the right hon. Member for Dundee East (Stewart Hosie) mentioned, and it made £144 million in profit for its new Australian owners last year, which just goes to show what an important role is being played by our funding partners for our climate change objectives.
The Liberal Democrats believe that it was a short-sighted move to sell off the green investment bank in the first place, so we very much welcome this Bill to set up something similar again. However, we worry that it might be too little and too late to make a real impact. Over the past seven years, numerous opportunities will have been missed to make substantial investments that could have made a real difference in progressing towards our net zero targets.
One of our big concerns is that the infrastructure finance that will be made available through the bank is very small in comparison with the challenges that we face with climate change and with levelling up. The bank will therefore need to mobilise a huge volume of private finance to meet the Government’s infrastructure goals and international climate goals. The bank has £22 billion of financial capacity over the next five years, but the Institute of Chartered Accountants has estimated that we will need £40 billion of investment per year to deliver net zero by 2050, and the Office for Budget Responsibility has projected that £1.4 trillion of investment will be needed by 2050 to deliver our climate change objectives. We really need the bank to be a success and mobilise those funds if we are to honour our climate commitments.
The Bill rightly identifies tackling climate change and achieving net zero as its strategic objectives, alongside supporting regional and local economic growth. However, as Liberal Democrat colleagues in the Lords have expressed, there is a need for a joined-up approach to protecting our environment, with biodiversity included as an objective alongside climate change. Since the Government sold off the green investment bank, the markets have failed to deliver on developing floating offshore wind, electric vehicle charging infrastructure, marine and tidal energy, broadband roll-out, carbon capture and storage or insulation—there is such a long list. So many green technologies could have been supported via the continuation of the green investment bank.
We want more ambition from the Government on the green agenda. We would like to see net zero achieved by 2045 rather than 2050, with a proper green industrial strategy so that we have a long-term plan in place. We want bold action to fire up net zero, from new targets for zero-carbon flight to new industrial strategies for hydrogen and power cabling and a major restructuring of the UK economic model to ensure that it is fit for the future.
To achieve climate targets, we need to limit warming to 1.5° by 2030. I welcome the Government’s concession in the other place that they will include investment in energy efficiency in the bank’s remit, as they have repeatedly failed to decarbonise our housing stock and take steps to reduce fuel poverty, but it is important to remember that effective investment requires much more than making money available. We need to ensure that finance is channelled into developing the skills needed to enable a green transition and help British businesses to become global leaders in key future technologies.
In 2012, the green investment bank was created. Ten years later, we are starting again, but the Liberal Democrats wish the project well. We want the Bill to proceed swiftly through the Commons and the bank to be successful.
Jonathan Edwards (Carmarthen East and Dinefwr) (Ind)
It is a pleasure to contribute to the debate, and to make a very short speech about the sort of projects that I hope the UK Infrastructure Bank will support. Given that we are talking about more than £20 billion, I am surprised that a great many Members of Parliament are not making specific bids. However, I will make the best of the time available to me.
This bank was created to replace the European Investment Bank, which, as you well know, Mr Deputy Speaker, had a proud record of investing in Wales. In the decade preceding the EU referendum, the EIB made £2 billion worth of investments in a wide range of sectors in Wales, including social housing, transport, energy, water and education. Wales was promised “not a penny less” during the referendum campaign, so a benchmark figure should be £200 million of investment in Wales per annum, adjusted for inflation. The Welsh Government have already expressed their concern that there is an overall shortfall of more than £1.1 billion in the Welsh budget as a result of our departure from the EU. I hope that the Minister will clarify whether the “not a penny less” promise applies to UK Infrastructure Bank spending.
Before I turn to the main focus of my speech, I want to touch on governance and accountability. Infrastructure development in my country is largely the responsibility of the Welsh Government, and I therefore welcome what the Minister said in his opening remarks about a greater role for the devolved Administrations. However, I am sure he will be aware of the Welsh Government’s view—as well as that of various Senedd Committees—that that Government should have equal status in terms of establishing the bank’s governance structures, as well as a role in setting its remit.
Currently all the bank’s directors are appointed by the Chancellor, and one small and obvious first step would be for the Welsh Government to appoint a director. According to the House of Commons Library, between five and 14 directors can be appointed by the Chancellor. While this would still be a far cry from an equal partnership, if the devolved Governments appointed one each, that would still allow 11 appointments for the Chancellor, including those of the chair and chief executive.
On the issue of scrutiny, it seems to me completely reasonable for the bank to be subject to a statutory requirement to appear annually before the relevant Senedd Committees. It may surprise Ministers and indeed other Members, but the Welsh Government do not brief Welsh MPs on their position in relation to UK Government Bills. In view of the work that has taken place in the Senedd and the statements made by Welsh Government Ministers about the Bill, they would do well to inform Welsh MPs of their reasons for not allowing those of us who bother to research their proceedings to understand where they are coming from. However, my understanding is that following close scrutiny of the Bill, the Welsh Government, as well as three separate Senedd Committees, believe that every clause requires the Senedd’s consent, as opposed to the six clauses for which the UK Government are currently seeking consent.
Furthermore, I understand that the Welsh Government have made it clear that they will not grant consent to the Bill unless their concerns about governance and accountability are addressed—perhaps the Minister was being slightly optimistic in his opening remarks—because the bank operates on a UK-wide basis, and will be able to exercise functions in Wales in areas of devolved competence.
If the new Prime Minister wants to restore integrity and accountability to the premiership, he surely knows that a key part of that process is resetting intergovernmental relations not only with the EU but with the Welsh and Scottish Governments. As I have said, nearly all post-Brexit related Bills are being used to trample over the devolved settlements. This is the first big test for the new Administration: that the UK Government is going to adopt the more grown-up approach of collaborating fully with the national Governments within the Union. Can the Minister guarantee that the bank will not support any projects in Wales that the Welsh Government oppose?
What I really want to talk about, however, is a project that I believe falls perfectly within the UK Government’s stated aims for the new bank, namely helping to address geographical wealth inequalities within the British state and helping to tackle climate change. The Minister will be aware of the protracted discussions about the proposed Swansea Bay tidal lagoon. In 2013, plans were announced to develop the lagoon. The development received planning permission in 2015, but plans collapsed in 2018 after the UK Government decided that they could not justify a contracts for difference financing model for the scheme. Since then, new proposals for a £1.7 billion lagoon were announced in October last year. DST Innovations hopes to build the lagoon over a 12-year period as part of the wider Blue Eden scheme that will include the UK’s largest floating solar farm, 5,000 cutting-edge eco-homes and a high-technology battery factory creating 1,000 jobs. The lagoon itself aims to produce 320 million MW of electricity, and agreement has already been reached with Swansea Council for a plot of land for the battery facility.
Such a project would place south Wales at the forefront of global environmental technology innovation. It would be a transformative project for the area and I am sure we all agree that we want to see the plans come to fruition. My concern is that we have felt close to delivering a Swansea lagoon on many occasions. I therefore ask the Government: is there scope for discussions between the infrastructure bank and the developers—that is, if they are not already happening? The ability of the bank to offer guarantees, for instance, could be useful in helping the developers to draw down the private finance they are seeking, hopefully at a preferential or slightly more favourable rate.
New technologies such as this come at a premium, but I hope the British Government will have learned from wind and solar that, once established, these technologies become much cheaper and an essential part of the electricity generating mix. Tidal is also a reliable energy source, giving it added value compared with other renewable technologies. Tidal technology off the Welsh coast offers huge opportunities for Wales, and I am sure the Minister will be aware of proposals for a far bigger lagoon, over 30 km in length, off the north Wales coast.
Furthermore, the Welsh Government last month announced the creation of their own renewable energy generation company, with initial plans to develop wind technology on public land. I really welcome this policy, because my constituency houses many wind developments that are owned by the state-owned companies of other Governments, which means that the profits from the use of Welsh resources leave Carmarthenshire and leave Wales. Revenue from the new Welsh Government-owned company will be reinvested in schemes to increase energy efficiency in the Welsh housing stock, and it therefore becomes circular—another stated aim of the bank. Clearly, there is therefore scope for formal links between the UK Infrastructure Bank and the company owned by the Welsh Government.
Bill Esterson (Sefton Central) (Lab)
Labour supports the creation of the UK Infrastructure Bank, and we support the Bill’s placing the bank on a statutory footing. In Committee, we will want to see changes to ensure that the bank focuses on strategically important areas, not least energy efficiency, nature-based solutions and job creation. We will also want to see changes to the governance of the bank, for example ensuring that there is a workers’ representative on the board of the bank.
This Government have a terrible record on infrastructure over the last 12 years, whether it is their cancellation of Northern Powerhouse Rail or their dismal failure to invest in renewable energy or take decisions on new nuclear. Their lack of strategy and planning was also shown when they closed the UK’s gas storage facility. Indeed, these 12 years of failure on infrastructure are central to the Conservative Government’s failures of low growth, low productivity and low investment.
Those 12 years of failure were also the prelude to the disastrous mini-Budget of 23 September. The Bank of England was forced to step in four times to support financial stability and rescue pensions, and there was criticism of the UK Government by the International Monetary Fund. Interest rates went through the roof, there was huge volatility in the pound and inflation is higher than in comparable countries. So, yes, the Conservatives crashed the economy. The result is higher mortgage payments for households, higher borrowing costs for businesses, chaos from the Government, crisis for ordinary people and crisis for the economy. The economic failure by the Conservatives has left the UK ill-prepared for the current energy crisis, pushing up bills and risking energy shortages.
A strategic approach to infrastructure is essential, and it is Labour’s industrial strategy that follows the evidence from across the economy. Unlike the Conservatives, our plan follows evidence from around the world. At the heart of our plan is Labour’s green energy plan. We will invest in the energy sources of the future. Our plan will deliver self-sufficiency in renewable energy by doubling onshore wind, trebling solar and quadrupling offshore wind, all supported by the creation of a publicly owned “Great British Energy” company. Our plan will create half a million jobs in renewable energy and a further half a million jobs in insulating 19 million homes over 10 years. Our plan will invest in the technologies and industries of the future, from EV charging points, supporting a burgeoning electric car industry, to clean steel and developing shorter, more resilient supply chains. Our plan will create jobs, cut bills and deliver energy security, and it will transform our prospects after 12 years of economic failure by this Government.
The UK Infrastructure Bank has to take a long-term view in the national interest. So what is the Government’s record? The sale of the green investment bank to private equity, yesterday’s distressing news about Britishvolt and the failure of the green homes grant scheme—all mentioned by my hon. Friend the Member for Ealing North (James Murray) and all examples of where the UK Infrastructure Bank could do so much better to ensure a greater chance of success with the right strategic mandate.
What should be the approach of the UK Infrastructure Bank? Labour’s industrial strategy will deliver prosperity through partnership: the Government working with business and trade unions to create thriving businesses, prosperous workers and successful communities that benefit from investment in the whole country and from a strategy that supports the everyday economy as well as those in advanced manufacturing. The question for this Government is whether their approach to the UK Infrastructure Bank matches the scale of our ambition.
It is worrying that, just last week, the Prime Minister answered a question about onshore wind by talking about offshore wind. I wonder whether he understands the difference. His refusal to end the moratorium on onshore wind is telling, and it certainly is not an indication that this Government intend to make a bold, ambitious commitment to benefiting from the opportunities of a low-carbon economy. A good test of whether this Government really are committed to infrastructure investment is whether the new bank will deliver the decarbonisation we need and whether it will enable this country not just to survive but to thrive, by making the most of the massive economic opportunities available from the energy transition.
We have exciting technologies in wind, solar, tidal, carbon capture and storage, nuclear and hydrogen. Will the bank give investors the confidence they need to develop the benefits for our domestic economy and for export markets, too? So far, the bank has faced criticism for following the market rather than setting new strategic priorities for big infrastructure projects. Will the bank really support local and regional economic growth? After 12 years of failure, people can be forgiven for being somewhat sceptical.
An industrial strategy is a partnership between Government, employers and workers. In government, we enshrined partnership working in the Olympic Delivery Authority to ensure good local jobs, and to ensure that those jobs were central to the construction of Olympic facilities. We set up the Automotive Council with employers and trade unions to protect local jobs. We will be pursuing amendments in Committee to enshrine a commitment to local jobs in the bank’s remit, and we will push for worker representation on the board. That is the recommendation of E3G, which says that a diverse representation includes workers. Partnership in a successful economic and industrial strategy depends on worker representation. We will follow the evidence in our approach. Our amendments in Committee will push this Government to do so, too. Labour’s approach to infrastructure and industrial strategy is through partnership. We recognise that success will follow when Government work with business and with workers.
Investing in infrastructure in a low-carbon future can deliver across the country, not least because of how the exciting opportunities are geographically spread. It can deliver prosperity in every community. The jobs in insulating 19 million homes will, by definition, be created in every community, especially in those with the poorest housing stock, which are those with the greatest need of good jobs as well as warmer homes. We can transform our prospects at home and through the export potential of new technologies. But the bank has to be on a sound footing, alongside a strategy and with objectives that are consistent with the way the bank is set up. We support the creation of the bank. It is a great way for us to implement our plans in government. It is a great way to give businesses and investors certainty. It is a great way of offering prosperity to communities through the creation of new jobs. But the bank has to be allowed to be ambitious, to push for new opportunities and to set the market, not just follow it. That is what an industrial strategy does. It is what Government can contribute to as a partner, where business would otherwise struggle to attract investment. It is also how to transform our economy, our country and our communities.
Mr Deputy Speaker (Mr Nigel Evans)
I welcome the Minister back to the Dispatch Box.
The Exchequer Secretary to the Treasury (James Cartlidge)
I begin by saying how grateful I am to all the Members who have contributed today; it has perhaps been more a case of quality than quantity. When we talk about the funding of this important bank, it is a case of both quality and quantity. We are talking about billions of pounds of investment for two crucial priorities for this Government and this country: levelling up and net zero.
Let us be clear that that work is already under way, with the bank delivering very important projects to date, as we can see when we consider the following: £107 million for the redevelopment of the former Redcar steelworks site on Teesside, which will drive forward the offshore wind sector and create 800 jobs; 4,000 more jobs unlocked by investment in green transport in Birmingham, connecting its city centre, Solihull and Birmingham airport through a zero emissions corridor; spades already in the ground to ramp up solar and meet our energy needs, with plants opening in Newport, south Wales, and Strensham, Worcestershire; and fast, affordable and reliable broadband to 8 million homes across 285 towns and cities in England and Wales by 2025, with a further investment to deliver ultrafast broadband to businesses and households in rural Northern Ireland.
Let me turn to the comments made by the Opposition spokespeople, as I am grateful for their support. I could not tell at times whether it was enthusiastic or slightly reluctant, but either way I am very grateful that we have a consensus in this Chamber on the importance of delivering this Bill, including from the SNP, whose support I am also grateful for.
Both the hon. Members for Ealing North (James Murray) and for Sefton Central (Bill Esterson) spoke about our record. Let us be clear about something: between 1990 and 2019 our carbon dioxide emissions in this country fell by a staggering 44%—they fell by almost half. I do not think there is any other industrialised economy that can compare on that. In the same period, our economy grew by three quarters, because we can have growth and cut emissions—we are proving that. That is why the bank has the dual mission to deliver on net zero and on investing in local and regional economic growth. [Interruption.] The hon. Member for Sefton Central chunters from a sedentary position. He was critical of our efforts on offshore wind and renewables, but we have the largest capacity of offshore wind in Europe. I am proud, as the MP for South Suffolk, of the extraordinary contribution of offshore wind off East Anglia and what it is doing to drive forward this country’s journey to net zero. The difference here is that we are doing it in the real world. Let me put that in context. Renewables in 2010 made up just 7% of our total energy, whereas this year the figure was up to 43%. We have seen extraordinary growth and we should all be very proud of that.
Both the Labour spokespeople asked the specific question on worker representatives. I understand where they are coming from, but we do not believe this amendment would be necessary. We have asked the bank to abide by the corporate governance code to the extent appropriate to the UK Infrastructure Bank, which specifies that the board should engage with the workforce through either a director appointed from the workforce, a former workforce advisory panel or a designated non-executive director. The bank has appointed a NED, Marianne Økland, who will take on this role. I hope that that answers that question.
The hon. Member for Sefton Central asked about our commitment to levelling up, so let me be clear. The levelling-up fund has already awarded £1.7 billion, and there is £2.6 billion from the shared prosperity fund, £3.2 billion from the towns fund and £5.7 billion from the city region sustainable transport settlements. I call that a commitment to levelling up, and we on the Government Benches are proud to be pushing that forward.
My hon. Friend the Member for North East Bedfordshire (Richard Fuller) speaks on these matters with great expertise; not only was he a Treasury Minister, but we must not forget that in the real world he was a successful businessman in his own right. He posed some very good questions, including one about the target rate of return. I can be clear that in the framework document for the bank, a target return of 2.5% to 4% by the end of 2025-26 is set out. We think there would be problems were we to state that target in law—one can imagine the potential downside—but to ensure transparency there will be a review of the bank’s operations within seven years. The review will look specifically at additionality—the degree to which investment is additional—because although we support the bank, we all have to defend the interests of taxpayers. We look to them as I look to you as I speak, Mr Deputy Speaker.
My hon. Friend also asked about green finance leadership. I can confirm that according to the latest global green finance index compiled by Z/Yen, London is once again classed as the greenest finance centre in the world. Rumour has it that a certain Treasury Minister might well be in Egypt next week promoting that very point.
On the power of direction in clause 4, no one should get too excited; we are not talking about a return to the good old days of socialism. I confirm that the bank is operationally independent. The Treasury can already issue directions to the bank under companies law and as set out in the bank’s framework document. Clause 4 simply puts the existing power on a statutory footing for transparency and accountability.
I am grateful to the right hon. Member for Dundee East (Stewart Hosie) for his welcome and for his discourse on rolling stock. As the son of a father who was into model railways, train sets and all the rest of it, it brought back some memories. He and the hon. Member for Carmarthen East and Dinefwr (Jonathan Edwards) both spoke about devolved issues. All I can say is that we at the Treasury have had very positive discussions with the devolved Administrations, and the bank itself has of course spoken to both the Development Bank of Wales and the Scottish National Investment Bank. I am sure we will have further discussions and a very positive relationship. On specific investment, I say to the hon. Member for Carmarthen East and Dinefwr that the bank is operationally independent, but I am sure it will take into account the points he put on the record today.
The hon. Member for Richmond Park (Sarah Olney) made a very good point when she spoke about the sheer scale of the investment needed to deliver net zero. We in His Majesty’s Treasury are well aware of that. That is why it is so important that the funding capacity from this bank will be £22 billion, crowding in a further £18 billion. That is a huge step forward, but we know there is more to do, which is why it is important that the Bill is before the House. It is the next step in a necessary but exciting journey of transformation of infrastructure projects in our country. It will establish the bank in the market and ensure its longevity in the future.
As my right hon. Friend the Chief Secretary to the Treasury said in his opening speech, we have designed the bank to be a long-lasting institution to deliver long-term priorities and projects on which we all depend and, above all, net zero and levelling up. For that reason, I commend the Bill to the House.
Question put and agreed to.
Bill accordingly read a Second time.
Uk Infrastructure Bank Bill [Lords]: Programme
Motion made, and Question put forthwith (Standing Order No. 83A(7)),
That the following provisions shall apply to the UK Infrastructure Bank Bill [Lords]:
Committal
(1) The Bill shall be committed to a Public Bill Committee.
Proceedings in Public Bill Committee
(2) Proceedings in the Public Bill Committee shall (so far as not previously concluded) be brought to a conclusion on Tuesday 22 November 2022.
(3) The Public Bill Committee shall have leave to sit twice on the first day on which it meets.
Consideration and Third Reading
(4) Proceedings on Consideration shall (so far as not previously concluded) be brought to a conclusion one hour before the moment of interruption on the day on which proceedings on Consideration are commenced.
(5) Proceedings on Third Reading shall (so far as not previously concluded) be brought to a conclusion at the moment of interruption on that day.
(6) Standing Order No. 83B (Programming committees) shall not apply to proceedings on Consideration and up to and including Third Reading.
Other proceedings
(7) Any other proceedings on the Bill may be programmed.— (Jo Churchill.)
Question agreed to.
UK Infrastructure Bank Bill [Lords]: Money
King’s recommendation signified.
Motion made, and Question put forthwith (Standing Order No. 52(1)(a)),
That, for the purposes of any Act resulting from the UK Infrastructure Bank Bill [Lords], it is expedient to authorise—
(1) the payment out of money provided by Parliament of:
(a) any expenditure incurred under or by virtue of the Act by the Treasury; and
(b) any increase attributable to the Act in the sums payable under or by virtue of any other Act out of money so provided; and
(2) the payment out of the National Loans Fund of any sums payable out of the Fund by virtue of the Act.—(Victoria Atkins.)
Question agreed to.
UK Infrastructure Bank Bill [ Lords ] (First sitting)
Tuesday 22nd November 2022
(2 years ago)
Public Bill CommitteesRead Full debate UK Infrastructure Bank Act 2023 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Public Bill Committee Amendments as at 22 November 2022 - (22 Nov 2022)
The Committee divided: - Ayes: 6 / Noes: 10 - Question accordingly negatived.
The Committee divided: - Ayes: 6 / Noes: 10 - Question accordingly negatived.
The Committee divided: - Ayes: 10 / Noes: 6 - Question accordingly agreed to.
The Committee divided: - Ayes: 10 / Noes: 6 - Question accordingly agreed to.
The Committee divided: - Ayes: 6 / Noes: 10 - Question accordingly negatived.
The Committee divided: - Ayes: 6 / Noes: 10 - Question accordingly negatived.
The Chair
I have a few preliminary reminders for the Committee. I will not make an autumn statement, though there are a lot of leaves about. Please switch electronic devices to silent. No food or drinks are permitted during sittings, except for the water provided. Hansard colleagues would be grateful if Members could email their speaking notes to hansardnotes@parliament.uk.
We will first consider the programme motion on the amendment paper. We will then consider a motion to enable the reporting of written evidence for publication. I call the Minister to move the programme motion standing in his name, which was discussed yesterday by the Programming Sub-Committee for the Bill.
Ordered,
That—
(1) the Committee shall (in addition to its first meeting at 9.25 am on Tuesday 22 November) meet at 2.00 pm on Tuesday 22 November;
(2) the proceedings shall (so far as not previously concluded) be brought to a conclusion at 5.00 pm on Tuesday 22 November. —(Andrew Griffith.)
Resolved,
That subject to the discretion of the Chair, any written evidence received by the Committee shall be reported to the House for publication.—(Andrew Griffith.)
The Chair
Copies of written evidence that the Committee receives will be made available in the Committee Room, and circulated to Members by email.
We now begin line-by-line consideration of the Bill. The selection list for today’s sitting is available in the room. It shows how the selected amendments have been grouped together for debate. Amendments grouped together are generally on the same or a similar issue. Please note that decisions on amendments take place not in the order they are debated, but in the order they appear on the amendment paper. The selection and grouping list shows the order of debates. Decisions on each amendment are taken when we come to the clause to which it relates.
A Member who has put their name to the lead amendment in a group is called first. Other Members are then free to catch my eye to speak on all or any of the amendments within that group. A Member may speak more than once in a single debate. At the end of a debate on a group of amendments, I shall call the Member who moved the lead amendment again. Before they sit down, they will need to indicate if they wish to withdraw the amendment or seek a decision. If any Member wishes to press any other amendment in a group to a vote, they need to let me know.
Clause 1
The UK Infrastructure Bank
Question proposed, That the clause stand part of the Bill.
The Economic Secretary to the Treasury (Andrew Griffith)
It is a pleasure to serve under your chairmanship, Mr Davies. I thank Members for their work on the Committee this morning. Clause 1 is a technical clause that outlines that the company incorporated as the UK Infrastructure Bank will be referred to as “the Bank” for the purposes of the Bill, and links it in legislation to its company registration number. The clause is essential to ensure that the Bill refers to the correct legal entity. I recommend that it stand part.
Clause 1 ordered to stand part of the Bill.
Clause 2
Objectives and activities
Richard Fuller (North East Bedfordshire) (Con)
I beg to move amendment 10, in clause 2, page 1, line 14, at end insert
“, and
‘(c) to create long term financial returns to its shareholder(s).”
It is a pleasure to serve under your chairmanship, Mr Davies, and to be the first Member, other than the Minister, to speak. As hon. Members look down the amendment paper, they will see that I have tabled a number of amendments. It is such a pity that so few Labour Members have bothered to show up to the Committee on such an important issue. I always thought that the Labour party thought that it was important to invest in green technologies and to level up. Clearly, the absence of Labour Members shows that that is just a paper commitment, not a real one.
This is an important Bill. Of course, in a certain regard it formalises what is already extant; however, it is important that we, as Members of Parliament, ensure that we provide the right objectives and activities to which the board and directors of the UK Infrastructure Bank should subsequently pay attention. In that regard, I have tabled two amendments to clause 2: amendments 10 and 11. If it is convenient with you, Mr Davies, I shall also speak to amendment 11.
Richard Fuller
Amendment 10 would add paragraph (c) to subsection (3), with a requirement that bank objectives should include long-term return to shareholders. To be clear, the shareholders are UK taxpayers.
Amendment 11 would add paragraph (c) to subsection (6) on the importance of the bank having regard to its role in additionality. That refers to the role of the bank in using taxpayers’ money or the power of the UK Government’s balance sheet in attracting private capital.
Why are those two amendments so important? Let us be honest. Parliament passed the Climate Change Act 2019, containing the net-zero policy, which has the potential to waste billions of taxpayers’ money. It is a policy objective with no price tag attached. It is also the case that technologies are evolving, and economies of scale can be elusive.
The UK Infrastructure Bank mentioned three things in its strategic plan that it was interested in pursuing for investment. The first was the roll-out of electric vehicle charging points. Does any hon. Member, or the Minister, know how that can be done today economically? The second was the retrofit of buildings. Does any hon. Member know how that can be done, what the right technology would be and how it should be funded? Does the Minister know? The third was the scaling of storage technologies. Does anyone know the right technology to choose for that?
The answers to those questions are crucial, because we are going to devolve the decision making about how that taxpayers’ money is spent to the UK Infrastructure Bank. There are significant risks with those technologies, and the consequences for taxpayers’ money.
The bank talks a lot about its potential for crowding in money and private capital, but there is also great potential for crowding out private capital. It is very simple. We already have a significant amount of investor appetite in environmentally sound investments. The Minister has been very successful recently in his efforts with Solvency II to release potentially additional long-term, patient capital that can invest in the sorts of projects that the UK Infrastructure Bank seeks to invest in. What reassurance can we have that the UK Infrastructure Bank is doing the right thing by crowding in private capital, rather than by crowding out?
We also need to see a little more clarity from the bank about where it is going to sit on the spectrum of risk. I draw Committee members’ attention to page 26 in the UK Infrastructure Bank’s strategic plan. Under the heading “Barriers to private infrastructure investment”, it lists four segments for investing: R&D, emerging, high-growth and maturity. It then splatters itself over three of those four segments. What sort of focus for investing is that?
What does that tell us about how we should assess the way in which capital has been allocated according to risk? Should the bank be investing more in late-stage opportunities? Is the real risk that it should be investing at an earlier stage, to stimulate the growth of technologies after they have come out of research and development? It is not at all clear what the focus should be. That gets to the root of the question that I want to press the Minister on. How comfortable is he that we and the Government have control over how the bank will invest taxpayers’ money? Is he comfortable that there are sufficient constraints on the bank to prevent it from wandering off with its own sense of purpose? Should there be provisions in this Bill to tighten it a little further?
Finally, the reason for us to focus on this is the UK Infrastructure Bank itself says that it has a “triple bottom line”. Well amen to a Government body actually having a bottom line because too often public bodies do not even worry about the bottom line, but it has three: achieving policy objectives; crowding-in private capital; and generating a positive return. It is because they have stated three bottom lines, one of which was to generate a positive return, that I sought, under amendment 10, to add that to clause 2(3).
I finally make some reference to Government amendment 1, which relates to deleting references to
“the circular economy, and nature-based solutions”.
I am interested to hear what the Minister’s rationale for this is; maybe I can see a rationale but I want to hear if that is actually the Minister’s rationale. The principles of the circular economy and the principles of nature-based solutions have the merit of being quite specific in what is otherwise quite a general set of remits for the UK Infrastructure Bank. I guess that the Minister will say, “Well yes, that is right. However, there are lots of other things that it needs to focus on. If we pick those two, we should not pick others.” But I would be very interested to know the particular reasons why the Minister does not feel that those two should be included.
Finally, I note that Government amendment 2, which relates to everything I have said about the objectives around additionality and long-term returns for shareholders, would delete clause 2(6) completely. If so, I will obviously withdraw my amendment.
Abena Oppong-Asare (Erith and Thamesmead) (Lab)
Good morning, Mr Davies. It is a pleasure to serve under your chairship. Good morning to the rest of the Committee. I look forward to our debate today. I think that this will be a productive conversation. I also use this opportunity to formally congratulate the new Minister.
Before I turn to clause 2, I want to say in my opening remarks that Britain has so much potential, but right now we are facing—and I want to put this on record—a Tory economic crisis that is holding us back. To get our economy growing again, we will need to see investment in infrastructure projects and create highly-skilled, well-paid jobs and tackle climate change in a modern industrial strategy, working hand in hand with businesses.
I also want to put on record my reassurance to the hon. Member for North East Bedfordshire that Labour is well represented on these issues. Members will see that through our ideas and what we are proposing today, which will strengthen this Bill. Also, it is really important that we recognise that there has been a lost decade of broken Tory promises that have left much of the UK with second-rate infrastructure. That is why Labour supports strengthening the Bill, but much of the Bill as it stands relies on out-of-date thinking. That is why we are proposing amendments today.
Alec Shelbrooke (Elmet and Rothwell) (Con)
It is a pleasure to serve under your chairmanship, Mr Davies. In terms of investment in infrastructure, the last Labour Government did invest in hospitals and schools and, through the private finance initiative, left the country with bills that were 10 times the cost of building the hospitals. On reflection, does the hon. Lady believe that was a mistake?
The Chair
Order. We are in danger of drifting outside the scope of the amendment. Please do respond, but let us not have a general debate on this.
Abena Oppong-Asare
I thank the right hon. Member for Elmet and Rothwell for his comments. However, we have had a Tory Government for 12 years. We are in the middle of an economic crisis.
Abena Oppong-Asare
Inflation is at its highest point, but I do not want to be drawn into a discussion about that. I want to focus on the Bill and I want us all to have a mature conversation about it.
Clause 2 sets out the objectives and activities of the UK Infrastructure Bank. This is probably the meatiest part of the Bill, and I can see that we have several amendments to get through, so I want to make a start on that. Subsection (3) lays out the bank’s two objectives, which are to
“tackle climate change, including by supporting efforts to meet the target for 2050 set out in section 1 of the Climate Change Act 2008”
and
“to support regional and local economic growth.”
I welcome the bank’s first objective. With COP27, a climate conference that the Prime Minister had to be shamed into attending, ending just days ago, it is clear that there is still a way to go to ensure that our country’s emissions reach the targets enshrined in international law. I have to be honest: the Prime Minister does not get it. He is a fossil-fuel Prime Minister in a renewable age. His is a record of tax breaks for oil and gas giants and blocks on wind and solar power. It has left our energy bills higher and our country less secure. The UK Infrastructure Bank sets out to invest in projects that lower emissions, while the Government undermine those ambitions. It will be unsurprising to the Committee that Labour has no confidence that the Government will deliver the long-term investment that the country needs.
I also welcome the bank’s second objective. Labour wants to see prosperity shared and spread across the country, with the Government working in lockstep with businesses to produce the high-skilled jobs of the future—something that I will come to later. Amendment 10 would add a third objective for the bank:
“to create long term financial returns to its shareholder(s).”
Labour wants to see the bank succeed. There is a global race for the jobs and industries of the future that, under the Tories, we will not win. We know that investment in green jobs, improved rail and other transport and modern infrastructure, such as broadband, have the potential for large returns and will boost our economy. We want the bank to crowd in private sector investment and help to provide confidence for investors and businesses innovating in new technologies. We also want the bank to have the freedom to invest in projects based on their ability to tackle climate change and grow our economy.
Katherine Fletcher (South Ribble) (Con)
It is a pleasure to serve under your chairmanship, Mr Davies. I am grateful for the opportunity to intervene. As recent data shows, the UK has decarbonised fastest in the whole of the G20 since 2010. Does the hon. Lady agree that a huge amount of that has been done with the investment of both public and private capital in the mechanisms to achieve it? And there is our world-leading legislation for net zero and even our commitment to reduce fossil-fuel cars. The idea that we are behind in the race on this is really for the birds.
The Chair
Order. Before the shadow Minister responds, let me just say that we do need to keep within the scope of this amendment, about creating long-term financial returns to the shareholder. I appreciate that I have allowed a certain amount of flexibility, and I respect what you are saying, but could we try to focus on the amendment rather than clause 2 stand part, which we will come to?
Abena Oppong-Asare
I thank the hon. Member for South Ribble for her comments, but I do not fully agree with her, because I feel that the Government have not done enough. There has also been a cancellation of Northern Powerhouse Rail and a dismal failure to invest properly in renewable energy and to take decisions on nuclear; there has been a lack of strategy and planning. That has happened under this Tory Government in the last 12 years.
The Government’s track record does not provide much confidence. The Government set up the Green Investment Bank 10 years ago and sold it to a private equity group five years ago, with the Public Accounts Committee concluding that the Government had focused on
“how much money could be gained from the sale over the continued delivery of GIB’s green objective.”
We would not want to encourage a similar short-lived path—
The Chair
Order. Shadow Minister, I think you are straying off the point of the amendment, if I may say so.
Abena Oppong-Asare
I do not believe I am, Mr Davies. This is very relevant to the clause.
Abena Oppong-Asare
Yes. I am just going to wrap up, Mr Davies; thank you. We would not want to encourage a similar short-lived path for the UK Infrastructure Bank. To achieve its objectives, it needs to be a long-lasting institution that supports businesses and improves investor confidence. We have a different third objective in mind for the bank, and I will explain that in Committee later today.
Andrew Griffith
I thank all those who have contributed to this grouping. If I may, I will speak to clause 2, the Government amendments, and then the amendments in the name of—
The Chair
Order. You cannot do that. You must speak to amendment 10, and we will come to clause 2.
Andrew Griffith
Perfect, Mr Davies. My hon. Friend the Member for North East Bedfordshire is not only a distinguished predecessor of mine, but is a doughty champion for the interests of the taxpayer, and we commend him for that.
We have set out in the framework that the bank must already generate a financial return as part of the company’s operating principles. As set out in the UK Infrastructure Bank’s strategic plan, that has been set at an admirable 2.5% to 4% by the end of 2025-26. The bank, as my hon. Friend said, has a triple bottom line, including a positive financial return as a requirement across its investments.
Putting that target into law—I cannot believe that my hon. Friend is an advocate of writing everything into statute; the statute is often large enough as it is without embellishing it with additional Christmas trees of prescription—could create legal problems for the bank and undermine its core purpose, given that there might from time to time be reasons outside of its control why it cannot meet the target in relation to every investment.
Richard Fuller
My hon. Friend is right: not everything should be written into statute, but there ought to be more clarity. Can he provide a couple of points of clarity so that I may withdraw my amendment? On the bank’s target of 2.5% to 4% return, is that a real rate of return, and above what cost of capital? And if the chief executive and the directors do not achieve that rate of return, what will be the consequences for them?
Andrew Griffith
I will write to my hon. Friend on the calculation of that return. The UK Infrastructure Bank is subject to the full panoply of disclosures, sanctions and accountability, not just to this place, as is appropriate, but under the Companies Act 2006 under which it is constituted. I do not believe, therefore, that there is a deficiency in that. For that reason, notwithstanding the very understandable spirit with which my hon. Friend advocates his amendment, I hope he will consider withdrawing it.
Richard Fuller
Yes. I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Abena Oppong-Asare
I beg to move amendment 17, in clause 2, page 1, line 14, at end insert—
“(c) to reduce economic inequalities within and between regions of the United Kingdom, and
(d) to improve productivity, pay, jobs, and living standards.”
This amendment clarifies that the Bank’s objective to support regional and local economic growth includes reducing economic inequalities within and between regions and improving productivity, pay, jobs, and living standards.
The Chair
With this it will be convenient to discuss amendment 18, in clause 2, page 1, line 14, at end insert
“, and
“(c) to support supply chain resilience and the United Kingdom’s industrial strategy”.
This amendment creates a third objective for the Bank to support UK supply chain resilience and industrial strategy.
Abena Oppong-Asare
As I have hinted, Labour Members believe that the bank’s objectives need expanding. My hon. Friend the Member for Ealing North will speak later about the bank’s climate objective and the ways in which it might achieve it. I will talk about the economic objective of the bank, which is to support regional and local economic growth. After a mini-Budget that crashed our economy and an autumn statement last week that papers over the cracks, the importance of that objective is as clear as day; but we believe in growth not for growth’s sake, but because it creates jobs and improves living standards. As a result of fairer choices, we could see our economy growing again, powered by the talent and effort of millions of working people and thousands of businesses.
Our amendment 17 would make it clear that the bank should support regional and local economic growth, both to reduce economic inequalities within and between the regions of the UK, and to improve productivity, pay, jobs, and living standards. In our constituencies we see the disparities between the regions. As it stands, the bank does not have to focus its investment on disadvantaged areas of the country that would most benefit from its support. The Prime Minister has boasted about moving money away from disadvantaged areas, and so-called levelling-up funds have so far funnelled money into Conservative constituencies, rather than focusing on areas that most need the support. On its own, therefore, clause 2(3)(b) is not a sufficient objective for the bank. It relies on the tired Conservative assumption that growth and prosperity will trickle down and be spread evenly, which we know is not true.
Amendment 17 is crucial to targeting the bank’s investments and ensuring that it creates lasting change. The Prime Minister, then Chancellor, argued in his strategic steer to the bank in March that it should support the Government’s ambition of addressing
“the deep spatial disparities across and within UK regions”.
Those are his words. I find it strange that when he outlined the bank’s objectives in the strategic steer, his description of the climate objective matched that in the Bill, but his description of the economic objective did not. He said that the bank’s objectives are to
“help tackle climate change, particularly meeting the government’s net zero emissions target by 2050”.
That all seems correct, and we can see it repeated near verbatim in clause 2(3)(a). However, in describing the second objective, the then Chancellor said that the bank should
“support regional and local economic growth through better connectedness, opportunities for new jobs and higher levels of productivity.”
That wording is not in the Bill. Will the Minister tell us whether the Government have abandoned those commitments? Why does the Bill include a watered-down version of that objective?
I note that in his letter yesterday, the Minister’s justification for Government amendment 2 was that
“with regards to the economic disparities component of”
clause 2(6),
“it could be overly restrictive where the Bank looks to invest in a deprived part of a relatively affluent region for example, as there are difficulties in drawing distinct boundaries on this issue.”
Before the Minister uses that as a reason to vote against our amendment 17, I hope that he will notice that the amendment has been worded specifically to avoid such restrictions: by addressing
“economic inequalities within and between regions of the United Kingdom”,
the bank will retain the freedom to target at any level. If their commitment still stands, I am sure that Conservatives will not oppose Labour’s efforts to put that in the Bill. The amendment would bring the Bill back into alignment with their stated objectives.
Amendment 18 would add a third objective for the bank:
“to support supply chain resilience and the United Kingdom’s industrial strategy”.
That seems reasonable. The Office for Budget Responsibility has said that the bank will have no effect on growth. With assets of 0.1% of GDP a year, the bank is dwarfed by its French and German counterparts, and the £12 billion of funding allocated over five years falls short of the £20 billion recommended by the National Infrastructure Commission. With their cancellation of Northern Powerhouse Rail and failed record on nuclear energy, the Government’s record on infrastructure is abysmal.
Labour has called for a strategic approach to infrastructure, and presented an industrial strategy that is based on evidence from around the world. Supported by the creation of a publicly owned Great British energy company, we would deliver self-sufficient renewable energy by doubling onshore wind, trebling solar and quadrupling offshore wind. We would create half a million jobs in renewable energy, and an additional half a million jobs by insulating 19 million homes over 10 years.
The importance of supply chain resilience has become particularly clear in the wake of the pandemic, and as concerns over energy security have come to the fore through the war in Ukraine. We are all concerned about it. We have an industrial strategy, and want the UK infrastructure bank to support and champion it. Our amendments 17 and 18 would clarify the objectives of the bank, and focus them on the challenges of the future.
David Linden (Glasgow East) (SNP)
Bore da, Mr Davies. It is a pleasure to serve under your chairmanship. Aside from one issue that I would split hairs about on amendment 17 —Scotland is not a region, but a nation, so the amendment should read “regions and nations of the United Kingdom”—I have another point to object to. The bank’s strategic objectives include tackling climate change, and it is vital that the Scottish Government’s climate change targets be reflected in the Bill, so I take a wee bit of issue with points made by the hon. Member for South Ribble about the UK’s “world-leading” climate change legislation; it legislates for net zero by 2050, whereas in Scotland it is 2045. I wanted to make that point on the record.
Given the significant overlap between the strategic objectives of the UK Infrastructure Bank and those of the Scottish National Investment Bank, a mechanism must be in place to ensure alignment on how the objectives are reached. I would be grateful if the Minister provided a little more clarity on that when he sums up. However, if His Majesty’s loyal Opposition intend to press the amendment to a vote, they can be assured of the support of the Scottish National party.
Alec Shelbrooke
On reducing economic and other inequalities between regions of the United Kingdom, I first make the point that if the bank is to be located in my home city of Leeds, in Yorkshire, and is to invest in the region, it follows that Northern Powerhouse Rail has not been cancelled.
I have risen to speak simply because an intervention on the Minister would have been too long. The Opposition parties almost seem to be tabling amendments for amendments’ sake. To state the obvious about the whole point of this policy, I do not, to use a phrase, need a weatherman to tell me when it is raining. The Infrastructure Bank will already do exactly what is in the amendments.
On the green industrial strategy, the reality is that a multi-billion-pound industry, with hundreds of thousands of jobs in the offshore wind industry, has been created since we came to power in 2010. It is simply mistaken to suggest otherwise. When we look at the track record of this Government over the past 12 years, there is much that I am exceptionally proud of. We have changed the energy strategy of this country. Sometimes, we produce well over 50% of our electricity through renewable means. All that has come about through investment in infrastructure.
I believe that amendments 17 and 18 were tabled simply to develop an argument with a weak foundation that does not stand up when we look at the physical outcomes from the past 12 years. I will finish with that—
Alec Shelbrooke
I will, because I like the hon. Member for Glasgow East, but I had wrapped up my comments.
David Linden
My stock in the SNP has just fallen through the floor. The hon. Gentleman said that we do not need a weatherman to tell us what the weather is outside, but over the past seven or eight weeks, the UK Government have flip-flopped on their policy on energy, and specifically on their fracking policy, in a major departure from the 2019 manifesto. Given the instability of the UK Government and the changes in various weather people, it might not be a bad thing to put something about this in the Bill.
Alec Shelbrooke
I am always grateful for the hon. Gentleman’s input. Personally, I believe we should get on with fracking, and I have licences in my constituency, but that is a decision for the local authority. Often with such plans, local authorities are far better placed to understand the needs and issues than people down in Westminster.
On the green industrial strategy and the increase in fossil fuels—I know we are straying slightly from the subject—the investment in the green strategy that is being made by this Government is clear to see, but we cannot let our fossil fuel supply fall off a cliff and disappear overnight, and send people’s bills through the roof. That strategy and this policy are a key plank in ensuring that we move towards where we all want to be, while ensuring that we have the investments and structures in place and are clear about the target we are aiming for. Fundamentally, this Government have a proud track record on this matter, and amendments 17 and 18 are surplus to requirements.
Andrew Griffith
The hon. Member for Erith and Thamesmead and the Opposition are as sincere in pursuing this amendment as they are wrong. They are adventurous in terms of scope, because they are trying to crowbar an entire—
David Linden
On a point of order, Mr Davies. I am sure the Minister is not at all suggesting that you have selected amendments that are out of scope for the Committee to vote on.
Andrew Griffith
My reference to “scope” related to the broad set of industrial policies laid out by the hon. Member for Erith and Thamesmead, not to the wording of the amendments.
The Chair
My comments were about the previous discussion. The shadow Minister was in scope on her amendments. I call the shadow Minister.
Abena Oppong-Asare
Thank you, Mr Davies, for allowing me to speak on this matter. I fundamentally disagree with the Minister’s comments. The amendments that Labour put forward are reasonable. In this climate, given the situation with covid and Russia, we know that things are different, particularly in terms of regional inequalities. The Prime Minister also talked about regional inequalities. We have all seen the speech he gave in Tunbridge Wells.
The Chair
Order. The hon. Lady will have the final word, but the issue is whether these amendments are in order. Obviously, they were selected for debate, and the Minister was speaking to them. I know his comments were about whether comments made were in order, but if he could make his speech, I will then call the hon. Lady to respond, and she can make similar points. I call the Minister.
Andrew Griffith
Thank you, Mr Davies. The Government think that the aim of reducing regional inequality is already implicit in the bank’s current objective. As my right hon. Friend the Member for Elmet and Rothwell reminded me, the bank was constituted in Leeds, rightly outside of the overheated south-east. A number of its early investments have already seen their capital deployed to some of the most left-behind parts of the United Kingdom. Our belief is that the objective of supporting regional and local growth provides a clear direction for the bank without being overly prescriptive, which I am sure nobody would want. The strategic steer by the Chancellor in March makes clear that the bank must focus on geographical inequality, with reference to the levelling-up White Paper, which the House will debate tomorrow. That is the right place to set out the Government’s strategic approach to levelling up, but that is best done on a portfolio basis rather than investment by investment, which is what the amendment implies.
Turning to the second part of the amendment, the bank’s framework document already includes, under its regional and local economy growth objective, achieving higher levels of productivity and providing opportunities for new jobs—something the hon. Member for Erith and Thamesmead talked about as an important output. We think it is more appropriate to have this requirement in the framework document rather than in legislation to minimise the legal risk across investments. I am sure that we can all agree that no one wants to create more work for lawyers.
Andrew Griffith
The right hon. Lady will have to talk to her Front Bench if that is the official policy, but I assure the Committee that it is not the policy of the Government.
Valerie Vaz
The point is that this is public money. The bank has to be accountable for it. Lawyers are the guardians of justice. It is not about making more money for lawyers. It is about interpreting legislation that is put through very quickly and not thought through. That is the basis of it.
Andrew Griffith
The hon. Lady makes a very fair point on the valiant role of lawyers in keeping us all to account. The alternative, of course, is legislation that is clear and allows the appropriate degree of discretion. The Government contend that that is what this is.
The amendments by the hon. Member for Erith and Thamesmead would include in the bank’s objectives the improvement of pay and living standards. Economic growth in the long run is closely linked to supporting productivity, income and employment and living standards. It is implicit in the bank’s objectives. Including the amendments would make the objectives too wide-ranging for an infrastructure bank, as it could focus on anything relating to pay or standards, for example training programmes or household appliances, which do not come under economic infrastructure. For these reasons, we consider it preferable to keep the statutory objectives as they are—a balance between clarity and flexibility—while instead providing further recommendations as to the bank’s targets and areas of focus via more flexible mechanisms such as the strategic steer, which can be updated from time to time.
Abena Oppong-Asare
I thank the Minister for his comments. We agree that the legislation needs to be clear, but I think our approach is very different. I do not want to repeat what I have already said, but I want to highlight that addressing economic inequalities, particularly between regions, is really important,. We think the amendments would help the bank retain its freedom while reaching targets at any level. For this reason, we will push the amendments to a vote.
Question put, That the amendment be made.
Andrew Griffith
I beg to move amendment 8, in clause 2, page 1, line 18, leave out “relevant”.
This amendment, and Amendment 9, would clarify that the Bank can provide loans to public authorities other than local authorities and Northern Ireland Departments (as well as to persons other than public authorities).
Andrew Griffith
The amendments broaden the definition of “public authority” used in relation to the bank’s capacity to lend. The drafting as is broadly meets the policy aims and would allow the bank to lend to local authorities and to the Northern Ireland Executive. However, given that primary legislation can be a blunt instrument, we do not want inadvertently and by implication to preclude the bank from investing in other public authorities. I hope that all members of Committee can agree on that.
Other public authorities could include existing public bodies, as well as new public bodies created in the future by local authorities or Government Departments.
Abena Oppong-Asare
I thank the Minister for his explanation of the amendments.
Clause 2(4) describes the activities of the bank, as the Minister explained, and sets out that in addition to funding private infrastructure projects, it can provide financial support to local government. Government amendment 8 seeks to clarify that the bank can provide loans to public authorities other than local authorities and Northern Ireland Departments. Amendment 9 to clause 10 would achieve the same purpose. It would clarify that the Bill considers public authorities to be local authorities, Northern Ireland Departments and any other person exercising functions of a public nature.
I am grateful to the Minister for his letter of yesterday that set out the reasons for the Government amendments, which we will not oppose.
Amendment 8 agreed to.
Andrew Griffith
I beg to move amendment 1, in clause 2, page 1, line 23, leave out from “includes” to “technologies” on line 24.
This amendment would remove the reference to “structures underpinning the circular economy, and nature-based solutions,” from the definition of “infrastructure”.
Andrew Griffith
The amendments would remove both the Lords amendments. Government amendment 1 would remove the addition of “nature-based solutions” and
“structures underpinning the circular economy”
from the definition of infrastructure. The bank has a broad mandate with flexibility to support a wide range of projects to help to tackle climate change and to support regional and local economic growth.
On nature-based solutions, earlier this year the Government conducted a review to consider the potential of broadening the bank’s objectives to include other areas such as improving UK natural capital. The review recognised the significant potential for increased use of nature-based and hybrid infrastructure solutions, including for the water sector, greenhouse gas removal and opportunities for the growth of ecosystems services markets. Those opportunities will be important to meet our objective to leverage private finance for nature recovery.
The outcome of the review was formally made clear to the bank and to the market through the Chancellor’s non-statutory strategic steer. As we discussed earlier, that is an alternative to writing everything in statute and is more flexible. That steer clearly laid out that nature-based solutions are in scope and are something that the bank should pursue. However, given that they are already part of the remit and are clearly covered within the non-exhaustive definition of infrastructure, we do not believe this language should be retained in the Bill.
Moving on to amendment 2, clause 2(6) focuses on improving
“productivity, pay, jobs and living standards”
and reducing geographic inequality. The effect of this subsection is to put a statutory duty on the bank to have regard to these two areas in relation to every potential investment that it considers, which would have significant impacts on the bank. On improving jobs specifically, we understand the intention of the provision and do not disagree with it as a general principle, but that is quite different from the individual investment evaluation.
Valerie Vaz
Those objectives are not set out in the Bill. Are they going to be in secondary legislation?
Andrew Griffith
As I have laid out, the Government’s position is that the steer to the bank, which is flexible and can be updated from time to time, rather than requiring primary legislation—it may be something the Labour party wishes to take advantage of in future—is a more agile and flexible way of guiding the bank as it seeks to achieve its objectives.
David Linden
Is the Minister therefore suggesting that that would only be within a policy framework rather than in the issuing of secondary legislation?
Andrew Griffith
The steer provided from time to time in the context of the wider oversight of the investment bank, under its statutory objectives—effectively, the interpretation layer—is the right place. We do not disagree with the principle, but we could sit here all day and think of various admirable principles that we would like to put into statute. It is the Government’s contention that the provision would over-fetter the discretion of the bank and that it is not the appropriate vehicle. I understand that we will debate this point a number of times as we go through the Bill. The Government want the bank to get on with its job. We want to give it the statutory clarity it needs and to allow Parliament and Government, from time to time, if they wish, to give the steer required.
James Murray (Ealing North) (Lab/Co-op)
It is a pleasure to serve on the Committee with you as Chair today, Mr Davies. As we know, clause 2 concerns the objectives and activities of the UK Infrastructure Bank. Subsection (5) seeks to define the infrastructure and makes reference to the
“structures underpinning the circular economy, and nature-based solutions”,
which reflects an amendment made in the Lords that Government amendment 1 seeks to remove. The Government’s opposition to this measure seems to run counter to subsection (3)(a), which defines tackling climate change as an objective of the bank. I note that the Government do not oppose this objective of the bank, but they do seem to reject its delivery. We naturally oppose the amendment, which highlights how the Government seem to be all talk but unwilling to follow through on solutions to the climate emergency.
The truth is that the Government and the newly appointed Prime Minister have a record of failure on investing in green infrastructure for our country and our economy. While we welcome the bank’s focus on tackling climate change, no matter how well it plays its part, the British people need a Government with an effective plan to make the investments in the jobs, homes and energy supplies of the future a reality.
Richard Fuller
The hon. Gentleman may point to conflict between taking out from subsection (5) the words
“structures underpinning the circular economy, and nature-based solutions”,
and the objective in subsection (3) about tackling climate change, but if he looks at subsection (5)(c), he will see that
“climate change (including the removal of greenhouse gases from the atmosphere)”
is retained. The amendment does not affect the Government’s commitments on climate change at all.
James Murray
I thank the hon. Gentleman for his intervention—it is a pleasure to speak with him once again following his brief tenure on the Government Front Bench. I am not quite sure from that intervention whether he supports our opposition to Government amendment 1. Perhaps we will see when we push it to a vote shortly.
Let me move on to Government amendment 2. It seeks to remove from the clause subsection (6), which was introduced by Labour in the Lords. Subsection (6) requires the bank to have regard to public interest when targeting investment that improves productivity, pay, jobs and living standards and reduces the economic disparities between the nations and regions of the United Kingdom. Sadly, it comes as no surprise to us that the Government wish to remove commitments to better pay and the reduction of economic disparities. My hon. Friend the Member for Erith and Thamesmead already set out clearly the importance of prioritising job creation and putting it in the Bill. We want all parts of the country to benefit from investment in green jobs for the future, along with improved rail and other transport services and other essential modern infrastructure, including broadband.
When it comes to supporting economic growth across the country—or levelling up, as the Government used to call it—words ring hollow unless people see change. That is why clause 2(6) is so important, as it seeks to ensure that the bank has regard to the first mission of the Government’s levelling-up White Paper when exercising its functions under the Bill. We oppose the amendment because we seek to hold the Government to account on their commitment to level up our country.
Question put, That the amendment be made.
Richard Fuller
I no longer wish to move amendment 11, because clause 2(6) has been removed.
Andrew Griffith
I beg to move amendment 3, in clause 2, page 2, line 16, at end insert—
“(7A) The Treasury must consult the appropriate national authority before making provision in regulations under subsection (7) that would be within the legislative competence of—
(a) the Scottish Parliament, if contained in an Act of that Parliament,
(b) Senedd Cymru, if contained in an Act of the Senedd, or
(c) the Northern Ireland Assembly, if contained in an Act of that Assembly made without the Secretary of State’s consent,
apart from provision that is merely incidental to, or consequential on, provision which would be outside that competence.”
This amendment would require the Treasury to consult the relevant devolved authority before making regulations under clause 2(7) that would contain provision within the legislative competence of the authority in question.
Andrew Griffith
This group concerns provisions that will, I hope, gladden the heart of the hon. Member for Glasgow East, because they add a duty to consult the devolved Administrations on the use of delegated legislative powers in the Bill, including the power to amend the bank’s activities or the definition of infrastructure, and to issue the strategic steer. The amendments come as a direct result of the positive engagement we have had with the DAs to date. They specifically address a concern raised that the Government would be legislating or acting in areas of devolved competence without an appropriate mechanism to engage with the DAs.
Stephen Flynn (Aberdeen South) (SNP)
I do not think we have any concerns about the UK Government consulting the Scottish Government in respect of their intended actions, but I think the key question is will they listen, and if the Scottish Government have any concerns, will they have a veto?
Andrew Griffith
These amendments are a proof positive of the Government having listened. If the hon. Member is so crushingly sceptical, perhaps he will oppose the amendments, which have been proffered following consultation with the DAs. It was never our intention to pursue these measures without an appropriate mechanism to engage with the DAs. That is why we are happy to bring forward these amendments today.
I would like to put on the record my gratitude to officials in Scotland, Northern Ireland and Wales for engaging so positively to date on the Bill. I think we all support the Bill’s ultimate objectives, and I am hopeful that it will secure a legislative consent motion from each of the devolved legislatures. I hope that hon. Members will support the amendments.
James Murray
Government amendment 3 concerns the consultation of appropriate national authorities when using statutory instruments to change regulations pertaining to the definition of infrastructure and the bank’s activities, as outlined in clause 2(7). If changing regulations under subsection (7) fell within the legislative competence of the Scottish Parliament, Senedd Cymru or the Northern Irish Assembly, the amendment would require the Treasury to consult the relevant devolved authority.
Similarly, Government amendment 4 would require the Treasury to consult the relevant devolved authority before including in a statement of strategic priorities for the bank matters within the legislative competence of the devolved authority.
Government amendment 6 simply defines “appropriate national authority” to mean the Scottish Ministers, the Welsh Ministers, or the Department for Infrastructure in Northern Ireland.
We are supportive of these amendments, as we are supportive of the Union. Labour recognises the very real importance of working closely with devolved Administrations, and we recognise the great work of Welsh Labour. Indeed, the Government could learn a thing or two from Welsh Labour, given its record for infrastructure investment. The Welsh infrastructure investment plan has already allocated more than £12 billion for key capital projects to transform and maintain the NHS estate, deliver 20,000 affordable homes and deliver rail infrastructure improvements.
Amendment 3 agreed to.
Question proposed, That the clause, as amended, stand part of the Bill.
Andrew Griffith
Clause 2 is of central importance to the policy remit in which the bank will operate. I think that is why we have heard so many different—sometimes contrasting—views about how prescriptive that remit should be. The clause sets out the bank’s objectives and activities, as well as an inclusive definition of infrastructure, which is central to its scope—it is the UK infrastructure bank, after all. The clause also creates delegated powers to enable the Treasury to change the bank’s activities or the definition of infrastructure using secondary legislation under the affirmative procedure, so Parliament will have its say. The bank’s objectives to help the Government meet their climate change ambitions and to support levelling up across the UK are currently set out in the framework document. Clause 2(3) puts those on a statutory footing, which we hope sends a signal to the market about the Government’s commitment to these policy aims and the bank’s central role in helping deliver them.
Katherine Fletcher
Studying Parliament as he does, the Minister will have paid attention to my campaign to be Transport Committee Chair, which was unfortunately unsuccessful last week. One point that I made repeatedly as part of that campaign was about the projects that are slightly too big for local authorities and slightly too small for the Department for Transport. The objectives, while hotly debated here, must be so prescriptive as to not allow the UK Infrastructure Bank to lend to local authorities for smaller but none the less important projects in local communities. Is that fair?
Andrew Griffith
My hon. Friend makes a very fair point. I will be happy to facilitate meetings between her— expert in transport as she is—and the infrastructure bank to get into some of those potential projects in more detail. She made a significant contribution as roads Minister.
Clause 2(5) sets out the definition of infrastructure. We have taken a power to amend the bank’s activities and the definition of infrastructure, using the affirmative procedure in both Houses. Across these different areas, clause 2 is the bedrock on which the bank will operate, and I commend it to the Committee.
James Murray
We know that after 12 years of low growth from the Conservatives there is a vital need to invest in the infrastructure of the future. Across the country, we need to invest in new transport, new digital infrastructure, new sources of energy that are sustainable and secure, and new high-quality jobs with decent pay. That is why we support the establishment of the UK Infrastructure Bank, and the Bill’s aim of putting it on a statutory footing.
We wanted the bank to address the deep economic inequalities across the country, which is why we sought to amend clause 2(3). My hon. Friend the Member for Erith and Thamesmead emphasised that, in supporting regional and local economic growth, the bank should reduce economic inequalities within and between regions of the United Kingdom to improve productivity, pay, jobs and living standards. In the same subsection, we wanted to add a third objective: for the bank to support supply chain resilience and the UK’s industrial strategy.
We wanted to retain two Lords amendments that strengthened the Bill: one that included the circular economy and nature-based solutions in the Bill’s definition of infrastructure, and one that Labour introduced to ensure that the Bill would focus on creating jobs and reducing economic inequalities. It is deeply disappointing that the Government have blocked those measures to make the UK Infrastructure Bank succeed and be fit for a modern, prosperous Britain. A Labour Government would deliver investment and loans in a way that supports the entire country, to meet the challenge of regional inequality and the commitments of our climate ambitions.
Question put and agreed to.
Clause 2, as amended, accordingly ordered to stand part of the Bill.
Clause 3
Strategic priorities and plans
Amendment made: 4, in clause 3, page 2, line 26, at end insert—
“(4A) The Treasury must consult the appropriate national authority about any provision which the Treasury proposes to include in a statement under this section and which concerns a subject matter provision about which would be within the legislative competence of—
(a) the Scottish Parliament, if contained in an Act of that Parliament,
(b) Senedd Cymru, if contained in an Act of the Senedd, or
(c) the Northern Ireland Assembly, if contained in an Act of that Assembly made without the Secretary of State’s consent.
(4B) The duty to consult imposed by subsection (4A) may be satisfied by consultation carried out before the passing of this Act.”—(Andrew Griffith.)
This amendment would require the Treasury to consult the relevant devolved authority before including in a statement of strategic priorities for the Bank any provision which the Treasury proposes to include in the statement and which concerns a subject matter within the legislative competence of the authority in question.
Question proposed, That the clause, as amended, stand part of the Bill.
Andrew Griffith
Clause 3 gives His Majesty’s Treasury the power to issue the bank with a strategic steer. We talked about that earlier as a mechanism by which the Government of the day can flexibly, and in an agile fashion, give the bank some direction. That steer will set out what, in the Government’s view, the bank should prioritise and focus its activities on. The strategic steer, and any revisions of it, will be required to be laid before Parliament.
The Chancellor issued the bank with its first strategic steer in March in order to inform the development of the bank’s inaugural strategic plan, which was published in June. That gave the opportunity to share an update on the Treasury’s interpretation of the bank’s strategic objectives and to clarify the definition of infrastructure that the bank should be working with. It highlighted the role that the bank can play in improving energy resilience, as well as setting out the outcome of the Treasury’s review of environmental objectives, confirming that there is significant scope in the bank’s existing objectives for it to invest in nature-based solutions.
We do not expect a steer to be issued more than once a Parliament, which will ensure that the bank has certainty in the long term to plan its investment strategy while keeping pace with Government priorities and ensuring policy alignment across infrastructure investment.
Richard Fuller
Can the Minister tell me whether the steer will include giving a bit more specificity to the UK Infrastructure Bank about where on the investment spectrum—emerging businesses, high-growth businesses, mature businesses—it should place the preponderance of its resources? Will the steer provide clarification from the Government to help the bank?
Andrew Griffith
The strategic steer is precisely an attempt to find the right balance between prescription—I understand that my hon. Friend does not seek that directly but wants to be able to command the bank to invest at particular points of the curve from time to time—and the bank’s being able to use its expertise and motivate its leadership by having a relatively broad set of parameters. We all understand that that is a careful balance, and we do not want to move it in either direction, but I agree with my hon. Friend that the strategic steer is a vehicle to achieve the purpose he seeks.
Richard Fuller
I do not mean to dwell too much on this issue, and I certainly do not want to irritate the Minister through my questioning, but I want to make the point that the skillsets required for the bank to be effective as an emerging-stage investor are different from those required for it to be an investor in a mature business or a high-growth business. My concern is that the bank will try to spread itself too thinly, particularly in the early stages.
Andrew Griffith
My hon. Friend makes a very wise and informed point. The UK Infrastructure Bank is not the only intervention that the Government make; the British Business Bank has a broad portfolio of ways to support the sector. I hope that between the two of them, with the strategic steer perhaps being used as a vehicle to align them, every outcome that my hon. Friend seeks can be properly covered. Again, he makes a strong point about confidence and capability, and about how we resource against different types of investment.
The bank is required under the clause to update its strategic plan to ensure that it reflects the changes when a strategic steer is issued, once per Parliament. That will ensure that the will of Parliament is satisfied within a reasonable timeframe. Given that the bank is ultimately owned by the Government and the taxpayer, it is right that we retain a power to issue the bank with a strategic steer to set out its priorities, which is why I support the clause.
Abena Oppong-Asare
I thank the Minister for his explanation of the clause, which lays out the bank’s strategic priorities and plans. It is largely administrative and requires the Treasury to prepare a statement of strategic priorities for the bank, which must be laid before Parliament and can be revised or replaced.
As the Minister said, the Chancellor—the now Prime Minister—put the strategic steer in place on 18 March. As I have already highlighted, the strategic steer included some plans that Labour do not oppose; indeed, we want to see some of them in the Bill, rather than in policy documents with ambiguous legal status. The Government must recognise that point, which is evidenced by the energy efficiency amendment that they introduced in the Lords. The Chancellor stated in the March strategic steer that
“I’d encourage you to prioritise opportunities that align with the government’s renewed focus on energy security. Examples of relevant opportunities may include helping to bring forward low carbon energy projects that accelerate the UK’s transition to clean energy and improve the energy efficiency of buildings and homes.”
It was rightly pointed out in the other place that the Bill did not include energy efficiency measures. In recognition of that, the Government introduced an amendment on energy efficiency, which Labour welcomed.
I anticipate that in much of the Committee’s proceedings, the Government will assure us that many of our asks are covered by the strategic steer or the framework document. However, if that is the case, will they put them in the Bill, as they did with energy efficiency? If they are firm commitments then they should be in the legislation itself. We are here to scrutinise the Bill, but so many key elements of it seem to be relegated to documents that are not amendable and are legally ambiguous. Labour does not oppose clause 3, but it would be useful if the Minister could clarify the legal status of the various documents that interact with the Bill.
I want to echo some of the comments made by the hon. Member for North East Bedfordshire. In terms of the skills required, I too am worried about the bank being spread thin. I appreciate that the Minister has made comments about competency and capability with respect to particular investments, but it is important that at this stage—while we can—we look at how we can clarify the legal status of the various documents that interact with the Bill.
Andrew Griffith
I thank the hon. Lady and I reiterate that, in general, our differences are to do not with outcome, but with process and how prescriptive one should be when putting things into legislation. Philosophically, the Conservative party does not think it is always right to be over-prescriptive; the objective is to provide a flexible and agile tool that can be responsive and deliver the outcomes that we seek. Passing laws in itself does not change the outcome.
Valerie Vaz
That is the whole reason we are here as legislators. I gently remind the Minister that it is important to put things in the Bill; otherwise, there is confusion and there are too many grey areas. The Minister does not want lawyers to get involved, but it is important to have clarity. That is the purpose of legislation. Does he agree?
Andrew Griffith
The hon. Member for Erith and Thamesmead asked me to clarify. Of course we do not put everything in legislation; that is just not the way that we work. As we have committed to doing on the strategic steer, we bring things to Parliament to provide the opportunity to debate and discuss them. How this will work will be laid down in the Bill itself. As I have explained, the strategic steer can be issued from time to time—once per Parliament. Its legal status is that the body itself must have regard to it and then respond by setting its own strategic plans.
Abena Oppong-Asare
I appreciate the time that the Minister has given me to intervene on this point. He said that we do not always put things down in legislation, but that has been done already with the energy efficiency measures. All I am saying is that if these are firm commitments, then I do not understand why they cannot be laid down in the Bill. That would avoid confusion at a later stage, and it is important that we get this right.
Andrew Griffith
I feel I have addressed this point a number of times. There is just a difference between us as to the degree to which we should embellish primary legislation, which is hard to change and inflexible to respond to circumstances. That remains the position in the House. If the hon. Member for Erith and Thamesmead and her party are successful in obtaining a majority in a future election, she will have the opportunity to provide the strategic steer, which I assure her the UK Infrastructure Bank will have regard to under this framework. Perhaps we can then reassemble, and she will have the opportunity to hang whichever baubles she would like to on this particular Christmas tree.
Question put and agreed to.
Clause 3, as amended, accordingly ordered to stand part of the Bill.
Clause 4
Directions
James Murray
I beg to move amendment 19, in clause 4, page 2, line 38, at end insert
“and any subsequent, consequential, or relevant correspondence between the Treasury and the Bank.”
This amendment increases transparency surrounding directions issued by the Treasury to the Bank.
I will briefly set out what the clause will do, because that context is necessary to understand what our amendment would do in turn. Clause 4 would grant the Treasury the power to give directions to the UK Infrastructure Bank about how to deliver on its objectives. Subsection (2) would require the bank to comply with those directions, but the Treasury would be unable to give those directions until it had consulted with the bank’s board of directors. The Treasury would be required to publish the directions as soon as practicable, and under an upcoming framework document the bank would have the right to publish a reservation notice in respect of the direction.
The bank has been described by the Government as operationally independent, but we know that the Treasury is the sole stakeholder in the bank. It is therefore possible for the Treasury to exert influence on the bank’s activities as a result of its ownership stake under the normal principles of company law. The Bill’s explanatory notes set out the Government’s position, stating:
“The Government’s policy is that such influence should be used sparingly in practice, and that the default position should be that the Bank is independent as regards its operations and investment decisions.”
Given that the Treasury is the sole stakeholder in the bank, however, we have concerns about the procedural transparency of the clause. We are conscious that the clause provides the procedural framework for the Government to direct the bank. As we have heard several times this morning, the Prime Minister’s infamous Tunbridge Wells speech indicates the need for an extra degree of caution.
The explanatory notes state that the Government’s use of influence will be constrained by the need
“to act rationally and proportionately”,
but the record of the Government causes us to have doubts. We therefore wish to enhance the safeguards in the Bill and ensure that the Government do not exert undue influence over the activity of the bank. Conservative Governments have recently rejected Treasury orthodoxy, and the bank may in future raise concerns about the direction of Government policy. As the bank is compelled to abide by directions given by the Treasury, it is important that we have a transparent process to allow for scrutiny in those circumstances. That is why we tabled amendment 19, which seeks to insert a requirement that
“any subsequent, consequential, or relevant correspondence between the Treasury and the Bank”
be made public. The purpose of the amendment is to increase transparency surrounding directions issued by the Treasury to the bank. It will simply require the Treasury to publish additional relevant correspondence between the Treasury and the bank, providing fuller context to any directions issued and enabling the proper scrutiny of investments made with public money.
Andrew Griffith
The hon. Member’s amendment is a solution in search of a problem. The bank is constituted with taxpayers’ money, for which Ministers are accountable to Parliament and to Select Committees, which have the power to compel information and witnesses. There is a strong degree of accountability, and it is entirely appropriate that Ministers, from whichever side of the House they may one day hail, have the ability to direct the bank as necessary, as part of the matrix of ministerial accountability. I therefore reject the amendment. The Government will not support it, simply because we consider it to be wholly unnecessary.
James Murray
I take no reassurance whatever from the Minister’s comments, so I will push this amendment to a vote.
Question put, That the amendment be made.
Andrew Griffith
Clause 4 contains a provision for His Majesty’s Treasury to issue the bank with a direction of a general or specific nature about how the bank is to deliver its statutory objectives. To address the concerns raised by the hon. Member for Ealing North, the bank must be consulted before any direction is given, and any direction given must then be published by the Treasury. Ministers are rightly accountable to Parliament for this bank, and for any element of risk to the Exchequer or taxpayer that its activities create. That is right, even though the bank will be operationally independent for its day-to-day operations and its own investment decisions.
It is therefore considered necessary and entirely appropriate that the Government have a reserved power to direct the bank about how it is to deliver its objectives. Without a power of direction in statute, His Majesty’s Treasury could still direct the bank; however, there would be situations where the board would refuse a direction if the power were not in statute, given directors’ obligations under the Companies Act 2006. The two things could conflict. The purpose of the clause is to clarify where that conflict could arise, and the power of direction in statute removes that potential.
I assure right hon. and hon. Members from both sides of the House that the Government expect to use the power infrequently. Constrained powers of direction are a relatively common feature of similar institutions, such as the British Business Bank and HMRC. I commend the clause to the Committee.
James Murray
I rise to speak briefly, as I set out our views on clause 4 more widely in the context of amendment 19, which I am disappointed that the Government chose to oppose. We were simply aiming to improve procedural transparency; it makes me wonder why the Government are so keen to avoid that being part of the Bill. Having lost that amendment, we will not be opposing the clause as it now stands.
Question put and agreed to.
Clause 4 accordingly ordered to stand part of the Bill.
Clause 5
Financial Assistance
Question proposed, That the clause stand part of the Bill.
Andrew Griffith
Clause 5 gives the Treasury the power to provide the bank with financial assistance to enable it to deliver on its objectives. Financial assistance is defined in clause 10 to include
“assistance provided by way of loan, guarantee, indemnity, participation in equity financing and any other kind of financial assistance”,
whether given on an actual or contingent basis. The bank has been operating on an interim basis so far, with £22 billion of capitalisation from the Treasury, using existing powers derived from the Infrastructure (Financial Assistance) Act 2012 and sections 50 and 51 of the United Kingdom Internal Market Act 2020. However, we believe that a specific spending power is important in ensuring that the bank is an enduring institution.
Normally, the bank borrows from the Debt Management Office through voted loans via the Treasury’s supply funding. However, subsection (2) will make it possible for the bank to receive money paid directly out of the National Loans Fund, with the terms and conditions and interest rates of any such loans being determined by the Treasury. This removes the need for the Treasury to act as an intermediary in lending money from the National Loans Fund, while still maintaining control over the terms and conditions of direct loans. That is consistent with the approach taken by the Green Investment Bank when that was established.
Clause 6 provides for the bank, each year, to provide to the Treasury a copy of its annual report and accounts, and for the Treasury to lay these before Parliament. This will ensure the direct accessibility of the accounts by Parliament. This is a common clause for arm’s length bodies; it was in the legislation for the Advance Research and Invention Agency, the Green Investment Bank and the Bank of England. We expect the bank to publish its annual report and accounts for 2021-22 before the end of this calendar year—I believe they will be laid in the immediate future. The annual report and accounts will cover, as is standard, the bank’s progress on its success criteria, which I am sure will be of interest to my hon. Friend the Member for North East Bedfordshire, including its key performance indicators, its compliance with financial services regulation and its financial accounts.
Abena Oppong-Asare
As the Minister highlighted, clause 5 concerns financial assistance to the bank and clause 6 concerns the bank’s annual accounts and reports. The Minister has already provided a detailed summary, so I am not going to repeat what he has said. As he mentioned, clause 5 allows for the Treasury to provide financial assistance to the bank for the purpose of helping the bank deliver its objectives. Clause 6 requires the bank’s directors to comply with section 441 of the Companies Act 2006, delivering the Treasury a copy of its accounts and reports each financial year. As the Minister has outlined already, such clauses are commonly used. These are clearly technical and administrative requirements, and we will not object to them.
Question put and agreed to.
Clause 5 accordingly ordered to stand part of the Bill.
Clause 6 ordered to stand part of the Bill.
Clause 7
Directors: appointment and tenure
Richard Fuller
I beg to move amendment 12, clause 7, page 3, line 20, leave out “fourteen” and insert “eight”.
The Chair
With this it will be convenient to discuss amendment 13, clause 7, page 3, line 20, at end insert
“of which at least four must be non-executive directors”.
Richard Fuller
I am getting clear instructions from the Whip to be as brief as possible, so—[Interruption.] Not quite that brief. I draw hon. Members’ attention to clause 7(a). Clause 7 concerns the directors and 7(a) is about the number of directors; it says the bank is to have at least five and no more than 14 directors. It was that number 14 that caught my eye: it seems an extraordinarily large number of people to have on a board, and I do not believe that it is in accordance with corporate best practice.
Furthermore, there is no provision for the balance between executive and non-executive directors. It is a clear aspect of corporate governance that there should be a plurality and, often, a majority of non-executive directors. I want to probe the Government about why the number is 14, and why there is not more specificity about non-executive directors.
To back up my argument, I should say that the Minister will be aware that in the United States the average number of directors for the largest American corporations is between eight and 11, not 14. In its review of the FTSE 100 companies, Spencer Stuart said that the average board size is 10, and that 77% of boards are solely non-executive directors. The Minister will also be aware that the British Business Bank has nine directors, of whom four are non-executives and one is additional—he is a senior independent director. These are important points. There is a risk that the board could be full of people there to please—[Interruption.] He just told me to shush up.
Richard Fuller
No, I am not going to take an intervention. He just told me to sit down, but he can sit down while I finish making my speech.
Richard Fuller
The right hon. Lady is right about the potential here; I think I heard her use the word “cronies”. That is the concern—that with so many places the board will end up being stuffed full of people who have their own interests to play and that good governance will, as a consequence, be a victim of that large board membership.
David Linden
Unfortunately, I was unable to catch the eye of the hon. Member for North East Bedfordshire, but I do not necessarily disagree with much of what he is saying. I only hope that the idea would extend, for example, to reform of the House of Lords and even the size of the Cabinet of the UK Government, which I think is the biggest it has ever been. I am more than happy to agree with the hon. Gentleman. He can rest assured of my support if he chooses to push the amendment to a Division, but I think we need a degree of consistency if he is willing to pursue this line of argument.
James Murray
Amendment 12 seeks to limit the maximum number of directors on the board of the bank, moving it down from 14 to eight. Amendment 13 stipulates that at least four of the board members must be non-executive directors. We will be opposing amendment 12, as we believe that it is important for a range of views and expertise to be represented on the board of the bank. We believe that narrowing the board simply narrows the potential for diverse insight and ideas. As we will push for in amendment 20, which I will speak to shortly, we believe it is vital that there be a workers’ representative on the board. Narrowing the maximum figure reduces the board’s capacity to gain workers’ insight. On amendment 13, we will abstain.
Andrew Griffith
I thank my hon. Friend the Member for North East Bedfordshire for rightly raising the important subject of governance, which relates to the arms length body in scope today. It is a very important point when considering how we manage efficiency and the will of Parliament through arms-length bodies. While not disagreeing in principle, the Government will not be supporting amendments 12 or 13, but I would be very happy to engage with my hon. Friend to see if there is something practical we can do.
My concern is with reducing the maximum board size to eight in the UK governance structure under the combined code, which my hon. Friend may have views on as well. Unlike in the US, in the UK we have a large number of committees of boards—rather more than is the case in the US. The limit of eight may present the challenge of not being able to successfully staff and structure those committees. That would be a concern to me.
The amendment requiring non-executive directors to hold a majority on the board is sensible, but I believe that would be the objective of the organisation anyway, and it complies with the corporate governance code to have a majority of non-executive directors. I do not think we need a requirement in legislation, but it is something I am happy to explore with my hon. Friend to give him the comfort he seeks without us moving out of potential compliance. I would ask him to withdraw his amendment.
Richard Fuller
Well, Mr Davies, I am sorely tempted to push this to a vote, notwithstanding the comments from my hon. Friend the Minister. I understand his point and would ask that in his direction he would issues around governance. I am disappointed that Labour is not prepared to support my amendment. Therefore, rather than my valiant quest end in ignominious defeat, I beg to ask to withdraw the amendment.
Amendment, by leave, withdrawn.
Andrew Griffith)
I beg to move amendment 5, clause 7, page 3, line 23, at end insert—
“(ba) the Board is to appoint one or more directors to be responsible for ensuring that the Board considers the interests of the appropriate national authorities when making decisions;”
This amendment would require the Bank’s Board to include one or more directors with responsibility for ensuring that the Board considers the interests of the appropriate national authorities when making decisions.
The amendment sets out the requirement for UKIB’s board to appoint one or more directors to be responsible for ensuring that the interests of the devolved Administrations are considered in the board’s decision making. The work of the bank is UK-wide and it has already supported projects in each of the devolved Administrations. Given that Scotland, Wales and Northern Ireland have strong interests in infrastructure investment in their respective nations, we, the Government, are keen to ensure that UKIB considers their views throughout its strategy and decision-making, including board discussions.
David Linden
I would not necessarily oppose that argument, but I look forward to the day when the legislation can be updated to remove any representatives of the Scottish Parliament’s view, when Scotland takes its place as a rightful independent nation.
James Murray
I will speak only briefly to amendment 5, which requires the board of the bank to appoint one or more directors to be responsible for ensuring that the board considers the interests of the appropriate national authorities when making decisions. Labour will not oppose the amendment as we believe it is important that the interests of devolved authorities are taken into full consideration through the administration of the bank.
Amendment 5 agreed to.
James Murray
I beg to move amendment 20, clause 7, page 3, line 23, at end insert—
“(ba) at any time, the Bank is to have at least one non-executive director who is a representative of workers.”
This amendment ensures there is a workers’ representative on the board of the Bank.
As I mentioned earlier, Labour is concerned about the absence of a workers’ representative on the board of the bank, especially as much of the board consists of political appointees at the behest of the Chancellor.
We are committed to a strong partnership between industry, workers and the state. Having a workers’ representative on the board of the bank is important for good governance. The UK’s corporate governance code states that a company should have a combination of a director appointed from the workforce, a formal workforce advisory panel, or a designated non-executive director to facilitate engagement with the workforce. It also states, however, that if the board has not chosen one or more of those methods, it should explain what alternative arrangements are in place and why. In the absence of such an explanation, we have tabled amendment 20, which was originally moved in the Lords. We recognise arguments made in the Lords about how the Government’s framework document, to be published after Royal Assent, provides safeguards and protective measures, however that document is not legally binding. Sufficient questions have also already been raised about the activity of the bank to require explicit assurances in the Bill.
Richard Fuller
Could the hon. Gentleman clarify to whom the clause refers when it talks about workers? Is he referring to workers of the infrastructure bank, and is he calling for a board representative of them, because most of those people will be bankers? I am not so sure that Labour has always felt that the bankers are the most in need of representation in financial institutions. Or is he referring to workers of the investee company? If so, how would that be facilitated?
James Murray
I thank the hon. Gentleman for his remarks.
As I set out, the UK corporate governance code already has clear guidelines about the involvement of workforce in governance of boards. However, we have not had explicit assurances from the Government. We have tabled the amendment to push the Government on that. We need assurances that investments and loans made by the bank will be guided by the economic needs of the entire country. Investments made into tax havens pose a real risk to achieving that goal. Marcus Johns from the think-tank IPPR North has said that the use of tax havens
“hollows out our economy, keeps wages low, holds communities back, and enables money to be syphoned away into a globalised system of extraction”.
He argued that the bank
“must look seriously to prevent the use of tax havens and avoidance among the firms it supports.”
As the shadow Chancellor, my hon. Friend the Member for Leeds West (Rachel Reeves), said, a Labour Government would support
“British industry, supply chains & support industrial strategy”,
and ensure that trade unions
“have access to workplaces”
and that all
“businesses & bodies receiving public money from the UK Infrastructure Bank…have a plan to create good jobs with decent conditions”.
We believe that only with a workers’ representative on the board will the bank have that critical perspective on job creation and succeed in being governed with the entirety of the UK’s economic prosperity in mind.
David Linden
I rise to indicate my support for amendment 20—[Interruption]—which I gather is also being given by Comrade Fuller on the other side of the Committee. It is very welcome that the Labour party, having recently departed from its relationship with trade unions and workers, is finally seeing the light and coming back to the idea that it ought to have a strong association with trade unions. The amendment probably could have been tidied up slightly, perhaps to include somebody from the Trades Union Congress, but on the broad thrust of the argument I very much support the idea that the Labour party is once again deciding to go back to its roots, rather than flirt too much with the policy of the right hon. and learned Member for Holborn and St Pancras (Keir Starmer).
Andrew Griffith
I shall strongly resist the temptation to debate the fundamental merits of workers on boards, overturning the existing system of UK corporate governance, or indeed the nationality of any particular worker. Why stop at one English worker when one could have representatives of workers from all the DAs?
In thoroughly opposing the amendment, I confirm that the bank will comply with the corporate governance code, which provides, as the hon. Member for Ealing North outlined, a number of options through which a company can achieve the desired representation. The bank has already designated Marianne Økland to take on the role of facilitating engagement with the workforce. That will be set out in the annual report when published. I ask, perhaps fruitlessly, the hon. Member not to waste the Committee’s time by pressing the amendment to a vote, given that the bank is complying with the existing UK corporate governance code.
James Murray
While I welcome the Minister’s assurance about the bank’s compliance with the UK corporate governance code, I am disappointed that he feels that a vote on worker representation on the board would be a waste of time. It is an issue of great importance to the Opposition, so we will press the amendment to a vote.
Question put, That the amendment be made.
Andrew Griffith
The clause sets out the core provisions on the make-up of, and appointment to, the bank’s board of directors. The clause requires that the board has a number of directors that is broadly consistent with comparable boards. It allows for the appointment of directors to have a spread of expertise across banking, infrastructure finance and climate change mitigation, as well as the appropriate balance between executive and non-executive directors. The clause sets out that the chair, chief executive officer and non-execs will be appointed by the Chancellor of the Exchequer.
All non-exec directors are recruited with reference to guidelines set out by the Office of the Commissioner for Public Appointments, and are being appointed based on the skills that they could bring to the board around the UKIB’s mandate. Throughout the process we have been conscious of the need to ensure a broad spread of expertise, as well as cognitive diversity. Finally, the clause contains provisions on the circumstances that would prohibit a person from continuing as a non-exec director, such as bankruptcy, or mental or physical incapacitation. I recommend that the clause stand part of the Bill.
James Murray
As the Minister outlined, clause 7 concerns the appointment and tenure of directors to the board of the bank. We note that it requires at least five but no more than 14 directors; that the board’s chair, chief executive officer and non-executive directors be appointed by the Chancellor of the Exchequer; that the tenure of non-executive directors not exceed four years; and that a person may not be appointed as non-executive director more than twice.
The clause also requires that a person ceases to be a non-executive director as soon as they cease to be a director by virtue of any provision of the Companies Act 2006, or are otherwise prohibited by law; they become bankrupt or their estate is sequestrated; a registered medical professional treating them provides the written opinion that that person is incapable of serving as a director due to physical or mental incapacity for more than three months; or the person has resigned from the position in accordance with the notification procedures of the bank. We recognise that the number of directors is broadly consistent with comparable boards, such as the Bank of England board. We also understand that the intention behind that is to provide flexibility and a wide spread of expertise.
Valerie Vaz
One of the difficulties is that the Bank of England does not have a spread across the regions. Does my hon. Friend not agree that we should have regional expertise as well, which is the whole point of levelling up all parts of the country?
James Murray
My right hon. Friend is right: it is critical that the bank considers regional inequalities in its mission, and we are very concerned that the Government opposed earlier amendments on having a commitment to tackle regional inequalities in the Bill. The fact that there is no reassurance that the board will have that in mind either causes further concern about what the bank’s mission will ultimately be.
James Murray
I am just drawing to a close.
We understand that the intention behind the composition of the board is to provide flexibility. Notwithstanding the important comments made by my right hon. Friend the Member for Walsall South, and our earlier comments about the lack of worker representation on the board, we will not oppose the clause.
Question put and agreed to.
Clause 7, as amended, accordingly ordered to stand part of the Bill.
Clause 8 ordered to stand part of the Bill.
Ordered, That further consideration be now adjourned. —(Andrew Stephenson.)
UK Infrastructure Bank Bill [ Lords ] (Second sitting)
Tuesday 22nd November 2022
(2 years ago)
Public Bill CommitteesRead Full debate UK Infrastructure Bank Act 2023 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Public Bill Committee Amendments as at 22 November 2022 - (22 Nov 2022)
The Committee divided: - Ayes: 6 / Noes: 10 - Question accordingly negatived.
The Committee divided: - Ayes: 6 / Noes: 10 - Question accordingly negatived.
The Committee divided: - Ayes: 6 / Noes: 10 - Question accordingly negatived.
The Committee divided: - Ayes: 6 / Noes: 10 - Question accordingly negatived.
Richard Fuller (North East Bedfordshire) (Con)
I beg to move amendment 14, in clause 9, page 4, line 14, at end insert—
“, and
(c) the effectiveness and scale of private and other third-party capital attracted to investments by the Bank.”
It is a particular pleasure to serve under your chairmanship, Mr Bone. Had you been with us this morning you would have witnessed a series of debates between the Minister, me and, on occasion, Opposition Members about the importance of the bank, with references to its ability to attract private capital from outside and to the importance of its achieving a financial return for its shareholders, who, I remind right hon. and hon. Members, are the taxpayers, through the choosing of the Government.
Amendment 14 relates to reviews of the bank’s effectiveness and impact. In previous discussions the Minister said—on balance, I think quite rightly—that there was sufficient power in the Government’s ability to provide a framework of strategic priorities and plans and, if necessary, to put directions in place for those objectives not to be included in the Bill. He said there was enough flexibility for the Government to provide a response by other means, which I accept.
In clause 9, however, we are trying to look at the bank’s effectiveness and impact. We are reviewing not just the bank’s homework but the directions provided by the Treasury and His Majesty’s Government over that period. That is underlined by subsection (1), which makes reference to “an independent person”. My amendment would amplify subsection (1)(b) by adding a specific provision on
“the effectiveness and scale of private and other third-party capital attracted to investments by the Bank.”
To reiterate some points that are relevant to the review —the hon. Member for Erith and Thamesmead has agreed with at least one of them, and perhaps more—there are concerns that the bank might spread itself too thinly with regard to where and how it might seek investments, all the way from early-stage investing, through growth capital, to mature investing. It is therefore important that the review by the independent person takes into consideration the efficiency of capital allocated between those various tasks or parts of the investing spectrum.
It is important that we understand the investment structures that are in place. What I have in mind—and I am interested to hear the Minister’s observations—is the fact that the bank is trying to attract external capital to achieve some of our climate change and levelling-up goals. For climate change goals, the backstop provider of the gap in any funding if the private sector does not provide, if we wish to achieve our policy objective, is the UK taxpayer. Right now, in the main Chamber Members are discussing the autumn statement. Members on both sides of the Committee are aware that we are pledging increases in taxation, expenditure and borrowing, notwithstanding additional pressures that achieving net zero will place on taxpayers. It is therefore crucial, if the bank is to play an effective role, that we are vigilant in understanding the burden left at the end of its efforts on the taxpayer, and we should seek to minimise it. My amendment seeks to put pressure on the independent person to look at that objective. Those are the main priorities of my amendment and I look forward to hearing the Minister’s response.
Abena Oppong-Asare (Erith and Thamesmead) (Lab)
It is a pleasure, Mr Bone, to serve under your chairship. It is an honour to follow the hon. Member for North East Bedfordshire. As he has highlighted, we have come to a substantial and key clause.
As the hon. Gentleman briefly stated, the clause sets out requirements for reviews of the bank’s effectiveness and impact. In particular, it states:
“The Chancellor must appoint an independent person to carry out reviews of…the effectiveness of the Bank in delivering its objectives, and…its impact in relation to climate change and regional and local economic growth (including the extent to which its investments in particular projects or types of projects have encouraged additional investment in those projects or types of project by the private sector).”
The independent person must share those reports with the Treasury, which must then publish the reports and lay a copy before Parliament. I welcome that there will be performance reviews of the bank. Given the importance of its objectives, it is right that its ability to meet its aims is evaluated. We will get to the frequency of the reports later. I am sure I do not need to reveal to Committee members that we think the current proposed frequencies are inadequate.
Amendment 14, tabled by the hon. Member for North East Bedfordshire, would add a third element to the reports: the independent person would have to consider the effectiveness and scale of private and other third-party capital attracted to investments by the bank. We have already discussed the concept of additionality—the idea that the bank should be adding value and crowding in private sector investment. Clause 9(1)(b) already makes reference to additional investment, so I am confident that that is already covered by the Bill.
The Economic Secretary to the Treasury (Andrew Griffith)
It is a pleasure to serve under your chairmanship, Mr Bone. I thank my hon. Friend the Member for North East Bedfordshire for his diligence in endeavouring to ensure that the Bill properly protects taxpayers’ interests and properly mobilises the private sector investment that the country depends on. I also thank him for trying his hardest to keep Ministers and this institution to account. I would never seek to do anything to discourage him.
However, in this case, I would like to join hands with the hon. Member for Erith and Thamesmead and, regrettably, confirm that it is my view that clause 9(1)(b), which already talks about the degree to which investments in particular projects or types of projects have encouraged additional investment in those projects or types of projects by the private sector, will go a long way to accomplishing what my hon. Friend wants. I am happy to write to him on what I consider to be the effectiveness of the clause and explore whether there is some value to be added in changing it, but it is my position, as it is that of the hon. Member for Erith and Thamesmead, that clause 9(1)(b) already does that.
My hon. Friend the Member for North East Bedfordshire should be reassured that the Government are setting up this institution with great foresight as to how we keep it accountable. The mere fact that we are legislating at its inception for an independent review to be carried out is a very progressive thing. We are trying to ensure that all our arm’s length bodies are as effective as possible. Speaking personally, I think it would be an innovation for every other arm’s length body to have to have independent reviews at frequent intervals.
I hope that my hon. Friend will agree that the wording of the Bill is already sufficiently broad to cover what he is seeking and accept my assurances to explore whether it should be changed, and that he will not press his amendment to a vote.
Richard Fuller
I appreciate the comments by the Opposition spokesperson and, of course, my hon. Friend the Minister. My concern about subsection (1)(b) is that the focus on the extent to which investments have attracted additional private sector investment is subordinate to the effectiveness, in terms of the impact on climate change and regional and local growth. That essentially means that if there is a project that is very strong on achieving climate change goals, the bank will be perfectly happy to pursue that, even at an extended cost to the taxpayer. I hope I have not got the Minister wrong.
Andrew Griffith
To clarify, I do not read it as being subordinate; it is merely clarificatory that that is within scope. I thought it might be useful to put that on the record.
Richard Fuller
That is very helpful. With that assurance from the Minister, I am happy to withdraw my amendment.
Amendment, by leave, withdrawn.
Abena Oppong-Asare
I beg to move amendment 23, in clause 9, page 4, line 14, at end insert—
“(c) the geographic spread of the businesses and bodies the Bank invests in, and
(d) the ownership of the businesses and bodies the Bank invests in.”.
This amendment requires reviews of the Bank’s effectiveness and impact to consider the location and ownership of the businesses and bodies it invests in.
It might be helpful if I give the background to the amendment. Labour wants to strengthen British industry, supply chains and our industrial strategy. That is why we have proposed amendment 23, which would require reviews of the bank to consider the geographic spread of the businesses and bodies that the bank invests in, and their ownership.
I was concerned to read research by Open Democracy that found that the bank has so far pledged nearly all its cash to firms with offshore owners, including some linked to tax havens and repressive regimes. That was an independent report, not carried out by my party, but by Open Democracy. We want the benefits of the UK Infrastructure Bank to be seen here in the UK, with home-grown renewables such as offshore wind, solar, nuclear, hydrogen and tidal power. We want to work with businesses to crowd in private funding and work with unions to ensure high-quality jobs. I am sure the whole Committee can agree on that.
We know that this could be a national enterprise. We have a world-leading offshore wind industry in Scotland and on the east coast, hydrogen in the north-west and Teesside, nuclear power in the south-east, and solar power in the south and midlands. That can only be realised if investment stays here in the UK. A lack of domestic champions has compromised our security and stalled progress.
Richard Fuller
Are the Opposition concerned that investments and co-investments in projects in the UK will come through funds that may be held in offshore trusts, or is the concern that the bank will be investing in projects offshore through offshore investment trusts?
Abena Oppong-Asare
The hon. Member asks an important question. I am sure that we agree that it is important to look at the geographical element of investments. This is not just a concern of Labour’s; the report I mentioned is by Open Democracy. Brilliant projects are taking place; I do not want to take anything away from them, but I want us to ensure that we are supporting businesses in the UK. That is really important. We all know from talking to our constituents that great investment could be used. That needs to be acknowledged, and that is why we tabled the amendment, which would ensure that reviews of the bank consider the geographic spread of the businesses that the bank invests in and their ownership.
Andrew Griffith
The Government do not support the amendment. The hon. Lady is quite right to raise the importance of the regional split, and we all aspire to higher standards of transparency in business investment. These investments will, of course, be highly transparent. We have talked before about the reporting to Parliament; we will talk later about the annual report and the frequency of reporting. I can assure the hon. Lady that it will not be possible to hide a physical investment in infrastructure. That is the very nature of the provisions. Where the bank has deployed its capital, and the nature of the investments, will be very transparent. Indeed, the report that she cites from Open Democracy rather proves that point. There is no deficiency of transparency if Open Democracy has been able fully to ascertain the ownership.
Abena Oppong-Asare
Open Democracy has done the research that the Government have not done to get that data. It spent significant time getting that data. It should not be left to organisations such as Open Democracy to get that information. That information should be easily accessible to us. This is taxpayers’ money, and I do not see how the amendment is unreasonable.
Andrew Griffith
I make the same point again. The fact is that the information is readily accessible in the public domain through Companies House. It will be accessible through the different mechanisms for holding the UK Infrastructure Bank to account. There is no desire to do anything other than ensure that Parliament and other public interest stakeholders can see precisely where the bank is deploying its capital. That is the very purpose of it. We can talk later about the annual report mechanism, which will include the disclosure of material information.
In respect of—
Andrew Griffith
I was going to say something helpful, but of course I will give way. Hopefully it will re-occur to me in a moment.
Nick Smith
I thank the Minister for giving way. I wonder whether he could talk a little more about why the report on the geographic spread of businesses would not be of value to our country. There was a very good National Audit Office report on the creation of the UK Infrastructure Bank published in June this year. One of its recommendations was that the bank should
“further develop its understanding of where infrastructure needs are greatest so that it routinely informs investment decisions and prioritises them.”
Surely such geographical reporting would help the bank with its work.
Andrew Griffith
The hon. Member sort of took the words out of my mouth. We will expect the UK Infrastructure Bank to make the regional nature of its investments clear. It has done so to date, and clearly it should do so going forward. Things that should happen do not necessarily need to be put into statute at every turn. There are lots of other ways of ensuring that the information is readily available.
Abena Oppong-Asare
I have no further comments, other than to urge Members to support our sensible amendment, which I think would benefit all our constituents across the country.
Question put, That the amendment be made.
Richard Fuller
I beg to move amendment 15, in clause 9, page 4, line 21, leave out from “Treasury” to end of line 22 and insert
“12 months and the second report within 24 months of the day on which this Act comes into force”.
The Chair
With this it will be convenient to discuss the following:
Amendment 21, in clause 9, page 4, line 21, leave out “7” and insert “4”.
This amendment requires an initial report of the Bank’s effectiveness to take place within 4 years after the Act comes into force, rather than the current 7.
Amendment 16, in clause 9, page 4, line 24, leave out “7” and insert “2”.
Amendment 22, in clause 9, page 4, line 24, leave out “7” and insert “5”.
This amendment requires reviews of the Bank’s effectiveness to take place every five years after the initial review, rather than the current 7.
Richard Fuller
One last time, Mr Bone.
This group, including my amendments 15 and 16, relates to the timing and frequency of reports that will be provided. My amendments focus on the start of the UK Infrastructure Bank’s existence. Essentially, my question is: does the Minister feel that there will be enough transparency and exposure around the bank as it sets up its guiding principles, begins its work, puts its board together and starts to put some flesh on the bones of its investment profile?
My concern is that we will be waiting a bit too long if we wait for seven years to have any influence at all on the way in which the bank is being structured and is moving. Will it be going in the right direction? Essentially, we will not know until the next decade, and that will be well on our way to the time at which Parliament has set the objective of achieving net zero.
Amendment 15 suggests that we should have a report within the first 12 months, and a second report after 24 months. Those two reports would provide independent understanding about what the board and the bank leadership itself are doing at such crucial stages. Amendment 16 tries to do something similar in clause 9(5). The Government propose that subsequent reports must be made every seven years, while my suggestion is that they should be every two years.
I am probably willing to concede to the Government that, after the first couple of years, my proposal would probably involve a bit too much oversight over the board. The board must be allowed to do its job, so someone looking over its shoulders every two years is probably a bit too much. I am therefore minded not to press that point, but I will be interested to hear the Government’s thinking, particularly on the first two reports.
Abena Oppong-Asare
I thank the hon. Member for North East Bedfordshire for his comments. I will speak briefly to amendments 21 and 22.
I share the hon. Member’s concerns, because the initial review of the bank will be published within seven years of the Bill coming into force, and subsequent reviews will be published at intervals of no more than seven years. Those timeframes are shocking, particularly given that the Government’s original intention was for the initial report to be published in 10 years’ time.
I point out to the Minister that the levelling up missions are due to be met by 2030 and the net zero target by 2050, so a review in seven years’ time would miss the first of those targets. I would be interested to hear from the Minister how, without that review, those targets will be met.
Amendment 21 would provide that the initial review would be published within four years of the Bill coming into force, while amendment 22 would see subsequent reviews published every five years. That would enable the bank to grow, improve and ensure that it is meeting its objectives. I noted that the hon. Member for North East Bedfordshire may not press his amendments, so hopefully he finds ours to be more appropriate.
Andrew Griffith
I thank both the well-meaning Members—my hon. Friend the Member for North East Bedfordshire and the hon. Member for Erith and Thamesmead—who seek to get the right interval of reviews, both in respect of the first and subsequent periods. The fact that both colleagues have ended up with different intervals suggests that this is not something that need be of doctrine or dogma.
Abena Oppong-Asare
I thank the Minister for pointing out that we have come up with different intervals, but I remind him that, obviously, the Government did that as well. Initially, they were looking to do the review every 10 years, but they have changed it to seven years, so there is scope to adapt and change, as under our amendments.
Andrew Griffith
There is indeed scope, but there is also interplay with other expected reviews to which the UK Investment Bank will be subject. While I oppose, fairly, all the amendments put forward, I undertake to come back on these points at subsequent stages.
Valerie Vaz (Walsall South) (Lab)
I understand that the Minister considers that hon. Members are being well meaning but, if I may say so—I do not know if this is parliamentary language, Mr Bone—that is a tad patronising. We are talking about transparency and ensuring that the bank, which is using public money, is going in the right direction. It should not be too difficult for the bank to come back and have a review in a much shorter time than seven years. Given that we have had three Prime Ministers in a year, we might see many Ministers in those seven years. This Minister may give us his undertaking, but he might not be in place throughout that period.
Andrew Griffith
I am not sure quite how to react to the right hon. Lady’s predictions about my expected tenure, but I dare say she is probably right in many respects. Let us try to get through the remainder of the afternoon before making any amendments. I certainly did not intend to patronise any colleagues.
We have to get this right. The most important thing is that the bank is equipped to deliver the outcomes that we seek by deploying its capital in pursuit of its statutory objectives. I do not want us to trip over a particular interval when, inevitably, a number of reviews will be ongoing. Whether the right hon. Lady likes it or not, the undertaking that I am going to give is to come back on this. The Government have already moved in respect of clause 9(5)—from 10 years to seven. I hear from Members on both sides of the Committee that there is concern that seven years is still too long, and I undertake to come back on that.
Abena Oppong-Asare
The Minister is being generous with his time. I appreciate that he will take this matter away, but I remind him of the bank’s core function: to help us to meet our climate change targets by 2050. Several Back Benchers have already mentioned that. I urge the Minister to review the situation, because if we are going to meet the targets, particularly the 2030 targets, seven years will be far too long. Our proposal seems reasonable, so it would be helpful if the Minister would consider it and write to me about it.
Andrew Griffith
That is effectively what I am doing. The key point is that this is a novel institution. It has a great deal of runway, and it also has an awful lot of operationalising and scaling to do over the immediate period. I hope that no one wants to subject the bank to an excess of reviews during that initial period, as that would inevitably detract from its resources. None of that takes us away from any of the accountability measures we have talked about. I will write to the hon. Lady with a determination, or an explanation, regarding whether we can substitute a different interval in clause 9(5).
David Linden (Glasgow East) (SNP)
As this is the first time I have spoken this afternoon, may I say that it is a pleasure to serve under your chairmanship, Mr Bone?
I want to pin the Minister down a little on what he means when he talks about coming back. Would that be coming back in the form of writing to the hon. Member for Erith and Thamesmead, or coming back during the Bill’s remaining stages? I want to clarify exactly what he means, because some of us have fallen foul of such behaviour by Ministers before.
Andrew Griffith
I am not sure what is the nefarious behaviour of which the hon. Member speaks. I have spoken about our wanting to get the review intervals right. I am talking about potentially proposing a different number as an amendment at a later stage of the Bill.
The Chair
Order. It might help if, when the Minister sends a reply to the shadow Minister, he sends it to the whole Committee.
Katherine Fletcher
It is a pleasure to serve under your chairmanship, Mr Bone—for the first time, I believe.
Recently, I was briefly the incumbent of the roads portfolio, which is obviously an important part of infrastructure. The average time from scheme idea to spades in the ground actually exceeds the seven years that is provided for in the Bill. While I am extremely sympathetic to the points made by my hon. Friend the Member for North East Bedfordshire about ensuring that we do not go too long without checking, I am also sympathetic to the idea that we need to be able to operationalise the schemes. Does the Minister agree that the key to getting the seven years down is the reform of planning legislation? We cannot guarantee an investment until the development consent orders are cleared.
Andrew Griffith
The Minister absolutely agrees that the key point is to make the institution effective in delivering its goals. The hon. Member for Erith and Thamesmead talked about net zero and the imperative to get on, decarbonise our economy and ensure that we have the infrastructure in place. All hon. Members are supporters of scrutiny and accountability, which is why we all trip over this period of seven years as potentially being a long period—it is longer than the tenure that any of us enjoy. That is precisely because there is a trade-off with operationalising and delivering objectives.
Nick Smith
I welcome the Minister’s undertaking to come back with a different date for the laying of a report before Parliament. It is the reporting to and scrutiny of Parliament that is important in this instance, not least because, these days, recent Parliaments have rarely run to four years, although that used to be the average for a Parliament. I hope that the Government will look at a date that will allow each Parliament in the realm to consider the work of the bank. In the very good NAO report that was published in June, as one of its key findings, it said that
“At the end of May 2022, the Bank had made five deals”.
Can the Minister update us on how many deals had been made by the bank up until, say, October this year?
Andrew Griffith
We are moving slightly away from the amendments, but I will write to all hon. Members with an update. The annual report is due to be published imminently; the hon. Member was not here this morning when I confirmed that I have signed off what I needed to do. I expect the report to be laid in the House of Commons Library in the coming days. Some 10 deals have been made so far but, because this is a subject of interest, we will ensure that everybody is aware of the deals and that we lay the annual report before the House as quickly as possible.
Andrew Griffith
If it is a choice, I will do it one final time. We will then move to the vote.
Richard Fuller
The Minister referred to coming back another time about clause 9(5). As my hon. Friend the Member for South Ribble said, when we are reviewing investments, a seven-year period, and perhaps longer, might be a reasonable period for consideration. As the hon. Member for Glasgow East said, there is logic to having a review every five years during a Parliament. To my mind, subsection (4) refers to the more essential period. Essentially, it says that we will not have our first report for seven years. My thought is that we need one more frequently than that. Will the Minister clarify whether he intends to come back to the Committee on not just subsection (5), as he said he would, but subsection (4)?
Andrew Griffith
With respect, these are quite different points. I do not intend to come back on subsection (4). There are many reviews. We should not confuse the additional process of bringing in an outside party and conducting an independent review. That is quite different from the normal regular accountability of publishing an annual report, disclosure, complying with the combined code, having good governance practices, the oversight of the Treasury Committee and any of the other ongoing reviews that the Government spawn all the time. This is a separate statutory independent review. It is an unusual but positive feature, and I do not propose to reopen the point, because that is the Government’s position. We thought about it, and it will take time for this entity to be operating at scale, when it is actually capable of providing a useful determination for the review.
Richard Fuller
I am looking expectantly across the room, but as I do not see any encouragement from Opposition Members, I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Amendment proposed: 21, in clause 9, page 4, line 21, leave out “7” and insert “4”.—(Abena Oppong-Asare.)
This amendment requires an initial report of the Bank’s effectiveness to take place within 4 years after the Act comes into force, rather than the current 7.
Question put, That the amendment be made.
Andrew Griffith
Given the lively exchange of views about frequency, I think that members of the Committee are broadly familiar with the clause. The provision for regular independent and statutory reviews of the bank’s effectiveness in meeting its core objectives is important to ensure that it meets its objectives and delivers good value for the taxpayer. It is important that this is an independent review, independent of the bank itself and of HM Treasury. The review will look at the extent to which the bank has met its climate change and levelling-up objectives. In response to the points made by colleagues in the other place, it will also look at whether the bank has been suitably additional in the market. All of that is fundamental to the bank’s success.
We have talked about the review period. The statutory independent review will be in addition to the UKIB framework document, which will be reviewed after the Bill receives Royal Assent and at regular intervals thereafter, in addition to effectiveness reviews from the Cabinet Office, to which all public bodies are subject. The strategic review in 2024 will cover the general progress to date of the UKIB and its capital position, the implementation of the financial framework, the UKIB’s delegation limits and the return on equity. It will be additional to the financial framework, which will be reviewed from time to time after the strategic review. Given all of that and the debate about the period and my undertaking to come back on clause 9(5) and revisit what is the appropriate time, given colleagues’ concerns that seven years is too long, I recommend that the clause stand part of the Bill.
Abena Oppong-Asare
I am disappointed that the measures to strengthen clause 9 were not adopted. However, I welcome the fact that there will be reviews of the bank. Here and in the other place, concerns have been raised about the projects that the bank is financing, from their location to the level of additionality they provide. Reviews of the bank will certainly clear up the issues that need to resolved.
I hope that there will be opportunity for parliamentary scrutiny and discussion following report publications. I have noted—and I am sure the Minister is aware—that the Public Accounts Committee is currently conducting a review of the establishment of the UK Infrastructure Bank. It is a shame that the recommendations may not come early enough to influence the Bill, but its work demonstrates that the importance of evaluation. We have spoken about this topic at length today, so we will not oppose clause 9.
Question put and agreed to.
Clause 9 accordingly ordered to stand part of the Bill.
Amendments made: 6, in clause 10, page 4, line 32, at end insert—
““appropriate national authority” means—
(a) the Scottish Ministers,
(b) the Welsh Ministers, or
(c) the Department for Infrastructure in Northern Ireland.”
This amendment would define “appropriate national authority”.
Amendment 9, in clause 10, page 5, line 4, leave out the definition of “relevant public authorities” and insert—
““public authorities” means local authorities, Northern Ireland departments and any other person exercising functions of a public nature.”—(Andrew Griffith.)
See the explanatory statement for Amendment 8.
Clause 10
Interpretation
Question proposed, That the clause stand part of the Bill.
The Chair
With this it will be convenient to discuss the following:
Government amendment 7.
Clause 11 stand part.
Andrew Griffith
I hope that this discussion is largely technical and not subject to controversy. Clause 10 sets out the definitions for various terms that are used in the Bill, such as financial assistance, local authority and relevant public authorities. Financial assistance is defined in a broadly similar way to the definition in other legislation, such as the Infrastructure (Financial Assistance) Act 2012, but also reflects the specific priorities of the bank. It is intended to be a broad and inclusive definition in line with the potential diversity of the bank’s investment activities.
The Bill contains provisions stating that the bank is able to provide loans to relevant public authorities, and the clause defines public authorities to include Northern Ireland Departments, as well as local authorities in England, Scotland and Wales, and district councils in Northern Ireland. That is indicative of our commitment that the bank should work to deliver collaboratively and UK-wide, taking into account different infrastructure financing landscapes.
Government amendment 7 is a privilege amendment, as is standard for a Bill that begins its passage in the Lords and concerns matters of public finance. A privilege amendment was passed; given the Bill is now in the Commons, I have tabled an amendment to remove it that is purely technical. Clause 11 confirms that the Bill extends to England, Wales, Scotland and Northern Ireland, and the point at which it will come into force, which will be two months after Royal Assent.
James Murray (Ealing North) (Lab/Co-op)
It is a privilege to serve under your chairmanship, Mr Bone, and to speak to this important but uncontroversial aspect of the Bill. As we have heard, clause 10 concerns interpretation. We do not oppose the definition of “activities”, “financial assistance”, “infrastructure”, “local authority”, “objectives” or “relevant public authorities”.
Clause 11 is a short clause concerning the extent and commencement of the Bill, as well as providing its short title. It stipulates that the Act extends to England, Wales, Scotland and Northern Ireland. The legislation comes into force two months after the date on which it is passed, and it is to be cited as the UK Infrastructure Bank Act 2022. Government amendment 7 simply removes the privilege amendment inserted by the Lords, and is a procedural necessity that we have no reason to oppose.
Question put and agreed to.
Clause 10, as amended, accordingly ordered to stand part of the Bill.
Clause 11
Extent, Commencement and short title
Amendment made: 7, in clause 11, page 5, line 11, leave out subsection (4).—(Andrew Griffith.)
This amendment would remove the privilege amendment inserted by the House of Lords.
Clause 11, as amended, ordered to stand part of the Bill.
New Clause 1
Businesses and bodies the Bank invests in
“(1) The Bank must publish an annual report setting out—
(a) the geographical spread of businesses and bodies it invests in, and
(b) the ownership of the businesses and bodies it invests in.
(2) The Bank must prepare and publish a “Good Jobs” plan for all businesses and bodies it invests in, which requires the business or body to improve productivity, pay, jobs and living standards.”—(Abena Oppong-Asare.)
This new clause ensures that the Bank considers the location and ownership of the businesses and bodies it invests in and only invests in businesses and bodies who create “Good Jobs” plans to improve productivity, pay, jobs and living standards.
Brought up, and read the First time.
Abena Oppong-Asare
I beg to move, that the clause be read a Second time.
New clause 1 supports amendment 23. It would require the bank to publish an annual report setting out the geographical spread of the businesses and bodies it invests in, and their ownership. To be clear, amendment 23 required the independent review, conducted over longer time frames, to consider those points. Our new clause requires the bank to report annually on those matters.
Subsection (2) of new clause 1 would require the bank to publish and invest in a good jobs plan for all businesses and bodies, which requires the business or body to improve productivity, pay, jobs and living standards. Before the Minister objects, I will say that the wording might be familiar to members of the Committee, particularly Conservative members, because it is the same wording they voted to remove from the Bill earlier in Committee. The wording will be familiar to Conservative Committee members because it is the first mission of the Government’s levelling-up agenda. Given their voting record in this Committee so far, I am not sure it is something they are committed to any more, but I am sure they can agree that they want the UK Infrastructure Bank to create highly-skilled, well-paid jobs in their constituencies and across the country. I know that constituents in Erith and Thamesmead want to see better job opportunities, whether for young people or older people who are looking to reskill and retrain.
As I said earlier, we do not believe in growth for growth’s sake. We believe in growth because it creates jobs and improves living standards. With fairer choices, we see our economy growing again, powered by the talent and effort of millions of working people and thousands of our businesses. Our new clause would ensure that the bank plays its part in its mission, creating new industries across the country and working hand in hand with businesses to create jobs for the future. Before the Committee concludes, I want to take the opportunity to make some closing remarks and thank some people.
The Chair
Order. That is normally done after we finish this bit. Points of order are normally done at the end.
Andrew Griffith
New clause 1 would oblige the bank to publish an annual report addressing the geographical spread and ownership of the bodies the bank invests in, as well as a good jobs plan for all businesses and bodies it invests in, which requires the business or body to improve productivity, pay, jobs and living standards. It is similar to amendment 23, which has fallen, although it would require reporting after the event rather than a review. Many of my earlier points about amendment 23 remain pertinent. The bank already reports on its investments and will publish a summary in its annual report and accounts. The bank is capturing data on location in its deal assessments and will consider how best to report publicly on location for future investments.
As discussed earlier, the nature of an infrastructure investment means that it is difficult to hide. They tend to be fairly visible and tangible and we would all be able to work out exactly where those millions of pounds of capital had been deployed. I reassure hon. Members that the bank is subject to freedom of information requests in the usual way, which I understand is a painless process by which one can readily find out information. [Interruption.] The legislation was not brought in by this Government, so if it is deficient, it is not on our watch.
Abena Oppong-Asare
The Minister says that it is open to individuals to put in freedom of information requests. I do not understand why the Minister would encourage that when our new clause would make things a lot easier and more transparent. It takes a lot of time to do the paperwork associated with FOI requests, so the new clause would save staff from having to do that extra admin work. In setting up the bank, why does the Minister want it to take on those extra responsibilities? It makes no sense.
Andrew Griffith
It remains my contention that it is simply not necessary for this barnacle to be adhered to this particular ship as it steams out on its levelling-up mission across the UK, taking us on the path to net zero.
David Linden
If I understand it correctly, the Minister’s objection to new clause 1 is that the bank would already be doing quite a lot of reporting anyway—by a nod of the head, he is acceding to that. If the Government oppose further reporting, I presume that they object to new clause 1 because they have undertaken an impact analysis of it. Could he place that impact assessment in the Library so that Members can see it, and perhaps the new clause could be brought back on Report?
Andrew Griffith
I remind the hon. Gentleman that this is not a Government new clause. If anyone wishes to conduct an impact assessment of it, they are very welcome to do so, but it was not tabled by the Government.
David Linden
Does that mean that the Minister is objecting to the new clause purely because it was tabled by the Opposition, rather than based on evidence?
Andrew Griffith
Our position has been very consistent. I understand that it may not be the position of the Opposition, and it is no worse for that. Our position is that statute is not the be-all and end-all. The most important thing is that we get this bank up and running, delivering on its outcomes, and that we do so in good fashion, with the minimum, not maximum, amount of extra statute.
The new clause contains two elements, so I will turn briefly to the other point nested in it, which is the good jobs plan. The bank is already committed to pursuing good environmental, social, resilience and governance policy. We do not feel that adding extra statutory requirements in this particular case is the right decision. The bank will be reporting on the number of jobs created as one of its key performance indicators and will be working up measures on productivity as well as setting out the impact of its assessments, on which we will all hold it to account. With that, I ask the Opposition to withdraw their new clause.
Abena Oppong-Asare
I am afraid that I will not be withdrawing the new clause. It is a sensible new clause and I urge all members of the Committee to support it, so I wish to push it to a vote.
Question put, That the clause be read a Second time.
Abena Oppong-Asare
On a point of order, Mr Bone. I thank all members of the Committee for our robust debate. I am sure that we agree through our different channels that we want the best for this Bill and for our constituents. I hope people take on board the fact that we have been making recommendations that we feel are best for the country.
I thank the Minister for answering our questions. I am disappointed that some of our amendments have been voted against, but I accept that the Minister is going to look at some of our recommendations on some clauses, in terms of the annual review. That is very important. Seven years is a very long time.
I thank the hon. Member for North East Bedfordshire for his detailed analysis and his amendments. I thank the Chairs of both sittings, Mr Davies and Mr Bone, who have guided the Committee with skill. At times, you have been very firm, but rightly so. I thank the Clerks, Amna Bokhari and Bethan Harding, who have been invaluable. I thank colleagues, including my hon. Friend the Member for Ealing North and our Whip, my hon. Friend the Member for Blaydon, and look forward to seeing what comes out of this next.
David Linden
Further to that point of order, Mr Bone. Following the remarks of the hon. Member for Erith and Thamesmead, I thank all hon. Members for their contributions, and you as Chair, Mr Bone, and the Clerks and the officials. I thank in particular the hon. Member for North East Bedfordshire. I think we knew it was unlikely that he would sacrifice his position in the governing party by voting against the Government, but his amendments were helpful in provoking discussion. I know that a number of my colleagues on Bill Committees this afternoon will not have the luxury of finishing at 3 o’clock. On that basis, I thank everybody present for the speedy way in which the Bill has passed through the House and look forward to the further stages and to any remaining t’s being crossed and i’s dotted.
Andrew Griffith
Further to that point of order, Mr Bone. I echo the comments of the hon. Member for Glasgow East and commend the hon. Member for Erith and Thamesmead for her graciousness and diligence. It is fully understood on this side of the Committee that Opposition Members do not have the same support as that provided to Ministers by officials. A great deal of diligence goes into preparing amendments and advocating them. The hon. Member for Ealing North is always a strong advocate for his party’s position. I thank my officials for their work in preparing and presenting the Bill. I thank you, Mr Bone, and your officers. I hope my colleagues will not mind me singling out my hon. Friend the Member for North East Bedfordshire for bringing a certain je ne sais quoi to proceedings, and for advancing his own cause.
Bill, as amended, to be reported.
UK Infrastructure Bank Bill [Lords]
Wednesday 1st February 2023
(1 year, 9 months ago)
Commons ChamberRead Full debate UK Infrastructure Bank Act 2023 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Consideration of Bill Amendments as at 1 February 2023 - (1 Feb 2023)
15:41 - The House divided: - Ayes: 210 / Noes: 271 - Question accordingly negatived.
15:54 - The House divided: - Ayes: 212 / Noes: 269 - Question accordingly negatived.
16:06 - The House divided: - Ayes: 41 / Noes: 285 - Question accordingly negatived.
Richard Foord (Tiverton and Honiton) (LD)
I beg to move, That the clause be read a Second time.
Mr Deputy Speaker (Mr Nigel Evans)
With this it will be convenient to discuss the following:
New clause 2—Businesses and bodies the Bank invests in—
“(1) The Bank must publish an annual report setting out—
(a) the geographical spread of businesses and bodies it invests in, and
(b) the ownership of the businesses and bodies it invests in.
(2) The Bank must prepare and publish a ‘Good Jobs’ plan for all businesses and bodies it invests in, which requires the business or body to improve productivity, pay, jobs and living standards.”
This new clause would ensure that the Bank considers the location and ownership of the businesses and bodies it invests in and only invests in businesses and bodies who create “Good Jobs” plans to improve productivity, pay, jobs and living standards.
Amendment 5, in clause 2, page 1, line 14, at end insert—
“(i) to reduce economic inequalities within and between regions of the United Kingdom, and
(ii) to improve productivity, pay, jobs and living standards.
(c) to support supply chain resilience and the United Kingdom’s industrial strategy.”
This amendment would ensure that the Bank’s objective to support regional and local economic growth includes reducing economic inequalities within and between regions and improving productivity, pay, jobs, and living standards. It would also create a third objective for the Bank to support supply chain resilience and the UK’s industrial strategy.
Amendment 3, page 1, line 14, at end insert, “, and
(c) to improve water quality in the UK.”
This amendment would add improving water quality in the UK to the Bank’s objectives.
Amendment 4, page 1, line 22, at end insert—
“(4A) The Bank may only provide any of the support listed in subsection (4) to water companies if they have produced a costed, time limited plan demonstrating they are committed to preventing discharge.”
This amendment would require water companies to have a costed, time limited plan, demonstrating they are committed to preventing discharges before they can receive investment from the UKIB.
Amendment 2, page 2, line 9, leave out “consult” and insert—
“gain the express consent of”.
This amendment would require the Treasury to gain the express consent of the appropriate national authority before making provision in regulations under subsection (6).
Government amendment 1.
Richard Foord
I rise to speak to new clause 1 and amendments 3 and 4.
I welcome the UK Infrastructure Bank Bill. We previously had a Green Investment Bank, founded by the Liberal Democrats in government. It was short-sighted for the Government to sell it off, especially as it made £144 million in profit for its Australian owners last year. Nevertheless, the Liberal Democrats are glad to see steps finally being taken to put the replacement UK Infrastructure Bank on a statutory footing.
Liberal Democrat new clause 1, in the name of my hon. Friend the Member for Richmond Park (Sarah Olney), seeks to ensure that this new UK Infrastructure Bank will remain in operation until the Government’s net zero and environmental commitments have been met.
I hope to see this new bank change investment in green infrastructure for the better, and this brings me to the two amendments—amendments 3 and 4—tabled in my name and those of Liberal Democrat colleagues. They seek to ensure that water companies set out costed, time-limited plans to deal with discharges before they can get funding through the bank. This is important because communities across the UK are currently being impacted by the actions of some negligent and wayward water companies. For years, we have seen these firms failing to invest in our vital infrastructure, but instead prioritising shareholder payouts and bumper bonuses for chief executive officers. It is shocking that this practice has been allowed to continue, and that the Government have resisted several attempts by the Liberal Democrats to clamp down on these sewage spills.
South West Water, which covers my patch in Devon, was awarded a one-star rating by the Environment Agency after having been found to have discharged sewage into rivers and lakes and on to our beaches over 42,000 times. This represents more than 350,000 hours of dumping, including at our prestigious blue flag beaches. Three of the 10 most affected beaches are in Devon. And what was the reaction at South West Water? It gave the chief executive a bonus of more than £1 million.
Richard Fuller (North East Bedfordshire) (Con)
We on the Government Benches are aware of some of the comments—if I may say so, the somewhat misleading comments—in Liberal Democrat propaganda about this issue. The hon. Gentleman is obviously familiar with the situation at South West Water. Could he tell me what the cost is to South West Water of eliminating sewage overflow, and what are the implications for water bills for residents in the south-west, because that is what the literature from his party has been saying needs to be done?
Richard Foord
The amendment that we are considering is about loans from the UK Infrastructure Bank. Whatever figure is required, the bank should not be permitted to release funds for the purpose of improving our sewerage system until there are plans by water companies for the system’s complete restoration.
Richard Fuller
I shall go through the amendments thoroughly and therefore I shall not detain the House long.
New clause 1 on the future of the UK Infrastructure Bank would have the effect of not permitting a sale of the bank until the duty set out in the Climate Change Act 2008 and the targets of the net zero commitment by 2050 had been met. That puts significant strictures on the maintenance of one bank and its objectives. I think the hon. Member for Tiverton and Honiton (Richard Foord) probably acknowledges that. He wants us to reflect on the sale of the green bank that was set up under the coalition Government. He talked about the profits that it made last year—about £180 million, perhaps a little less. However, I hope that he recognises a couple of things.
First, when the sale was made, the taxpayer benefited to the tune of £2.3 billion. That included a surplus of £186 million on taxpayer-invested funds and a commitment from the successful acquirer, Macquarie bank, to invest a further £3 billion. In the round, I do not think that was a bad transaction to make, because it enabled the attraction of more third-party capital—private capital—to try to achieve some of the objectives of that green bank under its new owners, and indeed that has taken place. Part of the balance with this Infrastructure Bank is: how are we going to evaluate its abilities and success in attracting third-party capital? If the hon. Member for Tiverton and Honiton reflects, he will see that his broad point in new clause 1 is a fair one, but I hope that he will not press it to a vote, because there are strong arguments on the other side and I would not support the points that he would be trying to make.
Again, I can understand some of the import of Labour’s new clause 2 and amendment 5. Labour is saying, “Here is an opportunity, with a major institution, with which we are going to look at and try to expand the infrastructure of the country, to make sure it has a full focus on the round of public interest in the things it is doing in our name.” That is a good intention but, as the hon. Member for Erith and Thamesmead (Abena Oppong-Asare) knows—we have talked about this in Committee—there are trade-offs to be made within those sets of objectives. As we add objectives to our institutions, those trade-offs make it more obscure to parliamentarians and to the public what the intention of the bank will be.
The objectives that the Government have set out in the Bill are already clear. They have the benefit of clarity, as we know what they are. They also cover a wide range of sectors and intentions, but with the underlying core objective of helping us to meet our green net zero and climate change objectives.
So if the Opposition wish us to support their amendments, where do they see the trade-offs being made between achieving those objectives and having the duties to reduce economic inequalities between regions, to improve productivity, pay, jobs and living standards, and to support supply chain resilience? Very few of us would disagree with some of those objectives—indeed, the Government are making great strides on some of them with their levelling-up initiatives—but we have to accept that as we give directions to some of these institutions with a broad range of objectives, we are, as democrats, losing some control over how public money can be directed; we are giving more discretion to the chief executives of those organisations to do as they see fit and not perhaps to do as we were laying down in statute. I encourage the Opposition to think again, and to consider that perhaps having the clarity and precision of objectives set out in the Bill is precisely what will enable this and future Parliaments to exercise control over the Infrastructure Bank.
The hon. Member for Tiverton and Honiton, who is speaking for all the Liberal Democrats today, as he has graced us with his presence in a number of the debates, talked a little about the water companies again. I hope that he will have been listening today and will be reflecting back to his party’s leadership that some of the publicity the Liberal Democrats have put out has been substantially misleading about the intentions and actions of this Government. Obviously, parties make political statements all the time, this way and that. However, particularly as he has now followed up with his proposal for how water company discharge can be managed, I hope he will see that it is a serious issue and therefore we should treat it seriously.
Amendment 4 seeks to provide that the support the bank can give can happen only after the water companies have produced a “costed, time limited plan”. I think the water companies would say, “We have already done that.” They have a plan, but not one that can be implemented just like that, in the flash of an eye—I mix my metaphors there. I am not sure that the amendment will have the intention that the hon. Member for Tiverton and Honiton wishes it to have, given what the water companies are already doing and what the Government are already doing with the monitoring and the objectives being set to reduce sewage discharge.
I will step over what the SNP spokesperson, the right hon. Member for Dundee East (Stewart Hosie), put forward, because I am sure he will be able to elucidate that point clearly—I believe we have heard it here a number of times, although we are never bored by the repetition. Finally, I thank the Minister for listening to the points that were made in Committee and coming forward with the Government’s amendment.
Finally, I thank the Minister for listening to the points that were made in Committee and coming forward with the Government’s amendment. I can see that the Opposition have not put down a further amendment on that matter, which is a sign that he has got that judgment call right.
Stewart Hosie (Dundee East) (SNP)
I will speak to amendment 2 in my name, but before I address that fully, I will say a little about the other Opposition amendments and new clauses.
New clause 1 seeks to stop the bank being sold prior to net zero targets being met, which is sensible in principle, given the fate of the old green investment bank, as I described on Second Reading. New clause 2 seeks a report on the geographical spread of investments, which, again, is sensible given the Government’s recent track record on allocating money from the levelling-up fund. It still strikes me as rather absurd that the Prime Minister’s wealthy Richmond constituency should have been allocated £90 million, while the entire city of Glasgow received nothing in the second round of funding. I think we would all want to ensure that the UK Infrastructure Bank was far more equitable in its disbursements.
Amendment 5 seeks to reduce inequality and improve productivity. Amendments 3 and 4 seek to ensure that investment in water supply quality is permitted, but with conditions on the private companies receiving it. Each of these amendments and new clauses have merit, and we will be happy to support any if they are pressed to a Division.
Government amendment 1 seeks to reduce the gap between reporting from a maximum of seven to a maximum of five years. That is progress of a sort, but five years is still too long. I would be looking for a commitment from the Dispatch Box that the Government anticipate the review and reporting frequency to be within the proposed five-year maximum.
Let me briefly reprise what I said about my own amendment on Second Reading, when I gave the UK Infrastructure Bank and the Bill a broad welcome. Taking it at face value, there was nothing to criticise in its objectives of helping to tackle climate change and supporting the efforts to meet the UK Government’s 2050 target. Nor was there anything to criticise in the objective to support regional or local economic growth.
What I pointed out, though, is that—the Minister on Second Reading alluded to this in his speech—the delivery of support to facilitate local and regional growth in Scotland is provided by the Scottish Government, local government and other agencies, and that the green targets in Scotland, such as the earlier net zero target, are also set independently. It is therefore important that the UK Infrastructure Bank actually supports the devolved Governments’ objectives and does not, even inadvertently, end up working against them. That remains important because we have our own infrastructure investment plan, our own global capital investment plan and our own national strategy for economic transformation that provides the framework for the Scottish Government’s policy priorities.
In giving the Bill a broad welcome, I also made the point that while there is clearly an overlap between the strategic objectives of the UK Infrastructure Bank and the Scottish National Investment Bank—the wording of the aims of both the UKIB and the Scottish National Investment Bank are broadly similar—it is vital to ensure that both banks meet their goals and deliver the maximum impact for the people of Scotland. In line with the objectives set in the Bill, it is essential that the two banks are able to work together to identify and support appropriate infrastructure projects in Scotland. It is also vital that Scottish interests are appropriately represented and that there is an awareness of the Scottish economic context and the Scottish Government’s policy goals.
To ensure that there is alignment between both banks’ aims, I have argued that there should be an administrative mechanism, such as a memorandum of understanding, between the UKIB and the Scottish National Investment Bank to ensure that policy alignment is maintained. I fear that unless we have a firm mechanism, the UKIB’s aims might also be undermined, and there will ultimately be a risk that it will not deliver fully on its objectives. However, the Bill merely suggests in line 9 of clause 2(7) that the Treasury must only
“consult the appropriate national authority before making provision in regulations…that would be within the legislative competence of”
one of the devolved Administrations.
Jonathan Edwards (Carmarthen East and Dinefwr) (Ind)
I was going to make my points through interventions, but as so few Members want to speak, I thought I would take the opportunity to make a speech. I will speak very briefly to new clause 2 and amendment 5—which stand in the name of the official Opposition, and deal with the need to ensure that the geographical investment is spread across the UK, which is of course is something we all support—and amendment 2, tabled by the right hon. Member for Dundee East (Stewart Hosie), which deals with the constitutional challenges created by these post-Brexit agencies and frameworks. The right hon. Gentleman made his points very eloquently, and I fully support what he said.
In my speech on Second Reading, I highlighted how I thought some of the challenges outlined in these amendments could be dealt with. In my view, that is primarily by ensuring that post-Brexit frameworks and agencies such as the UK Infrastructure Bank have a formal role for the Welsh, Scottish and Northern Ireland Governments within their constitutions and their administration. When I made that speech on Second Reading, the Welsh Government were withholding consent; they have now decided to offer consent because the UK Government have given an element of a concession by outlining that a director of the UK Infrastructure Bank will be responsible for liaising with the Welsh Government—I suppose the same will be true for the Scottish and Northern Irish Governments. That does not go quite as far as I was calling for on Second Reading, when I made the case for the Welsh, Scottish and Northern Irish Governments to be able to appoint their own individual directors.
That concession is a step forward, which I of course welcome. However, the Minister might be aware that the Climate Change, Environment, and Infrastructure Committee in the Senedd, which was responsible for scrutinising the legislative consent mechanism, advised the Welsh Government against awarding legislative consent because of that lack of a formal role—indeed, there was no role whatsoever for the Senedd. I would be grateful if the Minister reflected on my Second Reading speech, where I made the case that it would be very helpful if the UK Infrastructure Bank had to be scrutinised by the relevant Senedd committee, as well as by the Welsh Government.
In conclusion, this really comes down to the Labour party. We expect that it will form the next UK Government; how is it going to Brexit retrofit the UK constitution in light of all these frameworks and agencies that have had to be created since the Brexit referendum, and since we left the European Union and the single market in particular? In Labour’s response to this debate, I very much hope to hear that it is looking at a radical realignment of the British state when it forms the next UK Government, giving the Administrations in Wales, Scotland and Northern Ireland, where appropriate, a formal role in these post-Brexit agencies and frameworks.
Abena Oppong-Asare (Erith and Thamesmead) (Lab)
A lost decade of broken Tory promises has left much of the UK with second-rate infrastructure, which is why we support the establishment and the strengthening of the UK Infrastructure Bank and will not be opposing the Bill. The bank is much needed. It will invest in projects that support our net zero targets and contribute to local and regional economic growth. However, we will go further than the Government and harness the full potential of the bank to provide good jobs and opportunities across the country. I will speak to our amendments a little later.
I wish to start by saying how much I welcome the Government’s U-turn in relation to their amendment 1. I see Ministers on the Front Bench who were with us when the Bill was debated in Committee. I am sure that they notice how similar their amendment is to the one that Labour tabled at that stage. Indeed, it is identical to our amendment—an amendment that they voted against. As Labour has repeatedly emphasised, reviews of the bank’s performance will be essential to ensuring that it meets its objectives to invest in the industries of the future. It was shocking that the Government wanted an initial review in 10 years with subsequent reviews every five years. The bank needs momentum and drive behind it, and I am glad to see that the Government have now realised the error of their thinking and committed to reviews of the bank every five years.
Richard Fuller
I commend the hon. Lady for holding the Government to account on this particular issue of the review period. This is where we are setting the bank free to go on its mission. As she and I agree—I think we agree—the initial few years are really very important. I notice that the Minister has restricted to five years subsequent assessments, as both the hon. Lady and I thought would be wise, but there is still that initial seven years. She did not table an amendment on that, so I wondered what the Opposition’s thinking was on that initial period?
Abena Oppong-Asare
I am grateful to the hon. Gentleman for his comments. He might remember that we tabled amendments in Committee and again on Report on that issue, but because the Government announced a U-turn, we decided to withdraw our amendment.
Yesterday’s dreadful IMF forecast makes it very clear that Britain has so much potential but that the Conservative Government are holding us back. The UK is the only G7 country forecast to see negative economic growth. Let us look at the Government’s record on infrastructure: a green homes scheme closed just six months after its introduction, with a £1 billion cut from its budget; an energy system that sees fossil fuel companies making record profits while hard-working people’s bills soar; and just a fortnight ago, a crucial gigafactory, Britishvolt, went into administration, leaving the future of the British electric vehicle market in jeopardy. According to the Government, the purpose of the UK Infrastructure Bank is to provide access to money, particularly where there is an undersupply of private financing. Britishvolt, a UK battery start-up, was expected to support new jobs and green technology with a factory in Blyth. Now it is being sold by administrators, with the Government seemingly abandoning their promises of levelling up and supporting a green economy.
Just this week, the British electric van start-up “Arrival” announced that it is cutting 800 jobs, as it moves for extra funding and green subsidies in the US. Hon. Members will not be surprised to hear that Labour has no faith in the Government harnessing the potential of the UK Infrastructure Bank to invest in the high-skilled jobs of the future. A Labour Government will use our green prosperity fund to invest in wind, solar and nuclear energy; insulate 19 million homes; grow our economy; and get Britain winning the race to net zero. We have tabled new clause 2 and amendment 5 to ensure that the UK Infrastructure Bank can play its role in this mission. New clause 2 would require the bank to publish an annual report setting out the geographical spread and the ownership of businesses and bodies that it invests in. It would also require the bank to publish a good jobs plan for every project it invests in, to ensure that the project will improve productivity, pay, jobs and living standards.
Samantha Dixon (City of Chester) (Lab)
Does my hon. Friend agree that by failing to commit to Northern Powerhouse Rail, the Government have failed on their levelling-up promises to the north? Would she, along with me and other Members who have expressed opinions earlier in the debate, suggest that the Minister needs to offer the House some assurances that the UK Infrastructure Bank will distribute its benefit to every part of the country, with the geographical spread she just mentioned?
Abena Oppong-Asare
My hon. Friend makes strong points about what the Government should be doing, and I hope the Minister takes them on board. We have all seen the allegations of favouritism that have beset the Government’s levelling-up funding, with nothing in the Bill to guarantee that the bank will distribute its funds to the areas that need them the most. Our new clause would ensure scrutiny and transparency over bank investments. Given the Prime Minister’s now famous boast—I quote it in case Members have forgotten—about reversing Treasury formulas that
“shoved all the funding into deprived…areas”,
I hope the Minister can see why we think transparency is necessary. His party, after all, is the party responsible for the loss of £6.7 billion to fraud and mismanagement.
I hope, too, that the Minister is paying attention right now and agrees that we want the UK Infrastructure Bank to create high-skilled, well-paid jobs. With a good jobs plan for every project that it invests in, we can ensure value for taxpayers’ money. That approach has been taken with previous significant infrastructure projects in the UK. For example, the Olympic Delivery Authority worked with trade unions and others to ensure that the project delivered good quality local jobs, and a similar approach was taken with High Speed 2. If the Government are as committed to their levelling-up agenda as they claim to be, I am sure that they will vote for our new clause today.
Amendment 5 would strengthen the bank’s objectives. It would make it clear that the bank’s target of boosting regional and local economic growth includes reducing economic inequalities within and between regions in the UK. Despite the Government’s assurances to the contrary, the Bill contains only a watered-down commitment that could result in the bank’s resources being poorly targeted and ineffective.
We want a further objective for the bank to contribute to the UK’s supply chain resilience and industrial strategy. I have mentioned the collapse of Britishvolt and the warnings of green investment moving abroad. Those are serious concerns. The importance of supply chain resilience has become particularly clear in the wake of the pandemic and as concerns over energy security have come to the fore with the war in Ukraine. We want the benefits of the UK Infrastructure Bank to be seen here in the UK, with home-grown renewables such as offshore wind, solar, nuclear, hydrogen and tidal power.
Richard Fuller
The hon. Lady is being generous in giving way, and I am grateful to her. I want to probe her thoughts a little further on amendment 5. The Bill, as I have said, has the benefit of being quite precise in its current objectives. As parliamentarians, we know that when we take something from statute and leave it to regulators, the House’s ability to hold them to account in the public interest is somewhat weakened. Does she accept that additional objectives would give an Executive a lot more discretion to say, “I didn’t achieve that because I was focusing on this objective”? We have created some primary objectives about climate change and so on. Adding others would leave us somehow disempowered, because those Executives could move and shake around where they said their priorities were. As I said earlier, I am concerned about the balance between laudable objectives and ensuring that, when we have put the Bill into statute, we parliamentarians retain the ability to control what is actually happening on the ground in one, two, three, four and five years from now.
Abena Oppong-Asare
I thank the hon. Gentleman for his comments—as I say, I always like to take them on board—but I fundamentally disagree with him, because our amendment would ensure that we take the Bill further. As he once said, the best way to promote UK manufacturing jobs and production is to
“shape regulation to support enterprise.”—[Official Report, 16 November 2021; Vol. 703, c. 438.]
That is exactly what Labour seeks to do with our amendments, so I really hope he will support them. I understand where he is coming from, but our amendments would make sure that we deliver the projects that we need in the UK.
We know that the UK Infrastructure Bank could be a national enterprise. We have a world-leading offshore wind industry in Scotland and on the east coast, hydrogen in the north-west and on Teesside, nuclear power in the south-east, and solar power in the south and the midlands, but the potential of these industries can be realised only if investment stays in the UK. The amendments we have tabled would allow that to happen. The lack of domestic champions has compromised our security and stalled progress, and our amendments would enable the UK Infrastructure Bank to help reverse the trend.
I will speak briefly to the other amendments we are considering today. Labour strongly supported the circular economy and nature-based solutions being on the face of the Bill, and we were disappointed to see the Government remove them, but we are clear that amendment 4 has not been properly thought through. Nothing in it would do anything to improve water company performance or reduce sewage dumping; on the contrary, it would give water companies an excuse to not undertake the necessary improvement works. We will therefore not support it. Labour has set out a clear plan to end the Tory sewage scandal by introducing mandatory monitoring with automatic fines, ensuring that regulators properly enforce the rules, and holding water bosses personally accountable for sewage pollution.
Selaine Saxby (North Devon) (Con)
Does the hon. Lady not agree, having been in the Chamber earlier today, that the Government are already monitoring storm overflows across the country? One of the reasons why we are aware of the size of the problem that we are trying to tackle is because we have increased the monitoring from only 6% a few years ago to nearly 100% now.
Abena Oppong-Asare
I am not going to take any advice from the Government. They have been in government for 13 years, and what have they delivered so far? I suggest that the hon. Lady support our amendment, which would ensure that things go through properly.
The devolved Administrations must be included in the development of the UK Infrastructure Bank. I have already mentioned the fantastic wind energy sector that we have in Scotland, and I was excited to read about the opportunities that the bank has identified in Northern Ireland. We do not believe that amendment 2 is necessary to ensure that all regions and nations of the UK benefit from the Bill, so we will not support it.
As we enter another year of low growth and failed Conservative government, we know there is a vital need to invest in the infrastructure of the future. We support the establishment of the UK Infrastructure Bank and have sought to improve the Bill throughout. We want to see stronger objectives and reporting for the bank, so that it can play a role in meeting our net zero targets while creating good jobs across the country and supporting the UK supply chain’s resilience, but what the bank needs most of all from the Government is an ambitious plan. Once again, the Government are on the back foot and U-turning at the last minute with amendment 1, on the bank’s reviews. It is yet another sign that Labour is the party with a plan for government—a party that will grow the economy and create jobs for the future.
The Economic Secretary to the Treasury (Andrew Griffith)
It is always a pleasure to follow the hon. Member for Erith and Thamesmead (Abena Oppong-Asare). I thank all hon. Members who have tabled amendments and contributed to today’s debate, as well as those who made valued contributions in Committee. Notwithstanding a certain number of amendments, I feel that generally there is good consensus across the House about the core purpose and objective of an important institution.
If we are fully to meet our responsibilities to spread opportunity to all parts of the United Kingdom and support the all-important transition to the clean energy economy, it is right that we take bold action now with institutions such as the UK Infrastructure Bank. We have therefore introduced the Bill to make explicit—with a legislative lock, if you like—the scope of the bank’s objectives
“to support regional and local economic growth”
and
“to help tackle climate change”.
Enshrining the bank in legislation will help to establish it as a long-lasting institution. That is important to colleagues across the House, as we have heard, who agree that it is a welcome initiative. I am glad that there has been general consensus today about the importance of the Bill.
I turn to Government amendment 1, which stands in my name. In Committee, I committed to looking again at the frequency of statutory reviews into the UK Infrastructure Bank and undertook potentially to propose a different frequency at a later stage of the Bill’s passage. It would be a gross mischaracterisation to call the amendment a U-turn; it is simply an example of a listening Minister in a listening Government trying to do what is best to get the institution on the right footing. I thank hon. Members who brought the matter to my attention and shared their views, particularly my predecessor, my hon. Friend the Member for North East Bedfordshire (Richard Fuller), who raised the point in Committee.
It is, I hope, a sign of strength that I considered afresh what was appropriate for the first review period. However, given the pre-existing reviews to which the Cabinet Office and HM Treasury have already committed, and the need to allow a nascent institution time to embed itself, I remain of the view—having taken the question away and looked at it again—that it is right for the first review period to be seven years. However, I recognise the strength of the arguments for, the appropriateness of and the desire for a shorter period between every subsequent review to ensure that this House applies the necessary accountability. My amendment 1 would therefore reduce the interval between each regular review after the first.
Abena Oppong-Asare
Does the Minister remember rejecting our amendment about the reviews? He is saying that this is not a U-turn, so I just want to hear from him about that aspect.
Andrew Griffith
I hope the hon. Lady would never dream of trying to score cheap political points, as distinct from our good-natured and collaborative discussions in Committee. Rather than setting a new timeframe there and then, we looked at precedent in a quest for the optimal timeframe. I undertook to come back on Report and share a proposal with the House, precisely as I am doing today. Having listened and having made that determination, I can feel the warm radiation of support from the Opposition. I hope to see that good will extending to supporting the rest of the Bill without further amendment.
Richard Fuller
As it gets warm and huggy between the two Front Benchers, I would like to remind the Minister that I also tabled an amendment in Committee. I hope that he is feeling warm and huggy towards Government Back Benchers as well. He seems huggy, though I am not sure it is politically correct to say that any more. I want to emphasise that the Minister has been listening, which is why he has come back with the amendment. That is the right thing for him to do.
The serious part of my point is how the institutional culture of the bank is set. The Minister will know from his own experience that the first few years are very important. He says that the first review period will be seven years, and I understand that, but can he share with the House some of his thinking about how that responsibility will be balanced? I think Members on both sides of the House are concerned that we set the institutions and regulators out there a task, but then we do not have the time, the information or the control to hold them to the original principles that we have set. Does the Minister broadly agree with that? Is he comfortable with the way the legislation will now be framed?
Andrew Griffith
Let me assure my hon. Friend and the whole House that this institution will not lack the proper scrutiny. In that initial set-up period it will be reviewed by both the Cabinet Office and His Majesty’s Treasury. It will not lack scrutiny. It has an obligation to report annually. On some of the amendments we have discussed today, I have already procured a commitment from the bank to put more information into the public domain about its investments and their location, which Opposition Members have rightly pressed us for.
Although the bank is yet to reach its full complement of staffing and run rate of operations, it has already benefited from a serious review by the Public Accounts Committee of this House. I think it would be worth trying to correct some misapprehensions, but I do not for one moment take away the importance of regular scrutiny. We are talking about public money, and it is of the utmost importance that we engender trust as well as good value for public money.
That Public Accounts Committee report is a good and important piece of work. I absolutely commend the work of the Committee, which does a sterling job to protect the interests of taxpayers. We should always remember our duty of care when we are spending other people’s money. It is a good piece of work, and I am grateful for it. We will respond to it in the usual way through the Treasury minute process to get that on the record.
However, I want to address one or two of the points raised. The report raised concerns about governance, but this is an institution that has benefited from strong financial governance from the get-go. All deals done to date have been reviewed by the full UK Infrastructure Bank board before being approved. Because of that, early deals were also approved by HM Treasury Ministers to ensure that we protected taxpayers’ money.
I am proud, as we all should be, of the bank’s work as it continues to engage with the market and across Government, building on its first 18 months in which it has done 10 deals worth more than £1 billion of additive, incremental investment across all parts of the United Kingdom.
Richard Fuller
My hon. Friend has just used the magic word “additive”. Would he care to explain further, in the context of these new clauses and amendments, that the issue of additive capital is a crucial part of the bank’s responsibility? This is not just about protecting taxpayers’ money, but about attracting third-party private capital. One of the points about the proposal to spread the objectives is that it becomes harder to attract that capital when the mission of the institution is more diffuse. The more focus it has, and the more focus my hon. Friend has, the more likely we are to achieve the objective of additive capital that he has outlined so clearly.
Andrew Griffith
My hon. Friend is, once again, absolutely right. The principle of being additive is baked into the core charters and constitutions, as well as the steer that my colleagues and I will give.
New clause 1 would insert a provision to prevent the sale of the bank. I understand the concern that has been expressed by Members in the past, but I can reassure them that the bank is intended to be a long-lasting institution. I have detected a strong degree of consensus about the importance of this, both in Committee and here in the Chamber, just as our commitment to net zero is long-lasting and a subject of consensus. We intend the bank to be permanent; it is an essential part of the Government’s infrastructure strategy. Moreover, the new clause is simply not necessary. In the event that any future Government considered a sale of the bank—and that is not my expectation—it would require primary legislation at the time. The new clause cannot bind the House on a future occasion, and in any event it is not necessary, so I ask for it not to be pressed to a vote.
The hon. Member for Erith and Thamesmead has tabled a new clause and an amendment. New clause 2 would require the bank to publish an annual report addressing the geographical spread and ownership of bodies in which the bank invests. That is, of course, its core purpose, and I therefore do not think we need the new clause. We debated this proposal in Committee and, for the reasons that we set out then, we do not propose to accept it now.
The new clause is simply unnecessary, because the bank will already be reporting on its investments: it will publish a summary of them in its annual report and accounts. It captures data in all its deal assessments, and will be happy to make them publicly available. I have received a letter from the bank confirming that it will make publicly available the names of developers and/or sponsors of the projects it supports. It will also provide the geographical location of these projects. I feel pressed by colleagues on this matter. I have procured more information, as the hon. Lady has requested and, again, I ask for this new clause not to be pressed to a vote.
As for jobs, it is actions, not lines of statute, that count. We do not need to deliver an amendment to deliver good jobs; just ask the employees involved in the NextEnergy, Gigaclear and Fibrus investments which the bank has already supported. Every job is a good job. The bank is committed to pursuing the highest environmental, social, resilience and governance policy standards, and we do not feel that there is any added value in simply adding extra lines of statute or red tape for the sake of it, as the hon. Lady proposes. It is actions, not words, on which we are focused.
Amendment 5 asks for the bank’s objective to include reducing regional inequality and improving pay, productivity and living standards, as well as supporting supply chain resilience. However, those are already implicit in the bank’s current objective. That is the very purpose of setting up a UK infrastructure bank—the clue is in the name—and we now have a track record to show what the bank is doing to support regional and local growth.
Andrew Griffith
I will give way one final time, but my hon. Friend will have to make it count.
Richard Fuller
I am not so sure about that, but I know that my hon. Friend has a lot of reading to get through. As he obviously knows, part of what is inherent in the net zero objectives is the fact that there will be an increase in supply chain resilience.
Andrew Griffith
My hon. Friend did indeed make his intervention count, because that is a very pertinent point. Of course, the whole purpose of the bank is infrastructure and capability building, and the commitment to regions is at its heart. Regional and local growth are among its core objectives. The more diverse infrastructure we have in all parts of this great United Kingdom, the more we are naturally adding resilience and achieving our objective. Indeed, the strategic steer set by the then Chancellor in March last year makes it clear that the bank must focus on geographic inequalities by reference to the levelling-up White Paper, which includes a comprehensive set of levelling-up objectives and measures and supports the Government’s strategic approach to levelling up. We would rather do that on a portfolio basis than investment by investment, as proposed by the hon. Member for Erith and Thamesmead.
Amendments 3 and 4, tabled by the hon. Member for Tiverton and Honiton (Richard Foord), focus on the important issue of water quality. This is an area where the Government do not need any lessons. We are taking the lead in this matter, and are taking the action that the hon. Gentleman’s party and its leader failed to take in coalition. Sometimes one detects the fervour of a convert, or even the working-out of some past guilt about their failure to take action on water.
Selaine Saxby
It is obviously delightful to have another Devon MP who cares passionately about the environment, as did his predecessor. I cannot help but wonder whether, if the Liberal Democrats were serious about this, the Secretary of State for Energy and Climate Change from 2012 to 2015 might have implemented some of these things. Does my hon. Friend the Minister agree that there seems to be a trend of creating opportunities for dodgy graphics and social media content, rather than making serious changes to legislation?
Andrew Griffith
My hon. Friend makes an important point. It ill behoves a party that aspires to be taken seriously as a force in British politics to be all about clickbait, misleading graphics and half-truths, rather than about, for example, the data, which show that monitoring has increased from just 5% in 2016—a level at which it would be wrong for anyone to characterise themselves as having their arms around this long-standing issue—to more than 90% today. I understand from my right hon. Friend the Secretary of State for Environment, Food and Rural Affairs that it will be 100% by the end of this year. We are the party that is taking action. We are the party that is finding the data, exposing the conduct of the water companies and putting record investment into the sector to solve this long-standing problem. We are the party that provides the solution.
The hon. Member for Tiverton and Honiton needs to consider whether he wants to be part of the problem or, as we all are, part of the solution. One of his amendments is entirely superfluous, as such a measure is already underwritten by the objectives in the world-leading Environment Act 2021. Only yesterday, we announced ambitious interim targets to deliver those objectives in our environmental improvement plan. I believe that the hon. Gentleman was in the Chamber for the statement that preceded this debate. For that reason, we will accept his amendment, because it sits within the actions that we are taking and the commitments that we have made.
Finally, the amendment tabled by the right hon. Member for Dundee East (Stewart Hosie) would require explicit consent from the devolved Administration before using powers under clause 2(6) that touch on devolved competence. However, I was pleased when his colleague, John Swinney, the acting Finance Secretary, wrote to me indicating that he was happy with the content of the Bill, and would recommend that the Bill receive a legislative consent motion. Last week, I was even more pleased—imagine my delight—when the Scottish Parliament gave the Bill an LCM. The right hon. Member for Dundee East will see that not just the Government but his colleagues suggest that his amendment is not required by the Government in Holyrood. As a result, I very much hope that he will not seek to push it to a vote.
This is an incredibly important milestone and moment in establishing a new national institution that will deliver real social purpose and make an enormous difference to the lives of our fellow citizens across the United Kingdom. Establishing it today in statute will give the market greater certainty and confidence, and encourage significant private sector investment in all of the bank’s priority sectors. By partnering with the private sector—by mobilising the life force of private capital, the ferocious, problem-solving power of business—in areas that might otherwise struggle to get the investment they require, we will help speed up the transition to net zero and level up the UK. With the exception of amendment 4, which I have indicated the Government will not oppose, I hope Members understand the reasoning—even if they do not agree—that I have set out as to why we cannot accept the amendments and new clauses and that they respect the time of the House and agree not to press them to a vote.
Richard Foord
I beg to ask leave to withdraw the motion.
Clause, by leave, withdrawn.
New Clause 2
Businesses and bodies the Bank invests in
“(1) The Bank must publish an annual report setting out—
(a) the geographical spread of businesses and bodies it invests in, and
(b) the ownership of the businesses and bodies it invests in.
(2) The Bank must prepare and publish a ‘Good Jobs’ plan for all businesses and bodies it invests in, which requires the business or body to improve productivity, pay, jobs and living standards.” .—(Abena Oppong-Asare.)
This new clause would ensure that the Bank considers the location and ownership of the businesses and bodies it invests in and only invests in businesses and bodies who create “Good Jobs” plans to improve productivity, pay, jobs and living standards
Brought up, and read the First time.
Question put, That the clause be read a Second time:—
Andrew Griffith
I beg to move, That the Bill be now read a Third time.
The Bill will place the UK Infrastructure Bank on a statutory footing and enshrine key aspects of it in legislation, ensuring that the bank’s purpose is clear and enduring. It will enable the bank to lend directly to local authorities and the Northern Ireland Executive, and His Majesty’s Treasury will be able to put the bank into funds. The Bill also guarantees a high standard of transparency and accountability to this House.
The Bill will now enable the bank to be fully operational, ensuring that its two strategic objectives are put into statute. It marks the next chapter for the UK Infrastructure Bank as it continues to develop operationally. Since the summer of 2021, when the UKIB became operational, 10 deals worth close to £1.1 billion have been completed, including providing financing for a new £500 million fund that could double the amount of subsidy-free solar power in the UK.
The UKIB has a transformative potential that I know is recognised and supported on both sides of the House. I would like to thank my immediate predecessors, my right hon. Friend the Member for Salisbury (John Glen) and my hon. Friend the Member for North East Bedfordshire (Richard Fuller). I also thank the hon. Member for Erith and Thamesmead (Abena Oppong-Asare) and her colleague the hon. Member for Hampstead and Kilburn (Tulip Siddiq) for their appropriate challenge, but also for the support they have given the Bill.
I would also like to put on record my sincere thanks and the best wishes of this House to the UKIB, including its chair, Chris Grigg, and its chief executive, John Flint, who have both done such great work in establishing the UKIB to date. Finally, as is customary, I would like thank my Bill team—Alex McBeath, Milly Rainford and Lorna Cosgrave—along with those in my private office at the Treasury, who have supported me ably throughout this process.
I am honoured to have played a part in taking this Bill—one that will deliver meaningful, material benefits for our country and our constituents—through the House of Commons, and I commend it to the House.
Question put and agreed to.
Bill accordingly read the Third time and passed, with amendments.
UK Infrastructure Bank Bill [HL]
Tuesday 14th March 2023
(1 year, 8 months ago)
Lords ChamberRead Full debate UK Infrastructure Bank Act 2023 Read Hansard Text Watch Debate Read Debate Ministerial Extracts Amendment Paper: HL Bill 98-I Marshalled list for Consideration of Commons Amendments - (13 Mar 2023)
Baroness Penn
That this House do agree with the Commons in their Amendments 1 and 2.
The Parliamentary Secretary, HM Treasury (Baroness Penn) (Con)
My Lords, with the leave of the House, I shall speak also to the other amendments and that in the name of the noble Baroness, Lady Hayman.
I start with Commons Amendment 2. As was noted in the other place, the Government agree that the bank will make it a stipulation that any investment into the water sector must be in line with the company having an appropriate plan and making sufficient progress against that plan to deal with sewage discharges. However, I want to make it clear that in this circumstance the word “preventing” is aimed principally at preventing harmful discharges and does not mean eliminating all discharges. I want to make this distinction in the House because I do not want the bank to be prevented by fear of legal action from investing in water companies which have a plan in place to meet their obligations.
I reassure the House that the Government are already taking major steps to improve water quality. We have announced legally binding targets on water quality under the Environment Act and ambitious interim targets to deliver these in our environmental improvement plan.
This Government have also implemented the strictest ever targets to crack down on poor water company performance. On sewage spills, our storm overflows plan requires companies to deliver the largest ever environmental infrastructure investment—£56 billion over 25 years. Where water companies are found to have broken the law and face fines for this behaviour, this Government have committed to reinvest those fines directly back into schemes to improve our water environment.
Commons Amendment 3 removes the Lords amendment to include nature-based solutions and the circular economy in the definition of infrastructure. As noble Lords will recall, we debated this issue extensively in this House and it came up frequently in the Commons. At the time, I noted that nature-based solutions were already included under the inclusive definition of infrastructure and, as such, we did not think it necessary to add it explicitly in the Bill. The Government have reflected on the debate and recognise the strength of feeling on the matter and, as such, think the amendment from the noble Baroness, Lady Hayman, strikes a careful balance of making it clear that nature-based solutions are within the bank’s remit without being overly prescriptive.
The Government agree with the removal of the circular economy from the definition. We do not think including the circular economy—which is an imprecise term—in the definition of infrastructure would be helpful for the bank. However, I thank all noble Lords, and in particular the noble Lord, Lord Teverson, for raising this issue during the passage of the Bill. We reassure them that the circular economy is an incredibly important principle and will be key as we transition to a more sustainable economy in a number of sectors. While we do not wish to expand the scope of the bank, I reassure the noble Lord that several of the areas highlighted in the debate on the circular economy are covered within its existing remit and objectives; for example, nature-based solutions, waste and energy efficiency, as was clarified in an earlier amendment to the Bill. I therefore anticipate that the bank will invest in and be a key proponent of a circular economy wherever it is in line with the overall objectives.
Commons Amendment 4 removes subsection (6) from Clause 2 of the Bill. The subsection included the wording “have regard to”, but this would still have had a significant impact on the bank. For example, on improving jobs, we understand the intention of the amendment and do not disagree with it as a general principle. However, we are concerned that there may be consequences if the principle were to be applied across the board as a statutory requirement in relation to every investment proposal. It could lead to the bank being overly cautious for fear of legal challenge.
The second part of this subsection, on reducing regional inequality, is also of concern. We do not want the bank to be under a statutory duty to consider regional disparities in the same way in relation to every investment proposal that comes before it. The strategic steer makes it clear that the bank must focus on geographic inequalities. However, this is best done on a portfolio basis rather than investment by investment, which would be required by the proposed amendment.
Although the Government agree with the Commons amendment, we recognise the concern of the House, and I pay tribute to the work of the noble Lord, Lord Tunnicliffe, on this matter. I recommit to this House that after the Bill achieves Royal Assent the Government will amend the bank’s framework document to provide clarity on the role on the bank in levelling up the United Kingdom. We will include under the operating principles the wording:
“The bank will also address the spatial disparities across and within UK regions.”
This is in addition to the wording already in the framework document under its second objective:
“to support regional and local economic growth through better connectedness, opportunities for new jobs and higher levels of productivity”.
Commons Amendments 5, 6, and 9 concern provisions to add a duty to consult relevant Ministers in the devolved Administrations on the use of delegated legislative powers in the Bill, including the power to amend the bank’s activities or the definition of “infrastructure”, and to issue the strategic steer. Commons Amendment 7 is related and sets out a requirement for UKIB’s board to appoint one or more directors to be responsible for ensuring that the interests of the devolved Administrations are considered in the board’s decision-making. These amendments have come as a direct result of positive engagement we have had with the devolved Administrations, and I am pleased to say we have received legislative consent Motions from the Welsh and Scottish legislatures. Unfortunately, given that the Executive have not formed, it was not possible to get a legislative consent Motion from the Northern Ireland Assembly.
Given we are on the subject of the board of directors, I know that the noble Lord, Lord Tunnicliffe, was interested in whether the bank would appoint a workers’ representative to the board. I reassure him that the bank is abiding with the requirements of the corporate governance code and has appointed a non-executive director, Marianne Økland, to facilitate engagement with the workforce.
Commons Amendment 8 reduces the time period for statutory reviews of the bank following the first such review from seven to five years. This balance reflects the fact that we need to allow a nascent institution time to embed and fully establish itself in the market, which is why the first review will take place after seven years. However, subsequent statutory reviews will take place every five years to ensure proper scrutiny of the bank’s performance.
Commons Amendments 1 and 10 are of a technical nature and broaden the definition of “public authority” in relation to the bank’s capacity to lend. The drafting as is broadly meets the policy aims and would allow the bank to lend to local authorities and the Northern Ireland Executive. However, given that primary legislation can be something of a blunt instrument, we do not want inadvertently and by implication to preclude the bank from lending to other public authorities, such as any public bodies created by local authorities or government departments in future.
Finally, as is standard for a Bill that starts in the Lords and concerns matters of public finance, a privilege amendment was passed. Commons Amendment 11 removed this.
The Government have listened to concerns in both Houses and have made changes to improve the Bill. I look forward to the debate and hope that noble Lords will accept these amendments. I beg to move.
Baroness Hayman (CB)
I declare my interest as co-chair of Peers for the Planet and rise to speak to my Motion 3A, which as the Minister said would reintroduce nature-based solutions into the definition of infrastructure in which the UK Infrastructure Bank may invest.
We had some very helpful conversations after Report and the debates in the other place, and I think we have now reached a highly satisfactory position on this amendment, in no small part due to the Minister’s customary constructive approach to the debates that have taken place in this House, for which I am very grateful.
Of course, the original amendment included the “circular economy”, and I know that there will be some disappointment that that is not included now, but the bank’s strategy is reassuring on that issue. Anyone who listened to the item on the “Today” programme this morning about data centres using the heat they normally have to dispose of to heat up the water in local swimming pools will have heard a lovely example of how we need to put those sorts of issues together.
I thank all the Members of this House who have taken part in the debates, and in particular those who signed the various iterations of my amendment, including the noble Lord, Lord Bourne of Aberystwyth, the noble Baroness, Lady Jones of Whitchurch, and the noble Lord, Lord Teverson. This amendment has had significant cross-party support because of the increased recognition that nature-based solutions have a critical role to play in the fulfilment of the bank’s objectives. The Chancellor’s strategic steer in 2022 encouraged the bank to
“explore early opportunities in nature-based solutions”
and aim to have
“a positive impact on the development of the market”.
The bank has since published a discussion paper setting out its initial thinking on how it can invest in and support the growth of natural capital markets, and I look forward to the results of this consultation.
The discussion paper clearly explains the importance of natural capital as a form of infrastructure and the vital contributions it makes to our society and economy, often in ways which are more cost-effective to the taxpayer. Carbon removals through creating and restoring woodlands, wetlands and peatlands, flood mitigation measures, providing “clean and reliable” water supplies, underpinning our food security and bolstering our resilience to climate change: these constitute numerous examples of how we can deploy nature-based solutions to support our infrastructure and provide social, economic and environmental benefits. There is also an ever-increasing recognition of the key role that nature can play in solving climate change, nature being our biggest asset with which to fight it. Nature-based solutions also provide significant co-benefits, such as jobs and good health and well-being outcomes, with considerable economic advantages.
I welcome that the UK is leading on the Taskforce on Nature-related Financial Disclosures, but there is an average $700 billion funding gap for protecting and restoring nature globally, and evidence that more needs to be done to help market participants mainstream and scale these products alongside growing investor demand. This simple addition to the definition of infrastructure in the Bill sends a strong signal to the markets that the UK recognises this and the Government are serious about taking action to help build and develop this nascent market. It also provides certainty to the bank, which recognises that it has a role in developing capacity towards a pipeline of investable projects and is poised to act. It will encourage others to do the same and further develop the UK finance sector’s position as a leader in this important emerging new market.
As I said, I am very grateful to the Minister and her officials for the support they have given and the resolution that I think we have reached.
Lord Bourne of Aberystwyth (Con)
I support the noble Baroness, Lady Hayman, in her proposed amendment and congratulate her on her tenacity in pursuing this issue. She has achieved something notable, and I thank her very much indeed. Account being taken of nature-based solutions improves the Bill and, on that basis, I also congratulate the Minister. My noble friend has proved herself to be a listening Minister, and the Government have taken a very common-sense approach, which improves the Bill. It was previously a good Bill, and it is now a better Bill after changes made in this House and the approach of the Minister and the Government.
I do not propose to detain the House, except to say that I agree with much of what the noble Lord, Lord Teverson, said in Committee and at Second Reading. I regret that we have not gone a bit further, but at least we have an improvement in this legislation. On that basis, I once again congratulate the Government.
Baroness Bennett of Manor Castle (GP)
My Lords, I join in the congratulations to the noble Baroness, Lady Hayman, who is both a force for nature and a force of nature in your Lordships’ House. I thank everyone else who has joined in getting this progress on nature-based solutions, although we should not look at those solutions as an alternative to cutting our carbon emissions. Both those things have to be done.
I was not going to speak but, given something the Minister said in her introduction, I feel forced to ask her a question. In justifying the exclusion of “circular economy” in the Commons amendment, she said that it was “not a precise term”. Does the Treasury understand the term “circular economy” and its essential nature in delivering the sustainable society we need? If the Minister wants a source for this, I point to a government paper entitled, Circular Economy Package policy statement, from 30 July 2020, which was put out jointly with Wales, Scotland and Northern Ireland and which defined “circular economy” as
“keeping resources in use as long as possible, extracting maximum value from them, minimizing waste and promoting resource efficiency”.
Will the Minister confirm that the Treasury recognises that the circular economy is an acknowledged term and is urgently needed?
Lord Vaux of Harrowden (CB)
My Lords, I wanted to thank the Government and to associate myself with the words of the noble Baroness, Lady Hayman. I thank them for their constructive engagement, which has allowed us to reach a satisfactory conclusion.
However, I thank the Government for listening in relation to a couple of other places. First, during the progress of the Bill through this House we had a lot of discussions about the position of the devolved Administrations and how they should be involved. While they have not gone as far as I should have liked, I welcome the amendments that have now been included and the constructive engagement that has obviously taken place with the devolved Administrations. That is a nice change from some of the things that we have seen with other legislation in the past.
Secondly, Amendment 8 is identical to an amendment that I tabled on Report, which shortens the reporting cycle to five years. My amendment was not accepted by the Government at that time. When I tabled it, it led to what I think was a unique achievement of being co-signed by both the noble Baroness, Lady Noakes, and the noble Baroness, Lady Bennett of Manor Castle. That has not been achieved before or since. I said at the time that such a unique and powerful alliance should make the Government take that amendment seriously, so I am delighted and grateful that they have done so.
Lord Teverson (LD)
My Lords, I have to admit, although I should not, that when I saw the Bill appear on Forthcoming Business I thought that it had received Royal Assent about a year ago, that it had gone and that everyone was happy. Clearly, the other place was not quite happy, so we are debating the Bill today. I am delighted to see the noble Baroness, Lady Neville-Rolfe, here because this morning I was at a meeting of the Green Investment Group—the privatised Green Investment Bank—as a watchdog on its purposes after privatisation. I hope that this infrastructure bank will not also be privatised in the next couple of years and we have to do the same for it.
I welcome the House of Commons amendment around water companies, moved by my honourable friend Richard Foord MP. Although the noble Baroness the Minister has circumscribed the effect of that amendment, I am delighted that the Government have accepted it. We all understand that water companies are under extreme scrutiny, mainly for their lack of investment and focus on environmental concerns under their custody. Equally, I welcome the amendment of the noble Baroness, Lady Hayman, and I too join the congratulations on her tenacity in getting it accepted by the Government.
However, I also thank the Minister for her persuasive powers. I have said to her in the past that I should prefer her to be in another portfolio that I deal with even more, on which this House seems to be less persuasive on occasions. Yet she manages to persuade the Treasury, which is probably an even harder task, that sometimes this House can make some useful changes to the legislation before it.
I will not detain the House further, except to welcome these amendments, and hope that we can put the Bill to bed and that the UK Infrastructure Bank can get on and do what we all want it to do—invest in the future infrastructure of this economy in the wider sense, including the circular economy. I am grateful for the mention from the noble Lord, Lord Bourne, and I understand from the Minister that most of the circular economy will indeed be accessible by the bank. I look forward to that as well.
Lord Tunnicliffe (Lab)
My Lords, I thank the Minister, both for her introduction today and for a helpful briefing held last week. When your Lordships’ House considered the Bill in the first half of last year, we were told that passing it should be a mere formality. The UK Infrastructure Bank was already operating, having made its first handful of investment decisions. The Bill was therefore essentially a technical exercise to give the organisation statutory underpinning. The Government resisted several sensible amendments, including one on worker representation on the bank’s board, partly on the basis that this legislation needed to be on the statute book quickly. I pause to note that the inclusion of a non-executive director at least moves in that direction. I thank the Minister, as I do for everywhere in the Bill where she has persuaded the Government to seek compromise.
However, in reality, it took some time for the Bill to get through the other place. The legislation having been introduced last July, Second Reading did not take place until November and Report not until last month. The delay was presumably the result of the Conservative Party’s summer of chaos, with a succession of Prime Ministers and Chancellors of the Exchequer, and—if I remember correctly—a short period when the noble Baroness was not a Minister on this subject. We are back to our familiar form. The extra time has seemingly allowed Ministers to reflect, in some areas at least, as evidenced by the various Commons amendments that we are debating today.
We welcome the clarifications around the definition of “public authorities” and the importance of costed plans should UKIB funds be used to support the work of water companies. The devolved provisions, which have facilitated the passing of legislative consent Motions—something of a novelty in recent years—are also welcome. We are also glad that the Minister and the Bill team have been persuaded of the merits of including nature-based solutions in the definition of infrastructure.
The noble Baroness, Lady Hayman, made a persuasive argument but, as we have often seen, that does not always lead to the Government making a concession. I pause again, however, to note, as happens with so many Bills, the extent to which she and her supporters are making incremental progress in embracing the green thrust. Even now, I have a bit of optimism that we might move quickly enough to save at least some of the planet that we now enjoy. It is good to see that thrust building on both sides of the House. I hope that in a couple of years the sides will change but, if one has that general direction in the membership and on the Front Benches, it is possible that we will get there. In another two years we may be passing green amendments that will amaze us when we look back five years, at when some official or other said, “You can’t put green in there because it is nothing to do with the Bill”. We have put green in here and have persuaded people that it is something to do with the Bill.
I understand the disappointment of the noble Lord, Lord Teverson, with regard to the circular economy, but that concept will become ever more apparent and he will no doubt have other opportunities to promote it.
I regret that the Government have overturned my amendment. Colleagues may think, “You would say that, wouldn’t you?”, but I remain unconvinced of the Government’s reasoning for removing their own levelling- up mission from the Bill. I reluctantly accept the offer to make changes to the bank’s framework document and articles of association after the Bill receives Royal Assent. It is not exactly where we want to be but it is a small step in the right direction.
Finally, we gladly accept the reduction of the interval between reports on the bank’s effectiveness. I was somewhat amused by this, as we were previously told that an interval of five years was simply not practical and could even somehow undermine the bank’s work.
Overall, while the Bill is a short, technical piece of legislation, the UK Infrastructure Bank could make a significant contribution to some of the big challenges that we face. We fully support the bank and, while there may be cause to revisit its mandate in the future, we wish it well in its work. Again we thank the Minister for her co-operation in bringing us to this consensus position.
Baroness Penn (Con)
My Lords, the Bill is mercifully short, so I shall also keep my remarks brief. I thank all noble Lords who have spoken today and who contributed when we took the Bill through its substantive stages in this House a while back. I reassure them that the time it has taken for the Bill to progress is not unusual: I was working on the skills Bill in this House, went off on maternity leave and was back in time for ping-pong, so it is not necessarily an unusual passage for a Bill in Parliament.
I reassure the noble Baroness, Lady Bennett, that the Government are committed to moving towards a more circular economy which will see us keeping resources in use as long as possible, extracting maximum value from them, minimising waste and promoting resource efficiency. I hope I made that clear in my opening remarks. When it came to including a legal definition of “infrastructure” in the Bill, that is where my remarks about the potentially imprecise nature of the terms lay, but it does not reflect a broader lack of understanding or commitment by the Government to that agenda.
I also reassure the noble Lord, Lord Teverson, that His Majesty’s Treasury is very much committed to ensuring that nature and climate change are on the agenda for the Government and that we meet our global goals, committed to both in terms of Paris alignment and the new framework agreed at COP 15 in Montreal at the end of last year. He knows better than most that we published the Dasgupta review that looked at the role of nature in our economy. We have had an amendment to the Bill today, and that commitment will be ongoing.
Most noble Lords were very kind in not replaying my words on the review period for the bank. All I can say is that it is always a pleasure to listen to the contributions of noble Lords and be persuaded of the art of the possible. I am pleased with the changes that we have been able to make to the Bill; I think these have shown how effective Parliament can be in scrutinising our legislation. The UK Infrastructure Bank has transformative potential, which I know is recognised and supported on all sides of the House. I beg to move.
Baroness Penn
That this House do agree with the Commons in their Amendment 3.
Amendment to the Motion on Amendment 3
Baroness Hayman
Leave out from “House” to end and insert “do disagree with the Commons in their Amendment 3 and do propose Amendment 3B in lieu—
Baroness Penn
That this House do agree with the Commons in their Amendments 4 to 11.
UK Infrastructure Bank Bill [Lords]
Wednesday 22nd March 2023
(1 year, 8 months ago)
Commons ChamberRead Full debate UK Infrastructure Bank Act 2023 Read Hansard Text Watch Debate Read Debate Ministerial Extracts Amendment Paper: HL Bill 98-I Marshalled list for Consideration of Commons Amendments - (13 Mar 2023)
The Economic Secretary to the Treasury (Andrew Griffith)
I beg to move, That this House agrees with Lords amendment 3B.
The Lords proposed amendment 3B in lieu of Commons amendment 3. As the UK Infrastructure Bank Bill reaches the final stage of its passage, I am pleased that it will also include nature-based solutions explicitly.
Members will recall that in previous debates I noted that nature-based solutions were already included in the inclusive definition of infrastructure, and as such we did not think it necessary to add them explicitly to the Bill. The Government have, however, reflected on that position and we recognise the strength of feeling on the matter across both Houses. I am therefore pleased to say that we support the Lords amendment in lieu, and I hope that colleagues across this House will do so, too. We think that the amendment strikes a careful balance, making it clear that nature-based solutions are within the bank’s remit without being overly prescriptive and limiting the bank’s opportunity to invest.
I thank hon. Members for their contributions to this Bill. I am pleased that, on such an important Bill, we have reached consensus. UKIB has transformative potential, which I know is recognised and supported on all sides of the House, and the changes made to the Bill show how effective Parliament is in scrutinising legislation. This Bill is the final stage in establishing the bank as a long-lasting institution, establishing in statute its key objectives of tackling climate change and supporting regional and local economic growth.
Madam Deputy Speaker (Dame Eleanor Laing)
The question is that this House agrees with the Lords in their amendment 3B. I am going very slowly in case anybody appears on the Opposition Front Bench—or, indeed, in case anybody currently on the Opposition Front Bench wishes to address the matter. No? Then we will move to the SNP spokesman.
Stewart Hosie (Dundee East) (SNP)
I just have a small point. The SNP supports this Bill and the intention to create the UK Infrastructure Bank, with its objective to help tackle climate change. However, it is worth putting on record very briefly that both the original Government amendment 3 and amendment 3B in lieu from the other place—while the latter does keep “nature-based solutions” in the wording of the Bill—seek to remove
“structures underpinning the circular economy”
from the infrastructure that the Bill is designed to support in its objectives of tackling climate change and meeting the target for 2050.
I am sure people interested in such matters will look rather askance at that. How on earth can we have a UK Infrastructure Bank Bill, with highly laudable objectives to tackle climate change and meet the Government’s own targets, only then to have both the Government and the other place actively remove investment in infra-structure to support the circular economy—which, for goodness sake, must be part of the solution—from the Bill? We are not going to oppose the amendment, because the Lords amendment is marginally better than the original Government amendment, but it is worth putting on record that the removal of the words
“structures underpinning the circular economy”
from the Bill strikes me as somewhat perverse.
Richard Fuller (North East Bedfordshire) (Con)
I find myself in the unusual and extremely uncomfortable position of agreeing with what the SNP spokesperson has just said. It is a condition that I hope will be quickly removed so that I can assert my usual sound Conservative principles.
There is an important point here, which I know the Minister is aware of, and which is not specific to this Bill. It seems a little odd, if we are looking at the next 10 or 20 years of our investment in infrastructure under the terms of the new Infrastructure Bank, to omit explicitly one of the foundational aspects of infrastructure from the Bill. I know my hon. Friend the Minister will have already reviewed that and he will say, I think correctly, that there is nothing in this Bill to stop support for investment in the circular economy infrastructure. However, I think it is important to have voices at this stage of the debate who can say that clearly, so that those who will now take forward the Infrastructure Bank know that, even if it is not in the Bill, the importance of creating the foundation of the circular economy is explicitly one of the things we anticipate and hope that the bank will do.
Ruth Cadbury (Brentford and Isleworth) (Lab)
On behalf of the Opposition, I would like to say that we support this amendment. As other speakers have said, it improves on the text of the Bill, so we are happy to support it.
Andrew Griffith
I thank the hon. Member for Brentford and Isleworth (Ruth Cadbury) for the Opposition’s support. Indeed, the Bill has been characterised by support from across the House for this important institution, which, I remind the House, is already up and running. Today, I am pleased to say, we are putting it on a statutory footing.
I have heard the comments made by the right hon. Member for Dundee East (Stewart Hosie), as well as by my good and hon. Friend the Member for North East Bedfordshire (Richard Fuller), who helped to pilot the Bill through its early stages. I will make the point that my hon. Friend expected me to make: the language in the Bill is inclusive rather than exclusive. His point is well made and understood.
On behalf of this House, we wish the institution well as we put it on a statutory footing. We in this House all look forward to hearing how it fulfils its objectives of levelling up and adding to the transition to net zero.
Lords amendment 3B agreed to.
Royal Assent
Thursday 23rd March 2023
(1 year, 8 months ago)
Lords ChamberRead Full debate Read Hansard Text Amendment Paper: HL Bill 83-I Marshalled list for Report - (23 Jan 2023)