Infrastructure Improvements: Funding

Wednesday 23rd November 2016 Lords Chamber

Question

15:23

Asked by

[Baroness McIntosh of Pickering]

To ask Her Majesty’s Government, further to the National Infrastructure delivery plan 2016 to 2021, what assessment they have made of the ability of the private sector to part-fund infrastructure improvements.

[Baroness McIntosh of Pickering (Con)]

In referring to my interests on the register, I beg leave to ask the Question standing in my name on the Order Paper.

[Lord Young of Cookham (Con)]

My Lords, the private sector plays a vital role in the financing and delivery of our infrastructure. The private sector will deliver around half of the projects due to complete in the next five years. The Government will continue to create the right environment to encourage private investment.

[Baroness McIntosh of Pickering]

Given the 2% increase in the insurance premium tax and the major housebuilding programme announced today, will my noble friend commit not to build any houses in inappropriate places, such as flood plains, but to undertake a major sustainable drainage building programme and invite more money from the private sector to fund flood defences, in particular the insurance sector and pension funds?

[Lord Young of Cookham]

My noble friend has asked three questions. On building on flood plains, whether planning consent is given for a particular development is a matter for local planning authorities, but my noble friend will be aware of the National Planning Policy Framework, which—I paraphrase—basically discourages development in inappropriate areas and encourages development away from areas at high risk of flooding. On drainage schemes, the Government have committed £2.5 billion of investment between now and 2021, and I believe that the Chancellor announced a further increase in the Autumn Statement a few moments ago. Finally, on private finance, the Environment Agency and local authorities can bid for private finance for schemes that are outwith the public sector scheme and, subject to value for money, they have a good chance of succeeding. There is a new partnering scheme whereby local communities and landowners can bid for funds alongside Defra and make progress with schemes which would not be able to go ahead if they were solely dependent on public finance.

[Lord Campbell-Savours (Lab)]

My Lords, why should local authorities be held be responsible, as the Minister said, for planning matters in areas that flood, when it is the taxpayer that picks up part of the bill at the end of the day?

[Lord Young of Cookham]

The noble Lord may be referring to the introduction of Flood Re, which enables those who previously had difficulty in getting insurance now to get some. I very much hope the noble Lord welcomes that initiative.

[Lord Stunell (LD)]

My Lords, the Minister will be aware that to deliver the infrastructure programme which the Government wish to achieve will require the contribution not just of large contractors and manufacturers but of small and medium-sized businesses, especially in the building industry—that is the way to get the agility and flexibility needed. What progress are the Government making on engaging with those two communities of constructors—the small and medium-sized enterprises—to deliver on the housing targets which we all agree need to be met?

[Lord Young of Cookham]

The noble Lord was, of course, a Minister in the relevant department. He may be aware that, a few months ago, Ministers in CLG announced an initiative to bring back into the market the small builders who have disappeared from it in recent years. The initiative was aimed at making sites available in slightly smaller packages so that the smaller builder would have a chance of developing them, rather than relying on sites that are so big that only major developers can accommodate them.

[Lord Low of Dalston (CB)]

My Lords, does not the Minister agree that private finance initiatives have a very bad record of leaving a legacy of years, or even decades, of inflated debt on projects that are no longer required, such as schools which have been built in the wrong place and accordingly have no pupils, and, as such, need to be evaluated very carefully before being undertaken?

[Lord Young of Cookham]

I think the noble Lord is somewhat harsh in his verdict on the PFI. For example, the NAO says of the PFI:

“Most private finance projects are built close to the agreed time, price and specification”.

It further states that PFI contracts provide,

“two key advantages over conventional procurement … transparency of pricing in that the public sector knows in advance how much it will be paying”,

and a,

“consistent approach to maintenance as the SPV”—

the special purchase vehicle—

“is under an obligation to maintain the asset in good condition”.

Of course, some projects have not gone correctly, but this country is a world leader in the development of private finance and we should be proud of what we have achieved.

[Lord Berkeley (Lab)]

My Lords—

[Lord Forsyth of Drumlean (Con)]

My Lords—

[The Lord Privy Seal (Baroness Evans of Bowes Park) (Con)]

Order. It is the turn of the Conservative Benches.

[Lord Forsyth of Drumlean]

My Lords, while congratulating the Chancellor on his excellent Statement committing to building more housing, can I ask my noble friend what is to be done about the decision by the European Banking Authority to increase the capital weighting required for loans to small housebuilders from 100% to 150%, which is greater than is required for unsecured credit card debt and will result in less availability of money for builders to build and also require banks to make provision for their existing loans? I declare my interest which is on the register.

[Lord Young of Cookham]

There is only one answer for my noble friend: I will write to him.

[Lord Davies of Oldham (Lab)]

My Lords, on the related issue of research and development, of course we welcome what the Chancellor said earlier today on the proposed increase of £2 billion up to the year 2020. However, does the Minister accept that even with this commitment, if it is realised, the United Kingdom will still be below the OECD average expenditure in this area and below the 3% of GDP that the OECD recommends to all developed countries?

[Lord Young of Cookham]

Again, the noble Lord is somewhat harsh in his judgment. I very much hope he will welcome the extra money that has been found at a time of great difficulty for investment in research and development.

[Lord Wallace of Saltaire (LD)]

My Lords, the last Chancellor of the Exchequer suggested that infrastructure for the northern powerhouse could be paid for mainly by the Chinese. As many Ministers now talk about the importance of British independence, should the Government be quite so dependent on China for infrastructure?

[Lord Young of Cookham]

I very much hope that this country will remain open for business and that we will continue to attract private inward investment to help modernise infrastructure. We have a world-class regulatory system and strong financial and capital markets. I see no reason at all why we should do anything to discourage inward investment in our infrastructure from overseas investors.