UK Infrastructure Bank Bill [ Lords ] (First sitting)

(Limited Text - Ministerial Extracts only)

Committee stage
Tuesday 22nd November 2022 Public Bill Committees

[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.

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[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.

[The Chair]

Mr Fuller, do you want to withdraw the amendment?

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[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.

[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.

[Valerie Vaz (Walsall South) (Lab)]

Yes, we do.

[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.

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[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.

Division 1

Ayes: 6

Noes: 10

Amendment proposed: 18, in clause 2, page 1, line 14, at end insert

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Division 2

Ayes: 6

Noes: 10

[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).

[The Chair]

With this it will be convenient to discuss Government amendment 9.

[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”.

[The Chair]

With this it will be convenient to discuss Government amendment 2.

[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]

That is what I am suggesting.

[Valerie Vaz]

So how do they know?

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[Andrew Griffith]

Sorry?

[The Chair]

I think it was just a heckle, Minister.

[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.

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Division 3

Ayes: 10

Noes: 6

Amendment 1 agreed to.

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Division 4

Ayes: 10

Noes: 6

Amendment 2 agreed to.

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[The Chair]

The amendment is not moved.

[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.

[The Chair]

With this it will be convenient to discuss Government amendments 4 and 6.

[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.

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[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.

Division 5

Ayes: 6

Noes: 10

Question proposed, That the clause stand part of the Bill.

[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.

[The Chair]

With this it will be convenient to consider clause 6 stand part.

[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

--- Later in debate ---

[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.

[The Chair]

Richard Fuller, have you got the comfort you seek?

[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.

--- Later in debate ---

[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.

Division 6

Ayes: 6

Noes: 10

Question proposed, That the clause, as amended, stand part of the Bill.

--- Later in debate ---

[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.