Lord Balfe
To ask His Majesty’s Government what plans they have to seek a closer relationship with the European Investment Bank to encourage investment in the United Kingdom.
The Financial Secretary to the Treasury (Lord Livermore) (Lab)
My Lords, the Government have set out plans to significantly increase investment in the UK economy, including through a new national wealth fund and far-reaching reforms to the planning system. The Government have not set out any specific plans in relation to the European Investment Bank.
Lord Balfe (Con)
I thank the Minister for his reply. When we left the European Union, we left the agencies in a particularly violent way. We did not really deal with them at all, but there is nothing in the EIB statutes that precludes it lending to non-EU countries such as the United Kingdom. Will the Government consider opening negotiations with the EIB to get a closer relationship, one that is based not on cherry picking but on the mutual concerns on both sides to get a better spread of investment in the United Kingdom and Europe?
Lord Livermore (Lab)
I agree with the substantive points that the noble Lord is making. We need to reset our relationship with the European Union. The Government are committed to doing this in order to strengthen ties, reinforce our commitment to security and tackle barriers to trade. We also need, as he says, to increase investment in our economy, so we have set out significant steps to unlock billions of pounds in private sector investment in the industries of the future through a national wealth fund, planning reform, a pensions review and a modern industrial strategy.
The noble Lord asked specifically about a third-party relationship with the European Investment Bank. Although it is possible to agree such an arrangement, it is unlikely that such an arrangement would provide anything like as much investment into the UK as membership of the EIB did.
Baroness Bowles of Berkhamsted (LD)
My Lords, there are substantial links through the financial sector, legacy projects and joint development funding with the EIB at present, and I think there are opportunities that the Government could investigate further in the areas of defence and energy security, which have increased in significance since Brexit and where there is obviously mutual advantage. Will the Government look to explore those areas and make significantly greater political engagement by means of higher-level Civil Service relationships with the EIB and possibly the secondment of staff between the UKIB and the EIB, which could be mutually beneficial? These could all be measures where we could move forward and obtain greater funding or greater joint projects.
Lord Livermore (Lab)
The noble Baroness is correct that there are continuing projects in the UK that were financed by the EIB prior to leaving the EU and which it continues to support. I agree with her that there is merit in improving our relationship with the European Union. We have not yet set any plans on working with the European Investment Bank, but I will absolutely consider the point she makes.
Lord Watts (Lab)
When we left the European Union we were told that there were loads of trade deals to be done around the world. The previous Government sent people to every quarter of the world to try to do trade deals and failed. Will the Minister redirect his staff into doing something positive rather than waste our time?
Lord Livermore (Lab)
I do not think it is a question of either/or. Clearly we need to do more to reset our trade relationships right around the world. We want strong multilateral partnerships with new countries and to reset our relationship with the strongest and closest partners that we have in the European Union. We should work hard to develop stronger trade relationships right across the board.
Baroness Wheatcroft (CB)
If the Government are to set a good example about investing in the UK, should they not perhaps start at home and invest a little more of the MPs’ pension fund?
Lord Livermore (Lab)
I think that is a question for Parliament rather than the Government.
Baroness Blackwood of North Oxford (Con)
I declare my interest as chair of Oxford University Innovation. At the heart of this question is the need to have more scale-up capital invested in UK innovations. Australian pensions invest more than 10 times the amount of capital than we do in private markets. The previous Chancellor was trying to unlock UK pension capitals into our UK innovations. Are the Government going to continue that work and unlock pension capitals into these innovations? How do they intend to make sure that that happens at pace?
Lord Livermore (Lab)
I am grateful to the noble Baroness for her question, and I agree with the premise behind it. We as a country need to get better at start- up and scale-up capital, and we need to increase the levels of investment in our economy. Our goal is absolutely to unlock billions of pounds of private sector investment into the infrastructure that our economy desperately needs. The noble Baroness will be aware that the Chancellor and the new Pensions Minister have launched a review to boost investment, increase pension pots and tackle waste in the pensions system. In order to boost investment in Britain, we want to see more pension schemes investing in fast-growing British firms. As she will know, just a 1% increase in the £800 billion of assets that DC schemes are set to manage by the end of this decade could raise £8 billion of investment into the UK economy. The sectors that she identifies are definitely ones that we should prioritise.
Baroness Kramer (LD)
I would not argue for a moment that we should not be turning to UK pension funds as a source of long-term patient capital in the British economy, but will the Minister take on board that for people with small pension pots, for whom risk is very dire, investing their funds in illiquid long-term assets could be a significant blow when they reach retirement and find that their pots have shrunk dramatically?
Lord Livermore (Lab)
I agree with the noble Baroness. That absolutely has to be one of the criteria or conditions that we establish as part of the pensions review. I am sure that, as more details are announced, that will be taken into account.
Lord Foulkes of Cumnock (Lab Co-op)
My Lords, I congratulate my noble friend on his patience and understanding in not pointing out to Members opposite who are sitting quietly—not asking questions, even from the Front Bench—that they are the people who got us into this problem in the first place.
Lord Livermore (Lab)
Apologies. I was unsure whether that was a question. I am most grateful to my noble friend for his warm words. He knows that I agree with him that we must reset our relationship with our closest and strongest partners in the EU.
Lord Fox (LD)
During his very good summing up at the end of Monday’s excellent debate, the Minister did not get a chance to answer some of the questions that I had asked about the national wealth fund, so I will ask one of them now and perhaps he can go through Hansard and look at the others. How will the national wealth fund decide what it is going to invest in? Will it be a strategic investment or purely commercial? Who will be setting the criteria for those investments?
Lord Livermore (Lab)
The national wealth fund will work on the same basis as the UK Infrastructure Bank in terms of allocating investment. I think that is the answer to the noble Lord’s question.
Lord Davies of Brixton (Lab)
In a similar vein to the question from the noble Lord, Lord Fox, I had a question in the debate on Monday about the first phase of the pensions review, looking at the investment of pension scheme monies in productive economy. I am sure my noble friend will agree that in such discussions the voice of the trade unions that represent scheme members and pensioners through their organisation should be an important part of the debate.
Lord Livermore (Lab)
I thank my noble friend for his question. I did not address his question in the debate, because I hoped he knew that I would agree with him, which I do. As part of the pensions review, we will consult all interested bodies.
Lord Evans of Rainow (Con)
Will the Minister confirm that, during this pension review, the thousands of savers in pensions over decades will enjoy the 25% tax- free element when they eventually retire?