Brexit: European Investment Bank (European Union Committee Report)

Baroness Liddell of Coatdyke Excerpts

Tuesday 16th July 2019 Lords Chamber

[Baroness Liddell of Coatdyke (Lab)]

My Lords, I draw attention to my entry in the register of Members’ interest. I too thank the noble Baroness, Lady Falkner of Margravine, for her time as chair of the committee. With her energy, knowledge and commitment, she will be an extremely hard act to follow. I regret that we will no longer have the wisdom of the noble Lord, Lord Butler, and I hope that someone reports to the Treasury, fastish, the idea that a firework should be put under them, because I cannot think of a greater threat from the noble Lord. If I may say, it would not have happened in his day, because it would not have been needed.

Turning to the European Investment Bank, no-one is going to put, “Leaving the EU means leaving the European Investment Bank” on the side of a bus. It sounds like an issue for pointy heads in Government, in the banks and elsewhere, but in reality it is about jobs, our quality of life and the nature of the country that we aim to be, for ourselves and our children and grandchildren. An interesting thing about the work of this committee is that it has allowed us to go deeper into the work of the EIB. I have been interested in the EIB for a long time, but not to the extent that has been possible within this committee. It is the world’s largest multi-lateral borrower and lender by volume, and it provides finance and expertise for sound and sustainable investment. Walking away from that, as we seem to have done without blinking, seems a dereliction of duty of monumental proportions.

We have heard much about this issue of retained earnings, and about the failure to engage with what is our proper return on the earnings that have been made by the European Investment Bank, and, frankly, the Minister seemed to just shrug, as if this was an aside that was not really bothering anyone. The EU Commission must be laughing all the way to the bank at the inability of Britain to engage on these issues.

We have in this country a real crisis of infrastructure. We see it with transport, but it can be seen in many other walks of life, not least housing. We jeopardise that by walking away from the EIB. We have heard distinguished academics talk this evening about the impact on the universities; that in itself is serious. My own area of interest, the mitigation of climate change, is critical in this area. If we are going to reach net zero, which is our aim, the scale of investment is going to be considerable. There is one very good example of where EIB funds changed part of the renewables industry. If your Lordships look at offshore wind, you will see that the costs have come down dramatically. The initial investment was considerable, but a break-even point comes when the costs start to go down.

Another area where I have an interest is in carbon capture, use and storage—you can tell I am interested in all the glamorous things. Carbon capture is a way of us meeting our targets, but it needs investment and is not the most glamorous investment in the world. The route to the European Investment Bank would help get us to a critical stage where Britain would have the capability to be a world leader; we have walked away from that.

I am also interested to know what work has been done in the Treasury and elsewhere to identify the views of those critical industries on how they will replace that funding. There must be concern about where that kind of funding might come from. Does it mean that future projects in this country will no longer be commercially viable?

A number of noble Lords have talked about the extent to which the expertise and knowledge of the EIB is very important in encouraging crowding-in from other investors. How is that to be replaced? When looking at a risky investment, it is important to have the confidence that others who are conservative investors are prepared to take the risk of investing in that project. It is long-term and really patient finance; giving people that kind of confidence is important.

We have not said much about the European Investment Fund tonight, but the role that it plays in relation to SMEs, particularly in critical and magical sectors such as fintech and bioscience, is important. Where is the replication of investment and of that critical due diligence? Often with such investments, it is not so much the money but the rigour of examining the capabilities of the industry and getting security on your investment for the future, by knowing that it will have the kind of rate of return that you anticipate. I would love to know who is working out how we replicate the expertise and experience. You cannot buy that off the shelf; it has built up over time. Although our involvement in the EIB and the EIF has really been only since we joined the EEC, the bank has been around since 1958. It is a substantial and long-term entity.

I would also be quite interested to know what work is being done not just with industries that may lose investments in the future but on blue-sky thinking about where, for example, a national infrastructure bank will identify that kind of innovative projects for the future. In that area both the EIB and the EIF, because of the eligibility for their funding, had a particular expertise.

I make no bones about it: I am extremely concerned about the impact of no deal on many of our industries, not least some of those vulnerable industries. In April, the Financial Times talked about the British Government going AWOL about what will be the scale and nature of finance for SMEs—innovative SMEs—in the event of no deal. If you balance that with the loss of EIB and EIF funding, quite a critical time is developing in our more innovative sectors and it is highly important that action is taken on that.

I do not want to be too overtly political, but sometimes I wake up in the middle of the night and wonder about the extent of some of the risks that we are taking, particularly by playing games with the concept of a no-deal Brexit. Could it be that the reason the Government have not been prepared to take a more aggressive stand on maintaining our involvement with the European Investment Bank—I appreciate that is almost impossible, given the need for treaty change—is that there are those within government who are frightened to admit how much we have benefited from those years of access to EIB and EIF funding? There is little logic in the situation we find ourselves in now concerning that kind of investment, and I have to confess that I am worried.