Infrastructure Bill [HL]

Lord Adonis Excerpts

Wednesday 18th June 2014 Lords Chamber

[Lord Adonis (Lab)]

My Lords, I am very grateful to the Minister for explaining the Bill so clearly and lucidly. On this side of the House, I am delighted to be supported on the Front Bench by my noble friend Lord Davies, who will lead in Committee, and by my noble friends Lady Worthington and Lord McKenzie of Luton.

As the Minister recognised in her opening remarks, we face big infrastructure challenges on transport, on energy and on housing in particular. Although the Bill contains some useful provisions, the position, I suggest to the House, is that we have the big infrastructure needs of the country on the one hand, and this Bill on the other. They are like ships passing in the night, except that the Bill is perhaps more like a dinghy than a ship: it is no match for the high seas and, indeed, parts of it do not even exist. We still do not have the clauses related to fracking, and consultations on that issue and important issues relating to the Land Registry and community electricity are still incomplete—some have not even commenced.

The noble Baroness said, if I noted it down correctly, that this legislation is “still being developed”. If I may say so, that is one of the most remarkable statements I have heard from a Minister while introducing a Bill, which the House would expect to be fully developed at the point of introduction. Instead, we have a major heading, “Fracking”, and a long spiel from the noble Baroness about how this will be vital for the future energy needs of the country, but the following pages are blank. With respect, that is no way to treat Parliament or your Lordships. In the vernacular, the Government are legislating on the hoof—or perhaps I should say on the future hoof, as we do not even know what hoof they are going to be legislating on hereafter.

Still on the big picture, the World Economic Forum recognises infrastructure as one of the 12 pillars of global competitiveness. However, continued weak infrastructure investment has seen Britain’s global rank significantly slip. We are now ranked 28th for the overall quality of infrastructure, compared to 19th in 2006-07, and we are significantly behind our European neighbours, including France, Germany and Spain, with the US far ahead.

That is not to say that there have not been improvements: there have, particularly in rail infrastructure, but there have not been enough. The essential challenge is not to make largely tinkering changes to the law but for the Government to take some big decisions—which the current law does nothing to prevent—on building the new power stations, runways, bridges, roads and, above all, houses that are needed so urgently by the country.

However, we have to scrutinise the Bill before us, so I turn to its main provisions. Part 1 and Schedules 1 to 3 make provision for the appointment of strategic highways companies to manage strategic roads in England, in place of the Highways Agency. The strategic road network represents only 2% of the English road network, yet it carries more than a third of car and van traffic and more than 65% of heavy vehicle traffic so obviously it needs to be well managed. We support giving greater operational freedom to front-line managers but the question is: will the management be better under the proposed company or companies than under the existing Highways Agency? I should be grateful if the noble Baroness could give us some indication of how the very large figure that she mentioned in her speech— £2.6 billion of savings—is actually going to be made up.

The Highways Agency already operates at arm’s length from Ministers. It currently lets its maintenance and construction contracts to the private sector so it is unclear what efficiency gains are being projected in that respect. Its sources of finance depend almost entirely on the state because we have few tolls and fees and no road pricing, and this will continue to be the case under these companies as privatisation has been ruled out—unless of course the noble Baroness wishes to say that there may be future plans for tolls or road pricing. I take it that there are not. In that case, the sources of finance will remain as they are now, which raises the issue of how greater income generation or efficiency will be secured. There are no obvious improvements in the way in which the national and local road networks interact, which is an issue of genuine concern. The key issue is greater certainty over medium-term and long-term funding but there is no need to create a new company to give greater certainty over future funding. The Government could simply announce a detailed five-year settlement for strategic roads in any event.

The noble Baroness’s mention of stop/start was almost as remarkable a statement as, “This legislation is still being developed”. The reason there has been stop/start over the past four years is that the Government stopped and then they started again. They did not have to do that. They could have announced and stuck to a longer-term funding plan, and it is entirely within their prerogative to do so. However, if the simple act of setting up this company constrains the ability of Governments to stop and start in respect of roads investment, it will none the less be worth while. But until we see the detailed five-year settlement for 2015-20 we are not in a position to judge.

On the proposed company, I have four points to make. First, the unhappy experience with the Ministry of Defence government company in the Defence Reform Bill suggests that the success of this model depends on the clarity of the process for selecting the company, the quality of information provided to the company, the scope of services the company is being asked to provide, and how its performance will be measured. Simply setting up a company is no panacea.

Secondly, on the roads investment strategy, the proposal for ring-fencing funding for investment in the roads and a requirement to respond to a high-level output specification in the same way as Network Rail is, as I have said, a good idea in principle, but the legal architecture around it is vague. Where Network Rail is concerned, there is a well trodden process of settlement with the Office of Rail Regulation under the Railways Act regime. There is nothing that comes close to this in respect of roads. It seems to be the Government simply announcing a five-year road settlement. Will the Minister say more about how the settlement will be set in relation to the high-level output specification? Will there be some independent judgment as to whether the resources are sufficient to deliver the high-level output specification? Can she say when we will see the high-level output specification?

Thirdly, on the provisions regarding the Office of Rail Regulation, the proposal is that the ORR’s remit can be stretched to scrutinise the efficiency of the highways companies as well. But the ORR is obviously not sufficiently equipped or experienced to do this at the moment and we need to know how it is rapidly going to become so.

Fourthly, on accountability, Graham Dalton, the chief executive of the Highways Agency, says that these reforms will enable the Highways Agency to “set its own destiny”. That sounds very liberating but what if that destiny, decision by decision, arouses controversy and opposition, as in many cases it will, in respect of road schemes? At the moment, as I know from, to coin a phrase, the scars on my back—the noble Baroness probably has some as well—it is Ministers who mediate when there are controversial issues relating to road schemes, often at quite a detailed level. Stone curlews and their relocation to make it possible to dual the A11 to Norwich is etched on my mind as taking many hours of discussions in my office, and no doubt the noble Baroness can give equivalent examples. At the moment it is Ministers who mediate, and many MPs and Members of your Lordships’ House will, when it comes to controversial issues relating to road schemes and upgrades, want that to continue to be the case.

Under the Bill, there is to be a Passengers’ Council, which is a reform of the existing quango Passenger Focus, but it is hard to see how it will have the credibility and clout that Ministers currently exercise. Furthermore, as I understand it, the Passengers’ Council will be mandated only to promote and protect the interests of users of highways for which the highways company or companies are responsible. The Passengers’ Council will not represent the interests of communities along the road or the natural environment. That is a very important point. Who will represent their interests and take account of them? I should be grateful if the noble Baroness could clarify those issues. There is a lot for us to debate further about the new structure of the Highways Agency.

Moving to other issues, on invasive non-native species, there will be a lot for us to scrutinise in species control orders, the protection of animal welfare and the proposed powers of entry. The House of Commons Environmental Audit Committee has a great deal to say about all that, but obviously we support a proper control regime to effect eradication or control of invasive non-native species where they pose threats to biodiversity, the water environment, economic prosperity or health and welfare.

Turning to planning and land, on major infrastructure projects and the Planning Act, Clause 18 provides that examinations of projects may be conducted by panels of two inspectors. The noble Baroness said that there are large potential savings from that, but as it is to be the lead examiner who decides in cases of disagreement, does that not make the second examiner distinctly second-class? Is that not precisely why it is odd numbers of inspectors—one, three or five—who are appointed at present?

On land, the Bill proposes that the Secretary of State can transfer public land directly to the Homes and Communities Agency and the agency can then dispose of it to developers. We see benefits in having a less bureaucratic, expedited regime for land transfer, but accountability and reasonableness will be important. It is not clear how they are to be provided under the new regime. In particular, is it correct that there will be no need in any circumstances to go through local planning application processes before land is transferred in that way? Is it also the case that the proposed change may allow public rights of way to be extinguished? As the Minister said, concerns have been raised in respect of protected environments and public amenities; for example, the status of forests and land for recreational use. That is a vital issue. I noted what the noble Baroness said about that in her speech. I hope that her assurances are watertight. Otherwise we may need to propose exemptions at a later stage to safeguard vital public interests.

Clauses 23 and 24 on the Land Registry, transferring local land charges from local authorities to the Chief Land Registrar and extending the powers of the Chief Land Registrar raise a whole host of issues, particularly if the Land Registry is to be privatised, as leaked documents suggest. My noble friend Lord McKenzie of Luton will have a lot more to say about that in his speech. Perhaps the noble Baroness can enlighten us as to why a company that returns £100 million a year to the Treasury and is thought to be doing a good job needs to be sold off.

Clauses 19 and 20 propose to simplify the process of making changes to development consent orders and the discharge of conditions attached to planning applications. The Government say that that is due to concerns about delays with planning authorities discharging planning conditions, but obviously there will be concern that that will simply allow developers to ignore planning requirements. I should be grateful if the noble Baroness could tell us what evidence there is to support the notion that it is local planning authorities which are delaying the discharge of conditions at the moment. In her reply or in writing, perhaps she might tell us how many decisions regarding the discharge of planning conditions have been delayed and therefore merit this legislation. Is there any evidence to suggest that it is other statutory consultees who are holding up the process and, as this is all related to housebuilding, can she say what impact this will actually have on the level of housebuilding?

On fracking, we do not have the provisions at the moment, as I said, but the Government have put it up in lights. If the intention is to put shale gas production in line with the coal industry, water and sewerage, all of which have access to underground land, then we welcome this in principle. I endorse the potential gains that the noble Baroness mentioned as being well worth securing if it is possible to develop shale gas in this way. But communities need to be reassured about impacts on the environment, including methane levels, contamination of the water table and seismic shifts.

However, the big and immediate issue on energy, whatever the potential long-term gains from fracking, is the need for new power stations. According to a recent survey by the CBI and KPMG, two-thirds of British companies fear that UK infrastructure will deteriorate over the next five years and their most critical concern is about energy. Britain’s supply of electricity is dangerously close to demand. The safety margin of capacity has been shrinking and now stands well below the 20% necessary to ensure against shocks. Thanks to its antiquity and the demands of environmental legislation, roughly one-fifth of existing generating capacity will drop out of the system over the next decade.

As I said in the debate on the Address a fortnight ago, plans for delivering new gas and nuclear power stations are well behind the curve. Ministers talk about a dozen new nuclear power plants but only two are yet proceeding. As for gas, because of a lack of clarity and confidence in the Government’s capacity mechanism for encouraging new supply, we are facing a situation where existing gas stations may be mothballed with little appetite for new plants. On renewables, to repeat what is becoming a truism, there are two Governments at the moment: DECC, under Ed Davey, is in favour while DCLG, under Eric Pickles, repeatedly turns down applications for extra wind capacity. On all this, the Bill is irrelevant. There is already an Energy Act and what we need now are concrete proposals and consents and viable funding arrangements.

It is the same issue regarding a large part of the transport infrastructure that is required. Where are the plans? It is great that Crossrail 2 and HS2 are proceeding but where are the plans for new airport capacity in the south-east of England? All we have is a commission, which is not due to report for at least another year, because for the entirety of this Parliament the Government have not been able even to form a view, let alone take a decision. I am told that later this year, for the first time in 350 years, Britain will no longer have the world’s largest port or airport. That accolade will pass, symbolically, to Dubai.

It is the same situation year after year with there being no plan in respect of the new lower Thames crossing—vital infrastructure to relieve the Dartford crossing, the most congested short stretch on the entire Highways Agency network. I published three options for the new lower Thames crossing five years ago. Since then, three options have been reduced to two but there still has not been a government decision in respect of those two. It does not need a Highways Agency company to build the new lower Thames crossing; it just needs a Government and a Minister who can take a decision and see it through. The new crossing would be entirely paid for by tolls, so there is no public expenditure implication at all.

Above all, the Bill barely scratches the surface of the UK’s chronic shortage of housing. The rate of housebuilding is lower than at any time since the 1920s. Less than half the 250,000 new homes a year required are being built nationally and less than a third of the 60,000 required in London. There are estimated to be 150,000 unemployed construction workers, costing the economy up to £2.1 billion a year in unemployment benefits and lost tax revenue. Yet this situation has been getting worse, with 40,000 jobs lost in the construction industry last year. On current projections based on the low rates of housebuilding, employment in construction will still be 11% below its 2008 peak in 2018.

This is an infrastructure problem with huge social consequences. Rapid house price inflation, driven by shortage of supply, is pricing many out of home ownership, with average house prices nationally close to seven times the average income. With home ownership becoming increasingly elusive, many are turning to the private rented sector where the housing stock is often of poor quality and unable to keep up with demand. Almost one in seven people in the UK now rent, including 1.3 million families with children. One-third of these properties fail to meet the decent home standards, and the number of homeless households has risen to more than 50,000 a year. On almost all of this the Bill is silent, yet this is the biggest infrastructure issue that we face as a country.

As for the Government’s national infrastructure plan, I simply note that at the most recent count 355 projects and programmes—that is, 55% of the total of 646 that are in the pipeline—were not under construction or even part of an active programme of investment. So we face big infrastructure challenges. According to the Civil Engineering Contractors Association, a lack of investment in infrastructure is costing the UK around £78 billion a year in lost output. Our total infrastructure stock as a proportion of GDP is less than India, the US, China, Italy, Switzerland, South Africa and Poland. In March 2012 the Prime Minister said:

“I want to set out a vision for this country’s infrastructure in the 21st century; what we need, how we can pay for it and some specific steps that we are going to take”.

We still need that vision today.

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[Baroness Kramer]

I hope that my noble friend will encourage him to read my comments.

Moving on to more substantive issues, we had actually very little discussion of shale gas. My noble friend Lord Teverson spoke about geothermal extraction. I think that is rather positive. There is clearly an appetite in this House to ensure that this is a successful project. I know that many people are waiting for the detail, and that is exactly right. I would encourage anyone with an interest in this area to look at the consultation that is under way until 15 August because they may wish to participate in it as well as use it to inform themselves of what may happen, since the Government will not be making their final decisions until that consultation is complete and its implications are understood. We do not want to prejudge.

My noble friend Lord Teverson asked for more information on geothermal. I suspect that he knows this area far better than I do, but I remind him that geothermal power projects are eligible for support through the renewables obligation, and that under the contracts for difference the department has set a final strike price for geothermal power of £145 per megawatt hour until 2016-17 and £140 per megawatt hour thereafter. Indeed, there are a lot of measures to exploit geothermal, of which I think everyone recognises the potential.

In the same vein, my noble friend Lord Purvis mentioned the Wood review. We recognise that the oil and gas industry in the UK is of national importance and will be a vital part of the energy mix. While investment levels in the UK continental shelf are rising and near-term prospects are strong, there are new challenges for exploration and production. The environment is, frankly, very different from the circumstances when production peaked approximately 15 years ago. We will be responding very shortly to the Wood review. Details of how this will be carried forward will be available in Committee—I think my noble friend might have thought it would be later but it will be in Committee.

On zero-carbon homes, my noble friend Lord Teverson constantly reminds us that as well as talking about the supply side for energy we must focus on the demand side. This part of the Bill is absolutely critical in this area, and we will see those clauses before the Summer Recess. We recognise, as I suspect all noble Lords did in their speeches, that making all homes zero-carbon “on site” is sometimes not physically feasible or cost-effective for housebuilders. There are technical limits. Of course, we will be exploring the whole issue of allowable solutions. My noble friend Lord Teverson said he was concerned that we were focusing on potential exemptions for small sites, but we must recognise that small housebuilders face a very different economic framework from that faced by the big housebuilders, lacking economies of scale. But it is an important industry throughout the UK and we rely on it heavily for housebuilding in this country, and we must always keep in mind that the industry needs to be successful.

On roads reform, there was a very wide range of questions. A number of noble Lords, including the noble Lords, Lord Whitty and Lord Adonis, and my noble friend Lord Bradshaw—and there may have been others—talked about the importance of ensuring that reforms to the Highways Agency were seen within the context of spending on local authority roads, particularly the maintenance of those roads. It is obviously a very important point. Your Lordships will know that the Government are investing more than £6 billion in this Parliament—£12 billion in the next—on highways maintenance for strategic and local roads, enough to resurface 80% of the national road network and fill 19 million potholes a year on local roads. I also want to make it clear that there are benefits from that integration between the strategic highways network and local roads that come from our proposals for changes to the Highways Agency. The licence agreement for the reformed Highways Agency will include a duty to co-operate that will foster and improve partnership working with local authorities.

The new company will be a traffic authority and have the same legal responsibilities to ensure that traffic runs smoothly on its own network and the local network. These changes will strengthen the interplay between local authorities and the Highways Agency.

[Lord Adonis]

The Minister just referred to the “new company”. Many noble Lords in the debate asked whether we are talking about a company or companies because the Bill says “companies”. Do I take it from what the Minister just said that it is the Government’s intention to set up just one highways company?

[Baroness Kramer]

Yes, it is the Government’s intention to set up just one company. It is standard template language in legislation, I understand, to create the option of further entities. It has no sinister meaning at all behind it. The intention is for a single company, but of course the lawyers always think about what-ifs in the most extraordinary way. I guess we did not really kick back against that but, yes, it is one company.

A number of your Lordships seemed to think that we might be looking at privatisation. Indeed, I was not sure whether or not the noble Lord, Lord Adonis, was proposing that, but we are certainly not proposing it on this side. This will be a company with a single shareholder, the Secretary of State. Any change to that would require primary legislation, so there is no backdoor mechanism.

[Lord Adonis]

For the record, my Lords, I was not.

[Baroness Kramer]

A number of other noble Lords asked whether the body would go out and seek private finance. It could do so only with the authority and approval of the Secretary of State, so it is no different from the current situation of the Highways Agency. The Government do not anticipate that that is what it will do. Quite frankly, borrowing through government costs significantly less, and this is an on-books entity. That is not something that this is meant to facilitate, if that is helpful.

--- Later in debate ---

[Baroness Kramer]

The monitoring will indeed be there. That is crucial because of the way in which the SHC is being constructed.

The noble Lord, Lord Adonis, asked: where on earth do you get those savings from? It is covered in detail in the impact assessment and business case published by DfT on 6 June. It is important to understand that certainty of funding, which will come out of the road investment strategy, combined with the arm’s-length relationship, gives us a structure which is similar enough to the structure which has worked effectively in the rail industry. For example, the Government have committed £24 billion to road investment until 2021. Far more detail on all of this will come out of the road investment strategy.

The road investment strategy is set up in such a way that once established, if a future Secretary of State wants to change it, he or she obviously could—we cannot bind a future Parliament—but it would have to be done transparently, publicly and with consultation. Such pressures are an inhibitor which provides enough satisfaction to the industry to understand that it can look with reasonable certainty over the long term for the funding to be available. That leads to efficiency. We expect the SHC to approach asset management in a different way because it has such clear strategy and certainty of funding. It will also be set up as a company, with the roles that companies have, with its directors and chief executive. The sole shareholder will be the Secretary of State. I think that it will achieve its purpose. One could go over the top and try to reinforce that, but the question is: is that sufficient for the purpose to be achieved? If it is, that is the point at which we should stop.

Yes, the SHC will be subject to the Freedom of Information Act, so there should be no concern on the issue. I have addressed the issue of multiple companies. My noble friend Lady Miller of Chilthorne Domer mentioned—I am told that I have only two minutes left. Is that seriously true? If I have only two minutes left, I shall do one thing which is terribly important. I switch completely to address the issue that has been floating through the media and mentioned today: concern that land transfers could affect the Forestry Commission and the national parks. I addressed that issue briefly at the very beginning of my speech. I am looking hard to find the comments; if anyone can hand them to me I will love them for ever.

[Lord Adonis]

While the noble Baroness wrestles with her papers, I invite her to respond to another big concern raised in the debate, which is that there were discussions in government about privatising the Land Registry. Are there are indeed such discussions?

[Baroness Kramer]

I can tell the noble Lord only that there will be no such clauses in this Bill. I can provide that absolute clarity.

[Lord Adonis]

Are there any discussions about privatisation of the Land Registry at a later date?

[Baroness Kramer]

There will be a response to the consultation, but it is not the intention of the Government to provide for that in the Bill or, as far as I know, in any future legislation.