Infrastructure (Financial Assistance) Bill

Debate between Lord Newby and Lord Skidelsky

Tuesday 23rd October 2012 Lords Chamber

[Lord Newby]

I am always in awe of the culinary skills of the noble Lord, Lord Adonis, and am extremely grateful for that way of looking at it. However, whether it is a plan, recipe, menu, or none of the above, the key thing is that, as far as risk is concerned, which was the second question that I wanted to address, the Treasury will be responsible for managing the risk and assumes the contingent liabilities. Value for money, as I said earlier, is key.

The noble Lord, Lord Giddens, asked about the pension infrastructure platform, about which I should perhaps have said more. As he may know, last week, seven pension funds announced that they would be initial subscribers to the platform. They will each invest at least £100 million. We hope that the system will be up and running early next year and that it will be the first element of a much larger fund. As to why we think that pension funds might now get involved in this kind of investment whereas they have not in the past, the answer is that, in the past, they have been able to get better returns through conventional means of investing the money. At the moment, with interest rates so low, they are getting very low returns. The other problem that they have had is that, where they have gone via private equity houses which have managed infrastructure programmes, they have often found that the programmes have not worked very well and that they have been charged an arm and a leg for it. So this is a way for the funds, with support from the Treasury, to get into what could be very important new form of investment without what they have seen as being the unreasonable cost of going down a purely private sector route.

The noble Lord also asked about the relationship between this Bill and the energy Bill. The purpose of the energy Bill is to set a framework for investment in the energy sector over the medium term. Once the energy Bill, which will come forward relatively soon, is enacted, and against the framework that that Bill sets out, people looking to invest in the energy sector can form a view about what they want to do and individual projects will be eligible for support under the Bill.

The noble Lord, Lord Skidelsky, started with three nonsenses and will not be surprised that the Government do not agree absolutely with everything that he said. I find it almost incredible to think that if the Government had not been seen to get the fiscal position under control, interest rates would not have gone up. Even if they had not gone up to the levels that they are at in Greece or Spain, a single percentage point increase in interest rates, among other things, costs mortgage holders in the UK an extra £12 billion a year and would over the course of a Parliament, with all other things being equal, cost the Government about £25 billion. These are very important considerations. Interest rates would almost certainly have been higher if we had turned on the tap.

On his proposal for a British investment bank which would raise money in the private market, the noble Lord will not be surprised to know that the Treasury view is that, if that bit of the state is raising money in the private market and conventional government borrowing is happening in the same private market at the same time, the markets will judge the pair of them together as a common pool of demand from the UK Government. Therefore, we could not segregate borrowing for a British investment bank without it having consequences for the way in which all government borrowing was viewed.

The noble Lord asked how many of the net gains in employment were self-employed or part time. There is a false assumption that working for oneself or working part time are somehow second-class things to do or things that people do not necessarily choose to do. Some people are forced to do one or the other. However, when I was made redundant in the last property crash in 1992, I in effect became self-employed by setting up my own company and it was one of the better things that I have ever done. It did not mean that I was economically out of the market or that I was not able to grow anything. Many people who become self-employed find that they are successfully self-employed. Equally, many people who work part time—and even the Guardian accepts that the figure is at least 80%—do so through choice rather than because they are forced to.

[Lord Skidelsky]

Would the Minister be kind enough to answer my question? What proportion of the Prime Minister’s 900,000 new jobs are part time and what proportion are full time? Further, are those employed under government work schemes included in the figure of 900,000?

[Lord Newby]

I am afraid that I do not have those figures to hand but I will write to the noble Lord.

The noble Baroness, Lady Wheatcroft, raised concerns about continuing the old system of PFI. Many people share her concerns about the way that PFI has worked, and in any future schemes I know that the Government will seek to avoid the problems of the past in that respect.

The noble Lord, Lord Berkeley, asked several questions, one of which concerned the criteria were for which projects come forward. As I said in my opening remarks, the five principle criteria are that the schemes be nationally or economically significant, financially credible, good value for money for the taxpayer, not solely dependent on a guarantee to proceed, and ready to start construction in 12 months. He asked whether the £50 billion affects the PSBR. The answer is that it affects the PSBR only if guarantees are called upon. My understanding is that if it is a contingent liability, this does not affect what I still think of as the PSBR.

The noble Lord, Lord Berkeley, also asked about the Thames tunnel and whether we might have an independent review. Living as I do on the Thames and being subject to many public meetings about the Thames tunnel, it seems to me that the current programme of proposals on the tunnel involves a huge amount of consultation and much discussion of alternatives. Having got this far on what seems to be an unavoidable necessity, I certainly would be extremely loath to think that we had to go back to the drawing board and start again with an independent inquiry.