UK Infrastructure Bank Bill [HL]

Baroness Hayman Excerpts

2nd reading
Tuesday 24th May 2022 Lords Chamber

[Baroness Hayman (CB)]

My Lords, it is a pleasure to follow the noble Baroness, Lady Young of Old Scone, and to speak in this debate. I declare my interests as co-chair and a director of Peers for the Planet.

It is also a welcome change to be discussing legislation where we do not have to argue the need to put net zero and the Climate Change Act on the face of the Bill. This is an innovation, and one that I hope will be repeated, but, as the Minister will have understood from the speeches made already today, there is another front opening up: the front of nature recovery and the importance of that being in the Bill. This bank is a central part of the UK’s infrastructure ecosystem and represents an important delivery tool for both levelling up and decarbonising the economy; for helping to scale up the markets for much-needed technology such as battery storage; for supporting new jobs through the circular economy; and, I hope, as others have said, for turbocharging the energy efficiency and retrofit measures that are so necessary, given the dire state of our building stock.

The current objectives set out in the Bill of helping to tackle climate change and promoting regional and economic growth underpin its strategic direction, and the bank’s background documents recognise the “huge potential synergies” between these objectives. But there is, as others have said, another synergy that is not spelled out in the Bill: the key opportunity the bank has to deliver for nature recovery and for the UK to be a world leader in nature-based investment. That investment could be for natural flood management, peatland restoration and repairing coastal habitats; and it could be for projects which protect and enrich our biodiversity, improve our resilience to climate change and provide opportunities, through the employment they give, to address regional inequalities. Ensuring alignment between the objectives of levelling up, tackling climate change and aiding nature recovery would in fact make it easier to achieve the economic growth we all seek.

There have been estimates that agriculture and nature-based investments could generate financial returns of £4 billion a year by 2050. Investors are starting to seize these opportunities, but there is a huge funding gap, estimated by the Green Finance Institute at £56 billion over the next 10 years. This is referenced in the “strategic steer”—a phrase to which I think we will return during the course of the Bill—given to the bank by the Chancellor, which also identifies

“several barriers to finance that need to be addressed for a mature commercial market to develop”.

To bridge this gap, it notes:

“Private sector involvement in the market will need to scale up significantly”.


I hope that UKIB can be part of and help to drive the development of this crucial market, because the work that government has already undertaken firmly underpins the argument that nature should be more clearly embedded within the Bill. In 2020, the Natural Capital Committee called for

“all publicly-funded infrastructure … to invest in maintaining and enhancing natural capital.”

The Treasury-commissioned Dasgupta review echoed this, and the Government’s response committed to embedding environmental considerations and a “nature-positive approach” across infrastructure portfolios. Similarly, there is strong evidence that accelerating the development of nature-based projects through UKIB would make a meaningful difference to economic growth and levelling up, as well as climate adaptation. We have an opportunity to secure greater ambition on nature now by including it on the face of the Bill. We need to recognise the urgent need to respond, most recently articulated by the first monitoring report of the Office for Environmental Protection, which advised the Government:

“Do not delay in making the changes necessary to protect, restore and improve our environment.”


Setting natural capital alongside the existing objectives of climate change action and supporting local economic growth—as well as ensuring a robust approach to these objectives in the operational, transparency and governance provisions of the Bill—would not only serve to implement the recommendations of the Government’s experts; it would set a clear trajectory for the bank and a strong example both domestically and globally that infrastructure can help to deliver a nature-positive future, and in so doing contribute to net-zero targets and the regeneration of UK regions, and bring economic growth to the UK.

The Minister set out in her opening remarks the Treasury’s view that support for nature-based solutions can be delivered through the bank’s existing policy framework without the addition of a specific third objective. Like others who have spoken, I am far from convinced that this is correct, so I look forward to exploring at further stages in the passage of the Bill how we can include tackling biodiversity loss and nature recovery as a clear, mandated objective for the bank. Having listened to other noble Lords, I also look forward to the debates that we shall have on the governance of the bank and the role of the Treasury in ensuring its independence.

We have an opportunity to ensure that the UK Infrastructure Bank will be a world leader in supporting nature’s recovery, a subject on which I heard the Minister’s colleague the noble Lord, Lord Goldsmith, speak eloquently at an event only today. I hope that we will grasp that opportunity; I look forward to future debates, and to strengthening the Bill as it proceeds through the House.

UK Infrastructure Bank Bill [HL]

Baroness Hayman Excerpts

Committee stage & Lords Hansard - Part 1
Tuesday 14th June 2022 Lords Chamber

[Lord Tunnicliffe (Lab)]

My Lords, before I start to speak to this group, can we clear a piece of housekeeping with the Minister? I would be grateful if she could give us an assurance that, when she writes to one of us, she writes to all of us, unless there is an overwhelming case against it. I take her nod as an affirmative and thank her.

I move Amendment 2 and will speak to my other amendments in this group, Amendments 3, 8 and 20. Amendment 2 was tabled to facilitate a debate around the potentially competitive nature of the bank’s objectives. The bank has acknowledged that the climate and growth objectives are likely to come into conflict. To its credit, it has loosely committed to the “do no harm” principle. However, as we say so often during our consideration of legislation, a verbal or written commitment is not the same as a statutory safeguard.

As I referenced at Second Reading, the Government opted not to include a general climate change provision in the Subsidy Control Act. They wanted to give public authorities maximum flexibility when granting subsidies, even if they cause environmental harms. As we transition to a greener economy, one would hope that investment in and subsidy for polluting technologies will steadily decline, however there are no guarantees. As the front page of the Bill makes clear, this will become environmental law, once enacted. It therefore makes little sense to leave these matters to chance. What message does it send if our environmental law does not properly protect the environment?

Amendment 3 would broaden the bank’s climate objective to bring in the 2030 species abundance target under the Environment Act. As the Dasgupta review made clear, nature and biodiversity are inherently linked to our economic and wider well-being. We support the Government’s decision to include a species abundance target in the Environment Act and look forward to seeing the detail when it is brought forward by Defra. We worked with colleagues across your Lordships’ House to strengthen that target, and we are pleased that Ministers listened. Having set the ambition, we need concerted action to realise it.

There is not only a moral case for green, nature-based investment—those types of projects tend to have a higher cost-benefit ratio than traditional forms of infrastructure. Not only are there headline economic benefits but there are jobs to be created too. Projects to improve our natural environment could have a particularly positive employment effect in some areas with the worst labour market outcomes.

On jobs, I turn to Amendment 8, which would add job creation to the growth objective. The creation of jobs is mentioned as part of UKIB’s second objective in the Chancellor’s letter from 18 March. That document sets out the bank’s strategic steer. It is slightly curious that jobs are mentioned in that document, albeit only twice, but that has not been carried across to the Bill itself. The bank needs to be a force for good in all respects, which means creating highly paid, high-skilled jobs. The Government have long promised an employment Bill to ensure greater protection across the board, but curiously they have been unable to find parliamentary time to deliver on that commitment. The projects funded by the bank will create jobs, but it is not clear what weight, if any, will be given to the terms attached to those roles. I hope that the Minister can confirm that this is the Government’s intention for jobs created through UKIB’s investment—to be well-paid, secure jobs, rather than short-term or zero-hour contracts, with few rights and protections.

Finally, I have tabled Amendment 20, which seeks to expand the definition of infrastructure to include investment in the natural environment and the circular economy. This is a natural partner to several other amendments in this group, and the case for it is self-evident. What in a sense we are trying to do is to expand the two objectives to four; one of those objectives is about net zero, and the second is about levelling up. We want to include the environment and jobs; that way, the objectives will in our view become more balanced. I beg to move.

[Baroness Hayman (CB)]

My Lords, I declare my interests as set out in the register. As we approach this group, I have added my name to Amendment 2, which has just been so clearly introduced by the noble Lord, Lord Tunnicliffe. I do no more than to reiterate the point that including the “do no harm” requirement in the framework document and strategic plans is not, as the Minister suggested at Second Reading, actually significant. There is scope for conflict between these objectives, and we need to make it crystal clear in the Bill that the bank should not make investments or engaging in other activities that contradict its own objectives or the Government’s wider environmental objectives.

I would like to say my bit on the theme that will go through much of our discussions today about the absolute priority of putting essential policy components in the Bill, rather than any other accompanying document that does not have the force of legislation. We know that, when circumstances change, anything short of primary legislation can be changed or refocused. I hope that the Minister will forgive me if I remind her of our debates over the Financial Services Act. In those discussions, when asking to put things in it, we were assured that the “remit letters” to the PRA and the FCA would

“set ambitious recommendations relating to climate change”.—[Official Report, 24/2/21; col. GC 224.]

Indeed, they did. However, there was significant emphasis adjustment to those recommendations this April in the light of the Government’s focus on domestic oil and gas production in their energy security strategy. I, too, regret that we did not make it clear in the Subsidy Control Bill and it makes me more certain than ever of the virtue of ensuring that what we want is in the Bill.

I have Amendment 4 in this group, and am grateful to the noble Lord, Lord Bourne of Aberystwyth, my noble friend Lord McDonald of Salford and the noble Baroness, Lady Young of Old Scone, for adding their names to it. This amendment, like many others in the group which I generally support, considers the scope and ambition of the UKIB’s objectives. I am afraid I cannot pronounce “UKIB” as one word because, if I do, it comes out sounding like “UKIP” and I then come out in hives. I hope noble Lords will forgive me for continuing to use the initials. The amendment’s objective is to highlight two issues: one is nature and the natural environment—there are several other amendments in this group on that issue—and the other is adaptation. I am extremely glad to see my noble friend Lady Brown of Cambridge in her place and hope we may hear from her on the latter issue.

My amendment uses wording that the Government themselves proposed and passed into the Health and Care Act 2022. I will not compare duties for the NHS with the objectives of the bank further, but it is worth making one point on this matter. For the Health and Care Act, the Government set out an overarching three- pronged approach to their environmental considerations: reducing emissions, achieving environmental targets and adapting to climate change. These are interlocking issues; the Government recognised this and took action to ensure that they were given priority in that Bill. We should do the same here.

On adaptation, in particular, we must recognise that, however effective we are in our pursuit of a zero- carbon world, there is, as the third UK climate change risk assessment said,

“strong evidence that even under low warming scenarios the UK will be subject to a range of significant and costly impacts”.

According to Net Zero Strategy,

“it is essential that the UK’s adaptive capacity is rapidly developed to prepare for”

this. This amendment would address that issue.

The amendment also ensures that the protection and restoration of nature are included in the Bill. The interdependence of the climate change and nature crises has, in theory, long been agreed by the Government, and was confirmed by the Minister at Second Reading. We know that the worst climate outcomes cannot be avoided without a significant expansion in nature restoration. We also know that nature restoration supports levelling up, and regional and economic growth, through improvements to mental and physical health and through the creation of valuable jobs. However, it is also clear that there is a significant funding gap, estimated at around £5.6 billion a year by the Green Finance Institute, which needs to be bridged to achieve the necessary investment.

--- Later in debate ---

In short, all these amendments are seeking to push environmental, enabling and enhancement issues right into the Bill to make lives happy, healthy and humane.

[Baroness Hayman (CB)]

My Lords, I have Amendment 17 in this group, supported by the same cross-party group of noble colleagues as Amendment 4. It is a simple amendment which

“includes ‘energy efficiency’ within the definition of infrastructure.”

Last week, the IEA released new analysis showing that stronger efficiency measures can reduce energy bills, fuel imports and greenhouse gas emissions quickly and significantly. This was a point made by the noble Baroness, Lady Bennett, when speaking to her amendments earlier. In comments accompanying the analysis, the IEA executive director, Dr Fatih Birol, said that

“inexplicably, government and business leaders are failing to sufficiently act on this.”

Indeed, when the UK Government responded to the crisis in costs being experienced throughout the country, they committed £37 billion this year to help households with the cost of living crisis. However, when they implemented a tax on the revenues of oil and gas companies, they failed to announce any new efficiency measures which could help reduce energy demands and bills—in the long term, rather than the short term. It is, therefore, very important that we show a priority for energy efficiency in this Bill.

I will say something a little more broadly about Clause 2(5), dealing with the “technologies and facilities” included in the definition of “infrastructure”. The Government have got themselves into their own problem here. We know that the letter that was sent—the strategic steer—references energy efficiency. It mentions

“the urgent need to improve the energy efficiency of our buildings in the context of high energy prices and the Government’s renewed focus on energy security.”

So they have given us the steer that this is a priority. However, in the Bill, they give a list which does not mention it. As the noble Baroness, Lady Bennett, pointed out, the list includes roads, gas and all sorts of things which might not be in line with the priorities. There is a real problem, which we have all discussed many times, with lists in legislation. Including a list like this implies that these are priorities—although I understand that other things are not excluded by the inclusion of some things in the list—but there is an implicit suggestion that these are the main or important priorities.

The Government really must think about that, as they must also think about the issue which we were discussing earlier about what falls within the framework document and what falls within the Bill. I was not alone in not finding the definition of parliamentary scrutiny for the framework document, which the Minister conjured up for us earlier on, very comforting: it may be scrutiny, but not as I know it in the most rigorous of ways. Of course, we can ask questions about it, but that is not quite what the noble Lord, Lord Vaux, was getting at when he asked his question.

The problem that illustrated is that, within those two objectives of the Bill, when people said that the objective about economic growth could include vanity projects in very rich areas of the country, the Government’s response was, “Yes, it could, but we won’t do it.” When we said that the Government are not explicit about nature, biodiversity and adaptation projects, alongside the net-zero target, they said, “Ah, but don’t worry, because it could include those.” I really think that there is a problem in saying, “Yes, those are the words on the paper, but don’t worry about, because we can sort it all out.” I suspect that a lot of the rest of today, and on Report, will involve wrestling with exactly where that balance between the Bill, the steer that was given and the framework document should come.

[Lord Deben (Con)]

I do not think we should add too many details, so that the thing becomes a Christmas tree. Although I think I agreed with every suggestion that my noble friend Lord Holmes put forward as a principle, I am not sure that all of them are of equal value in this. However, I think the comments of the noble Baroness, Lady Bennett—she will be pleased, on this occasion, to find we are entirely aligned—are absolutely right. The Climate Change Committee has sought for a very long time to get the Government to take energy efficiency and demand reduction seriously, and there seems to be some utterly inexplicable reason that they can never do this.

I am beginning to think that this is a kind of male thing: they want to build big things—“Nuclear power stations; let’s do that”—instead of doing much simpler things. I am in favour of nuclear power, but the much simpler things are reducing the need to generate, reducing the need to use and understanding that this is as crucial a part of what we are doing as anything else. I hope that, because we have so eminent a female Minister here, she will push against this rather aggressive view of dealing with climate change, which is always to do big things. I think it is because the Government think they get votes for that, whereas with energy efficiency it is very difficult to get people to feel you have done something useful, but we are going to have to do it.

Take the electric motor car. If we are not careful, we will all be driving too much, as I do. What fun and how much better the electric motor car is than anything else, but I have to say that I ought to be careful about how often I use it, because there are resources involved which one ought to think about. If we do not have that attitude throughout, frankly, we will get the infrastructure arrangements wrong. Taking a wider view of infrastructure without thinking about the resources we are using and a reduction, within the infrastructure rules, in the use of those resources, seems to me to misunderstand what we should be doing.

Although I would not want to add all sorts of examples of things we ought to be doing, I want to make it very clear that the last speaker, as so often, got it absolutely right: if we have a list, something as important as this should not be left out, or the answer will be, as it always is, “Well, our priorities are laid down in the Act”. The Government have done that and, really, this is only an auxiliary, an addition. I want it to be central because it actually is central. It is not a question of my inventing it—it is utterly central.

I also want it to be here because this is what the Government’s advisers have said to them again and again. It really is difficult. We saw this yesterday with the so-called food strategy—it is not a strategy at all, of course. I had to ask why the Government have not even addressed the advice of the Climate Change Committee, or half the recommendations of the Dimbleby report. I think the Government have to think much more seriously about the fact that if they have advice and do not intend to do what that advice suggests, that is perfectly all right—they are the Government—but they must explain to their advisers why they do not think that energy efficiency is central to this, when that is the advice that has been consistently given.

UK Infrastructure Bank Bill [HL]

Baroness Hayman Excerpts

Report stage
Monday 4th July 2022 Lords Chamber

Moved by

[Baroness Hayman]

1: Clause 2, page 1, line 12, at end insert—
“(ii) to adapt to any current or predicted impacts of climate change identified in the most recent report under section 56 of the Climate Change Act 2008, and(iii) to protect, enhance and restore the United Kingdom’s natural capital, including by supporting efforts to meet the targets and improvement plans under Chapter 1 of Part 1 of the Environment Act 2021,”Member's explanatory statement
This amendment clarifies that the Bank’s objective to help tackle climate change includes mitigation of climate change, adaptation to climate change, and the protection and restoration of the UK’s natural capital.

[Baroness Hayman (CB)]

My Lords, I declare my interest as a director and co-chair of Peers for the Planet.

I thank the Minister for the constructive dialogue that has taken place throughout the passage of the Bill, including the meeting with the bank’s chair and chief executive last week to discuss their new strategic plan and the subsequent letter from the chief executive, which we received today. These meetings have been useful and have provided some comfort that the bank’s leadership, which is obviously of very high quality, has considered and intends to address many of this House’s concerns about issues such as natural capital, climate resilience and how certain types of infrastructure, such as gas and roads, will be treated. It would, however, be extremely helpful if the Minister made clear from the Dispatch Box the position on gas exploration and road building, concerns about which were raised in Committee and in our meeting. Although I know she believes that those concerns are unfounded, it would be helpful to have on the record some of the assurances that we received informally.

I welcome the Government’s amendment on energy efficiency, to which I have added my name. It is a much-needed signal of their recognition of the urgency and importance of making progress in this area. I hope the Minister may have an opportunity to have a word with her noble friend about the Social Housing (Regulation) Bill, where we could do with some movement on the same topic.

Where we have not made progress in making changes to the Bill is on the environmental priorities, including nature-based solutions, the circular economy and adaptation. It is with these issues, about which we spoke at length in Committee, that this group of amendments is concerned. I have tabled Amendments 1 and 6A, while similar related issues are raised in amendments tabled by the noble Lords, Lord Teverson and Lord Holmes of Richmond, and the noble Baronesses, Lady Jones of Whitchurch and Lady Bennett of Manor Castle. My amendments have signatories from all sides of the House, for whose support I am extremely grateful. Indeed, the Minister herself recognised the importance of these issues but simply queried the need to spell them out in the Bill.

Following the Minister’s comments in Committee, my Amendment 1 no longer sets out a third stand-alone objective for the bank, which she indicated would be extremely difficult to do, but is limited to expanding on the climate change objective to clarify exactly what

“to help tackle climate change”

means for the bank in practice, and to reflecting what has been indicated by the Chancellor, the Minister and the bank itself—that is, that resilience and adaptation measures and nature-based solutions absolutely fall within the scope of the climate change objective.

Given the consensus on this, it is hard to understand the argument against including these additional proposed new subsections and making clear that the bank has within its founding objectives a coherent, integrated response to climate change, and sending a clear message to the markets that these are priority areas for market development. We all agree on this, so why do we not make that clear to everyone else out there?

Including nature in the Bill in no way ignores the fact, as has been argued, that the market for nature-based solutions is nascent. What it does provide is a strong signal that the bank recognises that it has a role in developing capacity towards a pipeline of investable projects and will be poised to act—crucially, encouraging others to do the same—when these come to fruition. Moreover, the bank has a role now in helping build and develop these markets, including through taking a nature-positive approach to near-term projects, building internal capacity for future projects and taking a joined-up approach across government-related bodies, including UKRI, the British Business Bank and local authorities, to help seed projects and initiate the local capital and innovation needed to bring those projects to market.

On adaptation, we are told that it is agreed that climate-resilient infrastructure is critical to reaching net zero, and that mitigation and adaptation will be considered together. But even the Climate Change Committee’s most recent progress report last week observed that the UKIB consultation on investment priorities focused on key net-zero infrastructure priorities, but

“has no mention of adaptation.”

Clarity, focus and policy direction are needed.

Amendment 6A, the second tabled in my name, offers an alternative approach to these issues by including the circular economy and nature-based solutions in the definition of infrastructure, by making explicit that the infrastructure solutions set out in the indicative list in Clause 2(5) include those related to the circular economy and nature. As the Minister will have noticed, it mirrors the approach that the Government themselves have taken to energy efficiency.

I have already spoken about the importance of including nature in the Bill. It was generally accepted how important an issue it was in Committee, so I can be brief on this point. It is not in question that nature-based solutions play a role. The bank’s new strategic plan, which is focused on short initial timescales, already provides examples of some of the main near-term opportunities in the water sector for nature-based solutions. Explicitly stating that nature may play a part in infrastructure projects which realise the bank’s objectives would provide the confidence and the clarity needed to give momentum to the development of these solutions.

Similarly, adopting circular economy structures within the definition should be uncontroversial and a signal of how infrastructure projects may be approached. The bank’s strategy already says that it is

“open to financing … circular economy projects.”

A circular economy approach is completely in step with producing positive synergies between the bank’s objectives. Circular economy principles recognise planetary boundaries, promote fairness and reduce overconsumption. It is estimated that circular economy infrastructure could support up to 450,000 jobs by 2035 in reuse, recycling and remanufacturing. Crucially, those jobs would be in occupations and areas suffering higher rates of unemployment.

In our debates, the Minister spoke at length about the need for clarity, but the Bill is Parliament’s only opportunity to be not only clear but explicit about policy priorities. The Government recognised that by proposing their own amendment on energy efficiency. I believe that there is support all around the House for taking exactly the same approach to nature-based solutions and the other issues covered in these amendments. I beg to move.

--- Later in debate ---

[Baroness Penn (Con)]

My Lords, we start Report with a topic that has already been central to our discussion of the UK Infrastructure Bank: its role in investing in nature and the environment. I thank the noble Baroness, Lady Hayman, and all noble Lords who have engaged with the Government on this important topic.

I turn first to Amendments 1 and 3, in the names of the noble Baroness, Lady Hayman, and the noble Lord, Lord Teverson, which seek to add natural capital, biodiversity, wider environmental targets and climate adaptation to the bank’s climate change objective. As we discussed in Committee, nature-based solutions and projects to support climate adaptation are already within scope for the bank. Those who attended the briefing with the bank’s chief executive and chair last Tuesday will have heard that the bank is keen to explore this area. We have given thorough consideration to the question of adding to the bank’s objectives through our environmental review on whether nature-based solutions should be in the objectives. We engaged with a wide range of stakeholders during this review, from think tanks to investors, and we heard from a majority of them that they felt that there was already significant scope for intervention in nature-based solutions within the bank’s existing mandate without adding a third objective.

In considering this question it is important to acknowledge that the bank already has two stretching and broad objectives that are the outcome of significant work, starting from the recommendations of the National Infrastructure Commission and the national infrastructure strategy. Ultimately, the bank is an infrastructure bank, so it should invest in nature as a means of achieving its objectives and to enhance the UK’s infrastructure. The Chancellor made this clear to the bank when he sent it a strategic steer in March this year. The bank’s strategic plan sets out that it will explore opportunities to invest in nature and highlights opportunities to invest in water-related projects, as the noble Baroness, Lady Hayman, mentioned.

While the bank’s scope to invest in nature is already significant, it is important to note that this is not the only, or indeed primary, government intervention to support the market for natural capital projects. I will mention just a few areas. To provide an accredited route for income for nature projects, the Government are backing the maturation of the woodland carbon code and peatland code through the nature for climate fund and woodland carbon guarantee. To create demand for nature projects, we are implementing regulation to grow the market—for example, through mandating biodiversity net gain for development. The nature recovery Green Paper also sets out plans in this area, specifically on ensuring that environmental regulation and regulators, including Natural England, the Environment Agency and Ofwat, are equipped to support the uptake of nature-based solutions and more strategic, landscape-scale approaches to environmental protection and enhancement by industry. To help the market mature from grant support to a more commercial basis, Defra has established the natural environment investment readiness fund of up to £10 million, which will provide grants of up to £100,000 to environmental groups, local authorities, businesses and other organisations to help them to develop nature projects in England to a point where they can attract private investment. Defra is also initiating the big nature impact fund, a blended finance vehicle designed to use public concessionary capital to attract private capital into the fund. The fund will invest in a portfolio of natural capital projects that can generate revenue from ecosystem services to provide a return on investment. These initiatives will support the growth and commercialisation of the natural capital market.

I thank the noble Baroness, Lady Hayman, for her support for the government amendment in my name. I again reassure noble Lords that it was always the Government’s intention that the bank could invest in projects to increase energy efficiency—for example, the retrofitting of homes. In fact, this forms a key aspect of the bank’s strategic plan. However, recognising the points raised in debate on this, I have tabled this amendment to add “energy efficiency” to the non-exhaustive definition of infrastructure in Clause 2 to ensure that it is explicit that the bank can invest in projects to increase energy efficiency.

Amendments 6A, 7, 9, 10 and 11 all seek to make further changes to the definition of infrastructure in the Bill. Amendments 6A and 7 seek to add “nature-based solutions” to the definition of infrastructure. As noble Lords have already heard, the Government are confident and, through our review of the bank’s environmental objectives have sought third-party views to ensure, that the definition we have included covers nature-based solutions. The bank’s strategic plan also makes clear its commitment to supporting the development of a circular economy.

On Amendment 9 in the name of the noble Baroness, Lady Bennett, I hope she has received the letter from John Flint, the bank’s CEO, on this issue. As highlighted in the bank’s strategic plan, we do not anticipate the bank investing much in roads. However, it is important that it has the flexibility to do so under the right circumstances. The bank may, for example, consider supporting local authorities in road upgrades that feature as part of their wider transport infrastructure and transport decarbonisation plans. For example, the bank has already financed the West Midlands Combined Authority’s sprint bus programme, which includes road adaptations such as priority signalling, redesign of junctions and additional bus lanes.

I take this opportunity to comment on the bank’s investment in gas, which the noble Baroness, Lady Hayman, asked about. The bank will not lend or provide other support to projects involving extraction, production, transportation or refining of crude oil, natural gas or thermal coal, with very limited exemptions. These exemptions include projects improving efficiency, health and safety and environmental standards, without substantially increasing the lifetime of assets, for carbon capture and storage or carbon capture, usage and storage where projects will significantly reduce emissions over the lifetime of the asset, or those supporting the decommissioning of existing fossil fuel assets. The bank will not support any fossil fuel-fired power plants unless this is part of an integrated natural gas-fuelled CCS or CCUS generation asset.

Finally, I come to Amendments 10 and 11 tabled by my noble friend Lord Holmes and the noble Baroness, Lady Jones of Whitchurch. This is a difficult area to tackle, so let me set out how the bank considered the wider environment within its policy framework. First, there are investments which, while addressing climate change or growth, can help to improve the environment. Separately, there is a policy framework considering whether and the extent to which the bank’s investments impact environmental factors beyond climate change. With this in mind, I shall set out how the objectives of the bank relate to pollution.

The bank’s objectives are tackling climate change and regional and local economic growth, but not wider pollution. The bank can invest in projects that tackle pollution, but only so long as they also help to achieve its core objectives of tackling climate change or regional and local economic growth. Investments directly into infrastructure to tackle other pollutants that can impact clean air will already be broadly covered by the existing definition of infrastructure and the objectives in the Bill. For example, tyres would fall under transport, in the same way that water pollution is covered by water, and tackling those pollutants is in scope as long as that investment is also tackling climate change and/or facilitating regional and local economic growth. As we have discussed, there are likely to be large numbers of synergies in this area.

I know that there has been interest from Peers in broadening the bank’s definition of infrastructure to ensure that the bank takes into account the wider environmental impacts, beyond climate change, of its investment decisions. Widening the definition of infrastructure in this way is not the best way to achieve this. Instead, the way that wider environmental impacts are dealt with is via the bank’s environmental, social resilience and governance policy. The ESRG policy and framework that the bank is developing will be used to screen projects and provide transparency on its portfolio. Part of this policy will involve collecting data from each investment to meet reporting standards, such as the forthcoming sustainability disclosure requirements, which will include green taxonomy reporting. The objectives of the green taxonomy include pollution prevention and control, which the bank will need to report on for its investments.

More broadly, infrastructure projects are subject to a range of environmental regulations appropriate to their specific type and circumstances. It would not add value to apply these directly to the bank when they already bind the project developers directly. Defra is consulting on new legal targets for air quality, water, waste, and biodiversity, which the Government are required to set under the Environment Act by October this year and which noble Lords will be well aware of.

I hope, therefore, I have provided sufficient reassurance for the noble Baroness, Lady Hayman, to withdraw her Amendment 1 and for other noble Lords not to move the other amendments in this group when they are reached.

[Baroness Hayman (CB)]

My Lords, I am extremely grateful to all noble Lords who have spoken in this debate. As in Committee, we saw support from all around the House. Unfortunately, the Minister has not completely reassured me. I am grateful for her reassurance on gas and understand the reason for including roads, with caveats, in the infrastructure. I sort of understand not wanting to change the objectives, because of the process she described with consultation and wanting to keep clarity for the two objectives.

What I cannot understand is refusing to include the circular economy and nature-based solutions in the infrastructure. I am afraid her arguments are undermined by the Government’s actions. They keep roads in there even though they need to be caveated and we need reassurances that they will not be a mainstream activity of the bank. However, they tell us that they are absolutely committed to making these an activity for the bank. We know that the Treasury, departments and everyone who talks about these issues understands the connection between nature-based solutions and climate change. They understand that we need to tackle these areas; there is no difference between us. These are not tablets of stone, unlike the objectives—and the Government are seeking the leave of the House to change the objectives on energy efficiency. If they can do it for energy efficiency, why cannot they do it for nature-based solutions and the circular economy?

I rest my case on that issue and will return to it when we come to Amendment 6A. I beg leave to withdraw Amendment 1.

Amendment 1 withdrawn.

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Moved by

[Baroness Hayman]

6A: Clause 2, page 1, line 23, after “includes” insert “structures underpinning the circular economy, and nature-based solutions,”

[Baroness Hayman (CB)]

My Lords, in the earlier debate on this amendment, we heard very powerful arguments for including nature-based solutions and the circular economy in the definition of “infrastructure” in the Bill. The arguments that we heard from the Front Bench were not as strong: the principle was accepted, and we were asked to accept the reassurance that these issues could be included because they were in the framework document or the strategic plan. This is Parliament’s opportunity to say what its priorities are. I believe that there is support for this around the House, and I beg leave to test the opinion of the House.

UK Infrastructure Bank Bill [HL]

Baroness Hayman Excerpts

Consideration of Commons amendments
Tuesday 14th March 2023 Lords Chamber

[The Parliamentary Secretary, HM Treasury (Baroness Penn) (Con)]

My Lords, with the leave of the House, I shall speak also to the other amendments and that in the name of the noble Baroness, Lady Hayman.

I start with Commons Amendment 2. As was noted in the other place, the Government agree that the bank will make it a stipulation that any investment into the water sector must be in line with the company having an appropriate plan and making sufficient progress against that plan to deal with sewage discharges. However, I want to make it clear that in this circumstance the word “preventing” is aimed principally at preventing harmful discharges and does not mean eliminating all discharges. I want to make this distinction in the House because I do not want the bank to be prevented by fear of legal action from investing in water companies which have a plan in place to meet their obligations.

I reassure the House that the Government are already taking major steps to improve water quality. We have announced legally binding targets on water quality under the Environment Act and ambitious interim targets to deliver these in our environmental improvement plan.

This Government have also implemented the strictest ever targets to crack down on poor water company performance. On sewage spills, our storm overflows plan requires companies to deliver the largest ever environmental infrastructure investment—£56 billion over 25 years. Where water companies are found to have broken the law and face fines for this behaviour, this Government have committed to reinvest those fines directly back into schemes to improve our water environment.

Commons Amendment 3 removes the Lords amendment to include nature-based solutions and the circular economy in the definition of infrastructure. As noble Lords will recall, we debated this issue extensively in this House and it came up frequently in the Commons. At the time, I noted that nature-based solutions were already included under the inclusive definition of infrastructure and, as such, we did not think it necessary to add it explicitly in the Bill. The Government have reflected on the debate and recognise the strength of feeling on the matter and, as such, think the amendment from the noble Baroness, Lady Hayman, strikes a careful balance of making it clear that nature-based solutions are within the bank’s remit without being overly prescriptive.

The Government agree with the removal of the circular economy from the definition. We do not think including the circular economy—which is an imprecise term—in the definition of infrastructure would be helpful for the bank. However, I thank all noble Lords, and in particular the noble Lord, Lord Teverson, for raising this issue during the passage of the Bill. We reassure them that the circular economy is an incredibly important principle and will be key as we transition to a more sustainable economy in a number of sectors. While we do not wish to expand the scope of the bank, I reassure the noble Lord that several of the areas highlighted in the debate on the circular economy are covered within its existing remit and objectives; for example, nature-based solutions, waste and energy efficiency, as was clarified in an earlier amendment to the Bill. I therefore anticipate that the bank will invest in and be a key proponent of a circular economy wherever it is in line with the overall objectives.

Commons Amendment 4 removes subsection (6) from Clause 2 of the Bill. The subsection included the wording “have regard to”, but this would still have had a significant impact on the bank. For example, on improving jobs, we understand the intention of the amendment and do not disagree with it as a general principle. However, we are concerned that there may be consequences if the principle were to be applied across the board as a statutory requirement in relation to every investment proposal. It could lead to the bank being overly cautious for fear of legal challenge.

The second part of this subsection, on reducing regional inequality, is also of concern. We do not want the bank to be under a statutory duty to consider regional disparities in the same way in relation to every investment proposal that comes before it. The strategic steer makes it clear that the bank must focus on geographic inequalities. However, this is best done on a portfolio basis rather than investment by investment, which would be required by the proposed amendment.

Although the Government agree with the Commons amendment, we recognise the concern of the House, and I pay tribute to the work of the noble Lord, Lord Tunnicliffe, on this matter. I recommit to this House that after the Bill achieves Royal Assent the Government will amend the bank’s framework document to provide clarity on the role on the bank in levelling up the United Kingdom. We will include under the operating principles the wording:

“The bank will also address the spatial disparities across and within UK regions.”


This is in addition to the wording already in the framework document under its second objective:

“to support regional and local economic growth through better connectedness, opportunities for new jobs and higher levels of productivity”.

Commons Amendments 5, 6, and 9 concern provisions to add a duty to consult relevant Ministers in 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. Commons Amendment 7 is related and sets out a 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. These amendments have come as a direct result of positive engagement we have had with the devolved Administrations, and I am pleased to say we have received legislative consent Motions from the Welsh and Scottish legislatures. Unfortunately, given that the Executive have not formed, it was not possible to get a legislative consent Motion from the Northern Ireland Assembly.

Given we are on the subject of the board of directors, I know that the noble Lord, Lord Tunnicliffe, was interested in whether the bank would appoint a workers’ representative to the board. I reassure him that the bank is abiding with the requirements of the corporate governance code and has appointed a non-executive director, Marianne Økland, to facilitate engagement with the workforce.

Commons Amendment 8 reduces the time period for statutory reviews of the bank following the first such review from seven to five years. This balance reflects the fact that we need to allow a nascent institution time to embed and fully establish itself in the market, which is why the first review will take place after seven years. However, subsequent statutory reviews will take place every five years to ensure proper scrutiny of the bank’s performance.

Commons Amendments 1 and 10 are of a technical nature and broaden the definition of “public authority” 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 the Northern Ireland Executive. However, given that primary legislation can be something of a blunt instrument, we do not want inadvertently and by implication to preclude the bank from lending to other public authorities, such as any public bodies created by local authorities or government departments in future.

Finally, as is standard for a Bill that starts in the Lords and concerns matters of public finance, a privilege amendment was passed. Commons Amendment 11 removed this.

The Government have listened to concerns in both Houses and have made changes to improve the Bill. I look forward to the debate and hope that noble Lords will accept these amendments. I beg to move.

[Baroness Hayman (CB)]

I declare my interest as co-chair of Peers for the Planet and rise to speak to my Motion 3A, which as the Minister said would reintroduce nature-based solutions into the definition of infrastructure in which the UK Infrastructure Bank may invest.

We had some very helpful conversations after Report and the debates in the other place, and I think we have now reached a highly satisfactory position on this amendment, in no small part due to the Minister’s customary constructive approach to the debates that have taken place in this House, for which I am very grateful.

Of course, the original amendment included the “circular economy”, and I know that there will be some disappointment that that is not included now, but the bank’s strategy is reassuring on that issue. Anyone who listened to the item on the “Today” programme this morning about data centres using the heat they normally have to dispose of to heat up the water in local swimming pools will have heard a lovely example of how we need to put those sorts of issues together.

I thank all the Members of this House who have taken part in the debates, and in particular those who signed the various iterations of my amendment, including the noble Lord, Lord Bourne of Aberystwyth, the noble Baroness, Lady Jones of Whitchurch, and the noble Lord, Lord Teverson. This amendment has had significant cross-party support because of the increased recognition that nature-based solutions have a critical role to play in the fulfilment of the bank’s objectives. The Chancellor’s strategic steer in 2022 encouraged the bank to

“explore early opportunities in nature-based solutions”

and aim to have

“a positive impact on the development of the market”.

The bank has since published a discussion paper setting out its initial thinking on how it can invest in and support the growth of natural capital markets, and I look forward to the results of this consultation.

The discussion paper clearly explains the importance of natural capital as a form of infrastructure and the vital contributions it makes to our society and economy, often in ways which are more cost-effective to the taxpayer. Carbon removals through creating and restoring woodlands, wetlands and peatlands, flood mitigation measures, providing “clean and reliable” water supplies, underpinning our food security and bolstering our resilience to climate change: these constitute numerous examples of how we can deploy nature-based solutions to support our infrastructure and provide social, economic and environmental benefits. There is also an ever-increasing recognition of the key role that nature can play in solving climate change, nature being our biggest asset with which to fight it. Nature-based solutions also provide significant co-benefits, such as jobs and good health and well-being outcomes, with considerable economic advantages.

I welcome that the UK is leading on the Taskforce on Nature-related Financial Disclosures, but there is an average $700 billion funding gap for protecting and restoring nature globally, and evidence that more needs to be done to help market participants mainstream and scale these products alongside growing investor demand. This simple addition to the definition of infrastructure in the Bill sends a strong signal to the markets that the UK recognises this and the Government are serious about taking action to help build and develop this nascent market. It also provides certainty to the bank, which recognises that it has a role in developing capacity towards a pipeline of investable projects and is poised to act. It will encourage others to do the same and further develop the UK finance sector’s position as a leader in this important emerging new market.

As I said, I am very grateful to the Minister and her officials for the support they have given and the resolution that I think we have reached.

[Lord Bourne of Aberystwyth (Con)]

I support the noble Baroness, Lady Hayman, in her proposed amendment and congratulate her on her tenacity in pursuing this issue. She has achieved something notable, and I thank her very much indeed. Account being taken of nature-based solutions improves the Bill and, on that basis, I also congratulate the Minister. My noble friend has proved herself to be a listening Minister, and the Government have taken a very common-sense approach, which improves the Bill. It was previously a good Bill, and it is now a better Bill after changes made in this House and the approach of the Minister and the Government.

I do not propose to detain the House, except to say that I agree with much of what the noble Lord, Lord Teverson, said in Committee and at Second Reading. I regret that we have not gone a bit further, but at least we have an improvement in this legislation. On that basis, I once again congratulate the Government.

--- Later in debate ---

Moved by

[Baroness Hayman]

Leave out from “House” to end and insert “do disagree with the Commons in their Amendment 3 and do propose Amendment 3B in lieu—

3B: Clause 2, page 1, line 23, leave out “structures underpinning the circular economy, and””