UK Infrastructure Bank Bill [HL]

Baroness Penn Excerpts

Report stage
Monday 4th July 2022 Lords Chamber

[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.

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[Lord Tunnicliffe (Lab)]

My Lords, I am grateful to all noble Lords who have spoken in this important debate. I am particularly grateful to the noble Baroness, Lady Bennett, the noble Lord, Lord Ravensdale, and the right reverend Prelate—who is not present—for their support in tabling Amendments 4 and 5. Those texts are similar in intent to my Amendment 12, and those colleagues made a powerful case for tightening up the bank’s second objective.

I thank the noble Baroness, Lady Kramer, who joined the noble Lord, Lord Ravensdale and the noble Baroness, Lady Bennett, in signing Amendment 12, which I shall turn to now. The Government say their absolute priority is to deliver their levelling-up agenda. Ministers say they will use every tool available to them to ensure left-behind communities can catch up economically, compared to London and the south-east. However, anybody reading the Bill would be hard-pressed to identify that intent. Yes, the bank should be operationally independent from government, but that does not mean it cannot support the levelling-up agenda in its day-to-day work.

Amendment 12 would, in essence, place the first mission from the Government’s recent Levelling Up White Paper in the Bill. The amendment would not prevent the bank from acting in a manner that deviates from that mission. It will be free to invest in climate-related schemes or projects in wealthier parts of the UK; that would remain the bank’s prerogative. However, the amendment would introduce a general requirement for the bank to have regard to the public interest in targeting funds in a manner that will improve productivity, jobs, pay and living standards.

The Government say they want to create good jobs, lift people’s pay and improve life chances. However, at the same time, Ministers are slashing the size of the Civil Service and washing their hands of responsibility for pay negotiations in sectors where the Government have a direct interest. We still await an employment Bill that has been promised for many years. That Bill was not deemed a big enough priority to be included in the Queen’s Speech, meaning many workers will lack important statutory rights.

The aforementioned White Paper mentions that by 2030, the Government want to see the gap between the best and worst performing regions of the UK narrowing. We want to see that gap close, too, but let us be realistic: it will require concerted action, not just warm words.

The year 2030 is not very far away. Let us consider the current economic context: the economy is on the brink of recession and is forecast to flatline in 2023. The cost of living crisis is squeezing household incomes to an extent not seen for decades. There is not a huge amount of time to turn this picture around. If we are to do so, we need urgent action to create secure, well-paid jobs, and the bank can help only if it is explicitly encouraged to do so.

Amendments to the framework document or strategic steer are not enough to target the bank’s mind or provide comfort that the Treasury is sufficiently invested in following through with its stated ambitions. It is regrettable that the Government have not brought forward their own amendment at this stage in proceedings. We have pushed for this in meetings with the Minister but have not succeeded.

We will listen carefully to the Minister’s response today but feel that this is an important issue which deserves to be in the Bill. Unless the noble Baroness is able to commit to an amendment at Third Reading, I am minded to test the opinion of the House when Amendment 12 is called.

[Baroness Penn (Con)]

My Lords, I will first take Amendment 2 from the noble Lord, Lord Sharkey, which, as he explained, seeks to probe our use of “and” in the activities of the bank to see whether it must meet both objectives or just one. As we discussed previously, the bank’s two objectives—to help tackle climate change and to support regional and local economic growth—are both stand-alone but complementary objectives. I can confirm that the Bill’s drafting does not mean that a project must meet both of those objectives but rather that over the breadth of its activities the bank must meet both.

The bank can invest in projects which meet only one of these objectives, so long as supporting a project to deliver regional and local economic growth does not do any significant harm against the bank’s climate objective. The bank wrote to noble Lords with further detail on the “do no significant harm” policy on Friday.

To address the noble Lord’s two specific questions, there is no reverse or equivalent “do no significant harm” policy for climate change investments with regard to local and regional economic growth. However, in reality we do not consider the bank likely to invest in something harmful to economic growth given the need to crowd in private capital and be additional, in line with its investment principles. The bank will create its own framework for assessing what “do no significant harm” means, drawing on best practice from around the world.

Amendments 4 and 5 from the noble Baroness, Lady Bennett, and the noble Lord, Lord Ravensdale, attempt to define levelling up within the local and economic growth objective of the bank. I reiterate why we have taken the approach that we have. The Bill sets the foundation on which the bank will operate. The specificity of how the bank’s objectives will be achieved will be contained in the framework document and in the strategic steer and strategic plan. This is the appropriate use of primary legislation, which can be a blunt and inflexible tool. Specificity in the Bill must be backed up with detailed and precise drafting, and a number of the aspects which we will discuss today are not easily defined. Failure to do this unnecessarily increases the risk of legal challenges which the bank will face, and that increased risk could result in the bank having a decreased risk appetite for investment.

That is why we have taken the approach we have done with the objectives. We have kept the high-level principles in legislation and supplemented those with additional information in the strategic steer and the framework document. The definition of local and regional economic growth is addressed in the first strategic steer, issued by the Chancellor in March, which stated that a focus on geographic inequality must be a priority for the bank. It also pointed to the Levelling Up White Paper to set out the missions with which the bank should align itself when considering investments. We could not do something like that in the Bill.

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[Baroness Kramer (LD)]

My Lords, my motivation here is somewhat different: I want to see the bank move along the risk spectrum. There is a temptation, due to the structure of the bank, for it to stay within the range of fairly safe investments. It has to produce a return and it has a very small risk capital base, but I would like it to maximise that to move along the risk spectrum. I see no other way to accelerate the innovative technologies that we need, or development in disadvantaged areas where people have typically turned their backs, unless the bank is willing to take on that much higher risk profile. The various additionality amendments seem to create that kind of pressure to move UKIB much further down the risk spectrum than it might otherwise feel comfortable in doing, meaning that it therefore does not maximise the opportunities in front of it.

[Baroness Penn (Con)]

My Lords, I join my noble friend Lady Noakes in applauding Amendment 6 in the name of my noble friend Lord Holmes as a gallant attempt at defining additionality, although I dare say another Peer might draft it differently.

I want to make a more general point about additionality before coming on to the specifics of each amendment in this group. Additionality is a key principle underpinning the bank, and it is something that the Government take very seriously. That is demonstrated by the fact that additionality is one of the bank’s core investment principles, as set out in its framework document and strategic plan. However, following legal advice, the principle is not included in the Bill as there is no single agreed definition of additionality in a financial context that we could appropriately include in the Bill. Approaches to assessing additionality are developing over time and we would not want to stymie that development by creating a statutory definition of additionality at this stage.

While the term “additionality” has been included in previous legislation—for example, the Dormant Assets Act 2022 and the National Lottery Act 2006—additionality in those contexts had a different meaning: of funding projects or activities that the Government would not have otherwise funded. Assessing private sector additionality is more complex because it involves more actors and varied forms of financing. Each deal will have a particular set of circumstances that will indicate the amount of additionality that the bank is bringing. For the bank, as part of that, additionality means ensuring that it both crowds in private finance through its investments and avoids crowding out the market by providing finance that could have come from the private sector.

The bank has set out its approach to assessing and measuring these concepts of additionality in its strategic plan, which was published at the end of June. Currently the bank will assess additionality on a case-by-case basis, assessing the evidence as part of due diligence and monitoring that through a key performance indicator on the levels of private sector finance that it has crowded in. This is a measure commonly used by other organisations such as the OECD.

Crowding out is best assessed through evaluations and medium-term assessments of whether the portfolio of investments has led to crowding out in a particular sector. The bank is developing its thinking on how it will monitor and evaluate its work at both deal and portfolio level, including setting up an independent evaluation.

Further to this, additionality is implicitly covered in the Subsidy Control Act 2022, which of course applies to any subsidies the bank gives. Schedule 1D states:

“Subsidies should not normally compensate for the costs the beneficiary would have funded in the absence of any subsidy.”


Given the protections of the Subsidy Control Act 2022 and the regulatory regime, the difficulty in accurately defining additionality in the Bill, the work the bank is already doing on additionality and, finally, our amendment to the review, I hope my noble friend Lord Holmes will feel able to withdraw his amendment. I must say to my noble friend that the Government do not intend to bring forward any amendments at Third Reading, so I must disappoint him on that front. I should also say that to the noble Lord, Lord Tunnicliffe, in relation to the previous group, if I was not clear on that front.

The amendment in my name to Clause 9, on the statutory review, will ensure that the review of the bank will measure its success in encouraging additional investment. The drafting of the amendment is based on the reference to additionality in the framework document. I should like to provide reassurance that, given that the review will cover crowding in, it necessarily includes the question of whether crowding in did not happen, with the attendant risk of crowding out. This is because additionality is designed to measure genuine additional private finance—in other words, investment that would not have happened otherwise. I would fully expect the independent review to address the question of crowding out under the terms of this drafting.

The bank could act as the sole financer of a private project if it meets the bank’s investment principles and objectives, but it is highly unlikely that the bank, as the sole financer of a private project, would crowd out private investment, as the bank would be the sole investor in very immature or nascent financial markets for a technology only if no other investors were willing to support the project.

The bank’s initial assessment of the technologies, sectors and markets it plans to engage in, as published in its strategic plan, will allow it to focus its investment in areas with a limited risk of crowding out. This will continue to be developed and reviewed. In cases where the bank would act as the sole financer of a private project, it would expect to have a transformational impact on the market and for the market to be able to attract private capital over the medium to long term. This in part speaks to the concern of the noble Baroness, Lady Kramer, about the bank being able to operate along the risk spectrum, as it were, rather than seeking to invest solely in perhaps lower-risk or less innovative projects, given the other demands that it has: making a return on its investments and becoming self-funding.

Given this, I am grateful to my noble friend for her commitment not to move her amendment when it is reached. I hope that, in future, my best efforts produce more than a quarter of a loaf.

[Lord Holmes of Richmond (Con)]

My Lords, I thank all noble Lords who have spoken on this group, and particularly my noble friend Lady Noakes for bringing forward Amendment 24. I shall summarise what the Minister said: that additionality is pretty much impossible to define, but the bank will definitely do it—so that is good. It is unfortunate that we cannot have that in the drafting of the Bill given that, as I said in opening the group, this is the raison d’être of the bank: its only ultimate purpose is additionality. As other noble Lords have said, not having this could lead to less rather than more, and taxpayers’ money being put to that purpose.

It is desperately disappointing that we cannot have additionality in the Bill. I will withdraw my amendment but, in doing so, I gently, politely and respectfully request that my noble friend the Minister considers not moving government Amendment 23 and working to meld it with my noble friend’s Amendment 24 to come up with something that actually covers both crowding out and crowding in. Certainly, as drafted, government Amendment 23 does not do this. I beg leave to withdraw Amendment 6.

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Moved by

[Baroness Penn]

8: Clause 2, page 1, line 25, after “heat” insert “and, in relation to electricity, gas and the provision of heat, energy efficiency”
Member's explanatory statement
This amendment would make it clear that energy efficiency, in relation to electricity, gas and the provision of heat, is within the definition of infrastructure.

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[Lord Tunnicliffe (Lab)]

My Lords, I am grateful to the noble Lord, Lord Sharkey, and the noble and learned Lord, Lord Thomas, for tabling the various amendments in this group. I was pleased to sign Amendment 18, which would increase transparency relating to Treasury directions. The Minister and her officials have offered several helpful assurances on this subject during discussions between Committee and Report. I am grateful for those assurances, but I am not convinced that they go far enough. As with the earlier group on job creation and levelling up, this may be another area where the Treasury leans on the framework document as the preferred way forward. If that is where we end up after the Bill has been considered in another place, so be it, but there is merit in this House taking a view on transparency safeguards today.

Sadly, we have become all too familiar with non-legislative commitments or safeguards being flouted. By strengthening Clause 4, we can at least ensure that the bank will have a voice if there are concerns around the Treasury’s use of its powers. Accordingly, if the noble Lord, Lord Sharkey, divides the House on this issue, he will have our support.

Elsewhere, I appreciate the wish of the noble Lord, Lord Sharkey, to see the regulations under Clause 2 subject to a form of super-affirmative procedure. However, this concern was not raised by your Lordships’ Delegated Powers and Regulatory Reform Committee, and we will of course debate relevant regulations if and when they are brought forward in the future. The noble and learned Lord, Lord Thomas, has tabled a number of amendments in this group, and I hope that the Minister will be able to provide a comprehensive reply.

As with so many other pieces of Whitehall legislation, there is a clear overlap with devolved competence, and the Government will therefore have to seek consent Motions. I have huge sympathy for Amendment 21, which seeks to ensure formal consultation with the devolved authorities in certain circumstances. While the Government will dispute this, they have a poor and arguably worsening record in engaging with colleagues in the devolved nations. However, I am not convinced that an amendment to the Bill would change that, or that Conservative MPs will defy the Whip when the Bill is considered in the Commons. I hope this is an area where the Minister can provide strong, non-legislative commitments. Crucially, the Government must then follow through on them.

The union is at least fragile, and the way these relationships are conducted can add to that fragility. It is crucial on this occasion that the Government do everything they can to overcome the present concerns on this matter.

[Baroness Penn (Con)]

My Lords, Amendment 13 in the name of the noble Lord, Lord Sharkey, seeks to make the bank’s delegated powers subject to the super-affirmative procedure. As indicated in Erskine May, the super-affirmative procedure has been deployed for secondary legislation where an exceptionally high degree of scrutiny is thought appropriate. This procedure has rarely been considered the appropriate one to prescribe in primary legislation; where it has, the relevant instances have tended to be of a particularly substantive and wide-ranging sort. The noble Lord, Lord Sharkey, gave us an example but I had another: the Legislative and Regulatory Reform Act 2006, where the super-affirmative procedure was used to regulate significant powers under which Ministers could amend legislation to remove regulatory burdens. It cannot be said that amending the bank’s activities or the definition of infrastructure reaches the threshold of requiring the super-affirmative procedure. I have noted comments from noble Lords, but I also draw to their attention the Delegated Powers and Regulatory Reform Committee’s response to the Bill, which stated:

“There is nothing in this Bill which we would wish to draw to the attention of the House.”


On the other amendment from the noble Lord, Lord Sharkey, in this group, Amendment 18 on the power of direction, I recognise that there has been some concern about the wording in the framework document in relation to the issuing of directions. In particular, there were concerns that the Treasury would be able to “gag” the bank. That is clearly not the intention, and I have taken away the wording in section 15 of the framework document to make it clear that Her Majesty’s Treasury is not able to prevent publication of a written direction or any reservation notice in respect of that direction.

It is incumbent on the Treasury to meet its obligation to publish the direction and any associated reservation notice as soon as appropriate. Of course, there can be circumstances in which the publication of a written direction or any associated reservation notice needs to be delayed for reasons of national security or commercial sensitivity. An example of this occurred, in relation to a similar power in a different circumstance, during the sale of British Steel Ltd, where the Secretary of State directed the Permanent Secretary to continue an indemnity with the official receiver but delayed publication during negotiations with Jingye, despite value-for-money uncertainties, as to publish at the time would likely have undermined the rescue deal due to commercial sensitivity concerns. However, I will be clear with the House that if publication of a written direction were to be delayed for reasons of commercial sensitivity or national security, we would ensure that it was sent to the chair of the Public Accounts Committee immediately and on a confidential basis.

I hope that I have addressed the points made by the noble Lord, Lord Sharkey. However, to be absolutely clear, and maybe to go further than I did in our previous discussions, we will amend the framework document to be clear that where a direction is issued, an accompanying reservation notice “must” be published—rather than “may”—and, to further clarify, the content of the direction and reservations must be published rather than the fact of their existence. I hope that that provides further reassurance to noble Lords on that matter.

The amendments to Clause 3 in the name of the noble and learned Lord, Lord Thomas, seek to ensure that the bank’s framework document is updated to reflect any strategic steer, and that any revised framework document will be laid in Parliament. In maintaining the bank’s framework document, the Treasury will follow the guidance set out in Managing Public Money. This guidance states that framework documents should

“be kept up to date as the partnership”—

between a department and its arm’s-length body—

“develops.”

The Treasury will update the bank’s framework document as needed to follow this guidance. As has already been noted, the Treasury is currently reviewing the framework document and will publish a new version once the Bill has passed, which will include changes brought about by this House; for example, the clarification which I mentioned earlier in relation to the bank’s ability to publish a reservation notice if the Treasury subsequently issues the bank with a direction, and, in reference to an earlier debate, the clarification of the second objective in local and regional growth relating to levelling up and regional inequalities.

On the publication of framework documents, Managing Public Money is clear. Any revised framework documents should be published and laid in Parliament. Further, the Chief Secretary to the Treasury laid a Written Ministerial Statement today where he set out that all departments should lay their framework documents in Parliament. This has put the question of publication beyond doubt.

On whether the bank’s framework document should be updated to reflect the content of the strategic steer, I think that in that respect I differ in opinion from the noble and learned Lord, Lord Thomas. Managing Public Money sets out that framework documents should contain information on purpose, governance and accountability, decision-making, and financial management. It does not specify that they should contain information on current policy steers or priorities.

The bank’s framework document and strategic steers fulfil very different purposes; the framework document providing an agreement to govern the relationship between the bank and the Treasury, and the strategic steer providing an opportunity for the Government of the day to provide steers on current priorities and policy emphases. That does not mean that there will never be circumstances in which the framework document is updated. I have already told the House that we will reflect on the wording in the framework document on the regional and local economic growth objective. However, I do not think that the framework document needs updating every time a strategic steer is issued. It should be updated only when necessary, to provide for continuity and to avoid creating unnecessary resource burdens. The noble and learned Lord, Lord Thomas, would be inventing a new process for the framework document, when there is already a process set out in Annex 7.2 of Managing Public Money.

On this, I also refer noble Lords to the strategic steer issued by the Chancellor in March. This provided a steer on priorities for the bank in light of the situation in Ukraine, and the recently concluded environment review, as well as other priorities for the bank to reflect in its first strategic plan. None of this information impacted the high-level framework under which the bank operates, as set out in the framework document, and therefore a mandatory update to the framework document would have been unnecessary. However, the strategic steer must be reflected in the bank’s strategic plans. This is provided for in the Bill.

Amendment 21 seeks to bring a consultation process on the use of some of the powers in the Bill with the devolved Administrations. I appreciate the intent, but this will cut directly across the negotiations that we are having with the devolved Administrations on the legislative consent process. This was brought up in Committee and I explained then that the normal practice is to bring forward any amendments required for a legislative consent Motion in the second House, which for this Bill would be the Commons. It would not be appropriate to accept this amendment until we have begun those negotiations with the devolved Administrations in earnest.

I hope that I can reassure noble Lords by saying that we have begun those discussions with the devolved Administrations in a positive fashion. Engagement with the devolved Administrations on the set-up of the bank was also positive. They all support the establishment of a national infrastructure bank. The bank has also been developing its own relationships with the devolved Administrations and their respective institutions, such as the Scottish National Investment Bank. The bank has now also completed deals in all four nations.

The tone and tenor of the bank’s relationships with the devolved Administrations and their respective institutions, and the way that the bank has gone about its business so far, give noble Lords in this House quite a bit of reassurance, I hope, about the collaborative approach that the bank has taken so far and intends to take in future. Therefore, I hope that the noble Lord, Lord Sharkey, feels able to withdraw Amendment 13.

[Lord Sharkey (LD)]

I thank the Minister for her response and thank all other noble Lords who spoke to Amendment 13. I detect a chillier wind from my right than I would have liked. Under those circumstances I can only repeat that the House will not have a substantive opportunity to scrutinise these important things. I regret that. The loss of both parliamentary authority and the ability to scrutinise what comes before us is a critical issue, which I have no doubt we will come back to in future Bills. In the meantime, I beg leave to withdraw Amendment 13.

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[Baroness Bennett of Manor Castle (GP)]

My Lords, I offer Green group support for Amendment 20, to which we would have attached our name had there been space.

In Committee, I suggested that the bank should not be in the hands of the Treasury at all. I got some expressions of interest but not enough support to bring it back on Report. However, it is clear that we need systems thinking, as I often say in your Lordships’ House. We need an approach that looks beyond the narrow growth in GDP to something broader and more holistic. This amendment is a step towards achieving that.

[Baroness Penn (Con)]

My Lords, I speak on this group with some trepidation; I hope I do not show the lack of humility that the noble and learned Lord, Lord Thomas, has accused my department of. I will stand up for the Treasury: in my dealings with this group of public servants, they have been bright and suitably humble, trying to work in the best interests of the country.

I will take the amendments in reverse order. The amendment tabled by the noble and learned Lord, Lord Thomas, as he explained, seeks to ensure that the bank’s board has the necessary expertise to deliver on its objectives. He is right to focus on the importance of the bank’s board in steering this nascent institution to deliver on its two wide-ranging objectives across the whole of the UK.

I reassure noble Lords that the bank’s board already contains a wealth of experience in infrastructure finance, policy-making, economics and green investments, across the public and private sectors. Collectively, its members have worked at similar national organisations, such as the Canada Infrastructure Bank, the UK Green Investment Bank and UK Export Finance, as well as leading financial services firms and central government departments. John Flint, the bank’s CEO, was chief executive of HSBC, and Annie Ropar was the CFO at the Canada Infrastructure Bank. So, in its infant form, it has already attracted some high-quality individuals to work there.

The bank’s non-executive directors were recruited in line with the guidelines set out by the Office of the Commissioner for Public Appointments, and were selected based on the skills they could bring to the board to deliver on the bank’s mandate. These appointments could be audited by OCPA in due course. OCPA’s guidelines include a principle of merit, which means

“providing Ministers with a choice of high quality candidates, drawn from a strong, diverse field, whose skills, experiences and qualities have been judged to meet the needs of the public body or statutory office in question.”

As I have said in previous groups, in drafting this Bill, we are seeking to create a high-level framework within which the bank can operate, while providing for the longevity of its objectives. Therefore, given that appointments are already recruited in line with OCPA’s guidelines, which we expect OCPA to review and which include a principle of merit, I do not think it is necessary to add greater specificity to the Bill on this point. Including these provisions could be overburdensome and prevent the bank and Treasury hiring the most appropriate people for the roles.

I spoke about the recent appointments in Committee, so do not propose to do so in detail again, but I would be very surprised if the noble and learned Lord, Lord Thomas, could find much fault with the appointees. He has also expressed an interest in the representation of the devolved Administrations and, as he spoke about on the previous group, in making sure that the board and the bank command the confidence of all four nations in the UK. As I said to him before and will happily say again, commanding that confidence is central to how the bank has gone about its business. The skills of the board will adequately represent the needs of all four nations, although, as I said on the previous group, specifics in that area are not necessarily a discussion for now, as they are part of the process of legislative consent. I therefore hope that the noble and learned Lord does not move his amendment when it is reached.

The amendment of the noble Lord, Lord Tunnicliffe, seeks to ensure that the bank always has a representative of the workers on its board. The UK Corporate Governance Code already states that a company should have one or a combination of a director appointed from the workforce, a formal workforce advisory panel or a designated non-executive director to facilitate engagement with the workforce. It also states that, if the board has not chosen one or more of these methods, it should explain what alternative arrangements are in place and why.

I give the noble Lord my absolute reassurance that the bank will comply with the UK Corporate Governance Code; however, as I have said, it is a nascent institution, with its board appointments made and the non-executive directors joining only recently. The bank has not yet had the opportunity to determine how it will meet this specific provision. It is currently establishing its governance and will report on its progress in its annual report and accounts. The noble Lord can expect an update there.

[Lord Tunnicliffe (Lab)]

Before the noble Baroness sits down, could she find a device—a statement or something—to advise us on when that process has been completed and in what form that requirement has been met?

[Baroness Penn (Con)]

I am happy to write to the noble Lord to set out those anticipated timelines. The annual report and accounts are published and laid before Parliament so, between those two pieces of information, I will endeavour to cover this for the noble Lord. If we reach the annual report and accounts and are not in a position to do so, I will pick this up again then and ensure that I get back in touch.

[Lord Tunnicliffe (Lab)]

My Lords, I thank all noble Lords who have participated in this debate, and I thank the noble Baroness for her assurances on my specific point. I hope that it is seen through and that the result is not that the bank explains that it is not following the code, for some reason. This is an alternative, but one that I would deeply regret if it were chosen. With that, I beg leave to withdraw my amendment.

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Moved by

[Baroness Penn]

22: Clause 9, page 4, line 2, leave out “Treasury must” and insert “Chancellor of the Exchequer must appoint an independent person to”
Member's explanatory statement
This amendment (and the others to clause 9 in the Minister’s name) would require: reviews to be carried out by an independent person; the reviews to include consideration of “additionality”, or the extent to which the Bank’s investments encourage additional investment by the private sector; the independent person to give reports to the Treasury; the Treasury to publish those reports. The time limit for completing the first review would be 7 (rather than 10) years.

[Baroness Penn (Con)]

My Lords, I turn to Clause 9 of the Bill, on the statutory review. We had an extensive debate on this in Committee and, reflecting on that debate, the Government have tabled several amendments to this clause.

On the timing of the review, in Committee I set out the rationale for the first statutory review of the bank taking place after 10 years. This was for two reasons: first, to ensure that we could accurately measure the effect of the bank’s long-term investments and, secondly, to ensure that we do not overburden the bank with constant reviews. As I have previously noted, the Treasury is currently undertaking a review of the bank’s framework document and will undertake a review by spring 2024 of the bank’s capitalisation. The bank will also be subject to frequent Cabinet Office-sponsored arm’s-length body reviews, which should be conducted by an independent person.

However, I understand the strength of feeling in the House and, for this reason, I tabled an amendment to shorten the timescale for the first statutory review. Bringing forward the initial review to take place no later than seven years after Royal Assent will mean that the first statutory review will be conducted in 2029. This fits neatly with the timing of the levelling-up missions, which the bank’s work will support, that are due to be achieved by 2030.

I turn to my other amendments to Clause 9. I heard concerns in Committee that the Treasury would, in these reviews, be marking its own homework. That was not the intention, and so I have brought forward an amendment to clarify that the Treasury will appoint an independent reviewer to conduct the review. Noble Lords will, I hope, be further reassured that the Cabinet Office-sponsored reviews, as I have just noted, will have a recommendation that they be conducted by an independent reviewer too. I hope noble Lords are content with these amendments. I beg to move.

[Lord Vaux of Harrowden (CB)]

My Lords, I rise to speak to my Amendments 30 and 32. I am grateful to the noble Baronesses, Lady Noakes, Lady Kramer and Lady Bennett of Manor Castle, for their support. In fact, I think I may have achieved a world first in getting the noble Baronesses, Lady Noakes and Lady Bennett, to sign the same amendments. I hope, therefore that the Minister might take note of this extraordinary event and take the amendments seriously.

First, I thank the Minister for her amendments in this group, and for listening to and acting on the concerns that were raised by noble Lords as the Bill has proceeded. Her amendments are very welcome, especially those that deal with the issue that was previously raised about the Treasury marking its own homework. Having an independent person carry out the review is an important step. I also welcome the reduction of the period before the first review from 10 years to seven years. I think everyone agreed that 10 years was way too long, but even after that change, there will still be a review only every seven years, which I still think is too long. Amendments 30 and 32 would reduce this to every five years.

The argument in favour of the longer period seems to be that infrastructure investment is long-term, which it is, and therefore it will take a longer period before the success of the bank can be evaluated. I think this rather misses the point. Although it is true that the success of a particular investment may take more than seven years—indeed, it might be 20 or 30—to become clear, the review should be covering how effectively the bank has performed in making investments. Is it making enough investments, are they appropriate, are they in the appropriate parts of the country and, importantly, do they meet the additionality principle and, as we discussed earlier, the crowding-out problem? We do not need to wait until the investments themselves reach maturity to be able to see how well or badly the bank is performing in making investments.

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[Lord Tunnicliffe (Lab)]

My Lords, although I see an attraction in a higher frequency than the Government are proposing, equally, I think that, in many ways, even five years is too long. I take comfort in what I hope to hear from the Minister: that we will have much of the information we need to come to a judgment about the success, and effectiveness—crowding in and all those issues—annually in the report. Her assurance on that matter is crucial, but I have confidence that she will be able to give it.

[Baroness Penn (Con)]

My Lords, as I have said, I have listened to the concerns of the House around Clause 9, and it is for that reason that I have sought a compromise and tabled the government amendments to this clause, as I outlined earlier.

On the shortened timescale proposed by the noble Lords, Lord Vaux and Lord Tunnicliffe, and others, I have already set out the rationale for why the Government have gone for seven years. To reassure noble Lords on their questions about needing more regular information, quite rightly, on how the bank is performing, the bank’s strategic plan set out a whole range of KPIs that it will be assessed against, including additionality, to address the point made by the noble Lord, Lord Vaux. Those KPIs will be reported on in the annual report and in the updates to the strategic plan in future.

So more regular information will be provided on the progress of the bank, not just through the statutory review. In addition to the other reviews that I mentioned in my opening speech, there is currently a review by the National Audit Office looking at the set-up of the bank. As I said in Committee in response to my noble friend Lady Noakes, the bank is also subject to reports and investigations by Select Committees of both Houses and has already come to give evidence before those committees. I reassure noble Lords that the statutory review is not the only avenue through which the work of the bank will be scrutinised. There will be ongoing scrutiny through several different avenues, including in its annual report and accounts, which will judge its progress against many KPIs. With that, I beg to move.

Amendment 22 agreed.

Moved by

[Baroness Penn]

23: Clause 9, page 4, line 5, after “growth” insert “(including the extent to which its investments in particular projects or types of project have encouraged additional investment in those projects or types of project by the private sector)”
Member’s explanatory statement
See the explanatory statement for the Minister’s first amendment to clause 9.

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Moved by

[Baroness Penn]

25: Clause 9, page 4, line 5, at end insert—
“(1A) After each review, the independent person must—(a) prepare a report of the review, and(b) submit the report to the Treasury.”Member’s explanatory statement
See the explanatory statement for the Minister’s first amendment to clause 9.

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Moved by

[Baroness Penn]

31: Clause 9, page 4, line 11, leave out “published” and insert “submitted to the Treasury”
Member’s explanatory statement
See the explanatory statement for the Minister’s first amendment to clause 9.

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Moved by

[Baroness Penn]

33: Clause 9, page 4, line 11, at end insert—
“(5) In this section, references to an “independent person” are to a person who appears to the Chancellor of the Exchequer to be independent of—(a) the Treasury, and(b) the Bank.”Member’s explanatory statement
See the explanatory statement for the Minister’s first amendment to clause 9.