European Union (Withdrawal) Bill

Baroness Randerson Excerpts

Committee: 7th sitting (Hansard - continued): House of Lords
Wednesday 14th March 2018 Lords Chamber

Are the Government, following the Prime Minister’s Mansion House speech, prepared to seek either full or associate membership of the European Investment Bank? If so, what might that mean for the ongoing discussions over the funding of projects that were very much within the purview of the EIB but, because of the disruption caused by Article 50 and the current Brexit negotiations, are either not being funded or are unlikely to be funded? Of course, the best course of action by far, if the Government are going to seek associate or full membership of the EIB, is to get on with it as soon as possible and reach an agreement so that we unlock the funds that are currently not coming our way but could if we had an agreement with the EIB on what is going to happen.

[Baroness Randerson (LD)]

My Lords, I added my name to Amendment 187, which specifically refers to the European Investment Bank. I did so because, almost invisibly, the EIB has made a major contribution to investment in UK infrastructure. The advantage of the EIB, of course, is low interest rates, but it also offers commercial expertise and very highly prized advice.

I just want to illustrate the importance of the bank to our economy with some statistics. For example, in the field of transport, in 2016 over €2.5 billion was loaned to various projects in the UK. That included loans to Merseyrail for rolling stock, to the Port of Dover and to Aberdeen harbour, and over €1.75 billion for social housing. For energy projects, €3 billion was loaned, and for education projects, €0.75 billion. In my own country of Wales, in 2016 Swansea University borrowed €71 million for a splendid and wonderful new campus. It is so large that it is almost the size of a small town and it is very highly regarded. Bangor University borrowed €10 million for a new campus. Here in London, Transport for London is, in Britain, just about the biggest borrower from the EIB and has relied on it very heavily. Since 2002, there have been loans to London Underground for the Northern line extension, for Crossrail rolling stock, for Stratford International station, for the East London line and for the DLR Woolwich Arsenal extension, and that is in addition to seven other Underground schemes.

Noble Lords will see immediately the importance of this borrowing to some fundamental sectors of our economy: energy, transport, education—particularly universities—and urban regeneration and housing. In 2015, in total the UK received over €16.5 billion. In 2016, that went down to €9 billion, and in 2017 it was around only €3 billion. There was an immediate drop-off in the number of projects funded, and new lending by the EIB to the UK fell by almost two-thirds last year.

The Welsh Government had been hoping to use the bank to fund the South Wales Metro project and the M4 relief road. Already in Wales, providers of social housing have had to look elsewhere for funds, and that of course costs more. An increase of 200 basis points in the cost of capital would lead to an increase of around £1.5 million per annum for each £100 million borrowed.

There may not be an official moratorium on lending to the UK by the EIB but clearly the bank is already concerned about the future basis for repayment. It has been suggested that we should set up our own development bank, although so far the Government have not expressed interest in this. Can the Minister clarify the position of the UK Government on setting up our own investment bank? However, even if the Government were keen to do that, it would take years for a new bank to gain scale and expertise. There could also be uncertainty about its status. There could be a problem with the classification of its funding, as it could be classified as providing state aid, and we know that the Prime Minister has already said that she wants to observe international rules on state aid. The recent experience of setting up the British Business Bank and the Green Investment Bank indicates that it can be a complex and lengthy process. As a minimum, I believe that the UK Government should make it clear that they wish to negotiate a specific mandate for continued bank lending by the EIB to the UK as part of our future arrangements.

On the speech of the noble Lord, Lord Adonis, 90% of EIB lending is to EU member states. However, it also lends to EFTA states and to others preparing to join the EU. It therefore would not stretch the imagination too much that it might be possible for it to lend to those preparing to leave the EU. The rules and conditions of the EU guarantee for the EIB’s external lending are decided by the European Parliament and the Council of Ministers, and those rules were most recently decided in 2014. The Government need to negotiate an amendment to that decision. Do the Government intend to do so?

I hope I have illustrated that the amendment does not refer to a hypothetical situation. This is not a prediction that doom might come but a factual statement of the situation with the European Investment Bank as it is now: it has stopped lending. This has had a serious impact on our infrastructure, which is already showing signs of strain as a result. The lending could dry up altogether and projects will have to find an alternative source, but that source will be more expensive and less reliable. I urge noble Lords to take an interest in this issue, which is fundamental to the development of our infrastructure in this country.

[Lord Leigh of Hurley (Con)]

I shall speak briefly to Amendment 183. I am aware of the EIF because of its investment in the UK venture capital industry, in which I serve on a professional basis from time to time. I understand that the Chancellor has committed an extra £2.5 billion to the BBB specifically to make up for the loss of future investment from the EIF into venture capital funds in the UK, which would negate the need for this. There is a problem in that the EIF, from Article 50 being triggered, has announced that it is looking only at funds where two-thirds of the investment will be in the EU and at least 50% in continental Europe. So organisations that contribute enormously to our economy—for example, social impact investment companies such as Bridges, which is 100% investing in UK companies—have, from the moment of Article 50 being triggered, had the decision-making process frozen by the EIF. This has been damaging to them. I suggest—the Minister might care to comment—that the problem is not here and then after we exit the EU but in the transition period. For some unknown reason, the EIF is freezing the money rightfully due to UK investments.