Infrastructure (Financial Assistance) Bill

Barry Gardiner Excerpts

Monday 15th October 2012 Commons Chamber

[Chris Leslie]

That is a pertinent point. The Government seem oblivious to the thoughtful concerns being expressed by industry practitioners about the damage that is being done. Their ideological fixation with austerity has led them to a position in which they have completely pulled the rug out from underneath the economy, and we are still only at an early stage of being able to calculate the damage.

[Barry Gardiner (Brent North) (Lab)]

Will my hon. Friend answer a question on amendment 11, which proposes to add the words “within the United Kingdom” to clause 1(1)? One of the most important areas of infrastructure over the next decade will be energy, and the infrastructure required to meet our energy need will include interconnectors for electricity and gas pipelines that will come across Europe from the Caucasus. I presume that the Bill, as it stands, could incentivise investment in interconnectors and gas pipelines, but would it still be able to do so if the amendment were agreed to, even though parts of the pipelines would obviously be within the United Kingdom?

[Chris Leslie]

It is important to recognise that we want the benefits of any financial assistance to be felt in the UK economy. I shall deal with the details of the amendments in a moment. We believe that the scheme should focus on stimulating growth within these shores, and prioritising resources for infrastructure within the United Kingdom is the right approach. The Minister will undoubtedly point out that, as part of the guarantees under the scheme that the Government announced in July, a £5 billion export refinancing facility was introduced to underwrite the lending commitments of foreign buyers of UK exports. Of course we believe that export credit guarantees can be legitimate and helpful to construction exports, but in times of UK recession, our priorities should lie squarely here at home.

Incidentally, if there is such a great demand for the services of the Export Credits Guarantee Department—which is part of the Department for Business, Innovation and Skills—why does it appear to have underspent its existing budget in the past year? That does not suggest that there is a need to divert resources from domestic infrastructure into bankrolling foreign firms any more than is currently the case. The latest research shows that infrastructure spending within the UK will be of far greater benefit to our economy.

Indeed, the IMF had discussions last week about the multipliers. I do not want to go into too much technical detail, but the Office for Budget Responsibility used a fiscal multiplier of 0.5, which meant that Ministers thought that each pound they cut from public expenditure and capital investment would reduce economic output by only 50p. However, after examining the records of many countries that have embraced austerity since the financial crisis, the IMF reckons that the true multiplier is between 0.9 and 1.7. That has led the TUC to reveal that if the real multiplier is 1.3—somewhere in the middle of the IMF’s range—the OBR has underestimated the impact of the cuts by a cumulative £76 billion, more than 8% of gross domestic product, over five years. Instead of shaving less than 1% off economic growth during this financial year, austerity has potentially depressed it by more than 2%, which helps to explain why the economy has plunged into this double-dip recession. It is self-evident that providing financial assistance to infrastructure projects in the UK will provide a much greater stimulus to the British economy than giving financial assistance to projects abroad. Projects in the UK will boost employment in Britain; providing assistance to overseas projects will not.

Conservative Governments have a dubious record when it comes to underwriting foreign construction schemes. I am referring not only to the most recent, and much vaunted, export enterprise finance guarantee scheme, which assisted only five firms and has now folded because it was such a flop. I am also thinking of historic occasions such as that relating to the Pergau dam in Malaysia, which involved a too-close relationship between the aid being given to a foreign country and the trade that was taking place, particularly in relation to arms exports. It is very important that we learn the lessons from past failures when it comes to finance for foreign infrastructure schemes, and we particularly need to start prioritising schemes here in the UK.

--- Later in debate ---

[Chris Leslie]

I would not want the amendment to have that particular effect, and I do not think it need have it, especially if the Government were in a position to frame the legislation in such a way as to see this potential £50 billion focused very much on the needs of our own people in our own country. I hear what my hon. Friend says, but I do not think this is the be-all-and-end-all of Treasury expenditure, as there are other ways and means of dealing with those few projects that might have a cross-border character. When it comes to the underwriting capacity of this particular Bill, we think it important to prioritise investment here at home.

[Barry Gardiner]

My hon. Friend will be aware that the perimeter of Northern Ireland is defined as the six counties, and that the continental shelf offshore was never included in the original agreement drawn up by the Foreign Office. [Interruption.] I realise that my hon. Friend the Member for Foyle (Mark Durkan) knows this only too well. What that means is that we need clarity in respect not only of amendment 11, but of the “Short title, commencement and extent” provisions. At the moment, the Bill would preclude offshore wind development from the Northern Ireland coast. These matters may seem abstruse, but as constituted, the Bill does not make it clear that such infrastructure development would qualify for support. That question is as much one for the Minister as for my hon. Friend the Member for Nottingham East (Chris Leslie), but it seems to me that the question needs to be answered.

[Chris Leslie]

I am not sure I agree with my hon. Friend on the particular example he provided. It is quite clear that there would be benefit for the economy within the UK if those offshore schemes proceeded. The frustration I have is with the rather hasty drafting. Yes, we accept that it is necessary to frame a scheme that has sufficient flexibility, but there are dangers in enacting legislation that does not focus sufficiently on significant financial schemes, employment and jobs here in the UK. That is the purpose of the amendment.

--- Later in debate ---

[Sajid Javid]

I can confirm that CCS facilities are not excluded from the definition of infrastructure. If a project sponsor wanted to suggest such a project, it would be duly considered by the team under the scheme’s terms.

Finally, it would be difficult to define “national significance” and that may take away from the overall intention of the Bill. Perhaps I do not need to make that point because it was made very well by the hon. Member for York Central. I therefore ask the right hon. Member for Greenwich and Woolwich not to press his two amendments.

[Barry Gardiner]

I welcome the speech by the right hon. Member for Wokingham (Mr Redwood), who sought to tease out the Minister. Unfortunately, I am not sure that the Minister has provided the clarification that was sought. In clause 1, subsection (1), which provides that money may be provided by Parliament, is negated by subsection (5), which states that it would be provided on the say- so of the Treasury. This is a Government Bill that avoids real scrutiny by Parliament. I suspect that that is the objection of the right hon. Member for Wokingham, as well as my own.

I am grateful to the Minister for his clarification on interconnectors and gas pipelines. That is an important point.