Infrastructure (Financial Assistance) Bill

John Healey Excerpts

Monday 15th October 2012 Commons Chamber

That brings me to my right hon. Friend’s second point. The type of projects that are intended to be considered under the Bill are private sector-led ones that are commercially viable and creditworthy in their own right. The Government will make an assessment of each project. Let me say a bit more about how that will be done, because it is important. The Government have already set up a team within the Treasury called Infrastructure UK, which retains commercial specialists with the financial skills needed to handle a scheme of this nature. The due diligence process will involve external advisers in the same way as a financial institution, for example, would involve external advisers, and the governance structure will include expert members drawn from the private sector. At the end of this process, Infrastructure UK will have to assure Ministers that the project is commercially viable and that the only impediment to its going ahead is that it does not have the usual access to debt markets that it would have had under normal market situations. Even then, the Government will charge for a guarantee and have to be satisfied that they will not make a loss on their support for the project.

[John Healey (Wentworth and Dearne) (Lab)]

What will be next year’s budget for consultants to support the work of Infrastructure UK in carrying out that due diligence and giving advice to Ministers?

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[Sajid Javid]

I think that the hon. Gentleman will know that there is no way I can tell him that. I cannot predict the future; he may be able to do so, but I am not. I can tell him that there have already been expressions of interest from more than 50 project sponsors and that the Government have entered into negotiations with a number of them, but no final decisions have yet been made. He will also know that, in the national infrastructure plan published last year, the Government identified numerous key projects worth more than £200 billion, so there could be a substantial number of projects.

[John Healey]

I am grateful to the Minister for giving way on the point that he was good enough to respond to earlier. He said that there would be charges as part of the project costs and that, therefore, there would be no net cost for consultants to advise the Treasury’s Infrastructure UK team. Does that also apply to consultants who may be required to advise other Departments as part of this due diligence process? Will there be a net cost to those Departments for such advice?

[Sajid Javid]

Because of the charges that the Government will make for the guarantees, we anticipate that there will be no net cost. Of course, that cannot be absolutely guaranteed, because our current projected cost profile may change, but it is anticipated that the income will cover most of the costs.

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[Simon Hughes (Bermondsey and Old Southwark) (LD)]

I wish to speak briefly to amendment 12 and new clause 3, which are both in my name. Both relate to the reports that the Government propose in clause 3 should be annually produced, and to the transparency of the companies involved in this support for infrastructure, which I welcome.

Both the amendment and the new clause follow discussions that I have had with my right hon. Friend the Chief Secretary, who is now in his place on the Front Bench with his new ministerial colleague, whom I also welcome. The amendment and new clause are prompted by the fact that we often do not know the identities of the beneficial owners of the companies with which the Government do business. Companies often have shares owned by trusts or other companies based in countries that do not require disclosure of ownership, and I shall give a few examples.

The M6 toll road is owned by Midland Expressway Ltd, which is owned in turn by the Macquarie Motorways Group Ltd, which is in turn owned by Macquarie Atlas Roads International Ltd of Bermuda. It is controlled by Macquarie Infrastructure Group, but the identity of its investors and therefore of the owners of MEL remains unknown and undisclosed. In 2006, however, they paid themselves a £392 million exceptional dividend, and over six years made a return on their investment of more than 150% a year. This sort of profit at the public’s expense by we know not whom is not an acceptable arrangement, and I want the Government to be warned against it and to ensure that all owners are in the public domain.

Arqiva, as a private sector monopoly, is regulated by Ofcom. It runs all the transmission services for all UK terrestrial television broadcasters and for BBC Radio and most commercial radio services, owns two of the four digital multiplexes, supplies the Government with mobile and wireless communications and supplies three quarters of all police forces. It receives annual revenues of about £1 billion and makes annual losses of about £250 million. The ultimate owners of the company appear to be based in Bermuda, although we do not know who they are, and Arqiva has paid no corporation tax for four years.

Thames Water, the UK’s largest water supplier and a monopoly private sector company providing a public service with which the public therefore has no option but to deal was bought by Macquarie European Infrastructure Fund in 2006. The long-term debt held by the company was £3.4 billion and is now £7.7 billion. When the company was bought, Thames Water took on all the debt taken out by its owners to buy the company, which was more than £3 billion. To do that, it set up a company in the Cayman islands, Thames Water Utilities Cayman Finance Ltd, which is registered at an address at which are registered 18,000 other companies.

Over the past four years, Thames Water has made profits after tax of £314 million, £331 million, £225 million and £247 million, and has paid dividends of £398 million, £291 million, £271 million and £480 million, but in the last tax year paid no tax. In the previous year, it paid £500,000 in tax, and the year before that £16 million, yet it has a stable operating profit of about £600 million a year. I could go on. There are health care companies, and the company currently negotiating with the London fire brigade over the water to buy the old fire brigade headquarters looks as if it is based in the British Virgin Islands and the Isle of Man.

[John Healey]

rose—

[Simon Hughes]

I shall make one short point and then give way.

The other really important thing—this is the purpose of new clause 3—is that we should require due diligence to be carried out in the same way as we require it for money-laundering prevention. The trouble is that it is not done properly and is not effective.

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[Simon Hughes]

I give way to the right hon. Member for Wentworth and Dearne (John Healey)

[John Healey]

The right hon. Gentleman is making a powerful case against predatory capitalism and tax avoidance that ought to commend itself to the Treasury Front-Bench team. If they will not accept his argument and amendments, will he press them to a vote?

[Simon Hughes]

I am conscious that the first of my amendments is technically deficient—which was my fault, not anybody else’s—but I hope that Ministers will accept the point and amend the Bill in the other place. I will press them hard—I know that I have support from colleagues in both other parties in this place—to try to get the change made. I am hopeful that the Chief Secretary to the Treasury, who is in his place, has heard the proposition and will be able to respond.

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[Sajid Javid]

My right hon. Friend makes a fair point, and I am more than happy to discuss this in further detail with him at a later stage.

[John Healey]

The Minister was boasting before the last interventions about near-record-low interest rates of 1.9%. What does he think about the judgment of that by the hon. Member for Wyre Forest (Mark Garnier), who was trusted and appointed by the Chancellor to be his party’s member of the LIBOR investigation committee? He said:

“The reason we have a low interest rate is because the economy is absolutely screwed.”

[Sajid Javid]

We have low interest rates because, for once, we have a Government who actually understand public finances. Less than an hour ago, the shadow Financial Secretary, in introducing his latest amendment, said that he was concerned about the use of taxpayers’ money—I had to have a little chuckle to myself, because what happened to that during 13 years of Labour government? Our national debt tripled. He also talked about clawbacks, and there is one clawback I would be interested to learn about. When the previous Government sold off our precious gold reserves, did they negotiate a clawback at that point? I do not think so.

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[Chris Leslie]

If the Minister were talking on the basis of having made some progress or having reached some level of achievement as regards housing policy, perhaps he would have the right to start throwing accusations about. Of course, far more could and should have been done in the past, but after two and a half years under his party’s Administration, where are we going on housing construction? According to the Construction Products Association, it is going through the floor; “free-fall” is the phrase linked to the CPA in this morning’s Financial Times.

[John Healey]

My hon. Friend is absolutely right. In particular, social housing construction, which was the subject of the Minister’s intervention, has plummeted by 25% in the past year. That is the direction it is going in under this Government.

[Chris Leslie]

Exactly; my right hon. Friend is right. Official data show that construction output is down by 11.6% on the year before, and the Construction Products Association predicts a 13% fall in infrastructure investment this year. When one starts to look at what is actually happening in the real economy and the real world today, it is clearly not about the announcements that Ministers bring to the Chamber as though they represent reality. The Bill may well go on to the statute book after this debate, but if the Government are relying on it alone, we remain concerned that the infrastructure schemes for housing, schools, child care, transport and so forth which should be proceeding will not move forward as effectively as they should.

There are other concerns that the Minister has not addressed, perhaps because the Government do not have an implementation plan that they can allude to. For example, they have not talked about state aid clearance. The Bill says that financial assistance can be given to particular industries and private sector ventures in operations, in maintenance and in repairs, but perhaps to the exclusion of other companies. What is the Government’s approach to state aid clearance from the European Union? If they hit such a barrier in the EU, will they simply say, “Well, another month, another quarter, another year has gone by and we didn’t get state aid clearance”? How are they approaching those barriers, and when will they report to Parliament about how they are going to tackle these issues? Those are more obstacles that they do not appear to have addressed in any way.

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[John Healey]

I had not planned to speak on Third Reading, but I have been moved to do so by how seriously the Committee stage was curtailed this afternoon. For the entire Committee stage on the Floor of the House, we have had less time than a single sitting of a Public Bill Committee. I put it to the Economic Secretary that proper scrutiny would have done a great service to the objectives of a Bill as important as this, on which the Government are rightly looking to build a consensus in the House and beyond. I say that not least because those with an interest, who will have to finance, plan, deliver and make decisions about the big infrastructure projects that our country needs, could have had the chance to give evidence to the Public Bill Committee. That would not have held the Government up for long, but it would have made the Bill and the debate on it a great deal better.

We did not reach some amendments and new clauses today, but I hope that the Economic Secretary and his colleagues in another place will seriously consider amendment 3, tabled by my right hon. Friend the Member for Greenwich and Woolwich (Mr Raynsford), about the frequency of reports; amendment 12 and new clause 3, tabled by the right hon. Member for Bermondsey and Old Southwark (Simon Hughes), on transparency, due diligence and the tracing of beneficial owners; and new clause 1, tabled by my right hon. Friend the shadow Chancellor, on social and affordable housing. The Economic Secretary gave the House the impression that he cared about that matter, so I hope he will take that suggested provision seriously.

I do not just say, as my right hon. Friend the Member for Greenwich and Woolwich did, that I can find little to object to in the Bill; I positively welcome the aims behind it, and I will welcome action should it follow from the Bill’s provisions. It makes sound sense to make the private sector balance sheet support the public sector balance sheet and bring the two together, especially at a time when public finances are limited and normal lending is constrained.

The principles and aims of the Bill are sound, but the question remains whether the Government can put schemes in place in a way that is simple enough and speedy enough to ensure that the necessary action follows. The Economic Secretary will have to forgive me if I have a certain amount of scepticism about that. After all, it is almost a year since the Prime Minister promised

“an all-out mission to unblock the system and get projects under way”,

and almost two years since the Government published their first national infrastructure plan. It is almost two and a half years since they set up the Infrastructure UK unit in the Treasury, which the Economic Secretary has mentioned today, with its remit to

“provide a stronger focus on the UK’s long-term infrastructure priorities and meet the challenge of facilitating significant private sector investment”.

It has been so long, and there has been so little action, that business, investors and industry are all understandably losing confidence in the Government’s ability to act. That was reflected in the CBI’s annual infrastructure survey published recently, which concluded:

“The message to Government is a wake-up call that businesses in Britain are looking for action and we haven’t seen any yet.”

It found that business and industry were less confident about the Government’s ability to drive investment into crucial transport, energy, water and waste projects than they were a year ago.

I hope that the Bill will be part of a proper rebalancing of the British economy, and that the Economic Secretary will recognise that investment is currently heavily skewed towards London and the south-east. I hope he will take seriously his own interest in seeing a cross-party consensus because, in the end, long-term infrastructure projects do not correspond to our political cycle—they require cross-party consistency, confidence and consensus. If the Bill can contribute to that, it will build a sound basis for that consensus for the future.

Question put and agreed to.

Bill accordingly read the Third time and passed.