Infrastructure (Financial Assistance) Bill

John McDonnell Excerpts

Monday 17th September 2012 Commons Chamber

[Danny Alexander]

I am going to make some progress; I will come back to the hon. Gentleman later.

It could be used to support investment in utilities, transport, other infrastructure for the provision of economic and social public services or housing.

[John McDonnell (Hayes and Harlington) (Lab)]

Will the Minister give way?

[Danny Alexander]

No. I am going to make some progress.

The Bill does not affect any existing authority to incur expenditure that might already have been conferred on a Secretary of State; nor will it cover expenditure by a Secretary of State that can properly rest on the authority of annual supply legislation, without requiring specific statutory authority.

Where costs connected to the guarantee are incurred by the Exchequer that cannot reasonably be absorbed by the funds already provided by Parliament and where it is not possible to seek authorisation of Parliament for the additional expenditure—for example, because the House is not sitting—the Bill allows provision to be made from the Consolidated Fund. This is to cover the commercial reality of situations in which payments need to be made very quickly following an unforeseen obligation. Without this provision, any guarantee could lack commercial viability.

[John McDonnell]

rose—

[Danny Alexander]

I am going to make some progress; I shall take some more interventions later.

The Government intend to offer assistance in the form of guarantees, although the Bill makes provision for other forms of assistance that we intend to use only where unforeseen urgent provisions are required. We believe that up to £40 billion of investment in infrastructure could be brought forward or accelerated under the UK guarantee scheme, using the powers in the Bill. That will help to deliver core infrastructure that supports growth, to improve the UK’s energy, transport, water, waste and telecommunications, and it includes about £6 billion-worth of public-private partnership projects delivering essential public service infrastructure. We will issue guidelines and scrutinise proposals to ensure that any proposal that receives an infrastructure guarantee is nationally significant, financially credible, good value for the taxpayer, requires a guarantee to get under way and is ready to start within a year.

--- Later in debate ---

[Danny Alexander]

It is not an omission from the Bill, which puts in place broad and permanent powers to issue guarantees for infrastructure projects. The Government expect that under the UK guarantee scheme, which will be the first manifestation and use of the Bill’s powers, nationally significant projects will be the sorts of projects able to apply. That means projects listed in the national infrastructure plan or other such projects as may come forward, but the Bill gives a broader authority to the Treasury to issue guarantees in other circumstances. What I am describing is how the Government intend to use the powers in the Bill.

[John McDonnell]

rose—

[Danny Alexander]

I will give way to the hon. Gentleman, who has not intervened in the debate so far.

[John McDonnell]

On that specific point, I hope that the right hon. Gentleman is going to deal with clause 1(2)(b), which is one of the provisions defining the range of facilities that will be funded in this way. It refers to

“railway facilities (including rolling stock), roads or other transport facilities”.

Will he clarify whether those “other transport facilities” include airport expansion and runways? Although the third runway at Heathrow, or perhaps elsewhere, is not listed in the national programme and will not be brought forward in the next 12 months, there are no sunset clauses, so this Bill could be used to that effect.

[Danny Alexander]

The hon. Gentleman is right: there is no sunset clause. That is because we think that it is important to introduce these powers, not just for now but for the future. By circumscribing the financial limit of the extent of the powers and also by establishing strong requirements for reports to be made to Parliament, we can ensure that Members continue to be informed on how they are used. As the hon. Gentleman says, no such proposals are on the table at present, but in principle, should a major infrastructure scheme arise in the transport sector but be unable to attract the necessary finance because of conditions in the funding markets, it could be eligible in the future. However, that would be a decision for the Government of the day.

--- Later in debate ---

[John McDonnell (Hayes and Harlington) (Lab)]

This debate, on a Bill that most people agree with, has been fascinating. The last five speeches, by my hon. Friends the Members for Easington (Grahame M. Morris), for Glasgow North East (Mr Bain) and for Walthamstow (Stella Creasy), my right hon. Friend the Member for Greenwich and Woolwich (Mr Raynsford) and my hon. Friend the Member for Scunthorpe (Nic Dakin), are worth reading. They were superb. I do not usually follow the parliamentary convention of saying, “It is a pleasure to follow”, but it was a pleasure listening to their speeches. My hon. Friend the Member for Easington demonstrated a commitment to, and deep knowledge of, his constituency. My hon. Friend the Member for Glasgow North East set out the implications for Scotland and the overall economic situation. My hon. Friend the Member for Walthamstow was passionate about the problems and returned, as ever, to Wonga. My right hon. Friend the Member for Greenwich and Woolwich displayed his ministerial experience, while my hon. Friend the Member for Scunthorpe demonstrated his passion.

A succession of MPs have stood up and urged the inclusion of particular projects in the Bill. May I be a contrarian and suggest one that should not be included in the Bill—the expansion of Heathrow airport? I am worried because although the Bill is meant to account for ready-made projects—those on the drawing board and ready to be implemented over the next 12 months—there is no sunset clause. Furthermore, it can be renewed and additional sums can be bestowed simply by statutory instrument. Now, I am not a conspiracy theorist, but my constituents might start to believe in conspiracies: we had 12 months of intensive lobbying by the aviation industry; after that, the Chancellor expressed scepticism about existing Conservative party policy, which was against a third runway at Heathrow; then the Prime Minister announced a review of that policy by someone who was director of the CBI, which had lobbied for a third runway; and now we have a Bill that would go on the shelf as almost suitable for funding the expansion of Heathrow. It is no wonder, then, that my constituents are anxious about the attitude of the Government to that measure.

The measures in the Bill would perfectly suit Ferrovial, the Spanish company established by a fascist in the 1930s who made his profits as a result of contracts awarded to him by Franco. It would ideally suite Ferrovial to come forward and seek funding for the infrastructure expansion at Heathrow. I am sure it would be willing to pay for the tarmac, but not for all the infrastructure that goes with it, particularly the road and rail network needed to support a third runway. I fear that Ferrovial will come forward seeking Government guarantees to fund and back up the expansion. I say that because its construction company globally is in serious difficulties, or certainly is in doubt.

I give notice that despite the cross-party support for the Bill, which I also support, I will be moving amendments to ensure that the expansion of Heathrow is not part and parcel of it. I expect coalition support for that on the basis of the existing coalition policy, sworn in this Chamber by the Prime Minister, that the Government will not bring forward the expansion of Heathrow during the lifetime of this Parliament.

[Stephen Pound (Ealing North) (Lab)]

I am not entirely sure if Ealing North and Hillingdon constitute a coalition but, if it does, may I say that that coalition is solid and that we are as one on this?

[John McDonnell]

Interestingly, the coalition against the expansion of Heathrow has been cross-party up until now. If I remember rightly, the Government’s deputy Chief Whip committed to lying down in front of the bulldozers if it ever came about, and he was not moved in the reshuffle, so I take that as another commitment to opposition to the policy. I hope that the Government will support an amendment to prevent the Bill from being used to give guarantees on the funding of the expansion of Heathrow, certainly during the lifetime of this Parliament. We can then debate the matter with the subsequent Government.

Like everybody else, I am desperate for infrastructure investment in my constituency, which is suffering from a housing crisis on a scale not seen since the second world war. Housing should be included. The hon. Member for Reigate (Mr Blunt) argued for the funding of prison cells, but was not willing to argue that housing be funded. Housing my constituents is just as important as housing prisoners, given the housing crisis.

My schools also need to be renovated, because Hillingdon council pulled out of Building Schools for the Future at the last minute and pupils in my constituency are now being educated in crumbling schools. The buildings that are being built for new classes are portakabins, which are substandard for the long-term future.

On alternative energy, I want the green new deal to be implemented in my constituency as rapidly as possible. It has ground to a halt as a result of the Government’s measures on solar panels and on the funding of alternative energy in general.

As my hon. Friend the Member for Leeds West (Rachel Reeves) said, there has been an element of déjà vu to this debate. I remember Alan Milburn arguing in favour of private finance initiatives in 1997. We were told then that PFI was the solution to our infrastructure and investment problems and that it would transfer the risk from the public sector to the private sector. With the greatest of respect to a number of my hon. Friends, that did not happen. What we saw instead was profiteering at vast expense to the taxpayer and profligate expenditure that produced very little for the amount that we invested.

The bizarre thing about the plan under discussion, which will introduce another scheme to keep expenditure off the books and within the parameters set by the European Union with regard to public expenditure, is that it will transfer the risk back from the private sector to the public sector, so now the public sector will take all the risk for schemes. My hon. Friend the Member for York Central (Hugh Bayley) raised a number of detailed points that need to be answered and I have an additional question. If we look at the briefing paper for the Bill, we will see that it will also be able to fund revenue expenditure. Therefore, in addition to the capital expenditure, I take it that if some of these capital schemes go wrong, we will fund the revenue consequences as a result. There needs to be a detailed analysis—my hon. Friend the Member for Walthamstow mentioned the Public Accounts Committee—and it needs to take place now, before the next debate on this Bill. We are almost entering into another PFI-type situation whereby a grab of short-term resources will result in long-term costs.

That is all because no Government will grasp the real nettle, which is that there is no lack of resources in this country; the problem is that they are in the wrong hands and are not being used productively. The crisis in the economy was not caused by over-expenditure by the previous Government. The only time borrowing went up dramatically was when they had to bail out the banks and bring in large-scale quantitative easing. In fact, the level of public expenditure in relation to GDP just about met the John Major levels. The problem was that we never balanced that expenditure with an appropriate taxation regime. What we need to do now is introduce a fiscal package that includes a wealth tax, a financial transaction tax, land valuation taxation and measures to tackle tax evasion and avoidance, so that we can fund public expenditure and not have to create devices that in the long term will cost us more and produce so much less.

I regret that we may well be here in five years’ time—I do not look forward to it—as a result of this Bill, counting the cost as we did with PFI. Members need to consider the Bill’s detail as we move to the next stage, because it is the detail that will cost taxpayers dear and result in profligate spending and some abortive spending on some of the projects that have been mentioned tonight and that we all hold dear on behalf of our constituencies.

This has been an interesting debate, but I worry that when everyone agrees that we need to speed up and expedite the Bill, we will not give it sufficient consideration. That is what happened to the PFI legislation and we lived to regret it. I hope that we do not live to regret this Bill.