King’s Speech

Lord Altrincham Excerpts

Monday 13th November 2023 Lords Chamber

[Lord Altrincham (Con)]

My Lords, I declare my interest as a director of the Co-operative Bank in Manchester. I will make some comments on infrastructure investing and financial regulation.

The gracious Speech emphasised the importance of making long-term decisions, reducing debt and investing in energy. It went on to refer to the importance of investing and attracting private sector investment into renewables. In opening the debate today, the Minister reminded us of the importance of private sector investment to make that possible. The noble Lord, Lord Livermore, made the same comment for the Opposition, in particular referencing investment in the gigafactory project and a sovereign wealth fund investment project, which would attract up to three times the amount of public capital from the private sector. Both sides of the House support attracting private sector investment. That will become extraordinarily important given what has happened to government finances.

Unfortunately, renewable energy needs a lot of help. It is not just that the recent wind farm licence round did not work out—perhaps that was a one-off and the Government made some mistakes—but that the two largest wind farm operators in the world, Ørsted and Siemens, are in quite a bit of financial difficulty. In fact, they were running into financial difficulty at the same time as the gracious Speech.

Ørsted, by the way, runs 12 huge wind farms around the UK—one is out in the Thames estuary, in the Riddle of the Sands area. It said that its problem is not wind but interest rates. The problem we are running into is that these investments are very capital heavy and the decisions to make them were taken at a time when capital was very cheap. This is an enormous change for the Government, because renewable infrastructure inevitably rests on rates that are close to zero. As capital has repriced, many of those projects are no longer possible without a good deal of government help.

The other side of the equation is making more capital available from the private sector. The clue to that is in the financial services Bill that we have just passed. If it is successful, it may free up bank, private sector and asset manager equity to invest in the UK. We are all familiar with the possibility that legislation may be passed but that it may be ineffective, not be actionable and ignored or go out of date very fast. However, the Financial Services and Markets Act achieves accountability to Parliament for the regulators. This is a very important step which means that, in bringing back rules from Brussels, the regulators are not uniquely in a position to decide how to regulate. As your Lordships know, regulation has been somewhat cautious and there has been a gold-standard approach.

There will be accountability to Parliament and there will be two parliamentary committees—I will come on to that—which roughly replicates the kind of regulatory supervision that exists in Brussels; the ECON committee in Brussels supervises financial regulation quite effectively. Unluckily, the House of Lords made a recent approach to have a Joint Committee with the House of Commons, but we were rebuffed. It may be that we should not have asked, but the House of Commons’ committee will go ahead and ours needs to get going quickly. It needs to get going quickly because there needs to be a change in private sector investment in the UK and it is becoming rather urgent. A lot of the promises that the Government are making, our own expectations and often those expressed in this House rest on unleashing private sector investment.

That change would be a rebalancing away from looking at financial services regulations just through the lens of prudential regulation in favour of an underlying sense of growth, competition and promoting the wider good of the economy. It would be like the regulatory environment in Singapore, which allows for the growth of Singapore but also refers to and understands that without economic growth there are other risks to the economy and to the Government. We are perhaps running into those risks at the moment.

In supporting what is in the gracious Speech and the Government’s plans—and perhaps the next Government’s plans—we should get on with our own committee to look at financial regulation as quickly as possible. I wish the committee godspeed.