Infrastructure (Financial Assistance) Bill

Lord Berkeley Excerpts

Tuesday 23rd October 2012 Lords Chamber

[Lord Berkeley]

My Lords, I thank Ministers for briefing some of us about the Bill last night. It was a very interesting introduction to it.

First, I should like to spend a few minutes examining the wider problems, beyond the financing, associated with getting projects off the ground, such as the approval process, planning and, of course, the appraisal criteria. I think it was two years ago that Infrastructure UK published a report comparing the civil engineering costs of big projects in the UK and Germany. The costs of construction were remarkably similar, but what was different was the enormously greater cost of getting projects off the ground in this country. It was very interesting that in his introduction the Minister said that one of the criteria for financing was that you had to get the project off the ground within 12 months of obtaining the finance. That is quite a challenge. First, presumably one has to get through compliance with the Treasury Green Book, which is an incredibly complicated document. You need lots of consultants’ reports to support your case, which costs time and money, and sometimes the results are such that you wonder whether the exercise is worth while. A similar document is required for transport projects and, again, it is incredibly complex. It goes down to fractions of a second, timing millions of cars, and that decides whether you build a motorway, a road or something else. Again, that costs an enormous amount of money. What will the criteria be for allowing these projects to be financed in this way? At the same time, does the Minister agree that it is about time that the Green Book and the equivalent transport document were reviewed to make them cheaper and simpler?

The next issue is planning, alluded to by my noble friend Lord Adonis. Planning delays are getting longer and longer. I declare an interest as chairman of the Rail Freight Group. Some rail freight terminals in the south-east have gone through two planning inquiries. The Minister lost the last judicial review on one of them, so he is now thinking of a reason for having another planning inquiry. One might suggest that, in considering these things, Ministers should obey the law and look at these things objectively, as I am sure their legal advisers will have asked them to do. However, it all adds up to an enormous cost for developers and enormous time delays. Getting planning permission for some of these projects can cost £10 million or even £20 million because of all the consultants involved. Therefore, while I welcome the finance in the Bill, I am not sure how much it is going to help things to go ahead.

Secondly, I want to cover briefly what the Minister said about this Bill having minimum impact on the public sector finances. I would say that I have not been speaking for 10 minutes yet; that may be wishful thinking on someone’s part. There are so many here who are experts on finance that I deign to tread there, but if we have a £50 billion fund for investments or guarantees, does that not affect the PSBR somehow, if it still exists? A couple of years ago I asked the Secretary of State for Transport—it was Philip Hammond, who was two Secretaries of State ago—whether he had any views on whether Network Rail’s debts should be on the government books. He said that he was agnostic about it; I do not know whether that still applies. There is also said to be a debt liability of £1 billion on the Channel Tunnel going back 25 years, so I do not know how all this works. However, I cannot believe that a £50 billion fund or guarantee from the Government has no effect on government finances. I am sure that the Minister will be able to put me right on that.

While everyone is encouraging projects to go ahead with a kick-start, I find one in particular a bit odd. This is the second Bill this year that would authorise government funding for the Thames tunnel. The previous one was the Water Industry (Financial Assistance) Act 2012. Why is there this enthusiasm for pouring public money into a Chinese-owned so-called public-private sector utility? Are the Government not aware that on 18 October the European Court of Justice, in its judgment C-301/10, found that the UK had not complied with directive 91/271 in respect of the Thames and another river somewhere up north, but that in seeking to comply the Government should look at the best known technology that does not impose excessive costs? I think that £4.2 billion—the equivalent of £80 every year for 30 years on every water payer within the Thames Water catchment area, which goes as far as Oxford and beyond—is probably excessive if there is an alternative. Paragraph 64 of the relevant judgment says:

“The concept of BTKNEEC”—

that is what it is called—

“thus enables compliance with the obligations of Directive 91/271 to be secured without imposing upon the Member States unachievable obligations which they might not be able to fulfil, or only at disproportionate cost”.

Even without this government money, then, the Thames tunnel will put all that money on. It may or may not comply but the judgment requires the Government to look at this again and at alternatives, which I believe exist. The noble Baroness, Lady Gardner, said that money should be put to good use and spent wisely. This is an example where, if it goes ahead, it certainly will not be. I hope that the Minister will impress upon his colleagues in Defra the need now for an independent review of the different options for complying with the ECJ ruling and for mitigating the fine which, at its worst, I am told could reach £1.5 billion. There is big money at stake here and a lot of it could be saved by looking at different options a little creatively. I will be meeting the Minister in a couple of weeks’ time to discuss this, when I shall expand on it further.

--- Later in debate ---

[Lord Newby]

I am afraid that I do not have those figures to hand but I will write to the noble Lord.

The noble Baroness, Lady Wheatcroft, raised concerns about continuing the old system of PFI. Many people share her concerns about the way that PFI has worked, and in any future schemes I know that the Government will seek to avoid the problems of the past in that respect.

The noble Lord, Lord Berkeley, asked several questions, one of which concerned the criteria were for which projects come forward. As I said in my opening remarks, the five principle criteria are that the schemes be nationally or economically significant, financially credible, good value for money for the taxpayer, not solely dependent on a guarantee to proceed, and ready to start construction in 12 months. He asked whether the £50 billion affects the PSBR. The answer is that it affects the PSBR only if guarantees are called upon. My understanding is that if it is a contingent liability, this does not affect what I still think of as the PSBR.

The noble Lord, Lord Berkeley, also asked about the Thames tunnel and whether we might have an independent review. Living as I do on the Thames and being subject to many public meetings about the Thames tunnel, it seems to me that the current programme of proposals on the tunnel involves a huge amount of consultation and much discussion of alternatives. Having got this far on what seems to be an unavoidable necessity, I certainly would be extremely loath to think that we had to go back to the drawing board and start again with an independent inquiry.

[Lord Berkeley]

Could the Minister answer my question about whether there will be a review or abolition of the Green Book?

[Lord Newby]

It will not be abolished. I will pass on the noble Lord’s concerns to my colleagues in the Treasury, who I am sure are already aware of them.

This is an important and much needed Bill. It will allow critical infrastructure projects that are being held back by adverse credit conditions to proceed and will support much needed investment in the rented housing sector. It contains measures that will support growth, jobs and families, all at minimal cost to the taxpayer. It will help to unlock the investment that the UK urgently requires to make it one of the predominant places in the world to do business, and to support sustainable growth that is balanced across sectors and regions. I request that the Bill be given a Second Reading.

Bill read a second time. Committee negatived. Standing Order 46 having been dispensed with, the Bill was read a third time and passed.