UK Infrastructure Bank Bill [HL]

Lord Bishop of St Albans Excerpts

Committee stage & Lords Hansard - Part 1
Tuesday 14th June 2022 Lords Chamber

Finally, I have some figures to really drive this home. To be serious about a 1.5-degree target, global production of oil and gas must fall by 31% and 28% respectively between now and 2030. But the countries known as the “fossil-fuelled five”—Australia, the UK, Canada, Norway and the USA—are set to increase their oil production, so the global figures will increase by 33% and 27%. So we need a 31% fall and a 28% fall; instead, we are looking at a 33% rise and a 27% rise. It is crucial both that we do not put any money from this bank into fossil fuels and that we send a signal to the world that nobody should be putting money into fossil fuel exploration.

[The Lord Bishop of St Albans]

My Lords, I declare my interest as a vice-president of the Local Government Association and president of the Rural Coalition. I shall speak to Amendment 9, which stands in my name, but I also want to give my broad support to Amendments 6 and 7, which also deal with regional inequalities, and to echo the importance of getting biodiversity and nature into the Bill.

It is telling that London, as the most productive region of the UK, receives a larger per capita amount of public spending compared to other regions of the UK. Productivity relies as much on public investment as it does on private investment but, at the same time, it makes sense economically, from a private perspective, to invest in those areas that receive significant public backing, particularly in areas such as transport. The reality is that government transport spending by region remains heavily skewed towards London, at nearly double the UK average. Hence, it certainly holds that public expenditure is a significant contributory factor to productivity, even if other factors, such as economies of scale and private investment, also play their part.

Increasing the UK’s productivity and reducing the productivity gap is the first aim listed in the Government’s 12 missions to level up the UK, but this is not adequately reflected in the UK Infrastructure Bank’s objectives. The second objective, which a number of noble Lords have referred to, is supporting regional and local economic growth. That is an extraordinarily broad objective that allows incredible levels of discretion over where the bank will focus its investment. Supporting infrastructure improvements in some of the wealthiest parts of London to drive local economic growth would fall under the remit of the bank’s activities but that is surely not what the bank is meant to be doing. We need to concentrate investment in specific infrastructure initiatives to boost regional productivity and close the infrastructure gap.

I fear that the integrated rail plan is a good example. It has its priorities absolutely inverted. Better connecting London to Birmingham and Manchester is being given precedence over connecting some of the northern cities to one another. The scrapping of HS3 and the eastern leg of HS2 remains a mistake and, to quote the Mayor of Greater Manchester, is rightly seen as a betrayal of the north. People in deprived or less productive parts of the country are tired of their second-rate infrastructure and the lack of investment in it. The amendment places a clear responsibility on the bank to close the productivity gap between regions of the UK, better to align it with the Government’s levelling-up objectives.

The need to close regional infrastructure gaps does not pertain just to metropolitan areas. It is a crippling issue for rural communities. One thing I shall come back to when we get to the amendment—later today, I hope—is how we want to rural-proof what is going though in legislation. The rural economy is 18% less productive than the national average, and while economies of scale contribute to this, the gap is primarily driven by a failure to engage with rural economies on their own terms.

Poor rural transport infrastructure and digital connectivity are arguably the two biggest factors raised by those trying to sort out the huge gap between urban and rural in this country. The fear is that the UK Infrastructure Bank, as a private company wholly owned by the Treasury, will not be subject to the usual rural-proofing requirements to which all government departments are subject. Rural areas must be adequately considered as viable locations for investment by the UK Infrastructure Bank. By focusing on closing regional productivity gaps, this amendment would ensure that rural areas and underperforming urban areas would receive their fair share of the bank’s finances—money desperately needed to level up.

As this is simply a probing amendment, I am at this stage just listening to the other interesting amendments and I do not particularly want to push this later, but I would be grateful if the Minister could address these concerns. What mechanisms will be hard-coded into the bank’s commitments to prioritise investment in those areas that suffer from poor productivity and need improved infrastructure to meet that first mission statement of Her Majesty’s Government on levelling up?

[Baroness Brown of Cambridge (CB)]

My Lords, I rise briefly to give general support to the amendments in this group and specifically to support Amendment 4 in the name of my noble friend Lady Hayman and other noble Lords. I declare my interest as chair of the Adaptation Committee of the Climate Change Committee.

I agree with the noble Baroness, Lady Hayman, that it is absolutely critical to include adaptation in the bank’s remit in the Bill. It is only too easy to forget about adaptation, as so much recent, important government policy has done—so much so that in the Adaptation Committee’s advice to government last year on the third climate change risk assessment, we included a table of recent policy and legislation, showing just how frequently opportunities to include adaptation had been missed. It is crucial that we remind everybody to think about this and putting it in the Bill will help make that difference.

The most obvious example I have pointed to recently has been support for such things as the Green Deal as well as for net-zero homes. We are asking people to rip their homes apart to make them net zero but not at the same time supporting them to make the changes that would make them resilient to the future hotter summers that we are going to experience. It would be stupid to do those things separately—to have to refurbish your home twice. We must make sure that adaptation is flagged up in the Bill.

We also need to keep reminding people that, in dealing with climate change, net zero is not enough. Even if we are on a global pathway to net zero by 2050, the temperature will go on rising up to 2050, and we will look back from 2050—well, some of us, such as the noble Lord, Lord Ravensdale, might—and see that every decade between now and then was the hottest on record; so we must make sure that adaptation is a focus of the Bill.

I also strongly agree with the noble Lord, Lord Holmes, that the Bill must recognise nature—the natural environment, our natural capital—as essential infra- structure. The Bill specifically identifies as infrastructure the technology and facilities for removal of greenhouse gases from the atmosphere. The best and cheapest and way to do this is very often a tree. It would be completely perverse to encourage a complex engineered solution in a situation where an investment in nature could deliver.

As the noble Lord, Lord Teverson, said—I strongly agree—investments in nature-based climate solutions, especially those for adaptation, face some of the most difficult barriers and hurdles to secure, so we should absolutely ensure that this important development of the UK Infrastructure Bank enables those critical investments. If I might do a little bit of advertising, I will say that the Adaptation Committee is currently producing a report on the barriers to adaptation investment, which will be published in the autumn. I am sure the UK Infrastructure Bank will be an important part of the solution in overcoming those barriers.

UK Infrastructure Bank Bill [HL]

Lord Bishop of St Albans Excerpts

Committee stage & Lords Hansard - Part 2
Tuesday 14th June 2022 Lords Chamber

[Lord Vaux of Harrowden (CB)]

My Lords, I speak to my Amendment 56, which again relates to the crowding out discussions we had earlier. Amendment 55, in the name of the noble Baroness, Lady Noakes—I am pleased we are back on the same side again on this discussion—is aimed similarly, as is the amendment in the name of the noble Lord, Lord Holmes of Richmond, although his is for a one-off report rather than ongoing reporting.

We have already discussed crowding out and crowding in, in some detail. As I have said, if the bank simply ends up becoming a cheaper form of subsidised finance in situations where private finance is already available, we will have failed. The investments it has made so far, including in solar farms, are not terribly encouraging in this respect. Solar farms are easily financed. They are a nice, solid, predictable revenue stream—the perfect thing for private finance—so it is hard to see what benefit the bank brings in such a situation.

To see how effective the bank has been, it is essential that we measure and report on how successful it has been in its fundamental role of being a catalyst to crowd in private sector finance. How much has it crowded in? The amendment from the noble Baroness, Lady Noakes, tries to do this by looking at whether the bank’s activities have been confined to situations where there is an undersupply of private finance. My amendment takes a slightly different approach, requiring an actual assessment or measurement of the amount of private sector finance that the bank has crowded in, and an assessment of the extent to which it has replaced private sector finance that would otherwise have been available.

Looking again at the wording of my amendment, I regret saying that the assessment should be by the Treasury. It would be better if the Treasury did not mark its own homework, but I know we are coming to that later. I am sure the Minister could quibble with the wording, and that it could be worded more elegantly. However we do it, this is a fundamental measure of how successful the bank has been, how effective it is and whether it is a good use of taxpayers’ money. Somehow, within Clause 9, we need to include some measurement of crowding in and crowding out.

[The Lord Bishop of St Albans]

I declare my interest as president of the Rural Coalition and shall speak to my Amendment 57; I can be fairly brief. This amendment would require the Treasury to rural-proof the bank’s activities as part of its review every seven years. I shall not go over what I said on my earlier amendment as I have already referred to some of the case for rural-proofing. It is very important. It already exists as a tool to ensure that policymakers and analysts assess the effectiveness of their policies across rural areas. All government departments are subject to it, with the aim of embedding the principle that rural communities must be adequately considered when developing policy. The UK Infrastructure Bank ought not to be exempt from this as it is wholly owned by the Treasury.

Even then, the precise nature of the rural-proofing contained in this amendment is far weaker than the guidance to which most government departments are subject. Rather than require rural communities to be suitably considered in investment decisions, this amendment simply places a duty to review any disparate or adverse impacts or discrimination towards rural areas with respect to the bank’s activities. This would offer a framework for the Treasury to judge UKIB’s activities so that rural communities are adequately accounted for as part of its review. If rural-proofing requirements are good enough for the Treasury, they are more than apt to cover UKIB. This amendment would help to reassure rural communities that their concerns will be considered by UKIB and that at a minimum they will not be negatively impacted and will, we hope, be supported by the bank. When the Minister responds, I hope she will be able to offer some reassurance that the activities of the UK Infrastructure Bank are already covered by the current rural-proofing guidance to which the Treasury is subject. If they are not, how will the Government ensure that the bank will be properly rural-proofed in a similar manner to all other government departments?

[Lord Holmes of Richmond (Con)]

I shall speak to my three amendments in this group, which all concern reporting requirements for the bank. Amendment 64 takes us back to inclusive by design and asks HMT to produce a report within six months on how the bank is achieving it in its investment and to look across the whole of the UK infrastructure and put a plan together for how all of it can be made inclusive. Does the Minister agree that infrastructure investments which are not inclusive would not only fail the public sector equality duty and thousands, potentially millions, of people but should de facto also fail the economic test set for all the bank’s investment?

On Amendment 65, perhaps we should feel positive because crowding out has already encouraged the crowding in of three amendments on this area. My regret on my amendment is that I have put it in the singular rather than suggest the continuous reporting requirement. As other noble Lords have set out, it is a fundamental issue for the bank. To that end, will the Minister reiterate what is said in the blurb on the bank about what multiple can be returned on investments? More than that, as real investments have now been made by the bank, what multiple and what actual level of funds have been crowded into those investments?

Returning to my Amendment 15, I remind my noble friend that, when it comes to nature-based solutions, investments in peat projects return £4.60 to the pound while those in woodland projects return £2.80 to the pound. Does my noble friend the Minister agree that both these levels are above what the bank is setting as its multiple return on investments made?

My final amendment, Amendment 66, is very brief; it simply asks for a report to be placed on the rate of interest that the bank determines to charge. Can my noble friend share some of the detail underpinning the basis points that have been determined at this stage for the bank’s investment level? How will that sit alongside other investment funds, and how will it compare with where previous funding would have come from, such as the Public Works Loan Board, et cetera? How has that interest rate been arrived at? Will a report be placed within six months of the passing of this Act on how it has run in that period?