Brexit: European Investment Bank (European Union Committee Report)

Lord Butler of Brockwell Excerpts

Tuesday 16th July 2019 Lords Chamber

[Lord Butler of Brockwell (CB)]

My Lords, I start by saying how very much I have enjoyed serving on the EU finance sub-committee. I have now been rotated from it on to the Select Committee on the social effects of gambling. I hope one is not regarded as a qualification for the other. As has already been said, during the four years I have been a member of the sub-committee, it has been splendidly chaired by the noble Baroness, Lady Falkner, and very well served by a succession of clerks, particularly on this report.

When I was growing up, my mother used to say to me and my sister, “You will miss me when you haven’t got me”. I think the UK will say the same about the European Investment Bank. There are various statistics in our sub-committee’s report, but the most striking one has already been referred to: in the year before the referendum, the EIB financed no fewer than 40 different projects in the UK, amounting to one-third of our infrastructure investment in that year. Much of its funding has been in the energy sector, but it has also been very important in higher education. Since 2016, UK funding from the EIB has fallen precipitously by 87%.

It is important to understand that the EIB is not an aid agency; it is a bank. It examines rigorously the projects that it finances, together with the reliability of the prospect of repayment. It has substantially expanded its original capital over the years. That has been referred to and I will return to it later. Such is the reputation that it has built up over the 46 years of its existence for the quality of its scrutiny that it gives confidence to other investors. This brings in others to invest in the projects it supports.

On our departure from the EU, the UK will cease to be a member of the EIB and will become a third country. It will therefore cease to have access to EIB funding. Our committee received indications that the loss of the UK as a member will not be welcome to the EIB. For one thing, it will remove a substantial slab of the bank’s capital. But it can also be equated to a bank losing a good customer with whom it has had a long and successful relationship. The committee explored whether, following Brexit, the UK could retain its relationship with the EIB—something the Government have said they are interested in. Unfortunately, Article 308 of the Treaty on the Functioning of the European Union states that the members of the EIB,

“shall be the member states”.

Continuing full membership would require a treaty change and we had to conclude that this was an unrealistic possibility. The EIB provides some loans to non-member countries, but on a tiny scale compared with its loan to members.

In addition to loans for infrastructure investment, the EIB’s subsidiary, the European Investment Fund, supports SMEs and mid-cap companies through European venture capital and private equity funds. Loss of access to this fund can be partly replaced by the British Business Bank, whose resources were increased by the Chancellor in the last Budget in the event of the UK leaving the EU without a deal. The British Business Bank, led by the noble Lord, Lord Smith of Kelvin, is impressive, but, as the bank itself pointed out to us, it is a relatively new boy on the block and will need time to build up its reputation and clientele.

However, it is in infrastructure funding that the loss of access to the EIB will be felt most acutely by the UK. It was here that our committee felt, as the noble Baroness, Lady Falkner, said, on the basis of the evidence we received, that the Government are not regarding this problem with sufficient urgency. We also felt that, in accepting that the UK should not recover our share of the reserves that the EIB has built up on the foundation of the capital we helped to provide, our negotiators have driven a less hard bargain than the EU would have done if our roles had been reversed.

We recommend in the report that the Government should consider seriously, and indeed urgently, the National Infrastructure Commission’s recommendation for a UK infrastructure bank. Perhaps the Government are considering this, but we were given no hint of it. If the Government were to adopt the suggestion it would be important, as the noble Baroness, Lady Bowles, said, that a national infrastructure bank should operate independently of government, so as to attract the confidence of other investors, which the EIB has been so successful in building up.

As a former Treasury official, I endorse what the noble Baroness, Lady Bowles, said: it would be absurd if the Government were deterred from establishing a national infrastructure bank by the accounting convention that its capital would form part of the Government’s measure of public sector debt—a convention that does not apply to the EIB or other European countries. We cannot allow our hands to be tied behind our backs by our own accounting conventions.

Above all, our departure from the EIB will leave a hole in financing the investment in the UK’s infrastructure that all parties agree is crucial. We did not get the impression that the Government—no doubt preoccupied with other issues arising from Brexit—have addressed this matter with the urgency that it requires. Let us hope that the next Prime Minister will put a firework under the Treasury and get things moving.

House of Lords (Hereditary Peers) (Abolition of By-Elections) Bill [HL]

Lord Butler of Brockwell Excerpts

Friday 23rd March 2018 Lords Chamber

[Lord Grocott]

My Lords, this group of amendments includes a number which would kill the Bill. Amendment 5 would leave out subsection (2) and Amendment 24 would leave out subsection (3), but if we leave out subsections (2) and (3) we would not have much of a Bill left. In truth, the noble Lord, Lord Trefgarne, is confirming my suspicion that he is trying not to improve the Bill but to kill it, so I hope that he will withdraw his amendment.

[Lord Butler of Brockwell (CB)]

My Lords, this is the only opportunity I have to say that it is not often I would do anything which the noble and learned Lord, Lord Mackay, did not approve of. But I voted against the Motion and I want to make the point that it was the only way in which the House could send a message to the Government, and to people outside, that the House is greatly in favour of the Bill going forward.

[The Earl of Erroll (CB)]

My Lords, I am terribly sorry to intervene but the reason I did not vote on it was exactly the opposite. The Motion actually referred to regret about the Burns report; it would not in fact have prevented the Committee stage or any part of the Bill. It expressed regret that it had not been done, so, having read the Motion, I do not think that it conveyed exactly what people thought.

--- Later in debate ---

[Lord Mackay of Clashfern]

I want to just say, in support of what the noble Lord, Lord Grocott, has said, that my understanding is that this Bill has received a Second Reading. Therefore, it is inappropriate to propose amendments that have the effect of destroying the Bill, because that is trying to reverse a decision that the House has already taken.

The other thing that I want to say is that my noble friend Lord Butler and I have worked together for years and years, but I dispute very much the idea that the only way in which this House could indicate in a very strong manner that it supports the Bill proposed by the noble Lord, Lord Grocott, is by an absurd procedure that requires two Members of this House to record their vote in opposition to what they really believe. I think that there would be something very seriously wrong with the procedures of this House if there were no other ways in which the House could show its support of the Bill.

The other empirical observation that I want to add is that, if you want to make progress on the whole, it does not help you to interrupt the people who are opposing you.

[Lord Butler of Brockwell]

Before the noble Lord sits down, can I just say in reply that, if he reads the newspapers tomorrow or listens to “Yesterday in Parliament”, he will hear that the way in which the House demonstrated that it wanted to support the Grocott Bill was through that Bill.

[The Earl of Erroll]

My Lords, I want to say one thing on Amendment 59, which is the last one in this group and is a non-destructive amendment, which is why intrigued me.