UK Infrastructure Bank Bill [HL]

Lord Davies of Brixton Excerpts

2nd reading
Tuesday 24th May 2022 Lords Chamber

[Lord Davies of Brixton (Lab)]

My Lords, I thank the Minister, the noble Baroness, Lady Penn, for the helpful meeting yesterday, at which we explored the background to the Bill. Unfortunately, I am still not entirely clear as to why we need this Bill to establish an institution that is already up and running. I still think that, to some extent, it is because of what it looks like: “Look: we’re doing something.” It is legislation as performance. But no harm is being done and we all support the objectives, so why not? That is what I wrote here—until I heard the comments from the noble Baroness, Lady Noakes, who presented quite a convincing case from a rather different perspective.

Lying behind this is this concept of market failure, which has been little explored in this debate. It is not a new concept; we can go back to the 1930s and the Macmillan gap. Governments and their advisers have often come up with this concept that the market is failing and that government needs to establish institutions that will fill the gap. With new objectives, this is just another iteration of quite an old idea.

We have been given some examples of the sort of projects this bank will support. There are several, but the two that stick in my mind are emission-free buses for the West Midlands and, as mentioned earlier, the largest solar farm. I struggle with this. Why are we not doing these anyway? Why does it require this bank to achieve these things, which should be happening? I do not think the Minister or the Government as a whole have really told us or explained what the market failure here is. They just use the phrase market failure without identifying what exactly it is. We are told we have the most effective financial market in the world in the City of London, but it cannot provide Birmingham with emission-free buses or build a solar farm without the Government intervening. That seems a pretty fundamental problem.

This is the result of a period of discussion and debate about infrastructure and how it should be financed, but I really do not feel that what we have here has got to the bottom of the issue. The important point, again to quote the noble Baroness, Lady Noakes, is that this is a creature of the Treasury. However you dress it up, the money will be guaranteed by the Treasury, so it will effectively be gilts. However you describe it and whatever the technical structure, the Government will stand behind the money in this bank, so it is effectively gilts. It is just a way of feeding government money into created structures, and it strikes me as a complicated structure to achieve something relatively straightforward in a planned economy. As the noble Baroness said, it is government expenditure in different clothes.

My particular concern is whether there is some relationship or interface with the plans the Government have for pension funds. Last summer we had a joint letter from the Prime Minister and the Chancellor of the Exchequer. They wrote an open letter to those who look after our £2.6 trillion pension fund industry and said they should be investing more in

“the fruits of UK ingenuity and enterprise”.

They called on UK investors to

“back British success stories, and secure higher returns and better retirements.”

We will come back to this issue; we are promised some legislation or government action on these proposals this summer. What is the relationship between this bank and the money in people’s pension funds? My strong view is that pension funds are there to provide pensions and that if the Government think that infra- structure is required, it is the Government’s job to provide the infrastructure.

UK Infrastructure Bank Bill [HL]

Lord Davies of Brixton Excerpts

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

[Lord Vaux of Harrowden (CB)]

My Lords, I will be very brief because the noble Lord, Lord Sharkey, has introduced these amendments eloquently, and I am not sure there is a huge amount to add.

This goes back to what we talked about in the previous group: too much power for the Treasury to change things at will. You cannot have meaningful operational independence if the mandate within which the bank works can be changed without scrutiny and safeguard. The noble Lord, Lord Sharkey, eloquently explained the limitations around the affirmative procedure; we all know about them. Something as fundamental as the basic objectives of the bank should be changed only following proper, full scrutiny using primary legislation. That should not be controversial; it should be fairly straightforward.

Amendment 33 adds an element of scrutiny that is currently missing to the statement of strategic priorities given by the Treasury to the bank. Those priorities are very important. I can understand that it is appropriate that there is some level of flexibility to those strategic priorities, but the idea that they can just be changed at will and filed with Parliament but with no scrutiny, discussion or review just seems wrong. Introducing the affirmative procedure for those makes sense to me.

[Lord Davies of Brixton (Lab)]

My Lords, I hope the Committee will bear with me; I have taken an interest in the Bill. My interest is narrow: what bearing the Bill has on pension funds. Members of the Committee may not be surprised.

I have raised the issue on a couple of occasions: at the useful meeting we had with the noble Lord the Minister and the noble Baroness, and at Second Reading. On neither occasion did I receive a reply. My question is: how does this organisation fit with the declared intention, expressed by the Prime Minister and the Chancellor of the Exchequer, to see pension funds investing more in infrastructure? Obviously, infrastructure is a good thing, and there is a tendency to feel that the Bill is about infrastructure so it must be a good thing—but in truth the Bill is an empty vessel. We do not know what is in it or where it is going. It is a structure whose purpose and objectives will be revealed in time.

How does this relate to pension funds and the Government’s apparent intention—we are still waiting for them to make clear what they are proposing—to coerce or cajole pension funds to invest in infrastructure? As I say, I raised this at the meeting with the Ministers and at Second Reading. On neither occasion was there any response from the Minister. It just so happens that the day after Second Reading, the chief executive officer of this bank stood up at a meeting of the Pensions and Lifetime Savings Association and expressed what an important initiative this was for pension funds. All I want is a straight answer: what plans do the Government have for the relationship between this bank and their objective to see pension funds investing more in infrastructure? Personally, I am not interested in taking investment advice from the Prime Minister or the Chancellor of the Exchequer, but I think we should be told.

[Baroness Kramer (LD)]

My Lords, at this stage—I know we are about to take a short break—I just want to summarise where we might be on these constitutional issues, now that this group of amendments has been debated. I think it will be relevant for the Minister to reply on that.

As we learn from this group of amendments, in the Bill the bank is given activities and objectives in primary legislation—but that primary legislation can be changed wholly by statutory instruments. That is the point of a Henry VIII power: primary legislation is overturned by secondary legislation. As my noble friend Lord Sharkey made clear, this can include issues as fundamental as the bank’s activities and even the meaning of infrastructure. It is hard to get more fundamental than that when you are talking about a UK Infrastructure Bank. That is the first point.