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.