UK Infrastructure Bank Bill [HL]

Lord Sikka Excerpts

2nd reading
Tuesday 24th May 2022 Lords Chamber

[Lord Sikka (Lab)]

My Lords, I am grateful for the opportunity to speak. Since 2012, the Government have handed £695 billion of quantitative easing to speculators. Can the Minister explain why the QE route and the same volume of money are not made available for investment in UK infrastructure? Labour’s 2019 manifesto promised £400 billion over 10 years for investment in clean energy and infrastructure. Germany’s KfW, which has already been mentioned, has assets of €561 billion. In contrast, the funding available to UKIB is basically a pale shadow and seems a token gesture to show that the Government are doing something.

Can the Minister explain how much money each year the bank will spend on infrastructure, directly or through third parties? The capital structure of UKIB is £5 billion equity plus £7 billion debt, although another £10 billion may be provided by guarantees, which will not easily be part of the balance sheet. The Bill offers no rationale for this capital structure. Why does UKIB have to start with debt?

The cost of capital for the Government is always lower than the cost of capital for the private sector, yet UKIB will seek a more expensive £18 billion from the private sector, inevitably raising the cost of capital for some projects and making them unviable. Public bodies will end up effectively guaranteeing future corporate profits, in a kind of mini repeat of the PFI experiment we had for many years. Can the Minister explain why the bank is not entirely funded by the Government, especially as they stand behind the bank and will effectively be its guarantor? Would that not be a simpler capital structure?

The Bill is accompanied by just four pages of what is titled Impact Fact Sheet. On scrutiny, I could see no analysis of its operations or financing, or anything meaningful. In yesterday’s briefing we were told that the bank will be seeking a financial return on each of its projects, but the impact statement provides no clues about what this return means and why a return from infrastructure is desirable. If you are going to measure returns from infrastructure, that would involve measuring things such as social efficiency gains. What meaning do the Government attach to such phrases? There is no explanation given. I urge the Minister to provide a meaningful impact assessment for the Bill.