UK Infrastructure Bank Bill [HL]

Lord Teverson Excerpts

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

[Lord Vaux of Harrowden (CB)]

My Lords, I speak to Amendments 14 and 29 in my name. I thank the noble Baroness, Lady Kramer, for her support in these.

Ultimately, these amendments are aimed primarily at strengthening the operational independence of the bank. I explained at Second Reading the importance of the bank being genuinely operationally independent, so I will not repeat those arguments. The Government claim that they agree, and the framework document is clear that the bank should be operationally independent, as is the NIC. However, as drafted, the Bill does not achieve that. In fact, it actively undermines operational independence.

On Second Reading, the noble Baroness, Lady Noakes, referred to the Treasury having its fingers all over the Bill, and that must be right. We have seen the strategic priorities, which include some stuff which can be changed at will. We have the framework document, which can be changed at will and which has no legally binding basis. I am not even sure that it has to be published if it is changed, though maybe I am wrong on that. There are the articles of association, which the only shareholder can change at will. There are no safeguards over the independence of the bank.

Three things are required to ensure that operational independence is a reality. First, the mandate and the parameters within which the bank is allowed to act must be clearly defined—the barriers within which it can operate independently. Secondly, that mandate and those parameters must not be subject to political interference and change without scrutiny on a whim. Finally, the bank must then be able to operate independently without political interference within that mandate and those parameters. If any of those is too weak, you do not have operational independence.

These two amendments are aimed at the first two of those points. The direct meddling in the operations will be dealt with in a later group. Amendments 14 and 29 are aimed at ensuring that the mandate and operating parameters are clear and complete, and are on a statutory basis so cannot be changed on a whim. Amendment 14 brings into the Bill the operating principles that the Government have previously set out in the framework. These are extremely important. You would think that something called an operating principle was precisely the sort of thing that should be on the face of the Bill. These operating principles include the principles that the bank should aim to make a positive return, that it should operate in partnership with the private and public sector when financing investments, and that it should provide long-term finance. Most importantly—here we go back to the discussion that we have just had on crowding in and crowding out—the operating principles state clearly that the bank should aim to ensure that its activities crowd in private investment.

It is extremely important that these four operating principles are part of the mandate—the defined, statutory mandate—under which the bank operates. If they are not included in the Bill, the extent to which the bank is governed by them would not be clear and the Government would be able to change them at any time without scrutiny and, in some cases, without disclosure.

Amendment 14 simply lifts the Government’s own operating principles from the framework document. I have to assume that the Government are happy with them and therefore should not have any great difficulty accepting their inclusion in the Bill. If that is wrong, I would be interested to hear the Minister explain why she thinks that the Government’s own operating principles are inappropriate.

As the debate has gone on, I have become increasingly uneasy. Like the noble Lord, Lord Teverson, was in the first group, I have been rather woefully unambitious with this amendment. We keep hearing, “It’s all right; it’s in the framework document”, or “It’s okay; it will be in the strategic priorities”. But we have also heard that the framework document is a non-binding agreement, which is an interesting concept, subject to scrutiny that is not a definition of scrutiny that many of us have ever heard.

What this really means is that the Treasury can enforce the framework agreement on the bank, but can also change it at any point that it wishes. That is quite the opposite of operating independence. I am beginning to wonder whether we need to bring that framework document into the Bill more widely, on some sort of statutory basis, subject to some form of scrutiny if it is changed. That goes beyond my amendments at the moment. As I say, I have pulled four elements out of the framework document, but I am increasingly of the view that we may need to go further.

Amendment 29 follows on and says that, if the operating principles are to be changed, they need to be subject to parliamentary scrutiny—in this case only secondary legislation, which is of limited value but is better than nothing. I beg to move.

[Lord Teverson (LD)]

My Lords, as the noble Lord, Lord Vaux, said, I am afraid I am going to offend again in that my amendment is suboptimal. If we are stuck with the level of dependence on the Treasury that there is, I would like to see those directions from the Treasury at least being guided by or having to take notice of the infrastructure commission. This is referred to in the framework document, but also needs to be in the Bill.

Having said that, we are going to have a major debate on governance and independence issues and I suspect that my amendment would be overwhelmed by those points. It is important that there is a major connection between the National Infrastructure Commission and the UK Infrastructure Bank. There needs to be some definite joining up beyond the wish list there may be in the framework document. Exactly as has been said on this before, I like the idea of trying to put it into secondary legislation somehow, but we know that we cannot amend secondary legislation in this House and we rarely reject it. At least any changes going through Grand Committee or whatever is a higher degree of scrutiny and the Government know that.

This amendment is looking for the Minister’s response on how she sees the National Infrastructure Commission practically being taken into account by the Treasury in any directions it makes. This is important, because bodies such as the NIC can go on doing brilliant work but if, at the end of the day, they have no real effect or do not have to be taken notice of, I would rather abolish than keep them. It is an important body, but one that needs to be included in the Bill to make sure that its recommendations are properly taken into consideration.

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[Baroness Bennett of Manor Castle (GP)]

My Lords, I rise to speak to Amendment 68, which appears in my name. We have already had an interesting debate essentially about the operational independence of the bank. Looking around the Chamber, I think there are two noble Lords here who were also in the Schools Bill which we are taking in parallel with this Bill. I was rather struck by the similarity between the two Bills in that a great deal of debate on that Bill focused on what would happen if these powers were given to a Government and then a Government of a hue you did not like came in and exercised them. When I was thinking about that, I was thinking: what if we had a Green Government? Would I want operational independence for the UK Infrastructure Bank? If your Lordships’ House manages to get the objectives right as well as the composition of the board, which we will get to later, I believe we should have operational independence for the UK Infrastructure Bank because democratic control is the issue. As the noble and learned Lord, Lord Thomas, said, this is a public bank, so any steps being taken by the Government in directing it should be subject to full parliamentary scrutiny of a broader and more detailed kind than that which the Minister referred to earlier.

That brings me to my Amendment 68. In responding to some of the earlier debate, the Minister in a way made a point for me because, as the first amendment in this group states, this bank has a double bottom line. Its responsibilities include social justice and the climate emergency. Indeed, under a Green Government I might like to rename it the “Just Transition Bank” because that is essentially what it is setting out to try to do.

The Treasury is the ministry in control of this bank. What does it know about climate, nature, poverty, inequality or regional disparities? The very nature of the Treasury is that it is focused on money and what is called the economy—that mysterious thing outside human existence. What does it know about farming or health, despite the fact that it has a dictatorship over the actions of all the departments that cover them?

My original plan, which I alluded to at Second Reading, was to take the bank out of the Treasury’s hands entirely and put it in the hands of the departments that know about the things that it is supposed to be trying to do. However, the Public Bill Office—and I thank it for its patience and assistance on this—told me that that was, technically, practically impossible. The phrase “A Green Government wouldn’t start here” crossed my lips, but the Public Bill Office came up with Amendment 68, which would ensure that the Treasury fully consults the Secretary of State for Environment, Food and Rural Affairs, the Secretary of State for Energy and Climate Change—I admit to something of a Freudian slip and apologise to your Lordship for the error in this amendment, because proposed new paragraph (b) should, of course, refer to the Secretary of State for BEIS, although whether we should have a department entirely dedicated to tackling the climate emergency is a question to raise on another day—and the Secretary of State for Levelling Up, Housing and Communities.

[Lord Teverson (LD)]

I support the amendment tabled by the noble Baroness for that very reason. We should have a Department for Energy and Climate Change.

[Baroness Bennett of Manor Castle]

I thank the noble Lord for his support for my somewhat unintended amendment.

We come back to: what is this bank for and what is the economy for? The bank is supposed to serve the people of this land. The departments that focus on the people and the climate emergency this bank is serving should surely have an explicit statutory role in oversight. I have not been in your Lordships’ House that long, and I cannot count the number of times I have seen a Minister stand at the Dispatch Box and say in response to a question, “Well, I’d love to do that, but the Treasury —” and roll their eyes. That is the way the country is being run, and it needs to change. This could be a small way to step in that direction.

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[Lord Tunnicliffe (Lab)]

My Lords, I will briefly speak to my Amendment 32 before offering a brief response to the other amendments in this group. I have already raised the subject of jobs, and I am not convinced that the Government are giving this the weight that it deserves. As I mentioned previously, the strategic steer already offered to the bank makes only passing reference to the creation of jobs and no reference to what those roles should look like. There is a significant gap that needs to be closed, and the Treasury’s formal statement of the bank’s strategy priorities is the ideal means of doing that.

I am once again struck by the sensible nature of many of the suggestions made by other amendments in this group. The noble Lord, Lord Vaux, for example, has made a strong case for strengthening the status of the operating principles and for ensuring that any updates to those principles are subject to the affirmative procedure. The noble and learned Lord, Lord Thomas, put the whole thing succinctly by saying that the framework document needs to go into the Bill. I accept that it may not go in wholly, but its essence needs to go in. I commend to the Minister previously present, and to the Minister present now, that we must convey that to government. Let us not have an ugly scrap on Report but try to reach a consensus on this. If we do not get a consensus, those in the Chamber now will make a consensus of it and force it through.

The questions posed by the noble Baroness, Lady Bennett, are also interesting. The investments made by the bank will cut across different departments, and it therefore makes sense for there to be some role for those other bodies. I am not entirely convinced that we need a formal role for these other departments, but this could make governance matters more complicated than they need to be. However, I hope that one of the Ministers present—I cannot keep up—can clearly outline how the cross-cutting nature of the bank’s work will be recognised by the Treasury.

[Lord Teverson (LD)]

My Lords, I would gently challenge the noble Lord, Lord Tunnicliffe, on jobs. I have long experience in the far south-west—a deprived area that needs levelling up—of European funding, which always had jobs as its major output. The challenge is not normally jobs because, in the sort of areas that need levelling up, the jobs created by employers are normally low-grade jobs, so that is what you get. The real challenge, particularly on a levelling-up agenda in deprived areas, is actually careers, productivity and high-paid jobs. It is very easy to fill in a jobs return on jobs that are not very skilled or high grade, whereas we need to improve and raise the whole base level. I understand exactly what he is trying to get but I think it is a fundamental problem that we look at these issues in relation to grants, funding regimes, loans or other such systems. That is just a comment from my experience in Cornwall and the far south-west.

[Baroness Bennett of Manor Castle (GP)]

At the risk of ganging up on the noble Lord, Lord Tunnicliffe, which is not my intention, I would add a supplementary comment to his statement. When we talk about job creation, people will say they are building a new supermarket and that it will create 150 new jobs, but there is never any attempt to account for how many jobs will be destroyed by that development. It surely should be about net jobs.

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[Baroness Noakes (Con)]

My Lords, we are in the final lap of Committee. I shall speak also to the three other amendments in this group in my name. Amendments 54 and 58 deal with who should carry out the periodic review of the UK Infrastructure Bank under Clause 9. Clause 9 says that the Treasury must carry out the review, and my two amendments change this to “a person or persons” who are independent of both the Treasury and the bank. At Second Reading, I spoke about how the Treasury was intertwined with the UK Infrastructure Bank and in effect calls all the shots. We have covered that ground again today and I will not repeat any of that now, but all that adds up to a fact of life: that the Treasury is very closely involved in the bank and is not and cannot be a dispassionate observer when it comes to appraising how well the bank has done. The Treasury should not, as I think the noble Lord, Lord Vaux, said earlier, be marking its own homework.

In my view, it is only right that an independent person should be appointed to appraise the effectiveness and impact of the bank. Indeed, it may well be that the effectiveness or impact of the bank has been helped or hindered by the Treasury, and we certainly want to know about that. That would not emerge if the review were carried out by the Treasury. The noble Lord, Lord Teverson, has a more elaborate version of independent review in his Amendment 63, and I look forward to hearing what he has to say on it, but I wonder whether an annual report on performance is getting a bit too much like micro-oversight of the UK Infrastructure Bank.

Turning to Amendments 59 and 62, which address the timing of the Clause 9 reviews, I am grateful for the support of the noble Lord, Lord Vaux of Harrowden, and the noble Baroness, Lady Kramer, respectively, in respect of these amendments. Under Clause 9, the Treasury has up to 10 years to produce its first report and then has to produce reports at not more than seven-year intervals after that. My amendment calls for a first report within four years and Amendment 62 calls for subsequent reports at least every three years. I chose four years as the first period, rather than the three years called for by Amendment 60 in the name of the noble Baroness, Lady Kramer, because I thought that a report after three years of operation would be sensible and would allow a bit of time beyond the three years to actually make the report. But there is no magic in either three or four years: the main point is that 10 years followed by seven years is far too long. I beg to move.

[Lord Teverson (LD)]

My Lords, when the Green Investment Bank was privatised and we dealt with legislation to do that, we in this House looked at ways in which we could be sure that, with that change of ownership, whatever it would be, it remained true to its constitution, its values and objectives in that private situation. It was subsequently bought by Macquarie, which still owns the Green Investment Bank, now called the Green Investment Group. The Government at the time—I remember going through this with the noble Baroness, Lady Neville-Rolfe—were enlightened enough to set up a green share held by a non-profit organisation called the Green Purposes Company, of which I am a trustee, and therefore I declare my interest in that.

I take the noble Baroness’s point that my amendment is slightly more complicated and maybe slightly more micro, but it is there for a different reason. That company was set up in a similar way to the way described in this amendment, and what we do in the Green Purposes Company is certainly not to act in any way prior to investment—we are not part of any investment committee; we do not get involved in that. What we do, at the end of a year, is to assess whether those investments that have been made by what is now the Green Investment Group comply with its green objectives and the mission of the bank.

With the co-operation of Macquarie, that process has worked very well. As I said, we assess performance against the bank’s objectives and have four meetings a year with senior management—they are optional; we just decided to do that operationally—and then publish a letter in the annual report of the bank, making that assessment of the investment in general. It is a fairly short letter, but it provides total transparency and a completely independent view of whether the bank has met those objectives through its investments during the year.

Having agreed to and implemented this model, we have talked to Treasury officials about it in the past—it has been considered and, I think, welcomed by the Environmental Audit Committee at the other end—and to the Finance Minister John Glen. It is a successful assessment method; it is transparent, tried and tested and is a model laid down by the Government themselves. This is a really good way forward and I would very much like the Minister to consider it as a way that we can make sure there is independent, regular assessment, post investment, of how the bank is performing without getting into too much of the micro area in the report. I agree that, if that was too much part of the reporting structure, it could be onerous and reduce transparency.

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[Lord Tunnicliffe (Lab)]

My Lords, yet again, I have to concede that I agree with the noble Baroness, Lady Noakes, on Amendments 54 and 58. I will not labour that further.

The bank could, in time, play a significant role in our fight against climate change, and we very much hope that it will. Given the urgency of the green transition and the Government’s stated commitment to levelling up, carrying out the first review of the bank after 10 years makes no sense. I was pleased to sign Amendment 60, which would bring this forward to three years. However, let me be clear that, like a number of other noble Lords, I am not wedded to any particular number. The noble Baroness, Lady Noakes, may win the day with four years, or we may settle for something else entirely. What has been clear from this short debate is that the current decade is simply not acceptable. There are also some differences of opinion on frequency. Once again, I do not think it matters exactly where it ends up, if, in the end, the result is that we see these documents more frequently than currently envisaged.

[Lord Teverson (LD)]

Could I just ask the Minister one thing before she replies? Ten years is just ridiculous, so is this the one thing where the Government will say, “Right, we’ve listened to the House and we’ll make it three years. Look, guys, we’ve done the deal”, and then the Bill goes down to the other end? Is that the plot?

[Lord Tunnicliffe (Lab)]

That is what my original notes envisaged, but I simply could not believe that they are that clever.