UK Infrastructure Bank Bill [Lords]

Richard Fuller Excerpts

2nd reading
Tuesday 1st November 2022 Commons Chamber

[John Glen]

I will not be able to comment on specific investments. As I said, a series of investments have been made in the last 12 months, and I would be happy to correspond with my right hon. Friend and put him in touch with the bank so that the logic behind that decision can be explored with him.

[Richard Fuller (North East Bedfordshire) (Con)]

May I broaden out the question the Chief Secretary has just answered? Can he explain the oversight of the bank? There will be a report after a certain number of years, but will it be regulatory oversight, oversight by Parliament or oversight by the Treasury?

[John Glen]

I am grateful to my hon. Friend for the work that he did in the Treasury in recent months as my successor as Economic Secretary.

The board of the bank has been filled over the summer so that the right expertise has come in to oversee the investments and metrics for success. They will be accountable through normal processes and accountable to Parliament. Indeed, the chairman and chief executive of the bank have made themselves available to Parliament through the process of this legislation, and I attended meetings with them earlier this year with Members of the House of Lords. I know that they are willing to be scrutinised on the logic of their evolving processes and remit so that they can capture the wisdom of this House and the other place.

With regard to the climate change objectives, significant public and private investment will be needed to achieve the UK’s infrastructure policy goals, and low-carbon investment will need to be significantly scaled up to deliver net zero. That is highlighted by the fact that the UK’s core infrastructure—power, heat and transport networks—account for more than two thirds of UK emissions. Without the bank, the private sector is likely to focus its investment on lower-risk technologies and sectors, and we will not achieve regional and local economic growth without better infrastructure in every region of the country.

Disparity in infrastructure across the country has been identified as a key driver of economic inequalities, and central to the Government’s ambitions to level up is setting up new institutions boosting productivity, pay, jobs and living standards. The bank will help to grow the private sector and support it to deliver opportunities in parts of the country where they are lacking. Without intervention, the private sector is likely to continue to target geographic areas that have historically received higher levels of private capital. Targeted advice, support and challenge from the bank can help raise ambition and boost the capability of regional and local government as they tackle complex infrastructure projects.

Finally, the NIC recommended that the bank be set up in 2021. As I have already mentioned, the bank has been operational since last summer and has £22 billion of capacity. The bank is also operating across the UK and has already invested in each of our four nations. I am pleased that each Government have supported the bank, and discussions for a legislative consent motion are progressing well.

In that context, I come to the provisions of the Bill. It will complete the setting up of the bank as an operationally independent institution. It is a short Bill of 11 clauses, broadly split across three areas. First, the Bill enshrines the bank’s objectives and activities in legislation to provide clarity for the bank and the market on the bank’s long-term purpose. That is covered in clause 2, which includes the bank’s core objectives; its activities, including providing finance for the private sector and public authorities; and a definition of infrastructure.

The definition of infrastructure is inclusive and based on existing definitions in the Infrastructure (Financial Assistance) Act 2012 and the United Kingdom Internal Market Act 2020. Crucially, given the bank’s scope, we have focused the definition on economic infrastructure. As a result of the Bill’s passage through the Lords, we included energy efficiency in the definition to clearly signal policy intent. I am sure that we will discuss that further in this debate and in Committee.

I highlight that we have taken a power to amend the activities and definition of infrastructure to allow the bank to keep pace with an innovative market. We have not, however, taken the same power to amend the bank’s objectives. That is vital in providing clarity to the market and to ensure that the bank is not fundamentally changed without further primary legislation.

Secondly, the Bill will allow the bank to provide financial assistance to the private and public sector including, crucially, giving the bank the power to lend directly to local authorities in Great Britain and to the Northern Ireland Executive. That is covered under the bank’s activities in clause 2 and further defined in clause 10 and clause 5, which allows the Treasury to put the bank into funds.

It is important to note that the bank will be able to lend directly to each UK nation, including their local authorities. In the case of Northern Ireland, we have designed the bank to be able to lend directly to local authorities and the Northern Ireland Executive. That accounts for the fact that the Northern Ireland Executive hold responsibility for most capital infrastructure projects that would be the responsibility of local authorities in the rest of the United Kingdom. As I said at the beginning of my remarks, this is a Bill for the whole UK.

[Richard Fuller]

One of the objectives is that the bank should make a positive financial return. Can my right hon. Friend explain to the House why that is not in the Bill?

[John Glen]

I would be very happy to look into that matter and respond to my hon. Friend at the end. It is probably deemed to be unnecessary, but I will give absolute clarity, or the Exchequer Secretary will when he closes.

Thirdly, the Bill supports the operational independence of the bank by setting out clear governance and accountability in how it will be run. That is covered by the remaining clauses, including board requirements in clause 8, reporting requirements in clause 6, a review of the bank that will also look into its additionality in clause 9, and the ability for the Treasury to issue a strategic steer in clause 3 or a direction in clause 4.

Although the bank is still in its infancy, it is already taking a leading role in the clean infrastructure market. Over time, we expect the bank to catalyse new markets of infrastructure by crowding in private capital to help meet our climate change ambitions and level up across the UK. In much the same way that the EIB helped to catalyse the offshore wind market, where the UK is now a global leader, the UKIB will help to catalyse the infrastructure markets and technologies of the future.

Indeed, the Bill will be at the heart of our focus on our long-term energy security. It will help the Government to deliver more renewables, including more offshore wind. I have no doubt that the bank will grow to be a sophisticated and adaptive tool, which will allow the Government to quickly place capital behind the projects that this country needs. I reiterate to hon. Members on both sides of the House and to the wider public that we have designed the bank to endure and be a long-lasting institution that will deliver the long-term priorities on which we all depend. I greatly look forward to this afternoon’s debate and to drawing on the expertise of hon. Members on both sides of the House.

[James Murray (Ealing North) (Lab/Co-op)]

I will set out the views of the Opposition. We will not oppose the Bill today, as it seeks to put the UK Infrastructure Bank, which has been operating on an interim basis since June 2021, as we heard, on a statutory footing. We support the establishment and strengthening of the bank, and we want the new institution to play its part in tackling climate change and supporting regional and local economic growth.

The need for economic growth is central to the challenges our country is facing today, and it comes after 12 years of low growth under the Conservatives. During the last Labour Government, despite the global financial crisis, the economy grew by 2.1% a year. Since 2010, however, the Tories have grown the economy by just 1.5% a year. The outlook under the Tories now is even worse, with growth forecast to be the worst in the G7 over the next two years. As the previous Chancellor recently admitted, under the Conservatives we have been stuck in a “vicious cycle of stagnation”.

That stagnation in our economy has seen real wages fall and the tax burden rise for working people in this country. Even before the disastrous mini-Budget, working people were paying the price for the Conservatives’ record of failure on the economy. What the then Chancellor announced on 23 September poured petrol on the fire, as Ministers unleashed a discredited and reckless economic approach on the British public. Trickle-down economics, unfunded tax cuts and an ideological slashing of protections for workers and the environment—no wonder the former Prime Minister and Chancellor were removed from office so quickly, and no wonder the current Chancellor has had to U-turn on almost every measure. The truth is that this economic crisis was created in Downing Street. The damage has been done, and working people will be paying the price for years to come.

Part of the reason for the Conservatives’ failure to grow the economy as it could have been growing over the last decade has been their failure to invest in the infrastructure our country needs. As we look ahead to the coming decade, investment in our country’s response to the climate emergency could not be more critical, both to protect the environment and to grow the economy.

That is why Labour’s green prosperity plan is so important. Under our plan, we would invest in wind, solar and nuclear power to make our electricity system zero-carbon by 2030, we would insulate 19 million homes across the country, bringing down carbon emissions and people’s home energy bills, and we would invest in new jobs in industries of the future, from electric vehicles to clean steel.

We recognise that the UK Infrastructure Bank can play an important role in supporting essential investment. We therefore welcome the fact that one of its objectives, set out in clause 2 of the Bill, is to help tackle climate change. But setting up the bank is not enough on its own; we need a Government who will drive forward the agenda of green investment that we need. Sadly, the Government’s record makes it clear that they will fail to rise to that challenge.

There is evidence of that failure littered throughout the past 12 years. Ten years ago, the Government set up the Green Investment Bank. Five years later, they sold it off to a private equity group. The Public Accounts Committee said that the bank had

“failed to live up to original ambitions”.

The Committee was clear that, in selling it off, the Government had been focused on

“how much money could be gained from the sale over the continued delivery of GIB’s green objective.”

Supporters of the current Prime Minister on the Conservative Benches may remember that, two years ago, the then Chancellor published a video on his YouTube channel titled: “Rishi Explains: Green Home Grants”. In that video, the now Prime Minister excitedly announced that the brand-new green homes grant scheme was open for applications. However, I was not able to find any videos of him explaining why the green homes grant scheme closed six months later and saw £1 billion cut from its budget. Although he seems to have forgotten to make a video explaining that, the Environmental Audit Committee was happy to set out its views. In its report, “Energy Efficiency of Existing Homes,” it concluded that the scheme had been

“rushed in conception and poorly implemented”

and described its administration as “nothing short of disastrous”.

[Richard Fuller]

The Opposition spokesman talks about the importance of sticking with plans and of permanence. That is quite right; this is infrastructure, which lasts a long time. Will he therefore use this opportunity on the Floor of the House to give the assurance that, should Labour form a Government in the near future, it will make no changes to the objectives listed in the Bill?

--- Later in debate ---

[Richard Fuller (North East Bedfordshire) (Con)]

It is a pleasure to welcome this sensible Bill, which puts the operations of the UK Infrastructure Bank on a statutory footing. It is pleasing that the Opposition will support the Bill, but it was somewhat worrying to hear the Opposition spokesperson, the hon. Member for Ealing North (James Murray) say that the Labour party was not committed to its objectives. That will send a worrying signal to investors in infrastructure, who want to see a long-term view from both sides of the House on the plan for UK infrastructure. Perhaps he might clarify in his closing speech that Labour will commit today to make no changes whatsoever to the Bill’s objectives. It would be helpful for him to make that indication.

It is right that amendments were made to the Bill in the House of Lords to include issues to do with the circular economy and nature-based solutions. That will broaden its aspect and applicability.

In opening, my right hon. Friend the Minister referred to the European Investment Bank. It is true that the UK used to benefit significantly from investment funds coming from the EIB, but those really came to a close in 2016-17 and, as that was five or six years ago, we should be honest about the need to get the bank moving. I am not trying to push for quicker movement, but this is an opportunity to start getting to the £5 billion or £8 billion that the UK Investment Bank said was its objective in its strategic plan this summer.

I turn to crowding in, which is one of the three parts of the bank’s “triple bottom line”, as it calls it. That is absolutely the right thing. There is plenty more that we can do, and I know that the Government are focused on that. With Solvency 2 and pension fund money being made available for more infrastructure expenditure, will the Minister update the House on the Government’s thinking about that?

The City of London and the Government have made tremendous strides in promoting green finance and London as a centre for that. Again, it would be useful to hear an update from the Minister on the UK’s leadership position, which the bank could play a significant part in helping us to deliver.

One of the most important parts of the 2019 review of infrastructure finance was about how the Government can provide a reliable delivery pipeline. That means that they are clear about the projects that they wish to promote and have a timetable that paces them out over a number of years. The National Infrastructure Commission can—it does not always—do a good job of that. Perhaps we will hear more about that in the near future.

I return to the point that I put to the Minister about another part of the triple bottom line: generating

“a positive financial return”—

which it says is

“in line with the Bank’s financial framework.”

Perhaps that is the answer to why it is not in the Bill, but it would be helpful to have a little more transparency about what the financial framework would be and how it will be brought to the House for some regulatory oversight. Will that be through hearings of the Treasury Committee or other reports that may be made to the House from time to time?

That is an important factor in the UK Investment Bank’s goals and the role that it can play in helping the UK to achieve net zero. Let us be frank: when, I think, four or five years ago, the House committed to achieving net zero in a certain timeframe, there was no price tag attached. It was the biggest commitment ever made without a price tag attached for the British taxpayer. The UK Investment Bank can play a role in making sure that that price tag gets smaller and smaller. In fact, one objective the UK Infrastructure Bank says it wishes to focus on is the transition to subsidy-free models. That is absolutely essential to some key aspects of how we achieve net zero, in particular the decarbonising of home heat where we will need to attract private sector capital and long-term, patient capital. We will need the Government, through the UK Infrastructure Bank, to provide some catholic investment and, most importantly, the product structures that enable drawing in of that capital behind the most effective way, while also being able to show how we get out of the taxpayer funding it all. We cannot afford to make unfunded pledges again and again on not only this generation of taxpayers, but on future generations of taxpayers. That is why I am particularly keen on pressing the Minister and, should I be fortunate enough to sit on the Public Bill Committee, investigating further—[Interruption.] I guess that is a straight no, Mr Deputy Speaker—how we can ensure that the commitments to a positive financial return and to transitioning from subsidy-free models are given more weight in the structure of the UK Infrastructure Bank.

Finally, I draw the attention of those on the Treasury Bench to clause 4, on the power of direction. This is a familiar topic, I think, in various parts of the Treasury at the moment. I would be interested if in his winding-up speech the Minister provided us with a little more of his thoughts. There was a debate on that in the other place. It might be helpful if the Minister updated us on what further thinking there has been on the power of direction.

This is a very sensible Bill. It confirms what is already the case and I am sure it will go through the House with very great speed.

[Mr Deputy Speaker (Mr Nigel Evans)]

The Whip on duty has made a note of your enthusiastic application to sit on the Committee.