My Lords, I recognise that the Clock is moving rapidly, so I will be quite speedy. These amendments are reasonably self-evident. With the amendments that stand in my name here, I have tried to set what seem obvious principles for the way in which a board of directors is set up. That is, as covered by Amendments 43 and 44, to make sure that the total number of board members is an odd number, not an even number. With a board of directors, it is surely appropriate to be as certain as possible that the chair’s casting vote will be used as rarely as possible. Hopefully, decisions will not be so contentious that the board is completely split, but where that happens it is far healthier to have a resolution provided by an odd number of members than to have to look again and again to the chair’s casting vote. It is quite curious that 14 is the proposed number of directors. Now and again, we would find ourselves looking to the chair, and I think that would be genuinely unfortunate. It is not the most important issue in the world, but it seems to me that some decent housekeeping would not hurt here.
I also want to be sure, in Amendment 45, that the majority of board members must be non-executive directors. It does not speak to that in any way and, given that the board can be as small as five, you could easily see a situation in which three of the members were executives and only two were non-execs. It seems a simple principle.
Probably my most significant amendment in this group, on an issue that has been addressed by others, is Amendment 49. We have talked before about the importance of having the right range of skills on the board—people of independence, and people with expertise and knowledge. Amendment 49 simply asks the bank’s chair to keep under review such characteristics and, if he feels that there are gaps, to take steps to address or mitigate those shortcomings.
It is important to put that responsibility on the chair and not just to say, “Well, Treasury will take care of that. The Chancellor of the Exchequer appoints everybody and therefore he will decide what kind of skills are necessary”. We have talked about the operational independence of the bank. Frankly, if the chair cannot even guide what kind of skills he needs to be on his board, we are once again underscoring that there is no operational independence. It seems to me a standard and normal responsibility for a chair, and I simply ask that there be an opportunity for that to happen here.
My Lords, I will be very brief in speaking to my Amendment 46, but first, let me say that I support the amendments in the name of the noble Baroness, Lady Kramer. Frankly, they seem like normal, good practice and it is almost surprising that they are not already in the Bill.
Amendment 46 is very simple. The bank’s activities will cover the whole of the UK, including the devolved nations. I welcome that—it is a really good thing—but while allowing the bank to operate in the devolved nations, the Bill gives absolutely no right at all to the devolved Governments to have any say in how it operates. I would be completely opposed to giving veto rights or anything of that nature, but I do think it would be appropriate to allow them at least some input into the bank’s direction. As someone who lives in Scotland, I am not the world’s greatest fan of the Scottish Government, but devolution is a fact and we have to live with it and work with it. The devolved Governments have perfectly reasonable interests in how investment is directed in their countries.
It seems to me that the easiest way to achieve this is just to allow the devolved Governments to be represented on the board of the bank. Amendment 46 would simply allow the devolved Governments each to appoint a director to the board. That way, they would have the ability to represent their legitimate interests without introducing any veto rights or anything of that nature, which, obviously, we should avoid.
If we want to keep this union together, we need to recognise that the devolved Governments have legitimate interests, and we need to try to work together.
My Lords, it is a pleasure to follow the noble Lord, Lord Vaux, and to find myself in broad agreement with him on a number of areas of this Bill, if not always on the details—as with our views on the Scottish Government, which, of course, has Green Ministers among its members.
My amendment is rather similar to his, although perhaps not quite so expansive on the devolved Administrations. It says that
“a director must be appointed” jointly by
“the governments of Scotland, Wales, and Northern Ireland”.
It specifies two other directors, one of which would be appointed by the Climate Change Committee. I am a little disappointed that the noble Lord, Lord Deben, is not in his place, as I would be interested in his view on that. The third director—there is a deep irony here, and I should point out that I tabled this amendment some 10 days ago—would jointly represent Natural England, Nature Scotland and Natural Resources Wales.
In a sense, this is another way of getting at the issue I was trying to get at earlier. The Treasury does not really have expertise on environmental and social issues and devolution, and the same can be said, often, of bankers. This is an attempt to ensure that the directors really do have that expertise.
However, events have forced me to reflect at this point on the fact that a lot of our earlier discussions were about the operational independence of the bank. It is rather telling that Natural England was, of course, an independent body, and over the last decade it has gradually lost its independence under the hold of Defra. It was deprived of its independent online presence and its own press office in 2012, and in 2018 its former chair, Andrew Sells, confirmed that the body is no longer independent.
It has emerged in the last week—buried deep in a consultative proposal that campaigners have only just uncovered—that the Government are consulting on dismantling Natural England. That has caused a great deal of concern but it is a real demonstration of so many points that noble Lords have been making about how Governments can have structures that are supposed to hold them to account and somehow, through a process over a decade or so, effectively dissolve those structures.
This is an attempt to deal with the issues that the noble Lord, Lord Vaux, has already covered well. I also point to the Second Reading speech from the noble Lord, Lord Wigley. I will not go through it in detail but what he said there was that the bank needs to work with the grain of devolved Governments, regional and local government. Looking at this amendment now, I wonder if I should not also have put “a representative of local government” in it, but that is something to think about for Report.
My Lords, there are obviously different ways of trying to ensure two things. On one, expertise, my long experience of bankers has persuaded me that they are not the right people to be exclusively on this board. One needs someone with the expertise of addressing the objectives of the bank. That is critical. The second is to keep the union together and it is no use saying—I hope that we will not get this from the Minister, who has been so receptive to many points—“Don’t worry, we’ll all do the right thing”. I come from a school where if you all agree on what the right thing is, why do you not write it down?
That is really what I am saying: let us write down that you should have experts in the various areas central to the bank’s objective and make provision for those who live in the devolved nations to feel that the bank is acting in their interests. Here, the question of perception is critical. The idea that the Treasury carries on as before is, to my mind, not apposite in the current time. I would hope that the way in which I have phrased my amendment might be slightly more acceptable to the Treasury in that it would leave it with the decision while giving it objective standards. One can but hope.
My Lords, I shall make just a couple of comments. I support the noble Baroness, Lady Kramer, on her Amendment 45, which requires there to be a majority of non-executives on the board. My noble friend the Minister will doubtless say that the UK Infrastructure Bank will have to comply with the UK governance code, and therefore it has to have a majority of non-executive directors. But any public body that is set up always has the provision that there is at least a majority of non-executive directors on the board. It would be good practice to replicate that for the appointments here, given that we are dealing with those appointments in statute anyway.
I am not attracted by having odd numbers on the board. If there had been a problem, it would have surfaced in the UK Corporate Governance Code before now. The plain fact is that if there ever is a situation where a board is split, no chairman will use a casting vote to push something through. Boards simply cannot operate on that sort of basis. Normally something is withdrawn, people regroup and compromise is reached. It is just not a problem in practice, so we do not need to reflect it in the Bill.
One thing I really want to do, I am afraid, is to disagree with the noble Lord, Lord Vaux of Harrowden, on giving appointment rights to First Ministers in the devolved Administrations. I completely accept that the devolved Administrations will want to feel involved but I prefer the formulation in the amendment of the noble and learned Lord, Lord Thomas of Cwmgiedd, which is about recognising that a knowledge base is important to have on the board. Another and more normal way of doing it is to have a consultation option available to take the views of the devolved Administrations.
However, it is really important to avoid having representatives on boards. It will destroy the collective nature of the board if you have people parachuted in from outside with their only virtue being that they were a political appointment. It is really important to preserve the nature of the board as being an area—picking up what is in these other amendments—to bring together the skills and experience necessary to have the right decision-making processes.
My Lords, I have two interests in this group, having tabled Amendments 48 and 51, but I shall take them out of order as one is general and the other more specific. Amendment 51 is linked to the one tabled by the noble Baroness, Lady Kramer. It seeks to ensure that the bank’s board comprises individuals with knowledge and experience relevant to its objectives.
The second strand of the amendment is arguably more important as it suggests that the board should have knowledge and experience of the nations and regions of the United Kingdom. This is a slightly different proposition from those of the noble Lord, Lord Vaux, and the noble and learned Lord, Lord Thomas. It is vital that the nations of the United Kingdom are properly involved in this process. However, it is equally important that the bank appreciates the very different needs of England’s regions. The Bill sets the objective of achieving regional growth, yet there is no mechanism within it to ensure either a fair split of investment activity across the nations and regions or to address entrenched regional imbalances. Appointing the right board members may not directly address those concerns, but it would at least move things in the right direction.
Returning to the theme of jobs, my Amendment 48 proposes that at least one member of the bank’s board should be a workers’ representative. From previous debates, we know that the Government’s ambition is for jobs created through UKIB funding to be well-paid, secure, and so on. Surely the most effective way of ensuring that the bank supports the right forms of employment is for its board to have somebody with a track record of representing working people.
The Minister will resist the amendment, but in doing so, can she tell me precisely what alternative mechanisms are in place to ensure a voice for workers? I suspect there is none, once again calling into question the Government’s commitment to improving employment practices and rights. Labour wants the bank to be a force for good in all nations and regions of the United Kingdom, creating the highly skilled, secure jobs of the future. The Chancellor talks a good game, but he is falling back on his rhetoric in the Bill. I hope the Minister will reconsider.
My Lords, before turning to the detail of the amendments, I will give a short update on the bank’s recent appointments, as it has recently appointed its first non-executive directors, who all have extensive expertise in the bank’s areas of interest.
These include Bridget Rosewell CBE, who brings experience as a director, policymaker and economist, with roles in the M6toll company, Northumbrian Water Group and Network Rail, among others. Also appointed is Nigel Topping, who will bring a unique mix of experience across manufacturing businesses in the UK regions and industrial transformation to the zero-carbon economy. He was most recently appointed by the Prime Minister as the high-level climate action champion for COP 26, where he launched the Race to Zero and the 2030 climate breakthroughs.
The bank is also ensuring that it recruits the necessary technical expertise, including welcoming its first lead climate advisor, Professor Andy Gouldson, an internationally recognised expert on place-based climate action, who will work with the bank to shape its impact. Noble Lords may also be interested to know that the bank’s chief risk officer, Peter Knott, is a non-executive director at the Scottish National Investment Bank. I have no doubt that the board will be able to act in the interests of the whole United Kingdom when carrying out its duty.
I turn to the detail of Amendments 43, 44 and 45 in the name of the noble Baroness, Lady Kramer. As she said, Amendment 43 would change the maximum number of directors on the bank’s board from 14 to 13. I can see the logic for doing so, to prevent a tie in a board meeting vote. However, as set out in the articles of association and in line with market practice, quorum for board meetings is lower than the total number of directors and, in a scenario where there is a tie, it is the chair of the meeting who takes the deciding vote—again, as is standard market practice. This is set out in paragraph 92 of the bank’s articles of association. Furthermore, reducing the maximum board size to 13 limits the bank’s flexibility to have committees with separate membership. Amendment 44 would require the number of directors to be an odd number—again, with a similar intention to that of Amendment 43. On both these points, as my noble friend Lady Noakes said, there is nothing in the corporate governance code about these matters. The same arguments apply to what would happen in a tie for Amendment 44 as for Amendment 43, with the chair having the ability to cast the deciding vote.
Amendment 45 would require NEDs to hold a majority on the board. This is very sensible, and is in the framework document and the corporate governance code. When drafting this legislation, as we have discussed, we have sought to strike a balance between what is sufficient to be in the framework document and articles of association, and what needs to be in the Bill. The bank will report on compliance with the corporate governance code annually through its report and accounts, which are published in Parliament.
Amendments 46, 47, 48, 50 and 51 are all related to the experience of the board. Amendment 51, in the name of the noble Lord, Lord Tunnicliffe, and Amendment 50, in the name of the noble and learned Lord, Lord Thomas, would ensure that the bank has the right expertise to fulfil its objectives, and has appropriate regional experience. Amendment 46 from the noble Lord, Lord Vaux, is similar, although it allows the devolved Administrations to recommend their own nominee for the board. Amendment 47 from the noble Baroness, Lady Bennett, is a combination of the two, with recommendations on directors coming from the Climate Change Committee, the devolved Administrations, Natural England and relevant devolved bodies.
I understand that these amendments all seek to ensure that the board has adequate representation to meet its objectives. I reassure the Committee that non-executive directors are recruited in line with the guidelines set out by the Office of the Commissioner for Public Appointments and were selected based on the skills that they could bring to the board around UKIB’s mandate and objectives. I understand why the noble Lord, Lord Tunnicliffe, is minded to have a non-executive representative of workers, as set out in Amendment 48, but I hope that he will see with the appointments to date and the process that appointments must go through that this is not necessary.
The Government are committed to ensuring that the bank delivers for all four nations, and the Treasury has engaged with the devolved Administrations throughout the set-up of the bank, and will continue to do so to ensure that the bank delivers for all nations of the UK.
My Lords, I believe that there are a number of different routes by which the bank can ensure that it works closely with the devolved Administrations.
The reason why I asked the question was to do with public confidence from Northern Ireland, Wales and Scotland. That is critical at this stage of keeping the union together. I know that the Minister, who is very helpful on this Bill, may not be able to answer that tonight, but I shall return to this issue with detailed questions on Report, or press an amendment.
I understand the noble and learned Lord’s point, and recognise that I have been given notice that he will return to it at Report. All I was simply going to say was that I understand the point about confidence, which can be achieved in a number of different ways. His amendments suggest one of those, and I was seeking to describe some of the other ways in which UKIB has approached this in collaboration with the devolved Administrations and will continue to do so. I just note that we are seeking legislative consent for relevant aspects of this Bill.
Given that this consultation has been happening with the devolved nations, can the Minister give us some flavour of how that has gone and what the reaction from the devolved nations has been?
My understanding is that it has been very constructive, but perhaps I can write to noble Lords setting out further detail on that.
Amendment 49 in the name of the noble Baroness, Lady Kramer, would ensure that the bank’s chair must keep the board under review to ensure that it continues to perform adequately. I think it goes without saying that I agree with the policy of this, but again believe that it is set out sufficiently within the framework document which largely reflects the requirements of the corporate governance code, against which the bank, as I said before, will publicly report compliance each year. It covers most of these points adequately, particularly in paragraphs 5.5.2 and 5.9.5.
I have committed to write on a number of aspects and know that noble Lords have given notice that they may wish to return to this at Report. With that, I hope that the noble Baroness will be able to withdraw her amendment for now.
I thank the Minister for her comments. I am slightly alarmed by two things, the first of which is that she sees no reason why the chair should have influence over the shape of the board, so that it should be the responsibility solely of the Treasury and the Government. That troubles me, particularly in the much wider context of operational independence and so many of the other issues we discussed earlier today.
I am very sympathetic to the issues raised by the noble Lord, Lord Vaux, and the noble and learned Lord, Lord Thomas. I think that the noble and learned Lord is exactly right: this is an issue of confidence. I am somewhat surprised that we do not have legislative consent yet, even though we are already in Committee. I wonder if the Minister expects that we will have legislative consent before we get to Report. I have not dealt with many Bills, but legislative consent has always come very early in the process and not at this point in time. I am slightly concerned about that.
Perhaps I can pick that up in the letter. As this is a Lords starter, I believe we might have more time to deliver on legislative consent than when we receive Bills from the Commons—that may be the timetable.
The Minister makes a good point; I am used to thinking of legislation that starts in the Commons, and therefore legislative consent is in place by the time it gets to the Lords. I hope that this can be very quickly resolved.
Apparently, on the issue of non-executive directors, we have found another item within the framework that we want to consider putting in the Bill. It would be interesting to see that as we get to Report. For now, I am content to withdraw the amendment.
Amendment 43 withdrawn.
Amendments 44 to 50 not moved.
Clause 7 agreed.
Amendment 51 not moved.
Clause 8: Duties of the Bank etc
Amendment 52 not moved.
Clause 8 agreed.
Amendment 53 not moved.
Clause 9: Reviews of the Bank’s effectiveness and impact