Amendment 22

UK Infrastructure Bank Bill [HL] - Report – in the House of Lords at 6:40 pm on 4th July 2022.

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Baroness Penn:

Moved by Baroness Penn

22: Clause 9, page 4, line 2, leave out “Treasury must” and insert “Chancellor of the Exchequer must appoint an independent person to”Member's explanatory statementThis amendment (and the others to clause 9 in the Minister’s name) would require: reviews to be carried out by an independent person; the reviews to include consideration of “additionality”, or the extent to which the Bank’s investments encourage additional investment by the private sector; the independent person to give reports to the Treasury; the Treasury to publish those reports. The time limit for completing the first review would be 7 (rather than 10) years.

Photo of Baroness Penn Baroness Penn Baroness in Waiting (HM Household) (Whip)

My Lords, I turn to Clause 9 of the Bill, on the statutory review. We had an extensive debate on this in Committee and, reflecting on that debate, the Government have tabled several amendments to this clause.

On the timing of the review, in Committee I set out the rationale for the first statutory review of the bank taking place after 10 years. This was for two reasons: first, to ensure that we could accurately measure the effect of the bank’s long-term investments and, secondly, to ensure that we do not overburden the bank with constant reviews. As I have previously noted, the Treasury is currently undertaking a review of the bank’s framework document and will undertake a review by spring 2024 of the bank’s capitalisation. The bank will also be subject to frequent Cabinet Office-sponsored arm’s-length body reviews, which should be conducted by an independent person.

However, I understand the strength of feeling in the House and, for this reason, I tabled an amendment to shorten the timescale for the first statutory review. Bringing forward the initial review to take place no later than seven years after Royal Assent will mean that the first statutory review will be conducted in 2029. This fits neatly with the timing of the levelling-up missions, which the bank’s work will support, that are due to be achieved by 2030.

I turn to my other amendments to Clause 9. I heard concerns in Committee that the Treasury would, in these reviews, be marking its own homework. That was not the intention, and so I have brought forward an amendment to clarify that the Treasury will appoint an independent reviewer to conduct the review. Noble Lords will, I hope, be further reassured that the Cabinet Office-sponsored reviews, as I have just noted, will have a recommendation that they be conducted by an independent reviewer too. I hope noble Lords are content with these amendments. I beg to move.

Photo of Lord Vaux of Harrowden Lord Vaux of Harrowden Chair, Finance Committee (Lords), Chair, Finance Committee (Lords)

My Lords, I rise to speak to my Amendments 30 and 32. I am grateful to the noble Baronesses, Lady Noakes, Lady Kramer and Lady Bennett of Manor Castle, for their support. In fact, I think I may have achieved a world first in getting the noble Baronesses, Lady Noakes and Lady Bennett, to sign the same amendments. I hope, therefore that the Minister might take note of this extraordinary event and take the amendments seriously.

First, I thank the Minister for her amendments in this group, and for listening to and acting on the concerns that were raised by noble Lords as the Bill has proceeded. Her amendments are very welcome, especially those that deal with the issue that was previously raised about the Treasury marking its own homework. Having an independent person carry out the review is an important step. I also welcome the reduction of the period before the first review from 10 years to seven years. I think everyone agreed that 10 years was way too long, but even after that change, there will still be a review only every seven years, which I still think is too long. Amendments 30 and 32 would reduce this to every five years.

The argument in favour of the longer period seems to be that infrastructure investment is long-term, which it is, and therefore it will take a longer period before the success of the bank can be evaluated. I think this rather misses the point. Although it is true that the success of a particular investment may take more than seven years—indeed, it might be 20 or 30—to become clear, the review should be covering how effectively the bank has performed in making investments. Is it making enough investments, are they appropriate, are they in the appropriate parts of the country and, importantly, do they meet the additionality principle and, as we discussed earlier, the crowding-out problem? We do not need to wait until the investments themselves reach maturity to be able to see how well or badly the bank is performing in making investments.

This is especially true now that the only way of assessing the bank’s performance, in terms of additionality and crowding out, is through this review. Seven years is a very long time to wait before we can see whether the bank is achieving its additionality objectives; in particular, whether it is in fact crowding out private finance. A lot of damage will have been done in seven years if it is. It would be more difficult to change the direction if we wait that long.

Seven years is also substantially longer than the parliamentary cycle, and it does seem appropriate that the review period should be brought closer to that cycle. I have proposed a compromise of a five-year cycle, which is a balance between being too much of a burden on the bank and an appropriate level of scrutiny and transparency. I do not expect the Minister to accept this, and I am not going to push it to a Division, but she has mentioned in the past that the bank will be subject to all sorts of different reports, scrutiny, and so on. I ask her to at least confirm that the annual report and accounts will contain information on the progress of the bank, in terms of the sort of investments it is making and, in particular, that that will touch on the additionality question, even if it falls short of a formal review.

Photo of Baroness Kramer Baroness Kramer Liberal Democrat Lords Spokesperson (Treasury and Economy) 6:45 pm, 4th July 2022

My Lords, I will be very brief. I thank the Minister, particularly, for establishing that the review will be carried out by an independent body. That is absolutely crucial; we really could not have had the Treasury marking its own homework. That is now going to be established on the face of the Bill.

In terms of the review period, I am totally with the noble Lord, Lord Vaux, on this one. I add one reason to the many powerful arguments that he made. The two issues that this bank is set to address, climate change and levelling up, have a great deal of urgency behind them. Therefore, the decisions that the bank makes in its early days, even if they have a long tail to them, will be crucial. If that direction needs to be changed, the bank needs to know that that is Parliament’s view before we get to seven years out, at which point, particularly around climate change, it will be far too late to change a direction that is not meeting the needs of our climate change agenda. So, particularly for this bank, because it is tied to very specific objectives, a much earlier review phase is crucial.

I join the noble Lord, Lord Vaux, in being interested in how the Minister will lay out these other reviews that are meant to fill that gap. Why should we be having partial reviews that partially fill parts of the gap, rather than the comprehensive reviews on impact that could be managed under various amendments before the House today?

Photo of Lord Tunnicliffe Lord Tunnicliffe Shadow Spokesperson (Defence), Shadow Spokesperson (Treasury), Shadow Minister (Transport)

My Lords, although I see an attraction in a higher frequency than the Government are proposing, equally, I think that, in many ways, even five years is too long. I take comfort in what I hope to hear from the Minister: that we will have much of the information we need to come to a judgment about the success, and effectiveness—crowding in and all those issues—annually in the report. Her assurance on that matter is crucial, but I have confidence that she will be able to give it.

Photo of Baroness Penn Baroness Penn Baroness in Waiting (HM Household) (Whip)

My Lords, as I have said, I have listened to the concerns of the House around Clause 9, and it is for that reason that I have sought a compromise and tabled the government amendments to this clause, as I outlined earlier.

On the shortened timescale proposed by the noble Lords, Lord Vaux and Lord Tunnicliffe, and others, I have already set out the rationale for why the Government have gone for seven years. To reassure noble Lords on their questions about needing more regular information, quite rightly, on how the bank is performing, the bank’s strategic plan set out a whole range of KPIs that it will be assessed against, including additionality, to address the point made by the noble Lord, Lord Vaux. Those KPIs will be reported on in the annual report and in the updates to the strategic plan in future.

So more regular information will be provided on the progress of the bank, not just through the statutory review. In addition to the other reviews that I mentioned in my opening speech, there is currently a review by the National Audit Office looking at the set-up of the bank. As I said in Committee in response to my noble friend Lady Noakes, the bank is also subject to reports and investigations by Select Committees of both Houses and has already come to give evidence before those committees. I reassure noble Lords that the statutory review is not the only avenue through which the work of the bank will be scrutinised. There will be ongoing scrutiny through several different avenues, including in its annual report and accounts, which will judge its progress against many KPIs. With that, I beg to move.

Amendment 22 agreed.