New Clause 14 - Impact of infrastructure spending on costs for consumers

Infrastructure Bill [Lords] – in a Public Bill Committee at 3:00 pm on 15th January 2015.

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“28A Provision of impact data

‘(1) The Chancellor of the Exchequer may by regulations make provision for the regulators to provide data, in a manner prescribed by the regulations, about the anticipated impact of infrastructure spending on the cost of products for consumers.

(2) Regulations made under subsection (1) may prescribe—

(a) the type of infrastructure spending about which data must be provided;

(b) the nature of the data to be provided;

(c) the methodology for collating and manipulating the data, including assumptions that should be made;

(d) the form in which the data should be presented;

(e) the persons that should receive a copy of the data.

(3) The regulations may make different provision for different regulators where necessary.

(4) The Treasury must scrutinise the data provided under subsection (1) and assess—

(a) the cumulative impact of infrastructure spending on the cost of products for consumers;

(b) the affordability of any anticipated increases in the cost of products for consumers, taking into account factors other than infrastructure spending that are also likely to significantly impact the cost of products; and

(c) differences in affordability between different groups of consumers, if any.

(5) The Treasury must publish the data provided under subsection (1) and the assessment made under subsection (4) in such manner as it reasonably deems appropriate.

(6) The Treasury must take into account the assessment in subsection (4) in making decisions about the extent, prioritisation or timing of infrastructure spending.

(7) The duties in subsections (4) and (5) may be delegated to any person or organisation that the Chancellor of the Exchequer reasonably deems appropriate.

(8) A delegation under subsection (7) may specify—

(a) the extent to which the duty is delegated; and

(b) any conditions to which the delegation is subject.

(9) The Chancellor of the Exchequer may give directions to the regulators in relation to infrastructure spending in furtherance of this Part.”—(Tom Greatrex.)

Brought up, and read the First time.

Photo of Tom Greatrex Tom Greatrex Shadow Minister (Energy)

I beg to move, That the clause be read a Second time.

Photo of Roger Gale Roger Gale Parliamentary Assembly of the Council of Europe (Full Member)

With this it will be convenient to discuss:

New clause 15—Interpretation of section (Impact of infrastructure spending on costs for consumers)—

In section Impact of infrastructure spending on costs for consumers—

(a) “consumer” means any individual or household of individuals that purchases a product or products;

(b) “product” means a good or service the provision of which is regulated by a regulator;

(c) “a regulator” means any of—

(i) the Northern Ireland Authority for Utility Regulation;

(ii) the Office of Communications;

(iii) the Office of Gas and Electricity Markets;

(iv) the Office of Rail Regulation;

(v) the Water Industry Commission for Scotland; and

(vi) the Water Services Regulation Authority; and “the regulators” means (i) to (vi).”

Photo of Tom Greatrex Tom Greatrex Shadow Minister (Energy)

I want to talk about the intent behind the new clause, which is an important amendment to tease out the Government’s thinking on these important and significant issues. The title of the Bill is the Infrastructure Bill—we might have a discussion about the short title or the long title on Report—and it obviously impacts on different forms of infrastructure. We have heard today about energy, transport, standards for homes and a range of issues. With infrastructure, there are always costs, and costs end up being borne by the consumer and/or taxpayer—groups that often overlap.

It is important to reflect on a National Audit Office report on infrastructure costs. The NAO concluded that no one in Government is drawing together an overall forecast of aggregated costs on a range of different sectors or how that will impact on consumers. I am aware that in 2010 Ofgem in the energy sector undertook Project Discovery, which looked at costs associated with the renewal of energy infrastructure. Although a regulator did that, the Government took the view that it was policy work, so since 2010 the Department of Energy and Climate Change has done similar assessments.

In relation to water, however, as the National Audit Office report highlighted, the limited forecast for future bills is attempted by Ofwat and not by the Department for Environment, Food and Rural Affairs. In telecoms, neither the regulator nor the relevant Department is making any such forecast. We can see that there is an inconsistency in the approach to those important matters. I am sure that we all support infrastructure renewal; the need for it is pretty urgent in some areas and sectors. However, we are all rightly concerned about the cost and where it falls.

We can debate, as we frequently do, whether certain forms of technology are a waste of money and how effective they are. The hon. Member for Daventry may decide to start such a conversation. For the sake of transparency, however, I am sure that he and others would like that to be comprehensive. The amendment would compel the Treasury to charge someone else on its behalf, to undertake such an exercise systematically, so that the results could be compiled, compared and made available not only to those of us who scrutinise Government policy but to the general public.

Such an exercise is important for two reasons. First, it is important from the point of view of seeking the best value for money for taxpayer-funded or, eventually, consumer-funded projects when the cost ends up on people’s bills. Secondly, it is important to enable us to have an objective debate. Various different people make assessments and claims about the costs, but the comparisons are not always accurate. In the energy arena, for example, that can be done on the basis of generational capacity or of lifetime costs. The figures can be calibrated in different ways, which may lead to contrasting results from studies on the same issue. It would be helpful for the Government to consider a properly comparable way of doing that, which covers a number of different sectors in a consistent way, and new clauses 14 and 15 are designed to achieve that.

I am sure that the Minister is aware of the work that the NAO and the Public Accounts Committee have done on the matter. It is always wise to take account of their work and to look at ways to respond, through the work of Government, to their legitimate concerns so that if there are any deficiencies, as there seem to be in this area, those can be rectified. Members of the Committee may well be aware that the Consumers Association has, over a long time, pressed for something similar to new clauses 14 and 15, and the organisation contributed to the evidence taken by the NAO in the preparation of the report. Even if the Government cannot accept the new clauses, I hope that the Minister can indicate that they are seriously considering the issues I have raised. I hope that they are considering ways of providing the  relevant information objectively and with the right analysis, in order to remove the doubt and distortion that we have seen in some of the debates about cost and ensure that people are clear about the costs associated with different projects or policy developments. In such a way, the Government can ensure that public debate is well informed rather than misinformed.

Photo of John Hayes John Hayes Minister of State (Department for Transport) 3:15 pm, 15th January 2015

I have grown increasingly fond, during our deliberations, of a number of members of the Committee, including the hon. Members for City of Durham and for Birmingham, Northfield, but it is no secret that the hon. Member for Rutherglen and Hamilton West is my favourite. When I saw the notes that were prepared for me—which were immensely tedious and to which I am not going to refer— encouraging me to resist the new clause, I was not exactly resentful, but there was a certain sorrow in my heart. None the less, I am going to resist the new clause, but not because it does not have some nuggets at its core.

There are two powerful points at the heart of the motivation behind the proposed new clauses. The first is that consumers should know as much as possible about what their bill comprises. There is precedent for that because, as the hon. Gentleman knows, given his shadow ministerial responsibilities in the field of energy, energy bills are broken down to show what is spent, for example, on transmission costs, which are a substantial part of bills. Distribution and transmission costs together are something like 20% of the bill, and it is important that people know that.

The second nugget at the heart of the reason for the proposed new clauses is that it is good to have some independent scrutiny of the effect—particularly in those areas of infrastructure and investment that are necessary to deliver utilities—that the character of that investment has on consumers. That argument is made by the Consumers Association and others, and the hon. Gentleman amplified it in his short remarks. However, I am not sure that the new clause is the best way to go about it.

I have two problems with the way in which the hon. Gentleman set about addressing at least two important issues. The first is that because so much infrastructural investment is private—not dictated by Government—and the Government therefore do not set the overall level of infrastructural spending, I am not sure that it is appropriate for the Government to become involved in the way that they would have to if the new clauses were incorporated into the Bill.

We do not control how much is spent on a large proportion of infrastructure. Investment in roads is funded almost exclusively privately, and although we have a road investment strategy, the delivery of that strategy is essentially about building sufficient confidence in long-term commitment to encourage private sector investment. The same might be true in the area in which the hon. Gentleman has responsibility and considerable expertise. Given that at least 60% of our infrastructural pipeline is expected to be privately funded, I am not sure that the proposal that he is making is the right vehicle to achieve the two things that I have highlighted as seeming significant.

The second reason why I would resist the new clauses—just in case any members of the Committee were worrying, there are times to speak for a long time and times to speak for a short time, and I shall be speaking for a  short time on this occasion—is that I am not sure that aggregating spend on infrastructure is meaningful. I certainly do not think that it is easy to devise a robust mechanism for doing so. Certainly, aggregating effects on consumers is problematic, because of the variable character of the effect of infrastructural investment and the variable character of the nature of consumption. Therefore, for those two pretty central reasons of economic theory and practice, it is difficult to accept the new clauses.

There are any number of more detailed explanations that I could read out to the point of tedium, but I have no intention of doing so. However, because of the tone in which the hon. Gentleman spoke and the intent behind the amendments, which I recognise, I will look again at the matter, with the caveats I have mentioned.

The hon. Gentleman is right about the National Audit Office. If I were in opposition—far be it from me to teach people how to do their jobs—I might have focused more on the regulators’ teeth, because there is the question of the balance between measurement and regulation. There is an interesting point about what role regulators should and do play in assessing the appropriateness of infrastructure investment. As he will know, they already have such a responsibility, but the Bill provides an opportunity to test the effectiveness of what they currently do. There are matters that we can look at, the consideration of which has been catalysed by the tabling of these new clauses. Because of not only my affection for the hon. Gentleman but the sense in what he said, I will look at them again. On that basis, I hope that he will withdraw the new clause.

Photo of Tom Greatrex Tom Greatrex Shadow Minister (Energy)

Briefly, I would like to make two points for the record. The Minister talked about private investment, but that investment often ends up on consumers’ bills. I am talking not just about energy but about some transport matters that are the cause of concern.

During the festive period we saw disruption to many rail services, caused by overrunning works. The justification from, I think, one of the Minister’s colleagues in his Department, not just for those works but for the subsequent increase in fares, was that the investment would lead to better services and facilities and greater rail capacity. The Government often make that point, but it is important that the public and others who rightly want to scrutinise what the Government are doing can test the objectivity of those statements.

Photo of John Hayes John Hayes Minister of State (Department for Transport)

The hon. Gentleman makes an interesting point. Let me make our argument even more sophisticated than it is already—that is a tough call, but I will give it a shot. The disruption he described was not really about the investment, but was about the decision-making process and the effects of the delivery of that investment. In a sense, it is rather clumsy to confuse the two.

That gives me the opportunity to tell the hon. Gentleman, and, through him, the Committee, that the hon. Member for Birmingham, Northfield made several points in the early stages of our considerations about the accountability of the new body that we are establishing to deliver our road investment strategy, Highways England. I am clear that I want Highways England to look as little like Network Rail as possible.

Photo of Tom Greatrex Tom Greatrex Shadow Minister (Energy)

I am sure that that will be of comfort to my hon. Friend the Member for Birmingham, Northfield. We may return to those discussions on Report.

Perhaps I did not express myself clearly. My point was not that the investment was the cause of the disruption, but that following the disruption, which led to media and public attention, one of the Minister’s colleagues had to interrupt her Christmas break to speak about it, and she said that the reason for the investment of which that work was a part was to deliver better services. That was at the same time as announcements about fare increases, which were justified in part by that Minister as a way of funding some of the investment in the improvement in the railways that we want to see.

My other point is about regulators. The important point is that regulators in different sectors, whether energy, water or telecoms, seem to make forecasts differently. That was another reason for tabling the new clauses. If each regulator—or a combination of different regulators—made those forecasts consistently and with the same level of detailed work, there would perhaps be less of an issue. However, that is demonstrably not the case—for example, I made the comparison between the work that is done by Ofgem, and the way it is passed on to the Government, and the work done by Ofwat.

There are serious issues to be looked at, but, having said that, and not just because the Minister has highlighted me as his favourite Member on the Opposition side of the Committee—and only on this side, I am sure—I do not intend to press the new clause to a vote. However, I hope that he and colleagues in other Departments will look at those issues in detail, because even if they do not come to the fore while we are considering this Bill, I am sure they will be raised in future by Members on both sides of the House who are interested in ensuring absolute clarity about cost and information for consumers. I beg to ask leave to withdraw the motion.

Clause, by leave, withdrawn.