UK Infrastructure Bank Bill [HL] — House of Lords, 2022-06-14
Topic: Domestic Commerce
Susan Kramer (Liberal Democrats, Centre to centre-left): My Lords, just before we took a break, I tried to give a quick summary of where we were on the relationship between the shareholder—the Treasury and the Government—the UK Infrastructure Bank as a company and Parliament. I will not repeat that sequence, but I think Ministers will have picked up my concern that, at every level, there seems very little role, if any, for Parliament and very little accountability in any form For that reason, I drafted Amendment 30. It is not my language; it is language I took from the Green Investment Bank, so we know that it works in law and has a precedent. It might be helpful if I read it into Hansard: "The Treasury must lay before Parliament a copy of an undertaking (the "operational independence undertaking") provided by the Treasury to the Bank for the purpose of facilitating the Bank’s ability to act as its directors consider appropriate in the light of the objects in its articles of association." I did not include it in my amendment, which I slightly regret, but the relevant Act also says about the Green Investment Bank: "An order under this section may not be amended or revoked." Operational independence is captured in a very emphatic and direct way in that Act. That led to my question, which the Minister will remember from an early meeting: why is operational independence not in the Bill? If I understood the reply—she can correct me if I am wrong —it is because the legal advice was that the other clauses in the Bill would not permit it to be validly included as they contradict it. That is the reading of the summary I gave before the break Without operational independence, it will be very hard for the bank to thrive and to have credibility among private investors. I also consider it an underlying principle. As the Government so often make a declaratory statement about operational independence, I do not understand why that is not made much more substantive. Perhaps the Minister could explain why a mere declaration with nothing in place to support it is considered adequate At the beginning of Committee today, I also referred to the framework document. I think we have all accepted now that the framework document not only has no standing in law but can be changed at any point by the Government with nothing more than an agreement between the shareholder, in the form of the Treasury and the Government, and the company—that is, the bank. That has to be in writing and agreed between the parties, but there is not even a requirement to publish that change in the framework document I also referred to the resolution of disputes between the company and the shareholder. That brings me to the other amendments in my name in this group, which refer to Clause 4, "Directions", and various consequences related to it. The clause states: "The Treasury may give a specific or general direction to the Bank about how it is to deliver its objectives. The Bank must comply with a direction. The Treasury must—consult the Bank’s directors before giving a direction, and publish a direction." The framework document is quite helpful in taking us down to a more detailed level. When it does that, it talks about the capacity of the board, if it objects to the direction that it has been given, to send a reservation notice in response to instructions from the shareholder that would—and these are the circumstances in which a reservation notice could be given— "infringe the requirements of propriety or regularity … not represent good value for money for the Exchequer as a whole … be of questionable feasibility or is unethical … be contrary to the Strategic Objectives … result in the directors of the Company being in breach of their legal duties; and/or … not be in the best interests of the Company for any other material and demonstrable reason." Some of these are quite eye-opening, such as "the requirements of propriety or regularity" and something being of "questionable feasibility or … unethical", resulting in the directors being "in breach of their legal duties" It also makes it very clear, however, that this could apply to an individual project that the bank sought to fund but on which the shareholder—the Treasury or the Government—decided no. Or it could be the opposite: the bank could decide that it should not fund a project, but the Treasury or the Government decide yes. It is very clear that it applies at that level It is hard for me to see how that leads to operational independence in any way, which is why Amendment 30 is crucial. I am not proud, and if there are other ways in which we can achieve it, I would be very happy—but at least it is language that has survived a previous legislative process and supported a bank that was in place for quite a number of years I told the Minister at the time that I would use this occasion to try to follow up what looks to me almost like a direction for concealment. As I said, if the bank receives an instruction, it can object with a reservation notice; the shareholder can then override that reservation notice and instruct the bank to go ahead, but it can "inform the Board who shall undertake the Instructed Matter, without delay" and "if asked, explain the Shareholder’s course of action; and … arrange for the existence of the Written Direction or any Oral Direction confirmed in writing to be published (unless the Shareholder has directed in writing to the Company that the matter must be kept confidential)." That is the clause that particularly troubles me; it is a gagging clause, if ever I saw one I also asked the Minister: which executives and non-execs, which members of the board, have signed or are expected to sign non-disclosure agreements—we always get trapped by the name "confidentiality agreements"—or any other kind of agreement that would mean they cannot then go to the media? We have already established that there is no regulator so, without one, if they have signed confidentiality agreements, they have no mechanism and no one to whom they can go to disclose. I am exceedingly troubled by the idea that we have a bank that may be asked to do something that its senior members view as unethical or without propriety—or in fact illegal—under the terms of their duties, but they cannot even speak about it, report it or act in any way. I hope we get some fairly full answers from the Minister on that question, but it is frankly extraordinary When you put this whole package together, I cannot see that the current legislation in any way provides for operational independence. It may use the phrase "operational independence", but that is merely window dressing. I think I have pretty much covered the issues, but I hope other noble Lords will have comments to make in this area. I beg to move.