UK Infrastructure Bank Bill [HL] — House of Lords, 2022-06-14
Topic: Domestic Commerce
Joanna Penn (Conservative, Centre-right): We absolutely will come on to discuss the power of direction. The basis that we wanted to establish is that the Government have two powers in the Bill: the power of direction and the power to issue a strategic steer. However, setting those aside for one moment, day to day, the bank has its operational independence, and the basis of that is in its establishment as a company subject to company law We were debating Amendment 30, which seeks to establish that operational independence in the Bill. The Government believe that that is already provided for in the bank and so does not need to be set out separately in the Bill. However, the noble Baroness is absolutely correct that, if we were to set out in the Bill the operational independence clause that she has taken from previous precedent or somewhere else, we would still need to write into the Bill the two powers that we are going to talk about: the power of direction and the power to issue a strategic steer. Therefore, I absolutely accept that those two powers override in some ways, on those issues where they may be used, the operational independence of the bank I was trying to make another point on what this law is doing to strengthen the independence of the bank. As we know, the bank is already up and running. As the noble Baroness quoted from its operational framework, the Government and the Treasury already have the ability to issue it with a strategic steer and with powers of direction. The Bill puts those powers in statute but gives transparency requirements around them. In the establishment of the bank by statute, it is not for the Government to be free to then sell the bank or change it without returning to Parliament. UKIB is a separate legal personality in law, which is what I was trying to establish It may be worth moving on to the power of direction. As I said, it is a matter of company law that the bank is already operationally independent, and the Government have been consistent in their statements on this matter. The limited exceptions to this, as set out in the Bill, preserve the Government’s proportionate shareholder rights, which is appropriate for an institution which is in receipt of public funds. As I said to the noble Baroness, I accept that if we were to have such a clause in the Bill, any operational independence undertaken would still need to include the exemptions for the strategic steer and the power of direction On Amendments 35, 36, 37, 40 and 41, and the clause stand part objection in the names of the noble Baroness, Lady Kramer, and the noble Lords, Lord Tunnicliffe and Lord Vaux, these would seek to soften or remove the Government’s powers of direction over the bank so that their directions would no longer be binding. I understand that the aim of these amendments is to protect even further the bank’s operational independence. However, it might be helpful if I quickly set out why we have this in the legislation The power of direction is one of a small number of exceptions to the bank’s operational independence. It is right that, as a sole shareholder and as the department that must explain the bank’s activities and spend to Parliament, the Treasury exercises limited amounts of control on the bank. Although the Government expect to use this power infrequently, constrained powers of direction are a relatively common feature of similar institutions such as the British Business Bank, HMRC and the Bank of England. I hope noble Lords will appreciate that the examples are illustrative and intended to set out the circumstances that could potentially justify the use of such a direction in future. There may be aspects of national security where we may need to intervene on specific investments. We may need to direct the bank to invest in a technology that has the potential, if developed, to be particularly beneficial to the environment but may not meet its return on equity targets. That speaks a small amount to a debate we had earlier about the need to meet the double bottom line versus potential further public policy good from taking greater risk than would otherwise be the case. There may be some other emergency scenario where the bank is an appropriate institution to act. It is worth noting that the Department for Business, Energy and Industrial Strategy used a similar power to direct the British Business Bank to organise the Government’s Bounce Back Loan Scheme. Although those are illustrative examples, that final one might demonstrate that it is hard to anticipate all the circumstances in which we may want to use this power. Therefore, setting out greater circumscription of the use of the power is difficult in those circumstances where it is hard to anticipate the unknown of the future Should we remove the clause, the Government could still rely on our ability to issue directions as a shareholder and as set out in the framework document. However, crucially, there may be situations where the board could refuse a direction if not in statute, given its obligations under the Companies Act. This would likely lead to unnecessary tensions between the Treasury and the bank, which are best addressed in the way that the Bill provides, by introducing transparency to Parliament and the public over the use of the power of direction I committed to coming back to the noble Baroness, Lady Kramer, on issues she raised earlier in Committee. On the use of the power of direction, the Bill sets out clearly the Government’s ability to issue a written direction and the requirement for it to be published. The framework document provides a process that can precede the issuing of a written direction, with a written direction being the final step in a disagreement. As the noble and learned Lord, Lord Thomas, noted, the powers of the Bill to issue a direction take precedence over the framework document with regard to written directions, but I note the noble Baroness’s point about reservation notices. The Government are committed to giving the bank’s board freedom to operate the company in seeking to achieve its strategic objectives. It is not the intention of the Government nor the drafting of the framework document to gag the bank, and I should be happy to discuss the matter further with the noble Baroness ahead of Report To pick up the noble Baroness’s point about whistleblowers, UKIB must adhere to the expectations of the corporate governance code, as well as, more broadly, public sector accountability obligations for the conduct and corporate policies that it has as an organisation. This includes having in place a whistleblowing policy. On non-disclosure agreements, or any name they may go by, UKIB is operationally independent but we understand that it has no NDAs in place. I hope that has answered the noble Baroness’s earlier questions and some of the further questions about operational independence and the Government’s ability to issue a direction to the bank. I therefore hope that she will withdraw Amendment 30.