As the Public Accounts Committee inquiry report on the UK Infrastructure Bank is released, industry experts welcome the Bank’s potential to deliver net zero public sector development
A parliamentary Public Accounts Committee report examining the establishment of the UK Infrastructure Bank has been welcomed by the UK construction industry as part of a unified effort to achieve net zero targets.
Launched in June 2021, the government-owned policy bank is intended to provide up to £22bn of infrastructure finance in partnership with the private sector and local government to drive growth in sustainability sectors across the country.
The bank is operationally independent but owned by HM Treasury.
The report noted issues and successes related to the Bank’s hasty establishment
The government drove creation of the UK Infrastructure Bank at a rapid place to supplement £5bn funding lost from the European Investment Bank after the UK left the European Union.
The initial planning process took 10 months, in which the Bank was able to make six early deals with low risk projects. The PAC noted that beyond these deals, there was a lack of coporate governance as originally intended and that the Bank was overreliant on Treasury staff to fill the roles.
Since it began operating, the Bank has made 10 deals valued at just over £1bn, in the form of loans, both to local authorities and the private sector, and equity fund investments with fund managers acting on behalf of the Bank.
Recommendations from the PAC report on UK Infrastructure Bank demand greater accountability
Despite these early successes, the PAC report on the UK Infrastructure Bank recorded that there was no long term plan for the Bank’s intentions beyond reaching net zero targets through unspecified means.
It was unclear how the Bank would work with local government bodies and departments, given that current communication with Department for Levelling Up Housing and Communities (DLUHC) and the Department for Environment Food and Rural Affairs were described as “limited”.
The report recommended a consistent reporting process between the Bank and the Treasury of target investments, internal performance and assurances that it would remain a public sector body.
The Bank has also been instructed to ensure their systems are more independent of the Treasury, as it currently utilises day-to-day operations on Treasury IT systems, has 150 Treasury staff as secondees or contractors.
The Bank aims to have 270 permanent employees by September 2023; at the time of the inquiry in November 2022 there were only 16.
The UK Infrastructure Bank has responded to the PAC report
In their response to the PAC report, the UK Infrastructure Bank highlighted how it has worked to resolve many of the issues raised in the report, commenting: ‘We note the PAC cites us as having initially taken a ‘sensibly cautious approach’ to deals, and in the coming year we expect to invest in an increasing range of sectors and technologies, with a particular focus on clean energy and storage, in line with our strategy published in June. We will continue to test our published approach to additionality in our deals.
“Since our appearance before the PAC in November, we are pleased to confirm that we have made good progress on a number of the issues raised, including permanent staff recruitment, which at the end of 2022 stood at 31 out of a total of 181, and is due to rise to 66 soon.
“We look forward to updating the PAC in our formal response to this report.”
Greater transparency could help measure social impact
Commenting on the Committee of Public Accounts inquiry report on the creation of the UK Infrastructure Bank, Guto Davies, head of policy at the Association for Consultancy and Engineering (ACE) said:
“We welcome the recommendations made by the Committee into the establishment of the UK Infrastructure Bank, notably on sharing of performance metrics, encouraging a collaborative cross-departmental approach and more detail on how its advisory function will work in practice. The establishment of the Bank is a great opportunity for communities across the UK, and we need to ensure that it is set up to be as impactful as possible as quickly as possible.
“The Committee recommends that a full-suite of performance metrics are developed covering productivity and performance. We believe that there is an opportunity here to also include metrics around regional skills development and social value which will create a broader base on which to measure impact.
“Furthermore, the moves to encourage cross-departmental engagement are welcome, and could help the establishment of more co-ordinated placemaking approach throughout the UK. The Bank’s advisory function also has a role to play here, and we need to ensure that this approach is mirrored in its engagement with local authorities of all sizes, reducing the need for competition, tendering and ring-fencing when allocating investment to projects across the country.”
Others believe the Bank could be bolstered by legislation
ICE believes that many recommendations identified by the PAC would be answered by making the National Infrastructure Strategy a statutory requirement, ensuring the Bank has a long-term set of defined priorities that are based on national need.
In response to today’s report, Chris Richards, director of policy, the ICE, said:
“Getting the UK Infrastructure Bank up and running quickly was always going to be a challenge, and PAC has identified some gaps that need to be filled, like the need to set KPIs. The ICE believes that these KPIs should be linked to the National Infrastructure Strategy, which provides a roadmap for our long-term approach to infrastructure.
“That’s why we are calling for Parliament to include a National Infrastructure Strategy as a statutory requirement in the UK Infrastructure Bank Bill. Making the National Infrastructure Strategy a legal requirement will ensure that the Bank has a long-term set of priorities, based on clear national needs that are in line with net zero and levelling up goals.”
Harriet Clough
Twitter: @Harriet_PBC
