This is a House of Commons Committee report, with recommendations to government. The Government has two months to respond.
This is the report summary, read the full report.
Government created the UK Infrastructure Bank (the Bank) to help deliver on its aspirations to support the UK’s net zero commitments and level-up the regions. The Bank is approaching 18 months into its life and is still in its early stages of development; so far it has deployed £1 billion of its £22 billion capital to 10 deals and its advisory function to local authorities is being piloted. However, it is behind plan in its recruitment, with only 16 permanent staff in post against a target of 320; and it does not yet have powers to lend directly to local authorities. The Bank expects to reach ‘steady state’ in Autumn 2023.
Given its limitations, it was sensible for the Bank to adopt a cautious approach to early deals. But the Treasury does not seem to have a reporting approach which allows Parliament early sight of any significant emerging problems. The Bank faces trade-offs in many areas, for example in taking on investment risk to open new markets, while protecting the taxpayer; and deciding which local authorities to prioritise. The Bank does not yet have a clear strategic approach to managing these trade-offs; nor a clear explanation of what it is doing, that the market is not (‘additionality’). It is essential that the Bank develops strong performance measurement and evaluation of its important objectives to ensure it is adding value in its work and remains accountable to Parliament.
The Treasury set up the Bank quickly and, in rushing, Treasury chose not to follow its own business case best practice and normal government guidance for the establishment of an arm’s length independent body. Gaps in the Bank’s initial governance arrangements meant it was non-compliant with the UK Corporate Governance code for its initial year of operation, and the Bank had to lean heavily on Treasury’s processes and controls. The Bank is still closely linked to the Treasury, which could limit its operational independence. But we acknowledge that it was set up very quickly on the insistence of Ministers. Time will tell whether moving at this speed has proved beneficial to the long-term stability and functioning of the Bank, as well as whether it was the best way for taxpayer’s money to be used to achieve its stated aims.