State investment bank fails, MPs say

The British Infrastructure Bank (UKIB), which aims to help the UK meet its climate change goals through “fairer, faster and greener” investments, has just 16 employees more than a year after its inception, MPs have found.

Established in June 2021, then Chancellor Rishi Sunak said the bank will “accelerate our climate change ambitions and take them to the next level, while creating new opportunities across the UK as part of our job creation plan.” ”

Mr Sunak said the Leeds-based UKIB is a conduit for investing “billions of pounds in world-class infrastructure that will support people, businesses and communities across the UK”.

But MPs noted that the company had provided just £1bn of its £22bn capital across 10 deals, mostly conventional broadband and solar deals. They warned that staffing issues are “slow to resolve” as the company has only 16 direct employees but more than 100 contractors or seconded treasury employees it can rely on for its day-to-day IT needs.

The influential Accounts Committee also criticized the “hasty” establishment of the bank, which prevented it from following the government’s own rules of governance.

The bank was set up by finance ministers to help address the UK’s investment challenges it faces in meeting its massive zero-commitment and equalization programmes. The Infrastructure and Projects Authority estimates that the total cost of infrastructure needed by 2031 will be nearly £650 billion.

The loss of funding from the European Investment Bank for infrastructure projects due to Brexit was one of the main reasons the Treasury Department planned only 10 months for the bank, the GAC said, 14 months shorter than comparable planning milestones for Greens Investment. bank (GIB) and British Business Bank (BBB).

MPs said they were told by the Treasury Department that the UKIB is three times the size of the GIB with “slightly more powers”. The ministers “decided to set up a bank quickly” as European funds were no longer available, “there was an urgent need to meet the government’s zero ambition; and they wanted the bank to continue operating after the pandemic.

The need for speed forced the Treasury to make significant changes during the planning phase. According to the GAC, the company has completed only one business case, while three are scheduled to be completed in accordance with its own recommendations. Officials acknowledged that this was “not best practice.”

The Treasury has provided the bank with capital of £22bn for its first five years of operation and expects the bank to become self-financing after that. The bank told MPs it expects to be profitable within five years, with an income of more than £70-80m a year for running costs.

The report questions whether the bank has “a strategic sense of where it would be best to focus its investments.” The previous 10 deals were “mostly relatively conventional investments,” the report said.

“While the bank’s early operations reflected a fairly prudent approach, it is not yet in a position to make the full range of potential investments and will not be able to do so until it has enough qualified staff to handle more complex operations.

“The bank claims to be filling gaps in the market and making investments that the private sector would not consider, but so far the bank has provided financing for broadband deployments and solar farms, which are both relatively common projects.

Dame Meg Hillier, Chair of the Public Accounts Committee, said: “The UKIB was set up in a rush to support the government’s half-hearted promises of net zero and equalization as we lost £5bn a year in European infrastructure funding due to Brexit.

“It’s really not clear what the UKIB is doing if the market wasn’t already or wouldn’t be doing with better tax incentives – just one example.”

She said the Treasury Department “didn’t have to reinvent this particular wheel with all the risks that would come with benefits, cost and taxpayer money.”

“The forerunner of Green Investment Bank was also sold to the public as a ‘permanent institution’ and five years later sold to the private sector in Australia. Now he brings record profits. We need more reassurance from the government that the lessons learned will be implemented and that the set of policy and spending mistakes we have seen will not be repeated,” she said.

The Treasury Department said: “We take note of the committee’s report, but are disappointed that it contains a number of factual inaccuracies and misrepresentations. The bank has always had strict financial management and all transactions are carefully reviewed by the entire UKIB board before they are approved. The bank’s early operations were also approved by Her Majesty’s finance ministers to protect taxpayers’ money.”