Infrastructure (Financial Assistance) Bill

Baroness Wheatcroft Excerpts

Tuesday 23rd October 2012 Lords Chamber

[Baroness Wheatcroft]

My Lords, I will return to the narrow interpretation of the Bill, which is about infrastructure rather than employment figures. We all know that this country needs investment in our infrastructure which is second class. Our housing stock is too small. The Government are trying to address these problems. The Bill is a welcome contribution, although it is just one of many measures now being implemented, as the noble Lord, Lord Adonis, pointed out. However, as I listened to him and to the noble Lord, Lord Skidelsky, and their criticism of projects postponed, I had to disagree. The noble Lord, Lord Skidelsky, may well term me an economic illiterate, but it was right to postpone these projects because it was a simple matter of the accounts.

When the Government came to power, they were faced with a dreadful deficit, and their priority, quite rightly, was deficit reduction. However, not only were they seen to be reducing the deficit, but they had to persuade the financial markets that they were serious. Clearly, they have succeeded in persuading them of that and that is why we have the ratings we now have. Under the previous Government there was much talk about prudence, and prudence with a purpose, but profligacy was the reality. We now have a more prudent approach, and it is only because of that approach that the Government are now in a position to bring forward the scheme in this Bill.

We heard much talk from the noble Baroness, Lady Maddock, about the rise in rents and the problems that this is bringing to housing benefit. Providing housing benefit for those who cannot meet their rent now costs taxpayers almost twice as much as it did three years ago. We cannot afford that bill, let alone more. We need more affordable homes to rent and we need to enable those who want to own their own home to get a foot on the housing ladder. This Bill will help by giving backing to those who will provide the new homes. However, our needs go far beyond housing. If we are to compete as an economy, we must make long-overdue improvements to our road and rail networks, to our energy supplies, and to our airports. We cannot wait too long for that.

This Bill pledges some useful support for projects that need a helping hand, but the private sector can, and should, finance most of the infrastructure projects, with the Government in the role of enabler. I am glad to say that, as we heard from the noble Lord, Lord Newby, the Treasury is looking at £257 billion worth of projects to come forward over the next five years. I gather that 180 projects are now earmarked for development. These include the new, and crucial, nuclear power stations. Negotiations with the suppliers have now reached a very critical stage, when they have to be persuaded that there will be some guarantee of long-term price stability. I do not know how that can be done, but it is clearly extremely important that we should have nuclear power. The question is: how are these to be funded? The Government are now striving to find some innovative ways of securing that funding, because banks will not provide long-term funding. Five years is the longest that many of them will now contemplate.

We are due to hear more about these funding plans in the Chancellor’s Autumn Statement. It is interesting that, thanks to the Indian summer we have just had, autumn now comes in December. Apparently, the Statement will include details of the new-look PFI. I do not want another PFI. They are profligate, foolish, and inept, and we will be paying through the nose for many years to come for too many of those schemes that came forward through the old-style PFI.

The public were duped into believing that we could have new schools, hospitals and bridges without paying a penny. If it looks too good to be true then it is; and it was. Too many of the investors, many of them offshore, have made fortunes out of PFI, while the public have been saddled with long-term future commitments. These were heads-I-win, tails-you-lose commitments. We do not want PFI again, or anything like it. We need something new and innovative, and I hope that the Government will come forward with some means of providing funding that will not leave the public sector on the hook, as it has been. For example, as regards roads, the need for improvement is clear; there are potholes everywhere. However, if we are to have new roads, someone has to pay, and the Government simply cannot afford to. Surely it is right that those who use the roads pay; whether through tolls or through other electronic means of road pricing. That is surely the way forward. We have to avoid things such as the M6 toll road, where Macquarie, in its various guises, is now said to be making a return of about 150% a year.

There are sources of long-term financing that we need to tap into for such projects. The insurance and pension funds have long-term liabilities which could fit neatly with these schemes. The noble Lord, Lord Giddens, made mention of the pension funds. Clearly, they are right to have some qualms, but the Government are working with various trade bodies, including the Association of British Insurers, to try to devise ways in which the funds with long-term liabilities might come together to provide funding for major infrastructure projects. I hope that we will be able to hear more about that in the Autumn Statement. The talking has gone on for a while; it would be good if we were soon to see some action.

Finally, I am grateful to the noble Lord, Lord Skidelsky, for reminding us that this country can do infrastructure rather well. We should not lose sight of the fact that the Olympics were a great success, and the gold medal tally was pretty good too. However, we can do infrastructure and we need to get moving on it.