In a new report the Public Accounts Committee raises questions about the independence, strength and value of the first deals made by the new UK Investment Bank (UKIB).
The UK Investment Bank was created in a rush at Ministers’ insistence, which meant it operated with weak financial governance and very close to the Treasury for its first year.
The significant risk of begin operating without an effective audit and risk committee and outside the UK’s Corporate Governance code had to be counterbalanced by choosing low risk early deals, approved through Treasury processes.
UKIB has deployed £1 billion of its initial £22 billion capital in 10 deals, but the Committee questions the claim these will fill gaps in private sector investment markets. So far UKIB has provided financing to deliver broadband and build solar farms, which are both relatively common projects. There is also no clear strategic approach to balancing the risk of investment in new markets with the risk to taxpayer money. The reporting arrangements set up by the Treasury do not allow Parliament early sight of emerging problems.
The UKIB was set up in response to the scale of the investment challenge facing the UK particularly from Government's Net Zero and levelling up commitments. The Infrastructure and Projects Authority estimates that in total nearly £650 billion infrastructure investment will be needed between 2021 and 2031.
UKIB is well behind on recruitment plans and is only piloting an intended infrastructure projects advisory service for local authorities. The Committee says this must be developed to avoid past mistakes where Government has made loans to local authorities on property and other capital projects that put the authorities’ overall finances at risk.
Dame Meg Hillier MP Chair of the Public Accounts Committee: “The UKIB was set up in haste to shore up Government’s stalled promises on Net Zero and levelling up, as we lost £5 billion a year of European infrastructure funding to Brexit. It’s really not clear what the UKIB is doing that the market wasn’t already, or would be doing with better functioning tax incentives – as just one example.”
“The Treasury didn’t need to reinvent this particular wheel, with all the attendant risk to benefit, value and taxpayers’ money. The predecessor Green Investment Bank was also sold to the public as an ‘enduring institution’ and then sold off to the Australian private sector 5 years later. It’s now turning bumper profits. We need more assurance from Government that lessons learned are being implemented and the catalogue of policy and spending errors we’ve seen will not be repeated.”
In a statement UKIB said: “Having launched 18 months ago, the Bank has announced 10 deals in total, unlocking more than £4.6 billion in private capital, supporting projects across a range of sectors, including transport, solar and digital infrastructure.
“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.”
