The UK’s state-owned infrastructure investment bank has been accused of “reinventing the wheel” by funding projects that already draw private capital, according to an influential group of cross-party MPs.
The House of Commons public accounts committee said on Tuesday that it was “not convinced” the UK National Infrastructure Bank had a “strategic view of where it best needs to target its investments”.
The UKIB was set up 18 months ago to invest private sector finance into projects that help meet the government’s net-zero climate targets and levelling-up commitment to tackle regional inequality.
It was also created to address the loss of £5bn a year in funding from the European Investment Bank after the UK left the EU in 2020.
The UKIB has so far deployed £1bn of its initial £22bn capital in 10 projects. But seven of these are loans and three are equity investments made through funds that invest on behalf of the bank rather than directly, the MPs said.
Dame Meg Hillier MP, chair of the public accounts committee, said: “It’s really not clear what the UKIB is doing that the market wasn’t already or would be with better functioning tax incentives.”
“The Treasury didn’t need to reinvent this particular wheel, with all the attendant risk to benefit, value and taxpayers’ money,” she added.
Although the UKIB was “sensibly cautious” in its first year, the MPs said, its allocation of funding raised questions on whether the bank is delivering on its mandate to fill gaps in the market.
They said the UKIB operated outside corporate governance code in its first year, arguing that it had been set up in a hurry.
The 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”.
The bank, whose chief executive is former HSBC boss John Flint, continues to rely on Treasury systems, staff and approvals, which raised “serious questions” on the bank’s ability to make autonomous investment decisions, the MPs said.
Although the bank expects to reach a “steady state” by autumn this year, it is struggling to recruit enough staff, the committee reported. It had 31 permanent staff in post by the end of 2022 against a target of 270 in place by September 2023.
The UKIB said that since its launch it had succeeded in “unlocking more than £4.6bn in private capital, supporting projects across a range of sectors, including transport, solar and digital infrastructure”.
“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,” it added.
The Treasury said: “We note the committee’s report but are disappointed that there are a number of factual inaccuracies and misrepresentations within it.”
“There has always been strong financial governance at the bank and all deals were scrutinised by the full UKIB Board before being approved. The bank’s early deals were also approved by HM Treasury ministers to protect taxpayers’ money.”