Recommendation 7

HM Government Not Addressed

1. PAC conclusion: The Treasury’s decision to launch the Bank at pace had both positive and negative consequences. 1. PAC recommendation: By April 2023 the Treasury should write to the Committee: • Setting out the long-term plans for the institution, including when reviews will be made and by whom; • Assessing whether the governance arrangements in place are the right ones, explicitly considering the level of engagement and expertise that UK Government Investments as a shareholder representative brings to bear, and reporting on these to Parliament; • Setting out criteria for assessing whether operational independence for the Bank is working as intended, and for reviewing based on those criteria; and • Identifying lessons learned from setting up at pace and whether this was the best way to launch an organisation of this type 1.1 The government agrees with the Committee’s recommendation. Target implementation date: April 2023 1.2 HM Treasury will write to the Committee setting out the requested details by the end of April 2023. 1.3 The decision to establish the UK Infrastructure Bank (the Bank) at pace was prioritised to ensure that the institution could begin to deliver on its objectives as soon as possible, supporting investment in infrastructure throughout the UK and helping the government reach its net zero targets. The benefits of this approach are supported by the Bank’s work to agree 12 deals in total, investing approximately £1.16 billion and unlocking more than £5.1 billion in private capital. 1.4 The policy design of the Bank was set out by the Treasury prior to its launch alongside the March 2021 Budget. As highlighted by the NAO’s report, this design drew on experience with similar institutions such as the British Business Bank and the Green Investment Bank. The government introduced the UK Infrastructure Bank Bill in May 2022 to support UKIB’s future a long-lasting institution driving infrastructure investments towards projects that help tackle climate change and support regional and local economic growth across the UK. 1.5 Prior to opening the UKIB for business, the Treasury ensured clear governance procedures were in place including an agreed Framework Document and appointment of interim Board, with permanent Chair in post. After UKIB launched in interim form, the Treasury maintained close oversight as UKIB started to grow its operations. This included retaining delegated authorities on UKIB’s behalf until a permanent Chief Executive was in post and able to be appointed as Accounting Officer. This ensured appropriate protections were in place that were tailored to UKIB’s activities. 1.6 HM Treasury also agreed a Financial Framework with UKIB ahead of delegating authority to the UKIB CEO for investment decisions. This came into effect in January 2022 and gave the Board and Executive Team discretion over the day-to-day operations of the Bank, including delegated authority to make investment decisions independently of government. As is the case for any government ALB and sponsor department, the Bank must report on its performance to its shareholder including submitting an annual business plan to the Treasury for approval, including details of their operations, financial performance, and key performance indicators. The Bank’s business plan, and the planned Strategic Review will allow the Treasury to assess how these arrangements are working in practice. 1.7 The role of UK Government Investments (UKGI) is to act as the Treasury’s Shareholder Representative on the UKIB Board. UKGI have extensive experience in corporate governance and manage a portfolio of 23 government businesses UKGI are managed independently but are wholly owned by HM Treasury. The Treasury are responsible for oversight of UKGI and reporting on their performance to Parliament. 2. PAC conclusion: The Treasury and the Bank have not yet put in place the conditions necessary for the Bank to be a successful and long-lasting institution. 2. PAC recommendation: • The Treasury and the Bank should report to Parliament six-monthly on the roll- out of the Bank, including updates on recruitment, deals made and progress towards the operation of their own internal systems (e.g., IT systems). This should include timescales for future milestones. • The Treasury needs to be much clearer in its reporting of its expectations of the Bank, including its financing support, its plans for taking dividends, and the long-term ownership plans by defining more clearly what it means by the phrase ‘long-lasting institution’. 2.1 The government agrees with the Committee’s recommendation Target implementation date: March 2024 2.2 The final phase of the Bank’s roll-out will take place during 2023-24 – following the anticipated date of Royal Assent for the UKIB Bill and while the Bank completes its recruitment of its permanent workforce. The Bank will therefore provide the requested information to Parliament by the end of September 2023 and in March 2024 in additio