The UK Infrastructure Bank (UKIB) was created “in a rush at ministers’ insistence” according to MPs in a damning report that accuses the state-owned investment bank of “reinventing the wheel” by funding projects that already attract private capital.
In a report published by the Public Accounts Committee, MPs said the UKIB operated with “weak financial governance” and “very close” to the Treasury for its first year as it was set up in a hurry.
"The Treasury set up the Bank quickly and, in rushing, 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 House of Commons Public Accounts Committee said.
“Gaps in the Bank’s initial governance arrangements meant it was non-compliant with the UK Corporate Governance code for its initial year of operation and the Bank had to lean heavily on Treasury’s processes and controls,” it added.
MPs were also “not convinced” the investment bank had a “strategic view” of where it best needs to target its investments.
UKIB has deployed £1bn of its initial £22bn capital in 10 deals, but the committee questions the claim that these will fill gaps in private sector investment markets.
“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,” Meg Hillier, chair of the Public Accounts Committee, said.
The UKIB was launched in June 2021 by then-chancellor Rishi Sunak, providing £22bn of infrastructure finance and partnering with the private sector and local government to finance a green industrial revolution and drive growth across the country. It is wholly owned and backed by the Treasury but is operationally independent.
So far the UKIB has provided financing to deliver broadband and build solar farms, which the committee says are both relatively common projects.
“The Treasury didn’t need to reinvent this particular wheel, with all the attendant risk to benefit, value and taxpayers’ money,” Hillier added.
The Treasury has said that there are “a number of factual inaccuracies and misrepresentations” in the PAC report.
It defended itself from the criticism by arguing that there had “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”.