My Lords, I beg to move the new clause standing in my name. To begin with, perhaps I may say that I was very grateful for the opportunity to talk to my noble friend Lady Kramer about this and for the help that the department was able to give me.
As the heading suggests, this is about the impact of infrastructure spending on costs for consumers. That is an issue that has achieved a rising level of importance. My noble friend Lady Verma said in an earlier debate that the effect of rising prices on consumers is of growing concern in the country.
There is wide support across society for increased investment in infrastructure, but the question of how much of the cost will fall to be borne by consumers is, I have to say, a great deal less certain. The new clause is aimed to get the Treasury to lift the veil, as it were, so that we know more about what it will cost consumers.
That this is primarily a matter for Treasury Ministers rests on two facts. First, the responsibility for projected infrastructure investment is spread right across Whitehall and covers a great many departments. The costs fall to be met in many different ways: investment by private companies, local authorities; government departments; and, no doubt, other ways as well. In most areas, regulators also have a key role, but it is only the Treasury that can cover the whole field, bring it all together and assess the impact on the cost of products for consumers. That is what subsection (1) of this new clause provides.
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The second reason is that ministerial responsibility rests very firmly in the hands of Treasury Ministers, particularly in the hands of my noble friend Lord Deighton, the Commercial Secretary to the Treasury. He is in charge of the specialist unit, Infrastructure UK, which is an agency within the Treasury. When I asked my noble friend’s department who was going to respond to this new clause today, I was not altogether surprised that my noble friend Lady Kramer would do it, but I was even less surprised when I was told that she would be doing it on the basis of a brief from the Treasury. I hope I am not doing her an injustice. It will be her response that we hear.
I say straightaway that this new clause is not breaking new ground. In 2013, the National Audit Office published an interesting report, Infrastructure Investment: the Impact on Consumer Bills. It spelled out the purpose of the study:
“The report focuses on infrastructure investment that domestic consumers pay for through bills, with a specific focus on the energy, water and, to a lesser extent, telecoms sectors”.
It started with a number of key facts, saying:
“£310bn the estimated value of planned investment in UK infrastructure identified in the government’s 2012 National Infrastructure Plan … 67% of the £310 billion is expected to be financed privately, and repaid through consumer bills in the energy, water and telecoms sectors. Unknown aggregate financial impact of planned infrastructure investment on consumer bills across all sectors”.
That sums up the problem very neatly.
I am tempted to quote at length from the report’s summary, but in the context of this new clause, I will confine myself to just two central findings. Paragraph 16 says:
“Government has made no assessment of the overall impact of infrastructure on future bills or whether those bills will be affordable. Therefore government and regulators are taking decisions on behalf of consumers in the absence of full information about the situation for consumers”.
I do not think anybody would regard that as a satisfactory state of affairs. The report’s first recommendation is, in Paragraph 21:
“The Treasury should ensure that there are mechanisms in place to assess the cumulative impact of infrastructure investment on consumer bills and the affordability implications, particularly for low-income households”.
That sets out the problem very clearly. Not surprisingly, this report from the National Audit Office was taken up by the Public Accounts Committee in another place. Its fifth report was published in June, and the Government’s response followed very promptly. It was published on 1 July. The Government accepted three of the committee’s four main recommendations. They accepted the recommendations calling for the need to factor in the impact of complexity and uncertainty when making or changing policy; calling on regulators to pay closer attention to companies’ financial structures and to the standards of infrastructure providers; and, thirdly, calling on regulators to deliver a co-ordinated approach to their joint working arrangements. I shall follow that up a little later.
There was one important recommendation on which the Government disagreed. It was the recommendation that:
“HM Treasury should ensure that an assessment of the long-term affordability of bills across the sectors is produced and published”.
They spelt out the reasons for that, and I have no doubt that my noble friend will refer to them and to the difficulty of the whole subject; how robust or meaningful an aggregate affordability analysis can be and so on.
However, there was an extra paragraph at the end from which I drew a little more comfort. The Government’s response at paragraph 3.4 states:
“Nonetheless, the Government agrees that there is scope to improve understanding of affordability in this important area and will continue to work with the regulators on these issues, including”—
this is what really pricked up my ears—
“through the UK Regulators Network which is considering affordability as a key element of its work-plan”.
I had not heard of this network and I therefore thought it right to consult the regulator I know best—namely, Ofgem. I had a very good meeting with its representatives last week. It turned out that that paragraph had virtually been written by Ofgem, so it knew what it was talking about and the organisation was extremely helpful. I was told that it is working through the newly formalised UK Regulators Network. Its aim is to provide an overview of approaches taken by regulators to address, among other things, affordability issues. It also aims to identify the extent of affordability pressures on consumers, primarily in the telecoms, energy and water sectors. It will be paying particular attention to the impact on vulnerable groups of consumers—that is, of course, the fuel poor.
When I discussed all this with my noble friend, I was not altogether surprised to have sight a few hours later of the UKRN Memorandum of Understanding, which I had not been aware of. It was published earlier this year and it is a very interesting and important document which I have studied carefully. I shall come back to that in a moment.
I turn now to my proposed new clause. As I have said, it is intended to write into the Bill the gist of the recommendation of the NAO and the Public Accounts Committee, which of course the Government have so far rejected. I should say at once that I am indebted to the consumer organisation Which?, which has helped me with the drafting of this amendment. I also thank the Public Bill Office for making sure that it is in order. When I first saw it, I had my doubts, but I have been assured that with a few tweaks the office could ensure that it is in order, and I am grateful. Subsection (1) empowers the Treasury to introduce regulations to achieve the main intention. Subsection (2) defines the scope and form of the regulations. Subsection (4) lays an obligation on the Treasury to scrutinise the data and assess the impacts on consumer costs for different groups of consumers. Subsection (7) sets out the list of regulators whose industries are to be covered by the clause.
The Memorandum of Understanding throws useful light on how this might work. Perhaps I may quote briefly from it. Paragraph 2.1 talks about:
“Coherent and consistent economic regulation across sectors: we will give a clear joint view where cross-sector regulatory agreement or consistency is needed and will ensure that our actions deal effectively with cross-sector issues”.
The next bullet point is headed:
“Affordability and empowerment: we will work to understand cross-sector issues related to affordability of services, and work on consumer empowerment to ensure that consumers in regulated markets have the information and other tools necessary to engage effectively in markets”.
Those are very important words. Further on it talks about something which has been close to my heart, as my noble friend Lady Kramer will certainly remember—the “promotion of competition”. The noble Lord, Lord Berkeley and I, along with two other noble Lords, moved two amendments at a critical stage of the Energy Bill to improve competition.
The UKRN states:
“Promotion of competition in the interests of consumers: we will work, including with the CMA”—
the Competition and Markets Authority—
“and through the UKCN, to improve the use of competition and regulatory levers where appropriate, making markets work better to improve outcomes for consumers”.
It sets out its work programme in Annex 1. I will not quote it all but it clearly refers to:
“Understanding affordability across sectors”,
which is exactly what the Government said in the paragraph I quoted earlier from their response to the Public Accounts Committee. They referred to the,
“scope to improve the understanding of affordability in this important area”.
Therefore, the machinery is there. But I have a number of questions for my noble friend and I wonder whether she will be able to help the Committee. What more can she tell us about the work of this new UK Regulators Network? Is it true that at present its basic staff consists of just two people? That is what I have been told and perhaps she can confirm that. How will its priorities be decided? Even its first-year work programme sets out quite a number of objectives that it wants to look at. Who will be responsible for its decision making? To whom will the UKRN be accountable? That is not clear from the documents I have seen.
If the House is going to put any credence on the statement in paragraph 3.4 of the Government’s response to the Public Accounts Committee, from which I quoted earlier, we need answers to these questions. I look forward to my noble friend’s reply. I beg to move.