National Security and Investment Bill

Baroness Bennett of Manor Castle Excerpts

Committee stage
Tuesday 16th March 2021 Lords Chamber

[Baroness Bennett of Manor Castle (GP) [V]]

My Lords, it is a pleasure to follow the noble Baroness, Lady Bowles. I shall speak briefly to this group because my focus is solely on the final provision, which is that Clause 30 should not stand part of the Bill. I thank the noble Lord, Lord Hodgson of Astley Abbotts, for drawing our attention to this issue.

The whole subject of government spending, in particular where it relates to contracts but also to government aid, is now a matter of great public interest and concern. It is therefore important that this whole area should be given a great deal more attention and focus. We have seen, through our concern about international trade deals, the way in which companies carrying out their business and taking risks, which is supposed to be our economic model, have sought to attain compensation for, for example, government decisions about environmental matters or public health. We need to be concerned about the links in this, in particular as regards the ISDS arrangements, which I have debated with other Members of your Lordships’ House.

I would also ask the Minister if, either today or perhaps in the future, he would spell out how the Government see this working, especially what the mechanisms would be, and put a specific question to him about democracy and transparency. Clause 3 states that this legislation is to cover spending of £100 million or more. How has that figure been arrived at? Given that we are talking about government money, should it not perhaps be lower?

[Baroness McIntosh of Pickering (Con)]

My Lords, it is a pleasure to follow the noble Baroness, Lady Bennett. I support the amendments in this group and I am delighted to have the opportunity to speak to the proposal that Clause 30 should not stand part.

The impact assessment sets out graphically what the financial implications of the measures in this Bill will be. It states that the costs are to be found in two main areas where the new regime could incur additional costs, notably additional administrative costs and the potential impact of a new regulatory regime on investment decisions. Of course, what we do not know are the known unknowns of possible investments, particularly in infrastructure, that may be cancelled. I am delighted to see that my noble friend Lord Grimstone is the Minister to reply, given his background with the Trade Bill. However, do the Government have any idea what the implications might be?

I understand that the Government have put a figure in the cost-benefit analysis of the costs to business and the Government together being, on average, between £26.2 million and £73.1 million per year. My understanding was that, when we were in the European Union, we attracted more foreign direct investment than any other EU country, and that, as of 2019, we currently have the seventh highest inward foreign direct investment flow, as the impact assessment tells us. I have some involvement in the OECD and water policy and note that,, in paragraph 168 of the impact assessment, we are told that:

“ The National Infrastructure Pipeline details long-term plans to invest over £400 billion (including £190 billion to be invested—”


this year—

“across 700 projects in water, energy and transport infrastructure. A large proportion of this would have been in conjunction with overseas investors.”

Water is attracting a high proportion of foreign investment, which the Treasury and the Government have consistently and rightly encouraged.

My noble friend Lord Hodgson, in his remarks on the question on whether Clause 30 stand part of the Bill asked a lot of the right questions regarding who will decide and so on. I should add a few other questions. Are these loan guarantees or indemnities recoverable and, if so, what would be the timeframe within which they would be recovered? I should also be interested to know from which budget the grants, loans and indemnities would come. The clause recognises the financial hit that many of the parties and investors might attract, which is welcome, but, as my noble friend Lord Hodgson identified, we do not find a great deal of information in the clause. There is no supporting schedule that one might normally expect in those circumstances and the Explanatory Notes say little. That is why I welcome the opportunity to ask those questions and I look forward to my noble friend’s responses when he sums up.

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[Lord Naseby (Con) [V]]

My Lords, I shall be very brief. I am full of admiration for my dear noble friend Lady Noakes for the thoroughness with which she has trawled through the Bill and these particular aspects. I have been in and have knowledge of a situation of a mandatory notice—I make no comment on the other aspect—and my noble friend is absolutely right: we need certainty in life. Whether five working days is the appropriate length of time I personally am not able to judge, but it seems entirely reasonable, and if its sponsors and their experienced colleagues from the City believe in it, I am more than happy to go with it. It does not seem to allow for any wriggle room; the worst thing in politics and making law is to allow for wriggle room, so I am absolutely behind Amendment 49.

[Baroness Bennett of Manor Castle (GP) [V]]

My Lords, the noble Baroness, Lady Noakes, outlined very clearly what this group is about. She may not be entirely surprised that I am coming from the opposite angle, although we can perhaps agree that this is a question of balancing public good—making decisions about national security—versus private profit and convenience. The financial and other implications that might arise from more time being taken over whether or not to progress are weighed against both the chance of missing something important and using significant public resources, making a fuller assessment unnecessary.

I am here, rather unusually, to defend the Bill against the amendments. Broadly, in this debate we have heard a great deal of uncertainty about how the Bill, once enacted, will work: how the details will play out in practice, how many firms will be involved and what resources will be required. I am not sure how five days was arrived at as a firm deadline, given that there is such uncertainty about the actual operation of the Bill. As it currently stands, deciding whether to accept a mandatory notification should take as long as it takes; it should not be subject to an arbitrary—a very short —deadline.

[Lord Clement-Jones (LD)]

My Lords, these amendments are very much of a piece with many of the amendments we have heard in Committee—all designed to create a much tighter and less discretionary regime. That is quite right in the case of these amendments, which one would have thought the Government would find extremely straightforward to accept.

Under Clause 14, the Bill currently envisages that the investment security unit will reach an initial decision as to whether to clear a notified transaction or to call it in for a detailed assessment within 30 working days of acceptance of the notification as complete. As the noble Baroness, Lady Noakes, said in her excellent introduction, there will be a significant number of transactions that fall within the scope of the mandatory notification requirements—they are set out in the impact assessment—due to the target’s activities being in a specified sector but which clearly do not raise national security concerns.

Timescales for decision-making are currently extremely unpredictable. Even before defined timescales for decision-making kick in, the Secretary of State has an initial period, as has been described, to decide whether a notification has been submitted in the correct form. The Secretary of State must make this decision as soon as reasonably practicable. That is a set of weasel words which suit the convenience of the Secretary of State, not the investor.

This lack of clear timescales creates uncertainty for investors, universities and businesses, making domestic and foreign investment in university spin-outs less attractive, while disincentivising industry partners from engaging in collaborative R&D. These are all the downsides of uncertainty, as we have heard throughout this Committee. In addition, the Secretary of State has 30 days in which to review the notice after acceptance. Especially in circumstances of fast-moving corporate finance transactions, 20 days, as proposed, seems much more proportionate. Similarly, under Clause 18, relating to the voluntary notification procedures, greater certainty would be achieved if these amendments, regarding when a voluntary notice is accepted and setting out how long the review period should be, were included.

The noble Baroness, Lady Noakes, made an extremely good point: these provisions, where the timescales say “as soon as practicable” or 30 days, will be adhered to, to the letter. They are not going to be done speedily. Civil servants are going to interpret them extremely conservatively, as my own profession—the legal profession —would, because the penalties of getting it wrong will be seen to be too high. People will not want to get it wrong, whether they are in the position of giving advice to the Secretary of State or advising investors. That is why we need very clear provisions in the Bill, and we are certainly not there yet.

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[Lord Campbell of Pittenweem (LD)]

My Lords, I too shall begin by declaring an interest, having been a member of the Intelligence and Security Committee for seven years, five of which were enhanced, if I may say, by the presence of the noble Lord, Lord Butler of Brockwell. I have a further advantage because I have been listening, along with other noble Lords, to the three preceding speeches in this debate, which have set out the principles clearly and powerfully against what appears to be intransigence on the part of the Government. At this point, therefore, I shall adopt what has been said by the noble Lord, Lord West of Spithead, with which I agree entirely. I am also influenced to some extent by the fact that your Lordships have been exemplary in the dispatch of business today. I have been watching from the pavilion, as it were, and it seems that the conduct of this Committee stage so far could be recommended or possibly even compelled for the Committee stages of other Bills.

There is nothing that I can usefully add to the arguments put forward by the three preceding speakers, but I can make one further contribution. In advance of the debate today, I consulted the 2013 report of the Intelligence and Security Committee entitled Foreign Involvement in the Critical National Infrastructure. The noble Lord, Lord Butler, and I were members of the committee at the time and the chair was Sir Malcolm Rifkind. Among other things, the committee applied its mind to the issue of Huawei, in particular to its entry into the United Kingdom market and the fact that in doing so it entered into contractual arrangements with BT. What happened was that BT did as it was supposed to do and advised the relevant government departments of the position, but the officials then communicated what had been brought to their attention by BT not to any of the Ministers with responsibility for national security but to the then Secretary of State at the Department of Trade and Industry. That was done on the ground that the only thing which appealed to the officials to draw to ministerial attention was the possible impact on British businesses.

That having happened, for quite a long time, Huawei enjoyed not a privileged but certainly an unremarkable position in the British economy. It was only some years later that it became clear that there were other implications to be drawn from its interest in the economy of the United Kingdom. At that point, the Intelligence and Security Committee deemed it appropriate to include it as part of the inquiry whose report I have described. As a consequence, the committee was able, as has been hinted at already, to come to a much better and more informed judgment about Huawei because of its access to intelligence that would not otherwise have been available either to committees or to Parliament itself. I recommend the report as a good illustration of how an inquiry of that kind should be carried out and how profitable, if you like, the consequences are of so doing.

The issue is clear. If, at the stage of the involvement of Huawei in the economy of the United Kingdom it had been understood and perused by those with access to a very high level of classified intelligence, perhaps, since the moment of Huawei’s arrival into this economy, there would have been a much greater understanding throughout government of the significance of its entry into the United Kingdom and the implications for security which that has necessarily involved. For these and other reasons that I have indicated previously, I support the amendment tabled by the noble Lord, Lord West of Spithead, to which I have added my name.

[Baroness Bennett of Manor Castle (GP) [V]]

My Lords, I have attached my name to Amendment 82 in this group, tabled by the noble Baroness, Lady Hayter of Kentish Town, and signed by the noble Lord, Lord Fox. It is perhaps unfortunate that the structure of the debate means that neither of them have spoken in favour up to now. Some of the other speakers have briefly outlined what that amendment consists of. As with all the amendments in the group, it is an attempt to ensure proper parliamentary oversight of the operation of the Bill.

This is a classic “prepare a report” amendment and specifies in considerable detail what would be in that report, including the nature of the national security risks posed in transactions for which there were final orders, the particular technological expertise that was being targeted and any other relevant information. I admit that, having listened to the noble Lord, Lord Butler of Brockwell, introduce Amendment 70, which essentially calls for oversight scrutiny to be in real time as decisions are being made, [Inaudible], and having listened to the debate, on reflection, that would be the best outcome. If I were to make a case for Amendment 82 in comparison, there would be advantages in having a specified list of what the report contains and making sure that full information is being provided to the ISC. I rather suspect that the ISC would be strong-minded if it thought that it was not getting the information it needed.

It is interesting how support for this group of amendments is coming from all sides of the Committee, and it is clear that there is a real problem for the Bill without some kind of provision on reporting to the ISC. That would ideally be done in real time but there should certainly be some democratic oversight. The noble Lord, Lord Butler, was pre-empting a ministerial suggestion that there would not be enough time. As the noble Lord said that, I thought about sitting in the Chamber of your Lordships’ House on 30 December and how much legislation those in both Houses of Parliament were able to get through in that one day. I am sure that the ISC could cope with the level of work required.

The noble Lord, Lord West, put it well. Without one of these amendments, there is no oversight. No one has referred to this yet but about an hour before we met, the integrated review was finally published and I skimmed through it as fast as I could. One matter highlighted in it was the competitive advantage coming from Britain’s democracy. I will be raising that issue again later but if we are going to claim competitive advantage from democracy, it would be good to have some of it. We have heard the phrase, “Take back control”, a great deal. The structure of our alleged democracy is supposed to rest within Parliament, which is where scrutiny and oversight of the Executive is supposed to happen. I join other noble Lords in saying that we must have some form of reporting to the ISC.

[Lord King of Bridgwater (Con) [V]]

My Lords, I am delighted to follow the noble Baroness, Lady Bennett, who has bravely intruded in this debate involving an old-school reunion of former members of the ISC. I am delighted to follow two of the promising newer Members, in the shape of the noble Lords, Lord Butler and Lord Campbell. Another, the noble Lord, Lord Janvrin, is still to come.

The examples given by the noble Lords, Lord Butler and Lord West, set out the arguments very clearly. Having been involved, as I was for so long, with the founding of the ISC and its initial seven years of operation, what was carried on subsequently—[Interruption] —bugger! I am sorry; excuse my language.

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Moved by

[Baroness Bennett of Manor Castle]

93: After Clause 61, insert the following new Clause—
“Statement on climate, environment and ecological security
(1) Within six months of the passing of this Act, the Secretary of State must publish a statement on how the provisions contained in this Act will be exercised in relation to national security impacts caused by climate, environment and ecological damage.(2) The statement must include, but is not limited to—(a) a review of how damage to climate, environment and ecological impacts affect national security;(b) an assessment of how climate, environment and ecological damage affects biosecurity risks, including pandemics; and(c) a list of conditions in which it is likely that the actions or omissions of a qualifying entity or qualifying asset are likely to be deemed as a risk to national security due to their impact on climate, environment and ecology.”

[Baroness Bennett of Manor Castle (GP) [V]]

My Lords, we started this day, the final day of Committee on the National Security and Investment Bill, with an advantage that we have not previously enjoyed: access, finally, to Global Britain in a Competitive Age: the Integrated Review of Security, Defence, Development and Foreign Policy—if only just, as it appeared on the Government website about an hour before our debate started. It is particularly useful in presenting this amendment, particularly given our debate thus far, which has often been stuck in a narrow, pre-21st century idea of what delivers “security”.

Certainly, the term “cyber” has been thrown around a lot, and there are provisions that address—and we have debated—crucial issues of resilience and the dangers of complex, interlinked technological systems, but it has been noticeable that the answers always seem to involve more complex technology rather than consideration of what technology should and should not be doing, and the dangers it represents. I note the important work in this area of the NGO, Drone Wars.

I have to doubt, with the greatest respect to the participants, the level of expertise in covering these complex, fast-moving and highly technical areas of cybersecurity. It is a pity that we have not seen some of the House’s cyber experts in this Committee. I noted in the Financial Services Bill just how thin the debate was, how small the number of Peers participating and how short were many of the debates. I note the adjective “furtive” used by the noble Lord, Lord Clement-Jones, in the debate on the previous group. That is in stark contrast to the debates on the Domestic Abuse Bill, where scores of Members of your Lordships’ House are passionately engaged, as is a broad swathe of civil society. That observation applies even more strongly in this Committee. All we can do is what we can do, and in this amendment I am obviously on natural ground for a Green Peer—but, then, as a talk show host said to me recently, “Everyone’s talking green now.”

I have been skim-reading the integrated review and can confirm just that. In the foreword, the Prime Minister says:

“COVID-19 has reminded us that security threats and tests of national resilience can take many forms.”


Yes. The existence of nuclear weapons is clearly a huge security threat. The world cannot be secure until the global ban on these hideous weapons of mass destruction is delivered. That that is a threat we intend to increase is a decision that can be described only as incredibly dangerous, heightening tension in an unstable world. I also remind the Committee that the Trident nuclear replacement has been forecast to cost nearly £200 billion over its lifetime—surely more now if there are more weapons—while the Government’s 10-point plan for a green industrial revolution has a budget of £12 billion. Choices are being made, choices that are terrifyingly bad for the security of us all.

Thinking about the Government’s decision-making under this Bill, what if a key manufacturer of wind turbine components were to be threatened with takeover by a company wanting to convert it to weapons manufacture pumping out more arms into a world already awash with them? It would be a lose-lose for national security. Amendment 93 addresses one side of that scenario: the climate, environmental and ecological emergencies, fittingly being debated on a day when we are reminded of the dangerously poor state of our natural world, with the disappearance of yet another hen harrier beside a grouse moor.

Before the Whips start questioning what hen harriers have to do with national security, I shall paraphrase a long-term Green saying: there is no security on a dead or dying planet, or in a country with a collapsed natural world. If noble Lords prefer, I shall quote the financial costs identified in the integrated review, which states that

“nature loss could result in a cumulative economic cost of up to $10 trillion between 2011 and 2050”.

Should we have—we can but hope—a company making, say, massive strides in restoring a large spread of our carbon-depleted, nature-razed uplands, its takeover by another with intentions to return to driven grouse shooting management would be a security issue for the nation, a climate issue, a biodiversity issue and, very directly, an issue for the flood-threatened communities downstream of it.

The Prime Minister’s foreword to the integrated review says that

“Her Majesty’s Government will make tackling climate change and biodiversity loss its number one international priority”—

albeit that that is in the final paragraph of the second page of a 2.5-page foreword. I did a little analysis of our Committee’s debates thus far, looking for mentions of the climate emergency and excluding occasions when “climate” appeared in the context of “investment climate”. On day 1, the word did not come up once. On day 2, it did, when I referred to it. The noble Lord, Lord Grantchester, twice mentioned the net zero carbon target on day 1. As for “nature”—in the biodiversity sense—or “ecology”, those did not come up, although I will give credit to the noble Lord, Lord Grimstone of Boscobel, who appears to have a pleasing attachment to offshore wind farms as a case study.

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[Lord Callanan (Con)]

My Lords, let me thank the noble Baroness, Lady Bennett, for her amendment and begin by expressing my heartfelt sympathy to the noble Lord, Lord Fox, on being admonished by her. All that I can say is, welcome to the club.

The amendment would require the Secretary of State to publish within six months of the Bill becoming law a statement on how the regime will be exercised in relation to national security impacts caused by climate, environmental and ecological damage. As the noble Baroness, Lady Bennett, knows—we have debated these matters on numerous occasions in this House—this Government are committed to tackling climate change. We are especially looking forward to the COP 26 conference in November, which will highlight our leadership on this issue and promote co-operation on climate action through the UK’s G7 presidency, as Alok Sharma MP set out in a speech to the UN on 8 February. Of course, the COP 26 preparations continue to be led by Alok Sharma, who opened Second Reading on the Bill in the other place. I am sure that we all wish him well as he strives to bring the world to ambitious agreements in Glasgow.

The Bill, however, focuses on national security risks arising from acquisitions of control over qualifying entities and assets. If we were to view national security through a particular lens, as the amendment seeks to do through environmental concerns, we would be in some way defining national security. We have deliberately avoided defining it in the Bill, a matter that we have debated previously. We have expounded on that at some length in this House and in the other place.

Without rehearsing those arguments, which I am sure noble Lords are familiar with, I hope they will understand that we cannot accept amendments that seek to define national security in a particular way. The noble Baroness’s amendment asks for a statement on how the provisions in the Bill will be exercised. The most fundamental provision is the call-in power. The Bill already requires the Secretary of State to publish a statement on how that is expected to be exercised before being able to use the power. A draft of that statement was published on introduction of the Bill in November. The Government would be very pleased to receive comments and have committed to consult on it publicly. The final version of the statement must be laid before Parliament and will be subject to the negative resolution procedure.

Finally, two provisions in the noble Baroness’s amendment—proposed new paragraphs 2(a) and 2(b)—address specifically environmental concerns. Laudable as they are, they are not directly connected to the national security and investment regime proposed in the Bill. That is because the regime concerns whether the acquisition of qualifying entities and assets poses a risk to national security, not the actions of those entities or assets themselves. Given the Government’s commitment to environmental policies, but recognising that the Bill deliberately avoids defining national security, and given that a statement on how the call-in power is expected to be used is already provided for, I hope that the noble Baroness, in the light of what I have said, is able to withdraw her amendment.

[Baroness Bennett of Manor Castle (GP) [V]]

My Lords, I thank the Minister for his response and for pointing out how the Committee has taken a neatly circular route, almost like a circular economy, in getting back to more or less where we started—debating definitions of national security. I also note his welcome for comments on the statement on the call-in power, which I certainly hope to pick up and run with.

I should perhaps begin with an apology to the noble Lord, Lord Fox, if he took my comments as being directed at him or anyone taking part in this debate. As is often the case with Greens, I am not concerned with individual behaviour but systems change. It is clear that the systems in your Lordships’ House tend to result in a narrow range of Peers taking part in Bills related to financial matters. Yet, in our heavily financialised society, and given that finance is such an important part of security in this instance, we need input from a broader range of sources. I am certainly not blaming the noble Lord for that, although perhaps he could encourage fellow Peers from his party and others to engage on this issue.

I very much thank the noble Lord for his offer to work together, particularly on the list of technologies, which is also something I will be taking up. I understood his suggestion that we should all be focusing on the need for the Government to have an integrated strategy for 2050, but I pick up on the comments of the noble Lord, Lord Grantchester, who said that every action we undertake has to take account of the climate and ecological emergencies. To use a technical term, we are talking about mainstreaming. The climate emergency and ecological crisis must be at the forefront of our minds in every aspect of what the Government and your Lordships’ House do.

This is an emergency. Looking at the Chamber now, as I speak remotely, I think back to what it was like in March 12 months ago, when all anyone was thinking about was the Covid emergency, but we are also in a climate emergency and an ecological emergency.

I am aware that this is the final amendment to be debated. I hope we will see more people engaged in this debate when we get to Report. We have made some progress, I think, and so, for now, I beg leave to withdraw the amendment, although I expect I will still be looking at what we may do on Report.

Amendment 93 withdrawn.