EEA Nationals (Indefinite Leave to Remain) Bill [HL]

Viscount Waverley Excerpts

2nd reading (Hansard): House of Lords
Friday 19th July 2019 Lords Chamber

[Viscount Waverley (CB)]

My Lords I was in two minds about the need for the Bill brought by the noble Lord, Lord Oates, as I was unsure how elements were different in their effect from what the Government have already guaranteed through the pre-settled and settled status scheme. However, listening to the noble Lord’s introductory remarks, and given the current vagaries of the political arena—and this is a political matter—I have been persuaded otherwise.

It has always been a source of constant amazement, tallying the anomaly of decision-makers professing a global outlook for this country while being insular in approach. Not much need be said in support of the Bill, as it is not as if, from the word go, the Government have not been counselled—in this place and elsewhere. We all want the best for the UK, but—the noble Lord, Lord Kerr, captured the situation—we should be magnanimous and practical, we should consider the national interest, we should consider the uncertainty it causes and the plight that further uncertainty would cause, we should not fall foul of moral ineptitude but beware not to create a latter-day partition of sorts—not our finest moment.

Obstacles to working this out are time, political will and legal uncertainty—to which I may add that personal experience of the immigration decision-making process taught me that there is ill in the system. The rights situation and precarious status should be removed. It ill befits a country that prides itself as a global leader.

It should be noted that a number of EU countries—in my case, Portugal—have rightly acquiesced on citizens’ rights, whatever the UK’s upheaval. Who knows? It may well be that the UK will want to ally itself strategically to the EEA and EU in one form or another—so best not to upset the apple cart with aspects identified by the noble Lord, Lord Oates.

I ask for clarification on one point for the record: the question of who constitutes a family member who could accompany. The Minister may wish to comment on that point.

In conclusion, the time to address this is now. For reasons I have put before the House and so as not to leave anything to chance, I commend the Bill and encourage your Lordships to fast track it to the next stage.

Brexit: European Investment Bank (European Union Committee Report)

Viscount Waverley Excerpts

Tuesday 16th July 2019 Lords Chamber

[Viscount Waverley (CB)]

My Lords, this report can be commended for enabling negotiations with the EU to be arrived at in advance—an approach absent from Brexit negotiations thus far. I hope that the new political guard will take note of the messaging this evening.

The report recognises the worrying position we seem to be in regarding our investment in the EIB and the proposed financial compensation contained in the draft withdrawal agreement. If that was not enough, the effect of today’s news that the pound is dropping like a stone in reaction to a probable Brexit outcome makes the outlook on borrowing dismal, compounded by the generally parlous state of geopolitics and geo-trade issues, including financing. This debate is much about numbers. It would be helpful if the Government set out their proposals for their strategy on borrowing for UK infrastructure projects, given these additional challenges.

The mechanism to remove a member is not clearly defined in the constitutional documents of the EIB. The UK should not be accepting anything less than the fair value of its investment. This would equate to approximately €7 billion to €8 billion in value above the approximately €3.5 billion of paid-in capital on retained earnings alone. It appears that the UK will be liable for undrawn capital during the period in which it has been paying in capital until repaid. If this is called in, how will it be repaid? It is probable that such drawn funding is unlikely to be invested or lent back to UK organisations at all. Do the Government agree that the UK’s share of undrawn capital could be as high as €36 billion?

The negotiation of our sovereign value warrants greater focus. It seems prudent to look at alternative arrangements, either by renegotiating the current proposed terms, or by being more creative. For example, could the UK’s stake in the EIB be commuted into a direct shareholding in the EIF, given that owners of the EIF do not have to be members of the EU, as is the case currently with the EIB? Alternatively, could the UK exchange its stake for some of the UK investments or loans? This would ensure that the UK is able to remain a player in a non-obstructive and mutually beneficial way, post Brexit.

The UK has benefited from a number of key infrastructure loans from the EIB. Crossrail, for example, was a beneficiary of a £1 billion loan, with payments staggered annually. As the exit of a member state from the EU is unprecedented, will the Minister confirm whether outstanding loan payments confirmed would still be received by the UK in a no-deal scenario? Will the UK seek additional loans once we have exited, as Switzerland and Norway do? Given that the EIB’s mission is to make a difference to the future of Europe and its partners, such an arrangement would inject some much-needed confidence and positivity into the future of UK-EU relations, post Brexit.

I agree that the funding decline caused by the retraction of EIB support, be it via EIF or infrastructure-related investment and lending, must be substituted. This will have a compounding effect and get progressively worse. The British Private Equity and Venture Capital Association has remarked:

“Pitchbook data from February 2018 shows that the total capital raised by Europe’s venture groups fell by a quarter in 2017 to €7.4 billion, and the total number of new funds dropped to a 10-year low of 54 in 2017, compared with 75 in 2016”,


a point raised by many in this evening’s debate. Tim Hames, the BVCA’s director-general, said:

“There is no question but that the referendum, never mind the actual date of Brexit, has already had a pretty fundamental effect. EIF investment in the UK fell by 91% between 2016 and 2017, which is a large enough number to make you suspect that it was not an accident or a coincidence of timing”.


This is a stark reminder of what is at stake.

The British Business Bank has done a good job starting to cover the shortfall. However, British Patient Capital has £2.5 billion of funding over 10 years, while the EIF provided £2 billion over five years, so clearly more needs to be done. Additionally, BPC is yet to substitute the EIF’s cornerstone function via its reputation drive, “crowding in”. It needs to transition to this role sooner and be ready to scale further, particularly if the EIF increases funding across other EU jurisdictions. The gaping hole in the numbers is the need to crowd-in UK private institutional funds, particularly pension funds, to replace the EIF. Neither the BBB nor the Government can do that in isolation.

Specifically on infrastructure investment, the EIB can provide funding for infrastructure projects and initiatives across numerous sectors—energy, education and transport are examples—at low interest rates, due to its own AAA rating and zero-profitability objectives. However, a legitimate question might be asked: what if no deal damages the EIB AAA rating and causes a downgrade? This unlocks the viability of large-scale and riskier projects, because the EIB will both cornerstone these projects and consequently unlock parallel private infrastructure funding, given the blended cost of capital of these projects as attractive. It is not clear whether the BBB would be able to replicate that. Can the Minister comment on this and previous questions, or write and place a copy in the Library?

The scope to create a new UK funding institution capable of tapping into the capital markets should be explored. It is critical that the UK develops an alternative to the EIB capital—one that not only ensures that projects can be funded, but also that we do not revert to projects that fit a prescribed risk-return profile.

The report refers to the renewable energy sector, with lower-risk return visibility of offshore, for instance. Would the substitute funding support such large and ambitious plans? The alternative must evolve in time, to ensure that it is an organisation with the capability to assess projects with the robustness of the EIB, whose reputation also drives the crowding in of private funders.

This is where a sovereign wealth fund, or one-stop shop, can contribute to creating a best-in-class organisation. There will certainly be benefits in a one-stop-shop delivering both SME ambitions and broad infrastructure programmes, which will need to be developed as the EIB scales back. There could be significant benefits to having a sovereign institution independent of government, particularly with respect to individual investment decisions, thereby generating greater confidence from investors, especially for long-term projects and crowding in investment from the private sector. Such an institution must be free from day-to-day political interests, though aligned with clearly defined strategic national priorities.

The report recognises that the skills to deliver EIF and infrastructure-type investment differ. However, any institution tasked with funding, deploying and governing these can be constructed with the flexibility to ensure that it tasks the most capable teams with delivering its overall investment objectives, working alongside appropriate stakeholders and leveraging central functions such as HR, accounting, investor relations and compliance.

In conclusion, the UK requires a new and bold sovereign wealth fund, created to fit the nation’s needs, one that can deploy its funding, no matter the source, in a commercially viable and responsible manner. There is no need to single out any specific technology innovation, given the ongoing and rapid rate of change, but it is critical that the right funding solutions are available for all sectors, now and in the future. That said, a new sovereign wealth fund, working alongside Innovate UK, will help to unlock opportunities such as blockchain technology and AI.

--- Later in debate ---

[Lord Bruce of Bennachie (LD)]

My Lords, I join all the other members of the committee in thanking my noble friend Lady Falkner for introducing this debate and for her chairmanship of the committee over the last four years. She has done it with considerable application, skill and expertise, and will be sadly missed. The staff who supported the committee were a class act, supporting the committee expertly, promptly and without complaint, in spite of the extreme pressures put on them from time to time.

It is shocking, but not surprising, that this debate is taking place in an empty Chamber. This is a monumental scandal of mismanagement by the Government and a failure of communication to the wider public of one of the serious consequences of leaving the European Union. Members of the committee, and all noble Lords who have spoken, have highlighted the benefits that this institution has provided to the UK—the billions that have been invested across a range of sectors. These benefits are not just financial but nuanced in other ways. The reputation and the AAA credit rating of the bank have unlocked substantial private and public finance, some of which would simply not have happened without the existence of the bank, which is about to not exist for the United Kingdom in the very near future, unless things change very sharply. Of course, we continue to contribute while the investment has almost disappeared. I find it extraordinary that we have allowed a situation in which the UK is not financed, when we are a full member, despite our still providing the resources for that investment.

The Government’s determination to deliver Brexit and, as a number of speakers have said, their ideological indifference—if not hostility—to the public-private partnership that the bank represents, mean that the impact of losing it has been very undervalued. This has been brought out in our report. All we asked for, and all we are getting, is our capital over a long period and without interest—indeed, as the noble Lord, Lord Vaux, said, not even the value of the capital. The retained earnings that our capital has helped generate will stay just that: retained.

I draw the House’s attention to the fact that during the coalition, the Liberal Democrats introduced innovative measures in this area. It was the Liberal Democrats who called for the establishment of the Green Investment Bank. It was Vince Cable who, out of the wreckage of the financial crash, secured the establishment of the British Business Bank. If the Government had thought ahead about the implications of Brexit, I suspect that they might not have privatised the Green Investment Bank. My instincts are that they would have privatised the business bank, had Brexit not happened, but they realised that this was a vehicle they needed to strengthen, rather than let wither away or sell off.

We need to look at how we can replace the EIB. The noble Viscount, Lord Waverley, made some interesting suggestions, which I am not sure would be welcomed by the EU, about how we might find a way of effectively locking ourselves back in through a shareholding of the EIF. It is an interesting idea. Again, if we were in the right kind of negotiating framework and relationship, it might just be possible.

[Viscount Waverley]

Does the noble Lord agree that the UK does in fact have a lot of experience, through the Asian Infrastructure Investment Bank, which is funding the one belt, one road initiative from China all the way through central Asia and beyond? Maybe there is a lot we could learn from that process.

[Lord Bruce of Bennachie]

That is indeed true, and of course, Danny Alexander is one of the directors of that bank.

The point, which has been drawn out by all the speakers, is that infrastructure banks—promotional banks, as my noble friend Lady Bowles described them—are well established in many countries. You could argue that the EIB was, in effect, Britain’s answer to that, but as we leave the EU, we do not have an answer to that. I think it fair to say that all the speakers have suggested that now is the time for the Government to think about a promotional bank of this kind, because it is very difficult to see how we are going to fund massive infrastructure projects and the kind of innovative financing for small and medium-sized enterprises that has been provided, and which we do not have any mechanisms in place to deliver.

The evidence we had from KfW, established in 1948 partly to deal with the Marshall plan, demonstrated how a bank of this kind can become a major national asset. Yet, somehow or other, the UK has tended to sniff at these ideas, and we do not have anything to compare to it. When I was chair of the International Development Committee, I argued the case for a British development bank—something that France, Japan and a number of other countries have an equivalent of. We have in the CDC perhaps the nucleus of an organisation that could become a development bank, but on reflection, on the evidence that this committee received, I am of the view that we should not set up a series of banks; we should consider having one national bank which has sectoral commitments. Infrastructure is absolutely necessary—small and medium-sized enterprise finance—but so are development and external activities. I ask the Minister to take away from this debate the fact that we would like the Government to give serious and considered thought to setting up a bank of this kind—and if not, why not? In other words, I ask them to explain their thinking and what the alternative might be, because it is not at all clear from anything the committee has heard.

It is worth noting that, even within the United Kingdom, Scotland is setting up its own bank. I suggest that it will find that difficult in the consequences of a Brexit, and certainly a no-deal Brexit, but at least it is a recognition of something. It would be a bit ironic if Scotland could do something that the United Kingdom feels incapable of doing. What is abundantly clear is that, once we are left to our own resources outside the EIB, the UK’s credit rating is unlikely to soar. It is already downgraded. It is likely to be further degraded. One of the consequences is that we will have difficulty borrowing money and it will be expensive to do so.

It is difficult to see how the UK can possibly replicate the advantages currently available through the EIB. As we have learned, the EIB has the advantage, first, of borrowing at the lowest possible rate and being able to pass that on, and secondly, because of its established expertise, of effectively crowdfunding other sources of investment. There is no institution in the UK that has the capacity to do that, and the UK’s credit rating will be such that, in the short to medium term, we will be unable to do it. The consequence of that—especially if we have no deal, the economy and revenues are shrinking, yet the infrastructure needs and the other investment needs are growing—is that the Government are going to face a huge black hole of astronomical proportions.

We heard the noble Lord, Lord Butler. My mother’s expression was, “You’ll be sorry when I’m gone”. It is the same thing. We are going to be very sorry when the EIB is gone because, as we have established, we can see no future relationship with the EIB; certainly not if we do not negotiate in a constructive way. Without that, we will be left with no viable alternative. We will effectively be in a situation where we do not have a fallback and we have a gap. The noble Viscount, Lord Trenchard, made the point that it was a terrible deal. I am a passionate remainer, but I cannot understand why, if we are going to leave the EU, we do not negotiate the best future relationship that recognises the contribution we have made. Whatever side of the argument you are on, simply to throw up our hands and hand it over was quite extraordinary. We were led to believe that when this was discussed with the board of the bank, the British representative did not even contribute to the discussion, which I find utterly appalling—an abdication of responsibility, if you like.

To conclude, I suggest that the Government have some very hard thinking to do and some very serious questions to answer. I hope the Minister will be able to answer some of these, but I respect him enough to know that those he cannot, he will take away and bring back: I ask him to do that if that is the case. If I may say so, in a very partisan way, this debate and this report tell me exactly why we should stop Brexit.

Honours System

Viscount Waverley Excerpts

Tuesday 26th March 2019 Lords Chamber

[Lord Young of Cookham]

I agree: no one should get an honour simply for carrying out the job they are paid to do. As I said right at the beginning, the operation of the honours system is independent of government; there is a Main Honours Committee and nine or 10 sub-committees below it, with civil servants and Members of your Lordships’ House on them. I am sure they will take on board the comments made by the noble Lord that there should be a fairer distribution of the ranks of Orders of the British Empire between those who at the moment are the main beneficiaries and others who perhaps get some of the lower orders.

[Viscount Waverley (CB)]

My Lords, does the Minister accept that our now Commonwealth allies are part of our proud heritage and shared great hardship on our behalf? Decisions of this sort should not be taken in isolation as, more than ever, we need to stand shoulder to shoulder.

[Lord Young of Cookham]

I agree with the noble Viscount. As I said a few moments ago, the order remains in use in other countries: Antigua, the Bahamas, Belize, Grenada and many other countries continue to nominate. Any change would have implications for those Commonwealth countries.

Public Procurement (Amendment etc.) (EU Exit) (No. 2) Regulations 2019

Viscount Waverley Excerpts

Thursday 14th March 2019 Lords Chamber

[Lord Young of Cookham (Con)]

My Lords, the Government are committed to securing an agreement on the UK’s exit from the EU but we must be prepared for all outcomes, notwithstanding yesterday’s votes. It is for this reason that I am today bringing forward two sets of regulations for approval: the Public Procurement (Amendment etc.) (EU Exit) (No. 2) Regulations and the Public Procurement (Electronic Invoices etc.) Regulations. To be clear, in the event that the UK enters into a withdrawal agreement with the EU, the first of these sets of regulations will not be required.

The amendments in the Public Procurement (Amendment etc.) (EU Exit) (No. 2) Regulations do not amount to a material change in public procurement policy but, to all intents and purposes, maintain the status quo for UK contracting authorities with regard to their obligations towards certain non-UK suppliers. They will ensure that the UK’s procurement system continues to function as intended post-EU exit in the event of no deal, and grant certainty to UK contracting entities that they can continue to procure goods and services in the same way as they do now after exit day. In this way, the Government are ensuring that these entities continue to be able to obtain value for money for UK taxpayers.

As noble Lords will be aware, the UK Government are working to secure continuity agreements with a number of our international trading partners, which will replicate as closely as possible trade agreements to which the UK is currently a party via its EU membership. We have already laid before Parliament agreements with Switzerland, Israel and Chile. All these agreements contain substantial provisions on procurement, which will provide UK businesses with guaranteed access to lucrative procurement markets in those countries. Where the UK has entered into an agreement which contains provisions relating to public procurement, we must ensure that our domestic procurement legislation takes account of the obligations in that agreement.

In their current form the Public Procurement (Amendment etc.) (EU Exit) Regulations 2019, which were approved by this House on 20 February, would amend the existing procurement regulations so as to disapply, from exit day, the duties which UK contracting authorities currently owe towards economic operators from countries with which the EU has a trade agreement containing procurement provisions. Regulation-making powers in Clause 2 of the Trade Bill currently before Parliament would then enable the UK to reinstate these duties in such a way as to reflect the UK’s transitioned continuity agreements, rather than the EU agreements which these replicate and to which of course the UK will no longer be party after exit day.

As noble Lords will be aware, the Trade Bill is yet to complete its parliamentary passage. In the consequent absence of bespoke implementing powers in that Bill, we have had to look at other measures which would enable the UK to demonstrate compliance with the agreements that we have worked hard, and continue to work hard, to conclude. It is the duty of a responsible Government to ensure that, once we have left the EU, we continue to reap the economic benefits that these agreements bring. It is also our duty to uphold our reputation as a valued and respected trading partner, by ensuring that the obligations we have committed to maintaining after our withdrawal from the EU are adhered to.

I am therefore bringing forward this second EU exit instrument, which will amend the first such instrument before it comes into force so that, instead of removing from the procurement regulations the obligations owed by UK contracting authorities and other entities towards non-UK suppliers immediately on exit day, that first SI would preserve these obligations for a period of 18 months after exit day. The need for there to be a second, amending instrument was referred to during debate on the first EU exit instrument in the other place: specifically, during its consideration in the Delegated Legislation Committee on 13 February.

In practical terms, this preservation of obligations will have the effect of ensuring that, for a time-limited period, suppliers from certain non-EU trading partners will be afforded the same guaranteed rights of access to UK procurement markets that they enjoy now. This mirrors a similar provision already contained in the first SI in respect of suppliers from states which are party to the WTO government procurement agreement. That provision has already been approved by this House, but it is being extended so that it aligns with the other provisions in this instrument. By keeping alive the duties owed by contracting authorities as they exist already, the Government are ensuring that the UK can continue to meet its international procurement obligations. In turn, that will help to ensure that UK businesses continue to enjoy access to overseas public procurement opportunities and that UK contracting authorities can continue to obtain the best possible value for money when procuring, through robust supplier competition.

Noble Lords may at this point be wondering why, when the UK is leaving the EU, it is appropriate to preserve obligations arising from EU agreements to which we are no longer party, and whether doing so may produce any adverse effect on British businesses and authorities. The procurement obligations which arise from the UK’s continuity agreements are, in essence, the same as those which have arisen until now from the EU’s trade agreements, meaning that the amendments in this instrument represent a temporary technical solution to complying with the UK’s international procurement obligations until such time as the Trade Bill is enacted.

I reassure noble Lords once again that, in practical terms, the provisions in this instrument amount to a time-limited continuation of the status quo, which will create no additional burdens or costs for UK businesses or contracting authorities. Public sector contracting authorities and other covered entities across the UK will continue to be able to procure competitive goods and services from overseas suppliers as they do currently; and UK businesses will see no change as a result of this instrument in the way they go about bidding for and winning lucrative public contract opportunities, both in the UK and in countries with which the UK has a trade agreement. It is for this reason that it has not been necessary to publish an official impact assessment.

In summary, this instrument will ensure that the UK’s procurement system will continue to function as intended post EU exit in the event of no deal; that the UK can successfully ratify and comply with its international continuity agreements; and that UK suppliers and contracting authorities can continue to operate as they do now for the foreseeable future.

I now turn to the second of the two instruments: the Public Procurement (Electronic Invoices etc.) Regulations 2019. Unlike the other SIs which we have been debating today, we will need this if we secure an agreement—as I hope we will. In the event that the Government enter into a withdrawal agreement with the EU, we will be required, under the terms of this agreement, to continue to comply with EU procurement law during the implementation period. That includes this directive, which concerns electronic invoicing in public procurement. It is a short and simple measure which aims to promote the uptake of electronic invoicing in public procurement by requiring public bodies to accept electronic invoices from their contracted suppliers. Principally, this instrument is to transpose the e-invoicing directive; it also makes a small number of other technical corrections to the public procurement rules. There are numerous different types of e-invoice used across the EU. These varied formats cause unnecessary complexity and high costs for businesses and public bodies.

There are significant benefits to be realised in promoting the uptake of standardised electronic invoicing in public procurement, both in terms of a reduction in costs and administrative burdens for procuring entities and their suppliers and in terms of the environmental impact of a move away from paper-based invoicing. That is why, in 2014, the EU adopted Directive 2014/55 on electronic invoicing. This instrument transposes the e-invoicing directive into domestic law. It does so by amending existing procurement legislation applicable to the award of public contracts and contracts in the utilities sector. The Scottish Government have brought forward their own legislation to give effect to the directive, in similar terms to this instrument.

The directive contains one simple obligation for member states: to take the necessary measures to require public sector buyers and utilities to receive and process electronic invoices that comply with a common standard. Private sector suppliers, other than those privatised utilities remaining subject to public procurement rules, will not be obliged to use the e-invoicing standard unless they wish to do so. We are not imposing additional costs on suppliers. The measures we have introduced would oblige contracting authorities and other procuring entities to include within their contracts an express term requiring them to accept and process electronic invoices that comply with the standard where, of course, there is no dispute as to payment. In the absence of an express provision of the contract dealing with electronic invoicing, a term to that effect is to be implied. In that way, suppliers will be able to enforce their ability to invoice purchasers of goods and services electronically via the terms of the contract itself.

The European Committee for Standardization—CEN—was commissioned to draft the standard and the British Standards Institute was involved in its development. The standard was published in October 2017, following which the UK had 18 months to implement the directive’s requirements. The deadline for implementation is 18 April 2019. This falls after the date on which it is anticipated that the UK may leave the European Union. However, it remains the Government’s aspiration and intention that the UK will secure a deal with the European Union. We would then enter a period of implementation, as provided for in the withdrawal agreement, during which the UK would continue to be bound by most aspects of EU law, including the e-invoicing directive. This instrument is, therefore, expressed to come into force on 18 April 2019.

For sub-central contracting authorities, such as local authorities and utilities, the directive confers on member states the discretion to postpone the application of implementing provisions until 18 April 2020 and we have taken advantage of that derogation. It is right that we allow procuring authorities, other than central government authorities, time to adapt to the change, although there is of course nothing to prevent those authorities from accepting electronic invoices prior to that date. In the event of no deal being reached by 29 March, we are free to implement the European e-invoicing standard and we will consider the options available to us for this instrument. The UK will be free to set its own policy on electronic invoicing.

As set out in further detail in the Explanatory Memorandum, we have also taken the opportunity in this instrument to make minor amendments to the way in which the Public Contract Regulations 2015 and the Concession Contracts Regulations 2016 refer to offences under the Modern Slavery Act 2015. The aim of the amendment to the Public Contract Regulations 2015 is to ensure legal certainty as to which offences under the Modern Slavery Act constitute grounds for mandatory exclusion from award of a contract. More specifically, the amendment omits a duplicate reference to offences under Sections 2 and 4 of the Act. That duplicate reference was included in error in 2016.

For the Concession Contracts Regulations 2016, the amendment is to ensure that offences under Section 1 of the Modern Slavery Act 2015 are included within the mandatory grounds for exclusion from participation in a concession award procedure, and ensure consistency in the grounds for exclusion across the procurement regulations. With this instrument, therefore, we have the opportunity to provide real benefits to both the supplier community and the public sector, and I look forward to seeing it progress through both Houses.

I hope noble Lords will agree that both sets of regulations brought forward today are necessary for the UK to adhere to the commitments it has made, both in its trade continuity agreements and under the terms of the withdrawal agreement. I hope they will also agree that these instruments will provide benefits to the public sector and to UK businesses. I commend them to the House.

[Viscount Waverley (CB)]

I wonder whether the Minister’s notes allow him to comment on the following and, if not, he will agree to write. Currently, all UK public sector opportunities are published on Tenders Electronic Daily—TED—which is the EU service on which all public sector tender opportunities within the European Union are listed and updated, constantly. What might be the plan for UK public sector tender opportunities either to continue to be published on Tenders Electronic Daily or to be published separately? If so, where might they be published?

[Baroness Neville-Rolfe (Con)]

My Lords, I welcome the opportunity to debate these SIs, but I have one or two questions of clarification. Luckily, the Minister has already answered my question about the Modern Slavery Act.

As I understand it, the first of the two SIs, in practice, relates to third-country public procurement by the UK. I admit to having a concern about the interests of our own UK businesses and small operators that are involved in procurement. I refer to my registered interests, just in case any might be affected, although the impact assessment suggests that the impact of this order is negligible.

My experience is that we in the UK are more punctilious about enforcement of procurement rules based on,

“transparency, non-discrimination, equal treatment and proportionality”,

and the remedies for breach of any of those; I picked up the wording from paragraph 6.2 of the Explanatory Memorandum. Perhaps the Minister would be kind enough to comment on the risk that the changes will put us at a future disadvantage and not be fully reciprocated by the third countries concerned in the procurement process. If there is a risk, how long will it last? The SI lasts for 18 months, but I am not clear whether that is 18 months altogether or 18 months during which contracts might be let. Of course, procurement contracts often go on for many years.

I was sorry to see that there was no public consultation on this SI, but perhaps my noble friend the Minister can let me know if any concerns have been raised since the SI was published. I fully support the second SI on electronic invoicing. The UK has led the charge in Brussels on permitting businesses and citizens, and people around the world, to take advantage of the magic of online. That includes invoicing, contracts and many basic things. Both in business and as a Minister, this is an area that I have strongly supported and I am glad to see that electronic invoicing continues to apply. Our support for online should continue in third-country and EU procurement, although I know that the latter may be more peripherally affected on this occasion.

Cyber Threats

Viscount Waverley Excerpts

Thursday 18th October 2018 Lords Chamber

Moved by

[Viscount Waverley]

To move that this House takes note of the scale and complexity of cyber threats facing the United Kingdom and the case for innovative approaches across Her Majesty’s Government and beyond.

[Viscount Waverley (CB)]

My Lords, I move this Motion with the purpose of bringing added awareness on the crucial issue of cyber threats that face the United Kingdom. I shall bring an internal and international dimension to my remarks and in doing so, I thank those contributing.

This debate follows on the heels of a keynote speech at the National Cyber Security Centre by Mr Lidington of the Cabinet Office. The responsibility of government is to provide the first line of security and last line of defence. I therefore reference the underpinning of the UK Defence Doctrine, from which every enabling activity emanates. Scrutiny of the required outputs, matched against clearly defined intent, is essential to gain understanding of the required operating framework and ensure the supporting capacity is capable and sufficient. The complexity and scale of the interconnected world has brought benefits, but also poses immense challenges. Cyber activity, in this world of obfuscation, is a worldwide phenomenon and affects us all. The entire social infrastructure of how we communicate and live our lives has altered permanently, and so the need for mechanisms to monitor, detect, protect against and repel incursions constitutes challenges faced by all cyber experts globally.

From the use of capabilities in battlespace operations during military warfare to cybercrime, state-actor interference in other sovereign states’ critical national infrastructure and governance silos to the much-vaunted cyber interventions in national electoral processes, cyber confrontations have transformed 21st-century societies. Cybersecurity is a huge problem, and the global response is not moving at the speed needed. “Planning for the worst” should be the mantra. A major challenge is that it is hard to investigate given the non-sharing of intelligence between agencies, the inconsistency of the approach of Interpol and the lack of direct communication between banks, for example, which all compound the problem.

Another challenge is that companies often resist investing fully in their IT infrastructure and cybersecurity, believing it cheaper to clean up a mess than to prevent it in the first place. Reputational and financial damage is too often caused by not taking these threats seriously. The poor handling of breaches may also reveal deeper corporate failings. Threats will grow in volume and severity as criminal gangs gain access to more sophisticated tools and become reckless in using them. Mandatory reporting of cyber breaches has begun in some countries, but more must be done to raise awareness of the global nature of the threats. There is a call for an international outcomes-based approach to governance and regulation, to demonstrate the challenge of global cyber governance amid conflicting visions and approaches, and to set out the strategic direction of where we go and where we want to be.

The UK could lead the way. The UK’s National Cyber Security Centre is raising resilience in both corporate and government arenas and deepening its intelligence exchange. However, the task is so immense that the Government alone do not have the resources to face up to this issue. The solution lies in partnership—essential partnership between public and private sectors, and between states and agencies.

Another challenge is to agree cross-border rules of the game and the legal framework to enshrine them. There are too many gaps and inconsistencies between the way that different agencies collect, process and use evidence. Threat intelligence, for example, should not be beholden to the vagaries of political impasse. Cybercrime networks are international and have merged with organised crime covering terrorism, human trafficking, drug trafficking and child abuse. A keyword throughout should be “awareness”; government should work to ensure businesses are aware of the manifold initiatives and their contribution to them, and convince them of the need to view cybersecurity skills within businesses as a priority. Lack of skilled workers makes this harder. Can the Minister set out measures that will fill the shortage of the necessary skills and so put us in a stronger position in years ahead? The UK has become a leader in the use of outcomes-based regulation to influence the right behaviours. The approach taken with GDPR, the NIS directive and the ONR’s approach to nuclear cybersecurity suggests that the UK is creating the right environment.

While the UK has embraced and is implementing GDPR, other major states both inside and outside the European Union have been slow on the uptake. Cybercrime requires a united global response, as no single Government can act alone. As we prepare to leave the EU, we must call on international partners through groupings such as NATO, the Five Eyes, the UN and the Commonwealth to legislate more effectively. HMG should underpin international action and exert influence by investing in increased partnerships, including developing relationships with new partners to build on the levels of cybersecurity and protect UK interests overseas. The Five Eyes co-operation pledged at the end of August to make greater effort to attribute cyberattacks. This is welcome. The alliance has pledged to share more information between its cyber watch offices and, further, has plans to share risk assessments and certification practices to secure supply chain vulnerabilities.

The Commonwealth is embracing cyber development: the Commonwealth Cyber Declaration sets out a pragmatic vision for a free and open internet across the Commonwealth and a shared desire to build more resilient digital economies. The UK has an opportunity to share with Commonwealth countries the outcomes-based regulatory approaches that we are adopting to drive cyber resilience. Rwanda’s 2020 CHOGM will offer a milestone for what progress has been achieved. On a point of detail and given the increased importance of the Commonwealth in a post-Brexit world, will the Minister share an update on how the UK’s £15 million commitment to help review the national cybersecurity capacity of Commonwealth members and improve their capabilities has been spent to date, and detail what private sector innovation has been brought to bear?

It is understood that NATO formally recognises cyberspace as the new frontier in defence. The UK has offered both support and leadership to the establishment of NATO’s new cyber operations centre in Mons. This centre will not be fully operational until 2023, leaving unanswered fundamental questions regarding UK doctrine, capability and capacity in this intervening period. Can the Minister therefore outline what the UK’s position is for these gap years?

In addition, and within the military space, the UK and NATO cyber doctrine does not include a sufficiently common approach, including the underpinning doctrine that informs and directs supporting and enabling activities. It is perceived that the UK, extending to NATO, demonstrates an interoperable capability gap. It is felt that in adversarial activity we are outmatched due to being outnumbered but, more importantly, being doctrinally outmanoeuvred.

On the international front, Russia’s capabilities and techniques are well- documented. Considerable emphasis is placed on internet and related higher education. The Skolkovo Foundation in Moscow and the emerging Innopolis facility outside Kazan have active programmes further to develop internet technologies and offer a programme of start-up partnerships, which extends globally. Interestingly, the two driving forces behind the Innopolis city both attended Manchester University. In addition, the opening of a cyber school, as a centre for advanced cybersecurity education, was announced last night. The school will offer a variety of hands-on education programmes tailored for a wide range of people with different levels of cybersecurity qualifications and skills, from school and university students to cybersecurity experts. It is a useful idea that we should replicate in the UK.

As much attention has been focused on Russia in recent years, I will turn more specifically to a country that is fast assuming the mantle of world leader in cyber development: China. Its President has outlined plans to turn China into a cyber superpower. Through domestic regulations, technological innovation and foreign policy, China aims to build an impregnable cyber defence system and, increasingly, a separate government-controlled internet. State-led efforts in that country are central, with a focus on innovation in artificial intelligence, quantum computing and robotics, among other technologies. The Cyberspace Administration of China has responsibility for controlling online content, bolstering cybersecurity and developing its digital economy. Its investment in research and development now stands at 17% of global R&D spend.

However, Chinese policymakers are increasingly wary of the risk of cyberattacks on governmental and private networks, which could disrupt the control of critical services and impact economic growth. China has created an interlocking framework of laws, regulations and standards to increase cybersecurity and safeguard data in governmental and private systems, with surveillance a key feature, aided by facial and voice recognition software and artificial intelligence. It has required companies—this has become a trend—to store data within China, where the Government will have few obstacles to accessing it. Others adopt similar arrangements. It should be noted that that access compounds the potential for abuse and corruption by state interests.

Those who will lead in fundamental and applied research into quantum physics, quantum cryptography and quantum blockchain development will develop an edge. The night before last, I attended an artificial intelligence session promoted by the China APPG, together with the Chinese embassy, centred on the theme of potential partnership between our countries. The importance of the development of secure communications infrastructure by looking to the developments of quantum is the route forward and presents opportunities for the Government and the private sector to benefit from secure conferencing and secure data transfer.

That said—and this illustrates the overall environment—although quantum computers are still in their infancy, organisations such as the NIST estimate that mature quantum computers will be able to crack our public key encryption infrastructure within 15 years. So the race is now on to develop hybrid solutions to protect current and future data from the power of those quantum computers. Failure will rest with the international community if it does not come together with a collective approach to pass regulation and standards in the form of an international treaty or agreement.

So what should be done, and by whom, to rein in cyber threats? UN Secretary-General Guterres recently commented:

“I think it’s high time to have a serious discussion about the international legal framework in which cyberwars take place”.


Yet the last UN discussions by a group of experts took place in 2017, with no consensus being reached. However, the UN is the best forum to deal with this. I encourage the Secretary-General to grab the bull by the horns.

With all that as background, where should we go from here? I venture 15 specific initiatives, in no order of importance. These are: to support a call for a global move to outcomes-based regulation and legislation, as opposed to the mandating of standards, to form a regulatory framework that forces dialogue between friends and foes alike; to implement initiatives to limit inappropriate meddling that sows discord, either domestically or from abroad; to enable enhanced co-operation within the public sector and continuous dialogue with the private sector; to recognise that the private sector will play a central role in future international cyber governance; to establish a mechanism whereby financial services institutions are enabled to share information and intelligence, and work together more quickly and effectively; to encourage further development of the cyber-insurance industry to bridge the gap between the identification of liability and the lack of data consistency; to define a universal understanding of “cybercrime”, “cyberattack” and “cyber threat”; to promote Governments coming together through the United Nations to take an approach that treats cybersecurity in a sphere of its own; to strengthen the incident response functions of the NCSC and, in doing so, provide clearer guidance on what a reportable incident actually is; to promote advances in the practical application of quantum physics to achieve secure communications channels; to establish a cyber school for advanced cybersecurity education; to place maximum endeavour in technical co-ordination and information sharing; to encourage financial services to take a peer-to-peer approach to tackling cybercrime, starting with greater dialogue between major banks; to encourage international cybersecurity information-sharing partner- ships and further support sector-specific information-sharing centres; and finally, but possibly most importantly, to promote global discourse.

I conclude with five questions to the Government that I shall place as Written Questions today to allow the Minister appropriate space to respond fully. For the record, they are: what is the Government’s definition of a cyberattack and who will decide on the response? What are government departments doing to achieve agreed outcomes in cyberspace? Have those departments developed robust mechanisms so that there are parallel agreed outcomes across all ministerial silos? What role should the private sector play in assisting the Government with cybersecurity? Finally, but importantly, will HMG outline their achievements to date on the recommendations of the Joint Committee on the National Security Strategy’s report Cyber Security Skills and the UK’s Critical National Infrastructure?

I end where I began: if this debate achieves little more than assisting in underpinning the essential need for acute awareness of these critical issues, I believe we will have done our duty. I beg to move.

--- Later in debate ---

[Viscount Waverley]

My Lords, I hope that noble Lords will agree that this debate has achieved a practical purpose. I thank them for the scope of points that have been covered. Among the many observations that have come to light, the sharing of concerns regarding 5G has relevance, and we must pay attention to it as it develops.

It has been highlighted that we must encourage companies to invest fully in their infrastructure and cybersecurity. It is through education and clarification that we ask citizens to take the necessary steps to make our country and them more resilient. I underline again that cybercrime requires a global response, and no Government can act alone. With that said, I commend the Motion.

Motion agreed.

House of Lords (Hereditary Peers) (Abolition of By-Elections) Bill [HL]

Viscount Waverley Excerpts

Committee: 2nd sitting (Hansard): House of Lords
Friday 7th September 2018 Lords Chamber

[Lord Rennard (LD)]

My Lords, the Bill of the noble Lord, Lord Grocott, has full support from these Benches. The principle is entirely right. It is very important that we improve the reputation of this House by ending what is considered to be a farcical process of continuing to conduct hereditary by-elections. The Burns report has been referred to several times already. The Bill would actually assist the process of bringing forward Burns, which will face some problems if we do not bring an end to the hereditary by-elections because of the issue that has been raised about having a higher proportion of hereditary Peers in the House, unless we do something to stop them.

There is nothing with which I disagree in the regret Motion of the noble Lord, Lord Trefgarne. I recall that in 2010 the then Labour Government, in their Constitutional Reform and Governance Bill, brought forward the abolition of hereditary by-elections and received majority support in the House of Commons. One reason why the Bill of the noble Lord, Lord Grocott, should be approved is to allow the Commons to vote on the issue; if we do not approve it, the Commons will not have that say. That being said, in my view the regret Motion of the noble Lord, Lord Trefgarne, adds nothing to the debate. There is nothing with which I disagree but it takes up precious time and encourages the perception that there is a filibuster trying to prevent the Bill being approved. The filibuster itself brings the House into disrepute. That is enough said; I urge Members of the House to say no more than necessary in order to move on with the business, approve the Bill and discard what I consider to be irrelevant regret Motions.

[Viscount Waverley (CB)]

My Lords, the time for practicalities has arrived. Without wishing to incur the wrath of those who remain, those in line and those who kindly enable me to stay on, the time has come to recognise that if a strategy manifestly will not deliver, dithering must end. However, I wish to counsel against endless new appointments until the whole question of this second Chamber is satisfactorily resolved—the noble and learned Lord, Lord Brown, made this point earlier. At this stage, matters relating to Burns or any other way in which we can move on with this whole question must surely be taken. Why not today?

[Lord Elton (Con)]

My Lords, the Burns report is a question which is not before you. This is simply not a fatal Motion. It will not stop the progress of the Bill, on which there are mixed views among us. It merely expresses the opinion that this job ought to be done by central government. With that proposition I entirely agree, for reasons which will no doubt be extended later in the debate. The question is simply whether we can say to Her Majesty’s Government with a resounding voice—in unison, I hope—that they ought to get on with this. That will then be in their ears when they come to look again at Burns.

Andrey Lugovoy and Dmitri Kovtun Freezing Order 2018

Viscount Waverley Excerpts

Tuesday 20th February 2018 Lords Chamber

[Lord Young of Cookham (Con)]

My Lords, the 2018 order was laid before both Houses on 19 January of this year and came into force on 22 January. This was to ensure that there was no gap in the freezing measures enforced against Andrey Lugovoy and Dmitri Kovtun the day after the publication of the Litvinenko inquiry report on 21 January 2016. The order was debated and approved in the other place on 8 February.

Noble Lords will not need to be reminded that the independent inquiry, chaired by Sir Robert Owen, concluded that Alexander Litvinenko was deliberately poisoned in 2006 by Lugovoy and Kovtun through the use of polonium-210, a radioactive isotope. The inquiry also concluded that there was a “strong probability” that Litvinenko, an ex-KGB and ex-FSB officer and a critic of the Russian Government, was murdered on the order of the FSB, the Russian domestic security service. Furthermore, the killing was “probably approved” by the then head of the FSB, Nikolai Patrushev, and the Russian President, Vladimir Putin.

In response to the seriousness of the report’s conclusions, the Treasury imposed an asset freeze on Lugovoy and Kovtun on 22 January 2016 by making a freezing order under the Anti-terrorism, Crime and Security Act 2001. The 2016 freezing order had the effect of freezing any funds or assets that these two individuals held in the UK or with any UK-incorporated entities, denying them access to the UK financial system and prohibiting UK persons from making funds available to them. The Treasury routinely monitors information provided on financial sanctions on all designated persons. During the two-year period, no relevant information was received in respect of Lugovoy and Kovtun.

Under Section 8 of the Act, the duration of a freezing order is limited to two years. During that two years, the Treasury is required, by Section 7 of the Act, to keep the order under review. In order to maintain the asset freeze, the Treasury was required to review the case and to decide whether to make a new order. The Treasury has conducted such a review and has decided to make a new freezing order.

The Treasury believes that making a new order remains an appropriate and proportionate measure to take. It will ensure that any assets discovered in the UK that belong to the two individuals are immediately frozen, and it will prevent the men trying to access the UK financial sector. The relevant conditions required to be met, in accordance with Section 4 of the Act, are still being met today—the Treasury reasonably believes that action constituting a threat to the life or property of one or more nationals of the UK or residents of the UK has been or is likely to be taken by a person or persons resident in a country or territory outside the UK.

The freezing order is one of a limited number of measures available to the UK authorities as a means of acting directly against Lugovoy and Kovtun. The other actions include Interpol red notices and European arrest warrants, which also remain in place. The Russian authorities’ refusal to accede to extradition requests following the murder of Mr Litvinenko and their lack of co-operation with the inquiry have blocked progress being made by the Metropolitan Police investigation into Lugovoy and Kovtun. There is therefore little prospect of bringing them to trial in a British court.

However, we continue to believe that the freezing order acts as a deterrent and as a clear signal that this Government will not tolerate such acts on British soil and will take firm steps to defend our national security and rule of law. Failure to renew the asset freezes against Lugovoy and Kovtun would, I believe, risk reinforcing a damaging signal that the consequences of murder carried out in the UK are few and time-limited, and that it is possible to evade the UK justice system by fleeing overseas.

Noble Lords will be aware that the UK’s relationship with the Russian Government remains strictly limited as a result of the Litvinenko assassination and the illegal annexation of Crimea by Russia. We continue to engage with Russia on a guarded basis, defending UK national security where necessary. We will continue to pressure the Russian Government to do more to co-operate with the investigation into Mr Litvinenko’s death. This includes the extradition of the main suspects, the provision of satisfactory answers, and an accounting of the role and activities of its security services.

This new freezing order maintains the asset freeze originally imposed by a similar order passed in 2016. It acts as a deterrent and a signal that the UK will not tolerate such acts on British soil and that we will defend our national security and the rule of law. I beg to move.

[Viscount Waverley (CB)]

My Lords, following the protocol to declare such interests, I do so, informing the House that I am a vice-chair of the All-Party Parliamentary Group on Russia.

It is the nature of the challenge—the noble Lord, Lord Young, touched on this—that UK/Russia relations can charitably be defined as fraught. However, for ever wishing to see justice adhered to, and given that Russia is highly unlikely to agree to the extradition to the United Kingdom, not least because under the Russian constitution no Russian can be extradited if it undermines their citizens’ rights—in addition to the concern that in the UK the proceedings were, I understand, held in camera, thus suggesting to the Russians that this process is all being conducted in secrecy—I understand that there is a willingness by Russia to make these two men available for interview or for a process through a mechanism such as Skype or some other such means.

I want to make one point about something that troubles me. The Foreign Secretary travelled for a bilateral meeting in Moscow with his opposite number, Foreign Minister Lavrov, on 22 December, but I understand that the Foreign Secretary failed to discuss this case with Minister Lavrov. Since the case of Mr Litvinenko is a plank of UK foreign policy towards Russia, this is surprising to me, to say the least, as it sends conflicting messages to the Russians.

Given that background, would it not be more practical to consider encouraging other jurisdictions to assist—for example, by calling on the International Court of Justice to play a role and, in effect, lend good offices to allow for a fair hearing to be conducted? That would in no way suggest that the individuals in question would not receive a fair hearing here in the UK.

[Lord Robathan (Con)]

My Lords, I commend the Government for taking this action. I also commend my right honourable friend the Security Minister in the other place for his comments about the assets of many people that have been brought here. They are probably illegally obtained moneys and are now held by oligarchs in this country who are laundering them through the banks here and buying up a great deal of London real estate.

I have been put on a stop list and cannot go to Russia. I would rather like to go to St Petersburg, never having been. I have probably been put on the stop list because I said something slightly disobliging about President Putin a few years ago. I urge the Government not just to pursue this matter but to be really fierce with the Russian Government, as I believe our Foreign Secretary has been. If the Russian Government get away with it, they will continue to get away with it and life will get worse, not better.