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Public Bill Committees

Debated on Thursday 22 April 2021

Advanced Research and Invention Agency Bill (Fifth sitting)

The Committee consisted of the following Members:

Chairs: Judith Cummins, Mr Philip Hollobone, Esther McVey, † Derek Twigg

† Baker, Duncan (North Norfolk) (Con)

Bell, Aaron (Newcastle-under-Lyme) (Con)

† Blackman, Kirsty (Aberdeen North) (SNP)

† Butler, Dawn (Brent Central) (Lab)

† Crosbie, Virginia (Ynys Môn) (Con)

† Fletcher, Mark (Bolsover) (Con)

† Flynn, Stephen (Aberdeen South) (SNP)

† Furniss, Gill (Sheffield, Brightside and Hillsborough) (Lab)

† Hunt, Jane (Loughborough) (Con)

† Mayhew, Jerome (Broadland) (Con)

† Metcalfe, Stephen (South Basildon and East Thurrock) (Con)

† Onwurah, Chi (Newcastle upon Tyne Central) (Lab)

Owen, Sarah (Luton North) (Lab)

† Richardson, Angela (Guildford) (Con)

† Solloway, Amanda (Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy)

† Tomlinson, Michael (Lord Commissioner of Her Majestys Treasury)

† Zeichner, Daniel (Cambridge) (Lab)

Sarah Ioannou, Seb Newman, Committee Clerks

† attended the Committee

Public Bill Committee

Thursday 22 April 2021

(Morning)

[Derek Twigg in the Chair]

Advanced Research and Invention Agency Bill

Order. We are now sitting in public and the proceedings are being broadcast. We now continue our line-by-line consideration of the Bill. The selection and grouping list for today’s sitting is available in the room. As Members are aware, the selection and grouping list shows the order of debate on amendments, clauses, schedules and new clauses. The decisions on each follow the order of consideration, which is reflected in the way in which the amendments are marshalled on the amendment paper. A Member who has put their name to the leading amendment in the group is called first. Other Members are then free to catch my eye to speak on all or any of the amendments within the group. A Member may speak more than once in a single debate.

At the end of the debate on a group of amendments, new clauses and schedules, I shall call the Member who moved the leading amendment or new clause again. Before they sit down, they will need to indicate if they wish to withdraw the amendment or seek a decision. If any Member wishes to press any other amendments, including grouped new clauses and schedules, they need to let me know.

Clause 3

Ambitious research, development and exploitation: tolerance to failure

I beg to move amendment 19, in clause 3, page 2, line 20, at end insert—

“(2) On or before the date that an annual report is laid before Parliament in accordance with paragraph 15(4) of Schedule 1, the Secretary of State must lay before Parliament, and publish, a statement containing the required information about details of funding and ARIA’s tolerance to failure.

(3) In this section, the required information about ARIA’s tolerance to failure is—

(a) how this section has been interpreted by ARIA during the relevant financial year,

(b) the number and value of projects funded by ARIA which have been terminated or disbanded on the grounds of failure during the relevant financial year, and

(c) details of ARIA’s funding in the relevant financial year and its proportion of Government research and development expenditure.”.

This amendment would require the Secretary of State to make an annual statement regarding ARIA’s tolerance to failure.

It is a great pleasure to serve under your chairship, Mr Twigg. Before I speak to amendment 19, I want to say that that in the intervening time between the previous sitting and today, I have managed to break my foot, which was truly an achievement, given that all I was doing was running. If I am not as quick to rise as I would otherwise be, I hope you will be forgiving, Mr Twigg. The Minister said on Tuesday that the Advanced Research and Invention Agency might contribute to being able to “Beam me up, Scotty!” That would have been highly desirable as I tried to make my way into this place this morning. I am sure we wish ARIA luck in that. I am grateful to everyone for their indulgence as I deal with my new-found injury.

Amendment 19 would require that the Secretary of State makes an annual statement about ARIA’s tolerance to failure, in order to provide greater oversight and responsibility. It is very much in keeping with all the amendments that the Opposition have tabled. It is a constructive amendment that seeks to ensure that ARIA’s mission, when it has one, and its workings are understood by the public in general and that we have the right oversight to ensure that ARIA is not in any way subject to or tainted by the sleaze that is all too common and evident in the current Government’s procurement dealings with their mates. We believe that it is right that ARIA should be given operational independence from Government. We support the idea of specifying that it has a high tolerance to risk and failure, but the challenge is to establish what that tolerance is and to ensure that it is scrutinised properly and that there is public understanding of it.

We believe that ARIA should have a high-risk appetite, but we need greater clarity in order to understand how that appetite will be determined, calibrated and explained, and how Ministers will be accountable for ARIA’s failure and success with public money. That is critical and it was a theme of the evidence sessions that, if we are to maintain public support, we must be open and honest about ARIA’s tolerance to failure.

My hon. Friend is making a very good introduction to today’s proceedings. I express my sympathy to her for having to stand up and sit down; I will not make her do it too often.

The evidence sessions brought some of this out, but does she agree that attitudes to failure in our country are very different from those in America in particular, which is where we are learning lessons from in establishing the agency? Given that, does she also agree that this is a particularly important amendment? The British attitude towards failures is not very tolerant; we do not necessarily view them as being positive. There is a risk here because unless we get this right, it will be difficult for those establishing the agency to be able to explain what they are doing to a wider audience.

Thank you, Mr Twigg. I will do that. I thank my hon. Friend the Member for Cambridge for expressing his sympathy. It is always a pleasure to give way to his interventions because he makes such excellent points. Indeed, his point about the differences in culture was brought out in the evidence session, particularly by Professor Glover from the Royal Society of Edinburgh, who said that

“the biggest challenge might be—this will help in engaging with citizens—being up front right at the very beginning that we expect failure, and that failure is part of the measure of success for an agency like ARIA, because if you were not taking any risks, you would not get any failure. The challenge is that, culturally in the UK, and quite differently, I think, from North America, we see failure through an emotional lens, not a scientific lens, whereas I think the opposite is the case in North America. We need to think about that. In a way, just talking about it and saying that that is the case makes it easier for people to understand that we need to fail in order to get the big rewards.”––[Official Report, Advanced Research and Invention Agency Public Bill Committee, 14 April 2021; c. 61, Q58.]

That goes to my hon. Friend’s point and to the heart of this amendment. We have a cultural difference here in the UK. As someone who has worked in technology in the UK, France and the US, it is very noticeable to me that in the US, for example, a failure is a mark of experience from which one will go on to succeed better, whereas here a failure is intoned in negative headlines and comments.

I am sure the Minister will agree that in order for ARIA to have public support we need to change that culture. By seeking an annual statement on ARIA’s tolerance of failure, our amendment would make a significant contribution and help the public understand the importance of failure. When ARIA fails, there will be headlines saying that public money has been wasted. Certain newspapers, and perhaps even certain politicians, may say that. Would there not be support for both ARIA and the Secretary of State, whoever that may be, if the successes of this high-risk agency were mapped and placed in the context of the failures from which they directly stem?

Our amendment will provide details of the funding provided to high-risk research compared with public investment in wider science and research, so that the public can better understand the proportion of research funding going to this high-risk, high-reward investment. Without public buy-in, it will be very difficult to ensure long-term support for ARIA. Indeed, a consistent theme of the science community’s response to public funding is that it needs to be long term. The amendment would help to ensure that ARIA is not disabled, as it were, at the first failure. We recognise, and this was said in the evidence sessions, that there is a very high probability that ARIA will have a high number of failures, even if the level of failure is difficult to predict.

We want the Minister to be responsible for ARIA’s failures. Although the agency must act independently, this is public money, so there needs to be parliamentary and ministerial accountability for it. In particular, we do not want to see ARIA’s chief executive, whoever that may be, politically abandoned at the first failure. The amendment would help to ensure that accountability and wider understanding are there from the very beginning.

Dame Ottoline Leyser of UK Research and Innovation said:

“In that domain, where you have a very high probability of failure—that is what high risk means—but also an extraordinary probability of amazing levels of transformative success, it is a dice roll. The total number of projects will be relatively small, so it is very hard to predict an absolute number or proportion that one would expect, and one should not need to—that is what high risk, high reward means.––[Official Report, Advanced Research and Invention Agency Public Bill Committee, 14 April 2021; c. 12, Q7.]

We understand that we cannot predict the levels of failure, but by measuring and reporting on them, and by ensuring that there is a wider public understanding of them, we can help to begin cultural change, as well as ensure the long-term support for high-risk, high-reward research, which ARIA so fundamentally needs.

May I start by saying what a pleasure it is to serve under your chairmanship, Mr Twigg? I wish my colleague the hon. Member for Newcastle upon Tyne Central well. In fact, I was just reflecting that if we were on the Star Trek Enterprise, we could have beamed her up and Dr McCoy could have sorted her out.

I thank the Minister for her very kind remarks. I probably should have said earlier that the NHS, and the Royal Free Hospital, which treated me, showed all the support, kindness and innovation that Bones in “Star Trek” would have done.

I add my appreciation for the NHS as well. I welcome the debate so far and look forward to continuing the discussion on this important Bill.

As part of the discussion on amendment 19, I will draw on two comments about failure in research that we heard in last week’s evidence sessions. The first is Bob Sorrell’s point that, compared with the US,

“there is a definite culture in the UK that failure is something that you hide under the carpet”.

He went on to say that ARIA

“is about establishing a culture in which we can accept failure and move on.”––[Official Report, Advanced Research and Invention Agency Public Bill Committee, 14 April 2021; c. 76, Q79.]

My worry is that the amendment, which requires the publication of a statement containing information regarding ARIA’s tolerance to failure, just misses the point. Focusing on the number and value of project failures versus successes as an annual output risks creating the wrong mindset, and risks losing sight of the ambitious multi-year goals.

It is also the case that assessing the failure of programmes and projects on an annual basis might have the effect of limiting risk-taking over the longer term. A high-potential project might qualify as a failure after one year, even though it may deliver great results over the longer term.

The second comment was made by Professor Dame Ottoline Leyser, who questioned how we will know that ARIA has succeeded, and what one would expect the percentage failure to be. She said:

“There is also serendipity…to factor in. If you set yourself a fantastic target of solving a particular problem or producing a particular new product and you fail to do that, none the less, along the way you might discover something extraordinary that you can apply in another field.”––[Official Report, Advanced Research and Invention Agency Public Bill Committee, 14 April 2021; c. 12, Q7.]

Although ambitious research goals might not ultimately be achieved, ARIA will generate value from failures and should therefore embrace failure, and there is value in knowing what does not work, as well as in the successes.

ARIA will also be a great convenor of talent that would not otherwise be brought together. It is through the serendipity that value arises, which would not be captured by the information that the hon. Lady’s amendment would require. I therefore urge her to withdraw the amendment.

I thank the Minister for her remarks. We agree on the need for ARIA and for high-risk, high-reward research, but perhaps we differ on whether the publish share an understanding of that need. There are also, unfortunately, the realities of the environment in which we live: our culture does not have a high tolerance of failure. We truly believe that it is incumbent on us as parliamentarians and leaders to take what steps we can to help transform the situation and to not leave ARIA alone, so that we can all better understand the role that failure will play.

I am reluctant to detain the Committee. This was meant to be a constructive amendment, but if it has not met with the approval of the Minister, I am happy to beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Question proposed, That the clause stand part of the Bill.

It is absolutely vital that ARIA operates at the cutting edge of science and technology, and I have consistently heard from the scientific community that ARIA must tolerate the risk of failure to succeed. This idea gets to the very heart of what ARIA is about and on Second Reading there was also cross-party support for it, too.

ARIA will set highly ambitious research goals, which, if they are achieved, will bring about transformative scientific and technological advances, and those advances could also yield significant economic and social benefits. It follows that, as these goals are expected to be highly ambitious, it is likely that only a small fraction of them will be fully realised as originally intended, which will necessarily require a high tolerance of failure. For example, it might be that when some failures are judged over a longer time horizon, they will lead to unexpected successful outcomes. Clause 3 allows ARIA, in exercising its functions, to give particular weight to ambitious research, development and exploitation, which carry a high risk of failure.

I will just say a few words about failure. Although ambitious goals might not ultimately be achieved, ARIA will generate value from project failures. For example, a particular goal may not prove technologically viable, but in pursuing it scientists may happen across another promising technology or develop a new method of data collection. There is also value to be had in knowing what does not work, as well as in the successes.

ARIA is also expected to be a convener of high-calibre individuals and organisations from across the public and private sectors, which otherwise might not have been brought together. However, ARIA is not just about ambitious research goals. Clause 3 also allows ARIA to take greater risks in the form of the support it provides, including the use of innovation funding mechanisms. For example, clause 3 provides ARIA with the potential to take equity stakes in start-up ventures for the purpose of developing and exploiting scientific research.

That approach also extends to funding research and development that is untested and untried, and not necessarily peer-reviewed, which is a clear dividing line between ARIA and other public research and development funders, such as UK Research and Innovation. For ARIA to be a fruitful addition to the R&D funding landscape, it must be able to pursue truly ambitious targets and to support them in a novel and sometimes risky way. It must not be scared of failure, and clause 3 seeks to enable that mindset and approach.

We recognise that clause 3 is essential to enabling and empowering ARIA and ARIA executives in tolerating failure. That is part of ARIA, and the clause has our support.

On the exercising of functions in the Bill, following our debate on an amendment debated in the previous sitting, the Minister kindly sent me a letter about how the Secretary of State might consider removing the chair from their position. I thank the Minister for her comments that set out the way in which the chair might be removed. I point out that our amendment would have given powers to remove an executive member and the Bill only gives powers to remove a non-executive member, which is the issue we were concerned about.

Question put and agreed to.

Clause 3 accordingly order to stand part of the Bill.

Clause 4

Grants to ARIA from the Secretary of State

Question proposed, That the clause stand part of the Bill.

Clause 4 creates a power for the Secretary of State to fund ARIA. The Committee will be aware that the Government have committed to funding ARIA with £800 million up to financial year 2024-25. The clause allows the Secretary of State to attach conditions to the grants made to ARIA, which will be set out in the framework document and funding delegation letter, which are agreed between my Department and ARIA. The documents will be drafted and agreed with ARIA’s senior leadership team ahead of ARIA becoming operational in 2022.

The documents will complement the Bill, setting the broad parameters within which ARIA can operate and ensuring appropriate use of public money. It is a requirement for arm’s-length bodies of Government Departments to have these arrangements in place. I will be exceptionally mindful that we do not tie ARIA up in knots with endless Government approval processes, as that would run counter to what ARIA is about, but some parameters must be put in place to safeguard the use of public money.

For example, I have spoken about the importance of providing ARIA’s high-calibre programme managers with the freedom to experiment with a toolkit of funding methods in a way that best suits the programme goals and that does not always fund the usual suspects. As the policy statement sets out, that may include the use of inducement prizes, grant-prize hybrids and seed grants, taking equity stakes and so on. Some of ARIA’s activities could be subject to delegation levels, which limit the amount of a single type of activity, for example. The ability to attach conditions to grants paid by the Secretary of State to ARIA will set the appropriate framework within which ARIA can then freely determine its activities and funding choices without ministerial interference.

Clause 4 is as significant in what it does not say as in what it does. Unlike the corresponding clause in the Higher Education and Research Act 2017, clause 4 does not include a direction-making power regarding the allocation or expenditure of ARIA. This is important because the funding decision-making power should rest with ARIA, not Ministers. Clause 4, in allowing ARIA to be funded, is essential to its functioning and should stand part of the Bill.

As the Minister said, clause 4 enables the Secretary of State to make grants to ARIA. It is clearly essential—what is the point of an agency that is not able to receive funds? While we do not oppose the clause, however, we are concerned about the general tone and language in the discussion of the way in which grants and funding will be made available to ARIA.

The Minister talked about not burdening ARIA with bureaucracy. At this time, there are a number of investigations into accusations of sleaze and the inappropriate ways that funding has been made available to the mates of different Secretaries of State. Funding and procurement have been carried on through WhatsApp groups, rather than through the normal procurement procedures, for example. I believe that the clause would have benefited from setting out more robustly the importance of the procedures, which are to be agreed, as well as the importance of what the Minister calls “bureaucracy” in enabling and ensuring trust, which is so very important for this agency.

In the debate on Tuesday, the Minister talked about a “different model of trust” for ARIA. I put on the record that the Opposition believe strongly that it is not the model of trust that is wrong, but the way in which it is being followed or implemented by this Government. We believe that the current model of trust needs to be supported in relation to ARIA and in all funding and procurement decisions.

Question put and agreed to.

Clause 4 accordingly ordered to stand part of the Bill.

Clause 5

National Security Directions

I beg to move amendment 20, in clause 5, page 2, line 33, at end insert—

“(4) The Secretary of State must, in relation to each financial year—

(a) prepare a report in accordance with this section, and

(b) provide a copy of it to the Intelligence and Security Committee of Parliament as soon as is practicable after the end of that period.

(5) Each report must provide details of—

(a) any directions made under this section in the relevant financial year, and

(b) the nature of the national risks posed which triggered the making of the directions.”

This amendment would require the Secretary of State to prepare and provide to the ISC an annual report on any directions made under this section.

It is a great pleasure to move this amendment, which proposes an essential addition to the Bill. It would require the Secretary of State to prepare and provide to the Intelligence and Security Committee of Parliament an annual report on any direction made under the clause. I remind the Committee that clause 5 states that

“(1) The Secretary of State may give ARIA directions as to the exercise of its functions if the Secretary of State considers it necessary or expedient in the interests of national security. (2) The power to give directions under this section includes power to vary or revoke a direction. (3) ARIA must comply with a direction given under this section.”

We in the Labour party are very clear that we are the party of national security—[Interruption.] Would anybody like to intervene? Let me say it again: we are the party of national security, and we believe that it is vital that decisions taken by the Government reflect our national security interests. That is clearly in the interests of the nation. The first duty of any Government, of any colour, is to keep our nation secure, and we are very pleased that the Bill recognises the importance of national security. Indeed, we are often concerned that, at times, it seems that this Government place business interests, particularly foreign investment, ahead of national security.

Obviously, national security is an important consideration, but the issue and the challenge here is that, under the Bill as drafted, those directions cannot be subject to adequate parliamentary scrutiny. I am reluctant to remind the Committee again, but the Government are in the midst of a cronyism scandal. The Bill places power and responsibility in the hands of the Secretary of State, with little ongoing accountability generally. Part of our constructive approach to the Bill is to try to ensure that there is appropriate scrutiny provision throughout the Bill, particularly given that it was drafted before the cronyism scandal that has had such an impact on the public’s trust in procurement, funding and other decisions taken by this Government.

It is essential that the directions that the Secretary of State gives be subject to scrutiny, but how will that be possible under the Bill as it stands? A Select Committee does not have the intelligence clearance to discuss matters of national security. I hope that it is in order for me to remark that I have had the good fortune to work on the National Security and Investment Bill and the Telecommunication (Security) Bill as they have come through Parliament in the last few months. In both Bill Committees, we discussed the issue of a Secretary of State taking decisions on grounds of national security. By definition, those decisions would not be able to be subject to scrutiny, because only the Intelligence and Security Committee of Parliament has the intelligence clearance to scrutinise such decisions. By enabling that scrutiny, we want to correct the oversight of giving to the Secretary of State powers that are not subject to scrutiny.

The reports that we are proposing would be annual, coinciding with the financial year, and would provide Parliament with an accurate and periodic update on the impact of these measures on our national security. The Bill allows the Secretary of State to take decisions in the name of national security, but without any obligation to inform or liaise with the ISC. If the Minister objects to the way that the report would be required, we are quite happy to discuss other ways in which the ISC can provide the appropriate scrutiny.

The Department for Business, Energy and Industrial Strategy does not have a long-standing tradition of implementing national security measures. It was only very recently, with the National Security and Investment Bill, for example, which has yet to complete its stages in the House, that BEIS was given the powers to look at mergers and acquisitions and so on based on national security. We believe that experienced and qualified oversight is needed. If the Minister is reluctant to support the amendment, I would like to hear from her how the Secretary of State’s powers will be scrutinised.

I thank the hon. Lady for giving way. I am intrigued by the amendment, because on the one hand, the Opposition were very keen with amendment 15 that ARIA’s mission be to drive the net zero agenda; on the other hand, this amendment would require the Secretary of State to report to the ISC. Can she explain where she thinks a report on the potential for net zero to the ISC would be necessary and what it would achieve?

I thank the hon. Gentleman for his intervention, which I hope does not reflect a lack of understanding of the ways in which science research and our national interest work. On national security, a direction could be given to ARIA not to work in nuclear energy with a Government whose interests did not align with our own, for example. That is quite a relevant example, because we know that, rather than investing in it themselves—even though interest rates are so low at the moment—the Government have welcomed, and even encouraged, investment in our nuclear energy by the Chinese. Some kind of direction might well be given on that basis. There are many ways in which climate change is essential to our national security, so I do not think that example was very well chosen.

More generally, if the hon. Member is asking how trade-offs between national security and other priorities should be made, which is a very important question, we have already said that we believe in national security, and national security should always be the priority. However, when such a direction is made for reasons of national security, which we support, the fact is that we will not know why it was made. Perhaps that is right, because if it is an issue of national security, those concerns should not be shared publicly; none the less, somebody needs to scrutinise them. I hope everybody on this Committee will agree that someone in Parliament should be scrutinising decisions on national security, particularly when those decisions are taken by the Secretary of State for Business, Energy and Industrial Strategy. As I have already said, neither the Department nor the Secretary of State has long experience of making national security decisions.

I fully take the point made by the hon. Member for North Norfolk, but we Opposition Members have a degree of prescience in being able to predict the way that votes in this Committee might go. We anticipated that the Government might not accept our suggestion about giving ARIA this mission. Does not that the lack of a mission create this further problem? If we had had that clear mission around climate, this would be far less of an issue.

Once again, my hon. Friend raises an excellent point, and indeed he brings together the themes of our amendments. He is right to say that if ARIA had a clear mission, there would be better understanding of the kinds of decisions and trade-offs that might well need to be made, and we could have a much better informed discussion around that. However, the fact is that we have neither a mission for ARIA, nor any opportunity to scrutinise the national security directives that might be made in the interests of addressing climate change, but also might be made in the interests of ensuring that we have oil drilling rights, or that we continue to fund minerals extraction around the world in order to support other research objectives. It is clear to us that we need to have this scrutiny.

As I indicated, there have been a number of debates on Intelligence and Security Committee scrutiny of other Departments, including in relation to the National Security and Investment Bill and the Telecommunications (Security) Bill. In those cases, despite that Committee being keen to scrutinise national security decisions, the Government have shown a great reluctance to allow parliamentary scrutiny of issues of national security. Some believe—I am not one of those cynical people—that this is because the Government are not happy with Parliament’s choice of Chair of the ISC. I am loath to believe that the Government would be so petty when it comes to such an important matter as national security, so I hope the Minister will clarify how we will have appropriate scrutiny of national security decisions made by the Secretary of State, as set out in this Bill, and why the ISC is not the right vehicle for that.

I will finish with two brief quotes in support of the amendment. In the National Security and Investment Bill Committee, we had the great privilege of taking evidence from Richard Dearlove, former head of the British Secret Intelligence Service.

He said:

“My view would be that the annual report has as much transparency as possible, but you are probably going to require a secret annexe from time to time. It is a bit like the reports of the Intelligence and Security Committee, which I dealt with frequently as chief. They and we were keen that they should publish their reports, but there comes a point where it is not in our national interest that some of this stuff is put in the public domain.”

––[Official Report, National Security and Investment Public Bill Committee, 24 November 2020; c. 21, Q23.]

That is the case here as well.

My right hon. Friend the Member for North Durham (Mr Jones) has said:

“I do not want to give the impression that the ISC is looking for work, because I have been a member for a number of years and we are busy with a lot of inquiries—I have three or four hours’ reading every week looking through reports from the agencies. However, it is important that the ISC can at least look at the intelligence that lies behind decisions.”––[Official Report, Telecommunications (Security) Public Bill Committee, 21 January 2021; c. 143.]

That is all that we are seeking to achieve through this amendment.

Amendment 20 would require the Secretary of State to provide a report to the Intelligence and Security Committee at the end of each financial year detailing directions made by the Secretary of State to ARIA in the interests of national security and the national security risks that triggered the directions.

The Government take very seriously their duty to protect the national security of the country and its citizens. The ISC plays a valuable role in providing scrutiny and expertise in respect of its functions, as set out in the Justice and Security Act 2013 and the statutory memorandum of understanding. However, that remit does not extend to oversight of BEIS work.

I do not see any reason why such a report should be necessary. No such arrangements exist with UKRI through the Higher Education and Research Act 2017. Instead, the organisation has robust national security arrangements in place to ensure that appropriate action is taken. Similar arrangements will be put in place as ARIA becomes operational, and we are speaking with the relevant parts of Government to make sure that that is the case.

The clause reflects the fact that, while ARIA will be free from ministerial interference, we will always act on our responsibility to protect our national security. Information made known to the Secretary of State will be fed into the wider work of the Government to protect UK R&D from national security risks as appropriate. I see no case for ARIA to report on that to the ISC. I urge the hon. Lady to withdraw her amendment.

I thank the Minister for her comments, but she has not responded to the underlying and constructive aim of the amendment, which is to ensure that the ISC has sight of intelligence and security decisions.

She makes a comparison with UKRI. This agency is about high-risk, high-reward research, which we are told will be transformative. During many of our National Security and Investment Bill Committee debates, the point was raised that the nature of national security threats is changing and, as we heard numerous times in evidence, has moved, and is moving, very much into the technological domain. The question whether or not we play a leading role in artificial intelligence, for example, is an issue of national security, as are our cyber defences, which I am sure any chief executive of ARIA would be keen to look at. The agency needs the kind of intelligence scrutiny that only the Intelligence and Security Committee can give. On that basis, I would like to press the amendment to a vote.

Question put, That the amendment be made.

Question proposed, That the clause stand part of the Bill.

Clause 5 creates a power for the Secretary of State to give directions to ARIA regarding the exercising of its functions that are considered necessary or expedient in the interests of national security. It is right that ARIA is free from too much ministerial oversight. However, when it comes to questions of national security, Ministers may intervene to prevent risk to the UK’s national security interests.

The necessary and expedient threshold of clause 5 offers adequate protection and limits the possibility of ministerial overreach, owing to a more broadly defined power. The direction-making power with which ARIA must comply can be general—for example, a direction not to conduct research in conjunction with partners from a particular jurisdiction that poses a threat to the United Kingdom’s national security—or specific: for example, a direction to terminate a specific contract.

Subsection (2) states that the directions include the

“power to vary or revoke”,

which is to say that directions can be altered or withdrawn depending on how the national security risk develops or subsides.

I would like to take this opportunity to assure the Committee that my team are working hard to ensure that ARIA is set up with national security risks front of mind. That ranges from reducing the risk of cyber-attacks, to ensuring that ARIA is plugged to the appropriate Whitehall national security networks. This work complements a direct-making power in the Bill.

The hon. Lady has said on a number of occasions that Labour is the party of national security. I would be very interested to hear her views about what date it became the party of national security. If my memory serves me right, Sir Richard Dearlove, to whom the hon. Lady has referred approvingly, said that the former leader of the Labour party, the right hon. Member for Islington North (Jeremy Corbyn), was a personal risk to national security, particularly if he ever got the keys to No. 10. He said:

“Do not even think of handing this politician the keys to No10.”

If that was the Labour party’s approach under his leadership, at what stage did it change its mind about national security?

I am really disappointed in the hon. Gentleman for trying to make our national security an issue of party politics, and in particular for quoting a supposed critique of politicians by our intelligence service from previous years. I do not think that such comments have a place in this debate. We have elected leaders. I could go into a long list of quotations about our current Prime Minister and the concerns that he raises in many people’s minds, including from when he was Foreign Secretary.

I recognise that, Mr Twigg, but let us be clear. When I say that we are the party of national security, it is also what the shadow Secretary of State for Defence and my party leader say. That is a statement, and I really do not think it was appropriate of the hon. Member for Broadland to try to undermine the unity on both sides of the House with regard to the importance of national security. I fear that that is what he was trying to do.

As I was saying, Labour is the party of national security and believes strongly in the importance of the Secretary of State’s ability to give directions informed by national security. However, I feel that the Minister has yet to set out how those directions will be scrutinised. That remains a significant concern for the Opposition if we are to be sure that those directions are really driven by our national security interests and if we are to give the scrutiny that ensures continuing public confidence. However, given the importance of national security, we will clearly not be opposing clause 5.

Question put and agreed to.

Clause 5 accordingly ordered to stand part of the Bill.

Clause 6

Information

I beg to move amendment 27, in clause 6, page 2, line 38, at end insert—

“(2) ARIA must provide relevant Select Committees of the House of Commons and the House of Lords with such information as the Select Committees may request.”

This amendment is intended to allow relevant parliamentary Select Committees to access information in order to scrutinise the value for money provided by ARIA.

I will not say a huge amount about the amendment, which pretty much speaks for itself. As ARIA is not subject to freedom of information, I think it incredibly important that there should be a commitment from the Minister that ARIA will provide information to Select Committees if they request it. If the Minister will stand up and say that ARIA will of course provide information to Select Committees, I will withdraw my amendment post haste.

Amendment 27 would require ARIA to provide information requested by relevant Select Committees in both Houses. Sufficient measures are already in place to ensure that Select Committees have access to information that would allow them to scrutinise the work of Government Departments and public bodies.

I agree that Select Committees play an important role in examining the work of arm’s length bodies, and I am grateful for the interest and insight that the Science and Technology Committees in both Houses have had into ARIA so far. However, the Osmotherly rules provide guidance for how Government Departments and public bodies should interact with Select Committees. They are clear that the members of arm’s length bodies should be as helpful as possible in providing accurate, truthful and full information when giving evidence, taking care to ensure that no information is withheld that would not be exempted if a parallel request were made to the body under the Freedom of Information Act 2000. I believe that that is sufficient to ensure co-operation and a constructive relationship between ARIA and relevant Select Committees, as it is for other bodies such as UKRI.

On scrutiny of ARIA’s value for money, as was set out in discussions on schedule 1 the National Audit Office can conduct value-for-money assessment in the usual way. I wanted to address a comment made by the hon. Member for Newcastle upon Tyne Central on Tuesday about the role of the National Audit Office in scrutinising the work of ARIA. I do not agree that the safeguard is very limited; in fact, value-for-money assessments are rigorous and robust, and provide the basis for the Public Accounts Committee’s hearings and reports. I therefore believe that the right arrangements are in place for Select Committees to scrutinise the work of ARIA. That is in line with standard practice. I hope that the hon. Member for Aberdeen North will withdraw her amendment.

I thank the Minister for her statement. She has made it clear that she expects ARIA to comply and not withhold information necessary for Select Committees. I beg to ask leave to withdraw the amendment.

        Amendment, by leave, withdrawn.

        Question proposed, That the clause stand part of the Bill.

Clause 6 focuses on the Secretary of State’s information rights with respect to ARIA. The Secretary of State may request information relating to his or her functions—for example, information required to determine the Government’s funding of ARIA, to make national security directions, or for the appointment or removal of board members. It is important that the Secretary of State has the information that he or she requires to perform relevant functions.

The information rights remain limited compared with the other arm’s length bodies of Government Departments. The Bill does not allow the Secretary of State to request ARIA’s strategy or delivery plan, for example, as the Higher Education and Research Act 2017 does with respect to UKRI. A limited set of information rights is an important feature of maintaining ARIA’s independence from Government, and it also helps the body to be an agile organisation that can focus on high-risk, high-reward research.

I remind the Committee that this is not the extent of the information provided by ARIA. As we have discussed with respect to schedule 1, for example, ARIA must also send a copy of its statement of accounts and annual report to the Secretary of State, to be laid before Parliament. It is also in the gift of the Secretary of State to oblige ARIA to make other types of information available—via the framework document, for example—as a condition of funding under clause 4. Clearly, it is important to strike a balance between transparency in the use of public moneys and not operationally overburdening a small organisation.

The clause also sets out stipulations regarding the handling of information. Disclosure of information by ARIA under the clause does not breach any obligation of confidence owed by ARIA, and does not, for example, require a disclosure of information should it contravene data protection legislation. I hope that hon. Members agree that the information rights set out in the clause are important to allow the Secretary of State to carry out their functions effectively.

I thank the Minister for summarising clause 6. The theme of many of our amendments has been the importance of communication, information, understanding ARIA and its mission, and accountability, so we support the requirement for information to be provided by ARIA to the Secretary of State as appropriate. The duties in the clause seem entirely appropriate, but I have a couple of concerns that I hope the Minister will either respond to or perhaps write to me about.

Clause 6(3) states:

“A disclosure of information required under this section does not breach—

(a) any obligation of confidence owed by ARIA, or

(b) any other restriction on the disclosure of information (however imposed).”

Perhaps this is something that I should already understand, but I am not clear whether commercial confidentiality would come under subsection (3). If ARIA were funding, as I hope it will, a high-risk, high-reward and sensitive project, would that be excluded on the grounds of commercial confidentiality? There is no requirement for the information that ARIA provides to the Secretary of State to be published or shared more broadly, so I would hope that commercially confidential information could be shared.

Subsection (4) states:

“This section does not require a disclosure of information if the disclosure would contravene the data protection legislation.”

Clearly, if disclosure contravened data protection legislation, it would be illegal, so I am somewhat confused about a requirement on ARIA not to break existing laws. I am happy for the Minister to write to me to say under what circumstances there might be a need to share information, the disclosure of which would contravene data protection legislation. I can only think that it might involve personal information, which suggests that the Secretary of State would ask for personal information. Earlier, we discussed the gender pay gap and disclosing information on that. Did the Minister think that that might contravene data protection legislation if, for example, only women worked for ARIA?

Those are my concerns, and I would be obliged to the Minister if she wrote to me about those questions, but we will not oppose the clause standing part.

Question put and agreed to.

Clause 6 accordingly ordered to stand part of the Bill.

Clause 7

Transfer schemes

Question proposed, That the clause stand part of the Bill.

The clause introduces schedule 2, which contains provisions about schemes for transfer of staff, property, rights and liabilities to ARIA. It is very straightforward.

Question put and agreed to.

Clause 7 accordingly ordered to stand part of the Bill.

Schedule 2

Transfer schemes

Question proposed, That the schedule be the Second schedule to the Bill.

The schedule allows the Secretary of State to make one or more property or staff transfer schemes to ARIA. The permitted transferors are the Secretary of State or UKRI. The supplementary powers are standard and mirror those in, for example, the Higher Education and Research Act 2017. The principal purpose of clause 7 and schedule 2 is to ensure that important assets and personnel can be transferred from BEIS or, if required, UKRI, as ARIA is set up. For example, the chief executive officer and chair may be temporarily contracted to BEIS before ARIA becomes operational. It is administratively convenient to be able to use the power to transfer those staff to ARIA. Paragraph (4) provides that

“A staff transfer scheme may make provision which is the same as or similar to the TUPE regulations.”

That means that employers’ rights of transfer remain the same.

Alternatively, in the ARIA set-up phase, contracts may be entered into for an office lease or seed funding, which could be transferred to ARIA without contract novation. That means that the benefit and burden of the contract can be assigned to ARIA without having to obtain a third-party agreement. It is an important provision that may be needed to make ARIA operational.

Question put and agreed to.

Schedule 2 agreed to.

Clause 8

Power to dissolve ARIA

I beg to move amendment 38, in clause 8, page 3, line 21, at end insert—

“unless they are made under subsection (7)”.

This amendment ensures that ARIA cannot use its significant resources to fund weapon development.

With this it will be convenient to discuss amendment 37, in clause 8, page 4, line 4, at end insert—

“(7) The Secretary of State must immediately dissolve ARIA if it uses any of its resources to support weapon development.”.

This amendment ensures that ARIA cannot use its significant resources to fund weapon development.

It is important to consider the amendments together as one is consequential on the other. They would ensure that ARIA cannot use its significant resources to fund weapon development, and would provide the mechanism of the Secretary of State immediately dissolving ARIA were it to use any of its resources to support weapon development as an addition to the clause on dissolving ARIA. It is no secret that we in the SNP are not particularly keen to continue to be part of either the UK or the UK Parliament, but while we are contributing to ARIA and while some of our tax money is going to ARIA—while this money is being spent in our name—we do not want it to be spent on weapons or the development of weapons.

We have been very clear that we will not have nuclear weapons in an independent Scotland. We stand in opposition to them. For that reason, like many people in my party, I am a long-time member of the Scottish Campaign for Nuclear Disarmament. The decisions the UK Government have taken on the renewal of those weapons and on spending money on nuclear weapons have been some of the very worst things that they have done in the name of the people of the UK. I do not want to sit on a Bill Committee that creates an organisation which has no set purpose, but which could entirely fund weapon development with the money that it is allocated. It could entirely fund research into technologies with which I fundamentally disagree.

I completely understand the hon. Lady’s principled position on this issue. Does she not accept that, if the amendments were to pass, they would hamper the ability of the Secretary of State to activate clause 5 and direct ARIA towards working in our national security in a time of crisis? I fully accept that it would not be a good idea for ARIA to set its sights on developing new weapons, but we should not take its ability to do that away when we as nation may need it.

I thank the hon. Member for his characteristically sensible intervention. However, I feel so strongly about this that I think it is important that ARIA is excluded from doing that. There are other means that the UK can use to fund weapon development. I do not think ARIA should be one of them.

We are particularly concerned because of the lack of transparency and the issues that there have been around the use of weapons and the use of UK resources on weapons. We have said that we want the UK to immediately halt all military support and arms sales to regimes that are guilty of violations of human rights and international humanitarian law. The UK Government have not done so. Our concerns are well founded, which is why we have tabled what is quite an extreme amendment in comparison with others we have seen.

This is a subject of much moral debate. We will not ever accept the use of lethal autonomous weapons. Our concern is that, as they are on the cutting edge of technology, ARIA may consider looking at those weapons. I do not want that to be done in the name of the people I represent; they certainly do not want it done in their name.

The Minister has told us about the memorandum of understanding that will be in place between BEIS and ARIA. We have already touched on the issues of ethical investments that ARIA may or may not make. If the Minister was willing to make a statement about the ethical nature of investments ARIA will make and the direction that may be put into that MOU—we do not have as much information as we would like on the MOU—that might give us some comfort on the direction that ARIA may take. The lack of a mission for ARIA means that it is open to the possibility that this situation could arise, and that is a big concern of ours.

Amendments 37 and 38 challenge so-called dual-use research—research that is intended for benefit, but might be misapplied by a third party to do harm. The ways in which that could be done will not always be easy to predict, and given the possible benefits of the intended civilian application, it would not be right to close the door to any research that might fall into that category.

I assure the hon. Member that, alongside the Bill, my team is working hard to ensure that ARIA is set up with such risks at the front of people’s mind, including regarding how ARIA is equipped to perform due diligence on potential research partners to minimise risk. It would not be right to dissolve ARIA immediately if it had taken all necessary precautions to minimise the inappropriate use of its research, which would be the effect of the amendments.

Clause 5 will allow the Secretary of State to give directions to ARIA relating to the exercise of its functions when that is necessary or expedient in the interests of national security. That would apply, for example, if ARIA worked with a researcher in another jurisdiction on the development of a technology that could be used by another country for nefarious ends such as weapons development. In that event, the Secretary of State could direct ARIA to cease the contract or research. Under schedule 1, the Secretary of State is able to remove members from office on national security grounds.

I emphasise that while we have learned from DARPA in creating ARIA, ARIA differs from DARPA in several ways, principally because it is not set up with a focus on defence or weapons development. I urge the hon. Member to withdraw the amendment.

I thank the Minister for her statement. I listened to it closely, and it did give some comfort about the possible direction of ARIA. Given what she said, I do not intend to press the amendment to a Division, but we will keep a close eye on what happens. When we scrutinise ARIA, we will examine whether it uses significant portions, or indeed any, of its resources to fund weapons development, especially in countries where there is concern about use for nefarious purposes—not that weapons can generally be used for a particularly good purposes—and with regard to lethal autonomous weapons. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Question proposed, That the clause stand part of the Bill.

Clause 8 allows the Secretary of State to make provision by regulation for the dissolution of ARIA

“ten years after the date on which this Act is passed.”

Before making such regulations, the Secretary of State will be required to consult ARIA and other persons he or she considers appropriate, who could include the recipients of ARIA funding or other experts in the field. That will ensure that those leading ARIA at the time will have the opportunity to contribute to the decision. As is set out in clause 11, regulations under clause 8 are subject to the affirmative procedure in each House of Parliament.

We recognise that ARIA is a new body that will take time to get up to scale and demonstrate success. Its exclusive focus on high-risk, programme-led research requires patience, so it should not be evaluated on short -term outcomes. The Commons Science and Technology Committee and the R&D sector at large have welcomed the long-term, patient approach that has been set out for ARIA, and the dissolution grace period is designed to take account of that. There is no obligation to exercise the dissolution power after 10 years, and the Government are, of course, optimistic that clause 8 will not be needed. However, we recognise that ARIA represents a new way of funding research so, as a matter of good administration, we have provided for a power to dissolve ARIA in the event that it is not successful.

Question put and agreed to.

Clause 8 accordingly ordered to stand part of the Bill.

Clause 9

Consequential amendments

Question proposed, That the clause stand part of the Bill.

Clause 9 introduces consequential amendments to schedule 3, which we will go on to discuss. It has no other effect, and I hope that hon. Members agree with its necessity.

Question put and agreed to.

Clause 9 accordingly ordered to stand part of the Bill.

Schedule 3

Consequential amendments

I beg to move amendment 21, in schedule 3, page 13, line 37, leave out paragraph 11.

This amendment would remove ARIA’s exemption from the Public Contracts Regulations 2015.

Amendment 21, which stands in my name and those of my hon. Friends, is a key amendment that will ensure that ARIA merits and deserves the confidence of the public at this time of great debate about sleaze and cronyism. The amendment would remove ARIA’s exemption from the Public Contracts Regulations 2015. As drafted, paragraph 11 of schedule 3 excludes ARIA from the definition of a “contracting authority” under the 2015 regulations; as a consequence, ARIA is exempted from the usual public procurement rules. The Opposition do not understand why ARIA’s exemption from those rules is justified. Indeed, we are truly concerned that exempting it in this way opens a side door to sleaze in science.

My hon. Friend is absolutely correct in her presentation: we fail to understand why ARIA is exempt from the Public Contracts Regulations 2015. The Government are embroiled in the PPE and VIP lane scandals. It has been exposed that companies were put into the VIP lane by mistake—for example, PestFix was awarded £32 million. For ARIA to be exempted from any regulation risks this exploding to a larger extent with £800 million of public funds.

I thank my hon. Friend for her intervention, and she is absolutely right. It would be a cause for concern at any time to exempt an agency of this importance and public funding from procurement rules, but it is particularly worrying when the Government are already embroiled in a cronyism and procurement scandal.

In support of the point that my hon. Friend made, Transparency International—a well-known and reputable organisation—found that, of 1,000 procurement contracts signed during the pandemic and totalling £18 billion of public money, one in five had one or more of the red flags commonly associated with corruption. Is that not a figure of which we should be absolutely ashamed? That has happened within the existing rules, and the Minister proposes to exempt ARIA from those rules.

In her letter to the Chair of the Science and Technology Committee on 2 March 2021, the Minister explained that the Bill will

“provide ARIA with an exemption from Public Contracts Regulations so that it can procure services, equipment and works relating to its research goals at speed, in a similar way to a private sector organisation.”

We have several concerns about that explanation. What assessment has the Minister made of the ways in which private sector organisations procure services? Has she compared this with the success or otherwise of Government procurement processes for PPE during the covid crisis? Is she saying that private sector procurement is more effective, more honest and fairer; or is it simply quicker?

What the exemption is for is also a concern. The Minister implies that it is for services, equipment and works relating to ARIA’s research goals. Is it for equipment, services and works, or is it actually for research? Will ARIA be considered to be procuring research? We had been led to understand that it would a funder of research and development, not a body conducting its own research in a lab, so what actual procurement needs will it have, beyond office space and office equipment? There are months and months before ARIA is operational, so what will it need to procure at speed, or is the intention to enable ARIA to procure research without oversight? What is the justification for not having appropriate oversight for its procurement of research?

We absolutely understand, and support, providing ARIA with additional flexibility in terms of its funding activity, but the benefit of exempting ARIA’s procurement of goods and services is not clear. We suggest that ARIA’s procurement needs are not different from those of other Government funding bodies. We hope that the Minister will explain why that is the case. In terms of safeguards, the Government are proposing that in a future framework agreement BEIS will require ARIA to appoint an independent internal auditor to report its procurement activities. It is therefore going to have an internal bureaucracy, as the Minister puts it, rather than be subject to the procurement rules that have been developed, debated and put in place over time.

Will that framework agreement set out procurement rules for ARIA? Otherwise, what is the auditing requiring compliance with? How can we audit if there are no rules to benchmark against? Without safeguards, we have significant concerns about the risk of sleaze. What is to prevent ARIA from buying its office equipment from a mate of the Secretary of State or of the chief executive? Can the Minister say which of the regulations she objects to? The Public Contracts Regulations 2015, for example, state that a person awarded a public contract must

“be linked to the subject-matter of the contract.”

Does she object to that? What will prevent ARIA from operating effectively?

In the evidence sessions, we heard a number of times, including from Professor Glover, that there is a need for openness and transparency. David Cleevely said:

“The more open you are about what you are doing, the less easy it is to hide the fact that you have let particular contracts and so on, so there ought to be a mechanism within the governance structure of the agency to do that.”—[Official Report, Advanced Research and Invention Public Bill Committee, 14 April 2021; c. 75, Q78.]

The Minister is removing such mechanisms as there already are. We heard that having rules and regulations in place was part of the culture of DARPA, on which this agency is supposedly based, with one of its directors, Dr Highnam, saying:

“Honour in public service is top of the list.”—[Official Report, Advanced Research and Invention Public Bill Committee, 14 April 2021; c. 39, Q32.]

Did we not also hear from Director Highnam how DARPA benefits from other transaction authority and the flexibility that comes outside of the standard Government procurement process?

We heard from Dr Highnam repeatedly of the importance of rules and regulations. He spoke specifically of a culture in which the process was not considered bureaucracy and a barrier but part of enabling DARPA to meet its obligations. I say to the hon. Member for South Basildon and East Thurrock, for whom I have a great deal of respect, that the flexibility that DARPA benefits from in being able to procure research is not outside the United States procurement requirements. Dr Highnam made it clear that they benefit from providing extraordinary results while being open and following the highest standards in public service.

I hope that the Minister will agree to leave ARIA with public procurement rules that provide some measure of trust, particularly in the middle of the current cronyism scandal.

It is a pleasure to serve under your chairmanship, Mr Twigg.

If procurement rules for the traditional R&D granting used by UKRI do not apply, we need to understand that ARIA, like DARPA, will work differently. There will be some granting, but others will be commissioned and contracted to conduct research. If ARIA often procures R&D services, they could be within the scope of procurement regulations, so it is important to have the exemption. My hon. Friend the Member for South Basildon and East Thurrock made a good point when he referenced the evidence that DARPA deputy director Dr Highnam gave last Wednesday about how DARPA benefits from other transaction authority and has flexibility outside the standard Government-contracting standards. Those flexibilities exist in the US and it is important that ARIA has a similar flexibility.

The exemption places freedom in the hands of the leaders and programme managers. In that model, those programme managers will be recruited to run ARIA as an independent body. ARIA’s procurement will be at arm’s length from Government and Ministers.

Importantly, in paragraph (14) to schedule 1, the Government have made a commitment to ensure that ARIA internally audits its procurement activities. The upfront flexibility that the exemption affords will be balanced by reporting at a later point. It is clear that the need for agility does not negate ARIA’s accountability.

I will briefly highlight our view of amendments 21 and 22. We are considering perhaps some of the daftest things that the UK Government have proposed in my short time in the House. I cannot quite believe that we are in a situation whereby public contracts and freedom of information are simply brushed to one side by a Government. I am interested by the argument that we should follow DARPA’s example in procurement practices, but not when it comes to having a mission. The Government seem to have picked the worse of the two options, and that is bizarre.

The shadow Minister rightly covered the matter in detail. Last week, one of the expert witnesses said that transparency fosters trust. Why would any Government not want the trust of Parliament and the people?

The amendment would omit the extension of obligations on contracting authorities for the purposes of public contracts regulation that the Bill affords ARIA. I will take the opportunity to explain to hon. Members why the extension is so important.

I will make three points. First, ARIA is expected to commission and contract others to conduct research in pursuit of its ambitious goals. ARIA will often be procuring those services, and that commissioning and contracting is a fundamentally different way of funding R&D from traditional grant-making, where procurement rules do not apply.

Secondly, that way of funding research is core to DARPA’s approach, the successful US model we have learned from in designing ARIA. There has been some confusion on that point. As Dr Peter Highnam made clear in his evidence to the Committee, DARPA benefits from what he described as “other transaction authority”, which offers flexibility outside standard US Government contracting standards. For ARIA to take the innovative new funding approach that is so fundamental to its objectives, I believe that it will benefit from similar flexibilities here. For ARIA, the public procurement rules could prevent a critical investment being made at speed or at all. We will therefore provide that exemption so that ARIA may procure services, equipment and works relating to its research goals at speed, in a similar way to a private sector organisation.

Finally, there has been some discussion in Committee about trust in Government. I will therefore stress that that exemption places freedom into the hands of ARIA and the leaders and programme managers who will be recruited to run it as an independent body. That independence, as I have been clear throughout, is essential.

I am very much in favour of freedom, for want of a better phrase, but does the Minister not understand the concerns that the public will have about transparency on such a key amount of public money? That is something the Government have an awful track record on at this moment in time. Does she not understand the public’s view?

I make reference to all the methods that we have in place to ensure that we are transparent in the running of ARIA. As I have been clear about throughout, independence is an essential feature of ARIA. Its procurement will therefore be at arm’s length from Government and Ministers. I hope that this debate has demonstrated the necessity of such an arrangement and that the hon. Member for Newcastle upon Tyne Central will withdraw her amendment.

I thank the Minister for her response, but I do not feel reassured and I do not think that the public will feel reassured. I will therefore press the amendment to a vote.

Question put, That the amendment be made.

Ordered, That further consideration be now adjourned. —(Michael Tomlinson.)

Adjourned till this day at Two o’clock.

Advanced Research and Invention Agency Bill (Sixth sitting)

The Committee consisted of the following Members:

Chairs: Judith Cummins, †Mr Philip Hollobone, Esther McVey, Derek Twigg

† Baker, Duncan (North Norfolk) (Con)

† Bell, Aaron (Newcastle-under-Lyme) (Con)

† Blackman, Kirsty (Aberdeen North) (SNP)

Butler, Dawn (Brent Central) (Lab)

† Crosbie, Virginia (Ynys Môn) (Con)

† Fletcher, Mark (Bolsover) (Con)

† Flynn, Stephen (Aberdeen South) (SNP)

† Furniss, Gill (Sheffield, Brightside and Hillsborough) (Lab)

Hunt, Jane (Loughborough) (Con)

† Mayhew, Jerome (Broadland) (Con)

† Metcalfe, Stephen (South Basildon and East Thurrock) (Con)

† Onwurah, Chi (Newcastle upon Tyne Central) (Lab)

Owen, Sarah (Luton North) (Lab)

† Richardson, Angela (Guildford) (Con)

† Solloway, Amanda (Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy)

† Tomlinson, Michael (Lord Commissioner of Her Majestys Treasury)

† Zeichner, Daniel (Cambridge) (Lab)

Sarah Ioannou, Seb Newman, Committee Clerks

† attended the Committee

Public Bill Committee

Thursday 22 April 2021

(Afternoon)

[Mr Philip Hollobone in the Chair]

Advanced Research and Invention Agency Bill

Schedule 3

Consequential amendments

I beg to move amendment 22, in schedule 3, page 14, line 3, at end insert—

“Freedom of Information Act 2000

(12) In Part VI of Schedule 1 to the Freedom of Information Act 2000 (“Other public bodies and offices: general”), at the appropriate place insert “The Advanced Research and Invention Agency”.”.

This amendment would make ARIA subject to the Freedom of Information Act 2000.

It is a great pleasure to serve under your chairship, Mr Hollobone. Amendment 22 is critical and very simple. It would make the Advanced Research and Invention Agency subject to the Freedom of Information Act 2000.

The amendment forms part of a sequence of amendments that we have tabled, which seek to deliver greater oversight of ARIA and greater accountability, in order to increase public confidence, particularly at this time when we are in the midst of a cronyism scandal. We do not believe that ARIA’s blanket exemption from the Freedom of Information Act regime can be justified.

I make the point that £800 million of public money will be spent by ARIA. It is a new agency whose aims and ambitions we all support, but public trust will be vital to its long-term success. In our evidence sessions, we heard from Government witnesses such as Professor Philip Bond. Dominic Cummings, the self-proclaimed architect of ARIA, gave similar evidence to the Science and Technology Committee, which celebrated trusting the leaders of ARIA with £800 million of taxpayers’ money and no purpose. The Labour party believe that this could be a side door to sleaze in science.

We do not want to bureaucratise ARIA. We acknowledge that a hands-off approach is integral to its success. We simply want ARIA to be accountable to the public via the Freedom of Information Act.

On Second Reading, the hon. Member for Newcastle-under-Lyme stated that,

“UK Research and Innovation receives about 300 FOI requests a year”.—[Official Report, 23 March 2021; Vol. 691, c. 830.]

I have since received an answer from the Science Minister to a parliamentary question, which states that, for example, UK Research and Innovation received 371 freedom of information requests in 2020 and has answered 100 in the first three months of 2021. I asked about the costs to UKRI of complying with those requests, but it does not keep track of costs, which implies that they are not significant.

ARIA will be spending between 1% and 2% of the funding that UKRI is spending. If UKRI receives about 300 requests per year, we might calculate, say, that if freedom of information requests were related to the amount of public money being spent—a reasonable approximation—ARIA might receive between three and six freedom of information requests per year. I ask the Committee: would six freedom of information requests per year be a bureaucratic burden on ARIA, as the small and agile organisation we want it to be?

I thank the hon. Lady for giving way and for welcoming me back to the Committee by mentioning me in her first paragraph. I was sorry to miss this morning’s sitting, but I was paired with an Opposition Member. I admire her mathematics, but given the interest in ARIA and the cutting-edge research that it will undertake, I do not think that scaling back in the manner she did and suggesting that it might receive only three to six requests a month is likely. As she knows, UKRI has a team of people to deal with freedom of information requests. We should consider carefully whether we want to put such a burden on ARIA, because we want it to be nimble and lean. I am afraid that I do not believe the quantum of money can be scaled to the number of FOI requests. I think ARIA would get an awful lot, given the research we want it to undertake.

Will the intervention from the hon. Member for South Basildon and East Thurrock be on a similar point? I imagine it will.

My respect for the hon. Member only increases because he does not wish to repeat what somebody else has said. That is not always the case in this House, as we know. I welcome the intervention from the hon. Member for Newcastle-under-Lyme, and I would welcome a long discussion on probability, mathematics and statistics, but I can see that my Whip might not be entirely happy with that, so let me confine myself to this. I was not claiming that the estimate was rigorous. The hon. Member for Newcastle-under-Lyme suggested that because there will be more interest in ARIA, it will receive more Freedom of Information Act requests. That might be true for the first two or three years, but I do not think that level of interest would be maintained, even if it received more requests proportionately.

I mentioned funding because that is what enables activity, and freedom of information requests relate to that activity. Therefore, even if we doubled the greatest estimate to, say, 12, what price does the Committee think should not be paid for accountability and freedom of information? What would be too much? I was not here in Parliament for the expenses scandal, but we saw the impact that had on public confidence as we now see the cronyism scandals and their impact on public confidence and trusted institutions. Freedom of information and transparency is an essential part of that.

The Campaign for Freedom of Information reports that the Defense Advanced Research Projects Agency, with its significantly higher budget, was subject to just 48 requests in 2019. During the evidence sessions, we heard that UKRI was happy to deal with FOI requests, because it viewed them as an important aspect of spending public money. We also heard—this was telling—that the Royal Society of Edinburgh, although it is not subject to FOI, behaves as if it is and responds to requests because it views them as an important aspect of transparency. Regardless of whether the Minister accepts the amendment—I very much hope that she will—ARIA should echo the Royal Society of Edinburgh’s approach.

We heard in evidence from DARPA that it believed that rather than hindering the agency, the transparency offered by FOI requests was useful in building public trust in its work. In fact, DARPA’s deputy director stated that the level of oversight that it is subject to is “important to its success”. Other high-risk, high-reward agencies such as the Federal Agency for Disruptive Innovation in Germany, Vinnova in Sweden and the French National Centre for Scientific Research are all subject to the freedom of information requirements of their respective countries. What makes ARIA so different?

The protection of sensitive information cannot be used as justification for a blanket exemption, as the Freedom of Information Act 2000 already provides exemptions where disclosure would prejudice research or commercial interests, or cause a breach of confidentiality. In their initial response to the Secretary of State’s announcement of ARIA’s FOI exemption, NESTA said:

“Radical openness and honesty is needed or distrust will undermine it. The public will expect to know what’s happening with public money”—

I think we can very much see that now—

“and greater risk requires transparency and evaluation in order to determine what works.”

The Campaign for Freedom of Information said that ARIA

“will spend hundreds of millions of taxpayers’ money on high risk projects but the government apparently wants it to be less accountable to the public than parish councils, which are subject to FOI.”

In the evidence session, Tabitha Goldstaub said that

“at Google’s moonshot factory, X…they started in secret and everything felt so appealing, to protect people from any feeling of failure, but what they learned is that there are so many other much better ways than secrecy to incentivise people and to give them the freedom to fail. Actually, allowing for more transparency builds much more trust and encourages more collaboration and, therefore, better breakthroughs.”––[Official Report, Advanced Research and Invention Agency Public Bill Committee, 14 April 2021; c. 57, Q55.]

On what we are trying to achieve with this agency, the Minister has mentioned her concerns about bureaucracy a few times, but I think we as legislators have to decide whether we believe that rules and regulations are simply mere bureaucracy to be thrown out whenever possible, or whether we believe that they can contribute both to the effectiveness of an agency and to the contract that we in Parliament have with the public to take their hard-earned taxpayers’ money and spend it as best we can to encourage and enable growth, prosperity, and a national health service—all things from which the public benefit. We cannot do that in secret; we have to do it publicly.

I really urge the Minister to accept the amendment. She knows that the exemption has come in for much criticism and that the controversy around it will continue to mar the progress of the agency. I urge her to listen to the siren voices of concern and to accept the amendment to remove ARIA’s exemption from the Freedom of Information Act.

It is a pleasure to serve under your chairmanship, Mr Hollobone. I would like to speak briefly to amendment 22. In the past week, we have discussed the concerns about exempting ARIA from FOI requests, and we have heard evidence about the potential burden of administration. UKRI told us that it has a team of staff purely to deal with the 300-plus FOI requests that it receives annually. In addition, Professor Dame Ottoline Leyser said that although UKRI is happy to be able to respond to FOI requests,

“there is a judgment call about the burden of administration”.––[Official Report, Advanced Research and Invention Agency Public Bill Committee, 14 April 2021; c. 9, Q4.]

As my hon. Friend the Member for Newcastle-under-Lyme so eloquently put it—echoed by my hon. Friend the Member for South Basildon and East Thurrock—with unique freedoms and independence to enable transformational research, ARIA will inevitably receive a number of FOI requests that is disproportionate to its size.

Our vision for ARIA is that it should be lean and agile. Do we really want it encumbered by that level of administrative burden? Do we want ARIA’s brilliant programme managers to be stifled by bureaucratic paperwork?

We have also heard about whether ARIA will deliver the game-changing R&D that we want if it is subject to FOI. It was Tony Blair who gave us the Freedom of Information Act and it was he who subsequently described it as

“utterly undermining of sensible Government.”

To use his words:

“If you are trying to take a difficult decision and you're weighing up the pros and cons, you have frank conversations...and if those conversations then are put out in a published form that afterwards are liable to be highlighted in particular ways, you are going to be very cautious.”

Professor Philip Bond put this view into an R&D context in his discussions with us last week. He said that

“if you are asking people to go out on a limb to really push the envelope, I would assert that there is an argument, which has some validity, that you make it psychologically much easier for them if they do not feel that they are under a microscope.” ––[Official Report, Advanced Research and Invention Agency Public Bill Committee, 14 April 2021; c. 29.]

Mr Blair and Professor Bond perfectly highlight the fundamental reason why ARIA should be free from FOI. The last thing that our scientists need when they are looking for the next internet is to be held back by caution.

The Bill already contains very strong statutory commitments to its transparency. There will be an annual report laid before Parliament. Its accounts and spending will be published. There will be non-legislative mechanisms set out in a framework document. There will be a thorough and transparent selection process to ensure that it is led by respected individuals who uphold public honour. There will also be access to FOI requests on ARIA via the Department for Business, Energy and Industrial Strategy.

For all these reasons, I believe that there is no need for ARIA to be subject to an FOI regime that will stifle creativity and create unnecessary bureaucracy.

I want to make a couple of comments. We have talked a lot about transparency and the need for it, but mostly in the context of the scrutiny that we as parliamentarians will levy on ARIA. It is really important that we have transparency so that the public and journalists can scrutinise it. We are not always fans of some of the journalism that happens, but I hope we are all agreed that journalism plays a hugely important role and that journalists have no other route to access the information that they should have on ARIA in order to bring things to the public’s attention.

We discussed also the tolerance for failure that exists in the UK, and how it might differ from tolerance for failure in the US. I suggest that having more public transparency about that and more openness about the processes in ARIA would ensure that the public are more on board with the organisation’s ability to fail. The organisation should have the ability to fail, but if we do not know that that is happening, because we have not been able to scrutinise it, and that suddenly comes out in the end-of-year annual report, it will be even more of a shock for the public than if they had heard about it along the way.

On the topic of scrutinising the Department for Business, Energy and Industrial Strategy, it is interesting to consider whether BEIS will provide us with responses if we send it written questions on the subject of ARIA. That would be helpful to know. If there is not a normal mechanism for us or journalists to scrutinise this through FOI, it would be helpful to have some comfort that written questions relating to ARIA will be answered, with as much detail as the Minister feels can be given at that time.

It is a pleasure, Mr Hollobone, to serve with you in the Chair for the second time this week.

This has been a really interesting discussion, because it has demonstrated two very different views of how the world might operate. I am sorry to hear the Government’s view on this. When they are in Opposition, they might find that they are quite keen on freedom of information. All Governments, of course, are keen not to be subject to scrutiny in this way. There is a fundamental point about the modern world now, even more than 10 or 20 years ago. Perhaps it is because of the kind of constituency I represent, but I have a lot of people who are interested in what is going on and they expect, as citizens and taxpayers, to be able to ask questions, particularly where public money is being spent.

Let me give two very quick examples. Artificial intelligence is the kind of issue that may well be dealt with by ARIA. It is hugely controversial. Just a couple of years ago, many of my constituents, on the way home from King’s Cross, found that they had been subject to facial recognition technology. How did they find out about that? Ultimately, it was through freedom of information. It is always the case that the people who have the knowledge, the power and the control do not want to share it with others. That is not a good way of maintaining public trust. Just this morning, I found myself at the Dispatch Box challenging a Minister because expert advice on bee-killing pesticides had been revealed not through parliamentary questions or asking or writing letters, but through Friends of the Earth’s freedom of information requests. I understand why the Government do not want that information out there, but it should be out there, and ARIA should be in the same place. We should have confidence in the work being done, however close to the edge it is. Ultimately, it is about maintaining public trust. We are entering a hugely complicated world, in terms of science and technology. We will not keep the public with us by hiding and not acceding to freedom of information requests.

The Government are committed to good governance and transparency, and I believe that the Bill in its current form embeds that within ARIA. With regard to amendment 22, we have carefully considered the case for and against subjecting ARIA to the Freedom of Information Act. The intention is for ARIA to have a streamlined operating structure, with decision makers who can solely focus on ARIA’s research goals. We have spoken and heard a lot about culture and how important that is to facilitating an environment that pursues transformational research.

In turn, we have thought carefully about guaranteeing accountability and transparency in the most appropriate way. There are many different mechanisms to achieve this, and I cannot accept the claims that no such oversight exists for ARIA. To reiterate: the Bill requires ARIA to submit an annual report and statement of accounts, which will be laid before Parliament; ARIA will be audited by the National Audit Office and subject to value-for-money assessments; ARIA will interact with Select Committees in the usual way; and we will draw up a framework document detailing ARIA’s relationship with BEIS and further reporting requirements, such as details of what will be published in the annual report. Together, these provisions are rigorous and proportionate and will ensure that the research community, MPs, peers and taxpayers are informed of ARIA’s activities and where it spends its money.

By not subjecting ARIA to the Freedom of Information Act, ARIA’s leadership and scientists will be free to find and fund the most cutting-edge research in the UK and the world, and to maintain the UK’s competitive advantage as a science superpower. While there are exemptions to freedom of information requests, they must still be processed, and that administration is likely to run contrary to the lean and agile operation of ARIA. To be clear, other bodies subject to the Freedom of Information Act, such as universities and Government Departments, including BEIS, will still process requests regarding their activities with ARIA in the usual way. I hope that makes it clear that this is not about reducing transparency; it is about making ARIA streamlined. I hope that the hon. Member for Newcastle upon Tyne Central understands why I cannot accept the amendment.

I thank those Members who have taken part in the debate, which highlights, as my hon. Friend the Member for Cambridge said, a real difference between us and Government Members. I totally understand why Government Members do not want Government conversations to be known at the moment—releases of those on WhatsApp have not been in their interest. However, we strongly believe that freedom of information is a duty of public bodies, so I will press the amendment to a Division.

Question proposed, That the schedule be the Third schedule to the Bill.

Schedule 3 contains consequential amendments. There are a number of significant points to highlight, and a number of standard consequential amendments and obligations, which I will turn to first. The schedule has the effect of ensuring that records produced by ARIA should be treated as public records; subjecting ARIA to investigation by the Parliamentary Commissioner for Administration, the body responsible for investigating the administrative actions of public authorities; and disqualifying members of ARIA from membership of the House of Commons and the Northern Ireland Assembly. Those are all standard provisions.

Schedule 3 includes amendments to the relevant devolution Acts, with the effect of reserving ARIA. That will bring it into line with the other major public R&D funding institutions under the UKRI umbrella, including the most recently created Innovate UK. That will guarantee that, across the United Kingdom, ARIA can operate with minimal bureaucracy and without the possibility of unequal obligations or requirements on its activities in different nations. It is important to be clear that the devolved Administrations will continue to be able to fund research to the same extent that they can do now. The specific reservation of ARIA does not prevent the Welsh Government or the Scottish Government from providing additional support for advanced research in future.

The other significant provision in schedule 3 is the exemption of ARIA from the obligations on a contracting authority, for the purpose of the Public Contracts Regulations 2015. We have discussed that and I will not return to it. The provisions here are important for the effective operation of ARIA, and I commend them to the Committee.

Question put and agreed to.

Schedule 3 accordingly agreed to.

Clause 10

Power to make consequential provision

Question proposed, That the clause stand part of the Bill.

Clause 10 contains a power for the Secretary of State to make consequential provision. There are three points I would like to make on this clause. First, the power is only exercisable in consequence of the provisions of what will be the ARIA Act, or regulations made under clause 8, which we have already discussed. That represents a significant narrowing of the scope of the power. Secondly, I emphasise that it is a standard provision that allows issues that might emerge in future to be straightforwardly addressed. There is a comparable power in the Higher Education and Research Act 2017. Thirdly, as set out in clause 11, which we will turn to next, any regulations made under that power that amend, repeal or revoke any provision of primary legislation or retained direct principal EU legislation will be subject to the draft affirmative resolution procedure. That means that Parliament will have a say on any use of that power.

Finally, I would like to illustrate why the power is needed. If ARIA were to be dissolved in future through regulations made under clause 8, the references to ARIA inserted in other legislation would remain, and clause 1 of the Act—stating that ARIA was established—would be left hanging. In that situation, the power could be used to repeal the relevant clauses of the ARIA Act and remove references to ARIA elsewhere, which would be necessary and important to tidy the statute book and avoid confusion and ambiguity. I hope that demonstrates the importance of the power being taken.

Question put and agreed to.

Clause 10 accordingly ordered to stand part of the Bill.

Clause 11

Regulations

Question proposed, That the clause stand part of the Bill.

Clause 11 concerns the regulation-making powers in the Bill, which are limited. The principal point of interest is the parliamentary procedure that each of these delegated powers will be subject to. Subsection (4) sets out that regulations made under clause 8 to dissolve ARIA and any regulations under clause 10 that amend, repeal or revoke any provision of primary legislation or retained direct principal EU legislation will be subject to the draft affirmative resolution procedure. These are the most substantial powers, so I consider that it is right that Parliament has a say over how they are exercised.

With the exception of regulations made under clause 14 concerning commencement, any other regulations made under the ARIA Bill will be subject to the negative resolution procedure. These are predominantly concerned with operational and procedural details, so again I consider that the negative resolution procedure is appropriate in this case, and I hope the Committee agrees.

Question put and agreed to.

Clause 11 accordingly ordered to stand part of the Bill.

Clause 12

Interpretation

I beg to move amendment 23, in clause 12, page 5, line 10, after “social sciences” insert “and the humanities”.

This amendment would modify the definitions of scientific knowledge and scientific research to encompass the humanities.

With this it will be convenient to discuss amendment 24, in clause 12, page 5, line 13, after “social sciences” insert “and the humanities”.

See the explanatory statement for Amendment 23.

We are moving through this Bill at speed, so it would be good to take a few moments to think about the role of the humanities. These amendments modify the definition of scientific knowledge and scientific research to encompass the humanities.

It is incumbent on us, particularly during a pandemic when we are missing so many of the arts and other aspects of culture, to recognise the very important role that the humanities play, not only in our mental and social wellbeing but in scientific research, and particularly in our understanding of the world around us. We believe that science can be the engine of progress for our society, and it needs to be for and by everyone. Expanding the scope of ARIA’s research to include the humanities can provide greater returns for society.

This also speaks to the Government’s so-called levelling-up agenda. As part of that, they must appreciate the important role that social sciences and the humanities play in helping us understand and solve many of the issues faced in all our communities across our United Kingdom. ARIA presents us with an opportunity to drive innovation across the country, but it must be done in the right way. Currently, the Bill fails to adequately factor in the importance of all forms of research.

The statement of policy intent makes no reference to the social sciences. The examples of areas that may be funded by ARIA are AI, quantum computing and robotics. They are very important, but we also need answers from the Government on how they envisage that ARIA’s social science funding will work.

The recent report into race and ethnic disparities, commissioned by the Prime Minister, has been roundly condemned—indeed, trounced—for its lack of coherent or credible research. It has been criticised by historians, social scientists and academics from across our country. That illustrates very well how important it is that we have strengths in humanities and social science research, and that the Government and the Prime Minister recognise that. The role that institutional racism and prejudice play in the lives of so many in this country is worthy of credible research. Addressing the many inequalities that so many people still face is surely a worthy challenge—a worthy moonshot—that ARIA should consider.

Mariana Mazzucato, a leading academic and economist of mission-oriented research, said that all science should address social inequality. We heard from Felicity Burch that:

“Clearly defining the mission of what ARIA is trying to achieve when we get the team in place, making sure that it is something that excites people, having a clear market, and also solving national and international social problems will help encourage really bright, brilliant people to get involved.”––[Official Report, Advanced Research and Invention Agency Public Bill Committee, 14 April 2021; c. 68, Q66.]

With our two amendments, we wish to ensure that the humanities are considered part of ARIA’s remit.

I will speak to amendments 23 and 24 together. ARIA is unashamedly focused on achieving transformational breakthroughs in the sciences, and this is reflected in the definition set out in clause 12. I say to the hon. Member that scientific research and scientific knowledge are broadly defined to include the social sciences. I do not believe it is helpful for ARIA to extend the interpretation of “sciences” to include humanities. There are other funders that do a fantastic job at supporting the humanities, including the Arts and Humanities Research Council, but that is not the Government’s intention for ARIA. I hope the hon. Member will withdraw the amendments.

I am disappointed in the Minister’s response, but I will not push the amendments to a vote. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

I beg to move amendment 25, in clause 12, page 5, line 13, at end insert—

““Invention” means the process by which ideas are converted into value in the form of new and improved products, services and approaches.”

This amendment would establish the meaning of “invention” as referred to in the title and functions of ARIA.

The amendment is about defining “invention.” Before the sharp-eyed hon. Member for North Norfolk points out that, at the start of these proceedings, I tried to take the word “invention” out of the title, I repeat my earlier observation that we are quite prescient on this side of the House. I had rather anticipated that, despite all the fantastic strength of our arguments, Government Members were not necessarily persuaded, strangely enough.

I thank the hon. Gentleman for making that point, which I considered making as well. Given his remarks on Tuesday and his obvious love for the operatic nature of the Bill, it seems he might have considered changing the name of ARIA to the Advanced Research and Insulation Agency.

I would certainly like to do that, because we have a Government who have been unable to insulate our homes for a decade, but never mind. There are many musical references that could be made, including to The Mothers of Invention, with whom I grew up, but I suspect their notion of invention is rather different from the Government’s.

There is a serious point here, and it is a theme to which I return. We really think there is a problem with not having a clear definition. It seems to us that there are two very different approaches. The Government’s view is basically that our structure of accountability, and the way we deal with public money, is a problem for innovation. It is a difficulty that should be got rid of. I am afraid it goes back to the Dominic Cummings question, because that is his view of the world too. We take a very different view. Far from thinking that it is a problem, we think it is actually part of creating an innovation landscape—a community of people who are working towards shared goals.

I, too, was very tempted to make an intervention about the change in name, but I scanned through the entire Bill and noticed that there was one other mention of the word “invention” in the body of the text, so we were not able to move on that. But words have natural and ordinary meanings. The hon. Gentleman would perhaps refer to the “Cambridge Dictionary”, which defines “invention” as

“a product or a way of doing something which has never been made or never existed before”.

What is wrong with relying on the “Cambridge Dictionary” definition?

Absolutely right, and I have no objection to ever relying on anything that has been developed in Cambridge through a collegiate, collaborative approach of people working together. I was just about to say that we would be very happy to negotiate a definition of “invention”—I am very happy to take that one. We are just trying to help the Government to provide some clarity in the Bill. I suspect the Minister will not be tempted to take up the offer.

I will conclude by mentioning the public money point, which my hon. Friend the Member for Newcastle upon Tyne Central referenced. I can barely believe that I am saying this to Conservative Members, because I have been lectured many times over the years in various places about how it is taxpayers’ money and every penny needs to be spent carefully. It is absolutely right and proper that that should be done—£800 million is at least £10 per person. I suspect that other Members are knocking on doors at the moment and having a conversation with people, asking them how they are going to vote. I just wonder how many Members over the next week or two would like to end the conversation by saying, “Can I have a tenner, please?” When people ask, “What for?”, they offer the back of an envelope and say, “I don’t really know—I’ve no idea—but it might produce something wonderful.” And then they look down the list and find six others in the household, so they up it to £60. I do not think so. I think the public are not going to be convinced about this. Maybe—just maybe—a wonderful innovation will come through this, but I fear that, in years ahead, we will find that we are back discussing this again and will be putting in some of the checks and balances that are actually required.

I thank the hon. Member for the suggestion and I understand the sentiment. It is incredibly important that ARIA’s transformational ideas can lead to value creation. However, it is not necessary to use legislation to define words that already have a common meaning, as I believe “invention” does. I also emphasise that other definitions in clause 12 of the Bill—of “scientific knowledge” and “scientific research”—mirror existing provision in the Science and Technology Act 1965, so there is a precedent for the approach in that specific case. “Invention”, in contrast, is a commonly used concept that appears through the Patents Act 1977, and the term “invention” is not subject to a specific definition in that Act. I strongly suggest that we rely on the commonly understood meaning of “invention”, which is “the process of creating something that has never been made before”, and that that definition is sufficient, and I encourage him to withdraw the amendment.

I do not need to detain the Committee further. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Question proposed, That the clause stand part of the Bill.

Clause 12 contains further information on the interpretation of terms used in the Bill. It is a straightforward, technical matter and I hope that it is helpful in illuminating some of the clauses previously discussed.

Question put and agreed to.

Clause 12 accordingly ordered to stand part of the Bill.

Clause 13

Extent

Question proposed, That the clause stand part of the Bill.

Clause 13 details the extent of the Bill, which is UK-wide. Research is a collaborative endeavour, and working right across the United Kingdom, as other public research funders do, will be essential for ARIA in forging a wide range of productive partnerships. I hope hon. Members agree that this arrangement is beneficial for research organisations everywhere.

Question put and agreed to.

Clause 13 accordingly ordered to stand part of the Bill.

Clause 14

Commencement

Question proposed, That the clause stand part of the Bill.

Clause 14 contains standard provision for the commencement of the ARIA Act following Royal Assent. It contains a power for the Secretary of State to make commencement regulations. There is a limited number of provisions that for practical reasons will immediately come into force. That includes the power to make consequential provision in clause 10 so that it could, if needed, be used immediately after Royal Assent to address any issues that emerged. I am sure that the Committee will agree that the clause is standard.

Question put and agreed to.

Clause 14 accordingly ordered to stand part of the Bill.

Clause 15

Short title

Question proposed, That the clause stand part of the Bill.

This clause provides the short title of the Bill. ARIA’s name has already been discussed at the very start of proceedings, and I do not think we need revisit that discussion here.

Question put and agreed to.

Clause 15 accordingly ordered to stand part of the Bill.

New Clause 1

Protection of independence of ARIA

“In exercising functions in respect of ARIA, the Secretary of State must have regard to the need to protect its independence.”—(Chi Onwurah.)

This new clause would require the Secretary of State to have regard for the need to protect ARIA’s independence when exercising functions under the Bill, including with respect to appointments.

Brought up, and read the First time.

I beg to move, That the clause be read a Second time.

The entire debate has been extremely exciting, and I know we are all reluctant to bring it to a close, but the new clause, which I will discuss briefly, is in keeping with all our constructive amendments that we have considered in our debate on ARIA. The new clause would improve the Bill and protect the spirit and goals of ARIA. Indeed, it would clarify them in places.

The new clause would ensure that when exercising functions in respect of ARIA, the Secretary of State must have regard to the protection of its independence. Members on the Government and Opposition Benches have talked about the importance of ARIA’s independence and referred to the challenges to the relationship between business and Government that we see now in the many conflicts of interest and concerns that have been raised about sleaze and cronyism that are now being considered in Parliament and in Committees.

We feel it is important to set out that ARIA is independent and can act with operational independence. Indeed, the Minister has repeatedly told the Committee that she wants ARIA to act with operational independence. “Extreme freedom” was Dominic Cummings’ clarion call in his evidence to the Science and Technology Committee.

The new clause would ensure that the Secretary of State had regard to ARIA’s independence when exercising all functions under the Bill, such as his power of appointment. For example, appointing a major Conservative party donor or a Conservative peer to the board of ARIA would clearly have a damaging effect on ARIA’s independence and how that independence was perceived by the scientific community.

I hesitate to predict what the Minister will say, but I suspect that she will not look favourably on this amendment and she may say that the ministerial code already requires Ministers to behave in a way that upholds the highest standards of propriety and ensures that no conflicts of interest arise. In response to that, I would say that we can clearly see the repeated undermining of the code by Ministers in this Government and—critically—the current vacancy for the Prime Minister’s independent adviser on Ministers’ interests.

I also remind the Committee that the Government themselves introduced a very similar amendment to the Environment Bill—new clause 17—that imposes the same obligation on the Government in exercising functions under that Bill in relation to the Office for Environmental Protection. If such a measure is appropriate for the Environment Bill, why not for this Bill? For as long as we have this cloud of sleaze allegations hanging over this Government, we must ensure that we are crystal clear when it comes to key issues such as independence, propriety, conflicts of interest, and so on.

In addition, I will just briefly quote some witnesses who gave evidence. Tabitha Goldstaub, for example, said that

“ARIA has to be independent”.––[Official Report, Advanced Research and Invention Agency Public Bill Committee, 14 April 2021; c. 56, Q54.]

Dr Dugan said:

“That independence of decision making and the crafting of those programmes in that spirit are coupled, and that is part of the reason why the agency”—

that is, the Defence Advanced Research Projects Agency in the US—

“has been so successful over years.”––[Official Report, Advanced Research and Invention Agency Public Bill Committee, 14 April 2021; c. 47, Q43.]

And I will close by quoting Professor Glover, who said:

“I would argue that there is huge value in that”—

“that” being the independence of ARIA, and that:

“Obviously, the funding is coming from Government, but by giving it freedom from Government you might also be giving it the freedom to fail in many ways, and that is exceptionally important. If it is seen as very close to Government—whichever Government is in power—it potentially becomes a bit like a political football, either in what is being funded or in the direction suggested for where ARIA funding should go.”––[Official Report, Advanced Research and Invention Agency Public Bill Committee, 14 April 2021; c. 55, Q54.]

I think that all Members of the Committee will agree that we do not wish ARIA to become a political football; we certainly want it to avoid the controversy that has affected football itself in the last few days. We want its independence to be crystal clear. We do not want it to be subject to, or tainted by, any of the allegations of sleaze or cronyism, or the corrupting influence of there being too close a relationship between business and Government. By accepting this amendment, the Committee will send a clear message in that regard.

New clause 1 concerns ARIA’s independence, which is at the core of our policy aims here, and the Bill has been drafted to set ARIA as free from ministerial interference as possible. ARIA will set its own research programmes, recruit freely at the executive and programme manager level, and make decisions on what programmes to start and finish without recourse to Ministers.

I observe a contradiction in moving this new clause to protect ARIA’s independence to be discussed alongside a series of amendments which would take powers away from ARIA and give them to the Secretary of State. The Secretary of State deliberately has limited powers and the Bill strikes the right balance between providing ARIA with the independence to operate freely, which we believe is critical to its success, and sufficient Government oversight to protect the use of public funds, for example, the right to remove non-executive members or to intervene where necessary or expedient on national security grounds, or the Secretary of State’s reserve power to introduce procedure in law affecting conflicts of interest, a power that is not found in the Bill but which creates other statutory corporations, such as UKRI. These measures represent appropriate protections, rather than controls, affording ARIA greater freedoms and independence than those of typical arm’s length bodies.

Without real freedoms, there is a danger that ARIA will get pulled closer by Ministers over time, and will become an arm’s length body like any other. I therefore do not think the new clause is needed.

There is not a contradiction between wanting to establish ARIA’s independence while also ensuring the same levels of scrutiny. For us they are two sides of the same coin. As this is our last proposed amendment, I want to press the new clause to a Division.

Question put and negatived.

New Clause 2

Carbon costs

“ARIA must—

(a) have regard to the carbon costs of decisions it makes; and

(b) operate with net zero carbon costs.”—(Stephen Flynn.)

This new clause is intended to ensure that ARIA has regard to the carbon costs of its decisions, and runs with net zero carbon costs.

Brought up, and read the First time.

I beg to move, That the clause be read a Second time.

We are indeed going to the better side of Aberdeen, although I should be very careful on my way home, because my hon. Friend the Member for Aberdeen North and I are both on the same flight later.

I do not want to go over the arguments that we had earlier in the week. I think we had quite enough on net zero and climate change. We do of course still hold the view that that should be the abiding mission of ARIA itself. Given that the Bill does not make any provision for what we are suggesting in the new clause, it should be brought forward at this moment in time. I hope the Minister will be able to allay my concerns with her remarks.

We discussed climate change extensively on Tuesday. I want to put it on the record that I agree with the hon. Members who raised the urgency and importance of tackling that issue. As I am sure the hon. Member for Aberdeen South is aware, however, the clause would be a very unusual provision for a statutory corporation. I also want to emphasise that ambitious legislative action has already been taken by the Government in this regard, with our strong statutory commitment to net zero making the UK the first major economy in the world to do that.

As I have said before, achieving the legislative commitment to net zero remains one of the Government’s top priorities, as demonstrated by the Prime Minister’s 10-point plan. I know that ambition is shared by colleagues across this place. I therefore recognise why the clause has been brought forward today. I would, however, caution against placing an immediate obligation on ARIA that is out of step with the wider 2050 timescale for reaching net zero.

ARIA is also likely to be a very small organisation with a small footprint. I also want to emphasise that ARIA will be subject to the Environmental Information Regulations, which require public authorities such as ARIA to make environmental information available. This would likely include data relating to carbon costs. We have discussed the importance of giving ARIA freedom and independence and space to establish itself, and ultimately I do not think that imposing that immediate statutory obligation is the right way to achieve the climate objectives that it speaks to, or to ensure the success of ARIA.

New Clause 3

Presentation of funding in Estimates

‘(none) ARIA’s funding must be presented as a discrete item in the Supply Estimate presented to Parliament by HM Government. —(Kirsty Blackman.)

This new clause is intended to ensure that in the Estimates process, spending on ARIA is transparent and able to be scrutinised.

Brought up, and read the First time.

The new clause is in the name of the SNP, and we go this time to Aberdeen North.

I beg to move, That the clause be read a Second time.

Aberdeen North is by far the best part of Aberdeen, Mr Hollobone.

I know that new clause 3 is the most exciting thing, and that the Committee has been waiting for it the whole time. It is the key moment in our discussions. I jest—but it is important. The past few years saw the advent of English votes for English laws in Parliament, and we were told during its development that even though Scottish MPs were being written out of having a say on England-only legislation, we would still have a say on Barnett consequentials, because we would be able to vote during the estimates process.

We have made our issues with that process clear. Despite good changes to the system and the way we scrutinise estimates, the process is still wholly inadequate. Part of that inadequacy is the fact that we have no certainty about what will or will not be a discrete line within the estimates. We have no certainty about whether we can get the costs for something. As the shadow Minister said, when she asked for costs for UKRI, in relation to freedom of information requests, for example, she did not get them. Even if ARIA is to be an arm’s length organisation in relation to BEIS, with a memorandum of understanding, but it will be spending public money, I would be keen to keep track of how much we are allocating to ARIA each year. Once again, it would be quite good if the Minister would make a commitment to a discrete line in the estimates. If she does that, I will be more than happy to say nothing else.

New clause 3 is intended to ensure that ARIA is presented as a discrete item in the supply estimates. ARIA will be funded by BEIS and, like all other BEIS arm’s length bodies, will be separately identified in the BEIS supply estimates. ARIA statements of accounts, which will be laid before Parliament every year, will also include information on ARIA’s funding from BEIS. I therefore believe that the new clause would be an unnecessary addition to the Bill.

With that confirmation from the Minister, I am happy to say that I beg to ask leave to withdraw the motion.

Clause, by leave, withdrawn.

New Clause 4

Ethical code for investment

‘(1) Within three months of the date of commencement of this Act, the Secretary of State must lay before Parliament a code for ethical investment developed and agreed by ARIA.

(2) The code of ethics developed by ARIA under subsection (1) must go beyond regulatory requirements and adopt a best practice approach.’ —(Stephen Flynn.)

This new clause is intended to ensure that ARIA develops a code for ethical investment that goes beyond regulatory requirements and adopts a best practice approach.

Brought up, and read the First time.

I beg to move, That the clause be read a Second time.

Again, the new clause is very straightforward. It is intended to ensure that ARIA develops a code of ethical investment that goes beyond regulatory requirements, and adopts a best practice approach. What is not to like? That is something that we should all aspire to, particularly when it comes to such a significant amount of public money. We have talked at length today and on Second Reading about ARIA’s ability to dodge freedom of information requests, and the like. The new clause would provide the assurance that we need, given that the Government appear unwilling and unable to take forward our views on freedom of information. It perhaps provides a compromise position.

I recognise the issue raised in the amendment. The most transformational scientific research, of the kind that will be pursued by ARIA, is likely to have a wide range of potential technological applications, across different areas. Such research may prompt new ethical debates, such as those that we are already having about AI and robotics. The Government welcome lively, open and democratic public and parliamentary debate on the roles that new technologies play in our lives, and I do not think that that is something we should shy away from. However, I assure the hon. Gentleman that ARIA will operate in line with the law that already governs issues of research ethics, such as the use of animals in research. ARIA will not be given special dispensation to fund research that is not considered appropriate elsewhere.

I draw attention to the fact that there is no specific legislative requirement placed on UKRI, a much larger-scale funder, with respect to issues of research ethics. For ARIA the Government would be able to intervene in exceptional circumstances through the national security provision in clause 4 of the Bill, as we have already discussed.

I understand what the Minister says about the fact that there is no such provision for UKRI. However, perhaps if was being set up now, we would suggest that there should be. For her information, the Scottish National Investment Bank has a clause almost identical to new clause 4, on ethical investment. We believe that if the Scottish National Investment Bank can operate on that basis, ARIA should have no problem doing so. I understand exactly what she says about the debates that are happening, but that is why it is even more important for ARIA to sign up to some kind of code of ethics that we can all scrutinise.

To reiterate our viewpoint, the Government would be able to intervene in exceptional circumstances through the national security provision in clause 4, which we have already discussed, and by introducing powers on the grounds of conflict of interest and appointing a new chair or new non-executive directors. More broadly, in working with relevant Government institutions, special attention will be paid to ensuring that ethical questions generated by research are thoroughly explored and that we strike an appropriate balance between innovation and caution.

I beg to ask leave to withdraw the motion.

Clause, by leave, withdrawn.

New Clause 5

Human rights abuses

“No ARIA resources may be used in any way that would contravene human rights.”—(Stephen Flynn.)

This new clause is intended to ensure that ARIA is not able to contravene human rights.

Brought up, and read the First time.

I beg to move, That the clause be read a Second time.

It is perhaps apt to reflect on the debate on the annunciator screens, which relates to many right hon. and hon. Members’ concerns about human rights. Those concerns are just and appropriate, and I do not think that any of us wants to be under any illusion about whether ARIA might have cause to have or seek investment in technologies that may contravene human rights. It is an incredibly serious topic.

We can see from the Bill the flexibility and freedom that ARIA will have. We hear from the Government that they want it to be agile and nimble, and we know that it will not have the level of scrutiny and transparency that perhaps it should—certainly in our view. I would welcome an incredibly serious tone from the Minister and a cast-iron assurance that human rights will not be contravened in any way, shape or form by ARIA and its processes.

I second the concerns raised by the SNP spokesperson. If ARIA commissioned research, for example, that was collaborative between the UK and a Chinese tech company involved in the Uyghur human rights abuses, which are so extreme, how would we know about it and what action could be taken?

I completely agree with the sentiment and the intention behind the new clause. Human rights are protected in law in the United Kingdom through the Human Rights Act 1998, and ARIA will be subject to public authority obligations under the Act. I refer the hon. Member for Aberdeen South to the first page of the Bill, which confirms that the Secretary of State has signed a statement to the effect that

“the provisions…are compatible with the Convention rights.”

I therefore reassure the Committee that ARIA will operate in a way that is compatible with the European convention on human rights; indeed, it would be unlawful under existing legislation for it not to do so. I hope that that satisfies the hon. Member that there is no need for the new clause.

I think that there remain some outstanding concerns that are not covered by other Acts from the UK Government that we have debated in the House over many years. I do not think that the Minister necessarily addressed the shadow Minister’s question about ARIA seeking to partner with an organisation that was in breach of human rights or that contravened them in its activity, but I am more than happy for her to intervene if she wishes to correct me.

The concern over human rights in supply chains for tech companies has been raised a number of times, but we have yet to see it properly addressed by the Government. That echoes a concern represented here, and I hope that there will be an opportunity for the Minister to reassure us further.

I thank the hon. Member for that important contribution. On that note, I will press the new clause to a vote. I hope the Government will reflect on the issue before the Bill comes back to the House.

Question put and negatived.

Question proposed, That the Chair do report the Bill to the House.

I know that Members will be disappointed that this is the final question before the Committee.

On a point of order, Mr Hollobone. I thank you for the way in which you have chaired our deliberations, and for your guidance and that of the Chair of each sitting. I thank the Committee members, whose contributions have just about always been good-natured and constructive, and have often been humorous and enlightening at the same time. I offer my particular thanks to the Clerks of the Committee, to Hansard for taking down our words of wisdom—or whatever—so accurately and concisely, and to all the staff and Officers of the House who have furnished us with excellent briefings for the evidence sessions. We have benefited from their advice and guidance outside of the Committee Room as well.

Further to that point of order, Mr Hollobone. I echo the comments made by the shadow Minister. I have said thanks very much to the Clerks, but I also put on the record my thanks to Dr Jonathan Kiehlmann and Scott Taylor, our staff members who have been assisting us. I also put on the record my thanks to the Minister, who wrote to us with a response to questions that we asked on Tuesday. I thank her and her team for ensuring that happened.

Further to that point of order, Mr Hollobone. I take this opportunity to place on the record my sincere thanks to the Chairs for their excellent chairship. We have finished proceedings early, and I thank the Whips on both sides for their efforts in the management of time. I thank the excellent witnesses we heard from last week, and I thank all members of the Committee for our constructive debates. I am so pleased that every member recognises ARIA’s potential to bolster the reach of R&D funding across the whole United Kingdom and to be at the global forefront of new discoveries.

I very much welcome the sentiment behind the amendments we have discussed, such as maintaining the independence of ARIA, diversity in science and the importance of combating climate change. I hope I have demonstrated that the Bill will create a leading independent research institution and, while it is not for this piece of legislation, that the Government are making significant progress on other areas of policy through our net zero commitments and our upcoming people and culture strategy and places strategy. I welcome the support in delivering those aims.

Finally, I offer my thanks to the Clerks, the Doorkeepers, Hansard, all the parliamentary staff who have supported the debate and all members of the Committee for ensuring smooth proceedings and the livestreaming of the discussions. I look forward with great anticipation to the next stages of proceedings on the Bill and the continued insight from my experienced colleagues across the House.

I thank the Clerks for their hard work, and the Hansard reporters and all hon. Members for their attendance this afternoon.

Question put and agreed to.

Bill accordingly to be reported, without amendment.

Committee rose.

Finance (No.2) Bill (Second sitting)

The Committee consisted of the following Members:

Chairs: Dame Angela Eagle, † Sir Gary Streeter

† Bacon, Gareth (Orpington) (Con)

† Badenoch, Kemi (Exchequer Secretary to the Treasury)

† Buchan, Felicity (Kensington) (Con)

† Coutinho, Claire (East Surrey) (Con)

† Eshalomi, Florence (Vauxhall) (Lab/Co-op)

† Grant, Peter (Glenrothes) (SNP)

† Higginbotham, Antony (Burnley) (Con)

† Jones, Andrew (Harrogate and Knaresborough) (Con)

Marson, Julie (Hertford and Stortford) (Con)

† Murray, James (Ealing North) (Lab/Co-op)

† Norman, Jesse (Financial Secretary to the Treasury)

† Oppong-Asare, Abena (Erith and Thamesmead) (Lab)

† Owen, Sarah (Luton North) (Lab)

† Russell, Dean (Watford) (Con)

† Rutley, David (Lord Commissioner of Her Majesty's Treasury)

† Smith, Jeff (Manchester, Withington) (Lab)

† Thewliss, Alison (Glasgow Central) (SNP)

Chris Stanton, Jo Dodd, Committee Clerks

† attended the Committee

Public Bill Committee

Thursday 22 April 2021

(Afternoon)

[Sir Gary Streeter in the Chair]

Finance (No.2) Bill

(Except Clauses 1 to 5; Clauses 6 to 14 and Schedule 1; Clauses 24 to 26; Clause 28; Clause 30 and Schedule 6; Clauses 31 to 33; Clause 36 and Schedule 7; Clause 40; Clause 41; Clause 86; Clauses 87 to 89 and Schedules 16 and 17; Clauses 90 and 91; Clauses 92 to 96 and Schedule18; Clause 97 and Schedule 19; Clauses 109 to 111 and Schedules 21 and 22; Clause 115 and Schedule 27; Clauses 117 to 121 and Schedules 29 to 32; Clauses 128 to 130; any new Clauses or new Schedules relating to: the impact of any provision on the financial resources of families or to the subject matter of Clauses 1 to 5, 24 to 26, 28, 31 to 33, 40 and 86; the subject matter of Clauses 6 to 14 and Schedule 1; the impact of any provision on regional economic development; tax avoidance or evasion; the subject matter of Clauses 87 to 89 and Schedules 16 and 17 and Clauses 90 and 91; the subject matter of Clauses 92 to 96 and Schedule 18, Clause 97 and Schedule 19 and Clauses 128 to 130)

Clause 42

Plastic packaging tax

Question proposed, That the clause stand part of the Bill.

With this it will be convenient to discuss the following:

Clauses 43 to 46 stand part.

New clause 8—Report on Part 2

“(1) The Secretary of State shall, before 1 April 2023, publish a report on the impact of the provisions in Part 2 of this Act.

(2) The report in subsection (1) shall include consideration of the impact on—

(a) the rate of plastic recycling in the UK generally,

(b) the rate of PET plastic recycling in the UK,

(c) the rate of Polypropylene plastic recycling in the UK, and

(d) the rate of HDPE plastic recycling in the UK.

(3) The report in subsection (1) shall include consideration of the impact on—

(a) the volume of plastic used in the UK,

(b) the volume of PET plastic used in the UK,

(c) the volume of Polypropylene plastic used in the UK, and

(d) the volume of HDPE plastic used in the UK.

(4) The report in subsection (1) shall include consideration of the impact on—

(a) the volume of plastic stockpiling in the UK,

(b) the volume of PET plastic stockpiling in the UK,

(c) the volume of Polypropylene plastic stockpiling in the UK, and

(d) the volume of HDPE plastic stockpiling in the UK.

(5) The report in subsection (1) shall consider whether—

(a) £200/tonne provides an economic incentive to change the content of packaging for those types of plastic specified in subsection (2),

(b) the economic incentive in subsection (5)(a) remains in the event of lower than average oil prices, and

(c) a tax escalator might be more efficacious.”.

This new clause seeks a review of the efficacy of the proposed plastic packaging tax, with respect to whether the proposals will (a) increase use of certain plastics and (b) provide an incentive to recycle in the event of low oil prices.

New clause 11—Rate review (plastic packaging tax)

“(1) The Chancellor of the Exchequer must review the impact of section 45 and lay a report of that review before the House of Commons within six months of the passing of this Act.

(2) A review under this section must estimate the expected impact of section 45 on—

(a) plastic packaging tax revenue,

(b) levels of recycled material (plastic and non-plastic) in packaging, and

(c) levels of reusability and recyclability of packaging material (plastic and non-plastic).

(3) A review under this section must also estimate the expected impact of increasing the rate set out in section 45 by £50 each year.”.

New clause 13—Annual review (plastic packaging tax)

“(1) The Chancellor of the Exchequer must review the impact of sections 42 to 85 and schedules 9 to 15 of this Act and lay a report of that review before the House of Commons within six months of the passing of this Act and once a year thereafter.

(2) A review under this section must estimate the expected impact of sections 42 to 85 and schedules 9 to 15 on—

(a) levels of recycled material (plastic and non-plastic) in packaging,

(b) levels of reusability and recyclability of packaging material (plastic and non-plastic),

(c) the waste hierarchy,

(d) levels of carbon emissions, and

(e) progress towards a circular economy.”.

As the Committee will know, the Government are deeply committed to greening our economy and being the greenest Government ever. As part of our resources and waste strategy, published in 2018, we committed to reducing waste and incentivising more sustainable production. The introduction of this world-leading tax on plastic packaging is a key part of that strategy.

Plastic waste is a pressing global issue. It often does not decompose and can last centuries in landfill, or ends up littering the streets or polluting the natural environment. More than 2.2 million tonnes of plastic packaging are manufactured in the UK each year. The vast majority is made from new plastic, rather than recycled material, because recycled plastic is often more expensive to use than new plastic. To tackle this, our 2019 manifesto reaffirmed the commitment to introduce a world-leading new tax on plastic packaging from April 2022. The tax will apply to the manufacture and import of plastic packaging that does not contain at least 30% recycled plastic.

The tax charge will arise on unfilled packaging manufactured in the UK and to unfilled or filled packaging imported into the UK. Including imported filled packaging in the tax will prevent any potential disadvantage to the UK packaging industry and means that packaging around imported products—for example, the bottle a drink comes in—will be within the scope of the tax.

The tax will provide a clear economic incentive for businesses to use recycled material when manufacturing plastic packaging. That will help to tackle the problem of plastic pollution, creating greater demand for this material and in turn stimulating increased levels of recycling and collection of plastic waste, diverting it away from landfill or incineration.

Clauses 42 to 46 set out the introduction of the plastic packaging tax. They provide the high-level principles around the charging of the tax, including key definitions needed to give businesses clarity about whether they are liable to the tax on packaging they manufacture or import. The Bill also provides powers to make secondary legislation that will provide further clarity to these definitions. That will be supported by guidance, which will also be published later this year.

Clause 42 introduces the PPT and sets out that Her Majesty’s Revenue and Customs will be responsible for its collection and management, in line with its wider responsibilities for the collection and management of taxes. Clauses 43 and 44 set out that the tax will be paid on packaging manufactured in the course of business in the UK, as well as on imported plastic packaging. For packaging manufactured in the UK, the manufacturer will be liable for the tax. For imported packaging, the person on whose behalf the packaging is imported will be liable, as they are better placed to know about the packaging than those providing customs and transport services to import goods.

Clause 45 sets out that the tax will be charged at a rate of £200 per metric tonne of chargeable plastic packaging. We will come later to the clause that sets out the 30% threshold for recycled plastic, below which the tax will be charged. A £200 rate provides a clear economic incentive for businesses to use recycled material when manufacturing plastic packaging. The clause specifies that this rate applies to a single plastic packaging component, such as bottles, lids and wrappers. This will mean that manufacturers and importers have incentives to include 30% recycled plastic in each type of plastic packaging component that they manufacture or import. If this is part of a tonne, the amount is reduced proportionately. For example, 0.5 tonnes would equate to £100 in tax. Clause 46 provides the high-level principles for the payment of the tax in relation to the relevant accounting periods. Further detail on this will be set out in regulations.

I now turn to new clause 8, tabled by the hon. Members for Glasgow Central, for Glenrothes, for Gordon and for Midlothian, and new clauses 11 and 13, tabled by the hon. Members for Ealing North, for Erith and Thamesmead and for Manchester, Withington. These new clauses suggest that the Government conduct future reviews into the tax and the impact that it has, including after six months of passing the Bill for the tax rate and for all aspects of the tax in the year after introduction, or annually after an initial report.

The Government have already set out a large amount of detail about the expected impact of the tax, and a National Audit Office report on environmental taxes recently concluded that Her Majesty’s Treasury and HMRC

“had undertaken extensive work to understand the possible impact of the tax.”

The tax information and impact note published in March this year set out that, as a result of the tax, the use of recycled plastic in packaging could increase by around an estimated 40%—equal to carbon savings of nearly 200,000 tonnes—with expected revenue from the tax ranging from £210 million to £235 million a year between 2022-23 and 2025-26. Further detail on modelling to assess the impacts of the plastic packaging tax was set out by the Office for Budget Responsibility in its economic and fiscal outlook published in March 2020. Most significantly, that included the increase in recycled plastic in packaging and more marginal impacts, such as switching to alternative plastics or materials.

The aim of the tax is to incentivise the use of more recycled plastic, rather than new plastic, in plastic packaging. The tax will complement the reformed packaging producer responsibility regulations, which will encourage businesses to design and use plastic packaging that is easier to recycle, and discourage the creation of plastic packaging that is difficult to recycle. They will also make businesses responsible for the cost of managing the packaging they place on the market when it becomes waste. Given that, the Government have focused analysis of the plastic packaging tax on the objectives rather than wider issues such as the reuse and recyclability of packaging, as suggested in new clause 13.

As with all tax policy, the Government will continue to keep the plastic packaging tax under review, including the level of the tax, to ensure that it remains effective in increasing the use of recycled plastic. Given the substantive information already published and the fact that limited new information is likely to be available before the tax is introduced, six months after the passage of the Bill would not be the right time to conduct and publish a review into the impact of the tax rate and chargeable packaging components.

As regards evaluating the tax annually after its introduction, being able to accurately isolate the impact of particular policy measures alongside other external factors is inherently difficult, and the Government will carefully consider those issues. As set out in the tax information and impact note published in March this year, consideration will be given to evaluating aspects, including the rate, threshold and exemptions, of the policy after at least one year of monitoring data has been analysed and collected.

The Government agree that it is important to understand the efficacy and impacts of the plastic packaging tax, but given that these issues have been previously considered and will be kept under review, we do not think new clauses 8, 11 and 13 are necessary. The clauses in the Bill form the first part of the legislation needed to introduce the plastic packaging tax in April 2022. I therefore move that they stand part of the Bill.

I rise to speak to new clause 8, tabled in my name and that of my colleagues. I remain interested in the idea of a plastic packaging tax, and I will support it because too many of our natural resources are being wasted. We know from looking around that things are often thrown away that could be used again. We certainly broadly support what the Government are trying to do here, and it is a shame that it does not align with the deposit return scheme, which has been delayed in England but will move ahead in Scotland, because doing these things at the same time would have made a lot of sense and would make for a cohesive and coherent policy.

We tabled our new clause because there are aspects of the Bill where we need a wee bit more detail and aspects where the Government could be more ambitious. It is an ambitious new policy, but I think that more could be done. For example, we understand from the consultation that Her Majesty’s Treasury has closed a loophole that would have allowed people to switch to bringing in packaging from abroad, but there are still questions around the operation of the paperwork and the audit trail that will be required to ensure the success of the scheme. We also understand that the provisions are to be made by regulation under the negative procedure, and we urge the Government to be as clear as possible about how that will work, because it is important. Those in the industry will want to know how that will operate, and it falls to us as elected representatives to scrutinise that as much as we can to ensure that it is done properly.

Having spoken to stakeholders, there are concerns that I want to set out. The first is about the 30% threshold. Last night, I went to pick up a bottle of brand-name lemonade from the supermarket as part of my dinner. It proudly proclaimed on the side that it was 50% recycled, which is already above the 30% threshold—they were already doing more.

Some plastics lend themselves more to a higher level than others. PET, which is used in fizzy juice bottles such as my lemonade bottle, can be commonly and easily recycled up to 100%, so 30% is quite low for that type of plastic. The new clause seeks to look at different types of plastic and the scope for recycling them.

Polypropylene, which is used for food-grade plastics, is much more difficult to recycle. Just before lunchtime, a briefing from the Food and Drink Federation reached me. It queries what will happen about food-grade plastics and whether food businesses can avoid paying the plastic packaging tax when they cannot legally increase the recycled content of packaging in certain polymer types and formats for food contact. There are different regulations for food-grade plastics than for other plastics.

HDPE, which is used in milk bottles, could reach 30%. The dairy industry road map suggested that it was aiming for 50% of recycled material in opaque milk bottles. Again, we are not quite sure what the 30% makes possible. It would be good to be more ambitious in the areas where we can do more recycling, so that we can storm ahead. In areas where it is more difficult, it makes sense to look at things slightly differently.

The Association of Accounting Technicians commented on the international context. Brands such as Kraft Heinz have committed to make 100% of packaging worldwide recyclable or compostable by 2025. The American Chemistry Council’s plastics division is working towards 100% of plastic packaging being recyclable and recoverable by 2030. The European Commission and the Australian Government are also pushing ahead and say that 30% appears to lack ambition on a global scale.

I gently urge the Government to see if there is a differentiated approach that might be a bit more ambitious and a bit more detailed, to allow those areas where more speed is possible to push ahead. The Green Alliance believe that a differentiated obligation would be useful, because there is potential there. While we want all areas to be recycling 100% if possible, there are real technical difficulties in doing so at the moment.

The Green Alliance is also concerned about perverse outcomes from the Bill around packaging composed of multiple materials, such as card coated in a plastic or other such elements. Such items are very difficult and specialist to recycle. We would not want people to switch to those items rather than plastics; that would make the recycling situation worse because those items cannot be recycled and recovered as easily. Our new clause also addresses that point, as well as ensuring the reporting of recycling rates and the volume use of the relevant plastics.

It is important to note that the price of plastics, both recycled and virgin material, is very volatile, fluctuating with the oil price, which as we all know has moved considerably in recent years. We are worried that the scheme will not deliver the desired outcome in the event of low oil prices. Some experts suggest that plastics recycling is unviable if the oil price is under £65 a barrel. An HMT analysis of the tax level required to balance that volatility and reduce exposure would seem logical.

The £200 per tonne levy could be set higher, and there should be further analysis. At £200 per tonne, it might be more viable for businesses to pay the tax, rather than recycle the materials, which is not the Government’s very laudable aim. It would be useful to understand that fully, as low oil prices will have an impact on the viability of recyclers. Some have attributed the failures of recycling plants in London and Lincolnshire in 2015 and 2017 to that oil-price volatility. We want to ensure that those recyclers are viable businesses. We want to give a future to this sector and to ensure that these businesses can thrive, because they do good work.

A contrast has been drawn with the landfill tax, which has a clear trajectory and clear predictability, allowing people to plan a way for the market to shift to alternatives. We need to make it as easy as possible for businesses to do that. An escalator, as suggested by the Green Alliance, would be useful, so that people can plan and, if behaviour changes or other prices play into that, there is a clear sense of where we are going.

I know from my previous experience as a local government councillor in Glasgow that some recyclers stockpiled plastics until the price was right to sell. I visited one of the recycling facilities in Glasgow at the time—not recently, but about 10 years ago—and they were clearly stockpiling recycled materials, because it was not worth their while to sell them, and they would not get the return to Glasgow City Council on those materials. However, that meant that they needed the space to stockpile all those plastics, and it was building up, which had an impact on what they were able to do. The head of recycling at the time told me how he was having to phone up and haggle to get the best prices for some of the recycling within the city. That is not really what is wanted; we want a stable market, so that there is clear throughput and people can understand what money they will receive for the recycled material. There is certainly more to be considered. What consideration has the Minister given to that? What has come back through consultation with those who gather the recycled materials, because that is important?

Further to that, the Food and Drink Federation has asked whether the Government will consider ring-fencing the funds from the plastic packaging tax to re-invest in the recycling infrastructure across the UK. That seems pretty sensible. If we are trying to get the maximum amount recycled, we want to capture that as best we can. If there is money there, that would be useful.

Lastly, the British Plastics Federation—it fully supports the Bill, and was keen to stress that in its correspondence—expressed some concerns about how recycled content will be measured. It is difficult to measure once it is in a product, so we need clear mechanisms ahead of that. The federation also raised the issues I mentioned to do with food safety and other regulations and exemptions, and asked whether all plastic materials can be recycled properly, given what is in them. It feels that it is unfair to tax companies where regulations do not permit the use of recycled materials, which specifically affects food and cosmetic applications, because that cost will then be passed on to those companies, which can do little about it. Would that be a fair consequence of the legislation?

There is certainly a lot of scope here to change public behaviour and to make a real difference to plastic pollution across the UK. I commend the Government for looking at the issue, but very much urge them to look at the secondary details and to give some answers on exactly how this will work.

It is a pleasure to serve under your chairship, Sir Gary—for the second time this week for me.

I begin my discussion of the plastic packaging tax by saying that we welcome the new tax in principle. As members of the Committee can see, we have tabled a number of amendments to the clauses in this part of the Bill. We hope to encourage the Government to make improvements where they are needed. I will make some general remarks and be brief about the other proposals.

Plastic pollution is one of the biggest threats to our environment. In the UK, an estimated 5 billion tonnes of plastic are used every year, nearly half of which is packaging, and 67% of plastic waste comes from packaging. A report from the World Wildlife Fund calculated that total plastic waste generation in the UK could increase to about 6.3 million tonnes by 2030. As the Minister rightly mentioned, the vast majority of the plastic packaging used in the UK is from new rather than recycled plastic. We also know that far too much of that plastic waste goes to landfill or is incinerated, rather than being recycled or reused, so there is a dual problem: the environmental impact of producing new plastic, and the waste that is created by the failure to recycle plastic.

As the Green Alliance, to which I am grateful for its briefing on the issue, has said, solving those problems without increasing other environmental burdens will require an approach that tackles wider concerns about unsustainable resource use. It is a challenge that businesses, Government, and the whole of society must face together. The new plastic packaging tax is an opportunity to use the tax system to reduce the production of new plastics, encourage the use of recycled plastic, and divert plastic away from landfill or incineration.

However, we have a number of concerns about the detail and operation of the tax set out in these clauses. As the Exchequer Secretary mentioned, clause 45 sets a rate of £200 per metric tonne of chargeable plastic packaging components. We are concerned that this low flat rate tax will not provide enough of an incentive to encourage plastic manufacturers and importers to move to a greater use of recycled plastic at the speed we need them to. I echo comments made by the hon. Member for Glasgow Central, which the Green Alliance and others have also noted, that the relative effectiveness of the flat tax is likely to change according to market conditions, including seasonal variations in plastic prices and fluctuations in oil prices. Over the past year, low oil prices have impacted on the competitiveness of recycled plastic versus new plastic.

Our new clause 11 is a probing amendment to get the Government to review the impact of the £200 rate, and to consider a rate escalator through which the per tonne charge would increase each year. Of course, we understand that further work is required to set this at an appropriate level, but an escalator would set a clear expectation on the industry over the coming year. The SNP’s new clause 8 makes a similar point about whether the proposed rate provides the right incentive to remove non-recycled plastic from packaging as much as possible. The Food and Drink Federation has also asked whether the Government will consider ringfencing funds from the plastic packaging tax, to be reinvested in the UK’s plastic recycling infrastructure. I hope that when the Exchequer Secretary replies, she can respond to a number of the concerns that we have raised.

I will just add that our new clause 13, which is also in this group, is more of a general review on the impact of tax overall on levels of recycled material in packaging. That includes non-plastic material, the waste hierarchy, levels of carbon emissions, and progress towards a circular economy. Again, I hope the Exchequer Secretary can pick up on some of those points.

I will go through the points that hon. Members have raised, and I think I will be able to answer quite a few of their questions. On the point about the 30% recycled plastic threshold being too low to be effective, I would say to the hon. Member for Glasgow Central that a £200 per tonne rate for plastic packaging that does not contain at least 30% recycled plastic will provide a clearer economic incentive for businesses to use more recycled plastic in the production of packaging—at the moment, it is just about 10%—and, in many cases, will make it more cost effective. We as a Government believe that setting the threshold for the level of recycled packaging at 30% is ambitious, reflects the pressing need to act on this issue and is achievable in the foreseeable future for many types of packaging. There is no point setting a threshold that we do not think people will be able to meet.

On the question of consultation with industry representatives and stakeholders, we consulted extensively. All regulations under this part of this Bill will also go through a public technical consultation before they are finalised. We will seek comments from interested stakeholders. HMRC has also set up the plastic packaging tax industry working group and conducted meetings with it to support the implementation of the tax and aid the process of drafting regulations and guidance. I take the point that the hon. Lady has made about the clarity of that guidance, and I am sure—because HMRC is working with the industry working group—that it will get there. The group consists of an independent expert and trade organisations that cover the wide range of sectors affected by the tax, ensuring that a broad range of views are taken into account.

To date, the Government have conducted extensive engagement with the industry on the design of the tax, and held two policy design consultations and one technical consultation about the clauses of this Bill. HMRC also continues to have regular contact with the devolved Administrations, non-Government departmental bodies, and other interested stakeholders about all activity regarding the tax.

I am glad to hear that that engagement is ongoing. Can I ask whether the Food and Drink Federation is included within that? I am a wee bit concerned that its concerns came through this afternoon, just before we were due to discuss this issue. Perhaps the timetable that we have gone through with the Bill has surprised people who thought that they had a couple of days longer to get their submissions in, and I would like to know whether the Food and Drink Federation was part of that.

The Food and Drink Federation is part of the industry working group. The other members are WRAP, the British Plastics Federation, the Chartered Institution of Wastes Management, the Foodservice Packaging Association, the Grantham Institute, the Chartered Institute of Logistics and Transport, Inkpen, the British Retail Consortium, the Packaging Scheme Forum, the Association of the British Pharmaceutical Industry and the Forum of Private Business.

I was asked whether there is evidence that the tax will cause any change because of the level that it has been set at, but I think I answered that in my previous answer.

The hon. Members for Erith and Thamesmead and for Glasgow Central asked about the oil price. The Government recognise that the price of oil may impact on the demand for virgin and recycled plastic, which is why we are putting in place a number of reforms to transform the economics of recycling. A stabilisation fund to protect against changes to the oil price would be highly complex to administer and would carry a risk to public finances. We are not going with that, but tax measures are being introduced by the Department for Environment, Food and Rural Affairs, including extended producer responsibility reforms and a deposit scheme. The hon. Member for Glasgow Central mentioned that there is one in Scotland, and we will be introducing one in England as soon as is practical. We are seeking feedback on proposed timelines from DEFRA’s consultations. All of that will help increase the supply and quality of recycled plastic, making it a cheaper and more viable alternative to virgin plastic. That will also make demand for recyclable plastic less susceptible to changes in the oil price.

There was a similar question about complex multi-material packaging. We are not making an exemption for that, because during the consultation on the treatment of multi-material packaging, the Government decided that all packaging in which plastic is the largest material by weight should be within the scope of the tax. This will make it easier for businesses to administer the tax, and it will also rightly focus on packaging components that use the most plastic as a proportion of all material. We are confident that a reformed producer responsibility system for packaging will complement the tax and incentivise businesses to design and use packaging that can be recycled more easily.

One of the things that has been raised with me is that, if someone gets a traditional coffee cup from any high street coffee chain, the coffee cup would not be within the scope of the Bill, but the lid would be. Does that not seem a wee bit perverse?

I am not sure that is the case. HMRC and the members of the working group could give specific details on exactly how that would work, but we are having the public technical consultation. That is the sort of question that can be raised there; hopefully, it will receive an answer.

Question put and agreed to.

Clause 42 accordingly ordered to stand part of the Bill.

Clauses 43 to 46 ordered to stand part of the Bill.

Clause 47

Chargeable plastic packaging components

I beg to move amendment 20, in clause 47, page 26, line 4, at end insert—

“(6) Before making regulations under subsection (5), the Commissioners must consult—

(a) industry representatives,

(b) environmental NGOs, and

(c) any other relevant individuals or organisations.”

With this it will be convenient to discuss the following:

Clause stand part.

Clauses 48 to 50 stand part.

New clause 12—Plastic packaging components review

“(1) The Chancellor of the Exchequer must review the impact of section 47 and lay a report of that review before the House of Commons within six months of the passing of this Act.

(2) A review under this section must estimate the expected impact of section 47 on—

(a) plastic packaging tax revenue,

(b) levels of recycled material (plastic and non-plastic) in packaging, and

(c) levels of reusability and recyclability of packaging material (plastic and non-plastic).

(3) A review under this section must also estimate the expected impact of—

(a) raising the 30% threshold in section 47 by 5% each year, and

(b) introducing a power to vary the 30% threshold in section 47 depending on the type of plastic packaging.”

I rise to speak to amendment 20 and new clause 12, as well as to the Government clauses. Clause 47 sets out the plastic packaging tax that will be charged on plastic packaging in which less than 30% of the plastic is recycled. Again, we are concerned that the Government’s ambition is too low. The UK plastic cap is already targeting an average of 30% recycled content across all plastic packaging by 2025.

New clause 12 is another probing amendment, to get the Government to consider creating an escalator in the amount of material that must be recycled in order to avoid the tax. An escalator that would be used effectively to reduce landfill would signal the Government’s commitment in this area and would also help businesses to plan for an increase in their use of recycled material over time, rather than being locked into unsustainable supply chains. It would also encourage the development of technology to overcome barriers to higher recycled content use. Further work would be needed on the precise percentage increase that would be needed each year to achieve the optimal reduction in non-recycled plastic.

Subsection (3)(b) of new clause 12 would require the Government to consider varying the 30% threshold, depending on the type of plastic packaging. Recycled content is easier to achieve for some polymers than for others. Green Alliance has pointed out that a single obligation will encourage gaming and switching between polymers. For example, manufacturers could reduce recycled content in packaging that already exceeds the threshold so that they can increase it elsewhere, resulting in no overall improvement. I hope that the Minister will look closely at the possibility of varying this threshold, as appropriate.

Amendment 20 is really a simple amendment to clause 47, which would require the commissioners to consult industry representatives and environmental NGOs before making regulations about the way in which the 30% threshold is calculated. At the moment, there is very little clarity about the verification process that will be used. Ideally, what we need is something such as an independent and verifiable recycled content verification system. As our amendment says, this should be developed in consultation with businesses and other stakeholders, to ensure that information on recycled content is trustworthy and can be audited, including for overseas producers.

In their witness evidence to this Committee, the British Plastics Federation has pointed out that the definition of “plastic packaging” for the tax is not aligned with the widespread definition of “plastic packaging” within existing UK and EU law, which it said is likely to result in confusion among manufacturers. Can the Minister explain why a different definition has been used? I hope that the Government will commit to working closely with all interested parties on this matter.

Finally, I will say something about the exemption of packaging made of multiple materials, which is set out in clause 48(3). In practice, it means that many of the materials that are most difficult to recycle that contain plastic—for example coffee cups and food cartons, as mentioned by the hon. Member for Glasgow Central—will not be captured by the tax. We are concerned that this could have the unintended consequence of encouraging businesses to switch to that sort of packaging, in order to avoid the tax.

Multi-layer materials are particularly difficult to recycle and cannot be recycled back into the same format. Cartons are not reported as a separate packaging category in recycling information, so it is impossible to say what the current recycling rate for them is. The UK has one open-loop recycling facility for cartons, with a capacity of 25,000 tonnes per annum. This compares with a market size of at least 60,000 tonnes per annum, meaning that it is already impossible to recycle domestically all the cartons put on the market in the UK.

Can the Minister address these concerns directly? What will the Government do to encourage recycling of this type of material? How will they ensure that the plastic packaging tax does not inadvertently increase the use of plastic? Finally, will they consider bringing the materials that I have just talked about within the scope of the tax in the future?

Clauses 47 to 50 set out key high-level definitions for the plastic packaging tax, which between them define the meaning of “plastic packaging”, when packaging is in scope of the tax and at what point packaging becomes chargeable. These are important definitions that give businesses clarity about whether their packaging will be liable to the tax, so I will go through them thoroughly. I will add that they will be supported by regulations and guidance later this year, to give further clarity to businesses.

Clause 47 determines the minimum threshold for the recycled plastic content that packaging must meet to be out of scope of the tax. For packaging that comes under this threshold, clause 47 also sets out at what point this packaging becomes chargeable. For imported plastic packaging, clause 50, which I will turn to shortly, also needs to be considered when determining the tax point. The tax will be charged on plastic packaging that contains less than 30% recycled plastic when measured by weight, and once it has gone through its “last substantial modification”. The concept of “last substantial modification” was introduced following stakeholder feedback that the packaging supply chain is complex and packaging is not always completed by a single manufacturer. By moving the tax point to after the last substantial modification, we reduce the risk that UK manufacturers will be disadvantaged by the tax by bringing the tax point to when the packaging is finished, as it is for imported packaging. This also keeps the tax point as close to the manufacturer of the packaging as possible, where there is most knowledge and evidence about what recycled plastic it contains. I hope that that answers the questions from the hon. Member for Erith and Thamesmead.

Let me turn briefly to amendment 20, which was tabled by the hon. Members for Ealing North, for Erith and Thamesmead and for Manchester, Withington. It would require the Government to consult industry representatives, environmental non-governmental organisations and other relevant organisations prior to making regulations under subsection (5) of this clause. Since the Budget announcement in 2018, my officials have conducted two policy consultations on the design of the tax and a further technical consultation on the draft legislation in this Bill. These responses were analysed to inform and validate policy decisions for the design of the tax. The Government are currently developing regulations and will continue to consult industry representatives, both through Her Majesty’s Revenue and Customs’ plastic packaging tax industry working group, which I mentioned and, more broadly, through a technical consultation on these regulations, as with all other regulations that are required to support the implementation of this tax. Given that comprehensive consultation with external stakeholders, such as that detailed in this amendment, has and continues to be a major feature of the design and implementation of this tax, the amendment is not necessary.

Clause 48 defines what a “packaging component” is—a product designed to be suitable for use for the containment, protection, handling, delivering or presentation of goods in the supply chain. This includes items such as plastic wrap, drinks bottles, and food packaging such as yoghurt pots and ready-meal trays. The scope of this definition includes packaging that does not fulfil its packaging function until it is used by the end consumer. This definition was revised following a technical consultation to ensure that only items designed to be suitable for use as packaging in the supply chain of the goods from the producer—in other words, the manufacturer—to the consumer are in scope; but to provide clarity to the person liable for the tax, who may not know the eventual use of the packaging, it does not matter whether the packaging is used in a supply chain or by an end consumer for packaging such as cling film or bubble wrap.

Clause 49 defines key terms relating to plastic, including the meanings of “plastic” and “recycled plastic”. The definitions in this clause determine whether a packaging component is plastic, and whether any of the plastic within that packaging component is recycled. The definition of plastic includes alternative plastics, such as biodegradables and compostables, putting them in scope of the tax. Although alternative plastics can play a role in addressing plastic waste, further evidence of their impact is required. For this reason, work is ongoing in this area and we will keep their tax treatment under review. The hon. Member for Erith and Thamesmead asked why the definition of plastic packaging in the Bill does not align with packaging regulations terminology. We recognise that there are differences between the definition of plastic packaging for the tax and packaging producer responsibility obligations, an issue that the British Plastics Federation raised. However, differences between the design of the tax and these responsibility obligations mean that a different approach is required. For example, the tax will have quarterly reporting periods, whereas businesses have longer to determine use and report their annual packaging producer responsibility obligations—these are often known as packaging recovery notes, or PRNs. Furthermore, PRNs adopt the EU definition of packaging, and now that we have left the EU we do not feel it appropriate to use this, especially as we are aware that the EU definition is under review and therefore subject to change.

Clause 50 establishes the time of importation. It ensures that, where there is a customs formality in place, such as customs warehousing, the tax will become chargeable only after the plastic packaging has cleared the customs processes where these apply. That will ensure that the tax does not act as a barrier to international trade and gives clarity to businesses about when the tax becomes due for imported plastic packaging.

I turn to new clause 12, tabled by the hon. Members for Ealing North, for Erith and Thamesmead and for Manchester, Withington. The new clause suggests that the Government conduct a future review into the impact of clause 47, including the impact of increasing the 30% threshold for recycled content and having different thresholds for different types of plastic packaging. A £200 per tonne rate for plastic packaging that does not contain at least 30% recycled plastic will provide a clear economic incentive for businesses to use more recycled plastic in the production of packaging. In many cases, it will make using recycled plastic the most cost-effective option. Following consultation, the Government concluded that a single threshold will make the tax simpler for businesses to administer, minimise the compliance risks associated with multiple threshold levels and reduce the risk of lowering incentives for some types of packaging to include more recycled plastic.

As with all tax policy, the Government will continue to keep the plastic packaging tax under review, including the level of the tax, to ensure that it remains effective in increasing the use of recycled plastic. As I pointed out when discussing the previous set of new clauses tabled by Opposition Members, given the substantive information already published and the fact that limited new information is likely to be available before the tax is introduced, six months after the passage of the Bill would not be the right time to conduct and publish a review into the impacts of the recycled threshold for chargeable packaging components. The Government agree that it is important to understand the efficacy and impacts of the plastic packaging tax, but given that these issues have been previously considered and will be kept under review, the Government do not think that new clause 12 is necessary.

In conclusion, this group of clauses define key terms needed for the plastic packaging tax to work. They will be supported by secondary legislation and guidance, to provide further clarity on these terms.

I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 47 ordered to stand part of the Bill.

Clauses 48 to 50 ordered to stand part of the Bill.

Clause 51

Plastic packaging components intended for export

Question proposed, That the clause stand part of the Bill.

Clauses 51 to 53 set out the circumstances when plastic packaging tax can be deferred or exempted and when tax paid packaging is eligible for a tax credit. As I explained before, the rationale of the tax is to encourage the use of recycled plastic instead of new material within plastic packaging. To maximise the incentive for businesses to use recycled plastic, the Government, as a general rule, believe it is important to include types of plastic packaging even where it may be challenging to increase the level of recycled plastic. That will encourage further investment in the recycling infrastructure and innovation required to overcome these challenges.

These clauses provide for the deferral of PPT and the provision of tax credits for packaging that is exported. They also exempt packaging used in the immediate packaging of licensed human medicines; aircraft, ship and train stores; and packaging used to transport imported goods. I will go through the rationale for each of these in turn. These and other clauses in the plastic packaging tax legislation use the term “plastic packaging component”. However, for ease, from this point onwards I will use the term “plastic packaging” instead.

Clause 51 sets out that plastic packaging imported into or manufactured in the UK that is intended for export within 12 months is not chargeable. Based on consultation feedback, the clause requires that the export must be made within 12 months of when a plastic packaging component is manufactured or imported. The packaging must always have been intended for export. This relief will not apply to transport packaging used to export goods such as plastic pallets and wrap, given the administrative challenges of tracking and evidencing that this packaging has been exported. Clause 52 provides for exemptions from PPT for certain plastic packaging.

I apologise for my late arrival, Sir Gary; I was held up in another Committee. Could the Minister expand more on the rationale behind exempting plastic packaging that is manufactured for export? The whole problem with plastics is that plastics that are manufactured here end up in the stomachs of animals in the south Atlantic and the south Pacific. Has she considered, for example, exempting only materials being exported to countries where it is known that there is a similar tax system in place when they are imported? I can understand that we do not want a double tax if the plastic is being exported to a country where there is also an import tax, but is she concerned that the environmental impact of the tax will be reduced if companies can manufacture this stuff and then export it anywhere in the world without having to pay the tax?

We have considered extensively the issue around managing export and one of the things that we did not want to do is to disadvantage UK companies, which would be competing with companies that did not have to pay a similar tax. This measure will encourage other countries into which plastic is being imported to have their own regimes, which would make sure that we have a balanced global system. So, that is why. I think the hon. Gentleman is speaking specifically on the export of packaging, rather than on transport packaging, which is what I was actually talking about.

I think I have said this before, but I will repeat it just in case I did not. This relief will not apply to transport packaging used to export goods, such as plastic pallets and wrap, given the administrative challenges of tracking and evidencing that the packaging has been exported. That is still on clause 51.

Clause 52 provides for exemptions from the plastic packaging tax for certain plastic packaging. The clause exempts transport packaging used to import goods to the UK. There are limited records of transport packaging used on imports, such as pallets, crates and pallet wrap, and the importer will often have little to no control over, or knowledge about, the amount or type of transport packaging used. As a result, the Government believe that the burden of including this packaging in the scope of the tax would be disproportionate to the environmental impact of the packaging for both businesses and HMRC.

Clause 52 also exempts aircraft, ship and train stores, as defined under section 57 of the Customs and Excise Management Act 1979. This is similar to the operation of other taxes, notably excise duties that offer relief for stores on aircraft, ship and train stores, where products will be sold for retail or consumed on board.

Finally, clause 52 sets out a narrow exemption for plastic packaging used in the immediate packaging of licensed human medicines. Testing requirements mean there are greater barriers to including recycled plastic in this packaging, which go beyond sourcing concerns for other packaging such as food contact packaging. As a result, the tax may have unavoidable impacts on patients and vulnerable people. The Government recognise that this is a complex and difficult issue, but based on evidence that has been provided we are confident that it is feasible to operate this exemption.

The Government have carefully considered the case for providing exemptions for other types of packaging where it is challenging to include recycled plastic. The Government believe that including these types of packaging maintains the incentive to find new ways to overcome these challenges, but will keep exemptions from the tax under review. Clause 52 includes a power to create further exemptions from the tax where appropriate.

Clause 53 introduces powers for the Government to make regulations for tax credit where a person has already paid PPT on the packaging. This credit would be available where packaging is subsequently exported from the UK. That will support the competitiveness of UK businesses selling their products abroad. The credit would also be available where the packaging is subsequently converted into a different packaging component and prevents the tax from being charged twice. The Government will provide further guidance about when the tax is due, to minimise the circumstances where credit for subsequent conversion is necessary.

In conclusion and to reiterate, to maximise the incentive for businesses to use recycled plastic, the Government believe that, as a general rule, it is important to include types of plastic packaging even where it may be challenging to increase the level of recycled plastic. However, these clauses ensure that UK manufacturers are not disadvantaged by having to pay the tax on exports. They also provide exemptions to prevent risk to human health, to ensure similar treatment of aircraft, ship and train stores to that of other taxes, and where the administrative burden of controlling transport packaging used on imported goods would be disproportionate to the environmental benefits.

I therefore move that these clauses stand part of the Bill.

As we are now getting into some of the more technical details of the plastic packaging tax, I shall keep my remarks brief.

Clause 52 makes a number of sensible exemptions from the tax, including for packaging of medicines or other medical products. We welcome this exemption, of course, but it would be good to have reassurance from the Minister that the list of exemptions will be kept as short as possible. Clause 53 introduces tax credits for situations in which a person becomes no longer liable to pay the tax. At this point, could the Minister confirm that HMRC will have the resources that it needs to undertake the considerable administration involved in this new tax?

I think that I can reassure the hon. Lady on those points. We have kept the exemptions as small as possible. Industry would have liked there to be many more exemptions, but we think that this is the right place. And we of course recognise that HMRC requires resources for any new regulations. That is something that we continue to address, as I am sure my right hon. Friend the Financial Secretary to the Treasury will attest.

Question put and agreed to.

Clause 51 accordingly ordered to stand part of the Bill.

Clauses 52 and 53 ordered to stand part of the Bill.

Clause 54

The register

Question proposed, That the clause stand part of the Bill.

With this it will be convenient to discuss that clauses 55 to 58 stand part.

Clauses 54 to 58 make provision and set out the registration requirements for businesses liable to plastic packaging tax—or PPT, as it will henceforth be known—including the threshold that businesses must exceed before they are required to register for the tax. As I set out in my previous remarks, the tax applies to UK manufacturers of plastic packaging and importers of packaging. The Government announced at Budget 2020 that PPT would exclude businesses that manufacture or import less than 10 tonnes of plastic packaging. The Government believe that, by taking this approach, we will retain the vast majority of plastic packaging within the scope of the tax, while limiting the disproportionate burden on small business. The Government still expect businesses below the de minimis threshold to work towards increasing the recycled plastic content in their packaging.

Clauses 54 and 55 require HMRC to keep a register for the purposes of administering the tax, and establish the circumstances in which manufacturers and importers are liable to be registered. These clauses set out two tests to determine whether a person will exceed the de minimis threshold in either the coming 30 days, the forward look test, or over the past 12 months, the backward look test. This is a similar approach to that for other taxes, for example the VAT de minimis threshold, which is well tested. Packaging imported or manufactured in the UK before 1 April 2022 will not count towards either test.

Clause 56 provides for the period within which a person must notify HMRC of their liability to register for the tax. It also allows HMRC to make regulations about the information required and how it is provided. Clauses 57 and 58 provide for when a registration can be cancelled and corrected. HMRC may deregister a person if it is satisfied that the person was never liable to the tax, or has not been liable for 12 months. Clause 58 also allows HMRC to make further regulations regarding corrections of the register.

These clauses provide the essential framework for the administration and registration of businesses liable for the tax. The inclusion of a de minimis threshold ensures that the tax captures businesses only where the revenue and environmental benefit exceed the administrative burden of the tax. I therefore urge that the clauses stand part of the Bill.

Again, I have relatively little to say on the clauses, which in this case relate to registration. I do note that firms do not have to register or pay the tax if they manufacture or import less than 10 tonnes of plastic packaging. Is the Minister concerned that that is quite a sharp threshold, whereby producing just over 10 tonnes could bring a firm into the scope of the tax? Has the Treasury given any consideration to a more gradual threshold? Also—I am struggling to talk, because I have a mask on my face—let me ask the Minister what monitoring will be undertaken to ensure that all the individuals and firms that are required to be on the register are in fact registered?

In practical terms, how many additional staff will be brought into HMRC to deal with compliance? Does the Exchequer Secretary have an estimate of the cost to the Government? Is there any estimate of the cost to firms of complying with the additional paperwork? Firms are already having to do quite a lot of additional paperwork following Brexit.

I believe that the first question from the hon. Member for Erith and Thamesmead was about avoidance risk because of where we have set the de minimis threshold. As with other taxes, the Government intend to implement measures to prevent abuse—including anti-avoidance measures covered in later clauses, which I will come to—and, where appropriate, to enable HMRC to take action to tackle the artificial splitting of a business. Connected persons will also be treated as a single organisation in assessing whether they exceed the de minimis threshold.

On business readiness, awareness and the amount of support and guidance provided, which the hon. Member for Glasgow Central referred to, we have consulted extensively to ensure that businesses are ready. We have been discussing the measure for several years now, as the hon. Lady will remember from previous Finance Bills; it will be introduced in 2022. We are raising awareness through consulting on the tax, including through the technical consultation on draft legislation and through work with industry, which will help us to ensure that the regulations are fit and ready.

On administrative cost, we think that 20,000 manufacturers and importers of plastic packaging will be affected by PPT. For plastic packaging manufactured in the UK, the manufacturer must register for and pay the tax; for plastic packaging imported into the UK, the person on whose behalf the packaging is imported must register and pay. They will usually be the consignee on import documentation, but where a consignee or co-signee can demonstrate that they are acting on behalf of another business that owns the goods, as in the case of freight forwarders, the owner must register an account for the tax.

We have looked at all the measures to ensure that businesses are ready and that costs are proportionate, and we feel that we have struck the right balance.

I appreciate that the Government are looking into this to ensure that businesses are ready, but I would like a bit more clarification on what they are doing to monitor that businesses are registered.

That is a point that we will come to in later clauses.

Question put and agreed to.

Clause 54 accordingly ordered to stand part of the Bill.

Clauses 55 to 58 ordered to stand part of the Bill.

Clause 59

Notices imposing secondary or joint and several liability

Question proposed, That the clause stand part of the Bill.

With this it will be convenient to discuss that schedule 9 be the Ninth schedule to the Bill.

Clause 59 and schedule 9 set out secondary liability and joint and several liability for the plastic packaging tax. As with any tax, there is a risk of fraud and non-payment; the Bill introduces measures to enable HMRC to effectively tackle non-compliance.

Clause 59 will introduce secondary liability notices and joint and several liability notices. Schedule 9 contains powers to make a person operating with non-compliant businesses jointly or severally liable for the tax, or hold them secondarily liable where the tax has not been paid. While secondary liability is retrospective, joint and several liability is prospective; a secondary liability notice makes a person liable for tax that has previously not been paid, whereas a joint and several liability notice makes the person liable for future tax after the notice is given. Both notices will work in tandem to enable HMRC to tackle non-compliance with the PPT through recovery of the tax from other people in the supply chain, as is common in other tax regimes.

Use of the provisions will be limited to situations in which a person knows or ought to have known that tax should be paid, but where it has not been paid or is at risk of not being paid, on chargeable plastic packaging. This includes situations in which a person has previously been notified by HMRC of non-compliance by another person in their supply chain. Decisions in respect of secondary liability and joint and several liability notices, such as their issue and revocation, will be appealable to tribunal and may also be reviewed by HMRC.

Secondary liability and joint and several liability are essential compliance tools that enable HMRC to recover unpaid tax from another person in the supply chain when certain conditions are met. They have been successfully used in other taxes to ensure compliance.

Clause 59 and schedule 9 make provision for secondary liability or joint and several liability, as mentioned by the Minister. We do support these measures to prevent the avoidance of this tax by companies, but concerns have been raised by the Chartered Institute of Taxation and others that additional administrative and financial burdens for businesses may arise out of this joint liability. Businesses in the supply chain, including retailers and manufacturers of products that use plastic packaging, will not necessarily know whether the supplier of plastic packaging has accounted for the appropriate amount of tax. Can the Minister reassure us that there will be a straightforward way for businesses to check that the correct amount of tax has been paid and that they do not bear joint and several liability?

On that question, there is general support for this proposal, on the basis that it will be applied only where a person knew or had reasonable grounds to suspect that the tax had not been accounted for. For example, if an overseas seller confirms that the tax is not due and the business purchasing the goods in the UK has taken reasonable steps to verify this, it will not be held liable.

This approach is used effectively in other tax provisions; it is not a new thing that we will be doing. Businesses will be considered secondarily liable or jointly and severally liable for the tax in certain situations only where they knew, or had reasonable grounds to suspect, the tax had not been paid. The Government will continue to work with the sector on what constitutes due diligence in establishing whether the tax has been properly accounted for, and will publish further guidance on this.

Question put and agreed to.

Clause 59 accordingly ordered to stand part of the Bill.

Schedule 9 agreed to.

Clause 60

Measurement of weight etc

Question proposed, That the clause stand part of the Bill.

With this it will be convenient to discuss the following:

Clause 61 stand part.

That schedule 10 be the Tenth schedule to the Bill.

Clause 62 stand part.

That schedule 11 be the Eleventh schedule to the Bill.

Clauses 63 and 64 stand part.

That schedule 12 be the Twelfth schedule to the Bill.

Clauses 65 to 67 stand part.

I now turn to clauses 60 to 67. Among other things, they provide for how HMRC will enforce and administer the tax, which was the question asked by the hon. Member for Erith and Thamesmead.

These are technical clauses that grant powers to make regulations on the detailed operation of certain aspects of the tax. The amount of tax due is determined by the weight of the plastic packaging component, so a provision is needed to ensure that the weights used are accurate and can be assessed, to ensure that all businesses liable for the tax are treated fairly.

It is also essential to have mechanisms in place to collect the tax from businesses and to take action to recover tax when it is not paid, as required by the legislation. To ensure that the revenue is protected, businesses will need to keep appropriate records in respect of their tax liability. These provisions grant powers to set out what records they are required to retain and for how long, so all relevant information is available in the event of a later query.

The measures in schedule 12 are necessary to ensure that HMRC can take samples of plastic packaging to verify that the right amount of tax is paid, share information with other named public bodies and take effective action to protect the revenue. Clause 65 enables HMRC to require a person to give security for the payment of any tax likely to be due, to protect the revenue in certain circumstances. Clauses 66 and 67 provide for the treatment of unincorporated bodies and for how anything required to be given to businesses liable to the tax is sent to them.

Clause 60 gives the commissioners of HMRC powers to make regulations setting out how the weight of plastic packaging will be measured and assessed for the purposes of the tax. The power will be used to require the weight of components to be taken as an average over a production run, and businesses will need to keep records of the measurements and calculations. There will be scope for businesses to agree methods of measurement with HMRC in particular cases. Where HMRC suspects that inaccurate weights are being used, it will be able to inspect and weigh samples of the packaging components, to use assumptions about weights if necessary and to override any agreement with this information.

Clause 61 and schedule 10 give the commissioners powers to make regulations covering record keeping, the mechanics of making tax returns and payments, and recovering tax owed. These powers mirror the powers in this area for other taxes and will be used in the same way.

Clause 62 introduces schedule 11, which establishes which decisions are appealable. It sets out a system of reviews and appeals using procedures long established in the tax system and the existing tribunals system. As with other taxes, businesses contesting a decision or assessment will have the right to a review by HMRC and an appeal to a tribunal, should they wish to pursue the matter.

Clause 63 grants regulation-making powers to require businesses to keep specified records for a specified period that does not exceed six years. This is consistent with other taxes. The powers will be used to require businesses to keep records relating to the calculation of their liability for PPT. The records will include the weight and the quantities of materials used in the packaging.

Clause 64 introduces schedule 12. The first part of schedule 12 provides for someone authorised by the commissioners to take samples of plastic packaging where this is necessary to ensure that tax is being properly accounted for, to share and receive information from other public bodies and to provide information to the courts on registration and returns, and for evidence to remain acceptable when those providing it have had their penalties reduced for doing so. For example, HMRC may want to test a sample of packaging to validate the evidence provided about its weight and make-up.

The second part of the schedule provides for HMRC to share information obtained in connection with PPT with other named public bodies to assist them in their functions, and to receive information from the same bodies to assist with the administration of the plastic packaging tax. The final part of the schedule provides for the courts to accept certificates from the commissioners indicating whether a business is registered and whether returns have been made as sufficient proof of these matters. The schedule also makes provision that where evidence of non-compliance is provided by a taxpayer who has themselves been subject to a non-compliance penalty, that evidence will remain valid, even if the latter’s penalty is to be reduced as a result of their assistance in protecting the revenue.

Clause 65 gives a power to make regulations requiring security to be provided against liability for PPT, for the purposes of protecting revenue. We do not intend to use this power initially, but it is important that it is provided in case it is required to act against fraud in the future. Clause 66 allows HMRC to make regulations for determining who is responsible for fulfilling the obligations of unincorporated bodies in respect of PPT. Clause 67 provides that anything required to be given to a person as part of the requirements for PPT is given to that person or their representative by post to that person’s last known address.

These clauses and schedules set out important mechanics for the technical operation of the tax and for recovering tax due to the Crown. I therefore move that they stand part of the Bill.

Again, these are largely technical clauses on the administration and enforcement of the plastic packaging tax. Most of the clauses give the commissioners the power to make regulations—for example, on how the weight of the packaging is to be determined and how records should be kept. My only point here—we have tabled amendments on this that we will come to later—is that we believe that the Government should consult fully with relevant businesses and environmental groups before making such regulations. We also believe that all such regulations should be subject to proper scrutiny in Parliament. That will ensure that the Government have the best chance of making sure that the tax works effectively and with the minimum additional burden for businesses, which I am sure we all want.

I look forward to coming to those points later on this afternoon.

Question put and agreed to.

Clause 60 accordingly ordered to stand part of the Bill.

Clause 61 ordered to stand part of the Bill.

Schedule 10 agreed to.

Clause 62 ordered to stand part of the Bill.

Schedule 11 agreed to.

Clauses 63 and 64 ordered to stand part of the Bill. 

Schedule 12 agreed to.

Clauses 65 to 67 ordered to stand part of the Bill. 

Clause 68

Statements for business customers

Question proposed, That the clause stand part of the Bill.

The clause sets out requirements relating to the inclusion of a PPT statement on certain invoices and allows for further regulations specifying what the statement must contain. In consultations, stakeholders told us that customers often have influence over the specification and design of plastic packaging. Including the amount of PPT on invoices will help encourage the behavioural shift towards using more recycled plastic. It will also increase the visibility of the tax and show businesses how much more they are paying for their plastic packaging by not switching to using more recycled plastics. The clause assists with the environmental behaviour shift that is sought by the tax, and I therefore recommend that it stands part of the Bill.

I have just a few points on the clause. I can certainly understand the thinking behind it, but I note that it applies when the goods are first supplied—it applies to the person who is liable to pay the tax. Has the Minister considered what happens if there is a chain of supply but the intermediaries do not do anything that makes them liable to pay the tax? My reading of the clause is that the final user—the final customer—does not necessarily get the statement of how much tax has been paid. If the intention is to affect the behaviour of not only the manufacturers but customers, we are missing a trick, in that the customer might not realise how much of the final cost has been covered in the plastic packaging tax.

My second point is very simple. Is it envisaged that the statement of plastic packaging tax would be required to be printed on the face of the invoice, or could it simply be attached as a separate document? It is not clear what the commissioners are likely to put into any regulations. My concern is partly that if it is required to be put on the face of the invoice, that potentially requires quite a lot of changes to software by companies that use accounting software. Alternatively, if it is supplied as a separate document, are there not enforcement difficulties? It could be difficult to establish afterwards that it was not attached, whereas if somebody provides an invoice without accounting for VAT, it is quite clear to anybody that the requirement to give a VAT invoice has not been complied with. Have those two issues been considered by the Government in the precise wording of the clause?

The clause sets out the requirement for the PPT statement on certain invoices. The only point I want to make is to urge the Treasury and HMRC to work with businesses to ensure that they understand the requirement and implement it with the least burden possible.

On the question of liability, businesses that are liable for the tax will be required to include the amount of plastic packaging tax on the sales invoices to their customers. This will make the tax visible and help incentivise customers to choose recycled plastic packaging. The Government are not requiring the amount of PPT to be included on sales invoices further down the supply chain, such as the invoice from a wholesaler to a retailer, as such customers have less influence over the type of packaging and it may disproportionately increase the burden on businesses. However, businesses further down the supply chain can still choose to show the tax previously paid on their sales invoices.

Question put and agreed to.

Clause 68 accordingly ordered to stand part of the Bill.

Clause 69

Tax representatives of non-resident taxpayers

Question proposed, That the clause stand part of the Bill.

The clause is about tax representatives of non-resident taxpayers. It enables HMRC to make regulations requiring non-UK residential taxpayers to appoint tax representatives. The regulations may also include administrative matters—for example, provisions on the notification of being a non-resident taxpayer and naming tax representatives on the register against those whom they represent. The clause will help to ensure that liable overseas businesses register and comply with the tax. I therefore commend that it stand part of the Bill.

Clause 69 gives commissioners the power to make provisions requiring that every non-resident taxpayer appoint a person resident in the UK to act as a tax representative for the plastic packaging tax.

The Chartered Institute of Taxation made a number of comments about the clause in its briefing. It would like future regulations to consider whether exceptions could apply—for example, if the non-resident taxpayer has a history of a prescribed period of compliant behaviour with other UK taxes, or has an internationally recognised accreditation, such as being an authorised economic operator. It also points out that it could be common for non-resident taxpayers to outsource the completion of UK tax returns to UK tax agents to ensure good compliance with UK obligations. It should be noted, though, that for the majority of UK tax agents it will not be usual business practice to act with joint and several liability for the taxes that they administer, so the requirement to be a tax representative would be a barrier to taking on such business.

Where a non-resident business has outsourced its VAT or customs duty compliance to a UK tax agent, it would appear sensible to similarly outsource the PPT compliance to the same tax agent, as they will have the details of the imports into the UK. However, the mandatory tax representation responsibilities will be a barrier to that. That will be an increased opportunity for areas where UK tax compliance must be provided by separate tax agents and tax representatives.

On subsection (8)(a), the Chartered Institute of Taxation would like to see greater explanation of what constitutes an “established place of business” in future regulations. For example, if a large non-resident business has a presence in the UK, be it a large or small sales office, will the presence be enough to remove the obligation to appoint a UK tax representative? Businesses will require clarity on the definition of an “established place of business” with regard to this tax.

In terms of the requirements for businesses without a presence in the UK to appoint a UK-based representative, whether those requirements will work, and the additional burden that the hon. Lady refers to, the person on whose behalf the packaging is imported will be liable for the tax. The Government do not envisage that many businesses without a UK presence will be liable for PPT. The Government therefore intend to commence but not exercise the power initially. However, including the power in the Bill means that we can protect the revenue and maintain a level playing field for UK-compliant businesses if there is evidence of significant non-compliance with the tax by overseas businesses. The additional burden will therefore arise only if it is required to ensure compliance, protecting the revenue and ensuring a level playing field for UK-based businesses. In the absence of exercising that power, businesses without a presence in the UK will need to register for the tax in the same way as UK-based businesses. I am sure that HMRC officials will have taken note of some of the further questions, which I think will be addressed during later consultations.

Question put and agreed to.

Clause 69 accordingly ordered to stand part of the Bill.

Clause 70

Adjustment of contracts

Question proposed, That the clause stand part of the Bill.

Clause 70 provides for businesses to adjust existing contracts in respect of the plastic packaging tax. That covers two scenarios: first, adjusting the payment amount for a contract where PPT previously was not factored, or there is a change in the tax chargeable; and, secondly, adjusting a contract where chargeable plastic packaging is further processed into different packaging.

The latter case recognises the complexity of supply chains and avoids a double charge of tax. The Government expect that to be used in a very limited number of cases, given that the tax applies to substantially finished packaging. The clause helps businesses to take account of the tax within existing contracts. I therefore commend that it stand part of the Bill.

The clause is a technical measure that provides for the adjustment of contracts in respect of the plastic packaging tax. We have no questions for the Minister on that.

That is what we like to hear.

Question put and agreed to.

Clause 70 accordingly ordered to stand part of the Bill.

Clause 71

Groups of Companies

Question proposed, That the clause stand part of the Bill.

With this it will be convenient to discuss that schedule 13 be the Thirteenth schedule to the Bill.

Clause 71 and schedule 13 concern groups of companies. To make the reporting requirements for the tax less burdensome, clause 71 and schedule 13 set out when and how two or more corporate bodies may be treated as a group in respect of the plastic packaging tax. When used, PPT is charged to the representative of the group, rather than all members individually. This includes where a group member is found liable through secondary or joint and several liability. Schedule 13 contains further details on how the provision will operate, for example defining who is eligible to apply for group treatment and the limited grounds on which Her Majesty’s Revenue and Customs may refuse an application. The clause and schedule provide an administrative saving to businesses that choose this option and are eligible.

The clause and schedule allow two or more corporate bodies to form a group for plastic packaging tax purposes, so they can report and account for the plastic packaging tax as a single body with joint and several liability. I just want to know whether the Minister had seen the submission from the Chartered Institute of Taxation on this issue. It points out that the requirement for a group member to be a corporate body for VAT grouping rules was changed by schedule 18 of the Finance Act 2019, which extended it to individuals and partnerships that control other bodies in a VAT group with effect from 1 November 2019. Could the Minister explain why the updated rules for VAT do not apply to the plastic packaging tax?

I am afraid that I have not seen the note to which the hon. Lady refers so I am not able to answer the question, but I am sure we can get an answer from officials before the next sitting.

Yes.

Question put and agreed to.

Clause 71 accordingly ordered to stand part of the Bill.

Schedule 13 agreed to.

Clause 72

Prevention of artificial separation of business activities: directions

Question proposed, That the clause stand part of the Bill.

Clauses 72 and 73 prevent businesses artificially splitting in order to come under the tax’s 10 tonne per year registration threshold and avoiding paying PPT. The clauses protect PPT against avoidance in the form of the business artificially splitting to come under the tax’s 10 tonne per year de minimis threshold. Where HMRC determines that such avoidance is happening, the clauses allow it to issue a direction that means the persons named are treated as a single person liability for tax. The clauses are important for preventing attempts to circumvent the tax.

Clauses 72 and 73 introduce measures to prevent avoidance of plastic packaging tax by artificially separating business activities. We welcome the measures to prevent avoidance of this tax.

Question put and agreed to.

Clause 72 accordingly ordered to stand part of the Bill.

Clause 73 ordered to stand part of the Bill.

Clause 74

Death, incapacity or insolvency of person carrying on a business: regulations

Question proposed, That the clause stand part of the Bill.

Clauses 74 and 75 set out how the tax is dealt with in the event of a liable business changing ownership, or the unfortunate circumstances of an owner dying, or becoming incapacitated or insolvent. The clauses provide for further regulations to be made that will deal with how changes in a business due to a change of ownership, death, incapacity or insolvency are handled within the tax. Such provisions are a common part of many taxes and are important to ensure the protection of revenues owed to the Crown. The clauses are a necessary feature of most taxes needed to help the tax function properly. I therefore ask that they stand part of the Bill.

Clauses 74 and 75 make provisions for situations in which businesses are transferred. We welcome these sensible clauses, which I believe were suggested by the Chartered Institute of Taxation during an earlier consultation.

Why cannot Parliament always be like this?

Question put and agreed to.

Clause 74 accordingly ordered to stand part of the Bill.

Clause 75 ordered to stand part of the Bill.

Clause 76

Isle of Man: import and export of chargeable plastic packaging components

Question proposed, That the clause stand part of the Bill.

Clause 76 sets out the tax treatment of plastic packaging imported from or exported to the Isle of Man. For imports from the Isle of Man to the UK, if in the future the Isle of Man were to have a corresponding tax on plastic packaging, and the Isle of Man PPT rate is equal to or greater than the UK rate, the UK tax is not charged. For imports where the Isle of Man rate is lower than the UK rate, the UK tax is charged as the difference between the two rates. Where there is no corresponding Isle of Man tax, the UK tax is charged at the full rate on imports to the UK. Where plastic packaging is exported from the UK to the Isle of Man, these are not treated as exports for the purposes of the UK tax. This clause provides clarity on tax treatment of imports and exports to and from the Isle of Man.

Clause 76 relates to the import and export of plastic packaging in respect of the Isle of Man, as the Minister said. Once again, this seems like a sensible clause, and we have no questions for the Minister.

Question put and agreed to.

Clause 76 accordingly ordered to stand part of the Bill.

Clause 77

Fraudulent evasion

Question proposed, That the clause stand part of the Bill.

With this it will be convenient to discuss the following:

Clauses 78 to 80 stand part.

That schedule 14 be the Fourteenth schedule to the Bill.

Clause 81 stand part.

These clauses and the schedule set out a number of criminal offences in respect of fraudulent activities connected with the plastic packaging tax and the penalties and proceedings associated with these. It is essential that any tax is applied fairly and collected from all those liable to pay i