Consideration of Lords amendments
I must draw the House’s attention to the fact that financial privilege is engaged by Lords amendments 1, 12 and 14. If the House agrees to any of these Lords amendments, I shall ensure that the appropriate entry is made in the Journal.
I beg to move, That this House disagrees with Lords amendment 1.
I am delighted that the Bill to create this exciting new agency has returned to this House and that I am able to speak to it for the first time in my role as Minister for Science, Research and Innovation. I pay tribute to my ministerial colleague Lord Callanan for his work on the Bill in the other place. Not for the first time in matters scientific, their lordships have kept our Minister very busy on the Front Bench. I also pay tribute to my hon. Friend the Member for Derby North (Amanda Solloway), who so capably led the Bill when it was first before the House.
There are 15 amendments for our consideration tonight. Fourteen of those were tabled or supported by the Government. I will summarise them quickly. Amendments 2 to 8 relate to changes the Government made in response to the Delegated Powers and Regulatory Reform Committee’s report on the Bill. In doing so, we demonstrated the seriousness with which we take the DPRRC’s recommendations and the Government’s commitment to acting upon them. The effect of those amendments is to omit clause 10, which contained a broader power to make consequential provision, and to replace it with a narrower, more specific power in clause 8. The new power can be used only in consequence of regulations dissolving ARIA. Other amendments are needed to tidy up the rest of the Bill and reflect that change. I hope that the changes are, in general, welcome.
Amendments 9 and 10 remove a power for ARIA to pay pensions and gratuities determined by the Secretary of State to non-executive members. We have tested that thoroughly and are content that in ARIA’s specific case, that power is not needed. Again, the two amendments reflect the usual process of improving the Bill in response to scrutiny and the expertise that colleagues here—and in particular in the other place—have brought to bear.
Amendments 11 and 13 remove the amendments previously included in the Bill that had the effect of reserving ARIA. I have had productive discussions on this with my ministerial colleagues in Wales, Scotland and Northern Ireland, to reiterate the importance of ARIA and our broader science policy to help strengthen the Union. I am delighted that they share my vision and ambition for ARIA and that we have reached an agreement on the independence of ARIA—a memorandum of understanding that is a shared commitment to safeguard the organisation’s most important characteristics, and which means the reservations are not needed. I am delighted to be able to report that legislative consent motions have been passed in all three devolved legislatures on the basis of that agreement, and I similarly commend it to the House.
Government amendments 12, 14 and 15 apply some relevant obligations to ARIA that would normally apply automatically to public authorities listed in the Freedom of Information Act 2000. The amendments provide for ARIA to be treated as a public authority for the purposes of the Data Protection Act 2018, the Income Tax (Earnings and Pensions) Act 2003, the Enterprise Act 2016 and the Small Business, Enterprise and Employment Act 2015. They also amend various regulations and the UK GDPR to reflect that. That ensures that ARIA is treated in the same way as a public organisation normally would be treated in those important areas.
The Minister will know from previous discussions that the question of freedom of information has come up before. Would it not be much simpler just to make ARIA subject to the Freedom of Information Act? In the current climate, would that not reassure the public?
It may reassure the public, but we also have to take into consideration the fact that to succeed, world-class scientists have been recruited to ARIA to lead in cutting-edge science. That very small staff need to be sure that they will not be tied up answering 101—often spurious—freedom of information requests from the media, who are keen on running stories. We want to make sure the agency is accountable properly but not bogged down in what can be hugely onerous freedom of information requests.
I am grateful to my right hon. Friend for that question, and he will not be surprised to know that it is one I have also been asking since coming to this role. The point of ARIA is to be a new agency for doing new science in new ways, and it has been structured specifically to avoid meddling Ministers, even those with a good idea, and meddling officials, even those with good intent, and to create an agency that is free.
My right hon. Friend asks an important question. As we appoint the chief executive officer and the chair, the framework agreement will set out, a bit like a subscription agreement, the agency’s operating parameters, which will be published in due course. Each year ARIA will have to report on its stated plans. Crucially, as is so often not the case in scientific endeavour, ARIA will report where happy failure has occurred so that we do not continue to pour more money into scientific programmes that have not succeeded, which I know will reassure him. We want ARIA to be free to be honest about that, and not embarrassed. ARIA will be annually accountable through the framework agreement.
Finally, Lords amendment 1 deals with the conditions that ARIA may attach to its financial support. This arises from a series of important discussions in the other place relating to ARIA’s duty to commercialise intellectual property that may be generated, which I am keen to address properly. However, the amendment, as drafted, does not actually prevent ARIA from doing anything; it adds examples of conditions that ARIA may attach to financial support, but ARIA already has the general power to do just that. Legally, the amendment simply represents a drafting change. As such, we cannot accept it, but we understand and acknowledge the importance of the point that the noble Lord Browne had in mind.
It is our firm belief that, although it is not appropriate at this stage to specify ARIA’s contracting and granting arrangements in legislation, we recognise the substance of the concerns underlying the amendment: namely, that ARIA should have a duty to the taxpayer to ensure it is not haemorrhaging intellectual property of value to the UK. I will outline our position on that.
The amendment focuses principally on overseas acquisition of IP relating to the principles on which the Government intervene in foreign takeovers of UK businesses, particularly where those businesses have benefited from public investment in research and development activities. The National Security and Investment Act 2021, which fully commenced earlier this month, provides just such a framework, and it marks the biggest upgrade of investment screening in the UK for 20 years.
The NSI Act covers relevant sectors, such as quantum technologies and synthetic biology, that have benefited from significant public investment, and it permits the Government to scrutinise acquisitions on national security grounds. This new investment screening regime supports the UK’s world-leading reputation as an attractive place to invest, and it has been debated extensively in both Houses very recently. We do not believe that revisiting those debates today would be productive.
Although the NSI Act provides a statutory framework, a much broader strand of work is under way. As Science Minister, I take very seriously the security of our academic and research community. A number of measures have been taken in the past few months and years to strengthen our protections. We are working closely with the sector to help it identify and address risks from overseas collaborations, while supporting academic freedom of thought and institutional independence.
Members do not need me to tell them that intellectual property is incredibly valuable and we increasingly face both sovereign and industrial espionage. It is important that we are able to support our universities to be aware of those risks and to avoid them. The Bill already provides the Secretary of State with a broad power of direction over ARIA on issues of national security, which provides a strong mechanism to intervene in its activities in the unlikely event it is necessary to do so.
I welcome the Minister to the Dispatch Box for the first time on this Bill. He is saying that ARIA can already do this, so the Government do not need to legislate in this regard, but that the Government would, none the less, be keen to see ARIA do it. There seems to be a discrepancy in that thought process.
There is no discrepancy. I will explain why but, essentially, the Bill already sets out ARIA’s statutory responsibility to generate economic return for the UK, and the hon. Gentleman will know, as I do from my career negotiating intellectual property agreements, that at this stage it would be wholly inappropriate to mandate in statute the form that these intellectual property agreements will take. To be blunt, we do not yet know what programmes the chair and chief executive will put in place. It is only when we know the sort of science that ARIA is doing that we will possibly be in a position, through the framework agreement, to set out the appropriate ways to ensure that value is maximised.
Security issues will also be a core consideration in ARIA’s governance arrangements in the framework agreement to ensure its effective functioning as an organisation. I confirm to colleagues that the framework document, which deals with those issues, will include obligations on ARIA to work closely with our national security apparatus. That is prudent to ensure that ARIA’s research is protected from hostile states and actors and to stay connected to the Government’s wider agenda on strategic technological advantage.
The Government’s chief scientist, who will be on the ARIA board, will bring intelligence and expertise across security issues within Government, supported by the new Office for Science and Technology Strategy and the National Science and Technology Council. ARIA will of course have internal expertise to advise its board and programme managers, while also working with recipients of its funding in universities and businesses on research-specific security issues. That will be vital for ARIA to stay at the forefront of responding to the challenging nature of the UK’s interests in this area.
There is also the question of how ARIA responds to the UK’s strategic interests in science and technology more generally where they may not quite fall under the national security umbrella. The integrated review, the creation of the new OSTS and the National Science and Technology Council, on which I sit, outline our ambition to ensure that there is a serious, strategic machinery of government commitment to the strategic industrial advantage of UK science and technology. That is a fundamental priority for me and the Government more broadly.
ARIA is nestled within that structure and is required to be aware of all those priorities, but we must keep its role in perspective. It will be only a small part of a landscape that we are explicitly seeking to make independent of Government and free to explore new funding approaches. The whole point of ARIA is to be a new agency and to do new science in new ways.
The Minister is being admirably blunt about keeping interfering Ministers and officials from controlling or influencing ARIA, but there is also influence from the scientific establishment, which has its own programmes and would like the sums of money in ARIA to go to them. Given the structure of the board, is he satisfied that ARIA will maintain its independence not just from the civil service and Ministers, but from the scientific establishment?
The hon. Member raises a very important point. Yes, I am satisfied, and for this reason: the way in which the agency has been established through the Bill and our plans to appoint the CEO and the chair on the basis that they will set out a very bold vision for ARIA to be the agency for new science in new ways. All the support that we are providing is specifically designed to allow them to operate in an environment where they can draw on the very best of UK science infrastructure and expertise, but not find themselves bound by either the short-term grant application process that dominates or the often substantial interests seeking investment in their own field. We will be able to attract the people we intend to attract because of that freedom. For that reason, I am confident—as that will be set out in the framework agreement and held to account by the board of ARIA and the scientific advisory board—that we will be able to ensure that that is the case.
Although ARIA will operate independently, it will be guided by key obligations regarding economic and UK benefit. ARIA must, in all its activity, have regard to the economic growth or economic benefit in the UK, alongside other considerations. That statutory obligation is set out clearly in clause 2(6), and it is right that that is in the Bill. Public investment in R&D must drive long-term socioeconomic benefit and deliver value to UK taxpayers. ARIA will be scrutinised by Government and Parliament on how effectively it fulfils its functions, including that one.
I can confirm that mechanisms for that scrutiny will be in the framework agreement. This includes requiring an internal evaluation framework for ARIA programmes—that deals with the point made by my right hon. Friend the Member for Wokingham (John Redwood)—and looking at, for example, their expected benefits and alignment with the organisation’s strategic objectives. It also includes setting the terms on which ARIA produces annual accounts and reporting, through which ARIA’s CEO will be accountable to Parliament for how the resources allocated to it are used. The National Audit Office will be able to examine the value for money of ARIA’s activities, and we in the Government must be assured of that value, on which ARIA’s future funding will depend. Everyone involved is clear about that.
There are many ways in which the obligations that I have set out might be felt in respect of how ARIA operates. For example, ARIA may employ contracting arrangements that require funding recipients either to seek to exploit the outputs in the UK or forfeit the funding, as other funders routinely do. In some cases, ARIA may retain IP rights—it has that freedom—and will be able to draw on specialist support from the new Government office for technology transfer. That will help ARIA to extract the greatest possible value from its knowledge assets.
In general, we expect ARIA programmes to produce long-term, deep scientific benefits that are felt over the long term, and to support the highest-risk research where there is a clear role for public funding. It would be premature to seek to legislate in statute at this point, before the appointment of the CEO and the chair or the establishment of the funding programme plan. In addition to that being premature, given that its very freedoms will be a major attraction for people to come from around the world to work at the agency, we are concerned that to be seen to shackle those freedoms in statute may well disincentivise the most innovative scientists and researchers from coming to join programmes.
Finally, this issue encompasses the entirety of our R&D system and approach to investment in UK science and technology and we are extremely focused on it, but changes to ARIA alone cannot alter the wider environment. We must ensure that funding from ARIA is not subject to more stringent conditions than other public R&D funders, because that would undermine the independence and agility that are the defining characteristics of this exciting initiative for UK science.
I welcome the Minister to his place in leading on this important Bill and echo his thanks to the former Minister, the hon. Member for Derby North (Amanda Solloway). I also thank colleagues in the other place who have worked so hard to improve the Bill. In particular, I thank my noble Friend Lord Browne for his successful and much-needed amendment to protect Britain’s intellectual property.
The UK has a proud tradition in science and innovation. We are renowned around the world for the scientific breakthroughs and discoveries that have pushed humanity forwards. From the discovery of penicillin to the invention of Stephenson’s Rocket—in Newcastle—UK science has again and again pushed the boundaries of humanity’s knowledge.
UK science is not only inspiring but key to our health and that of our economy, as the pandemic has shown. Our university research base alone contributes £95 billion to the economy, supporting nearly 1 million jobs in science institutes, charities and businesses of all sizes. We have many innovative start-ups throughout the country that require only the right support to contribute to the innovation nation that our history, economy, security and future prosperity all demand. That is why it is so important that we get the Advanced Research and Invention Agency right.
ARIA, originally the brainchild of very-much-former adviser Dominic Cummings, is positioned as a high-risk, high-reward research agency, based on the Defence Advanced Research Projects Agency in the US. Labour welcomed ARIA and continues to support it—it has great potential to fill a gap in the UK’s research and development landscape and help deliver fantastic inventions—but we are clear that the benefits of ARIA’s investments must be felt in the UK. We are equally clear that without Lords amendment 1, that may not be the case.
Lords amendment 1 would give ARIA the option to treat its financial support to a business as convertible into an equity interest in the business and thus to benefit from intellectual property created with ARIA’s support. It would also enable ARIA to require consent during the 10 years following financial or resource support, if the business intended to transfer intellectual property abroad or to transfer a controlling interest to a business not resident in the UK.
We have to start by acknowledging that the UK does not provide a sufficiently supportive environment for innovation start-ups to thrive. That is why we have already lost so many of them. Too often, tech start-ups face a choice between relocating outside the UK and being bought out by a larger multinational, and the UK loses out. In 2014, Britain had probably the most important and groundbreaking artificial intelligence company in the world, DeepMind, but instead of capitalising on this cutting-edge technology and instead of introducing an effective support system for start-ups, the Government allowed it to be sold to Google for £400 million, with no investigation or action. In 2020, early investor Humayun Sheikh estimated that DeepMind would be worth $30 billion now. That is a huge reward on the investment, but not one that has gone to UK taxpayers or UK citizens, and the UK is now in effect losing out on billions in economic benefits.
In the Labour party, we want to support our start-ups. The Government—and, indeed, the Minister in his comments—have tried to claim that Lords amendment 1 is not needed because they believe that the National Security and Investment Act already gives sufficient powers to scrutinise and intervene in takeover bids. However, the Minister must acknowledge that, despite our attempts to include economic security in the NSI Bill, the Government insisted on a much narrower definition of national security. While it is progress that the Government are reflecting national security in takeovers and mergers policy, for which we have been calling for a long time, the NSI Act does not address the issue of intellectual property and its economic value.
The Government have also argued that the amendment will discourage companies from participating in ARIA because it is important for them to own their intellectual property, but what innovative start-ups really need is support so that they do not have to relocate to scale up. PsiQuantum, a world-leading quantum computing company credited with building the world’s first useful quantum company, started in Bristol, but had to relocate to Silicon valley to access greater support. With this amendment, companies can benefit from ARIA’s support and the UK can benefit from the innovation, instead of seeing it move abroad.
The Minister has set out that he shares our concerns, but I am afraid that he does not really seem to have a plan to address them. He hints that the framework agreement setting out ARIA’s functions will do so under some kind of general requirement to work with Government, but without any detail. In many ways, ARIA is emblematic of the Government’s science strategy—big promises followed by a lack of detail, a lack of transparency and a surfeit of confusion. Conservative peer Lord Lansley made the point:
“If ARIA is to have a strategy for the funding it receives from the Government, it needs to know in advance whether it can retain revenue derived from investment… That is where I want the most specific assurances from my noble friend that the Government will provide that opportunity to ARIA.”—[Official Report, House of Lords, 14 December 2021; Vol. 817, c. 82, 83.]
I agree with him.
We only want what is truly in the interests of our nation. We are not wedded to a particular form of words and we are willing to discuss an alternative that protects IP, but we need assurances that inventions generated by ARIA support, financial or otherwise, will benefit the UK, and I am afraid to say that the Minister just really has not given such assurances.
To assist the hon. Lady before she decides whether to divide the House, I just wanted to make it very clear that there is a statutory obligation on ARIA, set out clearly in clause 2(6), that it must have regard to
“economic growth, or an economic benefit, in the United Kingdom”
as a core part of its statutory duties. We simply want to make sure that the leadership team, through the framework agreement, have the freedom to set out what the right mechanism is, rather than to mandate it now.
I thank the Minister for that intervention, which demonstrates that he is with us in spirit but he just does not want to be with us in actual legislation. There is something of a confusion of thought there. I am very familiar with the clauses that require ARIA to have regard to economic benefit, but if he thinks this is something ARIA should be doing and should look to do—again, as we have said, this amendment is enabling and not prescriptive—surely he should be happy to make that clear. If he thinks it is too constraining for ARIA to do this, he ought to make that clear. He is the Minister and this Bill should reflect what the intent is, and the intent should be to ensure that the benefits from intellectual property generated, created and invented in the UK should be felt in the UK.
Lords amendments 2 to 8 limit ministerial powers to dissolve ARIA, in response to the delegated powers in the Regulatory Reform Committee’s report on the Bill, and we will not oppose those amendments. They prohibit the Minister from making consequential amendments to primary legislation and from dissolving ARIA in the first 10 years. Lords amendments 9 and 10 remove the Minister’s powers to determine a pension or gratuity for non-executive ARIA members. It should be noted that the Minister appoints non-executive members to ARIA’s board, and it is refreshing to see a Conservative Government taking steps to limit cronyism in advance of major losses to the public purse. Lords amendments 11 and 13 mean that ARIA will no longer be treated a reserved matter in relation to Scotland, Wales and Northern Ireland, and we also do not oppose this. Labour is clear that devolved voices must be heard and that scientific opportunities must be spread across the UK, so the consent of devolved Administrations is crucial.
Lords amendments 12, 14 and 15 provide for ARIA to be treated as a public body under the Income Tax (Earnings and Pensions) Act 2003, the Small Business, Enterprise and Employment Act 2015, the Enterprise Act 2016 and the Data Protection Act 2018. My colleague in the other place, Baroness Chapman of Darlington, pointed out, as did my hon. Friend the Member for Cambridge (Daniel Zeichner), that this would not be necessary if ARIA was subject to freedom of information requests, something that Labour has repeatedly called for. The Government were so busy trying to ensure that ARIA would not be treated as a public body for the purposes of FOI that they had to tack on these amendments. That these amendments were tabled only at the Committee stage in the Lords points to Government negligence. We have here a Government too busy trying to avoid accountability to do their job properly— why does that sound so familiar?
Does my hon. Friend agree that, during the covid epidemic we have been through, some of the mistakes that have been made came about because the Government were not as open as they could have been with the scientific advice, and that FOI and openness are of value to the scientific method itself? To exclude this body from FOI potentially detracts from the science. We saw another example of this 11 years ago, with the “climategate” emails at the University of East Anglia, when people did not operate openly and it caused scientific problems.
My hon. Friend makes two very important points. First, many of this Government’s mistakes have been due to lack of transparency, not only in the original policy of giving contracts to friends but in the follow-up of explaining those actions. Transparency is always a very good thing. Secondly, the scientific method is about openness. That is how ideas, inventions and progress are made in science. Critically, DARPA, on which ARIA is supposedly based, is subject to the freedom of information process and finds that that helps it in its work.
To conclude, Labour welcomes ARIA. Science and research can be the engine of progress for our society, and we welcome investment in our sciences. That investment, however, must benefit the people who pay for it: the British public. Without Lords amendment 1, we have no assurances that that will happen. If the Government want Britain to be a science superpower, why will they not protect British science and tech IP?
In the greatest traditions of this House, I intend to be brief, which I am sure will be to everyone’s pleasure.
The biggest issue before us is, of course, Lords amendment 1. I listened closely to what the Minister had to say, but I remain to be convinced. He has paid deference to the clause, which says, if I recall correctly, that ARIA “must have regard to”, while the amendment simply seeks to ensure that ARIA “must”. That is a strong difference to which the Minister should give cognisance, particularly given that, in effect, we could be talking about the crown jewels. We are all hopeful that ARIA will be an impressive institution that will reap rewards for all of us right across the four nations of this United Kingdom—while we remain within it, of course. I find it a little contemptuous that the Government do not want to be on that side of the argument.
The topic of equity has been raised. There are some very famous examples. For instance, though this is slightly different, the US Government provided a significant amount of money in a loan to Tesla. That money was subsequently paid back a number of years ago, prior to Tesla becoming one of the world’s wealthiest companies and, indeed, to Elon Musk becoming one of the world’s wealthiest men. There should be a lesson in that for the Government, and it is one that they should heed.
From what I have heard, the Minister seems to be in broad agreement. He thinks that what is in place will allow this to happen in any case. I hope that over the course of the remaining debate, to which I am sure there will be an extensive number of contributions, he may be swayed to agree to Lords amendment 1.
I, too, will keep my comments brief. The Liberal Democrats have been supportive of this Bill from the start, since its Second Reading. We very much welcome the opportunity and, indeed, the new vehicle to get funding into science and technology in this country.
I join the hon. Members for Aberdeen South (Stephen Flynn) and for Newcastle upon Tyne Central (Chi Onwurah), however, in saying that the absolute priority must be to ensure that that investment stays in this country and benefits the people, including the investors, those who may benefit from employment and, indeed, every single one of us who seeks to benefit from the new innovation for which this money may well pay. A couple of weeks ago I visited my former employers at the National Physical Laboratory in Teddington, where I saw for myself the incredible work that is taking place on battery technology and hydrogen technology. There is so much potential for the future, but this country has traditionally been really bad at converting that incredible R&D skill into entrepreneurism and innovation and at building sustainable businesses. That is why I think it is so important that we support the Lords amendment, and it is certainly why we will vote against the Government’s motion.
Question put, That this House disagrees with Lords amendment 1.
Lords amendment 1 disagreed to.
Lords amendments 2 to 15 agreed to, with Commons financial privileges waived in respect of Lords amendments 12 and 14.
Motion made, and Question put forthwith (Standing Order No. 83H), That a Committee be appointed to draw up a Reason to be assigned to the Lords for disagreeing to their amendment 1;
That George Freeman, Craig Whittaker, Felicity Buchan, Mark Fletcher, Chi Onwurah, Jessica Morden and Stephen Flynn be members of the Committee;
That George Freeman be the Chair of the Committee;
That three be the quorum of the Committee.
That the Committee do withdraw immediately.—(Gareth Johnson.)
Question agreed to.
Committee to withdraw immediately; reason to be reported and communicated to the Lords.
Dormant Assets Bill [Lords] (Programme) (No.2)
That the Order of 6 December 2021 (Dormant Assets) Bill [Lords] (Programme)) be varied as follows—
Paragraphs (4) and (5) of the Order shall be omitted.
Proceedings on Consideration shall (so far as not previously concluded) be brought to a conclusion two hours after the commencement of proceedings on the Motion for this Order
Proceedings on Third Reading shall (so far as not previously concluded) be brought to a conclusion three hours after the commencement of proceedings on the Motion for this Order.—(Gareth Johnson.)