House of Lords
Thursday 15 April 2021
The House met in a hybrid proceeding.
Prayers—read by the Lord Bishop of Gloucester.
Introduction: Baroness Merron
Gillian Joanna Merron, having been created Baroness Merron, of Lincoln in the County of Lincolnshire, was introduced and took the oath, supported by Lord Knight of Weymouth and Baroness Smith of Basildon, and signed an undertaking to abide by the Code of Conduct.
Introduction: Lord Morse
Sir Amyas Charles Edward Morse, KCB, having been created Baron Morse, of Aldeburgh in the County of Suffolk, was introduced and took the oath, supported by Lord Bichard and Lord Macpherson of Earl’s Court, and signed an undertaking to abide by the Code of Conduct.
Arrangement of Business
My Lords, the Hybrid Sitting of the House will now begin. Some Members are here in the Chamber, others are participating remotely, but all Members will be treated equally. I ask all Members to respect social distancing. If the capacity of the Chamber is exceeded, I will immediately adjourn the House.
Oral Questions will now commence. Please can those asking supplementary questions keep them no longer than 30 seconds and confined to two points. I ask that Ministers’ answers are also brief. I call the noble Lord, Lord Black of Brentwood, to ask the first Oral Question.
My Lords, the Government are committed to improving the welfare of domestic animals. We have updated legislation to facilitate the control of horses and improve licensing of activities involving animals, prohibited the third-party sale of puppies and kittens in England and targeted unscrupulous selling through our Petfished campaign. We are also supporting the Animal Welfare (Sentencing) Bill, which increases animal cruelty sentences to five years, and acting on cat microchipping, puppy smuggling, pet theft and more besides.
I congratulate my noble friend on everything that he is doing to protect domestic animals. Is he aware that one result of lockdown has been a surge in demand for companion animals and a resultant hike in prices, with Cats Protection reporting a 40% price rise for kittens last year? Sadly, some demand is met by unscrupulous online sellers, often peddling sick and underage kittens. It may also be responsible for the rising trend in cat thefts as well as the growing market for animals bred more for their looks than their welfare, such as the Scottish Fold cat, born with cartilage deficiency and destined for lifelong pain. What action will my noble friend take to ensure that cat breeding is properly regulated and that there is compliance with regulations governing commercial pet sales?
Following the introduction of Lucy’s law last year, anyone looking to get a kitten or cat now has to source directly from the breeder or consider adopting from a rescue centre. This is a major step forward in disrupting the unscrupulous online trade my noble friend has highlighted.
Defra’s national Petfished campaign, which launched in March last year, continues to educate prospective buyers on how to source pets responsibly and how to avoid deceitful sellers. Local authorities are responsible for enforcing the regulation of commercial pet sales, and I urge anyone with any concerns to report the matter to the relevant local authority.
The animal welfare sector has been under huge strain with the increase in abandoned pets during lockdown. The Minister mentioned horses. The RSPCA has raised serious concerns about the huge increase in abandoned horses and ponies. However, without rigorous enforcement and tough financial penalties, current legislation will do little to stop irresponsible horse owners continuing to dump their animals. Does the Minister agree that animal welfare charities need extra support following this very challenging year, and will he look at toughening up enforcement and increasing penalties for those who abandon horses?
The noble Baroness raises an important point. Animal rescue organisations do extraordinarily valuable work, usually on a voluntary basis, and the pandemic has had a massive impact on individuals, businesses and charities caring for animals. Throughout this challenging period, we have pressed to ensure that rescue and rehoming organisations are able to stay open, that staff and volunteers can continue to work and tend to the animals in their care and that rehoming, fostering and adoption services can continue. Throughout the pandemic we have kept in very close contact with the entire sector.
I am afraid to say that I did not hear the noble Lord’s full question. However, in relation to increased punishments for cruelty to animals, I can say that the Government are supporting a Bill that appears before this House tomorrow; my noble friend Lord Randall will be introducing the Sentencing Bill, and the Government support it. It will increase the maximum custodial sentence for animal cruelty from the current six months to five years, and that will enable courts to take a much firmer approach to cases such as dog fighting, the abuse of puppies and kittens and so on, and the gross neglect of farm animals. I hope that answers the noble Lord’s question.
My Lords, while I accept that my noble friend cannot anticipate the contents of the Queen’s Speech, perhaps I may none the less urge him to expedite the introduction of a Bill to ban the export of live animals for slaughter or further fattening, which has long been desired by many of us. Our patience is not merely thin, it is getting threadbare.
I am hopeful that the Queen’s Speech, when it happens, will include a number of measures to improve animal welfare, not just those that appeared in our most recent manifesto. As my noble friend will know, we recently consulted on ending live exports for slaughter and fattening. We are analysing the responses that we received and will be publishing the government response very soon. We hope to have legislation in place to end live animal exports for slaughter and fattening by the end of the year, and hopefully sooner than that.
There has been an explosion in the last two years of dogs imported into the UK—mainly puppies with poor disease status from Romania. What are the Government doing to increase the minimum age for imported dogs from 15 weeks to 24 weeks, which would solve this problem?
Now that the transition period has ended, we have the opportunity to manage our own pet travel and commercial importation rules. We are actively liaising with and listening to the concerns of stakeholders, not least Cats Protection, and there has been recent parliamentary work from the Environment, Food and Rural Affairs Select Committee. We are considering a whole range of recommendations in the area raised by the noble Baroness.
My Lords, does the Minister agree that it is actually up to the owners of animals to behave better towards them, which would be the best way to go forward, and that those who do not look after animals should be prohibited from owning them? Has my noble friend seen the SongBird Survival research into how cat owners can improve the mental and physical well-being of their cats, as well as reducing the number of wild birds that cats take each year, which is many millions?
I am not aware of the research cited by my noble friend, but I will certainly look out for it. The difficulty for the Government is that our job in a sense is to ensure that the minimum standard is acceptable and that owners are not able easily to sink beneath acceptable standards. It is therefore really a baseline that we set. But my noble friend is absolutely right that this is a country of animal lovers and most owners are inspired to look after their pets with great care, and we should of course be doing everything we can to raise standards across the board and encourage everyone to apply the same level of attention, care and love to the pets that they own.
My Lords, disease and ill health are a major cause of poor welfare in both companion animals and livestock. I congratulate Her Majesty’s Government on recognising this with respect to livestock in the Agriculture Act by providing the possibility of financial incentives to improve health and welfare. How do the Government intend to assess and measure livestock welfare to achieve that objective?
The Government’s planned animal health and welfare pathway will support livestock farmers financially by using public funds to deliver public goods and pay for health and welfare enhancements that are valued by the public but not currently delivered by the market or through existing regulatory standards. We are working closely with animal welfare scientists and stakeholders to determine which animal welfare enhancements to pursue and the most effective welfare metrics to use as a basis for those future payments.
My Lords, as has already been touched on, there has already been a massive upsurge in the purchase of domestic animals during lockdown. It is clear that, as people return to normal forms of working, there will be an acceleration of the abandonment of many pets, particularly dogs. Is the Minister’s department prepared to engage in an advertising campaign about both the treatment and the rehousing of animals rather than their abandonment on the street?
The noble Lord makes a really important point. The department has run a successful campaign called Petfished, which we launched in March last year, to raise issues associated with low welfare and the illegal supply of pets and to help prospective buyers source pets responsibly. It is one of the most successful comms campaigns that the department has run and it has generated masses of interest; we are told through YouGov polling that it has contributed to doubling awareness of low-welfare pet sellers. I cannot commit here and now that we will replicate those efforts in relation to the issues raised by the noble Lord, but I will certainly take his message back to the department and discuss it with colleagues and officials.
My Lords, there is well-reported and documented evidence of people stealing pets for profit. It is usually dogs, but cats are also being stolen to order, usually Persians and Bengal cats. According to Cats Protection, only 26% of cats are microchipped. Will the Minister consider introducing the mandatory microchipping of cats to give their owners a small chance of getting their pets back?
My Lords, I want to ask the Minister about the situation with pigs. I know we have high welfare standards here, but we still allow the import of meat from pigs and piglets that have been reared in less humane conditions such as farrowing crates and places where tails are docked. Will he level up the playing field and ensure that our trade rules ensure that animal compassion is in all our supply chains?
My Lords, the new pig welfare code of practice, which came into force in March last year, states that the aim is to phase out the use of farrowing crates in the UK and for any new system to protect the welfare of the sow as well as her piglets. We are continuing to work with the industry on this issue. In relation to imports of substandard produce, as set out in our manifesto and repeated many times since, both by the Prime Minister and by other Ministers, we will not compromise on our high animal welfare standards in the pursuit of free trade agreements. That is a commitment that we are absolutely committed to and will stick to.
Crohn’s Disease and Ulcerative Colitis
To ask Her Majesty’s Government what assessment they have made of the variation in the standard of care received by patients with (1) Crohn’s disease, and (2) ulcerative colitis; and what plans they have to work with NHS England to implement a framework to improve care and outcomes for such patients.
My Lords, on the basis of the IBD audit, NHSEI is working closely with front-line clinical experts, patient representative groups and leading charities, including Crohn’s & Colitis UK, to develop evidence-based improvement tools to address possible variations in service. This work includes an important new inflammatory bowel disease right-care scenario, setting out what high-quality, joined-up care looks like at every stage of the patient journey.
My Lords, I am grateful to the Minister. He will know that over 500,000 people are living with inflammatory bowel disease, often with debilitating long-term symptoms and complications. Given the current huge variation in standards of care to which the noble Lord referred, will the Government appoint a national clinical director for IBD, solely to concentrate on spearheading a drive to implement the national IBD standards, which are backed by 17 healthcare professional and patient organisations?
We are doing a huge amount in this area, as the noble Lord rightly points out. In particular, we are working with Crohn’s & Colitis UK on the scenario work I mentioned. That is on top of working on diagnostic waiting times, formal personalised care, access to specialist treatment and formal, structured education. I will look into the possibility of having a formal leader to oversee all these strands, but my impression is that, at present, the work is best done by the individual workstreams I mentioned.
My Lords, Covid-19 has hit all services in the NHS. I pay tribute to those involved in the IBD area who have moved extremely fast to anticipate these problems. Rapid guidelines for gastrointestinal and liver conditions treated with drugs have been made available over telephone, email and text messaging services. NICE issued new guidance in August 2020 to advise healthcare professionals on gastrointestinal and liver conditions.
My Lords, when I was a gastroenterologist, I knew that patients with inflammatory bowel disease did best when managed by a team made up of a gastroenterologist, surgeon and specialist nurse. Too often now, patients are denied access to such teams. In view of what the Minister has said, will this team approach be part of how we might correct this deficiency?
I would like to reassure the noble Lord that the scenario I described typically includes two gastroenterology consultants, a clinical intermediate fellow, a GP partner and a patient representative. It is exactly this kind of team approach that delivers the best patient outcomes, as the noble Lord rightly outlined.
In 2012, NICE published a treatment pathway for Crohn’s and colitis. It was a groundbreaking change to ensure consistent and comprehensive services, including the team approach referred to by the noble Lord, Lord Turnberg, and outcomes for all patients of this autoimmune disease across England. NICE further updated this in 2019, so there has been a pathway for nine years. Why is it not being adhered to by NHS England? What will the Minister do to ensure that all Crohn’s and colitis patients get the treatment they are promised by NICE?
I am not sure it is correct that it is not being adhered to widely, but there is some variation in all parts of the NHS. That is why we are developing a right-care scenario for IBD with key stakeholders. This will create a very clear template for all patients and all those involved in their care. It will, I hope, help create more consistent standards across the healthcare system.
My Lords, I suffer from ulcerative colitis and understand how disabling this condition can be. Support from IBD specialist nurses is a lifeline in managing periodic flare-ups of the condition, yet the postcode lottery means that one-third of IBD patients do not have access to a specialist nurse. This is just one of the many examples of uneven standards of care. I do not know why the Minister cannot simply commit to endorsing IBD UK’s 2019 IBD standards and ensure that services are commissioned to these standards across the country. We have waited an age—at least three years—for the scenario he is talking about. Half a million patients are fed up of waiting.
I am extremely grateful for the testimony of the noble Baroness. She speaks very movingly about the challenge faced by those with IBD—a challenge that we all sympathise with. We are working extremely hard with both Crohn’s & Colitis UK and IBD patient groups on this scenario. There has been disruption in the last year, but I reassure the noble Baroness that we are working extremely hard to get the scenario out as soon as possible.
My Lords, does the Minister agree that, even for very experienced clinicians, diagnosis and treatment of these conditions can be very difficult indeed—as my experience over the years has taught me? Patients may present in bizarre ways—for instance, with a disease of the skin, eyes or joints. Furthermore, a patient with ulcerative colitis can almost imperceptibly become dangerously ill, requiring drastic emergency surgery. Clinicians are always trying to do better, and they need encouragement and thanks, particularly over this very difficult pandemic.
My noble friend is entirely right that diagnosis is key to the accurate and prompt treatment of IBD and associated conditions. That is why we have put diagnosis at the heart of our research programme. Between 2015 and 2020, we funded 20 research projects, many of them on diagnosis, with over £17 million committed. That includes a study into the overlap of IBD and magnetic resonance enterology to image Crohn’s disease patients. This approach is extremely promising.
My Lords, I agree with the noble Baroness. A lot of late diagnoses are caused by the kind of delicacy the noble Baroness refers to. My noble friend talked about the challenge of diagnosis, which is made more complex by patients finding a lot of these subjects extremely delicate. The approach taken in primary care to handling such delicate issues has improved dramatically over the years. We are working with GPs and clinicians to make their bedside manner more delicate, so that they are able to broach such delicate issues more sensitively. That, I believe, is at the heart of the problem.
My Lords, Covid-19 has widened the huge cracks in the quality of IBD care, with patients facing even longer waits for elective care, surgery, investigations and a personalised care and support plan to support their daily lives. Surveys have shown nearly one in five IBD patients have suffered a flare-up crisis during the pandemic because they were unable to obtain specialist advice. We know that many have had to continue shielding because Crohn’s disease compromises the immune system and they have to wait for their two vaccines. What recognition and support of their particular care needs is being given at primary care and community level?
I completely sympathise with all those with IBD and associated conditions. The situation the noble Baroness described is exactly right and it is extremely challenging. I have particular concern for those shielding for a very long period, although I hope many of them will not be waiting long for their second vaccine. Those with all conditions have endured some waits because of Covid, but the NHS is working incredibly hard on the catch-up. Huge progress has already been made and there is a massive focus on diagnosis in particular, to ensure that we catch up with all those presenting with problems who need diagnoses.
Crown Courts: Outstanding Cases
My Lords, in relation to the Question posed by the noble Lord on behalf of the noble Lord, Lord Beith, we spent more than a quarter of £1 billion on recovery in the last financial year, making court buildings safe, rolling out new technology for remote hearings and opening 60 Nightingale courtrooms. Although there is further to go, this has made a difference. In the Crown Courts, we are completing around 2,000 cases each week, which is the same as before the pandemic.
My Lords, my apologies. Given that physical accommodation has at last been made available for Nightingale courts in football grounds, hotels, theatres and even the ballroom in Chester Town Hall, how are these being manned by trained court staff? Given the fact that very few have custody facilities, to what extent are serious cases being held back and periods of remand in custody thereby lengthened?
My Lords, at the Nightingale venues, we use experienced court staff who are trained to deal with the type of work heard on site. While Nightingales deal with non-custodial cases, by taking this work away from the main court estate, custody cases can be heard in our specialist facilities faster than would otherwise be possible. To expand further our capacity to hear complex cases, we have also modified around 70 courtrooms to increase the capability to hear multi-handed trials of up to 10 defendants. In addition, work has begun on a super-courtroom in Manchester, which will further increase capacity for multi-handed cases. For those on remand in custody, our systems show that the majority of such cases had their first hearing in February 2021, and those who have pleaded not guilty have been listed for trial prior to September 2021. I acknowledge the courtesy shown by the noble Lord, Lord Thomas of Gresford, by intimating to my department the terms of his supplementary question in order that a specific answer could be given to this important point.
My Lords, the Minister must be well aware that this problem has been going on for much longer than just the pandemic. The big problem is the Government’s savage cuts to court processes. The solution is not Nightingale courts but better funding. Will the Government do that?
My Lords, prior to Covid, the outstanding case load in the Crown Court was 39,000, which is well within the range of 33,000 to 55,000 over the last decade. At its lowest point, it was even as low as 33,000, in 2018-19. Immediately before the pandemic, the Government were increasing sitting days in the criminal courts to address rising demand.
My Lords, on 25 January, I tabled a Written Question to my noble friend Lord Wolfson regarding the closing, selling and standing empty of courts. My noble friend’s swift, detailed reply was that around 110 had been closed since 2015 but 21 new Nightingale courts, which have just been mentioned, had been made. Have these courts had what the Minister feels is the desired effect of reducing the backlog in the Crown Court as well?
My Lords, I am obliged to my noble friend for her question. The recovery steps taken have made a difference, allowing us to complete around 2,000 cases each week—the same figure as before the pandemic. I assure my noble friend that the decisions taken to close courts were not, and are not, taken lightly; they are taken alongside public consultation.
My Lords, the Covid pandemic has led to a surge of cases awaiting trial in the Crown Court. While the setting up of special Nightingale courts to help clear the backlog is welcome, delays to effective hearings are leading to additional stress and anxiety, particularly for vulnerable victims. Does the Minister agree that, in looking to greater efficiency, we need to look harder at cutting the considerable time spent on cases that do not move to trial?
My Lords, we are keenly aware of the need to improve timeliness for both defendants and victims, and to mitigate the impact of delays on complainers and witnesses in such cases. To that extent, I agree with what the noble Lord asked in his question.
My Lords, in a Written Question on 17 December, my honourable friend Alex Norris asked the Secretary of State for Justice
“what assessment he has made of trends in the level of defendants offending while awaiting delayed court dates.”
On 15 January, the dismissive one-sentence reply was:
“We do not hold any data on offences committed by offenders.”
Is data about the number of offences committed on bail no longer held on the police national computer? Why have this Government apparently lost interest in trends of the criminal behaviour of offenders awaiting trial?
My Lords, I repeat the answer given previously: the department does not collect specific data on the level of offending by defendants on court bail. However, as the noble Lord is aware—and as Members present may not be aware—the commission of a crime on bail is itself an aggravation, which will be reflected in the sentence.
My Lords, the recent Constitution Committee report pointed out that, because of delays to the courts reform programme, improvements to IT systems had not been sufficiently implemented by the time of the pandemic, meaning that remote hearings relied on antiquated systems and participants in the criminal and family courts in particular struggled with virtual hearings. How do the Government intend to supply adequate investment in training in IT while also guaranteeing fairness for all through physical participation for those for whom remote hearings are not a solution?
My Lords, we acknowledge that, in many cases, participation by way of remote hearings is valuable for people in such positions. None the less, we also appreciate that it is not appropriate for all such people, whether they be witnesses or complainers in cases.
My Lords, I am delighted that the Nightingale courts are being expanded. Can my noble friend comment on any plans that the Government might have to extend the serving period for, or bring back, retired judges so that we can deal with the backlog more rapidly—perhaps by extending court hours—and deal with ongoing ageism in the workplace, which seems to write off older people when they are too young?
My Lords, prior to retirement, judges below the High Court are already able to have their appointments extended on an annual basis up to the age of 75 where there is a business need. After retirement, salaried judges are already able to be authorised to sit beyond the current retirement age of 70, on an ad hoc basis, up to the age of 75. We are using our fee-paid judges, as well as salaried judges who wish to sit following retirement, to ensure that we maximise judicial capacity.
In answer to the second part of my noble friend’s question, we are looking at more flexible working. Temporary Covid operating hours have been piloted at seven Crown Court sites to test whether even more could be done, and we are looking at the extension of the working day as a short-term—I emphasise “short-term”—tool and aid to managing recovery. Magistrates’ courts also sat on at least 100 additional Saturday courts per month between September and December.
My Lords, justice delayed is justice denied. Is not the root cause of the delays the reduced finance that the Justice Department too speedily agreed to long before the pandemic? Have the Government given up on the alternatives that I have canvassed to speed up trials—for example, a reduction in the size of juries or trials of less serious offences decided by judges alone, with the consent of the defendant?
My Lords, I repeat the figure that I gave earlier: over a quarter of £1 billion has been spent on a range of measures to increase Crown Court capacity. With respect to the additional measures that the noble and learned Lord outlined, I regret that I do not have to hand details of consultation and discussions, but I undertake to write to him on behalf of my noble friend Lord Wolfson in the Ministry of Justice.
My Lords, does the Minister accept that this mountainous backlog impacts most upon victims, witnesses to crime and members of the public waiting for years to see justice done? Does he also accept that this backlog began well before Covid and is directly because of this Government’s savage funding cuts in courts and tribunals and even more punitive cuts in legal aid? Is it not high time that the Conservatives started investing in increased court capacity, qualified staff and victim support instead of cuts, cuts and still more cuts, benefiting only criminals?
My Lords, all supplementary questions have been asked, and we now move to the fourth Oral Question.
Higher Education: New and Returning Students
My Lords, on Tuesday my honourable friend the Universities Minister and I laid Written Statements confirming that, following the review of when all higher education students could return to in-person teaching, remaining students on non-practical courses should return to in-person teaching alongside step 3 of the road map out of lockdown no earlier than 17 May. Alongside this, the guidance document for students returning to or starting higher education was updated and published.
My Lords, I am grateful to the Government for updating the guidance shortly after this Question was tabled. I am, of course, conscious of the need for sensible restraint in emerging from lockdown. However, by 17 May, many summer terms will be so far advanced that it will be almost not worth while, in many cases, restarting physical teaching. For many students, I suspect that it will be the autumn before they get back to where they ought to be. It seems to me that university students have been handed yet again the shortest of short straws and are bearing a disproportionate part of the national burden. Will my noble friend think again?
My Lords, of course we recognise the difficulties and disruption that a return in line with step 3 might cause the students. It does allow them, however, to receive some extra in-person teaching and assessment, to engage with extra-curricular activities, to take part in face-to-face careers support, to visit specialist libraries and so on, as well as to see their peers and boost their mental health. Students are keen to get back to campus and universities are keen to have them back. We want to enable this as soon as the public health situation allows.
My Lords, I entirely agree with the noble Lord, Lord Moylan. Students have been short-changed: they are anxious; they are angry; they feel let down; and they cannot understand why they cannot return to university when schools, shops, gyms and hairdressers are open. I do not understand that either. It is having a detrimental effect on their mental health, their well-being and their studies. The appalling delay in the guidance has made the situation worse. How did the Government reach the decision to delay the return of students until 17 May? Have they assessed the current and long-term impact on the mental health and well-being of students? Have they considered the impact on universities, which play such a vital role in the economy of our country and which have made the most enormous efforts to put in place all of the requisite Covid-safe measures in respect of in-person teaching, libraries, accommodation and other facilities? I remind noble Lords of my interest as principal of Somerville College, Oxford.
My Lords, of course we understand the frustration that students might feel, particularly as things are opening up under step 2, but many of the things that are opening are taking place outside and do not involve the formation of new households, which a return of students to university would do. Inside, the risks of transmission increase, and the decision we have taken is in line with our cautious approach to the road map out of lockdown. At the heart of our decision is public health but also student well-being, as the noble Baroness mentioned. The last thing that any of us want is for students to have to self-isolate repeatedly, as some had to previously. That would not only be damaging to their mental health and well-being but put at risk the ability of some students studying creative and practical subjects to graduate.
My Lords, there is cross-party support for the noble Lord, Lord Moylan, and the noble Baroness, Lady Royall. From the Liberal Democrat Benches, I reinforce everything that he said. I declare my interest as an academic at Cambridge University. I note that this is guidance. Why on earth should students or universities listen to guidance if it is not law, particularly if it goes against the interests of students?
As I said, the Government recognise how difficult the situation is for students, but the road map is designed to maintain a cautious approach to the easing of restrictions so that we can maintain progress and not have to go back on it. The guidance that we have made available is in the best interests of students and the wider community, and we urge everybody to adhere to it.
My Lords, I draw the House’s attention to my entry in the register of interests. I congratulate the Government on the student hardship fund, including the addition £15 million that has recently been made available. This has provided a necessary lifeline for many students. However, in relation to students returning to university, I am with noble Lords who have already spoken. What assurance can the Minister give that, in the event of a potential future lockdown, which has already been spoken about, the education of university students, many of whom have already lost at least a year’s worth of face-to-face teaching, will be prioritised in ways that they have not been over the last year?
I thank my noble friend for her welcome for the further £15 million of student hardship funding that we have announced this week. That is on top of the £70 million that we had already provided and the £256 million which providers are able to use during this academic year. Our cautious approach is designed to ensure that this step out of lockdown will be irreversible and to avoid the situation that my noble friend outlined.
My Lords, I remind the House of my interests as set out in the register. The ONS student insights survey revealed that almost two-thirds of students have experienced a decline in mental health over this academic year, brought about in part by the uncertainty, anxiety and isolation which is, of course, exacerbated by this further decision. Will the Government commit to providing additional funding for university mental health services, given the increasingly high demand that they will face both now and over the coming year?
Yes, we have worked with the Office for Students to provide Student Space, which is being funded by up to £3 million by the OfS to support students with their mental health and well-being. Furthermore, we have asked the OfS to allocate £15 million towards student mental health this year through the proposed reforms to strategic priorities grant funding.
My Lords, university students feel forgotten in the Government’s plans for leaving lockdown. What discussions have the Government had with university leaders and student representatives regarding the date for return to in-person teaching? Given that, by mid-May, many universities will have finished their teaching year, does the Minister accept that the reality is that this decision means that many universities and courses will effectively stay online until the autumn? What impact will this have on students, who have, frankly, been paying through the nose to study at campuses that they have not been able to access since Christmas?
The students are most certainly not forgotten. My honourable friend the Universities Minister engages directly with students and representatives of students through various groups that she has set up, including ones focusing on mental health. The Office for Students is also conducting some polling of students so that their views can be fed into decision-making. That, alongside the scientific advice, is what has led us to the decision that we have taken this week.
My Lords, does the Minister agree that what is coming out in this Question Time and in the news is that students do not seem to know what the situation is? They do not know if they will get a reduction on fees. They do not know if they are going to get some money back on accommodation taken for university. Will the Government at least publish something that is a guideline to what sort of behaviour they think is proper? If not the Government themselves, the Office for Students would be a very good body to take this on.
My Lords, as I say, we have updated the guidance to students with advice on returning to universities this week. As was announced in February, students and HE providers will be given a week’s notice of any further easing of restrictions as it affects them. This is a changing situation with the pandemic. We understand the frustrations people face, but we are grateful to them for their forbearance.
My Lords, surveys suggest that over a fifth of university students say they would need extra teaching over the summer—which I believe many of them are being offered—to catch up on lessons, tutorials and classes they may have fallen behind on over the course of the year. Will the Government provide additional financial support for students who may need to study beyond the normal academic year?
My Lords, would the Minister agree that the uncertainties of lockdown and this incomprehensible delay are having a negative impact on international students and the reputation of the UK as a place to come and study? What impact does he think this will have on the intake for 2021 and 2022?
Students around the world will have seen how UK universities have reacted admirably to the challenges posed by the pandemic, designing and delivering high-quality online learning and offering exceptional well-being and mental health support. The UK was one of the first countries to introduce immigration flexibility for students, and our new post-study work route, the graduate route, will launch on 1 July, further encouraging international students to choose to come and study in the UK.
NATO: Russia and Ukraine
Private Notice Question
My Lords, we have significant concerns about Russian military activity on Ukraine’s border and in illegally annexed Crimea. We support Ukraine’s sovereignty and territorial integrity. We have discussed extensively with NATO allies; the Foreign Secretary has engaged with French, German and US counterparts and Ukraine and we attended the NATO-Ukraine Commission on 13 April. We and our allies urge Russia to uphold the OSCE principles and commitments it signed up to, which it violates through ongoing aggression against Ukraine.
Does the Minister agree that even if Mr Putin’s intentions are confined to the intimidation of Ukraine and those who support its legitimate wish to join the NATO defence alliance, the present, massive deployment of armed forces on the border is dangerously destabilising because of the risk of conflict arising by either misjudgment, mistake or provocation, real or manufactured? Is all this not particularly dangerous when we consider that the Russian military appears to have resurrected the Cold War doctrine of nuclear war fighting and the deployment of low-yield nuclear weapons on the battlefield? If there ever was a time for transatlantic solidarity, is this not that time?
My Lords, I agree with the noble Lord, and that is why my right honourable friend the Foreign Secretary has been engaging extensively with NATO allies. He was in Brussels only yesterday. I also agree with the noble Lord regarding Russia’s aggressive behaviour towards Ukraine. Let us be clear: it is not limited to Donbass and Crimea; we know that Russia seeks covertly and overtly to undermine Ukraine at every turn.
My Lords, Russia applies pressure militarily, economically and politically until it meets counterpressure that is credible and strong and it has to pay a price, which we have seen here. Therefore, will the UK apply the latest group of US sanctions against Russia and encourage our NATO and EU allies to do the same? Do the Government support the completion of Nord Stream 2, which will severely damage the economy of Ukraine?
My Lords, on the noble Lord’s second point, we have repeatedly stated our position on the issue of Nord Stream 2; while we ourselves do not welcome it, it is an issue and a challenge for Germany. I agree with the noble Lord’s earlier point, and we are working closely with our allies. The noble Lord alluded to reports that are currently circulating on further actions the United States will be taking. The formal announcement of that is imminent, and we will respond accordingly.
My Lords, I agree with my noble friend Lord Campbell of Pittenweem about the importance of a strong transatlantic response, but does the Minister agree that if we are concerned about Russia building up its forces on the border, the UK also needs to be careful not to be seen to be fuelling any sort of arms race by threatening to increase its nuclear weapons?
My Lords, the United Kingdom’s nuclear deterrent, as well as working with our key allies, is reflective of the importance the United Kingdom attaches to the defence of Europe and the wider world. History has shown us that our independent deterrent has ensured that those who sabre-rattle know that there would be an extensive response from allies of the United Kingdom if they were to go down that route. That said, the deterrent has done exactly what it is intended to do. It has deterred further action and aggression, which no one wishes to see.
My Lords, President Putin is an authoritarian and dictatorial bully, and like all bullies, he senses weakness. He senses weakness in Nord Stream in Germany; he senses it, rightly or wrongly—I think probably wrongly—in the new President Biden in the United States; and he senses weakness when the United Kingdom reduces its Armed Forces, its aircraft, its ships and, above all, the size of its Army at this time. So, will my noble friend go back to our right honourable friend the Foreign Secretary and get him to argue in Cabinet that to reduce the Armed Forces at the moment is a signal to bullies that we are not to be taken seriously?
My Lords, I know my noble friend speaks from great insight and expertise about our Armed Forces, but I assure him that Her Majesty’s Government are fully committed to our Armed Forces, which is underlined by the additional funding that has been provided to the Ministry of Defence. On the broader issue of security, we stand firmly with our allies and in support of the NATO alliance. I suggest that with the new Administration in the United States we have seen a realignment and strengthening of that alliance.
The Minister will recall that Sir John Major and Lord Hurd of Westwell were the west European signatories of the 1994 Budapest memorandum. Do the Government agree that this gives us a continuing responsibility for the security and territorial integrity of Ukraine? If so, how do the Government intend to discharge it? The United States has a similar responsibility as a signatory, and the Minister will have noted that President Biden believes that now is the time for dialogue with both President Zelensky and President Putin.
My Lords, given the relative ineffectiveness of the western response to the invasion of eastern Ukraine in 2014, what assurance might Ukraine assume, should conflict or further invasion ensue? Also, could the Minister comment on any prognosis for the future of the Minsk accords and the prospects for Normandy?
My Lords, the Minsk accords are very much alive, and we remain supportive of them. On Ukraine’s recognition of support from the United Kingdom, that is firmly acknowledged by President Zelensky and his team. Indeed, when he visited the United Kingdom last year, I also met his Foreign Minister; they all recognise the strong support the United Kingdom continues to provide Ukraine in protecting its sovereignty and by continuing to implore Russia to withdraw from Crimea. Crimea is occupied territory; Russia should withdraw.
My Lords, the threats and risks are clear, and the case for transatlantic co-operation cannot be overstated. Strong backing for President Biden’s bid for a summit is vital. When he spoke with President Putin earlier this week, he raised cyber intrusions and election interference. The Russia report called for a common international approach on Russia’s malicious cyberactivity, so what action is the Minister taking to support a common international approach on this, including through strengthening actions with the United States? Will we match the sanctions of the United States or sit back and wait?
My Lords, we fully engage with the United States. The noble Lord is correct that President Biden spoke with President Putin on 13 April. Equally, we have been engaged in a large degree of diplomacy, both through NATO and directly with our allies, including the United States. We are fully aligned with the objectives behind the approach of the United States and work very closely with it. On the specific issue, as I said earlier, a formal announcement is due shortly from the United States, but we are working in a very co-ordinated fashion with it.
My Lords, we continue to play a pivotal role in the NATO alliance, to which we are strong contributors in both strategy and financing. That will continue to be the case. We are centrally involved in the discussions around the current situation we are seeing in eastern Ukraine.
My Lords, as Washington’s closest ally, can my noble friend confirm that the Biden Administration are consulting us and other NATO allies rather than simply informing us as to whether they intend to send warships into the Black Sea? In strategic terms, is it not vital that we ensure the Black Sea remains an international waterway rather than watch it turn into a Russian lake?
My Lords, I agree with my noble friend’s second point in the sense that we continue to work with our NATO partners to ensure exactly that free operation in the Black Sea. On his earlier point, consultation is very much at the centre of the approach of the United States with its NATO allies, including the United Kingdom. As I alluded to earlier, my right honourable friend the Foreign Secretary was in Brussels yesterday, together with the United States and Secretary of State Blinken, to discuss Ukraine among other key priorities for NATO.
My Lords, the Integrated Review of Security, Defence, Development and Foreign Policy, published last month, makes much of the UK’s new freedom to pursue different economic and political approaches to those of the EU, but does the Minister agree that, when the threat is such as that posed by Russia to Ukraine, so close to Europe, we should not stand alone—where we will be weak—but work jointly with our EU neighbours?
My Lords, I agree with my noble friend. We are doing exactly that through the NATO alliance. As I said in my original Answer, the Foreign Secretary has engaged directly with key European partners, including France and Germany, and Italy joined various discussions in that respect.
My Lords, I was fortunate to visit Ukraine on several occasions to witness the training support that the UK Government have been giving the Ukrainian military. To date, that training has been defensive and non-lethal in nature—for example, first aid training or counter-IED training. Can my noble friend reassure me that in future the UK will not necessarily feel obliged to follow those constraints and will consider any reasonable request from the Ukrainian Government for support?
I recognise the role my noble friend played in this respect in his previous role as Minister for the Armed Forces. UK military support for Ukraine, as he will be aware, covers training delivered through Operation ORBITAL. This has been extended, resulting in training as well as maritime training initiatives. I note what my noble friend says. We are working very closely with not just Ukraine but our NATO allies to ensure that an appropriate response is given at the appropriate time.
My Lords, in addition to combating Russian aggression, support for improved governance and strong institutions in Ukraine—helping it build a proper democracy—is vital. Is the UK currently financially supporting any projects run by the UN, the OSCE or others in Ukraine? If so, will they be affected by the cut to overseas development assistance that the Government have announced?
My Lords, we are working very closely with Ukraine, and not just in providing training support for its defence requirements. The noble Lord is right that we have been working; indeed, I remember that in my first role as Communities Minister—going back a bit to 2013—one of my international engagements was with Ukraine, about building local government structures. That continues to be the case; we work very closely with President Zelensky and his team.
My Lords, egregious human rights violations and breaches of international law by murderous and kleptocratic regimes such as that in Russia can be responded to by using our relatively new Magnitsky legislation. Will my noble friend commit to using this legislation for such malign actions if they occur in the ongoing conflict in Ukraine?
My Lords, I agree with my noble friend; we are working on a range of issues around supporting human rights in support of Ukraine’s efforts, including in Crimea. We provide specific projects to groups supporting the rights of the citizens of Crimea. The United Kingdom has also contributed £700,000 to the UN Human Rights Monitoring Mission. On sanctions, I agree with my noble friend inasmuch as the whole basis of the governance structure of the sanctions is to call out egregious abuses of human rights. Where necessary, we have exercised them. We keep all matters under review, but I cannot speculate at this juncture about any future action we may take.
Business of the House
Motion on Standing Orders
That Standing Order 44 (No two stages of a Bill to be taken on one day) be dispensed with on Monday 19 April to allow the Financial Services Bill to be taken through its remaining stages that day and that therefore, in accordance with Standing Order 47 (Amendments on Third Reading), amendments shall not be moved on Third Reading.
Greenhouse Gas Emissions (Kyoto Protocol Registry) Regulations 2021
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British Library Board (Power to Borrow) Bill
Order of Commitment
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Education and Training (Welfare of Children) Bill
Order of Commitment
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Forensic Science Regulator Bill
Order of Commitment
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Arrangement of Business
My Lords, the Hybrid Sitting of the House will now resume. I ask all Members to respect social distancing. We now come to Report on the National Security and Investment Bill. I will call Members to speak in the order listed. Short questions of elucidation after the Minister’s response are discouraged. Any Member wishing to ask such a question must email the clerk. The groupings are binding. A participant who might wish to press an amendment other than the lead amendment in a group to a Division must give notice in debate or by emailing the clerk. Leave should be given to withdraw amendments. When putting the Question, I will collect voices in the Chamber only. If a Member taking part remotely wants their voice accounted for if the Question is put, they must make this clear when speaking on the group.
National Security and Investment Bill
Clause 3: Statement about exercise of call-in power
1: Clause 3, page 3, line 9, at end insert—
“( ) details of the circumstances in which the application to an asset of any export control, transfer control, technical assistance control or trade control imposed under the Export Control Act 2002 and related provisions may affect the Secretary of State’s exercise of the power to give a call-in notice, and”
My Lords, it is a privilege to open proceedings on Report. I want to say generally that Members across the House, on all sides, are supportive of the principles of the Bill. It has been clear that all the amendments tabled have the intention of trying to make it as clear, effective and workable as possible, and—as we will discuss later—to make sure that there is proper accountability and transparency in the proceedings. Several of my noble friends have tabled amendments in that spirit. I know that Ministers in charge of the Bill have responded in kind with a willingness, even in the past few days, to supply additional material on how the workings of the national security and investment regime will be made more transparent and clear to those it affects, who are substantial in number.
I come to one of the issues in the two amendments in this group, both in my name, which relate to the interaction between the national security and investment regime and the export control licensing regime. Amendment 1 relates to the exercise of the call-in power by Ministers. Amendment 37 relates to the making of interim and final orders by Ministers. I start with the first amendment.
I quoted the 2018 White Paper at more length in Committee but it stated, on behalf of the Government, that
“where national security concerns relate solely or primarily to the export of goods, the Government expects that the export control regime would remain the primary means of protecting national security”.
In Committee, I asked the Minister responding to reiterate that expectation. He failed to do so, nor did he offer any specific assurance about how the two regimes would interact. I am grateful to Ministers because, since then, they have committed to the publication of guidance, which will include the interaction of the national security and investment regime with the Competition and Markets Authority, the Takeover Panel and the export control regime. We have not, of course, yet seen the text of that guidance. Nor is a reference to the export control regime being included in the draft statement, which has to be made under Clause 3, that will explain where and in what circumstances the Secretary of State will exercise his call-in power.
The importance of that is illustrated not least by the references from time to time in the consultation on the sectors in scope of the mandatory regime, in which a number of respondents made it clear that they thought there was a widespread interaction and overlap. For example, paragraph 3.76 said that one respondent suggested that the pre-existing export control licensing regime was appropriate, for which a number of businesses had robust and sophisticated compliance programmes, noting a significant overlap between the lists and a number of the other proposed mandatory sectors.
The noble Lord, Lord Grantchester, on the Front Bench opposite, in Committee instanced other references to that in the consultation response. Indeed, he may have looked at the strategic export control list, which is 309 pages long, and the sectors in scope of the mandatory regime for the national security and investment regime. The overlap is very large indeed. It is important to those affected that these two regimes interact positively and sensibly.
Amendment 1 seeks to require that there be such a reference in the Clause 3 statement and a commitment to explaining to people how the two regimes will interact. Why does that matter? First, given the nature of the assets in the strategic export control list, a change of control of the entities that own them will often be a notifiable acquisition and therefore be subject to a mandatory notification. But will the acquisition be called in? That question will be in the minds of those affected and will depend upon the level of risk. If the acquisition is by a hostile actor, it is a fair argument that the national security and investment regime adds an extra safeguard beyond the export licensing process. However, it will be important for those who own sensitive assets to know when that issue—the nature of the acquirer—is the prompt for a call-in, not simply the sensitivity and nature of the assets themselves, since they can be safeguarded for national security purposes through the export control licensing regime. Therefore, those asset owners need to be able to reasonably predict when a call-in will be made.
Secondly, the Clause 3 statement should offer clarity about the distinction between the use of an asset and its control. The national security and investment regime is about ownership and, hence, control of assets. Export controls are directed to their use, specifically outside the United Kingdom by way of export. However, we should consider what will happen if we follow the American lead. Following the enacting three years ago of the latest US legislation, there are circumstances in which the American export control regime, because it anticipates that a given ownership could lead to a transfer of technology within an entity, deems such assets to be exports. We already see an increasing overlap between the question of control and the question of use. The statement needs to be clear about that distinction, too.
What I am really looking for from my noble friend on the Front Bench is, first, an assurance that these issues will be fully dealt with in the guidance to be published, and that there will be a specific reference in the statement to matters dealt with under Clause 3, even if that is supplemented in detail by the technical guidance.
Amendment 37 raises an important further interaction. When Ministers make interim or final orders, given the extent of overlap between assets in the scope of this regime and those in the strategic export control list, it is likely that the entities that control such assets may, if they pass into new ownership, be subject to such orders. Those orders are about not just the situation today but what should happen in future. There will be a temptation on the part of Ministers to make orders that, like contracts in law, provide for every set of circumstances in future.
My point is simple: when making orders, Ministers should always rely on the export control licensing regime to do its job effectively. They should not try to substitute for the export control regime in future by restricting, through orders, what entities are or are not able to do. Even though they have the power to do that, they should not do it. They should live up to the expectation of the 2018 White Paper that the export control regime is the means by which Ministers exercise control of the export of sensitive assets.
There are two units involved. The Export Control Joint Unit is made up of officials from the Ministry of Defence, the Department for International Trade and the Foreign, Commonwealth and Development Office, and there is the unit for the national security and investment regime. The interaction between the two units needs to be excellent. In the shape of my noble friend the Minister on the Front Bench, we have the embodiment of the relationship between the Department for International Trade and the Department for Business, Energy and Industrial Strategy. I hope that he makes sure that these two work together well.
We should not see orders under the NSI regime supplanting what should be licensing procedures under the export control licensing regime, not least because—I pre-empt an issue that we will come on to later—export control licensing is the subject of greater and specific parliamentary scrutiny by the Committees on Arms Export Controls in the other place. There is no such direct scrutiny of the orders being made under this NSI regime. I hope that I do not need to say that Ministers should not fall prey to the temptation to incorporate measures into orders under this regime because it entails less parliamentary scrutiny than would be the case for export licensing under the other regime.
When we get to Amendment 37, I hope that I will be able to rely on Ministers’ further assurances that they will not simply take account of the export control regime and will rely less on administrative law issues. It was slightly ironic that our debate in Committee was followed the following week by a debate on administrative law that suggested that statute should be as clear as possible about the requirements that people have to live up to and not rely on a general public law duty—but that is exactly what Ministers profess to rely on here. I would prefer Amendment 37 to be adopted by the Government and it to be very clear that Ministers will take full account of the export control licensing regime. Even if they are not happy to amend the legislation, I hope that what my noble friend says in response to this debate will make it clear that that will be the case. I beg to move Amendment 1.
I thank the noble Lord, Lord Lansley, for returning to the issue of the interaction of the NSI and export control regimes. He is correct to probe further with the explicit inclusion of Amendment 1, so that the new NSI regime is not buried within BEIS but works effectively across government, specifically across both regimes.
Amendment 37 underlines the need to recognise proper co-ordination in this regime. The Government had recognised only that the two regimes are distinct and would sit alongside each other, as the expression goes, yet they were concerned by activities that could circumvent the export control criteria. With the extent of the overlap to which the noble Lord, Lord Lansley, refers, this would be surprising.
Since Committee, further consideration has been given to the issue. We agree with the noble Lord in calling for greater clarity about the interaction needed with export controls, especially when a call-in notice has to be considered and when interim and final orders are being made. We are supportive of the intention behind these amendments regarding concerns about how this regime will interact with functions under the export control regime. Why does the Bill remain silent on the export control regime in its drafting?
In Committee, the Minister stated that,
“where export controls in relation to an asset are already in place, it may not be necessary or proportionate to make an order under this Bill prohibiting the transfer of the asset overseas, but this will depend on the facts of each case.”—[Official Report, 16/3/21; col. 199.]
This is not particularly helpful and could result, as the noble Lord, Lord Lansley, says, in an asset or situation being drawn into both regimes, without more explicit explanations on the interplay. What are the functions of any facts that would result in being subject to this regime, as well as having been referred to the Export Control Joint Unit? Where would it be proportionate for this to happen?
I am grateful that the Government have now recognised the validity of these concerns and committed to publishing guidance after enactment of the Bill. I am also grateful to the Minister and his departmental team for outlining an indicative list of nine points of regime guidance. Guidance 8, on how the regime will work alongside other regimes, including export control, takeovers and the CMA, will address this. However, there are still some important outstanding questions for the Minister to answer to add clarity on how duplication across both regimes will be avoided while meaningful co-ordination operates effectively. It would be most helpful if he could provide that clarity at this important stage in the passage of the Bill.
My Lords, I thank my noble friend Lord Lansley for his Amendments 1 and 37, which explore the interaction between the export control regime and the regime created through this Bill. As we start this session, I thank your Lordships for the constructive way in which they have approached this Bill and the constructive debates that we have had.
Amendment 1 would provide that the statement about the exercise of the call-in power may set out how the Secretary of State will factor in controls placed under the export control regime when deciding whether to call in asset acquisitions. Amendment 37 would ensure that the Secretary of State takes into account controls placed under the export control regime when imposing interim or final orders on asset acquisitions. These amendments follow discussions in Grand Committee on the links between export controls and NSI; I thank noble Lords for the insights that they have shared.
I am happy to confirm to my noble friend that the Secretary of State will need to take into account the impact of any controls placed under the export control regime, as well as other relevant regimes so far as they relate to national security considerations. This is required by both the legal tests in the Bill and public law duties. This is the case when he decides whether to call in an acquisition of control; whether to impose interim orders or final orders in relation to such acquisitions; and what form those orders should take.
In particular, if existing controls under the export control regime already address any national security concerns arising from the acquisition of an asset, I am happy to confirm for my noble friend that it is unlikely that the Secretary of State would be able to call in that acquisition. As has been referenced by noble Lords, I commit that we will provide guidance on the interaction of the NSI regime with other relevant regimes, including export control, which will ensure that affected parties are clear on this point.
My noble friend also asked specifically about the Statement. I am happy to confirm that the Government will consider specific reference to export controls in it if we judge this to be appropriate following the consultation on the Statement. I thank my noble friend Lord Lansley for this suggestion.
I appreciate the intent behind these amendments, and I hope that I have finally given my noble friend sufficient reassurance on these matters not to press them.
My Lords, I think I heard the Minister say that the export control regime and the regime established by this Bill will be equal, rather than one being precedent to the other. The noble Lord, Lord Lansley, quoted a White Paper which very clearly set the export control regime as having precedent over this regime. That is not what I heard the Minister say —so, in order of precedence, how does the Minister expect these two regimes, which I hope will be complementary and not conflicting, to work together?
I thank the noble Lord for that point. It is hard to give a black-and-white answer, because it would depend of course on the circumstances. Let us remind ourselves what the difference is. The export control regime, which is the licensing regime for certain controlled goods, is one important part of the safeguarding of our national security, and, of course, it sits well alongside the national security and investment regime. The two regimes are distinct and do not perform the same role. To give an example to clarify that, the export control regime does not provide the Government with the ability to scrutinise acquisitions of UK companies or the ability to direct the use of sensitive assets used in the UK, whereas the NSI regime would. In a nutshell, the precedence between these two regimes must and will depend on the circumstances that are being covered.
I thank your Lordships for this very short but useful debate—useful not least in assisting those who will be affected by the regime. I am grateful to the noble Lords, Lord Grantchester and Lord Fox, for their contributions.
The point about the White Paper and the commitment to use the export control regime primarily to deal with national security risks relating to the export of these assets, and specifically the qualifying assets, is that the export control regime sets specific limitations on the export of specific items to specific persons and places. It is very targeted in that sense. As the Minister says, it does not bear upon the question of control of entities or the overall ownership of assets, so there is a compelling need now for this new regime; it just does not need to reproduce or trespass upon those things that are being achieved through the export control regime. That is what I understood the White Paper to say, and I understood the noble Lord, Lord Fox, to be asking for that to continue to be the expectation.
I hope that Ministers will make it very clear to those affected that, where they have a compliance regime in place for export control, that will continue to be sufficient for the purposes of the management of qualifying assets, because Ministers have made it clear that rarely would they expect to invoke the national security investment regime in relation to specific assets. It is really targeted on the ownership and control of entities and, by that route, the ownership and control of large-scale assets. I am sorry to have had to explain that again, but I do hope that Ministers will take it on board.
I am most grateful to my noble friend for going further than we were able to go in Committee, and, in particular, returning to Amendment 1, what he was able to say about the Statement under Clause 3 and the additional guidance has moved us on quite a long way from where we began. I am most grateful for that, and I beg leave to withdraw Amendment 1.
Amendment 1 withdrawn.
My Lords, I apologise for speaking to two groups in a row. It is how chance would have it with the structure of the Bill.
Clause 6 of the Bill is where there is a definition of “notifiable acquisitions”. This is linked to Clause 8, which sets out the circumstances in which entities come under the control of a person, and the link between these two, as I understood it, was that if somebody takes control of an entity by any of the routes described in Clause 8, that acquisition would be notifiable under Clause 6 if it relates to a sector in scope of the mandatory regime. Therefore, I was slightly surprised that the cases presented in Clause 8 relate, in the first three instances, to shareholdings in total, or voting rights. My noble friend Lord Leigh has secured a notable concession from the Government, which he will no doubt refer to in a moment—actually, he may not, looking at the list—that secured a change. However, on his behalf I thank Ministers and I congratulate my noble friend on securing that change in the Bill in relation to shareholdings over 15%. It is a sensible shift.
However, I was looking not at shareholdings or voting rights but material influence, as defined under the Enterprise Act 2002. On the face of it, it seems that if one acquires control by virtue of material influence over an entity, why would that not also come under the Clause 6 requirement that it be a “notifiable acquisition”? In a very helpful exchange of correspondence, Ministers have explained to me that their intention is that the mandatory regime should apply only where those affected can be very clear that there is a mandatory notification requirement. Material influence, by its nature, is a less clear test. It is a subjective test and of course it can vary dramatically over time. It is much better, in the view of Ministers, that it should be governed by the voluntary notification regime or the Ministers’ power to call in if they are concerned, rather than by requiring everybody who acquires material influence over a sensitive entity to notify any change of material influence. They have explained that to me and I am very happy—so, in that sense, I am not pushing Amendment 2 any further.
I suppose the point of this short debate is to enable Ministers to explain that point, because otherwise, of course, people could fall into exactly the same confusion that I did: namely, is it control or not? The answer is that, where material influence is concerned, it may be control of a kind—you may be able to influence the policy of an entity—but there should then be a subjective question in the mind of somebody who acquires that kind of influence over the policy of a relevant entity in scope of the regime, and they should think that they should make a voluntary notification rather than being required to make a mandatory one. It does not take them out of the regime, but it changes their interaction with it. I am content that the Bill achieves that, but it is useful to explain that to those who might be affected. Otherwise, I very much welcome the government amendments in this group, and for the moment, I beg to move.
My Lords, since this is the first time I have spoken at this stage of the Bill, I add my thanks to those of my noble friend Lord Lansley to the members of the ministerial team and the Bill team for the time they have given and the meetings we have had to clarify and sort out the delicate balance we are all trying to achieve and the changes being made, which are part of the amendments in this group.
I will focus my remarks on Amendment 8, which returns to whether minority investor veto rights automatically bring the investment in question into the provisions of the Bill. It was an issue I addressed in Amendment 29 in its previous incarnation, along with Amendment 72. I found the Government’s arguments about Amendment 72 entirely convincing, so I have not retabled it, but I am not able to say the same about the response I received to Amendment 29, so I have retabled it and have discussed it with the Law Society, which seems similarly confused.
This is important because if we do not get clarity on this issue, there are at least two possible consequences: a potentially large increase in the number of voluntary notifications required, so further straining the system which the department is setting up, and/or a deterrent effect on people’s readiness to invest in the defined sectors of our economy.
I explained in Committee that a private equity investment essentially has two parts. There is the purchase of the shares, which will take place under the standard provisions of the Companies Act, and that is where the control of the entity lies. In parallel, it will be supplemented by a specially drafted, custom-made investment agreement. This is an agreement which both parties—the investee company and the investor—hope will be put into a drawer and never looked at again but, life being what it is, disagreements take place and the agreement is therefore essentially a protective device for the investor against malfeasance or bad performance by the managers of the company. The Minister needs to understand that it is essentially an agreement about corporate governance, not corporate law, which is how the company is controlled. That investment agreement is likely to require the investor’s consent to a number of major issues, such as approval of the budget, major capital expenditure proposals and so on.
When I describe it like this, it can be seen that these are protective provisions, not proactive initiating ones, but although they are protective, they are extensive, and this is where the use of the words “substantially all” in Clause 8(7) becomes significant. If that is the case, the Bill appears to bring within its ambit a range of private equity investments where the new investor has taken a minority position. It might be assumed that the new investor will be taking a minority position for malfeasance reasons, but there are a large number of reasons why private equity houses do not wish to buy 100% of a company. It may be that the existing management will not sell more than 50%. It may be that the new investor wishes the continuing management to have a real incentive to do well, and therefore likes it to have a larger stake. Last but not least, it may be that the investor has a maximum size of investment he can make and that determines the percentage that the investor can hold. So if you have an investor who can put up only £40 million and the company is worth £100 million, it can take only 40% because that is how the maths work out.
The new investors who are in a minority position need additional protections, and if they can obtain those protections only after making a notification then there are these consequences of more voluntary notifications and some diminution in the attractiveness of the sectors covered by the Bill. That does not seem a desirable outcome.
I have said that significant changes to a company’s status come about not from the investment agreement, but as a result of passages of ordinary or extraordinary resolutions under the Companies Act. Amendment 28 is therefore designed to remove some of the wording of Clause 8(6), which is untried, untested and, at least in the view of a number of law firms, open to interpretation, and replace it with company law provisions with which everyone is familiar.
When winding up the debate on this amendment on 9 March, the Minister said, “I believe that his”—that is my—
“intent is very much to seek to exclude acquisitions of minority veto rights from constituting trigger events.”
So far, so good. He then went on to say:
“However, the Government consider that the Bill already achieves this goal to some extent”—[Official Report, 9/3/21; col. GC 637-38.]
because of the provisions of subsection (7). That is the heart of the matter. The concern of the Law Society and others is that the Bill creates uncertainty where no uncertainty need exist. That uncertainty can easily be dispelled if we use familiar company law concepts.
To summarise, I argue that if no change is made to guard against these uncertainties, legal advisers to private equity investors can be expected to take a belt-and-braces approach and suggest that on all occasions a voluntary notification should be made. When he comes to reply, I invite the Minister either to say that the Government believe that minority investor rights are not covered by the Bill so that we are all clear about that or, if he cannot say that, to please agree to take a further look at it to try to create certainty and dispel uncertainty, and therefore further ensure that we get the right balance between personal property rights and the nation’s security.
My Lords, I shall speak to the Government’s amendment and to Amendment 8 in the name of the noble Lord, Lord Hodgson, but, as regards Amendment 2, the questions raised by the noble Lord, Lord Lansley, are valid and it is rather inexplicable that that subsection of Clause 8 is not included in Clause 6.
When we debated the thresholds for the trigger for mandatory notification, the noble Lord, Lord Leigh—I am sure he will get many tributes today for having pushed the envelope and succeeded in having the Government agree with him—raised issues about 15% versus 25%. The principal arguments were that keeping it at 15% would result in a huge number of notifications, the vast majority of which would not give rise to national security concerns, which would place a significant administrative burden on the new investment screening unit, and that that the current filing threshold of 15%, as set out in the Bill, is significantly below the threshold used in a number of other major foreign direct investment regimes such as France, which requires 25%, Australia which requires 20% and Canada which requires 33.3%. I am delighted that the mandatory notification threshold has been increased to 25%, which was the threshold set out originally in the White Paper. I think the Government’s reversion to their original intent is very much to be welcomed.
As regards Amendment 8, tabled by the noble Lord, Lord Hodgson, not having practised company law for many years now, I can only admire his forensic ability in setting out exactly why we need greater clarity under that provision. He has illustrated that the current language does not provide that level of clarity. In his words, it does not dispel uncertainty, but the language in his Amendment 8 certainly would. I believe it is only in the Government’s and the ISU’s interest to acknowledge that, and I very much hope the Government will accede to his request to provide clarity, either by accepting his amendment or by giving assurance that they will look at it further and take that forward at Third Reading.
My Lords, I rise to speak for the first time on this Bill. I declare my interests in the register as a director and former director of a number of companies, although none is obviously affected. I have not spoken until today because I support this Bill, and it has been making good progress without any help from me and with the forensic assistance of my noble friends Lord Lansley, Lord Hodgson of Astley Abbotts, Lady Noakes, Lord Leigh and others right across the House.
There has been a succession of regrettable takeovers of UK jewels in recent years without proper scrutiny by the authorities. The SoftBank raid was the most egregious, yet it was welcomed by the then Chancellor. ARM—my favourite firm when I was Intellectual Property Minister, if I may now say so—was the world’s leading chip maker, headquartered relatively modestly in Cambridge and run by the talented Warren East, who must look back with pleasure to that time. Allowing its subsequent takeover was a serious mistake for UK interests.
This Bill is concerned primarily with security, so I suspect it would not have caught another controversial deal, that of Kraft/Cadbury, though it would have been useful had that too been caught. That example highlighted the fact that it is not only jobs but both R&D spend and cultural support that tend to go with the head office of a company or group.
Decades of such highly leveraged deals have contributed to damage in this respect. Think of aerospace pioneer Cobham and satellite service provider Inmarsat. As an aside, how lucky those of us who have benefited from its vaccine are that AstraZeneca held out against Pfizer a few years ago. We ought to have powers to prevent such a proposal if it arose again and was not in the UK interest. The powers in this overdue Bill should, among other things, slow the sale to overseas interests of companies engaged in tech and biotech, as well as emerging forms of AI and intellectual property.
My concern today is not with the Bill but with government Amendment 3 and its associated provisions, which, as we have heard, raise the threshold, from 15% to 25%, at which investors are required to notify the Government of their deals. I know this is done for apparently good reasons, summarised by the noble Lord, Lord Clement-Jones—notably to avoid needless blockages and queues of deals awaiting approval in the new unit at the Department for Business, Energy and Industrial Strategy, my old department—but I believe it is the wrong call. No doubt the ARM deal would have been caught by the new rules anyway, but less radical deals might not. I believe that it would be better to invest more in administration at the business department, to keep the threshold as it is and to improve the incentives to discipline and speed in processing of applications.
This is such an important matter for our future that we should not skimp on the new unit, which should be staffed by top people with the ability to work at speed. My noble friend Lady Noakes and others have rightly expressed concerns on this score, which I will support later. It would be a tragedy if this new Act were undermined by administrative inadequacy.
If we are to flourish in this more competitive and dangerous world, we need to prevent British science, technology and intellectual property leaving these shores without anyone noticing or reviewing it. We need thorough scrutiny of the deals identified in this Bill, so, for me, Amendment 3 goes too far and I would find it difficult to support the Government if the House chose to divide.
My Lords, I am delighted to speak on Report. I congratulate my noble friend Lord Leigh on raising this persistently and so eloquently at earlier stages of the Bill. I congratulate my noble friend the Minister on listening to and acting on the concerns expressed across the House at that stage by bringing forward the amendments that he has today.
I particularly associate myself with Amendment 8, to Clause 8, in the name of my noble friend Lord Hodgson of Astley Abbotts. I would like to press the case a little further with my noble friend the Minister and ask that we pause for a moment at this stage and ensure that we are not going to scare off potential large investors with an increase in referrals that perhaps could not be managed or see a deterrence to potential investment, therefore possibly damaging the economy.
The way in which I would like to press my noble friend the Minister follows on from what my noble friend Lady Neville-Rolfe said in her opening remarks just now as to what extraneous factors may be taken into account that could damage potential investment in this country. Those further factors that I ask my noble friend to rule out have been put forward at earlier stages by the Law Society of England, which I supported in Committee and repeat in connection with Amendment 8 here.
Can my noble friend clarify and give greater certainty as to what constitutes national security? Will he specifically rule out extraneous factors such as employment effects, reciprocal investment and trading opportunities in other jurisdictions and a desire to protect UK business from international competition as factors that would be taken into account when assessing whether a trigger event would give rise to a national security risk? In terms of Amendment 8 and our earlier discussions, it would give clear guidance to those practitioners at this stage if we could rule out that those extraneous factors would ever constitute a potential national security risk.
My Lords, we have had a short and interesting debate. Speaking to Amendment 2, the noble Lord, Lord Lansley, has as ever uncovered an incongruity in the way the Bill is drafted. I suggest the Government are wise to listen to his advice. Similarly with Amendment 8, there is a need for clarity for people. Where do they stand on this issue? That is all people deserve when trying to manage their affairs.
We then come to the extraordinary intervention of the noble Baroness, Lady Neville-Rolfe. It is a shame that she was not around to give a Second Reading speech, which perhaps might have guided us through some of our decision-making, and arrived only at this late hour to offer her help. I suspect that, had she involved herself a little earlier, she might have been less concerned with the issues than she is now. For fear of doing the Minister’s work for him, I ask him to confirm that the regime retains the right to call in deals that are less than 25% at any time. The notion that there are deals that the regime may not see is one of the points inferred by the noble Baroness, Lady Neville-Rolfe.
This is the point: the unit has to be sufficiently resourced and efficient in its work to be able to pick these issues up. We shall talk later about where it gets its information and how the security guidance is fed in, because that comes under another group of amendments. However, with all the issues coming through, the point is how well the regime is actually operated; the noble Baroness, Lady Noakes, has mentioned this on many occasions. That will be the rub, in terms of how business will be affected by the Bill. The more the Minister can reassure us that the resources will be there to deliver this, the happier most of us will be.
My Lords, we remain committed to the principles of the Bill, and join others in thanking the Minister and his team for the way they have conducted discussions with us to resolve any issues on the Bill. One of the issues that remains involves the extensive adventure of the unit into the business environment. In Committee, my colleague and noble friend Lady Hayter introduced an amendment to delete Clause 6(2)(b), and asked why the Government wished to make subject to mandatory notification all acquisitions that resulted in only a minimum 15% stake in an entity. We consider that disproportionate. The noble Lord, Lord Leigh, also spoke passionately on the point, as did several other noble Lords. My noble friend apologises because, understandably, she cannot take part in these proceedings today.
However, it is to be welcomed that the Government have heeded the concerns about the unnecessary impact on businesses and the largely intrusive workload for the new ISU section in the department. Government Amendment 3, together with the consequential amendments in this group, would remove the 15% threshold for notifiable acquisitions from the regime. Throughout the proceedings on the Bill, we have been concerned about the impact on businesses, especially in the SME sector, and the huge workload that the Bill would create. That government concession goes a long way towards meeting those concerns.
The Government will still be able proactively to call in transactions involving acquisitions under the 25% threshold of shares or votes if such an acquisition could be deemed to result in “material influence”. However, the ISU would be notified only of transactions most likely to raise national security risks in the most sensitive sectors of the economy. This is plainly sensible. The removal of the 15% threshold will also remove unnecessary impediments to investments in smaller start-ups and enterprises, which might have concerns about hitting the 15% threshold.
Initially the Government reckoned that the new screening regime would result in about 1,800 notifications per year. We expressed scepticism at that estimate, as did several others, including the CBI. Whatever would have been the result, have the Government now recalculated how many notifications the department is likely to receive, having deleted the 15% threshold? I would be grateful if the Minister could give the House the new figure, with any further explanations as to its determination. It would be useful to reflect on it, in the light of the experiences of the unit that are to come.
I am grateful, too, to the noble Lord, Lord Hodgson, for his Amendment 8, which redrafts Clause 8(6). I understand very well the point he is making, and I await the Minister’s reply.
I am grateful to noble Lords for an interesting debate, and I am particularly grateful to my noble friends Lord Lansley and Lord Hodgson for their respective amendments in this group concerning the scope of the regime. I will turn to those in a moment, but let me start with a few remarks on the amendments in my name.
Debates on the Bill, both in this House and in the other place, have reflected that there is a strong degree of cross-party consensus on its underlying principles. I am grateful to the Opposition for making that clear. All sides agree that reforms are necessary to keep the country safe and to bring our investment screening powers in line with our friends and allies. There has also been a shared recognition that the requirements of the mandatory regime must be no more than are necessary and proportionate for the protection of our national security, so that business and investment are not unduly burdened or stifled.
The noble Lord, Lord Fox, put it well in Committee when he reminded us that the clue is in the name. This is the National Security and Investment Bill, and it is vital that we secure both these interests. To that end, the Government have reflected carefully on the scope of the mandatory regime and, in particular, on the comments made by a number of noble Lords in Committee on the 15% starting threshold. I pay particular tribute to the noble Baroness, Lady Hayter, who raised this—and who is, I am pleased to see, in her place, taking a break from her “get out the vote” campaign. Perhaps she would be better advised to be getting out the vote, but I am grateful that she has joined us. I am also grateful to my noble friends Lord Leigh and Lady Noakes, the noble Baroness, Lady Bowles, and the noble Lord, Lord Fox, who all spoke powerfully in support of her amendment.
The Government have concluded that the right approach is indeed to remove acquisitions between 15% and 25% from constituting “notifiable acquisitions”; Amendment 3 gives effect to this decision. We recognise that acquisitions between 15% and 25% will not result in material influence being acquired as a matter of course. Indeed, in many cases, we anticipate that material influence will not be acquired. We have always sought to ensure that the mandatory regime is reasonable and proportionate, and this is an important change, which I believe businesses and investors alike will welcome. I hope that it will reduce the business burden and allow the investment security unit to focus on notifications and cases that will necessarily result in control being acquired.
Let me make two further points on this amendment. First, there may be some noble Lords—my noble friend Lady Neville-Rolfe was one, I believe—who will say that this is a weakening of the regime. Let me explain why I do not believe that that is the case. As the noble Lord, Lord Fox, pointed out, the Secretary of State will continue to be able to call in acquisitions across the economy at or below 25%—and, indeed, if necessary, below 15%—where they reasonably suspect that material influence has been or will be acquired. That call-in power will be available up to five years after an acquisition takes place, so the incentive for parties to notify cases of material influence that may have national security implications remains, in order to achieve deal certainty. The five-year period also provides the Government with a significant window to identify acquisitions of concern and for the Secretary of State to call them in for scrutiny.
Secondly, the Clause 6 powers enable the Secretary of State to amend the scope of the mandatory regime through regulations. Notwithstanding this amendment, that would include the ability to introduce, if necessary, a 15% threshold or, indeed—assuming the will of Parliament, of course—any other threshold that would be relevant to determining whether a trigger event would take place, for mandatory notification in future if that is considered appropriate. The Government do not currently envisage doing so, but I am sure that noble Lords will agree that it is important that the Bill provides the power to do so, subject to the will of Parliament, if the evidence of the regime in practice suggests that this matter should be revisited. I hope that that reassures my noble friend Lady Neville-Rolfe.
Amendments 4, 5, 10 and 21 are all consequential amendments that reflect the removal of the 15% threshold, so I do not intend to dwell on them further.
I now turn to the other amendments in this group. Amendment 2 in the name of my noble friend Lord Lansley would make the acquisition of material influence a notifiable acquisition. I have to say that, in his speech, my noble friend did such a good job of advocating for the Government’s position on his own amendment that perhaps we should welcome him back to the Front Bench at some stage; actually, he would probably make a better job of it than me.
The Government do not consider that broadening the scope of the mandatory regime to material influence would be appropriate. The mandatory regime, given that it is underpinned by voiding and criminal and civil sanctions, must be defined with sufficient certainty for acquirers to determine their obligations objectively.
Material influence is, by its very nature, subjective and will depend on the facts of an individual case. The level of shareholding, the number of board seats, the other rights to be acquired, and the status and expertise of the acquirer are all examples of the factors which will be relevant to whether material influence will be acquired. The regime must, of course, enable the Secretary of State to be able to call in such cases where they may pose a national security risk, but that is clearly a different proposition from mandatory notification.
Amendment 8 in the name of my noble friend Lord Hodgson seeks to narrow the third case of control in Clause 8 to protect minority rights. The third case currently captures the acquisition of voting rights in the entity that enable the person to secure or prevent the passage of any class of resolution governing the affairs of the entity. His amendment would mean that acquisitions of such voting rights would be captured only if they enabled the passing or prevention of a resolution in respect of any matter governing the affairs of the entity that is equivalent to a matter that can be passed by ordinary or special resolutions under the Companies Act 2006. I listened carefully to my noble friend’s comments on this matter during Grand Committee, but the Government continue to consider that the Bill already broadly achieves his aim.
I take the example of where a person acquires preferred shares which provide the ability to prevent a resolution of that class of shares in order to protect their investment or minority rights and does not provide the ability to vote on all or substantially all matters at a general meeting. This would not constitute an acquisition of control within the meaning of Clause 8(6), as subsection (7) sets out that a reference to voting rights is to the rights conferred on shareholders in respect of their shares to vote at a general meeting of the entity on all or substantially all matters. I emphasise to my noble friend that limited veto rights are unlikely—in our view—to meet that threshold so their acquisition would not be notifiable or, indeed, a trigger event at all. I hope that reassures my noble friend and that this amendment can therefore be withdrawn.
I have received a request to ask a short question for elucidation from the noble Lord, Lord Leigh of Hurley.
I suppose I should say that modesty had forbidden me from putting my name down for this group. I wanted to have a point clarified and to thank the Government for listening to the Back-Benchers. I think it was fairly random that I took the 15% point: I cannot remember how it was allocated. I thank the Minister for listening to the many people who made representations.
In respect of the point from the noble Lord, Lord Lansley, about the fourth case—Clause 8(8)—we debated this and I think I raised the question at the time as to what influencing the policy of the entity means. To return the compliment to the Government, I agree with them in this instance because if we had Clause 8(8), I can see a lot of discussion and debate as to the meaning of enabling a person to materially influence “the policy”. We discussed the meaning of this at length. I return the compliment and agree with my noble friend the Minister.
My Lords, it has been a helpful debate, not least from the point of view of helping those—I imagine that over time, there will be more of them than we imagine—who will look back and ask what the intentions were behind the Bill as it was brought forward. If I perhaps can say by way of comfort to my noble friend Lady Neville-Rolfe, the point that we have discovered going through the Bill is that there are two tracks here—I confess that my Amendment 2 was tabled originally not quite getting that point. First, there is mandatory notification, which is required in respect of a notifiable acquisition, so the definition of notifiable acquisition needs to be specified very clearly. Then there is voluntary notification but also the power of Ministers to call in any transaction. That is precisely the point that the noble Lord, Lord Fox, made very clearly and which my noble friend on the Front Bench reiterated.
The common theme here is that taking out the 15% threshold and, indeed, not including the material influence test in notifiable acquisitions, means that it is not subject to a mandatory notification requirement. As my noble friend said, we should not ignore the fact that under Clause 13(1):
“A notifiable acquisition that is completed without the approval of the Secretary of State is void.”
The risk associated with an unclear boundary between what is notifiable and what is not is that potentially large numbers of acquisitions that should be notified are not and therefore those transactions are void. We do not want to arrive at that position. We want people who run the risk of their transaction being a notifiable acquisition either being captured by the mandatory requirement or voluntarily notifying. Frankly, for many people voluntary notification will probably be the better and simpler resort.
Taking out the 15% threshold does not mean, in any sense, that those transactions are taken out of the scope of the regime but simply means that they are dealt with within the regime in a more flexible manner than would be the case through the mandatory notification requirement. Some of the press reports I have seen about this slightly miss the point. This is not a hard-and-fast threshold. It is a threshold for mandatory notification, not voluntary notification. The regime still applies.
My noble friend very helpfully responded to my Amendment 2 in precisely the way that I anticipated and quite correctly and, on that basis, I beg leave to withdraw Amendment 2.
Amendment 2 withdrawn.
Amendments 3 to 5
3: Clause 6, page 4, line 17, leave out paragraph (b)
Member’s explanatory statement
This amendment has the effect of omitting a category of notifiable acquisitions from the scope of the mandatory notification regime, namely where a person acquires a right or interest in a qualifying entity such that their shareholding or voting rights in the entity increases from less than 15% to 15% or more.
4: Clause 6, page 4, line 22, leave out from “14(1)” to “would” in line 23
Member’s explanatory statement
This amendment and the amendments at page 4, line 42, page 8, line 30 and page 21, line 7 are consequential on the removal of Clause 6(2)(b).
5: Clause 6, page 4, line 42, leave out subsection (8)
Member’s explanatory statement
See the explanatory statement to the amendment at page 4, line 22.
Amendments 3 to 5 agreed.
We now come to the group beginning with Amendment 6. Anyone wishing to press this, or anything else in this group, to a Division, must make that clear in debate.
6: Clause 6, page 5, line 3, at end insert—
“( ) In making regulations for the purposes of this section the Secretary of State must have regard to the risk to national security posed by climate change and to the role of qualifying entities and assets in mitigating that risk.”Member’s explanatory statement
This amendment would require the Secretary of State to have regard to the risk to national security posed by climate change when making regulations relating to notifiable acquisitions.
My Lords, at the very end of the third day of Committee your Lordships had a short debate around the impact of climate change on national security. On these Benches, our view is that this is still not considered appropriately by the Bill as it is currently drafted. Climate is also possibly missed in some of the 17 technologies; I guess we will have a chance to debate that when the detailed list arrives formally. Infrastructure issues are also somewhat neglected, as we have heard on some occasions, not least from the noble Baroness, Lady Noakes, opposite.
During that debate, I suggested that the best route might not be a lengthy definition of national security, which included a part for climate change. Rather, I suggested, something that focused on Clause 6 might be a better approach. This amendment is the response to that suggestion. Amendment 6 in my name would require the Secretary of State to
“have regard to the risk to national security posed by climate change”
when making regulations relating to notifiable acquisitions. I am grateful to the noble Lord, Lord Grantchester, and to the noble Baroness, Lady Bennett of Manor Castle, for their signatures and, of course, to my noble friend Lord Clement-Jones.
It is quite clear that climate change is already causing national security issues. We have only to look at climate-inspired migration crises, which are hitting many countries, and the related security issues that arise from that mass migration, to appreciate the nexus between these two issues. It is also clear that, when it comes to meeting these challenges, access to both technologies and the raw material to deliver those technologies are crucial to our national response to the climate change threat. Further, the ownership of key infrastructure which will, I hope, help to deliver a zero-carbon footprint will be a matter of concern going forward.
All of this could implicitly fall within the remit of the Bill, and I accept that. This amendment calls for a more explicit recognition of the potential for climate change—which, in my view, includes biodiversity—to affect national security, and that is what I am looking for from the Minister today.
The Minister has previously indicated his allergy to “have regard” amendments, notwithstanding the fact that there are such clauses in Bills that the Government have asked your Lordships to approve from other departments, so perhaps this allergy is simply reserved for the BEIS area. But, recognising this, I ask the Minister, and expect him to explain, why this amendment would contaminate this Bill, because the Government have voiced their concerns around climate change, and it is easy to make that connection in some cases.
At the very least, I think it is possible for the Minister to acknowledge that climate change and its influence will be one of the factors that should be taken into consideration when making regulations related to notifiable acquisitions. I think that he could find his way to confirming that the technology and raw material issues that I set out earlier would also be on the investment unit’s checklist, because they are important elements of national security. I remain hopeful that the Minister will be able to do that while, of course, retaining the option of putting my amendment to a vote. I beg to move Amendment 6.
Amendment 7 (to Amendment 6)
7: After “climate change” insert “and biodiversity loss”
My Lords, as this is my first contribution to Report stage of this Bill, I make reference to the Law Society briefing. In summary, it expresses concerns about the Bill’s lack of a clear definition of national security, the definition of qualifying entities and assets, and the procedure for voluntary and mandatory notifications— the whole Bill then. There are grave concerns about the degree to which this has been thought through, through no fault of anyone here in this debate—a small number of people have put in a huge amount of often detailed work. On this point, it is right to note how appropriate it is that the noble Lord, Lord Lansley, opened the debate on Report. I ask noble Lords to forgive me if anything in my speech today is unclear, since I am still in recovery from a minor bit of dental work this morning.
I speak now to Amendment 6 in the names of the noble Lords, Lord Fox, Lord Clement-Jones and Lord Grantchester, to which I have attached my name, making it truly cross-party. It requires the Secretary of State to have regard to the risk to national security posed by climate change when making regulations relating to notifiable acquisitions. I also beg to move Amendment 7 and speak to Amendment 38 in my name. Amendment 7 adds “biodiversity loss” to the matters posing a risk to national security that the Secretary of State must have regard to when making regulations relating to notifiable acquisitions. Amendment 38 in some ways ties this all together, along with other matters, stating that:
“Within 6 months of the passing of this Act the Secretary of State must publish a statement which outlines how provisions in this Act will align with the United Kingdom’s long term security priorities and concerns which have been identified in the Integrated Review of Security, Defence, Development and Foreign Policy.”
That amendment is a repeat of an amendment in Committee—tabled by the noble Baroness, Lady Hayter of Kentish Town, and signed by the noble Baroness, Lady Northover, and myself—which has been only minorly updated to take account of the publication of the integrated review.
In introducing this group, the noble Lord, Lord Fox, has already spoken clearly and eloquently on the way in which the climate emergency is a national security issue. I note his focus on the list of technologies, which he has kindly offered to work with me on. I have not yet managed to get to that, but I will, and I very much appreciate his offer. I can also go to the Prime Minister’s foreword to the integrated review, which states:
“Her Majesty’s Government will make tackling climate change and biodiversity loss its number one international priority.”
I know that there are now few Members of your Lordships’ House who would at least actively deny the issue of the climate emergency. That does not include, I hope, any members of the new Environment and Climate Change Committee. Therefore, I will focus my remarks primarily on Amendment 7, which adds the concern about biodiversity to that of climate change. I might for completeness have made this amendment refer to planetary limits as a sustainable development goal-informed way of addressing the multiple national security threats from environmental degradation, social inequality and poverty, but this is at least a step along the way towards genuine systems thinking in our legislation.
I am aided by the publication this morning of a report in the journal Frontiers in Forests and Global Change, which finds that just 3% of the world’s land remains ecologically intact, with healthy populations of its original animals and undisturbed habitats. Previous estimates had been as high as 20%—now 3% of land is in decent, original condition. The more we come to understand about this planet, of which we still have so little knowledge, the more that the damage that we have done becomes evident. Those fragments of wilderness undamaged by human activities are mainly in the Amazon and Congo tropical forests, eastern Siberia, northern Canadian forests and tundra, and the Sahara. None of those is in the UK. Indeed, the UK ranks as one of the most naturally degraded nations on the planet, at 189 out of 218 nations in the independent State of Nature report. Restoration of land—for example, our upland peatlands—is something that our security very clearly depends on, whether in terms of climate, flooding or biodiversity. But, of course, there are British companies that are likely to have influence on the remaining untouched 3% of our landmass.
None the less, I can almost feel from a distance some Members of your Lordships’ House bristling, “What does this all have to do with national security?” I would argue that there is nothing more crucial to human security—national security—than the state of nature, including the state of our climate. If noble Lords do not want to listen to me, they might want to listen to the Nobel Peace Prize committee, which gave its award to the environmentalist Wangari Maathai back in 2004. Of course, she was most famous for tree planting. To make the obvious point, the very air you breathe today, the existence of life on this planet, is due to the process of photosynthesis in plants—due to nature. All the food that we eat also depends on that very same process, and it is the source of the genetics of all our current crops.
I briefly cite another recent academic study, in Global Change Biology, which demonstrates how existing crops have been greatly damaged by decades of industrial agriculture and breeding for yield, not resilience, and highlights the need to retain and support wild relatives of crops as a source for future cross-breeding to restore them. Or, to focus on something that your Lordships’ House must have at the forefront of its mind, there is also the massive ongoing threat of the SARS-CoV-2 virus. That emerged out of disturbed nature—the zoonosis threat that all the experts tell us is accelerating because of our destruction of nature.
Finally, I return to Amendment 38, which calls for a report in six months’ time on how this Bill relates to the integrated review. Again, we are talking about systems thinking, joining up different parts of government, seeing how they fit together and subjecting that to democratic scrutiny and oversight. We will debate that review next week, so I will not venture here in depth, but lots of the commentary on it has said that it identifies the problems clearly but fails to make choices between difficult alternatives—something that this amendment could help with in creating an opportunity for the House to consider those and to force the Government to confront them.
It is not my intention to test the opinion of your Lordships’ House on these two amendments. There will be ongoing debate and discussion, but I am confident that we will see climate change, biodiversity, sustainable development goals and systematic joined-up thinking at the absolute heart of our national and international security in future. I very much hope that in the future, we will look back and see that we made the right choices today, because there is no doubt at all that, in the climate emergency and the biodiversity crisis, we are right at the crunch point where action is needed.
My Lords, in Committee we debated the climate emergency as the most pressing issue that affects every aspect of everyday life. The climate crisis is not only a threat in the long term to our survival and that of the planet but a threat to security in the short to medium term. According to the Government’s own statistics, nature loss will result in a cumulative economic cost of up to £10 billion between 2011 and 2050. While the Minister may say that climate change is not directly connected to the national security and investment regime proposed in the Bill, actions by hostile actors that stifle our modern green infrastructure can only make us more vulnerable. As the former civil servant Paddy McGuinness has recently said, green networks
“provide an attractive opportunity for an adversary to unbalance, intimidate, paralyse or even defeat us."
I am grateful to the noble Lords, Lord Fox and Lord Clement-Jones, and the noble Baroness, Lady Bennett, who have returned with simple “must have regard to” wording in Amendments 6 and 7 regarding climate change and biodiversity loss. Of course, all Governments will have regard to all legislation on the statute book that impacts on our activities and lives. Nevertheless, it is imperative that the risks of climate change be recognised in the new regime being initiated through the Bill, and the Secretary of State must consider how to mitigate these deepening risks.
I am grateful to the noble Baroness, Lady Bennett, for retabling our Amendment 38 from Committee, which asks for a statement to be made on emerging threats in the light of priorities identified in the Integrated Review of Security, Defence, Development and Foreign Policy. It allows me to follow up with some further questions on the integrated review and its associated documents.
Can the minister provide an outline of how the ISU will work effectively with the MoD directorate for economic security? It is all very well to say that the ISU will be drawing on the expertise in the MoD and the Defence Secretary will be able to make representations to the Business Secretary, but what mechanisms will be set up to co-ordinate across departments? Will there be a mechanism whereby the MoD directorate can give advice directly to businesses in a defence and supply chain through policies initiated from the ISU in the business department, especially in connection with technologies and future associated threats? It would be helpful if the Minister could respond or follow up with a letter in due course.
I am grateful once again to the noble Lords, Lord Fox and Lord Clement-Jones, and the noble Baroness, Lady Bennett—I am particularly grateful that she has joined us after her dental work and of course we wish her a speedy recovery—for their respective amendments in this grouping.
With the permission of the House, I will take Amendments 6 and 7 together. Amendment 6 seeks to require the Secretary of State to
“have regard to the risk to national security posed by climate change”
when preparing secondary legislation under Clause 6 in relation to the scope of the mandatory notification regime. Amendment 7 then seeks to amend Amendment 6 to require the Secretary of State to also have regard to the risk to national security posed by biodiversity loss.
I commend the sentiment of the amendments regarding tackling climate change. As I set out in Grand Committee, this Government are of course committed to tackling the climate crisis. I can also confirm, in response to the amendment of the noble Baroness, Lady Bennett, that, just as the Prime Minister has said in his foreword to the integrated review, biodiversity loss very much sits alongside that as the UK’s top international priority. The Government continue to promote co-operation on climate action through the UK’s G7 presidency, and we look forward to the COP 26 conference in November, which will allow us to highlight our leadership in tackling the climate crisis, including biodiversity loss.
However, the Bill is focused on the risks to our national security posed by the acquisition of control over qualifying entities and assets. As the noble Lord, Lord Fox, correctly predicted, we are therefore unable to accept amendments seeking to set out what is or is not a factor to be considered when looking at national security, including factors relating to climate change and biodiversity loss, without edging closer to defining it—which, as he knows, we are reluctant to do. I hope that having my comments on the record in response to these issues provides due assistance to noble Lords. I can further reassure them that, as drafted, the Bill provides the flexibility for the Secretary of State to consider all types of risk to national security that are relevant in the context of this regime, including those that are environmental in nature.
I thank the noble Baroness, Lady Bennett, for her Amendment 38, which seeks to ensure that the national security and investment regime is consistent with the recently published integrated review. I note that a similar amendment was tabled in Grand Committee by the noble Baronesses, Lady Hayter and Lady Northover. However, whereas that amendment asked for a report
“as soon as reasonably practicable”,
the noble Baroness, Lady Bennett, has opted for “within six months”. As noble Lords will be aware, the integrated review provides a comprehensive articulation of the UK’s national security and international policy. It outlines three fundamental national interests: sovereignty, security and prosperity.
I understood the benefits of an amendment in Grand Committee when the Government had not published the integrated review but, now that we have, the alignment is clear for all to see. For example, the NSI will be tremendously valuable in countering state threats, in maintaining the UK’s resilience and in helping us to work with and learn from our allies, to name but a few areas of alignment. Indeed, as noble Lords would expect, this Bill is explicitly referenced within the review.
As noble Lords will know, the National Security and Investment Bill will prove a key tool in enabling the UK to tackle its long-term security concerns and pursue its priorities. The Bill will create carefully calibrated powers for the Secretary of State to counteract concerns around acquisitions and the flexibility to respond to changing risks and a changing security landscape. As part of this, the regulation-making powers in the Bill allow the Secretary of State to keep pace with emerging threats as they arise, such as by enabling them to update the sectors covered by mandatory notification.
Therefore, for the reasons that I have set out, I do not see a strong case for the amendments and I very much hope that their proposers will feel able to withdraw them.
Amendment 7 (to Amendment 6) withdrawn.
I thank noble Lords for that debate and I thank the Minister for his response. It was entirely predictable, as I think the noble Lord, Lord Lansley, who has just slipped out, said when we discussed the previous group.
What I heard the Minister say—
“types of risk … including those that are environmental in nature”—
was slightly more explicit than what is in the Bill. My sense when the Minister talks about long-term security is that the technology needed to maintain or further our fight against climate change will increasingly become a long-term concern. I suspect that this unit will find itself embroiled in calling in transactions that indeed concern the environment because they deal with technologies that are environmental in nature.
I will think again on this issue, and obviously I will read Hansard to make sure that I have got the words correct, but in the meantime I beg leave to withdraw the amendment.
Amendment 6 withdrawn.
Clause 8: Control of entities
Amendment 8 not moved.
We now come to the group consisting of Amendment 9. Anyone wishing to press this amendment to a Division should make that clear in debate.
9: Clause 8, page 6, line 38, at end insert—
“( ) For the purposes of this Act, a person does not gain control of a qualifying entity if the person acquires a right or interest in or in relation to the entity—(a) solely by way of obtaining security; and(b) in a situation where they obtain no effective control.”
I thank noble Lords. Amendment 9 is self-explanatory:
“Clause 8, page 6, line 38, at end insert—
“( ) For the purposes of this Act, a person does not gain control of a qualifying entity if the person acquires a right or interest in or in relation to the entity—
(a) solely by way of obtaining security; and
(b) in a situation where they obtain no effective control.”
The purpose of this is to ensure that transactions constitute a trigger event only where the person gains actual control of a qualifying entity and, very specifically, to exempt Scottish share pledges or other situations where no effective control is obtained. I moved a previous amendment in Committee, and I thank the Law Society of Scotland, which has drawn this matter to my attention. I thank both Ministers, the noble Lords, Lord Callanan and Lord Grimstone, for engaging with me, the noble Baroness, Lady McIntosh, and representatives of the Law Society of Scotland to discuss this issue, which the Law Society still feels has not been satisfactorily addressed by the Government. Obviously, this amendment would be an attempt to ensure that it was.
There is a particular point about Scots law. The amendment is intended to exclude a situation whereby the sole fact of pledging shares in security, under Scots law, would be classed as a trigger event. A Scottish shares pledge does not allow a security holder to exercise effective control over the relevant shares in a Scottish company. The primary concern is that the current proposal suggests that a trigger event would take place in a situation where no control has in fact passed. The Ministers will be aware that not only did we exchange very useful views in discussion in meetings— I repeat, we are grateful to the Ministers for engaging with us—but the Law Society president then wrote to the noble Lord, Lord Grimstone, copying in the noble Lord, Lord Callanan, to express the concern that there was still an outstanding issue that needed to be addressed. As set out in the letter, the Bill as currently drafted fails to align with clear statutory precedents for treating shares that are the subject of Scottish share pledges as still being controlled by the pledger. For example, there is the definition of “subsidiary” in Section 11(59) of the Companies Act 2006, as supplemented by paragraph 7 of Schedule 6 to that Act. That reference obviously comes from the Law Society and not from me. This would create a disparity between Scotland and England—that is the real concern —and could make it harder for Scottish companies to obtain loan finance, as well as disincentivising potential investors from establishing vehicles under Scots law.
The amendment would ensure that a trigger event was recognised at the point at which the transfer of control actually occurs. In doing so, it would enhance the ability of the Secretary of State to carry out a national security assessment and impose any safeguards, but at the most appropriate point.
The Law Society, very helpfully, has set out a hypothetical example reflecting what it would say is a common, real-life scenario. For the purposes of this, it is control over company C which gives, or may give, rise to national security concerns. The situation is this: company A is seeking to raise finance, by way of a loan, and approaches bank B. Bank B agrees to lend the money against security over the shares held by company A in its wholly owned subsidiary, company C. Under current Scots law, the only way to obtain fixed security over shares is by way of a share pledge, with the shares being transferred to bank B or its nominee. As such, it can be said that bank B holds the shares, as per Clause 8(2)—that is, the bank holds 100% of the shares in company C. However, holding the shares in this scenario is not ownership in the true sense, and does not give the security holder effective control. Bank B will be unable to sell the shares, has no right to be paid dividends, has an obligation to immediately retransfer the shares on the money secured being repaid and, most importantly, will be unable to exercise voting rights, other than in conformity with company A’s wishes. In practical terms, company A therefore remains in full control of company C, and bank B is not, in fact, in a position of control.
In the previous debate, Schedule 1 was acknowledged and it appears to address the issue, recognising a scenario where a person grants security over shares but continues to exercise de facto control. However, the clarification refers to rights attached to shares, rather than the holding of the shares. Therefore, it does not fully account for the different situation, where a lender becomes the registered holder of shares in security. That has been the case with a share pledge in Scotland and has been standard Scottish legal and business practice since the 19th century. This is different from English law because, by way of comparison, under an English charge over shares this situation just simply does not arise, because no formal transfer of the charge shares is required to perfect the charge. In the parallel English scenario, the same relationships of control or lack of control exist but—this is crucial—no trigger event is recognised. The disparity between the situations in Scotland and England is one of real concern, which has been highlighted. It is not only prejudicial to existing Scottish businesses, by increasing obstacles to obtaining finance, but risks making Scotland less attractive as a jurisdiction in which to establish a business vehicle. I do not need to remind your Lordships how important the financial services sector is to Scotland. Indeed, Scotland’s contribution to the UK economy is disproportionately large in this sector. So, in project financing, investors could prefer an English vehicle, if this makes it easier to obtain funding. The practical effect is that long-established Scottish legal and business practice is being treated adversely compared to its English counterparts. I am sure that is not the intention of the Government or Ministers, but that remains a continuing concern of the Law Society of Scotland.
Acquisitions will, of course, be notifiable only in relation to the listed sectors. However, it is not the notification requirement per se that poses the risk to the ability of Scottish business to access finance. As identified in the context of the PSC, lenders are reluctant to enter into arrangements that suggest that they have control over an entity when this is not the case. The breadth of the call-in power, the potentially broad scope of national security concerns, means that many transactions may be called in for up to five years after the event has taken place. This creates uncertainty, and uncertainty, of course, opposes a commercial risk. The potential for transactions to be called in after the event in other sectors, may ultimately have a greater impact by disincentivising lenders. I hope the House is clear that this is a point of real and substantive concern.
In real life, it is very unlikely that bank B would seek to appropriate the shares in company C, in the scenario I outlined earlier. The most common scenario, following an event of default, would be for bank B to notify company A that it was going to enforce the security, and then sell the share in company C to repay the debt. The sale of the shares in company C to another purchaser—purchaser P—would constitute a trigger event under Clause 5. There is also the potential that bank B would decide instead to retain the shares. Having given notice to company A, bank B would therefore, at that point, enter into control of company C, acquiring all voting rights, dividend rights and the ability to sell the shares. That is the point at which the trigger event should occur. Entering into control of the shares following a default could indeed be specifically recognised as a trigger event, but that scenario is already suitably covered by Clause 8(2).
In a situation where company C falls within one of the 17 listed sectors, bank B’s acquisition of control would be recognised only if the appropriate notification had been given. In a situation where the Chancellor was not compulsorily notifiable, the five-year call-in period would begin to run at the point bank B assumed control. This could give the Secretary of State a longer timeframe in which to assess any risks posed by ownership of the shares vested in bank B. Notice of bank B’s interest would appear as a matter of public record, subject to the default occurring after the annual return showing that the share pledge had been taken. That would all happen long before bank B was able to take control. For these reasons, there is no real risk of hostile actors targeting lending arrangements as a means to gain control of national security-sensitive entities. The Secretary of State would retain discretion over available remedies, which could be applied at the appropriate time.
Nothing in the remarks that I have just made will come as a surprise to Ministers, because it has been set out in detail in a letter from the president of the Law Society of Edinburgh, addressed to the noble Lord, Lord Grimstone, and copied to the noble Lord, Lord Callanan. I hope that the Minister will acknowledge that there is an outstanding point of concern. As I say, we are all grateful to the Minister for engaging with us and showing understanding that this is a real issue.
None of us is of the view that there is any intention to put Scotland and Scottish businesses at a disadvantage, but, without this amendment or some comparable amendment that the Government might agree to or introduce, there remains a real possibility of discrimination against Scottish financial services and investment businesses, which would be politically awkward and embarrassing as well as practically damaging to the interests of both Scotland and the United Kingdom sector. I hope that the Minister can acknowledge that this issue needs to be addressed head on and that assurances can be given that the concerns outlined will not actually take effect. I beg to move.
My Lords, I am delighted to speak in support of, and to have co-signed, Amendment 9. I am grateful to the noble Lord, Lord Bruce of Bennachie, for moving and speaking to the terms of the amendment so thoroughly. I also echo his thanks to the Law Society of Scotland for highlighting this issue at Committee stage and bringing forward this amendment for Report. I also thank my noble friends Lord Grimstone and Lord Callanan for the time that they spent with the noble Lord, Lord Bruce of Bennachie, me and members of the Law Society of Scotland going through the issue with us. I remind the House that I am a non-practising member of the Faculty of Advocates.
This is quite a sensitive time to be raising this matter, mindful of the fact that elections are going on in Scotland—they will be held on 6 May—so I am sure that it is not the intention of a British Government whom I overwhelmingly support to seek to disadvantage Scotland at this time. We are here to assist the Government and bring to their attention the ramifications of the preventions of the Bill currently before us. Amendment 9, so eloquently moved by the noble Lord, Lord Bruce of Bennachie, would simply ensure that transactions constitute a trigger event only where a person gains actual control of a qualifying entity—and to exempt Scottish share pledges in relation to other situations where “no effective control” is obtained.
Of all the comments made by the noble Lord, Lord Bruce, I echo the comparison that he made with English law, which could cause some confusion and has perhaps led to this regrettable situation. Of all the things that I recall from the conversation that we had on the call with my noble friends the Ministers, I want to impress on the Government that this is not just an issue but potentially one of some magnitude—my noble friend Lord Callanan seemed not to grasp that during the call, so I pause to emphasise it to him.
By way of comparison, under an English charge over shares, this situation does not arise, because no formal transfer of the charged shares is required to perfect the charge. In the parallel English scenario, the same relationships of control or lack thereof exist, but no trigger event is recognised. I am sure that this is just an unfortunate situation that has arisen, which is why it is timely to bring it to the Government’s attention today. The disparity between the situations in Scotland and England is one of the concerns that we seek to highlight as not only being prejudicial to existing Scottish businesses and increasing obstacles to obtaining finance but risking making Scotland less attractive as a jurisdiction in which to establish a business vehicle. I support all the comments that the noble Lord, Lord Bruce of Bennachie, made.
In the spirit of openness, as this is an extremely technical issue—I can quite understand if my noble friends perhaps do not fully grasp the situation in which we find ourselves—I have taken the opportunity to bring it to the attention of the Advocate-General, my noble and learned friend Lord Stewart of Dirleton, who will fully consider the ramifications. As such, I have every confidence that, before the Bill leaves this place, full and due consideration will be given to Amendment 9 and what we are seeking by moving it today.
I thank the noble Lord, Lord Bruce, and the noble Baroness, Lady McIntosh, for looking critically at the legislation in relation to Scotland and its legal approach. Clause 8 defines the circumstances in which a person gains control of a qualifying entity, thus constituting a trigger event that may be subject to assessment under this regime. Throughout this process, we have stressed the importance of clarity on who qualifies for assessment under the regime.
Amendment 9, tabled by the noble Lord, Lord Bruce, aims to ensure that transactions constitute a trigger event only when the person gains actual control of a qualifying entity and to exempt securities or other situations where no effective control is obtained. The amendment’s purpose is to avoid the potential unintended consequences of the Bill for financial transactions under Scottish law, as identified by the Law Society of Scotland. Under the amendment, rights and interests in, or in relation to, entities and assets held by way of security would be exempt from the regime, on the basis that lending and debt arrangements do not give rise to control.
We have been clear that the Bill must be fit for purpose across every part of the United Kingdom, and I ask merely whether the Minister can provide reassurances to the House that it has been properly considered in relation to its impacts on the Scottish legal system in particular. Can he reassure the House that consultation has taken place between the Scotland Office and the Scottish Administration and that there are no outstanding issues to be resolved in this respect?
I am of course grateful to the noble Lord, Lord Bruce, and my noble friend Lady McIntosh for Amendment 9 in their names. As they outlined, it seeks to exempt from the call-in power acquisitions made by way of obtaining security over a qualifying entity where no effective control is obtained. I start by placing on record my thanks to the noble Lord, my noble friend and the Law Society of Scotland for meeting my noble friend Lord Grimstone and me following Grand Committee to discuss this issue in detail. Indeed, we have considered all the points that were made.
As I emphasised in that meeting and in our subsequent correspondence, the Government do not consider that the provision of loans and finance is automatically a national security issue. Indeed, lenders need confidence that they can see a return on ordinary debt arrangements in order to provide that service. However, we must also recognise that in a small number of cases national security risks can arise through debt arrangements. Noble Lords have particular concerns about the Bill with regard to Scotland. I understand—and the noble Lord, Lord Bruce, stated—that this is because it is usual practice in Scotland for a lender to become the registered holder of shares in security through a shares pledge.
Having heard the concerns, the Government have reflected carefully on the issue, but we continue to believe that an exclusion would not be appropriate in this case. In such circumstances, the legal title to shares will, as a matter of fact, have been acquired by the lender, and it is important that we do not inadvertently create a loophole that those who wish us harm might otherwise seek to exploit.
While I note that the proposed amendment has been updated since the version debated in Grand Committee, reflecting my noble friend’s intention to limit the exemption to situations where “no effective control” is obtained, I fear that this would be difficult to reconcile with the mandatory regime.
It would introduce a new, inherently subjective concept that would sit uncomfortably with the need for acquirers to be able to objectively determine their legal obligations. I hope that noble Lords who have stayed the course on this Bill—a small, gallant band—will know by now that it is focused on the central premise of acquiring control, with these circumstances defined in detail in respect of entities in Clause 8. This amendment would lead to a circular argument in the Bill, in which a trigger event is the acquisition of control—except for when control is not acquired. I am sure that a number of lawyers in this country would be licking their lips with that provision in the Bill.
I mentioned particular concerns about how this would affect the mandatory regime, but the Government also consider that this would cause difficulties for voluntary notification and for the Secretary of State’s call-in power. None the less, both my noble friend Lord Grimstone and I have committed to monitoring the operation of the regime in practice with regard to this issue. Clause 6 provides the Secretary of State with the power to make “notifiable acquisition regulations” to amend the scope of the mandatory regime. That could be used in future, if considered appropriate, to exclude circumstances related to acquisitions by way of security from the mandatory notification regime.
I will address head-on the point made by the noble Lord, Lord Bruce, that this will be particularly disadvantageous to Scotland. It is important to emphasise that such lending arrangements are also possible in England and Wales—albeit we know that they are less common. This Government are staunch supporters of Scotland and it is vital that the Scottish legal and finance sectors continue to flourish.
Let me briefly make three other points on this amendment, which I hope will provide further reassurances to the noble Lord and my noble friend. First, the Bill broadly mirrors the existing approach of the persons with significant control register, which does not exclude legal owners of shares acquired by way of security. I take great confidence from the fact that this has been in place since 2016 and has had no discernible effect on the willingness of lenders to provide finance in Scotland.
Secondly, the mandatory notification and clearance element of the regime is proposed to apply only to entities of a specified description within 17 sectors of the economy. The number of circumstances requiring notification where a lender acquires the legal title to shares at or above the thresholds in this Bill is therefore likely to be low and, as with all acquisitions, the Government expect that the overwhelming majority will be quickly cleared to proceed.
Thirdly, as has been previously debated, I am sure my noble friends will welcome the removal of the 15% threshold I spoke about in a previous group. This will further reduce the number of cases covered by the mandatory regime in relation to securities.
So, for all the reasons I have outlined, I hope that both noble Lords will accept the arguments I have put forward and will feel able to withdraw the amendment.
I thank the Minister for his response and for addressing the details. I am not convinced that the Law Society will be entirely satisfied that the difference between Scottish and English law has been fully appreciated. The Minister talked about legal title but, as I said in my opening remarks, legal title is meaningless if the shares pledge explicitly excludes any mechanism for dealing with the shares—either receiving voting rights, dividends, or the right to sell and an obligation to have them back when the loan is repaid. It simply is not control.
I take note that the Minister is concerned that the Scottish situation is not unique and therefore could cause complications in England and Wales, but the practice is clearly well established in Scotland. As I said in my opening remarks, it has been since the 19th century and is relatively unusual elsewhere in the UK.
I understand that the Minister believes that there will be relatively few instances, but part of the problem with the Bill is that an awful lot is undefined, in terms of the 17 sectors, the details of how those will be determined, the circumstances in which triggers will happen and the definition of national security. All of those things are explicitly not set out in detail.
I welcome Ministers saying they will monitor the situation closely. The assurance I would be looking for if we withdraw this amendment—obviously we will ask the Law Society what it feels about the unamended Bill—is that, if it becomes apparent there is a significant negative impact on Scottish business and the Scottish sector, the Government will be prepared to act to remove such discrimination.
It is a long-established fact that one reason the Scottish financial services sector is so strong is that it has a long history of prudent asset management and insurance, which has given Scotland a disproportionate share of both national and international business because of its reputation for, if I may put it in these terms, “canniness” in managing investments and other people’s money. That being the case, we do not want a situation where the law as introduced somehow compromises that. That would not be good for Scotland or the UK either.
I hope these remarks will be noted by Ministers and they will undertake to consult and respond to any representations that emerge showing that the concerns we have outlined are real and significant. If the Minister is correct in his assurance that, though they may be real they will not be very significant, perhaps the matter can rest. But I am sure that I, the noble Baroness, Lady McIntosh, and others will make it clear to him that, if it becomes apparent that there is a significant problem for Scotland and that uncertainty is disadvantaging Scotland, he will hear about it. In the meantime, I withdraw the amendment.
Amendment 9 withdrawn.
Clause 14: Mandatory notification procedure
10: Clause 14, page 8, line 30, leave out paragraph (b)
Member’s explanatory statement
See the explanatory statement to the amendment at page 4, line 22.
Amendment 10 agreed.
We now come to the group beginning with Amendment 11. Anyone wishing to press this or anything else in this group to a Division must make that clear in debate.
11: Clause 14, page 9, line 10, leave out “as soon as practicable” and insert “within 5 working days”
Member’s explanatory statement
This amendment imposes a specific time limit on the notification required to be made after the Secretary of State has decided whether to accept or reject a mandatory notification.
My Lords, I rise to move Amendment 11 and I will speak also to Amendment 12 in my name and Amendment 13 in the name of my noble friend Lord Lansley, to which I have added my name.
With this group of amendments, we are returning to the issue of timing that we discussed quite extensively in Committee. There is a high level of concern in the business community that the timescales set out in this Bill are excessive and breed uncertainty. If a transaction is called in, the Secretary of State has 60 working days—with the possibility of a 45-day extension—to make up his mind what to do. That adds up to five months elapsed time, which could kill many deals and, if the target company is in financial distress, could spell the end of its existence.
I accept that, if national security issues are genuinely involved, we have to allow the Government sufficient time to examine transactions in order to make the right decisions in the interests of our nation. I am, however, concerned about the timing at the front end of the process, once a transaction has been notified to the Secretary of State for both mandatory and voluntary notifications.
I hope that most mandatory notifications will not result in a call-in notice, and it is important that the parties to a proposed transaction get clarity about whether they have to enter the tunnel of uncertainty due to a call-in notice or can proceed with their deal. Under the terms of Clause 14 the Secretary of State gets 30 working days—six weeks in real money—to decide whether to call in a transaction, but that is extended by two indeterminate periods.
In the first of these, the Secretary of State has an unlimited period of
“as soon as reasonably practicable”
in which to decide whether to accept or reject a notice. We challenged this in Committee, but the Minister told us that the Government could not define this period because it would be affected by the nature and quality of the supporting information that came with the notification. I have given the Government the benefit of the doubt on that.
Once the Secretary of State has decided whether to accept or reject the mandatory notification, he then has either to reject the notice and give his reasons or to notify the parties that he has accepted it. In either case, he has to do this “as soon as practicable” and the 30-day review period does not start until that has happened. I am not sure why these second grace periods are not qualified by “reasonably”—I hope that the Minister can explain this—but, whatever the subtleties of drafting are, it does not seem to be reasonable for the Secretary of State to make his decision but then sit on it without notifying it, thus extending the period of uncertainty. My Amendments 11 and 12 would take out the “as soon as practicable” formula in Clause 14(7) and (8) and replace it with “within 5 working days”. These amendments are very modest in the whole scheme of mandatory notifications; I hope that my noble friend the Minister can accept them.
I will leave my noble friend Lord Lansley to explain the different approach that we have taken to voluntary notifications under his Amendment 13, but I will say a word on the background. Most people with experience of transactions believe that the severe penalties in this Bill, plus the ability of the Secretary of State to look back for up to five years, mean that many transactions will be notified under the voluntary procedure; that is what parties will be advised to do. There are concerns about the sheer volume of transactions and whether BEIS will be adequately resourced to process them. I know that we will discuss this later today.
There are parallel concerns about unnecessary delays to transactions once a notification disappears into the black hole of the Investment Security Unit. These concerns are particularly acute if a business is in administration or liquidation, or is teetering on the edge. Putting some certainty around how long a transaction can be held within BEIS waiting for a decision on whether a call-in notice will be issued will be hugely important for those transactions that simply need the comfort of clearance that they will going not be called in.
Amendments moved in Committee that sought to set up a fast-track procedure did not find favour with my noble friend the Minister, but I hope that he will be able to set out today how in practical terms transactions that need to be dealt with swiftly—whether mandatory or voluntary notifications—can get an appropriate degree of attention in the ISU. What kind of system of prioritisation will be set up? Will transactions that are notified be triaged or simply put on a conveyor belt? Who will be accountable for the performance of the ISU, and will that be visible?
I remind my noble friend the Minister that it is not just individual deals that are at stake. The reputation of the UK as a good place to invest will be on trial once this Bill becomes law. I know that he is well aware of this, and I hope that he can provide reassurance today that the concerns I have expressed will be central in how the ISU really operates.
I have also tabled some amendments that seek to get some quite granular annual reporting on the time taken at each of the stages of the process for both voluntary and mandatory notifications. I am a realist on substantive amendments; government departments have a “not invented here” aversion to changing the Bills that they create. With that in mind, I have drafted some amendments to create transparency instead so that, even if our worst fears on timing came to pass, it would at least be in the open; that would make sure that the Government would have to pay some attention to it.
However, since I tabled my amendments, the Government have tabled their own, less granular, versions of annual reporting. We are due to debate these in a later group, so I will say no more about them at the moment. While transparency is better than no transparency, even better would be some changes to the Bill to give more certainty to the business community. That is why we have tabled these amendments, and I look forward to the Minister’s response. I beg to move.
My Lords, I am very glad to support my noble friend Lady Noakes in her Amendments 11 and 12. I am grateful to her and the noble Lord, Lord Fox, for adding their names to Amendment 13.
My noble friend explained Amendments 11 and 12 extremely well. Let me say why separately there is an additional amendment in relation to the voluntary notification separate from mandatory notification. It is precisely because our expectation must be that there will be a significant number of voluntary notifications, particularly in the early days as people involved in various sectors begin to understand how this regime is to act and under what circumstances they should make a notification. Our expectation would also be that, partly for precisely that reason and in the early days, there will be a significant number of voluntary notifications that do not lead to further action on the part of the Government because there is not a national security risk involved and they do not need to review it any further— that is, they do not need to take it through the call-in notice for an assessment.
For many of these transactions, because of the level of uncertainty associated with this—of course, these might be transactions where the seller brings them forward to the Secretary of State to understand under what circumstances they contemplate an acquisition, and whether they should proceed and how rapidly—there are a lot of reasons why this should happen quickly. In looking at Clause 18, about the voluntary notification procedure, our problem was that the review period had “30 working days” applied to it, but that period, as is the case with the mandatory one, follows two indeterminate periods. First, there is the period of time between a notification being made to the Secretary of State and the Secretary of State deciding whether to accept or reject it and, subsequently, the Secretary of State, after a period of time—this might be very short; I hope it would be very short—notifying each relevant person. The 30 working days, therefore, could be added to by two other periods.
The purpose of Amendment 13, therefore, is straight- forward. It is to say, “Let’s try to make sure that this is no longer than it needs to be, and that the pressure inside the Investment Security Unit is for what are essentially the bureaucratic processes”—in effect, saying, “We have received a notice. Is it compliant or not?”, then, “Okay, we have accepted the notice. Have we notified all the relevant persons?” Those things happen very quickly because the important thing is that the 30 working days are devoted as far as possible to the review period to get the decision right as to whether this potential trigger event should be called in or not. That is the crucial thing. All the time should be devoted to that review. Amendment 13 says that the 30 days start at the point at which a seller or an acquirer gives a notice to the Secretary of State. I hope that that is helpful.
I noted—no doubt we have a similar view—that the bureaucratic processes should be as short as possible, but the Government, as my noble friend Lady Noakes noted, have put forward their own amendments in a later group. The one that is relevant here is Amendment 27, which would tell us how long the period is between the receipt of a notice and the decision to accept or reject it, and tell us to report that in the annual report. Frankly, that is useful, but we would rather that the pressure was built into the statutory arrangements rather than simply through the question of what is in the annual report by way of performance against that.
My Lords, in speaking to these three amendments, I am extremely fortunate to follow the noble Baroness, Lady Noakes, and the noble Lord, Lord Lansley. I do not think anyone could have explained more succinctly how these different timescales work for both the mandatory and the voluntary notification, so I will not go through it again. I really appreciate the persistence of both noble Lords, and the noble Lord, Lord Hodgson, in teasing out the real consequences of these very indeterminate timescales, which may differ between the voluntary and the mandatory notification procedures but create uncertainty in both cases. As the noble Lord, Lord Lansley, said in Committee,
“we want to ensure that the greatest possible certainty and the least possible delay intrudes into these processes for investors.”—[Official Report, 16/3/21; col. 229.]
That has been our common theme throughout this Bill.
We have heard some graphic phrases throughout, such as the noble Lord, Lord Hodgson, decrying both the “no man’s land” that we must not and do not want to fall into and the powers to “stop the clock”. We also heard the noble Lord, Lord Grimstone, try to reassure the Committee that the Secretary of State has
“no desire to push his peas around the plate”,—[Official Report, 16/3/21; col. 222.]
another phrase introduced by the noble Lord, Lord Hodgson; he will probably write a book at some stage with all these phrases included. However, that is not the same as the assurance and certainty contained in statute.
The noble Lord, Lord Callanan, said in Committee that
“the process of initially determining whether a valid and complete notice has been submitted is separate from fuller screening”.
We understand that, but there should be clear time limits in that case. He tried to give us a reassurance:
“I mention ‘maximum’ again because that is exactly what these deadlines represent. In many cases, we expect the Secretary of State to be able to review and clear notifications much more quickly.”—[Official Report, 16/3/21; col. 235.]
Businesses need certainty on whether to proceed with a transaction. A delay in the Secretary of State making a decision outside the time limits—because they can—would cause uncertainty over the validity of the transaction. This lack of a clear timescale could create uncertainty for investors, universities and businesses, making domestic and foreign investment less attractive and disincentivising industry in the process.
I heard what the noble Baroness, Lady Noakes, and the noble Lord, Lord Lansley, said about the later amendments on what should be contained in the annual report; I entirely agree that more transparency is very desirable, but that is not the same as specifying exactly what the timescales will be.
There is also the question of what I think the noble Lord, Lord Lansley, called the “bureaucratic processes”. There is not yet a great deal of reassurance on that basis. We do not know how the regime will operate. Throughout this, especially on these timescales, the impression is that all the cards are in the Government’s hands, not the hands of the potential investor. That could be a real deterrent. I hope the Government will respond to the very consistent view throughout the passage of this Bill that there needs to be a considerable tightening up in this direction.
My Lords, I will be brief, but I wanted to speak in this debate having spoken on similar amendments in Committee. I oppose Amendments 11 and 12—I will reserve judgment on Amendment 13 until I have heard the full debate—and find myself in the unusual position of supporting the Government’s proposed legislation and opposing changes to it.
The noble Lord, Lord Lansley, in introducing Amendment 13, talked about the pressure from bureaucratic processes; these amendments are trying to impose a pressure for speed. We hear talk of not wanting these rules to slow things down or to have too many limits or controls. This very much reflects the kind of language we have heard about “cutting red tape”. I always go back to the words of the hazards at work campaign: better red tape than red bandages. What are referred to as red tape are very often the rules that keep us safe, protect us and ensure our security, in the terms of this Bill.
I wanted to make sure that the Government hear voices from the other side in this debate, saying that we have to privilege the public good and national security. Processes must take as long as they need to take to be done properly and have full and proper scrutiny.
The noble Baroness, Lady McIntosh of Pickering, has withdrawn from the debate, so I call the noble Lord, Lord Hodgson of Astley Abbotts.
My Lords, I have put my name to Amendments 11 and 12, tabled by my noble friend Lady Noakes, which concern mandatory notifications, as she made clear. However, I am equally enthusiastic about Amendment 13, tabled by my noble friend Lord Lansley—even though I have not put my name to it—which addresses voluntary issues as well.
I will add a couple of points in support of these two approaches. As my noble friend made clear on Amendments 11 and 12, the use of the phrase “practicable” or “reasonably practicable”—it is not clear why we have one in one place and one in another—has come in for some pretty widespread criticism. As we have discussed before and heard from various legal advisers, the word “possible” would be a big improvement on “practicable”.
Mandatory notifications will be at the sharp end of the Bill and can be expected in many cases to be controversial. There will be a temptation for a Secretary of State, faced with a controversial decision, to try to delay it. It is common ground that, while we need to take appropriate steps to protect our national security interests, it is also in our national economic interest to encourage as much investment as possible in the chosen 17 sectors which will collectively have a significant impact on our economic future.
With great respect, I understand what the noble Baroness, Lady Bennett of Manor Castle, is trying to say, but the reality is that this is a balance; if we are in a competitive market around the world for investment and are unable to balance it properly, people will go elsewhere. It is as simple as that. Her idea of having an open-ended arrangement for the Secretary of State to make up his or her mind is a recipe for an outflow of investment which might otherwise come here to support this country, with its worldwide reputation in tech and other sectors.
On my noble friend Lord Lansley’s amendment on voluntary notifications, we have been around this course many times before; there will be a substantial flow and the new unit at BEIS may find it difficult to cope. In Committee, we discussed a number of amendments to try to help the Government with this and focus the new regime on the really significant cases. Amendments by various Members of your Lordships’ House, including me, proposed inter alia to exclude intra-group investments, to require only one trigger event for each group of companies and to limit notifications to assets used in connection with activities carried on in the UK—in other words, to limit the extraterritoriality of this Bill’s provisions.
The Government declined to accept any of these, arguing that they needed the widest possible strategic view to prevent evasive tactics by unwelcome purchasers. I must accept the force of that argument, but it means the Government must live with the consequences of those decisions. To provide an appropriate level of certainty for investors, we simply cannot risk a situation where, if a flood of voluntary notifications occurs, the Government could decline to start the 30-day clock.
In his concluding remarks, my noble friend may refer to Amendment 27, which the Government have tabled, about the contents of the annual report. If it is accepted by the House, as I expect it will be, it will include details of the number of days taken to give a decision, or the time taken to reach a voluntary notification. I do not want to add to the points the noble Lord, Lord Clement-Jones, made, but I have to say to my noble friend that it is really shutting the stable door after the horse has bolted to be told, a year later, that we have not been able to hit the targets or that they are being missed widely. There is nothing wrong with that, but we are trying to create a balanced regime that hits the ground running, and to learn, a year later, that “the system is overwhelmed”, which a number of us in this Chamber feel is likely to happen, is simply not an adequate answer.
My Lords, the noble Lord, Lord Hodgson, set out his view of a balance, and I will set out another dichotomy—between thoroughness and timeliness. I do not think any of us in the Chamber are asking for this process to be less thorough. I think we are all saying we want a thorough process. But that thoroughness cannot be at the expense of timeliness, which is what these amendments are seeking to establish.
I do not think it is the Government’s intention to sow the market with uncertainty; I am absolutely sure that is not the intention of the Bill or this element of it. However, we all know that once things get written into law, they move into a departmental process and there is a unit dealing with this, unless there are specific guidelines on achieving timeliness, things will drag and take time. Departmental clocks can run at a different speed to business clocks. We should be clear that that will cost jobs and opportunities, because the longer a transaction takes, the longer it is in play, the fewer opportunities those companies have and the more threat there is for them. This is particularly clear in sales out of distress and in businesses that are already in play. Once they are in play, they become victims of exploitation, and the longer this department maintains a business in play through this process, the more danger those businesses are in.
The Government’s “intent” has come up many times in speeches, and that is an important element here. The way this Bill is currently drafted does not reveal an intent for rapid resolution. It does not reveal an understanding of the importance of timeliness, and that is what these amendments seek to establish.
I thank the noble Baroness, Lady Noakes, and the noble Lords, Lord Hodgson and Lord Clement-Jones, for returning to the issue of the impact of this legislation on businesses and the uncertainty it would create within a business environment as businesses must interface with its bureaucracy. It has been interesting to hear the reflections from debates in Committee.
In Committee, we were sympathetic to Amendment 11 and others in the group as we have also pushed the Government to ensure greater clarity and transparency regarding how long businesses and organisations will have to wait for answers from the Government concerning notifications. It is important not only that statutory time limits are laid down to each stage of assessment but that the overall accumulated length of time of the whole process is defined. We remain supportive of the intentions behind the amendments in this group, and I am grateful to the many business interests that have expressed concerns to us. I merely ask again: what does “reasonably practicable” mean as a length of time?
In Committee, the Minister did not address whether and to what extent five working days could become practicable. The noble Baroness, Lady Noakes, asked many pertinent questions concerning the operation of the unit and its systems in addressing the tasks it will have to be administrating. Could the Minister provide more clarity? Can he give assurances today that officials in the department will engage effectively with business and provide updates and explanations regarding issues under consideration to businesses, should an answer not be forthcoming within the defined five-day limit proposed in this amendment, rather than expect businesses to delay and wait for an unspecified length of time to be proved practicable? Communication of the position would prove extremely reassuring to businesses.
My Lords, I thank my noble friends Lady Noakes and Lord Hodgson for their contributions and all the other noble Lords who have contributed so far. Perhaps it is not out of order to especially thank the noble Baroness, Lady Bennett of Manor Castle, for her rare support of the Government in this instance. I will begin with Amendments 11 and 12 together.
As currently drafted, the Bill provides that the Secretary of State must decide whether to reject or accept a mandatory or voluntary notice as soon as reasonably practicable after receiving it. They must then inform relative parties of the decision as soon as practicable. I will later draw the distinction again between “as soon as practicable” and
“As soon as reasonably practicable”.
Amendment 11 would require the Secretary of State to provide written reasons to the notice “within 5 working days” if a mandatory notice is rejected, instead of “as soon as practicable.” Amendment 12 has a similar effect but would require the Secretary of State to notify each relevant party that a mandatory notice has been accepted within five working days of acceptance, rather than as soon as is practicable, as currently drafted.
My noble friends Lady Noakes and Lord Hodgson asked about the distinction in places in the Bill between the timescales, “as soon as practicable” and
“As soon as reasonably practicable.”
These different tests reflect that some requirements are more onerous. For example, determining whether a valid notification has been given will be dependent on the facts of the case, so it is appropriate, in that instance, to use
“As soon as reasonably practicable.”
However, communicating the decision to parties should be possible without delay, so in that instance, the Secretary of State must do so as soon as practicable. I hope that clarifies that for noble Lords.
The Secretary of State already expects to be able to quickly decide to accept or reject notifications in many cases—then inform parties of those decisions—much faster than the five-day working limit proposed. However, I must stress that it is important that there is scope for flexibility in the relatively rare circumstances where more time may be needed. When notifying relevant parties that a notification has been accepted, there may, for example, be multiple, potentially international, parties needing to be contacted whose details are not immediately available.
In some cases, purely as a matter of practicalities, the Secretary of State may need more than five working days to notify a party that their notification has been rejected. Take a notification sent in by letter, from either a UK or a foreign company, without proper contact details and which does not meet the requirement for notification. The Secretary of State would, therefore, be likely to reject it. This may seem trivial, but it may take more than five working days to find the contact details for the notifier to notify them of the rejection. If the letter contained commercially sensitive or personal information, it is particularly important to get that right to make sure that any correspondence from the Secretary of State is not sent to the wrong person. This is just one practical example where it could take longer than five days to notify of an acceptance or a rejection.
Just imagine: the amendments could enable sophisticated hostile actors to game the system. There will be people out there who will want to game this system, if they can, but I am sure that that is in no way the intention of my noble friends.
Amendment 13 would start the voluntary notification review period on the day a notification is received by the Secretary of State, irrespective of whether it has been accepted by the Secretary of State that day. This differs from the current drafting, which starts the review period on the day the party submitting the notification is notified of acceptance.
I am happy to assure noble Lords that we expect to confirm acceptance of the vast majority of notifications quickly in order to begin the clock on the review period quickly but, in rare situations, it may take much longer to determine whether a notification is valid, perhaps due to large amounts of information being submitted in an unclear way. It may be deliberately unclear. In that case, if the notification were ultimately accepted, the Secretary of State would have substantially less than the 30 working days that they may need to decide whether to issue a call-in notice, potentially being timed out and forced to clear the acquisition without proper scrutiny. For cases like this, it becomes possible for hostile actors to flood notifications with information to reduce the likelihood of a call-in.
In conclusion, I assure noble Lords that the ISU will be a thinking organisation and not a conveyor belt, as some noble Lords fear. Ministers will be accountable for its operations. There is a real national interest in making sure that the ISU does its job well, and we will do all we can to ensure this. I commend my noble friends and other noble Lords on their efforts to make the new regime more agile but I hope that they understand why we cannot accept the amendments I have addressed in this group, and kindly ask that they withdraw them.
My Lords, I thank all noble Lords for taking part in this debate—even the noble Baroness, Lady Bennett of Manor Castle, with whom I never agree. This is a Government trying to take the maximum possible scope for manoeuvre in the Bill because of bad actors out there. We understand that, but we have essentially been pressing practical issues. I was disappointed by what the Minister said, because he gave us lots of extreme outlying examples of where people might be trying to game the system, which I do not quite understand, but little about what the Government will do in practice to address the uncertainty that is feared by the business community, because of a lack of concentration on timeliness will in practice be part of that.
For example, I asked my noble friend the Minister whether there would be a prioritisation or triaging system, so that those transactions that have a great need for speedy resolution can, if possible, be dealt with quickly. I heard nothing on that. I am beginning to wonder whether Ministers have a handle on what the practical arrangements will be within the ISU. My noble friend said that Ministers would be accountable. That is good because if this starts to go wrong, transactions will be caught up, which will end up doing more damage to the UK economy by creating an environment in which no investment comes to us. That would be very damaging. I had hoped that the Minister would go further and say what sorts of practical steps would be taken to increase a focus on timeliness and what the implications would be.
I will not press my amendment to a Division today but, I must say, I do not have the impression that Ministers have a grip on this yet. We accept that the Bill needs to ensure that nothing bad can happen in the area of national security. On the other hand, the Government need to accept that the business community needs much more reassurance than Ministers currently appear willing to give. I beg leave to withdraw.
Amendment 11 withdrawn.
Amendment 12 not moved.
Clause 18: Voluntary notification procedure
Amendment 13 not moved.
We now come to the group beginning with Amendment 14. Anyone wishing to press this or any other amendment in the group to a Division must make that clear in the debate.
Clause 30: Financial assistance
14: Clause 30, page 20, line 3, leave out “, with the consent of the Treasury,” and insert “by regulations”
Member’s explanatory statement
The amendments to Clause 30 in the name of Baroness Bennett of Manor Castle seek to ensure that Parliament is able to scrutinise financial assistance before the Government is committed to its provision.
My Lords, I speak to move the linked Amendments 14, 19 and 20, which appear in my name. I must begin by offering my profound thanks to the Public Bill Office for providing the expert legal assistance to deliver a legal framework for the purpose set out in the explanatory statement, which is
“to ensure that Parliament is able to scrutinise financial assistance before the Government is committed to its provision.”
Noble Lords will recall that, in Committee, the noble Lord, Lord Hodgson of Astley Abbotts, drew our attention particularly to Clause 30, which provides the Secretary of State with the power to compensate for the consequences of him or her making a final order under Clause 26. I quote the noble Lord from that debate:
“Its wording can best be described as wide, and the Explanatory Notes are not much more helpful.”
The noble Baroness, Lady Bowles, said in that debate that,
“if the Government’s requirements have caused disaster to befall a company through delay, there should be a mechanism for compensation. However, how that is to operate needs to be made clear.”
The noble Baroness, Lady McIntosh of Pickering, asked a good question about
“from which budget the grants, loans and indemnities would come.”
I will now disagree with the noble Baroness, Lady Noakes, by proving that it is possible for us to agree, at least occasionally, for I entirely agree with her comment in Committee that
“a Bill about stopping certain transactions could have morphed into one whereby the Government will stuff public money into the pockets of one or more of the parties involved, with almost no explanation.”
I conclude my little roundup with the words of the noble Lord, Lord Clement-Jones, who started this debate. He said that
“there is no control over what the Secretary of State does.”—[Official Report, 16/3/21; cols. 215-20.]
I apologise to your Lordships’ House that these amendments appeared late. Given all the discussion in Committee, I was rather hoping that someone with more experience of legislating than me would pick the issue up but, when I saw that that had not happened, I thought that I should at least give the House a chance to find the solution to a problem so clearly identified in Committee. What I am doing is taking the financial compensation—the potentially swingeing payout—from the hands of the Minister and handing it to the best possible democratic control and greatest transparency: that of Parliament.
To run through some of the regular reactions that we hear from Ministers, if the Government say, “This could be better drafted”, I would be happy for them to do so. If they say that there should be a lower limit to the sums concerned, that is certainly something to talk about. If they suggest that this would slow the process, I would point to recent times when Parliament has proved able to act very quickly—the events of 30 December 2020 come to mind—if the money is needed and justified.
However, I think that there is clearly greatly increased public concern about the Government handing over money to the private sector; that concern has increased even more since our debate in Committee. In the interests of not being seen as political, I will resist the urge to expound at length on the reasons why there is growing public concern, because I am making a serious attempt here to see if some improvement, clarity or democratic oversight can be provided to the exercise of Clause 30.
Last night, during the Financial Services Bill, we were talking about regulatory capture and, indeed, political capture—a situation in which the Government are often seen to be acting as a wing of, or advocates for, business, rather than as an advocate for the common good. I am not saying at this moment that I will not push this matter to a vote but am not saying that I will. I want to hear the, albeit rather disappointingly short, debate and anyone who might want to question the Minister’s response before making a decision on that. I should like there to be some movement, clarity and reassurance on the use of Clause 30. I beg to move.
I thank the noble Baroness, Lady Bennett, for the amendments in this group. We recognise the importance of financial assistance in relation to the regime where it would have financial impacts on businesses, following a final order being made. We understand the public significance of financial assistance and are supportive of there being parliamentary oversight and agreement to that assistance. The issue of how practical it is to undertake that before any final order is made, presumably after close contact with an affected business, is an interesting point that the Minister will address.
The noble Baroness will understand that consideration of regulations is not generally contentious. Nevertheless, her points are well made. Any greater clarity that the Minister can give in the parliamentary process regarding awards made