Advanced Research and Invention Agency Bill

Consideration of Commons amendments
Wednesday 9th February 2022 Lords Chamber

Commons Reason

11:07

Motion A

Moved by

[Lord Callanan]

That this House do not insist on its Amendment 1, to which the Commons have disagreed for their Reason 1A.

1A: Because it would make provision relating to the administration of financial support provided out of public funds, and the Commons do not offer any further Reason, trusting that this Reason may be deemed sufficient.

[The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)]

My Lords, before turning to the substance of the amendment, I thought it would be a good time to address briefly the other major milestone in the creation of ARIA that we have reached since the Bill was last before this House. On 1 February, Dr Peter Highnam was announced as ARIA’s first CEO. I know that Peers had significant interest in this appointment during our previous debate on the Bill, given the critical role the CEO will play in leading the formation of the agency and directing its initial funding.

I hope noble Lords are reassured by Dr Highnam’s wealth of experience, as he joins from DARPA where he has served as deputy director since February 2018. I hope noble Lords will agree that he is uniquely capable of stepping into what will be a very important role at such a critical stage of its development. He will take up his post in May, starting discussions with stakeholders in the UK R&D system across academia, business, government and, of course, here in Parliament.

Amendment 1 deals with the conditions that ARIA may attach to its financial support, in response to the considerable concerns that have been so carefully and expertly championed by the noble Lord, Lord Browne of Ladyton. In his concluding remarks on Report, the noble Lord set out his desire, following more informal discussions, to hear my colleague, the Minster for Science, Research and Innovation, outline the Government’s position on this issue in the House of Commons. I certainly hope that, having heard the Minister’s remarks last Monday, he will have been pleased to hear him go slightly further than I was able to go when we last discussed the Bill in this House.

The Minister gave further assurances on two aspects, which I will quickly repeat here. The first is the seriousness with which he is taking the security of our academic and research communities, and new activities to identify and address risks from overseas collaborations while supporting institutional independence. He confirmed that obligations would be placed on ARIA to work closely with our national security apparatus, to maintain internal expertise to advise ARIA’s board and programme managers, and to work with the recipients of ARIA’s funding in universities and businesses on research-specific security issues. This will ensure that ARIA’s research and innovation is protected from hostile actors, and, most importantly, connected to the Government’s wider agenda on strategic technological advantage.

Secondly, and more broadly, the Minister addressed the benefits created by ARIA and our approach to maximising and retaining them. Specific businesses, often in important and emerging areas of technology, have been mentioned many times during our debate on this amendment, and the lack of consistent guiding principles behind the engagement and support that they have received from government has been held up for particular criticism. On this, I hope that noble Lords noted the Science Minister’s identification of the serious new machinery of government coming together to drive the agenda of strategic industrial advantage of UK science and technology as a fundamental priority for the Government and for him personally.

The office for science and technology strategy, the national technology adviser and national science and technology council together represent a new and significant architecture to support a new strategic government approach. Clearly, some patience will be needed while this beds in, but the ambition which the Science Minister outlined behind this change should go at least some way towards addressing the concerns that have been raised previously by the noble Lord, Lord Browne.

Similarly, questions have been raised in both Houses about ARIA’s obligations to create wider public benefit, and I should reiterate that public investment in research and development, including through ARIA, must drive long-term socioeconomic benefit and deliver value to UK taxpayers. This obligation will be felt by ARIA on several levels: first, through the Bill and ARIA’s statutory duty in Clause 2(6) to consider economic growth or economic benefit to the UK, among other considerations. This is the right degree of specificity for primary legislation. Secondly, mechanisms for assessing how effectively ARIA carries out its functions, including this duty towards UK benefit, will be detailed in ARIA’s framework document. This was the other set of commitments which the Science Minister provided in the House of Commons.

These mechanisms will enable the action that ARIA takes to respond to its statutory duty towards UK benefit to be evaluated. As the Minister set out, this will include obligations for ARIA to put in place a programme evaluation framework, considering its strategic objectives as well as detailing the contents of its reporting, which the Government and Parliament will use to hold ARIA to account for the value it provides in all the usual ways. Again, it is right that these more specific obligations are included in the framework document, as they must reflect the structure of ARIA’s programmes and require greater flexibility. These obligations will be set as ARIA’s overall governance and evaluation framework is finalised over the coming months, but I should like to echo the Science Minister’s comments that we will take seriously the concerns raised in the context of this amendment when doing so, as we share many of them.

The third and final aspect concerns the ways in which ARIA implements the obligations imposed on it—the statutory duty in the Bill and the obligations within the framework agreement that will help to give effect to it. As I have stated previously, we might expect ARIA to do so through its contracting and granting arrangements by requiring financial support to be repaid if recipients do not make an effort to exploit the outcomes within the UK—or, in some cases, by taking equity or retaining IP rights and seeking to maximise the value of these assets within the public sector. The Bill enables ARIA to do these things, but it is an arm’s-length body; we have placed a premium on its operational independence, and government should not intervene in its decision-making on these issues.

The questions for us here should be these. Does ARIA have all the powers and tools it needs to choose independently from a full suite of ways in which to deliver these obligations? I would submit that it does. Have we got the balance right in the first place with the obligations to produce and evidence benefit placed on ARIA through the Bill and in the framework document, which we then use to hold it to account? On the second point, I recognise that noble Lords have been pressing for us to go further, and I should reflect that in response to the questions posed in this House, and by the noble Lord, Lord Browne, in particular, we have now made concrete commitments to Parliament about the obligations on ARIA and greatly refined our thinking on the work that it is still to do.

I hope the Science Minister’s assurances were useful in demonstrating the seriousness with which these concerns are being taken and our commitment to reflecting a mindset focused on public benefit in ARIA’s governance framework, as that document is finalised. I therefore strongly hope that noble Lords will be content with the progress that has been made on this issue and I look forward to reaching further milestones in the creation of this important new public body. I beg to move.

11:15

[Lord Browne of Ladyton (Lab)]

My Lords, I thank the Minister for his opening remarks and his comprehensive repetition of what George Freeman, the Minister, said in the other place. To a degree, I am reassured. My concern is how I will know that the Government live up to the undertakings implied in the words of the Minister. I will come back to him in a moment. I intend to be brief.

I particularly thank the Minister for his generous remarks about me, but they ought to be shared by a significant number of Members in all parts of the House who contributed to the debate we had on the amendment. That the House was minded to support the amendment had more to do with Members’ combined advocacy than the way in which I introduced it. I also thank the Minister and his office for earlier this week drawing my attention to the Government’s recent announcement that Dr Peter Highnam has been appointed as ARIA’s first CEO. This man seems uniquely qualified to do this job; I suppose DARPA is the only place that he could have got the experience. He is also uniquely equipped to negotiate the framework agreement with the Government, which will be important to how ARIA works.

I accept that the Commons reason is not challengeable, and I do not intend to debate that or to divide the House on the noble Lord’s Motion. However, as the Minister and his office helpfully reminded me a week ago, while speaking to my amendment on Report, I set out my wish to hear the Science Minister address at the Dispatch Box the issues that prompted the amendment in the first place. At least I should address what he said, and I will do that for a few minutes, with the leave of the House.

In the other place, George Freeman acknowledged the importance of ARIA having a duty to the taxpayer to ensure that the intellectual property generated by its investment in R&D is commercialised to the advantage of the UK economy primarily, and to ensure that it is not

“haemorrhaging intellectual property of value to the UK.”—[Official Report, Commons, 31/1/22; col. 86.]

That reflects what he said to a number of noble Lords who met him before Report. To paraphrase another member of the Government, he gets it and clearly seems to understand the issue. The question is whether the Government have a plan to address this issue and will be able to share the development of the plan with Parliament properly. That is what I want to concentrate on now.

Turning to what the Science Minister said, he first referred to the terms of the amendment and argued that, as drafted, it added only examples of the conditions that ARIA may attach to financial support and, as it already has a general power to do just that, it represented a drafting change that cannot be accepted. There is no merit in this argument. The fact is that the Bill, as already drafted by the Government, already has examples of conditions that ARIA may attach to financial support in Clause 2. They are almost certainly there because the Government want to highlight those powers, not because those examples need to be there to give those powers to ARIA. Our amendment simply adds to their existing list and has a similar motivation—to emphasise and highlight the importance of this power.

On the specific issue of predatory overseas acquisition of IP through foreign takeover of UK businesses where there has been substantial public investment in R&D—there are many past examples of this, to the detriment of the UK economy—the Minister reassured the other place that the National Security and Investment Act 2021, which fully commenced in January, already provides a relevant and sufficient framework for the Government to scrutinise acquisitions on national security grounds. The Minister also referred to a broader strand of work that is under way to enhance that statutory framework, including other unspecified complementary measures designed to help the Government strengthen our protections. Perhaps the Minister can expand on that. He made some general references to it, but I am not clear as to what work is going on. I think the House would benefit if there was further specification. It may not be appropriate to do it now, but maybe it could be spelled out more clearly at some time in the future.

The Minister reassured the House that the Bill already provides the Secretary of State with a broader power of direction over ARIA on issues of national security, but the amendment was never intended to intervene in the Secretary of State’s powers. This is of limited comfort, as my honourable friend Chi Onwurah pointed out, national security in the relevant legislation, the NSI 2021, is narrowly defined, and it does not include economic security, despite attempts by Labour to expand the definition in that Act so that it would include this. It therefore does not address the issue of intellectual property and its economic value.

The Minister then pointed out that the because of the terms of Clause 2(6), ARIA must have regard to economic growth or economic benefit in the UK, and the mechanism for scrutiny by government and Parliament will be in what the Minister refers to as the framework document. This is a weapon which the Government deploy regularly to see off amendments to the Bill. On Report, the Minister used the potential of the framework agreement, and what it could include, five times in debates. The problem is that none of us has seen the outline of the framework document, or even the Government’s bid for the negotiations of what the framework document will include. Until we see that, there is no way that any of us can judge its merit as a mechanism for dealing with the issues that we have raised.

Perhaps during the negotiations that can at least now commence after May, when there is a CEO, the Government will undertake to make regular statements, or at least one statement, to the House about their negotiating position, so that we get some sense of whether the many concerns about this Bill that the House has shared with the Minister can be allayed by the framework agreement or document. There is now a CEO and these negotiations can begin.

Finally, in the debate that took place in the other place, at col. 87, the Minister turned to the question of how ARIA responds to the UK’s strategic interests in science and technology more generally, where these may not fall under national security. I think he played his ace there: drawing attention first to the integrated review, which he did not expand on, and then to the role of the new Office for Science and Technology Strategy and the national science and technology council, and the Government’s ambition to ensure that there is a serious, strategic machinery of government showing a commitment to the strategic industrial advantage of UK science and technology. The Government’s argument is strong: we should be persuaded that this will deal with these issues because the Government have a core to their infrastructure that will drive these ambitions. There is a fundamental difficulty with this, however: it is impossible to find, in any government documents, any information about either the Office for Science and Technology Strategy, or the national science and technology council, which is a sub-committee of the Cabinet, other than that they exist and a very broad outline of the first organisation, which is designed to service the second one. I do not know how we are supposed to evaluate the strategic machinery of government, unless we know what they do.

There is something worrying happening to the accountability in our Government at the moment. There is a proliferation of sub-committees of the Cabinet. We have gone from having about six to having 20 in a matter of months. Almost every area of important public policy now has one or more such sub-committees to deal with it. The pattern appears to be—it certainly is with climate change—a strategic sub-committee and an implementation sub-committee. You can find out nothing about what any of these committees do.

So that we know what the relationship between Parliament and these committees now is, I will quote for the benefit of the House what Alok Sharma, the COP president, said to your Lordships’ Environment and Climate Change Committee in answer to a very reasonable question, in a questionnaire sent by the committee, about these two key pieces of machinery for climate change. The committee asked him:

“Are the two relevant Cabinet Committees”—


that is, the strategy committee and the implementation committee, which he chairs—

“expected to continue in the long-term, and what plans does the Government have to increase transparency around their proceedings?”

The answer to this is in a letter, which is on the committee’s website. I will read it in short, because in the first part Alok Sharma gave the impression that they are intended to continue, but he said:

“With respect to Committee frequency and transparency, it is a long-established precedent that information about the discussions that have taken place in Cabinet and its Committees, and how often they have met, is not normally shared publicly”.


So that is it.

If that is to be it for this infrastructure, which sits at the heart of the development of science and technology and ARIA, we will not find out anything. I honestly have no way of knowing whether I should be reassured by what the Minister said in the other place, if that was his ace card. To paraphrase my honourable friend Chi Onwurah in the other place, the Minister has set out that he shares our concerns, but I am afraid that I cannot really assess whether he has a plan to address them, because there is a whole part of what he intends to do that I will never be allowed to know.

[Lord Lansley (Con)]

My Lords, I very much appreciate what my noble friend on the Front Bench has said by way of response to the several debates that we had on the Bill about the centrality of intellectual property, and its protection and exploitation by ARIA. Often in your Lordships’ House, we send amendments to the other place, and occasionally—perhaps often—we find that they are not given the weight of debate at the other end that we think they deserve. On this occasion, it did, and I was much reassured by the Science Minister’s response, and by the appointment of Dr Highnam to the chief executive post.

I want to raise one question. In the midst of the many reassuring things that were said, including that the powers exist for ARIA, or through the NS&I Act, the framework document remains. I raised one issue on that in an amendment, which was whether under the framework document ARIA would be able to retain and reinvest the exploitation of intellectual property arising from its investments so as to create a growing activity in support of its mission of disruptive innovation. I hope that will be incorporated in the framework document. It was not referred to, so I hope that my noble friend will take note of it and that the Treasury will allow this to happen.

[Viscount Stansgate (Lab)]

My Lords, I will not detain the House for long, not least because many of the points I wanted to make have been ably made by my noble friend Lord Browne. I welcome much of the Minister’s speech and the appointment of the chief executive-designate. Considering his background, I venture to suggest that by the time he leaves the post he is about to fill, the name of the agency may have changed from ARIA to DARIA. That would reflect his personal background and possibly the way in which developments may move.

I also welcome what was said in another place by the Minister for Science, who the noble Lord, Lord Lansley, referred to. I have a high regard for the Minister for Science and thought that he addressed seriously some of the concerns raised in our debates. However, to echo my noble friend, I point out that the National Security and Investment Act still provides too narrow a basis for protecting what really matters about ARIA, which is the intellectual property that it is going to generate. It is a strange position to be in, but I think that the definition of national security, which does not take into account the economic security of this country and the intellectual property attached to that, would be a mistake and possibly a loophole. I regret the fact that the framework document to which the Minister referred has not yet been seen by anybody, and I hope that in the months and years ahead we will be able to debate that framework and the new scientific architecture, which the Minister rightly referred to, because we are moving into a new era.

It is not often that Governments anywhere launch a new agency with so little idea about what it will do and how it will do it. Nevertheless, I wish it well, and I hope that in the months and years ahead when we come back to discuss ARIA and its development we will be able to see the progress it has made, which I for one hope it will.

11:30

[Lord Fox (LD)]

My Lords, it came as no surprise that the Government used their majority to negate the amendment of the noble Lord, Lord Browne. The noble Lord has, in his tenacious way, set out why he regrets that, and I agree with him. It is not to be—it will not go to a vote—but I hope that the ARIA leadership will be more careful when they write the contracts for the money that they will give than perhaps the Government seem to be with enshrining this in law.

I agree with the noble Lord, Lord Lansley, that the Science Minister’s comments were very helpful. They were more than we would usually get in these games of ping-pong, and that is to his credit.

As the Minister set out, since we sent this Bill to the other place, the name of the ARIA CEO has been announced. It is nice to see the Minister looking so pleased about things. He often looks quite downcast, so it is quite good for him to arrive with something that he can be pleased about. We wish Dr Highnam all speed and wish him well in what is a very important task.

Others have suggested that we look forward to the framework document emerging. In answer to the previous speaker, I do not think that the Minister has not shared with us something that he is sitting on; the Minister has not seen the framework agreement yet either, because it has not been written. However, we look forward to seeing it as soon as it has.

The Government have also had some important things to say about their focus for future research funding—I am talking here about the UKRI numbers. In their levelling-up White Paper, they announced the intention to increase the percentage of funding from what is rather dismissively called the golden triangle to other institutions, often but not exclusively further north. I should remind your Lordships that I am an alumnus of Imperial College.

Very briefly, I wanted to relate this to ARIA and, more importantly, to the commercialisation of innovation. There is a disparity between universities that are better at commercialising their innovation and thereby having another income stream, and those that are less good at that. I hope that ARIA is able to lead some excellence in that and spread the effective commercialisation of knowledge and innovation better. That would contribute to the Government’s levelling-up agenda at the same time.

I also recently met with the UK Innovation & Science Seed Fund—known as UKI2S—which, as the Minister will know, acts as a bridge between public sector research and private capital. I would be interested to know from the Minister how this organisation can fit with ARIA and improve our overall commercialisation. I am sure the Minister will admit that the UK’s record on commercialisation has been patchy in the past and could definitely improve. I would suggest that UKI2S is one of the models that ought to be taken into account. I hope that the Minister might meet with me and that organisation to discuss this and how it might play into this space with its track record in order to deliver on the promise of ARIA. I think we all share the Government’s desire to—in the Minister’s words—drive the agenda for strategic, industrial advantage. With that, we hope that in 10 years’ time, ARIA will be seen to have played an important part in achieving that objective.

[Baroness Chapman of Darlington (Lab)]

My Lords, we accept the reason given by the other place for rejecting Amendment 1, but we continue to disagree on the substance. I place on record my thanks to the noble Lord, Lord Browne of Ladyton, for his work on this amendment. His sparkling curiosity and polymath tendencies, combined with his government experience, make him ideally suited to this issue. He has been incredibly generous with his time and knowledge, and I am grateful to him for that.

The noble Lord, Lord Browne, suggested a sensible amendment to protect benefits arising from the UK’s creativity and ingenuity in ensuring that the taxpayer—the investor—retains the benefit of it. The majority of noble Lords agreed with my noble friend when we tested the will of the House. In the absence of any measures enabling sufficient scrutiny of ARIA’s activities, we felt we needed this amendment. We are clear that the benefits of ARIA’s investments must be felt in the UK. Lords Amendment 1 would have assisted in this; it would have given ARIA the option to treat its financial support to a business as convertible into an equity interest in the business, and thus to benefit from intellectual property created with ARIA’s support.

It would also have enabled ARIA to require consent during the 10 years following financial or resource support if the business intended to transfer intellectual property abroad or transfer a controlling interest to a business not resident in the UK. As my honourable friend Chi Onwurah said in the other place, we have to acknowledge that currently

“the UK does not provide a sufficiently supportive environment for innovation start-ups to thrive. That is why we have already lost so many of them.”—[Official Report, Commons, 31/2/21; col. 89.]

It is welcome that Ministers have said they agree with our concerns. It is just unfortunate that the Government did not want to take this opportunity to act on our shared concerns and seemed to lack the resolve to do anything about it on this occasion. Finally, I wish the new leadership of ARIA and the agency itself well. We look forward to the innovations and inventions that it is able to bring us.

[Lord Callanan (Con)]

I thank the noble Lord, Lord Browne, in particular, and all noble Lords who participated in this brief debate. I do not think there is a huge disagreement between us on this. The noble Lord, Lord Browne, wanted us to be more specific; our point is that ARIA already has the power and ability to do all the things he mentioned, but we want it to retain its operational independence and flexibility.

I will address a number of the points the noble Lord raised. He will have carefully noted, and from his ministerial experience will know, that in the National Security and Investment Act we deliberately did not define what national security is, following the practice of all previous Governments, to give ourselves the flexibility to adapt to changing circumstances.

The noble Lord also asked for further details on what the Science Minister said in the other place. We have published guidance to the sector on trusted research and supported it in publishing that guidance. We have broadened the scope of the academic technology access scheme and defined the rules on export controls as they apply to research activity. The terms and conditions for government research grants were also amended last September to require due diligence and checks for any overseas collaboration.

As expected, a number of noble Lords raised the framework document. The noble Lord, Lord Fox, is right: I have not seen a final version of the framework document precisely because it has not been finished yet. It will be negotiated between BEIS and ARIA’s leadership team, including the new chief executive and chairman when he or she is appointed, for which we are currently recruiting. I assure the House that as soon as it has been agreed, we will share it with the House as soon as possible.

My noble friend Lord Lansley asked a very good question about the retention of any possible revenues within ARIA. He will know from his government experience that the Treasury will wish to negotiate these matters directly with the agency, so I will not step on the Chancellor’s toes and get myself into trouble by overcommitting him on that. I am sure that ARIA and the Treasury will want to have a full and frank discussion on these matters.

On the questions from the noble Lord, Lord Fox, I assure him that we expect ARIA to work with all partners across the research and development landscape, including on the commercialisation of products. He asked for a meeting with me. I suggest that I am not the right person to meet on that issue; it would be more appropriate for him to meet the Science Minister, who has responsibility for pursuing this support for the agency, and I will certainly put that question to him.

The ARIA team has met UKRI and its sponsors. We are learning lessons from this and other mindsets and models for how ARIA can ensure the successful translation and commercialisation of its technologies. I hope that that provides the appropriate assurances for the noble Lord, Lord Fox.

I think I have dealt with all the questions that were asked. With that, I beg to move.

Motion A agreed.