Economic Activity of Public Bodies (Overseas Matters) Bill (First sitting)

(Limited Text - Ministerial Extracts only)

Committee stage
Tuesday 5th September 2023 Public Bill Committees

[The Chair]

I would like to call the first Member to ask a question—Minister.

[The Parliamentary Under-Secretary of State for Levelling Up, Housing and Communities (Felicity Buchan)]

Q Thank you, Chair. It is a pleasure to serve under your chairmanship. I would like to thank our witnesses for their time and expertise.

There have been instances where local government pension schemes have come under pressure from civil society groups to divest from a particular country or territory. Is that something you are aware of? What kind of pressure have you faced? Do you think that the Bill will allow pension schemes to focus on delivering value for their members, rather than being distracted by political campaigns?

Jon Richards: Perhaps I can start. Thank you very much for the question and for inviting us here. There have been limited incidents where there have been local attempts to push forward BDS at local levels. As a pension scheme, we are clear that this is a scheme about delivering pensions. Its fiduciary duty is on members to deliver what members want and expect. If, at any time, there are questions raised, we remind people of the fiduciary duty, which is the most important thing that drives matters.

Unfortunately, in recent years, we have seen a number of attempts by Governments and even suggestions by both the main parties that we should invest in various things—private equity and all the rest. That interferes with our duty to deliver pensions, and that is what drives us. So there have been a few small attempts, but they have not taken place. We have also seen some global investment managers making separate decisions, which our pension funds do not have any control over. Those are outwith our ability—we cannot do anything about it if they make those decisions, because it is a global investment association.

What we are fundamentally saying is that our primary duty is our fiduciary duty. Unfortunately, this Bill will interfere in that, and that is what our concern is. It has the potential to increase our administrative costs, as we have to monitor whatever we are asked to do, but also potential legal challenges, which we expect, because we know this is a very difficult minefield. So we have real concerns about the administrative governance and financial costs that this will put on us.

[Felicity Buchan]

Q But do you agree that it is not for pension funds to run your own foreign policy?

Jon Richards: Our primary aim is our fiduciary duty to deliver pensions, and you will hear us say that probably 10 more times throughout this session.

[Felicity Buchan]

Q Absolutely. Jo, do you want to come in on those questions?

Jo Donnelly: It is not a technical matter. My role here today is to assist you on the technical pension side of things.

[Felicity Buchan]

Q Great. Some may argue that the existing legislation is confusing and not comprehensive enough, as it does not deal with divestments—it deals with investment procurement decisions. In your opinion, does the Bill do enough to improve on existing legislation and prevent divestment campaigns?

Jo Donnelly: I think there are concerns around the clarity of a number of the provisions in the Bill and around how that will be dealt with in practice by pension committees, who are primarily making the decisions in the LGPS around investments and around strategy.

On the procurement side of things, I have taken some advice from my procurement colleagues in the LGA—obviously, I am not a procurement expert—and they have told me that, on the procurement side of things, there is nothing here that would cause any problems. The thing that is asked for is some more clarity around how the provisions on procurement in this Bill would interact with the Procurement Bill, which is currently going through Parliament as well. I think there is the potential for some confusion about how the provisions of each Bill interact with each other. So there is a request for some clarity and for clear communications to local authorities, and the LGA is happy to assist with that clarity on the procurement side of things.

[Felicity Buchan]

Q But you are happy that, given clear guidance on the harmony between the Procurement Bill and this Bill, this is very operable.

Jo Donnelly: On the procurement side, yes.

[Felicity Buchan]

Absolutely, yes.

Jon Richards: But not on the pension side. That is the difference: with procurement and pensions, this Bill will have a different impact on the ability in procurement, as opposed to the fiduciary duty, as I will say many times, versus pensions trustees.

[Felicity Buchan]

Clearly, this Bill is not—

[The Chair]

Before the Minister proceeds, could I just remind her that we have a fairly tight timetable? Perhaps she could take that into account in future questioning.

[Felicity Buchan]

Q Indeed. I just have one final question on the regulator. We have the Pensions Regulator in the Bill as the appropriate body for enforcing the ban, and they are clearly accustomed to similar roles. Do you think that that is the right regulator?

Jo Donnelly: There are not that many options in the pensions space for the LGPS. The Pensions Regulator already has a role in relation to the administration and governance of the LGPS, but it does not have a role in the investment side of the LGPS—it does with other, private sector pension schemes, but not the LGPS. So the provisions in the Bill would expand TPR’s powers over some investment-type decisions in the LGPS. Our main concern around the regulator’s role is that they ensure that they limit their oversight of investment decisions to the provisions of the Bill and that they are properly resourced and trained to do that role, because it is quite different to what they are used to doing already.

[Felicity Buchan]

Thank you, Chair.

[Alex Norris (Nottingham North) (Lab/Co-op)]

Q Thank you to our witnesses for their time. In opening, you were very clear, Jon Richards, about what your job is and what your job is not, and I think the Committee will have taken some comfort from that. Do you feel you need extra tools or controls do that job?

Jon Richards: I do not think we do. I think we think that the level of regulation of the LGPS is also already very high. You will have seen that the Government have just introduced a whole series of additional pension consultations, which we have to do—which poor Jo has to deal with and spend a long time on. Again, we think there is significant regulation. We have a regulator and we have a clear fiduciary duty. Trustees have clear responsibilities, including training responsibilities. They have a clear understanding of what should be done. There is a need for improving governance, and we have been doing a lot of work on that, including training. We have also tried to issue guidance on the need to be clear that, if there are challenges, or attempts to move people away from the fiduciary duty, we need to drag people back to that, and they should not be diverted by some of the political games that are potentially out there.

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[The Chair]

Thank you. Minister?

[Felicity Buchan]

Q Can you set out why you think that this legislation is necessary and also touch on the links between BDS campaigns and antisemitism?

Russell Langer: Sure. The boycott, divestment and sanctions campaign—BDS—against Israel is a pernicious campaign, which seeks to single out the world’s only Jewish state for unique treatment. As I just said in the previous answer, when we look at the picture in public bodies around this country when it comes to foreign policy discussions, Israel is the only country that is singled out in this way. That was something that was made clear in the House of Commons Library briefing, prepared ahead of Second Reading, as well. I therefore believe that the legislation is necessary to end the practice of Israel being singled out in that way by public bodies around the country.

On the links to antisemitism, the link between antisemitism here in the UK and the situation in Israel is clear—it is clear in the statistics, in the months with the highest levels of antisemitism on record, which all correspond to the months in which conflicts have happened in Israel. That link is clear.

When the Jewish community is most vulnerable in this country and when antisemitism is at its highest, we tend to see public bodies under intense pressure from campaign groups to get involved by boycotting Israel. That comes back to the point that I made about it being the only time that they are usually asked to get involved in such foreign policy. The legislation will therefore allow public bodies such as local authorities, higher education institutions and cultural organisations to focus on improving community cohesion at a time when it is at its most threatened. The legislation is helpful to that.

Daniel Sugarman: If I might add to that, on the links to antisemitism, there are a few points to consider, the first of which is the somewhat questionable double standards. People who take an extreme interest in the Israeli-Palestinian conflict and call for a full boycott of Israel seem rarely, if ever, to call for boycotts of any other country. It appears to be just the world’s only Jewish state that gets that sort of treatment.

The history of boycotts against Jews is a painful one, linking directly back to Nazi Germany, and it is clear that at least for a significant percentage of the community, when we hear about boycotts against Israel, that is a link that is raised. We have also had cases, unfortunately, where people participating in BDS campaigns have gone beyond Israel. For example, in a supermarket, a bunch of BDS campaigners went in and started defacing products that they felt were Israeli-linked, but of course they went straight for the kosher food section, not appearing to distinguish. That sent a clear signal.

I will make two more quick points, if I may. First, polling suggests that more than 80% of British Jews see Israel as either central or important to their Jewish identity. There is a very strong link between the Jewish community and Israel. When Israel and Israel alone is targeted in such a manner, that really has a strong impact on the Jewish community.

The other thing to consider is that the co-founder of the BDS campaign has been very clear about what he sees as the end goal, which is not a two-state solution, but the destruction of Israel as a state and its replacement with a state in which Jews are a minority. Given that in the past 50 or 60 years we have seen exactly what has happened to every single other Jewish community in the Middle East that was a minority, I think that the Jewish community here and elsewhere is right to be profoundly concerned.

[Felicity Buchan]

Q I have one more question. Clause 4 prohibits a statement of intent to boycott. Do you agree that that is a necessary addition to the Bill? One further question on enforcement: do you think that the enforcement regime is necessary?

Russell Langer: On clause 4, as I said, with BDS in public bodies, that is something we have seen over the course of several years. Often, while the results have an impact on the Jewish community, that impact is not limited to the implementation of BDS; it is part of the febrile nature of the debate, bringing it into our public bodies. Once again, the specific point is that that tends to be the only foreign policy with such debate in our public bodies in this country. Therefore, I understand the purpose of the clause, and to that extent definitely see the need for something.

In terms of the enforcement powers, absolutely—this Bill would have little merit without having adequate enforcement powers. Without them, it would lean towards a situation that we have now, whereby it is up to individual campaigners to raise these issues through judicial review and so on. Therefore, one of the key parts of this Bill is having proper enforcement powers to ensure that it is enforced.

[The Chair]

Q Before I bring in another Member, I think that this question has been partly answered but I would like to see whether we can get a clearer answer. Is there a distinction to be made, in terms of the provisions of the Bill, between on the one hand questioning the right of the state of Israel to exist and on the other hand being free to criticise the actions of the Israeli Government at any given moment in time?

Russell Langer: Absolutely—I am tempted to give you that one-word answer. There is absolutely no issue here in the Bill in terms of criticising Israel. The UK should have robust foreign policy on all issues, including Israel, and I do not think that anything should get in the way of that. However, what we have seen is a problematic picture, whereby the only country that any public body seeks to wish to criticise tends to be the one Jewish state in the world, and that I have an issue with. Nevertheless, I am not getting in the way of anyone here criticising Israel should they wish to do so.

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[The Chair]

Thank you.

[Felicity Buchan]

Q Can you tell us about previous attempts by councils to pass motions to boycott Israel? Do you agree that this legislation will help local councils to remain focused on their core functions, rather than being distracted by BDS campaigns, and give them clarity that they should avoid BDS campaigns?

Councillor Deering: I do not know whether it will disappoint you, but in Hertfordshire we have had very little agitation—if I can use the word—of this type. Ahead of me coming here today, we did the best that we could to check our records, and we think that there may have been some form of question or petition that may have come through in 2022 related to Israel. We then had something post the Ukrainian issue that related to Russia. We think that that is just about the limit of our experience in recent times, so maybe we do not have a lot of experience to draw on. We would say that that is a good thing, because in Hertfordshire we are trying to manage our finances in an objective and hopefully sensible way for the benefit of the residents of Hertfordshire, not for any particular lobby group, whichever it may be. My answer to your question is yes: what you are looking at here probably would be helpful.

If I may just add a rider, there is some crossover between what you are looking at here and procurement. I think we would be keen that no grey area emerges across those two areas of interest.

[The Chair]

Q Councillor Jamieson, is there anything you wanted to add to that, or are you happy with it?

Councillor Jamieson: I would also reflect that my personal experience in Central Bedfordshire is that we have not had motions of this nature relating to countries. Interestingly, we have had, on occasion, motions that would not be covered by this Bill, but which I would say were of a broader political nature and did not focus on what local government should be doing, which is delivering for our residents locally. My own personal view is that that is what councils should be focused on. Foreign policy really should be a matter for Government.

[Felicity Buchan]

Q There are exceptions in the Bill that permit investment decisions, such as labour market misconduct or environmental misconduct. Do you think that those are appropriate and are the right balance to strike?

Councillor Deering: That is quite a big question. I am conscious that you will be taking evidence from all sorts of people. I might provide you with a neutral answer, if I may. We can see why they are there. Again, I do not wish to be repetitious or boring, but really we simply try to run our finances as best we can. In principle, we do not want awkward issues to come up that make it difficult for us to run our finances in the way that we think is best for our residents.

Councillor Jamieson: I do think that it is important that pension funds—as is currently the regulation for pension funds—can take into account issues that would be of concern to their pension holders. That is right, and that is a carve-out, albeit it also has the carve-out—I cannot remember the exact wording— that effectively it must not have a significant financial impact. I think that is right. For instance, with things around the environment, people might have concerns when investing in certain companies. Local government has a public health duty and I could completely understand if certain councillors wanted to avoid investments in businesses that they deemed were harmful for public health. A classic example would potentially be the tobacco industry. I think it is important that we can still make those decisions.

[Felicity Buchan]

Q One final, holistic question: are you supportive of the Bill and why?

Councillor Deering: I think we are. I think we would support it for the central reason, which is that this country’s foreign policy, it seems to us, should be made by Government and should therefore be a coherent, unified foreign policy, rather than being fragmented across goodness alone knows how many organisations across the country, thereby becoming disparate. So yes, we are supportive.

May I come back on something the previous witness has just said in relation to pensions? Our experience is that if we find that there is some degree of pressure, it is more likely to come in relation to pensions. Our pension fund is valued currently at about £6 billion, which is a lot of money. We have 115,000 members and 400 employers. We take our responsibilities for our pension extremely seriously and I have been on our pension committee for a number of years. We have from time to time had situations where people, exactly as has just been said, come along and say that we should not be investing in x or we should not be investing in y because. There is a degree of difficulty with that because we understand always where people are coming from, but clearly, in the pension world, we have a fiduciary duty to deliver—to put it loosely but broadly—the best pension we can for all the prospective beneficiaries of our pension scheme. That comes up from time to time.

At Hertfordshire, we have an extremely good pensions committee. It is cross-party, as you would expect, but it is not party political. The reason I have come back to this is because, of course, environmental, social and governance is an issue in all investment these days. All the advisers that advise us in relation to our pension investments have some facility to advise on ESG. It might be thought that that strays into that area—tobacco, coal or whatever it is—but ESG works its way through to value and you start to realise that, actually, it is an investment criterion because it affects the value of what you are investing. I thought I should just say that because that is probably our biggest experience in this area.

[Felicity Buchan]

Q Just a point of clarification: the Bill only prevents decisions being made on the basis of moral or political disapproval of states as opposed to banning fossil fuels or environmental matters. It does not cover that.

Councillor Jamieson: I am speaking personally here. This is not an LGA view, just to be clear. I think the principle of this legislation is absolutely fine and, in many ways, helpful because it enables people on a pension committee to be very clear that they cannot consider countries when looking at this. However, my caveat is that there are some details in the regulations that need clarifying and those are quite concerning. It is not the principle but some of the details and we just want to make sure that some of those are right.

[Alex Norris]

Q I would like to start by putting on record the thanks of Members of the Opposition Front Bench to Councillor Jamieson for his leadership of the Local Government Association. It is safe to say that it is a broad family of all parties and none, so that leadership in a single person is an exceptionally tricky job and I think you did a very good job of it. As I say, we are grateful for your leadership and your candour with us when we have asked you questions in the past. Thanks again for your and Councillor Deering’s presence.

We speak a lot in this Parliament about transferring power from here to local communities, namely our local councils. The Bill very much transfers power from our local councils to this place. How do colleagues in the local government family feel about that?

Councillor Jamieson: Thank you very much for your kind words. As I should have mentioned in my little statement a moment ago, I am very vexed—and was very vexed as chairman of the Local Government Association—by the underlying trend of giving powers to local government with one hand and taking them away with multiple hands. I can genuinely understand why it is being done, but I do not like the fact that it is another example of central Government just eating away at the freedoms and devolution of local government, but there are far more contentious areas than this one in which I would argue that the Government have taken back powers.

Councillor Deering: My view is very similar. I do not know that in Hertfordshire we feel particularly that this is a power grab from us; I think we understand the rationale of the Bill, or the proposal. If we had more experience of problems in the area, maybe we would feel differently, but I think we would say that we are fairly relaxed about this.

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[The Chair]

We have a couple of minutes left in this session, if anybody has a question that they have not had the opportunity to ask. I call the Minister.

[Felicity Buchan]

Q There has been quite a lot of talk as to whether councillors can express their own views. The Bill applies only to public bodies, so a councillor can express their own view; it is simply that, if a councillor is talking on behalf of the local authority, they are covered by the Bill. In the light of that, are you comfortable with the Bill?

[The Chair]

Before I bring in the witnesses to answer that question, Bob Blackman has a very quick point.

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[The Chair]

We will now hear oral evidence from Hannah Weisfeld, director of Yachad. For this session we have until 11.10. Could the witness introduce herself, for the record?

Hannah Weisfeld: I am Hannah Weisfeld, the executive director of Yachad.

[Felicity Buchan]

Q I understand that Yachad does not support the BDS movement. Can you explain why?

Hannah Weisfeld: I guess I should start by clarifying who we are and what we do. We are a British Jewish organisation that works within the mainstream of Anglo-Jewry to build support for a political resolution to the Israel-Palestine conflict.

We do not support or advocate for the BDS movement, because we believe that putting pressure on one side does not necessarily bring about a resolution to the conflict. However, we are very clear that we support the right to non-violent protest. While we do not support or advocate for the BDS movement, we support the rights of individuals to adopt methods of non-violent resistance to Israeli Government policy—and in fact to the policy of any Government anywhere in the world. So, we would not advocate for the movement, but we would absolutely advocate for the right of people to express their opinions and to apply pressure in a non-violent way.

[Felicity Buchan]

Q So do you think it is appropriate for councils to support the BDS movement, with all the implications of them getting distracted from their core function—clearly, foreign policy is a reserve function for the UK Government—and also the consequences in terms of bringing dissension to local communities?

Hannah Weisfeld: Well, I know that one of the motivations for this piece of legislation has been around community cohesion and the idea that debating issues that are contentious at a local level creates community dissonance and disagreement. There is a reverse to that, which is that when you crack down on the ability of people to express their opinion and to express it in local democracies, you can do the exact opposite, which is that rather than bring people together, you can create real disharmony among communities. That has been mentioned already in the Committee this morning. There has been a tiny number of examples of there being what we would refer to as BDS motions at a local government level and in public bodies. I would not be overstating the reality if I said that if this legislation passes in its current form, there will be BDS motions in public bodies all across the country where people try to test this legislation because they are so frustrated that their right to express an opinion has been clamped down on. If the motivation here is to create community cohesion, there is a very real worry that this is going to do the exact opposite.

[Felicity Buchan]

Q But this Bill does not apply to private individuals or private companies; it applies only to public authorities. The motivation behind the Bill is to have one reserved foreign policy that is run by His Majesty’s Government, rather than local authorities which are tasked with providing local public services getting distracted away from their core functions.

[The Chair]

Could I just say that that is a statement, rather than a question?

[Felicity Buchan]

I am sorry; I was just about to say, do you agree?

Hannah Weisfeld: I do not think we have evidence, and the Committee has not just heard that the people representing local government have been particularly distracted. To me, the Bill is not really about that issue; it is about creating what I think will become quite a nasty debate around Israel-Palestine, and I do not think that that is going to benefit the Jewish community particularly.

[The Chair]

This is a very short session and three people have signified that they want to ask questions. I will bring in Wayne David. Again, I ask Members to be concise in their questions and our witness to be equally concise in her answers.

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[Felicity Buchan]

Q Can you set out why you think this Bill is needed?

James Gurd: I think this Bill is a very welcome piece of legislation and will go a long way towards reasserting the UK Government’s reserved foreign policy powers. In recent years—over the past decade, really—we have seen that being challenged by an increasing number of public bodies pursuing very divisive BDS activities in the UK. Indeed, the Government have made repeated efforts through the issuance of guidance to try to challenge that; I think the Government have now finally, rightly, reached the decision that legislative action is required.

Those BDS activities, as we have heard from a number of other witnesses this morning, have led to community division. I do not see it as the place of public bodies to be, effectively, picking one side in a dispute over a foreign policy matter that is several thousand miles away. The Jewish community—I believe, as a non-Jew—has felt increasingly isolated in the United Kingdom throughout this process. It is probably worth stating that no UK political party is on the record as supporting BDS, so I would hope that there will be broad support for this.

I believe that this legislation will also have a positive effect for the UK. The UK has very strong economic relations with Israel. Israel makes a very important contribution to this country’s national health service, for example, and BDS has had a chilling effect on those relations and on the prospect of further improved relations over recent years. I know that that is something that CFI certainly welcomes in the Government’s efforts to secure a free trade deal with Israel.

I believe that the Bill would also support the UK Government’s belief in a two-state solution. That is something that I believe is undermined by BDS. It is a movement that is, I believe, associated more with extremists. Certainly you can look at the Palestinian BDS National Committee, which is the organising body over in the Palestinian territories. That body includes organisations such as Hamas and Palestinian Islamic Jihad, which are terror groups proscribed here in the United Kingdom. Within the UK context, the Palestine Solidarity Campaign is seen as one of the most prominent organisers of the BDS activities here in the United Kingdom. It is an organisation that until a few years ago—I feel this is probably worth putting on the record—had a logo presenting a future Palestinian state on top of a state of Israel. So I believe that the Bill will have a number of positive implications.

[Felicity Buchan]

Q You have addressed the impact that BDS campaigns can have on community cohesion and, clearly, in driving antisemitism. Do you therefore think it important that we specify in the Bill that Israel can only be exempted from this Bill through primary as opposed to secondary legislation?

James Gurd: I believe that that is a reasonable approach that the Government have decided to take, and I believe it is a reaction to the fact that BDS is unique in its singular focus on the state of Israel. We have seen, as a number of others have referred to this morning, a House of Commons briefing note that pointed out that of all recorded examples of boycott activity pursued by public bodies in the United Kingdom, they are targeting exclusively Israel, so there is clearly a unique problem here.

When you look at the Bill in a broader sense, it is a Bill that has universal application. Foreign policy is a reserved matter for the UK Government; it is not, I believe, the place of public bodies to be pursuing that. They are there to represent all their diverse communities equally and to ensure that they are fiduciarily responsible in how they deliver that.

[Nicola Richards]

Q We have heard concerns from others giving evidence today about people who wish to disagree politically with things that happen in Israel. People should have the right to freedom of speech on those matters. In your evidence, however, you make it clear that the aims of BDS are to cut off economic and cultural ties. Do you believe that the nature of BDS is totally different from making a political argument against a Government and policies and activities that happen in another state? Is it that difference that makes it so damaging to the Jewish community, in your view?

James Gurd: We have seen a growth in BDS activities in public bodies over the last decade. As I have referred to before, BDS is uniquely discriminatory in nature, as it only targets Israel.

I first encountered BDS while I was at university. I was at King’s College in ’09, which coincided—as is so often the case when there is conflict in Israel and the Palestinian territories—with a spike in BDS interest. That led to a series of BDS activities, which students were perfectly entitled to do and which they will be able to continue to do under the Bill, but it led to a series of antisemitic incidents on campus. The head of the university had to send around a communication to all members of the student body to call it out. It has since gone mainstream, in the sense that it has left the student body politic and entered public bodies here in the UK, so it has grown as a challenge.

Having said that, it is worth putting it on the record that the Bill will in no way challenge the right of a private individual or a private company to pursue BDS. They are perfectly entitled to do so if they wish.