(2 years, 8 months ago)
Grand CommitteeMy Lords, I am glad we have come to that agreement. I thank my noble friend Lord Astor for initiating this debate and the noble Lord, Lord Lipsey, for his colourful perspective, although, as he says, the solutions in these matters are never easy.
Like both noble Lords, I love racing, especially on the flat, and believe that elite sport broadcast here and around the world is important to UK growth, enterprise and soft power. Over the years, I have spent a good deal of time in Asia and Europe and have been struck by the power of teams such as Manchester United and indeed Manchester City, English cricket, Welsh rugby and of course the Derby to bring people together and attract wealth and investment into Britain.
I was Intellectual Property Minister for nearly three years—happy times—mainly under David Cameron, and I helped others to understand the evolution and importance of intangible assets such as those that we are talking about. Over 4% of our GDP in 2019 was invested in intellectual property rights, and of course copyright, which we are discussing today, is the biggest intellectual property right in economic terms.
At that time, we not only had the best IP regime in the world but we prided ourselves on good enforcement of the rights, which provided certainty for business, sport, inventors, scientists and the creative industry, while the Intellectual Property Office and the IP crime unit in the City of London Police led the charge against infringements of all kinds. Some of them were very dangerous, such as counterfeit airbags and website scams. I am delighted to see the noble Lord, Lord Stevenson of Balmacara, in his seat; we did a lot of work together on trying to get IP into a decent place, and to avoid the sorts of scams that we have heard about from my noble friend today.
One offending area was autovisual content, including live match footage, which could then be streamed in from abroad by, say, Greek or Asian providers for a very low fee but not be caught by the rules on copyright and the associated licensing because of the wording of an exemption in Section 72 of the Copyright, Designs and Patents Act 1988, which followed a confusing ECJ judgment in 2011. The beneficiaries of that state of affairs seemed to be from overseas, as in the racing example that my noble friend Lord Astor has raised. While some pubs might have been getting cheaper deals, they might well at the same time have been breaching copyright laws, which was itself a big cause of concern.
Like much to do with IP, this area is very complex, as we will discover when we seek to put our towels around our heads and solve the very real problem that has been raised today. On the issue that I have mentioned, after two painful consultations, we concluded that the right thing was to remove film completely from the Section 72 exemption. We made regulations in 2016 that seemed to do the trick and reduce lawbreaking. We put a review clause in, which is something I am always very keen on in regulations, and that review is now taking place. I recall this and mention it today because of its relevance and because it has been mentioned in the excellent briefing by the Library for this debate. My strong advice to the Minister on that one is to leave well alone, because it is very complex and you can go around in circles.
I listened to my noble friend Lord Astor, who raised a new horror that perhaps could be addressed by the right regulation of copyright, which is what we were doing on that occasion. This is exactly the sort of issue that the Intellectual Property Office, of which I am a great admirer, is good at tackling. Illegal gambling is for the DCMS, of course, but in my experience they work well together and should act as my noble friend Lord Astor suggested.
He has identified a very valuable and unfair two seconds. That was the thing that struck me—the delay that allows this profit to be a completely wrong accretion of value. It is a new online harm for us to wrestle with, and regulation is no doubt needed. That is why this debate is very timely, with the legislation on that issue coming forward soon.
I very much look forward to my noble friend the Minister’s comments and hope that the two issues we have raised are not in conflict.
(2 years, 9 months ago)
Lords ChamberMy Lords, it is a great honour to follow the noble Lord, Lord Rees of Ludlow, one of our most distinguished scientists. I agree with him about the modern excess of performance indicators and the valuable contribution the private sector can make. I am very grateful to my noble friend the Minister for his clear exposition of the purpose of the Bill, and I declare my interest as a director of Health Data Research UK—which is largely funded by the Medical Research Council—and of Capita plc.
I am not a scientist. Indeed, perhaps because I went to an all-girls school in less progressive times, I have never had a physics or chemistry lesson in my life. I have, however, always been a huge proponent of scientific innovation and invention and everything that encourages them, from academic excellence to fostering a culture of enterprise. As a former Minister for Intellectual Property, I also regard a sound framework for the protection of IP as a vital necessity.
The context of these proposals is important. I congratulate the Chancellor on an assured Budget performance in very difficult circumstances. There was a cheering ending for those like me—watching from the Gallery—who believe that high taxes hurt the economy, and enterprise and innovation. I would single out his welcome extension of R&D tax credits to cloud computing and data costs, the shift to focusing tax relief on domestic rather than overseas research, and the increase in the UK R&D budget to £22 billion by 2026-27, which is 2.4% of GDP and a cash increase of 50% by the end of the Parliament.
I did, however, find one moment chilling: the growth forecast of 6% in 2022, 2.1% in 2023 and a miserable 1.3% in 2024. This is, of course, not the Chancellor’s fault. It is an OBR forecast, and we need to do all we can to prove it wrong. I want to see growth overshooting substantially. That brings us to innovation and its companion, productivity. We need major change to bring about a new dynamism in our economy so that growth takes off and is sustained. We can build on the success of the Covid vaccine and the legacy of our multiple Nobel Prize winners.
The proposal for ARIA is the most radical I have seen in my time in this House. It sets aside all the most cherished Whitehall controls which envelop all other agencies. It would create a significant, truly blue-sky research base not subject to normal constraints other than, of course, the financial limit. My view—which I think is widely shared if the discussion in another place is to be believed—is that it is both welcome and timely, given the country’s needs.
Given the greater freedom that the new agency will have, the choice of the right people to lead it will be vital, as my noble friend Lord Borwick said. That poses two questions: who will these be, and who will decide on them? I will be interested to hear from the Minister how that vital but difficult task will be managed.
On one illustrative point, we should certainly not specify how the new body should go about its work, as some parliamentarians have already tried to do. That would be absurd. Neither this House nor the other one, nor indeed Her Majesty’s Government, is likely to be the best authority on the development of science over the coming years.
Perhaps not for the first time, I am in a different place from my noble friend Lord Bethell. Societal challenges and fashions move on, as we saw with the pandemic itself. I believe we need independent thinking and that the agency should decide its own programme.
Normally in our debates I press at this point for the provision of a cost-benefit analysis of the proposal. Today I will not do so—I cannot see how such an analysis could be done before the new body is established—but we will need checks and reporting by the agency. I suggest that we need annual reports, while recognising that judgments of success will not be possible for several years and that patience and tolerance of failure are needed, as the Minister has said. However, eventually it will be possible to assess both successes and missteps, and we should not hesitate to do that. As one example, we should have a requirement in the Bill for the agency to make a full assessment of its work ahead of the 10-year dissolution power in Clause 8 so that we can determine objectively whether the experiment should be continued.
In all this, I am influenced by what I have learned of success elsewhere—for example, about the Manhattan Project. I was lucky enough to visit New Mexico before Covid and to learn from its museums, and those who have spent careers in the nuclear industry, of the importance of the people you put in charge of such a project, and of giving them responsibility and space. Those are the two concerns that I have already alluded to. In New Mexico the team was literally hundreds of miles away from any stakeholders.
As some of you will know from my Zoom backdrop, I am an enthusiastic student of the 18th-century Staffordshire potters. Stoke was the Silicon Valley of its day and mushroomed in a way not unlike the pop music business 200 years later. The entrepreneurs pioneered brilliant new chemical techniques and competed in a vibrant and growing consumer market right around the globe. Focus, competition and the stealing of each other’s ideas and master craftsmen were everyday occurrences.
Look at the rise of Japanese, Korean and Taiwanese manufacturing in the 20th century. They copied a lot but that was a skill that drove growth, and there developed in Japan a vital intellectual attitude—“lean thinking”, pioneered by Toyota—which has been an inspiration to successful businesses right round the world. Unfortunately, it has yet to be fully established in the public service or the NHS—but I threaten to digress.
This is a worthwhile initiative. I support the Bill’s Second Reading and look forward to its progress through the House.
(3 years, 1 month ago)
Lords ChamberMy Lords, I refer to my interests listed in the report and thank the noble Baroness, Lady Donaghy, for the fine job that she did chairing our committee. I also thank the staff—clerk Dee Goddard and Hadia Garwell—for their excellent work. Overall, I support the Government on Brexit, but with only three minutes, I must concentrate on areas of difficulty.
This is a big sector, with professional and business services providing £225 billion gross value added in 2019 and employing 13% of the workforce, yet in the negotiations it was more or less ignored. However, all is not gloom. Our legal and accountancy firms have been ahead of the game, setting up complex arrangements where necessary, to keep serving customers in the EU. Extra qualifications have been secured by talented individuals, young and old, with the Republic of Ireland being a major beneficiary. The very process may have generated innovation, fired up by the need to move online with Covid.
I have two areas of questioning. The first relates to small and medium-sized businesses, which are less able to jump through expensive hoops, such as smaller legal firms, architects, and engineers. Does my noble friend have any data on how they are faring? Are they offering services in the EU? Are they diversifying into markets elsewhere?
My second area of questioning is a matter that we found most unsatisfactory. It is the Government’s handling of the future relationship with the creative industries—a sector facing the challenge of both Covid-19 and arrangements in the agreement, which make touring very difficult. In response, the Government said that they
“could not expect to end free movement into the UK while at the same time expecting that nothing would change with respect to movement into the EU … It was inevitable therefore that there would be significant changes in the arrangement under which creative workers operate in the EU, all the more so because many of the relevant rules are set at Member State level.”
To put it mildly, the sector feels let down and that better arrangements could have been won.
We suggested that the Government should pursue negotiations to address these issues, with both the EU and member states. Sadly, the Government do not seem to be in negotiation with the EU, and instead say:
“Through our engagements, we have established that some touring activities are possible without visas or work permits in at least 17 out of 27 member states.”
This is progress, but it is not sufficient. Can my noble friend update us and offer any hope?
The Government’s response to two related issues was disappointing. The first was the extra costs of creative professionals moving their equipment across borders and the need for costly ATA carnets. The second was the impact on the specialist touring haulier industry of cabotage restrictions. The creative sector, especially musicians of the classical and pop variety, and the tours they make, are hugely important to the UK. We need a better response. I hope that my noble friend the Minister can update us or write, and that the European Affairs Committee, with its new energy, will be interested in taking this issue forward.
(3 years, 4 months ago)
Lords ChamberI can give the noble Lord the assurance he asked for in the first part of his question: Sir Wyn, as part of his evidence gathering, is looking at the issue of corporate governance, where it is clear that there are some serious questions that need to be answered. On his question about the role of the shareholder, as I have said before on a number of occasions in this place, the Government pressed the management at the time on issues regarding complaints brought by sub-postmasters about Horizon, and we received repeated assurances that the system was reliable. Of course, the Court of Appeal opined that the Post Office had consistently asserted that Horizon was robust and reliable at the time.
Having been a Minister in the business department whose responsibilities included the Post Office for a period, I join others in congratulating the postmasters and the courts on restoring justice. I have always been much troubled by these cases and the tenacity of the Post Office in defending the integrity of its IT systems—now shown to be wholly unjustified—and by the fact that the Post Office was both investigator and prosecutor, which has already been touched on. Does my noble friend the Minister agree that, while being extremely important and useful, the criminal cases review process is far too slow? As part of lessons learned, will he follow up with the Ministry of Justice and explore the case for statutory deadlines or other incentives for speed? People’s lives have been wrecked for literally decades.
I will certainly pass on the noble Baroness’s comments on the speed of the justice system to the Ministry of Justice. I am sure there are many other areas where we would all like to see speedier justice.
(3 years, 4 months ago)
Grand CommitteeMy Lords, it is a pleasure to follow the noble Lord, Lord Davies of Brixton. I agree that the decline of defined benefit schemes, which he outlined, is something to be regretted; they were extremely valuable to millions of employees but, sadly, action by both parties over many decades has led to their virtual demise. However, today’s debate is about the broader issue of international accounting standards, and I thank my noble friend the Minister for his explanation. I refer to my interests in the register as a director of Secure Trust Bank and Capita, and a shareholder in some international companies, including Tesco, where I served for many years, hence my knowledge of pensions, and lived through the introduction of international accounting standards.
As a supporter of free trade and the benefits of comparative advantage, I favour global standards, for the reasons the Minister highlighted. I also favour using UK strength in financial services to participate in the international standard-setting process for accounting conventions; we have done so for many years, and that has been beneficial. Now that we are out of the EU, it is essential that we play our part directly. There is, however, a major problem: an enduring fight between the proponents of prescription, often favoured by Brussels, and principles-based rules which are essentially meant to reflect common sense. I have always been in favour of the latter because I worry about burdens and costs, which always end up being passed on to the consumer.
I am also keen on learning from history, and I have two lessons for today and then a couple of questions on the regulations before us. The first lesson reflects the introduction of Sarbanes-Oxley in 2002 in the United States—a typical example of overreaction to a financial crisis. There had been a failure to enforce accounting rules properly in the case of Enron, WorldCom and others, but the correct response to that was to enforce the rules properly, not to make them excessively complicated. I know from direct experience that Sarbanes-Oxley stopped some companies listing in New York at the time and encouraged others to delist, admittedly with the welcome effect of boosting growth in London. The extraordinary prescriptions it introduced were costly and bureaucratic and yet it did not prevent the 2008 financial crisis. Remember: accounting standards affect most businesses of any size, not just financial services; some 15,000 are subject to them in the UK, according to the Minister’s helpful introduction.
The second lesson of history is the emerging evidence that economic growth, which is how we can make everyone better off, can be explained in part by the stripping away of impediments. There is a fabulous book on this subject, free from modern fashion, which I borrowed from the Lords Library: Barriers to Growth by Eric L Jones, published in 2020. It explores the slow dissolution of such barriers in English history. In brief, the book suggests that the increase in the rate of economic growth in recent centuries reflects the removal of institutional and environmental barriers that held it back before the Industrial Revolution and which were then progressively relaxed over the following centuries. This is not the occasion to set out the many fascinating strands of the thesis developed in the book, although I would commend the section on how tithes retarded increased productivity in agriculture. The essential point is that all ages have their concerns and obsessions which have as a major—perhaps the major—effect the retarding of economic growth. My concern is that, in our age, what I call bureaucratisation is such a failing, and that today’s SI is an example of it.
I am not really convinced that we need a quango to endorse international standards—this new UK Endorsement Board. I understand that it will enable us to make sure that international standards are not missing a vital dimension and to reflect UK stakeholders’ needs, as the Minister explained. However, when you create such a body it will find work to do; people will want to write strategies and have a work programme. It will have a comprehensive diversity programme, although I note that it will be served, on HR, IT and finance, by the FRC. I would have left the work with BEIS and its civil servants, some of whom are extremely talented and will no doubt be conducting the international negotiations on accounting standards. We have too many regulators.
We are, however, where we are today. I ask my noble friend, who I know takes a welcome interest in corporate governance, from a practical perspective to enlarge on the criteria he will set. Page 3 of the Explanatory Memorandum says:
“the Secretary of State retains the function to amend the criteria for determining whether the use of an IFRS is conducive to the long term public good of the UK.”
What sort of things are we talking about? My main concerns would be: first, relative UK competitiveness; secondly, simplicity and clarity, to the extent that that is possible; and, thirdly, sensible timing in the introduction of new IFR standards, with more flexibility where that is justified. In my experience, IFR standards, while welcome conceptually, have often come in at difficult times, been expensive in accountants’ fees and diverted management damagingly.
Will Ministers be able to control any of these things, or will they just be in the hands of the new body, the new chair—Pauline Wallace—and anyone she appoints? If so, how will we ensure that a common-sense business voice, including the voice of smaller business, is heard?
While I am on my feet, I take this opportunity to remind the Government of interest in this House about the nature of the audit and governance package which is now out for consultation. It would be extremely helpful to have an oral briefing from BEIS on this subject while there is still some time to influence the content.
I understand that the noble Baroness, Lady Bennett of Manor Castle, has withdrawn, so I call the noble Lord, Lord Sikka.
(3 years, 4 months ago)
Lords ChamberMy 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 have a number of amendments in this group, all of which would amend the annual reporting requirements. Some of them overlap with amendments that my noble friend has just spoken to. In particular, my Amendments 26 and 28 are similar to his Amendments 25 and 27. The difference is that my noble friend’s amendments ask for the average time to be given, whereas I ask for both the average and the maximum, because averages can be very misleading. However, we shall have some data, and I am sure that those can be used as a springboard for further examination of BEIS Ministers and officials, if either House wished to do that, so I shall not pursue those amendments.
Of my other amendments, Amendment 29 asks for differentiation between call-in notices issued for mandatory and for voluntary notifications. That is not given, and it is quite an important bit of information, which would be useful to enable us to see how important that mandatory notification route turns out to be. The other thing I have asked for is a focus on timing—the time between issuing the call-in notice and getting to the end of the process and giving the final notifications and the final orders. I continue to believe that those areas would be important for keeping an eye on how well the process is operating, especially as there are very long times available once the call-in notice is issued. Again, I am sure that questions can be tabled and Ministers can be interrogated in the usual way, so I am not worried about that. I am glad that my noble friend has moved towards more transparency, although he has perhaps not gone quite as far as I would have preferred.
Although I have not added my name to the amendment in the name of the noble Lord, Lord Grantchester, I think it is important for annual reporting to keep a focus on the resources dedicated to this, because the timing performance will be in part a reflection of whether adequate resources have been dedicated. Of course, giving numbers never gives an idea of the quality of resources, so that can only ever be an imperfect picture, but it is important for Parliament to have an opportunity to review and keep in focus the resources dedicated to the ISU processes. That is where the biggest impact is likely to be felt by businesses as they come up against the system. Well done for bringing in some transparency; a bit more would have been better.
My Lords, as I noted earlier, the administrative arrangements for consideration of deals referred to BEIS are incredibly important. This is a good Bill, but it must not be undermined by poor implementation, or UK plc will be cast in a bad light. As others have said in Committee, delays create cost and uncertainty, which can jeopardise beneficial takeovers or combinations. Deals in the 17 categories must be reviewed, but this must be done professionally and quickly.
I therefore welcome the Government’s amendments, and thank my noble friend the Minister, but I do not think they go far enough. At the least, I feel that he should also accept some or all of Amendments 28 to 31, tabled by my noble friend Lady Noakes—either in the Bill at Third Reading or through a commitment to add to guidance.
I have years of experience of being regulated, by the CMA and other anti-trust and investment authorities round the world, mainly in my former retail role. Good people, and good regulators, are both thorough—I know that has been a cause for concern right across the House—and timely. I can tell noble Lords that authorities use the set timeframes as a defence, and almost never, in my experience, report or publish ahead of the deadlines. So the timelines need to be clear, and, as argued by my noble friends Lady Noakes and Lord Lansley, and the noble Lord, Lord Fox, in the debate on Amendment 11, they need to be tight. They could perhaps also be shorter for smaller or struggling companies, which have more to lose. It would be helpful if my noble friend could have a look at that, if it is not already envisaged that we will take special care with those categories.
It is a worry that we are running out of time for the Bill in this legislative Session. As I have said, I supported the Bill at the start, and I am keen to get it on to the statute book, as I know the Government are as well.
In the light of discussion, I have four questions that probably go slightly wider than the annual report. Perhaps I could ask the Minister to respond either today or before Third Reading. My first question is whether in principle the Minister has the ability to consult on sensible arrangements on timeliness and timelines and put them into statutory guidance or whether a new power is needed, which is rather suggested by my noble friend Lord Leigh’s Amendment 36, which we will come on to.
My Lords, I have received a request to speak after the Minister from the noble Baroness, Lady Neville-Rolfe.
I thank the Minister for what he has said, particularly on education. I am also grateful for the letter sent by the noble Lord, Lord Callanan, which I expressed my appreciation for when speaking on Amendment 22.
My question relates to something said at that time: the suggestion that market guidance to buyers and sellers could not cover timelines, timeliness and the modus operandi. There was a reference to the Constitution Committee apparently making that problematic. Clearly, guidance on such issues is very helpful to operators, so I wondered whether it would be possible to have a little more detail—not now, but later—as to why there is a problem in covering that in guidance. If there is a problem, perhaps the Minister would consider whether we need to take a power, which I think the amendment tabled by my noble friend Lord Leigh provides for. This would ensure that we can give operators the sort of guidance they need to make operations work well, as we all hope.
I thank my noble friend for those comments. It certainly seems a bit weird that the Constitution Committee will have a role in this. If I may, I will look into the matter, write to the noble Baroness and put a copy in the Library.
(3 years, 5 months ago)
Lords ChamberWe are discussing audit reforms and reforms to the audit market. I think that the noble Baroness may want to have a separate debate about reforms to company structures.
My Lords, I refer to my interests in the register. I hope my noble friend realises that this audit and governance package is onerous. It will place significant costs on businesses of all shapes and most sizes and is, I fear, unlikely to achieve a lot in practice. Does he not agree that the best and more immediate way forward would be for the existing, comprehensive rules to be enforced properly by everyone—including firms, auditors and, if appropriate, prosecutors—while minimising the burden of any new regulations?
(3 years, 5 months ago)
Lords ChamberMy Lords, I thank my noble friend the Minister for his explanation of these regulations, and for his courtesy and that of officials in meeting some of us to explain how thinking in this important area was developing. It is a particular pleasure to follow the noble Lord, Lord Mendelsohn, with his extensive practical experience.
One of the problems with insolvency law is that it is monumentally complex. I know this because I am a chartered company secretary and passed papers which tested me on the law in this area. The course taught me helpful and important lessons about a director’s duties if a company was heading anywhere near insolvency. However, I confess that I do not fully understand all the minutiae of the law and I suspect that I am not alone in this.
Nevertheless, we are where we are, and I thank the Minister for recognising that pre-packs can have value: business is not interrupted, jobs may be saved and a good brand safeguarded, although conflicts have to be watched very carefully. This inherent benefit influenced the Graham report on the future of pre-packs in 2015. I have a lot of time for the common-sense expertise of Teresa Graham. She favoured a voluntary approach with a reserve power, so it is a little disappointing that the Government have now found it necessary to legislate, difficult though this is. The Minister has explained why he thinks this is needed.
A very important Graham recommendation was that there should be a Pre Pack Pool of experienced business people where, on a voluntary basis, details of a proposed sale to a connected party could be disclosed to an independent person prior to the sale taking place, thus giving greater confidence to creditors that the deal had undergone independent scrutiny. This pool has apparently not been much used and that is one of the reasons the Government have moved to a statutory system, with all pre-pack administration sales to a connected purchaser requiring an independent opinion from an evaluator on the sale.
The problem with this provision as now drafted is that the evaluator must only be independent, without obvious blemish on their record, and have relevant knowledge and experience; they do not have to have professional qualifications or be recognised in some other objective way. This moves away from the Graham notion of a Pre Pack Pool of people with knowledge of the industry exchanging good practice and intelligence, which might help to head off trouble. Has my noble friend considered the case for such a pool of evaluators? They could be explicitly recognised by the Insolvency Service, or some other body, and be encouraged to exchange experiences.
I should thank my noble friend the Minister for the progress made in consultation on these regulations. There is, however, a feeling among those I have consulted that he could usefully have made more changes to the consultation draft. Returning to my point about complexity, this is difficult stuff and it needs to be “work in progress”, with changes to the regulations if the need arises. We also need an eagle eye for perverse effects and for those gaming the system—we heard from the noble Lord, Lord Mendelsohn, about his concern about opinion shopping.
Perhaps I could echo the noble Lord’s final point on review; it would be very helpful if my noble friend could outline his plans for monitoring and evaluation and indicate when and how we might receive a review of progress on the new system. I was a little disappointed by paragraph 14 of the Explanatory Memorandum on this point, given the importance and complexity of legislation on insolvency. For example, maybe something could, in practice, be done in the annual report of either BEIS or the Insolvency Service. But I support the regulations and thank the Minister.
(3 years, 5 months ago)
Grand CommitteeMy Lords, I thank my noble friend for his explanation of these regulations, which extend the powers to regulate that we agreed last year during our lengthy debates on the Corporate Insolvency and Governance Act for a further year, until April 2022.
We know from the report by our hard-working Secondary Legislation Scrutiny Committee that the power has been used only to suspend temporarily the personal liability incurred by company directors through wrongful trading. As my noble friend said, that has not been renewed, so I cannot see why a wide-ranging power of this kind needs to be extended—and extended for a whole year. If necessary, I would have favoured a more focused provision and a six-month extension.
It is dangerous to take too much power in regulations. I do not favour the method apparently adopted by the ancient Greek state of Locris, where proposers of law change stood with a noose round their neck, ready to be hung should the proposal be rejected. However, every burden placed on business and society makes someone poorer, and we need to outgrow the juvenile temptation to meddle, using strong, grown-up powers. Perhaps my noble friend can reassure me by outlining the circumstances in which he thinks he might need to use these powers.
From the Back Benches it has seemed that BEIS, the Minister’s department, has dealt with Covid relatively well. Instructed to bring in extensive controls on business, it tried its best to consult and find ways around problems like insolvency and access to business, retail, hospitality and other premises. Several sectors of the economy have kept working better than in the first lockdown. BEIS has also been a critical player in the success of vaccines, which, like all victories, has many fathers, to pick up an observation of President John F Kennedy.
However, the voice of business and economics has not been heard loudly enough. This is part of the reason that the programme of lockdown is far too lengthy. Each day of lockdown takes the country closer to a potential financial crisis, especially as bond yields start to move up. In what amounts to a reverse takeover, the objective of BEIS has become:
“Building a stronger, greener future by fighting coronavirus, tackling climate change, unleashing innovation and making Britain a great place to work and do business.”
There seems to be very little emphasis on the success of British businesses, large or small, which create the wealth and pay the taxes that finance hospitals, schools, transport and social care, let alone unfashionable causes like the police and defence.
In the wider health sphere, our approach to Covid has failed. Our handling of the epidemic, which is not the Minister’s fault, has undone years of progress in the NHS and threatens a decade of excess deaths. According to a left-wing think tank, IPPR, disruption to healthcare will be felt for 10 years. There will be 4,500 needless cancer deaths this year alone and doctors’ appointments are down by 31 million.
In terms of mass suffering, we need to add the impact of the pandemic on mental illness and social care. That does not allow for the agony of people, especially the elderly, being unable to see family and friends. Nor does it count the cost to the young unemployed or to those who have built up businesses only to see them go bankrupt—just visit the centre of a relatively prosperous town like Salisbury, my local town. This contrasts with the United States, which has been more confident, less fearful, kept its economy going well and is on course to match our record in vaccination in a few weeks’ time. Sadly, one has to conclude that it is a better friend to business, innovation and enterprise than we sometimes are.
In closing, I thank my noble friend for his letter of today and ask when we will be able to debate the changes to company law announced by the Business Secretary. As a non-executive company director who takes my responsibilities seriously and as an ex-company secretary, I am alarmed by these proposals. They seem bound to have the perverse effect of discouraging skilled people from taking positions on the boards of companies that need their help. Blaming business, as some seem to be, is not the way to rebuild confidence.
Indeed, unlike parts of government, business has done superbly during the pandemic—think of the food supply chain and the supermarkets, AstraZeneca, construction; think of the adaptability of and investment by pubs and restaurants still unable to open.
I am sure that the Minister will not wish to reply now, but I urge him to prepare a full impact assessment, not only of the benefits of these proposals but of all the risks and the costs including, perversely, the extra accountancy charges that businesses will have to pay. We need to think very carefully about these changes and consider what could be achieved by better enforcement of existing rules.
More broadly, we need an end to the fantasy that we can make things work perfectly by passing new laws. I know that my noble friend was a Brexiteer, and that a driver of Brexit thinking was getting rid of EU rules and ending Brussels bureaucracy—a cause I support. It would be unwise now that Brexit is finally secured to abandon this path.
(3 years, 6 months ago)
Lords ChamberMy Lords, I speak in support of Amendment C1, in the name of the noble Lord, Lord Alton, and the very similar Amendments C2 and C3, in the names of my noble friends Lord Forsyth and Lord Cormack. I echo the tributes paid to the noble Lord, Lord Alton, for his dedicated work on this issue and his powerful and moving speech.
As the child of two parents who fled the Holocaust, and most of whose family was wiped out by the Nazi regime, I feel duty-bound to do my best to ensure that the repeated promises of “never again” are more than mere words. Just a few days after Holocaust Memorial Day, there are lessons that we should have learned from the genocides of the 20th century, but too often we turn a blind eye, as this is so much easier.
I recognise my noble friend the Minister’s words, that our courts can find individuals guilty of genocide, but this will not cover Governments which engage in such behaviour. It is all too easy to appease and to look for ways to avoid confrontation. Of course, there is a place for diplomacy, but if there are no consequences, in trade and other areas, for a country whose Government engage in such behaviour, then they can continue with impunity. Such impunity will lead to further crimes against humanity.
We are living in an increasingly authoritarian world, as powerful countries are crushing domestic dissent and those who oppose the ruling power. The lessons of World War II are being forgotten, but they must not be. I mention just one of the horrific concentration camps, Ravensbrück, which began as a labour camp that was, uniquely, exclusively for women opponents of Nazism in the 1930s. It ended up as a forced labour camp producing goods for powerful German companies and then also as a camp for the industrialised death of innocent victims.
There are clearly parallels today in Xinjiang, where what is happening to Uighur Muslims should provide a reason for our Government to support an opportunity to ask our courts to investigate this. As others have said, clearly China would just veto an ICC inquiry. This cannot just be left to the Executive. There is no excuse for inaction in the face of such evil in the 21st century. I echo the words of Chief Rabbi Mirvis that we must not be silent, and I believe that these amendments also uphold the Government’s stated aim of putting victims first. The Government now have the chance to do so.
As it prioritises trade, this amendment has a specific focus. It aims to ensure that in the tiny number of cases—thankfully, today—where our trading partner or prospective partner is committing genocide and this determination is made by our courts, the Government will have the reason, and the power, not to continue to negotiate or co-operate on trade. No matter how important trade and economic prosperity are to us in the short term, it cannot be worth being complicit in genocide and, in the long run, it will damage us all. This country increasingly favours ethical trade and, as other nobles have said, this is a matter of morality and values. Trade cannot be prioritised over genocide.
A parliamentary Select Committee is not enough on its own; it would still need to have the power to refer this to a court. The noble and learned Lord, Lord Hope, has confirmed that there are no practical difficulties in courts evaluating evidence of genocide. This has been echoed by the powerful words of so many other noble Lords, including the noble Baroness, Lady Kennedy, the noble Lord, Lord Carlile, my noble and learned friend Lord Mackay, Supreme Court judges and former Attorney-Generals. They are all united in the view that this issue can and should be determined by the courts. My right honourable friend the Prime Minister himself has said that
“genocide is a strict legal term, and we hesitate to deploy it without a proper judicial decision.”—[Official Report, Commons, 21/11/17; col. 839.]
Precisely, my Lords, which is why it is important for us to support Amendment C1.
The concession made by the Government this afternoon—I have huge sympathy for my noble friend the Minister in the position in which he finds himself today—does not provide for a court ruling on this issue and would therefore not trigger the UK’s obligations under Article 2 of the 1948 genocide convention. I believe this country has never recognised genocide while it was taking place. This amendment would take the pressure away from politicians and place it with the courts, of which we are rightly so proud; they are world-leading authorities in legal matters.
These are complex problems, but I urge noble Lords to support this amendment and remember that, as Edmund Burke said, all it takes for evil to triumph is for good people to be silent.
My Lords, it is always good to follow my noble friend Lady Altmann, who speaks on these issues with such eloquence. As noble Lords will know, I have supported this Bill, and its promotion by Department for International Trade Ministers since its first outing in 2017. It is vital to have a proper framework for trade in global Britain. I refer to my interests as in the register, and perhaps I could remind noble Lords that the purpose of the Bill is a sensible one: to ensure continuity for UK businesses and consumers. It allows us to join the GPA to implement 63 agreements and establish the Trade and Agriculture Commission on a statutory basis, as well as our own independent Trade Remedies Authority. There is a wide measure of agreement on all this, and this is the only time I will speak on the Bill today.