Advanced Research and Invention Agency Bill

Baroness Noakes Excerpts

Report stage
Tuesday 14th December 2021 Lords Chamber

[Viscount Stansgate (Lab)]

My Lords, I rise to speak to Amendment 6, to which I added my name. This is a subject I raised at Second Reading, but I reassure the noble Baroness acting as the Whip that, on this occasion, she can relax; there is unlikely to be any need to interrupt me on the grounds that I have gone on too long, because I want to be very brief.

There are two reasons why ARIA should be subject to the Freedom of Information Act. The first is one of principle. Public bodies set up in statute should be subjected to the same FOI requirements as apply elsewhere. In this country, I submit that FOI legislation is an essential safeguard in the political world in which we now live. To reject this amendment will send a bad signal and set a bad precedent. I even suggest to the Minister that he may reconsider his view as and when he sits on these Benches in the future.

The second reason is practical. We do not want to allow ARIA to come to be viewed with public suspicion and distrust, especially as it has the right to fail, so being open about its work will be beneficial. If it turns out that it is not easy to discover what it is doing, public support for ARIA might be damaged, to the detriment of its wider role. It is not difficult to imagine circumstances in which a campaign is waged against ARIA for excessive secrecy, possibly utilising inaccurate information about it, and for public support to be damaged; nor, in my judgment, would making ARIA subject to freedom of information turn out to be an excessive practical burden. Moreover, if there are aspects of ARIA’s future work that turn out to be sensitive, the Government already have powers elsewhere in the Bill for the Secretary of State to intervene on grounds of national security.

I will leave my remarks there, but I strongly urge the acceptance of Amendment 6.

[Baroness Noakes (Con)]

My Lords, I spoke about the freedom of information aspects of these two amendments in Committee, and I repeat that I think it is reasonable to exclude ARIA from the freedom of information requirements.

I do not regard the Freedom of Information Act as malign, and I am sure my noble friend does not either. It is appropriate in many cases that our public bodies are opened up, but it is true that it is burdensome. That has been a constant complaint, and certain kinds of organisations attract lots of fishing expeditions which increase the burden, and this goes beyond what would be regarded as being reasonable.

In Committee, I quoted both Tony Blair—who, having introduced the Freedom of Information Act, had a Damascene conversion and did not regard it as a helpful thing in the end—and Professor Philip Bond, the Professor of Creativity and Innovation at the University of Manchester. Both of them highlighted the fundamental reason why ARIA should be free from the Freedom of Information Act: because the last thing our scientists need when looking at the next internet, or whatever it is, is to be overcome with excessive caution because they are worried about what would happen if their conversations had to be revealed through Freedom of Information Act requests. Creativity thrives in an environment where it is not subject to ex-post analysis.

The other reason why I wanted to speak this evening is that I do not understand why Amendments 6 and 7 have been positioned as they are in Clause 2. They seem to set up a conflict with the provisions of Schedule 3, which is introduced by Clause 9. I have not followed through the detailed drafting in respect of freedom of information, but I have followed it through in respect of the Public Contracts Regulations. Basically, Amendment 7 says that the regulations will apply to ARIA, while paragraph 17 of Schedule 3 says that the requirements do not apply to ARIA.

So, the effect of these amendments—and I believe the same is true of the freedom of information amendment, but I have not completely followed that through—is that one part of the Bill would say that the requirements do not apply, but the next part would say that they do apply. That does not seem to me a very clever way to write amendments or legislation, so I suggest that the amendments themselves are defective. Also, I think they are defective in drafting terms—in particular, the public contracts amendment does not mention the separate Scottish regulations, which are included in paragraph 17 of Schedule 3. Paragraphs 13 to 15 are much more complex than Amendment 6, so that may well not be as effective as noble Lords seem to suggest.

[Baroness Chapman of Darlington (Lab)]

My Lords, Labour tabled a combined version of Amendments 6 and 7 in Committee, and we welcome the re-tabling of the text by the noble Lord, Lord Clement-Jones. We debated FoI extensively at Second Reading, in Grand Committee and in private meetings with the Minister and his officials. Despite the strong feelings expressed, the Government have offered us absolutely nothing—not just on FoI but on transparency more generally.

The Government’s determination to keep ARIA’s projects and decision-making secret is worrying. This is a matter of principle: do they believe in transparency, or not? If they do, such a measure should be put in the Bill. If they do not, they have not really given us a sufficiently good explanation for their reluctance to do this. We believe that it is in ARIA’s best interests to have the benefit of engagement of the public through the use of FoI. Failing to do that is not going to stop ARIA’s activities becoming known; it will just happen in a less controlled manner and create more suspicion.

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Moved by

[Baroness Noakes (Con)]

15: Schedule 1, page 6, line 18, leave out “five” and insert “four”

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[Baroness Noakes (Con)]

My Lords, in moving Amendment 15, I will also speak to my Amendments 16 and 18 in this group. With these amendments, I am returning to the issue of governance of ARIA. We debated these or similar amendments in Committee, and I thought I would give my noble friend the Minister another chance to answer the issues that I raised.

Amendment 15 is directed at the maximum size of the ARIA board. In Committee, I explained that large boards are subject to weaknesses such as passive free-riding, dislocation and groupthink. While it is true that there is no magic formula determining the size at which boards become ineffective, studies generally agree that, once they get to 13 or 14, they do not work well.

Schedule 1 has no overall size constraint but does require a majority of non-executive directors. One way to constrain the size of the board is therefore to limit the number of potential executive directors. My Amendment 15 would limit those executive members to six, which implies a board size of 13, assuming that non-executives are appointed simply to achieve a bare majority. The current Bill would allow a board size of 15 with a full complement of seven executives.

In Committee, the Minister said that the Government believed that a size of 15 was

“in line with standard practice”.—[Official Report, 17/11/21; col. GC 103.]

It might well be standard practice for public bodies that BEIS creates, but I am sure that it is not in line with any of the literature on effective boards. I would hope that BEIS, in particular, would want to be at the forefront of best practice in this area.

Amendment 18 is about the executive/non-executive balance on the board, and I full support a majority of non-executive directors. I am concerned, however, that by allowing a quorum of half the members, as paragraph 10(2) does, a quorum could be achieved with only one non-executive member. My amendment requires a majority of non-executives for all board meetings, in order to ensure that important decisions are not taken by a dominant executive cadre.

My final amendment in this group, Amendment 16, would delete a power to pay pensions or gratuities to non-executive members, which I believe is drafting from another era and which keeps being repeated merely because it follows precedent. My noble friend the Minister said that the Government had no intention of using the power, but curiously then said that the Government wanted to retain it in the Bill. On the basis that the Government do not want to use the power, I hope my noble friend will now agree with me that it is time to read it its last rites.

Lastly, I will offer a comment on Amendment 17 in this group, tabled by the noble Lord, Lord Morse. I completely understand the thinking behind this amendment, but I believe we should be very wary of imposing this kind of legal straitjacket. We need ARIA to be the kind of place where high-quality people come to work. The concept of employment, which places a considerable fetter on life beyond ARIA, could well end up with exactly the wrong kind of people being attracted to work in ARIA. I agree with the earlier remarks of the noble Lord, Lord Broers, on this. I beg to move.

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I hope I have clearly illustrated the potentially damaging unintended consequences of placing such broad restrictions in legislation. I hope I have also assured noble Lords that ARIA will be required, as is any other arm’s-length body, to have clear and robust business appointments and conflict of interest policies in place. On the basis of the assurances that I have been able to provide, I request the noble Baroness to withdraw her amendment.

[Baroness Noakes (Con)]

My Lords, I thank those noble Lords who supported the amendments that I spoke to in this group. There was a small, select bunch of us, but it was a high-quality debate.

I am grateful to my noble friend the Minister for the further helpful explanation that he has now given in relation to my Amendments 15 and 18. I should say that I am thrilled that the Government are accepting my Amendment 16. It remains only for me to say thank you and beg leave to withdraw Amendment 15.

Amendment 15 withdrawn.

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Moved by

[Baroness Noakes]

16: Schedule 1, page 7, line 36, leave out paragraph (a)

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Moved by

[Baroness Noakes]

20: Schedule 1, page 10, line 22, after “may” insert “with the agreement of the Secretary of State”

[Baroness Noakes (Con)]

My Lords, we will all be relieved that we are on the final amendment of this Report stage.

Amendment 20 would have the effect of requiring the consent of the Secretary of State if ARIA seeks to use the powers in paragraph 17(2) of Schedule 1. These powers allow ARIA to borrow money, to acquire and dispose of land, to accept gifts, to form and participate in partnerships and joint ventures, and to form companies. I have no problem with these powers existing; they are useful techniques which are commonly used in research and development activities and scale-ups. I am, however, against public bodies taking on liabilities which are counted as public sector liabilities and which will end up being footed by taxpayers if they go wrong, without any controls. I am also wary of private sector counterparties, who may well be queuing up for a free ride on the public sector’s credit lines, knowing that they will be rewarded for success and may not have to pick up the tab for failure.

My noble friend the Minister replied to my amendment in Committee, saying that conditions would be attached to grant funding given under Clause 4 of the Bill, and that borrowing would have to meet stringent requirements set out in Managing Public Money. The Minister also said that any borrowing would have to be agreed with HM Treasury in advance. I accept that it is possible that this will work perfectly well, with ARIA agreeing to abide completely by whatever the Treasury and BEIS say. It is certainly likely to toe the line all the time that it is dependent on grant funding from BEIS.

My question to the Minister is based on a different scenario. Let us assume that BEIS has handed over the £500 million committed for this Parliament and that the Chancellor has said that there is no more money. We know that the power to wind up ARIA will kick in only after 10 years, so what does the Minister think will happen in the years between, say, 2024 and 2032, with no more grant money arriving? My guess is that borrowing money would become irresistible. Moreover, the value-for-money test in Managing Public Money will be very easy to satisfy, because the counterfactual of using public money will not exist. Complex structures that look like partnerships or joint ventures could actually be borrowing by another name—I have seen that all before.

That is why I believe it would be safer if this Bill embedded a consent requirement. A consent requirement might look rather heavy-handed at first sight, but it could easily be tempered by delegation arrangements which did not require all transactions to have to be sent to the Secretary of State for approval.

I look forward to hearing how the Government think they can keep control of an organisation which has unconstrained statutory powers once the Government have lost the lever of grant payments. If they are not certain that they can deal with all eventualities, I respectfully suggest to my noble friend that an amendment such as this one, or something similar, is needed. I beg to move.

[Baroness Chapman of Darlington (Lab)]

My Lords, this is a very interesting discussion initiated by the noble Baroness, Lady Noakes. At first, I thought she was suddenly getting into big state interference, but that is obviously not the case. It is curious why ARIA would need to be able to borrow money when it is being given a budget from the Government. Presumably the intention is not to give it the Government’s credit card also, because we will be underwriting the borrowing that takes place—I think. I am not quite sure on this; perhaps the Minister could explain some circumstances in which the borrowing of money would be needed and how that would be beneficial to ARIA.

On gifts, we are not quite clear what that is about. If the noble Baroness wanted to test the will of the House—I suspect that she does not want to, this evening—we would be interested in supporting that.

We really need to get some assurance from the Government, particularly on this issue of borrowing money.

[Lord Callanan (Con)]

Once again, I thank my noble friend Lady Noakes for her thoughtful and constructive contributions throughout the progress of the Bill so far. However, she will be disappointed to know, I am sure, that on the substance of her Amendment 20, I am not convinced that adding a legislative requirement for the Secretary of State to approve how these supplementary powers are exercised would be beneficial to ARIA’s effective function or enhance its accountability measures that are already in place.

On ARIA’s ability to borrow money, I recognise that this has been consistently raised throughout the passage of the Bill by my noble friend. I thank her for her previous probing amendments on this matter, which prompted an important conversation on the balance between ARIA’s activities and the appropriate government oversight. As I outlined in correspondence with my noble friend, any borrowing would be contingent on ARIA complying with the rules of Managing Public Money and subject to approval by Her Majesty’s Treasury.

ARIA’s allocation and delegation letters, which the CEO of ARIA will be duty-bound to adhere to, will confirm that ARIA will be subject to, and comply with, all Managing Public Money rules that relate to borrowing. Managing Public Money sets robust conditions on borrowing, and states:

“Public sector organisations may borrow from private sector sources only if the transaction delivers better value for money for the Exchequer as a whole.”


Ensuring that ARIA’s expenditure is made in accordance with Managing Public Money guidance, except for in certain agreed circumstances, will be a condition of the budget ARIA receives from BEIS in its allocation and delegation letters from the BEIS Permanent Secretary to ARIA’s CEO.

There is an expectation of a level of faith between the Government and their arm’s-length bodies. This understanding of trust, and all of ARIA’s freedoms and powers, will be balanced with a number of core accountability principles. The CEO will be ARIA’s delegated accounting officer and will be personally accountable to Parliament for the stewardship of ARIA’s resources, decision-making and financial management. This includes the Public Accounts Select Committee, which will, I am sure, take an interest in such matters. The BEIS Permanent Secretary, as principal accounting officer, will retain an important oversight role, and has the power to make arrangements to ensure they are satisfied that ARIA’s systems are adequate and its finances soundly managed. The Permanent Secretary may intervene if ARIA is significantly off track, and in the unlikely scenario that serious concerns are raised, or there is financial mismanagement, the CEO’s delegated accounting officer authority can be revoked. I hope my noble friend is reassured that the mechanisms here are well established and robust and that they will be enforced.

Moving on to ARIA’s ability to form partnerships, I believe that adding a Secretary of State approval to ARIA’s activities in this area would significantly hinder its effective operations. In designing ARIA, we have put emphasis on the agency operating with significant autonomy from government, and with freedom from standard bureaucracy. Forming partnerships, such as providing grant funding to a project with a university or a business, will be an essential part of ARIA’s daily operations. We expect the agency to contract with, commission and collaborate with a range of different actors for each of its research projects—indeed, that will be one of its core functions.

We have designed this agency to be led and run by experts with technological vision. It is vital that these individuals are free from arduous processes so that they can act quickly, decisively, with autonomy and with clear authority. We should trust ARIA to have discretion over how it forms those partnerships, and I believe that requiring it to engage in a central government approval process for each partnership sits squarely contrary to its aims and purpose.

Moving to ARIA’s ability to form companies and to form and participate in joint ventures, my department is currently in negotiations with Her Majesty’s Treasury about the exact clearance processes ARIA will undertake for each of these transactions. The detail will be set out in ARIA’s allocation and delegation letters, the conditions of which the CEO, as accounting officer, will be duty-bound to comply with. However, I assure my noble friend that all iterations of this delegation letter will include sufficient assurances that ARIA’s internal assessment processes and capability are sufficiently robust. Given that these arrangements may need to evolve in the future, it would not be appropriate for this to be mandated at this stage in the Bill.

On ARIA’s ability to accept gifts, there are already stringent conditions on this in Her Majesty’s Treasury’s Managing Public Money that ARIA would need to comply with. ARIA would consult BEIS about gifts, and HMT’s approval is explicitly required for any gift over £300,000. Gifts made would be recorded in ARIA’s accounts and gifts received would be recorded in a register. These rules will also be confirmed in ARIA’s allocations and delegations letter from the BEIS Permanent Secretary.

ARIA’s power to acquire and sell land would be exercised only in compliance with the Managing Public Money guidance, which sets controls on the below-market sale of land, will compel ARIA to take professional advice when disposing of land and property assets, and will mandate ARIA to include land in its asset register.

Furthermore, introducing a blanket statutory requirement for Secretary of State approval would leave ARIA with less freedom than comparable arm’s-length bodies such as UKRI, which is able to exercise supplementary powers related to accepting gifts and the buying and selling of land without a legislated approval from the Secretary of State.

I appreciate that my noble friend has significant expertise and interest in the areas of financial management and propriety, and we welcome that. However, adding a statutory requirement here would not add value or challenge beyond what is already well established and enforced through Managing Public Money. Furthermore, as I have set out, adding the requirement to the forming of partnerships would, I believe, be genuinely detrimental to ARIA’s agile, autonomous operations, which I know my noble friend is keen not to prejudice.

Before I conclude on this final group of amendments, I once again thank all noble Lords who have taken an interest in this Bill for their excellent and constructive contributions throughout our scrutiny. ARIA provides us with enormous opportunities. I have been delighted to take the Bill through this House and engage with colleagues on all sides, who have focused on the task of providing appropriate scrutiny with enthusiasm, ability and great skill.

[Baroness Noakes (Con)]

My Lords, I start by thanking again the noble Baroness, Lady Chapman of Darlington, for her support for my amendment. What the Minister has said in setting out in more detail how the various mechanisms work in the public sector to achieve de facto control over public bodies has been very useful. I hope he is right that this will work well in practice, and I completely accept his point that there has to be an element of trust and faith between BEIS and its public sector bodies. At the end of the day, this is a risk management decision on whether the balance has been set in the right place, given the particular circumstances of the public body.

I say to the Minister that I hope I shall never have to say, “I told you so”—I warn him that I have an elephantine memory. With that, it is late and time to withdraw my amendment.

Amendment 20 withdrawn.