National Insurance Contributions (Secondary Class 1 Contributions) Bill

Baroness Noakes Excerpts

Report stage
Tuesday 25th February 2025 Lords Chamber

[Baroness Neville-Rolfe (Con)]

My Lords, I will speak to my amendments in this group and to Amendment 42 in the name of my noble friend Lady Lawlor.

One of the difficulties the House has faced in dealing with this Bill has been the Government’s refusal to provide official estimates of the effects they expect the proposals to have on the individual sectors of the economy where its effects are likely to be the most profound. When we discussed their assessment in Committee, the Minister referred us to the impact note published on 13 November 2024. But I am afraid it is a very limited document, with only five pages of substantive text and no detailed assessment of the impact of the national insurance charge on a number of very important areas. Given the harm this policy will have in the many sectors we have already discussed, it is vital that the Government assess this properly. So, as a second-best measure, we have suggested additions to the Bill requiring the Government to look at the various areas of concern and make an assessment of the effect of the NICs changes—including the employment allowance, which should of course limit the damage to the very smallest businesses.

My Amendment 38 would require a sector-by-sector analysis of the impacts of the Government’s jobs tax. I am very grateful to my noble friend Lady Noakes and the noble Lord, Lord Londesborough, for supporting the amendment. It includes key areas that are adversely affected but that we have barely discussed today, notably hospitality, the creative industries and retail, whose challenges were starkly set out in Committee by my noble friend Lord Wolfson of Aspley Guise, with his unique experience of the sector.

Amendment 37 seeks to establish the Government’s view on the effect of the jobs tax on economic growth. We know that economic growth is the Chancellor’s number one policy, so I hope the Minister will be able to give the House some clarity on the Government’s expectations in this area. I also support my noble friend Lady Lawlor’s Amendment 42 and look forward to hearing from her.

We are very concerned about the Government’s failure to publish a full sector-by-sector impact assessment for this policy. I therefore intend to test the opinion of the House on my Amendment 38.

[Baroness Noakes (Con)]

My Lords, I have added my name to my noble friend’s amendment. We debated impact assessments several times in Committee and the Minister’s reply was always the same formula. It went along the lines of: “HMRC has published a tax information note”—which the rest of the Committee thought was wholly inadequate—“and the Government never do any more than this on tax legislation. The Government intend to do no more in respect of this Bill”. That was not a proper debate on impact assessments. The formula hardly changed over the four days we spent in Committee. The Minister eventually cited some precedents, but they were much smaller in scale and different in impact, and provided a precedent only really for the fact that the Treasury treats Parliament with contempt when it comes to providing full information on legislation. It is about time that Parliament stood up to the Treasury. I urge noble Lords to support my noble friend’s Amendment 38.

[Baroness Lawlor (Con)]

My Lords, I support my noble friend Lady Neville-Rolfe and will say a few words about my Amendment 42 on reviewing the impact of the Act one year on in respect of the different categories of employers in the business sector—small, medium and large.

This is needed given the worsening outlook for the UK economy and employment, which has been going from bad to worse month by month since, and in response to, the Budget. Unemployment figures are up. In the quarter ending December 2024, 1.56 million people of working age were unemployed and the UK unemployment rate was 4.4%. Unemployment levels have increased by 210,000 over the last year. Economic inactivity is also up. At the end of the last quarter of 2024, 9.29 million people aged 16 to 64 were economically inactive; the inactivity rate was 21.5%.

Jobs are being cut, as this month’s figures from S&P Global indicate. Data reveals that the decline in staffing numbers in February was the sharpest since November 2020. The chief business economist at S&P Global Market Intelligence explained that the data revealed that

“business activity remained largely stalled for a fourth successive month, with job losses mounting amid falling sales and rising costs … One in three companies reporting lower staffing levels directly linked the reduction to policies announced in last October’s Budget”.

The number of vacancies fell in the last quarter too, although they remain slightly above pandemic levels.

We want the Government to take responsibility for their actions and face up to the costs they have imposed on growth, productivity and employment and the impact on businesses, be they small, medium or large. I echo the comments of my noble friends throughout Committee that what we had on 14 November and the figures presented at the time of the Budget were inadequate in detailing the sort of impact this country is already facing. Employees’ lives and livelihoods are at stake.

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Moved by

[Baroness Noakes]

39: After Clause 3, insert the following new Clause—
“Exemptions(1) The Treasury may by regulations specify that specified categories of person shall be exempt from the changes to secondary Class 1 contributions made by this Act.(2) The categories of person exempted by regulations may be defined by the activities which they carry out, their size, their legal status or in any other way that the Treasury considers appropriate.”

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[Baroness Noakes (Con)]

My Lords, we come to an exciting part of this Report stage, having had several debates on this Bill.

The Bill will have significant impacts on: some types of employers; some business sectors and sizes of business; some types of employees; and some types of the provision of public services by bodies which are not themselves in the public sector. More broadly, we have heard that businesses will face the double whammy of the minimum wage increases and the national insurance increases together in just a few weeks’ time, and they are likely to respond by taking actions to reduce their workforce and the hours that their workforce can work and reduce wages where they are not constrained by the national minimum wage. Prices are likely to go up, and profits are likely to go down. All this will have negative impacts on the economy. It is difficult to avoid opening a newspaper nowadays without seeing one or more campaign groups, industry representatives and charity representatives making their case for the harmful impacts of this Bill, but to date the Government have been completely deaf to all these entreaties. All this is bearing down on the economy, which is already flatlining.

I can understand why the Government do not want to make any changes to a centrepiece of their growth-destroying Budget last October. We know there is almost no room left in their fiscal rules for any changes. There are lots of downside risks to the economy, and there are precious few upsides. These are all the results of choices that the Government have made in the last seven months, so I understand why the Minister’s response to every issue presented to him in Committee, and indeed again today, was that the Government reject the cases being made.

My Amendment 39 provides for a very simple power for the Treasury to issue regulations that exempt categories of employer from the national insurance changes that this Bill introduces. There is not even a parliamentary process attached to the regulations. My amendment would therefore allow the Treasury to act quickly, once it faces up to the fact that it really has created some problems. There are no downsides to the Government accepting this amendment, as they need never use it, but it would be a useful backstop if things turn out as badly as many of us believe they will.

It is not often that the Opposition Benches offer an unrestricted power to a Government to do things, but I and others are so alarmed by the potential impacts of this Bill that I think it is the right thing for the Government to take this kind of power in the interests of the country.

We have passed some amendments today that have taken some of the roughest edges off this Bill, and I hope they will survive their passage through the Commons, but this has not made the Bill completely harm free. My sincere hope is that the Government will support this amendment, if not in its current form then in a reworded form to their own taste at Third Reading. I beg to move.

[Lord Altrincham (Con)]

My Lords, I support Amendment 39 in the name of my noble friend Lady Noakes. I thank all noble Lords for their courage and grace in staying all the way through to group 7.

Amendment 39 would give the Treasury the power to exempt sectors that would suffer significantly under the Government’s national insurance rise. The amendment introduces a degree of flexibility that Ministers can use to protect the most vulnerable of British businesses; by allowing the Treasury to introducing specific exemptions when required, we can exempt them from the additional financial burden of the national insurance increase.

I am grateful to my noble friend for bringing forward Amendment 39. It is clear that we share many of the same concerns. The amendment in her name is closely aligned with those in the name of my noble friend Lady Neville-Rolfe that seek to exempt specific sectors, such as the social care or charity sectors. So many sectors need exemption from this policy, and we hope the Government will give the arguments thoughtful consideration.

[Lord Livermore (Lab)]

My Lords, Amendment 39, tabled by the noble Baroness, Lady Noakes, seeks to include powers as part of this Bill to exempt certain groups in future. As I have already set out, the revenues raised from the measures in this Bill play a critical role in repairing the public finances and rebuilding our public services. Clearly, any future changes that exempt certain groups from paying national insurance would have cost implications, necessitating either higher borrowing, lower spending or alternative revenue-raising measures. I would therefore respectfully ask the noble Baroness to withdraw her amendment.

[Baroness Noakes (Con)]

My Lords, I cannot make the Government accept a power that I have generously offered to be made a part of this Bill. I hope the Government do not regret at a later stage turning down this opportunity to allow them to save face in a simple, pain-free way. As I say, I cannot force the Government to accept a perfectly sensible measure that would allow them to repair some of the damage that this Bill will inevitably do. I beg leave to withdraw the amendment.

Amendment 39 withdrawn.

National Insurance Contributions (Secondary Class 1 Contributions) Bill

Baroness Noakes Excerpts

Report stage
Tuesday 25th February 2025 Lords Chamber

[Lord Hogan-Howe (CB)]

My Lords, I support the Government in opposing all these amendments. Some individually are attractive, especially the later amendment about the level at which national insurance is set. However, I shall not support any of the amendments because I think it is for the Commons and the Government to decide on taxation. It is an unfortunate event that has already been remarked on, and there is an opportunity here to comment and vote on it. I realise the political attraction of forcing the Government to remove these amendments one by one when the Bill returns to the Commons. Some are very attractive—I get that, intuitively —but it seems unfair to unpick a Budget, which is a comprehensive account of the macroeconomics of the country, and then pick off each of these measures by an amendment. I cannot support that; it is good to have the debate, and the Government may decide to change their opinion on any one of them.

The noble Lord, Lord Eatwell, made the point that taxation should be simple, and I agree. If every one of these cases were to be included by the Government in their new Budget, I think that it would be incomprehensible for the public in general. Although I see that, individually, some cases are attractive, I cannot support the amendments for the reasons that I have set out.

[Baroness Noakes (Con)]

My Lords, I rise briefly to challenge the analysis of the noble Viscount, Lord Chandos. He claimed that if we took the health and social care levy employer element and what was proposed here, it would sort of level itself out. It would not. The employer element of the health and social care levy is roughly one third of the amount that is expected to be raised by this Bill. The two cannot be compared.

[Lord Macpherson of Earl’s Court (CB)]

I support the comments from my noble friend Lord Hogan-Howe: I think that it is an important principle that Budgets should be determined by the House of Commons. Those who argue for exemptions should be obliged to explain how they will pay for the tax cuts in those exemptions. If you cut taxes in one area, they will need to be raised somewhere else. That will result in higher marginal rates for everybody else, which do far more damage than low ones.

National Insurance Contributions (Secondary Class 1 Contributions) Bill

Baroness Noakes Excerpts

Committee stage
Tuesday 4th February 2025 Grand Committee

Moved by

[Baroness Noakes]

18: Clause 2, page 1, line 12, leave out “£96” and insert “£130 for the tax year 2025/26 and £96 from the tax year 2026/27”
Member’s explanatory statement
This forms part of a package of amendments in the name of Baroness Noakes to allow for a phased introduction of the reductions to the secondary threshold.

[Baroness Noakes (Con)]

My Lords, I rise to move Amendment 18 and to speak to Amendments 21, 24 and 25 in this group. These amendments are designed to make the national insurance increases in the Bill more manageable by businesses, as they are going to be picking up the lion’s share of the costs of national insurance in the first instance. The amendments do not change the overall approach of raising the rate and lowering the secondary earnings threshold; instead, they seek to phase in the secondary threshold reduction over two years, rather than taking the “big bang” approach taken in the Bill. The reduction in the secondary threshold is the larger of the two main changes in the Bill, raising roughly one and a half times the amount raised by raising the national insurance rate of contributions.

I should declare my financial interests in a wide range of listed companies, many of which operate in the UK and are therefore affected by the Bill. These include shareholdings in Next plc—which gives me a neat segue into the fact that I was prompted to table these amendments after listening to a “Today” programme interview with my noble friend Lord Wolfson of Aspley Guise, in his capacity as chief executive of Next, who argued for delayed implementation. I was delighted when my noble friend then added his name to my amendment, along with my noble friend Lady Neville-Rolfe. I very much look forward to his contribution to the debate.

I was particularly struck when listening to the “Today” interview by my noble friend’s analysis of the financial impact of the changes on part-time jobs and those that pay at or around the minimum wage. I think he said that it will add roughly 2% to the cost of employing higher-paid workers, but for part-time and lower-paid workers the figure is 6.5%. This, of course, is before you factor in the minimum wage hike, which will be coming in at the same time and will more than double the impact on certain kinds of employees, particularly younger ones.

I spoke about the regressive effect of the Bill at Second Reading and I was frankly astonished that the Minister’s Back-Benchers were not jumping up and down about the impact of the national insurance changes on the employment prospects of key groups such as female part-timers and young people. His Back-Benchers seem to have bought the disingenuous line, which has been run by the Chancellor and, indeed, the Minister, that these extra national insurance costs will be borne by businesses. The plain truth is that employers will not simply absorb the cost increases, as the Office for Budget Responsibility made abundantly clear: employees will pay, in the form of reduced hours, reduced pay increases or job losses. We will all pay in higher prices and, if that keeps interest rates higher for longer, home owners will pay too.

Part of the problem from the business perspective is the sheer scale of the increase in employers’ national insurance contributions, hitting them in just a few months’ time, at exactly the same time as the minimum wage hike. I expect that the Minister will say that the minimum wage increase is not in this Bill, but the plain fact is that businesses are facing a double whammy. Very few businesses can shrug off an increase of well over 10% in their payroll costs. The likelihood is that businesses will take rapid action to try to curtail the financial impact, but that action may well be suboptimal when looked at over a longer timeframe.

Recruitment freezes are the quickest way to put a lid on costs and they are already a feature of today’s uncertain business environment. The recruitment sector is therefore struggling and will doubtless have to reduce its own headcount in due course. If hours are reduced for part-time staff, that will have a particularly hard impact on women and their families, who are often dependent on the additional income that such jobs bring. Pay increases, other than for those on the minimum wage, will probably be held down, and most families are already struggling with inflation and will be hard hit if wages go down in real terms. We can also expect employers to reduce headcount. This is already happening, as a glance at the business pages of the media will confirm.

The noble Lord, Lord Eatwell, who is not here today, may well run his argument that this is entirely healthy, because it will encourage businesses to invest to reduce their reliance on labour and thereby increase productivity and release workers to be redeployed elsewhere in the economy. As I have said before, that is a nice theory, but it fails at a practical level. Businesses need confidence in the country’s economic prospects before they invest, and most business confidence surveys are well into negative territory. Many investment decisions are already on hold or being cancelled. In addition, we have high employment at present, thanks to the previous Government, but job vacancies are relatively low and falling. A more realistic outcome, at least in the short term, is that there will be fewer people in employment. The OBR calculated the impact of the national insurance changes as a loss of 50,000 jobs, but it could easily be higher than that.

My amendment is about ameliorating the short-term impact of the Government’s national insurance changes on businesses, so that they have more time to plan how they will absorb the increases alongside the additional minimum wage costs. If businesses have more time to work out the best way to cope, the impact on jobs and pay could well be softened. My amendment merely delays the full impact of the national insurance changes for an extra year, by phasing in the reduction in the secondary threshold over two years rather than make businesses face the whole impact at once next April. I am quite sure that the business community would prefer an even longer phasing in and would prefer it to apply to the increased rate of contributions as well as to the reduction in the threshold. My amendments are an attempt at a reasonable compromise. I beg to move.

[Lord Wolfson of Aspley Guise (Con)]

My Lords, I declare my interests as set out in the register, particularly my role as chief executive of Next plc, a company that employs over 40,000 people, of whom 22,000 are part-time. It is a job that I have had for 22 years, which I think makes me the longest-serving chief executive in the FTSE 100. I hope that I am able to bring that experience to inform the debate, which is why I rise to speak to all the amendments in this group tabled by my noble friend Lady Noakes, to which I have added my name.

I hope that the Minister will take this amendment in the spirit in which it is intended. To that end, I recognise the Government’s need to balance their books, the importance of their doing that, and that the parlous state of public finances cannot be wholly laid at the door of the current Administration. Nor can I see, in principle, why the employer national insurance threshold should disproportionately benefit lower-paid jobs, as it does at the moment. In principle, I can see no reason for that; it is the speed at which the change is happening that concerns me.

The problems caused by that speed are particularly acute because the axe falls hardest and disproportionately on entry-level part-time work, as my noble friend Lady Noakes pointed out. The way in which the change in the threshold works is something of a poll tax on jobs. Poll taxes do not have a great history of success, but the cost of around £600 is the same whether you earn £9,000 or £900,000. So, the combined effect of this increase on a job paying £60,000 would be 2%; on a part-time job paying £12,000, it would be 6.5%.

That change needs to be taken in the context of the rise in the national living wage. My noble friend Lady Noakes is absolutely right that, together, they mean that the figure for entry-level part-time working—jobs in hospitality, retail and care homes—will go up by 13% in April this year. It is impossible to see how this can result in anything other than a reduction in opportunities to join the workforce; indeed, it will result in some people having to leave the workforce. I hope that, going forward, these types of changes and the work of the Low Pay Commission are considered in conjunction with each other. It seems to me that these two changes have come in at the same time without co-ordination.

Unfortunately, this change comes at a time when the employment market is at something of a tipping point. Again, it is no one in particular’s fault—it is the employment cycle—but every economic indicator that I can see, through both the ONS and my own work, suggests that the labour market is hardening. In every single discipline in the business that I work for, whether it is computer programming or product development for stores, the applicant to vacancy ratio is rising.

Let me give a flavour of that. Last year, when we took on temporary staff in the run-up to Christmas, the ratio of applicants to vacancies was up by 50% on the previous year. In the previous year, we had nine applicants for every shop job; last year, it was more than 13. In this environment, the speed of change will dramatically affect the national insurance threshold change’s impact on both people and inflation.

Starting with the social impact, it is inevitable that businesses will have to accelerate their plans to increase productivity. There are plenty of opportunities to increase productivity, mechanisation and artificial intelligence both being at the forefront of those opportunities; but one way or another, that increase in productivity means fewer jobs. The time we have to implement those changes will directly affect the social impact of those efforts to increase productivity. The faster the change occurs, the less time businesses and individuals will have to manage down employee numbers through the natural turnover of staff, which is the normal way we would try to implement any improvement in productivity, particularly in part-time work. Natural turnover of staff is quite high; if you can manage such changes through natural turnover, it dramatically reduces the impact on human beings.

It is a shame that the noble Lord, Lord Eatwell, is not here, because I have heard him say that labour becoming more productive—that is, going out into the workforce and finding other, more productive things to do—can be a good thing. It can, but it will take people time to find those additional jobs, and time is what these amendments ask for.

Last Wednesday, my noble friend Lady Lawlor highlighted the acute pressure that the threshold change will put on retailers. She was right. On that day, Morrisons said that, in the light of the Budget, it would have to go harder and deeper in its drive to reduce costs. It joined Sainsbury’s, which has already announced 3,000 job losses.

The second reason for phasing in this change is its effect on inflation. Again, it might be helpful if I give the perspective of the company I work for. It is in the fortunate position whereby the growth we are able to enjoy, the margins we have and the productivity gains we think we will be able to achieve, collectively mean that we will need to pass on an increase in prices of only 1% this year, as a result of the Budget changes. Had we not had those margins to absorb the changes, and had we not had those productivity gains, that figure would have been just over 4%.

In other industries, in particular the food industry, margins are much narrower than those enjoyed in fashion retail. My concern is that everything I am hearing from that industry means that we will see price rises in the order of 4%. Were the threshold change to be phased in over two years, that inflationary spike would reduce price rises to closer to the Bank of England’s 2% target. That in turn would pave the way for a faster reduction in interest rates, which is in everyone’s interest—including the country’s biggest borrower, the Government. Phasing in the change would reduce the social and inflationary costs of this increase.

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[Lord Livermore (Lab)]

The noble Lord set out some figures that are based on his assumptions, not the Government’s assumptions. I have no reason to dispute his maths or the computing power of Microsoft Excel, but I do not think I can commit Treasury resources to checking the figures in his own spreadsheet.

[Baroness Noakes (Con)]

My Lords, first, I thank all my noble friends for taking part in this debate and supporting these amendments. They were put forward as a constructive way to deal with what could be some very damaging impacts caused by the Government’s legislation.

I was confused by the noble Baroness, Lady Kramer, saying that she is against the Bill, so she does not want to engage in ways of making things better. As His Majesty’s loyal Opposition, we believe that what we are here to do is try to make policies better, even though we disagree with virtually all the Bills the Government are putting forward at the moment. Our job is to engage constructively and, certainly, to try to avoid damaging aspects.

My noble friend Lord Wolfson spoke about being able to pass on price increases of 1%; he has an amazing luxury, because not all retailers can do that. At the weekend, I got talking to a local businessman who owns a number of shops. Most of his workforce are part-time staff. He employs quite a lot of people in and around our villages, and in the neighbouring villages, where he has other shops. He said that he does not know what to do. He cannot increase prices because the goods he sells do not lend themselves to significant price increases. The only thing he can do is to reduce hours or numbers. These measures means that our local economies—things that are really important to people—will be damaged by less income for local families. They are having really significant impacts, whether at the large end of business or the very smallest end.

I regret the Minister just saying again and again that he has to repair the finances and put more money into public services because he wants to protect working people. The one thing he is not doing with these changes is protecting working people. I sincerely hope that, between Committee and Report, the Government will think about whether they can find ways of making this Bill less damaging. We are not arguing that the Bill should not exist—we do not believe that that is our role, and we did not vote against it at Second Reading and certainly would not have done so—but there are many ways of softening its edges. I hope the Government will consider that between now and Report.

With that, I beg leave to withdraw the amendment.

Amendment 18 withdrawn.

National Insurance Contributions (Secondary Class 1 Contributions) Bill

Baroness Noakes Excerpts

Committee stage
Wednesday 29th January 2025 Grand Committee

[Lord Londesborough (CB)]

My Lords, I shall speak to Amendments 22, 39 and 53 in my name in this group, to which the noble Baroness, Lady Kramer, and my noble friend Lady Neville-Rolfe have added their names. I shall also speak to Amendments 6 and 33, tabled by my noble friends Lady Neville-Rolfe and Lady Noakes respectively.

Rather than taking a sectoral approach, about which others spoke passionately last week, my three amendments focus on the size of businesses and organisations impacted by the measures in the Bill, specifically those categorised as small businesses, which means that they employ between 10 and 50 full-time staff. I should again declare my interests as set out in the register, as I advise and invest in a number of businesses of this size, predominantly start-ups and scale-ups. These are the companies that grow and create jobs at the fastest rate and, through their size and agility, seize the nettle of productivity. If I may mix my metaphors for a moment, these are the acorns that seek to become unicorns or, at the very least, sturdy oaks.

The Department for Business and Trade reports that there are some 220,000 businesses across the UK that employ between 10 and 50 staff—that is 4.3 million of the 28 million jobs in the private sector and they generate £780 billion in annual turnover. However, this group involves not just fast-growing early-stage start-ups but a huge swathe of family and local businesses spread across the country and, indeed, businesses that have been struggling to keep their heads above water in what have been five very difficult trading years.

While the Government have sought to protect the majority of our micro-businesses, those employing between one and nine staff, from rising NICs, they have left all other small businesses exposed to these sudden and dramatic increases. In terms of impact, the Government tell us that 250,000 employers will see their NICs decrease, 940,000 will see theirs increase, while about 800,000 employers will see no change. This has allowed the Government to claim that the majority of employers will see no increase. With respect, that is deeply misleading. The question that matters is what proportion of jobs will attract increased national insurance contributions. I ask the Minister that question. Can he confirm, if he does not have the numbers at hand, that in fact the number is close to 80%?

I turn to the financial impact of Clauses 1, 2 and 3 to small businesses. For businesses of 25 staff paying the national full-time median salary, which is put at £37,000 by the ONS, their NICs bill will rise from £90,000 to £110,000. That is an increase of more than 20%.

However, most small businesses, given their nature and stage of development, pay less than the median national average. For them, the increases get even steeper. For those employing 25 staff and paying an average salary of £25,000, as is common out in the regions, their NICs bill will rise by no less than 30%. For those employing 50 staff at that salary, they face an eye-watering 33% increase. As we know, the main culprit for those outsized increases is Clause 2: the brutal and, in my view, economically illiterate drop in the per-employee threshold from £9,100 to £5,000. Ironically, this hits the lowest-paid jobs the hardest. In short, it is a regressive tax.

Then we come to retail and hospitality, with thousands of outfits that rely on part-time shift workers. For those employing 20 part-timers, typically earning £300 per week, their NICs bill goes up by an extraordinary 70%. I will stop there with the examples but noble Lords, including the Minister, will be delighted to know that I have here all the spreadsheets to prove it; I will happily share them out later. In the interest of transparency, on the impact for 5 April, I strongly suggest that the Government have the honesty to publish these figures.

These increases are of course bad news for the working person, especially the 4 million of them who work in small businesses. They rather grate against Rachel Reeves’s statement this morning about kick-starting the economy. Let me turn to my Amendment 22, which seeks to address this in what I hope noble Lords will agree is a measured, proportionate way to help protect our small businesses. In short, the per-employee threshold would remain at £9,100 for those employing fewer than 25 staff, while those employing fewer than 50 but more than 25 staff would see their threshold reduced to £7,500. Somewhat reluctantly, I have left the £9,000 threshold for all businesses employing more than 50 staff.

By my calculations, the nominal cost to the Treasury of this key amendment would be less than £2 billion—that is, to support and sustain 4 million jobs and almost £800 billion in turnover. I humbly suggest that this amendment would more than pay for itself in economic growth and increased revenues to the Exchequer. Commencing Clause 2 without undertaking a full impact assessment on small businesses—addressed by Amendment 33 in the name of the noble Baroness, Lady Noakes, which I fully support—strikes me as reckless.

I turn now, much more briefly, to my Amendment 53, which addresses the increase in the employment allowance. Clause 3 is designed to soften the increase in NICs from Clauses 1 and 2. It offsets the costs but, having crunched the numbers, it does so only for those employing seven staff or fewer. My Amendment 53 would raise the employment allowance from £10,500 to £15,000 for all small businesses employing fewer than 25 staff. This would help around 200,000 businesses across the country. I estimate that the cost to the Treasury would be less than £1 billion. Again, I argue that such an amendment would more than pay for itself in the medium term.

I hope that the Minister will carefully consider the amendments in this group, given the severity of these increases to SMEs and the potential damage to both jobs and economic growth. I have spoken to Amendments 22, 39 and 53.

[Baroness Noakes (Con)]

My Lords, I have Amendment 33 in this group; I thank my noble friends Lady Neville-Rolfe, Lord Ahmad of Wimbledon and Lord Howard of Rising for adding their names to it. As my noble friend Lady Neville-Rolfe said, my noble friend Lord Ahmad of Wimbledon is unfortunately unable to join us for the early part of this Committee. He very much regrets that he is not able to take part because he cares a lot about the fate of small and medium-sized businesses.

My amendment would delay the commencement of the Bill, and therefore the extra national insurance contributions, until the tax year after an impact assessment focusing on the impact of the Bill on smaller businesses has been published. My amendment is similar to Amendment 59, tabled by the noble Baroness, Lady Kramer, which was debated on our first day in Committee. Amendment 59 required an ex-post impact assessment, while mine is on an ex-ante basis. Amendment 59 also used a rather broad definition of SMEs, including those with employees of up to 250; my amendment is more granular and focuses on the smaller end of the SME spectrum, which is where most SMEs are.

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[Lord Eatwell (Lab)]

My Lords, with respect to all the amendments in this group, with the exception of that of the noble Baroness, Lady Noakes, I repeat what I said last time: these amendments are designed to increase the complexity of the system and that is a very bad idea. I can assure noble Lords that, right now, tax-avoidance accountants are sharpening their pencils with glee at the possibility of more complexity being introduced into this structure. It is a very bad idea and we should not be doing it.

If we want to support small business, we should do it directly by deciding what subsidies or benefits should be given. Playing around with the tax system or, in this case, the national insurance system, is a bad idea. I will not say this again, because we have a series of other attempts to increase complexity coming in later amendments—so, please, let us not do this. It is bad for the tax system, bad for the national insurance system and a bad way to achieve the goals set out.

I now turn to the important amendment from the noble Baroness, Lady Noakes. The problem with it is that it is seriously underspecified. She does not say whether the examination of the effects of the national insurance changes should take place in the context of the pre-government Budget situation, or should take account of some measures in the Budget or of the Budget as a whole. If we take the Budget as a whole, the examination by the OBR shows that employment will increase over the relevant period. What the noble Baroness is doing is taking just one part of the actual economic package represented by the Budget and saying, “Let us look at this in isolation, even though this part funds the other part”—the expenditure decisions of the £26 billion injection of demand into the economy in the next fiscal year.

In that context, this amendment is seriously under- specified and impractical. We need to understand whether she wishes to look at just one side of the equation, how revenue is raised, or the other, how revenue is spent. Surely the correct thing to do is to put both together to see the overall impact of the policy represented by the Budget. I am afraid that the amendment is unsatisfactory, in that it is seriously underspecified.

[Baroness Noakes (Con)]

I will briefly respond to that. I am asking for an impact assessment of the Bill. The Bill does not incorporate the whole Budget; it incorporates one policy decision, which is the focus of my amendment. It is clear that I am open to drafting suggestions. I have already spent some time with the noble Lord today in another committee on drafting improvements and I am sure that, between us, we could come up with some better words.

[Lord Howard of Rising (Con)]

My Lords, I support Amendment 33 in the name of my noble friend Lady Noakes and to which I have added my name. I declare my interest as an employer.

It is incredible to me that His Majesty’s Government should be seeking to impose an increase in national insurance for employers without taking a proper look at what the effect will be. The extra costs will be difficult to cope with for all businesses, but disproportionately so for small businesses. They lack the flexibility and the ability to manoeuvre that can exist in larger corporations. This will be especially true for smaller manufacturing businesses, which are being hammered by the Government from more than one direction.

The noble Lord, Lord Livermore, was good enough to say that it is reasonable to set out the rationale for the points we want to make. In my view, this is important, as the increase in national insurance comes on top of many other things that impede business. By itself, it might be bearable, in so far as any tax is bearable, but, on top of everything else—some of which I will mention—it is a significant problem, especially for those smaller companies that this amendment is about.

Before going into the detail of my arguments, I wish to endorse the comments made by noble Lords—most recently the noble Lord, Lord Eatwell—that exemptions that complicate tax structure are a bad thing in principle. However, as my noble friend Lady Noakes pointed out on the first group of amendments, there are cases where they are justified.

One reason why the proposed increase in national insurance will be particularly difficult for smaller manufacturing businesses, and why an impact assessment is needed, is electricity and gas costs in this country, which, roughly speaking, are double those of our competitors in Europe. This is caused by the lunatic rush to net zero which, among other things, has nearly destroyed the steel industry, which is now on its last legs.

--- Later in debate ---

I am not a Pollyanna; the Government have to raise money to deliver public services and they have to make decisions. We are hopefully not in the realm of reciting the £22 billion black hole. I have heard it so many times from the Minister. He is a very clever man but, nevertheless, even he reiterates the line occasionally.

[Baroness Noakes (Con)]

Occasionally? It is more than occasionally.

[Lord Jackson of Peterborough (Con)]

I am getting gently heckled by my noble friend Lady Noakes. It may be more than occasionally. On a serious point, we know that some taxes are easy to raise quickly; one is fuel duty and this is another. I implore the Minister that this will have real consequences for many years. It is having consequences now in displacement activity that is not going to the most vulnerable people.

I know that the Labour Party would not inflict that sort of upset on people; most people in the Labour Party are decent and community minded, and want to do the best for the local community. I know, having served with Labour Members of Parliament in the other place, that they care about their local community and their constituents.

I would just ask the Minister to think about this again, particularly this case of people who are trying to do their best for their fellow citizens. All these amendments are extremely compelling, so I ask him to reconsider. It will not show weakness, but will show strength, magnanimity and the ability to govern wisely. I think he should consider pushing that forward because it is the right thing to do.

--- Later in debate ---

So it is important that we have a proper analysis of the employment impact of these measures that looks specifically at the impact on the private wealth-creating sector, as distinct from additional jobs in the public sector, however needed they may be. It is important that we do not simply take the assurance of the noble Lord, Lord Eatwell—that more jobs will be created overall—as a vindication of the fact that this has no impact on employment.

[Baroness Noakes (Con)]

My Lords, I want to comment briefly on whether we should have impact assessments, which has been a theme running through a number of amendments.

I know that the Minister has his set formula, which he will repeat again now. When he responded to the earlier amendments, he talked about finding precedents for not having impact assessments. I will go back and look at the details of those in Hansard, but, from memory, none of those changes produced the outcry that these sets of changes have produced. Businesses, charities and hospices are all telling us that this is a major disaster. So I believe that his precedents are not on all fours in this particular case; we ought not to be fobbed off by the fact that the Treasury has, over time, found it inconvenient to produce impact assessments. I cannot think of anything quite as damaging in the past to large sectors of the employed population and their employers, so we should not regard the Minister’s set formulation as an end to the story on impact assessments.

[Lord Leigh of Hurley (Con)]

I just ask: what are the Government afraid of? This is a sensible suggestion about assessing what the effect might be of an enormous change to every business and charity organisation in the country. If it is such a good thing—we are told that it is—verify it.

--- Later in debate ---

[Baroness Kramer (LD)]

My Lords, I shall speak briefly. If I had spotted the amendment of the right reverend Prelate the Bishop of Southwark in time, I would have signed it because it makes absolute sense. There is a pressure created, when one knows that a review is coming afterwards, to think through actions now. All in this Committee recognise that this Bill deals with the weakest of the weak. As there are two Bills, this one and one in the other place, either of which could be used to manage a remedy, I should have thought the Government might have been able to see a way through this.

I wanted to mention a procedural thing, just as a comment on the statement made by the right reverend Prelate the Bishop of Southwark. I hope that he realises that if he does not withdraw his amendment at this stage, he will not be able to bring it back on Report. Some people are not clear on that element of the procedure, so I mention it simply in case it guides what he might wish to do.

[Baroness Noakes (Con)]

His amendment is Amendment 67, so he is not going to be moving it until day four.

[Baroness Kramer (LD)]

He said, “I beg to move”.

[Baroness Noakes (Con)]

He cannot move it.

[Baroness Kramer (LD)]

Problem solved; I am back in my place. Those are the only comments that I wanted to make.

Public Sector Productivity

Baroness Noakes Excerpts

Wednesday 9th October 2024 Lords Chamber

[Baroness Noakes (Con)]

My Lords, I join other noble Lords in congratulating my noble friend Lady Neville-Rolfe on securing this debate and for her masterly introduction. Public sector productivity, or the lack of it, is holding back the UK’s overall productivity growth and thereby putting a damper on our economic growth. In the time available, I will not concentrate on the soaring numbers of civil servants, the clear issues with working from home—which was addressed by my noble friend Lord Patten—or the inflationary public sector pay deals which have shockingly been awarded in return for zero productivity. Instead, I want to focus on two areas: state-owned economic activity and the NHS.

We are only a hundred days into this new Government, but there is one clear direction of travel—we can expect more state-controlled economic activity. The Government are already laying the foundations for renationalising the railways, the energy system operator has just been brought into the public sector and GB Energy is being set up with £8 billion in order to take an active role in energy generation. I doubt that the Government’s ambitions will stop there, but they need to learn the lessons from history.

Before 1979, we had a lot of nationalised industries and, the record shows, third-rate productivity at best; they were a real drag on the UK economy. There were several attempts to impose economic and financial frameworks to solve this problem, but they failed. The one thing that did eventually work was privatisation, which unlocked considerable efficiency gains, and I am especially proud of what we achieved in the 1980s and 1990s. Now, the Government are heading in the other direction with little apparent regard for efficiency. I was struck when the noble Baroness, Lady Blake of Leeds, who is the Minister here today, introduced the Second Reading of the Passenger Railway Services (Public Ownership) Bill two days ago and, in her opening speech, did not even mention productivity or efficiency. As the activities of the state increase, the greater will be the impact of low or negative efficiency on the whole economy, and the Government cannot afford to rest on hopes that it will all be different this time.

My other topic is the NHS. Because the NHS gobbles up about 40% of public expenditure, overall public sector productivity will be a problem if the NHS is not fixed. Measuring productivity in the NHS is very difficult, as the noble Baroness, Lady Wheatcroft, has already said, but it seems generally agreed that the NHS has not even returned to pre-pandemic levels of productivity; it is treating fewer patients but has far higher staff numbers. Before the pandemic, the ONS measure, which includes a flattering quality adjustment, had the NHS as the best performing bit of the public sector, but not anymore. It is vital that the Government grasp this issue.

The last Government’s productivity plan for the NHS involved £4 billion being spent on technology transformation. The current Secretary of State has talked about creating a digital NHS. Another lesson from history is that all previous attempts at large scale technology-led transformation in the NHS have failed. There are lots of reasons for this, including the complexity of the NHS and insufficient management skills and capabilities.

More importantly, transformation will not happen unless the whole of the NHS buys in; it cannot be optional. The NHS has to want to change, not just in the upper echelons of NHS England, but in every GP surgery, every ward and every support service. If that does not happen, it is not worth investing a single pound in a grandiose transformation plan.

In my view, the NHS has to stop finding excuses for low productivity—lack of investment, burnout in the workforce, strikes and so on—and turn its attention to the basics of delivering world-class efficiency. I wish that I had confidence that this will happen.

Economic Activity of Public Bodies (Overseas Matters) Bill

Baroness Noakes Excerpts

Committee stage
Tuesday 14th May 2024 Lords Chamber

[Lord Thomas of Cwmgiedd (CB)]

My Lords, I will make three brief points from the view of a lawyer. An awful lot has been said very ably by previous speakers about the reasons why, particularly in relation to Amendment 27, there seems to be no disagreement. This has nothing to do with the politics of the Bill; it is to do with making certain that we make the lives of those who become members of the pension fund board acceptable. I do not want to say too much about the burdens of being on a board or being a trustee of a pension fund—I do not want to put people off—but we ought to legislate to make their life easier in an age where litigation risk is growing. This Bill adds to that litigation risk, which is the second factor that we should take into account. I will not go into Clause 5 now because we will come to it later, but we must take into account the extraordinary encouragement it gives to litigation.

Everyone seems agreed on the objective, particularly in Amendment 27, that financial risk and impact should be taken into account. It is baffling; it is bad legislation to rely on the words rather than to take two minutes to amend the Bill. I am sure this debate has cost more than the cost of putting the Bill right. It cannot possibly be about the parliamentary draftsmen’s pride. It is incomprehensible to me why we cannot put forward a short amendment to reduce litigation risk, make it more attractive to be a pension fund trustee and enable us all to go home a bit earlier.

[Baroness Noakes (Con)]

My Lords, the noble Baroness, Lady Drake, explained her Amendment 27 with great clarity, but I am afraid that I do not agree with her analysis of the problem, nor do I agree with the analysis of the noble and learned Lord, Lord Thomas of Cwmgiedd, for reasons which I will now explain.

Financial matters have been my stock in trade for well over half a century, since I left university. I have been trying to work out what these additional words, “risk” and “impact”, would add to the concept of financial value. The term financial value is not a term of art in my world, the accountancy world, but I think that it means something along the lines of the worth of something expressed in money terms. What something is worth can mean what it is realised for in a market transaction, or what it is worth in terms of the financial benefits it is evaluated to or expected to bring. I believe that neither “risk” nor “impact” add anything to the meaning of financial value.

I start with risk. Risk will affect value, so any determination of what something would fetch in a market or what benefits it would bring would of course take account of the risks when doing the calculations of financial value. This is just 101 of calculating things in financial terms. That is effectively why the DWP documents refer to risk. They do not refer to documents about risk as an adjunct to financial value; they are just encouraging the identification of risks, because that is a normal part of a balanced evaluation. While I do not think that the word risk does any particular harm to the concept of financial value, I do not think that the word is necessary.

I have struggled a bit more with working out what financial impact means. The only thing I could come up with was something like the evaluation of the net costs or benefits to be obtained from what is being acquired, but I cannot see what financial impact adds to the meaning of financial value. In this case, it would be positively confusing to add financial impact alongside financial value, because it might encourage somebody to litigate on the basis that there was a difference between financial value and impact, as Parliament clearly meant something other than financial value by the concept of financial impact. That would be a failure on our part to create certainty in our legislation.

I would also like to comment on Amendment 46A, from the noble Lord, Lord Collins, which is in this group. I expect he will be speaking to it a little later. I could not understand why the noble Lord has chosen UN-related documents to refer to when trying to put what he calls “established investment principles” into the Bill. The UK Government have already announced a series of actions that they have implemented in relation to the UN guiding principles on business and human rights, much of it already in legislation and unaffected by the Bill. In response to those principles, the relevant parts of our legal system are already in place, and we do not need to refer to a UN document to get any further on investment principles; they have already been interpreted by the UK Government.

Furthermore, we already have a perfectly good Stewardship Code in the UK, issued by the Financial Reporting Council, which deals with ESG matters. I do not believe the Bill alters that at all, so long as ESG principles do not acquire a territorial dimension.

[Lord Collins of Highbury (Lab)]

There was a little throwaway remark there: that ESG principles will not involve territorial matters. There are many examples where it could be quite a big influence.

[Baroness Noakes (Con)]

The noble Lord picks me up when I used a bit of shorthand. I really mean the contents of Clause 1 and the moral disapproval in relation to territorial consideration. I was just trying to say that ESG principles are unaffected; they are in the UK system of corporate governance and stewardship, and they are unchanged by this Bill, except where those principles are used in the way described in Clause 1.

The UN principles of responsible investment are not even issued by a UN body: it is a private body that issues them. Those principles have no standing whatever in the UK, except to the extent that UK-based signatories sign up to them. In my view, it is a rather odd thing to be putting into the Bill to define investment principles.

The UN Human Rights Council, which owns this territory, is, like most of the UN, including the General Assembly, pretty anti-Israel. I have an underlying concern that using these UN-affiliated principles—to use a shorthand—is just another way of allowing divestment decisions in relation to Israel by the back door. I am sure that the noble Lord, Lord Collins, does not intend for that to be the effect of his amendment, but I have a fear that it will be the outcome of it.

[Lord Collins of Highbury (Lab)]

When I speak to my amendment, I will make the case for it. I would actually put the noble Baroness’s arguments on their head: if the purpose of the Bill was to stop BDS campaigns, it should have been about that. Our problem—and my noble friend’s problem—is that it is going to be much broader in scope, and will include things that this Government want to achieve. That is why these amendments are quite important.

[Baroness Noakes (Con)]

I accept that this goes beyond the narrow BDS campaign that has been focused on Israel. Nevertheless, it is a concern for a number of us that the Bill will be effective as regards its impact on actions by UK public authorities towards dealings with Israel, which is why I raised it.

To finish, my concern on this score was underlined by the action of the UN human rights special rapporteur on the Occupied Palestinian Territories. This person wrote to the Local Government Pension Scheme in 2021 with a “request for action”, which included divestment from companies that are involved in the Occupied Territories. Here we have someone associated with the UN Human Rights Council telling our Local Government Pension Scheme to carry out divestment activities. That is why this whole area is so concerning.

[Lord Collins of Highbury (Lab)]

How does the noble Baroness think that that advice—I have not seen it—compares with the advice of her own Government in relation to the Occupied Territories?

[Baroness Noakes (Con)]

I think we discussed this briefly on the previous day of Committee. The Government highlight the risks associated with dealings in relation to the Occupied Territories but do not call for divestment. Very explicitly, that is not the case.

[Lord Collins of Highbury (Lab)]

Is not the noble Baroness making my point? It is a risk which the Government have highlighted in their own policy on the Occupied Territories. They are illegal, and have no legal status, and that investment could be at risk. The noble Baroness should make up her mind about what she is arguing.

[Baroness Noakes (Con)]

The issue of risk is a separate issue, dealt with in the amendment of the noble Baroness, Lady Drake. I was talking about later amendments which seek to apply UN principles to local government pension schemes. This is a fairly large group, and I think we have got a little cross-wired on which issues affect which part.

To conclude, I know that the noble Lord, Lord Davies of Brixton, has tabled a stand-part debate on Clause 12, which is in this group. I hope he is not serious about taking local government pension schemes out of the Bill. The actions of the special rapporteur in our domestic affairs are proof enough that we need local government pension schemes firmly within the Bill.

[Baroness Blackstone (Lab)]

My Lords, I strongly support what my noble friend Lady Drake has put forward in her amendment and very much hope that the Government will respond positively to it and accept it.

I listened carefully to what the noble Baronesses, Lady Noakes and Lady Altmann, said. I know that their arguments were made sincerely, but I was surprised that they were somewhat complacent in brushing aside the arguments put by my noble friend. Amendment 45 in my name adds to the important points raised by my noble friend Lady Drake, the noble Lord, Lord Willetts, and other speakers on the fiduciary duties of local government pension funds and their ability to consider risk.

Economic Activity of Public Bodies (Overseas Matters) Bill

Baroness Noakes Excerpts

Committee stage
Tuesday 14th May 2024 Lords Chamber

[Lord Hendy (Lab)]

My Lords, in the unavoidable absence of my noble friend Lady Blower, and at her request, I beg to move Amendment 30, which is intended to add to paragraph 6 of the schedule.

The paragraph, which we discussed in Committee last week, permits a decision-maker to take into account whether the decision might put the UK in breach of its obligations under international law. In the last debate, we discussed the nature of the international law obligations comprehended in this paragraph and the question of who determines whether there has been a breach of them. I do not seek to reopen that debate; this amendment is not dependent on the outcome of it.

The amendment would make it clear that the decision-maker will be permitted to take into consideration and reject a tender or an investment that the decision-maker reasonably considers might put the UK in breach of its obligations under the genocide convention, the Universal Declaration of Human Rights or any UN Security Council resolutions supported by the United Kingdom. The amendment would still stand and have force, whether or not the Government accept amendments along the lines suggested by the noble and learned Lord, Lord Etherton, and the noble Lord, Lord Verdirame, identifying what entity appropriately determines what amounts to a UK breach of international law. Amendment 30 merely clarifies that the conventions and resolutions mentioned in it are to be regarded as UK obligations.

I find it impossible to see what conceivable objection there could be to identifying matters of such grave importance to a law-abiding nation. The rationale is so obvious that I cannot think of anything more to say in support of my noble friend Lady Blower’s amendment, and I look forward to hearing that the Minister will support it.

I will now speak to Amendment 32. Paragraph 8 of the Schedule permits the potential decision-maker on procurement to take into consideration certain forms of “labour-related misconduct”. The problem is that that is a very limited list. We touched on that in Committee last week. In the last debate, the Minister asked me to provide further details on whether the violations of core labour standards would be covered by the provisions of paragraph 8. I looked at that matter again and did not take up her kind invitation to write to her, because Amendment 32, which was not before us last week, makes clear the distinction between the core labour standards identified in the amendment and the standards set out in paragraph 8.

I will explain. Paragraph 8 is confined only to conduct that would amount to a criminal offence in relation to slavery or human trafficking orders, failure to pay the national minimum wage and labour market orders under the Immigration Act. That list does not currently permit those making procurement and investment decisions to have regard to the fundamental labour standards binding on all countries by virtue of their membership of the ILO. As a matter of convenience, we can take those standards from Articles 399(2) and 399(6) of the trade and co-operation agreement—the Brexit deal—signed by our then Prime Minister in 2020, where they are conveniently summarised.

The provisions commit the UK to respect, promote and effectively implement the ILO Constitution, which includes the Declaration of Philadelphia of 1944, the

“ILO Declaration on Fundamental Principles and Rights at Work and its Follow-up, adopted at Geneva on 18 June 1998 … the ILO Decent Work Agenda as set out in the 2008 ILO Declaration on Social Justice for a Fair Globalization”,

and the fundamental ILO conventions. The fundamental ILO conventions are those identified in those provisions of the Trade and Cooperation Agreement and in the amendment. They protect freedom of association and the effective recognition of the right to collective bargaining; the elimination of all forms of forced or compulsory labour; the effective abolition of child labour; the elimination of discrimination in respect of employment and occupation; decent working conditions for all with regard to, inter alia, wages and earnings, working hours, maternity leave and other conditions of work; health and safety at work, including the prevention of occupational injury or illness and compensation in cases of such injury or illness; and, finally, non-discrimination in respect of working conditions, including for migrant workers.

The only point in that list which is included in paragraph 8 of the Schedule is the second point that I mentioned: the elimination of all forms of forced and compulsory labour. That is the only point at which my amendment and paragraph 8 coincide, because paragraph 8 of the Schedule deals with slavery and trafficking. However, all the other elements of the fundamental labour standards are outside paragraph 8, even though they are binding on every country which is a member of the ILO by virtue of its membership and, regardless of whether they have ratified these conventions, they are matters of customary international law. These are vitally important standards, as the UK government representatives will doubtless reiterate at the International Labour Conference of the ILO, which takes place in June.

Plainly, paragraph 8 does not go far enough. International labour standards are important for ameliorating the conditions of workers in less developed and authoritarian regimes, and, from a more self-interested perspective, for diminishing the extent to which UK manufacturers and UK suppliers of services and works are undercut by competitors seeking to, as I put it on the last occasion,

“exploit cheap labour, poor conditions, inadequate standards, lack of enforcement, and powerless trade unions”.—[Official Report, 7/5/24; cols. 23-24.]

I refer to the examples I gave on the last occasion, but I will not repeat them.

Reverting to the point made by the noble and learned Lord, Lord Etherton, and the noble Lord, Lord Verdirame, on the last occasion, identification of whether there has been a breach of a fundamental ILO convention is not here left to the lay opinion of the decision-maker in the public entity. The ILO has extensive and long-established machinery for determining whether each state is in conformity with each of the fundamental conventions and each of the conventions that state has ratified. The UK fully participates in that machinery and those determinations. Why, then, I ask rhetorically, should the minimum standards of the fundamental international labour conventions, which are all ratified by the UK, not be included in the list of legitimate labour-related misconduct which procurement decision-makers can take into account under the Bill? I wait with anticipation to see whether the Minister will seek to justify their exclusion.

[Baroness Noakes (Con)]

My Lords, when we debated paragraph 6 of the Schedule in an earlier group, I argued that it was inappropriate to include an international law exception in the Bill. Therefore, it will not surprise the noble Lord, Lord Hendy, to find that I do not support the extension to paragraph 6 that his Amendment 30 seeks to achieve.

The briefing sent by the Palestine Solidarity Campaign asserted that without this amendment, the Bill could compel public bodies to contravene the genocide convention. This extraordinary statement was explained in the context of the much-publicised opinion of a number of UK lawyers, including the noble and learned Baroness, Lady Hale, that the International Court of Justice had ruled that there was a plausible case that Israel has committed genocide. As the then President of the ICJ subsequently made clear, this is a complete misinterpretation of the ICJ’s judgment. Judge Joan Donoghue, the then President of the ICJ, has stated that the court decided that the Palestinians had a plausible right to be protected from genocide and that South Africa had the right to present that claim in court. However, to correct something that is often said in the media, the court did not decide that the claim of genocide was plausible. So the items of international law referred to in the amendment, including the genocide convention, basically have the name “Israel” etched on them. Whether by design or otherwise, this amendment would simply make it easier for public authorities to find excuses to boycott Israel and it would be very damaging if this amendment were accepted into this Bill.

Amendment 32, tabled by the noble Lord, Lord Hendy, raises rather different issues. I am conscious that I am in dangerous territory because of the acknowledged expertise in labour law of the noble Lord compared with my ignorance of labour law. However, it is my understanding that the ILO conventions do not have direct effect in the UK. I thought that we achieved compliance through our domestic legislation. The noble Lord spoke about ILO matters on the last Committee day and, while he made the point that the UK is bound by the ILO conventions, I do not think that he claimed that they had any direct effect in UK law.

If I am correct, this amendment is a very unwelcome addition to the Bill because it seems to give full legal effect to the ILO conventions directly. These conventions are not drafted as stand-alone laws but in rather broad terms. They lack a lot of definitions and the language is often rather vague. That is why national Governments have to adopt them using their own legislation. I am not speaking against the ILO conventions; I have no views one way or the other on the conventions. My point is that we comply with these conventions through our national law and that law is the foundation of labour-related misconduct, which is covered in paragraph 8. It seems to me that paragraph 8 means that we can hold overseas suppliers to the same standards to which we hold UK suppliers. In particular, it aligns with the provisions of the Procurement Act which was passed last year. That is a wholly proper basis for this Act, rather than some broader concept of principles that cannot be read directly into our law.

[Lord Verdirame (Non-Afl)]

My Lords, I rise to offer a few remarks on these two amendments.

Amendment 30 does not really extend what paragraph 6 already does, because the expression “international law” in paragraph 6 includes everything that Amendment 30 mentions. My criticism of it, aside from the points that were discussed on day 3, is that it is just redundant. “Convention” is just another term for “treaty” and “obligations under international law” will include obligations arising under treaties to which the United Kingdom is a party. They will obviously include the genocide convention. The Universal Declaration of Human Rights is not a convention or a treaty but a resolution of the General Assembly, but it is widely believed to reflect customary international law and so is binding on the United Kingdom.

The reference in the amendment to the Security Council resolutions is also unhelpful and confusing. Security Council resolutions will be binding on the United Kingdom provided that they contain decisions under Article 25 of the United Nations charter, because it is the decisions of the Security Council that are binding on member states. Those resolutions will be binding on the United Kingdom, whether we supported them or whether we abstained in those votes.

--- Later in debate ---

[Lord Davies of Brixton (Lab)]

I shall follow the line taken by the noble Lord, Lord Beith, who quoted from the Government’s Explanatory Notes. This is the House of Lords wording in the Explanatory Notes: it was supposedly toughened up following discussion in the Public Bill Committee in the House of Commons. So we have this explanation in front of us and I shall just quote again what the noble Lord, Lord Beith, quoted, which is that

“councillors of a local authority are not a public authority and, therefore, are not prohibited from expressing support for or”—

my emphasis—

“voting in favour of a motion supporting a boycott”.

Can the Minister give us an assurance? If councillors vote for a boycott, which they are entitled to do, according to the Explanatory Notes, and if that boycott motion is passed, enforcement action is taken and ultimately a civil penalty can be levied, is there any prospect whatever of those councillors who voted for the boycott motion being surcharged? Because the prospect of that must clearly be a limitation on their ability to speak.

[Baroness Noakes (Con)]

My Lords, as a Conservative, I believe absolutely in the right to freedom of speech, but I do not think that the limits on freedom of speech in Clause 4 are as great as some noble Lords have tried to make out. I do not think that Article 10 of the European Convention on Human Rights is something that affects the rights of individuals, and Clause 4 is fundamentally aimed at public authorities. I completely understand that there is a very small number of public authorities who can be individuals as well, but, as my noble friend the Minister explained at Second Reading and as the Explanatory Notes make very clear, the prohibition on statements is against public authorities and attaches to individuals only to the extent that they are speaking for the public authority. Even if it applies to the statements made by individuals on behalf of the public authority, the ban applies to the public authority and the enforcement action is taken against the public authority. So individuals are not targeted by Clause 4.

We have to remember that this is not an academic issue. We already know that councils are starting to pass BDS motions and they are against this Bill. We know that the student encampments are including demands or public statements on the conflict in the Middle East and on divestment. They may not get all their demands, but that is certainly where they are pushing towards. Without the Bill, I think we can be fairly sure that BDS activities and statements will continue to increase and that will have an impact on social cohesion, and a particular impact on the Jewish communities that are affected by the sorts of statements that are made.

[Lord Wallace of Saltaire (LD)]

The noble Baroness said that she is afraid that BDS statements will increase. Is she in favour of preventing such statements in unavoidably lively public debate?

[Baroness Noakes (Con)]

Yes, I am against statements being made by public authorities. I am trying to make the distinction at the moment between public authorities and the individuals who are involved in those public authorities, who I think are hardly affected by this, except to the extent that they speak for the public authority. I think there is a case for taking a position against statements by public authorities, because of the impact on social cohesion.

We have to remember that this provision does not come from nowhere: it is rooted in the real, live example of what happened in Leicester Council back in 2014. It passed a BDS motion and then said, “only as far as legal considerations allow”. At that time, that was hugely divisive in the local community. It does cause very real harm and that is why this is so different from the kind of example that the noble Baroness, Lady Chapman, gave at the beginning, about wanting to make a statement about stealing my noble friend’s excellent handbag. This is about social cohesion, at the end of the day; that is why this provision is in here.

[Lord Warner (CB)]

I have listened with interest to the noble Baroness. Can she explain why the rather talented and experienced Constitution Committee took a totally different view from her and was so concerned about Clause 4? Why is she saying that, in effect, it has got this wrong—that it should not be saying that Clause 4 should be removed from the Bill but should welcome it as delivering the requirements of the Bill? I am rather puzzled.

[Baroness Noakes (Con)]

I have never been a member of the Constitution Committee—I am certainly not a current member—so I simply cannot answer that question. I do not know why it has reached the conclusions that it has, but I believe that they are not in accordance with the impact of Clause 4 as drafted.

When dealing with stopping people doing things and making judgments about whether doing so is right, a balance always needs to be struck. In this case, the Government have tilted the scales in favour of social cohesion. People may think that that is the wrong decision and that allowing elected officials to speak on behalf of an authority in the way that they want to is a price worth paying. I believe that, because of the limited nature of Clause 4 as drafted, it strikes the right sort of balance in this case.

We must remember that this Bill does not stop elected officials speaking in their own capacity, nor does it stop bishops doing so—not that that would ever be an easy thing to do. Individuals in public life can have a big impact on social cohesion, but they are not debarred by this Bill from giving their own views on BDS activities, even though they would have such an impact. In that sense, this Bill is a modest change to the status quo on public statements. It is certainly not as far reaching as people have tried to make out. I would like to get a little balance in this debate.

[Lord Hendy (Lab)]

My Lords, the noble Baroness asserted that Clause 4 does not apply to individuals but only to entities. Clause 4 says:

“A person who is subject to section 1 must not publish”,


and so on. In law, a “person” could be a corporation or an individual, but Clause 1 is quite clear in referring to a “decision-maker”, which can clearly be an individual. One can easily visualise a public entity where the decision is made by one person who has had authority delegated to them, a committee or group of people who have the power to make such a decision or the full council, body or whatever it may be. Clearly, Clause 4 is capable of being directed at individuals.

[Baroness Noakes (Con)]

I hear what the noble Lord is saying. Clause 1 affects persons who are decision-makers. Decision-makers are defined in Clause 2, which uses the definition of public authority. As I said earlier, there are a very small number of cases where individuals can be decision-makers. It is not a question of people taking delegated authority to be decision-makers; if I were in a council and delegated to the chief executive, they would not thereby become the decision-maker. The decision-maker remains the public authority under the terms of Clause 2.

[Lord Warner (CB)]

I refer the noble Baroness to Clause 1(7)(b), not just Clause 1(7)(a), which says

“any person seeking to persuade the decision-maker to act in a certain way”.

That sounds to me rather like an individual.

[Baroness Noakes (Con)]

Indeed, but a person who is subject to Clause 1 is a decision-maker. The noble Lord has just referred to the person giving advice or the person seeking to persuade the decision-maker, but that person is not a decision-maker for the purposes of Clause 1, and therefore not for the purposes of Clause 4.

[Lord Warner (CB)]

With all due respect, Clause 4 applies to Clause 1(7)(b), which refers to an individual. We must perhaps ask the Minister to advise us on whether that is true.

[Baroness Noakes (Con)]

We discussed this very point on our first day in Committee, and I think I have stated the correct position on the interpretation of the Bill.

[Baroness Janke (LD)]

My Lords, to answer some of the points made by the noble Baroness, Lady Noakes, the idea that individuals are not targeted is certainly not sufficiently reassuring to make local decision-makers feel protected. Most of what is in the Bill seems to be very much targeted at local authorities and their members.

It is perhaps worth while to point out here, in this unelected Chamber, that councils are directly elected and are accountable to their electorate. They are also obliged to report back to their constituents about such things as decisions that they have made. I was a former leader of a council, and I would have wondered, on seeing this Bill, having been asked why I had made a certain decision, whether replying in a certain way would mean that I was prosecuted, or perhaps that I was not able to reply because I am forbidden to speak about this. There is sufficient lack of clarity in the Bill to make people wonder about that. I do not think that it has been demonstrated otherwise. As the noble Lord, Lord Warner, said, the Constitution Committee sees this as a major threat to free speech. We need some more guidance on this.

I take exception to the idea that, somehow, statements from student encampments are equated with statements issued by locally elected authorities and their officials. They are not the same at all. Local authorities have a constitutional role, and they should be respected as such. The contempt that I have heard from some people in this Committee is unwarranted, given the lack of evidence of councils making such decisions as are prohibited in the Bill.

The idea that prohibiting such statements will have a good effect on social cohesion is much more likely to have the opposite effect. If people are told that they are not allowed to make statements, they are much more likely to try to find other ways of getting their messages across. The idea of oppression leading to better social cohesion seems to me to be a false premise.

I agree with the noble Baroness, Lady Chapman, that there is a complete failure by many of us in this Chamber to explain why Clause 4 is necessary. We have not really heard any good reason, other than the noble Baroness, Lady Noakes, telling us it is for social cohesion.

On the idea that freedom of speech is offended by Clause 4, as the right reverend Prelate said, freedom of speech is a basic right and a cornerstone of democracy. Although we are an unelected House, we fight for democracy—I would hope—and stand by democratic principles, as has the Constitution Committee, as told to us by the noble Lords, Lord Beith and Lord Warner.

The practical issues with the Bill, as to how its provisions are actually enforced, is again something that needs clarity. As the noble Lord, Lord Warner, said at the beginning, we are discovering with the Bill that, the further we go with it, it really lacks clarity. Trying to establish what it is meant to do and how it is meant to do it seems to have defeated us so far.

We need much better clarification about the Human Rights Act. If the Constitution Committee of this House tells us that the Bill contravenes Article 10 of the Human Rights Act, we need to know how it is that Ministers are telling us that it is somehow compliant, as this is clearly not the case.

As the noble Lord, Lord Beith, said, to prevent people talking about issues important enough for them to be calling for a boycott is an outrage. The Explanatory Notes trying to maintain that somehow individual councillors will not be targeted or held responsible is totally inadequate if that is not going to be on the face of the Bill.

The clause deserves to be removed. I very much regret that it disrespects the role and responsibility of directly elected councillors and their officials. It has extreme overreach in trying to gag them and prevent them explaining their decisions, for which they are publicly accountable. I believe that contraventions of the ECHR are matters to be taken very seriously, so I want to hear from the Minister further explanation and further response to the recommendations of the Constitution Committee.

Economic Activity of Public Bodies (Overseas Matters) Bill

Baroness Noakes Excerpts

Committee stage
Tuesday 7th May 2024 Lords Chamber

[Lord Verdirame (Non-Afl)]

My Lords, I rise to move the first amendment in this group, Amendment 18 in my name, with the support of the noble and learned Lord, Lord Etherton. It must be read together with Amendment 29, which is also in this group. I shall speak to both of them together. These two amendments deal with the problem arising from the international law exception at paragraph 6 of the schedule.

A number of noble Lords highlighted this problem at Second Reading. In my speech, I referred to the opinion on the Bill by the Richard Hermer KC. I disagree with certain aspects of his opinion, but I agree with his analysis of the effect of paragraph 6 of the schedule. As he put it, a breach by the UK of an unincorporated treaty does not normally give rise to a claim under domestic law, but paragraph 6 of the schedule provides a domestic law foothold for such claims on a virtually unlimited basis. Unless the paragraph is amended or removed, the consequence will be that, contrary to the purposes of the Bill, local authorities, for example, will make their own determinations about UK compliance with international law obligations. If there is a dispute about the correctness of the position they have taken, that dispute will be decided by our courts.

We do not normally implement international law obligations on such an unspecified and broad basis. What we generally do is give effect to specific international law obligations in a manner that is clear, and thus consistent with the rule of law requirement of legal certainty and clarity. There are countless examples of this approach, from the Diplomatic Privileges Act 1964 to the Human Rights Act. In essence, what happens is that the implementing legislation identifies specific provisions in a treaty that are to be incorporated in domestic law, and sometimes those provisions will be listed in a schedule to the Act. The legislation will then create special rules or mechanisms that Parliament considers are required to give effect to those international law obligations. Examples include the declarations of incompatibility under the HRA and Foreign Office certificates under Section 4 of the Diplomatic Privileges Act.

Paragraph 6 of the schedule to the Bill does not do any of that. It purports to import the entirety of international law—potentially all treaties, whether incorporated or not—in every rule of customary international law, and invites decision-makers to consider for themselves whether their decisions will be compliant with any such international law. It is an inherently uncertain and unclear provision. Moreover, the international law obligations that might be relevant in this field are contested and unsettled.

This is particularly the case for international legal rules on the duties of third parties vis-à-vis a serious breach of peremptory rules of international law—most notably, Article 41 of the International Law Commission’s articles on state responsibility provides for three very general obligations for states faced with a serious breach of international law by another state. Those obligations are non-recognition, non-assistance and co-operation; but whether this rule entirely reflects customary international law and what it specifically requires of a state are not settled.

Public bodies would also have to determine for themselves whether they can avail themselves of the international law exception. That too requires a complex international law analysis. Whether an entity is a public body under domestic law is, of course, a question of domestic law, but whether the conduct of that body is attributable to the state on the international plain is a question of international law. Universities might be an example of public bodies under domestic law—we have been discussing that in previous debates on this Bill—but it is not the case that the conduct of a university would ordinarily be attributable to the state as a matter of international law.

The amendment that we propose would maintain the international law exception but add clarity to it by ensuring that regulations are adopted to include descriptions of considerations, including disregard thereof, to give effect to the UK’s obligations under international law. There may be a better formulation than the one we propose, but in essence the idea is to replicate the manner in which we have given effect to international law obligations that have not yet come into existence: for example, those that may arise in the future under decisions of the Security Council.

An example of this power is in the Sanctions and Anti-Money Laundering Act 2018. It creates the power to make regulations for purposes of compliance with UN obligations and, more generally, for the purpose of compliance with any other international obligation. What happens in practice is that the Foreign Office lawyer, together with the Attorney-General, will consider the specific international law obligations that have arisen and then contribute to the drafting of clear, specific and precise regulations to give effect to those obligations. To be clear, the power that we are proposing will not, of course, replace the power in the Sanctions and Anti-Money Laundering Act. It would be in addition to that.

I understand that the noble Baroness, Lady Noakes, and the noble Lord, Lord Pannick, take the view that that power in paragraph 6 may not be needed and could simply fall away. Our proposal is a compromise that reflects the reality that this is a sensitive area and we thought that embedding in the Act a power to make regulations for purposes of complying with international law may, in this context, be useful. I beg to move.

[Baroness Noakes (Con)]

My Lords, I have Amendment 28 in this group and I thank the noble Lord, Lord Pannick, for adding his name. I should first say that I am in complete agreement with the thoughts that lie behind Amendments 18 and 29, to which the noble Lord, Lord Verdirame, has spoken so eloquently.

My Amendment 28 is simply a more direct way of dealing with the same problem. It deletes paragraph 6 of the schedule in its entirety, so that public authorities cannot use international law considerations as a means of avoiding the effect of Section 1 of the Bill. Public authorities are not experts in international law but might well seek to use ill-founded concerns about the UK’s adherence to international law as a smokescreen behind which they believe that they can hide their boycott activities. Put simply, it creates a huge loophole in the Bill.

I tried to compare the Bill with last year’s Procurement Act to see whether the exclusions in the schedule to this Bill are the same as the mandatory and discretionary grounds for exclusion in the Procurement Act. This was not easy, because it is clear that two completely different sets of draftsmen have been involved in the two Bills. However, the one thing that I am pretty sure of is that the Procurement Act did not have an international law exclusion ground, so the inclusion of paragraph 6 in the schedule to this Bill is somewhat puzzling.

I shall comment briefly on Amendment 31 in this group, in the name of the noble Lord, Lord Kennedy, and the noble Baroness, Lady Blower, because that would extend the range of things that public authorities could look at to breaches of international law outside the UK. Not only is this way beyond the Procurement Act exclusions as well, but it adds yet another loophole, making the loophole as big as it could possibly be in order to allow public authorities to justify boycotts. For that reason, I cannot support it. I look forward to hearing the Minister’s rationale for the inclusion of paragraph 6 in the schedule.

[Lord Hendy (Lab)]

My Lords, I shall speak to Amendment 31 in my name and that of the noble Baroness, Lady Blower. I have no observations on the amendments that have just been spoken to.

Paragraph 6 of Schedule 1 disapplies the bar in Clause 1 of the Bill on a public entity, for want of a more precise definition, from taking into account political or moral disapproval of a foreign state’s conduct in making procurement or investment decisions in one particular situation. A procurement decision is defined in Clause 2(2) as

“a decision about a contract for the supply of goods, services or works to the decision-maker”.

Paragraph 6 applies where the decision-maker reasonably considers that its political or moral disapproval of a foreign state’s conduct is relevant to whether the procurement or investment decision would place the UK in breach of its international law obligations. I have no problem with that at all.

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[Lord Deben (Con)]

My Lords, I remind the House of my declaration of interests. It is exactly from that position that I wish to ask a fundamental question of my noble friend. We spend an awful lot of time trying to get companies not to be complicit with the Government of Myanmar, for example, because of their actions. We are proud that there is a whole series of decent private and public companies that make decisions on those grounds. Are we sure that we should be in a position in which we will encourage public and private companies to make decisions on those grounds but specifically exclude the right of elected bodies—and some non-elected bodies, because they have been designated as public bodies—to make those decisions? I find that a very difficult position to support.

Part of the problem is that we are now in a complex and extremely uncertain area, which is why all the amendments before us are of considerable importance. They say that we are putting public bodies—we are not quite sure what they are—in a position where they do not know quite how they should behave, and we are opening them up to the opportunity of people taking them to court because the decision they have made has not been in conformity with what the plaintiffs suggest should have been their decision in relation to international law. At the same time, we are saying to them that they should not take into account the same things most of us would try to get private companies—and public companies, in that sense—to take into account.

We are getting into a real mess here, and I do not see that this is a carefully written Bill. Indeed, my last point is simply that this is a terribly badly written Bill. I do not know who thought it through. We have now had a series of people taking rather different views—as a matter of fact, I am unhappy about the particular way in which Israel is treated in the Bill. We are all taking different views, but we are all saying that the Bill is so badly written that people will not know how to deal with it.

This is a central concern for this House; we need legislation through which we can explain to people what is happening. If I may say to the noble Lords who put the amendments forward, it took a bit of listening to understand what their problem was, to put it bluntly. How on earth are we going to have public bodies coming to decisions when they have to read that to start with to understand what mess they might be in? I hope my noble friend will help me to understand how this Bill will be simple enough for it, first, to be enforced and, secondly, to be proper. At the moment, I feel it is improper, because it is so badly drafted.

[Baroness Noakes (Con)]

My Lords, we should get this into perspective. I say to my noble friend Lord Deben and indeed to the noble Lord, Lord Hain, that this Bill is handling one particular aspect: fundamentally, boycotts and divestment decisions. There is a whole range of law in the Procurement Act, which we passed last year, which sets out the UK’s version of the procurement rules we used to take from the EU—they have been modernised for our own purposes, but they are still hugely complicated.

For a very long time, the Government’s own procurement advice to public bodies was that:

“Public procurement should never be used as a tool to boycott tenders from suppliers based in other countries, except where formal legal sanctions, embargoes and restrictions have been put in place by the UK Government”.


In many ways, this Bill provides a more liberal approach to that blanket proposition, which was in a government procurement policy note and which has been governing procurement for a long time. We need to see this Bill in context and in the light of the rather narrow area it is trying to deal with.

[Lord Wolfson of Tredegar (Con)]

My Lords, unlike the noble Lord, Lord Hain, I think this is a rather good Bill, although I agree respectfully with him that these amendments, particularly those on international law, merit careful consideration by the Minister and the Government. I say that essentially for three reasons, and I can be brief.

First, the general approach in this country is that public bodies do not have their own interpretation of international law. It is the Government who assess international law obligations, because they are binding on the United Kingdom as a state.

That leads me to the second point, which might in part answer that made by my noble friend Lord Deben. The effect of the Bill as drafted is to introduce, by the back door, potentially vast swathes of international law into our domestic legislation. As I never tire of saying in this House, we have a dualist system: international law is not part of domestic law unless and until it is incorporated. So the answer to my noble friend’s point may well be this: if somebody were to say in a domestic court that a public authority was in breach of “the law” because it had not complied with some international law obligation that was not part of our domestic law, the public body’s obvious retort would be to say that it is not subject to that obligation.

The third point is a practical rather than legal one. My concern is that, in the real world, if the Bill is left as drafted it will in practice drive a coach and horses through what it really seeks to achieve, because the courts will be clogged up with arguments, even if they are entirely unmeritorious, as to the scope of international law. I agree with the noble Lord, Lord Verdirame, about Richard Hermer KC’s opinion: it is something of a curate’s egg, and I will perhaps come back to that in a later group. But I agree that, on this point, he is absolutely right to sound a note of warning and to highlight that the Bill as drafted risks undermining the Government’s ambitions for it.

I gently invite my noble friend the Minister to reconsider the Government’s approach to this international law question, which we can perhaps come back to at a future opportunity.

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[Lord Warner (CB)]

My Lords, I support Amendment 19, to which I have added my name, and I will speak to Amendment 48 in my name. Amendment 48 is focused on a simple question: does the statement of compatibility by the Minister on the face of the Bill comply with the terms of Clause 19(1)(a) of the Human Rights Act 1998, or would the Minister have been wiser to make a statement under the terms of Clause 19(1)(b) of that Act?

Just to remind the Committee, the Minister states on the face of the Bill that its provisions

“are compatible with the Convention rights”.

It is, of course, possible for Parliament to pass legislation that is not compliant with convention provisions. That is indeed provided for in Section 19(1)(b) of the 1998 Act. But if we adopt that course, we have to fess up to the fact that although Ministers are

“unable to make a statement of compatibility the government nevertheless wishes the House to proceed with the Bill”.

I recognise that some members of the Conservative Party would find it a badge of honour to flourish a statement of non-compatibility with the Human Rights Act, but I would not have placed the Minister in that group, so I am curious to find out what is going on.

First, however, I must own up to my personal involvement with and attachment to Section 19 provisions in the 1998 Act, when I was a senior policy adviser to the then Home Secretary. At that time, there was a robust debate about whether, despite the sovereignty of Parliament, legislation could be stopped if it breached ECHR provisions. Quite naturally, parliamentary sovereignty inevitably triumphed, but there was concern in the Labour Government at the time that they wanted proper consideration to be given to the ECHR when Bills came to Parliament. With my good friend the late and much-missed Lord Gareth Williams, a distinguished lawyer, Home Office Minister and later Leader of this House, we came up with the idea of a ministerial statement of ECHR compliance on the face of the Bill. That led to the drafting of what became Section 19 of the 1998 Act. This provision was intended to make Ministers stop and think carefully about human rights convention compliance before they introduced a Bill to Parliament.

It is quite difficult to see that this has happened with this Bill. Clause 4 as drafted is a straightforward gagging provision. It stops people openly discussing a full range of possible actions they might take to express their disapproval of an Israeli Government’s continued breaching of international law in Gaza and the Occupied Territories. This places the Bill in breach of Article 10 of the convention—the right to freedom of expression—and therefore in breach of Section 6 of the 1998 Act.

That is not just my view—it is the clear view of Liberty, Amnesty International and many others, including many parliamentarians. People cannot see how Clause 4 can be squared with Article 10 of the ECHR. Liberty has also argued that the Bill constitutes an interference with the rights of freedom of conscience under Article 9 of the ECHR, a view that I think is shared by Quakers, given their beliefs.

In these circumstances, I am at a loss to see how the Minister can make the statement on the face of the Bill that it is compliant with Section 19(1)(a) of the Human Rights Act. When I consulted the clerk about framing an amendment to delete the statement on the face of the Bill, I was told I could not do that. However, they helpfully suggested that I could insert a provision that after the passage of the Bill, there should be a review of its compliance with the Human Rights Act 1998 within a given period. That is exactly what Amendment 48 would do, with particular attention paid to compliance with Article 10 of the ECHR, the right to freedom of expression. If that review found that the Act was not compliant, the Government of the day would then have to decide whether they would go forward and implement the Act, in contravention of the 1998 Act.

I return to the question I posed at the beginning of my remarks. If the Minister still believes that she has placed the correct statement of compliance on the face of the Bill, I respectfully ask her to share with the House the source of the legal advice that convinced her it was the right thing to do.

I turn briefly to Amendment 19, to which I have added my name and strongly support. I will not repeat the persuasive arguments of the noble Lord, Lord Collins. This amendment is an important step towards making the Bill more compliant with the Human Rights Act 1998, but I fear that the Minister’s statement on the Bill’s compliance will not pass muster.

[Baroness Noakes (Con)]

My Lords, the noble Lord, Lord Collins, helpfully explained in his opening remarks the extent to which he agrees with the aims of the Bill but not the means chosen. However, his amendment could open a huge back door to councils and devolved authorities doing what they want in relation to BDS activities, because they would only have to dress up what they want to do as a statement of human rights policy. That statement is not even fully defined as regards what is meant by human rights. This could be a massive loophole. At the end of the day, it would still involve public authorities, including the devolved Administrations, in ignoring foreign policy as set by the UK Government. We must not allow ourselves to get away from the fact that that is crucial. We cannot have public authorities setting foreign policy.

[Lord Hain (Lab)]

My Lords, I follow on from the noble Baroness’s diktat position whereby central Government decide the policy and nobody else can have a view. That would undermine the position. It was the thrust of the noble Baroness’s earlier speech that the Minister indicated that it is for the UK Government to set foreign policy on boycotts and sanctions, and nobody else can do anything about it. As I pointed out at Second Reading, that would have made illegal the decision by many local authorities, universities and student unions to boycott products from apartheid South Africa, and I quoted a KC’s legal opinion confirming that.

How can the noble Baroness possibly justify her position, given the history of the downfall of apartheid, which is contrary to what she tried to suggest? The noble Baroness, Lady Deech, in a very unfortunate speech, tried to suggest that sanctions played no role. No serious student of the history of South Africa agrees with that position. Sanctions certainly played a part. But the boycott decision taken by many local councils, universities and student unions, in particular, among the public bodies covered by the Bill to refuse to source products from South Africa—and indeed, to impose sanctions and boycotts and to support Nelson Mandela’s being freed from 27 years of imprisonment—would have been illegal under the Bill. Why? Because the Government of the day in the 1980s, under Margaret Thatcher, did not support that boycott and sanctions policy. So all those local authorities and churches, including many archbishops, bishops and vicars, supporting those boycott campaigns would have all been acting illegally under the Bill if speaking for public bodies.

I want to speak especially to Amendment 19 and to notify your Lordships’ House that I do not wish to move my Amendment 49, in the sixth group, not least to spare Members hearing a further similar speech from me.

--- Later in debate ---

[Baroness Noakes (Con)]

I merely said that it was not defined in Amendment 19.

[Lord Purvis of Tweed (LD)]

It does not need to be defined in Amendment 19 because it would adopt the normal practice of human rights, as defined in the definitions at the front of the Government’s annual report on human rights—which I am sure the noble Baroness reads on an annual basis, as I do.

As the noble Lord, Lord Hain, indicated, those human rights reports refer to a separate category of countries, the priority countries, and he named them: the A to Z is Afghanistan to Zimbabwe. The thrust of the Bill seems to suggest that, unless the Government, through legislation, put sanctions to limit trade with certain countries, any decision-makers would not be able to make any decisions about investing in that country. That is contrary to current practice with countries from A to Z on the priority list.

For example, other than the sanctions that exist against certain elements of the Taliban regime in Afghanistan, the Bill would prohibit a decision-maker in the United Kingdom deciding not to invest in a Taliban state-owned enterprise. That is extraordinary. Under this legislation, a decision-maker would be prohibited from making a decision about investing in a mining or a gold company in Zimbabwe, which has had many concerns over human trafficking and other human rights concerns. That is also extraordinary, because unless the Government have put in trade sanctions, the Bill will prohibit any other decision-making.

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[Lord Purvis of Tweed (LD)]

I am most grateful to the noble Lord as that leads on to my next question. It relates to those who are democratic figures in those countries and, indeed, our country.

As regards this country, my reading of this legislation is that, if I, in Parliament, call on the Government to sanction, let us say, a foreign Government’s Minister, or an enterprise or a body operating in another country—as I have done regularly in relation to the Wagner Group, by calling on British enterprises not to trade with those enterprises owned by the Wagner Group —I would be a person under this Bill whom a body would have to disregard. Not only are the Government seeking the nonsense that decision-makers should set aside due diligence on human rights, they are seeking to neuter parliamentarians raising the very concerns that we have raised on a regular basis.

I remind the Minister why this is so important: on 12 occasions, I had called for the proscription of the Wagner Group, and called on any British enterprises to desist from having any relationship with it, before the Government made the decision to proscribe it. Up until the point that the Government made the decision to proscribe the group, which I supported, I was in contravention of this Bill. I was in contravention of it on all the occasions that I called on the Government to do what I asked them to do, which they then did.

The nonsense of this legislation gets serious when it comes to Parliament raising human rights concerns about other countries. One country on the list is the DRC. A country not on the list is Rwanda. I have raised human rights concerns about the March 23 group in the conflict between Rwanda and the DRC. I am prohibited from calling on any British bodies not to trade with a group that is not currently proscribed by the British Government.

I refuse to be neutered in this Chamber, by this Bill, on raising human rights concerns. The Leader of the House is shaking his head from a sedentary position as to how I might be neutered by this Bill. I am sure that he has read the Bill. I am allowing him to intervene on me to explain why I am wrong in my interpretation of this Bill.

[Baroness Noakes (Con)]

I—

[Lord Purvis of Tweed (LD)]

I am talking about not the noble Baroness, Lady Noakes, but the Leader. No, the Leader prefers to shake his head and not to intervene. In his absence, I can think of no better deputy than the noble Baroness, Lady Noakes.

[Baroness Noakes (Con)]

I will answer the noble Lord’s question: he is not a “decision-maker” for the purpose of this Bill.

[Lord Purvis of Tweed (LD)]

I am not a decision-maker for the purpose of this Bill but, under Clause 1(7)(b) of this Bill, I am considered to be a “person”. A decision- maker making a decision based on what I asked them to do would be prohibited. Now the noble Baroness is shaking her head. Why would I not be considered a “person” under Clause 1(7)(b)?

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[Baroness Noakes (Con)]

My Lords, I am not going to waste the time of the House getting into these nitpicking debates. The noble Lord is not covered by this Bill.

[Lord Purvis of Tweed (LD)]

I do not think that it is nitpicking. I would be considered a person when a body was making a decision based on what I called them to do. I know that I am not a decision-maker, nor am I a Minister of the Crown, nor am I an exempted officeholder, but I would be considered a person calling on bodies to act. If bodies choose to act on what I say, they are currently prohibited under this from acting.

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[Lord Hannay of Chiswick (CB)]

My Lords, I support the amendment introduced by my noble friend Lord Warner. It is conceivable that the Government’s objective of exempting the State of Israel—I say that carefully, the State of Israel—from the imposition of BDS, which I do not support, could be achieved with different drafting. However, to have introduced it in the way that it is introduced in Clause 3(7) is a mistake, and the mistake is compounded by mixing up completely different things: the State of Israel and the Occupied Territories, which certainly include the West Bank, east Jerusalem and the Golan Heights. They should not be treated in the same way. They are not part of the State of Israel in the view of the British Government, though they are in the view of the present Israeli Government. I repeat, they are not in the view of the British Government part of the State of Israel. Within those Occupied Territories—Golan, east Jerusalem and the West Bank—there are internationally illegal settlements. Illegality is another category on which the British Government’s policy is quite clear—just read the Security Council resolution, which has been quoted. Mixing these things up together is, frankly, a solution of disaster. It will just doom this legislation by including it.

I am not trying to suggest that it would not be possible to do something, though I doubt very much whether specifically mentioning Israel is a wise thing in the first place. I agree with the Government that public bodies should not be making foreign policy, but I am not sure that specifying one country out of 194 where they particularly should not be making foreign policy is a very clever way of setting about that. If you took that away and tried to sort out these unhelpfully mixed-up elements, there might be a better chance of this Bill making progress. So long as they are all mixed up together, we will have a cat’s cradle of contradictions.

[Baroness Noakes (Con)]

My Lords, the noble Lord, Lord Warner, said that this Bill will increase anti-Semitism. That is one view. I prefer to observe what is actually happening. We only have to look at what is happening in universities at the moment; we will come on to universities in a later group.

If we look at what has been happening with the encampments that have been springing up in the UK following what has been happening in the US, they are vocally calling for boycott and divestment in relation to Israel—and, indeed, quite a lot worse. This is a very live issue. It is causing much harm on campuses for Jewish students, who are clear that there has been a significant increase in anti-Semitism since this has started. This is not theory; it is actually happening.

Israel is always the focal point for BDS campaigns. The BDS movement itself came into being to attack Israel. I am glad that we are aligned with the noble Lord, Lord Collins, on the need to protect Israel from those activities. From my perspective, if the Bill does nothing else, it should try to protect Israel from boycott and divestment activities. That is why we need Clause 3(7): it underlines the importance of Israel and the particular attacks on Israel.

I accept that the Occupied Territories raise much more difficult issues. In line with the international community, the UK recognises the settlements as illegal, but the practicalities are that this will not be settled conclusively until there is a two-state solution. This is something that cannot be imposed; it will have to be agreed, but that is unlikely to happen very soon. Anyone who has been to Israel or has been in touch with people in Israel will know that the attacks by Hamas on 7 October have left a traumatised Israeli people, for whom the possibility of discussing a two-state solution seems almost unthinkable at this point in time. That is not to deny that that is the right solution in the long term but simply to say that it does not appear to be an immediate, practical problem.

The reality on the ground is that, in the meantime, the unsatisfactory nature of the Occupied Territories is likely to continue. Even if we thought that boycotts and divestments in relation to the Occupied Territories would punish Israel, this ignores the simple fact that there is economic activity in those settlements. Anything that harms that will almost certainly harm Palestinians as much as it harms the people of Israel. We only have to look at what happened when SodaStream, an Israeli company, was forced to withdraw from its activities in the occupied West Bank. The people who really lost out were the Palestinians who lost good, well-paid jobs when that facility had to close.

On our last day in Committee, the noble Lord, Lord Collins, pointed me to the FCDO guidance, which I duly went and read; he has read much of it into the record today. The important thing about that guidance is that, although it highlights the risks involved, it does not prohibit anyone in the UK from investing or dealing with those who are active in the Occupied Territories. I believe that this Bill reflects that pragmatic position—that the Occupied Territories are a fact of life—and that, until there is a two-state solution, trying to eliminate it from the Bill does not reflect the practical politics we are facing.

[Lord Collins of Highbury (Lab)]

I did indeed read it into the record. Although it did not prohibit investment, it was saying, “Don’t do it. The risks are great. Be aware of those risks and seek legal opinion on them”. We are now debating a Bill that will say that you cannot make a decision based on the advice that the Government have issued.

[Baroness Noakes (Con)]

The noble Lord is right that the FCDO highlighted the risks and said that businesses involved should seek their own legal advice but it absolutely did not say, “and you mustn’t do it”. It is a fact of life that there will be economic activity in the Occupied Territories and that that may or may not involve businesses from Britain.

The only point I am trying to make is that the Occupied Territories are a fact of life at the moment; there is no easy solution and it is probably not a near-term solution. At the point when it is settled via a two-state solution, they will cease to be Occupied Territories, so that bit of the Bill will cease to have any relevance—but, for the moment, it has relevance. The other point I am trying to make is that anything that deliberately harms that is just as likely to harm Palestinians as it is Israeli citizens.

[Baroness Blackstone (Lab)]

My Lords, I am puzzled by the speech that the noble Baroness, Lady Noakes, has just made. First of all, I do not know why she feels that she can speak up on behalf of the Palestinians or how much time she has spent on the West Bank. I do not think that most of them would agree for one moment with anything she said about the proposal that we should stop, or that including Israel and the Occupied Territories in the Bill would damage the Palestinians. The Palestinians are concerned about their basic rights both to have their own state and to be able to live in what is now occupied by the Israeli Government and the Israeli Defence Forces in the completely different way that that occupation has created.

I am also very puzzled by what she said about anti-Semitism, which is in complete conflict with what was said by Margaret Hodge MP, who has thought about this very deeply—that the Bill is damaging from the point of view of creating anti-Semitism rather than alleviating it. The noble Baroness does not really respond to that point but has made points about what is happening in universities at the moment, which does not seem terribly relevant to this.

However, the point I really want to make is not to address the rather odd speech by the noble Baroness, Lady Noakes. I want to ask the Minister: what legal advice have the Government taken about including the Occupied Territories in the Bill in the way that they are? I draw the Committee’s attention to what the noble Lord, Lord Hannay, said: under international law, which we have accepted, this occupation is illegal and the settlements, which have grown and grown, are also illegal. So how can it be that the Government bring to Parliament a Bill that includes the Occupied Territories and does not differentiate them from the state of Israel? The counsel’s advice that I have seen says that to distinguish them is absolutely essential; it is pure sophistry to say that a distinction is made in the Bill and is an untenable view without any legal merit. I wonder whether the Minister would like to comment on that.

Economic Activity of Public Bodies (Overseas Matters) Bill

Baroness Noakes Excerpts

Tuesday 7th May 2024 Lords Chamber

[Baroness Noakes (Con)]

My Lords, my noble friend Lord Willetts and others have queried whether there is any evidence of a problem. It may be true that there is not much evidence of actual BDS activities by universities to date, but it is certainly true that there is a problem of anti-Semitism on campuses. It may also be true, as the noble Lord, Lord Mann, said, that it is less acute than in the United States—most things are less acute here than in the United States—but I do not think that means we should ignore it. It is clear that the accelerating protests on campuses are having a deleterious effect on Jewish students on campuses. Indeed, the Union of Jewish Students said only last week:

“Jewish students are angry, they are tired, and they are hurt by the continuous torrent of antisemitic hatred on campus since October 7th”.


I am not sure that gives the Union of Jewish Students a veto on whether the Bill should go through, but it indicates that there is still a very real problem.

The current round of student protests—the encampments and related demands—do seem, as I have seen reported, to include BDS demands on the universities. As far as I am aware, none of the universities has yet succumbed and changed its policies on BDS, but at least one has given in to some other demands, such as renaming buildings and changing some other organisational arrangements, and we cannot be sure what universities will do in the longer run. The Bill would close the option of them ever implementing BDS policies and would therefore be one small step to closing that route off and helping to create an environment for Jewish students, who would be even more oppressed if the universities publicly announced BDS policies against them. I do not think it is a very big item, but I do not agree with the noble Lord, Lord Mann, that the Bill does nothing. I think it does something towards closing off an avenue that universities might be tempted to go down in order to see off the undoubted nuisance of all these student protests.

I would just like to briefly say something about the ONS as well. The ONS reviews all sets of bodies that are on the borderline between the public and private sectors at regular intervals, and it does it in a careful way in accordance with international definitions. These are all careful considerations. It is clear that universities are in a grey area: they are public authorities for the Human Rights Act, are included in the Freedom of Information Act and were included in the Procurement Act that we considered last year. They are already subject to a lot of the public sector laws, and nothing is going to change that. I agree with my noble friend Lord Willetts that this Bill will not be the straw that breaks the camel’s back, but it is always legitimate to ask on which side of the line these bodies that exist half in and half out fall.

Just being classified by the ONS does not of itself lead to other consequences. There may well be further considerations down the line, but we certainly cannot stop the ONS doing the job that it is set up to do, which is to consider classifications in accordance with international guidelines,

[Lord Leigh of Hurley (Con)]

My Lords, it seems to me to be fundamental to this Bill that universities and other relevant bodies are included. We are not talking about individual academics having their right to free speech being affected at all. We are talking about institutional behaviour. Yes, as the noble Lord, Lord Willetts, has pointed out, what happens in universities really matters. I also went on a trade trip to China with the vice-chancellors. I remember, because they were the ones sitting in business class. They are a very important part of the fabric of our society—

Economic Activity of Public Bodies (Overseas Matters) Bill

Baroness Noakes Excerpts

Wednesday 17th April 2024 Lords Chamber

[Baroness Randerson (LD)]

My Lords, I rise to speak specifically to Amendment 20A, to which I have added my name. I did so because the Bill is yet another intrusion on devolution. It is part of a pattern by which Bill after Bill in this House, Act after Act produced by this Government, raids the powers of devolved Governments and the devolved Assemblies. The Internal Market Act started that, along with the Procurement Act—and there are others. It is a complete pattern by this Government; an intention to reduce devolution in stature and in practice.

As a Wales Office Minister between 2012 and 2015, I recall that it was unthinkable that we, as a UK Government, would ignore the need for an LCM on something like this. We have now got to the point where it is routine for this Government to do that. In addition, in the case of this Bill, the unpredictability of Henry VIII powers will give the opportunity to the Secretary of State to make regulations that could have additional, profound implications for both Wales and Scotland, and throughout the UK.

The Government seem to forget the history of devolution. In 1999, when devolution was established, the Scottish Parliament had a much more comprehensive settlement than that provided for Wales. That proved to be a mistake. It was not just that Wales had fewer powers. The lack of a proper pattern to those powers and a comprehensive picture of them made it very difficult to make devolution work. I am conscious that I have signed an amendment led by the noble Lord, Lord Hain, and that I am criticising the Government of whom he was a part. I am sure he would agree that Labour First Ministers led campaigns to increase the powers of the Welsh Assembly, now the Welsh Senedd, specifically because it just did not work with much more limited powers. We now have something much more workmanlike, effective and constitutionally coherent. This Government have set about dismantling it again.

Added to that, the Bill is unnecessary. In the Senedd, the Minister made it clear that the Welsh Government are of the view that the UK Government have sufficient powers in place within the World Trade Organization Agreement on Government Procurement, enshrined in the Public Contracts Regulations 2015, and that those powers enable fair and equal treatment of overseas bidders where there is a relevant trade agreement. They do not believe that there is any need for additional powers. The UK Government already have the power to set sanctions for trade. All these arguments and discussions that we are having are irrelevant because those powers already exist. The Welsh Government fundamentally believe that the powers in this Bill would have a significant impact on the freedom of public bodies and democratic institutions in Wales. They have the majority support of Members of the Senedd on this. The impact would be on their freedom to decide not to purchase or procure in a way that impacts on their existing legal obligations in relation to human rights, abuse of workers’ rights and the environment. In practice, these powers are not going to fit comfortably with the structure of our legislation as it currently exists.

The fundamental reason why I signed this amendment on behalf of the Liberal Democrat Benches is that this is yet another impact on devolution and the coherence and effectiveness of the way in which the Governments of the United Kingdom should work together in a positive and effective manner.

[Baroness Noakes (Con)]

My Lords, I think that noble Lords who have spoken have misrepresented the devolution settlement. It is clear that foreign policy is a reserved matter. When we come to this Bill, the question of the political or moral disapproval of the conduct of foreign states is a matter of foreign policy that can be determined only by the UK Government.

Noble Lords have been trying to describe devolution as they would like it to exist but the plain fact is that foreign policy is a reserved matter, and that is what is driving this. I do not think that the other matters that the noble Baroness, Lady Randerson, just referred to prevent action by the devolved authorities because of the quite extensive exemptions, which align with the procurement legislation, that are set out in the Schedule. We are talking about political or moral disapproval of state conduct, very specifically, and that is a matter reserved to the UK Government.

We have to remember that the devolved Administrations have form here in relation to Israel. To take the Scottish Government, back in 2014, they issued a Scottish procurement policy note which, in effect, encouraged Scottish bodies to boycott operations in the Occupied Territories. That note, which is quite difficult to find on the internet nowadays, because it seems to have disappeared into a black hole of an archive, was reconfirmed by current Scottish Ministers only a couple of years ago, so it remains the Scottish Government’s policy, which they cannot effectively implement because of the reserved nature of foreign policy.

To take the Welsh Government, in 2020 they informed the Welsh Parliament that they intended to issue advice to all Welsh authorities

“that they may exclude from tendering any company that conducts business with occupied territories either directly or via third parties”.

It was only after intervention from an organisation called UK Lawyers for Israel that the Welsh Government deferred their decision. So we have the Scottish Government and the Welsh Labour Government itching to boycott Israel, and to use that as a reason—

[Lord Hain (Lab)]

The noble Baroness accurately quoted the Welsh Government’s position as referring to occupied territories which are illegally occupied, including those determined by the British Government, not as boycotting Israel.

[Baroness Noakes (Con)]

Whether that is relevant is another matter, because the boycotting of the Occupied Territories would also cause a problem under this Bill if Wales and Scotland were allowed to, in effect, opt out of the Bill.

[Lord Collins of Highbury (Lab)]

I am sorry to interrupt again, but has the noble Baroness had the opportunity to read the FCDO’s advice on the Occupied Territories?

[Baroness Noakes (Con)]

The noble Lord has the advantage of me, because the straight answer to that is no. However, if he points me to it, I shall certainly read it before we consider that again. I believe that trying to boycott the Occupied Territories is the same as trying to boycott Israel. Certainly, the intent is the same, and they are covered by the Foreign Office.

[Lord Collins of Highbury (Lab)]

I am sorry to labour the point. The noble Baroness keeps using the word “boycott”. We are also talking about decisions on procurement and investment, and there is advice from the FCDO about investing in occupied territories.

[Baroness Noakes (Con)]

I was referring largely to procurement because those were the decisions that were made by the two devolved Administrations that I cited. I would be very surprised if the FCDO had advice that boycotting procurement decisions relating to the Occupied Territories was something that it approved of, and therefore it was something that it thought the devolved Administrations could do. However, in any event, that is for the Foreign Office, not the devolved Administrations, to determine. I do not think we can get away from the fact that the current devolution settlements give foreign policy autonomy to the UK Government.

[Lord Warner (CB)]

My Lords, I have listened to this debate with some astonishment. I will not raise the issue of the ECHR; we will come to that when we get to my Amendment 48. However, to keep chanting the view that it is for the national Government to make foreign policy seems to be ducking out of a fundamental democratic issue.