Advanced Research and Invention Agency Bill

Debate between Baroness Noakes and Lord Browne of Ladyton

Committee stage
Monday 22nd November 2021 Grand Committee

[Lord Browne of Ladyton (Lab)]

My Lords, Amendment 30 seeks to ensure that any grant made by ARIA is subject to the condition that the entity or asset supported may not be subject to a takeover for five years. I confess that, on reflection, this may more felicitously have been an amendment to Clause 2, which deals with the conditions of grants made by ARIA. As its tabling is for exploratory purposes, at least today, I do not think that matters, but if it comes back it will probably come back in a different form and as an amendment to a different clause.

On the first day of Grand Committee, the debate on the group of amendments led by Amendment 18 in the name of and moved by the noble Lord, Lord Lansley, took about 20 minutes, and the phrase “intellectual property” was used 37 times. Introducing the debate, the noble Lord described the group as being

“about the way in which ARIA acquires, creates, disposes of, retains and shares intellectual property”,—[Official Report, 17/11/21; col. GC 127.]

so it is not really a surprise that the phrase was picked up.

In some senses, it is a pity that this amendment was not grouped with the noble Lord’s amendments, because the concerns that have given rise to the need for this amendment were to some extent aired in that debate. The noble Lord, Lord Lansley, shared with us the extent to which there was concern in the United States that

“some of the public funding which has led to”

DARPA

“research has led to private as opposed to public gain.”—[Official Report, 17/11/21; col. GC 128.]

I share his concern about the extent to which we are creating such an opportunity, but more so about the extent to which such publicly funded research may lead to foreign, mainly US, private as opposed to British private or public gain.

Refinitiv data shows that, in the first half of 2021, buyout groups spent $45 billion snapping up companies in Britain—more than double the next-best first six months on record and almost 10% of the total $547 billion spent across the world. Am I to understand that British stocks’ discount to global peers is the deepest in more than three decades and that Brexit is one reason? I do not want to divert us into another debate, but Brexit is for good, not just for Christmas, so that situation may persist for a period.

On 17 November, reporting the Culture Secretary’s decision to announce a competition and national security investigation into the planned takeover of the British chip business Arm Holdings by the American multinational tech giant Nvidia, and coupling this with the recent news that Kwasi Kwarteng is investigating the proposed sales of defence suppliers Ultra Electronics and Meggitt to American suppliers on similar grounds, Ben Marlow, the chief City commentator of the Telegraph, wrote:

“For too long Britain has adopted a naive and unquestioning ‘help yourself’ approach to foreign takeovers. For a while it looked as though the … government would take an even more extreme laissez-faire approach as it sought to live up to its ‘Global Britain’ credentials but perhaps the penny has dropped in Westminster … It is a welcome shift in tone. Ministers routinely greet the sale of British companies to overseas buyers as a vote of confidence in this country’s prospects when it is nothing of the sort. It simply means foreign firms see the UK as easy pickings and an opportunity to make a quick buck. Hoisting a giant ‘for sale’ sign over your best and brightest companies is not sound industrial policy, it is an act of … self-harm.”


It will not be a surprise to anybody in your Lordships’ Committee that I am not used to quoting the Telegraph in debates or in support of my arguments. I do so because, in a sense, it may be a bit of an instruction to the Minister as to the attitude he ought to adopt to this issue. I do it because it may have more impact on the Minister.

I have tried twice now, in supplementaries to Questions in your Lordships’ House on these issues, to engage the Minister on what is actually happening in the United Kingdom to some of our best and brightest businesses and the effect it is having. I even quoted on one occasion the concerns of the Bank of England about the way these businesses are funded and the damage that this leveraged debt potentially poses to the economy of the United Kingdom in the long term, but he did not respond.

On another occasion, in relation to both the companies referred to in addition to Arm—Ultra Electronics and Meggitt—I pointed out that 85% of R&D in the defence industries in the United Kingdom is public money, and that the intellectual property of these businesses was in danger of leaving the United Kingdom, having been paid for by public money. That is exactly the issue that the noble Lord, Lord Lansley, raised, although he did so in a slightly different context, and exactly the concern I have.

On none of these previous occasions did the Minister bite. With respect to him, he deployed a slightly less complacent version of the words the Telegraph’s city correspondent pointed out, but he deployed them nevertheless.

I close my remarks in support of this amendment by thanking the Minister for his gracious invitation to me over the last few days to indicate to him what lay behind it so that he could, if possible, give me the reassurance I sought. I responded with an even shorter version of what I have said to your Lordships’ Committee today. I hope he has the reassurance that I and others seek about how we will protect the product of this new initiative from being raided by the predators of venture capital funds in particular. I conclude with the words the Telegraph uses, that

“the Americans wouldn’t allow it to happen so why should we?”

[Baroness Noakes (Con)]

My Lords, I am not as opposed to foreign takeovers as the noble Lord, Lord Browne, but I accept that there are some instances where this country is not well served by the ability of organisations outside the UK to cherry pick some of our best assets. The broad thrust is that foreign investment in the UK has been good for our economy—indeed, large amounts of our productive economy are owned by foreign businesses and they are an important part of the success of the UK economy—but I concede that there is a potential issue, especially when we deal with the kind of things we expect ARIA to fund.

However, I do not think the amendment works. It says that if ARIA gives a grant to an entity, it has to be subject to the condition that that entity cannot be taken over. That entity cannot give an undertaking that it cannot be taken over, because the people who will control who takes over an entity are the people who own the entity, which is not the same as the entity itself. While in some cases it might be a private company with two or three shareholders, which would probably be quite easy to deal with, if the shareholdings were much more dispersed it would probably be impossible to operationalise that sort of requirement. If there is a case, it needs another solution.

I also note that this is a bit of a sledgehammer. There could be very good reasons for an entity having the control over it changed. It could need greater access to capital to scale up whatever it has been looking at; it could have liquidity issues in taking its research and development to the next stage, before it even gets to scale up, and need the involvement of other partners; or it could just be that it makes sense to continue with whatever it has been looking at only if it is part of a larger organisation and subject to a merger or joint venture, where control would be ceded. If there is a problem, I do not think it can be met by this amendment.