National Security and Investment Bill

Lord Callanan Excerpts

Consideration of Commons amendments
Wednesday 28th April 2021 Lords Chamber

Moved by

[Lord Callanan]

That this House do not insist on its Amendments 11 and 15, to which the Commons have disagreed for their Reason 11A.

11A: Because it is appropriate and sufficient for oversight and scrutiny of decisions made by the Secretary of State for BEIS to be conducted by their departmental select committee.

[The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)]

My Lords, with the leave of the House, I will speak also to Motion A1. I will, of course, address any further comments at the end of the debate.

It goes without saying that I am delighted to be back in the Chamber after a short respite while the other place has considered our amendments to this Bill. I am pleased to advise noble Lords that there was resounding support for all the amendments made by this House, with the mere exception of two. The other place has resolved against amendments which, in effect, would have introduced a reporting requirement to the Intelligence and Security Committee in relation to the NSI regime.

Amendments 11B and 11C in lieu, tabled by the noble Lord, Lord West, draw on his earlier amendments. They would require the Secretary of State to include in the annual report provided for in Clause 61 a summary of his decisions in respect of final notifications given and final orders made, varied or revoked, as well as a summary of any national security risk assessment provided by the security services in relation to those decisions. Where publication of any of that additional information would be contrary to the interests of national security, the Secretary of State may instead place that information in a confidential annexe provided to the ISC. The amendments before us would end those requirements should the memorandum of understanding that governs the remit of the ISC be amended to bring the Secretary of State’s activities under Clause 26 in scope of ISC scrutiny.

I merely echo the words of my colleague, the Minister for Small Business, Consumers and Labour Markets, on Monday, when he welcomed the “passionate and expert debate” this issue has seen in both Houses. In particular, I repeat the praise offered in this House for those who previously spoke in favour of this amendment. Rugby analogies aside, it is a particularly serious, knowledgeable and experienced group of Peers, and I of course acknowledge the weight and credibility that they undoubtedly bring to these issues.

However, the other place resolved by a significant majority of 106 to restore the Bill to its previous form in this regard. The elected Chamber has given this issue its due consideration, and a majority of 106 elected Members has made the position of the other place very clear. This includes four of the seven members of the ISC, who, similarly, sit in the other place voting with the Government, with only one Conservative Member in the entire House voting against.

I do not intend to try the patience of the House and repeat the arguments that we have heard many times before which the Government have already made on this issue, but I will address the specific changes in this amendment from the original which this House has previously considered.

The Government do not consider that the addition of an endpoint for the effective requirement on the Secretary of State to provide confidential information to the ISC makes the approach any more necessary or appropriate. It is our view that the BEIS Select Committee remains the most appropriate committee for scrutiny. It is capable, it is interested and it stands ready. The Secretary of State for BEIS has written to the chair of the BEIS Select Committee to confirm this, and this was acknowledged by the chair of the committee in the other place, also on Monday. The BEIS Select Committee will be ably supported by the Science and Technology Committee, where that is appropriate.

The Government hugely value the Intelligence and Security Committee, but we also hugely value the BEIS Select Committee and the clear and appropriate scrutiny that it provides. We do not need to conflate the two through amending this Bill, the memorandum of understanding or, indeed, anything else in this field.

The Government’s position, and that of the elected Chamber, is clear, and I can tell your Lordships that the Government have no plans to concede on this issue. I therefore ask that noble Lords respect the clear wishes of the other place and, while I am of course grateful for noble Lords’ insight and passion on this matter, I hope that this House does not insist on these amendments. Therefore, I beg to move.

Motion A1 (as an amendment to Motion A)

Moved by

--- Later in debate ---

[Baroness Hayter of Kentish Town (Lab)]

My Lords, it is clear that the Government have no good reason for refusing to accord the ISC its proper role in overseeing the intelligence input into a decision by the BEIS Secretary of State to forbid an otherwise bona fide investment in an enterprise—the sort of investment that the noble Lord, Lord Fox, has just described. I am sad to say that the Minister cited only the size of the House of Commons majority and gave no argument against proper parliamentary scrutiny. Frankly, if we are to say that this House should never question what the majority in the House of Commons does, you would wonder whether there is any role for this House. The size of the majority down there is not important; what is important to the security of this country is the correctness of the views that we take.

At one point, I think in this House, it was suggested that the Government did not want to amend the MoU case by case, but why not? As the noble Lord, Lord Fox, has said, if a new law comes in that has “national security” in its title and gives powers to a Secretary of State that depend wholly on intelligence, why not scrutinise that intelligence in respect of the use to which it is put? As we have head, neither the BEIS Select Committee nor its highly respected chair—who I assume will now be made a privy counsellor, since he is about to be briefed on Privy Council terms; I will be there to congratulate him if that happens—have the security clearance or experience to question the intelligence in the sorts of ways that we have been hearing from around the House. So why not let our experts carry out that work, on behalf of Parliament? What my noble friend is asking for is simple: an amendment to a memorandum of understanding. Is that too much to ask of the Government?

[Lord Callanan (Con)]

I thank all noble Lords who have contributed; it has again been a good demonstration of the quality of contributions from this House. I have listened very carefully to the points that have been made, in particular by the noble Lords, Lord West, Lord Campbell and Lord Butler, and by my noble friend Lord Lansley.

I will address the primary issue head on. This was raised by the noble Lords, Lord West and Lord Campbell, and the noble Baroness, Lady Hayter. It is the issue of whether the BEIS Select Committee will have access to “top secret” information. We will make sure that the BEIS Select Committee has the information that it needs to fulfil its remit and scrutinise the work of the ISU under the NSI regime. Much of this is unlikely to be highly classified and, where the Select Committee’s questioning touches on areas of high classification, it is likely that the relevant information could be given in a way that does not require as high a classification and provided to the committee confidentially. If, however, the BEIS Select Committee requires access to highly classified information, we will carefully consider how best to provide it, while maintaining information security in close collaboration with the committee’s chair.

Another point made by the noble Lord, Lord West, was that the current system for scrutiny is run out of the Cabinet Office and therefore comes under the ISC’s unit, so the Bill reduces the ISC’s remit. The Government’s main powers to scrutinise and intervene in mergers and acquisitions for national security reasons in fact come from the Enterprise Act 2002; the powers under that Act sit with the Secretaries of State for BEIS and DCMS, not in the Cabinet Office. Giving the BEIS Select Committee oversight of the new NSI regime is entirely in keeping with this and does not represent a reduction of the ISC’s remit.

A point made particularly by my noble friend Lord Lansley was about changing the memorandum of understanding, but the question here is not whether the MoU allows for the role proposed by noble Lords, but whether that role is appropriate. Our answer—and I appreciate that noble Lords will disagree—is no. The Government have made their case, which comes off the back of a resounding vote by the elected Chamber, that no change should be made to the Bill in relation to reporting to the Intelligence and Security Committee. We maintain our view that the BEIS Select Committee remains the place for scrutiny of the investment security unit and that the Intelligence and Security Committee remains the appropriate committee for scrutiny of the intelligence services, in accordance with the memorandum of understanding and the Justice and Security Act 2013. With acknowledgement to all who have spoken and with regard to the points that I have made, I appreciate the difference of opinion on this, but ask once again that the House does not insist on these amendments.

[Lord West of Spithead (Lab)]

My Lords, first, I thank those who spoke in support of my Motion. They have an incredible amount of knowledge about this issue. I find the Government’s position extraordinary and I feel sorry for the Minister opposite—for whom I have great respect—who has to parrot arrant nonsense. As an admiral and a captain who had defaulters in front of me, I have had people spouting arrant nonsense at me and I know how to spot it. This is arrant nonsense and I find that rather sad. It is unfortunate that he has to do this as I am sure that, deep down, he does not believe it, because he is an intelligent chap. I am appalled that the Government are not willing to give ground on this and I cannot understand why—I really cannot. This is not a great party-political issue or anything like that. It is quite extraordinary, so I am afraid that I will test the opinion of the House.

Post Office Court of Appeal Judgment

Lord Callanan Excerpts

Wednesday 28th April 2021 Lords Chamber

[Lord Fox (LD)]

My Lords, I thank the Minister for bringing this Statement to your Lordships’ House, and for his two letters to all Peers over the last five weeks. I should say that I have been a member of the Post Offices APPG for some time.

Looking back, the Government have said that they will determine what went wrong. Of course, we absolutely support that. To this end, their route has been to ask Sir Wyn Williams to lead the Post Office Horizon IT inquiry. The inquiry, they say, will work

“to fully understand these events, gather available evidence and ensure lessons have been learnt so that this cannot occur again.”

I am sure that this will be a thorough investigation, which will shine a bright light on systems and programmes, and their implementation. But can the Minister reassure us that it will also illuminate the overriding issue of how this business behaved? As the noble Baroness, Lady Hayter, has just eloquently set out, the moral shortcomings of the management are central to why this happened. To fully understand this issue, as the Government want to, they need a thorough appraisal of the management culture of the Post Office. It is changing the culture that makes sure that something never happens again, not updating an operating system or rewriting a computer programme.

Can the Minister please make available the full terms of reference according to which Sir Wyn will conduct his inquiry? Government communications include the phrase:

“The Government look forward to receiving Sir Wyn’s report in the summer”.


Does the Minister expect the report to be completed by this summer, or have I misunderstood? If so, what support will the investigation have to run to such a tight timetable? I am concerned because this is not a statutory inquiry. What will happen if individuals retain lawyers to represent their interests? How will Sir Wyn proceed in those circumstances?

I echo the praise given by the noble Baroness, Lady Hayter, to the noble Lord, Lord Arbuthnot of Edrom. He has tenaciously pursued this issue, and in February last year he asked a question of the then Under-Secretary of State at BEIS, the noble Lord, Lord Duncan of Springbank:

“To ask Her Majesty’s Government what recent assessment they have made of the Post Office’s powers to conduct prosecutions.”-


The response was that

“the Post Office’s powers to bring a private prosecution, which fall under section 6(1) of the Prosecution of Offences Act 1985, are not specific to that company.”—[Official Report, 4/2/20; col. 1709.]

I forewarned the Minister that I would bring this up, because my understanding is that while it has not been granted investigative powers, the Post Office has regularly undertaken joint investigations with the police and other investigative bodies that do have statutory investigating powers. It was granted access to the national police computer system for intelligence and prosecution purposes; it had financial investigators appointed by the National Crime Agency for the purpose of undertaking financial investigations for restraint and confiscation proceedings; and Royal Mail was included in the list of relevant public authorities, under the Regulation of Investigatory Powers Act 2000, designated to grant authorisations for the carrying out of directed surveillance to investigate crime. The Minister’s views on that would be welcome. Is it really still appropriate that this organisation should enjoy those powers?

This is by no means the end of the road, as the Statement makes clear. In yesterday’s debate in the House of Commons, my honourable friend Christine Jardine MP asked the Parliamentary Under-Secretary, Paul Scully, to give an assurance that the Government will commit to treating each of the former sub-postmasters as individuals. The Minister acknowledged that, as well as those prosecuted, there were those whose lives had been blighted by incorrect accusations. I am pleased to report that he acknowledged the human cost. However, it is not clear to me what this acknowledgment means in practice. How will the Government embark on treating everybody individually? As part of the settlement, we have the historical shortfall scheme and it has been explained that this had received over 2,400 applications when it closed last August. First, although this is more than the Post Office anticipated, is the Minister satisfied that everybody who could have applied for this was aware of it and did? Secondly, the Minister was clear that Her Majesty’s Government will support the Post Office with resources. We of course endorse that. We do not yet know what form compensation will take and how it will be calculated. However, in a Written Answer, the noble Lord, Lord Callanan, said:

“we will not spend more of taxpayer’s money than is necessary to ensure that the Scheme meets its objectives.”

That sounds like a management expectation exercise and is a bit ominous. This is not an area, or a time, for penny pinching.

However financially generous the scheme turns out to be, the Government have to be clear that they can never fully compensate for the emotional and social damage that has been visited on many thousands of innocent people in this country.

[The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)]

I thank the noble Baroness, Lady Hayter, and the noble Lord, Lord Fox, for their comments. I completely share many of their sentiments of shock and outrage. The tragic failings of the Post Office have occurred over many years, over many different Governments. On behalf of the current Government I can only say that we are truly sorry.

We welcome the decision of the Court of Appeal on 23 April to quash the 39 convictions. This is in addition to the six convictions that were quashed in the Crown Court in December. The impact that this ordeal has had on affected postmasters, their lives and livelihoods cannot be overstated. Nobody who saw the television coverage and the news reports the other day can fail to have been affected by the individuals featured. We certainly hope that, with this decision, these postmasters can at least start the process of moving forward to a new chapter in their lives.

I move on to the specific issues raised by the noble Lords. On compensation, the Government hope that the court’s decision is another important step towards bringing resolution to these postmasters. The Court of Appeal’s judgment will require careful consideration by all involved, and the Post Office itself will need to consider the next steps and the best process for fairly compensating these postmasters. We are keen to see that all those whose convictions are overturned are fairly compensated as quickly as possible and we will certainly work with the Post Office towards this goal. I understand the strength of feeling felt by those postmasters in the GLO who I understand only received a portion of the original £57.75 million settlement by the Post Office. However, that was a full and final settlement reached between the claimants in the GLO and the Post Office.

Both noble Lords mentioned the inquiry. Many postmasters and their families have suffered issues and distress since the faults in the Horizon system. We all agree on that. Some had their livelihoods and businesses taken away and were convicted of crimes that we now know they did not commit. Anybody can only imagine the distress that that must have caused to loyal, upstanding and honest members of the community. We are clear that a situation such as this must never, ever be allowed to happen again.

To ensure that the right lessons are learned, and to establish what must change, we launched an independent inquiry, led by Sir Wyn Williams, in September last year. He is a retired High Court judge with a wealth of experience and is fully independent of both the Government and the Post Office. I can tell the noble Lord, Lord Fox, that the inquiry has made swift progress. It has already heard from a wide group of affected postmasters. The call for evidence has recently closed and I understand that Sir Wyn is planning to have some public hearings on these matters in June. I can confirm that we expect to get his report by the end of the summer.

Given that all parties so far are committed to co-operating, we remain of the view that a non-statutory inquiry is the right approach. However, if Sir Wyn does not get the co-operation he requires, then all options are on the table and we will not hesitate to act. We do expect his report in the summer.

On who is to blame, decisions regarding the litigation strategy at the time were taken by the Post Office based on the legal advice that it had received. The Government at the time relied on the Post Office’s management to investigate issues with the Horizon system. As we have seen from both Mr Justice Fraser’s judgment and now the Court of Appeal judgment, the Post Office consistently maintained that the Horizon system was robust. That obviously turned out to be incorrect. What is also clear, from the Court of Appeal judgment last week and the judgments in the 2019 group litigation, is just how misguided the Post Office was in its approach to the management of issues arising from the operation of the IT system. All of these matters will be investigated in the inquiry, so that we can ensure this never happens again. I commit to keeping the House fully informed.

The noble Lord, Lord Fox, raised the issue of private prosecutions. The Post Office no longer undertakes any private prosecutions, and I have been personally assured by the new chief executive that it has no plans to undertake any further prosecutions in these matters. However, the Government understand the wider challenge that the Post Office case poses regarding the responsibilities that companies have in undertaking private prosecutions. The Justice Select Committee considered this last year and concluded that prosecutions brought by victims of crime themselves, whether corporate or individual, still have a valuable part to play. The Select Committee concluded that existing safeguards in place to regulate private prosecutions are effective at filtering out weak claims. As the noble Lord, Lord Fox, himself acknowledged, the Post Office’s powers to bring private prosecution fall under Section 6(1) of the Prosecution of Offences Act 1985, and they are not specific to that company. It has the same right as any other, whether an individual or a company, to bring a private prosecution but, as I said, I have been assured that it has no plans to bring any further prosecutions.

The noble Lord, Lord Fox, was kind enough earlier today to mention the issue of the Post Office and its investigatory powers. Since he did, I have asked my officials to investigate this matter. There are, apparently, over 600 public authorities that can use investigatory powers, and these are overseen by the Investigatory Powers Commissioner’s Office. There have been no changes to the authorities that the IPCO oversees since the introduction of the Investigatory Powers Act. According to the IPCO 2019 annual report, Post Office Ltd is not on that list.

[The Deputy Speaker (Lord Alderdice) (LD)]

We now come to the 20 minutes allocated for Back-Bench questions. I ask that questions and answers be brief so that I can call the maximum number of speakers.

[Lord Mackay of Clashfern (Con) [V]]

My Lords, this is a situation in which the Post Office used our system of justice to produce a massive injustice. I would like to know who represented the Post Office in these proceedings, whether they had any reason to doubt the validity of the evidence that the Post Office produced and, if so, whether that was passed to the defence.

[Lord Callanan (Con)]

My noble and learned friend makes some very good points. Given that some of these initial prosecutions happened, in some instances, 20 years ago, the fact is that the Post Office representation changed a number of times. It is difficult to provide a complete answer to my noble and learned friend’s questions. Postmasters were prosecuted by the in-house legal teams of the Post Office and, before that, by the Royal Mail, and they were supported by external counsel as needed. It is important to emphasise that none of these prosecutions involved any current Post Office lawyers, nor that of Peters & Peters, which is the criminal lawyers firm now supporting the Post Office to address these issues. I am unable to say what prosecutors thought at the time. However, as my noble and learned friend is of course well aware, prosecutors have a duty to disclose to the accused material that could reasonably be considered capable of undermining the prosecution case or assisting the defence case.

[Lord Pannick (CB)]

The Minister spoke of fair compensation. Is he aware that the statutory test for compensation for miscarriages of justice is much stricter than simply showing that the Court of Appeal has quashed a conviction as unsafe? The statutory test would impose a burden on postmasters to prove beyond reasonable doubt that they did not commit the alleged offence. Can the Minister assure the House either that this onerous statutory test will not be applied to restrict compensation or that the statutory test will be treated as satisfied in all these cases? Any other approach would compound the wrong done to these postmasters.

[Lord Callanan (Con)]

The noble Lord makes a powerful point. Of course, the judgment is relatively recent and no decisions have been taken regarding compensation, so I cannot give him any specific commitments today. However, I repeat that we are keen to see that all postmasters whose convictions are overturned are fairly compensated as quickly as possible. I know that the issue of compensation will be of great interest to the House, and I commit to update the House on this matter whenever it is appropriate.

[Lord Mendelsohn (Lab) [V]]

My Lords, as a businessman, I am embarrassed that our culture of corporate governance and a failure of corporate leadership has directly ruined the lives of the innocent. As Mr Justice Fraser’s judgment lays bare, this includes the fact that they defended an untenable case, and how they did it shows how hollow and disingenuous even the current statements by the Post Office should be seen. The positions of the chairman and CEO are difficult to justify. Can the Minister provide assurance that the serious questions this raises about the position of every member of the current board, and indeed the responsibility of all members since the board was first presented with problems in the system nearly a decade ago, can be fully examined without a statutory inquiry? Can he also assure us that the Government are now willing to provide a full statement relating to what they were told and their actions and role as shareholder? Their apparent failure to provide vigorous challenge to the board meant that this scandal has carried on for as long as it has and illustrates a likely flaw in the Government’s role as a shareholder in this and potentially other circumstances.

[Lord Callanan (Con)]

I can give the noble Lord the assurance he asked for in the first part of his question: Sir Wyn, as part of his evidence gathering, is looking at the issue of corporate governance, where it is clear that there are some serious questions that need to be answered. On his question about the role of the shareholder, as I have said before on a number of occasions in this place, the Government pressed the management at the time on issues regarding complaints brought by sub-postmasters about Horizon, and we received repeated assurances that the system was reliable. Of course, the Court of Appeal opined that the Post Office had consistently asserted that Horizon was robust and reliable at the time.

[Baroness Neville-Rolfe (Con)]

Having been a Minister in the business department whose responsibilities included the Post Office for a period, I join others in congratulating the postmasters and the courts on restoring justice. I have always been much troubled by these cases and the tenacity of the Post Office in defending the integrity of its IT systems—now shown to be wholly unjustified—and by the fact that the Post Office was both investigator and prosecutor, which has already been touched on. Does my noble friend the Minister agree that, while being extremely important and useful, the criminal cases review process is far too slow? As part of lessons learned, will he follow up with the Ministry of Justice and explore the case for statutory deadlines or other incentives for speed? People’s lives have been wrecked for literally decades.

[Lord Callanan (Con)]

I will certainly pass on the noble Baroness’s comments on the speed of the justice system to the Ministry of Justice. I am sure there are many other areas where we would all like to see speedier justice.

[The Deputy Speaker (Lord Alderdice) (LD)]

The noble and right reverend Lord, Lord Harries of Pentregarth, has withdrawn, so I call the noble Lord, Lord Stevenson of Balmacara.

[Lord Stevenson of Balmacara (Lab) [V]]

My Lords, the Minister has confirmed that the inquiry—although, technically, I think it was originally called a review—is looking at corporate governance issues, and that is welcome. Could he answer two specific questions? Have the Government submitted any evidence already in the response to the call for evidence? If not, why not? Secondly, does Sir Wyn have the powers to subpoena information from the Government if it turns out that he requires that?

[Lord Callanan (Con)]

The Government are committed to fully cooperating with Sir Wyn’s inquiry; whatever information or access he needs will of course be provided. I am not sure whether we have submitted evidence, but I will certainly get back to the noble Lord on that. As I said, the inquiry is making swift progress and we look forward to receiving Sir Wyn’s report. However, as I said in my earlier remarks, if there are instances of any stakeholder in this area not co-operating, we will certainly not hesitate to take further action.

[Baroness Stuart of Edgbaston (Non-Afl)]

My Lords, the tragedy of this case is not just the length of time it took to put this wrong right but the number of players who individually felt they had nothing to answer for other than just to say that they were sorry, which is not sufficient. We need to find out why this happened.

I return to the issue of the Criminal Cases Review Commission. It was set up as a royal commission to speed up the process in the wake of the Guildford Four, the Birmingham Six and a number of serious miscarriages of justice. When you look up the funding structure of that body over the years, we see a combination of increased workload and reduction of funding. The very least that we can do is to fund it so that it can perform its function as it was set up to do, and not allow this sub-postmasters miscarriage of justice to be added to that list of grave injustices which have not been righted in the proper way.

[Lord Callanan (Con)]

As I said in my answer to the noble Baroness, Lady Neville-Rolfe, we support the work of the Criminal Cases Review Commission, which does some powerfully valuable work in its independent investigating of possible miscarriages of justice. I know that it has worked hard to complete the review into the Post Office Horizon cases with the necessary speed and thoroughness. However, as I said to the noble Baroness, Lady Neville-Rolfe, we will pass on the remarks of a number of noble Lords to the Ministry of Justice to see what more can be done to support its work.

[Lord Arbuthnot of Edrom (Con) [V]]

My Lords, the Post Office and the Government have expressly excluded the 555 group litigants from the compensation scheme. Nick Read, the chief executive of the Post Office, has called on the Government to compensate the 555 fairly. Are the Government considering compensating all the 555 litigants—as they should, because they have taken their money and should not be keeping it—or are they limiting compensation to those whose appeals have succeeded? Should not Sir Wyn Williams have considered this in his inquiry?

[Lord Callanan (Con)]

I start by paying tribute—as have a number of other noble Lords—to the tireless work that my noble friend has undertaken on behalf of the sub-postmasters in this case. His is a splendid example of some of the fine work that is done by many Members of this House in tenaciously seeking to draw attention to tremendous miscarriages of justice, and he has done a good job. I know we have spoken a number of times about it when he has drawn attention to these issues. I understand the strength of feeling felt by the postmasters in the GLO who, we have all come to understand, received only a portion of the £57.75 million settlement paid by the Post Office. However, that was a full and final settlement that was reached between the claimants. For postmasters who have convictions overturned, we are keen to see that they are fairly compensated as quickly as possible, and we will certainly work with the Post Office towards that goal. Given that the Court of Appeal judgment is an important development since the launch of the inquiry, I am sure that Sir Wyn Williams will want to note this in the final report on his inquiry.

[Lord Berkeley of Knighton (CB) [V]]

My Lords, it is a great shame that the Post Office did not approach this with the same sense of admirable humility as does the Minister, who is able, for example, to say, “We got it wrong.” I endorse what my noble friend Lord Pannick said. Would the Minister agree that it would be adding insult to injury—in fact, injury to injury—if these victims had to prove what had gone on? In addition, does the Minister feel that he and the Government have learned enough already that, if they were to discover something similar going on elsewhere, they would now be able to intervene much faster?

--- Later in debate ---

[Lord Callanan (Con)]

I cannot really add anything to the answer I gave the noble Lord, Lord Pannick. On the noble Lord’s second question, I would certainly hope that, if the situation arose in any of the arm’s-length bodies for which I am responsible as a Minister, I would ensure that attention was brought to it and the appropriate lessons drawn as quickly as possible. I hope that those in wider government have also learned the lesson of this sad and tragic case.

[Baroness Stowell of Beeston (Non-Afl)]

My Lords, my point picks up on that just made by the noble Lord, Lord Berkeley. As horrified as we all are at this miscarriage of justice, what is also shocking to everybody is just what it tells us and shows us about the arrogance of those of us in positions of authority when we are faced with something that is so obviously wrong and has been brought to us by the general public. I understand what the Minister is saying about a statutory inquiry and the inquiry that Sir Wyn is doing at the moment. However, will he consider and express to us his understanding of the reasons why there is that lack of confidence from the sub-postmasters and many others in the robustness and validity of the review that is under way and the need for more reassurance that other steps can be taken if accountability and responsibility is not shown through that process?

[Lord Callanan (Con)]

The noble Baroness makes an important point: it is vital to get the buy-in and support of the postmasters for the operation of the inquiry. I hope that we will get that. If there are any shortcomings in the process of the inquiry, we will not hesitate to go further, if necessary. My understanding is that the inquiry is proceeding well. Sir Wyn is getting on with his work; he is a well-respected judge in this field, and will hold some public hearings in June, which will, we hope, draw more attention to these matters. We will keep it under review, and I hope he will get the support of the postmasters, because that is vital to ensure that the inquiry is robust.

[Lord Harris of Haringey (Lab) [V]]

The Minister said that the Horizon IT system had “real problems”. That is a huge understatement, given the misery caused to hundreds of sub-postmasters who had been serving their communities for many years. The Statement says nothing about Horizon’s manufacturer, Fujitsu, a company that continues as a trusted partner of HMRC, the Department for Education, the Cabinet Office, the Home Office, the Ministry of Defence and no doubt many other government departments. The NHS had to sack Fujitsu for a huge IT programme which, like Horizon, did not work. The company’s response was to demand £700 million in compensation. The Minister did not answer my noble friend Lady Hayter’s question: how much compensation will Fujitsu be paying those whose lives it knowingly wrecked with its Horizon software? What assessment have the Government made of what this scandal says about other Fujitsu software embedded in so many government departments?

[Lord Callanan (Con)]

Fujitsu has been rightly and severely criticised in much of the judgment, but the noble Lord will understand that compensation from Fujitsu is a contractual matter between the Post Office and Fujitsu. I am pleased by and welcome the fact that Fujitsu continues to co-operate fully with Sir Wyn’s inquiry. The noble Lord is right to say that Fujitsu provides a range of services across government and, of course, many parts of the private sector. We are not at the moment aware of any other problems in its systems.

[Lord Mackenzie of Framwellgate (Non-Afl) [V]]

My Lords, I thank the Minister for his update today, which is helpful. One of my passions throughout a long police career was the fight for justice and to put right miscarriages. This case has caused personal tragedy to hundreds of people through family breakup, bankruptcy and loss of liberty on an industrial scale. Some, of course, have since died. For example, why did nobody join the dots when deficits were occurring throughout the Post Office estate following the installation of the new Horizon IT system, and why was it kept secret? Does the Minister think it is now time for those who took the decisions at the top of the Post Office all those years ago to be called to account, so the matter can now be closed? Has Sir Wyn Williams got powers to summon witnesses and seize written evidence? If not, surely it requires nothing less than a full statutory inquiry, with powers to determine who knew what and when, so that fair compensation can be awarded to allow all the victims of this massive miscarriage of justice to get on with their lives.

[Lord Callanan (Con)]

As I said in previous answers, we are keen to see that all postmasters whose convictions are overturned are fairly compensated as quickly as possible, and we will work with the Post Office towards this goal. On the noble Lord’s comments about the inquiry, the problem with a full statutory inquiry is that it could take many years to report. The current inquiry is going well; everyone is co-operating and we should be able to get a report in the summer. I think it is better for all concerned that we have the report, so that we learn the lessons that have to be learned as quickly as possible, rather than waiting years—but, as I say, we are not ruling anything out. If there is any lack of co-operation that we need to address, we will not hesitate to go further.

[Lord Forsyth of Drumlean (Con) [V]]

My Lords, given that people have lost their livelihoods, liberty and even lives as a result of the incompetence and bureaucratic bullying, does my noble friend really think it is enough, after 20 years of injustice, for the Post Office to apologise for historical failings and recruit two NEDs, and for the Government to compliment the victims on their tenacity and offer the cliché that lessons will be learned? Why has no one been held to account and why, as the noble Lord, Lord Harris, just asked, is Fujitsu, the producer of the dodgy Horizon software, not paying for the damage it caused and repeatedly denied? Will my noble friend return to the question asked by my noble friend Lord Arbuthnot, who has done so much in this area, about why the 550 people are not to be included? As for the argument that there was an agreement signed—it was an agreement signed before people knew of the scandal of the way the Post Office was behaving.

[Lord Callanan (Con)]

I totally agree with the noble Lord that, of course, words are never enough, and we are keen to see that those whose convictions were overturned are fairly compensated. I cannot make any commitments on funding at this stage; it is for the Post Office to engage with the appellants in the first instance as to how compensation can be paid as quickly as possible. The inquiry is doing its work, we will see the report in the summer when it is produced and we will learn all the appropriate lessons.

[Lord Browne of Ladyton (Lab) [V]]

My Lords, the Metropolitan Police are conducting an ongoing investigation into Fujitsu workers after Mr Justice Fraser wrote to the DPP expressing grave concern about the evidence provided in earlier court hearings. Does what we already know about this appalling miscarriage of justice not justify a wider police investigation? Will the Government not call for one?

[Lord Callanan (Con)]

The noble Lord will notice that I have avoided commenting on any potential police investigation, for very good reasons that he will understand. However, I hope the investigation will reach speedy conclusions and the police will take the appropriate action.

[The Deputy Speaker (Lord Alderdice) (LD)]

We have come to the end of the 20 minutes and I regret that two noble Lords who were actually in the Chamber were unable to ask their questions.

National Security and Investment Bill

Lord Callanan Excerpts

Wednesday 28th April 2021 Lords Chamber

Moved by

[Lord Callanan]

That this House do not insist on its Amendments 11B and 11C, to which the Commons have disagreed for their Reason 11D.

11D: Because it is appropriate and sufficient for oversight and scrutiny of decisions made by the Secretary of State for BEIS to be conducted by their departmental select committee.

[The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)]

My Lords, here we are again. We return once more to parliamentary scrutiny of the National Security and Investment Bill. It is of course always a pleasure for me to be in your Lordships’ company, so to be here twice in one day on this legislation and once on a Statement repeat is obviously a treat of the highest order.

Noble Lords will have seen that the other place once again rejected the amendments put forward by the noble Lord, Lord West, by a further significant margin. Let there be no doubt that I welcome and value the considerable expertise that noble Lords have put into their amendments and proposals. In addition to their expertise, I now have the opportunity to further compliment their stamina and resolve.

However, as I said earlier today in this House, in our view the BEIS Select Committee remains the most appropriate committee for scrutinising the operation of this regime by the Secretary of State for BEIS. I have already put forward the Government’s arguments in this regard on a number of occasions, so I will not try your Lordships’ patience much further. Assurances have now been provided, both in this House and the other place, that there will be no barriers to effective scrutiny by the BEIS Select Committee. In particular, its handling of material, be it confidential or classified, will be appropriately dealt with.

I know your Lordships have some scepticism on this claim. I am not sure what else I can say to reassure noble Lords, other than that my department will work closely with the BEIS Select Committee and its chairman to ensure that effective scrutiny can and will take place. Of course, there will be times when further scrutiny by other committees is appropriate—for example, the Science and Technology Committee or even the Intelligence and Security Committee. As this House has heard in previous debates, there is also nothing stopping these committees carrying out the important work that falls within their respective remits.

I now look to this House to respect the clear wishes of the other place and to acknowledge our rapidly dwindling time to pass this essential Bill. I therefore hope that this House will now support the Government’s Motion and allow the Bill to pass. I beg to move.

[The Deputy Speaker (The Earl of Kinnoull) (Non-Afl)]

The noble Lord, Lord West of Spithead, has withdrawn. Accordingly, I call the noble Lord, Lord Fox.

--- Later in debate ---

[Baroness Hayter of Kentish Town (Lab)]

My Lords, it is a treat for us to have the Minister here again. He says that there is some scepticism in the House about this matter. I think that there is some mystification, actually. It is said that when he heard about Talleyrand’s death, Metternich said, “What did he mean by that?” There is a bit of me that, as a historian, wonders how historians looking at this in the future will ask, “What was going on? What did they mean by that?”—to have such a squabble, and to go back and forward at the end of a Bill that we all agree is important, over the possible addition of five words in a memorandum of understanding. That is what we have got down to. And I remain mystified. One day, maybe long into the future, when the noble Lord and I have gone on to other things but are still in the land of the living, we may sup together and hear what was really behind the resistance to amending the memorandum of understanding simply to allow one committee to look at the work of the unit.

Having said that, we are pleased that we are now at the end of the Bill. We wish it and the new unit in the Minister’s department well. We talked previously about the number of notifications that it may have to deal with. There is a real challenge there. We seriously wish that unit well as it begins to take on and embed what this soon-to-be Act will enable it to do.

[Lord Callanan (Con)]

My Lords, the hour is getting late and I will not try your Lordships’ patience. It remains for me to thank the last two indomitable warriors on this subject, the noble Lord, Lord Fox, and the noble Baroness, Lady Hayter, once again for their help, support and the valuable scrutiny that they have provided to this legislation.

The legislation has changed as a result of your Lordships’ efforts. I know that there will be disappointment in those noble Lords’ parties that we were unable to agree on this final point but, nevertheless, the House has done its work well. The Bill has been improved as a result of the work of this House, but it is now time to let this matter rest. As I set out earlier, the Government have made their case. Noble Lords will be pleased to know that I will not repeat that case, which was made both in this House and the other place. Let me finish by saying that I appreciate the strength of feeling on this matter and I am sure that we will have further discussions as the work of the ISU takes place. We must now ensure that the Bill is passed.

Motion A agreed.

International Accounting Standards (Delegation of Functions) (EU Exit) Regulations 2021

Lord Callanan Excerpts

Tuesday 27th April 2021 Grand Committee

Moved by

[Lord Callanan]

That the Grand Committee do consider the International Accounting Standards (Delegation of Functions) (EU Exit) Regulations 2021.

Relevant document: 46th Report from the Secondary Legislation Scrutiny Committee

[The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)]

My Lords, these regulations, which were laid before the House on 1 February, aim to address matters relating to company reporting arising from the UK’s exit from the EU. I shall refer to these regulations as the delegation SI.

International financial reporting standards—IFRS—are a set of international accounting standards used in over 125 countries around the world, including Australia, Canada and across the EU. In a world with growing economic interconnectivity, accounts prepared in accordance with high-quality international accounting standards provide the consistency and reassurance that investors require to confidently invest in capital markets. The Government are committed to IFRS as standards that drive improvements in the quality and comparability of financial reporting, facilitate investment across borders and build links for investors and regulators between capital markets. The UK is the largest single user of IFRS, with over 15,000 economically significant UK companies now using the standards. This includes all publicly traded companies, which are required to use them to prepare their consolidated accounts.

Legislation made in 2019 provided post-transition period continuity for IFRS by transferring all existing EU-adopted IFRS into UK law to form “UK-adopted international accounting standards”. I shall refer to these regulations as the principal regulations. The principal regulations also provided a mechanism for IFRS to be adopted for use in the UK after the end of the transition period. This action meant that the Secretary of State has been able to adopt crucial amendments to IFRS for use in the UK, including amendments relating to the ongoing interest rate benchmark reform. This was, however, intended only as an interim measure. The principal regulations also provided for the delegation of the adoption functions to an expert body.

The purpose of the delegation SI is straightforward. In line with the intent of the principal regulations, it will delegate decision-making powers on the adoption of IFRS to the recently established UK Endorsement Board. The board will have two primary responsibilities: it will be responsible for the analysis and adoption of IFRS for use in the UK, and for influencing the development of IFRS by the International Accounting Standards Board.

To adopt a standard, the endorsement board will need to be satisfied, first, that its application is likely to be conducive to the UK’s long-term public good; secondly, that the standard meets the criteria of understandability, relevance and comparability; and thirdly, that its application would not be contrary to the principle that accounts provide a “true and fair” view. In addition, decisions on the adoption of IFRS can be taken only following consultation with stakeholders with an interest in the quality and availability of accounts.

I turn to the endorsement board’s influencing work. While it is beneficial for the UK to maintain alignment with international standards, it is also important that those standards work for the United Kingdom. That is why influencing the development of IFRS by the International Accounting Standards Board is one of the board’s key responsibilities. Effectively performed, this will mean that UK interests are addressed during the development process and final standards reflect the needs of UK stakeholders.

These are substantial responsibilities, but the endorsement board has been equipped to meet those needs. Clearly, the calibre and expertise of those involved in the decision-making process is vital. The appointed board, led by Pauline Wallace, is talented, experienced and diverse. Its membership includes preparers of accounts, members of accounting firms and academics and investors; an economist will also be recruited over the coming months.

Further, we recognise that the board’s decision-making, although independent, cannot overlook the regulatory context. As such, those in attendance at endorsement board meetings will also include representatives from the relevant government departments, the FCA and the Bank of England. These observers will be involved in discussions but not the final decision-making stage, in order to maintain the board’s independence.

The endorsement board’s terms of reference were adopted at its first meeting in March and are available on the board’s website. The terms of reference are structured around guiding principles of accountability, independence, transparency and thought leadership. They provide for an active and transparent adoption process that is receptive to the views of stakeholders and reflects the long-term public interest. In drafting the terms of reference and the establishment of the endorsement board, we involved a broad range of stakeholders with an interest in IFRS, including regulators, at each stage of development. We are grateful for their insight and commitment.

I now move to the oversight of the endorsement board. The board is an independent unincorporated association supported by a subsidiary of the FRC via a service-level agreement. This agreement will include support in the areas of HR, finance and IT equipment to enable the board to carry out its work.

I have already stressed that the endorsement board’s decision-making will be independent. However, this does not mean that it should be beyond the reach of those with wider responsibilities for the integrity of company reporting. As such, a key principle of the adoption process will be transparency, with both the discussions and the outcome of adoption decisions being made publicly available.

The endorsement board will be accountable to the Secretary of State for how it performs its delegated functions, and the Secretary of State will, in turn, lay the endorsement board’s annual report before Parliament. The board will also report, in a publicly available document, on its governance and due processes to the FRC. I should add that the Secretary of State will also retain the ability to make regulations to amend or withdraw the delegation if it appears to the Secretary of State that the delegation is no longer in the public interest.

With the appointment of an interim chair, board members, the recruitment of a secretariat and adoption of the terms of reference, we have completed important steps to establish the endorsement board. The cost of this has been approximately £2 million over the past two years and we expect future ongoing costs of £2.9 million per year. These ongoing costs will be funded using the FRC’s levy on preparers of accounts. This will put the cost of the endorsement board to those who benefit most from IFRS.

In conclusion, I hope noble Lords will agree that delegating statutory powers to the UK Endorsement Board will support the UK’s long-term public interest and maintain high standards of UK company reporting. I commend the regulations to the Committee and ask it to support and accept them. I beg to move.

--- Later in debate ---

[Lord Callanan (Con)]

My Lords, I thank noble Lords for their insightful contributions to this debate. The many points raised have demonstrated the need for the measures contained in the delegation SI and the support that they will give to users and preparers of accounts. Businesses up and down the UK continue to face uncertain trading conditions, particularly in light of the Covid-19 pandemic. The delegation SI provides reassurance for UK-registered companies using IFRS, on a mandatory or voluntary basis, that the Government remain committed to these global standards and their role in the UK’s company reporting framework. Further, we will use the strengths of the UK’s accounting and finance sectors to contribute to the future development of IFRS and to ensure that UK company interests are taken into account. I believe that the board will develop a reputation as a major voice on the global accounting stage.

I will now deal with some of the points raised in debate. The noble Lord, Lord Davies of Brixton, asked a question on parliamentary accountability. As I set out in my opening speech, Parliament will have oversight of the Endorsement Board’s activities and the board will be required to report on its technical decision-making to the Secretary of State on at least an annual basis. The Secretary of State will, in turn, be required to lay that report before Parliament. The Secretary of State must also, separately, lay a report each year on the carrying out of responsibilities related to the adoption of international accounting standards.

The statutory criteria for the Endorsement Board means that it must consider the long-term public good when deciding to adopt a standard, together with the costs and benefits, and any effects on the economy. The whole point of the UKEB is for the UK to decide on its adoption for use in the United Kingdom. While the UK was a member of the EU, the European Commission decided on adoption; now, the UK can make its own decisions on what standards are used.

The key advantages of IFRS are the high-quality, transparency and comparability that the standards bring to financial statements. They are now in use in over 125 countries, including the majority of the G20 states, all EEA member states and 93 major securities exchanges around the world. If the UK is to continue attracting international investment, it is in our interests to maintain alignment with these international standards. This was recognised by Parliament when continued use of IFRS in the UK was approved in 2019. A dedicated and independent Endorsement Board is more easily able to recruit the expertise needed for decision-making and influencing the future direction of IFRS. It is also better placed to conduct the outreach required to assess the impacts of adoption in the UK. A separate board is also consistent with the approach taken by many other countries that use IFRS, including Australia and Canada.

My noble friend Lady Neville-Rolfe referred to the Sarbanes-Oxley regime on internal controls in the US. I understand that this has had some benefit in terms of fewer US companies having to restate their accounts, but I respect my noble friend’s knowledge of potential negative impacts. The Government’s current audit reform and corporate governance White Paper includes proportionate proposals on internal controls. I would be very happy for my officials to brief my noble friend on the White Paper as a whole; I know that she has already had some meetings on it.

The regulations set out what is meant by long-term public good. They particularly require regard to be paid to the following matters: whether the use of the standard is likely to improve the quality of financial reporting; the costs and benefits likely to result from the use of the standard; and whether the use of the standard is likely to have an adverse effect on the economy of the United Kingdom, including on economic growth. The board will be required to consult with those representatives of users and preparers of accounts before adopting a standard, including smaller business where that is relevant.

Regarding the points made by the noble Lord, Lord Sikka, the Endorsement Board will be bound by the same assessment criteria that Parliament approved for the Secretary of State. These are based on established principles for financial reporting, including that the standards are not contrary to the principle to provide a true and fair view of an undertaking’s financial position, and that they are conducive to the long-term public good. There is also an obligation to consult persons representative of those with an interest in the quality and availability of accounts.

It is true that the IFRS Foundation is registered as an overseas company incorporated in Delaware, where it is classified as a not-for-profit, tax-exempt organisation. In the UK, the foundation’s tax is calculated on the basis of notional trade, where publications revenue is offset by the costs of developing the published materials. This was agreed with the UK authorities in 2006 and is set out in the foundation’s latest annual report. The terms of reference require meetings and decisions to be held in public. Its initial meetings have been held in public and are available to view on its website. The key advantages of IFRS are the high quality, transparency and comparability they bring to financial statements; they are prepared following extensive consultation and consideration.

Regulated entities are required to prepare separate accounts for investors and the market at large. These are separate from those produced for the regulator, which is considering the entity’s solvency and liquidity position to understand the impact on the system as a whole, and the two have two separate purposes. Accounts prepared under IFRS are general purpose accounts designed to meet the needs of a wide range of investors, finance providers and stakeholders. The proposals in this SI do not change the existing capital maintenance and distributable profits regime in the Companies Act. As I said earlier, the international standards are used in more than 125 countries, including Australia and Canada and across the EU.

Moving on to the points made by the noble Baroness, Lady Bowles, the conditions of the EU withdrawal Act do not provide the powers to create a new statutory body to endorse IFRS. The Endorsement Board is therefore an unincorporated association, comprising the chairman and the board members. Resources and funding are provided by the existing body, the Financial Reporting Council. The Endorsement Board has been designed to be accountable and open to scrutiny by government and stakeholders, and there are statutory requirements for reporting to the Secretary of State, to the FRC and to Parliament.

IFRS are not incompatible with the requirement to show a true and fair view in UK company law. Section 393 of the Companies Act 2006 sets out the overriding requirement that directors must not approve accounts unless satisfied that they give a true and fair view of a company’s financial position, notwithstanding the accounting standards used in their preparation. Additionally, the legal criteria for adopting a new or amended IFRS for use in the UK already includes a provision that a standard cannot be adopted if it would be contrary to the requirement for accounts to provide a true and fair view of the undertaking’s financial performance and position. Accounts prepared under IFRS are general purpose accounts, designed to meet the needs of a wide range of investors, finance providers and stakeholders and, as I said earlier, the proposals in this SI do not change the existing capital maintenance and distributable profits regime in the Companies Act.

The Endorsement Board secretariat has commenced some of the foundational work that will be needed to inform the assessment of IFRS 17. This includes conducting a survey of insurance companies and establishing an insurance technical advisory group. The work is expected to escalate in the coming months and will include outreach with representatives from stakeholder groups across the UK’s insurance sector, including preparers of financial statements and investors. As the recent announcement of the board members demonstrated, membership is representative of areas with an interest in the quality and availability of accounts. This naturally includes representatives with experience in the biggest accounting firms, as their expertise and insight will be invaluable. However, as the board composition demonstrates, those with experience in smaller firms are also valued as board members, and no one on the board has an existing role at any of the big four accounting firms.

Pauline has over 30 years’ experience in the development of accounting standards and I am delighted that she is the inaugural chair of the Endorsement Board. Her experience and technical knowledge of the standards has been invaluable during the work so far and there is no question in my mind that she is the right person to lead the board. She retired from PwC in 2013 and in my view this provides a sufficient gap between the end of Pauline’s employment by a big four firm and appointment as chair of the UK’s Endorsement Board, without any danger of being unduly influenced by the policies of a former employer. In addition, the terms of appointment for members of the board require it to comply with the terms of reference. The Secretary of State could take action if the terms of reference were being disregarded, including the ultimate ability to revoke the delegation.

Moving on to the comments of the noble Lord, Lord Lennie, the terms of reference are already published on the UKEB website, and these are intended to be finalised after the completion of the parliamentary debates. All board members are, of course, required to act independently and in the UK’s long-term public good, including not showing preference to special interests. The Endorsement Board has been developed with Sir John Kingman’s review of the FRC in mind, and we envisage ARGA’s role in relation to the board to be similar to the FRC’s role.

To close, I reiterate that the action taken by these regulations represents the best way forward for adoption of IFRS in the UK’s long-term public interest. The endorsement board is ready, now is the time for it to take on its functions, and I commend this statutory instrument to the Committee.

Motion agreed.

Employment Rights Act 1996 (Protection from Detriment in Health and Safety Cases) (Amendment) Order 2021

Lord Callanan Excerpts

Tuesday 27th April 2021 Grand Committee

Moved by

[Baroness Bloomfield of Hinton Waldrist]

That the Grand Committee do consider the Employment Rights Act 1996 (Protection from Detriment in Health and Safety Cases) (Amendment) Order 2021.

[Baroness Bloomfield of Hinton Waldrist (Con)]

My Lords, I beg to move that the order, which was laid before the House on 17 March 2021, be approved.

I want to begin with some important background to this statutory instrument. The UK is unique in having three employment statuses for employment rights—self-employed, limb (b) worker and employee—when most other countries, including in the EU, have two: self-employed and employee. Those in the category of workers known as limb (b) workers have a more casual employment relationship than employees and are entitled to a basic set of rights, such as minimum wage and holiday pay. The limb (b) worker employment status allows for much-needed flexibility in the labour market.

Sections 44(d) and 44(e) of the Employment Rights Act 1996, which implements the EU health and safety directive into domestic law, gives employees the right not to be subjected to detriment by their employer for leaving or refusing to return to their workplace. It also gives employees the right not to be subject to detriment for taking steps to protect themselves or others in circumstances of danger that they reasonably believe to be serious and imminent.

Moving on to what this statutory instrument does, in May 2020, the Independent Workers’ Union of Great Britain brought a judicial review against the Secretaries of State for the Department for Work and Pensions and the Department for Business, Energy and Industrial Strategy. Following comprehensive proceedings, the High Court found in November 2020 that the UK had not fully implemented the EU’s health and safety framework directive into domestic law in Section 44 of the Employment Rights Act 1996, concluding that some protections were available only to employees while the court held that they should also extend to limb (b) workers.

The claim succeeded only in part: the court accepted that the UK was not required to extend unfair dismissal to limb (b) workers and had properly implemented the general obligations of the health and safety framework directive. The Government accepted this judgment and are therefore proposing this order, which will extend these protections from detriment in health and safety cases to all workers, not just employees—as had previously been the case. The court also held that the Personal Protective Equipment at Work Regulations 1992 should also be extended to limb (b) workers. I am assured by officials at the Health and Safety Executive that work is under way to consult and extend these regulations to all workers through an additional statutory instrument due to be laid later this year.

These important protections have proved even more essential for employees who have continued to work throughout the pandemic and for those who are returning to work as businesses emerge from lockdown. It ensures that employees have the legal protection that they need to act to ensure their own safety and the safety of others without fear of suffering detriment for doing the right thing. This includes protecting them against being denied promotion or training opportunities.

Having considered the court judgment, we agree that limb (b) workers should also benefit from these protections. This does not represent a major change as limb (b) workers represent a small share of the workforce. However, that does not make it less important, as these workers will undoubtedly have a significant role to play in our economic recovery from the Covid-19 pandemic. That is why the Government would like to clarify the UK’s understanding of the health and safety framework directive by amending Section 44 of the Employment Rights Act 1996.

This Government are committed to protecting workers’ rights and supporting workers through the challenges created by the Covid-19 pandemic, making the UK the best place in the world to work. Clarifying our interpretation of this directive in the light of the High Court judgment will mean that more people are protected by these provisions.

On scope, the changes made to Section 44 of the Employment Rights Act in this SI will apply in England, Scotland and Wales. Employment law is devolved in Northern Ireland. However, we have discussed this statutory instrument with the Northern Ireland Administration; they have laid legislation to the same effect, which will come into operation in parallel subject to the Northern Ireland Assembly procedure.

Given that limb (b) workers represent a small share of the workforce, the direct cost to business of this change is expected to be very low. We also do not expect the amendments to have a significant and disproportionate cost or impact in any region across England, Scotland and Wales.

In conclusion, this change is necessary to clarify the Government’s interpretation of the health and safety directive. It will ensure that all workers are covered by these protections and that we build back better from the pandemic by maintaining the highest standards when it comes to workers’ rights in the UK labour market. I therefore commend this order to the Committee.

Industrial Strategy: Local Growth

Lord Callanan Excerpts

Monday 26th April 2021 Lords Chamber

[Baroness Thornhill]

To ask Her Majesty’s Government what assessment they have made of the Annual Report by the Industrial Strategy Council, published on 23 March, which recommended the development of local strategies to deliver sustainable local growth.

[The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)]

The work of the Industrial Strategy Council to date has been pivotal for the success of the industrial strategy. As we begin to transition into our plan for growth, the work of the council, including reflections in its annual report, will be taken into account. We are working with local enterprise partnerships, mayoral combined authorities and other local partners to build on the priorities identified through local industrial strategies. We will also address new issues which have arisen since their publication.

[Baroness Thornhill (LD)]

I thank the Minister for that reply. One wonders why, if it was so pivotal, the council is being disbanded. The report is critical of the Government’s proposed approach to levelling up, which it argues is over-reliant on big infrastructure projects and centrally controlled pots of funding spread far too thinly over too short a time. Does the Minister agree with significant historical and international research that such a centralised approach rarely works? Can he confirm whether the forthcoming, much awaited devolution White Paper will provide an opportunity to reverse this trend and provide a far more effective way forward?

[Lord Callanan (Con)]

We will continue to work on the levelling-up agenda, building on the strength of many places. We encourage those places to consider key sectors, assets and clusters that they want to support to foster their long-term growth ambitions, building on the strong evidence base and the brilliant work done to date by many places across the country.

[Lord Stevenson of Balmacara (Lab) [V]]

My Lords, following on from that question, can I ask the Minister to set out the ways in which the innovation, productivity and wealth-creation capacity of sectors of the economy that are not the direct responsibility of BEIS, such as the creative industries, will be engaged at a local level in the delivery of the plan for growth?

[Lord Callanan (Con)]

I know that the noble Lord has been a long-term champion of the creative industries, and I agree with him. We recognise the importance of the creative sectors. In Build Back Better: Our Plan for Growth, creative industries are highlighted as one of the sectors that we expect to shape the UK’s economic future. Upgrading and creating new cultural and creative spaces represents a core element of the £4.8 billion levelling-up fund.

[Lord Goddard of Stockport (LD)]

The Industrial Strategy Council’s annual report points out that the Government’s plans

“are not yet a practical roadmap for delivering Net Zero, with several areas at present lacking the required scale to make progress at the required speed”.

Housing retrofit is one such area. Will the Government accept the recommendation of the House of Commons Environmental Audit Committee’s recent report on energy efficiency to open up the proposed £3.8 billion social housing upgrades? It is estimated that green home upgrades could support 77,000 jobs across the north alone. That is levelling up.

[Lord Callanan (Con)]

The noble Lord makes a good point. The £62 million social housing decarbonisation fund demonstrator is currently delivering 19 projects across England and Scotland. In the autumn 2020 spending review we committed a further £60 million towards funding the main elements of the social housing decarbonisation fund to ensure some early progress and, of course, we are still committed to the manifesto commitment of £3.8 billion for the funding total.

[Lord Forsyth of Drumlean (Con) [V]]

My Lords, the report by the Industrial Strategy Council, which was appointed by the Government and consists of a number of distinguished businesspeople, points out that, whether it is called an industrial strategy or a plan for growth, the basic premise is the same: a programme of supply-side policies to drive prosperity in and across the economy. Does my noble friend agree, and, if so, what are those supply-side policies?

[Lord Callanan (Con)]

In the new plan for growth that the noble Lord refers to, we have decided that the Industrial Strategy Council in its current form will no longer be needed to monitor and evaluate the impact of the industrial strategy. The Prime Minister and the Chancellor have convened a build back better business council to act as a sounding board and to provide help, advice and support on the way forward.

[Lord Aberdare (CB)]

My Lords, the ISC report urges the Government to develop a comprehensive and ambitious labour market strategy, co-ordinated across government, employers and the education sector. What plans do the Government have for such an overarching strategy and for overseeing how their various skills-related initiatives mesh together to deliver a skilled and resilient workforce across the UK as needed by the plan for growth, and to close the future skills gap highlighted by the ISC?

[Lord Callanan (Con)]

The noble Lord is right that skills are one of our key priorities for investment, along with infrastructure and innovation. The Prime Minister and the Cabinet Secretary have asked Sir Michael Barber to conduct a rapid review of government delivery, including in the skills system, to ensure that it remains focused, effective and efficient and to suggest how it could be strengthened.

[Lord Bassam of Brighton (Lab) [V]]

My Lords, the Industrial Strategy Council’s most recent annual report suggested that, for levelling up to succeed, it needed to include consideration of devolution. How much thought have the Government given to further devolution in their industrial strategy? Will the Minister tell the House what progress has been made in convening the build back better business council and who will lead its work? Is it always the case that pivotal councils, such as the Industrial Strategy Council, get abolished?

[Lord Callanan (Con)]

Of course it is not always the case. Many councils do good work. We think that the local Industrial Strategy Council did some good work, but we are building on that, extending and taking it forward. The Build Back Better Council, to which the noble Lord refers, will take forward that work.

[Baroness Sheehan (LD)]

My Lords, why is the Industrial Strategy Council to be abolished? A number of other noble Lords have asked this question and I want to press the Minister on it. How do the Government intend to fill the gap that will be created to hold government Ministers to account on the plan for growth overall?

[Lord Callanan (Con)]

Many of the elements of the work of the Industrial Strategy Council have been superseded. There are now new challenges—we had the Covid epidemic. The Government, of course, are still being held to account in this House and elsewhere. The purpose of the Build Back Better Council will be to provide help and advice on the way forward.

[The Lord Bishop of Rochester]

My Lords, although I was once a voluntary sector member of a regional assembly, I do not hanker after a return to that particular bit of structure. However, are Her Majesty’s Government contemplating any new local structures as part of the response to the questions raised, or do they trust local authorities, executive mayors and existing bodies, such as the LEPs, to deliver on this agenda? I notice that the Minister did not mention local authorities in his original response.

[Lord Callanan (Con)]

That was not a deliberate omission. Local authorities are still key to the development and delivery of these strategies and policies, along with the LEPs, the mayoral combined authorities and, of course, local businesses themselves that need to be involved in the way forward.

[Lord Lucas (Con) [V]]

My Lords, I refer to the paragraph from Build Back Better headed “Changing the way we invest in places”. For a town such as Eastbourne, what will be the empowered local institution and with whom will it cohere and co-ordinate?

--- Later in debate ---

[Lord Callanan (Con)]

I refer the noble Lord to the answer I just gave to the right reverend Prelate. We will work with local enterprise partnerships, mayoral combined authorities and other local partners. The key to that is local businesses in areas such as Eastbourne, and we will look at the geography and structure of these partnerships going forward.

[The Earl of Clancarty (CB)]

My Lords, if developing skills across the country is to be part of the levelling-up agenda, will the Minister recognise the importance of design, which gets no mention at all in the Build Back Better plan? Does the Minister agree that education and design starting in schools will be crucial in developing creative ideas and innovation, one of the Government’s three pillars of growth?

[Lord Callanan (Con)]

I agree that design and innovation are going to be key and crucial. We have a history in this country of taking good design and innovation and then not developing them into viable products led by British businesses. That is something that we need to correct, and our forthcoming innovation strategy will address many of these issues.

[Lord Clark of Windermere (Lab) [V]]

My Lords, in the earlier report, the council said that we should keep the spotlight on places whose productivity levels and growth rates were well below the national average. I know that the Minister shares my view and agrees particularly with this recommendation. What are the Government are doing to try to bring this idea into reality?

[Lord Callanan (Con)]

I agree with the noble Lord that productivity will be key to our success going forward. He and I come from part of the UK that needs to expand its productivity and key to that will be developing the skills agenda, which I set out in the previous answer.

[The Lord Speaker (Lord Fowler)]

My Lords, all supplementary questions have been asked—a compliment to the Minister, who consistently manages to answer them all in the time allotted.

National Security and Investment Bill

Lord Callanan Excerpts

3rd reading
Thursday 22nd April 2021 Lords Chamber

Moved by

[Lord Callanan]

That the Bill do now pass.

[The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)]

My Lords, I start by expressing my gratitude to noble Lords from across the whole House for their contributions to the passage of the Bill. In particular, I thank my noble friends Lord Grimstone and Lady Bloomfield for their steadfast help, guidance and support throughout its passage. I also place on record my thanks to the noble Baroness, Lady Hayter of Kentish Town—my commiserations on the results of the Lord Speaker election—and to the noble Lords, Lord Grantchester and Lord Rooker, for their constructive attitude and helpful challenges from the Opposition Front Bench throughout the passage of the Bill. I also thank the noble Lords, Lord Fox and Lord Clement-Jones, for their customary ability to ask the most difficult questions at totally wrong times during the passage of the Bill.

It would also be remiss of me not to thank some of my noble friends who have taken a particular interest in ensuring that we get the Bill right. I am thinking in particular of my noble friends Lord Lansley, Lady Noakes, Lord Hodgson of Astley Abbotts, Lord Leigh of Hurley, Lord Vaizey of Didcot, Lady McIntosh and others.

Noble Lords from across the House have rightly held the Government’s feet to the fire in a number of areas, in the finest traditions of this House, and I can honestly say that the Bill leaves the House in a better state as a result of that scrutiny. I extend my particular thanks to parliamentary counsel for their exemplary drafting and to the clerks and all the House authorities for shepherding us through these exceptional times. The smoothness with which proceedings flow masks the sometimes immense and exceptional logistical operation going on behind the scenes.

I also extend my thanks to the officials and lawyers within my department, who have worked tirelessly on the drafting and subsequent passage of the Bill, for their immense patience in explaining some of the difficult concepts to a mere simpleton such as myself. In particular, I thank Dr Sarah Mackintosh, Mike Penry, Danny McCarthy, Arash Abzarian, Alex Midgley and George Kokkinos, who embarked on their NSI journey before I was even a Minister in this department. In my view, they act in the finest traditions of our civil servants, and I am very grateful to them for all their expert help, support and guidance. Finally, I thank the wonderful Melissa Craig, in my private office, and the immense Yasmin Kalhori in the Whips’ Office, who is ever-helpful in feeding forward suggested speaking notes—not all of which I can use in this House.

I said at Second Reading:

“This Bill will keep the British people safe.”—[Official Report, 4/2/21; col. 2335.]


In the meantime, we have had lengthy discussions on fishing, lectures to insolvency practitioners and—in one memorable case—the makeup of a particularly hawkish rugby front row. These discussions and others have made me certain that the Bill will go a long way in ensuring that the UK’s defences are fighting fit, both now and long into the future.

I am heartened that, in the finest traditions of this House, all parties have recognised the Bill’s importance, even if we have disagreed on some of the detail. In that sense, it has genuinely been a cross-party effort, and I am grateful to all noble Lords who have participated. I beg to move.

--- Later in debate ---

[Lord Callanan (Con)]

I thank noble Lords for their kind words and renewed support for the Bill. Empathy is not something I normally get accused of—I am sure that the noble Lord, Lord Fox, did not have his tongue in his cheek, so I will take that as a compliment. As I said earlier, there has been genuine cross-party enthusiasm for the Bill and, with the exception of one important detail, I have been heartened by the House’s desire to get it on the statute book. The debate has been excellent and shows the finest traditions of this Chamber.

I will certainly take up the suggestion made by the noble Lord, Lord Fox, for my considerable reading list. My in-tray is very high at the moment, but I will look at the article he referred to, and I am sure that it will enhance my understanding of the subject. For a final time, therefore, I beg to move.

Net-Zero Carbon Emissions

Lord Callanan Excerpts

Wednesday 21st April 2021 Grand Committee

[The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)]

First, I join others in congratulating the noble Lord, Lord Teverson, on securing this debate this afternoon. We have had some excellent contributions from all parts of the House, highlighting what is one of the most important issues of our time. Of course, while we presently find ourselves in the middle of a health pandemic which has to be our top priority, we also need to give this issue all the attention that it so dearly warrants. The Government absolutely accept and are determined that the UK will play its part in upholding the Paris Agreement and driving down our greenhouse gas emissions. Despite the considerable challenges we face, we can leverage our strengths to deliver a better and greener economy and go further and faster to accelerate the transition to net zero greenhouse gas emissions by 2050.

We need look only at what has happened with coal and wind in the last few decades, or the political consensus that has formed around reducing our emissions, to see that this is something that the whole nation is embracing. We were the first major economy in the world to set a legally binding target to reach net zero across our economy by 2050. As many noble Lords have pointed out, today marks another important step forward as we lay legislation for the UK’s sixth carbon budget, proposing a target which would reduce greenhouse gas emissions by 78% by 2035 compared to 1990 levels.

To respond directly to the challenge from the noble Baroness, Lady Bennett of Manor Castle, on where the UK is leading on action, I am sure she has noticed that we are achieving extremely rapid progress on decarbonisation. We have shown that it is possible alongside a thriving economy. Our emissions are down by almost 44% across the past 30 years, and our economy has grown by 78% in the same period.

Under the Climate Change Act 2008, we have made significant progress in meeting our climate targets. We confidently met our first two carbon budgets and we are projected to meet the third out to 2022. We exceeded the required emissions reduction in the first carbon budget by 1.2% and in the second by nearly 14%. Now is the time to double down and decrease our emissions further and faster.

To do this, the Prime Minister has set out his 10-point plan for the UK to lead the world into a new green industrial revolution. This innovative programme sets out ambitious policies backed by £12 billion of government investment. The plan will support up to 250,000 highly skilled green jobs across the UK, accelerate our path to achieving net zero by 2050 and lay the foundations for building back greener.

The 10-point plan will also help to develop the cutting-edge technologies that will be needed to drive down emissions in industry across the UK, such as through our significant investment into hydrogen and carbon capture technologies through our £1 billion Net Zero Innovation Portfolio. This will provide support to sectors which are some of the toughest to decarbonise. The Government recognise the significant advantages that the net-zero transition can bring in addition to the essential benefit of ending our contribution to global warming.

In response to my noble friend Lady Altmann and the noble Lord, Lord Oates, I can say that ahead of COP 26 we will bring forward an ambitious net-zero strategy to cut emissions and create new jobs and industries across the whole country. This will go further and faster towards building a stronger, more resilient future and protecting our planet for this generation and those to come. It will build on today’s announcement on the level of carbon budget 6 and ambitious plans across key sectors of the economy, including the energy White Paper, the transport decarbonisation plan and the heat and buildings strategy. The strategy will set out more clearly our plans and proposals for delivering the historic commitments that we have made.

The noble Lords, Lord Teverson, Lord Shipley and Lord Oates, and my noble friend Lady Altmann, all drew attention to the importance of government working closely with local government to help deliver net zero. It is fair to point out that a significant amount of support has already been made available to councils to act on climate change, from heat networks to cycle paths to flood defences. Councils are uniquely positioned to align local needs, local opportunities and local resources to deliver strategic intervention at all scales.

For those who recognise the urgency of the climate crisis, a great deal of funding is available. In the current financial year, the Government have provided several targeted funding schemes, including the £1 billion public sector decarbonisation fund. BEIS and the Government more widely also work with local authorities across a broad range of net-zero policies. For many of these policies, such as heat networks, EV charging and retrofit, local authorities are some of our key delivery partners. As part of developing these projects, BEIS will consult stakeholders either formally or informally, and ideally both. Local authorities and community groups are important stakeholders and, as such, we have a local energy contact group specifically set up to discuss policy with them. Furthermore, the BEIS local energy programme, set up in 2017, provides capacity and capability support to local authorities through the five local energy hubs.

In his introduction, the noble Lord, Lord Teverson, asked whether the Government would consider a road map for working with local authorities towards net zero. The net-zero strategy will indeed look at this issue further. It will specifically include a focus on place-based approaches and we will continue to stay closely engaged with local partners through forums such as the ADEPT Energy Working Group and the Core Cities sustainability sub-group, and of course the LGA itself, as we develop this strategy.

Further on local authorities, my noble friend Lady Altmann and the noble Lord, Lord Shipley, spoke about plans to decarbonise local authority pension fund assets. The Ministry of Housing, Communities and Local Government will consult later this year on requiring the Local Government Pension Scheme fund to manage and to report on climate risks. On private sector pensions, Parliament has now approved the Pension Schemes Act to allow us to require more effective governance of climate risk and disclosure in line with the task force on climate-related financial disclosures.

The noble Lord, Lord Whitty, asked about plans for integrating policy across Whitehall. He was right to point out that it is a considerable challenge; I think the noble Lord, Lord Oates, also highlighted some of the difficulties that we face in working with some other government departments. The Government aim to take a whole-systems approach to reaching net zero by 2050. This means considering policy areas and economic sectors as part of an interconnected system where changes to one area directly or indirectly impact others.

The National Audit Office has acknowledged that there has been significant progress on net-zero governance and that this reflects the high priority the Government give to the issue. That includes two Cabinet committees dedicated to climate change—one focused on strategy, chaired by the Prime Minister, and the other on implementation, chaired by the president of COP 26.

My noble friend Lord Caithness, and the noble Lords, Lord Grantchester and Lord Redesdale, all asked whether there should be a dedicated Minister for the climate and biodiversity. It is not unusual for government agendas to span many departments. The answer is rarely to move it all into the Cabinet Office or to make all departments have similar responsibilities. The Prime Minister has shown his commitment to net zero by taking the chair of the CAS. The Cabinet committees hold Secretaries of State to collective responsibility for delivery. The focus on net zero is borne out by results of government action, including of course the 10-point plan.

My noble friend Lord Caithness asked how often these committees have met. I am afraid I can tell my noble friend only that Cabinet committees meet as and when required. He will be aware from his time that there is a long-standing convention that the frequency, attendance list and minutes of Cabinet and its committees are not made public. The release of that information could undermine the principle of collective agreement and the ability of Ministers to openly debate policy in a confidential manner.

The noble Lords, Lord Teverson and Lord Grantchester, and the noble Baroness, Lady Hayman, all asked for an update on the net-zero task force announced through the 10-point plan. I can tell noble Lords that a further announcement will be made in due course.

The noble Baroness, Lady Sheehan, and the noble Lords, Lord Stunell and Lord Shipley, asked, correctly, about plans to decarbonise the built environment in the light of developments that noble Lords will be aware of regarding the green homes grant voucher scheme. I can tell the Committee that we are firmly committed to decarbonising the UK’s homes and buildings, and that emissions from public buildings have come down by 42% since 1990. As has been stated, meeting our net-zero target will require virtually all heated buildings to be decarbonised.

[The Deputy Chairman of Committees (Baroness Barker) (LD)]

My Lords, there is a Division in the Chamber. The Committee will adjourn for five minutes.

--- Later in debate ---

[The Deputy Chairman of Committees (Baroness Barker) (LD)]

My Lords, the Grand Committee is resumed. Lord Callanan?

[Lord Callanan (Con)]

The Government are planning to publish a heat and buildings strategy in due course. This will set out the immediate actions that we will take to reduce emissions from buildings. These actions will include the deployment of energy-efficiency measures and low-carbon heating, as part of an ambitious programme of work required to enable key strategic decisions on how we achieve the mass transition to low-carbon heat, setting us on a path to decarbonising all homes and buildings.

The green homes grant voucher scheme, referred to by many noble Lords, made significant strides—although not enough—with over 49,000 vouchers worth £208 million issued. To ensure that we continue to deliver on our net-zero ambitions, the Government have expanded their commitment to the green homes grant local authority delivery scheme and the social housing decarbonisation fund, with an extra £300 million of additional funding delivered across these schemes in 2021-22. That will bring the total spending on energy- efficiency measures to £1.3 billion, exceeding the Government’s manifesto commitment of £1 billion.

The noble Lord, Lord Shipley, asked about the decarbonising of the transport system. The Government recognise the urgency of stepping up the pace of progress to ensure that the transport sector plays its part in supporting the delivery of the UK’s emissions reduction targets. We have recently announced that the UK is embarking on a comprehensive transport decarbonisation plan, which will be a bold and ambitious programme of co-ordinated action needed to end the UK’s transport greenhouse gas emissions by 2050 and at the same time ensure that the transport sector plays its part in delivering our legally binding carbon budgets. The plan will think in terms not only of modes of transport but of technology and places. Part 1 of this plan was published in March 2020, with part 2, containing policies and proposals, expected shortly.

The noble Lord, Lord Knight of Weymouth, described an aversion to green spending. The outcome of the 2020 spending review counters this impression: in order to ensure that net zero remained a priority within a one-year spending review, the Treasury made exceptions on measures that are critical to meeting net zero by providing some multiyear settlements. SR20 committed £12 billion to green measures, boosting the UK’s global leadership on green infrastructure and technologies, ahead of COP 26 next year.

The noble Baroness, Lady Sheehan, asked about the alignment between revenue and net zero. Government cannot simply spend its way to net zero, not only because bearing the cost alone is simply unaffordable for current and future taxpayers but because spending is often not the most effective way to reduce emissions. It also risks crowding out private investment in the green industries of tomorrow: for example, while the 10-point plan will mobilise £12 billion of government funding directly, it will potentially drive three times as much from the private sector to create and support up to 250,000 green jobs.

The noble Lord, Lord Grantchester, asked about the Treasury’s net-zero review. The Government have announced that the review report will be published in spring this year, instead of its originally intended target date of autumn 2020. In the meantime, Her Majesty’s Treasury published an interim report this autumn, which sets out our approach to the review and analysis, which will inform the final report.

The noble Lord, Lord Knight of Weymouth, asked about our plans for the public sector. I can tell him that phase 2 of the public sector decarbonisation scheme has now been launched and has a stronger focus on heat decarbonisation, as this is what we need to reduce direct emissions from public sector buildings. Phase 2 of the scheme supports the transition to low-carbon heating in public buildings by providing funding to replace end-of-life fossil fuel systems, such as gas boilers, with low-carbon heat sources. The funding can be used to deliver projects that combine low-carbon heating measures, such as heat pumps, with energy-efficiency measures, such as insulation and LED lighting. Phase 2 of the public sector decarbonisation scheme has now closed to applications, and those that we received are being assessed.

The noble Baroness, Lady Altmann, raised the interesting issue of the Government’s plans for bitcoin and other cryptocurrencies. As always, the Government stand ready to respond to emerging risks or changes in the market and will continue to monitor how cryptoassets are being used in the UK, specifically with regard to the emissions that they create. This is an important point, but it is also vital to consider this in the context of the UK’s success in decarbonising the power sector. Between 1990 and 2019, the sector saw a reduction of emissions of 71%.

The noble Lord, Lord Redesdale, made some good points and asked about the potential to include a requirement for companies that fall within streamlined energy and carbon reporting to include an outline of their net-zero plans. It is important to note that, for most organisations in scope, this will be the first time that they will be reporting this information in company reports on a mandatory basis. We will therefore keep under review whether to mandate other types of disclosures, such as those that address the net-zero target, as we continue to evaluate the impact of these regulations and how the new reporting practices are being embedded.

In response to points made by the noble Lord, Lord Lea of Crondall, I can say that the Government already publish estimates of historic and projected UK emissions annually. Later this year, we will publish a net-zero strategy that will consider what metrics are needed to monitor delivery of our emissions targets, and will take the noble Lord’s helpful suggestion into account.

The noble Lord, Lord Knight of Weymouth, asked how the Government could elicit the behaviour change necessary to meet net zero. Reaching net zero requires not only changes to our energy systems and substantial new low-carbon infrastructure, but shifts in how we, as individuals, travel, what we buy and how we use energy in our homes. In many areas, delivering net zero will require the uptake of new lower-carbon technologies, such as electric vehicles or heat pumps. The Government are supporting people to adapt to these new technologies, with initiatives such as Go Ultra Low and the Simple Energy Advice service. We are also exploring how we could go further and support individuals to make green choices, as part of the development of our net- zero strategy.

In response to the question from the noble Baroness, Lady Hayman, regarding the Climate Assembly UK, I can tell her that the right honourable Alok Sharma as BEIS Secretary of State spoke at the report launch and welcomed the report. Its findings will help to shape the work that the Government are doing over the next year in the run-up to COP 26 and as we develop our plans for reaching net-zero emissions by 2050.

In response to the points made by the noble Baroness, Lady Sheehan, I can say that the Government have committed to issuing their first sovereign green bond. Subject to market conditions, this will be done this summer. Reflecting our long-term commitment to the green finance sector, we intend to follow up with a further issuance in 2021 to start to build out a green gilt yield curve.

On how to finance local authorities, the UK Infrastructure Bank has £4 billion set aside for local authority lending at very favourable rates. Furthermore, the Government launched the Green Finance Institute in July 2019, alongside the City of London Corporation. The GFI’s overarching mission is to accelerate the domestic and global transition to a clean, resilient and environmentally sustainable economy through accelerating UK leadership in green finance. Since its inception, the GFI has progressed significantly with initiatives and coalitions established on the built environment, transport, supply chains, and using finance to deliver nature-based solutions.

The noble Baroness, Lady Altmann, asked what could be done to encourage sustainable investments. Our new and ambitious UK ETS came into force on 1 January and will promote cost-effective decarbonisation in industry, power and aviation, allowing businesses to cut carbon where it is cheapest to do so. It will help to mobilise the scale of capital investment necessary, deploy clean energy technologies and capture new trade opportunities on the back of the energy transition.

In response to the points made by the noble Baroness, Lady Bennett of Manor Castle, I can tell her that the Government are currently consulting on a bottle deposit return scheme for England, Wales and Northern Ireland. With regard to the UK shared prosperity fund, a point raised by the noble Baroness, Lady Sheehan, I can say that the 2020 spending review sets out the main strategic elements of the UK SPF in the heads of terms, and the Government will shortly publish a UK-wide investment framework later this year and confirm the multiyear spending profiles at the next spending review.

As we develop our plans for reaching net-zero emissions by 2050, we will of course continue to engage with local authorities, devolved Administrations, businesses and the public on the changes needed to develop our ambitions to reach net zero. I know that I can speak for my right honourable friend the Secretary of State when I say that significant work is under way to engage with stakeholders across society at pace to understand how the transition can best work for the whole country.

This year we find ourselves in the extremely privileged position of being both president of the G7 and host of COP 26, and we are determined to use both those key international moments to promote ambitious action to deliver the transformational change required by the Paris agreement. Ahead of COP 26, we will bring forward further bold proposals, including a net-zero strategy to cut emissions and create new jobs and industries across the whole country, going further and faster towards building a stronger, more resilient future and protecting our planet for this generation and those to come.

Greenhouse Gas Emissions (Kyoto Protocol Registry) Regulations 2021

Lord Callanan Excerpts

Thursday 15th April 2021 Lords Chamber

Moved by

[Lord Callanan]

That the draft Regulations laid before the House on 25 February be approved.

Relevant document: 48th Report from the Secondary Legislation Scrutiny Committee. Considered in Grand Committee on 13 April

Motion agreed.

National Security and Investment Bill

Lord Callanan Excerpts

Report stage
Thursday 15th April 2021 Lords Chamber

[Lord Grantchester (Lab)]

My Lords, we remain committed to the principles of the Bill, and join others in thanking the Minister and his team for the way they have conducted discussions with us to resolve any issues on the Bill. One of the issues that remains involves the extensive adventure of the unit into the business environment. In Committee, my colleague and noble friend Lady Hayter introduced an amendment to delete Clause 6(2)(b), and asked why the Government wished to make subject to mandatory notification all acquisitions that resulted in only a minimum 15% stake in an entity. We consider that disproportionate. The noble Lord, Lord Leigh, also spoke passionately on the point, as did several other noble Lords. My noble friend apologises because, understandably, she cannot take part in these proceedings today.

However, it is to be welcomed that the Government have heeded the concerns about the unnecessary impact on businesses and the largely intrusive workload for the new ISU section in the department. Government Amendment 3, together with the consequential amendments in this group, would remove the 15% threshold for notifiable acquisitions from the regime. Throughout the proceedings on the Bill, we have been concerned about the impact on businesses, especially in the SME sector, and the huge workload that the Bill would create. That government concession goes a long way towards meeting those concerns.

The Government will still be able proactively to call in transactions involving acquisitions under the 25% threshold of shares or votes if such an acquisition could be deemed to result in “material influence”. However, the ISU would be notified only of transactions most likely to raise national security risks in the most sensitive sectors of the economy. This is plainly sensible. The removal of the 15% threshold will also remove unnecessary impediments to investments in smaller start-ups and enterprises, which might have concerns about hitting the 15% threshold.

Initially the Government reckoned that the new screening regime would result in about 1,800 notifications per year. We expressed scepticism at that estimate, as did several others, including the CBI. Whatever would have been the result, have the Government now recalculated how many notifications the department is likely to receive, having deleted the 15% threshold? I would be grateful if the Minister could give the House the new figure, with any further explanations as to its determination. It would be useful to reflect on it, in the light of the experiences of the unit that are to come.

I am grateful, too, to the noble Lord, Lord Hodgson, for his Amendment 8, which redrafts Clause 8(6). I understand very well the point he is making, and I await the Minister’s reply.

[The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)]

I am grateful to noble Lords for an interesting debate, and I am particularly grateful to my noble friends Lord Lansley and Lord Hodgson for their respective amendments in this group concerning the scope of the regime. I will turn to those in a moment, but let me start with a few remarks on the amendments in my name.

Debates on the Bill, both in this House and in the other place, have reflected that there is a strong degree of cross-party consensus on its underlying principles. I am grateful to the Opposition for making that clear. All sides agree that reforms are necessary to keep the country safe and to bring our investment screening powers in line with our friends and allies. There has also been a shared recognition that the requirements of the mandatory regime must be no more than are necessary and proportionate for the protection of our national security, so that business and investment are not unduly burdened or stifled.

The noble Lord, Lord Fox, put it well in Committee when he reminded us that the clue is in the name. This is the National Security and Investment Bill, and it is vital that we secure both these interests. To that end, the Government have reflected carefully on the scope of the mandatory regime and, in particular, on the comments made by a number of noble Lords in Committee on the 15% starting threshold. I pay particular tribute to the noble Baroness, Lady Hayter, who raised this—and who is, I am pleased to see, in her place, taking a break from her “get out the vote” campaign. Perhaps she would be better advised to be getting out the vote, but I am grateful that she has joined us. I am also grateful to my noble friends Lord Leigh and Lady Noakes, the noble Baroness, Lady Bowles, and the noble Lord, Lord Fox, who all spoke powerfully in support of her amendment.

The Government have concluded that the right approach is indeed to remove acquisitions between 15% and 25% from constituting “notifiable acquisitions”; Amendment 3 gives effect to this decision. We recognise that acquisitions between 15% and 25% will not result in material influence being acquired as a matter of course. Indeed, in many cases, we anticipate that material influence will not be acquired. We have always sought to ensure that the mandatory regime is reasonable and proportionate, and this is an important change, which I believe businesses and investors alike will welcome. I hope that it will reduce the business burden and allow the investment security unit to focus on notifications and cases that will necessarily result in control being acquired.

Let me make two further points on this amendment. First, there may be some noble Lords—my noble friend Lady Neville-Rolfe was one, I believe—who will say that this is a weakening of the regime. Let me explain why I do not believe that that is the case. As the noble Lord, Lord Fox, pointed out, the Secretary of State will continue to be able to call in acquisitions across the economy at or below 25%—and, indeed, if necessary, below 15%—where they reasonably suspect that material influence has been or will be acquired. That call-in power will be available up to five years after an acquisition takes place, so the incentive for parties to notify cases of material influence that may have national security implications remains, in order to achieve deal certainty. The five-year period also provides the Government with a significant window to identify acquisitions of concern and for the Secretary of State to call them in for scrutiny.

Secondly, the Clause 6 powers enable the Secretary of State to amend the scope of the mandatory regime through regulations. Notwithstanding this amendment, that would include the ability to introduce, if necessary, a 15% threshold or, indeed—assuming the will of Parliament, of course—any other threshold that would be relevant to determining whether a trigger event would take place, for mandatory notification in future if that is considered appropriate. The Government do not currently envisage doing so, but I am sure that noble Lords will agree that it is important that the Bill provides the power to do so, subject to the will of Parliament, if the evidence of the regime in practice suggests that this matter should be revisited. I hope that that reassures my noble friend Lady Neville-Rolfe.

Amendments 4, 5, 10 and 21 are all consequential amendments that reflect the removal of the 15% threshold, so I do not intend to dwell on them further.

I now turn to the other amendments in this group. Amendment 2 in the name of my noble friend Lord Lansley would make the acquisition of material influence a notifiable acquisition. I have to say that, in his speech, my noble friend did such a good job of advocating for the Government’s position on his own amendment that perhaps we should welcome him back to the Front Bench at some stage; actually, he would probably make a better job of it than me.

The Government do not consider that broadening the scope of the mandatory regime to material influence would be appropriate. The mandatory regime, given that it is underpinned by voiding and criminal and civil sanctions, must be defined with sufficient certainty for acquirers to determine their obligations objectively.

--- Later in debate ---

[Lord Leigh of Hurley (Con)]

I suppose I should say that modesty had forbidden me from putting my name down for this group. I wanted to have a point clarified and to thank the Government for listening to the Back-Benchers. I think it was fairly random that I took the 15% point: I cannot remember how it was allocated. I thank the Minister for listening to the many people who made representations.

In respect of the point from the noble Lord, Lord Lansley, about the fourth case—Clause 8(8)—we debated this and I think I raised the question at the time as to what influencing the policy of the entity means. To return the compliment to the Government, I agree with them in this instance because if we had Clause 8(8), I can see a lot of discussion and debate as to the meaning of enabling a person to materially influence “the policy”. We discussed the meaning of this at length. I return the compliment and agree with my noble friend the Minister.

[Lord Callanan (Con)]

I will just say that, as always, I agree with my noble friend.

[Lord Lansley (Con)]

My Lords, it has been a helpful debate, not least from the point of view of helping those—I imagine that over time, there will be more of them than we imagine—who will look back and ask what the intentions were behind the Bill as it was brought forward. If I perhaps can say by way of comfort to my noble friend Lady Neville-Rolfe, the point that we have discovered going through the Bill is that there are two tracks here—I confess that my Amendment 2 was tabled originally not quite getting that point. First, there is mandatory notification, which is required in respect of a notifiable acquisition, so the definition of notifiable acquisition needs to be specified very clearly. Then there is voluntary notification but also the power of Ministers to call in any transaction. That is precisely the point that the noble Lord, Lord Fox, made very clearly and which my noble friend on the Front Bench reiterated.

The common theme here is that taking out the 15% threshold and, indeed, not including the material influence test in notifiable acquisitions, means that it is not subject to a mandatory notification requirement. As my noble friend said, we should not ignore the fact that under Clause 13(1):

“A notifiable acquisition that is completed without the approval of the Secretary of State is void.”


The risk associated with an unclear boundary between what is notifiable and what is not is that potentially large numbers of acquisitions that should be notified are not and therefore those transactions are void. We do not want to arrive at that position. We want people who run the risk of their transaction being a notifiable acquisition either being captured by the mandatory requirement or voluntarily notifying. Frankly, for many people voluntary notification will probably be the better and simpler resort.

Taking out the 15% threshold does not mean, in any sense, that those transactions are taken out of the scope of the regime but simply means that they are dealt with within the regime in a more flexible manner than would be the case through the mandatory notification requirement. Some of the press reports I have seen about this slightly miss the point. This is not a hard-and-fast threshold. It is a threshold for mandatory notification, not voluntary notification. The regime still applies.

My noble friend very helpfully responded to my Amendment 2 in precisely the way that I anticipated and quite correctly and, on that basis, I beg leave to withdraw Amendment 2.

--- Later in debate ---

Moved by

[Lord Callanan]

3: Clause 6, page 4, line 17, leave out paragraph (b)
Member’s explanatory statement
This amendment has the effect of omitting a category of notifiable acquisitions from the scope of the mandatory notification regime, namely where a person acquires a right or interest in a qualifying entity such that their shareholding or voting rights in the entity increases from less than 15% to 15% or more.

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[Lord Grantchester (Lab)]

My Lords, in Committee we debated the climate emergency as the most pressing issue that affects every aspect of everyday life. The climate crisis is not only a threat in the long term to our survival and that of the planet but a threat to security in the short to medium term. According to the Government’s own statistics, nature loss will result in a cumulative economic cost of up to £10 billion between 2011 and 2050. While the Minister may say that climate change is not directly connected to the national security and investment regime proposed in the Bill, actions by hostile actors that stifle our modern green infrastructure can only make us more vulnerable. As the former civil servant Paddy McGuinness has recently said, green networks

“provide an attractive opportunity for an adversary to unbalance, intimidate, paralyse or even defeat us."

I am grateful to the noble Lords, Lord Fox and Lord Clement-Jones, and the noble Baroness, Lady Bennett, who have returned with simple “must have regard to” wording in Amendments 6 and 7 regarding climate change and biodiversity loss. Of course, all Governments will have regard to all legislation on the statute book that impacts on our activities and lives. Nevertheless, it is imperative that the risks of climate change be recognised in the new regime being initiated through the Bill, and the Secretary of State must consider how to mitigate these deepening risks.

I am grateful to the noble Baroness, Lady Bennett, for retabling our Amendment 38 from Committee, which asks for a statement to be made on emerging threats in the light of priorities identified in the Integrated Review of Security, Defence, Development and Foreign Policy. It allows me to follow up with some further questions on the integrated review and its associated documents.

Can the minister provide an outline of how the ISU will work effectively with the MoD directorate for economic security? It is all very well to say that the ISU will be drawing on the expertise in the MoD and the Defence Secretary will be able to make representations to the Business Secretary, but what mechanisms will be set up to co-ordinate across departments? Will there be a mechanism whereby the MoD directorate can give advice directly to businesses in a defence and supply chain through policies initiated from the ISU in the business department, especially in connection with technologies and future associated threats? It would be helpful if the Minister could respond or follow up with a letter in due course.

[Lord Callanan (Con)]

I am grateful once again to the noble Lords, Lord Fox and Lord Clement-Jones, and the noble Baroness, Lady Bennett—I am particularly grateful that she has joined us after her dental work and of course we wish her a speedy recovery—for their respective amendments in this grouping.

With the permission of the House, I will take Amendments 6 and 7 together. Amendment 6 seeks to require the Secretary of State to

“have regard to the risk to national security posed by climate change”

when preparing secondary legislation under Clause 6 in relation to the scope of the mandatory notification regime. Amendment 7 then seeks to amend Amendment 6 to require the Secretary of State to also have regard to the risk to national security posed by biodiversity loss.

I commend the sentiment of the amendments regarding tackling climate change. As I set out in Grand Committee, this Government are of course committed to tackling the climate crisis. I can also confirm, in response to the amendment of the noble Baroness, Lady Bennett, that, just as the Prime Minister has said in his foreword to the integrated review, biodiversity loss very much sits alongside that as the UK’s top international priority. The Government continue to promote co-operation on climate action through the UK’s G7 presidency, and we look forward to the COP 26 conference in November, which will allow us to highlight our leadership in tackling the climate crisis, including biodiversity loss.

However, the Bill is focused on the risks to our national security posed by the acquisition of control over qualifying entities and assets. As the noble Lord, Lord Fox, correctly predicted, we are therefore unable to accept amendments seeking to set out what is or is not a factor to be considered when looking at national security, including factors relating to climate change and biodiversity loss, without edging closer to defining it—which, as he knows, we are reluctant to do. I hope that having my comments on the record in response to these issues provides due assistance to noble Lords. I can further reassure them that, as drafted, the Bill provides the flexibility for the Secretary of State to consider all types of risk to national security that are relevant in the context of this regime, including those that are environmental in nature.

I thank the noble Baroness, Lady Bennett, for her Amendment 38, which seeks to ensure that the national security and investment regime is consistent with the recently published integrated review. I note that a similar amendment was tabled in Grand Committee by the noble Baronesses, Lady Hayter and Lady Northover. However, whereas that amendment asked for a report

“as soon as reasonably practicable”,

the noble Baroness, Lady Bennett, has opted for “within six months”. As noble Lords will be aware, the integrated review provides a comprehensive articulation of the UK’s national security and international policy. It outlines three fundamental national interests: sovereignty, security and prosperity.

I understood the benefits of an amendment in Grand Committee when the Government had not published the integrated review but, now that we have, the alignment is clear for all to see. For example, the NSI will be tremendously valuable in countering state threats, in maintaining the UK’s resilience and in helping us to work with and learn from our allies, to name but a few areas of alignment. Indeed, as noble Lords would expect, this Bill is explicitly referenced within the review.

As noble Lords will know, the National Security and Investment Bill will prove a key tool in enabling the UK to tackle its long-term security concerns and pursue its priorities. The Bill will create carefully calibrated powers for the Secretary of State to counteract concerns around acquisitions and the flexibility to respond to changing risks and a changing security landscape. As part of this, the regulation-making powers in the Bill allow the Secretary of State to keep pace with emerging threats as they arise, such as by enabling them to update the sectors covered by mandatory notification.

Therefore, for the reasons that I have set out, I do not see a strong case for the amendments and I very much hope that their proposers will feel able to withdraw them.

[Baroness Bennett of Manor Castle (GP) [V]]

I beg leave to withdraw the amendment.

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[Lord Callanan (Con)]

I am of course grateful to the noble Lord, Lord Bruce, and my noble friend Lady McIntosh for Amendment 9 in their names. As they outlined, it seeks to exempt from the call-in power acquisitions made by way of obtaining security over a qualifying entity where no effective control is obtained. I start by placing on record my thanks to the noble Lord, my noble friend and the Law Society of Scotland for meeting my noble friend Lord Grimstone and me following Grand Committee to discuss this issue in detail. Indeed, we have considered all the points that were made.

As I emphasised in that meeting and in our subsequent correspondence, the Government do not consider that the provision of loans and finance is automatically a national security issue. Indeed, lenders need confidence that they can see a return on ordinary debt arrangements in order to provide that service. However, we must also recognise that in a small number of cases national security risks can arise through debt arrangements. Noble Lords have particular concerns about the Bill with regard to Scotland. I understand—and the noble Lord, Lord Bruce, stated—that this is because it is usual practice in Scotland for a lender to become the registered holder of shares in security through a shares pledge.

Having heard the concerns, the Government have reflected carefully on the issue, but we continue to believe that an exclusion would not be appropriate in this case. In such circumstances, the legal title to shares will, as a matter of fact, have been acquired by the lender, and it is important that we do not inadvertently create a loophole that those who wish us harm might otherwise seek to exploit.

While I note that the proposed amendment has been updated since the version debated in Grand Committee, reflecting my noble friend’s intention to limit the exemption to situations where “no effective control” is obtained, I fear that this would be difficult to reconcile with the mandatory regime.

It would introduce a new, inherently subjective concept that would sit uncomfortably with the need for acquirers to be able to objectively determine their legal obligations. I hope that noble Lords who have stayed the course on this Bill—a small, gallant band—will know by now that it is focused on the central premise of acquiring control, with these circumstances defined in detail in respect of entities in Clause 8. This amendment would lead to a circular argument in the Bill, in which a trigger event is the acquisition of control—except for when control is not acquired. I am sure that a number of lawyers in this country would be licking their lips with that provision in the Bill.

I mentioned particular concerns about how this would affect the mandatory regime, but the Government also consider that this would cause difficulties for voluntary notification and for the Secretary of State’s call-in power. None the less, both my noble friend Lord Grimstone and I have committed to monitoring the operation of the regime in practice with regard to this issue. Clause 6 provides the Secretary of State with the power to make “notifiable acquisition regulations” to amend the scope of the mandatory regime. That could be used in future, if considered appropriate, to exclude circumstances related to acquisitions by way of security from the mandatory notification regime.

I will address head-on the point made by the noble Lord, Lord Bruce, that this will be particularly disadvantageous to Scotland. It is important to emphasise that such lending arrangements are also possible in England and Wales—albeit we know that they are less common. This Government are staunch supporters of Scotland and it is vital that the Scottish legal and finance sectors continue to flourish.

Let me briefly make three other points on this amendment, which I hope will provide further reassurances to the noble Lord and my noble friend. First, the Bill broadly mirrors the existing approach of the persons with significant control register, which does not exclude legal owners of shares acquired by way of security. I take great confidence from the fact that this has been in place since 2016 and has had no discernible effect on the willingness of lenders to provide finance in Scotland.

Secondly, the mandatory notification and clearance element of the regime is proposed to apply only to entities of a specified description within 17 sectors of the economy. The number of circumstances requiring notification where a lender acquires the legal title to shares at or above the thresholds in this Bill is therefore likely to be low and, as with all acquisitions, the Government expect that the overwhelming majority will be quickly cleared to proceed.

Thirdly, as has been previously debated, I am sure my noble friends will welcome the removal of the 15% threshold I spoke about in a previous group. This will further reduce the number of cases covered by the mandatory regime in relation to securities.

So, for all the reasons I have outlined, I hope that both noble Lords will accept the arguments I have put forward and will feel able to withdraw the amendment.

[Lord Bruce of Bennachie (LD) [V]]

I thank the Minister for his response and for addressing the details. I am not convinced that the Law Society will be entirely satisfied that the difference between Scottish and English law has been fully appreciated. The Minister talked about legal title but, as I said in my opening remarks, legal title is meaningless if the shares pledge explicitly excludes any mechanism for dealing with the shares—either receiving voting rights, dividends, or the right to sell and an obligation to have them back when the loan is repaid. It simply is not control.

I take note that the Minister is concerned that the Scottish situation is not unique and therefore could cause complications in England and Wales, but the practice is clearly well established in Scotland. As I said in my opening remarks, it has been since the 19th century and is relatively unusual elsewhere in the UK.

I understand that the Minister believes that there will be relatively few instances, but part of the problem with the Bill is that an awful lot is undefined, in terms of the 17 sectors, the details of how those will be determined, the circumstances in which triggers will happen and the definition of national security. All of those things are explicitly not set out in detail.

I welcome Ministers saying they will monitor the situation closely. The assurance I would be looking for if we withdraw this amendment—obviously we will ask the Law Society what it feels about the unamended Bill—is that, if it becomes apparent there is a significant negative impact on Scottish business and the Scottish sector, the Government will be prepared to act to remove such discrimination.

It is a long-established fact that one reason the Scottish financial services sector is so strong is that it has a long history of prudent asset management and insurance, which has given Scotland a disproportionate share of both national and international business because of its reputation for, if I may put it in these terms, “canniness” in managing investments and other people’s money. That being the case, we do not want a situation where the law as introduced somehow compromises that. That would not be good for Scotland or the UK either.

I hope these remarks will be noted by Ministers and they will undertake to consult and respond to any representations that emerge showing that the concerns we have outlined are real and significant. If the Minister is correct in his assurance that, though they may be real they will not be very significant, perhaps the matter can rest. But I am sure that I, the noble Baroness, Lady McIntosh, and others will make it clear to him that, if it becomes apparent that there is a significant problem for Scotland and that uncertainty is disadvantaging Scotland, he will hear about it. In the meantime, I withdraw the amendment.

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Moved by

[Lord Callanan]

10: Clause 14, page 8, line 30, leave out paragraph (b)
Member’s explanatory statement
See the explanatory statement to the amendment at page 4, line 22.

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Moved by

[Lord Callanan]

22: Clause 53, page 33, line 15, after “if” insert “a sender or”
Member’s explanatory statement
This amendment clarifies that regulations under Clause 53 may make provision in respect of non-individuals required to give notices and any other documents under the Bill, as well as those in receipt of such documents.

[Lord Callanan (Con)]

My Lords, I rise to move Amendment 22 in my name, but with the permission of the House I will also speak to Amendments 23, 25, 27 and 32. I shall begin with Amendments 25, 27 and 32.

A strong theme of debate in Grand Committee, and in the other place, has been whether there is sufficient accountability in the regime—in particular, through the reporting requirements in the annual report. In general, as the House will be aware, the Government’s position has been that, as the Secretary of State may add anything judged appropriate to the annual report, there is no need to amend the Bill to include additional reporting requirements. The Government have, however, listened to proposals, including those made through amendments tabled in Grand Committee, and seek to add additional reporting requirements where it is judged that they would provide significant additional value for parliamentarians and the general public.

Amendment 32, in my name, will therefore increase the level of detail provided on final orders in the annual report, so that in addition to their total number being published, the number of orders varied and revoked will also be published. We recognise that final orders will be significant and reflective of government intervention following the call-in of an acquisition. There will already be a duty on the Secretary of State, in Clause 29, to publish notice of the fact that a final order has been made, varied or revoked. It is therefore appropriate that we provide information on the total number of orders varied and the total number of orders revoked. I thank, in particular, my noble friend Lord Lansley for this proposal, and for our discussions on how to improve this Bill prior to, during, and following Grand Committee. His counsel has been much appreciated.

Amendments 25 and 27 address the concern that the requirements on the Secretary of State to decide whether to accept or reject a mandatory notice or voluntary notice are insufficiently specific. As it stands, the Secretary of State must decide

“As soon as reasonably practicable”


after receiving a notification, and thereafter notify parties of his decision as soon as practicable. I set out during Grand Committee that the Secretary of State would strive to ensure that decisions to accept or reject notifications were made quickly. In many cases “as soon as reasonably practicable” is expected to be a very short period indeed, but we do not consider it appropriate to limit the period to a specific number of days, so as to provide scope for flexibility where required. In place of that, the Government propose reporting on the average number of days taken to respond to voluntary notices and mandatory notices. This additional detail will, we believe, ensure that parliamentarians and the wider public will be able to judge whether the Government’s expectation that this will be a matter of hours or days is proving correct year on year. Of course, these changes do not preclude the Secretary of State from going further by providing more information than required, where the information provides value to Parliament, and where, in particular, it provides reassurance where there is no time limit expressed in terms of a number of days.

Amendments 22 and 23 are minor amendments. Noble Lords will be aware that Clause 53 provides for regulations to be made setting out the procedure for service of documents under the Bill. These changes are intended to put the scope of the power beyond doubt. A change is proposed in subsection (2)(g), so that it is clear that the regulations may specify what must, or may, be done in relation to service of documents by senders outside the United Kingdom. A corresponding change is then made to paragraph (e), to avoid any doubt that the regulations will be able to set out what must, or may, be done where a sender is not an individual.

I hope that I have made clear the principles on which the Government are approaching the amendments in this group. I beg to move.

[Baroness Noakes (Con)]

My Lords, I have a number of amendments in this group, all of which would amend the annual reporting requirements. Some of them overlap with amendments that my noble friend has just spoken to. In particular, my Amendments 26 and 28 are similar to his Amendments 25 and 27. The difference is that my noble friend’s amendments ask for the average time to be given, whereas I ask for both the average and the maximum, because averages can be very misleading. However, we shall have some data, and I am sure that those can be used as a springboard for further examination of BEIS Ministers and officials, if either House wished to do that, so I shall not pursue those amendments.

Of my other amendments, Amendment 29 asks for differentiation between call-in notices issued for mandatory and for voluntary notifications. That is not given, and it is quite an important bit of information, which would be useful to enable us to see how important that mandatory notification route turns out to be. The other thing I have asked for is a focus on timing—the time between issuing the call-in notice and getting to the end of the process and giving the final notifications and the final orders. I continue to believe that those areas would be important for keeping an eye on how well the process is operating, especially as there are very long times available once the call-in notice is issued. Again, I am sure that questions can be tabled and Ministers can be interrogated in the usual way, so I am not worried about that. I am glad that my noble friend has moved towards more transparency, although he has perhaps not gone quite as far as I would have preferred.

Although I have not added my name to the amendment in the name of the noble Lord, Lord Grantchester, I think it is important for annual reporting to keep a focus on the resources dedicated to this, because the timing performance will be in part a reflection of whether adequate resources have been dedicated. Of course, giving numbers never gives an idea of the quality of resources, so that can only ever be an imperfect picture, but it is important for Parliament to have an opportunity to review and keep in focus the resources dedicated to the ISU processes. That is where the biggest impact is likely to be felt by businesses as they come up against the system. Well done for bringing in some transparency; a bit more would have been better.

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[Lord Grantchester (Lab)]

I welcome the lead amendment in this group from the Government, providing greater clarity to the Clause 53 procedure for service. However, the bulk of the amendments in this group concern Clause 61, on the annual report. I thank all noble Lords who have contributed to this debate.

In commerce, I have always championed annual reports as a strategic publicity document for an organisation, displaying how it is performing, how effective it has been, what results and achievements it has attained and what wider societal responsibilities it has performed. It can be far more than a dry, lumpy statutory document that has to be produced and is a chore to be complied with. I am sure it should be the same for government departments and public agencies.

I am grateful, therefore, for the dialogue since Committee with the Minister and his team regarding this issue. I am very glad that the Government have looked again at Clause 61 and at the material that could be provided in the annual report of this new unit and its operation. I am grateful to the noble Baroness, Lady Noakes, for looking at this and extending the information to be provided to cover both mandatory notifications as well as voluntary notices.

The noble Baroness has also added many more aspects that would provide greater visibility for the activities of the ISU. It is important that the Government are transparent about these areas so businesses can see the impact on their activities and compare experiences. Parliament and the public can monitor the work of the unit and determine the value to national security activities and how far legitimate businesses are being affected. These amendments were all supported by the UK BioIndustry Association. I thank it for the briefings it has sent throughout the Bill.

However, we still believe that there is more that the Government could do to assist the understanding of this new regime. I thank the noble Lord, Lord Clement-Jones, for adding his name to my Amendment 34. Greater transparency could still be given on the resources allocated to the new unit, the extent to which small and medium-sized enterprises are called in under the regime and the Bill’s impact on foreign investment. This is about requiring greater accountability from the department on the unit’s service standards.

The business community still remains somewhat nervous concerning the impacts on it as a result of the Bill. Throughout its passage, we have sought to champion clarity and support for SMEs and innovative start-ups, which are the engine of growth in the economy, create many new jobs and enhance prosperity. We are keen to foster a business environment in which SMEs can thrive.

It would be beneficial for the Government to report on the unit’s work with SMEs in the annual report. This can only be helpful in providing detail and reassurances to SMEs on the operation of the unit and its impacts on them. I would be very grateful if the Minister could provide reassurances that his department will embrace the annual report in a positive manner and provide as wide a range of information as possible.

[Lord Callanan (Con)]

My Lords, first, I thank all noble Lords who spoke in this debate, particularly my noble friend Lady Noakes—for her Amendments 26, 28, 29, 30 and 31—and the noble Lords, Lord Grantchester and Lord Clement-Jones, for Amendment 34.

I also thank my noble friend Lady Neville-Rolfe, to whom I will reply first. The Government have written on plans for a range of guidance, as my noble friend said. This is intended to aid parties in understanding and complying with the Bill. Timings and matters of requirements are set out in the legislation; they were consulted on, and of course they cannot be added to in guidance. As in the past, the Constitution Committee advised us quite strongly against legislating through guidance. Of course, we remain open to further proposals for guidance that assists in understanding and complying with the basic provisions in the Bill.

I move on to Amendments 26 and 28, which seek to require the Secretary of State to report on the “maximum and average time” taken to process mandatory and voluntary notices. These amendments would also require the Secretary of State to report on the “maximum and average time” taken between a notice being accepted and a call-in notice or notification of no further action being given or issued. Clauses 14 and 18 already set out that, if a notification is accepted, the Secretary of State has up to 30 working days to either give a call-in notice or notify each relevant person that no further action will be taken under the Bill.

I outlined in Grand Committee that these timings are a maximum, not a target. I have also set out the principles by which the Government consider it appropriate to specifically amend the Bill to require additional reporting, rather than to judge over time whether it would be beneficial to publish the information. It is already clear in the Bill that the maximum time that can be taken to make a call-in decision is 30 working days.

On the point of including average times, as I hope noble Lords will appreciate, each case will turn on its own facts. Therefore, reporting an average time without explaining the complexities of every individual case would be meaningless, in my view. For example, there may be a low average for some response times where particularly straightforward cases were prevalent—this may be held up as an efficient case review. There may be another period where particularly complex cases are dealt with exceptionally efficiently but none the less slightly more slowly. What would a comparison of the averages without further details on the cases provide? To my mind, it would provide nothing but a misunderstanding.

Amendment 29 seeks to require the Secretary of State to separately report on the number of call-in notices given in response to mandatory and voluntary notifications. I reassure the noble Baroness that the Bill already allows for the Secretary of State to do this in the future if deemed useful. Clause 61 sets out minimum reporting requirements that the Secretary of State must meet in the annual report.

Amendments 30 and 31 seek to require the Secretary of State to report on the “maximum and average time” taken between a call-in notice being issued and the making of a final order as well as the “maximum and average time” taken between a call-in notice being issued and a final notification that no further action will be taken under the Bill. In my view, the same argument applies in response to these amendments.

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The key players in the other place, as I see it, are Johnson, Gove and Rees-Mogg. From a political point of view, those are not people of substance. Shallow, mediocre and trivial is the way in which I would sum them up. That is the issue. We have messages here from people who have been at the front line, and we are simply saying to the Commons, “We want you to think again about this, and the reasons we want you to do so have been deployed in this debate.” They, the Commons, ought to be asking the Government—and no one has had the answer yet, unless we get it from the Minister—what is the Government’s central objection? That is what this is all about and, unless we get an answer from the Minister, I will certainly recommend that my noble friends support my noble friend Lord West in a Division.

[Lord Callanan (Con)]

My Lords, perhaps I may start by welcoming back to the Front Bench the noble Lord, Lord Rooker, who is an extremely adequate substitute, if I might say. It is a delight to see him back and fully recovered from injury.

There have been a lot of analogies about rugby and positions in this debate. I did not really play much rugby in my career, which is probably a good thing, but the occasional time that we played at school, I seemed always to be the hooker, which seemed, in the poor quality of rugby that we played, to be the one in the middle of the scrum being kicked by everybody else—somewhat appropriate in this debate.

I thank the noble Lords, Lord West and Lord Butler, for their Amendments 24 and 33, which would require the Secretary of State to provide additional information on regime decisions, either in the annual report, or, where details are too sensitive to publish, in a confidential annexe to the Intelligence and Security Committee. This information would include summaries of decisions to make final orders or to give final notifications, and summaries of the national security assessments provided by the security services in relation to those decisions.

A number of noble Lords have spoken with such passion and knowledge on this important issue, both in this debate and when we previously discussed amendments in this area during Grand Committee. I am particularly grateful—I say this genuinely—to the noble Lords, Lords West and Lord Butler, for their careful consideration of the words used by my colleague my noble friend Lord Grimstone during Grand Committee, and for their continued pursuit of an amendment that attempts to satisfy all parties.

The noble Lords’ amendment would effectively require the Secretary of State to include material provided by the security services in a confidential annexe. Of course, the ISC is already able to request such information from the security services as part of its long-established scrutiny of those organisations, as is set out in the Justice and Security Act 2013 and its accompanying memorandum of understanding.

I will directly address the issue raised by the noble Lord, Lord West, and others, about the BEIS Select Committee and its access to sensitive or classified information. The Government maintain their view that there is no barrier to the committee handling top-secret or other sensitive material, subject to agreement between the department and the chair of the committee on appropriate handling. As part of its role, the BEIS Select Committee can request information, which may include sensitive material, from the Secretary of State for BEIS, including on the investment security unit’s use of information provided by the intelligence and security agencies. The Select Committee already provides scrutiny of a number of sensitive areas and there are mechanisms in place for them to scrutinise top-secret information of this kind on a case-by-case basis.

The amendment would also require sensitive details to be provided to the ISC of the Secretary of State’s decisions in respect of final notifications given and final orders made, varied, or revoked. As we discussed earlier, the Bill already provides that the Secretary of State must publish details of each final order made, varied, or revoked. The Government have also recognised that providing this information at an aggregate level will be helpful, and Amendment 32 in my name would require the Secretary of State to include the number of final orders varied and revoked in the annual report. Even without Amendment 32, Clause 61 already requires the report to include the number of final orders made. The Secretary of State must also include in his annual report a number of other details pertinent to this amendment. I am confident that this will provide a rich and informed picture of the Government’s work to protect our national security from risks arising from qualifying investments and other acquisitions of control.

As I have said before, for further scrutiny, we welcome the fact that we can follow existing appropriate government procedures for reporting back to Parliament, including through responding to the BEIS Select Committee, which does such an excellent job of scrutinising the work of the department. As the Secretary of State for BEIS said on 13 April, during a session of that committee, the NSI Bill “sits within BEIS” and the powers of the Bill sit with the Secretary of State for BEIS.

The chair of the BEIS Select Committee—who, I remind noble Lords, is an Opposition Member of Parliament—supported the view that his committee should scrutinise the investment security unit as part of its oversight of the department. Therefore, it makes sense that, from a governance perspective, the BEIS committee should be the appropriate scrutinising committee.

As this was discussed at length in Grand Committee, I do not wish to try the patience of the House by repeating the assurance that my noble friend Lord Grimstone, the Minister, provided to the House on the ability of the BEIS Select Committee to request and see materials regarding the work of the investment security unit. Therefore, I hope—it is probably more in hope than expectation—that noble Lords will accept my explanation and feel able to withdraw their amendments.

[Lord West of Spithead (Lab)]

My Lords, I thank all those who had an input in this debate, particularly those supporters. We almost got a full scrum, with the noble Lord, Lord Lansley, added as well—we had a bit of weight there. We are more second than front row, to be quite honest, but I have now found that the Government Minister is actually a hooker, so we have a bit of front row around. As he rightly says, the hooker gets punched by everyone—I am afraid that that is the way that it is going tonight.

I have considerable sympathy for the Minister: I was in that position when I had to argue for 90 days pre-trial detention. Because I am not really a politician, I had actually already said on the “Today” programme that I thought that this was a very dodgy thing to do—and then I had to stand at the Dispatch Box and argue for it. Lo and behold, I am in Guinness World Records for the biggest defeat of the Government since the House ceased being entirely hereditary—so I feel for the Minister.

However, I am afraid I question a couple of the things that he said—for example, the chairman of the BEIS Committee has no objection to my amendment at all, so he was given some wrong information there. I also fear that the Minister has failed to provide an explanation for the Government’s intransigence and indeed seems willing to stop Parliament having a mechanism whereby it can scrutinise highly classified intelligence, based on which key decisions are made. To cut it short—I have spoken for far too long—I therefore have no choice but to test the opinion of the House on this key amendment.

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[Lord Grantchester (Lab)]

I am grateful to the noble Lords, Lord Fox and Lord Clement-Jones, for the amendment, which proposes a super-affirmative process for regulations under subsection (1) of Clause 6, “Notifiable acquisitions”. This was debated at length in Committee, and we certainly agree that parliamentary scrutiny of regulations is not always as meaningful as it might be. We can feel sympathy with the view that notifiable acquisition regulations are highly significant and require proper oversight, not merely by both Houses of Parliament but also by many experts who might become involved.

The opinions of those experts could be sought and made available to Parliament and deliberated on. The importance of consultations with stakeholders who are knowledgeable and familiar with the situation at the leading edge is also recognised. However, the Delegated Powers and Regulatory Reform Committee did not call for the super-affirmative procedure to be adopted for these regulations under the Bill. Indeed, in its report of 22 February it said that

“there is nothing in the Bill to which we would wish to draw the attention of the House.”

It would be unusual to take a view contrary to the considered opinion of that well-respected committee of your Lordships’ House.

We remain somewhat sceptical about how the super-affirmative procedure would work in practice, over and above the normal affirmative procedure, in this case, even if custom and practice deemed the process less than ideal in all circumstances. We feel that experience needs to be gained first before undertaking this extra affirmative process. I hope this confirmation of what the noble Lord, Lord Fox, may have heard about our view on his amendment may not greatly startle him.

[Lord Callanan (Con)]

My Lords, I of course welcome the amendment from the noble Lords, Lord Fox and Lord Clement-Jones, which seeks further parliamentary scrutiny of Clause 6 regulations, and the opportunity to put forward the Government’s case once more. I can spare the noble Lord, Lord Fox, the agony and tell him that, great though my ministerial powers are, I am not a miracle worker and, therefore, probably will not satisfy him.

The Bill as drafted provides for regulations made under Clause 6 to be subject to the affirmative resolution procedure. This amendment would require the Secretary of State to lay a proposed draft of any regulations made under Clause 6 before Parliament for 30 days before the draft regulations themselves are laid and subject to the approval of both Houses. It would also require the Secretary of State to identify a committee to report on the proposed draft regulations and then report on their consideration of the committee’s recommendations.

We have, as the noble Lord, Lord Fox, said, previously discussed the importance of regulation under Clause 6, and I thank the noble Lords for their commitment to ensuring meaningful parliamentary scrutiny of the making of such regulations. However, the Government’s position remains that the affirmative procedure—or regulations made under Clause 6—ensures such scrutiny by requiring Parliament to approve regulations. In Grand Committee, the noble Lord also highlighted the importance of the Secretary of State maintaining “serious technology foresight” and making any regulations under Clause 6 to protect our national security effectively. I can assure noble Lords that the Government are committed to keeping regulations under constant review to ensure that this regime is effective in protecting our national security and reflects technological changes.

The affirmative procedure will, in addition, provide the Secretary of State with the flexibility to update the mandatory regime quickly should new risks to national security arise. For all these reasons, I ask that the noble Lord withdraw his amendment though, in the absence of the requested miracle, I suspect that he is not going to do so.

[Lord Fox (LD)]

I thank the Minister for his response and the noble Lord, Lord Grantchester, for his speech. The Minister is correct: there was no miracle, and there was no surprise. Of course, I was aware that the Secondary Legislation Scrutiny Committee had not recommended opposing this in any way. Sitting through three days in Committee and a day on Report would activate many people who worry about the way in which Governments run their affairs. Therefore, with all due respect to everyone, having been through that process, it would be remiss if someone did not bring an amendment of this kind before your Lordships’ House. To that end, I would like to test the mood of the House.