Climate Change Committee: Carbon Budget Report
Lord Callanan Excerpts(3 years, 9 months ago)
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Baroness Blackstone
To ask Her Majesty’s Government, further to the report by the Climate Change Committee Sixth Carbon Budget report, published on 9 December 2020, what plans they have (1) to engage the public on, and (2) to ensure the behaviour changes included in, the recommendations of that report.
The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)
My Lords, we are engaging the public on the challenge of net zero through regular dialogues, consultations and online advice services. In 2020, we launched the brand Together for Our Planet, with a dedicated website, stakeholder engagement and a push across government digital channels. We are also developing policies to support people to make greener lifestyle choices, such as buying an electric vehicle or insulating their home, which will form part of the upcoming sectoral decarbonisation plans.
Baroness Blackstone (Ind Lab)
My Lords, I thank the Minister for his Answer, but I am sure he will agree that we need more than a website. Four months ago, the Minister assured the House that a dedicated engagement team was up and running and working on how COP 26 could be utilised to best affect behaviour change. So far, the only civic society engagement is an art competition for under-16s and a hashtag. Assuming that that is not the extent of the campaign, can the Minister say when the behaviour change part will be launched, what areas it will cover and who is leading on it? Speed is of the essence.
Lord Callanan (Con)
Throughout 2020, we held deliberative dialogues with the public on transport and heat decarbonisation, the environment, the future of food, carbon capture, usage and storage, and our transition to net zero. I can assure the noble Baroness that, in the run-up to COP 26, we will be working closely with businesses, civil society groups, schools and others.
The Lord Bishop of Winchester [V]
My Lords, at local and national levels, in communities across the country, the Church of England is committed to reducing net carbon emissions to zero by 2030. Can the Minister say a bit more about the plans Her Majesty’s Government have to offer practical support for local communities already committed to transformation, using new, low-carbon technologies to achieve net-zero emissions?
Lord Callanan (Con)
The right reverend Prelate makes some good points. A BEIS-supported parish council carbon calculator has just been launched to support local communities to develop their own plans for tackling emissions locally. Once they have developed a plan, the Rural Community Energy Fund is available to support the development of net-zero energy projects.
The Earl of Caithness (Con)
My Lords, does my noble friend agree that the advice he mentioned in his reply to the original Question needs to pass the “three Cs” test and be clear, concise and consistent? Does he agree that the handling of the Cumbrian coal mine is an example of where the three Cs test was failed on all accounts?
Lord Callanan (Con)
My noble friend will realise that there is a limit to the amount I can say on this. The planning application was called in by the Secretary of State for Housing, Communities and Local Government on 11 March.
Baroness Boycott (CB) [V]
My Lords, in November, I asked a supplementary question, and the Minister said that
“all campaign spend will be released in line with the usual Cabinet Office spend data publications.”—[Official Report, 18/11/20; col. 1415.]
This was in relation to what we are spending on engagement for COP. I have had a look, and I cannot see anything related to COP 26 engagement since then. Can the Minister please be clear about whether or not the Government actually plan to spend money on public engagement to drive behaviour change? If so, what is the budget? As the noble Baroness, Lady Blackstone, said, this is a crucial and urgent issue. If the Minister does not have the figures to hand, could he please write to me and place a copy in the Library?
Lord Callanan (Con)
I agree with the noble Baroness that this is crucial work, and, as I said, the figures will be released in due course. If there is any further information I can release at the moment, I will of course write to the noble Baroness.
Lord Clark of Windermere (Lab) [V]
My Lords, the message from the Sixth Carbon Budget report is important but complicated. We need to take people with us if we are going to succeed. The message needs to be clearer and simpler. Will the Government use the resources at their disposal to re-present the case, so that it can be understood by the ordinary person and not only the expert?
Lord Callanan (Con)
I agree with the noble Lord that we need to engage not only experts or early movers in this technology but the public as a whole. He makes some good points, and we will engage the full resources of Government to make sure that this message gets across.
Lord Greaves (LD)
My Lords, I chair Pendle council’s climate emergency working group. An additional 100 pages, as part of this huge document, are about local authorities:
“For local authorities, this does not entail focused emissions cuts”—
this is government policy—
“in separate sectors, but means transforming whole places towards Net Zero, working with residents, communities and businesses to deliver the right changes and investments for the area.”
That seems fairly obvious to some of us, but the report says that
“there is no overall plan for how local authorities fit into delivering Net Zero.”
Will the Government devote more attention to the need to bring local authorities together in this vital work?
Lord Callanan (Con)
The noble Lord makes some good points. Local government is indeed a key partner in delivering net zero, and this Government are supporting it with a range of funding streams covering key decarbonisation areas such as transport and building. Local government bodies are, of course, key to leading transition in their areas, leading by example on their own estates, and supporting and enabling others to follow their campaigns.
Lord Lucas (Con) [V]
My Lords, does my noble friend the Minister agree that, since we are asking for long-term, fundamental and voluntary changes in behaviour, we should do that on the basis of trust and openness? Will the Government investigate the potential for setting up a repository of the best available data and research, so that individuals can easily establish, for instance, how much they are helping by adopting a vegan diet and how on earth it is possible for the local council to say that it is recycling when it is mashing up broken glass with our newspapers?
Lord Callanan (Con)
I certainly agree with the first part of my noble friend’s question about the need for trust and openness. The Government are currently examining how best to support the public in making green choices and adopting sustainable behaviours. This includes identifying information that people need and how it can best be communicated, and providing it in an accessible format.
Lord Grantchester (Lab)
My Lords, one year into the pandemic, what lessons have the Government learned to encourage behavioural change in relation to net zero, given that the Public Accounts Committee reports this month that the
“Government has not yet properly engaged with the public on the substantial behaviour changes that achieving net zero will require”,
via co-ordinated, cross-department, consistent messaging?
Lord Callanan (Con)
It is important that we get cross-departmental working going correctly. Obviously, the pandemic has resulted in some challenges in this area, but we are devoting considerable attention across government committees, and different departments are engaging with each other to try to get that message across. I agree with the noble Lord that there needs to be consistent messaging, and we need to get all of government focused on this effort.
Lord Krebs (CB) [V]
My Lords, to get to net zero we need to encourage people to switch from cars to walking and cycling for local journeys. In this context, how does the average investment in local infrastructure in the UK to support this transition compare with places such as Copenhagen, where this has been done successfully, with about 50% of journeys on foot or bike? Secondly, my local authority, Oxfordshire County Council, is proposing changes that will increase car traffic in residential urban side streets and therefore discourage walking and cycling. How will the Government respond to this?
Lord Callanan (Con)
I am not aware of the specific changes proposed in Oxfordshire—I will certainly have a look at that—but there is a walking and cycling strategy. The Government have devoted considerable resources through the Department for Transport to encouraging both those modes of transport.
Baroness Sugg (Con) [V]
My Lords, the Sixth Carbon Budget report includes options for reducing emissions in the aviation sector. Can my noble friend the Minister tell us what the Government are doing to encourage sustainable aviation fuels, the development and take-up of which would not only reduce emissions but would support and create new green-collar jobs across the country?
Lord Callanan (Con)
My noble friend makes some very good points. As we were both aviation Ministers, I am delighted to tell her that today we launch the Green Fuels, Green Skies competition, which will provide up to £15 million in funding for the early-stage development of first-of-a-kind, large-scale sustainable aviation fuel projects in the UK.
Lord Taylor of Goss Moor (LD) [V]
I refer noble Lords to my interests in relation to sustainable development and low-carbon heat. Does the Minister agree that the switch from coal to gas was successful primarily because it was made easy and simple for households to make the switch by connecting to the infrastructure that was put into the great majority of streets in the UK? Is there more that the Government could do to support low-carbon networked heat solutions to make it similarly easy for people to connect and go low-carbon?
Lord Callanan (Con)
The noble Lord makes some very good points. Networked heat will be one of a number of different contributions that we will need to make to encourage transition to low or no-carbon heating. A number of different options are available, supported through a range of government incentive schemes.
National Security and Investment Bill
Lord Callanan ExcerptsTuesday 16th March 2021
(3 years, 9 months ago)
Lords ChamberRead Full debate National Security and Investment Bill 2019-21 View all National Security and Investment Bill 2019-21 Debates Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: HL Bill 165-III Third marshalled list for Committee - (11 Mar 2021)
Lord Grantchester (Lab)
Amendments 39 and 87, tabled by the noble Lord, Lord Lansley, probe the Minister around the question of the interaction of the NSI regime with the export control regime. The Committee must be assured that this new regime is not buried within the Business Department but works effectively across government, not least in relation to export controls. The Government’s response to the sector consultation in the report already mentioned states
“how the NSI regime sits alongside export controls to provide a comprehensive regime protecting our national security capability”.
It is not merely a question of sitting alongside, however that may be interpreted, but of interacting and co-ordinating with the Department for International Trade. The Government seem to recognise this in the comment:
“We must ensure that the export control criteria cannot be circumvented by allowing the acquisition of companies that produce such goods, rather than buying the goods themselves, without effective screening.”
More clarity and information in the procedures to this eminently sensible statement would be very welcome from the Minister.
The Government responded to the consultation that they intend to capture all materials that are considered likely to give rise to national security concerns and which are contained in the relevant legislation set out in the UK’s strategic export control list. I would be grateful if the Minister could provide better information on their intentions, and how and when this will become clear and transparent. Will he provide a guarantee that this will happen—the assurances that the noble Lord, Lord Lansley, has required during the passage of the Bill?
The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)
First, I thank my noble friend Lord Lansley for these two amendments, which seek to ensure seamless integration between the new regime provided for by the Bill and the existing export control regime. I shall take his amendments sequentially.
Amendment 39 seeks to ensure that the Secretary of State can, through regulations, exempt from the regime certain acquisitions of control over qualifying assets that are subject to export control orders. Clause 11 provides for exceptions relating to control of assets. Subsection (1) sets out that acquisitions made by individuals for purposes wholly or mainly outside the individual’s trade, business or craft are not to be regarded as gaining control of a qualifying asset and are therefore excluded from the scope of the call-in power. This does not apply in relation to an asset that is either land or subject to certain export controls set out in subsection (2)(b).
Subsection (3) also provides a power for the Secretary of State to amend the list of assets that are outside the scope of this exemption or to prescribe other circumstances in which a person is not to be regarded as gaining control over a qualifying asset. That includes being able to prescribe circumstances in which the acquisition of an asset subject to export control legislation is not to be regarded as gaining control over a qualifying asset. Any use of this power in subsection (3) would, of course, be guided by the operation of the regime in practice and any patterns of activity that are observed. As such, I can therefore assure my noble friend that the Bill already provides for what his amendment intends to achieve.
Amendment 87 would require the Secretary of State to ensure that any interim orders or final orders made in relation to acquisitions of control over assets take into account controls imposed under the Export Control Act 2002 and related provisions. I thank my noble friend for his proposal and commend the intent behind it. It is, of course, very important that the Secretary of State’s use of the powers provided for by the Bill is in keeping with the Government’s measures under other legislation. The Secretary of State must take into account all relevant factors when making decisions about the use of interim orders and final orders.
The legal tests in the Bill require the Secretary of State, before making an order, to reasonably consider that the provisions of the order are necessary and proportionate for the purpose. In the case of final orders, that purpose is to address a risk to national security, and in the case of interim orders, it is to prevent or reverse an action that might undermine the national security assessment process. Whether controls have been imposed under export control legislation will be relevant to whether the envisaged provisions of an order are necessary and proportionate. For example, where export controls in relation to an asset are already in place, it may not be necessary or proportionate to make an order under this Bill prohibiting the transfer of the asset overseas, but this will depend on the facts of each case.
Addressing the questions of the noble Lord, Lord Purvis of Tweed, about why we need the Bill when we already have the export control regime, I say that the export control regime is a licencing regime for certain controlled goods. It is an important part of the safe- guarding of our national security and it sits well alongside the proposed national security and investment regime. The two regimes are distinct though, and do not perform the same role. For example, the export control regime does not provide the Government with the ability to scrutinise acquisitions of UK companies or direct the use of sensitive assets used in the UK, whereas of course the NSI regime would.
On the noble Lord’s points about standard individual export licences if they have been granted for an export, I tell him that a standard individual export licence is granted to one person to export specified items to a named recipient. If the parties involved precisely follow the terms of a standard individual export licence that has already been granted following an assessment of national security risks, it is unlikely that the Secretary of State would reasonably suspect that the export might give rise to national security risks. In this situation, it is unlikely that he would be able to call that export in under the NSI regime. However, it is important to say that any decisions would need to be made on a case-by-case basis. It is important that the Secretary of State retains the ability to call in and scrutinise trigger events involving the export of assets in the event that national security risks are present.
The noble Lord asked about Northern Ireland. Qualifying entities as assets in Northern Ireland sit within the scope of the Bill, and that ensures that there are no loopholes. A trigger event under the Bill is not based on the application of EU law. For completeness, I should also say that the Secretary of State will, in any event, be subject to public law duties requiring him to consider all relevant factors when deciding whether to make an order under the Bill. Therefore, where export controls are relevant, the Secretary of State will need to take them into account when making that order.
I hope that that has explained, for the benefit of the House, the interaction between the two pieces of legislation. With the explanations that I have provided, I hope that my noble friend will feel sufficiently reassured that his concerns have been taken into account, and that he will not press his amendments.
Lord Lansley (Con)
My Lords, I am grateful for each of the contributions to the short debate. They were helpful and, indeed, added to the questions. The noble Lord, Lord Purvis of Tweed, referred appropriately to the Export Control Act provisions. I remember that I was on quadrilateral committee in the other place, about 15 or 16 years ago, so I remember how these issues were considered at that time. Indeed, there was a level of parliamentary oversight of the export control regime, which may be something we refer to at a later stage. He raised some good points: I thought the point about the EU export control regime was a very good one. The noble Lord, Lord Grantchester, made an interesting point about the interaction with the Department for International Trade in this context.
If I understand my noble friend correctly, he is more or less saying that the power under Clause 11(3)(b) would enable the Secretary of State to prescribe, by regulation, such circumstances as necessary, so in that sense my Amendment 39 is not necessary. I agree; it is not necessary but certainly the explanation of the interaction between the two regimes is desirable. However, Amendment 87, proposing a new clause, perhaps drafted differently to make it clearer about the interaction between the two regimes—both at the point where a call-in notice has to be considered, as well as the point at which interim and final orders are made—would be very useful. What I have heard from my noble friend suggests that, by administrative means, using the powers in the Bill and under public law requirements, the Secretary of State will have regard to the export control regime when using his powers under this regime. That is undeniably true. I think we all knew that, but there is much more that we put into legislation, particularly with a new system, that helps people who are to be affected by it to look at it and understand how it works.
What I found deeply surprising was that such an important part of the Government’s policy intentions—that the export of goods should still be primarily controlled by an export control regime—was not even referred to in the Bill or in the Government’s response to the consultation. It is as if it did not exist, but it does exist and it is important, as the Minister’s reply suggested. I shall reflect on what he said, but it may well be that there continues to be a “desirable interaction” clause in the Bill that makes it very clear to all those affected that the export control regime plays a significant part in the control of qualifying assets where they are to be exported. However, based on what my noble friend said, I beg leave to withdraw the amendment at this stage.
Lord Callanan (Con)
I thank all noble Lords who have taken part in this brief debate, particularly my noble friends Lady Noakes and Lord Lansley for their contributions. I will start with Amendments 49, 62 and 64, which for the convenience of the Committee I will take together.
As drafted, the Bill provides that the Secretary of State must decide whether to reject or accept a mandatory or voluntary notice
“as soon as reasonably practicable”
after receiving it. He must then inform relevant parties of his decision as soon as is practicable. Amendment 49 would require the Secretary of State to decide whether to accept or reject a mandatory notice within five working days, as opposed to the current drafting. Amendment 62 would have the same effect, but for voluntary notices. Amendment 64 would require the Secretary of State to notify each relevant person whether a voluntary notice has been accepted within five working days of it being accepted, as opposed to the current drafting of doing so as soon as practicable.
As I am sure noble Lords would agree, mandatory and voluntary notifications should include the necessary information to enable the Secretary of State to determine whether to call in an acquisition for further scrutiny. Once a notification is accepted, the Secretary of State will be required to issue any call-in notice within 30 working days or else clear the acquisition to proceed. It is therefore important that the Secretary of State is able to reject a notification if it does not meet the requirements specified in the legislation. Of course, it is important that all decisions made under this regime by the Secretary of State are made promptly.
I therefore assure the Committee that the Secretary of State will make great efforts to ensure that decisions to accept or reject notifications are made quickly and that parties are notified in a timely way. In fact, one of my officials was keen to point out that the record so far for responding to informal guidance is 19 minutes. Civil servants will of course have different ways of going about it and will pursue different speedy methods, so I am sure that will not always be the case. Nevertheless, we will endeavour to reach these decisions to provide help and guidance to businesses and companies as speedily as possible.
As noble Lords will be aware, the Government intend to lay regulations setting out the form and content of the types of notification soon after Royal Assent. The draft notification form was published alongside the introduction of the Bill to help interested parties understand what information is likely to be required. Parties will therefore have clarity, and certainty about the information that they should provide when notifying the Secretary of State. We therefore expect notifications to be generally of high quality and, where this is the case, the Secretary of State expects to be able to decide quickly and then inform parties of decisions to accept their notices, in many cases, clearly, more quickly than the five working-day limit proposed.
However, it is important that there is scope for flexibility in the relatively rare circumstances where more time may be needed. For example, a hostile actor could intentionally provide very large amounts of unnecessary information that would take many days to read through to establish that important information was missing or incorrect. Or there might be multiple parties involved in a particularly complex acquisition that had all submitted notifications. In the event that the notifications do not match up, more detailed verification may be needed. I would argue that it is better for the Secretary of State to take the time to ensure that he has the information that he needs at the start of the process rather than risk finding gaps in information later on.
I turn to Amendments 51, 54 and 66. I know that my noble friend Lord Lansley did not speak to Amendment 51, but it is in this grouping, so, if he will forgive me, I will address the issue at this point. Clause 14 provides for the mandatory notification procedure, including subsection (6), which sets out the grounds on which the Secretary of State may reject a mandatory notice, and subsection (9), which explains when the 30-working day “clock” for reviewing a mandatory notice begins. These amendments go to the heart of both matters, so let me address each of them briefly.
Amendment 51, to which my noble friend referred although he did not speak to it, would remove the third ground for the Secretary of State to reject a mandatory notice, which is where
“it does not contain sufficient information to allow the Secretary of State to decide whether to give a call-in notice in relation to the proposed notifiable acquisition”.
I imagine that noble Lords may well consider that the first two grounds—which enable the Secretary of State to reject a mandatory notice where it does not meet the requirements of this clause or as prescribed in regulations—will cover most bases. However, we must also ensure that an acquirer cannot meet the technical requirements of providing a notice by doing so in a limited way or with incomplete information. Noble Lords will appreciate that if, for instance—in a purely hypothetical example, I was required to fill in the name of my chief executive on a mandatory notice, the ISU would have a pretty good chance of working out who “Boris” was, but in the case of the chief executive of a small start-up company that might have been operating for only a few months, a mandatory notice that had the same information would provide little to go on. I understand that it is an outlandish example, but it illustrates why we must not prevent the Secretary of State rejecting notices from those who plainly look to game the system.
Amendment 54 would adjust the timing for the beginning of the 30-working day review period from, as now, the date on which the Secretary of State confirms acceptance of a mandatory notice to the date on which he received the notice. Amendment 66 would make the equivalent changes in respect of voluntary notices. I can assure my noble friend Lord Lansley and other noble Lords that in the vast majority of circumstances we expect to confirm acceptance quickly and to begin the clock on the review period. However, the process of initially determining whether a valid and complete notice has been submitted is separate from fuller screening of the acquisition itself. Some acquisitions are likely to be complicated and a significant amount of information may be provided as part of the mandatory notice. In these instances, it is conceivable that the investment security unit may need a short time to ascertain that the relevant information has been provided. None the less, the screening will not yet have begun and, accordingly, it is right that the clock does not do so either.
Amendments 53 and 65 would reduce the time available to the Secretary of State to screen mandatory and voluntary notifications from a maximum of 30 working days to 20. I mention “maximum” again because that is exactly what these deadlines represent. In many cases, we expect the Secretary of State to be able to review and clear notifications much more quickly. The question, therefore, is what is appropriate in more complex cases and whether the ISU may need to gather input and expertise from across Whitehall on those acquisitions. The total figure of 30 working days is not arbitrarily chosen by the Government. I apologise to my noble friend Lady Noakes for saying yet again that it reflects detailed work undertaken across Whitehall to test past cases and mock scenarios against the new regime—I repeat that because it is our position. Some acquisitions may involve complicated ownership structures; the technology and activities of the target entity may not be immediately clear, and the format of the acquisition itself may be unconventional. It is vital the Secretary of State has the necessary time to examine an acquisition and to make an informed decision.
I again commend my noble friend’s efforts to make the new regime even more nimble and fleet of foot, but I hope she will understand—even if she does not agree with me—why I am unable to accept these and other amendments that I have addressed in this group. Therefore, I hope that both my noble friends will choose not to press their amendments.
The Deputy Chairman of Committees (Lord McNicol of West Kilbride) (Lab)
My Lords, I have received no request to speak after the Minister, so I call the noble Baroness, Lady Noakes.
Lord Callanan (Con)
I thank those who have taken part in this short debate, in particular my noble friend Lord Lansley and the noble Lords, Lord Grantchester and Lord West, for their considered and thoughtful comments on the amendments. Amendments 80 and 81 seek to add a number of additional areas of information to the annual report, namely around time taken processing cases, the resources of the investment security unit, the extent to which acquisitions involving SMEs are being called in, and the number of final orders being varied or revoked. The aims of these amendments are commendable, and the Government are a strong supporter of SMEs and government transparency.
The first part of Amendment 80, tabled by the noble Lord, Lord Grantchester, seeks the inclusion of the average number of days taken to assess a trigger event which has been called in. Noble Lords will recall that Clause 23 provides statutory time periods for assessment under the regime. The Secretary of State must assess any trigger event that has been called in within a period of 30 working days, as we have discussed in earlier debates, or, if additional time is required, within the additional period of a further 45 working days, or within any further voluntary extension or extensions agreed with the acquirer.
As there are these time limits, and they are as short as we are able to make them while also ensuring there is time for appropriate national security assessment, it does not seem that there would be any additional benefits from including average times in the annual report. Clause 61 sets out the minimum reporting requirements that the Secretary of State must meet in the annual report. The information provided in the annual report will provide Parliament with good insight into how the regime is functioning in practice.
Furthermore, the amendment seeks to add additional reporting on the minimum, average and maximum turnaround times for notifications in the annual report. The Government have laid out clear statutory timelines for responding to voluntary and mandatory notifications in Clause 23, providing investors and businesses with the certainty that they need. However, I would be happy to discuss this proposal further with the noble Lord, Lord Grantchester. The time taken to assess trigger events that are called in will vary on a case-by-case basis; therefore, it would not be helpful to share the average time.
Secondly, on the time taken for deciding whether to accept mandatory and voluntary notices, the Bill requires that the Secretary of State must do so
“as soon as reasonably practicable”,
as we discussed, after receiving a notice. In practice, this is likely to be a matter of days, but it is important to retain flexibility so that an accurate assessment of the completeness of the information is undertaken. Additionally, if the Secretary of State decides to reject a notice, he must as soon as practicable provide reasons in writing for that decision to the notifier. Where the decision is to accept a notice, the Secretary of State must as soon as practicable inform the parties of the decision.
Thirdly, where the noble Lord seeks inclusion of the average headcount of the investment security unit in the annual report, I can only repeat what my colleague Minister Zahawi said in the other place: resourcing would, of course, be
“an internal matter for the BEIS permanent secretary.”—[Official Report, Commons, National Security and Investment Bill Committee, 10/12/20; col. 334.]
I am unsure whether very high numbers would demonstrate appropriate resourcing, or insufficient efficiency. In any case, we have committed to ensuring that the investment security unit is appropriately resourced. I am sure that the Permanent Secretary will make sure that that is the case.
Furthermore, on SMEs, the report is intended to give a sense of the sectors of the economy where the greatest activity of national security concern is occurring. The Secretary of State may include additional information relating to SMEs if he considers that appropriate.
Turning to Amendment 81, tabled by my noble friend Lord Lansley—I am sorry that this is the last occasion we will hear from him—I am pleased to confirm that Clause 29 already places a duty on the Secretary of State to publish notice of the fact that a final order has been made, varied or revoked. This intentionally complements the annual report in Clause 61. We must not encumber the investment security unit with ever greater reporting as this will draw focus away from scrutinising acquisitions and responding to businesses as soon as possible. Individually, these amendments of greater reporting may seem reasonable, but combined they can be quite burdensome for the unit.
On Amendment 91, in the name of the noble Lord, Lord West of Spithead, I am grateful that this came with only his secondary armament—although I noticed that he had the noble Baroness, Lady Smith, for additional offensive capability. The amendment relates to the provision of guidance for the defence sector. It would require the Secretary of State to publish guidance for businesses in the defence supply chain about the provisions in the Bill, including a list of countries which the Secretary of State considers less likely to give rise to a risk to national security and from which investment is encouraged.
The noble Lord’s amendment highlights the importance of the defence sector and its supply chains, which is part of the reason why the defence sector is intended to form part of the Bill’s “mandatory notification regime”. A robust defence sector is vital to our national security and essential for the development of innovative and first-class military capabilities that enable us to protect our people, territories, values and interests at home and overseas. The defence sector, including businesses in its supply chains, such as those providing emerging technologies, must remain resilient to a wide range of national security risks, including those posed by hostile actors.
We are keen to ensure that the mandatory notification regime works proportionately and provides sufficiently clear parameters to inform businesses and investors of the need to notify and obtain prior approval. That is why we have consulted on the definitions of sectors covered by mandatory notification in the recent public consultation. This approach has enabled experts from the defence sector and its supply chains, along with the legal profession, businesses and investors, to help us refine the final definitions to ensure that the regime is appropriately targeted and provides legal certainty.
The noble Lord’s amendment also seeks to require the publication of a list of countries which the Secretary of State considers less likely to give rise to national security risks, and those from which investment is encouraged. As it stands, as I have said before on other amendments, both the mandatory and voluntary notification regimes provided for by the Bill are actor- and nationality-agnostic.
The mandatory notification regime is set based on the risks posed by acquisitions of target entities due to those entities’ activities rather than risks posed by the acquirers. The risks posed by an acquirer are then considered on a case-by-case basis by the Secretary of State as part of the particular national security assessment. It would not be appropriate to set out through guidance a variation to the legislation; that would confuse more than it would clarify, and it might give rise to legal challenge.
On whether guidance can be provided more generally for the defence sector on the provisions in the Bill, we must also guard against legislating through guidance. The Government will of course consider what appropriate explanatory material should accompany the regulations to define the sectors subject to mandatory notification, including the defence sector.
I thank all noble Lords and my noble friend for their amendments. For the reasons mentioned, I am afraid I cannot accept them. Therefore, I hope the noble Lord will feel able to withdraw his amendment.
The Deputy Chairman of Committees (Lord Lexden) (Con)
I have received no requests to speak after the Minister, so I invite the noble Lord, Lord Grantchester, to conclude the debate on his amendment.
Lord Clement-Jones (LD)
My Lords, it is a pleasure to follow the noble Lord, Lord Bilimoria, particularly as I am speaking to the two amendments that he has spoken to, because he speaks with huge authority and considerable backing.
To start with Amendment 85, we on these Benches are very sympathetic to the cause of SMEs. Whether this is the best way of catering for the considerable issues that they will face under the Bill is a matter for debate. I would prefer to see the thresholds altered to accommodate the needs of small businesses, but the heart of Amendment 85 is certainly in the right place.
I turn to Amendment 89. As we have heard, throughout the course of the Bill’s passage concerns have been expressed about its impact and the culture of the ISU as it enforces the Bill’s provisions. As ever, my noble friend Lord Fox anticipated some of my arguments in the previous group. It is critical that a regular review is undertaken to ensure that the Act is achieving its aims proportionately while not unduly deterring foreign investment.
Other aspects of the Bill include the five-yearly review of the Secretary of State’s statement about the exercise of the call-in power under Clause 3 and, of course, the annual report that we have just been talking about, which is inadequate in many ways. It is currently envisaged in Clause 61 and, as we debated in the last group, it does not go nearly far enough. Neither provision makes any reference to the effectiveness of the overall scheme of the legislation, whether it is achieving its objectives and, indeed, whether its overall purpose is being achieved. As my noble friend said, two key questions need answering here—effectively, are we safe and is our investment climate healthy? Where in any of the Bill’s provisions is the provision for that to be considered?
Amendment 89 would require the Secretary of State to undertake a review of the Act and report to Parliament every three years. This would involve a cost-benefit analysis of the regime’s impact, as set out in proposed subsection(2)(c).
I support Amendment 92 in the name of the noble Lord, Lord Leigh, and have signed it. I am sure that the noble Lord would have introduced it with far greater panache than me. But the Minister—the noble Lord, Lord Callanan—said at Second Reading:
“Noble Lords are entirely reasonable to expect further high-quality guidance from government to help businesses and investors navigate the regime.”—[Official Report, 4/2/21; col. 2391.]
That is reassuring but, as was made very clear by David Petrie, the head of the Corporate Finance Faculty of the ICAEW—I declare an interest as a member of its advisory board—in the Public Bill Committee on behalf of the members of the ICAEW, and as the noble Lord, Lord Bilimoria, has confirmed, the most effective way of tackling asymmetry of information in the business, investment and advisory communities would be the periodic production by the ISU of meaningful market guidance notes, modelled around the practice statements that accompany the City Code on Takeovers and Mergers.
Market guidance notes would be an important way for the ISU to engage closely and on an ongoing basis with businesses, investors and professional advisers. They would signal a culture of professionalism and openness to investment in UK businesses. They would support a necessary communication and awareness campaign of the legislative requirements. By setting out in an accessible way and in consultation with business, professional and sector bodies why and how businesses may be affected, the ISU could ensure that consistent and accurate information reaches the population of businesses and their advisers. Of course, future updates could also be issued in this format.
Beyond raising awareness, issuing market guidance notes over time would help to inform market participants on what they could be doing to make sure that the process works with more certainty, speed, clarity and transparency—all these cultural things that we have been talking about throughout the Bill, things which financial markets and the wider UK economy need to see. There would be a positive impact on productivity as a result; they would help to ease potential resourcing pressures on the ISU by increasing the proportion of notifications being submitted correctly, with all relevant details included.
I hardly need to say that market guidance notes would not form part of the Act and accordingly would not be binding on the Secretary of State. They would be issued to provide informal but meaningful guidance to businesses, investors and professional advisers on matters such as the level of information required in a mandatory or voluntary notification, and they would also provide commentary on the ISU’s normal approach to various provisions of the Act and greatly assist market participants seeking to establish the extent to which the Act may apply in a particular case. The ISU can also use them to share insights into trends where this would benefit the process. They would be amended periodically, or withdrawn as necessary, without the need for legislation—so extremely flexible. Each note could indicate the date on which it was issued, and so on.
There are other details that I could provide. There is great enthusiasm for this instrument, and I very much hope that the Bill will provide specifically for these. It would be an extremely useful indicator of the way in which the ISU proposes to operate.
Lord Callanan (Con)
I am grateful to the noble Lords, Lord Grantchester, Lord Leigh and Lord Clement-Jones, for their amendments in relation to equity stakes of affected parties, small and medium-sized enterprises, an impact review of the regime, and market guidance.
I first turn to Amendment 84, tabled by the noble Lord, Lord Grantchester. This amendment seeks to require the Secretary of State to analyse the financial support provided by government, as part of Covid-19 support, to sectors considered more likely to give rise to national security risks. It then seeks to require him to consider converting loans and grants to equity stakes when there is a clear economic and national security rationale for doing so.
There is no doubt that the impact of Covid-19 on businesses and livelihoods of people across the country has been truly terrible, and I have a massive amount of sympathy for those affected. I can assure noble Lords that the Government are committed to supporting all UK businesses through the Covid period. The Government continue to provide extensive support to businesses to survive the pandemic, so far totalling over £280 billion, including through furlough, the Self-employment Income Support Scheme and business grants. However, I do not think that converting loans into equity stakes necessarily represents the best use of public money. As noble Lords will be aware, Clause 30 provides for the Secretary of State to give financial assistance to, or in relation to, entities in consequence of the making of a final order. However, it is expected that this will be used only in exceptional circumstances. What the noble Lord is proposing would be much wider than this and, while I am sure that it is very well intentioned, is very much a substantive diversion from the main purpose of the Bill.
I turn to Amendment 85, which would require the Secretary of State to create a small and medium enterprise engagement unit within three months of this Bill being passed. This unit would take particular actions in relation to SMEs and their interaction with the regime. I note that this amendment bears a strong similarity to an amendment proposed during Report in the other place, and it will not surprise noble Lords that my views on the subject are closely aligned with those of Nadhim Zahawi, my fellow Minister. The Government strongly support SMEs and so have sought to provide a clear and easy regime for businesses of all sizes to interact with. The Government have been happy to provide support to businesses both large and small through the contact address available on GOV.UK and discussions with BEIS officials. The Government have published fact sheets on GOV.UK which make clear what the measures in the proposed legislation are and, importantly, to whom they apply.
We are also creating a digital portal and a simple notification process to allow all businesses to interact with the regime without the need for extensive support from law firms. Furthermore, there is no fee for filing a notification, unlike many of the regimes operated by our allies. Consequently, we have no reason to believe that this regime will disproportionately affect SMEs or that this new clause is necessary.
Lord Clement-Jones (LD)
My Lords, I should thank the Minister for his response; I am not sure I really want to. I found it rather extraordinary, particularly to Amendment 89. We have a Bill on foot with a purpose in mind but, when it comes to reviewing it, we are told that it is far too sensitive and we cannot possibly review whether it has met its objectives. We can keep it under review—within the department in some shape or form, I assume—but we cannot possibly undertake a periodic review of any kind. Even a normal post-legislative review process would expect to see whether an Act of Parliament was meeting its objectives. The Minister cannot even say whether that will take place at any stage.
This really adds to one’s concerns about this Bill in so many ways. It is a rather furtive creature that, if we are not careful, will be hiding in the dark for quite a long time and will not get reviewed. There is no way of seeing whether it is achieving its purpose other than the kind of review the Minister was talking about, which is purely internal to government and part of the government department’s overview. This is not particularly reassuring.
On Amendment 92, the Minister talked about just making statements about the call-in power or having the annual report. I said a set of market guidance notes would do; I did not adumbrate about six points that a set of market guidance notes could set out. They are far more extensive and market friendly than anything that is going to be caught by the call-in power statement or the annual report. We are talking about real guidance to business so that it knows what to expect and the parameters within which the Secretary of State is operating—particularly when it comes to guidance about the kinds of sector that will be caught and the current issues that the Secretary of State believes would give rise to a call-in notice and other aspects dealt with by the ISU. The idea that five years is a reasonable time to adjust a call-in power statement is laughable in the commercial world. The Takeover Panel updates its notes on a regular basis, and that is exactly what the ISU should do with market guidance.
Lord Callanan (Con)
I am not sure there were any questions for me there; the noble Lord has made some observations. I understand that he was unhappy with my replies, but I am afraid I cannot agree that the Bill is “furtive” or “hiding in the dark” at all. We are committed to transparency as much as possible. He says he has six additional points on market guidance notes. If he wants to send them to me, I will happily have a look at them and see what we can do. We said a maximum of five years, but of course the Secretary of State has the ability to do earlier reviews if necessary. That is a maximum date, and we could bring that forward. I take on board his points and am sorry if he is disappointed by my replies.
Lord Grantchester (Lab)
I thank the noble Lord, Lord Bilimoria, for his amendment in this group proposing a review of the Act and its engagement with businesses. I am sure it will become clear and the appropriate responses will be forthcoming from the department.
I thank the noble Lord, Lord Clement-Jones, for his sympathy. The effect of the regime on SMEs is very relevant, and high-quality guidance for businesses has been recognised in the Minister’s replies. I thank him also for his replies on the pandemic and the business environment with the call-in powers of the Secretary of State. He returns to the issue of the annual report, thus giving room for these matters to be considered slightly further. With that in mind, I beg leave to withdraw the amendment.
Lord Grantchester (Lab)
My Lords, unlike the noble Lord, Lord Fox, I am not unduly fearful of the noble Baroness, Lady Bennett. I have always thought that being Green does not allow for having a whip. However, I thank the noble Baroness for proposing this new clause to the Bill. I am certainly clear that the climate emergency must hang as a backcloth to every action that we undertake.
The aim of Amendment 93 is completely understood and appreciated. It seeks a Ministerial Statement on how the provisions set out in this Bill will be exercised in relation to the national security impacts caused by climate, environmental or ecological damage. The climate crisis is not only a threat to our way of life in the long term but a threat to national security in the short to medium term. Only last week, Jens Stoltenberg, the NATO Secretary-General, said that
“climate change makes the world more unsafe, so NATO needs to step up and play a bigger role in combating it.”
A few weeks ago, even the Prime Minister made a comment that climate change is a threat to our society. How will the new regime take account of this and reflect on his comments?
The Committee has already questions about the list of sectors affected, especially the energy sector, as well as about protecting green infrastructure. I have raised with the Minister the EV infrastructure, solar and wind industries and how their growth should be protected. It is certainly important that we hear more from him on the issue and what the difficulties would be in undertaking to produce the kind of statement being proposed by the noble Baroness, Lady Bennett. If the Government are resistant to producing such a statement, could the issue be included as an integral part of the annual report?
Lord Callanan (Con)
My Lords, let me thank the noble Baroness, Lady Bennett, for her amendment and begin by expressing my heartfelt sympathy to the noble Lord, Lord Fox, on being admonished by her. All that I can say is, welcome to the club.
The amendment would require the Secretary of State to publish within six months of the Bill becoming law a statement on how the regime will be exercised in relation to national security impacts caused by climate, environmental and ecological damage. As the noble Baroness, Lady Bennett, knows—we have debated these matters on numerous occasions in this House—this Government are committed to tackling climate change. We are especially looking forward to the COP 26 conference in November, which will highlight our leadership on this issue and promote co-operation on climate action through the UK’s G7 presidency, as Alok Sharma MP set out in a speech to the UN on 8 February. Of course, the COP 26 preparations continue to be led by Alok Sharma, who opened Second Reading on the Bill in the other place. I am sure that we all wish him well as he strives to bring the world to ambitious agreements in Glasgow.
The Bill, however, focuses on national security risks arising from acquisitions of control over qualifying entities and assets. If we were to view national security through a particular lens, as the amendment seeks to do through environmental concerns, we would be in some way defining national security. We have deliberately avoided defining it in the Bill, a matter that we have debated previously. We have expounded on that at some length in this House and in the other place.
Without rehearsing those arguments, which I am sure noble Lords are familiar with, I hope they will understand that we cannot accept amendments that seek to define national security in a particular way. The noble Baroness’s amendment asks for a statement on how the provisions in the Bill will be exercised. The most fundamental provision is the call-in power. The Bill already requires the Secretary of State to publish a statement on how that is expected to be exercised before being able to use the power. A draft of that statement was published on introduction of the Bill in November. The Government would be very pleased to receive comments and have committed to consult on it publicly. The final version of the statement must be laid before Parliament and will be subject to the negative resolution procedure.
Finally, two provisions in the noble Baroness’s amendment—proposed new paragraphs 2(a) and 2(b)—address specifically environmental concerns. Laudable as they are, they are not directly connected to the national security and investment regime proposed in the Bill. That is because the regime concerns whether the acquisition of qualifying entities and assets poses a risk to national security, not the actions of those entities or assets themselves. Given the Government’s commitment to environmental policies, but recognising that the Bill deliberately avoids defining national security, and given that a statement on how the call-in power is expected to be used is already provided for, I hope that the noble Baroness, in the light of what I have said, is able to withdraw her amendment.
Baroness Bennett of Manor Castle (GP) [V]
My Lords, I thank the Minister for his response and for pointing out how the Committee has taken a neatly circular route, almost like a circular economy, in getting back to more or less where we started—debating definitions of national security. I also note his welcome for comments on the statement on the call-in power, which I certainly hope to pick up and run with.
I should perhaps begin with an apology to the noble Lord, Lord Fox, if he took my comments as being directed at him or anyone taking part in this debate. As is often the case with Greens, I am not concerned with individual behaviour but systems change. It is clear that the systems in your Lordships’ House tend to result in a narrow range of Peers taking part in Bills related to financial matters. Yet, in our heavily financialised society, and given that finance is such an important part of security in this instance, we need input from a broader range of sources. I am certainly not blaming the noble Lord for that, although perhaps he could encourage fellow Peers from his party and others to engage on this issue.
I very much thank the noble Lord for his offer to work together, particularly on the list of technologies, which is also something I will be taking up. I understood his suggestion that we should all be focusing on the need for the Government to have an integrated strategy for 2050, but I pick up on the comments of the noble Lord, Lord Grantchester, who said that every action we undertake has to take account of the climate and ecological emergencies. To use a technical term, we are talking about mainstreaming. The climate emergency and ecological crisis must be at the forefront of our minds in every aspect of what the Government and your Lordships’ House do.
This is an emergency. Looking at the Chamber now, as I speak remotely, I think back to what it was like in March 12 months ago, when all anyone was thinking about was the Covid emergency, but we are also in a climate emergency and an ecological emergency.
I am aware that this is the final amendment to be debated. I hope we will see more people engaged in this debate when we get to Report. We have made some progress, I think, and so, for now, I beg leave to withdraw the amendment, although I expect I will still be looking at what we may do on Report.
Offshore Gas Rigs
Lord Callanan Excerpts(3 years, 9 months ago)
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Lord Teverson
To ask Her Majesty’s Government what plans they have to prohibit the flaring of gas on offshore gas rigs within the United Kingdom’s exclusive economic zone.
The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)
My Lords, as set out in our recently published energy White Paper, the UK has committed to the World Bank’s “Zero Routine Flaring by 2030” initiative. We are working with regulators towards eliminating routine flaring as soon as possible in advance of this date. Furthermore, we are working with the sector to transform the UK continental shelf into a net-zero basin by 2050.
Lord Teverson (LD)
My Lords, I welcome the intent, but could we please have a timetable for this? The Netherlands, Denmark and Norway not only signed up to that initiative but actually practise it at the moment. At the moment, we are the dirty man of the North Sea; when will that end?
Lord Callanan (Con)
Of course, the circumstances and timescale of those other countries are, depending on their operations, different from ours. However, I assure the noble Lord that we will continue to work with the industry, through the North Sea transition deal, and regulators, drawing on their range of powers to drive down this practice as soon as possible.
Lord Kirkhope of Harrogate (Con) [V]
We have already been reminded today of the United Kingdom’s hosting of COP 26 later this year, so will my noble friend join me in congratulating and further encouraging the engineers and academics, part-funded by Innovate UK, who have designed a new geo-engine that can neutralise sour gas from oil rigs and produce clean electrical energy as a by-product. Is this not a better approach than immediate prohibition?
Lord Callanan (Con)
My noble friend makes some very good points, and we are open to processes that can drive down emissions from offshore operations. As I know my noble friend is aware, sour gas contains significant amounts of hydrogen sulphide and would need, of course, to meet the Gas Safety (Management) Regulations before it could be used to supply industrial and domestic consumers.
Lord Browne of Ladyton (Lab) [V]
My Lords, flaring produces 1% of total UK annual CO2 emissions, and venting produces 1% of annual methane emissions. Worryingly, Oil & Gas UK reports that, in 2019, the number of oil and gas leaks in the North Sea rose to 130, including 48 significant and three major releases, one of which was 900% greater than the release that caused the Piper Alpha disaster. Why on earth do we allow flaring in such circumstances, when, for both climate change and safety reasons, a ban on flaring and venting must surely be a priority?
Lord Callanan (Con)
The Health and Safety Executive will continue to hold operators to account to investigate any gas leaks, given that this is, as the noble Lord says, a significant safety concern. The industry actively works to reduce any opportunity for a leak where possible, and there is an ongoing initiative between the industry and regulators to reduce the number of hydrocarbon releases in the offshore sector.
Baroness Walmsley (LD) [V]
My Lords, I declare that a family member works in the oil and gas industry. The Oil and Gas Authority’s policy on flaring is to ensure that the flare and vent volume requested for permission is at a level where it is “technically and economically justified”. Why is the word “environment” not included in this policy?
Lord Callanan (Con)
The environment is clearly very important in this matter; I agree with the noble Baroness about that. However, our revised Oil and Gas Authority strategy came into force last month and features a range of net-zero obligations for the oil and gas industry.
Lord Randall of Uxbridge (Con) [V]
My Lords, I declare my interest as a council member of the RSPB. Although I fear that this is probably not in my noble friend’s remit, have Her Majesty’s Government undertaken any research into the effect of flaring gas from offshore gas rigs on wildlife, particularly birds?
Lord Callanan (Con)
The noble Lord is right that that is not in my remit, but I am happy to tell him that my department has not undertaken any research in this area because, to date, there is no known evidence of significant impacts identified. Some species of birds migrating across the North Sea may become attracted to offshore light sources. To this extent, the 2015 OSPAR convention developed guidelines to reduce the impact of offshore installations on birds in the OSPAR maritime area.
Lord Grantchester (Lab)
Besides the philosophical objections for the Government, what are the difficulties for introducing a Norway-type zero-flare policy? Could the Government bring flaring into the emissions trading scheme and make it subject to carbon taxation?
Lord Callanan (Con)
There are significant practical and operational difficulties, which the noble Lord alludes to. However, I am happy to tell him that flaring intensity decreased by 22% in 2020 from 2019 levels, as production facilities cut the overall volume to 33 billion cubic feet.
Lord German (LD)
Despite what the noble Lord just said, the portion of flaring due to what I would loosely call economic reasons has been rising over the last three years—that portion is economic. Given that Norway has now found ways of reinjecting this waste back in, and that there are other solutions as well, what are the Government fearful of in trying to tackle this rising problem?
Lord Callanan (Con)
The data that I have just quoted shows that it actually fell last year. However, the noble Lord makes a good point; we should try to reuse these gases as much as possible. A number of companies are working on solutions, such as generating electricity on platforms et cetera. However, there are significant practical difficulties.
Lord Moynihan (Con)
My Lords, I declare my interests as set out in the register. Does my noble friend the Minister accept that, given the excellent work being undertaken on net zero by the OGA, it is certainly conceivable that the UK can meet the zero routine flaring goal by 2030? If so, given that environmental and sustainability technology is increasingly being deployed in the gas industry, gas should and must remain an important part of the energy mix as we progress through energy transition?
Lord Callanan (Con)
Absolutely—my noble friend makes some very good points. Oil and gas are expected to remain a vital part of the UK’s energy mix as we move towards net zero, and maximising the economic recovery of oil and gas need not be in conflict with the transition to net zero—a point that my noble friend understands well.
Baroness McIntosh of Pickering (Con) [V]
While I welcome that a target has been set, can my noble friend reassure us that the essential flaring and venting for operational and safety reasons will be allowed to continue? How can this be accommodated within a net-zero approach?
Lord Callanan (Con)
I have set out that, where it continues for operational reasons, we want to reduce it as much as possible, and we are committed to the World Bank initiative to eliminate it completely by 2030.
Baroness Altmann (Con)
My Lords, with UK oil rigs being the most polluting in Europe and North Sea oil producing 21 kilograms of CO2 per barrel, compared with 8 kilograms for Norway, could my noble friend tell the House what further measures the Government might consider introducing to ensure that oil companies phase out this flaring much faster than planned—and well before 2030?
Lord Callanan (Con)
Transforming the UK continental shelf into a net zero basin will be achieved through a combination of energy efficiency, electrification from alternative, decarbonised energy, and the use of carbon-capture technology. There are a range of policies that we can bring into play to try and bring these practices to an end.
Baroness Gardner of Parkes (Con) [V]
My Lords, given the vast amounts of carbon dioxide emitted directly into the air due to gas flaring, can the Minister set out how, as part of the Government’s green industrial revolution, we can capture this carbon and put it to good use, while removing these harmful emissions from the atmosphere?
Lord Callanan (Con)
We do encourage companies to capture as much of it as possible and, as the noble Baroness said, put it to good use on the platforms or pipe it to shore and use it, where possible, in domestic gas transmissions. The Government’s 10-point plan for a green industrial revolution, announced in 2020, stated our ambition to capture 10 megatonnes of carbon dioxide a year by 2030—the equivalent of 4 million cars worth. Where possible, we can use it; if not, we can store it safely underground.
The Lord Speaker (Lord Fowler)
My Lords, all supplementary questions have been asked. We now move, therefore, to the fourth Oral Question.
Global Navigation Satellite System
Lord Callanan Excerpts(3 years, 9 months ago)
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Lord West of Spithead
To ask Her Majesty’s Government whether the design and development research for the United Kingdom Global Navigation Satellite System has been completed; and if not, what is the timeline for (1) the development of the requirements, and (2) the procurement, of that system.
The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)
My Lords, the space-based positioning, navigation and timing programme is one of the key programmes in the Government’s major projects portfolio. This underscores the importance of strengthening resilience for critical national infrastructure, given the wide use of PNT services. The UK’s requirements for trusted services will be confirmed in March as part of a national PNT strategy. In response to the strategy, the programme will identify in November a preferred space-based solution to improve our PNT resilience as part of a mix of technologies.
Lord West of Spithead (Lab)
My Lords, the outrageous behaviour of our European friends over the use of the Galileo system necessitates our going our own way, or in league with the Five Eyes community, our real friends, over the provision of additional GPS. Such a system is critical, as the Minister says, not just for defence and security but for a broad swathe of things in this country. There are real concerns over resilience. There is a great deal of confusion, misinformation and fake news swirling around about OneWeb. It is time to get clarity and a sense of urgency. Have we decided on the use of low-earth-orbit capabilities for a sovereign-based PNT system, also providing secure satellite communications, not least 5G connectivity?
Lord Callanan (Con)
I thank the noble Lord for his question. We have always been clear that the possible provision of PNT services was not the rationale for our investment in OneWeb. The programme is analysing a number of ideas for concepts in low earth orbit, and OneWeb is of course one of the many companies that are contributing to that.
Lord Forsyth of Drumlean (Con) [V]
My Lords, could my noble friend help me and explain why an independent space-based positioning, navigation and timing system is necessary, whether it is affordable and whether the investment in OneWeb is a practical and cost-effective means of delivering it?
Lord Callanan (Con)
I answered the point about OneWeb in the previous answer. That is not the rationale for our purchase of OneWeb. PNT services from space underpin all 13 critical national infrastructure sectors, including national security, defence and transport. They are an important component of future technologies such as autonomous vehicles, smart cities and so on, so it is essential that we have our own autonomous capability.
Lord Ravensdale (CB)
My Lords, there is increasing concern from the scientific community about the impact of large satellite constellations upon astronomical observations. What work is being done to address this aspect of the OneWeb constellation? Specifically, what measures are being considered in the satellite design and operation to reduce its albedo?
Lord Callanan (Con)
The noble Lord makes an important point. OneWeb has met the Royal Astronomical Society to discuss the potential impact of its operations on astronomy. We will continue to support that dialogue and wider engagement with the scientific community.
Lord Stevenson of Balmacara (Lab) [V]
My Lords, the Minister said that he was clear that OneWeb was not going to play a significant part in the PNT strategy—while at the same time saying how important that was —but he did not say what exactly it would be doing. Could he elaborate a little more on where he sees the focus of that £1 billion investment?
Lord Callanan (Con)
As I said in answer to the noble Lord, Lord West, we have been clear that the possible provision of PNT services was not the rationale for our investment in OneWeb. OneWeb is primarily a telecommunications operation and that is what its primary focus will be. However, we are not ruling out that it may play a role in future services to come.
Lord Fox (LD)
My Lords, the cost of OneWeb does not stop with the Government’s share of $1 billion. In order to complete the array, the chairman of Bharti Enterprises says that a further $2.5 billion will be required, for which the Government are on the hook for $600 million. Given that that has to happen soon, where in the Budget is that line for the Government’s investment, and what value are UK taxpayers going to get from that huge amount of money?
Lord Callanan (Con)
We will be setting out a strategy for OneWeb in the future. We have made an investment in OneWeb and we are looking for alternative sources of finance to come.
Lord Lennie (Lab) [V]
Following on from the questions from my noble friends Lord West and Lord Stevenson, does OneWeb have a proven PNT capability? How is the Cabinet Office-led review progressing, who is being consulted and when will its findings be published?
Lord Callanan (Con)
That is the third time that this question has been asked. Government investment in OneWeb was for cutting-edge telecommunications capability based on market analysis. We have always been clear that PNT services were not the rationale for this particular investment.
Lord Lancaster of Kimbolton (Con)
My Lords, this is an ambitious project, but I cannot help but feel that, on a cost basis alone, it is one that is best pursued with our allies, perhaps the Five Eyes community. There is no doubt that we have an enormous amount to offer, not just the skills that we hold here in the United Kingdom, but does my noble friend agree that the strategic location of some of our overseas territories in the southern hemisphere will make us very attractive partners?
Lord Callanan (Con)
Indeed. I know that my noble friend has great experience in these matters. Collaboration with partners and industry will be vital for success in this field. A new UK capability could offer opportunities to deliver more on global Britain through strengthening our international relationships. We would most likely seek to use our overseas territories for ground-based stations.
Baroness Wheatcroft (CB) [V]
My Lords, it is highly regrettable that our Brexit negotiations failed to secure a deal over Galileo. Are there any plans to try to revisit that and negotiate a deal, rather than ploughing our own course? Could the Minister also tell us about the National Space Council, which was announced in June 2019? How often has it met? Was it consulted over the purchase, which others have mentioned, of OneWeb, which was done against the advice of the Civil Service?
Lord Callanan (Con)
The answer to the noble Baroness’s first question is no. The UK National Space Council, chaired by the Prime Minister, will continue to play an important role in future government affairs.
Lord Harris of Haringey (Lab) [V]
My Lords, I refer to my interests in the register. The Blackett review into critical dependency on the GNSS was published in January 2018. What progress has been made on the review’s first recommendation that operators of this critical national infrastructure should report on how vulnerable their systems are to a failure or interruption of the GNSS network? The Cabinet Office was tasked with assessing our overall dependency on these systems. When will this be published, along with an action plan to remedy any weaknesses and the proposals for back-up systems called for by Oliver Dowden, then the Cabinet Office Minister?
Lord Callanan (Con)
The UK PNT strategy group is developing the UK’s first national PNT strategy, which includes a review of critical dependencies and actions. Decisions on the publication of the strategy and leadership for implementation are subject to a wider review of PNT governance being led by the Cabinet Office.
Lord Campbell of Pittenweem (LD)
My Lords, the Government paid £400 million for a minority interest in a failing company whose satellites, as we have heard, are for communication, not navigation. What kind of investment was that?
Lord Callanan (Con)
I outlined in answer to three other questions the rationale for our investment in OneWeb.
Lord Walney (Non-Afl)
Further to what a number of speakers today have said, could the Minister clarify whether the Government are pursuing a formal partnership with our Five Eyes allies? Would that not be a good idea for our long-term security?
Lord Callanan (Con)
That is indeed one of the points that are being considered in the review, which will be reporting at the end of March. We will then outline a business case and, if there can be collaboration with our Five Eyes partners, I am sure we would want to go down that route.
The Senior Deputy Speaker (Lord McFall of Alcluith)
My Lords, all supplementary questions have been asked.
National Security and Investment Bill
Lord Callanan ExcerptsTuesday 9th March 2021
(3 years, 9 months ago)
Grand CommitteeRead Full debate National Security and Investment Bill 2019-21 View all National Security and Investment Bill 2019-21 Debates Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: HL Bill 165-II Second marshalled list for Grand Committee - (4 Mar 2021)
The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)
I thank all noble Lords who have contributed to this very useful short debate. I welcome the amendments proposed by my noble friend Lord Vaizey. Taken together, as numerous speakers have said, his amendments would exempt UK investors and investors from other particular countries from the Bill’s mandatory notification regime. As it stands, both the mandatory and the voluntary notification regimes provided for by the Bill are both actor and nationality-agnostic. The mandatory notification regime is based on the risks posed by acquisitions of target entities due to those entities’ activities, rather than the risks posed by the acquirers. The risks posed by acquirers are then considered on a case-by-case basis by the Secretary of State as part of the particular national security assessment.
My noble friend is right to suggest that, in many cases, acquisitions by UK nationals and UK-based companies, or those based in like-minded countries, are less likely to give rise to national security concerns, even in relatively sensitive sectors. Such acquirers, if their proposed acquisitions do not give rise to national security risks, will find their acquisitions cleared to proceed by the Secretary of State, following assessment or following call-in, should that be necessary, for further review.
However, an acquirer’s nationality cannot tell the Secretary of State everything he needs to know about that acquirer’s intent. For example, it is possible that a UK acquirer may be paid by a hostile actor or otherwise have strong links to hostile actors based outside the UK. A similar rationale follows for the amendment’s reference to other like-minded countries. So, excluding purely on the basis of nationality could create a loophole to exploit.
The particular approach of the amendments in this group also raises some practical challenges. For instance, the references to nationality appear not to deal with the issue of dual nationality; nor is a change of nationality covered. Key considerations in designing this regime have included ensuring that it is not discriminatory, and that it upholds our World Trade Organization and other international obligations in this regard. It is not clear that these amendments would achieve this.
None the less, we wish to consider over time how we might temper and adjust the regime to take account of areas of lower risk. Under Clause 6, the Bill gives the Secretary of State the ability to make exemptions from the mandatory notification regime based on the “characteristics” of the acquirer. This may include nationality if this is judged appropriate and the various issues that I have highlighted can be resolved.
We will of course monitor closely how the regime works in practice to determine through detailed further work and carefully assess whether any such exemptions should be introduced. Any such regulations would be subject to appropriate parliamentary scrutiny through the affirmative procedure.
I welcome the opportunity to discuss the impact of nationality on the regime with my noble friends and to set out our thinking in more detail. However, for the reasons I have given, I cannot accept my noble friend’s amendments. Before I conclude, I can confirm to the noble Baroness, Lady Hayter, that the Government will engage with a number of stakeholders on the voluntary and mandatory notification forms. Therefore, given the points I have made, I wonder whether my noble friend will consider withdrawing his amendment.
Lord Vaizey of Didcot (Con) [V]
My Lords, I am grateful to my noble friend the Minister for his response. Never have I seen so many noble Lords and noble Baronesses arraign so uniformly against an amendment, so the mood of the Grand Committee is clearly against me. In fact, through the powers of my advocacy I think that I even persuaded the noble Baroness, Lady Bowles, to move from being a supporter to an opposer of my amendments, if I followed her speech correctly.
I am not sure that the issue of media ownership threw much light on the power of my amendments. However distasteful we might find the antics of media owners in this country, the British ones are just as guilty as any foreign ones of potentially challenging our democracy.
My noble friend Lord Lansley was correct to say that I included New Zealand along the lines of the Five Eyes, although I notice that he said that the US regime could be helpful to UK businesses if the UK was exempt from the equivalent provisions in the US. That was the purpose of my amendment.
Fundamentally, the point I was trying to make with these amendments, which did not really shine through, is that I seek not to hide any transactions from the national security regime but simply to avoid an overwhelming number of mandatory notifications for the department. Of all the speeches that I heard, the Minister’s was the most supportive. I noted his very welcome comments that the door remains ajar, as the regime develops, to put in place provisions to ease the bureaucracy and the number of mandatory notifications.
Finally, I was inspired by my noble friend Lord Leigh of Hurley’s speech to potentially draft a new amendment as we progress—perhaps the pub amendment, whereby the only transactions that can be notified in a mandatory fashion to the Government are those that can fit into my noble friend’s local pub. I beg leave to withdraw the amendment.
Lord Callanan (Con)
First, I extend my thanks to the noble Baroness, Lady Hayter, and my noble friend Lord Leigh for the amendments in this grouping. Let me start by addressing Amendments 15A and 17, which concern the scope of the mandatory notification regime.
Clause 6 sets out the circumstances where a notifiable acquisition takes place for the purposes of the Bill. Noble Lords will see in subsection (2) that the types of acquisition covered by mandatory notification are not simply the full list of trigger events in Clause 8. Rather, notifiable acquisitions are objective circumstances based primarily on an acquisition taking a party’s holding of share or votes to or past a particular numerical threshold. The amendment of the noble Baroness, Lady Hayter, would remove subsection (2)(b) to remove the lowest of the numerical thresholds: 15%. My noble friend’s amendment seeks to amend Clause 8(2)(b).
Let me make three points about these amendments, which I trust will address the concerns which the noble Baroness, Lady Hayter, and my noble friend Lord Leigh raised in their opening comments. First, acquisitions that take a party’s shares or voting rights in a specified entity to 15% or more, not exceeding 25%, are notifiable even though they are not, by themselves, trigger events that may be called in by the Secretary of State for scrutiny under the Bill. We have, nevertheless, required such acquisitions to be notified, because increases in shares or voting rights to 15% or more may realistically result in the acquirer having material influence, and therefore control, over the policy of the entity, and that would constitute a trigger event.
The notification requirement is thus intended to ensure that the Secretary of State is made aware of the proposed acquisition and can take steps to determine whether material influence will in fact be required. The 15% threshold is broadly consistent with the UK’s merger framework. As the Competition and Markets Authority notes in its merger guidance, although there is no presumption of material influence below 25%, shareholdings of 15% or more may be examined to see whether the holder might be able materially to influence the company’s policy. We think that this strikes the right balance by requiring parties to focus only on a numerical threshold, while still allowing the Secretary of State to be notified about, and then call in if the legal test is met, more subjective acquisitions of control in the most sensitive sectors.
Secondly, my noble friend made an important point: the investment security unit will be required to process notifications for acquisitions of 15%. We expect that, as with acquisitions across the regime, the vast majority will quickly be cleared to proceed. It is vital that the statutory timescales set out in the Bill for processing such notifications are met to maintain business and investor confidence; the Government will resource the investment security unit accordingly to do just that.
I understand that my noble friend has a particular interest in what “material influence over the policy of an entity” relates to. I assure him that material influence is an existing concept under the Enterprise Act 2002. The Competition and Markets Authority sets out what it considers constitutes material influence in its mergers guidance. The Secretary of State intends to apply this in so far as it is possible in the context of this new regime for the purposes of determining whether control has been, or is to be, gained over a qualifying entity. For the avoidance of doubt, the Government have no plans to publish their own separate guidance on material influence.
My noble friend also queried the reference in subsection (3) to excluding acquisitions that are “impossible” to notify from constituting notifiable acquisitions. Let me explain the reasons for this. The Government recognise that there may be circumstances where it is impossible to notify and obtain clearance from the Secretary of State for an acquisition before it takes place. They could include lack of awareness on the part of the acquirer that they were about to acquire control, or where it was otherwise impossible to notify in the time available before the acquisition took place.
Let me give an example. A beneficiary to a will may have no prior knowledge that that they stand to inherit a stake in a business that would ordinarily be a “notifiable acquisition” and will automatically do so on the execution of the will. The Bill does not exhaustively define the circumstances that are “impossible”. I have given one example around inheritance; others might include bankruptcy, intestacy and by operation of law, but these examples are indicative.
The third point I should make, specifically about my noble friend’s amendment, is that, as currently drafted, it would not simply remove the 15% threshold but replace it with a reference to 25%. On this point, I hope he will recognise that subsection (2)(a) of the clause already provides for this—or, to be specific, very close to this effect—as it draws on the existing numerical trigger event thresholds in Clause 8, which start at acquisitions taking a person’s holding past 25%. As such, the amendment would duplicate those existing provisions and would in fact result in a requirement to notify when acquiring specifically 25% and then again if moving beyond 25% in future. I trust he will agree that we should avoid this, I am sure, unintentional effect.
Amendment 19A in the name of the noble Baroness, Lady Hayter, seeks to prevent notifiable acquisition regulations being used to bring asset acquisitions in scope of the mandatory notification regime. Let me start by setting out why it is important that the delegated powers in Clause 6 are not constrained in this way before I address the amendment itself.
The noble Baroness will accept, I am sure, that the future is uncertain, that the threats we face as a nation inevitably change over time and that the ways in which hostile actors seek to bring us harm are constantly evolving. That is precisely why the Bill extends the new investment screening regime’s coverage to acquisitions of individual assets, not just acquisitions of control over entities. We cannot, and should not, rule out the possibility that changes to the scope of the mandatory notification regime may be required, based on the types of acquisition and not just the sectors in which they take place.
None the less, the noble Baroness has spoken powerfully on a couple of occasions about the concerns of the Wellcome Trust and others, so let me say this categorically: the Government have no current plans to bring assets in scope of the mandatory notification regime, and neither subsections (5)(a) nor (6) require them to do so; they merely allow for that possibility, subject to the restrictions in subsection (7). Were we or a future Government to do so, it is clear that such a move would constitute a major change to the regime. It is difficult to conceive of many instances where consultation with relevant stakeholders would not be a practical necessity for a change such as this.
Lord Leigh of Hurley (Con)
I thank my noble friend the Minister for his very considered comments, in particular his explanation of Clause 6(3). I think it allows a coach and horses to be driven through most of this legislation if someone can claim an impossibility. The examples he gave were excellent but there will be many other examples where people can claim an impossible circumstance. We will come on later to talk about, for example, the position of administrators and liquidators, and I can think of many others as well. I would have thought Clause 6(3) needed refinement.
Both the Minister and the noble Lord, Lord Fox, mentioned “materially control” as opposed to “materially influence”. There is a difference and this is not about materially controlling but about materially influencing. Regarding Clause 8(8), I accept that there are definitions elsewhere of materially influencing the policy. However, I remain of the view that it is not possible below 15%, or indeed below 25%, to materially influence the policy as far as national security is concerned. Therefore, I very much hope that my noble friend the Minister has a chance to reflect on this specifically before Report.
Lord Callanan (Con)
I will take that as a comment and not as a question. I continue to look at all aspects of the Bill to see how they can be improved.
Baroness Hayter of Kentish Town (Lab)
The Minister referred to the meeting that he and the noble Baroness, Lady Bloomfield, very kindly held yesterday with the Wellcome Trust, and I very much welcome the reassurances that he has read into the record today. The shorthand for this is the nervousness in academia of bringing in assets—IP, information, ideas and software—rather than just entities. That was what we discussed at the meeting yesterday, and the Minister has now read into the record the reassurances he gave there, for which we thank him.
I thought that the suggestion—I was going to call it a wheeze—of the noble Lord, Lord Lansley, was rather crafty: if that is what you mean, why do you not say it upfront? However, from what the Minister said, there seems to be a difference between the objective and the subjective criteria. I do not know whether that is why the Government want them in different clauses, but there is a problem with the subjectivity of this phrase. It is not simply, as the noble Lord, Lord Leigh, just said, about material influence rather than material control, but also the policy, and it is hard to define what that means. It seems to me a very subjective test for the big change made in Clause 6. I remain unconvinced that we have got it clear enough.
I thank the noble Baroness, Lady Bowles, for explaining where the 15% figure, to which the Minister referred again, comes from. The CMA uses it when talking about mergers, but we are talking here about big companies, not small ones. However, because there is no threshold, much smaller companies will be covered by this. It may be absolutely important for the takeover of very large companies whether competition is taken out of the market. The Minister knows that, as a consumer champion, I am always very happy for the CMA to look at the impact on competition. However, I have my doubts whether a regime defined for competition in consumer goods and access should be lifted and shifted—the Minister said that there will not be separate guidance—into something that will sometimes affect small start-ups and new developments.
I certainly know more about the subject than I did 43 minutes ago, for which I thank all those who have spoken on the amendment. As has been said, I hope that the Minister and his draftspeople will look at whether this is clear enough, necessary and appropriate for the sorts of investments we are dealing with. When the Minister gives a bequest in a will as the reason for including a particular provision in the Bill, that feels like clutching at straws to me. I hope there are better arguments than that, but, for the moment, I beg leave to withdraw the amendment.
Lord Callanan
Member’s explanatory statement
This amendment removes the reference to Article 9 of the Export Control Order 2008 (S.I. 2008/3231) which was revoked by regulation 4(7) of the Export Control (Amendment)(EU Exit) Regulations 2019 (S.I. 2019/137).
Vauxhall at Ellesmere Port and Battery Manufacturing Strategy
Lord Callanan Excerpts(3 years, 9 months ago)
Lords ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Lord Bassam of Brighton (Lab) [V]
My Lords, the Ellesmere Port plant is a major employer, and letting it wind down would have devastating consequences, with 1,000 highly skilled jobs lost in the local community. The Government must do all they can to secure the future of the plant, and it is worth reminding ourselves that the automotive sector has had no sectoral support during the pandemic.
To achieve net zero and sustain our automotive industry, we need a plan and action and investment. As such, will the Government bring forward ambitious investment in electric vehicle technology, including the electric battery supply chain, in tomorrow’s Budget—so that manufacturers have the long-term confidence that they need to build new electric models in the UK and so that we can move forward and secure the future of Ellesmere Port as a major automotive producer?
The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)
I assure the noble Lord that we are doing all that we can to ensure that Ellesmere Port has a bright future. The automotive industry in general is an essential part of the Government’s plans for green growth, levelling up across our country and driving emissions to net zero. As the noble Lord will be aware, as part of the Prime Minister’s 10-point plan, the Government brought forward the phase-out date for new petrol and diesel cars and vans to 2030, and, by 2035, all new cars and vans must be fully zero-emission at the tailpipe.
Lord Fox (LD)
My Lords, I am on the executive of the All-Party Parliamentary Motor Group. In his Statement, the Secretary of State boasted that some £1.5 billion of joint funding had gone to the APC and the Faraday battery challenge. To put that into context, that is about a tenth of what the French Government are putting into this sector. The fate of Ellesmere Port will be decided in days, but the Government have had years to get ready for moments like this. Everyone knew and knows that we need significant battery manufacturing capacity in this country. The Faraday challenge has been running for eight years, so what has stopped a battery gigafactory being built already?
Lord Callanan (Con)
Ultimately, of course, these are commercial decisions for the companies involved, but we are working closely with a number of people interested in establishing gigafactories. We have announced £500 million as part of our wider commitment of up to £1 billion to support the electrification of vehicles and their supply chains, including developing gigafactories in the UK.
Baroness Altmann (Con) [V]
My Lords, I congratulate the Government on their aim to ban sales of new internal combustion engine cars from 2030. What specific plans do they have to invest in the production of electric vehicles and batteries to ensure that the UK remains competitive globally in manufacturing? Does my noble friend see a role in this for regions such as the north-west, where Vauxhall is sited?
Lord Callanan (Con)
I agree with my noble friend that it is very important that we see a future for these industries. As I have said, we are doing all that we can to help—I outlined our financial commitment in my answer to the noble Lord, Lord Fox. I come from the north-east, so I want to see it do well along with the north-west, and I repeat my earlier answer that we are doing all that we can to secure the future of the Ellesmere Port facility.
Baroness Boycott (CB) [V]
My Lords, like everyone, I welcome the introduction of full electric vehicles, but the Secretary of State said:
“We want to see a circular economy for electric vehicles.”—[Official Report, Commons, 1/3/21; col 33.]
However, he also said, “If we attain that”. Can the Minister give us an assurance that the Government are looking into how this can be achieved? A recent report by the Transport and Environment Committee found that it is eminently feasible to have batteries that are one-fifth lithium and nickel and 65% cobalt, coming from recycled sources, by 2035. Will the Government put some sort of target into legislation as a statement of intent to drive the industry to do just that?
Lord Callanan (Con)
I outlined in previous answers the support that we are giving; we are looking closely at all these matters. I am sure that it is eminently possible to ensure that a circular economy applies to electric vehicles as much as it applies to many other parts of the economy.
Baroness Jones of Moulsecoomb (GP)
Are the Government aware that electric vehicles can only ever be a tiny part of reducing our carbon emissions—and that it would be more effective to stop building new roads and not open new coal mines? If they are worried about jobs, the Government should be starting up thousands of schemes to train people to retrofit insulation in houses and install clean heating systems. Are the Government thinking about this?
Lord Callanan (Con)
I am pleased to tell the noble Baroness that we are already investing millions of pounds in training for green jobs under the Green Homes Grant scheme. We invested about £7 million in a training competition, and there are numerous other government schemes doing precisely what she suggested: the eco scheme, the home upgrade grant, et cetera.
Lord Woodley (Lab)
My Lords, I appreciate the helpful comments that have already been made, but I must ask the Government to leave no stone unturned in keeping this Vauxhall car plant at Ellesmere Port open—it is crucial, as people have said. Finalising an agreement with Stellantis to manufacture not one but potentially two next-generation battery-driven vehicles is crucial, securing, of course, thousands of high-skilled jobs for Ellesmere Port and, indeed, our country. Battery-driven vehicles are the future for this industry, if we are to have any future at all, and I suggest that it would be unforgiveable if the Government missed the opportunity of this investment and of securing these jobs for our country.
Lord Callanan (Con)
I know the noble Lord’s personal commitment to the north-west, and I agree with him about leaving no stone unturned. I assure him that the Government are committed to securing the future of Ellesmere Port. The Business Secretary and his senior officials are engaging frequently with the company to explore ways to ensure that the plant stays open. The noble Lord will understand that, while these discussions are ongoing, I cannot comment further, but we will do all that we can.
Lord Mann (Non-Afl)
We have the land and the skilled workforce, and we no longer have the bureaucracy of the European Union restricting state aid to new industries. The Minister talks about the private sector—of course it needs to be there. But should we not be in the lead in the world on electric vehicles, with state money—government money—helping to make sure, as we have done with vaccines, that we are first, not second, third or fourth in this technology? Therefore, should those decisions not be made now?
Lord Callanan (Con)
Those decisions have already been made, and I agree with the noble Lord: it is essential for the future of the industry, and in relation to issues such as rules of origin, that we establish domestic supply chains. I outlined in a previous answer the very substantial investments that the Government are making in this area.
Lord Randall of Uxbridge (Con) [V]
My Lords, I was very pleased to hear my noble friend explaining what Her Majesty’s Government are doing to ensure the future manufacture of electrified vehicles, helping us to meet those net-zero targets. Does he agree that there is a huge opportunity for the manufacture of batteries not just for cars but for larger vehicles, such as buses?
Lord Callanan (Con)
I agree with my noble friend and indeed I would include vans as well. He makes a very good point. Developing a competitive UK electrified supply chain is key to maintaining the success of our automotive industry, which I remind noble Lords is one of the most productive and efficient in the world. Doing this will protect and create thousands of high-quality jobs across the UK.
Lord Austin of Dudley (Non-Afl) [V]
My Lords, I draw attention to my entry in the register of interests. The electric vehicle revolution can also bring thousands of well-paid jobs to areas such as the West Midlands, but that requires investment in battery technology and mass production. What assessment have the Government made of proposals for a battery plant at Coventry? I commend to the Minister the brilliant work being done in this area by the Warwick Manufacturing Group, where I and many other parliamentarians sit on the voluntary advisory group.
Lord Callanan (Con)
There are a number of good proposals around the country, including from Coventry, for the location of gigafactory investment. Ultimately, of course, the decision will be a commercial matter. Ministers and officials are in close discussion with those developing the Coventry proposals, the Blyth proposals and other factories around the country.
Lord Field of Birkenhead (CB) [V]
I thank the Government for their statement. What do the Government need to bring to the table? What does Vauxhall need to bring to the table to ensure that we have in Wirral one of the centres for battery production?
Lord Callanan (Con)
A bid from Coventry, bids from the north-west, a bid from the Wirral as well—we totally understand that. The noble Lord will understand that these are commercial decisions. We are willing to stand behind companies and help them develop their proposals, but there are a number of exciting proposals in different parts of the country. I have outlined the financial support that is available. With regard to the future of Vauxhall, or Stellantis as it now is, we are in discussions with it; my right honourable friend the Secretary of State has had a number of meetings with it, and senior officials are meeting it. Those discussions remain confidential at the moment but we are doing all that we can to assist.
The Deputy Speaker (Baroness Fookes) (Con)
All supplementary questions have been asked.
National Security and Investment Bill
Lord Callanan ExcerptsTuesday 2nd March 2021
(3 years, 9 months ago)
Grand CommitteeRead Full debate National Security and Investment Bill 2019-21 View all National Security and Investment Bill 2019-21 Debates Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: HL Bill 165-I(a) Amendments for Grand Committee (for Second Marshalled List) - (1 Mar 2021)
Baroness Hayter of Kentish Town (Lab)
My Lords, it was clear at Second Reading, and again today from when the noble Lord, Lord Fox, began, that everyone across the House agrees that national security is the number one priority.
The discussion therefore is twofold. First, will what is, and is not, covered in this legislation be clear enough? Secondly, is the balance between security needs and the desire for economic growth, research, innovation and freedom to invest, correctly delineated? On the first issue, it is obvious that the new regime must be based on the best advice coming from across government, as well as on emerging and current threats, and the behaviour and developments of our adversaries. We will come in the next group to the definition of national security.
This first amendment is focused more on the second question that I posed. Will the unit take sufficient account of technology investment, research and innovation, and business opportunities, particularly for SMEs? From everything said at Second Reading and even today, that is an important discussion. We should not expect the Bill, nor its new unit, to be the generator of investment, research and development—that is for an industrial strategy—but the Government must have a careful eye on whether the workings of the Bill have a detrimental impact on technology investment and innovation, while ensuring that the economy does not override security interests. That is a difficult judgment. If it were not, there would never be any problems for the Government to solve.
I read today—others may already have been aware—of possible changes to the listings regime to help the City compete with New York, Amsterdam and Frankfurt in attracting fast-growth companies by creating an “agile” new economy focused on innovation and technology. We welcome such moves and attention being given to making Britain a more attractive place in which entrepreneurs can take companies public.
We hope that the proposals emanating from one of our colleagues, the noble Lord, Lord Hill, on relaxations on the use of dual-class shares, to allow founders to keep control over their companies by giving them deciding votes on decisions such as corporate takeovers, could work in harmony rather than at variance with the objectives of the Bill. I hope there will be an opportunity to discuss those interplays as we go forward.
In the meantime, we will consider future amendments that will look at whether the right procedures, definitions, timelines and so on strike the right balance as to workability in making those fine judgments between security and economic interests. However, this amendment is calling for the Secretary of State to be required to have regard to those other interests. The Minister will say that, of course, he or she is bound to do so. However, it is a question on which some assurance is needed and we look forward to the Minister’s view on that.
The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)
I am grateful to noble Lords, Lord Clement-Jones and Lord Fox, for their introductions to this debate. I thank them for proposing this new clause and for enabling a further discussion on the purpose of the Bill.
Amendment 1 seeks to establish an objective for the Bill and include a number of elements to which the Secretary of State must have regard when using his powers. Let me say at the start that the intent behind this amendment is to provide a clear statement of the scope of the Bill, to prevent so-called mission creep and give certainty to businesses and investors, while avoiding the pitfalls of attempting to define “national security”. However, the legal effect of the amendment presents us with a number of challenges.
The amendment would require the Secretary of State when exercising his powers under the Bill to safeguard national security in respect of economic and social harm, which is reasonable. It is indeed possible that economic or social harms could give rise to risks to national security, but so could other harms such as physical or military harm. For example, a hostile actor could use control over a piece of critical infrastructure to put UK citizens in physical danger or they could acquire companies in the UK defence supply chain and thereby degrade our military capabilities.
The absence of other harms in the factors listed by the amendment suggests that the Secretary of State may not use his powers under the Bill to safeguard national security from those harms that I have outlined. It is also unclear how he should have regard to the factors in subsection (3) of the proposed new clause. As the amendment does not say that they are to be regarded as part of national security, that would suggest the scope of the Bill is being expanded beyond national security. It is important to note that the government position on the issue of defining, wholly or in part, “national security” remains consistent with when amendments in a similar vein to this were discussed at Second Reading and in the other place; I have discussed that with the noble Lord, Lord Fox, previously. The Bill does not set out the circumstances in which national security is, or may be, considered at risk. That reflects long-standing government policy to ensure that national security powers are sufficiently flexible to protect the nation. It also does not include factors which the Secretary of State must or may take into account in assessing national security risks on the face of the Bill.
While it is crucial for investor confidence that there is as much transparency in the regime as possible, there is clearly a limit to how much the Government can and should disclose in this regard, given that the regime deals explicitly with national security matters. National security risks are multifaceted and constantly evolving. What may not constitute a risk today may well do so in future. We may find over time that such specificity becomes outdated. Indeed, as my noble friend Lady Noakes pointed out, it is enough of a challenge to ensure sufficient specificity in the objectives of the Bill, especially with regard to concepts such as those referenced in the amendment.
While I have nothing but gratitude for the noble Lord’s intention—to provide a specific objective for the Bill—it is primarily for the reasons I have set out that I am unable to accept the amendment, and hope that in the light of that he feels able to withdraw it.
Lord Lansley (Con)
My Lords, like other noble Lords, I spoke at Second Reading and referred to this question. Together with the noble Lord, Lord Truscott, I took the view that there were inherent problems in attempting a definition of national security and that the best definition is rendered through the Bill as it stands. Once one defines the nature of an entity, the nature of the assets covered, the nature of the acquirer concerned and the extent of control—or the definition of control for these purposes—I think one arrives at what a trigger event is. By definition, a trigger event gives rise to the question: does this trigger event cause a problem for national security?
I do not dispute that large numbers of consultees to the White Paper and speakers in our debates have said that it would be very helpful to define national security and—I would expect nothing less from her—the noble Baroness, Lady Hayter, has done as well as one is likely to do. However, I fear that Amendment 13 in particular demonstrates all the flaws with providing such a definition. I will not seek to delay our debate too long, but I will go through a number of them.
The noble Baroness asked whether critical national infrastructure was included. In Amendment 13, critical national infrastructure is included but not defined. We do not know which bits of national infrastructure are in the regime and which are outside it. We know, broadly, the sectors in the scope of the mandatory regime even if we have further detail and amendments to them today. However, if I look at what the Government have published, I find the nuclear industry, the communications industry, data infrastructure, energy infrastructure and transport infrastructure, including ports, harbours and airports. I do not find water infrastructure and food security infrastructure. That is the question and, with the greatest respect, Amendment 13 does not answer whether they are in or out.
We will come on to debate these things but it slightly introduces the concept of whether we are using the EU regulation. My noble friend Lady McIntosh referred to it. The EU regulation includes food security and water. Even if we do not follow the EU lead, which of course now we will not be doing, it at least gives us an interesting list to work from and to question why there are differences.
This brings me to Amendment 2. One of the other differences between our proposed legislation here and the EU regulation is that the EU regulation says that it proposes to safeguard against threats to security and public order. Amendment 2 proposes including public order. However, the European investment screening regime includes freedom and pluralism in the media as one of its investment screening criteria. We are not including that in the Bill. Why are we not including it? It is already in the media public interest regime inserted into the Enterprise Act by the Communications Act 2003, on which I served. I also served on the Enterprise Act Standing Committee in 2002. In that sense, we are not pursuing a public order regime here; we are pursuing a security regime.
I now come to some of the other issues with Amendment 13. Proposed new paragraph (c) talks about the characteristics of the acquirer. If you were to say to me that in my little definition of what constitutes a security risk, we have definitions of the natures of the entities and assets concerned and quite exhaustive definitions of what constitutes control, I would say that what we do not have are definitions of the nature of the acquirer, other than that, presumably, it is hostile in intent.
Amendment 13 effectively tries to give us a list of the trigger events that might give rise to an intervention. In some senses, the amendment is far too narrow. There may be all sorts of unanticipated trigger events that would not be included in primary legislation through this amendment. In other respects, it might be far too wide. Proposed new paragraph (c) talks about
“the characteristics of the acquirer, including whether it is effectively under the control, or subject to the direction, of another state”.
There are virtually no Chinese entities for which that is not true. There are many American corporations for which one could say that that was true. One could certainly say the same of a number of state-owned European companies, including EDF and those engaged in our national infrastructure. What does proposed new paragraph (c) tell us? Does it tell us whether those characteristics are a threat to national security or not? It does not tell us either of those things; all it tells us is that we must have regard to them. We know that Ministers will have regard to them because they are having regard to that kind of issue. It does not get us very far.
The same is true on three occasions, in proposed new paragraphs (a), (e) and (f), which refers to
“the likely impact of the trigger event on”.
It does not say whether the impact is adverse, beneficial or on security. Therefore, almost by definition, all that Amendment 13 tells us is that Ministers should have regard to trigger events in relation to these activities, whether they relate to data or defence capabilities. That is what Ministers are setting out to do.
In a couple of respects, Amendment 13 takes us further than we were intending to go in the Bill. The idea that non-compliance with our international obligations is, by definition, a security risk to the United Kingdom seems to be misplaced. It may be a matter on which we have obligations or be of great policy importance but one cannot construe that compliance with our international obligations in every respect is a security risk to this country.
I am afraid that one also has to look at proposed new paragraph (h), which asks
“whether the trigger event may adversely affect the safety and security of British citizens or the United Kingdom”.
It does not say “British citizens in the United Kingdom”. For example, there are hundreds of thousands of British citizens in South Africa. I was in Natal a few years ago, where there are 500,000 British passport holders, many of whom are British citizens. Are they, by definition, therefore included in this security investment regime?
All that I seek to demonstrate is that although Amendment 13 is a helpful effort, trying to define all the trigger events is bound to fail. Therefore, we should focus on making sure that the listing of entities and assets—as, for example, those published today by the Government—is as good as we can make it, and we will have some debates on that. We should define control properly—not too broadly or narrowly—and we should understand what kind of acquirers we are talking about. We will talk about whether something is foreign or domestic, state or non-state, or hostile and in what circumstances. That is where the lack of definition in the Bill is as yet more important. I refer to the question of what kind of acquirers. I hope that we will talk about that matter in later debates but, for the present, I cannot see the merit of adding Amendment 13 to the Bill.
Lord Callanan (Con)
I thank all noble Lords who have taken part in this debate. Let me first say to the noble Baroness, Lady Hayter, that I anticipated that she might be a little critical—in her normal, super-polite way—about the letter coming out late. There were some delays in the internal approval process and, faced with a choice of whether to send it out now or wait until after Committee, I thought that, on balance, it was best to get it out to noble Lords. I was fully aware that when I arrived today, some noble Lords might have criticisms for me, but I thought they would like to see the letter rather than not see it before we started Committee. I hope that during a lull in proceedings, Members might have a chance to read the letter—all 100-odd pages of it.
I am grateful to the noble Baroness, Lady Hayter, as well for her amendments to Clause 1 and after Clause 5, which are Amendments 2 and 13 respectively on the Marshalled List, and I give my combined thanks to her and the noble Baroness, Lady Northover, for the proposed new clause relating to the integrated review.
I will begin with Amendment 2, which would expand the scope of the Bill to include public order and public safety, in addition to national security. The noble Baroness, Lady Hayter, is of course right that public order and public safety are exceptionally important and some of the highest priorities for any Government. However, the Bill is about national security—nothing more, nothing less. Including public order and public safety as grounds for calling in an acquisition would be a substantial expansion in the scope of the Bill, as has been pointed out. We do not wish to see any additions to national security, to ensure that we maintain the careful balance struck in this regime between the appropriateness of government powers for intervention and ensuring that the UK remains one of the best places in the world for investment.
In addition, I note that the regime has been carefully designed with the protection of national security in mind and not public safety or public order, as important as they of course are. For example, the trigger event thresholds in Clause 8 are calibrated to protect against activity that could harm national security due to an acquisition of control over a qualifying entity. It is far from guaranteed that these would also protect against risks to public order or public safety, or that they would be the most effective or proportionate way in which to do so.
For example, a certain type of investment may give rise to a risk to public safety or public order only if an entity were bought in its entirety or if, conversely, any investment could harm public order or public safety. Of course, there may be situations in which a risk to public safety or public order is considered to give rise to a risk to national security as well. I assure Members of the Committee that, in such cases, the Secretary of State will be able to call in the acquisition in question if it meets the tests in the Bill, and will be able to take action if appropriate.
I will pick up on a specific issue raised by the noble Baroness, Lady Hayter. The Bill would apply where a qualified acquisition could undermine democracy in a way that amounts to a national security risk.
Amendment 13 seeks to create a non-exhaustive list of factors which the Secretary of State must take into account when assessing a risk to national security for the purposes of the Bill. It will not come as a great surprise to the Committee to hear that the Government’s position on this issue remains consistent with their position when amendments related to this one were discussed on Second Reading and in the other place.
As drafted, the Bill does not set out the circumstances in which national security is, or may be, considered at risk. That reflects long-standing government policy to ensure that national security powers are sufficiently flexible to protect the nation. It also does not include factors which the Secretary of State must or may take into account under the Bill in assessing national security risks. Instead, factors which the Secretary of State expects to take into account in exercising the call-in power are proposed to be set out in the statement provided for by Clause 3. A draft of that statement was published on introduction of the Bill, to aid noble Lords in their parliamentary scrutiny. The draft statement includes details of what the Secretary of State is likely to be interested in when it comes to national security risks. That includes certain sectors of the economy, and the types of acquisitions that may raise concern.
While it is crucial for investor confidence that there is as much transparency in the regime as possible, there is obviously a limit to how much the Government can and should disclose in that regard, given that the regime deals explicitly with national security matters. Nevertheless, the draft statement goes into some detail about the factors which the Secretary of State expects to take into account when deciding whether to call in a trigger event. The proposed new clause would instead create, alongside this statement, a non-exhaustive list of factors which the Secretary of State must have regard to when assessing a risk to national security.
Lord Fox (LD)
During that comprehensive answer, I think I heard the Minister say something and I would like to test whether I understood correctly. In explaining why people should not be concerned that certain parts of infrastructure are not included in the list, I think I heard the Minister say that the Bill’s call-in power is economy-wide. That suggests to me that the list of 17 issues is irrelevant because everything is on the list. In other words, anything can be called in, whether it is on the list or not. So, the list is merely indicative, but the exhaustive list is the entire economy. Could the Minister explain whether that is the correct interpretation of what I just heard?
Lord Callanan (Con)
If the acquisition in question poses a risk to national security, yes, there is the general power, but the point I was making is that, with regard to areas of political and national infrastructure, there are also separate powers in different pieces of legislation that would help to protect in those areas.
Baroness Hayter of Kentish Town (Lab)
First, I thank everyone for their contributions, which I found extremely helpful and thoughtful. In particular—this will not surprise the Minister—the Minister confirmed that it would be possible to call in any threat to democracy or anything like that. I am sorry he did not feel able to answer on when exactly the integrated review will be published, but we live in hope.
I was a bit disappointed that the Minister said that he did not want to define national security because it was long-standing government practice not to. My heart sank at that point, thinking that the Minister must have a better reason. Luckily, he did and he gave us answers other than, “It’s always been done that way”, which always seems to me a really bad answer. I am not saying I was completely persuaded by his answer, but it is a thoughtful and useful way of thinking about how we approach this. I hope it is not just because the Government would fear a JR if there are words that could be challenged over whether something should or should not have been brought in.
My fear is about the difference between the list and the call-in power. As the list will be mandatory, people will know what they have to do. Where investors, researchers or companies will probably have the biggest fear in respect of the call-in power is that they will not know in advance. I hope that we will come to the possibility of either safe harbours or a quick turnaround—though that does not get over the call-in power—because that seems the area of greatest uncertainty. We will probably have to return to that. In a sense, it is the same issue when it comes to critical national infrastructure. I guess I should leave it to those far more experienced in infrastructure to know whether those comments are helpful.
We heard a thoughtful and challenging response to the amendment from the noble Lord, Lord Lansley. If I understood him correctly, he suggested that we start at the back end: we discuss the assets; we discuss the acquirer; we look at the definition of control—which is the end part of the Bill—and use that to define national security in the front part of the Bill. I am bemused by whether that is the right way round; it may be, but by the time we have defined it, we may have got to it. It seems an odd way round to do things to have a Bill that has “national security” in its title and then to have to work through “Well, if it is that sort of asset owned by that sort of people to that sort of percentage” to decide that it comes into the category of national security. However, I want to read more carefully what the noble Lord said because the elements appear to be there, but it seems slightly upside down. The noble Lord also said:
“We know that Ministers are going to have regard … to that kind of issue.”
If we do, what is the harm in writing them down? He may know that Ministers would have regard to those issues, but will everyone else know what they are?
I have a lot more to think about having heard the wisdom expressed today. It is possible that we will want to come back to this issue on Report—maybe in a more refined way; I am sure that those who have read the Commons debates carefully will have noticed that my words were not all of my own drafting. I thank everyone who has contributed—more sincerely, perhaps, than in other debates. I beg leave to withdraw the amendment.
Lord Grantchester (Lab)
I thank the noble Lord, Lord Vaizey, for these probing amendments relating to the penalty of deeming mergers and acquisitions void in the event of proper notifications and subsequent assessments by the Secretary of State not having taken place. The Minister will need to explain how this will work. Most of the amendments in this group focus on Clause 13, “Approval of notifiable acquisition”, in Chapter 3. Subsection (3) states that:
“A notifiable acquisition, in relation to which a final order has been made, that is completed otherwise than in accordance with the final order, is void.”
I appreciate the view of the noble Lord, Lord Vaizey, that there could be alternative outcomes to certain elements or aspects of any deal. Has the Minister considered whether the Secretary of State could publish guidance on how the mechanisms of deeming non-compliant transactions void would work in practice? Clarity for SMEs would be most helpful.
The ability for transactions to be deemed void where they have not been approved by the Secretary of State, have not been notified or are non-compliant with any final order could have large repercussions. Clause 15, “Requirement to consider retrospective validation without application”, and Clause 16, “Application for retrospective validation of notifiable acquisition”, raise the issue of retrospection in relation to the legally void provision. Could transactions that took place in the past, even up to five years previously, be immediately deemed void? If the first transaction in a chain were deemed void, that would leave the legal rights and entitlements of all subsequent transactions’ parties in total confusion. There could be conditions in a transaction that came to fruition or were exercisable over a length of time, with these events deemed the trigger events rather than the merger itself. Those elements would have had impact at the inception of any M&A activity. An impossible series of rights, entitlements and developments would have to be unwound, which would cause great legal uncertainty.
The noble Lord, Lord Vaizey, also raised the issue of other jurisdictions or cross-jurisdictions. Have these circumstances, among the many others, been considered in the provision of this power? What are the legal implications for the process where the possible imposition of a transaction to be void is under consideration? Have the Government made plans to publish guidance in this area, even though they may consider that circumstantial evidence may make such guidance highly speculative? Many speakers have found the provision impractical and unworkable.
Lord Callanan (Con)
My Lords, first, I apologise for my noble friend Lord Grimstone, who has had to attend a debate on Kenya in the Chamber. I am afraid you are stuck with me for this one, which is obviously disappointing for the noble Lord, Lord Fox. I thank all noble Lords who have contributed.
We understand the aim of this group of amendments, which is to convert the automatic voiding provisions in Clause 13 into powers to void. Further amendments in this group then seek consistency with associated provisions in the Bill. I thank the noble Lords, Lord Vaizey and Lord Hodgson, for bringing together this grouping. I will first address the purpose of the automatic voiding provisions, before turning to the amendments in detail.
Notifiable acquisitions are those that occur within the most sensitive areas of the economy—sensitive enough that the Secretary of State judges that he must be notified and must clear an acquisition to proceed before it can complete. As such, it is essential that there are clear incentives for compliance with the regime and that any national security risks arising from these sensitive acquisitions being completed without approval are mitigated, as far as possible. Noble Lords present will understand that any Government’s first preference in legislating to create requirements on persons, particularly where the matters relate to serious issues such as national security, is that compliance with such requirements is incentivised and that we do not merely rest on the threat of weighty enforcement.
The automatic voiding provisions in Clause 13(1) mean that there is no way around these requirements and that parties who wish to evade the requirements are unable to complete acquisitions which must be approved by the Secretary of State and have not been. This ensures that the regime mitigates a wealth of national security risks, without the Secretary of State ever being engaged. It is efficient and effective government, and a key tool in protecting our national security.
However, voiding is not a sanction; it is instead the logical implication of not complying with a mandatory regime that concerns only the most sensitive acquisitions. Clause 13(3) ensures that any notifiable acquisition in respect of which a final order has been made, which has been completed otherwise than in accordance with the final order, is also void.
I understand that the voiding provisions have raised some concerns, as outlined by my noble friend Lord Vaizey, that the unaware may be unduly or adversely affected, which would otherwise lead to significant costs for parties who are affected by voiding. I hope that I can offer them the following reassurance. First, those who have been materially affected by the voiding of an acquisition, including sellers and third parties, not just acquirers, may apply for retrospective validation of the acquisition using Clause 16. If a valid and complete application is received, the Secretary of State will have up to 30 working days to decide whether to issue a call-in notice. If he does not issue a call-in notice, for example if there are no national security risks involved, he must validate the acquisition retrospectively. The impact of retrospective validation is that the notifiable acquisition is to be treated as having been approved by the Secretary of State and is, accordingly, not void. Anyone materially affected by the voiding, including those unaware of the requirements, is therefore able to secure retrospective validation, such that the acquisition was always valid in law.
Secondly, there are concerns around what happens if a significant purchase of shares in a publicly listed company is caught by the provision. Usually, for significant purchases, parties are advised by a law firm of high repute. I can also assure the Committee that, where the acquisition involves a takeover, BEIS works closely with the Takeover Panel to ensure the there are no issues in the interaction with the takeover code.
Thirdly, there are murmurings that the voiding provisions might create uncertainty. I do not think that Clause 13 could be clearer and more succinct about the effects of not obtaining the approval of the Secretary of State before completing a notifiable acquisition.
Let me now respond to the heart of the proposition of the amendments in this grouping—that voiding should be exercisable as a power by the Secretary of State, rather than being automatic. I am afraid this raises a number of issues. It is, first, unclear why and when the power to void would be exercised. The Secretary of State is already able to order the unwinding or divesting of acquisitions, following assessment as part of the final order. Why would he need to void the acquisition if it can simply be unwound or divested? Would it be intended that the Secretary of State would decide whether to void the acquisition prior to the assessment? If so, on what basis would he make that decision?
Lord Leigh of Hurley (Con)
Does my noble friend the Minister recognise that some countries allow voiding? He pointed out some that do not, but some do. Does he agree that if a transaction is voidable, it could still be declared void?
Lord Leigh of Hurley (Con)
If the legislation says a transaction is voidable, it could still be declared void.
Lord Callanan (Con)
Yes, but we are arguing it should be declared void by automatic obligation of statute, rather than it being a power the Secretary of State could exercise. I have just explained that.
Lord Vaizey of Didcot (Con) [V]
Although I mentioned it at Second Reading, I refer noble Lords to my entry in the register of interests. Also, as noble Lords have done throughout Committee, I thank all the trade bodies that have been so helpful in advising noble Lords on some of our amendments and, particularly, for me, Veronica Roberts at Herbert Smith Freehills. Just for the record, may I also say how delighted I am that it is the noble Lord, Lord Callanan, responding on my amendment rather than the noble Lord, Lord Grimstone? I had a touch of the noble Lord, Lord Grimstone, on my previous amendment, and now, to have the noble Lord, Lord Callanan, frankly, my cup runneth over.
I thank all noble Lords who have supported my amendment. Without wishing to pick any winners, I thought that the noble Baroness, Lady Noakes, put it most succinctly when she spoke of the automatic voiding penalty. She channelled her inner football commentator by saying the automatic voiding was a “massive penalty”. I think that is right. I also point to the noble Lord, Lord Leigh, who has been very good at introducing me to the mysteries of Lords amendments and has marshalled me extremely well. These amendments pose an unanswerable question to the Minister, because if they are accepted and a transaction can be made voidable, it can, by definition, be voided. It is just not automatic. It ensures voiding can apply where the Government think that is the only solution with a transaction that has not been notified.
In the real world, it is unlikely that a mandatory notification would not be made. The tenor of most of the speeches that have been made during the passage of this Bill is that the Government should expect far more notifications than they have estimated so far. The Minister is quite right to say that anyone transacting in the midst of a mandatory area is likely to have some high-powered lawyers advising them.
What I would say in response to the Minister’s excellent response to this debate is that there are certain points that I feel have not been addressed. One is obviously going back to the massive penalty phrase. If you void a transaction where it is part of a wider transaction, how do you go about unwinding it? Would there not be other, more suitable punishments than simply voiding the entire transaction? Indeed, as the Minister indicated, there will be plenty of people—shareholders, for example—who will be unduly punished by the automatic voiding provisions. Surely there must be alternative punishments.
However, by definition, given that you can effectively retrospectively apply to the Government if you have failed to comply with the mandatory notification requirements, you are, as my noble friend Lord Leigh pointed out, effectively making your transaction voidable. You are giving the Government the chance not to void the transaction, yet by introducing an automatic voiding penalty, the Government have precluded themselves from punishing the parties who failed to comply with their requirement for mandatory notification. Giving themselves flexibility by allowing themselves potentially to void a transaction also gives them the flexibility to impose other punishments.
There are other dogs that have not barked in this debate. In other amendments that we have been debating, previous legislation has been cited as an example that has guided the Bill—but there is no similar sanction, as far as I am aware, in any other business-facing legislation in this country. I hope the Minister will not mind me teasing him a bit at the end because I suspect I know—I think I am right in saying—where his sympathies lie in terms of the great debate of the past decade between Brexit and remain. Is there not an irony in him citing the great example of the French and the Germans but ignoring the far more practical Anglo-Saxon common-law tradition evidenced in the US, Canada and Australia? I beg leave to withdraw the amendment.
Baroness Hayter of Kentish Town (Lab)
My Lords, we support the approach of this amendment. As we have all made clear, the new regime must focus on protecting national security. The clue is in the title of the Bill. The definition of national security has to take best advice from across the Government about the threats and behaviour of our adversaries.
While I hope the Government will monitor the impact of the Act on technological investment, innovation and SMEs—which I hope a different part of the Government is actively supporting—those interests, along with employment, investment and competition, cannot and should not trump national security, albeit that I hope that the Government would consider mitigating any detrimental domestic impact of placing security first if that were needed.
Clearly, concerns about any political pressure, rather than any disregard for the issues listed, give rise to this amendment. The tone and the purpose of it are ones that we share.
Lord Callanan (Con)
I thank everybody who has spoken in this debate and thank my noble friend Lady McIntosh of Pickering for tabling the amendment. It seeks to clarify that certain factors, namely employment effects, reciprocal investment or trading opportunities and the desire to protect UK businesses from international competition, cannot be taken into account in assessing whether a trigger event would give rise to national security risks. I was surprised to see that the noble Baroness, Lady Bennett, and my noble friend Lady McIntosh are now differing on some things. That is most unusual; it is something to be encouraged for the future.
My noble friend articulates a reasonable concern here: that a regime used to screen investment for national security purposes could be used to screen investments more widely. Indeed, the shadow Secretary of State, in his opening speech at Second Reading in the other place, argued that the Bill should include an industrial strategy test—I was therefore surprised to see the noble Baroness, Lady Hayter, supporting this amendment.
As such, I have some sympathy with the aims of this amendment. I can, however, reassure my noble friend that the Bill is about protecting national security, nothing more and nothing less. The Bill does not set out the circumstances in which national security is, or may be, considered at risk. As I said on previous groups, this reflects long-standing government policy to ensure that national security powers are sufficiently flexible to protect the nation. The Bill also does not include factors which the Secretary of State must or may take into account when assessing national security risks. Instead, factors that the Secretary of State expects to take into account in exercising the call-in power are proposed to be set out in the statement that we have provided a draft of and is provided for by Clause 3.
The draft statement, published upon introduction of the Bill, includes details of what the Secretary of State is likely to be interested in when it comes to national security risks. This includes certain sectors of the economy, and the types of acquisitions that may raise concern. It does not currently state anything which the Secretary of State intends not to take into account with regard to national security. This is a conscious choice. If the Secretary of State were to start listing areas of the economy or types of acquisition that he considered unlikely to present national security concerns, I suspect that this would result in a long and dense document of little use. We judge that it is therefore more helpful for businesses and investors to set out where the Secretary of State is more, rather than less, likely to use the call-in power.
I understand, however, the concern that without a definition extraneous factors may be taken into account. My reassurance for my noble friend comes from the courts. Were the Secretary of State to seek to use the powers in the Bill for a purpose beyond national security, his decisions could be challenged in the courts through judicial review and could not be successfully upheld. It is with this judicial oversight in mind that the Secretary of State is constrained in delivering the purpose of the Bill. I am therefore confident that the Bill as currently drafted contains sufficient safeguards against inappropriate use of the regime, and that the Government are already providing a good amount of information for parties affected by the regime on its likely areas of focus.
I hope that my explanation, taken together with these points, provides sufficient reassurance to my noble friend, and that she therefore feels able to withdraw her amendment.
Baroness McIntosh of Pickering (Con)
My Lords, I am most grateful to all those who have spoken in the debate, particularly my noble friend Lord Hodgson, and the noble Lord, Lord, Clement-Jones, for their eloquent support.
Like the Minister, I am slightly baffled by the sudden lack of support from the noble Baroness, Lady Bennett, with whom I have enjoyed a deeply cordial relationship. I obviously take issue with a number of issues to which she referred, not least setting out the importance to the economy of foreign investment, which is well established and repeated in the national security and investment government response published, I understand, this week. I also take issue with the fact that I am not a great expert on the financial crash, although I seemed to lose an awful lot of the small amount of money I had invested in the stock market. What is the saying about how to make a small fortune in the stock market? I have forgotten, but, anyway, that burnt my fingers.
I believe that the start of the financial crash was actually in the US, with the selling of mortgages, both in the US and here, for a greater value than the value of the property, and a lot of grief was caused as a result. I am pleased that my noble friend Lord Callanan feels that the Bill is still perfectly formed and fit for purpose, but I beg to differ. My noble friend referred to the statement in Clause 3, but we are told that the Secretary of State only “may” publish such a statement. Clearly, it would be immensely helpful to have such a statement at this stage, if possible, to give an indication of the direction of travel.
Baroness Hayter of Kentish Town (Lab)
My Lords, we welcome the Government’s Amendment 12 to make changes to the sectors statement in respect of feedback from stakeholders. Can the Minister confirm whether all the suggested changes that come back in that consultation will actually be published?
I will make a comment about the document that has arrived in front of us today because, in a sense, it gives a very good description of how good consultation works—never mind the timing; we have made that point—in relation to the degree of change that looks as if it is going to happen as a result of conversation on that particular issue. However, it then feeds into what happens if, had this been the statement, changes were wanting to be made. For example, what we have heard today, as a result of some very good consultation, is that the definition of AI has been narrowed significantly to focus on three high-risk applications: identification of objects, people and events; advanced robotics; and cybersecurity.
The interesting thing is what happens after you have had a consultation that has got the Government to rethink and that may then have other implications. In this case, with those changes, does this change the Government’s estimate of the number of notifications that that might give rise to, in relation to the change in definition? It is that sort of issue that might come up, and it would want the dialogue that I think is being referred to in the amendment, in relation to whether there is a second stage—if it is turned down, so to speak—about having to go on further. As such, how we handle the feedback is about both the transparency of what has come back in and the full implications of any changes that that has made.
We keep coming up with the figures where, even though the Government have increased the assumption of how many notifications there would be—less than 1% or so—the CBI and other commentators feel it would be much greater. As such, that degree of dialogue is needed in relation to consultation over these very big issues. Some assurance about the results of such a consultation, as well as a second stage, seems very helpful, along the lines in the amendment.
On the Government’s Amendment 75, it would be interesting to know what advice led to the change—we are not questioning it but wondering why it has been made—to extend the regulatory power from a notice or serving an order to include all documents as well. It would be helpful, certainly to me and possibly to other Members of the Committee, to know what other types of additional documents will thus be added to this regulatory power—could the Minister spell that out?
Lord Callanan (Con)
First, I thank my noble friend Lord Lansley for his Amendment 11. With the permission of the Committee, I will speak first to the three minor technical amendments that the Government wish to make to the Bill: Amendments 12, 37 and 75. Briefly, before I begin, I reassure the Committee that the Secretary of State must lay and publish a statement before using the call-in power.
Amendment 12 is to Clause 4, which concerns consultation and parliamentary procedure for the statement pursuant to Clause 3, in which the Secretary of State sets out how he expects to use the call-in power. At present, Clause 4 enables the Secretary of State to meet the requirement to carry out such consultation as he considers appropriate, in relation to a draft of the statement under subsection (1)(a), before Clause 4 is commenced.
However, it does not make it clear that the Secretary of State is able to make any changes that he considers necessary in view of the responses to that consultation under subsection (1)(b) before the clause is commenced. Amendment 12 clarifies this point, ensuring that stakeholders will be able to see a revised draft statement before it is laid before Parliament.
Amendment 37 is to Clause 11, which provides an exemption for certain asset acquisitions which would otherwise be trigger events. Subsection (2), however, provides that assets that are either land or are subject to certain export controls should not fall within the exemption, and subsection (2)(b) sets out the relevant export control provisions. One of these provisions, Article 9 of the Export Control Order 2008, was revoked on implementation period completion day as a result of EU exit by Regulation 4 of the Export Control (Amendment) (EU Exit) Regulations 2019, with which I am sure all Members are very familiar. The amendment would remove the reference to this revoked provision from Clause 11.
Amendment 75 is to Clause 53, which enables the Secretary of State to make regulations, subject to the negative resolution procedure, prescribing the procedure for giving notices and serving orders under the Bill. At present this clause enables the Secretary of State to specify how a notice or order must be given or served, but does not make it clear that these powers are intended to extend to all documents given under the Bill. The amendment would clarify that point, ensuring that the Secretary of State has the power to make regulations in Clause 53(1) in relation to the procedure for service of documents for all the different types of notices, orders and other documents under the Bill. These are relatively small tweaks to the Bill, and I hope that the Committee will see fit to agree to them.
Amendment 11 was tabled by my noble friend Lord Lansley, and I will begin by briefly setting out its context. Clause 4 sets out a consultation requirement and parliamentary procedure for a statement about the exercise of the call-in power which must be published before the Secretary of State may issue a call-in notice. It requires the Secretary of State, before publishing the statement, to carry out such consultation as he thinks appropriate in relation to a draft of the statement, to make any changes to the draft that appear to him to be necessary in view of the responses, and to lay the final statement before Parliament.
My noble friend’s amendment seeks to clarify the process by which the Secretary of State may publish a new statement if either House resolves not to approve the previous version that he lays before Parliament. The apparent stumbling block that the amendment seeks to remove is that the Secretary of State is under a duty to carry out such consultation as he thinks appropriate in relation to a draft of the new statement, and make any changes to the draft that appear to him to be necessary in view of the responses to such consultation. However, I point out that the Secretary of State must carry out such consultations as he “thinks appropriate”, according to Clause 4(1)(a).
The Bill therefore provides the Secretary of State with some measure of flexibility in deciding whether, for how long and how widely the draft statement should be consulted on. Therefore, the Bill as drafted does not in appropriate circumstances prevent the Secretary of State from publishing a new updated statement, reflecting the debate in Parliament, almost immediately without first undertaking a consultation if he does not think that a consultation is appropriate.
In short, while my noble friend’s amendment seeks to ensure that a new statement may be laid speedily if either House resolves not to approve the previous version, the Bill as drafted already allows for this. I am grateful that he has afforded me the opportunity to make the functioning of this clause clear. Therefore, in the light of the explanation that I have been able to provide, I hope that he will feel able to withdraw his amendment.
Lord Lansley (Con)
My Lords, I am grateful to all noble Lords who have participated in this short debate. It is quite helpful just to focus on the question of making a statement because, if one looks back at Clause 1(6), it clearly states:
“The Secretary of State may not give a call-in notice unless a statement has been published (and not withdrawn) for the purposes of section 3.”
Although the word “may” is used in Clause 3, all it means in practice is that, if the Secretary of State chooses not to bring any of this into force, he would not publish a statement—but if he wants to issue call-in notices, he has to publish a statement. My noble friend the Minister is right in the sense that he must do this for the system to operate. The words I want to focus on, however, are “and not withdrawn”. If either House of Parliament resolves not to approve a statement, he must withdraw it. At that moment, the Secretary of State can issue no further call-in notices. My noble friend says the amendment is unnecessary because the Secretary of State has the power to consult only as he thinks appropriate.
Lord Callanan
Member’s explanatory statement
This amendment ensures that as well as carrying out the consultation on the statement about the exercise of the call-in power, the requirement to make changes to the statement in view of the responses to the consultation may also be met before this section comes into force.
Domestic Energy Efficiency: Retrofitting
Lord Callanan Excerpts(3 years, 9 months ago)
Lords ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Baroness Bennett of Manor Castle
To ask Her Majesty’s Government what policies they plan to put in place in relation to the use of domestic energy efficiency retrofitting to meet their goal of net-zero carbon emissions by 2050.
The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)
My Lords, the UK has made good progress in improving the energy performance of existing homes but reaching net zero will be challenging. We are responding to this challenge by introducing long-term minimum standards, providing financial support where it is needed most and getting the market conditions right so that people can access tailored advice, green finance and quality supply chain. We will set out further details in our heat and building strategy in due course.
Baroness Bennett of Manor Castle (GP) [V]
My Lords, I know that the Minister will not be able to pre-empt the Budget but, given the abject failure of the green homes grant, can he reassure me that the Government are well advanced with plans to bring in a quick, simple and workable scheme to inject government funds—ideally with the administration not outsourced to a US multinational—to deliver the £65 billion in investment for the 2020s that he told me in a Written Answer in November would need to be spent on domestic retrofit this decade to meet the net-zero 2050 target?
Lord Callanan (Con)
The noble Baroness is correct that I cannot pre-empt the Budget, but I agree that there have been significant challenges in getting the green homes grant voucher scheme up and running. We are working closely with the scheme administrator to streamline the voucher issuance and redemption process as a top priority. The noble Baroness might be interested to know that, as of 22 February, we have issued 25,000 vouchers against a total of 110,000 applications.
Baroness Young of Old Scone (Lab) [V]
My Lords, the £1.5 billion green homes grant scheme was launched by the Chancellor last July with a target of 600,000 homes. It was going to reduce carbon, create 16,000 jobs and tackle fuel poverty. The Prime Minister extended it for a year in November, yet here we are in March with it on the verge of being scrapped. As the Minister said, fewer than 25,000 grants have been made and less than £100 million of the £1.5 billion has been spent. What lessons will the Government take from this total failure into a much-needed plan B?
Lord Callanan (Con)
We are of course always keen to learn lessons. I acknowledged in the previous answer that there have been significant challenges in getting the scheme up and running, but I assure the noble Baroness that considerable effort is going into improving its performance.
Lord Mann (Non-Afl)
The Minister cannot pre-empt the Budget, but someone is briefing the press that the green homes grant will be slashed on Wednesday. Our ambassadors are warning that COP 26 is in danger because of the perceptions abroad of government action. Does the Minister agree that there must be a review of where the Government are going with their green policies, very quickly?
Lord Callanan (Con)
We are progressing well with our green policies. The Prime Minister’s 10-point plan indicated the route map forward, and we will be publishing the heat and building strategy shortly.
Baroness Fall (Con) [V]
My Lords, a vital part of our efforts to tackle climate change and reach net-zero targets is catching CO2-emitting boilers in households across the country. This is a painstaking and expensive job that must be rolled out household by household. Can the Minister confirm that the commitment to installing 600,000 heat pumps a year by 2028 still stands, and if it does, are the incentive arrangements in place to deliver this adequate?
Lord Callanan (Con)
The noble Baroness is right that these targets are a challenge, but I can confirm that the target remains the same for heat pump installations. We will set out further details in the heat and buildings strategy. She will be aware of the tremendous commitments that we made in the manifesto to spend money in this area.
Lord Oates (LD)
Does the Minister recognise that, contrary to his earlier assertion that we have made good progress on energy efficiency upgrades, at the rate of progress achieved by the green homes grant scheme it would take 480 years to retrofit all the homes in the UK that need it? Does he also recognise the huge damage that the stop-start, short-term nature of the scheme has done to industry confidence, which is vital if industry is to invest in the skills required to undertake this immense and vital task?
Lord Callanan (Con)
It would of course be best to have long-term guarantees of funding, but we continue to have these discussions internally. I agreed earlier that the green homes grant scheme has been a challenge. We are working hard to improve its performance because we must get it working and up and running to bring about confidence in the supply chain.
Lord Lucas (Con) [V]
My Lords, does my noble friend recognise that the advent of another huge government subsidy scheme will be widely welcomed by cowboys? Can he assure me that the new scheme will work closely with local authorities to ensure that those thinking of having their homes retrofitted can find a reputable person to undertake this easily and quickly?
Lord Callanan (Con)
My noble friend’s reference to local authorities reminds me that the other part of the scheme, the local authority delivery scheme, is working extremely well. We are working closely with a number of local authorities. He is right that we need to invest more in training. We have awarded more than £7.5 million of funding to support the development of new and better retrofit technologies.
Lord Best (CB) [V]
My Lords, can the Minister confirm that Her Majesty’s Government agree with the Sustainable Energy Association—I declare an interest as its president—and the Committee on Climate Change, that a target for all domestic properties to reach energy performance certificate band C by 2035 is important and realistic as the halfway marker to achieving the Government’s net-zero goal by 2050?
Lord Callanan (Con)
We remain committed to getting as many homes as possible to EPC band C by 2035 where it is practical, effective and affordable.
Baroness Wheeler (Lab)
My Lords, the Government heralded the green homes grant scheme as a key programme for retrofitting and net zero, but the scheme has descended into a fiasco, as we have heard, with small businesses not being paid, cuts to funding for the next year and the slow installation of measures. According to the Government’s own statistics, nearly 61,000 voucher applications were from low-income households, but only 799 measures have been installed for those families—just 1.3%. Can the Minister explain why the scheme is failing low-income families so badly?
Lord Callanan (Con)
I am not sure that the noble Baroness’s figures are correct, but I will write to her with the correct information. The scheme is not failing low-income families. We have maximum grants of £10,000 available, many of which are being taken up by low-income families. We have issued thousands of vouchers to installers to retrofit works in low-income families’ homes.
Baroness Scott of Needham Market (LD) [V]
What consideration are the Government giving to reducing or eliminating VAT on energy-efficient products and services, as recommended by the Environmental Audit Committee? I was always told that EU membership prevented the Government doing that, so what is to stop them now?
Lord Callanan (Con)
The noble Baroness is tempting me down the same path as the noble Lord, Lord Mann, of trying to predict what the Chancellor might announce in his Budget. She will need a little patience.
Lord Carrington (CB) [V]
My Lords, does the Minister accept that the proposed energy efficiency rating measurement does not consider vital differences in properties? For instance, rural properties are less likely to be heated by mains gas, and old rural houses with solid walls have a thermal capacity that is not considered. Consequently, it will be disproportionately difficult and expensive for them to be adapted. Will these differing circumstances be recognised?
Lord Callanan (Con)
The noble Lord makes a very good point. I have received a number of representations from rural landlords and others on these matters. We recognise that improving older rural properties may be more challenging. That is why we have provided an incentive for off-gas homes to be insulated under the current eco-system and will focus the future home upgrade grant on poorer performing homes. The noble Lord will also be aware that we produced a range of exemptions under our minimum standards regulations for homes that are too expensive or too difficult to improve.
Baroness McIntosh of Pickering (Con)
My Lords, I remind the House of my interest as president of National Energy Action. Will my noble friend work closely with bodies such as NEA to ensure that the least-efficient homes will obtain the highest amount of warm home grants and other grants that are available through the government schemes?
Lord Callanan (Con)
We work with a wide range of organisations. My noble friend is right to point out that it is important that we target the poorest-performing homes for the first and most urgent action. We will certainly do that as far as possible under many of the current schemes.
Uber: Supreme Court Ruling
Lord Callanan Excerpts(3 years, 9 months ago)
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Lord Lennie (Lab) [V]
The Supreme Court ruling of 19 February was a good day for workers in the gig economy and an embarrassing one for the Government. It has taken four years to get this ruling, with Uber kicking and screaming all the way. During that time, the Government commissioned and received, but then ultimately ignored, a report from Matthew Taylor about workers’ rights in the gig economy.
Either the Government accept that workers must have decent, understandable and contractual rights at work—including receiving at least the national minimum wage—or they do not, in which case workers will continue to be exploited by these huge multinational organisations. Do the Government accept that this ruling must apply to all Uber drivers and those other comparable gig-economy workers, such as those who work for Deliveroo? If not immediately, when precisely will the Government bring forward an employment rights Bill based upon the Taylor report and, by doing so, prevent businesses having to interpret this ruling for themselves?
The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)
The Government are committed to improving the clarity around employment status and to bringing forward an employment Bill, which we will do as soon as possible. The Bill will protect and enhance workers’ rights, promote fairness in the workplace and strengthen workers’ ability to get redress for poor treatment.
Lord Taylor of Goss Moor (LD) [V]
My Lords, the Minister will be aware that Uber has made statements suggesting that it believes that the ruling is limited only to a handful of individuals and that subsequent changes mean that it will not apply to current staff—but that is not the advice that others are giving. HMRC has statutory responsibility for enforcement of the minimum wage, and it can take action either on its own initiative or in response to complaints made online. If enforcement action is taken by HMRC, then it will be for Uber to prove that it has complied with its obligations, and the two-year limit on claims will not apply. Is HMRC expected to take that action, and is government encouraging it to do so?
Lord Callanan (Con)
The noble Lord will be aware that I cannot comment on individual cases, but, of course, HMRC is fully empowered and able to take all the action that it requires in order to get people to comply with the law.
Lord Blencathra (Con)
My Lords, everyone knows that Uber is a thoroughly disreputable and exploitative company, and I warmly welcome the Supreme Court’s decision. Will the Minister now ensure that Uber does not weasel out of its obligation to all drivers, past and present? Will he also encourage HMRC to go after it for its billions in back taxes, and will he bring forward urgent legislation to make sure that all companies in the so-called gig economy are no longer able to exploit the lowest-paid workers in this country? That is a thoroughly Conservative view of these things.
Lord Callanan (Con)
The noble Lord knows the tremendous admiration that I have for him, but I have to disagree with him on this. The thoroughly Conservative thing is that there is choice and competition in the market, and Uber has provided tremendous choice and competition, particularly in London. It is not just Uber—there are other apps as well. The monopoly previously enjoyed by black cabs was bad for the consumer. They were overpriced and Uber has been a thoroughly good thing for the market in London—so I disagree with the noble Lord on that one.
Lord Berkeley of Knighton (CB) [V]
My Lords, I am delighted to agree with the Minister’s remarks. As has already been mentioned, the Supreme Court ruling probably applies to many other areas. I am thinking, for example, of freelance broadcasters in local radio. The Minister has already partially answered my question. It is always better to avoid court if we can, so we do need to simplify the legislation surrounding workers and workers’ rights. Does the Minister agree that that would help to avoid court cases in future?
Lord Callanan (Con)
Of course, it is always better if these matters are settled without court action. As I said in a previous answer, we are committed to bringing forward an employment Bill. I thank the noble Lord for his support.
Lord Monks (Lab) [V]
My Lords, I agree with the noble Lord, Lord Blencathra. Will the Government now enshrine the very welcome Supreme Court judgment in statute by including its principles, plus the availability of workplace pensions, in the long-promised but long-delayed new Bill on employment rights and the gig economy? Will they also reject the expected campaign by Uber and other global tech companies to reverse or limit the judgment and so strike a blow against bogus self-employment, with all the risks to the tax base and other problems that it incurs, and eliminate abuses in the gig economy?
Lord Callanan (Con)
I never thought I would hear the noble Lord say that he agreed with my noble friend Lord Blencathra, but there we are. I make absolutely clear that the Supreme Court judgment is final, and Uber will of course need to align its business model to comply with it. Employers have a duty to automatically enrol qualifying workers into workplace pension schemes. This already extends to engagers of agency workers and those on temporary, fixed-term and zero-hours contracts.
Lord Vaizey of Didcot (Con)
I refer to my entries in the register of Members’ interests. I proudly declare myself a user of Uber’s services, as well as those of home-grown, UK global companies such as Deliveroo. I congratulate the Minister on his thoroughly Conservative—indeed, three-Shredded-Wheat—response to the noble Lord, Lord Blencathra. But why has the position of the Director of Labour Market Enforcement, previously occupied by the distinguished Matthew Taylor, been left vacant, despite his offer to carry on until a replacement is found? It is an important role, given where we are.
Lord Callanan (Con)
I thank the noble Lord for his support. In my view, it is all about choice in the market. Those who wish to use services such as black cabs are free to do so, as are those who wish to use Uber or other home-grown services. That to me is the essentially Conservative thing; it is about choice and competition, which produce better standards for all. In answer to the noble Lord’s question, we will be making an announcement shortly.
Lord Hendy (Lab) [V]
My Lords, it is good to hear that the Government will introduce legislation to simplify this complex area of the law and end repeated litigation over workers’ status. Does the Minister agree that simplicity requires that worker status be limited to a simple binary choice between employees on the one hand and, on the other, those who are genuinely in business on their own account, with their own clients and customers?
Lord Callanan (Con)
As I said, we are committed to considering options to improve clarity on employment status and how best to address that in a post-Covid scenario. However, it is important that we retain the flexible labour market that has served this country so well and has resulted in our unemployment rate being significantly better than that of the rest of Europe.
Lord Faulks (Non-Afl) [V]
My Lords, I too welcome the decision of the Supreme Court. Those who have read the judgment of Lord Justice Leggatt will realise the detail which the court went into in deciding that, whatever the lawyers had devised, the reality of the relationship meant that the Uber drivers were in fact workers. I welcome the news that there is to be legislation, but I suggest that there are some occasions where the courts will have to deal with the reality. Even the best-drafted legislation will have to set out the principles. The courts here were doing precisely what they should do—applying the principles of the Act to the reality on the ground.
Lord Callanan (Con)
The noble Lord has put the case very well. The Supreme Court’s decision is, of course, final. Uber will have to comply with that judgment, as everybody else has to comply with court rulings.
Lord Davies of Brixton (Lab) [V]
My Lords, I want to follow up the issue raised by my noble friend Lord Monks of the implications of this judgment for pension provision. Including these people within the aegis of automatic enrolment throws up a series of practical problems. There is the question of whether back pay will be pensionable. These workers tend, by their very nature, to have widely fluctuating emoluments, which again creates problems. Will the Government be undertaking a study of the implications of this judgment for pension provision, particularly under automatic enrolment?
Lord Callanan (Con)
The noble Lord makes a good point. Of course, pension entitlement is based on employment status, age and income. It is a complex area of law and we will, of course, look very closely at the judgment.
Baroness Goudie (Lab) [V]
My Lords, the Uber case was directly concerned with the national minimum wage, the working time regulations and whistleblowing under the Employment Rights Act, but it applies to all rights enjoyed by workers that are subject to statutory regulation. Pension is deferred pay. Does the Minister accept that workplace pensions and, as my noble friend mentioned, auto-enrolment under the Pensions Act 2008 for eligible job holders, are aspects of what is secured as a consequence of the Supreme Court judgment?
Lord Callanan (Con)
Well, many individuals working in the gig economy will already be eligible for automatic enrolment and all employers have a duty to automatically enrol qualifying workers into the appropriate workplace pension scheme. All workers aged between 22 and the state pension age who earn more than £10,000 a year and are working, or ordinarily working, in the UK will be entitled to be automatically enrolled into a workplace pension.
National Minimum Wage (Amendment) Regulations 2021
Lord Callanan Excerpts(3 years, 9 months ago)
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Lord Callanan
That the draft Regulations laid before the House on 1 February be approved.
The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)
My Lords, the purpose of these regulations is to raise the national living wage and the national minimum wage rates on 1 April 2021. We are determined to make the UK the best place in the world to work. This has been an extraordinary year presenting extraordinary circumstances. Our approach is to balance the needs of workers and employers.
The impact of coronavirus on the economy has been significant. The UK economy contracted by 9.9% in 2020. This recession has been much more severe in magnitude than previous ones. The effects on the labour market, however, have so far been more muted. The latest ONS headline estimate of unemployment was 5.1% from October to December 2020. This is in part due to government intervention, including the Coronavirus Job Retention Scheme. With the number of employees supported by the scheme peaking at 8.9 million in May 2020, workers were able to retain some form of attachment to a job. At the end of December, there were around 4 million jobs on the scheme.
Turning to these regulations, which will increase the rates of the national minimum wage and the national living wage from 1 April, we estimate this will provide a pay rise to approximately 2 million workers. I am pleased to say that this Government accepted all the recommendations made by the Low Pay Commission in October 2020. This independent body brings together the views of businesses and workers, informed by expert research and analysis, to reach a consensus on its advice. I would like to place on the record my sincere gratitude for its work.
Many low-paid workers have supported the country through these challenging times, but this Government recognise that many businesses are also struggling in the current crisis. In its recommendations, the Low Pay Commission sought to balance these needs against the wider economic conditions. Therefore, 2021’s increase is smaller than in previous years. The Low Pay Commission concluded that these rates would give low-paid workers a real-terms pay rise, recognising their contributions during this pandemic, without presenting a significant risk to employment prospects. The LPC makes its recommendations on the basis of significant stakeholder evidence from business, worker and academic representatives. Business representatives broadly supported a cautious increase to minimum wages.
These regulations will increase the national living wage for those aged 23 and over by 19p to £8.91, an increase of 2.2%. A full-time worker on the rate will be more than £345 better off over the course of the year. The national living wage currently applies to workers aged 25 and over. However, from April 2021 it will be extended to those aged 23 and over. This gives 23 and 24 year-olds an extra 71p an hour, the largest increase for these individuals ever.
The regulations also increase the rates for younger workers and apprentices. Workers aged 21 and 22 will be entitled to a minimum hourly rate of £8.36, a 16p increase. Workers aged between 18 and 20 will receive an extra 11p an hour, taking their rate to £6.56. Under-18s will earn at least £4.62 an hour, a 7p increase. Apprentices aged under 19, or those in the first year of their apprenticeship, will receive an increase of 3.6%—an hourly rate of £4.30, 15p more. The regulations also change the amount that employers can charge workers for accommodation without it affecting their pay for national minimum wage purposes. From April, that will increase to £8.36 per day.
I turn to record-keeping. This year, the Government will make a further legislative change to the minimum wage regulations. This pertains to the records that employers must keep to ensure compliance with the minimum wage. These records currently have to be held for three years. We are extending that to six years. This change will align the period for which an employer must keep records with the period of liability under the National Minimum Wage Act 1998, which is six years, and it follows a recommendation in the Director of Labour Market Enforcement’s UK Labour Market Enforcement Strategy 2019/20. Amending the length of time for which records must be kept will give employers clarity, remove an inconsistency that will aid HMRC investigations into underpayment and ultimately enable underpaid workers to receive the money that they are legally owed as soon as possible.
Looking ahead, the Government have pledged to continue raising the minimum wage rates. As set out in our manifesto, we have set a target for the national living wage to reach two-thirds of median earnings by 2024. To improve fairness for younger workers, beyond the age threshold change this year we will apply the national living wage to those aged 21 and over by 2024. These targets continue to be dependent on economic conditions, and we will of course carefully monitor the labour market.
In conclusion, these regulations ensure that the lowest-paid workers are fairly rewarded for their valuable contributions to the economy. The Government will continue to monitor the impact of the minimum wage as we navigate our way out of this economic crisis. We will shortly publish the remit to the Low Pay Commission for 2021 asking it to make recommendations for new minimum wage rates to apply from April 2022. I commend the regulations to the House.
Lord Callanan (Con)
I thank all noble Lords who contributed to this important debate. There were a number of valuable contributions, and the points raised show the importance that many noble Lords attach to the issue of providing an appropriate pay rise to lower-paid workers. As my noble friend Lord Balfe pointed out, the national minimum wage and national living wage make a real difference to the lives of millions of workers in this country, particularly during the current crisis. I am glad that there seems to be some agreement across the House that the lowest-paid workers who have contributed during this pandemic deserve an inflation-beating pay rise to protect their standard of living, which these regulations will provide.
The national minimum wage and national living wage have increased every year since their introduction. These regulations mean that, on 1 April, workers on the national living wage will be around £4,030 better off over the year compared to when it was announced in 2015. All noble Lords will be aware that, once again, the Government’s impact assessment has received a green fit-for-purpose rating from the Regulatory Policy Committee. The impact assessment estimates that around 2 million low-paid workers will benefit from these minimum wage increases. We estimate that there will be a total benefit to workers of £419 million. The total cost to employers for implementing the LPC’s recommended rates is estimated at £428 million. This marks a 24% increase in the national living wage since 2016 when the policy was introduced. For the first time, these increases to the national living wage will benefit workers aged 23 and 24. Younger workers will also get more money through the increases to the national minimum wage rates.
We know that most businesses support increases in the minimum wage rates. Through these regulations we are reducing burdens on employers in meeting minimum wage obligations, while maintaining worker protections. Though these increases are more moderate than in recent years, we remain committed to the target for the national living wage to reach two-thirds of median earnings by 2024, provided that the economic conditions allow. We will continue to monitor the labour market closely over coming months.
The changes to record-keeping requirements for employers will improve enforcement of the national minimum wage and ensure that underpaid workers receive the arrears owed as quickly as possible. In response to the noble Baroness, Lady Chakrabarti, I can say that we will continue to prioritise this through HMRC’s ongoing enforcement work, and through the naming scheme which relaunched on 31 December, naming and shaming 139 employers who had underpaid their staff.
The issue of enforcement was also raised by the noble Lords, Lord Lennie, Lord Bradshaw and Lord Empey, the noble and right reverend Lord, Lord Harries, and the noble Baroness, Lady Jones. They all made the important point that enforcement is key to this. The Government take robust enforcement action against employers who do not pay their staff correctly. HMRC’s enforcement and compliance budget has been increased to £27.5 million in 2021, up from £13 million in 2015-16. In 2019-20, HMRC identified over £20 million in arrears for over 263,000 workers and issued just under 1,000 penalties, totalling £18.5 million, to non-compliant employers.
The noble Baroness, Lady Chakrabarti, also raised the issue of age discrimination. The national living wage has historically been limited to workers aged 25 and over, to protect the employment prospects of younger workers. However, the Low Pay Commission’s advice noted that generally employment trends for workers aged 23 and 24 tend to be similar to those of workers aged 25 and over, which is why the Government are accepting the commission’s recommendation to reduce the age threshold for the national living wage from 25 to 23. Evidence shows that younger workers are more vulnerable in the labour market. For example, from October to December 2020 the unemployment rate for people aged 16 to 17 was 25% and for people aged 18 to 24 it was 13%. By comparison, the rate for those aged 25 to 34 was only 4%.
A number of noble Lords, including the noble Baronesses, Lady Chakrabarti and Lady Clark, and the noble Lord, Lord Lennie, raised the crucial point of key workers. The Government value the outstanding work that key workers are doing during these challenging times, which is why we are proceeding with this increase in the national living wage from April. The Government need to balance the needs of businesses and the low paid, including key workers, to ensure that any future increase does not harm their employment prospects. The Government remain committed to helping hard-working individuals earn more while we level up this country. We are delighted to be giving key workers on the national living wage this increase. Public sector workers on the national living wage threshold will benefit from the increase to the rate in line with the rest of the country. In addition, the 2.1 million public sector workers who earn less than median earnings of £24,000 will receive an increase of at least £250.
A point was raised by the noble and right reverend Lord, Lord Harries, and the noble Baronesses, Lady Blower and Lady Jones, about the real living wage and the Living Wage Foundation. The Government consider the expert and independent advice of the Low Pay Commission when setting the rates. The key distinction between the Low Pay Commission’s rates and other rates, such as the Living Wage Foundation’s voluntary living wage is that the Low Pay Commission considers the impact on businesses and the economy as well as the impact on individuals.
The noble Lord, Lord Bradshaw, asked about the number of enforcement staff. There are now more than 400 staff involved in HMRC’s enforcement of the minimum wage. As I said earlier, we have doubled the budget since 2015.
A number of noble Lords, including the noble Baronesses, Lady Jones, Lady Clark and Lady Blower, asked an understandable question about why the national living wage is not higher. The new national living wage rate of £8.91 is a 2.2% increase and will be the highest ever UK minimum wage. I accept the ambition of the noble Baronesses to go even higher, but this increase balances the Government’s commitment to supporting the low paid with the need also to support businesses and employment. Although it reflects a significant adjustment in response to current economic circumstances, this increase still allows the Government to make progress towards their long-term ambition for the national living wage to reach two-thirds of median earnings by 2024. I hope the noble Baroness will be here to welcome that happy step when we finally arrive at it.
The Government are still committed to their goal of ending low pay and reaching the 2024 target, provided that economic conditions allow. We will continue carefully to monitor wider economic interests.
The noble Lord, Lord Empey, asked me about the accommodation offset. This is the daily amount which can count towards minimum wage pay when a worker is charged for accommodation provided for them by their employer. Where a worker is charged for accommodation, either by making a payment to the employer or by a deduction being made in the worker’s pay, and the charge is more than the accommodation offset, it will reduce the worker’s pay for minimum wage purposes. Following these regulations, the accommodation offset will increase on 1 April from £8.20 per day to £8.36 per day, which is a 2% increase. Anyone concerned that they are not getting the national minimum wage should complain to HMRC, which follows up every complaint it receives.
The noble Baroness, Lady Jones, also asked me about the rationale for 23-plus as an age group, and I addressed that question earlier.
The noble Lord, Lord Hendy, made a number of points about his so-called social dialogue. The Low Pay Commission is an independent and expert body which makes annual recommendations on the appropriate rate for the national minimum wage. As my noble friend Lord Balfe pointed out, its commissioners are balanced between employer and worker representatives and independent commissioners. It is also responsible for carrying out extensive research and consultation and for commissioning research projects. It draws on economic, labour market and pay analysis, independent research and stakeholder evidence to produce the best possible recommendations, which we are delighted to accept in this case.
I thank the Low Pay Commission again for its extensive evidence-gathering and for providing its well-reasoned recommendations. The Government will shortly publish the Low Pay Commission’s remit for 2021. With that, I think I have addressed all the questions that were put to me. I commend these draft regulations to the House.
Motion agreed.