National Security and Investment Bill (Eleventh sitting)

Debate between Matt Western and Chi Onwurah

Committee stage & Committee Debate: 11th sitting: House of Commons
Thursday 10th December 2020 Public Bill Committees

[Matt Western]

My hon. Friend the Member for Southampton, Test has stolen my thunder—had I known that he was going to stand up, I perhaps would not have done so. It is interesting that paragraph (a) says “must” but paragraph (b) says “may”. Another valid point, beyond the semantics, is about the substance and the resource of the CMA, and whether there should be provision for that in the Bill. Can the Minister comment on the capacity of the CMA to support the demands and obligations set out in the clause?

[Chi Onwurah]

I will say a few words to the clause—reflecting the comments made by my hon. Friend the Member for Southampton, Test, in particular—because there seems to be a theme in the Bill. I know that the Minister believes that the Bill is beyond improvement, and that he is reluctant even to contemplate any changes, as he said in response to the hon. Member for Glenrothes, but he must recognise that a consistent theme seems to be that requirements, or “musts”, are placed on others and the discretion—the “may”, if you like—is with the Business Secretary. The Minister himself observed that we are keen to allow the Business Secretary the necessary discretion to fully protect our national security, but does he see not that that would better achieved by clearly circumscribing the Business Secretary’s actions?

I also support my hon. Friend the Member for Warwick and Leamington in his recent contribution. Throughout this Bill, we need to ensure that the resources are there when placing requirements on bodies. I hope that the Minister can give such reassurances. On that basis, we recognise that the clause should stand part.

Question put and agreed to.

Clause 56 accordingly ordered to stand part of the Bill.

Clause 57

Data Protection

Question proposed, That the clause stand part of the Bill.

National Security and Investment Bill (Tenth sitting)

Debate between Matt Western and Chi Onwurah

Committee stage
Tuesday 8th December 2020 Public Bill Committees

[Chi Onwurah]

I genuinely thank the Minister for the clarification that equity investments will be included in this bit of the Bill.

[Matt Western (Warwick and Leamington) (Lab)]

We are focusing greatly on small and medium-sized businesses, but this can also happen to slightly larger organisations, which might be outside the commonly used definition of an SME. When a larger business is distressed because it has lost a major customer and finds itself in financial difficulty, it needs that cash injection, so that sort of assurance is important.

[Chi Onwurah]

As always, my hon. Friend makes a really important point, and one that I had not thought of. The point about this being applicable to medium-sized businesses is absolutely right. In some ways, medium-sized businesses can often be at a critical point; cash flow is so important, and they could suddenly become very distressed, but with the right cash flow or the right injection of capital, they could expand greatly.

Will the Minister consider this? During the pandemic, when certain innovations have become incredibly important, and cash and support are needed to significantly increase the volume of production—of a vaccine, shall we say, with which the Minister is intimately concerned—a delay of 30, 70 or whatever days will create a huge problem for a medium-sized or growing business, as well as for small businesses.

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[Chi Onwurah]

I thank the Minister for that, which brings me to the point that I wanted to make in response to him. I discerned that that seemed to be his point—that the Bill may cause harm to companies, but that rather than seeking redress under the Bill, or this clause in particular, they should seek redress or some kind of compensation through the well-oiled machinery of Government that provides support for small and growing businesses. I am afraid that that response will be met with undiluted cynicism among the many small and medium-sized businesses that have dealt with Government.

Again, we are talking about a fast-moving situation. Perhaps the Minister will provide examples of where, on such timescales, support has been provided. More importantly, if that is a consequence of the Bill, why would it not be addressed in the Bill, especially as we have a clause that seeks to address this issue in the case of notices of final order. I gave the example of OneWeb satellites, which was a major investment that took some time to come about, and we were not clear whether it was a strategic asset or national security. Clarity is critical.

[Matt Western]

This is important. I take on board exactly what the Minister is saying, but I am sure he can assure me on this. To give one specific example, Imagination Technologies is a fantastic company, which lost its major customer, which was Apple. Chinese-backed investment—private equity—then came in. The US refused the company the chance to buy into a US business in 2017. I would love to think that whoever was in BEIS in 2017 looked at it closely and offered support. This might be beyond our remit, but it is important that such businesses are reached out to. Will someone in the Minister’s team confirm that the Government tried to support Imagination Technologies?

[Chi Onwurah]

I very much hope that the Minister or his Department will respond to that. My hon. Friend gave an example of an innovative company in need of support from the Department. Presumably it was similar to the cases we are discussing now, and that support was offered. If confirmation is not forthcoming, we should perhaps look for it via a parliamentary question, which might help us.

I want to say one word about amendment 28, which seeks to ensure that the term of the reporting does not undermine what is reported or its effectiveness. The Minister said that if the £100 million barrier was crossed, another report would have to be made on any further expenditure. However, the amendment concerns a small amount of expenditure in a given period, followed by a larger amount, and whether the periods in which the expenditure was made might mean that a report did not have to be made. The Minister also did not address the question of why £100 million was the right threshold for making a report. On that basis, I wish to press the amendment.

Question put, That the amendment be made.

National Security and Investment Bill (Tenth sitting)

Debate between Matt Western and Chi Onwurah

Committee Debate: 10th sitting: House of Commons
Tuesday 8th December 2020 Public Bill Committees

[Chi Onwurah]

[Matt Western (Warwick and Leamington) (Lab)]

[Chi Onwurah]

[Chi Onwurah]

[Matt Western]

[Chi Onwurah]

National Security and Investment Bill (Seventh sitting)

Debate between Matt Western and Chi Onwurah

Committee stage & Committee Debate: 7th sitting: House of Commons
Thursday 3rd December 2020 Public Bill Committees

[Chi Onwurah]

It is a pleasure to serve under your chairship, Mr Twigg, and to see the Committee reconvened to debate this important Bill. On Tuesday, we had a lively, informative and generally collegiate debate in which we learned a significant amount about the Bill and each other. We learned, for example, that the hon. Member for Arundel and South Downs has an interest in low pay, the hon. Member for South Ribble is a scientist, the hon. Member for Wyre Forest has a great interest in defending business investment, and my hon. Friend the Member for Southampton, Test knows well the difference between “may” and “shall”, and entered Parliament at the same time as yourself, Mr Twigg. We learnt that my hon. Friend the Member for Ilford South has a great interest in defending our national security through supply chains. We learnt that I have a tendency to mispronounce and misplace my hon. colleagues’ constituencies—something that I am working on. We also learnt that the Minister feels this Bill is perfect in every way, clause and subsection, such was his reluctance to accept the most constructive and helpful amendments—I would say—put forward by the Opposition. As we look at our amendments today, I gently point out to the Minister that that is not a view held by everyone across the House, even by Government Members. I note the letter sent yesterday by the Intelligence and Security Committee pointing out several aspects that we have raised, requiring clarification and significantly indicating its intention—or desire—to be a greater part of both the scrutiny of this Bill and its implementation. I hope that in today’s deliberations we will meet with more support from the Minister.

We had lively debates on Tuesday and some votes, which as I have indicated that we did not win. Amendment 16, in my name and those of my hon. Friends, is a probing amendment. We seek to understand that the Minister fully understands the provisions of his Bill. That is an absolutely appropriate thing to do, as hundreds of thousands of business and individuals will be impacted by it and will have to seek to understand it. It is appropriate that we test the impact of the Bill now, particularly as the Minister has many competing duties, and, as we understand, is taking on more onerous ones.

Clause 12 contains supplementary provisions in relation to determining when a trigger event that takes place over more than one day is to be treated as taking place, and determining whether a trigger event is in progress or contemplation in circumstances where a person has entered into an agreement or arrangement that enables them to do something in the future that would result in a trigger event taking place. The amendment, as we have framed it, would considerably expand the scope of events that could be considered trigger events. In effect, it would give the Secretary of State power to call in events under contemplation, by leaving out from “does” to the end of line 11 and inserting:

“establishes that arrangements are in progress or contemplation which, if carried into effect, would result in a trigger event taking place”.

As we have discussed, the Bill gives significant powers to the Secretary of State and the amendment would significantly expand notification volumes. There are many minor transactions where parties agree that someone might have the right to buy more shares in the future, and, in themselves, these transactions do not create direct influence and are unlikely to create a threat to national security. We recognise that the amendment would require all such minor transactions to be notified; it would seek to reflect the potential intention that these minor transactions may be part of a greater contemplation of something which would lead to a trigger event.

We recognise that Government would already have the power to intervene, through notification, once a trigger event takes place, so this amendment brings all possible future trigger events into scope, not just actual, or likely, future events.

[Matt Western (Warwick and Leamington) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Twigg. On the point on these disguised elements, does my hon. Friend agree that the issue is about not simply shareholding, but, as we heard in the evidence sessions, membership of boards, and how voting rights might not necessarily be in line with shareholding percentages, and that they can be distorted at a future date?

[Chi Onwurah]

I am grateful to my hon. Friend for that intervention. He makes a good point, which reflects why we are proposing this amendment to test the Bill. As he says, influence can be exercised in a wide range of ways.

I will elaborate on this later, but we must recognise that hostile parties will not sit back and see the Bill, then say “Oh well, that’s fine; we won’t try anything against the United Kingdom’s security,” as a consequence. They will seek ways to game and effect an influence regardless. Changes to the relationships between voting rights and shareholdings, for example, might be one way where they could seek to bypass the Bill.

I recognise that this is a wide-ranging amendment, but I seek to understand how the Minister feels that the Bill, as it stands, can address the kinds of concerns that my hon. Friend has just raised. This also reflects—I emphasise this again—the approach that we are taking, as the Opposition, on the Bill. The first priority and central plank of that approach is to put our national security first, and to do everything that we can to secure the strategic and economic resources on which our security relies; that focus on putting national security first motivates this probing amendment.

As my hon. Friend indicated, there can be a number of contingent investment transactions where parties agree to future events that transfer controls or influence. For example, a buyer might buy a low share of a company today, but might acquire with it the right to influence its shareholding in the future to levels of material influence.

I think the Minister will agree that we must watch out for these disguised transactions. They can start with innocuous levels of shareholdings, but set the ground for harder-to-notice increases in influence. At the moment, the Bill leaves out these transactions from the scope of notification, so the Government could not intervene. The amendment is therefore intended to probe the Government’s approach.

National Security and Investment Bill (Fifth sitting)

Debate between Matt Western and Chi Onwurah

Committee stage & Committee Debate: 5th sitting: House of Commons
Tuesday 1st December 2020 Public Bill Committees

[Matt Western (Warwick and Leamington) (Lab)]

My hon. Friend makes a point about the market failure that we have experienced over the past decade and its relevance to or inappropriateness for national security. The Government actively encouraged inward investment from China and let the market be totally open, without any control whatsoever, which is one of the driving factors in the challenges we face today, especially with Huawei, as outlined in last night’s debate.

[Chi Onwurah]

I thank my hon. Friend for that intervention. He is absolutely right. This is particularly relevant to amendment 3, as we shall see. This Government, and previous Conservative Governments of the past 10 years, have maintained an ideological position that bypasses the question of national security and leaves Government responsibility much curtailed and focused purely on our defence capabilities and requirements without considering the impact of our technology and R&D. As the debate on the telecoms Bill showed, the Government are not considering the impact of the telecoms sector on our short-term and long-term security.

On the specifics of amendment 3—these principles guide the reason for the amendment—the Secretary of State would have to draw up a multi-agency review or act on the recommendation of Parliament’s Intelligence and Security Committee prior to issuing a call-in notice.

The Bill marks the total transformation of the UK’s existing merger control process and the provisions of the Enterprise Act 2002. It would move us away from 12 reviews in 18 years to a potential 1,830 notifications a year. It would shift the locus of merger control from the experienced Competition and Markets Authority to a novel unit of the Department for Business, Energy and Industrial Strategy. As we heard in our expert evidence, the world is looking at the UK and seeing a pretty seismic change. We recognise the need for such a change, but we do not accept that the skills and knowledge to implement and monitor such a change reside wholly in BEIS.

The Minister is a modest man, and he may not want to share with the Committee the fact that he has recently been made the tzar for vaccine acquisition and delivery across the nation, but that is one of the many responsibilities of his Department. I hope he will agree that is a considerable responsibility, but the responsibility of identifying and understanding the national security implications of 1,830 notifications a year is a particularly great challenge. As someone who champions the importance of trade and economic growth, he will agree that there is potentially a conflict of interest—we have seen this for many years, as my hon. Friend the Member for Warwick and Leamington suggested—between the trading implications of foreign direct investment and access to finance and the national security implications. This is such a huge shift that we cannot rely on discretionary judgments made potentially to suit political ends alone. We cannot rely on BEIS alone because the Department may have a conflict of interest in its separate role of boosting UK investments.

This is a critical point, and I hope to hear from the Minister how he or the Secretary of State will prioritise the role of the Department in boosting investment in the UK and in scrutinising these 1,830 notifications. We need to ensure a robust contribution from across Government and the agencies in guiding these decisions.

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[Matt Western]

My hon. Friend is making incredibly important points. There are really two issues. One is the volume that will be coming through, as she articulated earlier, but there is also the multiplicity of the challenges and where they may come from. This is not simply about the most obvious security challenges or risks. It is not necessarily about defence contracts or telecoms; it could come from all sorts of areas. It is the soft areas that are perhaps the most vulnerable. That is where the expertise of the different Departments will come into play, and that is why a multi-agency approach is so important.

[Chi Onwurah]

My hon. Friend is absolutely right. Perhaps I should have emphasised that point more.

When we look at the examples of Huawei or DeepMind, which was allowed to be sold to Google in 2014, we are looking backwards. We now recognise the security implications. Artificial intelligence is a key security capability, as I think the Minister will agree, given that it is one of the 17 sectors for which notification will be mandatory. At that time, it was difficult and I take it—perhaps the Minister will contradict this—that the Department for Business, Innovation and Skills did not recognise the security implications of the acquisition.

The key question is, what are the acquisitions now that will have security implications in five or 10 years’ time? That is what the Secretary of State needs to know in order to make the decisions we are discussing. It is no injustice to the Secretary of State and the Department for Business, Energy and Industrial Strategy to say that alone, they are not in a position to know that. Deciding from where in the world the great threats to our security may come is not purely technological, although it requires technological expertise, and it is not even purely geopolitical. Last night we heard a lot about China and Russia. In future, we may be looking at other emerging threats. This is an attempt to improve the Bill by ensuring that there is a multi-agency approach.

[Chi Onwurah]

I do not think it would be appropriate to be prescriptive at this point. Some of the agencies I have in mind are the Intelligence and Security Committee, the National Cyber Security Centre and our security services—MI5 and MI6. I am very happy to hear from the hon. Gentleman what agencies should be involved, but the key point is that we need multiple agencies.

[Matt Western]

If the University of Cambridge were approached by a Chinese academic institution with an offer of funding to collaborate on some project, for example, surely that would need the intervention of the Department for Education. It is obviously not just about the intelligence services; it would need the engagement of the DFE and not just BEIS.

[Chi Onwurah]

I thank my hon. Friend for that important point. I am reluctant to continuously mention China, because this is not an anti-China Bill per se, but we heard in oral evidence of the real concerns about Chinese influence in our higher education institutions. He is right that the Department for Education may have an important input to make about securing our future national security.

In defining the agencies that need to be involved in this multidisciplinary approach, we could look at the Committee on Foreign Investment in the United States, which has nine voting departments, two non-voting agencies and additional White House representation on its decision-making committee. I know that the Department for Business, Energy and Industrial Strategy has done some work on comparisons with other countries, in particular our Five Eyes allies. There are models to take.

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[Matt Western]

This is about putting it on a different footing; it is as simple as that. As was said by Sir Richard Dearlove and others in the evidence sessions last week, with the sort of agenda that a Government of any political colour may have, we have seen particularly over the past decade an embrace of, say, China, and the investment in our nuclear power stations provision as well as in other areas. Now, that could have been Russia, and if it had been Russia, what would the advice have been? What would the agenda of the Government of the day have been? Would it have been as embracing? That is why it is really important to understand from the ISC what its views are and to put this in a different setting, as my hon. Friend has said.

[Chi Onwurah]

Another excellent contribution from my hon. Friend, who raises a delicate, nuanced, important point. Governments of all colours may have trade and geopolitical agendas that lead to, as my right hon. Friend the Member for North Durham (Mr Jones) described it, a “hug a panda” approach, whereas the ISC, which we have seen mark its independence of thought both as a Committee and in its contributions in parliamentary debates, has a duty, a responsibility and an understanding to see beyond short or even medium-term political ambitions and to focus wholeheartedly on the security of our nation. That is where its support is invaluable.

I will finish my comments on the amendment by quoting some of our parliamentary colleagues with regard to the Intelligence and Security Committee. On Second Reading, the Chair of the Select Committee on Foreign Affairs, the hon. Member for Tonbridge and Malling (Tom Tugendhat), said that

“there is a real role for Committees of this House in such processes and that the ability to subpoena both witnesses and papers would add not only depth to the Government’s investigation but protection to the Business Secretary who was forced to take the decision”.—[Official Report, 17 November 2020; Vol. 684, c. 238.]

I think that is powerful advocacy for the amendment. A member of the ISC, the right hon. Member for South Holland and The Deepings (Sir John Hayes), said that

“we need mechanisms in place to ensure that that flexibility does not allow the Government too much scope. That is why—this point was made by my hon. Friend the Member for Tonbridge and Malling (Tom Tugendhat) and I emphasise it on behalf of the ISC—Committees in this place missioned to do just that need to play an important role.”—[Official Report, 17 November 2020; Vol. 684, c. 244.]

We had support in the evidence sessions, support across the House and, most importantly, we have the support of the ISC itself, or at least its agreement that the amendment would be a constructive improvement to the Bill.

Finally, I will say a few words on amendment 5, which would require the Secretary of State to notify the Intelligence and Security Committee before making regulations under clause 6 and would provide a mechanism for the Committee to respond with recommendations. Regulations made under clause 6 would likely define the sectors that pose the greatest national security risk and would come under mandatory notification requirements. With the amendment, the ISC would be able would to provide both scrutiny and challenge to these sector definitions. The Committee will understand that the driving reasons behind the amendment are similar to those behind amendments 3 and 4, which is of course why the amendments have been grouped together, and would seek to improve the Bill through putting in place a requirement for parliamentary scrutiny specifically on the definitions.

As we have said, the Bill gives the Secretary of State major powers, and it demands mandatory notification of investments in large parts of the economy, with 17 proposed sector definitions already. I really cannot emphasise enough how broad those definitions currently seem. I know it is the intention that the definitions should be tightly drawn. However, I speak as a chartered engineer with many years’ experience in technology. Three or four decades ago, we might have talked about digital parts of the economy, but now the economy is digital. Similarly, in the future, parts of the economy not using artificial intelligence—from agriculture to leisure to retail to education—will be looking to use it.