Advanced Research and Invention Agency Bill

Baroness Chapman of Darlington Excerpts

Report stage
Tuesday 14th December 2021 Lords Chamber

[Lord Clement-Jones (LD)]

My Lords, I am largely going to speak to and support Amendment 1. I commend the noble Lord, Lord Browne, for raising these important issues on the question of ARIA’s ability to impose investment conditions. Unlike the noble Baroness, Lady Neville-Rolfe, I do not see those as bureaucratic constraints.

One key issue in delivering technology into the market in this country is the commercialisation and translation of that technology. We have seen report after report telling us about that. The UK is a top nation for the global impact of its R&D but not so effective at innovation, where it ranks 11th in the world for knowledge diffusion and 27th for knowledge absorption, according to an October 2021 report by our own BEIS department. The greater risk averseness of the VC and private equity market for technology start-ups in the UK compared to that of the US is common ground in the investment community itself; we need to hang on to our unicorns. As a result, outside fintech, we have seen too many high-technology companies sold to overseas companies at too early a stage. We have heard examples from the noble Lords, Lord Broers and Lord Morse—and, in Committee, the noble Lord, Lord Browne, took the risk of quoting the Daily Telegraph.

The National Security and Investment Act will impact on that to some extent, but in a limited number of sectors involving national security. Without this kind of scale-up support we cannot become—to coin the phrase so often used by this Government—a science and tech superpower by 2030. This excellent amendment will, I hope, ensure that those making decisions about future financing at least have some friction in the system to ensure that they have to think twice about where and how to raise capital for the future; at the same time, it gives ARIA skin in the game to help it do so. The Minister has said in correspondence that he shares the objectives of this amendment, so I hope that he will agree at the last stage to accept it.

As regards the other amendments by the noble Lord, Lord Lansley, in this group, I agree in principle with many of the issues that he has raised and the support for intellectual property rights that should be retained by ARIA in certain circumstances. He had powerful support from the noble Lord, Lord Broers, whose expertise we are certainly going to miss when he retires from the House.

As the noble Lord, Lord Browne, says, we have only this Bill today. We cannot solve all the problems relating to the taking of stakes by companies or our research institutions, but we can put this into ARIA’s terms; I very much hope that we will do so today.

[Baroness Chapman of Darlington (Lab)]

My Lords, I find myself listening to some excellent speeches and frantically scratching sections from my own contribution as I do not see the point in repeating the points that have already been made. I put on record my thanks to my noble friend Lord Browne, in particular, for his generosity with his expertise and time in working so collaboratively on this issue, which has support on all sides. The principle is very simple: the state is taking a big risk by granting funds to speculative research projects. In cases where that risk pays off—we hope that is not an infrequent event, but we understand that this is about high-risk ventures—ARIA should have the ability to protect the potentially significant benefits that will arise from initial taxpayer support. It seems equally appropriate that ARIA has a say in potential takeovers or transfers of intellectual property. We know that there is a big market for speculative purchases of new technology. While ARIA may decide that there is no public interest in preventing certain events from taking place, there might be other investments that should be safeguarded.

It is clear from the debates that we have had in Committee and this evening that there is a shared desire on all sides—including, to be fair, from the Minister—to deal with this issue. He has correctly observed previously that the problem we are trying to fix is not limited to ARIA; that is understood and agreed with. However, while the amendment by the noble Lord, Lord Browne, does not fix everything, that does not mean we should not try to fix the thing that is in front of us now. It moves us in the right direction and is appropriate given the specific activity of ARIA; the Opposition are solidly in support of Amendment 1.

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

I thank noble Lords for what has been an excellent and very well thought-through debate. While the noble Baroness, Lady Chapman, was lucky enough to be scratching bits from her contribution, I found that I was adding lots more to mine to take account of some of the excellent contributions. The debate showed the House at its finest, even if I do not necessarily agree with all the points raised, as I will outline.

Amendment 1, introduced by the noble Lord, Lord Browne, imposes a number of conditions on ARIA’s financial support. He made his case well, raising a number of important issues regarding the UK’s approach to capturing value from public investment in R&D, the role of public IP retention within that, the Government’s powers to intervene in acquisitions and our approach in so doing. I have listened carefully to all the contributions made by noble Lords on this matter, and I think that there is some measure of common agreement. We are all agreed that public investment in R&D should indeed drive long-term socioeconomic benefit and ultimately drive value to UK taxpayers who are funding it. We are clear across this House that exploitation of IP will play an integral role in creating these benefits, and that our paramount concern should therefore be generating the maximum public value from that exploitation; I will return to that specific issue shortly.

The debate that we have had today on the benefits derived from public investment in R&D speaks to a much wider issue, which extends beyond intellectual property, ARIA and this piece of legislation. I respectfully say that I do not think that Report on the Bill is the most effective forum for setting precedents to this very expansive and wide-ranging area of government policy. While I will do my best to address the range of points raised this evening, the Government’s approach to foreign investment and how IP rights are treated within the public funding disbursed across the entirety of our considerable R&D system are indeed extensive areas of policy.

I recognise that there is some common ground, as the noble Lord, Lord Browne, has set out—although perhaps not as much as he might have indicated. As he said, I offered to facilitate a meeting with the Minister for Science, Research and Innovation, who came along to our all-Peers meetings to discuss these issues in the round. I still believe that this is the correct forum to discuss this issue in sufficient breadth—something that I do not think could be provided through this amendment to the proposed arrangements for ARIA alone. I suspect that the noble Lord will not be satisfied with my offer but nevertheless I repeat it here.

I have welcomed the insightful contributions of noble Lords in the scrutiny of the Bill so far, and I recognise the importance of Amendment 1 in providing a vehicle for this debate, but I hope that the noble Lord, Lord Browne, will recognise that this represents an unusual and strong restriction and we would have serious concerns as to its proposed workability.

To respond directly to the noble Lord’s amendment, let me set out the Government’s current position. The UK is a premier destination for foreign direct investment. I recognise the concerns the noble Lord has expressed about the current context and the issue of leveraged loans highlighted by the Bank of England, but, in general, I think we all have to recognise that this investment brings tangible economic benefits and the Government are rightly cautious about introducing wider powers to act on the grounds of public or economic interest, as such an approach could destabilise investment into the UK, reduce economic growth and ultimately, therefore, risk jobs and prosperity.

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[Lord Clement-Jones (LD)]

My Lords, the noble Lord, Lord Ravensdale, the noble Baroness, Lady Bennett, and my noble friend have made a compelling case for supporting this amendment, based on the climate and ecological emergency that we face. Tackling those challenges will require massive innovation and ingenuity and the development of practical applications from that. If ARIA has the bold, independent, innovative culture that the Minister emphasised throughout Committee, then it must be the ideal vehicle for this research, and we should spell it out. We should make ARIA an essential component of the net-zero strategy.

[Baroness Chapman of Darlington (Lab)]

My Lords, I am grateful to the noble Lord, Lord Ravensdale, for bringing back his amendment on these important issues. It has been a real pleasure working with him and hearing from him throughout the debates on this Bill. In Grand Committee, Labour proposed making addressing climate change a core purpose for the first two years of ARIA’s existence. It is, after all, one of the greatest challenges, if not the greatest, that we face, and it is science and technology that we look to for new tools and solutions. We were disappointed by the Minister’s response to that suggestion and to the proposals put forward by other noble Lords. We feel this is of critical importance, so we would be prepared to support Amendment 4—depending, of course, on what the Minister has to say.

The noble Baroness, Lady Bennett of Manor Castle, has tabled Amendment 5, which seeks to promote three of the UN sustainable development goals, which Labour supports. My noble friend Lord Collins of Highbury looks for any opportunity to press the Government to secure progress on them, domestically and overseas. Without wanting to soften the Minister’s cough—as I think we say where we are both from—I am sure he will say that the Bill is not the correct vehicle. However, whether or not there is a vote, the Government should understand that amendments such as this, which embed climate as a golden thread in legislation, will be put forward by noble Lords and Members in the other place at every opportunity.

[Lord Callanan (Con)]

My Lords, I thank the noble Lord, Lord Ravensdale, for his productive engagement on the amendments in his name, as well as others for contributing to this important debate. Clearly, this issue matters to us all. I will start by exploring the intention behind the amendment. If it is to signal the importance of climate action, of course there is no disagreement between us on that. It is clearly an issue of the utmost strategic importance to this country, and that is reflected in the Climate Change Act, which marks the UK as the first major economy to pass laws to end our contribution to global warming by 2050. Our statutory obligations and ambition on this issue could not be clearer, and they do not need to be marked elsewhere. I do not believe that we should add to this legislation to signal our general intent. It is not appropriate for any provision to be added to a Bill unless it has an actual effect.

The alternative is a statutory duty that seeks to influence—and therefore constrain—ARIA’s activity in some way and, as drafted, the amendment would do so in a very sharp sense. I am grateful to the noble Lord, Lord Ravensdale, for his willingness to engage with the concerns that I put to him and explore alternative ways to achieve his objectives. I have raised these points with him directly, so for the benefit of others I will outline my position—with apologies to the noble Lord, who has heard all this before.

There are well-rehearsed arguments that I have put forward against a defined climate mission. I remind noble Lords that UKRI, through which the overwhelming majority of our public R&D funding is delivered, funds a full portfolio of projects focused on tackling climate change. Where there are specific research and innovation needs to support the Government’s strategic priorities in this area, UKRI delivers across: adaptation and resilience; clean energy; and sustainable industry, agriculture and transport. I think we are all aligned behind the idea that ARIA should complement, not duplicate, our existing capabilities. That is why this amendment is rightly presented now as a more general obligation. The excitement and support that ARIA has generated within the research community has been based on its different model of funding, with agility and risk appetite absolutely central to all the recommendations of how and why ARIA should be created.

ARIA should not be focusing on the scale-up and exploitation of known technologies, for climate change or indeed any other government priorities; noble Lords with expertise in this area will know well that the extent of its funding, at £800 million over five years, makes it completely unsuitable to play such a role. ARIA will contribute by focusing its programmes on the most ambitious objectives, and funding high-risk research and innovation to achieve them. When ARIA finds solutions to these hard problems or gathers learnings along the way, they will be adapted and applied to other fields in different contexts: that is where the benefits to our climate ambitions are likely to be felt.

Breakthroughs in materials science led to huge progress in what is possible in terms of battery storage or fusion. Those technologies are now critical to the energy transition, but much of the original research was not done with that goal in mind. Being prescriptive limits the scope to take completely novel approaches, as we hope and expect ARIA will do. Placing this obligation on ARIA requires us to answer the question: who will assess whether the radical breakthrough targeted by an ARIA programme might—in future, in some way—contribute to our climate goals?

The National Audit Office will assess the regularity of ARIA’s spending each year, which would include this addition to its funding. Is it well placed to make this assessment? That is not intended as any slight at all on the NAO—I am sure the noble Lord, Lord Morse, will be glad to hear that. However, I submit that even the researchers and innovators steeped in a technology cannot predict how it might evolve or be applied in the years to come. That is the nature of innovation and high-risk research. Essentially, it is unknowable. Adding this provision to the Bill asks us to make that essential assessment not only knowable but justiciable. Whoever performed the assessment of whether ARIA’s activities fell within the scope of this obligation would have their judgment subject to judicial review.

I strongly suggest that the actual effect of this amendment would be to push ARIA towards objectives where the assessment would be clear cut. It would disincentivise risk-taking, new approaches or exploring the application of technologies in unusual or unprecedented contexts. I submit that it would work against the grain of everything we are seeking to achieve with this organisation—

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[Baroness Noakes (Con)]

My Lords, I spoke about the freedom of information aspects of these two amendments in Committee, and I repeat that I think it is reasonable to exclude ARIA from the freedom of information requirements.

I do not regard the Freedom of Information Act as malign, and I am sure my noble friend does not either. It is appropriate in many cases that our public bodies are opened up, but it is true that it is burdensome. That has been a constant complaint, and certain kinds of organisations attract lots of fishing expeditions which increase the burden, and this goes beyond what would be regarded as being reasonable.

In Committee, I quoted both Tony Blair—who, having introduced the Freedom of Information Act, had a Damascene conversion and did not regard it as a helpful thing in the end—and Professor Philip Bond, the Professor of Creativity and Innovation at the University of Manchester. Both of them highlighted the fundamental reason why ARIA should be free from the Freedom of Information Act: because the last thing our scientists need when looking at the next internet, or whatever it is, is to be overcome with excessive caution because they are worried about what would happen if their conversations had to be revealed through Freedom of Information Act requests. Creativity thrives in an environment where it is not subject to ex-post analysis.

The other reason why I wanted to speak this evening is that I do not understand why Amendments 6 and 7 have been positioned as they are in Clause 2. They seem to set up a conflict with the provisions of Schedule 3, which is introduced by Clause 9. I have not followed through the detailed drafting in respect of freedom of information, but I have followed it through in respect of the Public Contracts Regulations. Basically, Amendment 7 says that the regulations will apply to ARIA, while paragraph 17 of Schedule 3 says that the requirements do not apply to ARIA.

So, the effect of these amendments—and I believe the same is true of the freedom of information amendment, but I have not completely followed that through—is that one part of the Bill would say that the requirements do not apply, but the next part would say that they do apply. That does not seem to me a very clever way to write amendments or legislation, so I suggest that the amendments themselves are defective. Also, I think they are defective in drafting terms—in particular, the public contracts amendment does not mention the separate Scottish regulations, which are included in paragraph 17 of Schedule 3. Paragraphs 13 to 15 are much more complex than Amendment 6, so that may well not be as effective as noble Lords seem to suggest.

[Baroness Chapman of Darlington (Lab)]

My Lords, Labour tabled a combined version of Amendments 6 and 7 in Committee, and we welcome the re-tabling of the text by the noble Lord, Lord Clement-Jones. We debated FoI extensively at Second Reading, in Grand Committee and in private meetings with the Minister and his officials. Despite the strong feelings expressed, the Government have offered us absolutely nothing—not just on FoI but on transparency more generally.

The Government’s determination to keep ARIA’s projects and decision-making secret is worrying. This is a matter of principle: do they believe in transparency, or not? If they do, such a measure should be put in the Bill. If they do not, they have not really given us a sufficiently good explanation for their reluctance to do this. We believe that it is in ARIA’s best interests to have the benefit of engagement of the public through the use of FoI. Failing to do that is not going to stop ARIA’s activities becoming known; it will just happen in a less controlled manner and create more suspicion.

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[Viscount Stansgate (Lab)]

My Lords, I will speak to Amendment 11, which is in my name. Of course, the idea behind it also applies to Amendment 10, as just outlined by my noble friend Lord Davies of Brixton, who has probably halved my speech because there is no need to repeat everything.

This amendment is very straightforward. It seeks to ensure that, at an appropriate time—I have suggested half way through its allotted 10 years—Parliament has the chance to be sure that ARIA is fulfilling its broad mission. After all, as we all agree, we are doing something new, and, while it is scheduled to receive only a small amount of funding compared with the wider scientific landscape, the fact is that we are still talking about £800 million of public money. So I ask the House: is it that unreasonable to want to ascertain how it is getting on after five years?

In looking ahead, Parliament will want to be sure that, for example, ARIA has not begun to duplicate work that can or could be done elsewhere—by UKRI, for example. Parliament will want to be satisfied that it has not been captured in some way by a scientific cabal or that it has not become involved in dealing with what you might call the “known unknowns”—because other parts of the scientific world are in charge of that—when we want it to focus on the “unknown unknowns”. We are all hoping—at least, I hope that we are—that ARIA will continue to focus on exciting and potentially disruptive new areas and inventions.

The purpose of this amendment is not—I repeat, not—to enable a future Government or Parliament to require a report into every single programme with which ARIA is engaged, or to burden ARIA with what we might call “excessive accountability”. We have already agreed to give the programme managers a huge degree of freedom, including the freedom to fail. However, we must remember that ARIA’s initial lifespan of 10 years will span at least one Parliament and maybe more, and it seems reasonable, without placing too great a burden on it, to enable a future Parliament to have the chance to satisfy itself that it is fulfilling its strategic mission. I look forward to the Minister’s reply and commend this amendment to the House.

[Baroness Chapman of Darlington (Lab)]

My Lords, we remain disappointed that the Government failed to accept the Delegated Powers and Regulatory Reform Committee’s recommendation to omit Clause 8, which provides a very broad power to be carried out with minimal parliamentary scrutiny. I am not surprised that the noble Lord, Lord Clement-Jones, has retabled the amendment, although I suspect that the Government will not change their approach this evening.

I am grateful to my noble friends Lord Davies of Brixton and Lord Stansgate for tabling their Amendments 10 and 11, which would ensure that there is better understanding of ARIA’s work as it progresses toward the magic 10-year mark. We agree with the thrust of both those amendments. On Amendment 10, it is important that lessons can be learned and any required changes enacted to ensure that ARIA’s funds are continually put to the best possible use. Amendment 11 would give Parliament a loose oversight role, which feels incredibly important, given its almost complete lack of involvement once the body has been established. I noted that when he was in his place earlier, the Minister described the arrangements that the Government are proposing as “robust”. I gently say that they are anything but.

We hope that the Government see some merit in these proposals. It is not clear that the provision needs to be statutory—I accept that—but can the Minister give a clear commitment about interim or periodic reviews beyond the publication of annual reports, which are the absolute minimum that we should expect, and opportunities for Members of this House and the other place to discuss and debate them?

[Baroness Bloomfield of Hinton Waldrist (Con)]

I want to start by addressing the comments on the Delegated Powers and Regulatory Reform Committee’s report on this Bill. As noble Lords will know, the Government made significant changes to the Bill in Committee to respond to the DPRRC’s recommendations. We have taken its report extremely seriously and shown that we are willing to engage with, and act on, its recommendations.

Regarding the committee’s other recent report, on the delegation of power more generally, we would submit that the changes we have made to this Bill are a clear demonstration of the relationship between the legislature and the Executive operating as it should and of legislative proposals submitted and amended in response to scrutiny. Certainly, what we are proposing for ARIA is a world away from some legislation made in the context of Brexit or the pandemic, which is the focus of the committee’s concern in its report.

We have carefully considered the committee’s recommendation with regard to Clause 8. In our view, the power to dissolve ARIA through regulations made under this clause, which would be omitted by Amendment 9 in the name of noble Lord, Lord Fox, remains an important part of the Bill. We have decided not to accept the recommendation in this instance because there is both a strong policy rationale and a clear precedent for this delegation of power.

As was said in Committee, the power can be exercised only 10 years after the Bill receives Royal Assent, and it is therefore an indication of the Government’s long-term commitment to ARIA. I think there is broad agreement that this patience will be essential if ARIA is to pursue successfully the most ambitious research and innovation. It goes to the heart of what ARIA is about. It must have the opportunity to prove itself before it is judged, and this has been recognised by many R&D stakeholders.

In Committee, my noble friend Lord Callanan referred to the precedent for this delegation of power. Under powers contained in the Public Bodies Act, several bodies established in primary legislation have been dissolved by statutory instrument. Again, if noble Lords will permit me, I will refer to the Administrative Justice and Tribunals Council, which was created by the Tribunals, Courts and Enforcement Act 2007 and was abolished using powers from the Public Bodies Act in 2013. The Public Bodies Act gave Ministers broad delegated powers not just to abolish bodies but also to merge them and change their governance structure and functions. That goes far beyond the power in Clause 8. As we do not know the context in 10 or more years’ time, when this power might be exercised, it is right that it is applicable in a range of scenarios.

On consultation, there is a broad requirement for the Secretary of State to consult those they think appropriate. I suggest that Parliament and Select Committees will be included among these stakeholders, and that the Secretary of State will think it appropriate and necessary to consult them. We do not believe that there is no opportunity for parliamentarians to be involved in those discussions. I hope I have managed to convince noble Lords of the seriousness with which we take the DPPRC’s recommendations, the careful consideration we have given to its view of Clause 8 and the very good reasons I think there are for departing from its recommendation in this instance, and retaining it. I hope noble Lords are convinced and that the noble Lord, Lord Clement-Jones, feels able to withdraw his amendment.

The power in Clause 8 shares with Amendments 10 and 11 a recognition of the experimental nature of ARIA, which has been highlighted by many in the R&D community. These amendments speak to our desire to extract the greatest possible benefit from our £800 million investment in this new agency. We hope those will be both direct benefits from the research and innovation it funds and indirect benefits in terms of learning that can be applied to R&D funding in the UK more generally. I hope that learning will be a dynamic process, and while I sympathise completely with the intent behind these amendments, I hope I can reassure noble Lords that there are already more than adequate arrangements in place for public bodies such as ARIA to be formally reviewed. I do not think anything further is necessary.

Amendment 11 in the name of the noble Viscount, Lord Stansgate, introduces a review of various aspects of ARIA’s operations, including whether it has fulfilled its functions and achieved value for money. Both of these are core considerations of the National Audit Office. The regularity of ARIA’s spending—whether it is in line with its functions—will be part of the annual assessment and certification of ARIA’s accounts, and the NAO will be able to conduct value-for-money examinations of ARIA as per the National Audit Act in the usual way. I hope the noble Viscount will agree that a further review mechanism on these points is not needed.

I turn to the second two elements of this amendment, which deal with the geographical spread of grants and ARIA’s transparency arrangements. I stand by my noble friend’s earlier commitment that ARIA will proactively publish information on its regional funding annually and, in the interests of transparency, make information publicly available on all delivery partners, supported through the full range of its funding mechanisms. I hope this reassures the noble Viscount, Lord Stansgate, that there are already arrangements in place to cover all these important points he has raised and that he does not feel it necessary to press his amendment further.

Amendment 10 is very specific to ARIA. As I have said before, I do not think a one-off formal report is the right way to envisage these lessons being learned. It should be a dynamic process: some important points may become apparent relatively quickly while some advantages or disadvantages of the ARIA model may not emerge even within the six years outlined in this amendment. We have discussed the need for patience, and I believe that means we must resist, as far as possible, the temptation to poke and prod and investigate this new organisation. Clearly, there is a balance to strike here, but it is my contention that the default position must be to let it be and gather these learnings in the most light-touch way we can.

In his amendment, the noble Lord, Lord Davies of Brixton, has allowed an entire year for the review to be conducted and published. That indicates a significant intervention in ARIA’s activities and a degree of close scrutiny that I do not think is a natural companion to risk-taking and high ambition. I note that the noble Baroness, Lady Chapman, also expressed concern about 10 years being a long time without scrutiny. There are a number of avenues for scrutiny—as a public body, ARIA will be subject to tailored reviews of its governance and effectiveness. It will need to bid for new funding in coming years and evidence its effectiveness and impact at that point. I hope the noble Lord will accept my assurances that it is absolutely our intention to learn from ARIA to the benefit of the wider R&D system, and that he will not press his amendment, on the grounds that such a structured and formalised obligation may not be the most appropriate way to do so.

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[Lord Browne of Ladyton (Lab)]

I speak principally to support Amendment 17 in the name of the noble Lord, Lord Morse, to which I added my name, but having heard the noble Baroness, Lady Noakes, twice—in Committee and today—on Amendments 15, 16 and 18, I am persuaded by her simple, accessible and convincing explanation that changing the Bill in this way would be to its benefit. Hearing from the noble Lord, Lord Morse, that the amendments reflect current practice, I am even more convinced, so I have corroboration and I support them.

I have had the benefit of having had the noble Lord, Lord Morse, explain his amendment to me on a number of occasions. If I was going to be partisan about this, I could think of a lot of contemporary examples of behaviour which the existing ACOBA system has manifestly failed to deal with. Apart from anything else, recent history has damaged significantly the reputation of politics and politicians as a group, and it has bled into civil servants because of the apparent practice of senior civil servants taking positions in private industry while continuing to work in the Civil Service. I have no intention of going through all of them. I am just convinced by the argument made by the noble Lord, whom I have known for a long period, that if we do not recognise that this could become a problem, and if it does become a problem, it will seriously damage ARIA and we should protect it—at the very least by including these provisions in the Bill and indicating that Parliament decided that people who have had those experiences should not move to other positions where it looks as though they are exploiting the information that they had for their own personal gain, and therefore operating in a way that most people in the country would think unethical. If in these circumstances we do not have a narrative that says, “We in Parliament are concerned that this may happen and took the steps that we could to prevent it from happening”, we will be complicit in the damage that will inevitably be done not only to ARIA but, yet again, to those who work in the public service as officials, civil servants, Ministers or just politicians.

[Baroness Chapman of Darlington (Lab)]

My Lords, I recognise the expertise of noble Baroness, Lady Noakes, on issues of corporate governance and, like my noble friend Lord Browne, I have enjoyed listening to her in Committee and again today. I will be interested to hear what assurances the Minister is able to give as a consequence of her amendments. I have learned a lot from her through this process and I look forward to learning more in the future.

I welcome Amendment 17 from the noble Lord, Lord Morse, whose case is no doubt bolstered by his experience over many years. It is a real joy to me that we have come to this House at more or less the same time. This is our first Bill together, and I am very pleased to add my name to his amendment.

There have long been concerns about “revolving doors” in politics—it is not something that started with this Government—but my noble friend Lord Browne was correct to observe that concern about issues such as those dealt with by Amendment 17 is growing, and frankly the Government have brought it on themselves. There is deep concern in the public mind about these issues and we shall see on Thursday what the people of North Shropshire make of it all.

I am struck by the fact that the Minister has taken the amendment from the noble Lord, Lord Morse—a very good amendment which we support—and has directed us to look at paragraph 11 of Schedule 1, which states:

“The Secretary of State may by regulations make provision about the procedures to be adopted for dealing with conflicts of interest.”


They may, but “may” is doing a lot of lifting there, and obviously they may not as well, so there is nothing to give us any assurance that the danger of which the noble Lord, Lord Morse, is correct to warn us could be averted by that provision. We are just not buying it. Although the Minister has, for illustrative purposes, provided a suggestion of how the regulations might look, that does not provide us any assurance whatever.

Given the Minister’s reluctance to accept any of the suggestions that we have made—none of the suggestions, from FoI to reporting, have been taken up by the Government—he is somewhat leaving ARIA exposed, in the way that the noble Lord, Lord Morse, explained so well. We want this organisation to succeed, but because of the Government’s rigidity on these issues, the fear is that we are setting it up with a weakness: this lack of transparency and ability to challenge.

The Minister is kidding himself if he thinks that these issues will not be scrutinised and that some of the problems that may emerge will not somehow get out. I am sure that the Public Accounts Committee will enjoy crawling all over this when it gets the opportunity to do so. We want this to work, but I am afraid that the Government’s approach is not doing ARIA any favours.

I want to hear what the Minister has to say and whether something can be done to provide us with the assurance we are looking for that ARIA will not be characterised—or mischaracterised, I hope—as some sort of secret agency. That would only cause this fascination and determination to probe into its activities to grow.

[Lord Callanan (Con)]

Before I start, I will deal directly with the comments of the noble Baroness, Lady Chapman, which I thought were a little unfair. We have responded to a number of the points she has made, and we have adopted some of her suggestions on transparency, delivery partners and regional funding. We obviously have not gone as far as she would like in some respects, but it is slightly unfair to say that we have not listened at all to many of the reasonable suggestions that have been put forward from all sides. I will come on to another suggestion that we will adopt shortly.

I start by responding to the amendments put forward my noble friend Lady Noakes. I thank her once again for her considered contributions, which, together, aim to ensure that ARIA is a well-governed and effective agency. I certainly echo the comments of the noble Baroness, Lady Chapman, about her great knowledge of corporate governance. My noble friend’s Amendment 16 would remove the Secretary of State’s power to determine a pension or gratuity for non-executive members. As I said in Committee, it is in fact not our intention to offer these for ARIA’s non-executive members. In consequence of the helpful suggestions and debates we had on that occasion, I have reflected further on the functions of ARIA and the duties and responsibilities we expect of its non-executive members, and I am pleased to be able to confirm to my noble friend that we do not see circumstances in which this power will be required. I am therefore able to say that the Government will support this amendment, and I thank my noble friend again for bringing it forward.

I turn to Amendment 15, also tabled by my noble friend Lady Noakes, who spoke about reducing the maximum possible number of executive members from five to four. The chair of the agency will have responsibility for appointing ARIA’s executive members. Following government guidance for corporate governance, we will set out the responsibilities for ARIA’s chair to review the performance of ARIA’s board and its members in the framework document. This will include evaluating the composition of the board and considering its size, diversity and balance of experience and skills. We expect that, in the initial phases of ARIA, this will tend towards a small board structure. However, I believe that it is important to retain at least some flexibility in the legislation to account for ARIA’s future needs as appropriate, and to allow for a slightly larger board if necessary.

As ARIA will be working across the public and private sectors, using a range of funding mechanisms and funding research at various stages of technological development, I do not think we should rule out a slightly larger arrangement so that ARIA can bring knowledge from a range of backgrounds and ensure that this is represented at board level. I thank my noble friend for her thoughtful remarks on groupthink; it is this diversity of thought and experience that would be the best antidote to such an outcome.

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[Baroness Noakes (Con)]

My Lords, we will all be relieved that we are on the final amendment of this Report stage.

Amendment 20 would have the effect of requiring the consent of the Secretary of State if ARIA seeks to use the powers in paragraph 17(2) of Schedule 1. These powers allow ARIA to borrow money, to acquire and dispose of land, to accept gifts, to form and participate in partnerships and joint ventures, and to form companies. I have no problem with these powers existing; they are useful techniques which are commonly used in research and development activities and scale-ups. I am, however, against public bodies taking on liabilities which are counted as public sector liabilities and which will end up being footed by taxpayers if they go wrong, without any controls. I am also wary of private sector counterparties, who may well be queuing up for a free ride on the public sector’s credit lines, knowing that they will be rewarded for success and may not have to pick up the tab for failure.

My noble friend the Minister replied to my amendment in Committee, saying that conditions would be attached to grant funding given under Clause 4 of the Bill, and that borrowing would have to meet stringent requirements set out in Managing Public Money. The Minister also said that any borrowing would have to be agreed with HM Treasury in advance. I accept that it is possible that this will work perfectly well, with ARIA agreeing to abide completely by whatever the Treasury and BEIS say. It is certainly likely to toe the line all the time that it is dependent on grant funding from BEIS.

My question to the Minister is based on a different scenario. Let us assume that BEIS has handed over the £500 million committed for this Parliament and that the Chancellor has said that there is no more money. We know that the power to wind up ARIA will kick in only after 10 years, so what does the Minister think will happen in the years between, say, 2024 and 2032, with no more grant money arriving? My guess is that borrowing money would become irresistible. Moreover, the value-for-money test in Managing Public Money will be very easy to satisfy, because the counterfactual of using public money will not exist. Complex structures that look like partnerships or joint ventures could actually be borrowing by another name—I have seen that all before.

That is why I believe it would be safer if this Bill embedded a consent requirement. A consent requirement might look rather heavy-handed at first sight, but it could easily be tempered by delegation arrangements which did not require all transactions to have to be sent to the Secretary of State for approval.

I look forward to hearing how the Government think they can keep control of an organisation which has unconstrained statutory powers once the Government have lost the lever of grant payments. If they are not certain that they can deal with all eventualities, I respectfully suggest to my noble friend that an amendment such as this one, or something similar, is needed. I beg to move.

[Baroness Chapman of Darlington (Lab)]

My Lords, this is a very interesting discussion initiated by the noble Baroness, Lady Noakes. At first, I thought she was suddenly getting into big state interference, but that is obviously not the case. It is curious why ARIA would need to be able to borrow money when it is being given a budget from the Government. Presumably the intention is not to give it the Government’s credit card also, because we will be underwriting the borrowing that takes place—I think. I am not quite sure on this; perhaps the Minister could explain some circumstances in which the borrowing of money would be needed and how that would be beneficial to ARIA.

On gifts, we are not quite clear what that is about. If the noble Baroness wanted to test the will of the House—I suspect that she does not want to, this evening—we would be interested in supporting that.

We really need to get some assurance from the Government, particularly on this issue of borrowing money.