National Security and Investment Bill

Baroness Hayter of Kentish Town Excerpts

2nd reading & 2nd reading (Hansard) & 2nd reading (Hansard): House of Lords
Thursday 4th February 2021 Lords Chamber

[Baroness Hayter of Kentish Town (Lab)]

I thank the Minister for introducing the Bill. He will be pleased to know that, as he will have gathered from its passage through the Commons, the Opposition are fully supportive —we might even say “at last”. We will, however, be wanting to make a few changes to ensure that it works even better than the Government envisage.

Today’s debate, not unusually for your Lordships’ House, will bring together an experienced group of speakers with expertise in industry, defence and security. I particularly look forward to the maiden speech of my noble friend Lord Woodley, who will speak from his own knowledge of the field. Some of his former trade union members, whom he represented, worked in defence sectors and thus played their role in the defence of the realm.

We hardly need to repeat that national security is the number one priority for any Government. We welcome the changes the Bill makes to ensure that investment, whether in companies, land, assets or know-how, never jeopardises our security. Our only surprise, as my honourable friend Chi Onwurah pointed out in the Commons, was that the impact assessment

“regrets that national security is an area of market failure requiring that the Government do something about it.”

As she said about that quite astonishing claim:

“National security is not a private concern first and a Government afterthought second. National security is the first reason for Government. It is not undersupplied by the market; it is outside the market altogether.” —[Official Report, Commons, 20/1/21; col. 998]


Putting that to one side, we welcome the new and updated regime for intervening in business transactions that might raise national security concerns. We applaud both the requirement for automatic pre-acquisition referrals in some areas, as well as a voluntary notification system and the ability to call in acquisitions of sensitive entities and assets where it is thought they need a national security assessment.

I do, however, wonder whether sufficient thought has been given not just to tangible or IP assets but to the brain power which is vital to dealing with the security threats of today. It is not simply a matter of retaining domestic control over key assets, but also of ensuring that we grow and nurture the skill sets needed for this rapidly changing technology, where we need ability and domestic capability here in the UK. Could the Minister reflect on this when he comes to reply? Could he also comment on whether crucial national infrastructure is likely to be covered in the automatic notification part?

The Bill as it stands should be capable, subject to some issues over capacity which my noble friend Lord Grantchester will address when he winds, of protecting vital security interests. Our questions are twofold. First, they are about the security capability and cross-departmental working within BEIS. Secondly, they are about parliamentary scrutiny, which appears woefully thin.

Much of the business department’s work is to foster and promote inward investment, for the best of reasons. The UK has twice the direct foreign investment of France or Germany. That is good for our economy but potentially risky for security. Because of that dual responsibility, it is surely challenging to give the business department almost the opposite role to that of a cheerleader for investment: to check and sometimes prevent such investment. Indeed, it almost looks like a potential case of moral hazard. Can the Minister confirm that, at least, there will be strict Chinese walls within the department?

Perhaps even more fundamentally, it is hard to see how the Minister’s department can be close enough to departments dealing with land use, defence, supply chains, higher education, foreign relations, transport, science and medicine to be fully aware of what is happening across those areas. Traditionally it has been the Cabinet Office that handles such significant cross-departmental or multiagency working.

Having looked carefully at the draft Statement setting out the three types of risk to be considered by the Business Secretary—the target risk, a trigger event, and the acquirer risk, according to the Minister—it is clear that while judgments as to degree of ownership or control of a business fall within his department’s expertise, some of the other security judgments listed, such as the hostility of a particular state or knowledge of our security services, are not among those traditionally made by business specialists. The backgrounds and expertise of the advising personnel will need to be drawn from across other departments, and many of them will require high-grade security clearance. The decisions taken will be serious and could impact on our international and diplomatic relations, including with close allies.

I recognise that this remit has been with the business department to date, but the increased remit of the Bill—the sheer number of cases and their increased sensitivity—makes the future quite different from what was correct in 2002. Is the Minister therefore confident that the passing on of intelligence and advice from around Whitehall will work smoothly in the new set-up?

Allied to the nature of this work is my second question, which is about whether the Bill allows for adequate parliamentary scrutiny of the decisions which will fall to the business department. A strong case was made in the Commons for the Intelligence and Security Committee to be given an explicit role in scrutinising the working of the Bill; indeed, its chair spelled out very clearly how it was well within the committee’s terms of reference to handle it.

The response of the Minister in the Commons was rather disappointing, to say the least. He said that the Intelligence and Security Committee could ask for extra information or invite the Minister to attend if it wanted. However, as a Nobel laureate commented

“they do not know what they do not know.”

Indeed: the committee will not know what it has not been told until and unless it sees a report. The Intelligence and Security Committee, with its security clearance, would be able to do a proper job on behalf of Parliament in seeing how these powers are—or indeed are not—being used.

We need therefore to amend the Bill, along the lines suggested in the Commons, to ensure that reports are made to the Intelligence and Security Committee. Perhaps the Minister could reflect on whether this would be best achieved via a government amendment.

We welcome the Bill, which, as I said, is in some ways sorely overdue. We will scrutinise it seriously and call for changes to be made, particularly in relation to parliamentary scrutiny and ensuring that the new unit has the skill set, working methods and resources to ensure that its decisions are timely, cross-departmental and forward-looking, so that it safeguards our future security. I look forward to working with the Minister as we take the Bill through the House.