Advanced Research and Invention Agency Bill

Baroness Noakes Excerpts

2nd reading
Tuesday 2nd November 2021 Lords Chamber

[Baroness Noakes (Con)]

My Lords, it is always a pleasure to follow my noble friend Lady Neville-Rolfe. Like her, I support the Bill. My interest in research and development is not in the science per se but in its link to productivity and growth. I see it as a driver of economic gains and wealth creation and, as my noble friend said, that is important in the context of the economic situation we are facing.

Noble Lords will know that I am not a big-state person. My instincts are to keep government and the public sector well out of the way of the business of wealth creation. However, I back the Bill because I know we cannot rely on private sector enterprise or the research programmes of universities or elsewhere to optimise outcomes for UK plc. Of course there are some fabulous examples of successful research leading to genuinely world-beating and commercially successful products and services, but I do not believe that the UK has maximised the potential in and for our nation. So I am prepared to try another way. We should be thankful that Dominic Cummings was determined to create a UK version of the US ARPA. I know it is not fashionable to say that Dominic Cummings did anything of value but I believe he deserves credit for driving this idea forward.

I see ARIA as a once-in-a-generation opportunity to break out of the old way of doing things. As has been said, this means not only accepting failure but welcoming it. Traditional ways of thinking about how public money should be spent do not accommodate failure, and successful careers in public sector organisations rarely have failure in their foundations. ARIA has to be able to take much bigger risks than any normal public sector body would dare to take.

A crucial part of this is to ensure that the new agency is headed by outstanding people with vision and intellectual boldness. These people do not exist in large numbers. As other noble Lords have referred to, I know that the Government have been pursuing the key appointments of the first chief executive and first chairman, but I understand that the recruitment process for the chairman has been deliberately paused. I hope that my noble friend the Minister, when he winds up, will say something about where the Government have got to with these appointments and the timescale to which they are now working.

The composition of the whole board will also be important if ARIA is to operate outside the risk-averse culture of the public sector. I hope that, when the non-executives are appointed, the Government will focus on genuine diversity rather than ticking Equality Act boxes. Genuine diversity means people with diverse mindsets and thinking patterns, and it means people who reject groupthink. The worst possible thing would be a board that squashed risk-taking and innovation. To that end, I believe that the Government should not appoint any civil servants to the board—with the possible exception of the Chief Scientific Adviser, who is mandated under the Bill. I propose to explore that further in Committee.

Another crucial element is that we should not tie the organisation up in bureaucracy. For that reason, I fully support the exemption from the Freedom of Information Act. If noble Lords wish to pursue this in Committee, as I expect they will, I hope they will remember that Tony Blair, the architect of the freedom of information legislation, said that it was

“utterly undermining of sensible government”.

If it undermines sensible government, what would it do to a groundbreaking organisation such as ARIA? It does not bear thinking about.

I also reject the notion that the Government should be setting an overarching strategy for ARIA. What ARIA focuses on should be the product of the big brains that I hope the Government will be appointing to the organisation. It should not be forced into following the political thinking of the day. The Government have plenty of other opportunities to promote things on their own agenda. We have to set ARIA free in this important respect.

I shall want to explore in Committee whether ARIA should have the power to borrow money. An unconstrained borrowing power, as found in Schedule 1, is dangerous. I support the initial commitment of £800 million because it is limited. We can draw a circle around it and, at some stage—not too early—we can see whether the nation is getting value for money. A power to borrow money could allow it to increase its scale very significantly and, under the well-established doctrine of standing behind, that could leave taxpayers picking up a much bigger bill than £800 million. There is a big difference between placing an £800 million bet, which might produce nothing in return, and underwriting someone’s credit card.

I look forward to the Bill becoming law and to starting a new chapter in the UK’s exploitation of its talent and resources.

Advanced Research and Invention Agency Bill

Baroness Noakes Excerpts

Committee stage
Wednesday 17th November 2021 Grand Committee

Moved by

[Baroness Noakes]

2: Schedule 1, page 6, line 18, leave out paragraph (c)

[Baroness Noakes (Con)]

My Lords, in moving Amendment 2 I will speak also to Amendments 6, 8 and 10 in my name. These are all probing amendments that concern the governance of ARIA and its board, so I am dealing with much more mundane matters than we covered in the first group. There are a lot of different aspects in this group so I apologise in advance for taking a little time in my opening remarks.

Amendment 2 is about the size of the ARIA board. It deletes paragraph 2(2)(c), which allows between two and five executive members to be appointed to the board in addition to the chief executive and the chief financial officer. As with the governance arrangements relating to commercial boards, paragraph 2(4) requires there to be a majority of non-executive members. Therefore, the minimum size of the ARIA board will be twice the number of the executive members, plus one. If there are two additional executive members, the total number of executives would be four, the minimum number of non-executive members would be five, with a minimum board size of nine. If, however, the full complement of five additional executive members was appointed, the board would comprise seven executive members, with a minimum of eight non-executive members, making 15 in total. There is, however, no limit to the number of non-executive members and hence no upper limit on the size of the board.

I believe that this design is flawed and could result in an unwieldy and ineffective board. Some years ago, in the wake of the financial crisis, Sir David Walker produced a review of corporate governance in banks and other financial services entities. His report included an annexe, which dealt with optimum board and committee size, based on evidence from a number of sources. Sir David said that the optimum board size was between eight and 12, and that beyond 12 a board was prone to

“passive free riding, dislocation and ‘groupthink’”;

in particular, the likelihood of groupthink increased “exponentially” above 12.

I will quote some of the rationale for this:

“This importance of size is due to the cognitive limit to the number of individuals with whom any one person can maintain stable relationships, this limit is a direct function of relative neocortex size, and this in turn limits group size.”


My own direct experience of a number of boards in different sectors over the years is pretty much in line with the Walker report.

At Second Reading I emphasised the need to avoid groupthink in ARIA, and I hope the Government will look again at their design for ARIA’s board. Many listed companies have only the chief executive and the CFO as board members, which helps limit overall size and keep the board effective. Is it really necessary to have a minimum of any extra executive members? Why not just set an upper limit on the size of the board—at, say, 12—and let the rule on the majority of non-executives drive the remaining appointments?

Amendment 6 is designed to ensure that the culture of ARIA is kept away from the Civil Service and government, about which I also spoke at Second Reading. It states that non-executives cannot be either Ministers of the Crown or employed by a government department and paid out of public expenditure. There is a precedent for a prohibition on Ministers and civil servants in the Bank of England legislation which governs appointments to the Court of the Bank of England. It is now in the Bank of England Act 1998, and I have largely copied that drafting, although I have added a prohibition regarding positions held within the five years preceding the appointment. It is clearly important that the central bank is formally independent of government. In the case of ARIA, formal independence is not the issue; rather, it is very important to be independent of the prevailing mindset in Whitehall. I hope that the Minister will agree with me on that.

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[Lord Callanan (Con)]

I will write to the noble Lord with the legal details he requires.

[Baroness Noakes (Con)]

My Lords, I can probably help the noble Lord, Lord Fox. In the case of public corporations created by statute, it is quite common that they are the members. It is not usually drafted as if the board is a separate legal entity.

[Lord Fox (LD)]

The non-execs and execs, or just the non-execs?

[Baroness Noakes (Con)]

No, the members. The members are executive and non-executive, as defined. They comprise the body. That is quite normal in public sector formulations. While I referred to the board when I introduced my amendments, that is not set out in legislation because they are the members. In common parlance, I was talking about the creation of the board of the agency.

I thank noble Lords for their support and their contributions to this short debate, and I welcome the noble Lord, Lord Morse, to our deliberations. I heard what the Minister had to say. He has decided that there will be four executives and therefore a minimum board size of nine, but I do not think he really engaged with the substance of my arguments on why the potential for 15—or, indeed, more because the Bill does not limit the size of the board to 15—which was a little disappointing.

When the Minister dealt with whether or not there could be payments for pensions or gratuities to non-executives, he said that the Government do not intend to do that but are going to put it in anyway. Actually, this is really old drafting, which I can point to in many old statutes, which have not been used for many years, for very good reason, and there really is no need to carry on drafting in this way.

I could go on but I am not going to answer the individual points made by the Minister in response to my speech. I hope he will go away and read more carefully the content of the debate because I think there are some issues that he did not deal with in his reply, and I will certainly read his remarks more carefully when I see them in Hansard. I anticipate returning to some of these issues on Report. In the meantime, I beg leave to withdraw my amendment.

Amendment 2 withdrawn.

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[Baroness Noakes (Con)]

My Lords, I will comment on Amendment 4 in the name of the noble Baroness, Lady Randerson. We must not lose sight of the fact that the board is there to contribute to the total purpose or mission of the organisation, and we need to be very clear, when looking at getting those with some relationship to the devolved Administrations, precisely why they are there. I question whether there is a devolved dimension to, for example, the focus of ARIA or determinations about particular projects. These should transcend any issues that arise at the national level.

In addition, the amendment says that there should be

“a representative of the Welsh Government”.

I believe very strongly that boards should not have representatives of anybody on them. Board members should be selected because of their contribution to the totality. Indeed, if we look at examples of boards that do have individuals nominated either by or with the consent of the devolved Administrations, those people are never ever drafted as representatives. They are usually drafted as members who are appointed in a particular way. It is really important that we do not lose sight of the fact that we are trying to create a unitary board dedicated to the mission of the organisation. I query whether there needs to be input from the devolved nations to that process because of the nature of ARIA, but even if there were, I am absolutely clear that they should not be “representatives”.

Furthermore, if we look at the size of the board, which I addressed in the previous group of amendments, if there are four executives there are likely to be five non-executives, and that includes the chairman. So there would be a chairman, four executives and three people appointed who are in some ways related to the devolved Administrations—although none, under this formulation, representing England—but none, or perhaps one, appointed for the general skills and abilities they bring to the party. I hope that noble Lords will think carefully about whether it is appropriate in this instance to act in accordance with the way the noble Baroness’s amendment is drafted.

[Lord Ravensdale (CB)]

My Lords, as co-chair of the Midlands Engine APPG, I am very supportive of the levelling-up agenda and have a lot of sympathy with the amendments in the name of the noble Baroness, Lady Chapman. My only concern is the additional bureaucracy inherent in looking at the regional distribution of investment.

Building on the point made by the noble Viscount, Lord Stansgate, another lesson learned from DARPA was that the headquarters of DARPA was located away from many of the main research centres of the United States, which avoided the inevitable capture of research funding by institutions in a particular area and really encouraged the take-up of ideas from all parts of the country. I thank the Minister for writing to me on this but I hope that the Government will look further at how the location of the ARIA headquarters fits into the levelling-up agenda.

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[Baroness Noakes (Con)]

My Lords, I can probably help the noble Viscount. It is a shame that the noble Lord, Lord Morse, has not stayed with us. I think what I am about to say was referred to in the opening remarks of the noble Baroness, Lady Chapman.

Because the Comptroller and Auditor-General is specified as the person to examine, certify and report on the statement of accounts, the National Audit Act 1983 gives the Comptroller and Auditor-General the power to do value-for-money audits in the way that the National Audit Office does for all government and public departments. The power therefore already exists and there is no need for Amendment 11, as I think the noble Baroness herself conceded; it is simply not an issue. A power for the Comptroller and Auditor-General to carry out a value-for-money audit will exist and the audit will be carried out in the normal way that the National Audit Office undertakes its value-for-money audits.

[Lord Fox (LD)]

Again, this is an interesting group of amendments, and the noble Baroness, Lady Chapman, and the noble Lord, Lord Ravensdale, should be congratulated on tabling them. Bearing in mind what the noble Baroness, Lady Noakes, has just said, I was already planning to focus on Amendments 12, 13 and 14 and not to talk to Amendment 11, and that is probably a good idea.

However, I say to the noble Lord, Lord Browne, that I do not think his work was wasted because one way or another he has managed to uncover the fact that the Government have decided deliberately to exclude this requirement that they expect every other central government purchase to meet. The Minister has a serious question to answer as to why that is being left out.

Amendments 12, 13 and 14 cover an important issue. I do not think we need to underline, after the week or 10 days that we have just had, why it is in the interests of ARIA itself for it to be seen that there is no conflict and there are no issues around where the money is being spent. In a sense, these amendments or versions of them, will help ARIA in its own housekeeping. Of course, the Electoral Commission will register donors. As the noble Baroness, Lady Chapman says, we then need a list of all the companies and then to go to Companies House to find out who is registered as being in control of those companies. Making it easier also makes it clearer to the ARIA administration what it is dealing with.

I go back to the statutory instrument that we are not debating today, which talks about conflict of interest—so it is clearly relevant. It says that a member of ARIA must disclose any “relevant interests” promptly on appointment. The trouble with that is that I do not think that many people can consider their donations to be a relevant interest, but they are relevant with respect to an organisation of this nature. So something clearer needs to be spelled out, either in the statutory instrument or in the primary legislation. I would prefer it to be in the primary legislation.

When that is done, in listing the companies that are being supported, I suspect that the Minister is going to stand up, in the same way as he is going to stand up when we debate the freedom of information stuff, and say, “This work needs to be kept under wraps and kept secret”. There is a balance to run on this, and if there is an issue we need to find a third-party agency to scrutinise it on behalf of Parliament. But to hide specifically through national security or proprietorial security is wrong, because in that darkness—even if abuses are not happening—the perception of abuse will happen, which will harm ARIA before it even starts.

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Moved by

[Baroness Noakes]

17: Schedule 1, page 10, line 23, leave out paragraph (a)

[Baroness Noakes (Con)]

My Lords, I beg to move Amendment 17 and shall speak also to Amendment 20 in this group. These are probing amendments designed to explore the extent of the powers given to ARIA by virtue of paragraph 17 of Schedule 1. Sub-paragraph (1) of paragraph 17 says that ARIA can pretty well do what it likes, and this is expanded by some particular powers in sub-paragraph (2). The two I have focused on in my amendment are sub-paragraph (2)(a), which says that ARIA may borrow money, and sub-paragraph (2)(d), which allows ARIA to form and participate in partnerships and joint ventures.

My concern is that these powers will be used to create liabilities for the state and hence, ultimately, for taxpayers, beyond the resources that we were led to believe would be devoted to ARIA. As I remarked on Second Reading, there is a world of difference between placing a bet of £500 million or £800 million and underwriting someone else’s credit card. In the former case, there is the hope of winning very much more than the initial £500 million or £800 million, although, obviously, the possibility of losing the lot. In the latter case, there is the possibility of an unlimited amount of additional money being needed if the funds raised by the borrower failed to produce any return.

ARIA will be a public sector body in every sense of the term. It gets its money from the Treasury, it is subject to public sector audit and accountability arrangements and its key personnel are appointed by and paid in accordance with the directions of the Secretary of State. It is always accepted that the state stands behind public sector bodies. That has been the case for as long as I can remember. If they fail, their liabilities are underwritten by the state. That is why there is usually a raft of controls placed on those bodies, including restrictions on the power to borrow money. The Treasury has an obvious interest in ensuring that public sector bodies do not create uncontrolled demands on public finances and, as a public sector body, ARIA’s borrowing will, I believe, automatically score as public sector borrowing. Will the Treasury really allow that to happen without controls?

I have focused on the borrowing power in sub-paragraph (2)(a), but my comments apply also to the ability to participate in partnerships and joint ventures, which are often structured in a way that means liabilities can be left with one of the parties to the venture. Private-sector counterparties would be queueing up to enter into arrangements which could possibly leave the state with the requirement to pick up the bill for failure. Similar dangers also apply in relation to companies which are allowed to be formed under sub-paragraph (2)(e), but I failed to table its deletion for today’s debate. I am not against partnerships, companies or joint ventures; they all have a part to play in working with private sector organisations. What I am against is the ability of ARIA to enter into arrangements that impose potential financial burdens on government finances without any controls or consents being required.

As it stands, Schedule 1 might allow some ex post interventions once the Secretary of State became aware of things that cause financial concerns beyond the initial amounts of money committed to ARIA—£500 million by the end of this Parliament—but the main tool he has is an extremely blunt instrument because it is related to replacing the members of the board. Even here he is restricted, as under paragraph 6(3) he can sack non-executive members of the board on any grounds he “considers appropriate” but, to get rid of an executive member, his power under paragraph 5(2) is restricted to grounds of “national security”. The real villains are more likely to be the executives than the non-executives, but the Secretary of State’s powers to deal with those individuals are, perversely, concentrated on the non-executives.

The notes given to noble Lords on this side of the Committee for today’s groupings said that my amendments would limit ARIA’s novel funding mechanisms. That gives an insight into what these powers are about. They are positively designed to allow ARIA to go beyond the resource envelope that has been announced for it. Calling funding “novel” might sound progressive, innovative and all those good things that ARIA is said to be focused on, but to those of us who have been around financing for rather a long time, it just sounds like another way of doing things to get around rules and restrictions. That would be okay if there were not ultimately recourse to public funds, but the Bill does not require borrowing to be on a non-recourse basis. It leaves public finances at risk to an unspecified degree.

I look forward to hearing from my noble friend how she thinks this very real risk will be managed in practice and how the Government have concluded that ARIA’s powers are compatible with sound public finances. I beg to move.

[Baroness Chapman of Darlington (Lab)]

My Lords, I support the noble Baroness, Lady Noakes. I had not had the pleasure of hearing from her at such length as we have today, and I am very impressed by her contributions. The issue of borrowing money is a concern. There is clearly the potential for financial risk but also significant reputational risk when a level of borrowing might emerge that may seem unduly risky. I am concerned about that and interested in what the Minister will say to prevent that concern doing any damage to ARIA.

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[Baroness Bloomfield of Hinton Waldrist (Con)]

My Lords, these amendments relate to ARIA’s supplementary funding powers—its ability to borrow and form and participate in partnerships and joint ventures. I will begin by clarifying some of the controls and rules that would govern ARIA exercising these powers and I hope I can find enough reassurance for my noble friend Lady Noakes here. She always starts a debate with a great deal of knowledge, so we always pay attention.

ARIA could only ever make use of a financial mechanism, such as borrowing, for the purpose of exercising its functions—to conduct scientific research and exploit and advance scientific knowledge. Any such activity would also be subject to conditions attached to grant funding provided by the Secretary of State under Clause 4. Any borrowing would also meet the stringent requirements and controls of HMT’s Managing Public Money, which sets conditions to ensure value for money. It would be agreed with Her Majesty’s Treasury in advance. This is part of a suite of non-legislative controls that exist on borrowing.

I also highlight that UKRI has the power to borrow. Mirroring that approach, it is reasonable for ARIA to have this full financial toolkit, as it may be appropriate for it to use in certain future circumstances. For example, one possible scenario in which borrowing may be useful would be if ARIA were to own a controlling stake in a subsidiary, which while partially government owned, aims to act with autonomy. Such an entity may want to borrow if purchasing a large capital asset, in order to resolve cash flow issues if an upfront payment were required.

On ARIA’s power to participate in partnerships and joint ventures, using this power ARIA could take an equity stake in a company forming around a new technology. This could provide a clear benefit in cases where the company is creating assets of strategic importance to the UK. On this point, I reassure the noble Lord, Lord Fox, that the National Security and Investment Act does indeed apply to all ARIA’s activities.

In another scenario, ARIA’s taking an equity stake in a company may help to crowd-in private sector interest, bringing in greater funding totals, lowering financial exposure and creating a clear pathway for the commercialisation of a technology. It is fundamental to the design of ARIA that it is able to innovate with different methods of funding high-risk research.

As I have made clear, appropriate checks are in place to ensure the Government can agree the details of any future borrowing activity, and the ability to engage in joint ventures will be an integral feature of ARIA’s full financial toolkit. I therefore see no reason the mechanisms available to ARIA should be limited through the Bill and I ask the noble Baroness to withdraw her amendment.

[Baroness Noakes (Con)]

My Lords, I thank all noble Lords who have taken part in the debate. I particularly thank the noble Baroness, Lady Chapman, not only for her kind words but for pointing out the reputational risk in addition to the financial risk. As an accountant, I tend to think of financial risk before anything else.

I should say to the noble Lord, Lord Fox, that I did not say that I was against joint ventures and partnerships; I said that they were fine and that it was just a question of the degree to which, through those mechanisms, additional liabilities could be taken on that would then end up on the public sector balance sheet. Often joint ventures and partnerships are structured in such a way that, through those vehicles, access to additional borrowing of various kinds, or quasi-borrowing, can then end up coming back. Those are the reasons why I was probing in relation to joint ventures and partnerships. I accept that in many types of arrangement they are a natural way to do business in this area.

I thank my noble friend the Minister for what she said. I think she said that conditions could be attached to grant funding—indeed, there is a sentence on that in the Explanatory Notes for whatever clause relates to grant funding, which I cannot remember at the moment—but no other details were provided on how that works. Is that prospective? Is it done every time that money is paid over? I do not understand how it will work. Once ARIA has got hold of the money and does not need any more grant funding at that point in time, what powers do the Government have over its further borrowing after that?

My noble friend also talked about managing public money. I do not have an encyclopaedic knowledge of that, but from memory I could not see how that related to the issue I was really raising—whether you can borrow money without Treasury consent, which is what is implied by the statute, with it ending up on the public balance sheet.

[Baroness Bloomfield of Hinton Waldrist (Con)]

Perhaps I could come back on that point. Any borrowing will be agreed with HMT in advance and will comply with the terms of managing public money, which requires that public sector organisations may borrow from the private sector only if the transaction delivers better value for money for the Exchequer as a whole.

[Baroness Noakes (Con)]

I think I understand what my noble friend is saying. It is then about seeing how managing public money bites on ARIA, which has an unconstrained power to borrow. I would like to think about that further, and perhaps my noble friend could explain alongside that how conditions attaching to grant funding work in practice. Who says what to whom, and when? Perhaps then I can understand the mechanics of that. I am sure that, if the Government have thought this through, she will be able to give me a comprehensive answer on how we are not letting ARIA go out into the world and bust the public sector borrowing requirement—even more than it is already bust. I beg leave to withdraw the amendment.

Amendment 17 withdrawn.

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[Baroness Bloomfield of Hinton Waldrist (Con)]

Is that not the point?

[Baroness Noakes (Con)]

No.

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[Baroness Noakes (Con)]

Can I ask my noble friend the Minister to ensure that when she comes back she explains the relationship between paragraph 17 in Schedule 1 and Clause 2, which sets up ARIA’s functions but seems to go beyond functions into things it can do? Paragraph 17 then comes and says again the things it can do. I find that confusing and that confusion may be shared by other noble Lords.

[Lord Lansley (Con)]

I am grateful to my noble friend. We are going to return to some of these issues and I beg leave to withdraw the amendment.

Advanced Research and Invention Agency Bill

Baroness Noakes Excerpts

Committee stage
Monday 22nd November 2021 Grand Committee

[Viscount Stansgate (Lab)]

My Lords, first, I apologise for being late. I do not know whether amendments can be moved by Thameslink.

[Baroness Noakes (Con)]

Perhaps I might say to the noble Viscount that it is customary, if a noble Lord is not here for the commencement of a debate, for them to take no part in it at all. In the noble Viscount’s absence, the noble Baroness on his Front Bench formally moved his amendment so that a debate could take place—but that does not mean that he can take part in the debate.

[Viscount Stansgate (Lab)]

I found the noble Baroness’s comments in our last session very helpful and I learned a great deal—and now I have learned some more.

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[Viscount Stansgate (Lab)]

My Lords, I support my noble friend Lady Chapman and shall speak also to Amendment 32A, which, ironically, was the first amendment that I drafted. If there is any benefit to a signal failure on Thameslink, it is that by accident I turn out to be speaking to the very first amendment that I drafted. I pay tribute to the noble Baroness, Lady Noakes, because it was her who pointed out last week that the former Prime Minister had said that he regretted the Freedom of Information Act. Next time I see him, I shall gladly discuss that subject, but I think it tells you more about Prime Ministers than it does about the principle of freedom of information.

There are two and a half arguments in favour of this amendment. The first is the principle. We live in a parliamentary democracy—we live, incidentally, in a world in which we learn less and less about the Government, who can know more and more about us—and it is a good principle of public life that any new body should be subject to freedom of information. The half argument is that, if it is suggested by the Government that this will cause practical difficulties for ARIA, I am perfectly happy for them to bring forward their own amendment saying that at a later stage they can review the operation of the Freedom of Information Act to see whether it has turned out to be very difficult.

The other argument in favour of making it subject to freedom of information is this. This is a new body. It will be given a not insubstantial sum of public money. It will be doing things the nature of which none of us around this Committee Room knows. If it is thought to be too secretive about what it is doing and in no shape or form accountable to Parliament, apart from the odd appearance by the chair or chief executive in front of the Select Committee in another place, there is a risk that ARIA’s work and reputation could be damaged. Freedom of information would protect ARIA against that risk. That is the other argument I put to the Committee in favour of the amendment.

[Baroness Noakes (Con)]

My Lords, I spoke on this at Second Reading and quoted Tony Blair. Just to remind the Committee, he said that the Freedom of Information Act was

“utterly undermining of sensible government.”

I do not think it is, but I think anybody in the public sector will attest that it is often very burdensome and extremely costly to operate. It was looked at relatively recently by a group, led I think by the noble Lord, Lord Burns, and the conclusion was that on balance the law should remain as it is. But that does not mean that for every new body we should automatically apply the Freedom of Information Act requirements. The noble Baroness, Lady Chapman, was clear that if there was a case, the Opposition would support it.

It is worth looking at why an organisation such as ARIA might well be worthy of special consideration. Let us look further at what Tony Blair said:

“If you are trying to take a difficult decision and you’re weighing up the pros and cons, you have frank conversations … And if those conversations then are put out in a published form that afterwards are liable to be highlighted in particular ways, you are going to be very cautious.”


We do not want an organisation that is dragged into caution and risk aversion. We want one that is fully open internally to grappling with some very difficult issues.

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[Lord Browne of Ladyton (Lab)]

My Lords, Amendment 30 seeks to ensure that any grant made by ARIA is subject to the condition that the entity or asset supported may not be subject to a takeover for five years. I confess that, on reflection, this may more felicitously have been an amendment to Clause 2, which deals with the conditions of grants made by ARIA. As its tabling is for exploratory purposes, at least today, I do not think that matters, but if it comes back it will probably come back in a different form and as an amendment to a different clause.

On the first day of Grand Committee, the debate on the group of amendments led by Amendment 18 in the name of and moved by the noble Lord, Lord Lansley, took about 20 minutes, and the phrase “intellectual property” was used 37 times. Introducing the debate, the noble Lord described the group as being

“about the way in which ARIA acquires, creates, disposes of, retains and shares intellectual property”,—[Official Report, 17/11/21; col. GC 127.]

so it is not really a surprise that the phrase was picked up.

In some senses, it is a pity that this amendment was not grouped with the noble Lord’s amendments, because the concerns that have given rise to the need for this amendment were to some extent aired in that debate. The noble Lord, Lord Lansley, shared with us the extent to which there was concern in the United States that

“some of the public funding which has led to”

DARPA

“research has led to private as opposed to public gain.”—[Official Report, 17/11/21; col. GC 128.]

I share his concern about the extent to which we are creating such an opportunity, but more so about the extent to which such publicly funded research may lead to foreign, mainly US, private as opposed to British private or public gain.

Refinitiv data shows that, in the first half of 2021, buyout groups spent $45 billion snapping up companies in Britain—more than double the next-best first six months on record and almost 10% of the total $547 billion spent across the world. Am I to understand that British stocks’ discount to global peers is the deepest in more than three decades and that Brexit is one reason? I do not want to divert us into another debate, but Brexit is for good, not just for Christmas, so that situation may persist for a period.

On 17 November, reporting the Culture Secretary’s decision to announce a competition and national security investigation into the planned takeover of the British chip business Arm Holdings by the American multinational tech giant Nvidia, and coupling this with the recent news that Kwasi Kwarteng is investigating the proposed sales of defence suppliers Ultra Electronics and Meggitt to American suppliers on similar grounds, Ben Marlow, the chief City commentator of the Telegraph, wrote:

“For too long Britain has adopted a naive and unquestioning ‘help yourself’ approach to foreign takeovers. For a while it looked as though the … government would take an even more extreme laissez-faire approach as it sought to live up to its ‘Global Britain’ credentials but perhaps the penny has dropped in Westminster … It is a welcome shift in tone. Ministers routinely greet the sale of British companies to overseas buyers as a vote of confidence in this country’s prospects when it is nothing of the sort. It simply means foreign firms see the UK as easy pickings and an opportunity to make a quick buck. Hoisting a giant ‘for sale’ sign over your best and brightest companies is not sound industrial policy, it is an act of … self-harm.”


It will not be a surprise to anybody in your Lordships’ Committee that I am not used to quoting the Telegraph in debates or in support of my arguments. I do so because, in a sense, it may be a bit of an instruction to the Minister as to the attitude he ought to adopt to this issue. I do it because it may have more impact on the Minister.

I have tried twice now, in supplementaries to Questions in your Lordships’ House on these issues, to engage the Minister on what is actually happening in the United Kingdom to some of our best and brightest businesses and the effect it is having. I even quoted on one occasion the concerns of the Bank of England about the way these businesses are funded and the damage that this leveraged debt potentially poses to the economy of the United Kingdom in the long term, but he did not respond.

On another occasion, in relation to both the companies referred to in addition to Arm—Ultra Electronics and Meggitt—I pointed out that 85% of R&D in the defence industries in the United Kingdom is public money, and that the intellectual property of these businesses was in danger of leaving the United Kingdom, having been paid for by public money. That is exactly the issue that the noble Lord, Lord Lansley, raised, although he did so in a slightly different context, and exactly the concern I have.

On none of these previous occasions did the Minister bite. With respect to him, he deployed a slightly less complacent version of the words the Telegraph’s city correspondent pointed out, but he deployed them nevertheless.

I close my remarks in support of this amendment by thanking the Minister for his gracious invitation to me over the last few days to indicate to him what lay behind it so that he could, if possible, give me the reassurance I sought. I responded with an even shorter version of what I have said to your Lordships’ Committee today. I hope he has the reassurance that I and others seek about how we will protect the product of this new initiative from being raided by the predators of venture capital funds in particular. I conclude with the words the Telegraph uses, that

“the Americans wouldn’t allow it to happen so why should we?”

[Baroness Noakes (Con)]

My Lords, I am not as opposed to foreign takeovers as the noble Lord, Lord Browne, but I accept that there are some instances where this country is not well served by the ability of organisations outside the UK to cherry pick some of our best assets. The broad thrust is that foreign investment in the UK has been good for our economy—indeed, large amounts of our productive economy are owned by foreign businesses and they are an important part of the success of the UK economy—but I concede that there is a potential issue, especially when we deal with the kind of things we expect ARIA to fund.

However, I do not think the amendment works. It says that if ARIA gives a grant to an entity, it has to be subject to the condition that that entity cannot be taken over. That entity cannot give an undertaking that it cannot be taken over, because the people who will control who takes over an entity are the people who own the entity, which is not the same as the entity itself. While in some cases it might be a private company with two or three shareholders, which would probably be quite easy to deal with, if the shareholdings were much more dispersed it would probably be impossible to operationalise that sort of requirement. If there is a case, it needs another solution.

I also note that this is a bit of a sledgehammer. There could be very good reasons for an entity having the control over it changed. It could need greater access to capital to scale up whatever it has been looking at; it could have liquidity issues in taking its research and development to the next stage, before it even gets to scale up, and need the involvement of other partners; or it could just be that it makes sense to continue with whatever it has been looking at only if it is part of a larger organisation and subject to a merger or joint venture, where control would be ceded. If there is a problem, I do not think it can be met by this amendment.

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Moved by

[Baroness Noakes]

36A: After Clause 8, insert the following new Clause—
“Protection of ARIA’s independence
In exercising functions in respect of ARIA, the Secretary of State must have regard to the need to protect its independence.”Member’s explanatory statement
This new Clause would require the Secretary of State to have regard for the need to protect ARIA’s autonomy.

[Baroness Noakes (Con)]

My Lords, at the request of my noble friend Lady Neville-Rolfe and with the agreement of the Committee, I will move her amendment. My noble friend had hoped we would have a third Committee day and would go slowly today so that she could move it herself on Wednesday. However, she realised earlier this afternoon that that was not going to be the case, so I agreed to move it. I will be as brief as possible, because this is a relatively small point. The intention of the amendment is to underline the Government’s commitment to the independence of ARIA, and it requires the Secretary of State to protect the independence of ARIA.

My noble friend tabled the amendment because she heard the discussions on our first day in Committee about the purpose of ARIA and its mission, including whether it should be directed to act only in certain areas, particularly in relation to climate change. She was very concerned to ensure that the spirit of ARIA—that it should be unencumbered and able to think the unthinkable wherever it wants to pursue its issues—should be preserved.

Obviously, huge amounts of money are spent on research and development overall by the Government and by other organisations in the economy, all of which are subject to lots of different kinds of checks and balances, and controls and directions. But ARIA is supposed to be very different, and it would be easy to start altering the way in which it worked: for example, by attaching conditions to grants that are made to it, and by constraining or confining what it did, using the powers in the Bill. But ARIA is going to be a success only if it is genuinely independent of government, if it is not dancing to the Government’s tune in any sense, and if it is allowed to go wherever it wants in seeking new areas for research and innovation. I think the Committee understands that ARIA’s independence from government should be preserved.

So this very small amendment underlines the concepts that we believe underlie the creation of ARIA, and I hope that it will be helpful to the Government in enshrining its independence from government. I beg to move.

[Baroness Chapman of Darlington (Lab)]

I just want to make a quick observation about this. Obviously, we have argued to have climate as ARIA’s overriding priority, and we stand by that—but should that not be the case, this amendment would not cause any problems were it not for the fact that the Government were declining amendments on oversight and scrutiny. I do not think that the two are incompatible. You can have an independent agency, and we would not wish to have government interference, but there is no compromising of independence by allowing for freedom of information or some of the other measures that we have suggested.

[Lord Callanan (Con)]

I thank the noble Baroness, Lady Noakes, for her comments and for stepping so ably into the breach to represent my noble friend Lady Neville-Rolfe in her amendment. It is perfectly right that we have returned once again to the central issue of ARIA’s independence, because it is a core part of equipping it for its unique funding approach and for the distinct contribution that we expect it to make to the UK’s R&D landscape.

I support the ambition for the Secretary of State to be mindful of protecting ARIA’s independence in all its interactions with the organisations, where such interactions are required by the Secretary of State’s very limited functions. However, I differ with my noble friend on how we protect its independence in a practical way. I submit that it would be the accumulation of many small things—perhaps creeping influence over strategy, new mechanisms of oversight, or ever-increasing reporting demands on issues of political priority—that would be the arena in which ARIA’s independence would be compromised or lost.

My noble friend Lord Willetts, who is not in his place, spoke eloquently on Wednesday about the challenges he has experienced in trying to carve out space for new approaches in the current R&D system. At that stage, we also had a fairly extensive debate on the accumulated obligations placed on ARIA. We considered how those obligations might be balanced with this vital principle of independence, in the context of amendments which, I believe, would have diminished ARIA’s autonomy in a way that would have been entirely counterproductive. If we truly wish to safeguard ARIA’s independence, it is on those issues that we must look to do it, and there is no easy alternative.

I do not suggest that this is a moment to reopen that debate, but I submit that we cannot have this conversation on independence in an abstract way, divorced from consideration of the practical and operational ways in which it will or will not be given to ARIA. I am sure that there will be plentiful opportunities to discuss this important issue in future. I hope, on the basis of the reassurances I have been able to provide, that my noble friend will, on behalf of my noble friend Lady Neville-Rolfe, feel able to withdraw the amendment today.

[Baroness Noakes (Con)]

My Lords, let me thank all noble Lords who have spoken. I agree with the noble Baroness, Lady Chapman, that independence is not incompatible with the Freedom of Information Act and other aspects that are included in the proposition for ARIA in this Bill. However, I do not think that independence is compatible with prescribing that it should focus only on climate change. We will have to agree to differ on that point.

The point of this amendment was that the Secretary of State had to respect the independence of ARIA, not that everybody else had to respect that independence, and I am not sure that I got the ringing endorsement of the Secretary of State not interfering in ARIA. However, we have had a good debate, and I am sure that my noble friend Lady Neville-Rolfe will enjoy reading it in Hansard. With that, I beg leave to withdraw the amendment.

Amendment 36A withdrawn.

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[Lord Lansley (Con)]

My noble friend referred to the agreement having been shared with us, but I am not aware of having seen it or where it was shared with me.

[Baroness Noakes (Con)]

My noble friend also sent a letter to me following last week’s Committee; that was shared only with the noble Lord, Lord Browne of Ladyton. My noble friend’s department has form on not sharing widely with those in Committee when things are circulated. Can he go back to his department to ensure that all active members of the Committee get access to all the information circulated in response to its deliberations?

[Lord Callanan (Con)]

My apologies—we shared it with those who had contributed to the debate on the subject previously. In retrospect, we should perhaps have shared it more widely; we will now do so.

As my noble friend Lady Bloomfield set out last week, all four Administrations are equally committed to facilitating ARIA’s seamless operation throughout the UK. I hope that this will provide some comfort, in particular to the noble Baroness, Lady Randerson, who raised some important points on this issue at the time. My department will remain as ARIA’s sponsoring department to reflect the power of the UK Secretary of State, who alone has the power to fund ARIA through Clause 4 of the Bill. In our view, the accountability for that use of public money must therefore flow through the UK Government.

In addition to these protections for ARIA’s autonomy, the agreement provides an input mechanism from a new forum of science advisers to the four Administrations of the UK, directly to ARIA’s executive leadership. While there will be no obligation for ARIA specifically to respond to this input, the scientific challenges relevant to the policy priorities of all four Governments will be jointly communicated.

I appreciate that noble Lords have raised questions on how this will work in detail. At the moment this is necessarily a high-level document and clearly there is more work to do, at a working level, to flesh out this agreement between the UK Government and the devolved Administrations. This work is ongoing and will be the subject of further work in the months to come. However, as a result of it, Ministers in Scotland, Wales and Northern Ireland have all now given in-principle consent for the Bill on the basis of this approach. On that basis, I hope that noble Lords will similarly be able to support it. I beg to move.

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[Lord Fox (LD)]

My Lords, this is the last group of amendments in Committee, and it is probably just as well, because if the Minister has any more jelly babies I suspect he will go into a coma. We have established through both our useful meetings with him and Second Reading that the framework agreement is a crucial document to point the way to how ARIA will operate and its future relationships. Without knowledge of that document, we are being asked to approve all manner of clauses, as we just have, that set ARIA in motion before we know how it will operate—actually, before we know what it is.

With Amendment 47, my noble friend Lord Clement-Jones and I are offering the Minister an alternative to the Government’s magical mystery tour approach. Remember that this tour comes with a ticket price of £800 million of taxpayers’ money—and that is just the start. The Minister is loading us on to his metaphorical charabanc, ready to go who knows where, flat cap in place. The amendment is intended to remove some of that mystery. Thanks to it, before the vehicle can be put in gear, we must at least be told where we are going.

I have perhaps laboured that image a little much but, as I said, it is the last group. More prosaically, the amendment would require the Secretary of State to publish a copy of ARIA’s framework agreement before regulations can be made to commence the substantive parts of the Bill. It continues our theme of ensuring that Parliament has sight of, and an appropriate say in, the progress of this important institute, and it would do so without impeding ARIA’s progress or meddling with its future. In this way, the Minister can remove the mystery without harming the magic, so I beg to move.

[Baroness Noakes (Con)]

If ARIA does not exist until the Act is commenced, how can there be a framework agreement that involves ARIA being a party to the agreement to be tabled before the commencement of the Act?

[Lord Clement-Jones (LD)]

My Lords, I do not need to do very much more. My noble friend is finishing this symphony of a Bill Committee con brio, with metaphorical charabancs, mystery and magic. What more do we need at the end of a Bill stage?

I point out that the equivalent UKRI document of 2018 runs to 60 pages and 16 chapters. It covers a huge range of information: the purpose of UK research and innovation, its powers and duties, its aims, the partnership principles, and the responsibilities of the CEO. It then goes on to deal with devolution and relationships with other bodies, public appointments to UKRI, reviews of boards and committees, and so on. There is some really important content in the UKRI framework document, and I am sure that the ARIA document will not be very different. I very much hope that the Minister will reconsider the decision. On the arrival of the CEO, the Minister said that it followed the Treasury’s standard template. Even something in draft, which does not have to be agreed by the CEO, would seem fundamental to our understanding of what ARIA is going to do.

Advanced Research and Invention Agency Bill

Baroness Noakes Excerpts

Report stage
Tuesday 14th December 2021 Lords Chamber

[Viscount Stansgate (Lab)]

My Lords, I rise to speak to Amendment 6, to which I added my name. This is a subject I raised at Second Reading, but I reassure the noble Baroness acting as the Whip that, on this occasion, she can relax; there is unlikely to be any need to interrupt me on the grounds that I have gone on too long, because I want to be very brief.

There are two reasons why ARIA should be subject to the Freedom of Information Act. The first is one of principle. Public bodies set up in statute should be subjected to the same FOI requirements as apply elsewhere. In this country, I submit that FOI legislation is an essential safeguard in the political world in which we now live. To reject this amendment will send a bad signal and set a bad precedent. I even suggest to the Minister that he may reconsider his view as and when he sits on these Benches in the future.

The second reason is practical. We do not want to allow ARIA to come to be viewed with public suspicion and distrust, especially as it has the right to fail, so being open about its work will be beneficial. If it turns out that it is not easy to discover what it is doing, public support for ARIA might be damaged, to the detriment of its wider role. It is not difficult to imagine circumstances in which a campaign is waged against ARIA for excessive secrecy, possibly utilising inaccurate information about it, and for public support to be damaged; nor, in my judgment, would making ARIA subject to freedom of information turn out to be an excessive practical burden. Moreover, if there are aspects of ARIA’s future work that turn out to be sensitive, the Government already have powers elsewhere in the Bill for the Secretary of State to intervene on grounds of national security.

I will leave my remarks there, but I strongly urge the acceptance of Amendment 6.

[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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Moved by

[Baroness Noakes (Con)]

15: Schedule 1, page 6, line 18, leave out “five” and insert “four”

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[Baroness Noakes (Con)]

My Lords, in moving Amendment 15, I will also speak to my Amendments 16 and 18 in this group. With these amendments, I am returning to the issue of governance of ARIA. We debated these or similar amendments in Committee, and I thought I would give my noble friend the Minister another chance to answer the issues that I raised.

Amendment 15 is directed at the maximum size of the ARIA board. In Committee, I explained that large boards are subject to weaknesses such as passive free-riding, dislocation and groupthink. While it is true that there is no magic formula determining the size at which boards become ineffective, studies generally agree that, once they get to 13 or 14, they do not work well.

Schedule 1 has no overall size constraint but does require a majority of non-executive directors. One way to constrain the size of the board is therefore to limit the number of potential executive directors. My Amendment 15 would limit those executive members to six, which implies a board size of 13, assuming that non-executives are appointed simply to achieve a bare majority. The current Bill would allow a board size of 15 with a full complement of seven executives.

In Committee, the Minister said that the Government believed that a size of 15 was

“in line with standard practice”.—[Official Report, 17/11/21; col. GC 103.]

It might well be standard practice for public bodies that BEIS creates, but I am sure that it is not in line with any of the literature on effective boards. I would hope that BEIS, in particular, would want to be at the forefront of best practice in this area.

Amendment 18 is about the executive/non-executive balance on the board, and I full support a majority of non-executive directors. I am concerned, however, that by allowing a quorum of half the members, as paragraph 10(2) does, a quorum could be achieved with only one non-executive member. My amendment requires a majority of non-executives for all board meetings, in order to ensure that important decisions are not taken by a dominant executive cadre.

My final amendment in this group, Amendment 16, would delete a power to pay pensions or gratuities to non-executive members, which I believe is drafting from another era and which keeps being repeated merely because it follows precedent. My noble friend the Minister said that the Government had no intention of using the power, but curiously then said that the Government wanted to retain it in the Bill. On the basis that the Government do not want to use the power, I hope my noble friend will now agree with me that it is time to read it its last rites.

Lastly, I will offer a comment on Amendment 17 in this group, tabled by the noble Lord, Lord Morse. I completely understand the thinking behind this amendment, but I believe we should be very wary of imposing this kind of legal straitjacket. We need ARIA to be the kind of place where high-quality people come to work. The concept of employment, which places a considerable fetter on life beyond ARIA, could well end up with exactly the wrong kind of people being attracted to work in ARIA. I agree with the earlier remarks of the noble Lord, Lord Broers, on this. I beg to move.

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I hope I have clearly illustrated the potentially damaging unintended consequences of placing such broad restrictions in legislation. I hope I have also assured noble Lords that ARIA will be required, as is any other arm’s-length body, to have clear and robust business appointments and conflict of interest policies in place. On the basis of the assurances that I have been able to provide, I request the noble Baroness to withdraw her amendment.

[Baroness Noakes (Con)]

My Lords, I thank those noble Lords who supported the amendments that I spoke to in this group. There was a small, select bunch of us, but it was a high-quality debate.

I am grateful to my noble friend the Minister for the further helpful explanation that he has now given in relation to my Amendments 15 and 18. I should say that I am thrilled that the Government are accepting my Amendment 16. It remains only for me to say thank you and beg leave to withdraw Amendment 15.

Amendment 15 withdrawn.

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Moved by

[Baroness Noakes]

16: Schedule 1, page 7, line 36, leave out paragraph (a)

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Moved by

[Baroness Noakes]

20: Schedule 1, page 10, line 22, after “may” insert “with the agreement of the Secretary of State”

[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.

[Lord Callanan (Con)]

Once again, I thank my noble friend Lady Noakes for her thoughtful and constructive contributions throughout the progress of the Bill so far. However, she will be disappointed to know, I am sure, that on the substance of her Amendment 20, I am not convinced that adding a legislative requirement for the Secretary of State to approve how these supplementary powers are exercised would be beneficial to ARIA’s effective function or enhance its accountability measures that are already in place.

On ARIA’s ability to borrow money, I recognise that this has been consistently raised throughout the passage of the Bill by my noble friend. I thank her for her previous probing amendments on this matter, which prompted an important conversation on the balance between ARIA’s activities and the appropriate government oversight. As I outlined in correspondence with my noble friend, any borrowing would be contingent on ARIA complying with the rules of Managing Public Money and subject to approval by Her Majesty’s Treasury.

ARIA’s allocation and delegation letters, which the CEO of ARIA will be duty-bound to adhere to, will confirm that ARIA will be subject to, and comply with, all Managing Public Money rules that relate to borrowing. Managing Public Money sets robust conditions on borrowing, and states:

“Public sector organisations may borrow from private sector sources only if the transaction delivers better value for money for the Exchequer as a whole.”


Ensuring that ARIA’s expenditure is made in accordance with Managing Public Money guidance, except for in certain agreed circumstances, will be a condition of the budget ARIA receives from BEIS in its allocation and delegation letters from the BEIS Permanent Secretary to ARIA’s CEO.

There is an expectation of a level of faith between the Government and their arm’s-length bodies. This understanding of trust, and all of ARIA’s freedoms and powers, will be balanced with a number of core accountability principles. The CEO will be ARIA’s delegated accounting officer and will be personally accountable to Parliament for the stewardship of ARIA’s resources, decision-making and financial management. This includes the Public Accounts Select Committee, which will, I am sure, take an interest in such matters. The BEIS Permanent Secretary, as principal accounting officer, will retain an important oversight role, and has the power to make arrangements to ensure they are satisfied that ARIA’s systems are adequate and its finances soundly managed. The Permanent Secretary may intervene if ARIA is significantly off track, and in the unlikely scenario that serious concerns are raised, or there is financial mismanagement, the CEO’s delegated accounting officer authority can be revoked. I hope my noble friend is reassured that the mechanisms here are well established and robust and that they will be enforced.

Moving on to ARIA’s ability to form partnerships, I believe that adding a Secretary of State approval to ARIA’s activities in this area would significantly hinder its effective operations. In designing ARIA, we have put emphasis on the agency operating with significant autonomy from government, and with freedom from standard bureaucracy. Forming partnerships, such as providing grant funding to a project with a university or a business, will be an essential part of ARIA’s daily operations. We expect the agency to contract with, commission and collaborate with a range of different actors for each of its research projects—indeed, that will be one of its core functions.

We have designed this agency to be led and run by experts with technological vision. It is vital that these individuals are free from arduous processes so that they can act quickly, decisively, with autonomy and with clear authority. We should trust ARIA to have discretion over how it forms those partnerships, and I believe that requiring it to engage in a central government approval process for each partnership sits squarely contrary to its aims and purpose.

Moving to ARIA’s ability to form companies and to form and participate in joint ventures, my department is currently in negotiations with Her Majesty’s Treasury about the exact clearance processes ARIA will undertake for each of these transactions. The detail will be set out in ARIA’s allocation and delegation letters, the conditions of which the CEO, as accounting officer, will be duty-bound to comply with. However, I assure my noble friend that all iterations of this delegation letter will include sufficient assurances that ARIA’s internal assessment processes and capability are sufficiently robust. Given that these arrangements may need to evolve in the future, it would not be appropriate for this to be mandated at this stage in the Bill.

On ARIA’s ability to accept gifts, there are already stringent conditions on this in Her Majesty’s Treasury’s Managing Public Money that ARIA would need to comply with. ARIA would consult BEIS about gifts, and HMT’s approval is explicitly required for any gift over £300,000. Gifts made would be recorded in ARIA’s accounts and gifts received would be recorded in a register. These rules will also be confirmed in ARIA’s allocations and delegations letter from the BEIS Permanent Secretary.

ARIA’s power to acquire and sell land would be exercised only in compliance with the Managing Public Money guidance, which sets controls on the below-market sale of land, will compel ARIA to take professional advice when disposing of land and property assets, and will mandate ARIA to include land in its asset register.

Furthermore, introducing a blanket statutory requirement for Secretary of State approval would leave ARIA with less freedom than comparable arm’s-length bodies such as UKRI, which is able to exercise supplementary powers related to accepting gifts and the buying and selling of land without a legislated approval from the Secretary of State.

I appreciate that my noble friend has significant expertise and interest in the areas of financial management and propriety, and we welcome that. However, adding a statutory requirement here would not add value or challenge beyond what is already well established and enforced through Managing Public Money. Furthermore, as I have set out, adding the requirement to the forming of partnerships would, I believe, be genuinely detrimental to ARIA’s agile, autonomous operations, which I know my noble friend is keen not to prejudice.

Before I conclude on this final group of amendments, I once again thank all noble Lords who have taken an interest in this Bill for their excellent and constructive contributions throughout our scrutiny. ARIA provides us with enormous opportunities. I have been delighted to take the Bill through this House and engage with colleagues on all sides, who have focused on the task of providing appropriate scrutiny with enthusiasm, ability and great skill.

[Baroness Noakes (Con)]

My Lords, I start by thanking again the noble Baroness, Lady Chapman of Darlington, for her support for my amendment. What the Minister has said in setting out in more detail how the various mechanisms work in the public sector to achieve de facto control over public bodies has been very useful. I hope he is right that this will work well in practice, and I completely accept his point that there has to be an element of trust and faith between BEIS and its public sector bodies. At the end of the day, this is a risk management decision on whether the balance has been set in the right place, given the particular circumstances of the public body.

I say to the Minister that I hope I shall never have to say, “I told you so”—I warn him that I have an elephantine memory. With that, it is late and time to withdraw my amendment.

Amendment 20 withdrawn.