Economic Activity of Public Bodies (Overseas Matters) Bill

Baroness Noakes Excerpts

Committee stage
Tuesday 14th May 2024 Lords Chamber

[Lord Thomas of Cwmgiedd (CB)]

My Lords, I will make three brief points from the view of a lawyer. An awful lot has been said very ably by previous speakers about the reasons why, particularly in relation to Amendment 27, there seems to be no disagreement. This has nothing to do with the politics of the Bill; it is to do with making certain that we make the lives of those who become members of the pension fund board acceptable. I do not want to say too much about the burdens of being on a board or being a trustee of a pension fund—I do not want to put people off—but we ought to legislate to make their life easier in an age where litigation risk is growing. This Bill adds to that litigation risk, which is the second factor that we should take into account. I will not go into Clause 5 now because we will come to it later, but we must take into account the extraordinary encouragement it gives to litigation.

Everyone seems agreed on the objective, particularly in Amendment 27, that financial risk and impact should be taken into account. It is baffling; it is bad legislation to rely on the words rather than to take two minutes to amend the Bill. I am sure this debate has cost more than the cost of putting the Bill right. It cannot possibly be about the parliamentary draftsmen’s pride. It is incomprehensible to me why we cannot put forward a short amendment to reduce litigation risk, make it more attractive to be a pension fund trustee and enable us all to go home a bit earlier.

[Baroness Noakes (Con)]

My Lords, the noble Baroness, Lady Drake, explained her Amendment 27 with great clarity, but I am afraid that I do not agree with her analysis of the problem, nor do I agree with the analysis of the noble and learned Lord, Lord Thomas of Cwmgiedd, for reasons which I will now explain.

Financial matters have been my stock in trade for well over half a century, since I left university. I have been trying to work out what these additional words, “risk” and “impact”, would add to the concept of financial value. The term financial value is not a term of art in my world, the accountancy world, but I think that it means something along the lines of the worth of something expressed in money terms. What something is worth can mean what it is realised for in a market transaction, or what it is worth in terms of the financial benefits it is evaluated to or expected to bring. I believe that neither “risk” nor “impact” add anything to the meaning of financial value.

I start with risk. Risk will affect value, so any determination of what something would fetch in a market or what benefits it would bring would of course take account of the risks when doing the calculations of financial value. This is just 101 of calculating things in financial terms. That is effectively why the DWP documents refer to risk. They do not refer to documents about risk as an adjunct to financial value; they are just encouraging the identification of risks, because that is a normal part of a balanced evaluation. While I do not think that the word risk does any particular harm to the concept of financial value, I do not think that the word is necessary.

I have struggled a bit more with working out what financial impact means. The only thing I could come up with was something like the evaluation of the net costs or benefits to be obtained from what is being acquired, but I cannot see what financial impact adds to the meaning of financial value. In this case, it would be positively confusing to add financial impact alongside financial value, because it might encourage somebody to litigate on the basis that there was a difference between financial value and impact, as Parliament clearly meant something other than financial value by the concept of financial impact. That would be a failure on our part to create certainty in our legislation.

I would also like to comment on Amendment 46A, from the noble Lord, Lord Collins, which is in this group. I expect he will be speaking to it a little later. I could not understand why the noble Lord has chosen UN-related documents to refer to when trying to put what he calls “established investment principles” into the Bill. The UK Government have already announced a series of actions that they have implemented in relation to the UN guiding principles on business and human rights, much of it already in legislation and unaffected by the Bill. In response to those principles, the relevant parts of our legal system are already in place, and we do not need to refer to a UN document to get any further on investment principles; they have already been interpreted by the UK Government.

Furthermore, we already have a perfectly good Stewardship Code in the UK, issued by the Financial Reporting Council, which deals with ESG matters. I do not believe the Bill alters that at all, so long as ESG principles do not acquire a territorial dimension.

[Lord Collins of Highbury (Lab)]

There was a little throwaway remark there: that ESG principles will not involve territorial matters. There are many examples where it could be quite a big influence.

[Baroness Noakes (Con)]

The noble Lord picks me up when I used a bit of shorthand. I really mean the contents of Clause 1 and the moral disapproval in relation to territorial consideration. I was just trying to say that ESG principles are unaffected; they are in the UK system of corporate governance and stewardship, and they are unchanged by this Bill, except where those principles are used in the way described in Clause 1.

The UN principles of responsible investment are not even issued by a UN body: it is a private body that issues them. Those principles have no standing whatever in the UK, except to the extent that UK-based signatories sign up to them. In my view, it is a rather odd thing to be putting into the Bill to define investment principles.

The UN Human Rights Council, which owns this territory, is, like most of the UN, including the General Assembly, pretty anti-Israel. I have an underlying concern that using these UN-affiliated principles—to use a shorthand—is just another way of allowing divestment decisions in relation to Israel by the back door. I am sure that the noble Lord, Lord Collins, does not intend for that to be the effect of his amendment, but I have a fear that it will be the outcome of it.

[Lord Collins of Highbury (Lab)]

When I speak to my amendment, I will make the case for it. I would actually put the noble Baroness’s arguments on their head: if the purpose of the Bill was to stop BDS campaigns, it should have been about that. Our problem—and my noble friend’s problem—is that it is going to be much broader in scope, and will include things that this Government want to achieve. That is why these amendments are quite important.

[Baroness Noakes (Con)]

I accept that this goes beyond the narrow BDS campaign that has been focused on Israel. Nevertheless, it is a concern for a number of us that the Bill will be effective as regards its impact on actions by UK public authorities towards dealings with Israel, which is why I raised it.

To finish, my concern on this score was underlined by the action of the UN human rights special rapporteur on the Occupied Palestinian Territories. This person wrote to the Local Government Pension Scheme in 2021 with a “request for action”, which included divestment from companies that are involved in the Occupied Territories. Here we have someone associated with the UN Human Rights Council telling our Local Government Pension Scheme to carry out divestment activities. That is why this whole area is so concerning.

[Lord Collins of Highbury (Lab)]

How does the noble Baroness think that that advice—I have not seen it—compares with the advice of her own Government in relation to the Occupied Territories?

[Baroness Noakes (Con)]

I think we discussed this briefly on the previous day of Committee. The Government highlight the risks associated with dealings in relation to the Occupied Territories but do not call for divestment. Very explicitly, that is not the case.

[Lord Collins of Highbury (Lab)]

Is not the noble Baroness making my point? It is a risk which the Government have highlighted in their own policy on the Occupied Territories. They are illegal, and have no legal status, and that investment could be at risk. The noble Baroness should make up her mind about what she is arguing.

[Baroness Noakes (Con)]

The issue of risk is a separate issue, dealt with in the amendment of the noble Baroness, Lady Drake. I was talking about later amendments which seek to apply UN principles to local government pension schemes. This is a fairly large group, and I think we have got a little cross-wired on which issues affect which part.

To conclude, I know that the noble Lord, Lord Davies of Brixton, has tabled a stand-part debate on Clause 12, which is in this group. I hope he is not serious about taking local government pension schemes out of the Bill. The actions of the special rapporteur in our domestic affairs are proof enough that we need local government pension schemes firmly within the Bill.

[Baroness Blackstone (Lab)]

My Lords, I strongly support what my noble friend Lady Drake has put forward in her amendment and very much hope that the Government will respond positively to it and accept it.

I listened carefully to what the noble Baronesses, Lady Noakes and Lady Altmann, said. I know that their arguments were made sincerely, but I was surprised that they were somewhat complacent in brushing aside the arguments put by my noble friend. Amendment 45 in my name adds to the important points raised by my noble friend Lady Drake, the noble Lord, Lord Willetts, and other speakers on the fiduciary duties of local government pension funds and their ability to consider risk.