National Security and Investment Bill

Bob Stewart Excerpts

2nd reading & 2nd reading: House of Commons
Tuesday 17th November 2020 Commons Chamber

[Sir John Hayes (South Holland and The Deepings) (Con)]

This Bill is welcome, necessary, important and, it has to be said, overdue. In making a few remarks about it, I draw the Minister’s attention to the fact that the Chairman of the ISC, the right hon. Member for New Forest East (Dr Lewis), is not able to be with us and sends his apology. I will make a number of points from the Committee on his behalf and that of other Committee members.

The first is that this Bill is stimulated, at least in part, by the ISC report from 2013. That report, “Foreign involvement in the Critical National Infrastructure”, made the case that new legislation was required. The hon. Member for Dundee East (Stewart Hosie) has already made that point emphatically, but the Minister does need to explain what might have happened differently had this legislation been in place seven years earlier, because some of these powers are clearly retrospective but they do not stretch back into the mists of time.

The Bill is important, not least because the Government have acknowledged that the UK faces continued and broad-ranging hostile activity from foreign intelligence agencies, hostile state actors and others. Novel means of undermining UK national security include investments that can be structured to obscure the real actors behind them. This is not a straightforward matter of takeovers that are directly linked to defence or critical national infrastructure; it is subtler than that, as the Bill acknowledges and as the Government have said. I want to dig a little further into that during my extensive, but not tediously so, contribution.

The Bill’s importance is also reflected in the dynamism of the threat that we face, which is metamorphosing, as I implied a moment ago. Those who seek to undermine our national security are becoming increasingly clever at doing so and the Bill will need to exercise all the flexibility that its provisions permit. But it may be that, as well as that, we need to return to these matters time and again. In a recent debate, I emphasised that traditionally legislation coming before this House pertaining to security has been spasmodic—it has been periodic. Legislation has stood the test of time but, as the increasing dynamism of the threats we face obliges Government to think again about means of countering them, it may be that we see more legislation than we have hitherto in this area. I happily give way to my hon. Friend, a fellow member of the ISC

[Bob Stewart (Beckenham) (Con)]

I thank my very good friend for giving way. It seems to me that, if we define national security closely, we will not keep up with the speed at which it changes. So I am against the idea of having a definition of what national security is. Does my right hon. Friend agree?

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[Bob Stewart (Beckenham) (Con)]

I want to concentrate on what is essentially the core of this Bill—our national security. Today our country continues to face a broad-ranging hostile attack from foreign intelligence agencies. A few of our critical industries and technologies may already have been purchased, at least in part, by foreign investors, some of whom may not have a particularly benign approach to British national security.

This Bill comes not before time, considering that the Intelligence and Security Committee ruled on the matter and suggested changes in 2013. Unless the UK curbs the right of foreign firms and investors to obtain technologies through the means of mergers and acquisitions, and similar, our advanced technologies could easily find their way into the weapons systems of foreign and potentially hostile states. This would definitely harm the UK either directly or indirectly. The Bill gives the Secretary of State the power to screen investments that might just pose a national security risk, and that is what we are talking about today.

Obviously the Bill very much reflects the views of the ISC, of which most Members, apart from the Chairman, are present. [Interruption.] I didn’t use the word “you”, did I, Madam Deputy Speaker? [Interruption.] Oh good—you were looking at me with horror.

[Madam Deputy Speaker (Dame Rosie Winterton)]

I only pointed out that I was once a member of the ISC as well.

[Bob Stewart]

I am always a culprit on the word “you”. I have now lost my place, thanks to your intervention, Madam Deputy Speaker!

The report produced by the ISC in 2013 contained a requirement for legislation, and we are now getting that legislation seven years later, which is rather a long delay. I am delighted that the Bill protects British industry and puts safeguards on it, but it puts particular safeguards on our national security. In future, investors will have no choice but to notify the Government if the ownership of certain businesses is to change hands—thank goodness for that. However, I note that the Secretary of State will also have the power to call in other businesses if he or she has concerns about national security. That is why I am slightly against a narrow definition of national security; I would prefer it to be a bit more fluid.

The decision to call in an investment will be based on three factors: the nature of the target of acquisition; the type and level of control being acquired and how that could be used in practice; and the extent to which the acquirer raises national security concerns. The list of sectors to be covered is under consultation. I will not use a mnemonic, which until today I thought was some sort of drill, but that list includes advanced robotics, artificial intelligence, cryptographic authentication, whatever that is, quantum technologies—I do know what that is—and satellite and space technologies, in which we are world leaders. It is very important that those sectors are guarded against being infiltrated, because that is what it is—infiltration to take away intellectual property.

At the moment, the UK is almost unique among major western economies in not having stand-alone foreign investment legislation, and this Bill will sort that out. It will give Ministers the power to look at transactions overall and to review them. The Government’s impact assessment estimates that it will result in well over 1,000 transactions a year—possibly up to 1,800, as some Members have suggested. That is a lot, and it means a lot of work for a specific department of BEIS. There will only be 100 people to do that work, which is slightly worrying.

I will finish, because I was told to be short—and I have been, in six minutes—and because I had your naughty finger pointed at me, Madam Deputy Speaker.

[Tim Loughton (East Worthing and Shoreham) (Con)]

Get on with it!

[Bob Stewart]

I am getting on with it! I am trying to finish. This is a good Bill. I hope the House will support it. I will not finish my last paragraph, because my hon. Friend the Member for East Worthing and Shoreham (Tim Loughton) has stolen my thunder. This is a good Bill, and we need it.

National Security and Investment Bill

Bob Stewart Excerpts

Report stage & 3rd reading & 3rd reading: House of Commons & Report stage: House of Commons
Wednesday 20th January 2021 Commons Chamber

We also need serious planning and investment in these sectors, training and reskilling of our workers, and strategic investment in line with the plans for regional levelling up to provide the necessary conditions for these sectors, and the communities dependent on these jobs, to flourish. Now is the time for bold action to put critical national infrastructure at the heart of Government policy, and to retain high-growth and strategically important companies in the UK.

[Bob Stewart (Beckenham) (Con)]

Enhanced protection of our national security is obviously at the heart of the Bill. It has come not before time, too. It has had a gestation period of something like seven years since the Intelligence and Security Committee first raised the matters that it addresses directly. As a member of the Committee, I will not repeat what my right hon. Friend the Member for New Forest East (Dr Lewis), the Chair of the ISC, or the senior Opposition member of the ISC, the right hon. Member for North Durham (Mr Jones), have said with regard to oversight of investments. I think the point has been well made, and I totally accept that the Minister gets those points.

Let us be clear, though, that if a potential enemy state can get critical information and technologies, it is highly likely to do so. In truth, as we all know, the UK is a primary target for a broad range of national security attacks from both foreign intelligence agencies and organisations, as well as companies, which certainly are operating at the moment. If a company that is British and world leading in a technology—for instance, artificial intelligence or robotics—is bought by a foreign investor from a country that is not particularly friendly to the UK, we must have a system to ensure that British technology, ideas and even hardware are not simply hijacked and possibly used against us. We have to stop that.

Unless the United Kingdom curbs the right of foreign firms and investors to obtain technologies through the means of mergers and acquisitions and similar, our advanced technologies could easily find their way into weapons systems of foreign, potentially hostile states. These days, weapons systems should be much more broadly defined. They include possible attacks on the way we live. For example, using the internet to turn off water purification and supplies or just sewerage would have a dramatic and immediate impact on British society. I reckon that is a weapons system these days. In future, investors will have no choice but to notify the Government if the ownership of certain businesses is to change hands. That is good news. I note, too, that the Secretary of State will also have the power to call in other businesses if he or she has concerns about national security. That is good, too: it allows for sensible flexibility.

In contrast to others who have spoken, I think we should be careful about defining exactly what national security involves because it changes all the time. It is difficult to pin it down. We know what it is, but I am worried about defining it.

Within the Department for Business, Energy and Industrial Strategy will now sit this new investment security unit, which will be tasked with supervising sensitive sectors of our economy. I know that those sectors have yet to be fully defined, but most are pretty obvious—defence communications, energy, cryptography, satellite and space technologies and many more. But in the fast-moving modern world that we live in, it will also be important for the investment security unit to look actively at seemingly innocent technologies and systems, which in the wrong hands could bring our society to a grinding standstill. Others have mentioned the national grid: if that could be disabled by the simple means of remote instructions, the whole of the country’s electricity supplies could be turned off. Just think of how difficult that would be!

Keeping sovereign control over the methods of controlling something like the national grid is crucial. I presume and hope that the investment security unit will spend some time looking out for non-obvious threats. Having once been an intelligence officer, I know that trying to identify the threat, the signals that identify what is about to happen, is really difficult because they are embedded in a plethora of noise. But this investment security unit will have to try.

I am pleased that the Bill extends the current screening powers to allow the Secretary of State to investigate the acquisition of sensitive assets in intellectual property as well as the straightforward acquisition of companies. In short, I support the Bill and I am pleased that it has at last reached this stage.

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

It is a pleasure to follow the hon. Member for Beckenham (Bob Stewart). I join my hon. Friend the Member for Newcastle upon Tyne Central (Chi Onwurah) and others in thanking the Bill Committee, the Clerks and others who supported us so well—including the expert witnesses from whom we got to hear during that fortnight. I had not sat through Second Reading, but we had a particularly enlightening series of sessions.

I wish to speak to new clauses 5, 6 and 7, which I will be supporting, along with the Bill.  I emphasise how strongly colleagues and I feel about how important national security is, and how much Labour prioritises it. That is why we welcome the Bill, following, as it does, unfortunately, the leadership of states such as the United States, Germany and the EU; perhaps we are just that much behind the curve. I am sorry to say that it is clear that the Government failed to recognise the clear and present danger of the commercial strategy of other powers. Although I very much support the Bill, as it introduces the greater powers for Government to intervene when corporate transactions threaten our national security, it is late, perhaps even a decade or more late.

As so many have said, national security has traditionally been viewed quite narrowly. Perhaps we have had the light touch of economically liberal Governments welcoming investment when in fact those acquisitions are aimed at reducing the competition, improving margins and protecting domestic interests. Also we have seen the purpose being to asset-strip those businesses of their intellectual property, often at considerable cost to the UK in terms of our knowledge base and expertise, but with the risk of seriously damaging our supply chains and having the consequent economic impact. Often this results in those businesses moving overseas. So overall, although the Government’s proposal brings the UK in line with other countries on national security, there is the need for greater powers on mergers and acquisitions, particularly in respect of what may be deemed to be beyond security but actually in the national interest, as in the US and France, where they have the powers to block takeovers of companies deemed strategic or that have major implications for national interests.

I am afraid that the past 10 years show that consecutive Conservative and coalition Governments have been persistently slow and muted in intervening to protect national security in a series of cases: Huawei and 5G has been cited frequently this afternoon: Pfizer and AstraZeneca—the proposal of course failed, but we can only imagine what would have happened to the cost of vaccines had those two companies merged and had we been reliant on one major player; Google and DeepMind; and now Nvidia and Arm technologies. Among a great many others, we have also had the takeover of GKN by Melrose and the acquisition of Cobham aviation. They are now owned by businesses based in a friendly state, which is okay and acceptable, but it is questionable how we are prepared to let some of these important businesses—important leaders in technologies—be disposed of, with the assets, the research and the intellectual properties of those businesses moved offshore, to elsewhere.

New clause 5 seeks to define national security. Interestingly, the right hon. Member for Reading West (Alok Sharma), the former Secretary of State, has stated that the Government had a very narrow interpretation of national security. It was surprising what came to light in the Bill Committee, where we heard that, as I understand it, in drawing up this legislation the Government had failed to engage with the Intelligence and Security Committee in the first instance. That was a shortcoming. The evidence sessions proved more than enlightening, particularly when we were hearing from some of the expert witnesses. Some of what we heard was deeply disturbing. The words spoken by Charles Parton of the Royal United Services Institute were some of the most alarming of all. He said:

“we should not underestimate the degree to which Xi Jinping and the Communist party intend, as Xi said to the first politburo meeting, to get the upper hand against western democracies… When you add that to his policy of civil-military fusion—using civil in the military context—and the fact that he has set up a party organisation specifically to push that forward, and the change in investment policy away from things such as property, football clubs and other things, very much towards benefitting China and its technology, we have to be a lot more careful than we have been in the past.”

I think he said that, perhaps deliberately, with extraordinary understatement. Perhaps most alarmingly, he added:

“I am not aware of a really good assessment of just how much technology has been bought, the targets and so on. Maybe the Government have one—I don’t know—but I do not think that they do.”

––[Official Report, National Security and Investment Public Bill Committee, 24 November 2020; c. 6, Q2.]

Perhaps that is something that the Minister could answer when he sums up.

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[Bob Stewart (Beckenham) (Con)]

I will make four quick points. The first is that I am pleased that we have improved the prospects for national security through this Bill. Well done, everyone! My second point is that I am also pleased that the Intelligence and Security Committee will have some role in the oversight of sensitive investment decisions, albeit in retrospect. I fully expect that to happen, as the Chair of the ISC has already suggested and the Minister has accepted.

My third point is that I am clear that the new investment security unit will have to have close links with the security services—probably with liaison officers. I make my final point as a member of the ISC. I guarantee that our job is simple: to ensure that the pro-business outlook of the Government is tempered, if necessary, by the requirements of national security.