National Security and Investment Bill (Twelfth sitting)

James Wild Excerpts

Committee stage
Thursday 10th December 2020 Public Bill Committees

[Chi Onwurah (Newcastle upon Tyne Central) (Lab)]

I beg to move, that the clause be read a Second time.

It is a pleasure to see you back in the Chair, Sir Graham. I am also pleased that the Committee is now moving to the new expanses of new clauses. I see that Committee members have come fully prepared to deal with the environment in which we find ourselves. I should say, Sir Graham, that the previous Chair said that we should be able to put on as many coats as we liked. I think that that is much to be desired. Unfortunately, I left my office in a rush and forgot to bring my coat, as well as the Houses of Parliament Christmas jumper in which I invested only yesterday, in anticipation that it might be needed today. We shall have to take the temperature as an encouragement to press on.

Had we known that, regardless of the title of the Bill, it was actually the National and Security and Investment, and any improvements to the Enterprise Act 2002 we feel it is necessary to make, Bill, we might have ranged somewhat broader in our new clauses. We chose instead to focus on what we felt was absolutely critical to the good functioning of our national security framework. New clause 1 seeks to set out some of the factors that the Secretary of State may have regard to when making assessments under the provisions of the Bill. We recognise some of the implications of including a definition of national security. The Bill is called the National Security and Investment Bill, even if it does go somewhat beyond that title.

[James Wild (North West Norfolk) (Con)]

I note that the hon. Lady uses the word “may” not “shall” in the new clause. Can she explain why she opted for “may” in this instance?

[Chi Onwurah]

I am grateful for that intervention. First, it shows that the hon. Gentleman is paying attention, which in itself is something to be welcomed. If I may say so, it also shows that he is taking lessons from my hon. Friend the Member for Southampton, Test. We have considered the matter and this is the correct use of the term “may”. I shall go into more detail later, but this is not about prescribing what the Secretary of State must look at; it is about giving greater clarity, particularly to those who will come under the Bill’s remit. One of the expert witnesses put it very well. Those who will come under the Bill’s remit need to get a sense of what the Government mean by national security, not in a specific and detailed definition.

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[Peter Grant]

I can assure the hon. Gentleman that I have been a supporter of small businesses significantly longer than he has perhaps. I did make it clear that this is a way that we can protect small businesses without in any way compromising the integrity of the Bill. There is nothing in the new clause that will in any way weaken the effectiveness of the Bill and protecting our national security. I would be happy at another time to debate the reasons why, for example, employment measures in Scotland should be taken by the Parliament and Government elected by the people of Scotland rather than somewhere down here, but that is not a debate for today. I expect, Sir Graham, that neither you nor anybody else would be too pleased if we started to take up time this afternoon on that subject.

[James Wild]

In clause 32, there is provision to look at whether a reasonable excuse exists in an individual case. The hon. Member’s amendment would give a blanket exemption to any small business by dint of being a small business. Is the case-by-case basis not a better way to approach the issue?

[Peter Grant]

That is a valid point, but I do not think it is. The difficulty with the case-by-case basis is that it creates uncertainty and worry for the small business concerned. We are talking about a period of only six months. I do not really think that hostile overseas investors are waiting to pounce during those six months to gobble up small businesses in a way that will damage our national security. Let us face it: if they were going to do that in the first six months, they would be doing it now or they would have done it in the last six months.

I hear what the hon. Gentleman is saying, but the new clause is deliberately worded to explicitly recognise the importance of small businesses, particularly during this period. The Bill is likely to come into force at the exact time that small businesses will be trying to get back on their feet. They need all the help they can get. There is a danger that the way that the Bill could be implemented and enforced will be an unintentional barrier to their growth.

All that we are asking is that, for a short period, until smaller businesses get used to the new legislation, it does not allow them to go ahead with transactions that are otherwise prohibited and would otherwise be blocked by the Secretary of State. The Secretary of State will still have the full power to block those transactions or to impose conditions on them. It does not mean that an acquisition is legally valid if it would otherwise be void under the terms of the legislation. The only difference it makes is that it removes the danger of small businesses or their directors spending time defending themselves in court when they should be developing their business and helping to get the economy back on its feet. On that basis, I commend both new clauses to the Committee.

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[Chi Onwurah]

I will not take up the opportunity of a test. We have all learned a lot about air flows—in this room, at any rate—as we seek to maintain some heat. What we have not learned, though, is how the Minister believes the Bill can be improved. All our line-by-line scrutiny has yielded many assurances, compliments on our intention and, indeed, some letters, for which I am grateful, but no acceptance and not even the commitment to go and think about some of our constructive proposals, amendments and new clauses. I urge him to consider this new clause as an opportunity to show that he truly believes, as he said earlier, in the skills, experience and expertise of the Committee by reflecting on the potential for improvement.

The new clause returns to an earlier theme and would require—the Minister will be pleased to note that that is a “must”, not a “may”—an annual report to be prepared by the Secretary of State

“in accordance with this section”

and a copy of it to be provided

“to the Intelligence and Security Committee of Parliament as soon as is practicable after the end of that period.”

It sets out what should be in that report, such as the events, the number of entities, the nature of the risks and

“details of particular technological or sectoral expertise”

and so on. It would provide the Intelligence and Security Committee with information about the powers exercised under the Bill and allow closer scrutiny and monitoring.

The new clause reflects how we have consistently supported the need for the Bill. Our approach to the security threats we face is to push for change specifically to allow broad powers of intervention, but for those using those broad powers to be held to account by Parliament and through transparency. Our international allies do exactly that. The US requires CFIUS to produce a non-classified annual report for the public, alongside a classified report for certain members of Congress, to provide security detail to them, allowing congressional scrutiny while retaining sensitivity of information.

As I think the Minister acknowledges, the Government have been late in following where international allies and the Opposition have led with calls to better protect our national security, so he must not fall behind in following our calls for accountability and transparency. That is critical not just to ensure our security and wider parliamentary understanding of the nature of the threats we face but for accountability.

The Secretary of State is to be given sweeping powers. For the last time, I should say that we will go from 12 reviews in 18 years—less than one a year—to 1,830 notifications a year, which is more than five every single day. The Secretary of State will be able to intervene in every single such private transaction. It will be hard to bring claims against national security concerns in court, where the judiciary will understandably find it difficult to define national security against the Government’s definition. In that context, it is important to bring expert parliamentary scrutiny to the Government’s decisions. I do hope the Minister will reflect on that. Alongside a public report, the new clause would require the Government to publish an annual security report to the Intelligence and Security Committee so that we have greater accountability without compromising security.

I will say a few words about the evidence base and the reason for tabling the amendment. Professor Ciaran Martin said:

“I think that the powers should be fairly broad. I think there should be accountability and transparency mechanisms, so that there is assurance that they are being fairly and sparingly applied.”––[Official Report, National Security and Investment Public Bill Committee, 26 November 2020; c. 81, Q96.]

My understanding is that the only accountability and transparency mechanism is the public report, which may be published, and the prospect of judicial review, neither of which provide for expert scrutiny on the security issues.

I also ask the Minister to reflect on Second Reading, where member after member of the Intelligence and Security Committee stood up to say that they felt that their expertise would be useful and helpful in the working of the Bill.

[James Wild]

The hon. Lady said that the annual report “may” be published, but in clause 61 it “must” be laid before the House, so there is no question that the annual report will be published.

[Chi Onwurah]

The hon. Gentleman makes a good point. It must be published, but the details that it sets out are limited. The reporting on other information, as I think the Minister has said, is something that is intended but is not required. We have requested that several other pieces of information be published, but the Minister has said that they may be.

The hon. Member for North West Norfolk is absolutely right that there will be an annual report, but that is a public report that will provide only the limited information set out in clause 61(2). Obviously, it will not provide anything that might have an impact on national security. With regard to what is published in the final notifications, for example, that can be redacted to take out anything of commercial interest as well as of national security interest. There is no requirement to report on any aspect to do with national security. Given that the only report is a public report, that is understandable. That is why we are proposing that a secure sensitive report should also be published and shared with the Intelligence and Security Committee.

The hon. Member for Tonbridge and Malling (Tom Tugendhat), the Chair of the Foreign Affairs Committee said that

“there is a real role for Committees of this House in such processes and…the ability to subpoena both witnesses and papers would add not only depth to the Government’s investigation but protection to the Business Secretary who was forced to take the decision”.—[Official Report, 17 November 2020; Vol. 684, c. 238.]

A member of the Intelligence and Security Committee also said that

“we need mechanisms in place to ensure that that flexibility does not allow the Government too much scope.”—[Official Report, 17 November 2020; Vol. 684, c. 244.]

As I have already noted, CFIUS has an annual reporting requirement.