Three and Vodafone: Potential Merger

Julian Lewis Excerpts

Thursday 14th December 2023 Commons Chamber

[Liam Byrne]

Along with the police. To cap it all, we now have a Minister warning that our investment security regime is out of date with the threats as we now understand them.

[Sir Julian Lewis (New Forest East) (Con)]

I am very grateful to the right hon. Gentleman for bringing this debate before the House. I am here primarily to listen, rather than contribute, but it is overwhelmingly clear that the relatively new Investment Security Unit is tailor-made to consider a merger proposal such as this one.

However, does the right hon. Gentleman realise that, if he gets his wish and the Investment Security Unit does consider the merger proposal, the Intelligence and Security Committee would be blocked from scrutinising the work of that unit? The Government originally said that all its work should have been overseen and scrutinised by what was the Business, Energy and Industrial Strategy Committee. The unit is now in the Cabinet Office, but even now, we are still not being allowed to scrutinise it. There is something very strange, if not sinister, going on. We have demanded the right to look at the classified elements of that unit’s work.

Finally, if the right hon. Gentleman were allowed into a secure room to look at the documentation that will come before the Investment Security Unit, if it is ever allowed to look at this deal, does he believe that his looking at that documentation without cleared staff, without being able to take notes and without being able to go away and discuss it with anybody else—as we on the Intelligence and Security Committee can do under our special regime—would amount to effective scrutiny of something with such clear security implications?

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[Chris Loder]

I thank the hon. Gentleman for his kind intervention. The right hon. Member for Birmingham, Hodge Hill made a lot of those points, along with my right hon. Friend the Member for New Forest East (Sir Julian Lewis), and I agreed with them earlier in my speech. This area needs much greater scrutiny. I remember not long after first coming to this House a few years ago, we had considerable concern about the behaviour of companies that was taking place, or could take place, that would put our national security at risk. That is why I support the comments made earlier by both right hon. Gentlemen.

[Sir Julian Lewis]

On that point, I recall that in 2021, while the National Security and Investment Bill was going through the House, the Government repeatedly said from the Dispatch Box that in any conflict between economic interest and national security their policy was that national security would come first. That was the whole point of bringing in the legislation. Now it appears that there is even a question mark on whether the structures set up in the legislation will examine this proposed questionable deal, let alone allow it to be effectively scrutinised by Parliament once they have done that examination.

[Chris Loder]

I thank my right hon. Friend for his intervention. He makes a very valid point. I recall the debates we had in the House several years ago and I think they were very meaningful. I hope that my right hon. Friend the Minister will respond to some of the genuine concerns that a number of us in this House have.

In its first line, the Vodafone and Three brief states that the current UK telecoms market—their own industry—is dysfunctional, and that consolidation is needed to remedy that. I regret to say to the House that, having gone through that and some of the excellent briefings received from other organisations, I am not convinced that the merger is the right thing to do. A number of points have been made on national security, competition and the consumer that indicate to me that it is not necessarily in the interests of the country or the consumer. The brief confirms that, talking about billions of pounds—or euros, on the website—which appear to be the only thing they are interested in. It is of huge concern to me that we are going from four operators to three, given the situation we face. I hope my right hon. Friend the Minister will consider what action to take so that the regulator not only has proper teeth to sort out the issues I have mentioned but that in any future decisions genuine consideration is given to whether a potential merger is in the interests of the country and our constituents. I am afraid that at the moment I am not convinced that it is the right thing to do.

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[Sir John Whittingdale]

The overall question of the efficacy of the investment security process is for the Cabinet Office. The right hon. Gentleman may well wish to pursue his inquiry with the Minister responsible. I have no doubt that my right hon. Friend, who chairs the Intelligence and Security Committee, will also have views about the process that the Government have put in place. All I can say to both Select Committee Chairs is that, in relation to this specific merger, we cannot comment on whether it is currently undergoing scrutiny through that process, but we believe that the process that is available for the examination of mergers of this kind on national security grounds is robust. Beyond that, I cannot really go.

[Sir Julian Lewis]

I am not asking my right hon. Friend to say whether this particular proposed merger is being investigated. What I am asking him to say is whether the Government accept that there is a significant national security dimension to any proposal for a merger involving a major shareholding by a Chinese subservient company.

[Sir John Whittingdale]

I hope that my right hon. Friend will forgive me; I am not sure that I can even go so far as to say that. It is on the record that the Government believe that foreign ownership of major critical infrastructure raises security concerns, which is precisely why the process was put in place and the Investment Security Unit was set up. We believe that we now have the ability to determine whether there are serious national security concerns, and if it is determined that there are, powers are available to the Government to take action to protect our national security. I think the answer is yes, but I do not want to be drawn into particular countries or companies. If he will forgive me, I will leave it at that.

Several Members raised wider questions. My hon. Friend the Member for West Dorset (Chris Loder) is right that we need to look at the context in which the merger is possibly being considered. His test of whether it is good for his constituents is a perfectly valid one. As he observed, this is the third time we have debated connectivity in 24 hours. That is a measure of how important it is to people. It is the Government’s very firm view that the roll-out of 5G connectivity has huge potential for such things as public services, industry, transport and education. There will be enormous benefits to obtaining the widespread adoption of 5G—benefits that might amount to £159 billion by 2035.

That is why the Prime Minister’s commitment to the UK becoming a science and technology superpower will deliver benefits for everybody in this country. Connectivity, and the availability of mobile telephony, lies at the heart of that. We are already beginning to see benefits from 5G, but the Government are clear that we wish to move beyond the current basic, or non-stand-alone 5G, towards stand-alone 5G. Considerable investment is taking place: something like nearly £2 billion is being invested by the mobile operators in enhancing and improving their networks, and 5G is now available from at least one operator outside 85% of premises.