National Security and Investment Bill

Lord Grantchester Excerpts

2nd reading & 2nd reading (Hansard) & 2nd reading (Hansard): House of Lords
Thursday 4th February 2021 Lords Chamber

[Lord Grantchester (Lab)]

I start by thanking everyone who has spoken in today’s excellent debate. It reminds me just how extensive the array of expertise present in the House is, especially from the security, defence, technology and business sectors. I join colleagues in congratulating my noble friend Lord Woodley on his maiden speech. My noble friend Lord West welcomed him as a fellow sailor; I welcome him to your Lordships’ House as a fellow Evertonian. I look forward to his further contributions during the Bill’s passage.

As my colleague and noble friend Lady Hayter said in her opening reply to the Minister, national security is Labour’s top priority, as it should be the first and foremost task of any Government to protect their own citizens. That is why Labour strongly welcomes the Bill and agrees that it is necessary. Inward investment is crucial for businesses across the UK and our economy. It is also crucial that the UK Government have the correct powers in place to scrutinise and intervene on business transactions that could have implications for our national security. It is essential that the balance of the Bill is correct to ensure that it does not deter foreign direct investment, while being certain that national security is protected.

Nevertheless, it is regrettable that, once again, Ministers have acted too slowly in bringing forward these changes. They have acted slowly in comparison with other countries, including the US, Germany and France, all of which have already taken steps to update their legislation in line with evolving security threats. In Committee in the Commons, Charles Parton of the Royal United Services Institute—many have quoted him—said that

“the Government have not really been attending to the problem with the attention that they should, given the nature of the threat, particularly from the Chinese”.—[Official Report, Commons, National Security and Investment Public Bill Committee, 24/11/20; col. 5.]

The Government have acted slowly in relation to technological change. It was only last year that artificial intelligence was added to the relevant section of the Enterprise Act. The Government have been somewhat behind the curve in recognising this critical sector, explicitly highlighted by the takeover of DeepMind by Google. Naturally, they have acted slowly again on this Bill. Last January—a year ago—the noble Viscount, Lord Younger, promised that the Government would soon be

“publishing a draft national security and investment Bill, to strengthen the Government’s powers to investigate and intervene in business transactions … to protect our national security”.—[Official Report, 9/1/20; col. 438.]

But this—and any pre-legislative scrutiny, as argued for by the Secondary Legislation Scrutiny Committee—never happened. This slowness might have implications for our national security, so we are ready to help the Government pass this legislation as soon as possible and will work on this Bill with all colleagues around the House to achieve this.

I turn now to the Bill. Labour will be seeking assurances in some critical areas. During the debate, a number of common themes have emerged, perhaps five main ones: the scope and meaning of national security with enterprise policy; the investment security unit workload and the implications of the process on business; competitiveness, risk and agility; intangible assets, IP and algorithms in a networked world, not forgetting fintech. My noble friend and colleague Lady Hayter mentioned an important fifth theme highlighting how we will look for improvements in scrutiny and a greater role for Parliament’s Intelligence and Security Committee. This was echoed by my noble friend Lord West. We need to have proper oversight of security issues, to which my noble friends Lord Rooker and Lord Foulkes added their cogent comments.

Returning to the themes, most importantly, Labour will be probing to make sure that the new investment security unit to be set up by the Bill will have the capacity to handle its workload and is properly resourced to help small businesses through the challenges they may face. It is hard to overestimate the extent of this challenge for the new unit. It will have to respond to a large volume of notifications within the tight timeline set out in the Bill. The impact assessment estimates that more than1,800 notifications will be made each year, and many speakers have wondered how imaginary this number is.

During an evidence session in the Commons, the head of national security for the financial firm, Skadden, Michael Leiter, said:

“I am concerned that no Government are ready for that rate of change.”—[Official Report, Commons, National Security and Investment Bill Committee, 24/11/20; col. 41.]


A submission from the Russell Group of universities—I thank the group for its briefing—states: “Research institutions and businesses across the globe require regulatory environments that allow deals to be concluded at pace.” The investment security unit will have to track the development of fast-moving and highly complex technologies, and monitor each of the listed markets. The Secretary of State will have to take decisions on the advice of the unit, which can be challenged in court in the context of highly sensitive information and its wide-ranging powers. The unit will need to develop policy, practice and precedent to provide clarity and certainty to a wide swathe of the economy.

In Committee, it will be important to consider how the new unit is to be sufficiently resourced, have the right skills to monitor a fast-moving landscape and be able to turn cases around fast enough not to hold up possible investments. Many speakers, notably the noble Lords, Lord Bilimoria, Lord Hodgson and Lord Leigh, have defined the Bill as “difficult for business”. We need to probe whether the unit will be sensitive enough to assist SMEs which themselves might not have the capacity to deal with the increased administrative burden being introduced by this new regime. We believe that a specific SME engagement division within BEIS may be needed to assist and support SMEs through the national security screening process. A reporting requirement on the Secretary of State is needed on staff resourcing for the unit.

Another critical consideration will be how cross-departmental working will be assured via the unit, as this will not happen if it is merely siloed away within a department. This cross-departmental independence could be enhanced, as the Minister said in his opening remarks, through representation of all the relevant departments, Armed Forces personnel, and security and foreign policy expertise. It is interesting to note that the Office for Investment was set up only two days before the Bill was introduced to the Commons. How will this cross BEIS-DIT body work with the investment security unit to ensure overall effectiveness and focus? The Office for Investment will need to inform the department on my third and fourth themes of competitiveness and modern intangible assets, as well as the ISC on security implications. The impact assessment states that

“Geopolitical, economic and rapid technological changes are producing an evolving national security landscape.”


Focusing on geopolitical changes, how will the Bill’s measures fit in with the soon-to-be-published integrated review, of which national security will be a key component?

That will lead us to probe again why the definition of “national security” has been omitted from the Bill —the first and foremost theme throughout the debate. Ministers will argue that there needs to be flexibility—a point on which we are not totally unsympathetic. Nearly all speakers examined the implications of that oversight. The Commons considered that a way forward might be provided by a framework scoping key features, while determining national security and flexibility on a case-by-case basis. We will examine how these possible solutions can be made more transparent, as this will be very important for business.

Finally, although it is important legislation, the Bill does not provide the basis for a more active industrial strategy. However, it suggests it and presents a further opportunity for considerations to be made on bringing forward a more comprehensive industrial policy to support and grow British businesses. My noble friends Lord Rooker, Lord Woodley, Lord McNicol and Lord Foulkes all drew attention to the potential benefits of the enhanced security that this might bring. Let us not make this a missed opportunity. Considering the current levels of unemployment, there is a need to encourage businesses to rebuild and create jobs as the country emerges from the pandemic.