Economic Activity of Public Bodies (Overseas Matters) Bill

Lord Shipley Excerpts

2nd reading
Tuesday 20th February 2024 Lords Chamber

[Lord Shipley (LD)]

My Lords, this has been a most instructive Second Reading and I very much look forward to the Minister’s response to the many detailed points that have been raised. I remind the House that I am a vice-president of the Local Government Association and that I have a small local authority pension.

I also make it clear that I support the long-term security of the State of Israel but think that a broad Bill of this kind should not be built on a single country, nor should it include the Occupied Territories—as we have heard from several speakers. No doubt when we are in Committee or on Report, we will pursue that in greater detail.

I have concluded that the Bill is disproportionate. It runs counter to the basic principles of civil liberties, human rights and upholding international law. As my noble friend Lord Wallace of Saltaire said:

“This Bill is ambiguous, confused and contradictory”.


It has been claimed that the Bill will assist community cohesion, but it will not; it will make community cohesion more difficult. As my noble friend Lord Palmer of Childs Hill said, it

“could have a negative effect”

and, as my noble friend Lord Oates said, it will not “combat anti-Semitism”.

Three tests should be applied to any proposed Bill: what problem are Government are trying to solve? Is what is proposed a solution to that problem? What consequential problems might arise if the Bill becomes an Act? In my view, the Bill fails all three tests and we have heard compelling evidence of that from many speakers. I have reached the conclusion that the Bill is too complex, too unwieldy and, in practice, unworkable. It would require a huge bureaucracy to underpin it, at huge cost, with enforcement authorities with powers to issue monetary fines and all the judicial reviews arising from that process. The Bill is not proportionate.

The Government’s own impact assessment for the Bill says:

“The number of actual or attempted boycotts or divestments inconsistent with UK foreign policy is relatively low”.


The Minister has referred to six; in the impact assessment, six are mentioned. But attempted boycotts or disinvestments are just that—unsuccessful attempts. How many have actually happened? How many have actually been successful? It would help if the Minister, when she replies or perhaps later, gives the House a list of all the public bodies and public authorities which have boycotted or disinvested from an overseas country, including Israel, on political grounds, so we can understand the true extent of the problem the Government have identified.

Universities UK has expressed concerns about the unintended consequence for the higher education sector. Universities are not public bodies, and I have concluded that universities should not be part of the Bill, as indeed we have heard from the noble Baroness, Lady Blackstone, the noble Lords, Lord Willetts and Lord Johnson of Marylebone, and others. I say that for three reasons. First, it could influence the outcome of the ongoing ONS review into universities’ status and whether they should or should not be defined as public bodies. Secondly, Clause 4 contradicts duties placed on universities via the Higher Education (Freedom of Speech) Act 2023 to uphold freedom of speech and academic freedom; I have concluded that Clause 4 should be deleted from the Bill. Thirdly, it would give significant new powers and functions to the Office for Students, but is it able to take those on, given all the other duties it has?

I turn to pensions. It is not necessary for the Bill to apply to pensions. The Public Service Pensions and Judicial Offices Act 2022 already gives the Secretary of State powers to issue guidance to pension schemes not to make investment decisions that conflict with UK foreign and defence policy.

In terms of the Local Government Pension Scheme, in a Supreme Court judgment in 2020 the Government were criticised for thinking that the scheme administrators were

“part of the machinery of the state”.

They are not; they do not manage public money. It is a funded scheme, paid for by contributions made by 15,500 participating employers and 7.1 million pension scheme members. Legislation already exists which prevents the Local Government Pension Scheme decision-makers from expressing political disapproval of a territory in making an investment decision. It contains sufficient enforcement mechanisms. Regulations exist which require administering authorities to publish an investment strategy statement, which must be in accordance with official guidance from the Secretary of State. Why do we need this Bill?

The Local Government Pension Scheme is a well-funded scheme with very few regulatory cases for a scheme of its size—with over 7 million members and assets of over £360 billion. The Government’s role is to provide clear guidance to the Local Government Pension Scheme, setting out their foreign policy aims and objectives so that scheme managers can undertake their duties investing in and stewarding global markets.

More broadly, existing legislation is sufficient. I am very grateful for the excellent Library briefing on the Bill. Section 17 of the Local Government Act 1988 already prohibits local authorities from taking non-commercial considerations into account in procurement decisions. They cannot take into account considerations of country or territory of origin of the contractor or their supplies. The Bill would then extend restrictions to cover investments as well as procurement, so I will comment on local government investment policy. Treasury management investments by councils are made largely within the United Kingdom. Where there are investments internationally, the key considerations are return and risk, rather than non-commercial considerations. The Bill will make no significant difference to that process.

Many speakers have pointed out that the Bill would restrict free speech of both public bodies and elected representatives. Clauses 4 and 7 would block discussion of actions against any foreign state. They would impact on freedom of speech and extend the powers of the state to inform itself about discussions within autonomous bodies, as my noble friend Lord Wallace of Saltaire pointed out. Do the Government really mean for that to happen?

Finally, the Constitution Committee has done a very good job in suggesting to the House that it may wish to consider whether Clause 4 should be removed from the Bill. It said:

“In our view, clauses 4(1)(a) and 4(1)(b) unduly limit freedom of speech by preventing public bodies from stating that they would or even might make a procurement or investment decision in contravention of clause 1 had it been lawful to do so”.


There are other conclusions that the Select Committee has made which I support, and which I hope we can debate in Committee.

I say to the Minister and the Government more generally that I wish central government would trust local government a bit more. As my noble friend Lady Janke said, local government is not an outpost of central government.

We shall investigate all these issues in Committee, but I will just point out that if we were to take out Clause 4; if universities were not to be part of the Bill; if the pension problems the Government think exist and which I think do not exist are also taken out; if the role of local authority procurement policy is properly understood; and if we recognise that there is not much overseas investment by local authorities as part of their investment portfolios, there really is nothing much left in the Bill for us to talk about. For that reason, the Government should take a long, hard look at what they are trying to do.