Economic Activity of Public Bodies (Overseas Matters) Bill

Lord Wallace of Saltaire Excerpts

2nd reading
Tuesday 20th February 2024 Lords Chamber

[Lord Wallace of Saltaire (LD)]

My Lords, when I read through the Commons debates on this Bill, a number of things struck me: the frequency with which MPs of all parties described it as badly drafted, the large number of Conservative MPs who called for substantial changes, and the stubborn resistance of the Secretary of State to any changes. This Bill is ambiguous, confused and contradictory. It is about a specific campaign to boycott Israeli firms and companies based in the Occupied Territories, but it also applies to all foreign countries. It is aimed primarily at local authorities and universities, but it also extends far more widely, across a large and unknown number of public authorities.

Hard cases make bad law. All of us who support the long-term security of the State of Israel are opposed to campaigns to discredit and undermine it. Those of us who believe that a secure future for Israel within the Middle East depends upon permitting a Palestinian state as its neighbour have more doubts about goods produced in illegal settlements, but remain clear that Israel, within its 1967 boundaries, is and remains a trusted trading partner.

The current conflict means that there are passionate views within our society about what has happened on both sides. Michael Gove, nevertheless, has argued that the Bill is needed to maintain “community cohesion”, but the conflict has shown how diverse and divided the British public are on the Israel-Palestine conflict, at the moment. The recent short debate on Gaza, in this House, showed that we are similarly divided.

The Bill is not just about Israel and the Occupied Territories. I will focus on its wider implications. This is not the first time that people in Britain have campaigned against behaviour in territories overseas. In the late 18th century, anti-slavery campaigners promoted the boycott of West Indies sugar. My generation of students boycotted South African oranges and sherry, with student unions raising money to support scholarships for ANC members—at a time when the older generation regarded Nelson Mandela as a terrorist and a communist. Few would now disagree that the younger generation then were right.

The Bill proposes damaging limitations on speaking or protesting against a wide range of potential injustices, based on a single and particularly delicate case. There will be other cases in the future, no doubt, when elements in our civil society campaign against foreign injustice, while the Government remain reluctant to jeopardise trade or intergovernmental relations— in China, Myanmar and elsewhere. However, the Government argue that every aspect of foreign policy must be controlled and directed from Whitehall. As a liberal and a democrat, I insist on the contrary: in a healthy democracy, there should be a lively debate about foreign policy choices, with civil society playing an active role.

The Government also assume that local government is merely an agent of the central state, not to be trusted even to discuss divergent actions. Those of us who believe in an open democracy see strong local government as an essential part of a healthy society, and have watched with horror as Michael Gove and others have undermined local democracy over the past decade.

To me, Clauses 4 and 7 are the most noxious aspects of the Bill. They block discussion of actions against any foreign state. They impact on freedom of speech and extend the powers of the state to inform itself about discussions within autonomous bodies. Clause 1(2) and (7) also inhibit freedom of discussion; the drafting is dangerously authoritarian in tone. I recommend to the Minister the excoriating article that Matthew Parris wrote in the Times two weekends ago, which attacked the Conservative hypocrisy of championing free speech on issues that right-wingers approve of while clamping down on discussion of issues that they dislike.

I emphasise how wide the powers that the Bill gives the Government may reach. Its title refers to “public bodies”, but the text refers mostly to “public authorities”. The impact assessment refers to “hybrid public bodies” and the Explanatory Notes refer to “hybrid public authorities”. I have been advised that there are far more public authorities than the much tighter category of public bodies.

In answering an Oral Question on 23 January, the Minister told us that there are “nearly 100,000 public authorities”, including schools, the NHS and a whole range of publicly funded or partially funded organisations. The Trade Union (Deduction of Union Subscriptions from Wages in the Public Sector) Regulations 2023, a statutory instrument which the Minister took through in December, provided a lengthy schedule, detailing all the

“Persons deemed to be public authorities”

under the regulations, including a list of 200 minor bodies, such as the Social Care Institute for Excellence, the Sir John Soane’s Museum and Worcestershire Children First. No such list is provided here.

The impact assessment for the Bill implies that charities, including student unions, will be caught by the Act. There is a loose and worrying reference to it extending to “cultural institutions”. I have just read the department’s memorandum to the Delegated Powers Committee, which admits that

“the Bill may … capture a range of bodies that it was not necessarily intended to apply to”.

This all leaves plenty of room for ambiguity, confusion and, I suspect, legal challenge. We will certainly wish to query the Henry VIII powers that the memorandum admits the Bill will transfer to Ministers. I note that one of these powers is justified

“because there will be instances where boycotting and divesting will be in line with the Government foreign policy, and therefore the Secretary of State … will need the power … to allow public bodies to boycott and divest if they wish”.

Conservative politicians tell us that they stand for a smaller state and a stronger civil society. What we have here looks like a dangerous extension of state surveillance over institutions that rightly claim a degree of autonomy from central government. It is against everything that Conservatives ought to stand for.

My noble friend Lord Shipley will say more about the implications for local democracy. I will emphasise how the Bill undermines the autonomy of British universities. I declare an interest, as I spent my career in a number of universities. The noble Lord, Lord Willetts, is on record as insisting, as he may confirm, that UK universities are not public bodies, and there are court judgments confirming that. Are universities public authorities? Are the Government now claiming that their dependence on public funding makes them part of the public sector? I remind the House that only 17% of Oxford University’s income comes from domestic student fees and other government grants. For the sector as a whole, public funding is around 50%. Most HEIs are charities, many of them under royal charter, not subordinate agencies of the central state. Will the Minister assure us that her colleague from the DfE will participate in the Committee discussion that refers to universities, to assure us that there is cross-government consistency on what this Bill intends?

Clause 6 makes the Office for Students the enforcement authority for the higher education sector. I hope the Minister is aware of the recent report on the OfS from the Industry and Regulators Committee of this House, which is highly critical of its capacities and ability to balance its different tasks. The Higher Education (Freedom of Speech) Act 2023 has just added an extra section to the OfS, under a “free speech champion” and staff. In direct contradiction to that new responsibility, this Bill would require the OfS to restrict freedom of speech on overseas matters.

A recent Universities UK survey did not find any higher education institution that has imposed a boycott or sanctions related to a foreign state, or recently come close to doing so, so what is the case for including universities within this Bill? A Government who preach deregulation wish to impose extra burdensome regulation, including the threat of large fines, on one of our country’s most internationally respected sectors. Clause 7, which one Conservative MP in the Commons described as introducing “thought crime” to UK legislation, is a massive intrusion on the principles of academic freedom and university autonomy.

I have some sympathy for the Minister in having to take through a Bill that offends against so many Conservative and democratic principles. She will be aware of the strong criticisms that Conservative colleagues in the Commons have made. The chair of the Foreign Affairs Committee noted

“the concerns emanating from the Foreign Office and from diplomatic posts.—[Official Report, Commons, 3/7/23; col. 605]

and the incompatibility of Clause 3(7) with UNSC Resolution 2334, which British diplomats drafted. The chair of the Public Administration Committee referred to advice from FCDO lawyers that Clause 3 would place the UK in breach of that resolution. A former Secretary of State for Education tabled a number of amendments, which the Government would have been wise to accept. Both the co-chairs of the All-Party Group on British Jews—one Conservative, one Labour—strongly criticised the Bill.

The Bill has arrived from the Commons unamended, in spite of those well-founded criticisms. It is our duty to challenge the contradictions it contains and the damages it threatens. The Minister must recognise her duty to engage constructively, and to ensure that it will not leave this House before it has been significantly reshaped.

--- Later in debate ---

[Baroness Neville-Rolfe (Con)]

I am grateful for the comments of the noble Lord, Lord Hain. I will certainly look into this further and perhaps we can come back to it on another occasion.

Perhaps me could move on, in the interests of time, to climate change. I would like to clarify that the Bill will ban only considerations that are country-specific. It will therefore not prevent public local authorities divesting from fossil fuels or other campaigns that are not country-specific.

The Bill will not prevent public authorities accounting for social value in their procurement decisions, the reform mentioned by the noble Lord, Lord Collins— of course, we worked together on moving to most advantageous tenders; that is a change that has come about. For example, authorities might structure their procurement so as to give more weight to bids that create jobs or promote animal welfare. Moreover, the Bill contains an exception to the ban for considerations that relate to environmental misconduct, as I think the noble Baroness, Lady Bennett, mentioned.

To answer the question from the noble Lord, Lord Collins, there was official-level engagement with the devolved Administrations on the Bill’s provisions before it was introduced to the other place through the common frameworks working groups process. Senior official engagement on the Bill dates back to April 2022. The Minister for this Bill in the other place, who I saw witnessing our proceedings earlier this evening, has also engaged with responsible Ministers in Scotland and Wales. We intend to engage with Ministers in Northern Ireland now that power has been restored.

The Government have never set out to legislate without consent. We formally sought consent from all the devolved legislatures. Where the legislative consent process is engaged, we always tend to legislate with the support of the devolved Administrations and the consent of the devolved Parliaments. However, as the noble Lord, Lord Stevens of Birmingham, highlighted, boycotts and divestments against foreign countries or territories are a matter of foreign policy. This Bill relates to foreign affairs and international relations, which are reserved matters, but I am sure we will come back to this point in Committee.

I turn to the Bill’s enforcement powers. I start by clarifying that the Bill does not create any new criminal offences, as suggested by the noble Baroness, Lady Janke. They are not criminal offences. Moreover, these enforcement powers are not unprecedented: the regime is based on existing enforcement regimes, such as the powers given to the Office for Students in the Higher Education and Research Act 2017. Clause 7 is a necessary addition to the Bill to ensure that enforcement authorities have the necessary information to assess whether there has been a breach of the ban. It would not make sense to implement a ban with a toothless enforcement regime but, again, I am sure that we will discuss enforcement further in Committee.

The noble Baroness, Lady Chapman of Darlington, and the noble Lords, Lord Wallace of Saltaire, Lord Willetts, Lord Hannay of Chiswick and Lord Johnson of Marylebone, questioned why the ban needs to apply to universities. This ban will ensure that any public authority, including universities in scope of the Bill performing public functions, can maintain their focus on their core purpose rather than taking partisan stances that undermine community cohesion.

It is not appropriate for those institutions to have a corporate view on a matter of foreign policy in the context of their public investment and procurement functions. That risks stifling the academic freedom of individual members of staff to take positions on foreign policy. However, I note the comments made by the noble Lords, Lord Johnson, Lord Willetts, Lord Shipley, and others on the ONS reclassification of universities. I will come back to noble Lords on this issue in Committee, once I have consulted other Ministers.

[Lord Wallace of Saltaire (LD)]

My Lords, regarding public investment and private investment, a lot of our universities have very substantial endowments. Will the Minister clarify that these are well outside the Bill’s remit? When they take decisions on investment and procurement from their private investment funds, they are acting privately and not publicly.

[Baroness Neville-Rolfe (Con)]

That is my sense, but I will obviously check where we are. I would also make it clear that things such as conference centres and so on are obviously outside the remit. I will come back to the noble Lord on the exact definition, if I may, and we can perhaps discuss it in Committee in any event.

I will now address concerns that this Bill represents a change in the UK’s foreign policy. The noble Baroness, Lady Kennedy of The Shaws, and others, will be pleased to know that the Government have been clear throughout the Bill’s passage that nothing in this Bill changes the UK’s position on Israeli settlements. They are illegal under international law, present an obstacle to peace and threaten the viability of a two-state solution. The Government continue to urge Israel to halt settlement expansion immediately.

I reassure the House that the Government’s assessment is that the Bill distinguishes between Israel and the territories it has occupied since 1967. It is therefore compliant with UN Security Council Resolution 2334. The Government believe very strongly in the importance of complying with international obligations under the UN Charter.