National Security and Investment Bill (Fifth sitting)

Matt Western Excerpts

Committee stage & Committee Debate: 5th sitting: House of Commons
Tuesday 1st December 2020 Public Bill Committees

[Matt Western (Warwick and Leamington) (Lab)]

My hon. Friend makes a point about the market failure that we have experienced over the past decade and its relevance to or inappropriateness for national security. The Government actively encouraged inward investment from China and let the market be totally open, without any control whatsoever, which is one of the driving factors in the challenges we face today, especially with Huawei, as outlined in last night’s debate.

[Chi Onwurah]

I thank my hon. Friend for that intervention. He is absolutely right. This is particularly relevant to amendment 3, as we shall see. This Government, and previous Conservative Governments of the past 10 years, have maintained an ideological position that bypasses the question of national security and leaves Government responsibility much curtailed and focused purely on our defence capabilities and requirements without considering the impact of our technology and R&D. As the debate on the telecoms Bill showed, the Government are not considering the impact of the telecoms sector on our short-term and long-term security.

On the specifics of amendment 3—these principles guide the reason for the amendment—the Secretary of State would have to draw up a multi-agency review or act on the recommendation of Parliament’s Intelligence and Security Committee prior to issuing a call-in notice.

The Bill marks the total transformation of the UK’s existing merger control process and the provisions of the Enterprise Act 2002. It would move us away from 12 reviews in 18 years to a potential 1,830 notifications a year. It would shift the locus of merger control from the experienced Competition and Markets Authority to a novel unit of the Department for Business, Energy and Industrial Strategy. As we heard in our expert evidence, the world is looking at the UK and seeing a pretty seismic change. We recognise the need for such a change, but we do not accept that the skills and knowledge to implement and monitor such a change reside wholly in BEIS.

The Minister is a modest man, and he may not want to share with the Committee the fact that he has recently been made the tzar for vaccine acquisition and delivery across the nation, but that is one of the many responsibilities of his Department. I hope he will agree that is a considerable responsibility, but the responsibility of identifying and understanding the national security implications of 1,830 notifications a year is a particularly great challenge. As someone who champions the importance of trade and economic growth, he will agree that there is potentially a conflict of interest—we have seen this for many years, as my hon. Friend the Member for Warwick and Leamington suggested—between the trading implications of foreign direct investment and access to finance and the national security implications. This is such a huge shift that we cannot rely on discretionary judgments made potentially to suit political ends alone. We cannot rely on BEIS alone because the Department may have a conflict of interest in its separate role of boosting UK investments.

This is a critical point, and I hope to hear from the Minister how he or the Secretary of State will prioritise the role of the Department in boosting investment in the UK and in scrutinising these 1,830 notifications. We need to ensure a robust contribution from across Government and the agencies in guiding these decisions.

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[Matt Western]

My hon. Friend is making incredibly important points. There are really two issues. One is the volume that will be coming through, as she articulated earlier, but there is also the multiplicity of the challenges and where they may come from. This is not simply about the most obvious security challenges or risks. It is not necessarily about defence contracts or telecoms; it could come from all sorts of areas. It is the soft areas that are perhaps the most vulnerable. That is where the expertise of the different Departments will come into play, and that is why a multi-agency approach is so important.

[Chi Onwurah]

My hon. Friend is absolutely right. Perhaps I should have emphasised that point more.

When we look at the examples of Huawei or DeepMind, which was allowed to be sold to Google in 2014, we are looking backwards. We now recognise the security implications. Artificial intelligence is a key security capability, as I think the Minister will agree, given that it is one of the 17 sectors for which notification will be mandatory. At that time, it was difficult and I take it—perhaps the Minister will contradict this—that the Department for Business, Innovation and Skills did not recognise the security implications of the acquisition.

The key question is, what are the acquisitions now that will have security implications in five or 10 years’ time? That is what the Secretary of State needs to know in order to make the decisions we are discussing. It is no injustice to the Secretary of State and the Department for Business, Energy and Industrial Strategy to say that alone, they are not in a position to know that. Deciding from where in the world the great threats to our security may come is not purely technological, although it requires technological expertise, and it is not even purely geopolitical. Last night we heard a lot about China and Russia. In future, we may be looking at other emerging threats. This is an attempt to improve the Bill by ensuring that there is a multi-agency approach.

[Chi Onwurah]

I do not think it would be appropriate to be prescriptive at this point. Some of the agencies I have in mind are the Intelligence and Security Committee, the National Cyber Security Centre and our security services—MI5 and MI6. I am very happy to hear from the hon. Gentleman what agencies should be involved, but the key point is that we need multiple agencies.

[Matt Western]

If the University of Cambridge were approached by a Chinese academic institution with an offer of funding to collaborate on some project, for example, surely that would need the intervention of the Department for Education. It is obviously not just about the intelligence services; it would need the engagement of the DFE and not just BEIS.

[Chi Onwurah]

I thank my hon. Friend for that important point. I am reluctant to continuously mention China, because this is not an anti-China Bill per se, but we heard in oral evidence of the real concerns about Chinese influence in our higher education institutions. He is right that the Department for Education may have an important input to make about securing our future national security.

In defining the agencies that need to be involved in this multidisciplinary approach, we could look at the Committee on Foreign Investment in the United States, which has nine voting departments, two non-voting agencies and additional White House representation on its decision-making committee. I know that the Department for Business, Energy and Industrial Strategy has done some work on comparisons with other countries, in particular our Five Eyes allies. There are models to take.

--- Later in debate ---

[Matt Western]

This is about putting it on a different footing; it is as simple as that. As was said by Sir Richard Dearlove and others in the evidence sessions last week, with the sort of agenda that a Government of any political colour may have, we have seen particularly over the past decade an embrace of, say, China, and the investment in our nuclear power stations provision as well as in other areas. Now, that could have been Russia, and if it had been Russia, what would the advice have been? What would the agenda of the Government of the day have been? Would it have been as embracing? That is why it is really important to understand from the ISC what its views are and to put this in a different setting, as my hon. Friend has said.

[Chi Onwurah]

Another excellent contribution from my hon. Friend, who raises a delicate, nuanced, important point. Governments of all colours may have trade and geopolitical agendas that lead to, as my right hon. Friend the Member for North Durham (Mr Jones) described it, a “hug a panda” approach, whereas the ISC, which we have seen mark its independence of thought both as a Committee and in its contributions in parliamentary debates, has a duty, a responsibility and an understanding to see beyond short or even medium-term political ambitions and to focus wholeheartedly on the security of our nation. That is where its support is invaluable.

I will finish my comments on the amendment by quoting some of our parliamentary colleagues with regard to the Intelligence and Security Committee. On Second Reading, the Chair of the Select Committee on Foreign Affairs, the hon. Member for Tonbridge and Malling (Tom Tugendhat), said that

“there is a real role for Committees of this House in such processes and that 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.]

I think that is powerful advocacy for the amendment. A member of the ISC, the right hon. Member for South Holland and The Deepings (Sir John Hayes), said that

“we need mechanisms in place to ensure that that flexibility does not allow the Government too much scope. That is why—this point was made by my hon. Friend the Member for Tonbridge and Malling (Tom Tugendhat) and I emphasise it on behalf of the ISC—Committees in this place missioned to do just that need to play an important role.”—[Official Report, 17 November 2020; Vol. 684, c. 244.]

We had support in the evidence sessions, support across the House and, most importantly, we have the support of the ISC itself, or at least its agreement that the amendment would be a constructive improvement to the Bill.

Finally, I will say a few words on amendment 5, which would require the Secretary of State to notify the Intelligence and Security Committee before making regulations under clause 6 and would provide a mechanism for the Committee to respond with recommendations. Regulations made under clause 6 would likely define the sectors that pose the greatest national security risk and would come under mandatory notification requirements. With the amendment, the ISC would be able would to provide both scrutiny and challenge to these sector definitions. The Committee will understand that the driving reasons behind the amendment are similar to those behind amendments 3 and 4, which is of course why the amendments have been grouped together, and would seek to improve the Bill through putting in place a requirement for parliamentary scrutiny specifically on the definitions.

As we have said, the Bill gives the Secretary of State major powers, and it demands mandatory notification of investments in large parts of the economy, with 17 proposed sector definitions already. I really cannot emphasise enough how broad those definitions currently seem. I know it is the intention that the definitions should be tightly drawn. However, I speak as a chartered engineer with many years’ experience in technology. Three or four decades ago, we might have talked about digital parts of the economy, but now the economy is digital. Similarly, in the future, parts of the economy not using artificial intelligence—from agriculture to leisure to retail to education—will be looking to use it.