National Security and Investment Bill (Twelfth sitting) Debate
Full Debate: Read Full DebateDepartment: Department for Business, Energy and Industrial Strategy
Nadhim Zahawi
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National Security and Investment Bill (Twelfth sitting)
Nadhim Zahawi ExcerptsThursday 10th December 2020
(3 years, 11 months ago)
Public Bill CommitteesRead Full debate National Security and Investment Bill 2019-21 View all National Security and Investment Bill 2019-21 Debates Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Public Bill Committee Amendments as at 10 December 2020 - (10 Dec 2020)
Peter Grant
Even by my standards, it feels as if it is a long time since I stood up to start speaking, so I will bring my comments to a close, Sir Graham.
The examples that I quoted of a potential software threat to our critical transport infrastructure or facilitation of large-scale money laundering are just two examples where I think it would be to the benefit of the legislation to have those factors explicitly permitted for the Secretary of State to take into account when exercising the powers created by the Bill. I understand Government Members’ concern, but I ask them not to judge the new clause by their understandable and shared concerns about the dangers of having a precise dictionary definition of national security. I ask them to judge it by the additional certainty and reassurance it will give the Secretary of State that if they take those factors into account in all of our interests, there will be no question but that the court will uphold the decision. On that basis, I commend the new clause to the Committee. If, as has happened with depressing regularity, the Committee splits along party lines, I sincerely invite the Government to think seriously about tabling a similar measure at a later stage, because the new clause could improve the Bill substantially and it would be a great shame if it was lost simply for party political considerations.
The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Nadhim Zahawi)
I am grateful to Opposition speakers, the shadow Minister and the hon. Member for Glenrothes, for their contributions and to my hon. Friends the Members for Arundel and South Downs, for North West Norfolk, for Clwyd South and for West Aberdeenshire and Kincardine for their excellent interventions.
On new clause 1, it will not surprise the hon. Member for Newcastle upon Tyne Central that the Government’s position remains consistent with that of 1 December, when amendments relating to the new clause were discussed. Such amendments included, among others, proposals for the inclusion of a definition of national security in the statement made by the Secretary of State. The new clause seeks to create a new, exhaustive list of factors that the Secretary of State may take into account when considering whether something is a risk to national security.
Chi Onwurah
I am listening intently to the Minister’s response—given the great skills of the Committee he is taking the new clause in the right spirit—but it is not appropriate to say that we are presenting an exhaustive list when we specifically say, “this and other things”. It meant to be not an exhaustive list but a guide and a sense.
Nadhim Zahawi
I apologise. I will say instead that the clause seeks to create a non-exhaustive list of factors that the Secretary of State may take into account when considering whether something is a risk to national security for the purposes of the Bill.
The Bill as drafted does not seek to define national security. It also does not include factors that the Secretary of State will take into account in coming to a national security assessment. Instead, factors that the Secretary of State expects to take into account in exercising the call-in powers are proposed to be set out, as the hon. Lady rightly said, in the statement provided for in clause 3. A draft of the statement was published on introduction of the Bill to aid the Committee’s scrutiny efforts. The draft statement includes details of what the Secretary of State is likely to be interested in when it comes to national security risks. That includes certain sectors of the economy and the types of acquisition that may raise concern.
While it is crucial for investors’ confidence that there is as much transparency in the regime as possible, there is self-evidently a limit to how much the Government can and should disclose in that regard given that the regime deals explicitly with national security matters. Nevertheless, the draft statement goes into some detail about the factors that the Secretary of State expects to take into account when making a decision on whether to call in a trigger event.
The new clause would instead place in the Bill, alongside the statement, a non-exhaustive list of factors that the Secretary of State may have regard to when assessing a risk to national security. That raises a number of issues. First, it is unclear what the benefit is of including a non-exhaustive list of factors that the Secretary of State may have regard to directly in the legislation as opposed to in the statement.
Nadhim Zahawi
I will happily take the hon. Lady’s intervention once I have gone through these points.
Secondly, the new clause would not replace the statement; instead, it would appear to sit alongside it. The Government think that would probably cause confusion rather than clarity, although I have no doubt that the hon. Lady and the Opposition agree that clarity for all parties will be crucial to the regime’s success.
Thirdly, by stating what may be taken into account when assessing a risk to national security under the Bill, the new clause indirectly sets out what can be a national security risk for the purposes of the Bill, and therefore what comes within the scope of national security—many colleagues pointed out some of the evidence suggesting that we should do exactly the opposite of that—which could clearly have unintended consequences for other pieces of legislation that refer to national security. The Bill requires that the statement from the Secretary of State be reviewed at least every five years to reflect the changing national security landscape. Indeed, in practice, it is likely that it will be reviewed and updated more frequently. We think that this is the right approach, rather than binding ourselves in primary legislation.
Fourthly, but perhaps most importantly, I note in this list that the Secretary of State may have regard to an ever-broadening set of suggestions that Opposition Members wish to be taken into account as part of national security. On Second Reading, the shadow Secretary of State, the right hon. Member for Doncaster North (Edward Miliband), requested that an industrial strategy test be included in the Bill alongside national security assessments. I am afraid that an industrial strategy test is not the purpose of this legislation.
Peter Grant
The Minister comments on a speech by the shadow Secretary of State at an earlier stage of the Bill’s passage and on the undesirability of building an industrial strategy test into the Bill. I do not see an industrial strategy test mentioned in the new clause, so, for the purpose of clarity, is that part of the new clause that we are debating?
Nadhim Zahawi
I was referring to the shadow Secretary of State’s request on Second Reading that an industrial strategy test be included in the Bill.
As I was saying, factors that the Secretary of State may have regard to through the new clause are wide ranging. This is an important Bill about national security and national security alone. We do not wish to see an ever-growing list of factors for the Secretary of State to take into consideration. That would risk the careful balance that has been struck in this regime between protecting national security and ensuring that the UK remains one of the best places in the world to invest. The Government consider that the Secretary of State should be required to assess national security as strictly about the security of our nation. That is what the Bill requires. These powers cannot and will not be used for economic, political or any other reasons.
While I understand the objectives of the hon. Member for Newcastle upon Tyne Central, for the reasons I have set out I am not able to accept the new clause. I hope the hon. Member will agree to withdraw it.
Chi Onwurah
I thank the Minister for his response, not all of which was entirely unexpected. I also thank the hon. Member for Glenrothes for his speech and his interventions, which were very much to the point.
I feel that the Minister was, to a certain extent, doing what the hon. Member for Arundel and South Downs accused me of doing—I did say that I had learned so much from the Minister—which was arguing both sides of the question at once. He seems to be saying that there should not be any definition, but that if there needs to be a definition, it is already there in the statement that the Secretary of State has set out. Indeed, I have been looking for that statement, because I did not recognise it from the way the Minister described it when talking about giving detail on the types of national security questions that might arise.
Chi Onwurah
I rise to speak briefly in support of additional support for SMEs. The hon. Member for Glenrothes is a champion of small businesses, which is a pleasure to hear. As he set out, and as has been set out in a number of the amendments that we have tabled in Committee, we are concerned to make sure that the seismic shift in our national security assessment with regard to mergers and acquisitions does not stifle our innovative but often under-resourced small businesses, which are such an important driver of our economy. New clause 2 reflects our intentions, particularly in amendments 1 and 11, to support and give further guidance to small businesses. I hope that the Minister and Conservative Members recognise the importance of supporting small businesses at this time through direct measures in the Bill.
Nadhim Zahawi
I thank the hon. Member for Glenrothes and the hon. Member for Newcastle upon Tyne Central for setting out the arguments in support of new clauses 2 and 3, which both relate to the treatment of small and medium-sized enterprises in the regime.
On new clause 2, the Government are a strong supporter of SMEs and have sought to provide a slick and easily navigable regime for businesses of all sizes to interact with. We are creating a digital portal and a simple notification process to allow all businesses to interact with the regime without the need for extensive support from law firms, which is a particular burden for small businesses. Furthermore, there is no fee for filling a notification, unlike many of our allies’ regimes, which in some cases charge hundreds of thousands of pounds for a notification. Consequently, we do not expect this regime to disproportionately affect SMEs.
New clause 3 would create a grace period whereby SMEs would have a “reasonable excuse” defence if they committed an offence within six months of the Bill’s being passed. I can offer reassurance to the hon. Member for Glenrothes that we expect non-compliance to be very low, and we will be making every effort to keep it that way through, for example, effective engagement and outreach.
Sam Tarry
That is exactly the kind of example on which we are trying to use the new clause to provide more clarity and give more force to the Bill so it can deal with these sorts of thing. If, for example, public investment by Chinese venture capital groups in western countries—whether it be this country or others—is visible but is actually just the tip of the iceberg, that is going to be a real problem. One lesson that Richard Dearlove described clearly to the Committee was that we need to take a longer medium-term view that goes beyond just being the most free-market and economically attractive investment prospect, particularly given the rise of those geopolitical challenges. The Chinese are being explicit about what their goals are. They do not want to build Britain up; they want to take us for as much as they can get. This is about protecting ourselves and ensuring that those smaller things, which may just be going on under the net and may not hit some of the parts on mandatory notices, not the big headline-grabbing things, could be looked at.
I agree with an earlier comment made by the hon. Member for Glenrothes that one problem is that, while we need regular advice from intelligence services and of course it needs to come through to the Secretary of State, having a regularised timeframe in which we know that those things will get full scrutiny is incredibly important. Parliamentarians and the public will want to see if there are any patterns developing in types of investments and the way those investment vehicles are used to buy into some of the most advanced British technology companies.
This new clause does not require the Secretary of State to publish a list of countries; it simply requires that the Secretary of State, working with the agencies, maintains a list of state-driven risks, which feed into national security risks. Our drive, as the Opposition, is our concern that the Minister does not recognise the state-based nature of those major security threats.
If this new clause is accepted, it would provide those guarantees and the extra ability to bring together the agencies that would be able to compile that list of state-driven risks, which can then inform decisions. In that context, it is vital that the country is assured of the Government’s ability to act on intelligence and expertise in protecting British security against hostile actors.
Nadhim Zahawi
New clause 5 seeks to require the Secretary of State to maintain a written list of high-risk and low-risk acquirers, as we have heard, to allow differential internal scrutiny to be applied, by reference to the characteristics of the actors linked to the acquirer, and based on regular multi-agency reviews. I assume that the intention of the hon. Member for Ilford South is that this list would be an internal document, but I would be happy to discuss my concerns about publishing such judgments, if that would be of interest to him.
In order to exercise the call-in powers, the Bill already requires the Secretary of State to publish a statement, which we will discuss later, about how he expects to exercise the call-in power. This statement may include the factors that the Secretary of State expects to take into account when deciding whether to call in a trigger event. Guided by the statement, the Secretary of State will need to consider every acquisition on its own individual facts, as befits the complex nature of national security assessments. In my view, such a list as the one proposed would not, therefore, be the right way forward.
Mark Garnier
Has the Minister made an assessment of the resources that would be needed to look after a list such as this, not only to compile a list of hostile actors but to look after things like GDPR? There could be any number of legal challenges by companies that find themselves on this list unjustly. Perhaps the characteristics of a hostile actor may not individually be hostile, but a combination of several characteristics could be. It could easily exclude quite benign actors who accidentally fall into this. While the intention of the new clause is not unsound, it sounds like a hideous nightmare to administer.
Nadhim Zahawi
My hon. Friend raises an incredibly important point, because, as he rightly says, factors other than the risk profile of the acquirer may determine whether an acquisition is subjected to greater or lesser scrutiny. It is also likely that any list would quickly go out of date. Entities in this space can change and emerge rapidly, especially if parties are attempting to evade the regime and the Secretary of State’s scrutiny. In addition, such lists being intentionally published or otherwise disclosed publicly could have significant ramifications for this country’s diplomatic relations and our place in the world, in respect of both those on one of the lists and those who are not on the list. Publishing the list may also give hostile actors information about gaming the system, to the UK’s detriment.
I would suggest that what the hon. Member for Ilford South describes would essentially be an internal and highly sensitive part of a national security assessment. While I appreciate the sentiment behind the new clause, I do not believe that it would be appropriate to set out such details in writing. It is, however, entirely reasonable for the hon. Gentleman to seek to reduce the burden on business where possible, in particular if the acquisition presents little risk and can be cleared quickly. I have an enormous amount of sympathy with that aim.
Chi Onwurah
I do not intend to make a speech, but I wanted to intervene on this particular point. A part of the source of the new clause is the Minister’s own comments. He said that national security was not dependent on a particular country. He is giving a lot of reasons why there cannot be a list, because of different actors, but does he recognise that national security may relate to a specific country? Has he woken up to the risks that particular countries may pose?
Nadhim Zahawi
I assure the hon. Lady that Her Majesty’s Government do exactly that, but the Bill is deliberately country-agnostic. Indeed, to give parties predictability on small business and to provide for rapid decisions where possible, the regime has clear and strict timelines, as we have heard throughout the debate. Additionally, clause 6 enables the Secretary of State to make regulations to exempt acquirers from the mandatory notification regime on the basis of their characteristics. Arguably, this places the strongest requirement on acquirers, such as where acquisitions by certain types of party are routinely notified but very rarely remedied or even called in. Taken together, these provisions are already a highly adaptable and comprehensive set of tools, so the list and its proposed use would be unnecessary and potentially harmful.
I shall touch briefly on national interests, which the new clause once again references. I have said before that the regime is intentionally and carefully focused on national security. That is specifically the security of the nation, rather than necessarily its broadest interests. This is therefore not the right place to introduce the concept of national interest, which would substantially and, we strongly believe, unhelpfully expand the scope of the regime.
In conclusion, with the strength provided by clauses 1, 3 and 6 already in the Bill, I am of the very strong opinion that the Bill already achieves its objectives. I therefore cannot accept the new clause and ask that the hon. Member for Ilford South withdraw it.
Sam Tarry
As I listened to the Minister, it struck me that one of the witnesses, Charles Parton from RUSI, said:
“Let us not forget that most foreign investment by the Chinese is state owned, so it is not just a fair bet but a fair certainty that any state-owned enterprise investing is fully politically controlled.”––[Official Report, National Security and Investment Public Bill Committee, 24 November 2020; c. 17, Q19.]
That is in part our thinking. One slight contradiction with the Bill is that it does not feel as though it always quite reflects the statement of political intent published alongside it. We support that statement of political intent, so the new clause’s objective was to strengthen the Bill’s commitment to ensuring that the Investment Security Unit is provided with an assessment that recognises the relationship between hostile actors and the countries to which they owe allegiance, which is stated in the statement of political intent.
I hope that the Minister takes time to take stock of what the new clause is trying to do, but on this occasion I beg to ask leave to withdraw the motion.
Clause, by leave, withdrawn.
New Clause 6
Access to information relevant to national security
“(1) The Secretary of State may by regulations make provision for the call-in power under section 1 to be exercisable by the Secretary of State in respect of circumstances where a person acquires access to, or the right of access to, sensitive information but does not acquire control of an entity within the meaning of section 8 or control of an asset within the meaning of section 9.
(2) For the purposes of this section, sensitive information means information of any form or description the disclosure of which may give rise to a risk to national security.”—(Dr Whitehead.)
This new clause would allow the Secretary of State to regulate to include new trigger events, where a person has access to information relevant to national security, even if the party does not acquire control or material influence over a qualifying asset or entity as a result of an investment.
Brought up, and read the First time.
Peter Grant
The new clause is a significant improvement to the Bill and I hope that the Government will support it. It takes action to close a loophole that I certainly did not spot reading through the Bill the first time. I suspect a lot of others did not spot it either. It was highlighted by a number of the expert witnesses we spoke to a few weeks ago. They pointed out that a hostile operator does not necessarily need to have control or even significant influence over a security-sensitive operation to be able to do us some harm. One of the examples I vividly remember was that if somebody buys up as little as 5% or 10% of the shares of a company, possibly keeping it even below the threshold where it would need to be publicly notified to Companies House, that might still be enough by agreement to give them a seat on the board of directors. That means they will have access to pretty much everything that is going on within that company. For that kind of scenario alone, it is appropriate that we should look to strengthen the Bill.
The way the new clause is worded is entirely permissive. It would not require anybody to do anything, but it would give the Secretary of State the statutory authority to make regulations, should they be necessary, and to word them in such a way that they could be targeted towards any particular kind of involvement by a hostile power—it is difficult for us to predict now exactly what that might be.
I know that the usual format is that an Opposition amendment is not supported by the Government, but if the Government are not minded to support this one now, I sincerely hope they will bring through something similar on Report or when the Bill goes through the other place at a future date.
Nadhim Zahawi
I am grateful to the hon. Member for Southampton, Test for setting out his case for the new clause and to the hon. Member for Glenrothes for his contribution.
When I first read the new clause, I was fortified to see that, despite previous debates that we have had in this Committee, Her Majesty’s Opposition are clearly now firm converts to the “may by regulations” formulation. I am incredibly grateful. We have found much common ground in the course of our line-by-line scrutiny, but this was, I admit, an unexpected area of consensus.
My understanding is that the new clause would enable the Secretary of State to, by regulations, introduce a new trigger event covering circumstances in which a person acquires access to, or the right to access, sensitive information, even if the party does not acquire control over a qualifying entity or asset. The hon. Member for Southampton, Test may have in mind particular circumstances relating to limited partnerships and the role of limited partners.
The attempt to potentially include access to national security sensitive information as a separate trigger event is, in some ways, a reasonable aim, but I fear that it would, at best, sit awkwardly with a Bill introducing a new investment screening regime that is specifically designed around acquisitions of control. At worst it would bring into scope a huge swathe of additional circumstances, outside the field of investment, in which the Secretary of State could intervene, which could be notified by parties and which could create a backlog of cases in return for little to no national security gain.
For example, such a new clause could raise significant question marks about whether the appointment of any employee who might have access to certain information would be a trigger event in scope of the Bill. I am almost certain it would. Similar concerns would apply in respect of any director, contractor, legal adviser or regulator who might have access to sensitive information. That is not the Government’s intention.
If limited partnerships are the specific target of the new clause, I can reassure the hon. Gentleman that there is no specific exemption in the regime for acquisitions of control over a limited partnership. Of course, in practice, the rights of limited partners are, by their nature, limited, so we expect to intervene here by exception. But those acquisitions remain in scope of the call-in power, along with any subsequent acquisitions of control over qualifying entities by the limited partnership—particularly where there are concerns about the general partner who controls the partnership, or limited partners who are exerting more influence than their position formally provides.
I should also highlight that the Bill already covers acquisitions of control over qualifying assets, the definition of which includes
“ideas, information or techniques which have industrial, commercial or other economic value”.
For the purposes of the Bill, a person gains control of a qualifying asset if they acquire a right or interest in, or in relation to, a qualifying asset that allows them to do one of the two things set out in clause 9(1). That means that an acquisition of a right or an interest in, or in relation to, information with industrial, commercial or other economic value that allows the acquirer to use, or control or direct the use of, that information is in scope of the Bill. Therefore, depending on the facts of a case, an investment in a business that, alongside any equity stake, provides a person with a right to use information that has industrial, commercial or other economic value may be called in by the Secretary of State where the legal test was otherwise met.
The Committee heard from our expert witnesses that these asset provisions are significant new powers and that it is right to ensure that we have the protections we need against those who seek to do us harm, but I firmly believe we must find the right balance for the new regime. That is why acquisitions of control over qualifying entities and assets are a sensible basis for the Bill. Broadening its coverage to ever-wider circumstances risks creating a regime that theoretically captures everything on paper, but that simply cannot operate in practice, due to a case load that simply cannot be serviced by Whitehall. I urge the hon. Member for Southampton, Test to reflect on that point, given all we have heard in the last few weeks about the importance of implementation and resourcing, and I respectfully ask him to withdraw the new clause.
Dr Whitehead
I respectfully ask the Minister to reflect carefully on what I and the hon. Member for Glenrothes have said this afternoon. Whether or not the Minister thinks the new clause is one he can reasonably adopt, he has already accepted, in terms of what he says may be in the scope of the Bill, that this is a real issue. This is something that we have to think very carefully about and that, by its nature, is fairly difficult to pin down, because it relates to a series of actions that do not easily fit into the box of control or company takeover. It is much more subtle and potentially wide-ranging, but nevertheless it is something that we know is real. As my hon. Friend the Member for Ilford South said, it is happening in silicon valley, Germany and this country. It is happening in a number of places. Interests are being bought up not because of altruistic concern for the health and welfare of that particular start-up, but for other, much more worrying reasons than simply influence as a limited partner in a company.
I am pleased that the Minister put on record that he thought that the extension of this activity might be in the scope of the Bill already, although I think it is stretching what the Bill has to say to take that line. I hope he will not regret that. When he looks at what he has said about what he thinks is in the Bill, he may find, on reflection, that the new clause would have been more use to him than he thought. However, I am not going to press the issue to a vote this afternoon.
I hope the Minister will reflect carefully. He has already said on the record that he thinks that a number of these measures can be squeezed into the Bill. I hope he will not find that there are circumstances where he needs this method of operation but that it can, after all, not be squeezed into the Bill as well as he thinks it can be. I hear what he says and wish him the best of luck with squeezing things into legislation that perhaps were not quite there. I beg to ask leave to withdraw the motion.
Clause, by leave, withdrawn.
New Clause 7
Annual report to the Intelligence and Security Committee
“(1) The Secretary of State must, in relation to each relevant period –
(a) prepare a report in accordance with this section, and
(b) provide a copy of it to the Intelligence and Security Committee of Parliament as soon as is practicable after the end of that period.
(2) Each report must provide, in respect of mandatory and voluntary notifications, trigger events called-in, and final orders given, details of—
(c) the jurisdiction of the acquirer and its incorporation;
(d) the number of state-owned entities and details of states of such entities;
(e) the nature of national security risks posed in transactions for which there were final orders;
(f) details of particular technological or sectoral expertise that were being targeted; and
(g) any other information the Secretary of State may deem instructive on the nature of national security threats uncovered through reviews undertaken under this Act.”.—(Chi Onwurah.)
This new clause would provide the Intelligence and Security Committee with information about powers exercised under this Act, allowing closer scrutiny and monitoring.
Brought up, and read the First time.
Chi Onwurah
I beg to move, That the clause be read a Second time.
It is with some regret that I rise to move new clause 7, because it is the last new clause we propose to the Bill. It is a Christmas present to the Minister. Things have certainly been interesting since we began our line-by-line scrutiny. With your leave, Sir Graham, I will take this opportunity to thank all those involved in drafting the Bill, as well as the Clerks, who have worked so hard and played such an important role in helping to draft amendments and provide support to all members of the Committee. I also thank you, Sir Graham, for chairing it so admirably.
We have learned a great deal over the last couple of weeks. I have learned just about everybody’s constituency—
Chi Onwurah
I will not take up the opportunity of a test. We have all learned a lot about air flows—in this room, at any rate—as we seek to maintain some heat. What we have not learned, though, is how the Minister believes the Bill can be improved. All our line-by-line scrutiny has yielded many assurances, compliments on our intention and, indeed, some letters, for which I am grateful, but no acceptance and not even the commitment to go and think about some of our constructive proposals, amendments and new clauses. I urge him to consider this new clause as an opportunity to show that he truly believes, as he said earlier, in the skills, experience and expertise of the Committee by reflecting on the potential for improvement.
The new clause returns to an earlier theme and would require—the Minister will be pleased to note that that is a “must”, not a “may”—an annual report to be prepared by the Secretary of State
“in accordance with this section”
and a copy of it to be provided
“to the Intelligence and Security Committee of Parliament as soon as is practicable after the end of that period.”
It sets out what should be in that report, such as the events, the number of entities, the nature of the risks and
“details of particular technological or sectoral expertise”
and so on. It would provide the Intelligence and Security Committee with information about the powers exercised under the Bill and allow closer scrutiny and monitoring.
The new clause reflects how we have consistently supported the need for the Bill. Our approach to the security threats we face is to push for change specifically to allow broad powers of intervention, but for those using those broad powers to be held to account by Parliament and through transparency. Our international allies do exactly that. The US requires CFIUS to produce a non-classified annual report for the public, alongside a classified report for certain members of Congress, to provide security detail to them, allowing congressional scrutiny while retaining sensitivity of information.
As I think the Minister acknowledges, the Government have been late in following where international allies and the Opposition have led with calls to better protect our national security, so he must not fall behind in following our calls for accountability and transparency. That is critical not just to ensure our security and wider parliamentary understanding of the nature of the threats we face but for accountability.
The Secretary of State is to be given sweeping powers. For the last time, I should say that we will go from 12 reviews in 18 years—less than one a year—to 1,830 notifications a year, which is more than five every single day. The Secretary of State will be able to intervene in every single such private transaction. It will be hard to bring claims against national security concerns in court, where the judiciary will understandably find it difficult to define national security against the Government’s definition. In that context, it is important to bring expert parliamentary scrutiny to the Government’s decisions. I do hope the Minister will reflect on that. Alongside a public report, the new clause would require the Government to publish an annual security report to the Intelligence and Security Committee so that we have greater accountability without compromising security.
I will say a few words about the evidence base and the reason for tabling the amendment. Professor Ciaran Martin said:
“I think that the powers should be fairly broad. I think there should be accountability and transparency mechanisms, so that there is assurance that they are being fairly and sparingly applied.”––[Official Report, National Security and Investment Public Bill Committee, 26 November 2020; c. 81, Q96.]
My understanding is that the only accountability and transparency mechanism is the public report, which may be published, and the prospect of judicial review, neither of which provide for expert scrutiny on the security issues.
I also ask the Minister to reflect on Second Reading, where member after member of the Intelligence and Security Committee stood up to say that they felt that their expertise would be useful and helpful in the working of the Bill.
To summarise, the Minister must welcome the expertise of the Intelligence and Security Committee. He would certainly be obliged to appear before the Intelligence and Security Committee, if requested to do so. Does he agree that placing an annual report before that Committee would aid business and BEIS confidence? I previously mentioned its potential conflicts of interest, and we spoke about its having access to the right kind of resources. Agreeing to this new clause and to the placing of a report with the Intelligence and Security Committee is in the interests of both the Bill and the better working of our national security.
Nadhim Zahawi
I am grateful to the shadow Minister for her contribution on new clause 7, which seeks to require the Secretary of State to provide an annual report to the Intelligence and Security Committee, including detailed information relating to mandatory and voluntary notifications, trigger events that were called in and final orders made. In particular, it seeks to require the Secretary of State to provide details of factors relevant to the assessment made by the regime, including the jurisdiction of the acquirer; the nature of national security risks posed in transactions where there were final orders; details of particular technological or sectoral expertise that were targeted; and other national security threats uncovered through reviews undertaken under the Bill.
I am pleased that esteemed members of the ISC are taking a continued and consistent interest, including in relation to their role in scrutinising the regime provided for by the Bill. The Committee will be aware that clause 61 requires the Secretary of State to prepare an annual report and to lay a copy before each House of Parliament. That clause provides for full parliamentary and public scrutiny of the detail of the regime, which we judge to be appropriate and which does not give rise to national security issues when published at an aggregate level. I reassure hon. Members that that annual report will include information on the sectors of the economy in which voluntary, mandatory and call-in notices were given. It will also give a sense of the areas of the economy where the greatest activity of national security concern is occurring.
We intend to follow the existing, appropriate Government procedures for reporting back to Parliament, including through responding to the Select Committee on Business, Energy and Industrial Strategy. The ISC’s remit is clearly defined by the Justice and Security Act 2013, together with the statutory memorandum of understanding. That remit does not extend to oversight of BEIS work. I am sure that the BEIS Committee will continue to do a sterling job of overseeing and scrutinising the Department’s overall work. I welcome and encourage the ISC’s security-specific expertise, which the hon. Lady referred to, and its review of the annual report when it is laid before Parliament.
For the reasons I have set out, I am not able to accept the new clause. I hope that hon. Lady will agree to withdraw it.
Chi Onwurah
I thank the Minister for his response, but he did not address the issue scrutiny of sensitive aspects of how the Bill will work. I recognise that the ISC’s remit does not cover BEIS—that is the exact point of requiring such a report. As I think was discussed on Second Reading, the BEIS Committee will not scrutinise any sensitive information or information that is directly relevant to our national security. I am afraid that I cannot accept the Minister’s reasoning for his rejection of the new clause—namely, that it is effectively already covered by clause 61—so I will put it to a Division.