(5 days, 22 hours ago)General Committees
It is a great pleasure to serve under your chairship, Sir George, to consider these two pieces of legislation.
As the Minister said, these regulations are made under the National Security and Investment Act 2021. I thank the Minister for setting out some of the background to that Act. During the passage of that legislation through Parliament, I was clear, as were colleagues, that the Government need new powers to deal with evolving national security threats in corporate transactions. Labour supported the legislation because it was legislation demanded by Labour, and we support these SIs too, as they are critical to the effective functioning of the new investment-screening regime.
I will say something about each of these SIs in turn, starting with the turnover of a business regulations. As the Minister has set out, this relates to the civil monetary penalties that the Secretary of State can impose under the new regime. Section 41 of the Act sets out the maximum fixed penalty and, where applicable, the maximum daily rate penalty that may be imposed. Where a business commits an offence, the maximum fine is the higher of 5% of global turnover or £10 million. I do not recall intellectual property or other assets being referenced in the Act.
Section 41 also enables the Secretary of State to make regulations specifying how the maximum penalties applicable to business should be calculated and to amend the maximum penalty amounts or percentage rates. The SI is made under section 41(8) and 41(9) of the Act and does three things: it clarifies that, for the purposes of penalties, businesses include sole traders; provides a statutory definition of where one business controls another; and establishes the test for determining the turnover of a business for the purpose of calculating maximum penalties.
We support the principle that the new regime should be underpinned by robust enforcement mechanisms, and it is important that the Secretary of State has the relevant powers to punish and deter non-compliance with the regime. However, such penalties make the need for clarity and certainty even more important.
During the Committee stage of the Act, I asked whether the monies received by the Department for Business, Energy and Industrial Strategy from the payment of penalties could be put towards a specific purpose, rather than going into the general Consolidated Fund. I urge the Government to think about that again. Would it not be fantastic if this money was, for example, spent on supporting our great innovators and start-ups to further build on our domestic resilience in these sectors?
I turn to the specification of qualifying entities regulations, which establish descriptions of qualifying entities for the purposes of section 6 in the Act. In other words, this SI defines the sectors that will fall under the scope of the mandatory regime. A notifiable acquisition takes place when a person gains control of a qualifying entity of a specified description. As Members will know, a buyer must give notice to the Secretary of State before making a notifiable acquisition in one of the 17 sectors, so the responsibility falls on the buyer to understand whether the acquisition it is contemplating is notifiable.
As the Minister set out, the definitions contained in the 17 schedules have been refined in response to stakeholder feedback following earlier consultations on the scope and definitions of the 17 sectors from November 2020 to January 2021. This led to important changes in all 17 sectors. For example, the scope of the mandatory regime within the artificial intelligence sector has been significantly narrowed to focus on only three higher-risk applications: the identification of objects, people and events, advanced robotics, and cyber security.
We welcome the fact that the Government have continued their consultation with business and wider stakeholders to refine the mandatory sector, but there is a lack of transparency in who has been involved and what the impact has been. I think it would benefit the Committee if the Minister described how the key changes made by this statutory instrument differ from the draft definitions published in March 2021, and why those changes have been made. For example, the reference to “Critical Suppliers to the Emergency Services” sector in the March proposals has become “Suppliers to the emergency services”, and the definitions of goods and services used by the emergency services have also been amended. Can he set out why those changes have been made? We see that changes have been made, but we do not know who has been consulted. It would be helpful to understand what changes have been made and why.
The Minister will know that there remain concerns about the definitions. The BioIndustry Association, which focuses on synthetic biology, has said most recently, so after the consultation, that:
“Synthetic Biology is defined too broadly in the legislation, meaning companies developing medicines and technologies with no national security implications will be captured. This risks imposing a long, unnecessary process for biotech to receive funding and could deter investment in the sector, and subsequently the development of medicines for patients.”
The Minister spoke about the level of consultation without giving specifics on how many businesses had been consulted. The BIA goes on to say:
“It is important that the new regime works well and is effective. Even once the regime commences, the BIA encourages the Government to listen to industry about how it is being perceived.”
I would be grateful if the Minister gave some indication of how he intends to continue engagement with industry and business on these issues.
There is a lack of transparency on the consultations that have led to these amendments, so can the Minister confirm what engagement he has had specifically with small businesses and organisations that represent small and medium-sized enterprises? As he will know, the Act’s impact assessment notes that 80% of transactions within the scope of the mandatory regime will involve SMEs. SMEs are the lifeblood of our economy, and it is from the growth of SMEs that we hope to build back not only better but more sustainably and fairly. That is why Labour has consistently called for SMEs to be consulted by the Government, listened to and provided with comprehensive guidance on how to navigate this new regime.
Staying with the question of guidance, I note that to date the Department for Business, Energy and Industrial Strategy has published only one piece of sector-specific guidance, for the higher education and research-intensive sector. In the Bill Committee, I and my hon. Friends repeatedly highlighted the importance of prompt and accessible guidance so that firms operating in the relevant sectors understand whether their businesses are affected.
I say to the Minister directly that, based on conversations I have had with stakeholders—including university research departments and university start-ups, but also investment and equity finance organisations, and indeed law firms—there remains significant confusion as to who may be impacted by these regulations, and indeed by the Act. That is seen as having a chilling impact on foreign direct investment in this country and—something we raised in the Bill Committee—as a job creation scheme for lawyers. Many legal firms are already setting up workstreams to address that but, as we all know, small and medium-sized enterprises do not have the benefits of large legal firms, so not to provide the kind of guidance that we have asked for is putting such enterprises at a huge disadvantage.
Will the Minister therefore confirm what wider sector-specific guidance will be published, and according to what timetable, in advance of the regime coming fully into effect on 4 January? If the regime is to operate effectively, it is critical that businesses understand how to interpret whether their activity falls within the scope of the regulations. I suggest to the Minister that he needs to do more on this over the next 12 weeks, if we are to ensure—as I emphasise yet again—that small and medium-sized enterprises are not unduly and negatively impacted by the regulations.
Before concluding, I want to say something about the important context of the draft SIs. Owing to a weak pound and lower equity prices on the FTSE when compared with other international markets, private equity firms are acquiring UK companies at the fastest rate since 2008. Unprecedented levels of dry powder mean that that is only set to continue.
The Act gives the Secretary of State the power to call in transactions across the economy, not just in the 17 mandatory sectors where that decision has given or may give rise to a national security risk. Clearly, however, the success of the new regime in protecting our national security interests, such as in the supply chain, is dependent on the Secretary of State’s willingness to use his new powers. The indications are not good.
To take Morrisons, for example, it is a much loved British company, which has been rooted in communities up and down the country for more than 100 years. It is the second-largest fresh-food manufacturer in the UK, supporting thousands of farmers across the country. That is why my right hon. Friend the Member for Doncaster North (Edward Miliband) and others have been clear for months that Morrisons is also of strategic importance to the country’s food security. Labour is clear that food security is an essential part of national security, and yet there is no indication that the Secretary of State has considered the impact of that transaction on the country’s food security.
Labour supports the two draft SIs, which will play an important role in shaping the scope of the new regime and the consequences when the rules are not followed. Labour is calling for greater transparency and greater guidance to support our small and medium-sized enterprises. We are aware that the public will be watching closely how the Government use their powers under the Act to protect our vital national interests.
I thank hon. Members from both sides of the room for their valuable contributions. First, let me have another go at responding to my hon. Friend the Member for North East Bedfordshire: turnover does not include stock and assets, but it does include any income that derives from their use. The hon. Member for Newcastle upon Tyne Central raised with my right hon. Friend the Member for Stratford-on-Avon (Nadhim Zahawi), now Education Secretary, when he was covering this subject in Committee, the question of where the fines go. As she knows, the fines are going to the Consolidated Fund, but none the less, she makes her case powerfully.
In terms of what changes have been made to the definitions since the consultation, the scope of a number of descriptions—communications, critical suppliers to Government, data infrastructure, energy, suppliers to the emergency services, and synthetic biology—was narrowed following the publication of the consultation response, and a few descriptions were amended. For example, in the area of communications, qualifying entities carrying on activities in the UK that related to public communications supply chains were removed from the definition, substantially narrowing the activity of the qualifying entities captured. For critical suppliers to Government, two of the five limbs of the definition set out in the Government response to the consultation were removed, again to narrow the scope of the definition. Those two limbs were the provision of services to facilitate the security of network and information systems, and the guarding of premises to insure against unauthorised access or occupation and against outbreaks of disorder or damage.
In the area of data infrastructure, as was mentioned by the hon. Member for Glenrothes, the Government response to the consultation provided a definition of a public sector authority using the meaning of “contracting authority” in the Public Contracts Regulations 2015. The final regulations revised the definition of a public sector authority to a much narrower list of authorities, set out in a table within the regulations. I understand the hon. Gentleman’s point: I would say that first of all, the purpose of that table is to make sure that the notifications to the Secretary of State are proportionate and balanced. None the less, we will review this SI within three years, rather than the normal five years, to ensure that we lean into this and get it right, to give certainty to businesses and to ensure that we capture the whole gamut of the areas that he raised.
In terms of energy, changes were made to clarify the infrastructure activities carried on in the UK and captured within this description. Suppliers to the emergency services, as the hon. Lady mentioned, and several meanings in the definition, published in the Government response to the consultation, have since been amended and narrowed to provide an objective list of activities, captured for the purposes that require self-identification. The applicability of each activity to each type of emergency service listed has been narrowed to ensure that the activities of qualifying entities, captured by mandatory notification, are as targeted and proportionate as possible.
Finally, on synthetic biology, new paragraph 6 was added to the definition to create exceptions relating to human or veterinary medicines, or immunomodulatory approaches, which is not easy to say.
The hon. Lady also asked who was consulted on this and what was said. We are proactively and extensively engaging across all the relevant sectors. For example, our policy colleagues at the Department for Business, Energy and Industrial Strategy have attended meetings with techUK members, the AI Council, an aerospace, defence, security and space group webinar, and an electricity industry forum. We conducted targeted and extensive engagement with organisations most likely to be affected by the NSI Act, including companies that invest in or acquire entities in the 17 mandatory areas of the economy, and those providing legal or financial advice in UK acquisitions.
We have met and spoken to more than 200 cross-economy organisations through workshops, teaching and presentations, including the Law Society, the Institute of Chartered Accountants in England and Wales, techUK, international investors and UK universities. Tailored communications have been sent out to more than 100 industry bodies in those mandatory areas of the economy, including 70 major law and financial services firms, 36 international investors and 550,000 businesses via Companies House.
Additional care has been taken to ensure that we can reach small and medium-sized enterprises, because the hon. Lady is absolutely right that they need to have the capacity to be ready and will be affected by the regulations. We have used associations, such as the Federation of Small Businesses, the British Chambers of Commerce and the Confederation of British Industry, so together there is a network of 580,000 businesses. We will continue to ensure that we work with SMEs in particular, to give them guidance ahead of time, because we need to keep on engaging directly with businesses around this Act, ahead of the full commencement.
The first tranche of detailed guidance has already been published to assist businesses, investors and advisers in understanding the Act and how to comply with its requirements. We have established a BEIS expert panel, which includes business representative organisations, higher education bodies, investment associations, law societies and others, that has provided detailed feedback on the draft guidance, ensuring that the guidance is fit for purpose, rather than rushing it.
Our second tranche of guidance will be published ahead of regime commencement, to continue to aid the interaction of parties with the new investment security unit and to ensure compliance, including how to submit a notification form and guidance around notifiable acquisitions. A communications campaign will focus on delivering teaching and guidance to that cross-section of businesses in the UK and internationally.
The hon. Member for Glenrothes asked about turnover and whether we were confident about getting this right; absolutely, we are. If the Secretary of State and a business disagree on the business’s turnover, the Secretary of State can overrule the business. Clearly, the Secretary of State has to act reasonably under public law duty, so it does not give him a free pass, but it is a fallback option if there is a disagreement on business turnover for the reasons mentioned.
As is set out in the statutory instrument, annual turnover is calculated by taking the turnover for the available period and scaling it up to a full year—if there is not even information for one year. None the less, the Secretary of State will have to take a view, albeit under his public law duties, to ensure that turnover is a realistic. There must be an effective deterrent against a breach of the rules, which is why in some cases the Secretary of State may even deal with a subsidiary business with a small turnover that is funded and controlled by a large, wealthy parent business. Indeed, the subsidiary may have been established specifically to carry out the acquisition in question and may not even have a turnover, full stop, at the point when the Secretary of State is calculating a penalty. That is why there is scope for the Secretary of State to overrule and take the wider view that he is asking for.
I hope that I have covered most of the areas that were raised and provided sufficient clarifications and assurances to hon. Members on today’s statutory instruments. Both SIs are essential for the effective operation and running of the NSI Act and the provision of a safeguard for the UK, and I commend them to the Committee.
(6 days, 22 hours ago)Commons Chamber
The first building block for doing that—Labour Members should listen, given that they are all so keen to intervene—is to ensure that we have a strong and sustainable economy, built on strong and sustainable public finances and with policies that are funded. By working together, we can then continue to ensure that Britain is the best place in the world to do business, both now and in future.
As my hon. Friend the Member for Bexhill and Battle (Huw Merriman) has just said, it was not laughter; it was astonishment. I have been in business for 30 years. Not every businessperson I meet votes Conservative, but the vast majority do, and I have not heard anybody say what the hon. Member for Glenrothes (Peter Grant) has just said—that the Conservative party is no longer the party of small business. Not only that, but there is huge support for what this Government have done over the last 18 months in supporting those businesses through the worst crisis to hit business in the last 100 years.
Perhaps we could mention one example of this Government helping small business: the requirement for outsourcing agencies, such as National Highways and Network Rail, to put a third of all their contracts into the hands of small businesses. Indeed, Network Rail is up to that third already. Is that not a tangible example of this Government doing something to support small businesses?
It is an absolute pleasure to contribute to this debate. I thank the shadow Chancellor for laying this motion, which gives us an opportunity to talk about business and the support that we have for business in our communities. I will certainly be doing so, as well as speaking to the reform of business rates, which I have had a long interest in since coming here in 2015.
Before I do so, let me respond to the hon. Member for Glenrothes (Peter Grant). I had the pleasure of being up in Edinburgh for a few days over the weekend, and it was very sad to see that not just Jenners on Princes Street but shop after shop had closed. In my view, that demonstrates that across the UK changing trends are causing people to shop differently, which is having a huge impact on our high streets. It is down to this Government, and indeed all Administrations, to support their high streets. That does not just mean expecting the shopping of the past to return, because it will not, but looking at how we can turn these units back into retail, which gives more footfall within the cities and towns and helps, not least, those who are perhaps older and do not wish to live as far out. Those boarded-up shops may be the responsibility of the changing trends or may actually have something to do with the hon. Gentleman’s own Administration as well.
I am extremely glad that the shadow Chancellor moved the motion before the House, because the support of our small businesses has to be one of the principal priorities of the Government at this time. I know that enormous challenges are crowding in from every side as we continue to tackle the covid crisis while dealing with fuel price rises, supply chain shortages, NHS backlogs and the work to decarbonise our economy, but a thriving economy built on private enterprise will do more to help us to solve all those problems than anything else, so it is imperative that the Chancellor does all he can to support and promote small businesses over the next few months.
Given its well-publicised proximity to Heathrow airport, my constituency plays host to many companies in the travel sector. I am particularly concerned about the future of the sector. Despite announcements in recent weeks, there are still considerable restrictions on people’s ability to travel that continue to limit the opportunities for trading in the sector, not least with continued uncertainty about the sector’s prospects as covid cases continue to soar.
The travel sector underpins so many other aspects of the UK economy, both in attracting visitors to our cultural and hospitality sectors and in enabling us to seek out new markets elsewhere, so it must be a strategic priority for the Government to provide it with support. Travel industries will not thrive after the end of the pandemic if they do not receive assistance now.
I call on the Government to extend furlough to all the sectors that are still trying to operate under restrictions, but particularly to the travel sector. They also need to redesign the furlough scheme to enable companies to use it to part-pay their employees. When I spoke to travel companies at a surgery in my constituency recently, they highlighted that at the moment they have enough trade to pay their previously full-time employees to come in for two or three days a week to man the phones, take bookings and research options. They would love to have furlough to be able to pay them for the remainder of their time, just to keep going while there are still so many restrictions and so much uncertainty. Furlough was conceived as an all-or-nothing system, but it really needs to change in order to continue to support businesses that are still affected as we come out of the pandemic.
The retail and hospitality sectors were badly hit by the pandemic. Many are now struggling to reopen fully, thanks to supply chain and labour market issues. The Government need to look again at their immigration policies and think about how they can be better designed to support our key high street industries as we emerge from the pandemic. More than that, they need to complete their promised review of business rates and think again about how they are levied on town centre businesses.
There has been a lot of discussion this afternoon about what might take the place of business rates—I think that there was some freelancing from some hon. Gentlemen on the Tory Back Benches about what might replace them. They are no longer in their place, which is a shame; I was very interested to hear about their suggestions to increase VAT, although I think I am right in saying that the Conservatives committed in their 2019 manifesto to not doing so.
The hon. Gentleman has indeed anticipated exactly what I was about to say, which is that, given that in their 2019 manifesto the Conservatives committed themselves to not raising VAT, we can surely expect it to be raised at some point before the end of this Parliament. Nevertheless, if the Government are not sure how to proceed on business rates, I can give the hon. Gentleman a fully fleshed-out policy from the Liberal Democrats. We believe that a commercial landowner levy would be a much fairer way of raising local revenue, by taxing landowners rather than business owners. We urge the Government to consider that option.
Small businesses provide about three fifths of the employment in the private sector, and it is vital that those jobs are supported. The Government’s recent announcement of a rise in national insurance payments will deter small businesses from creating the new jobs that are so badly needed and limit the expansion of companies seeking to offer new products and services, including those that offer the innovation we need for the green economy. The Government should limit the impact of this rise on the small business sector by quadrupling the employment allowance from £4,000 to £16,000. That would enable a small business to employ five full-time workers on the median UK salary without paying any national insurance contributions, and would incentivise and support new businesses as we make the transition towards a net zero carbon economy.
The UK faces a troubling few months. Covid is not over yet, and a return to normal patterns of life seems likely to be substantially delayed. However, problems create opportunities, and we need to help our entrepreneurs to find solutions and bring them to the people who need them. Small businesses support communities, provide employment and deliver a good society, and the Government need to support them for everyone’s benefit.
(3 months, 3 weeks ago)Commons Chamber
Travel has an impact beyond the sector itself and the impact of reopening our cities. We will continue to work with the sector to offer it support and to flex our support. My hon. Friend mentioned weddings. On 21 June, the restrictions on weddings were eased, which I was pleased to see. The number is now determined by how many a venue can safely accommodate with social distancing measures in place. I am looking forward to the day when those final social distancing measures can melt away.
I have continued to converse, whether in person or on social media, with some of the people leading the campaign in this area. As I have said before, a lot of the schemes we put in place have been reverse engineered so we can deliver them quickly, at pace and at scale. We have not been able to save every business and every job, but clearly, we will look to not only reopen and recover, so that we can bounce back better and protect as many jobs as we can, but create new jobs as well.
(3 months, 3 weeks ago)Public Bill Committees
Q Thank you for your evidence today, Mr Pegge. I understand that you helped to establish the covid-19 lending schemes. The Government have suggested that some companies have been dissolved to avoid paying back Government loans given as coronavirus support. Have you seen any evidence of that? If these measures go through, do you believe, from your experience and what you have seen, that the Insolvency Service is adequately resourced to deal with the expansion of powers it would have through the Bill?
Stephen Pegge: Yes, we have seen instances of this practice being used to try and avoid liability under bounce back loans. Back in May 2020, UK Finance with the British Business Bank established the bounce bank loan fraud collaboration group. It involves attendees from the Cabinet Office; CIFAS, the UK fraud prevention service; the Treasury; BEIS; and the National Investigation Service—NATIS. The aim is for intelligence to be shared, good practice to be developed and a threat log to be maintained and fed into the National Crime Agency and the National Economic Crime Centre. In fact, this was one of the practices which had been identified through that and has led to some efforts more recently to try to intervene and intercept these cases of dissolved companies involving Companies House and BEIS.
In the meantime, it is always possible that these cases may well have got through and there is some evidence—again, reported by the Insolvency Service—that there could be around 2,000 such cases which are dissolved and where currently the powers to investigate do not exist, so it is a real problem. If it were to become a more popular route for fraud, while there are mechanisms to deal with it and creditors can object when they get notice through alerts when these situations are gazetted, unscrupulous individuals can still get through and it is important that it is closed as a loophole.
As regards the resources of the Insolvency Service, we have all been conscious that, while the number of insolvencies has been low during a period of suspension and the generous support that has been provided to businesses through public agencies and the finance industry, we would expect that to rise significantly in this next period. There is already some evidence that it will do so. It is important that the Insolvency Service is resourced sufficiently to be able to deal with this. The evidence at the moment is that they have been involved in disqualification of directors in something like 1,000 or so cases across the last year, so it is quite possible that there might be a rise in the amount of work that they will need to do. We would certainly support any investigation into what additional resources might be necessary.
Q Welcome, Mr Pegge. Do the Government proposals address all the problems that have been identified with the dissolution process in relation to liabilities and directors’ conduct?
Stephen Pegge: This is certainly a very important contribution to addressing major issues, and it is the one that we have been most concerned about recently. We have seen, as I mentioned, real evidence of dissolution being used as an attempt to avoid liability, but I stress that in many cases dissolution is an efficient and appropriate way for companies to be removed from the register where there is no money owing and that business is ceasing, without going through the time and cost of liquidation, which obviously is available as an alternative—for solvent businesses through members’ voluntary liquidation, or in insolvent situations through creditors’ voluntary or compulsory liquidation. I am not aware of significant other means by which we need to deal with abuse of dissolution. This is the one that has been most to the fore in the evidence that we have seen of abuse, certainly through the fraud group.
Q Finally, what effect do you think there would be on lending if this regime did not come into place or the loophole were not closed? Would there be a chilling effect?
Stephen Pegge: As you say, it is a matter of a chilling effect. It is one other factor that would weigh on finance providers’ minds when making lending decisions. This is a crucial time for lenders to provide finance. If you look at the latest Bank of England figures, for May, which were published last week, some £7 billion of new lending was provided to SMEs.
Latest surveys suggest that high proportions of loan applications are being sanctioned—something like 85%—and we want that to continue. The expectation that this sort of loophole is being closed should build confidence. It will ensure that there is discouragement of bad actors, so that it does not grow out of proportion, which we fear might otherwise be the case.
Q Thank you for giving evidence, Mr Kerr. Can you talk a little bit more about the deterrent that you spoke about? How much of an impact do you think the measure, and especially the threat of disqualification, will have on providing the necessary deterrence?
David Kerr: The current disqualification provisions act as a deterrent to some extent, because directors know that, in respect of every company that goes into an insolvent liquidation or administration, there will be some inquiry. There is an obligation on the insolvency practitioner to carry out a certain amount of inquiry into the contacts of the directors of those companies and make a report in each of those cases to the Insolvency Service on their conduct. The provisions do not provide for the same report. It will have to be triggered by something else, whether that is a creditor complaint or other information, but it will provide the opportunity for the service to make the same inquiry.
(7 months ago)Commons Chamber
I am delighted to relate to my hon. Friend that she is absolutely right. We need to retrain people in new green technologies, which is precisely why I, as energy Minister, with my hon. Friend the Member for Chichester (Gillian Keegan), set up the green jobs taskforce to look at exactly the requirements and skills we need to drive the green industrial revolution.
(7 months, 2 weeks ago)Commons Chamber
I draw the attention of the House to my entry in the Register of Members’ Financial Interests.
No Chancellor has faced this kind of crisis in living memory and, by and large, I think the Chancellor has navigated through it with some skill over the last year, supporting those who need support as much as he can. The Bill, as a result, underpins all of this particular Budget: some £407 billion will be spent by the end of next year, with an eye-watering deficit of over £250 billion, as set out in the Budget he has just produced. That clouds every single judgment.
The key point I want to make, and I agree with my right hon. Friend the Member for Maidenhead (Mrs May), is that we must not lose sight of the reality of the need for growth. If we forget that, then we fall back on the idea that we will somehow get through this. The OBR’s forecasts for growth should make us sit up and look very carefully at that. I worry that the level of growth beyond the year after next is really very low in relation to where we start from now. If we cannot grow faster than that, it says a huge amount about some of our policies. I therefore remind my right hon. Friends on the Treasury Bench that growth is the No. 1 reality for us now.
That is why I was somewhat concerned about some issues, and I want to come back to them, but one thing I did like, which feeds towards the idea of growth, is the super deduction tax relief to kickstart business investment. That is the right kind of thing to do: encourage businesses to bring their money back in to invest in the UK. The news about freeports is also very good indeed. I hope the Government will have time to review the corporation tax rate and be very careful about the effect of that further down the road. I note that the Chancellor has given himself some time to look at that very carefully.
The issue here is that sometimes we compare productivity across countries. I give a warning about that. I do not know why the Treasury has not done more work on this. No two countries compile productivity rates at the same level. For example, France does not have the public sector in its productivity rates; it has only the private sector. That means that comparisons are often between apples and pears. Our problem in the UK is not productivity, because the London and the south-east have the highest productivity in the whole of Europe. Our problem is regional productivity. No other region of the UK meets the average for the UK in productivity. That single fact should tell us more than anything else why it is critical to put stuff and build things in the north, the midlands and places such as Wales. Our productivity around the country does not match that average level of productivity, as we are far too concentrated in London and the south-east.
I agree with those who have said that R&D tax credits are really important. I would stress that that is a good idea and a policy that the Government have to push forward on, because it encourages greater growth. We must remember that many of our technology advancements are made in universities these days, and we have to maximise that. On deregulation, I am going to come forward with plans shortly; there is huge scope for us to release some businesses through deregulation.
I want to draw to a close by making a couple of points. First, I want to make the case for the Government to review the universal credit money. The reason for that is that universal credit is not a flat payment; it is a dynamic process, and it is aimed at helping people back to work. So in truth, even if we invest the £6 billion in universal credit, as we get more people back to work, the cost of that falls because they are back at work and paying taxes. This is the critical bit: I do not want it to be compared with the furlough scheme, which is a very different item. Universal credit is about getting people back to work, and therefore they pay more. I recommend that the Under-Secretary of State for Business, Energy and Industrial Strategy, my hon. Friend the Member for Sutton and Cheam (Paul Scully), and his colleagues think carefully about that, because money was taken out of it some years before, and it needs that investment back in it. That was how it was intended.
My last point relates to the 0.7% on overseas aid. I understand the Government’s issue on this and I recognise their problem, but I hope they will keep this under review. As we move away from certain countries, places such as China will move in, and their money will come with serious problems. They will demand more dictatorial government. We need only to look at Burma to see what is going on when China supports countries. I just raise that as a policy point that the Government may want to think about.
Overall, I say to the Government that this has been a good Budget, but it is a Budget that needs to buy a bit of time, and we must think carefully: growth, growth, growth is the most important thing in front of us now.
(8 months ago)Commons Chamber
(8 months ago)Commons Chamber
I have met representatives from ExcludedUK. We continue to talk to them, we continue to flex and we continue to work out what more we can do to help the economy and to help jobs and livelihoods. The Chancellor will set out his position next week.
In addition to the grant schemes, businesses have received £70 billion in loan guarantees as of 24 January. That has provided a lifeline to more than 1.5 million businesses across the nations and regions of the UK. We have extended the application deadline to apply for those loans to the end of March 2021.
Last year, we changed the bounce back loan scheme rules to allow those businesses that had originally borrowed less than their maximum to top up their existing loans. We also announced the pay as you grow measures, which give all businesses that borrowed under the bounce back loans the option to repay their loan over a period of up to 10 years and to access an additional six months repayment holiday as well as interest-only repayment periods.
On 8 February, we announced that these measures will be made more generous, removing the requirement to make six payments before accessing the six months repayment holiday. Businesses can use these options either individually or in combination with each other, and lenders have begun contacting borrowers to let them know how they can access the pay as you grow measures. These flexible repayment options will give businesses the time that they need to recover from the pandemic and the confidence to build back better.
The Chancellor has also announced our intention to allow lenders to extend the repayment for coronavirus business interruption loans where this is needed to a maximum of 10 years, and we have announced that more support will be available beyond March through a successor loan scheme, more details of which will be announced in due course.
From the outset of this pandemic, we have acted decisively to protect jobs and people’s livelihoods. The coronavirus job retention scheme, the first intervention of its kind in UK history, delivers country-wide support to protect millions of British workers. It has already helped 1.2 million employers across the UK furlough 9.9 million jobs. That scheme has been extended until the end of April 2021 for all parts of the UK, but the Chancellor has always been clear that the Government will keep the situation under review, adapting their approach as the context evolves. The Government will set out the next phase of the plan to tackle the virus and to protect jobs at the Budget next week.
A healthy hospitality sector is critical for the UK economy. It not only accounts for 2.4 million jobs and generates more than £59 billion of economic benefit, but underpins other economic sectors, including tourism and, indeed, our high streets. It is also an important part of our society, supporting social cohesion, cultural integration and mental health. It is a gathering place for communities, and we must continue to support it. The pandemic has hit the hospitality sector hard. I have worked extremely closely with the sector since March 2020 to understand the issues as far as possible so that we can strike the right balance between restrictions and business support.
Not only have the Government provided over £280 billion to support businesses, including hospitality, but we have provided support for commercial rents and deregulated to allow the better use of public spaces for outdoor hospitality. We will continue to keep all that support under review. I want the sector to open up. I want businesses to start to recover and thrive, but it must be done safely, led by the data, as the Prime Minister outlined yesterday.
The retail sector is vital not only to the UK economy, but to the communities that it serves, and I am grateful for the continued efforts of those retail staff who have kept this crucial service going throughout. I recognise that the pandemic has impacted on the sector in different ways and brought significant challenges, but while we have seen a welcome boost in the food sector and online sales, we have also witnessed a more challenging outlook for those not permitted to open, and I appreciate that it has been a really uncertain time for many retail staff. Regrettably, we have seen the closure of some well-known household retail brands, with resulting job losses, impacting on young people and women in particular.
The Government have acted to support as many businesses and employees as possible with that economic package worth over £280 billion, and those measures are carefully designed to complement one another to ensure that we protect jobs and livelihoods. However, as I said, we cannot save every business or job and the support can in no way fully compensate businesses for the loss of trade as a result of the restrictions. Retailers, pubs and hotels have been able to benefit from 100% business rates relief, worth about £10 billion in total, and we have frozen the business rates multiplier for 2021-22, saving businesses in England £575 million over the next five years.
I know that many businesses are eager for an extension to the rates relief beyond the current financial year. The next round of covid-19 support measures will be set out in the Budget next week, but the Prime Minister has written to local authorities in the meantime advising them to delay issuing business rates bills until after the Budget, which, hopefully is good news for businesses.
I know that businesses may be disappointed by the decision to delay publication of the final report into the fundamental review of business rates until the autumn, but an interim report will be published on 23 March, and the final report will be published once there is more clarity on the long-term state of the economy and public finances. I encourage the sector to continue engaging with Government on these important issues.
Supporting people back into employment is also a key priority. Our plan for jobs includes a series of measures to protect, support and create jobs, and we are helping those who have lost jobs in the pandemic back into employment through our job entry targeted support programme. A £2 billion kickstart scheme has also been launched to create opportunities for young people, and we are taking action to help the high street to evolve. In September 2020, we brought forward over £80 million-worth of investment to support immediate improvements in 101 towns selected for deals to build back better in the wake of covid-19.
On 26 December 2020, the Secretary of State for Housing, Communities and Local Government confirmed £255 million for 15 areas for the future high streets fund, with a further 57 areas receiving provisional funding offers totalling up to £576 million. We are also launching a £4 billion levelling-up fund, investing in local infrastructure that has a visible impact on people and their communities and supporting economic recovery. We will publish a prospectus for that fund soon.
To date, we have provided the largest package of emergency support in post-war history. As highlighted by the Office for Budget Responsibility and the Bank of England, without the action taken by the Government, the outlook could be so much worse. The co-ordinated approach of the UK’s authorities has also been praised internationally by the International Monetary Fund as one of the best examples of co-ordinated action globally that has helped to mitigate the damage, holding down unemployment and insolvencies. Given the current climate, it is right that we focus on supporting individuals and businesses through the pandemic. In the past, the Government have ensured that businesses and people have that certainty by extending the furlough and business grants. The announcements at the Budget will reflect the steps set out in the Prime Minister’s road map, ensuring that the next phase of our economic support package continues to deliver tailored support for individuals and businesses.
What businesses want now is that road map. They want to able to give a safe and warm welcome back to their customers, clients and people using their services, but in the meantime, as the Chancellor will set out next week, we will continue to work with businesses and individuals to protect jobs and livelihoods as we see the light at the end of the tunnel in this pandemic.
I remind hon. Members that there is now a three-minute time limit on Back-Bench speeches. When that limit is in effect, a countdown clock is visible on the screens of hon. Members participating virtually and on the screens in the Chamber. For those participating physically in the Chamber, the usual clock will operate.
With your permission, Mr Twigg, I will speak initially to clause 54 stand part and then address amendment 30, relating to clause 54. I will then turn to clause 55 stand part.
On clause 54, for this regime to function effectively, the Secretary of State needs access to the right information at the right time to make decisions with the fullest range of evidence available. All relevant information required by the Secretary of State to make a decision might not be obtainable from the parties to the acquisition, but rather might be stored by other public authorities, both in the UK and overseas. The hon. Member for Newcastle upon Tyne Central referred to the speed at which deals have changed; she mentioned Facebook and others. I agree that modern deals are structured in an increasingly complex manner and often across borders and continents. There is a need to work with allies at home and abroad to ensure that we are making well-aligned, timely and correct decisions.
Therefore, the clause provides that public authorities may disclose information to the Secretary of State for the purpose of facilitating the exercise of his functions under the Bill. Equally, it permits the Secretary of State to disclose information to UK and overseas public authorities for the purpose of facilitating his functions under the Bill, but also for a limited number of other purposes, including crime prevention and the protection of national security. I absolutely agree with those who say that businesses do not want slow decisions made by multiple public authorities working in silos. We all want to see an efficient regime in place. Businesses want public authorities that can talk to each other and give a quick and efficient answer that is right first time. Being able to share information is the first step in Government making fast and informed decisions without having to burden businesses unduly, which I know the hon. Lady cares about.
I of course recognise, though, that some hon. Members will feel uneasy about the Government being able to share potentially very sensitive information both within the UK and overseas. The clause includes a number of safeguards relating to the disclosure of information by the Secretary of State. First, the clause prohibits onward disclosure of information shared by the Secretary of State or use for an alternative purpose without his consent. Secondly, when disclosing information, the Secretary of State must consider whether the disclosure would prejudice, to an unreasonable degree, the commercial interests of any person concerned.
I am grateful to the hon. Member. I hope that in my further remarks, if I can make some headway, I will be able to reassure him on those points.
Thirdly, when disclosing information to an overseas public authority, the Secretary of State must have particular regard to whether the law of the country or territory to whose authority the information is being disclosed provides protection against self-incrimination in criminal proceedings corresponding to the protection provided in the UK, and whether the matter is sufficiently serious to justify disclosure. I hope that addresses the hon. Member’s point.
I am grateful. If the drive of the hon. Member’s probing is to ensure that the Secretary of State, when he considers disclosing information to a foreign country, takes into account protecting people being caught in the regime who come from that country, I think I have just made it clear that the clause provides protection against self-incrimination in criminal proceedings corresponding to the protection provided in the United Kingdom. I hope that the hon. Member will be satisfied with that.
Finally, the disclosure is subject to data protection legislation, which provides additional safeguards in relation to the disclosure of personal data. I hope that the hon. Member for Newcastle upon Tyne Central will feel reassured that the Secretary of State may request only the information that he requires in order to exercise his function under the Bill, and that such information will be treated securely.
Amendment 30 aims to increase the scrutiny that the Secretary of State undertakes in deciding whether a person constitutes an overseas public authority for the purposes of disclosing information under clause 54. It is of course important to ensure that any person believed to be a public authority for the purposes of seeking information from, or disclosing information to, is a public authority. I am therefore pleased to reassure the hon. Lady that the Bill does that as it stands. The approach that we have taken mirrors that—I know that she does not like this—in section 243(11) of the Enterprise Act 2002, which includes a similar definition of an overseas public authority for the purposes of disclosure of specified information to overseas public authorities under the Act.
I have the explanatory notes, and they do not state that the clause deals with a separate topic. Paragraph 173 states:
“Clause 59 amends the overseas disclosure gateway in section 243 of the Enterprise Act 2002, removing the restriction on UK public authorities disclosing information that comes to them in connection with a merger investigation under that gateway.”
The explanatory notes do not state that the functions of the CMA are separate from national security as clearly as the Minister just has. I do not want to detain the Committee, but I register the Labour party’s concern—
I am grateful to the hon. Gentleman for his intervention, because he is absolutely right that, rather than having a debate on the contents of the explanatory notes, line-by-line scrutiny of the Bill should focus on what the Bill says, and it does not mention general improvements to our competition and mergers regime, much as we feel that improvements could be made. Although we will not oppose the clause, I register our disappointment that we were not better informed of the Bill’s additional scope.
Before turning to the amendment, it occurs to me that the Minister, in his new role as vaccinations tsar, could consider this Committee Room as somewhere to store some of the vaccine.
Amendment 31 would simply require the Secretary of State to report on the time taken to process notices, on the resource allocated to the new unit, and on the extent to which small and medium-sized enterprises are called in under the new regime. It is about requiring greater accountability from BEIS in the investment security unit’s service standards. That sounds anodyne, but it does something very important.
Throughout our discussions, there has been one point of agreement across the Committee: hon. Members, across party lines, have raised concerns about the capacity and capability that a new investment security unit will have to deliver on the Bill’s ambition. A number of the expert witnesses added to that concern, describing the shift as “seismic”—totally transformational—and said that changes will need to be thoroughly resourced in that unit, which should be especially prepared to work closely and efficiently with our innovative start-ups.
Indeed, some of the experts were pretty clear on that point. David Petrie of the ICAEW said:
“The first point I make about that is that this new investment security unit will need to be very well resourced. A thousand notifications a year is four a day; I am just testing it for reasonableness, as accountants are inclined to do. That is quite a lot of inquiries.”––[Official Report, National Security and Investment Public Bill Committee, 24 November 2020; c. 53, Q60.]
The hon. Gentleman raises a good point. I think that the wording is precise enough. The accompanying guidance to the Bill could perhaps clarify some of those points. The key reason that we want that in the Bill, rather than for it to be overseen in the way that he has suggested, is that—
Absolutely. That is why we are not seeking a statutory definition of national security. That is why we are seeking to include and to set out points that the Secretary of State may take into account. The hon. Member should recognise that the Government’s statement of intent is designed to give guidance as to how the Bill will work and be used in practice, and what might be taken into account. The guidance is there. It is just that it is very limited.
We are deliberately not seeking a prescriptive definition of national security. We recognise, as Sir Richard Dearlove did, that it can and must evolve over time. We are seeking to give greater guidance and to promote a better understanding of the remit of the Bill, so that it can be better interpreted and better implemented and so that all those who come under its remit can share that understanding. That is what other nations do. The new clause takes our security context seriously, and signals to hostile actors that we will act with seriousness, not superficiality.
Paragraph (f) bridges the gap between the Government’s defined sectors and focus and the critical national infrastructure that we already define and focus on in our wider intelligence and security work. It brings us in line with allies. Canadian guidelines list the security of Canada’s national infrastructure as an explicit factor in national security assessments. In Committee on Foreign Investment in the United States cases, Congress lists critical infrastructure among the six factors that the President and CFIUS may access.
The provision also acts on the agreement of the ex MI6 chief. In relation to having a critical national infrastructure definition in the Bill, he said:
“I would certainly see that as advantageous, because it defines a clear area where you start and from which you can make judgments”.––[Official Report, National Security and Investment Public Bill Committee, Tuesday 24 November 2020; c. 24, Q31.]
Some of the interventions have been about whether the new clause hits the right spot between prescribing and defining what national security is and giving greater clarity and focus. We would argue that the evidence that I have just set out shows that it does.
Paragraphs (g), (h) and (i) recognise that national security is about more than a narrow view of military security; it is about human security, clamping down on persistent abuses of law—as other countries do—and recognising that a party that consistently abuses human rights abroad cannot be trusted to do otherwise at home. It is about knowing that the single greatest collective threat we face, at home and across the world, lies in climate risk. It is about acting on illicit activities and money-laundering threats that underpin direct threats to national security in the form of global terror.
I recognise that many Government Members have recently raised the importance of human rights, illicit activities, money laundering and climate change in our security. In the statement on Hong Kong this week, the Minister for Asia acknowledged that human rights should be part of our considerations when it comes to trade and security but said that he did not feel that the Trade Bill was the right place for such provisions. I argue that today’s Bill is the right place for them because it deals with our national security.
The new clause would show the world that the UK is serious about national security. We must protect our national security against threats at home and abroad, and build our sovereign capability in industries that are the most strategically significant for security. We must view security in the light of modern technologies, climate and geopolitical threats. None of those constrain the Government’s ability to act; they simply sharpen the clarity of that action, and its signal to the world.
When we began line-by-line scrutiny, I spoke of my astonishment that the Government’s impact assessment referred to national security as an area of market failure that therefore required Government action. I hope that the Minister can confirm that he does not believe that national security is an area of market failure, but that it is the first responsibility of Government. The new clause sets out to give bones to that assertion and to demonstrate to the world that we understand our national security and the interests at play in promoting and securing it, and that we will act decisively in the interest of national security, taking into account this range of factors to protect our citizens, our national interest and our economic sovereignty, now and in the future.
I can only ascribe my lack of the usual Geordie central heating to being so far from home at the moment. I take the hon. Gentleman’s point about the new clause seriously, and I think he is right. The title misleads to the extent that we are not looking to define national security.
The hon. Gentleman reminds me that I should have mentioned either the impact assessment or the consultation response. I think the consultation response gives the deliberately induced software failure at Heathrow as an example of a failure of national security that the Bill would be able to circumvent by preventing hostile parties from owning that software company, without setting out how that would be part of the definition of national security that the Bill is seeking.
I do not know how familiar the hon. Gentleman is with the process by which the courts look at the definitions for judicial review, but one of the dangers of trying to write them down—I accept that it is “may” language, not “must”—is that the court will look at them. We could inadvertently circumscribe the degree to which the Act can be used. I know that is not the hon. Gentleman’s intention, but I have to say that, in practice—he might be familiar with how the courts work, particularly for judicial review—that is absolutely a legitimate consideration. That is one of the reasons why I would argue that the new clause should not be accepted.
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.
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.
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.
I welcome the hon. Gentleman’s conversion to the zealous promotion of free enterprise and the cause of small businesses, but would he extend his support to any new taxation measures, new business regulation or employment measures that are advanced by the Government? While I support the thrust, the principle and the philosophy from which he clearly speaks, I do worry that the new clause could create somewhat of a precedent, and I am not sure that all of his colleagues have fully thought through the profound implications for the application of the law on business in this land.
In clause 32, there is provision to look at whether a reasonable excuse exists in an individual case. The hon. Member’s amendment would give a blanket exemption to any small business by dint of being a small business. Is the case-by-case basis not a better way to approach the issue?
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.
I thank the hon. Member for that intervention, which goes back to what the hon. Member for Arundel and South Downs said. That is why this needs to be looked at regularly enough to be on top of the process. Obviously, threats change. Countries rise and fall and their agendas and Governments change, but we know that in some instances countries are actively making moves to invest in technology companies in such a way that might not be caught by some of the provisions in the Bill. We feel that being more stringent here would allow the Secretary of State more powers to keep, in some ways, a better eye on exactly what is going on.
Perhaps I should explain a little what I mean by that. One of the things that we are trying to uncover and drive at with the new clause is the importance of some of the ways in which venture capital firms are being used, particularly by the Chinese and by some companies. For example, in Cambridge and Oxford—two important tech hubs for our country—start-ups are regularly invited to pitch ideas to the Chinese state investment company. Nothing particularly untoward is happening there, but it is quite interesting that Chinese investors are particularly interested in talking to emerging biotech, internet of things, artificial intelligence and agri-tech companies.
Why is China particularly interested in those areas? The publicly available “Made in China 2025” strategy to become an economic superpower says that the first three things that the Chinese are interested in are biotechnology, the internet of things, and artificial intelligence. It is quite clear that there is a specific move by the Chinese—this could be replicated by other countries, whether it be Russia or others—but it is not as obvious as, “This is a state company that is going to come in and invest.” They will be taking part in buy-ins of some of the companies. This is something that has already happened.
I thank the hon. Gentleman for his intervention. Those are valid points, and part of what we are driving at here is to be more prescriptive. The feeling is that we essentially need to allow the loops in the net to be closed enough such that we catch some of these companies. We do not want a situation where a number of companies have portions of them being owned by, for example, China or another country, and do not fall foul of any of the provisions currently in the Bill. In time, that could mean that countries and entities that were hostile to Britain’s strategic goals ended up having quick and strategic access to things around nanotechnology, agriculture and a range of other areas where they had essentially got their hands into something that I think should be protected far more closely by the UK.
To give an example, in the US—this is already under way—a Palo Alto-based venture capital firm backed by the Chinese Government had dozens of US start-ups in its portfolio. On 15 November 2020, the Office of the US Trade Representative said that 151 venture capital investments in US start-ups had featured at least one Chinese investor—up from 20 in 2010. We are not saying we do not want Chinese investment, but what we do not want is a situation where we are unable to have a grip when we find that loads of our technology companies —our most cutting-edge firms—are essentially all part-owned by the Chinese Communist party or one of its subsidiaries. That is why we have been more prescriptive in many parts of the new clause.
I beg to move, That the clause be read a Second time.
Hon. Members will be sad to know that I have failed in the ballot to be one of the 2,000 supporters to watch Southampton Football Club this Saturday. I will reflect on that, but I have already sat here for much longer than 90 minutes in near-freezing conditions, watching two equally matched teams slug it out together, so I am not too upset about it. That is the last thing I will say about the unpleasant conditions in this Committee Room.
I hope this clause will be seen as helpful to the Secretary of State and as an addition to the armoury of this Bill in dealing with the multitude of different circumstances under which influence may be sought, or technologies and sensitive information may be acquired, as we have discussed. It seeks to give the Secretary of State an exercisable power under the clause 1 call-in powers and it follows on from what my hon. Friend the Member for Ilford South said in the previous debate.
Start-ups may be invested in by venture capitalists, but those venture capitalists may turn out to be bodies that are effectively seeking to gain influence in the start-up or small company, by means of investing in it. They are not seeking to control it, or to control either the entity or the asset, in terms of the meaning in section 8 or 9, but to put themselves in a position where it is pretty impossible for those companies to resist providing information to that limited partner.
In the UK, British start-ups effectively rely on foreign investment. In 2019, 90% of large tech investment rounds included US or Asian investors, according to Atomico’s “The State of European Tech.” There are many circumstances in what we might call our UK venture capital ecosystem in which that kind of sourcing of funds is a regular state of affairs. Venture capital-reliant firms in this country are now receiving millions of pounds from Chinese investors, as my hon. Friend the Member for Ilford South has enumerated for us.
Those venture capital investments do not end up, and are not supposed to end up, with the seeking of material control of those companies. As I have said, it would be difficult—practically impossible—for that venture capital-based firm to deny its limited partner investors access to technological information from portfolio companies. In such cases, especially when limited partner investments in the fund take place after an initial trigger event, those would be missed by the Bill as it currently stands. Indeed, that is made tougher still by the fact that most venture capital funds do not publish the names of limited partners. So the Government would not even know when those investments happen and when access to information passes into potentially hostile hands. That series of circumstances is becoming pretty widespread in the high-tech world, and does not appear to be focused on very accurately by the provisions already in the Bill.
What the amendment seeks to do, as I have mentioned, is enable the Secretary of State—if it is considered by the Secretary of State to be an issue that warrants further consideration—to make regulations for the provision of that call-in power outside the terms of clause 9 of the Bill. I think that is a potentially very positive additional power that would reside in the Bill and would be an additional piece of armoury in the hands of the Secretary of State on the basis of what we think is a continuing expansion of investment which may have malicious intent to scoop up, by that venture capital arrangement, a slice of sensitive information.
I was thinking about the equivalent of Chinese dragons in “Dragons’ Den”, taking a portion of the company in return for having a hand in that company’s investments. In a sense, that is what venture capitalists will do under these circumstances. Although the control of the company, as we see in “Dragons’ Den”, remains very much in the hands of the person who has gone into the den in the first place, the investment in that company is nevertheless a source of very substantial leverage in what the company does, what information it provides and what sensitive information it gives out.
I offer this new clause in what I hope will be seen as a very constructive spirit. The clause endeavours to strengthen the Bill by providing a particular option to the Secretary of State, when looking at the entire landscape of how influence is sought, at how sensitive information may be provided and at how assets may effectively be acquired.
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.
Clause 11 is intended to provide an exemption for certain asset acquisitions, which would otherwise be trigger events. The power to call in acquisitions of control over qualifying assets, as defined in clauses 7 and 9, will significantly expand the Government’s ability to protect our national security.
The clause ensures that these new powers will not extend to certain acquisitions made by individuals for purposes that are wholly or mainly outside the individual’s trade, business or craft. The Government do not believe, for example, that it would be right for the Secretary of State to be able to intervene in consumer purchases. Given their nature, such acquisitions cannot reasonably be expected to give rise to national security risks.
Moreover, a regime which could apply to such circumstances would quickly become impractical and could result in significant numbers of additional notifications for no national security gain whatsoever. As such, this clause explicitly limits the types of assets that the Secretary of State may scrutinise in line with the Government’s intention that the regime will primarily concern control of entities and only extend to assets as a precautionary backstop.
It would mean, for example, that sales of software products to consumers by a software company would not be caught by the regime, but—this is important—it would not prevent a transaction involving the software company selling the underlying code base supporting that software to a buyer acting in a professional capacity from the possibility of call-in under the regime, where that might give rise to a national security risk.
The Government have also carefully considered whether certain types of assets should remain outside this exemption clause. We have concluded that all assets that are either land or subject to export controls, as my hon. Friend the Member for Wyre Forest regularly reminds us, should not fall within the exemption. This approach, I believe, reflected in the clause, recognises the unique nature of the risks posed by land acquisitions and proximity risk to certain UK sites, as well as the particularly sensitive nature of items on the export control lists. The Government consider that this approach is proportionate and appropriately exempts acquisitions that do not give rise to national security risks, while ensuring flexibility exists to scrutinise hostile actors directly targeting the acquisition of sensitive assets.
Hear, hear—I agree with every word.
For the benefit of the Committee, I will begin with clause stand part, before turning to the amendment. The Secretary of State’s power to call in trigger events that have taken place is limited to a maximum of five years after the trigger event takes place and six months after the Secretary of State becomes aware of the trigger event. It is important to bear that in mind when discussing the amendment. That means that the issue of timing as to when a trigger event actually takes place is incredibly important. Many trigger events will have a self-evident completion date, as supported by contractual or other legal agreements. However, some trigger events may be less clearcut. There could be terms agreed formally by the parties, followed by further documentation, leading to a formal completion, all spread out over a period of time.
The clause ensures that where a trigger event takes place over a period of more than one day, or if it is unclear when during a period of more than one day the event has taken place, the last day of that period is treated as the date the trigger event takes place. In addition, the clause seeks to provide clarity about when a trigger event may be considered to be in progress or contemplation, where a person enters into an agreement or arrangement enabling them to do something in the future that would result in a trigger event taking place. It makes clear that entering into such agreements or arrangements, including contingent ones, does not necessarily mean that a trigger event is in progress or contemplation at the time the agreement or arrangement is entered into.
Amendment 16 would ensure that a person entering into any agreement or arrangement that enables the person, contingently or not, to do something in the future that would result in a trigger event taking place would be deemed a trigger event in progress or contemplation for the purposes of the Bill. I welcome the intention to ensure that the Secretary of State can be notified about acquisitions before they take place and I understand the motivation behind that. That is very much the Government’s policy. Indeed, the inclusion of mandatory notification and clear requirements within the proposed 17 sectors illustrates that approach in the most sensitive parts of the economy.
The timing of any notification is clearly very important. It must contain sufficient information for the Secretary of State to decide whether to give a call-in notice. That means that a proposed acquisition must be at an advanced enough stage that all the key details are known: for example, the names of all the parties involved, the size of any equity stake in the entity or asset, and the specifics of any other rights—such as any board appointment rights, which the hon. Member for Warwick and Leamington cited in his intervention—being provided to the acquirer.
In some cases, however, such details may be known, but the likelihood of a trigger event actually taking place may still be low because the acquisition is conditional. For example, the striking of a futures contract or an options agreement may stipulate conditions that must be met before the acquirer is required to, or has the right to, acquire a holding in an entity or an asset. Such arrangements are common in the marketplace where, for example, a company’s future share price might be the basis of a conditional acquisition. Equally, lenders provide finance to many UK businesses on the basis of conditional agreements, often with collateral put up by the business as security in return for the loan. Those terms may, subject to certain conditions being met, allow the lender to seize collateral if repayments are not made as agreed.
I am grateful for the hon. Gentleman’s intervention. I am just getting to the crux of the resistance to this amendment on the Government Benches, so if he will allow me, I will do that. As far as subsections (3) and (4) are concerned, we think they are exactly where they should be in the Bill.
In the loan scenario, obviously loans are routinely paid back by businesses as planned, so lenders do not have the option of enforcing any rights towards collateral. Indeed, even where businesses default on payments, lenders will often look for an alternative way to recoup their funds, such as restructuring the repayment amounts or repayment period. That is why the Secretary of State generally only expects to be notified about and, if the legal test is met, to call in acquisitions when they are genuinely in progress or contemplation, not just when they are optional or might take place in the future, as the amendment would effectively do. That could include where an option holder had resolved to exercise their option, or where a lender had decided to enforce their collateral.
None the less, the clause as drafted does provide the Secretary of State with the ability to call in at the time agreements or arrangements are entered into. That would be determined on a case-by-case basis and would, as per subsection (4), take into account how likely it is in practice that the person will do the thing that would result in a trigger event taking place. The amendment put forward by the hon. Member for Newcastle upon Tyne Central—she is right to probe on this—would mean that entry into any agreement or arrangement under which a trigger event could take place in future would be treated as a trigger event currently in progress or contemplation, allowing it to be notified and called in by the Secretary of State. We believe that this would—unintentionally, I am sure—have two significant negative implications.
I am grateful for that clarification. I wrote down the hon. Lady’s words. She did say that it is an excellent deterrent, and went on to make her argument for the amendment.
To return to the substance, the provision means that the acquisition has no legal effect if it is void. It is not recognised by the law as having taken place. Clearly, voiding is a situation that it is in the interests of all parties to avoid, which should act as a powerful compliance incentive, if I can describe it as such. The Government’s view is that voiding is the logical result of a regime based on mandatory notification and clearance for acquisitions in the most sensitive sectors before they take place.
Although the Secretary of State, or the courts, may be in a position to punish non-compliance with criminal or civil sanctions, voiding is necessary to limit or prevent risks to national security that may otherwise arise where such acquisitions take place without approval. For example, there may be day one risks whereby hostile actors acquire control of an entity and seek to extract its intellectual property and other assets immediately. This is a reasonable and proportionate approach, and in arriving at this position we have carefully considered the precedent of other investment screening regimes. For example, France, Germany and Italy all have voiding provisions.
Amendment 17 would require the Secretary of State to publish guidance within three months of Royal Assent and then review it annually in relation to the approval process for notifiable acquisitions. I have listened carefully to the hon. Lady’s case for the amendment, and I hope that I can begin on common ground by saying that clearly voiding an acquisition is something that it is in the interests of all parties to avoid. That is why we are consulting on the sector definitions covered by mandatory notification and clearance, rather than simply presenting them to Parliament and external stakeholders like a fait accompli in the Bill.
That approach will allow experts from the sectors and the legal profession, and businesses and investors, to help us to refine the final definitions and tighten them up to ensure that the regime is targeted and provides legal certainty. Equally, mandatory notification applies only to the clearest acquisitions, focused on objective thresholds of shares and voting rights. Together, that will help acquirers to determine whether their acquisitions are in scope of mandatory notification, and therefore allow them to comply with their statutory obligation and avoid any voiding scenarios altogether.
I am grateful for the hon. Gentleman’s intervention. As I was laying out, there is precedent from other screening legislation in Germany, France and elsewhere. Of course, the hon. Member for Newcastle upon Tyne Central is concerned about the hundreds of thousands of people who may be shareholders in a company. If the acquisition was a notifiable acquisition and completed without approval, it is void, regardless of the number of shareholders.
I return to the point I was making before the hon. Gentleman’s intervention. Together, this will help the acquirers determine whether their acquisitions are in scope of mandatory notification. None the less, the Bill sets out the various ways in which an acquisition may be retrospectively validated, both proactively by the Secretary of State and in response to a validation application, where non-compliance occurs. I believe the guidance that the amendment would require the Secretary of State to publish is well meaning but fraught with difficulties.
There are a number of reasons why the Government must reject the suggested approach. First, the amendment is an invitation to the Secretary of State to, in effect, legislate through guidance to set out the legal implications of acquisitions being voided pursuant to clause 13. In our view, it would not be appropriate for the Secretary of State to do so, as it is for Parliament to legislate, but ultimately for the courts to interpret and apply that legislation.
The hon. Member for Newcastle upon Tyne Central will be aware of the much-quoted report from the House of Lords Select Committee on the Constitution, which has emphasised the importance of avoiding guidance being used as a substitute for legislation. We have no intention to do so in respect of voiding.
One of the things that we have probed a number of times, when taking evidence from witnesses and in our debates in Committee, is the idea that we need to give businesses clarity, because many are feeling uncertain. If they cannot make decisions about forward planning, clearly that will be detrimental as we move through the crisis.
Perhaps I should refer to some of the expert evidence we heard last week. Michael Leiter, who represents a very large, global limited liability partnership, told us:
“I think this is a rather seismic shift in the UK’s approach to review of investment… having some opportunity to make sure that both the private sector and the public sector are ready for that and understand the rules…is particularly important”.––[Official Report, National Security and Investment Public Bill Committee, 24 November 2020; c. 46, Q52.]
That was in our discussion about resourcing, and one of the questions that I and colleagues on both sides of the Committee raised was on the resourcing of BEIS. As my hon. Friend the Member for Newcastle upon Tyne Central suggested, rather than the burden falling on small and medium-sized enterprises, there should be a fully resourced and expanding new unit within BEIS. Given that the number of call-ins could rise from 12 to 1,800, as we have heard, we need a huge scaling up of BEIS’s ability to look at these, and obviously it does not have the same experience that the Competition and Markets Authority had previously.
I humbly point out that the Minister assured the House on Second Reading that:
“The investment security unit will ensure that clear guidance is available to support all businesses engaging with investment screening”.—[Official Report, 17 November 2020; Vol. 684, c. 277.]
The amendment is intended to secure that assurance in substance; not to tie the hands of the Secretary of State, but to give clarity to businesses by shifting from something that may happen to something that shall happen.
The amendments relate to clauses 19 and 20. Amendment 20 might be regarded as slightly unusual, as it seeks to remove a number of sentences in the Bill: to be precise, lines 24 to 27 on page 12—it would remove clause 19(2), while amendment 21 would remove clause 20(2). The Minister might be saying to himself that Oppositions usually try to restrict Ministers’ powers, yet here we are trying to extend their powers through these amendments. I want to explain why we think that is important.
We want to hear from the Minister why he thinks those particular paragraphs should remain in the Bill, and how the restriction that they place on the Secretary of State’s activity is advantageous to the Bill’s main purpose. The paragraphs that the amendments would take out relate to the power to require information and the power to require the attendance of witnesses and seek evidence. I am sure that hon. Members can read clause 19 for themselves, but I will point out the key part:
“The Secretary of State is not to require the provision of information under this section except where the requirement to provide information is proportionate to the use to which the information is to be put in the carrying out of the Secretary of State’s functions under this Act.”
That is to say that unless it can be, or is, established that the requirement to provide information is proportionate to what the Secretary of State wants to do under the Act, the Secretary of State is not able to require the provision of information. That is effectively what the clause states.
We have already heard during evidence to the Committee that there may well be a complex web when it comes to getting information and working out what is and is not relevant, particularly if a hostile power or body is seeking to take over a company or gain access to its information and IP. The information may well not consist of what it appears to consist of, or there may be a number of paths by which that information can be obtained.
From our expert witnesses we heard some interesting examples of things they thought looked rather far from the central activity of information provision. For example, on academic projects, in his expert evidence, Charlie Parton from the Royal United Services Institute told us:
“It is quite difficult to distinguish some of these and to know about them all, but a few weeks ago The Daily Telegraph did a story on, I think, Oxford University and Huawei’s commissioning of research. I think there were 17 projects. I looked at those, and I am not a technologist by any means, but some of them rang certain alarm bells.”––[Official Report, National Security and Investment Public Bill Committee, 24 November 2020; c. 6.]
He was suggesting that, of a number of those postgraduate and PhD projects, there were some that he might have put a question mark against and others not, but he was not sure which were which. Nevertheless he seemed to think that some of those research projects—although they were cited within the ordinary parameters of whatever the research project might be, and who might be collaborating with whom, and who might get what information out of that—might ring alarm bells. That was in terms of who was collaborating, how the information might be used and where it might be going.
The hon. Gentleman raises an important point. I will come to the word “proportionate” in a moment, because that is an important part of this clause. I hope I can satisfy him about my concerns about the word “proportionate”. He may want to come back when we have that discussion.
We heard from Sir Richard Dearlove, who said that,
“the Chinese are highly organised and strategic in their attitude towards the West and towards us. For example, some of the thousands of Chinese students who are being educated in Western universities, particularly in the UK and the United States, are unquestionably organised and targeted in terms of subjects”.––[Official Report, National Security and Investment Public Bill Committee, 24 November 2020; c. 19.]
Before we go any further, perhaps I should say that I have nothing against Chinese students coming to the UK. On the contrary, I think that in general, Chinese students in UK universities is a very positive thing, and spreads a very good element of international learning into the process. I also think we might be reasonably confident that those Chinese students are getting as much from us, in terms of our way of life and our way of organising things, as we are from them. I do not think Sir Richard Dearlove’s point was partial towards Chinese students, but he made the point that he thought that some of those students may have targeted, or have been targeted towards, particular subjects and areas in the UK and the United States. Again, that is extremely difficult to find out and go forward on.
I am citing those particular expert witnesses in the context of this area of information, particularly concerning somebody—a company, an organisation, or indeed a state actor—that has hostile, malevolent intent towards the information that they have. It is not very likely that they will simply present that information in a ring binder with coloured markers, specifying where the various bits are; it is a very different process indeed. The clause therefore appears to very much limit the extent to which the requirement to provide information can be carried out, and it does so by requiring the provision of information to be proportionate to the use to which the information is to be put.
The word “proportionate” is very important here, and is potentially a real problem in terms of ensuring that the search for information that may be necessary by diverse means can be carried out properly. On the surface, looking at the ordinary language, one might say that the use of the word “proportionate” is a thoroughly good idea. If we apply the ordinary language test—what is the opposite of proportionate?—the opposite would be unproportionate; we would not want the Secretary of State to go about this in an unproportionate way. However, in legal terms, the word “proportionate” has rather a different context,
Proportionality as a legal term is a relative newcomer to the legal lexicon. It entered the legal arena—I am not saying that it had not been used before, but it was put forward as a concept around which a lot of other matters might turn—with the civil litigation reforms introduced in April 2013, known as the Jackson reforms. They covered the concept of proportionality in legal terms as it relates to costs in legal cases, but the question of proportionality was discussed in a wider context. The concept of proportionality, which had not been a particular issue in legal matters before, stuck itself firmly into the legal lexicon. Since then, there have been a number of debates about whether ways of apportioning legal costs were proportionate, even if they might otherwise be seen as reasonable.
Up until that point, the guidance on the issue of proportionality came from Lord Woolf in the Court of Appeal in—I am sure hon. Members will remember the case well—Lownds v. Home Office, where he concluded that if the legal steps that had been taken had been reasonable and necessary, the other party could not object to the cost of these steps on the grounds of proportionality. The test of reasonability and necessity overrode the question of the grounds of proportionality.
That is what changed in 2013 with the civil litigation reforms. An interesting commentary was made in an article published on 12 March 2014 in The Law Society Gazette, entitled “Proportionality and legal costs”—I am saying all this because I am not sure I will get the article to Hansard easily.
The author had this to say about the meaning of proportionality:
“However, the meaning of proportionality is not straightforward and the new rules do not provide clear guidance on how proportionality should be applied. The suggestion seems to be that a body of law will develop on a case-by-case basis until gradually the meaning will become clear. Until that happens, litigants, legal advisers and judges will have to guess at what costs will be considered proportionate in particular circumstances.”
I hope that the hon. Gentleman will bear with me a few moments longer. Having unpacked “proportionality” in legal rather than colloquial terms, I want to put it back into the clause and see how it works, as far as the concerns of the Secretary of State go.
Indeed, the hon. Member for Glenrothes has questioned what we want to do on this clause in terms of the colloquial understanding of “proportionality”. I have mentioned how “proportionality” has come into the legal arena, specifically in terms of costs. Nevertheless, “proportionality” is now loose in the legal arena, so there is an interesting area of debate about it in general in the legal arena. That is not necessarily solely attached to the question of costs and civil litigation.
The problem is that there is virtually nothing to define that wider issue of proportionality in case law at the moment. Placing that word back into this particular clause suggests to us that the Secretary of State is restricted considerably on how that information may be gathered. The hon. Member for Glenrothes talked about research projects and various other things listed to us by our expert witnesses. I emphasise that I do not want to undermine those research projects or the presence of Chinese students. All I want to underline from that is that, on occasions, the process of getting hold of information and requiring people to give evidence can be convoluted. Indeed, it may require seeking information by going down paths that are not immediately apparent. As I say, it is not a question of someone turning up with a ring binder of things that can be perused.
In this clause, it appears that the Secretary of State may well have denied him or herself the ability to get hold of information, because it states that it has to be
“proportionate to the use to which the information is to be put in the carrying out of the Secretary of State’s functions under this Act.”
But he or she will not know about that information until it has been obtained. If there are difficulties in getting hold of the information, he or she will never know whether it is useful for carrying out his or her functions, because there is already a limit on getting the information in the first place.
I have brought the rather wobbly legal status of proportionality into the debate because it is potentially actionable through an obfuscation or refusal to put information forward by those actors. An actor who was required to give information could say, “It appears to me, your honour, that this request for information is not proportionate.” Of course, the Secretary of State may have a different point of view about what is proportionate from the person who is required to give the information.
There is also a vagueness in the application of the term “proportionate”. Although we think we know what it means in common language, that is not the case in the courts. That could be an additional issue that affects the Secretary of State’s ability to get the required information to make a judgment, over and above the fact that he or she may not know that until the information has been collected. So there are two procedural problems in the clause.
The hon. Member for Glenrothes said to me, to put it bluntly, “What exactly are you driving at? Perhaps it is not a good idea to appear to enable the Secretary of State to act disproportionately.” Of course, that is not what we are saying. We know that the Bill is more or less a giant amendment to the Enterprise Act 2002. Indeed, if hon. Members look at the back of the Bill, they will see that that is the only Act amended by it. Several amendments are made to the 2002 Act, but that is it—it is still sited within that Act. That Act was drawn up before the civil litigation changes to proportionality were put in place. The test set out in that Act, which is not amended by the Bill, is one of reasonableness, which is well understood, widely commented on and pretty clear.
If hon. Members consult the 2002 Act, they will see in clause 55 that the Secretary of State, in terms of enforcement, shall take such action
“as he considers to be reasonable and practicable to remedy”.
Therefore, we are not saying that the Secretary of State by acting disproportionately should act unreasonably. We are suggesting that the test that should be carried out is one of reasonableness, and should be in this particular clause. As the Enterprise Act already does, that would indeed prevent the Secretary of State going on fishing expeditions and undertaking actions that are wholly disproportionate because they would be unreasonable in terms of the definition of the Act. Our suggestion is to stick by that definition, which would be good enough to restrict the Secretary of State under the different circumstance that we are in today, in terms of seeking information. At the same time, it would give the Secretary of State the ability to take a path—I have said it is often a convoluted one—to obtain information that can be judged and used for the purpose of this Bill. I hope that the Minister will be favourably inclined towards that slight, but constrained, addition to his powers under this legislation.
The clause provides the Secretary of State with the power to require the attendance of witnesses.
The Government are acutely aware that many of the acquisitions considered by this regime will be complex and highly technical. In addition to clause 19, which enables the Secretary of State to require the provision of information, most likely in written form, this clause enables the Secretary of State to require the giving of evidence. A notice requiring a person to attend under this clause is called an “attendance notice”. The clause is complementary to clause 19, discussed previously, as it provides, for example, for the Secretary of State to be able to receive expert explanation, in person, from those involved in a trigger event, where the information previously provided does not provide sufficient clarity.
In responding to an attendance notice and providing evidence, a person is not required to give any evidence that they could not be compelled to give in civil proceedings before the court. That protects privileged information. In addition, the Secretary of State will only be able to request information through an attendance notice that is proportionate in assisting him in carrying out his functions under the regime.
We envisage a range of scenarios where the Secretary of State may require the attendance of a witness in order to gather further evidence to make an informed decision on the case. I will provide a few to illustrate. First, I expect that a number of cases will involve complex acquisitions, either because of the advanced nature of the technology in question, or due to their financial structuring. In those cases, the Secretary of State may require those who hold expert knowledge to provide him with an explanation. There may also be cases where it seems that parties are being deliberately non-compliant, or only partly compliant with information-gathering requests. I expect those to be rare but, again, it is only right that the Secretary of State has the power to require the attendance of those parties to provide further information.
The attendance of witnesses may also be a more efficient way to secure additional information in some circumstances, and limit the risk that further time will be needed to consider additional information. There will be criminal and civil sanctions available to punish non-compliance with the notices and the provision of false or misleading information. The attendance notice is provided under threat of such sanction as it is important that the Secretary of State receives the information he needs and can count on to come to a decision.
I suspect that the Government will accommodate whichever way is secure and provides the evidence.
I am sure that hon. Members will agree that the clause is crucial in allowing the Secretary of State to consider the fullest range of information in order to make informed decisions under this regime.
Clause 21 makes provision in respect of the persons on whom the Secretary of State may serve an information notice or an attendance notice outside the United Kingdom. The clause applies in relation to the two earlier clauses. Clause 19 provides the power for the Secretary of State to obtain information either before or after the call-in power is exercised. Clause 20 gives the Secretary of State the power to require the attendance of witnesses to assist him in carrying out his function under the Bill.
Those outside the United Kingdom to whom an information notice or attendance notice may be given are clearly set out in clause 21, which is technical in nature. The purpose is to ensure that certain categories of persons with a connection to the United Kingdom are caught by the information-gathering powers, even if they are outside the UK. These categories of persons are UK nationals, individuals ordinarily resident in the UK, bodies such as companies incorporated or constituted in the UK, and persons carrying on business in the UK. Perhaps more importantly, notices may also be served on persons outside the UK who have acquired, or who are in the process of or are contemplating acquiring, qualifying UK entities or qualifying assets that are either located in the UK or otherwise connected to the UK. In practice, this means that notices may be served on most parties from whom the Secretary of State may wish to require information or evidence.
I think the hon. Gentleman is referring to parties that are abroad and have a business in the UK—what if notice is served on them and they are non-compliant? Obviously, under UK law that would be a problem for them. I certainly think that, if an information notice is served, the timeline for the Secretary of State’s assessment of a trigger event is paused until the information is provided from the individual in whatever jurisdiction they or the entity happen to be at the end of the time period provided for compliance in the information notice.
If a party does not comply during the assessment process, that may lead to more onerous and stricter remedies being imposed by the Secretary of State than would otherwise be the case, including the acquisition being blocked or unwound where appropriate. It will therefore plainly be in the interest of those involved directly in the trigger event to provide information in a timely manner to the Secretary of State in order that a speedy decision can be taken. That is where the leverage lies.
I will pick up on one issue, which concerns subsection (3)(a). I would like some clarification from the Minister. I am trying to get my head around what is meant by
“a qualifying entity which is formed or recognised”.
Could he give an illustration of what is meant by “recognised”? I assume that this is about some takeover, merger or acquisition. Could it be some sort of shell company or some other form? Perhaps the Minister could clarify what is meant by recognition under the law.
Q Thank you both for your submissions this morning. I want to go further into the issue of how you, the Government or the agency it sets up to do this makes a judgment about whether a small or start-up company really falls within being a threat to national security. I imagine that that might be quite a difficult judgment to make. I am putting to one side the issue of mandatory notification, which Mr Kinnock has looked at in more detail. I am saying that once it has been notified, how do you make the judgment about whether it is a threat to national security?
I would have thought that there are two aspects to that. One is the nature of the acquirer, which is partly what you have already alluded to. The second part is that I would have thought that it is quite difficult to ascertain whether something at the cutting edge of technology is or is not a threat. I would have thought that that is a really difficult judgment to make in practice. Do you have any thoughts on that, and what experience do you have of other regimes trying to make that kind of judgment?
Lisa Wright: I think there are probably a number of ways to tackle that question. I guess that an answer is that it is ultimately a question for the Government. They are the ones who understand the threats and the intelligence. As advisers, we can look at the guidance and cases that have happened in the past, and we can speak to the unit, which, as we understand it, will be open for engagement and will welcome that. We can guide clients through the process, using the touch points and information that is available to us, but ultimately it is the Government that are in possession of the full set of facts and considerations that go into the decisions about whether that particular transaction is a problem or not. I guess what that speaks to is having the right people in the unit and getting them plugged into the right people elsewhere in Government to arm them with the ability to make these assessments.
Christian Boney: To pick up on that, I agree entirely with what Lisa said. It is not necessarily an easy thing for the advisory community or clients themselves to make a judgment about whether they are presenting risk to national security. That is why this concept of real-time, interactive engagement with the unit that is set up to police this regime is going to be so important.
In the world I operate in, one of the regulators we deal with is the Takeover Panel, which is fantastic at being responsive, with real-time engagement. It results in a dialogue and an interaction that helps advisers navigate their clients through a regime that is not straightforward at times. That is the kind of practice that could usefully be learned from in the context of the investment security unit, because that kind of real-time feedback and informal advice will be very helpful in helping companies make the judgment about which side of the line they fall.
Q I will carry on with the line you took just now about an investor’s potential influence over or access to a company. A little earlier, you were talking about start-ups who sought to get staged financing in order to try to build their businesses. Of course, there are more ways of getting investment than just getting equity. We know that if a business has a relatively small amount of equity but a huge amount of debt, the provider of the debt has much more influence over the company than perhaps the shareholders do. We saw that on the banking commission when we looked at the role of bondholders in influencing banks, compared with equity holders. Clearly the bondholders, in effect, had much more influence.
The other thing is that a start-up company can raise money in other ways. The Bill tries to make sure that we are not losing intellectual property, but a business can raise finance by licensing the intellectual property that we are trying to protect—I am not sure that that would come within the scope of this Bill—or even sell the intellectual property and license it back again. There are various other ways in which a company can raise finance, over and above equity, where there is a huge amount of influence or it falls outside the Bill. Clearly, crucial national infrastructure is a very different thing, but intellectual property is something that is very difficult to grab hold of; it is like trying to grasp a handful of sand. Given the objectives, I wonder how the Bill tackles those other areas, which seem to allow malign investors a way through.
Christian Boney: I think an important aspect of the Bill—this is one of the reasons why Lisa and I have described it as a broad regime—is that it does allow policing of the acquisition and control of assets, including intellectual property. In my experience, at least, that is quite different from what you see in other international regimes. Clearly, the acquisition of control of assets does not fall within the mandatory notification regime; nevertheless, it is helpful that the Government have the power potentially to exercise a voluntary call-in in respect of, for example, an acquisition or a licence of intellectual property.
Q Professor Martin, I have been listening with interest—it has been fascinating—especially when you were talking about the need to balance national security, the national interest and economic security. I have been reading the very good briefing by the Law Society of England and Wales, which suggests that the Bill could be improved by the insertion of a definition of national security. Do you agree?
Professor Martin: I do not vehemently disagree with that suggestion, but I am not persuaded by it. It is not a new issue. I remember cases—they have nothing to do with this—going back to the aftermath of the so-called global war on terror, with demands during inquiries for definitions of national security. I am not sure what that would achieve other than it would be heavily litigated. In terms of both definitions of national security and the categories of technology, a better answer is a drumbeat of reviewable activity, which is by definition transparent, about how the Government interpret the scope of the Bill, if it becomes an Act, and the sort of cases it applies to so that, over time, you build up a broadly accepted framework—of course, not everyone will accept it—that is seen to be fair and rational.
Q Thank you for your excellent evidence, Professor Martin. You said, if I understood you correctly, that the process needs to be relatively open about why it is making decisions, but I foresee problems, particularly where there are issues of confidentiality and national security. Would you explore that a little? I note that within the terms of the Bill, decisions will be subject to judicial review or appeal, and the Government will be able to apply for a closed material procedure to protect sensitive matters in such proceedings. It seems to me that there is a potential problem there in relation to commercial and national security information sensitivity, so the “openness” of the system might be fairly limited and it might not be as respected as it could be.
Professor Martin: I get that completely. I do not think 100% transparency will be possible in this case. Obviously, it will be judicially reviewable, but I am entirely unsurprised that there is an explicit provision for closed material procedures. It will be a minority, but there will be cases in which the reason why a particular aspect of a particular piece of technology is really sensitive—it will probably be highly specialised, and there might be a dozen people, of whom four serve in government, who actually understand why—cannot be published. Then, of course, there will be commercial sensitivities.
Having said all that, if you take, for example—these are real examples—the current debate around the potential use of offensive cyber, or the sort of allegations Edward Snowden made against Five Eyes countries in 2013, or some of the defences that the Government had to use in the 2000s about their role in the aftermath of 9/11 and Iraq and co-operating with US forces, in my view there is a clear distinction between being able to describe the operating environment and the sorts of thematic issues that you are dealing with, versus individual cases, which often contain extremely sensitive detail. National security organisations can say much more about the former than historically they have been willing to do.
In something like this, where we are talking about business confidence and how the country looks to potentially very friendly and helpful outside investors who like the UK, want to come here, want to put money here and like the high-quality research and the brilliant innovators and individuals, it should be possible to give them something that says, “In the course of the last year, we have looked at quantum resistant cryptography and here are the types of aspects of this that we are reserving and here are the bits that are more open” or that sort of thing, without disclosing anything sensitive. That is all you need to be able to say—these are the judgments. Let us say that the Bill becomes law in the middle of 2021, for sake of argument. By 2025 and the beginning of the next Parliament, the tech landscape will look very different. You will not want investors to be looking back at the debates you are having in the House now as a guide to the latest way in which the Government are applying this, or looking at drip feeds of information. You will want something official. It should be possible to do that.
Q Do you think it should be formalised or do you think an informal relationship with other Government Departments will be adequate?
Professor Martin: I think it should be formal. The Government are not new to this. There should be some sort of review board to make sure that it has the right resources, the right performance, the right skillset and so forth. I would encourage ministerial interest. It may be something that the National Security Council wants to periodically review. In my time in national security, there were standing issues that the Government would come back to twice a year, whether there was anything interesting happening on them or not, just to take stock. That might be an issue. In answer to the previous question about transparency, there may be a case for a formal presentation, secret detail and all, to the National Security Council every year, which would include all the potentially covert and sensitive stuff. It really needs to work with the grain of ministerial thinking as well. That will need to be done collectively, at some point, so there may be a role for the NSC.
Q You have placed a lot of emphasis on the right technological skills and said that they should be forward looking, for a number of reasons, including identifying new technologies, but also giving clarity and certainty to businesses. Where do you see those tech skills being located? How can the Bill ensure adequate appropriate access to them?
Professor Martin: I am not sure if the Bill will get in the way or help, one way or the other. I think Government technological nous across the civil service needs to be invested in properly. There is a deep, fairly sizeable reservoir in GCHQ. Again, without going into too much detail, more and more people are being transferred and seconded from there into other areas. That is a good thing, and we should welcome that rather than cast aspersions on this being all secret state stuff. It should be permeating normal Government activity.
There will be issues about how to pay for some of the specialists that are needed. I do not think we will ever compete with the big tech companies, but there may be scope for paying some specialists a bit more and bringing them in here. There is something about creating a career path for technologists in Government. There are big issues for the heads of the civil service and the permanent secretaries. If I were heading it, I would want an immediate infusion of seconded talent and private sector buy-ins relatively quickly. Government can do that quite well some- times, and sometimes not so well. There also needs to be a long-term strategy for technologists in Government.
Q I think that Mr Palmer’s point, if I understood him correctly, was that if we bring the Bill in, we create a tougher regime than there is at the moment. I think he used the example of Ireland, and I hope I am not misrepresenting what he said, but he said it was potentially an environment that would have a less structured regime, and therefore could take business away from us, to put it crudely.
David Offenbach: We have the issue that we do not know what difference being out of the European Union is going to make to future investment; but Ireland has been very attractive for many years, partially because of the tax regime—and for lots of other reasons—so will people choose Dublin rather than London if they want to do business? They might very well, but the fact that Britain is open to trade is an important part of the British economy. People will still come here and work here, open businesses and enjoy the infrastructure of the technology and the various businesses that are already here, and that they can feed off, so I am not worried about that in the medium term.
Q Mr Offenbach, thank you very much. I have a very quick question. You ran through a long list of acquisitions at the beginning of your evidence, most of which I think you would suggest were not in the national interest, although people may disagree. Given the Bill as it stands, which, if any, of those acquisitions would have been thwarted or prevented by it? Which, if any, of those acquisitions would have fallen foul of running the risk of being a threat to national security?
David Offenbach: The answer is that one is not quite sure. That is why I want to widen the definition. The reason why there are 17 different areas and categories in the Bill is that it is hard to know what national security is at any particular time and how it is reflected in the business that is actually being considered. The only way to make sure that something does not slip through the net is to have a slightly wider definition. There is no definition of national security itself in the Bill, which is perhaps why strategic, research and development, innovation or other issues should be brought in. Then one can be quite sure one has not accidentally lost an asset where there are national security issues.
Q I wonder, Mr Butler, if you would elaborate on, and give more examples of, the sorts of international threats that you see us facing, in terms of not just national security but economic security, and the links between the two.
Creon Butler: In my view of economic security broadly, the biggest existential threat is climate change, frankly. We are going through a ghastly pandemic. Fortunately, it looks like we can see the way out of it, but I do not think that at any point we felt that this particular virus was an existential threat to mankind more generally. My view of climate change is that it is, and it is very close. In any broad assessment of national and economic security, I would put climate change as one of the most important issues. That is why the accelerating efforts both within Governments and in the private sector to deal with it are crucial.
In terms of other kinds of threats, we have had this particular pandemic, which as far as we can see is not an existential one; there could be other pandemics that are. That is why infectious diseases have been so high on our risk register in the past. Steps to ensure that we do not face future pandemics that are even more serious than this one in terms of the threat to human life, or the economy, are a very important priority. Those are two examples of broader threats beyond hostile powers that we should incorporate in our approach to national and economic security.
Q Thank you, Mr Butler, for your evidence so far. It has been incredibly enlightening. It is probably fair to say that national security—what is tantamount to national security—is an ever-evolving feast, particularly given the technology that is now available. Do you feel that the scope of the Bill, particularly the consultation of the 17 sectors that have been included, satisfies your concerns around national security? I am particularly thinking of social media and the level of data that is pertinent within that. Do you think that is adequately covered by the Bill as it stands?
Creon Butler: I think this comes again to the point about how we will tightly define national security in relation to these broad powers. I think you are thinking of a hostile power investing in a social media platform that can then be used to attack the UK—I guess that is what you have in mind. It is, again, something that I have not thought through. Probably, I would not see the nature of the threat as being so great that we would necessarily make it a mandatory notification, but by using other sources to collect information about threats, we might use the other powers in the Bill—the calling in and those kind of powers, and the voluntary notification —to make sure that we had covered the threat. I do not think I would put it in the mandatory category, but I would want to use other information and powers to collect information, and to call in a particular investment if I felt it was a threat.
Q It is a pleasure to serve under your chairmanship, Mr Twigg. Good morning, Mr Parton. The Bill obviously aims to protect national security while promoting investment in the United Kingdom and not dissuading any inward investment into the country. With your experience, and given everything that you have said this morning, do you think the Bill will succeed in its aims?
Charles Parton: Again, I am not a legal expert, but it seems to set out the legal framework. It all very much depends on the structures and mechanisms, and the resourcing of them, that are set up to ensure whether the judgments about a particular company or a piece of academic research and the technology from them should be blocked or allowed through. I put it back to the Committee: if its detailed research, and the measures that go into the Bill, show that whatever organisation is set up is sufficient unto the job, and that the channels are there to ensure that all these small and sometimes obscure technologies are at least passed by it, that is a really important piece of work.
Q It is a pleasure to serve under your chairmanship, Mr Twigg. Sir Richard, I want to ask some questions about how the Bill and the mechanisms that make it operate cut across certain other parts of Government Departments. That is clearly looking at how we can scrutinise investments coming into the UK, but we also have a department with respect to export control. Broadly speaking, this is quite a similar type of problem. Although it is not necessarily looking at intellectual assets, it certainly looks at the ability of countries that are buying certain things to reverse-engineer, and therefore to try to steal our intellectual property in that way.
I am interested in your view on how the department that is proposed to be set up within BEIS to scrutinise this cuts across the Export Control Joint Unit, which is obviously a combination involving four Government Departments. Is that complementing it or contradicting it? Can they cut across each other? How do you see those two departments working together? They ultimately have the same aim, although they come from slightly different objectives.
Sir Richard Dearlove: I cannot give you a detailed answer to that question. From my experience, I would say that on some of these issues the co-ordination of Government Departments is one of the really big challenges, particularly when they ultimately have different objectives. The sophistication of our co-ordination mechanisms in the UK has not been highly developed, so we have run into problems in the past. My suggestion would be that this be given forethought rather than afterthought—that there is some arrangement to avoid those clashes of departmental interest.
Q Thank you, Mr Leiter. That is really good feedback. Building on the point made by my colleague the shadow Minister, the CFIUS regime in the US obviously operates successfully, in the sense that the US remains an incredibly attractive place for inward investment. How have the US regulators balanced those two things? Does the Bill as drafted provide us with a similar opportunity to strike that balance?
Michael Leiter: I am honoured to have worked with the UK Government for 20-plus years on security issues, and over the past 10 years on economic issues. I certainly think you have the potential to strike that balance. In the US, traditionally, the CFIUS structure was a balance between the security agencies, which tended to want to restrict investment, and the economic and commerce agencies, which tended to want to encourage that investment. Certainly, in the case of China, we have seen massive decline in direct investment because of both Chinese controls and US controls: a tenfold decrease from 2016 to 2018. But as you said, the scale and strength of the US economy mean that global investors look to the United States no matter what.
I do not mean to make less of the UK in any way but, from a UK perspective, one has to be a bit more careful, because you simply do not have the scale that inevitably will attract investment. The US could be a rather poor place to invest, with lots of regulation, but people would still come because of the scale of the market. You don’t have quite that luxury. That is not to say that the UK has not for generations been an incredibly attractive magnet for investment, but whereas the US can err on the side of security, from my perspective, admittedly an American one, the UK might want to be a bit more careful about restrictive measures, because the size of the market is not in and of itself so inherently attractive that companies and investors must be in it. We have a bit of an advantage over you on this one.
Q There are 17 sectors included in the Bill, but are any sectors missing? Is there scope for future-proofing?
Michael Leiter: Right now, it is a very robust list. In fact, I would probably err on the side of going in the other direction. I think this is a good list of 17, but what is critical is that these sectors gain further definition about what this actually means. Let me give you a quick example: artificial intelligence. I invite you to go online and try to find more than 10 companies in the world right now who are doing well and do not advertise their use of artificial intelligence in one way or another. It is one of the most commonly used marketing terms there is: artificial intelligence and machine learning, all to serve you in your area of work. If one interprets artificial intelligence as encompassing all those businesses, there will be a flood of reviews. Now, if one focuses on those companies not using artificial intelligence but actually developing artificial intelligence, I think the definition of the mandatory sector will make much more sense. That is an area where I think the US is still finding its way. As Dr Lenihan noted, the US began with a set of listed sectors where transactions were more likely to be mandatory. They eliminated that and now focus purely on export controls, but again, it is not that a company uses export control technology; it is that it produces export control technology.
That may be too narrow for your liking, but if one mapped out your 17 sectors as currently described to their widest description, I think there would be very little left in the UK economy, except for some very basic manufacturing and some other services that would not be encompassed. This is a very broad list and, again, I think it will take some time to tune those definitions so they are not overly encompassing. Again, if you look at data infrastructure, communications, transportation —at their extreme, that is quite a broad set of industry descriptions.
Q But they would be quite difficult to police, would they not? How would you know—
David Petrie: Yes. I don’t think anyone is suggesting that the job of this new investment security unit is going to be straightforward. In fact, we are absolutely not suggesting that. It is going to be absolutely essential for Government Departments to work together and, going back to my original point, for this unit to be extremely well resourced, to be able to respond quickly and appropriately to what is put before it.
Q How have you found your engagement with Government so far, and what processes are you looking for, in terms of how the Government engage with you and the industry—whether it is with your organisation or more widely? Do you have any comments on that?
David Petrie: Yes, I have. The Government have been very clear about the need to bring this legislation on to the statute book, and they have done so through the Green and White Papers. When consulting on the White Paper, they sought opinion from a very broad spectrum, including business groups, businesses, the investment community and so on. They have set that out in the response to the consultation.
The next consultation is the one on the sectors within the scope of the mandatory regime, and the next month or so is going to be a very important stage in this process. Defining those sectors in a way that market participants understand and that does not trigger manifestly unnecessary notifications is going to be very important, and we look forward to engaging in that process, as does the legal and investment profession and British business.
Q On the 17 sectors that were included in the Bill, do you think there are too many or do you think any sectors are missing?
Chris Cummings: That is something we are looking forward to engaging with. When you first hear it, 17 sectors sounds like quite a lot, but having worked through the 17 sectors and looked at some of the draft definitions, I think that each one is justifiable.
We would be keen to point out a few things to the Government. First, the greater the specificity around the definitions, the better. Secondly, we should not rush to change the sectors by adding to them too quickly. Investment needs a degree of stability, and legislative stability most of all.
Thirdly, in consulting with industry and thinking about the operations and practice, I would ask to have industry expertise around the table. We found time and again working with officials—they are hugely valuable, talented individuals, but do not come from a commercial background, almost by definition, although some do—that having the commercial insight, we can play a role in nudging in the right area, to ensure that nothing is hard-coded that would prevent a deal because the nuance has not been appreciated. Having that industry insight would be a big step forward, if it could be accommodated.
Q Thank you, Mr Cummings, for a very good presentation. I just want to go back to your point about the blanket exclusion for investment managers. First, you say that is the situation in Japan, but maybe you could say where else it exists. Secondly, why is it needed? I totally accept that, on the whole, the investments being made by your members will not fall within the trigger points, because they will not be taking over 25% of Shell or even some small companies, but they might do in certain circumstances.
Thirdly, to what extent do hedge funds represent members within your organisation? Obviously, they have greater capacity, or greater natural affinity, for investing in smaller companies—not always, but in certain cases. They might actually fall within the remit of the triggers, so I do not quite see how we could implement the blanket exclusion, if from time to time there are exceptions to the exclusion.
Chris Cummings: Thank you for asking me to clarify; I apologise that I was not as clear as I should have been. The hedge fund community has a representative organisation. It is a splendid one that can do a tremendous job in speaking for them, and I would not put myself in that position; I would not try to speak for them. We have members that invest substantially through private markets into smaller and unlisted companies. Again, it comes down to intention. The intention is not to invest in such a way as to take over the company and to seize the reins; the intention is to make an investment that is in the strategic direction of the company, to support its growth.
I am trying not the use the term “passive investment”, because we are anything other than passive when it comes to investing, but it is an approach that is designed to support the company, rather than to change dramatically the company’s ownership or direction, or to land one of our members on its board—in effect, they would then be part of the management and governance of that company. I hope it is more than a subtle definition; it is a distinction with a real difference. That is part of why we think it is an important distinction to make.
Other jurisdictions have been through similar experiences. The Japanese example is so relevant, because it is only a year or so ago that the Japanese Government were considering very similar legislation. As a result of consultation, they came up with the approach that we are suggesting: to exclude the activities of investors, insurance companies and so on, because it is around the intentionality—not wanting to take an active role in the management or to change the company’s direction, but to support through investment rather than to seek control.
The US has a similar modus operandi. It is not quite as framed in the legislation as it is in Japan—again, just through history. The approaches that we have seen in Germany and France also nudge in the direction that I am describing, so there are parallels. The Japanese experience is the closest match that I can offer the Committee, but we will continue to do further investigations and to feed in ideas through the Bill’s stages and through the consultation on individual sectors.
(11 months, 2 weeks ago)Commons Chamber
Obviously, I am not familiar with the exact details that the hon. Lady refers to. What I can point out is that in her constituency of Central Ayrshire, banks have provided something like £37 million of business loans, but I would be very interested to hear the specifics of that case and to see what we can do to meet those concerns.
We are in constant contact with Companies House and other sources of information relating to businesses. With regard to the specifics, I am not as familiar with those charges as the hon. Gentleman, but again I point out that something like £30 million of loan money—of credit—has been supplied to companies in his constituency.