National Security and Investment Bill (Fourth sitting)

Sam Tarry Excerpts

Committee stage & Committee Debate: 4th sitting: House of Commons
Thursday 26th November 2020 Public Bill Committees

[Nadhim Zahawi]

Q Welcome, Mr Offenbach; thank you very much for making the time. I wanted to get your view on how you think the Bill deals with the range of sanctions available to the Secretary of State in order to protect national security. How do you see that?

David Offenbach: I am very pleased with it. It is much better than the previous regime, because now, rather than just having post-offer undertakings that are subject only to contempt of court criteria if they are breached, we have a proper statutory framework that will enable the Minister to impose orders so that for non-compliance, there is a breach of statutory duty, not merely a breach of an undertaking. Of course, one of the problems with the takeover code is that the object of a takeover code is to protect shareholders and to encourage fair dealing in takeovers. It is not there—and this has never been its job—to protect the public interest; it is there to protect the shareholders who are in receipt of an offer, so that they have been given fair treatment. For example, if you take SoftBank and Arm at the moment, we do not know whether or not they will have complied with their post-offer undertakings when the five years is up, because the price that is being paid now is more than was paid in 2016. There is no complaint. Public interest is irrelevant to the job of the takeover panel, which is why this new regime is a very welcome improvement on the old regime.

[Sam Tarry (Ilford South) (Lab)]

Q Thank you, Mr Offenbach. This is very interesting evidence, and clearly you and the previous witness have really exposed this tension—this debate—between having an open and liberal economic approach, and our self-interest and national security. This is not a new debate: Peter Lilley had his famous Lilley doctrine, and earlier this week, we heard from Sir Richard Dearlove. Most of the Committee members listened in earnest to that discussion.

For me, there is something really important we need to explore a little bit more when it comes to our approach, in terms of rushing to be the most open, the most liberal, the most pro-business country we can possibly be, and the exposure that is left—in this case—to China. Just thinking about that, are there particular areas of law that you think need to be tightened up and thought about alongside this, and that need to be looked at in tandem, perhaps around IP protection, licensing and that kind of thing?

David Offenbach: I think this actually does most of what is necessary. I do not think it needs to be improved in that regard. One thing that does slightly worry me is that the present regime, which is essentially a competition regime, has the Competition and Markets Authority as a statutory body, having lost national security to the new unit that will be set up inside BEIS. They only have financial stability, media plurality and public health, which was added this summer, but it is a proper organisation that deals with public interest in those areas. Public interest is the only area.

It is quite important for us to think that one of the reasons why one wants to extend the definition of national security to a public interest element is because there are many more areas of public interest, other than those three that are now left in the CMA. There is a little bit of an anomaly, because national security does not have its own separate statutory body to deal with these issues. It suggests that this is going to be put into a little hole somewhere in BEIS and that somehow competition is more important than national security, because it has a statutory body.

I wonder whether there should be a parallel statutory body, which could be called the national security investment commission, or something like that, that actually dealt with these things separately, outside BEIS. That would deal with some of the objections that people have and that a Minister is going to be lobbied about. It would be dealt with in more of a quasi-judicial way, in the same way that the CMA now deals with referrals to it. I wonder whether the Minister would like to consider that, as part of the amendments.

[Sam Tarry]

Q Clearly there would be some serious resourcing implications around that. Thinking about what you said earlier, about a number of different examples that have been in the press about major UK-owned companies that were the subject of various takeovers, would you like to say a little about how industrial strategy could also relate to national security?

David Offenbach: I listened to and read the Second Reading debate in the House of Commons last week. I know that a lot of Members were concerned to try not to let issues of industrial strategy stray into areas of national security. It is a subject that I do not really want to go into.

Some people have expressed anxiety about the activities of sovereign funds in other countries posing dangers to assets in this country. Is there more of a risk from investments in China? Somehow, people feel that those investments are connected with the Government and that they are not really independent. I think the necessary protections are in this new statute that will prevent that from being an issue.

So far as industrial strategy is concerned, people are worried about sovereign funds. I think Britain should have its own sovereign wealth fund, like Norway does and like we used to have with the Industrial and Commercial Finance Corporation, and then with 3i. There are amazing investments that could be made and wonderful technological discoveries that Britain should be able to get the profits from, and that should not be going overseas. When I went on a trade visit to China a few years ago, I saw the China Investment Corporation. They said, “We are really pleased with our investment in Thames Water. We do nothing every year. The dividends come and it doesn’t cost us any money.” I thought, “Why shouldn’t Britain have the advantage of the dividends, rather than the China Investment Corporation?” Norway’s sovereign wealth fund is worth more than £26,000 for every citizen in Norway and is one of the most successful. That is something that really we ought to look at.

[Simon Baynes (Clwyd South) (Con)]

Q Thank you very much, Mr Offenbach, for your interesting comments which, as my colleague has said, are in sharp contrast to Mr Palmer’s point of view—so that is helpful to us. I have two questions. Apart from the lack of inclusion of public interest, are you broadly happy with the Bill as it stands, in terms of what it is seeking to achieve? I suspect you are.

David Offenbach: Yes, I am.