National Security and Investment Bill

Stephen Kinnock Excerpts

Report stage & 3rd reading & 3rd reading: House of Commons & Report stage: House of Commons
Wednesday 20th January 2021 Commons Chamber

The Bill is so close to doing all that that I will support it whatever the Minister does, but I do hope he will think about adopting new clause 4. As he has seen, it has cross-party support, and has been tabled with great respect for his work and the work of the civil servants he has pulled together to draft the Bill. He has done a fantastic job of it. I very much hope that he will look at the new clause, consider its merits and pull it together. We know the dangers; we have only to look at the silencing of people like Jack Ma of Ant Group, and the intervention in various other businesses around the world by some of the state-owned enterprises that are now sniffing around British businesses, to see that the risk is sadly real. I hope the Minister will look at the new clause, and will use all the extraordinary experience and skill that he has at his fingertips—many of us wish that we had it—to consider where we go and how to do this best.

[Stephen Kinnock (Aberavon) (Lab) [V]]

It is always a pleasure to follow the Chair of the Foreign Affairs Committee, who is doing sterling work in an area of increasing concern to this House and our country; the impact of hostile state actors plays an increasingly important part in how we think about our country’s place in the world. He is doing outstanding work in thought leadership and political leadership in that context.

It was a privilege to serve on the Bill Committee, and it has been a real privilege to work with my hon. Friend the Member for Newcastle upon Tyne Central (Chi Onwurah), who has led the team in an exemplary manner. She has been assiduous in the scrutiny of the Bill and in bringing us together around the amendments—more than 30 of them, I think—that we tabled in Committee.

Unfortunately, while I have huge respect for the Minister in charge of the Bill, he chose not to integrate any of our amendments into the Bill, which is a pity because, as my hon. Friend just pointed out from the Dispatch Box, we have approached the Bill in a spirit of constructive engagement with the Government. We wish to see its substance put in place as rapidly as possible; it is long overdue. It is a pity that that spirit was not reciprocated by the Government when it came to some of our amendments, which we genuinely tabled not for any partisan reasons, but to try to improve the Bill as much as we could.

However, we are where we are. We are through Committee, and we are looking at the Bill as it is. As has been mentioned, we heard from experts in Committee, including the former head of MI6, Richard Dearlove, and Charlie Parton, one of the leading experts on China, and their contributions were enlightening. It is worth touching on what they talked to us about, because it sets out the backdrop against which the Bill is being put on to the statute book.

I will mention two of the key takeaways from that evidence. First, the impact of covid on the ability of the British economy and businesses to withstand a hostile foreign takeover is deeply troubling; it increases their vulnerability. It feels very much like we are out on choppy waters in a relatively difficult economic climate, and are relatively isolated, of course, having left the European Union. We need to ensure that we do all we can to hold on to our strategic national assets. We should not allow them to be snapped up by investment vehicles and businesses that are sniffing around, to use the term of the hon. Member for Tonbridge and Malling (Tom Tugendhat), our business sector, potentially taking over businesses in a way that would be deeply damaging to our economy and national security.

The second key trend that was highlighted was, of course, the rise of China. It was made very clear by Mr Dearlove, Mr Parton and others that successive Governments since 2010 have been profoundly naive and complacent about how we respond to the rise of China. We had the so-called golden era, which was supposed to be about economic integration, and supposed to lead to China beginning to align with the rules and norms of the international rules-based order. Clearly, the opposite has happened, and as a result of that naivety and complacency, we find ourselves very exposed, and in a position that could lead to the undermining of our sovereign capabilities. The Bill is being introduced against that backdrop.

I will speak in favour of new clause 5, which is really important, and on which I worked with colleagues, including my hon. Friend the Member for Newcastle upon Tyne Central, but first I will talk about the Bill’s intentions, and whether it will achieve its goals. The Bill seeks to protect Britain’s national security from the threats posed by hostile business takeovers, and by investment vehicles that are not aligned with the UK’s values and interests, and are potentially even actively hostile and seeking to cause harm to our country. However, there is potentially a flaw at the heart of the Bill. A key part of our national security is our economic security; indeed, I would argue that it is a foundation stone of our national security. It underpins our long-term national security, in the sense that if we lose control of key parts of our economy, it leads to an undermining of our sovereignty, our sovereign capability, and our prosperity. That has a knock-on effect on our resilience and our national security.

We need to put our sovereign capabilities at the heart of the Bill, and ensure that when the Government do national security assessments, they look at long-term, strategic, structural threats in addition to the more immediate threats to our national security of espionage, intellectual property theft, and a range of others.

That is why in Committee I honed in on two issues that I felt were most critical: our critical national infrastructure, and enterprises and investment vehicles that have clear links and allegiance to other states. On the first point, the Bill unfortunately neglects to define critical national infrastructure. The Government consultation lists 17 sectors that might come under the national security regime’s mandatory notification process, but it does not list and define critical national infrastructure as an asset class in itself.

There is a difference between the list of 17 sectors in the Bill and the 13 sectors that the Centre for the Protection of National Infrastructure, which is of course a Government body, defines as critical national infrastructure. The missing five sectors are chemicals, defence, finance, health and water, which I would argue are crucial to our national interest. Potentially hostile foreign takeovers in those crucial sectors should give all of us, and certainly the Government, pause for thought. Those sectors form the basis of the safety and security of every citizen of our country, so I strongly recommend that critical national infrastructure be defined as an asset class in the Bill, and that the gap be closed between those 13 sectors and the 17 listed in the Bill.

Our critical national infrastructure of course needs protecting. Sir Richard Dearlove, in response to my question in Committee about including a defintion of critical national infrastructure, 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.]

The truth is that we have failed to protect these critical national assets for a decade. Just look at the involvement of Chinese-based investment vehicles in our water, energy and nuclear sectors. This is a serious problem that needs to be fixed urgently. It is also part of the laissez-faire approach that successive Governments have taken since 2010. It leads to a short-term business culture that opens the door to acquisitions, and to our having by far the highest number of successful hostile takeover bids of any advanced economy in the world—certainly as defined by the OECD.

Our strategic assets have too often been flogged off to the highest bidder. The case of Arm—a jewel in the crown of British tech—has been mentioned by several hon. Members; it is, of course, in the process of being sold off to NVIDIA. Huawei acquired the Centre for Integrated Photonics and of course DeepMind was sold to Google; I absolutely agree with the Chair of the Foreign Affairs Committee, who said that that was one of the most egregious decisions taken by a Government in recent political history.

--- Later in debate ---

[Madam Deputy Speaker (Dame Rosie Winterton)]

Order. Could I interrupt the hon. Gentleman to say that we have quite a few more speakers? We do have a fair amount of time, but I am hoping that speakers will take about 10 minutes, and he has now taken 15, so I hope that he might be bringing his remarks to a close before too long.

[Stephen Kinnock]

With apologies, Madam Deputy Speaker, I am indeed finishing now.

Protecting our national security is just one element of protecting, nurturing and developing the sectors that are vital for the future. Technology sovereignty will be the defining issue of the coming decade. The economic dislocation we have seen from covid means that the case for action is stronger and more urgent than ever.

[Jamie Stone (Caithness, Sutherland and Easter Ross) (LD) [V]]

I shall heed your remarks, Madam Deputy Speaker, and try to keep my contribution short. In truth, I have not been involved thus far in this Bill, but I am my party’s defence spokesman and I therefore take a view on it.

Given the constituency I represent at the very top of the British mainland—north coast, east coast and west coast—I intuit from what I see that the Russian navy is no stranger to those waters. Therefore, the defence of the realm is in my mind personally as well as in speaking in the Commons. As I have said many times before, we do, alas and alack, live in a world where there are states that are not about the best interests of the United Kingdom. As other speakers have said, we see the Chinese threat and we see the Russian threat. It is within that context that I say what I say.

I want to make three or four very general points; as I say, I will try to be fairly speedy. The first is about the amendment that seeks to place an annual security report before the Intelligence and Security Committee. Yes, we have heard that the Government are proposing to bring in something similar to this amendment in the upper House, but it would be no bad thing for us to agree on it at this stage, and then let us see what the Government come back with if they decide not to accept it. In recent days, we have seen on the other side of the Atlantic the whole notion of parliamentary democracy come under some challenge. Here in the mother of Parliaments, the idea of Parliament as supreme and of reports brought back to Parliament is very much a part of our democracy. It is a vital mechanism in securing the way we do things nationally and our freedoms.

On the Chinese point, the sale of DeepMind to Google, and Arm, which will go to NVIDIA in due course, is regrettable, to say the least. Let us make no mistake: this is a quite deliberate act by China and other Governments who are hostile to us. At the end of the day, there are front organisations that are trying to get a grip on cherry-picking those parts of the British economy that are fundamental to our workings. That is extremely dangerous, to say the least.

The scope of the public interest test is important to the Liberal Democrats, as we have been saying for a long time. First and foremost, this Bill, which I support entirely, is important to the safety of the realm—to protecting British interests—but at some stage I would like the public interest test to be broadened out. Mention has been made of China. We know how incredibly badly the Chinese are treating their Muslim minority in the west of the country. It amounts to something approaching genocide: let us not muck about with this. When companies buy up a British company or business, I would like the public interest test to be applied, for instance, on child labour and on modern slavery. The trade deals should be examined in that context as well. At the end of the day—we have said it many times in the House of Commons and the House of Lords—we disapprove entirely of the way in which the Chinese have treated the Uyghurs. We have to try to take action to try to influence that. If we can stymie a trade deal on that front, that might be a very good move for the future.

I have discovered—it is a curious factor during my three years in the Commons—that on defence matters there is often broad agreement across the House, which is very encouraging. The idea of constructive opposition is important, and what comes back from the upper House will be of extraordinary interest. I hope that the lesson has been learned, and that when the Bill is enacted there will be a sensible approach to stopping the repetition of DeepMind and the sale of Arm. I give huge credit to the Chairmen of the Foreign Affairs Committee and of the Intelligence and Security Committee, who have worked assiduously, as have their Committees, on a cross-party basis, to protect the best interests of our nation. There I shall conclude my remarks.