Clause 3 - Statement about exercise of call-in power

National Security and Investment Bill – in a Public Bill Committee at 2:00 pm on 1st December 2020.

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Photo of Chi Onwurah Chi Onwurah Shadow Minister (Business, Energy and Industrial Strategy), Shadow Minister (Digital, Culture, Media and Sport) 2:00 pm, 1st December 2020

I beg to move amendment 1, in clause 3, page 3, line 1, leave out “may” and insert “shall”.

This amendment would make it obligatory for the Secretary of State to include certain matters in a statement about his/her exercise of the call-in power.

Photo of Graham Brady Graham Brady Chair, Conservative Party 1922 Committee

With this it will be convenient to discuss the following:

Amendment 2, in clause 3, page 3, line 9, at end insert—

“(d) the Secretary of State’s definition of the scope of what constitutes national security.”

This amendment provides that a statement from the Secretary of State about the exercise of a call-in power may include his/her definition of national security.

Amendment 9, in clause 3, page 3, line 9, at end insert—

“(d) details of the resource allocated annually to reviews of national security assessments guiding call-in decisions, including specific headcount, skillsets and review caseload figures.”

This amendment provides that a statement from the Secretary of State about the exercise of a call-in power may include details of the resources allocated to reviews of national security assessments within BEIS.

Photo of Chi Onwurah Chi Onwurah Shadow Minister (Business, Energy and Industrial Strategy), Shadow Minister (Digital, Culture, Media and Sport)

It is a pleasure to serve under your chairship once again, Sir Graham. Amendment 1 would make it obligatory for the Secretary of State to include certain matters in the statement about his or her exercise of the call-in power. As we have said on a number of occasions, the Bill gives major powers to the Secretary of State and marks a significant shift in the UK’s merger control process. It is worth emphasising that. It is important to make sure that that shift is done in a transparent and accountable way. The Bill is critical for our national economy and our national security. There is a great deal of uncertainty and there is no definition of national security, and I will come to that point later.

There is a great deal of latitude in the powers, but the Bill attempts to mitigate that by indicating that the Government may publish a statement setting out the scope of their call-in powers. That statement would include details of which sectors are especially under focus, details of trigger events, and details of factors that may be considered by the Secretary of State as part of an intervention. That transparency is welcome, as far as it goes, but we believe that it should go further. As Professor Martin said of the powers, in his expert evidence,

“there should be accountability and transparency mechanisms, so that there is assurance that they are being fairly and sparingly applied.”––[Official Report, National Security and Investment Public Bill Committee, 26 November 2020; c. 81, Q96.]

The Government consultation responses list some detail on the scope of call-in powers but not on a clear final statement of scope. There is no detail on sectors, trigger events and, critically, factors considered under national security. The statutory statement of policy intent—in its current draft version—is woefully lacking in detail. Amendments 1 and 2 are designed to ensure that greater clarity is given about the Secretary of State’s intent. In particular, amendment 2 includes a definition of national security.

There was a good deal of debate during the evidence sessions—I see the Minister nodding—about defining national security. Certainly, I found it a very good and informative debate, hearing from a wide range of experts with different levels of experience in different aspects of national security, from Sir Richard Dearlove to academics, and their views on the importance of and the concerns with defining national security.

Sir Richard Dearlove said that he would certainly see a definition of national security as

“advantageous, because it defines a clear area where you start and from which you can make judgments about the involvement of foreign firms being given space or activity in those areas. That is not a bad idea at all, actually.”––[Official Report, National Security and Investment Public Bill Committee, 24 November 2020; c. 25, Q31.]

David Offenbach said:

“National security is not defined in the Bill, which I actually approve of, because once it becomes too closely indicated, then it is not easy to decide what should be in it, or what should not be in it. I would like to see a definition that includes what Lord Heseltine said when Melrose took over GKN, that research and development should be a subject of importance; it should be included.”––[Official Report, National Security and Investment Public Bill Committee, 26 November 2020; c. 99, Q106.]

He also said:

“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.”––[Official Report, National Security and Investment Public Bill Committee, 26 November 2020; c. 105, Q130.]

As I have referred to on a number of occasions, I think the loss of DeepMind to Google and of the Centre for Integrated Photonics to Huawei show that we can lose strategic assets through a lack of clarity about what might constitute a national security threat. Amendment 2

“provides that a statement from the Secretary of State about the exercise of a call-in power may”— not “must”—

“include his/her definition of national security.”

We are trying very hard to reflect the advice from certain experts that too closely defining national security would limit the powers of the Secretary of State, would not allow it to evolve with the threats and would give indications that could in some respects be gamed, but at the same time we are trying to address the vacuum that no definition creates. That vacuum risks creating major uncertainty for businesses and arbitrary powers for politicians to intervene without appropriate scope for that intervention.

We discussed earlier the conflict of interests between the Department for Business, Energy and Industrial Strategy welcoming foreign investment and the national security interests perhaps saying that there should not be foreign investment. That is especially challenging in the light of the major increases in interventions expected—as we have heard, we expect to go from 12 interventions to 1,830.

We believe strongly that we owe our citizens and businesses clarity on what will guide this increased intervention, but it is also right for the Government to retain flexibility for action and not to have their hands tied with a precise, narrow definition of national security, as security risks change due to technological, economic and geopolitical changes. Indeed, that is why we have needed this legislation for some years now, and why Labour has been calling for it.

The amendment again seeks to make the Secretary of State’s life easier, by encouraging him—or her, in the future—to provide guidance on the factors that might form part of national security assessments. That would not tie the Government’s hands by ruling anything out; it simply asks them to guide businesses with clarity on the sort of factors that might matter, giving flexibility to the Government and clarity to our small and medium-sized enterprises in particular.

I emphasise that many of the small and medium-sized enterprises that may be caught up in the measures under the Bill will not be experts on national security; they may simply be doing world-leading research into particular aspects of artificial intelligence or materials science, so having some guidance would be of significant help to them. Providing guidance only matches what countries across the world already do and is what small businesses across the country desperately seek from the Government.

I will finish my remarks on this amendment with some supporting statements from the some of the experts. Dr Ashley Lenihan from the London School of Economics said:

“What you do see in regulations is guidance as to how national security risk might be assessed or examples of what could be considered a threat to national security. US guidance is helpful on this”.––[Official Report, National Security and Investment Public Bill Committee, 24 November 2020; c. 38, Q42.]

Lisa Wright, of Slaughter and May, said:

“There is not a widespread understanding of what it means and the circumstances in which the Government would intervene.”––[Official Report, National Security and Investment Public Bill Committee, 26 November 2020; c. 70, Q81.]

Several countries give a sense of the factors that might guide national security reviews, which is really what we are asking for here, without excluding areas from the definition. The US FIRRMA legislation—Foreign Investment Risk Review Modernization Act 2018—provides for a “sense of Congress” on six factors: countries of specific concern; critical infrastructure, energy asset, critical material; history of US law compliance; control of US industries that affect US capability and capacity to meet national security requirements, which is very important; involvement of personally identifying information; and potential new cybersecurity vulnerabilities. The amendment seeks to encourage the Secretary of State to do likewise.

Photo of Stephen Kinnock Stephen Kinnock Shadow Minister (Foreign and Commonwealth Affairs) 2:15 pm, 1st December 2020

Just to add to the argument that my hon. Friend is making in her very eloquent manner, this is also about having a smart approach to regulation, whereby we do not take a one-size-fits-all approach but recognise that there is a hierarchy of risks. By pointing out in the definition of national security what key factors make up that definition, we will point both the business community and the Secretary of State to that hierarchy of risks and make sure that there is additional screening, monitoring and assessment of those risks where they are considered to be higher because they contain the factors in the definition.

Photo of Chi Onwurah Chi Onwurah Shadow Minister (Business, Energy and Industrial Strategy), Shadow Minister (Digital, Culture, Media and Sport)

I thank my hon. Friend for that intervention. As a past employee of a regulator, Ofcom, he really appeals to my sense of regulatory best practice in speaking as he does about the importance of smart regulation that is not tied to narrowly defined legalistic definitions of national security but allows, as he says, a hierarchy of assessment of the different interests. We all need to take responsibility for doing everything we can to ensure that kind of smart judgment can be made by small businesses. We encourage giving as much guidance as possible—I see the Minister nodding, so I hope that he will be receptive to the amendment.

Finally, amendment 9 would mandate Business, Energy and Industrial Strategy unit resourcing updates. I will speak briefly to amendment 9, because I know that other hon. Members wish to speak to it. This amendment provides that a statement from the Secretary of State about the exercise of call-in power may include details of the resources allocated to reviews of national security within BEIS.

The driving thought behind this, again, is to ensure that the Secretary of State’s life is made as easy as possible by consistently looking at the resources available to do this very complex and difficult job, particularly given that we are transitioning, as one witness put it, from a standing start to potentially thousands of notifications.

Photo of Sam Tarry Sam Tarry Labour, Ilford South

It is an honour to serve under your chairmanship so soon again, Sir Graham. Following on from the eloquent exposition of those last two amendments by my hon. Friend the Member for Newcastle upon Tyne Central, I would like to focus on amendment 9. The amendment is simple. It tries to help the Government help themselves.

Amendment 9 provides that a statement from the Secretary of State about the exercise of a call-in power may include details of the resources allocated through reviews of national security within BEIS. We know that this is a significant and large change that the Department will have to absorb. For that to be effective—in whatever state the Bill ends up passing through Parliament—there will clearly be a need for proper resource allocation and for Parliament to scrutinise that process.

The Bill transforms the UK’s merger control processes. It locates the merger control processes away from the Competition and Markets Authority, which is a new development. The CMA had a history of experience of overseeing those sorts of processes. At the moment, there is no such expertise in BEIS.

While massively expanding the scope of the intervention, as my hon. Friend the Member for Newcastle upon Tyne Central said, moving from only 12 national security interventions in 18 years to potentially over 1,800 is such a significant step change, so it will be important for Parliament to have the ability to monitor that. It is unprecedented. The Government have neither a precedent nor a plan—none has come forward with the notes to this Bill—to assure the House of how the shift will be managed. That is why we felt it was important to put forward this amendment.

I believe this amendment has support on both sides of the House. Crucially, hon. Members across the House have raised legitimate concerns about the capacity and capability that will be required to manage this major shift. My colleague from the Transport Committee, Greg Clark, said,

“It is an enormous challenge for the Department to set up a new unit, especially since the current regime…has dealt with a very small number of transactions each year.”—[Official Report, 17 November 2020; Vol. 684, c. 228.]

Similarly, James Wild said,

“It is crucial that the structures and resources are put in place to ensure that the timetables for review and assessment in the Bill are actually met.”—[Official Report, 17 November 2020; Vol. 684, c. 266.]

I think both of those points are extremely pertinent.

I do not see this as a controversial amendment. I think it is important to allow the Bill, once passed, to function effectively and with proper oversight. It also provides the appropriate scrutiny, ensuring that this critical part of our national and economic security functions effectively and efficiently. I am sure that in amendments to come we will debate where the balance should be between economic freedoms and our responsibility to safeguard our citizens. But clearly, on the simple idea put forward in this amendment, the Government will have to be transparent about the capability and capacity of BEIS on investment security, as many other countries around the world do.

Photo of Stephen Kinnock Stephen Kinnock Shadow Minister (Foreign and Commonwealth Affairs)

My hon. Friend is setting out the case very well. To add to that argument, this is also about reassuring us as Members of Parliament. A Bill is all very well—it puts it all down on paper—but what really matters is putting it into practice. How does the implementation work? The investment security unit will be the key place for that. We need assurance that that crucial part of this process will have the capability to deliver. The amendment we are putting forward is also an assurance amendment—that when Parliament votes this Bill through, we can be assured that the implementation capability will be there.

Photo of Sam Tarry Sam Tarry Labour, Ilford South

My hon. Friend is absolutely right. As we have shaped our own Bill, we have been learning about regimes in other countries and comparing and contrasting provisions. For example, in the US—we have heard evidence on this from Michael Leiter earlier in the week—they look in detail at only around 240 cases, and then they look at 100 in a short form. We are saying that will have up to 1,800, and at the moment we do not have any guidance on what would be a more detailed and thorough investigation. Clearly, we need to have confidence about the amount of resources and about the fact that the Department has proper oversight of that and has been doing things properly.

This is not just about making our country the most attractive destination to do business; it is also about ensuring that we have the resources in place so that we do not slip up. We do not want another Huawei situation. We do not to be in a place where we do not have the resources, and where the former head of MI6 has to come to our evidence session and say that successive Governments have placed too much emphasis on building the economy at the expense of our security.

One of the evidence sessions last week touched on the idea of moving from just a few dozen cases to 1,000-plus being investigated. We do not know exactly when those cases will come. If there is suddenly a glut of cases at the same time, we need to make sure that the resources are there to deal with all of them. In that way, we will not have smaller companies, in particular, which are not getting the media coverage that some companies have had, falling through the net. As we know, very small, innovative technology companies sometimes develop some very radical forward-thinking technologies, and we might not even notice that they have been bought out or taken over by a state-owned business or by a business that is aligned closely with another state that may not share British values or interests.

I will leave it there, Sir Graham. This is about helping the Government to help themselves, allowing Parliament to have oversight and ensuring that the resources are in place, so that we get this right and do not have to revisit it after a calamity in a few years’ time.

Photo of Graham Brady Graham Brady Chair, Conservative Party 1922 Committee

Before I call the next speaker, I did not interrupt the hon. Gentleman, because I am feeling benign this afternoon. However, it is timely to remind Members that other Members of the House should be referred to by their constituencies, not by their names.

Photo of Alan Whitehead Alan Whitehead Shadow Minister (Department for Business, Energy and Industrial Strategy) (Energy and Climate Change), Shadow Minister (Business, Energy and Industrial Strategy)

It is unfortunately force of habit, and it is a habit that I am loth to break.

Amendments 1, 2 and 9 are closely related. Clause 3 is about the Secretary of State putting forward a statement about the exercise of the call-in power and, within that, specifying—or it looks like they are specifying—what at least some of the contents of that statement are likely to be.

I will talk about the context in a moment, but amendment 1 draws attention to another problem that I have had to look at closely on several occasions in my examination of Bills over the years: the use of the word “may”, which appears at the beginning of clause 3 and in clause 3(3). In looking at Bills, whenever the word “may” appears, I have always concluded that there needs to be a silent “(or may not)” after it, although it is never there. That is what that phrase actually means in any piece of legislation.

What is interesting about the construction of this clause is not only that the Secretary of State is not required to publish a statement—the Secretary of State “may” publish it—but that the Secretary of State is not actually required to include anything in it either. The clause says they “may include, in particular” and then it lists certain things. The “in particular” is peculiar wording, because things that the Secretary of State does not have to include in a statement are actually highlighted by the words “in particular”. That is completely redundant if the Secretary of State does not have to include those things in a statement.

Hon. Members may think that this is just a little piece of pedantry and that I am picking away at things, but I can give the Committee a small story about a piece of legislation where the use of the word “may”, in a way that I will describe in a moment, has had very serious effects. The issue was remarkably similar—a requirement on the Secretary of State to make a statement—and the legislation was the Energy Act 2013. Part 5 set out at great length how the Secretary of State should make a statement about the environmental and climate change obligations and requirements of the Office of Gas and Electricity Markets. The statement was to have a great deal of content—all sorts of guidance on what Ofgem should do.

The only problem was that, at the front of part 5, were the words, “The Secretary of State may, by order, implement this particular part of the legislation.” I am sure hon. Members will not believe this, but seven years later there has been no statement of climate and environmental intent put forward by a Minister as far as Ofgem is concerned. Ofgem is crying out for such a statement, but it does not have one, because the Government of the day decided that because they “may” implement that particular provision, they would not, and they have not. Despite a number of suggestions that they should, that legislation remains resolutely unimplemented.

The problem we have with this legislation today is that we countenance the idea that the same thing might happen. I am not saying that it necessarily would happen, and I am sure that, in the safe hands of the present Minister, it pretty certainly would not. However, the point is that we are not making legislation in the hope that particularly fine Ministers will be particularly good in their application of it. We are making legalisation in a way that will ensure both that it is proof against the worst things that might happen and that it will stand the test of time even if the worst things do happen.

It is important, therefore, to look very closely at how these things function in the legislation. I can see no good reason why the word “may” should not be replaced by “shall”. I might add that our amendment is slightly misplaced, inasmuch as it targets the “may” at the top of page 3, in clause 3(3), but not the one in clause 3(1), which is the key “may” because everything follows from that. One might argue that the right place for the “shall” should be clause 3(1), which should read: “The Secretary of State shall publish a statement for the purposes of this section.” Clause 3(3) could then read: “The statement may include”—we do not need the words “in particular”—"various things.”

The things the amendment says should be covered include a definition of national security, which is very important in terms of the content of the statement. As my hon. Friend the Member for Newcastle upon Tyne Central mentioned, that need not be a tight definition; it is just a definition for guidance, as far as the statement is concerned. In amendment 9, we say that the Secretary of State’s definition of national security should be followed up with

“details of the resource allocated annually to reviews of national security assessments guiding call-in decisions, including specific headcount, skillsets and review caseload figures.”

That is far more specific, but it is nevertheless important in terms of the transparency that is necessary when this statement is produced. However, I emphasise that all of that is as nothing if the Secretary of State does not have to produce a statement in the first place. We can have a wonderful piece of legislation that says exactly what is supposed to be in the statement, but it will fall to the ground, as I have illustrated, if the word “may” stays in at the beginning of the clause.

I therefore earnestly ask the Minister whether he might reconsider that particular word in that particular part of the legislation, and whether he thinks the word “may” might well be replaced—perhaps on Report or elsewhere—by “shall”. That would give a tremendously strong indication that we are going to go about this process with strong transparency and clear intent, that we are going to do what we said we would and that the rest of the clause is switched on by that “shall” to ensure not only that the statement exists, but that it is transparent, does the job it is supposed to and includes the things that it should, in terms of being a comprehensive statement that is good for now and for the future. I hope the Minister, in between his other, onerous duties, will take two minutes to consider whether he might be more comfortable with that wording, as far as the future of the legislation is concerned.

Photo of Nadhim Zahawi Nadhim Zahawi Parliamentary Under-Secretary (Department for Business, Energy and Industrial Strategy), The Parliamentary Under-Secretary for Health and Social Care 2:30 pm, 1st December 2020

I am pleased to speak to this group of amendments, which relate to clause 3. This clause provides for a statement to be published by the Secretary of State, setting out how he expects to exercise the call-in power. Clause 1 requires that this statement is published before the power may be used. There are three amendments in this grouping—amendments 1, 2 and 9—and I will speak to each of them in turn.

I advise the Committee that we have interpreted amendment 1, including with regard to the Members’ explanatory statement, as seeking to amend clause 3(1) rather than 3(3). The effect of this amendment, as we believe it was intended, is to require the Secretary of State to publish the statement. As I set out on Second Reading, the Government are committed to providing as much clarity and predictability as possible for business when it comes to the use of the new investment screening regime that is provided for by this Bill. The proposed statement will provide valuable information to businesses and investors, and help them to determine whether they should submit a notification about their trigger event. Indeed, the Secretary of State must lay before Parliament, publish and not withdraw the statement before the call-in power may be used. In effect, this means that the Secretary of State will need to have published a statement to use the call-in power, which is crucial to the regime.

Of course, as the security landscape changes over time, he may wish to publish an updated statement at a future point; this will need to go through the same consultation and parliamentary procedure as the original statement before it can take its place. I assure hon. Members that the Secretary of State has neither the intention nor the power to run this regime without having first published a statement.

I will now turn briefly to amendment 2, which would allow for the Secretary of State to include a definition of national security in the statement provided for by clause 3. The Secretary of State’s powers under the Bill are expressly predicated on investigating and addressing risks to national security. When exercising these powers, the Secretary of State is required to proceed on the basis that national security is strictly about the security of our nation. That is because what national security means is a question of law, which has already been answered by the highest courts of the land as being the security of our nation.

The Secretary of State will obviously need to comply with the law when exercising the powers in the Bill. There is therefore no need to define what national security means in the Bill. As Dr Ashley Lenihan—a fellow at the Centre for International Studies at the London School of Economics, who was quoted earlier by the shadow Minister—mentioned in last week’s evidence session:

“What we have seen is that most foreign direct investment regimes of this nature all refer to national security. I do not know of a single one that actually defines it or limits itself to a particular definition”.––[Official Report, National Security and Infrastructure Public Bill Committee, 24 November 2020; c. 38, Q42.]

Furthermore, as national security is a term used in the Bill, it would in any event not be appropriate for the Secretary of State to define the scope of the term in the statement; the statement is not legislation and is not subject to approval by Parliament.

Wanting to understand the Government’s aims and expectations for these powers is entirely reasonable—there is no discussion about that. However, I refer the Committee to the comments of Michael Leiter, a partner at Skadden, Arps, Slate, Meagher and Flom LLP, who told us that he would consider that

“it is a bit of a fool’s errand”––[Official Report, National Security and Investment Public Bill Committee, 24 November 2020; c. 49, Q55.]

to define national security. Instead, the statement will set out how the Secretary of State expects to use the call-in power, and we plan to include details of the types of national security risks in which the Secretary of State is especially interested.

Photo of Stephen Kinnock Stephen Kinnock Shadow Minister (Foreign and Commonwealth Affairs)

I just want to come back on the point the Minister made about other regimes not using a definition of national security. The United States Foreign Investment Risk Review Modernization Act provides a sense of congress on six factors: countries of special concern; critical infrastructure, energy assets and critical materials; history of compliance with US laws; control of US industries that affect US capability and capacity to meet national security requirements; involvement of personally identifiable information; and potential new cyber-security vulnerabilities. In his comments, the Minister said that no other regime includes a definition of national security, but that sounds like a definition of national security to me.

Photo of Nadhim Zahawi Nadhim Zahawi Parliamentary Under-Secretary (Department for Business, Energy and Industrial Strategy), The Parliamentary Under-Secretary for Health and Social Care

I am grateful to the hon. Member for Aberavon for his comments. I was quoting from the evidence that Dr Ashley Lenihan provided. She said:

“I do not know of a single one that actually defines it or limits itself to a particular definition,”––[Official Report, National Security and Investment Public Bill Committee, 24 November 2020; c. 38 Q42.]

if that is what he was referring to.

Instead, what I am trying to share with the Committee is that the statement will set out how the Secretary of State expects to use the call-in power. Within that, we plan to include details of the types of national security risks in which the Secretary of State is especially interested. These include certain sectors of the economy and types of acquisitions relating to entities and assets that may raise concern. I think I have said enough on that.

Photo of Matt Western Matt Western Opposition Whip (Commons) 2:45 pm, 1st December 2020

I am not sure that the Minister has; it is always a pleasure to hear his dulcet tones. In all seriousness, is this not open to interpretation with a change of Secretary of State, in the way that we have seen in the US with a change of President, and how that President chooses to define what national security means?

Photo of Nadhim Zahawi Nadhim Zahawi Parliamentary Under-Secretary (Department for Business, Energy and Industrial Strategy), The Parliamentary Under-Secretary for Health and Social Care

I am grateful for the hon. Member’s contribution. Of course, no Government can tie the hands of future Governments, if that is his argument.

Moving on, I commend hon. Members for their interest in the process and function of the regime, made clear through amendment 9, which provides for additions to the statement about the exercise of the call-in power. It aims to ensure that the regime created by the Bill is properly resourced with the right numbers of skilled staff. The hon. Member for Ilford South was thoughtful in his concern about that. However, I would say to him and other Members that the purpose of the statement is to set out how the Secretary of State expects to exercise the power to give a call-in notice. It will provide information on the types of scenarios where the Secretary of State may consider there to be a national security risk. It would not be appropriate to add details about how the regime will be staffed.

Furthermore, internal arrangements on resource and skills are a matter for the Secretary of State and, of course, the permanent secretary at BEIS. I reassure hon. Members, however, that the Bill compels—this is the lever for Parliament, in my view—the Secretary of State to publish an annual report, which will provide information on the number of mandatory notices accepted and rejected, the number of voluntary notifications accepted and rejected, and the number of call-in notices and final orders made. That review is incredibly important in measuring performance. The exact details and requirements for the annual report are set out in clause 61. I will not go through all of them.

For the reasons I have set out, I am unable to accept the amendments and hope that Opposition Members feel able to withdraw them.

Photo of Chi Onwurah Chi Onwurah Shadow Minister (Business, Energy and Industrial Strategy), Shadow Minister (Digital, Culture, Media and Sport)

I thank the Minister for his response. I particularly thank my hon. Friends for the points that they have raised. My hon. Friend the Member for Ilford South set out the importance of reporting on resourcing. I am disappointed that the Minister could not accept that amendment. He said that it was not appropriate to include details of resourcing and staffing. I point him in the direction of the Government’s misinformation unit, which was set up to grand acclaim in order to address that important issue. As the Minister for vaccines, he will have a strong interest in the effectiveness of misinformation, which could harm our wellbeing and future return to normality.

That unit was set up. Written parliamentary questions that I tabled revealed that it had no full-time staff or full-time equivalents, and we see a resultant lack of action on misinformation. I make that point to counter the Minister’s assertion that it is not important to have details on resourcing reported. On the contrary, our experience in Parliament and the civil service suggests that it is what is resourced that will get done, with the appropriate skill and care. With such a great number of cases, and such a great change in the scope of takeover and acquisition legislation that the Bill represents, reporting on resourcing is very important.

I also thank my hon. Friend the Member for Ilford South for such intriguing and at times amusing oratory on the importance of a single word in the right place.

Photo of Chi Onwurah Chi Onwurah Shadow Minister (Business, Energy and Industrial Strategy), Shadow Minister (Digital, Culture, Media and Sport)

My hon. Friend intends to stay where he is. I thank him for his oratory on the importance of the single word “may”. Something has been lost in translation between ourselves and the Clerks, in that there was originally an intention to address the first “may” with regard to publishing the statement. The Minister says that we do not need that to become a “shall” because it will be published but rejects the notion of it becoming “shall” despite the fact that it will be published. I leave it to the Committee to decide on the holes in that logic.

I am sure that the Minister was not deliberately trying to misinterpret what we were saying, but we made it clear that we are not looking for a precise and narrow definition of national security; we are looking for broad indications or guidance. As my hon. Friend the Member for Aberavon said in citing how the US does it, we are looking for a sense of what is taken into consideration with regard to national security. I would only plead with the Minister to recognise the circumstances of so many small businesses, start-ups and investors in trying to understand what the Secretary of State will take into account. This is intended not to define it narrowly, but to give a sense of what will be taken into account as we move into this new regime that is so vastly different. Because these amendments are important and significant, I intend to press them.

Question put, That the amendment be made.

Division number 2 National Security and Investment Bill — Clause 3 - Statement about exercise of call-in power

Aye: 6 MPs

No: 9 MPs

Ayes: A-Z by last name

Nos: A-Z by last name

The Committee divided: Ayes 6, Noes 9.

Question accordingly negatived.

Photo of Graham Brady Graham Brady Chair, Conservative Party 1922 Committee

We must now deal formally with amendments 2 and 9, which can either be pressed to a Division or withdrawn.

Photo of Chi Onwurah Chi Onwurah Shadow Minister (Business, Energy and Industrial Strategy), Shadow Minister (Digital, Culture, Media and Sport)

I would like to press amendment 2 but withdraw amendment 9. I would like to hear the Committee specifically on national security.

Amendment proposed: 2, in clause 3, page 3, line 9, at end insert—

“(d) the Secretary of State’s definition of the scope of what constitutes national security.”

This amendment provides that a statement from the Secretary of State about the exercise of a call-in power may include his/her definition of national security.

Question put, That the amendment be made.

Division number 3 National Security and Investment Bill — Clause 3 - Statement about exercise of call-in power

Aye: 5 MPs

No: 9 MPs

Ayes: A-Z by last name

Nos: A-Z by last name

The Committee divided: Ayes 5, Noes 9.

Question accordingly negatived.

Photo of Sam Tarry Sam Tarry Labour, Ilford South

I beg to move amendment 11, in clause 3, page 3, line 16, at end insert—

“(7) The Secretary of State must publish guidance for potential acquirers and other interested parties separate from the policy intent statement.

(8) Guidance under subsection (7) must cover—

(a) best practice for complying with the requirements on acquirers imposed by this Act and regulations;

(b) the enforcement of the requirements; and

(c) circumstances where the requirements do not apply.

(9) Guidance under subsection (7) must be published within six months of this Act receiving Royal Assent.”

This amendment would require the Secretary of State to provide clear guidance to potential acquirers and other interested parties.

Again, this is, in our view, a fairly simple amendment. It is important because it is about ensuring that we are an attractive destination for business. A number of witnesses were very clear that many businesses need an early warning. The amendment would require the Secretary of State to provide clear guidance to potential acquirers and other interested parties, so that people are not put off from investing or getting involved in the British economy because of red tape that they might fear being tied up in. The amendment is about providing that clear guidance to companies.

If the Government went even further and published guidance that created regulatory sandboxes and clear engagement guidelines for innovative small and medium-sized enterprises, which could benefit from efficient regulatory engagement to pursue investment transactions just as, for example, the Financial Conduct Authority has done for the UK’s world-leading FinTech sector, we could turn this into an opportunity to encourage the right types of companies from our allies around the world to invest in Britain.

One of the things we fear is the introduction of significant uncertainty. We know that hard work is going on to finalise a trade deal. Businesses have for so long felt that their big problem, in deciding about long and medium-term investment, is uncertainty. The amendment is about tackling straightaway any fears of uncertainty among businesses, particularly innovative SMEs, which will not have the resources to spend on figuring out the lengthy processes and, potentially, the accompanying guidance that could be put in place once the Bill passes. The amendment would require the Government to try to reduce that uncertainty.

Photo of Mark Garnier Mark Garnier Chair, Committees on Arms Export Controls, Chair, Committees on Arms Export Controls

I have a lot of sympathy for what the hon. Member says, because clearly the more clarity a potential investor has when investing in the UK, the better. The only problem is that if the Government are in a position to provide guidance in the first place, they are in a position to subsequently update it. Governments of different colours could change the guidance without necessarily having to refer back to Parliament. Does the amendment therefore not perversely create greater potential uncertainty, by enabling Governments to change their guidance willy-nilly, without scrutiny?

Photo of Sam Tarry Sam Tarry Labour, Ilford South

The hon. Gentleman makes a valid point, but it was not really borne out in the evidence that we heard from the witnesses. They were clear, even while having different approaches, that more guidance accompanying this, and providing it early, would provide that certainty. We heard a range of approaches and opinions, and that advice should clearly be listened to. Dr Lenihan said:

“The Bill provides for a lot of regulatory guidance, which needs to come forward in a clear and very easily comprehensible and understandable manner.”––[Official Report, National Security and Investment Public Bill Committee, 24 November 2020; c. 38, Q42.]

Particularly when thinking about how we champion those small and medium-sized enterprises that will boost us and get us back on the front foot once we are out of this awful covid crisis, those are exactly the kinds of companies that we will want to be invested in from abroad, and we should give them a framework that they can quite simply understand without tying them up for too long in too much red tape, while of course balancing that with all the things we have discussed today, including balancing security against economic freedom.

That clarity could also be focused on the new investment security unit, reducing the complexity and increasing the understanding and the relevance of that unit’s work once it is in place. David Petrie from the Institute of Chartered Accountants in England and Wales said that the unit would be

“extremely useful if it was able to issue meaningful market guidance notes, similar to the notes that accompany the takeover code. That would again be extremely helpful so that we can understand. It would help the market to be better informed.”––[Official Report, National Security and Investment Public Bill Committee, 24 November 2020; c. 54, Q60.]

In our current climate, that certainty would allow the Bill to serve its purpose in safeguarding our national security while at the same time maintaining Britain as an attractive destination to invest in and to do business.

Photo of Chi Onwurah Chi Onwurah Shadow Minister (Business, Energy and Industrial Strategy), Shadow Minister (Digital, Culture, Media and Sport) 3:00 pm, 1st December 2020

I thank my hon. Friend the Member for Ilford South for moving the amendment. The Committee must support the aims of the amendment and the implementation of the requirement to publish guidance for potential acquirers and other interested parties separate from the policy intent statement. My hon. Friend set out the importance of avoiding uncertainty and of providing certainty for companies and businesses that might come into the scope of this Bill.

Now is perhaps the time to highlight a failing of the Bill and the impact statement, in that the focus is on the acquirers—those who will acquire companies or shares through transactions. The explanatory notes explain why that is the case: because a trigger event might take two or three separate transactions to complete, such as acquiring a 25% interest, so it has to be on the acquirers to make the notification. I understand that, but I think the impact statement dramatically underestimates—in fact, it does not make an estimate—the impact that will have on those being acquired.

By that, I think particularly of small start-ups—our small, innovative new ventures and new enterprises, perhaps spun out from universities or other institutions. As they seek finance to grow and to thrive and to make further discoveries and innovations, they will have to give a lot of consideration to the provisions in the Bill. To be frank, as all of us who have worked in small businesses know, time is at a premium, as is access to legal advice. Small start-ups need this kind of guidance easily and readily available. I fail to understand why the Minister would not want the Department to provide this guidance specifically to companies, separate from the policy intent statement. I support my hon. Friend’s amendment.

Photo of Nadhim Zahawi Nadhim Zahawi Parliamentary Under-Secretary (Department for Business, Energy and Industrial Strategy), The Parliamentary Under-Secretary for Health and Social Care

Amendment 11 would require the Secretary of State to publish guidance in relation to the Bill and regulations made under it within six months of Royal Assent. The hon. Member for Ilford South raised an important issue and I welcome the opportunity to discuss the Government’s plan for communicating the application of the proposed new regime, including the requirements that would or might be imposed on persons. It is important that appropriate steps are taken to make such persons aware of the requirements that would or might be placed on them. I have used “persons” here deliberately as it is the correct term, but I wish to make it clear that that includes acquirers.

First, the Government have published factsheets on the digital platform .gov that make clear what the measures in the proposed legislation are and who they apply to. The factsheet “Process for Business” sets out step by step what steps persons must or may need to take to ensure compliance with the regime. Secondly, we have set up the email address investment.screening@beis.gov.uk specifically for the purpose of providing advice on what may be in scope of the NSI regime for persons to contact to ensure that they properly understand the proposed regime. Of course, the Government believe that the Bill does not require any adjustment but should adjustments happen as it passes the scrutiny of this House and the other place, then any adjustments that affect persons would be reflected in the factsheets.

Thirdly, the Government have published and will continue to publish guidance alongside key documents in the Bill. Hon. Members will, for example, be able to review the information likely to be required for notifications online, as well as draft guidance. It is our intention to complete similar such guidance wherever it would be beneficial to parties. I hope that that provides sufficient reassurance for the hon. Member for Ilford, South and the shadow Minister that the Government are thinking carefully, and will continue to think carefully, about how to ensure that all parties who need to understand the measure are able to. For the reasons that I have set out, I cannot accept the amendment and I hope that the hon. Member for Ilford, South will withdraw it.

Question put, That the amendment be made:

Division number 4 National Security and Investment Bill — Clause 3 - Statement about exercise of call-in power

Aye: 6 MPs

No: 9 MPs

Ayes: A-Z by last name

Nos: A-Z by last name

The Committee divided: Ayes 6, Noes 9.

Question accordingly negatived.

Question proposed, That the clause stand part of the Bill.

Photo of Nadhim Zahawi Nadhim Zahawi Parliamentary Under-Secretary (Department for Business, Energy and Industrial Strategy), The Parliamentary Under-Secretary for Health and Social Care

I hope that hon. Members will recognise that the Government are committed to providing as much clarity and predictability as possible for business on the use of the new investment screening regime provided for in the Bill. Clause 3 is the third clause related to the call-in power, and concerns the statement of policy intent. Colleagues will remember that clause 1 requires that, prior to the use of the call-in power provided for in that clause, the Secretary of State must publish and not withdraw a statement that sets out how they expect to use the call-in power.

The Secretary of State was pleased to publish a draft of that statement alongside the Bill to enable hon. Members, businesses and, indeed, the general public to review the approach he expects to take. As hon. Members will no doubt have seen, the draft statement contains details of what the Secretary of State is likely to be interested in when it comes to national security risks. It includes certain sectors of the economy and the types of entities, assets and acquisitions that may raise concerns.

Although it is crucial for investors to have confidence that there is as much transparency in the regime as possible, there is self-evidently a limit to how much the Government can disclose in that regard given that the regime deals explicitly with national security matters. Nevertheless, the draft statement goes into some detail about the factors that the Secretary of State expects to take into account when making a decision on whether to call in a trigger event. The statement will also be required to be reviewed at least every five years to reflect the changing national security landscape, although in practice it may be reviewed and updated more frequently.

Taken together, I hope that hon. Members will agree that the requirement for the Secretary of State to publish a statement of policy intent prior to use of the call-in power and the requirement to review it regularly provide a good level of transparency and guidance to businesses, while not disclosing our national security vulnerabilities, which of course hostile actors would be grateful to receive. The statement will provide valuable information for businesses and investors and help them, we believe, to determine whether they should submit a notification about their trigger event. I hope that hon. Members feel that I have sufficiently explained and justified the clause and its place in the Bill.

Photo of Chi Onwurah Chi Onwurah Shadow Minister (Business, Energy and Industrial Strategy), Shadow Minister (Digital, Culture, Media and Sport)

Clause 3 is critical, as it sets out the context in which the Secretary of State will exercise the important power to call in transactions. We have sought in our amendments to improve it. I accept the Minister’s response to and rejection of our amendments, and his belief that the clause provides for the guidance and clarity that businesses need. I would just say to him that it was the clear conclusion of just about every witness in the evidence sessions that greater clarity and understanding were required, and that to make this change was an immense mountain to climb.

In some respects, the Government could not give too much support and guidance, within the bounds of national security, to the many companies and persons who will be caught up in the measures. Having said that, given that it is an essential part of the Bill, which we support, we accept that the clause stand part.

Question put and agreed to.

Clause 3 accordingly ordered to stand part of the Bill.