Clause 14 - Mandatory notification procedure

National Security and Investment Bill – in a Public Bill Committee at 12:45 pm on 3rd December 2020.

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Photo of Sam Tarry Sam Tarry Labour, Ilford South 12:45 pm, 3rd December 2020

I beg to move amendment 18, in clause 14, page 8, line 36, leave out “may” and insert “shall”.

This amendment seeks to make the Secretary of State’s prescription of regulation of the form and content of a mandatory notice mandatory.

Photo of Derek Twigg Derek Twigg Labour, Halton

With this it will be convenient to discuss the following:

Amendment 19, in clause 18, page 11, line 28, leave out “may” and insert “shall”.

This amendment seeks to make the Secretary of State’s prescription of regulation of the form and content of a voluntary notice mandatory.

Clause stand part.

Photo of Sam Tarry Sam Tarry Labour, Ilford South

It is an honour to serve under your chairmanship, Mr Twigg. These two amendments are simply about giving more direction. One issue that we have debated on every day of the Committee’s scrutiny so far is how the Bill will radically transform the merger control process and create an entirely new centre for that process within BEIS.

Small and medium-sized enterprises across the country will look at these changes with great interest and understanding that national security is important and imperative, but also with uncertainty as they consider the need to seek investment to grow and create jobs. We owe those businesses clarity, confidence and certainty in the new regime, which is why the amendment simply seeks to make the Secretary of State’s prescription of regulation of the form and content of a mandatory notice mandatory by deleting “may” and inserting “shall”.

The Bill gives some clarity on the assessment period and the review period under the new regime, but there is still major uncertainty about the first stage of the regime. It is unclear how long the Secretary of State can take to decide on rejecting a mandatory or voluntary notice. The Government’s consultation suggested that it would be as soon as reasonably practicable, but unfortunately that is of no assurance. For a new unit with major resourcing challenges, as soon as reasonably practicable could be far from soon.

My hon. Friend the Member for Southampton, Test spoke earlier in the week about his experience and the bad practice that could occur if the Secretary of State was left with so much discretion, rather than a little more compulsion. There are a number of examples, including the Energy Act 2013, where having “may” rather than “shall” meant that, in real terms, what was determined by the Bill never came into being.

Clause 66 of the Bill says that some clauses will immediately come into force, but it later says “may”. The Secretary of State could—hopefully he would not—wait for years or not do it at all. In both clauses referred to by the amendments, the regulations must be laid by the Secretary of State, and the term “may” creates some degree of uncertainty. It would be far better to take a more direct approach by inserting “shall”.

It is also unclear what specific form of content and information could be required in the mandatory or voluntary notices that firms and investors would have to provide. We could end that uncertainty. It is already an incredibly challenging time for firms to engage with a major new control process in the midst of a pandemic and, of course, while waiting to hear what our new relationship with the European Union will be.

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 the excellent remarks he is making. Is his experience of small and medium enterprises in Ilford South the same as mine in Newcastle, in that they generally do not have the time to fill out the multiple forms required to receive grants or to apply for support? To expect them not only to respond, but to design the form and decide what should go into it is really taking our small and medium enterprises for granted.

Photo of Sam Tarry Sam Tarry Labour, Ilford South

I agree. It is Small Business Saturday this weekend, and I imagine that many SMEs will be telling us when we are back in our constituencies about exactly these kinds of issues: the uncertainty, and the decisions they want to take about investment in staff, in technology and, of course, in equipment.

With this amendment we are trying to focus on ensuring that businesses have as much clarity as possible, so that they can begin to plan. If that uncertainty is ended, as we come out of the covid crisis and move forward from the debacle of Brexit, it will be better for businesses to have clarity, so that they can begin to take the positive decisions that will hopefully create jobs.

It is already challenging for firms to engage in such a tricky process. Remember that small and medium enterprises will not have the vast resources that are perhaps available to the multinationals or mergers-and-acquisitions-type companies from which we heard evidence. It will be far more frightening for SMEs to face such things given everything else they are dealing with at the moment.

The amendment would go a long way towards ending uncertainty for SMEs and ensuring that the Government act with clarity and, of course, with competence. It would require the Government to publish guidance on the form and content of the notices that firms will have to fill out. There will always be a degree of paperwork for businesses, but this is about ensuring that it can be filled in as quickly as possible. The recommendation is that guidance should create efficient forms and content requirements, and that it contains some indication of how long the Government will take to accept or reject a mandatory or voluntary notice,

Photo of Matt Western Matt Western Opposition Whip (Commons)

My hon. Friend is making some important points. The issue here, as he is illustrating, is simply that the pressures that SMEs face in particular are about cash-flow and attracting inward investment. They do not have the resources or the capacity to cope with those sorts of approaches and will be under huge pressure. That is why the amendment is so important.

Photo of Sam Tarry Sam Tarry Labour, Ilford South

My hon. Friend makes a good point. Businesses are feeling huge pressure. SMEs will often experience a degree of fear at the moment about potentially having to grapple with a whole series of new regulations—not just under this important Bill, but under the spin-outs that come out of our ongoing negotiations with the European Union. Many businesses are, I think, holding back on investment and investment decisions—even inward investment into their own company—simply because of the uncertainty. It is incredibly important to remove those barriers and to get people back investing in both staff and technology and feeling that they have the ability to see forward far enough to keep staff on the books through such a difficult crisis.

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

My hon. Friend is making an excellent point about Brexit, but I will not test the Committee’s patience on that. As for the changing forms and the requirements on SMEs, does my hon. Friend understand why the Minister is putting the onus for deciding what information is required on to small businesses, rather than on to his Department and the civil service, which could do that?

Photo of Sam Tarry Sam Tarry Labour, Ilford South

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.

Photo of Peter Grant Peter Grant Shadow SNP Spokesperson (Europe), Shadow SNP Deputy Spokesperson (Treasury - Chief Secretary)

It is a pleasure to serve under your chairmanship, Mr Twigg. I know that there was quite a bit of discussion in an earlier sitting, which I was unable to attend, about the different between “may” and “must”. In relation to clause 14—my comments apply also to clause 18—if we try to imagine the circumstances in which the Secretary of State would choose not to make those regulations, we realise that there are none. If no regulations have been made, most of subsection (6), which clearly is the meat of the clause, just does not make sense.

Subsection (6) states that the Secretary of State may reject the mandatory notice if

“it does not meet the requirements of this section”.

But the clause does not place any requirements on the notice. A letter that says, “Dear Secretary of State, this is a notice under section 14” would meet all the requirements of that subsection, so it cannot be rejected on those grounds. Clearly, it cannot be rejected on the grounds that

“it does not meet the requirements prescribed by the regulations”,

unless the Secretary of State has made the regulations. It can be rejected if

“it does not contain sufficient information to allow the Secretary of State to” make a decision. How can it possibly be fair for a business to have a notice rejected on the grounds that it does not contain sufficient information to allow a decision to be made by somebody who has chosen not to state what information needs to be provided?

Therefore, two of the grounds on which the Secretary of State can reject the notice are meaningless. The third one has meaning, but it is surely not a reasonable way to treat any business. If there is information that the Secretary of State feels will be necessary to allow her or him to come to a decision on the notice, surely that information should be set out in regulations so that there can be no doubt.

It is perfectly in order for the statutory form of notice to require additional information that cannot be specified in advance. Clearly, the Bill will cover a wide range of transactions, and there will always be information that is needed for one transaction but maybe not for others, but surely we will need to know the name of the acquirer, the identity of the asset and the timing of the intent to acquire. It will be impossible to process any notice without those kinds of things, so surely the Secretary of State will at the very least make regulations requiring that information to be provided. If the Minister can persuade me that there are realistic circumstances in which the Secretary of State can choose not to make any regulations at all, perhaps I would not support the amendment, but the clause will simply not work if the regulations have not been made. For that reason, it should require the Secretary of State to make those regulations.

That is made more important by the points that the hon. Member for Ilford South made, in that subsection (5) only requires the Secretary of State to come to a decision

“As soon as reasonably practicable”.

That is about as vague and woolly a time requirement as it is possible to put in legislation. I remember, thinking back to my days in the Health and Safety Executive, that the phrase “reasonably practicable” appeared in a lot of legislation on health and safety requirements. The “reasonably” part means taking into account the other circumstances applying to the Secretary of State and the Department at the time, so if they are up to their eyes in dealing with Brexit, trade deals, getting the vaccine distributed or anything else, then “as soon as reasonably practicable” could become a very open-ended time limit indeed. As soon as the Secretary of State has decided to accept—

Photo of Michael Tomlinson Michael Tomlinson Government Whip 1:00 pm, 3rd December 2020

On a point of order, Mr Twigg. I beg to move—

Photo of Derek Twigg Derek Twigg Labour, Halton

Order. The hon. Gentleman cannot move to adjourn while a Member is speaking.

Photo of Michael Tomlinson Michael Tomlinson Government Whip

I apologise to the hon. Member for Glenrothes; I will wait.

Photo of Peter Grant Peter Grant Shadow SNP Spokesperson (Europe), Shadow SNP Deputy Spokesperson (Treasury - Chief Secretary)

It is easy to see that there will be circumstances where “as soon as reasonably practicable” becomes a very open-ended time limit—or non-time limit—indeed.

Given that so much of the rest of the Bill puts time limits on the Secretary of State to ensure that potentially beneficial transactions cannot be held up forever simply due to delays in the Department, the combination of the words “as soon as reasonably practicable” in subsection (5), right at the start of the process, and the massive uncertainty in the minds of businesses if the Secretary of State does not make regulations persuades me that the Bill should not allow the Secretary of State to make those regulations but should require the Secretary of State to make them, because the clause simply does not work or make sense if they are not made.

Ordered, That the debate be now adjourned.—(Michael Tomlinson.)

Adjourned till this day at Two o’clock.