PARLIAMENTARY DEBATE
Investment Security Unit: Scrutiny - 23 March 2023 (Commons/Commons Chamber)

I rise today to give a statement on behalf of the Business, Energy and Industrial Strategy Committee in respect of our memorandum of understanding with the Government on scrutiny of the use of powers contained in the National Security and Investment Act 2021. I am grateful to the Backbench Business Committee for giving me the time to do so.

As the House knows, the National Security and Investment Act established a new statutory regime for Government scrutiny of, and intervention in, investments for the purposes of protecting national security. The Act applies to a wide range of sectors, which themselves are broadly defined, and—unlike in other countries—covers all transactions, not just those involving foreign investment. The investment security unit was then established within the Department for Business, Energy and Industrial Strategy to operationalise the Act. At that stage, the Secretary of State for Business, Energy and Industrial Strategy was the decision maker.

When the Bill was going through the House, the Government confirmed their preference that scrutiny of the use of these powers should be done by my Committee. There was a debate in this House and in the other place about whether a departmental Select Committee had sufficient processes, people and protections in place to scrutinise secret information, and right hon. Members from the Intelligence and Security Committee understandably argued that their Committee was best placed to do that work. However, the Government were not minded to accept amendments for a statutory regime of scrutiny in the Bill, nor to change their position on which Committee should have oversight of the regime. As such, Ministers committed to entering into a memorandum of understanding with my Committee to set out how information would be made available to allow us to do our work.

While negotiating that memorandum, my Committee established a new National Security and Investment Sub-Committee and appointed special advisers. We are also grateful to the House for providing us with national security subject specialist staff with relevant levels of security clearance. In addition, we undertook a short study visit to the United States to understand how congressional oversight of that country’s equivalent regime is conducted.

I am pleased to inform the House that the memorandum of understanding between the Government and my Committee has now been agreed, and that we have published it today in our report. I will not test the patience of the House by reading out the whole memorandum, but I will just make two points. First, it has been agreed that scrutiny will largely be done in private and, in so far as it relates to individual transactions, will be done retrospectively following any appeal or legal challenge. This was agreed to prevent actual or perceived political interference in quasi-judicial decision making, and means that we operate in line with our counterparts in the United States. Secondly, the bulk of our work will focus on the effect of the legislation on investment in the United Kingdom and the effectiveness of Government operations.

When the Committee decides that it wants to understand individual transactions in more detail, we will be able to request information from the Government via a private explanatory memorandum, which we will not publish. If the Committee wishes to see more sensitive information that is not contained in the explanatory memorandum, I as Chair of the Committee will be able to request access to such information, and will be briefed on equivalent to Privy Council terms or by notification under the Official Secrets Act. Lastly, while the recent machinery of Government changes have resulted in the investment security unit moving to the Cabinet Office and the decision maker now being the Chancellor of the Duchy of Lancaster, the Government have confirmed that they still intend for scrutiny of the Act to be undertaken by my Committee and, soon, its successor Committee on the basis set out in today’s report and the letter from the Minister received by other relevant Committees.

I thank the Minister for her question. Of course, for a long time, she was a member of my Committee. She pushed me quite hard to ensure that we got very effective scrutiny of this legislation, so I look forward to working with her collaboratively on the exchange of information as it relates to our interests as a Select Committee.

The Minister invites me to thank her officials, as well as my Clerks on the Select Committee, and I should do so. It took, I think, nearly 13 months to get to this point, sometimes with some frustration, but we got there. However, much of the work has been done and much of the detail has been agreed at length by our officials and Clerks, and we are very grateful to them for their contributions.

As for when the Minister will be summoned to my Select Committee, it is unusual that people are keen to come and be cross-examined by me and my colleagues on the Committee, but we look forward to welcoming her in due course.

I am in the unusual circumstance, as a member of the Opposition, of having to put the Government line to my right hon. Friend. I merely recognise, as he will know from our extensive conversations, that it has always been the case, in line with the Osmotherly rules for Select Committees, that we do not have a statutory power to summon information, as he does on the Intelligence and Security Committee, but that there is a presumption that information will be shared with us. He will know that, if that information is not exchanged in a timely and ready fashion for us to do our work, the Committee will escalate those issues via the Committee, the usual channels or on the Floor of the House. As to my right hon. Friend’s question on where the unit resides, it resides in the Cabinet Office. I assume it is within the National Security Secretariat. I think he is therefore suggesting that that means the ISC has oversight. I know full well that he and his colleagues will make use of their powers to try to request information from the Government in their work.

There is an interesting question there, to which none of us knows the answer: how routine will it be for us to have to look at either commercially sensitive or national security-sensitive information about individual transactions? From our study visit to the United States, it seemed that most of the transactions were operationalised, and had not become political or been escalated to a committee level, because the issues were seen to be sensible, small or below de minimis thresholds.

There will be examples where there is more political interest in a particular transaction. In the past year, for example, where the 2021 Act has been operational, the vast majority of the notifications that my Committee has received have not warranted our having to look at the national security information. For some cases, such as Newport Wafer Fab, the industrial implications of that decision will warrant our looking at that information in more detail. Under this memorandum of understanding, we will request that information when we are permitted to do so—after the period of judicial review and appeal has closed—so that we may understand whether the Act is being used in the way it is supposed to be used, without deterring investment in the interests of workers and business in this country.

The right hon. and learned Gentleman refers to staff. As I said in my statement, the House has kindly provided the Committee with additional staff, who are national security specialists and have a range of security clearances. In the MOU, there are procedures and processes for the handling, holding, storage and use of information, both between my Committee and my Clerks, but also where necessary within Government facilities.

We have to give the MOU a whirl and see how it works. I understand the right hon. Member’s concerns. My only point is that I am not sure there will be lots of documents we will want to host in a safe special location for us to keep returning to. Our job broadly is to look at the implications for investment and for business in the UK. When something is escalated from a transactional basis to a political level, we need to understand why Ministers have made their decisions.

As much as I would like it to be the case, it is not for the Committee to be the Government, and it is not for us to make different decisions from Ministers. Ministers—the right hon. Member’s colleagues—are empowered to make the decisions they make. It is for my Committee merely to have oversight and scrutiny of how they have come to those decisions and to recommend improvements, should the Committee see fit to do so. While the right hon. Gentleman’s point is correct factually—the ISC has a whole range of assets and processes and people who are not available to my Committee—I am not sure in practice how much of that information would need to be processed in that way for us to do an effective job of scrutinising the use of the legislation.

I hope the right hon. Member recognises that, albeit I have been in the House for the short period of six years, I am not a timid politician. If I am blocked or prevented from doing the work I have been asked to do by the House, I will make it clear that is the case. I am happy to come back to the House as and when appropriate to report on the scrutiny of the Committee. As the Bill was passing through the House, I and my Committee were, to be honest, fairly ambivalent about which Committees did the work and on what basis. We were open to other Committees and colleagues making their case, but ultimately the Government have made the decision, and we have responded to that and set up our processes in the best possible way. I reassure her that if they do not work well enough, I will certainly be back here to make that case.