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.
“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.
All that undermines our sovereign capability, and as a result so much of our critical national infrastructure is not in our own hands. In fact, 57 of our critical infrastructure supply chains depend on China—from energy suppliers, to airports, to personal protective equipment. That is a dangerously exposed position to be in. The repercussions, of course, were felt through the pandemic. Our lack of capacity to produce personal protective equipment has cost the UK taxpayer eye-watering amounts of money, and there have been shocking stories of so-called middle men pocketing millions of pounds for simply acting as a broker between the British Government and overseas suppliers.
I now turn to the issue of foreign state involvement, state-owned enterprises and investment vehicles backed by states. Many of the so-called private takeovers and infrastructure investments are in fact being carried out by companies and investment vehicles that are a front for authoritarian state actors who have wider political and national security agendas and whose values are at odds with our own concepts of democracy, liberty and the rule of law. The most obvious and pressing case is the role of the Chinese state, which is committed to expanding its influence economically, politically and militarily in order to become the world’s leading global power. We need only recall the recent case of Imagination Technologies, which was the target of a hostile takeover attempt by an investment vehicle with direct links to the Chinese state—and, of course, there is a substantial Chinese stake in Hinkley Point.
We need to tighten our view and definition of hostile foreign takeovers when they have a particular role and when they owe allegiance to hostile foreign states. That is set out in the statement of policy intent, but it is not in the Bill. As I pointed out in Committee, it really needs to be in there as a clear definition of an additional threshold—a higher threshold and a more assiduous look at the backers of investment vehicles and companies seeking to take over British companies and interests.
In addition to the comments on these broader issues of critical national infrastructure and the state-owned and backed enterprises, it is important that we should flag up concerns about the fact that so much of it sits within the Department for Business, Energy and Industrial Strategy. That is really an issue, because decisions are going to have huge cross-departmental implications. It would be better for there to be a cross-departmental unit bringing together the Treasury, the Home Office, the Foreign, Commonwealth and Development Office, the security services and the Ministry of Defence. It would follow a model similar to that of the Committee on Foreign Investment in the United States.
There were signs that BEIS was something of a cheerleader for the Huawei deal; that does not fill us with great confidence or optimism that a sufficiently astringent look will be taken of these issues if they are left exclusively in the hands of BEIS. There is also an issue around the change of incumbent at Cabinet level, with the Secretary of State being potentially influenced. We would of course never cast such aspersions on the current incumbent, and we congratulate him on his promotion, but we really do need to make sure that we have a belt-and-braces approach and that undue influence is not exerted.
We have seen reports about so-called elite capture by foreign powers, we have seen the Russia report, and we would like far more assiduous action to be taken. It is naive to think that we are not vulnerable to these influences—
Madam Deputy Speaker: 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.