17 November 2020

Concerns over No 10 interference in business decisions with security impact

17 November 2020

Downing Street could pressure the Business Secretary to approve mergers and takeovers despite national security concerns, according to a Tory former leader.

Proposed legislation gives powers to the Secretary of State to “call in” acquisitions of sensitive entities or assets to assess the impact on national security.

But Sir Iain Duncan Smith said an external body should make decisions on the investments rather than Business Secretary Alok Sharma.

Speaking as MPs considered the National Security and Investment Bill, Sir Iain said: “I do feel the pressures on him (Mr Sharma), and I’ve sat six years in Government, and I know what Downing Street does – it gives you a call and it says, ‘oh, you don’t have to go very far with this sort of stuff do you? I mean, after all, this is worth a lot of money to us’.

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“He will be sitting thinking, ‘this is a balanced judgment, where do I go on this?’

“And I just wonder whether that pressure isn’t unfair a) on the Secretary of State and b) also leaves us wondering and be questioned later on why certain decisions were made.

“And I would, if I was Secretary of State, want to release myself from that point. I do not want to be dragged to the courts to be accused of being biased in that decision and making a decision that wasn’t agreeable.

“So I would look for a more external body to be able to judge this.”

The Bill seeks to boost investigations into mergers, buyouts and other business deals that could threaten national security.

Investors and businesses would be forced to tell Whitehall about proposed deals in areas like defence and artificial intelligence (AI).

MPs raised concerns over China, with Sir Iain describing the country as the “single biggest threat” to the UK and the free world.

He said: “We understand in China something very, very special is taking place. This idea of civil-military fusion which is now infecting every single enterprise and company in China.

“The Chinese military, as is already heard, uses this concept, this strategy, to acquire intellectual property, technologies and research for civilian use and for military use.

“An external investment screening body therefore really should be set up under this to establish and investigate cases where this may now affect UK investments.”

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Opening the second reading debate, Mr Sharma said: “The UK is very much open for businesses, but being open for business does not mean that we are open to exploitation.

“An open approach to national investment must also include appropriate safeguards to protect our national security.”

Conservative former minister Nusrat Ghani raised concerns about China potentially harvesting data through social media platform TikTok.

Mr Sharma replied: “Let me assure her that if there are security concerns with any transaction then of course we will act.”

Fellow Conservative Bob Seely (Isle of Wight) said: “There is lots in this Bill which I’m sure we all support, but does (Mr Sharma) accept that without a public interest test, without a character test, without an anti-slavery test, without a human rights test, the definition of national security being offered here is extraordinarily narrow and problematic to the broader age that we live in?”

Mr Sharma replied that “the whole point of this Bill is for it to be narrow on national security grounds”.

For Labour, shadow business secretary Ed Miliband suggested the Bill did not go far enough.

He said: “It’s notable that the Bill brings us into line with other major economies on the security questions we face, but fails to do so on broader issues of public interest and takeovers going beyond national security, despite the clear lessons that I believe have been shown over the last decade.”

SNP trade spokesman Stewart Hosie said only 12 transactions have been reviewed on national security grounds in the past 17 years, and that could jump to more than 1,000 a year under the legislation, as he called for “necessary resources” to be in place.

Richard Graham, Conservative MP for Gloucester, told the debate: “It is simply not enough for this country to say, ‘China is communist, we will not accept communist investment, therefore we will not accept Chinese investment’. We must be a great deal more sophisticated and open than that.”

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