18 Jan 21. Report: Striking the balance: Protecting national security through foreign investment legislation.
Ambiguity harms our security and prosperity
The Foreign Affairs Committee today publishes its Report Striking the balance: Protecting national security through foreign investment legislation.
The UK remains an open, stable and attractive environment for foreign investors but the open investment regime, combined with the attractiveness of its businesses, leaves Britain vulnerable to exploitation from those whose investments may be more than a simple bet on future growth and are in reality a national security risk.
The Committee therefore welcomes the introduction of the National Security and Investment (NSI) Bill, which will bring the UK into line with its major economic competitors and partners who have already taken measures to strengthen the national security screening powers within their foreign investment legislation.
Lacking clarity
This report found that in line with the request for comment by the Minister responsible, Nadhim Zahawi, the Bill could be clarified in places, particularly in relation to the types of transactions that might be captured under the new regime and the decision-making process behind this. The term ‘national security’ is not defined in the Bill. The Committee heard the arguments against providing a comprehensive definition, due to the dynamism of the threats faced by the UK and the consequent need for flexibility in responding to them but considered the importance of clarity greater.
How national security will be interpreted will be important for the effective implementation of the new business regime and without this there is a risk of nugatory reporting making the system unworkable. It is evident that some of the concerns outlined in this report can, at least in part, be mitigated by greater clarity on how “national security” is to be understood in the context of this law.
This would help to ensure that foreign investment decisions are made only on the basis of national security as is the Bill’s intended remit, as well as improving clarity for UK businesses and their investors, while also providing a level of flexibility that permits responses to unforeseen events or developments. The report outlines that this is what the Bill should be aiming to achieve in order to protect the UK’s security without deterring foreign investment.
The Committee has therefore tabled an amendment to the Bill at report stage, outlining the set of issues and considerations that the Secretary of State should take into account when assessing foreign investments on national security grounds.
Chair of the Foreign Affairs Select Committee, Tom Tugendhat MP, said:
“Many invest in the UK because of our stability and openness. We all welcome that international support for our innovation and ideas but we need to be careful. State-backed enterprises are now changing investment decisions from looking for financial to strategic returns. If the Government is not more coordinated and long-term in its approach, we risk losing our most innovative companies overseas, undermining our national security.
“Our strategic competitors, notably China, have a track record of using foreign investments to gain access to important technologies and information. We’ve witnessed too many of our country’s brilliant tech firms disappear abroad with potentially significant economic and foreign policy implications.
“The Bill in its current form would benefit from guidance on how national security should be understood to target application of the new law and prevent the reporting system being overwhelmed and deterring legitimate approaches, with adverse repercussions for the UK’s national security and economy.
“That is why we have tabled an amendment to the Bill, outlining the issues that the Secretary of State should consider when assessing foreign investments on national security grounds.
“The Government’s open and discursive approach has been hugely important which we welcome. We will work with the Minister to clarify those areas that would improve this important Bill.”
House of Commons and House of Lords Hansard Written Answers
NATO
UIN 138428, tabled on 15 January 2021
Richard Fuller
Conservative
North East Bedfordshire
Commons
To ask the Secretary of State for Defence, whether the UK will remain committed to NATO’s conventional deterrence tasks, including Enhanced Forward Presence; what role the UK will play in those deterrence tasks; and what the planned timescale is for that commitment.
Answer
James Heappey
Conservative
Wells
Commons
Answered on
21 January 2021
NATO is the cornerstone of UK defence policy, and we are proud of our enduring commitment to its valuable deterrence role. As the leading European Ally, the UK makes significant contributions to operations, including as framework nation for the enhanced Forward Presence deployment in Estonia as well as in operations and defence activity from the High North to the Baltic region, the Balkans, the Mediterranean and the Middle East. We regularly contribute to NATO’s enhanced Air Policing mission, to the NATO Readiness Force and to Standing NATO Maritime Groups. Working on a rolling timeline of five years, we are firmly committed to Estonia’s regional security, through eFP and NATO, and I have made it clear that we will continue our presence for as long as it is required.
Type 26
Mr Kevan Jones
Labour
North Durham
Commons
To ask the Secretary of State for Defence, pursuant to the Answer of 18 January 2021 to Question 135843, what the optimal delivery rate is for the Type 26 programme.
Answer
Jeremy Quin
Conservative
Horsham
Commons
Answered on
21 January 2021
The delivery rate for vessel acceptance for all classes of ship is planned to be the optimum that can be achieved considering all relevant factors. On current plans, the average delivery rate for vessel acceptance from the Contractor of Type 26 Batch 1 is one ship every 18 months, while that for Type 31 is contracted as one ship approximately every eight-12 months. For both classes the time between the delivery of successive ships is not constant across the whole of the class.
Military Aircraft: Procurement
UIN 138403, tabled on 15 January 2021
Question
Mr Kevan Jones
Labour
North Durham
Commons
To ask the Secretary of State for Defence, whether his Department has contracted (a) C-17 and (b) other heavy-lift transport aircraft under the NATO Airlift Management Programme in the last 24 months.
Answer
Jeremy Quin
Conservative
Horsham
Commons
Answered on
20 January 2021
Defence Supply Chain Operations and Movements has not contracted (a) C-17 or (b) other heavy-lift transport aircraft under the NATO Airlift Management Programme in the last 24 months.
Mali: Peacekeeping Operations
UIN 136045, tabled on 11 January 2021
Stephen Morgan
Labour
Portsmouth South
Commons
To ask the Secretary of State for Defence, what steps his Department is taking to provide appropriate air cover for troops taking part in the UN peace keeping mission in Mali.
This answer is the replacement for a previous holding answer.
Answer
James Heappey
Conservative
Wells
Commons
Answered on
20 January 2021
The Ministry of Defence assesses the threat in Mali to be unchanged from that set out in my statement to the House on 9 December 2020.
There is close air support provided by El Salvador as part of the MINUSMA force. In the unlikely event that our peacekeeping troops required this capability, it would be made available through the UN’s mission commander. The UK cannot operate its own – non-UN affiliated – close air support as the UN rules are clear on the requirement for only UN attributed force elements to contribute to a UN mission. Helicopter based medical evacuation is also available through MINUSMA. As the Long Range Reconnaissance Group develops a better understanding of the mission and the medical evacuation capability is assured, Ministers will take a view on extending the range at which it can operate. Availability of appropriate helicopter medical evacuation will be key in determining the range.
Defence: Expenditure
UIN 135844, tabled on 11 January 2021
Question
Mr Kevan Jones
Labour
North Durham
Commons
To ask the Secretary of State for Defence, if he will publish the evidential basis to support the Prime Minister’s 19 November 2020 statement that the increase in defence spending will create 10,000 jobs every year.
Answer
Jeremy Quin
Conservative
Horsham
Commons
Answered on
19 January 2021
The Ministry of Defence (MOD) publishes statistics which set out the number of jobs in the UK currently estimated to be supported by existing Defence spend.
Using an MOD jobs calculator that estimates the number of jobs supported per pound of MOD spend, the MOD estimate that as a result of the new investment the Prime Minster announced, an average of 10,000 jobs will be supported in UK industry and commerce every year within the four year settlement period, in addition to those currently supported in the UK Defence sector.
Army: Robots
UIN 135838, tabled on 11 January 2021
Question
Mr Kevan Jones
Labour
North Durham
Commons
To ask the Secretary of State for Defence, what type of robots the Government plans to deploy 30,000 of in the British Army by 2030.
Answer
Jeremy Quin
Conservative
Horsham
Commons
Answered on
19 January 2021
The British Army is transforming land capability through increasingly expansive use of technology, including Robotics and Autonomous Systems employed across all areas of operations. Explosive Ordnance Disposal robots and uncrewed ground and air systems, used for reconnaissance and surveillance, are already in service. The final number and composition of robots to be utilised throughout the British Army and their in-service dates have not yet been confirmed.
Defence: Finance
UIN 137121, tabled on 13 January 2021
Question
John Healey
Labour
Wentworth and Dearne
Commons
To ask the Secretary of State for Defence, what assessment his Department has made of the effect of currency depreciation in defence procurement on the defence budget.
Answer
Jeremy Quin
Conservative
Horsham
Commons
Answered on
18 January 2021
We address the impact of foreign exchange using forward purchase contracts agreed with the Bank of England. Foreign Currency Exchange hedging is layered over a number of years which means that by the start of the year, a significant proportion of the forecast foreign currency requirement has already been purchased. The layering approach mitigates the risk of over or under hedging and provides budget stability in the forward programme. It is not intended to generate gains or savings from the foreign exchange market.
Frigates
UIN 135843, tabled on 11 January 2021
Question
Mr Kevan Jones
Labour
North Durham
Commons
To ask the Secretary of State for Defence, what assessment his Department has made of the optimal rate for the delivery of frigates.
Answer
Jeremy Quin
Conservative
Horsham
Commons
Answered on
18 January 2021
There is no single optimum rate for the delivery of frigates; delivery rates are decided on an individual programme basis and are dependent on a range of different factors.
Iron and Steel: Procurement
UIN 136671, tabled on 12 January 2021
Alexander Stafford
Conservative
Rother Valley
Commons
To ask the Secretary of State for Defence, what steps his Department is taking to ensure that procurement opportunities are promoted to UK steel firms before a decision is made by (a) his Department and (b) his tier 1 contractors.
Answer
Jeremy Quin
Conservative
Horsham
Commons
Answered on
18 January 2021
Steel for our major defence programmes is generally sourced by our prime contractors from a range of UK and international suppliers and that remains the case. This Government is committed to creating the right conditions in the UK for a competitive and sustainable steel industry. It publishes its future pipeline for steel requirements, together with data on how Departments are complying with steel procurement guidance at the following link:
www.gov.uk/government/publications/steel-public-procurement
This enables UK steel manufacturers to better plan and bid for Government contracts.
USA: Defence Equipment
UIN 135841, tabled on 11 January 2021
Question
Mr Kevan Jones
Labour
North Durham
Commons
To ask the Secretary of State for Defence, what steps he is taking to ensure compatibility between the purchase of US equipment for UK armed service and job creation within the defence industry through the levelling up agenda.
Answer
Jeremy Quin
Conservative
Horsham
Commons
Answered on
18 January 2021
The UK’s involvement in international bilateral and multilateral partnership and equipment programmes, including with the US, offers significant opportunities for UK companies. This can be seen in the UK’s role in the F-35 supply chain, with British companies building approximately 15% by value of all F-35s. The Ministry of Defence works closely with US and international suppliers to highlight opportunities for the UK Defence Industry, for example this includes supply events with major US primes, the most recent of which attracted 800 attendees from across all nations of the UK who were briefed on future opportunities.
As part of the cross-Government review of the UK’s defence and security sectors (DSIS), we will identify how to enhance our strategic approach to ensure we continue to maintain competitive, innovative and world-class defence and security industries that drive investment and prosperity across the Union and underpin national security now and in the future.
HMS Montrose: Repairs and Maintenance
UIN 135835, tabled on 11 January 2021
Question
Mr Kevan Jones
Labour
North Durham
Commons
To ask the Secretary of State for Defence, what estimate he has made of the cost to the public purse of HMS Montrose’s recent repair work in Duqm, Oman.
Jeremy Quin
Conservative
Horsham
Commons
Answered on
14 January 2021
The estimated cost of the maintenance work on HMS MONTROSE is £506,000.
Defence Spending
Mr Kevan Jones
Labour
North Durham
Commons
To ask the Secretary of State for Defence, whether his Department has allocated any of the £16.5 billion increase in defence spending.
Jeremy Quin
Conservative
Horsham
Commons
Answered on
14 January 2021
The Ministry of Defence secured £16.5 billion additional funding in the 2020 Spending Review. While this will help address existing pressures, we will still need to make changes and take difficult decisions to ensure financial sustainability and adapt to current and future conflict. We will decide on the allocation of the settlement funding as part of our normal Departmental financial planning and budgeting process. The financial settlement, alongside the Integrated Review, will allow Defence to meet its priorities and commitments on a sustainable basis.