Business and Trade Committee

We begin with the Select Committee statement. Liam Byrne will speak on the publication of the 11th report of the Business and Trade Committee, “Toward a new doctrine for economic security”, HC835, for up to 10 minutes, during which no interventions may be taken. At the conclusion of his statement, I will call Members to put questions on the subject of the statement and then call Liam Byrne to respond to those in turn. Questions should be brief and Members may ask only one question each.

It is a privilege to serve with you in the Chair, Ms Lewell. Let me record my thanks to the Backbench Business Committee for making time for this debate; to a brilliant team of Select Committee members—it is a privilege to serve alongside them—and to a first-class team who help to ensure that the Select Committee does its work so expertly. The report we present today sounds a note of agreement, but is also designed to sound a warning. The note of agreement is this: we agree that national security is economic security. But the note of warning is stark: we do not find that our economic security regime is fit for the future.

If we think about the risks we faced this summer, with the Jaguar Land Rover cyber-attack, which ended up costing a £1.5 billion state guarantee; the struggles that our Dutch allies went through with Nexperia; and the struggles that our American allies went through in the spat with China over rare earth technology exports, we can now see that the question of economic security is front and centre for businesses and policymakers, each and every day. The warning that we sound is that the risks are going to multiply significantly over the years to come.

The threat surface that most businesses now operate is much bigger than in the past. Artificial intelligence is going to transform cyber-aggression. We now have states and state-backed actors operating in this space. This is all at a time when our country is going to seek to entice around £100 billion extra in inward investment, much of it from abroad and much of it in our energy infrastructure. What Ciaran Martin calls the private ownership of public risk is about to expand exponentially. Yet, right now, we simply do not have the defences in place that we need.

The core argument of our report is that just as we need a whole-of-society approach to defence, so we now need a whole-of-society approach to our economic security, but we do not have the systems in place to deliver that today. That is why change is needed over the years to come. In order to help understand precisely the gaps, we worked together with experts at the Royal United Services Institute, gathered lots of evidence, took lots of witness testimony and heard from Ministers. What that basically revealed is that many of our allies, such as Japan, but also in a way the European Union, have legislative backing for many of the regimes that they have in place.

Our allies in Japan in particular, who have had to think about this for a lot longer than we have, have a very sophisticated set of defences and state machinery. Equally, we could find very durable institutions in the United States and real policy innovation in the European Union today. In this country, we have a number of strategies, which are growing in number, but frankly do not really add up to a comprehensive regime for economic security.

It is a pleasure to serve under your chairmanship, Ms Lewell. In my short time in Parliament, perhaps the most terrifying thing I have heard so far is the evidence we took on the Business and Trade Committee that state actors are joining forces with criminal gangs to attack this country in the cyber-theatre. From his vast experience, has the right hon. Gentleman ever delivered a report quite so urgent and time-sensitive?

I am grateful to the hon. Member for the question and for his sterling work on the Committee as our inquiry has been driven forward over the last seven or eight months. I have not. It was striking to compare the evidence we took with history lessons from the 1920s and 1930s. As a country, we have developed infrastructure to tackle these kinds of threats in the past. Indeed, the forces that we assembled in the 1920s and 1930s were so important that they became known as the fourth fighting service. It was certainly crucial in helping us to stand up the Ministry of Economic Warfare in world war two with the speed that we did. We are now in a world of chokepoints, coercion and weaponised interdependence, and today’s cyber-attacks will be nothing compared with those in future. Frankly, the country is simply not ready. We have to get our skates on.

It is a pleasure to serve under your chairmanship, Ms Lewell. I congratulate my right hon. Friend on his report. I will not mention his vast experience though, because he is still young to me. Redditch was deeply impacted by the JLR shutdown, with many of our supply chains affected. My right hon. Friend talks in the report about the need for an economic security Minister and about the specific measures needed to upgrade cyber-security across our critical sectors. What powers would my right hon. Friend envisage such a Minister having, and how do Government support businesses to get up to date to meet the challenges mentioned in the report?

We have a very good Minister in place, but in a way, the report is designed to ensure that that Minister is empowered in his work and across Government. But first we must understand, and help the Minister have the powers to understand, the full breadth of the UK supply chains and where the risks are. The Jaguar Land Rover case was striking because the supply chain information was kept on the computers that went down. When the computers went down, they had to generate, I think, almost paper lists of tier 2 and tier 3 suppliers to work out who needed cashflow and who could survive without direct help. We must ensure that we have a full picture of supply chains and where the critical dependencies are, as the Japanese have been doing for many years.

Making sure that there is a proper backstop to the cyber-insurance market is important. That is why the proposals for a much bigger and better-equipped Pool Re are so important. Pool Re, as many will know, was set up to backstop terrorism insurance during the height of the IRA attacks. It now needs modernising for new times. The tax regime that we have in place today simply does not incentivise small and medium-sized enterprises in the way that we could, to draw down on subscription-based cyber-security policies. Making sure that there are the right incentives, powers and insights available are just some of the tasks that we think an economic security Minister needs to be fully empowered to perform.

I congratulate the right hon. Member on the report. As I am sure he knows, I responded to his request for comment. My question is about the security of financial services. He says that diversification is one of the solutions to the risk of cyber- attack. My worry is that, if we put all our eggs into the basket of an increasingly electronic-based financial services market where high street banks retreat behind electronic walls, that does not just result in vulnerable and digitally-excluded customers struggling to access financial services, but creates a big national risk. It is a problem for our communities where banks are retreating—in Cornwall, there will be only one Lloyds bank left next year—and for the security of the nation as well.

Order. This is just a reminder that the debate must end at 10 minutes to 2.

I was very grateful to receive the hon. Member’s email. He is absolutely right. The shutdown of branches all over our country is a really serious problem that creates real risks. One answer is to ensure that we lean in behind the Post Office plans to create banking hubs, not just in a couple of hundred high streets, which is the proposal of the main banks, but in thousands of locations across the country. The Post Office has in place an agreement with the banks until about 2030, but the future thereafter is not clear, so I hope that Ministers can take up this point in the Department for Business and Trade to ensure that we lean into the plans that the Post Office has developed to transform the availability of banking services on thousands of high streets up and down the country.

I warmly commend the Committee on producing its report. I take no offence at the demand that there be a separate economic security Minister, even though I think the Culture, Media and Sport Committee demanded, when I was the Minister responsible for tourism, that there be a separate tourism Minister as well—there seems to be a growing theme. I am very glad that the Committee agrees with the Government on the need for mandatory reporting of cyber-attacks. It seems to me that until we have a full understanding of the pattern of the problem that there is in the nation, we will not really be able to seize the opportunity. What shape does my right hon. Friend think the legislation that he proposes might take?

This is a very good point. We want to ensure that there is an enshrinement of the principles of the Bill, so that the private sector has clarity, certainty and confidence in the durability of the economic security regime that we operate in this country. In the inquiry, we heard overwhelming evidence that businesses frankly do not know whom to ring when there is a problem. They did not know whether there were particular spaces where they could work together, certainly with agencies but also with economic security services more generally. Providing clarity, certainty and durability is the only way in which we will be able to mobilise the scale of long-term finance that we will need in order to upgrade the resilience of this country for new times.

I thank the Chair of the Select Committee for his help and work on this issue. I want to ask his opinion on the efficacy of our arms export control regime. We had two sessions in which we were looking into the F-35 in Gaza, and essentially it seems like the UK has outsourced its arms export controls to the Americans for F-35 replacement parts. Also, we continue to sell a lot of weapons to the United Arab Emirates, and it has been widely reported in the international press that the UAE is arming the Rapid Support Forces, which is creating enormous numbers of atrocities in Sudan. Does the right hon. Member think that our arms export control criteria are up to scratch?

I think there is a real opportunity in the course of the next year to modernise the way we export arms, and we will need to do that because of the simple reality that the definition of an arm in new times is very different. Many of our allies talk to us, as members of the Committee, about the need to strengthen in particular intellectual property export controls in the future. In a world where ideas can be weapons if they are, for example, novel artificial intelligence programmes, we have to take a much broader approach to this in the future. It is not clear to us that the way we license weapons and control adherence to licence conditions is strong enough, so it is an area to which the Select Committee will need to return. Again, if we are upgrading our economic security defences, I do not think we can do that, in the world in which we live, without comprehensively upgrading our arms control systems too.