Economic Activity of Public Bodies (Overseas Matters) Bill

Written evidence submitted by the Methodist Church in Britain and United Reformed Church (EAPBB16)

ECONOMIC ACTIVITY OF PUBLIC BODIES (OVERSEAS MATTERS) BILL

About us

This submission is presented by the Methodist Church in Britain and the United Reformed Church, two of the largest Free Church denominations in the UK. We appreciate the opportunity to offer evidence to the Bill Committee. Our denominations have experience in community and interfaith relations in the UK; close relationships with Christian partners in the Middle East; a desire to promote ethics in investment through our own institutional investment practice; longstanding concerns of our members to be active in the areas of social justice and involvement in higher education through Methodist and URC affiliated theological training institutes.

Summary – An unnecessary and damaging bill

1. Members of our Churches have had a long engagement with Christian, Jewish and Muslim people in the region. [1] Our two denominations are a part of a coalition that founded the Ecumenical Accompaniment Programme in Palestine and Israel which is now a programme of the World Council of Churches and is managed in the UK by Quakers in Britain. [2] Not all of our Christian, Muslim or Jewish partners in Palestine and Israel support the Palestinian-led Boycott, Divestment and Sanctions movement but several do.

2. For the reasons outlined below we do not believe that the Government has made its case for the necessity for this bill and would prefer that it is withdrawn. In paragraph 20 below we draw attention to the lack of consultation with faith groups on this bill.

The ‘Purpose of the Bill’: transferring moral agency from local government to national executive government is unwarranted and out of step with public perceptions

3. The purpose of the bill ("to prevent public bodies from being influenced by political or moral disapproval of foreign states when taking certain economic decisions") appears to diminish the value of moral considerations in the decision-making of publicly funded bodies. What is or is not ‘moral’ is often contested yet, as Churches, we encourage the pursuit of ethical and moral positions in public life, including in investment decisions. It may be that in bringing this bill, the Department of Levelling Up, Housing and Communities is, instead, proposing that executive branch of government under the guidance of Ministers is the proper authority for determining ethical and moral action on the part of public bodies and universities (and potentially other parts of civil society that receive public funding). Data from the 2021 national census indicates people’s trust in national government stands at 35% while trust in local government stands at 42%. In our view the transfer of moral agency from local procurement and investment managers to national government would be a somewhat disturbing innovation in public policy and out of step with public perceptions.

4. The proposed primacy of national government in moral and political action with respect to procurement and investment by public bodies cannot be defended on grounds of protecting public finances. The alleged risk to reserves of responding to the types of procurement and divestment campaigns envisaged by this bill is in our view entirely notional; it is unsubstantiated in the documents relating to this bill.

Celebrating and upholding the civil society contribution to the UK’s international relationships and advocacy. (The Government of the day may not have a monopoly of wisdom.)

5. The desire to limit the moral and political agency of universities and public bodies in foreign relations implied by the stated purpose, is at odds with the value that our Government rightly places on the rich contribution of civil groups to the UK’s influence internationally. We welcome the Government’s recognition of this contribution to ‘soft power’ which it has frequently championed. For example, the recent Integrated Review ‘Global Britain in a Competitive Age’ [3] commits the Government to "work with allies, like-minded partners and civil society worldwide to protect democratic values, as part of our force for good agenda". Universities have structural links with others overseas, Churches are a part of global denominational fellowships, and UK towns and cities work on advocacy initiatives with local government partners worldwide. These relationships often result in joint statements around collective concerns and these sometimes involve challenging the behaviour of repressive governments. We appeal for a degree of humility and respect that recognises that the Government of the day may not have a monopoly of wisdom in this regard.

6. The Integrated Review further states that "the source of much of the UK’s soft power lies beyond the ownership of government – an independence from state direction that is essential to its influence". [4] It is precisely this independence from ‘state direction’ that empowers citizens locally to take action through Local Government and for student bodies and university staff to advocate through their institutions. The Government risks giving the impression that it is rowing back on the promotion of democratic governance at home and abroad, unless there is a clearer justification for the necessity of the restrictions sought by this legislation. [5]

This bill would have banned actions of the Anti-Apartheid Movement

7. The clearest instance to date of a widespread Boycott, Divestment and Sanctions campaign in the UK was the opposition to the policy of apartheid in South Africa. Looking back at the 1960’s, 1970’s and 1980’s from the perspective of today, this campaign may not appear controversial. Yet it was strongly opposed by the UK Government for well over 10 years before the Prime Minister was persuaded in 1986 by a vote in Parliament and members of her party to relax her opposition, leading to the introduction of some limited economic sanctions. By then Churches, Universities and many local authorities had passed resolutions in support of Boycott, Divestment and Sanctions. Notably, 38 local authorities had passed resolutions in relation to their investments. [6] These actions would have been illegal had this proposed legislation been in place at the time. [7] While the legislation does not extend to national church bodies, nevertheless our decisions in support of Boycott, Divestment and Sanctions in relation to South Africa would have been that much more difficult if we had been making statements deemed illegal had they been made by representatives of public bodies.

Historical precedence: boycott and divestment has not undermined foreign policy as claimed

8. The impact assessment for the Bill expresses concerns regarding "public bodies pursuing their own foreign policy agenda" [8] , "that foreign policy is reserved for the UK Government" [9] , "that the UK Government speaks with one voice internationally" [10] and that BDS activity "undermines UK foreign policy". [11] Yet the historical precedent does not bear out these concerns. Rarely have investment actions taken place on issues that are in contravention of the UK government’s concerns. [12] For example, the UK Government did express its opposition to apartheid in South Africa. Campaign actions to oppose the behaviour of governments overseas, whether concerned with forced labour in China, land appropriation in Myanmar, occupations in Western Sahara and Palestine or suppression in Hong Kong, more often than not share the concerns of the UK government as outlined in the Human Rights and Democracy Report produced by the FCDO annually. The central government makes a foreign policy response, while local communities and civil society responds in other ways which may include a break in economic exchanges with the country concerned. In this respect citizen action is more likely to support an advocacy position of the UK Government than it is to undermine UK foreign policy as alleged. We invite the UK Government to call on historical precedent to evidence its concern over the negative impacts on foreign policy.

A lack of evidence for the need for such restrictive measures on free speech

9. The Methodist Church and the United Reformed Church deplore acts of antisemitism and our governing bodies (the Methodist Conference and the URC General Assembly) have made a number of statements to this effect. [13] The government is right to be concerned about the rise in reported incidents of antisemitism in the UK and to seek initiatives to support members of all religious groups against attacks and discrimination.

10. The Government’s Equalities Impact Assessment for the bill acknowledges that without a larger volume of evidence it is unable to draw definitive conclusions on the impact of the legislation on discrimination for ‘race’ or ‘religion or belief’. Neither can it draw conclusions on the impact towards advancing opportunity for people with these protected characteristics. The Equalities Impact Assessment also states that "while we cannot say with certainty when or if a boycott and disinvestment campaign incites hate crimes or antisemitism and anti-Muslim hatred, there are examples of them occurring alongside each other". Given the lack of supporting evidence we argue that the restrictions that the bill would impose on the rights of free speech require much clearer justification.

11. We acknowledge that those who engage in hate crimes towards members of the Jewish community may also support BDS. But the Palestinian-led BDS movement calls for non-violent measures "until Israel meets its obligation to recognize the Palestinian people's inalienable right to self-determination and fully complies with the precepts of international law" [14] [15] The Government acknowledges that it has not been able to identify a definitive causal link between support for BDS and hate crimes. Hate crimes must be challenged through the strengthening of relations in our communities and through law enforcement. We argue that the UK has adequate measures in the Crime and Disorder Act 1998 and associate legislation to prosecute those engaging in racial and religiously motivated hate crime. The Economic Activity of Public Bodies Bill appears to be directed against a particular non-violent campaign that is founded on the promotion of human rights; the legislation is very poorly targeted towards reducing hate crime or antisemitism.

The bill imposes on investors a particular approach to handling difficult investment environments

12. Our organisations have considerable experience in the area of ethical investment both through our own investment practices and ethical policies [16] as well as through our engagement with other Church investors, including through the Church Investors Group. [17] Our Churches seek to make a contribution to the thinking on ethics within the investment management community as a whole (for the Methodist Church through Epworth Investment Management [18] and for the URC through CCLA [19] ).

13. Although the investment industry has regulations and guidelines around responsible investment there is no single approach or best practice to the management of ESG issues. In some environments, Myanmar for example, opportunities for impact through constructive engagement can be quite limited. In environments with high ethical risk, compliance with ethical investment policy may favour avoidance of the investment market in the country altogether. The Government is concerned that a country-wide exclusion policy by publicly funded bodies could cost taxpayers money. The opposite may be the case as the cost of analysis and research required to screen investments in a complex environment where human rights abuses are systemic may not be cost effective. Myanmar might provide a case in point.

14. The Burma campaign has called on a number of occasions for the UK government to implement sanctions against companies based in Myanmar, for example, the call for a sanction on Myanmar Oil and Gas Enterprise (MOGE) that, according to the Burma Campaign, channels $2 billion of business from UK based companies. The Burma Campaign also produces a "Dirty List" of international companies that do business with the military regime. Because an exclusion of companies that are highly exposed to Myanmar could reasonably be construed as ‘responding to organised campaign in contravention of UK sanctions policy’, it might be prosecutable under this legislation. It is not clear to us whether the chilling effect on shareholder activism in such contexts is the Government’s intended purpose. We invite the Government to confirm that it is, but alternatively it may be that the suppression of ethical investment policy in such contexts would be a consequence that is unintended by the Department of Levelling Up, Housing and Communities.

Israel is a particularly challenging investment environment from an ESG perspective and can justify avoidance

15. The arguments set out on investment practice in paragraphs 13 and 14 also pertain to Israel. Israel has become a very difficult environment from the perspective of due diligence and ethical risk. For many years leaders of Israeli local councils in the illegal settlements have been pledging to expand the Jewish populations in the occupied West Bank to a million people. [20] [21] A restrictive and discriminatory planning regime and house demolitions have enabled progress towards this goal. These demographic changes arising from Israeli Government policy, supported by changes in Israeli basic law, have increased the importance of illegally occupied territories to the Israeli economy. This has forced investors to recognise the systemic risk to investment in the Israeli market [22] that makes due diligence on a company by company basis expensive and challenging. [23] The divestment and exclusion of Israeli investments altogether can reduce the cost of compliance with business and human rights standards in this systemically challenging national environment. However, by legislating against the exclusion of a national investment market, this bill would place additional burdens and costs on investment managers of public bodies, universities and pension fund managers in protecting portfolios from providing financial support to illegal settlements.

Section 3 ‘Exemptions’ (7) a, Israel. The bill sends a perverse message to the Government of Israel as it considers formal annexation of the West Bank

16. The FCDO has observed for some years the rising rate of demolitions of Palestinian homes, the physical destruction of Palestinian communities, the modifications in Israeli basic law privileging Jewish settlement and the increasing construction of settlements and associated security infrastructure across the West Bank that denies the possibility of a future two-state solution. Benjamin Netanyahu’s promise in December 2022 to annex most of the West Bank is consistent with the direction of Israeli policy over recent years and will not have come as any surprise to our Government.

17. How then should the UK respond? Whether intended or not, the stipulation in the bill that Israel is the only nation that warrants permanent protection from a boycott, divestment or sanctions campaign sends a message of unconditional support to the Government of Israel. Our Churches do not wish to see the bill proceed, but if it does it should do so without explicit reference to Israel in order that all nations are treated on a consistent basis.

Section 3 ‘Exemptions’ (7) b, Occupied Palestinian Territories. This legislates against an avoidance of the provision of economic support to illegal settlements, although such avoidance is a widely recognised requirement.

18. The reference to the Occupied Palestinian Territories prevents a public body or university from developing a procurement policy that restricts the eligibility of Israeli companies that source produce from Israel settlements on illegally occupied Palestinian territory. A boycott of goods from illegal settlements in the Occupied Palestinian Territories is supported by many mainstream organisations including some Jewish groups and is also supported by the Methodist Church and United Reformed Church. [24]

19. The prohibition on action in relation illegal settlements is inconsistent with principle behind the UK Government’s own stance to avoid economic support of settlements in the occupied territories. This has been a longstanding principle of FCDO assistance to Israel and, in 2016, was reiterated in the UK’s commendable support for Security Council Resolution 2334. [25]

Lack of consultation

20. It is worthwhile pointing out that although the Government has stated that improved community relations are a motivation for this bill and our Churches in the UK have considerable experience in interfaith relationships and on community relations, at no point have the Department of Levelling Up, Housing and Communities sought to consult with our Churches on this legislation. We appreciate this opportunity to submit evidence to the Public Bill Committee.

August 2023