The Economic Activity of Public Bodies Bill aims to stop universities pursuing their own foreign policy agendas

A new bill seeks to prohibit public bodies from taking overseas procurement and investment decisions which run counter to government policy. Michael Salmon explains

Michael Salmon is News Editor at Wonkhe

It’s almost the summer holidays but the government has still got some new bills for Parliament to consider. And here’s one that explicitly sets requirements for universities.

The Economic Activity of Public Bodies (Overseas Matters) Bill was trailed prior to introduction as communities secretary Michael Gove moving to ban councils from boycotting Israeli goods, fulfilling an almost forgotten 2019 manifesto promise.

But as Wonkhe Daily readers will have seen last week, the legislation (in its initial form) goes much further than that, and explicitly references higher education providers – in England at least.

Under pressure

The bill seeks to prevent public bodies from being influenced by “political or moral disapproval of foreign states” when taking “certain economic decisions” such as procurement and investment. The accompanying press release contends that universities are under pressure from groups “that want to impose their own subjective views about foreign policy.”

The Department for Levelling Up, Housing and Communities told Wonkhe:

Academic and student groups aligned with the BDS [boycott, divestment and sanctions] movement have in the past attempted to pressure UK universities to divest from Israeli companies via open letters and staging protests.

The Bill does not stop groups protesting. But it means, in fulfilling their role as public institutions, universities cannot adopt the boycott and divestment policies that the protests demand.

For the activity of higher education providers in England, the enforcement authority will be the Office for Students. The level of fine levied would be established through secondary legislation, as with other OfS charges.

A message to you

As has regularly been the case in recent years, to some extent this is about “sending a message” through legislation. Publicly-funded institutions are being told that “they need to focus on delivering for the public and not spending tax-payers’ money pursuing their own foreign policy agenda.”

My colleague James Coe last week raised the question of whether universities need to consider themselves foreign policy actors to a greater extent. Whether universities are allowed to have a foreign policy “agenda” separate from the government’s is a vexed question though. Many – most? – working in universities would reserve the right to act according to their own political and moral judgments of international affairs, and would distance themselves from a good deal of recent governments’ geopolitical decisions (we’re talking light years here in some cases).

The Foreign Affairs Committee earlier in the year articulated the view that academia is mistakenly behaving “as if it is free of geopolitics,” with senior figures from the sector trying to make the case that – especially in the case of China – the issue is that the government is not giving clear guidance as to what its foreign policy really is.

What it isn’t

Now, the bill is seeking only to address procurement decisions (refusals to contract for the supply of goods, services or works) and investment decisions (refusing to invest in or to remove investment from certain countries) made at the institutional level. But this will apply to foreign countries and territories as well as UK firms who trade with these countries. Boycotts that have government support (think Russia) will have the legislation disapplied to them.

There are a lot of exceptions too, in terms of the reasons behind procurement and investment decisions – these include financial and practical matters, considerations related to the possibility of bribery and corruption, labour-related misconduct, and environmental misconduct. Our reading of this, then, would be that a university would be able to be influenced in its investment decisions regarding, say, a Gulf state due to concerns about exploitation of workers or pollution, but not over prohibition of homosexuality. The bill has already been criticised by Uighur community groups and China hawks within the Conservative Party.

Decisions by pension scheme trustees are exempt from these provisions, with the curious exception of local government pension schemes. Students’ unions are not in the bill’s scope, as they are not public bodies, but the non-legislative guidance in the impact assessment suggests that SU activity in this area is at least on the government’s mind:

We have been communicating with the Charity Commission, the independent regulator of charities in England and Wales. The Charity Commission has confirmed their position on BDS activity within Student Unions. They have said that Student Unions can discuss BDS under their educational purposes, but that taking action would constitute political activity that the Commission would then consider in line with its normal processes, taking any regulatory action that is appropriate in the circumstances.

Yes, but does it legislate?

As the documentation around the legislation makes clear, the examples the government has in mind of real cases of the sort which it is seeking to prohibit in future involve councils (or local authority pension funds). An incident at a university does get a mention in the background to how such boycotts can “undermine community cohesion”, in this case over the backlash to the students’ union passing a pro-BDS motion. The interaction with the freedom of speech duty on stuff like this promises to be interesting.

But case law supports the idea that an SU can discus, debate and reach a “corporate conclusion” on issues that do not relate to students as students, and can communicate that decision – albeit that they can’t then take action on or incur expenditure on that issue. The Education Act 1994 (Part 2) also requires universities draw the attention of all students annually to “restrictions imposed on the activities of the union by the law relating to charities”.

In investment terms, the increasing default among serious investors is to seek environmental, sustainability, and governance covenants alongside financial placements – investors are keen that their money is seen to be doing good in the world. Constraining universities’ ability to make promises about procurement (even given the exceptions above) may affect the availability of affordable finance – a loan for construction given with the expectation of ethical procurement is hardly uncommon in the sector.

There’s a lot more to unpack and consider, from the interaction between this bill and the Procurement Bill, to how this might apply to transnational education, and potentially a whole range of unforeseen consequences. Before we get into the weeds of these issues, it’s also worth noting that second reading in the Commons will take place on 3 July, only a handful of days before summer recess. This leaves very little legislative time in an extended 2022–23 parliamentary session expected to end in October this year. The House of Lords will presumably have plenty to say about the practicality of the legislation, assuming they have time to do so (the bill could also potentially be saved via a carry over motion).

But the question of the UK government wanting to ensure that universities and other public bodies “speak with one voice internationally” – and that this voice is the government’s voice – is a much wider question than a single bill around procurement and investment, and one that seems to be working its way up the agenda.

2 responses to “The Economic Activity of Public Bodies Bill aims to stop universities pursuing their own foreign policy agendas

  1. There’s a level of complexity with TNE decisions here.

    The explanatory note specifically includes this:

    “The ban in clause 1 is not intended to prohibit a higher education institution from
    deciding to terminate a collaboration with a foreign university on the grounds of
    academic freedom, if they deem it necessary in line with their statutory duties in Part
    A1 of the Higher Education and Research Act 2017 or other legislation.”

    The ‘other legislation’ presumably includes the new HE (Freedom of Speech) Act. The OfS, which gets to regulate HE providers under this proposed law, is quite clear that overseas collaborations should be included under the full range of protections for students – say protection from harassment and sexual misconduct. It would be expected then that there’s quite a list of grounds a higher education provider could legitimately decide were reasons to terminate a collaboration with a foreign university, because they are required by the regulator.

  2. To update on the progress through parliament – the government’s intention is indeed to carry over the bill into the next session. Committee stage (following second reading on 3 July) will conclude in September

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