Artificial Intelligence (Regulation) Bill [HL]

Viscount Camrose Excerpts

2nd reading
Friday 22nd March 2024 Lords Chamber

[The Parliamentary Under-Secretary of State, Department for Science, Innovation and Technology (Viscount Camrose) (Con)]

I join my thanks to those of others to my noble friend Lord Holmes for bringing forward this Bill. I thank all noble Lords who have taken part in this absolutely fascinating debate of the highest standard. We have covered a wide range of topics today. I will do my best to respond, hopefully directly, to as many points as possible, given the time available.

The Government recognise the intent of the Bill and the differing views on how we should go about regulating artificial intelligence. For reasons I will now set out, the Government would like to express reservations about my noble friend’s Bill.

First, with the publication of our AI White Paper in March 2023, we set out proposals for a regulatory framework that is proportionate, adaptable and pro-innovation. Rather than designing a new regulatory system from scratch, the White Paper proposed five cross-sectoral principles, which include safety, transparency and fairness, for our existing regulators to apply within their remits. The principles-based approach will enable regulators to keep pace with the rapid technological change of AI.

The strength of this approach is that regulators can act now on AI within their own remits. This common-sense, pragmatic approach has won endorsement from leading voices across civil society, academia and business, as well as many of the companies right at the cutting edge of frontier AI development. Last month we published an update through the Government’s response to the consultation on the AI White Paper. The White Paper response outlines a range of measures to support existing regulators to deliver against the AI regulatory framework. This includes providing further support to regulators to deliver the regulatory framework through a boost of more than £100 million to upskill regulators and help unlock new AI research and innovation.

As part of this, we announced a £10 million package to jump-start regulators’ AI capabilities, preparing and upskilling regulators to address the risks and to harness the opportunities of this defining technology. It also includes publishing new guidance to support the coherent implementation of the principles. To ensure robust implementation of the framework, we will continue our work to establish the central function.

Let me reassure noble Lords that the Government take mitigating AI risks extremely seriously. That is why several aspects of the central function have already been established, such as the central AI risk function, which will shortly be consulting on its cross-economy AI risk register. Let me reassure the noble Lord, Lord Empey, that the AI risk function will maintain a holistic view of risks across the AI ecosystem, including misuse risks, such as where AI capabilities may be leveraged to undermine cybersecurity.

Specifically on criminality, the Government recognise that the use of AI in criminal activity is a very important issue. We are working with a range of stakeholders, including regulators, and a range of legal experts to explore ways in which liability, including criminal liability, is currently allocated through the AI value chain.

In the coming months we will set up a new steering committee, which will support and guide the activities of a formal regulator co-ordination structure within government. We also wrote to key regulators, requesting that they publish their AI plans by 30 April, setting out how they are considering, preparing for and addressing AI risks and opportunities in their domain.

As for the next steps for ongoing policy development, we are developing our thinking on the regulation of highly capable general-purpose models. Our White Paper consultation response sets out key policy questions related to possible future binding measures, which we are exploring with experts and our international partners. We plan to publish findings from this expert engagement and an update on our thinking later this year.

We also confirmed in the White Paper response that we believe legislative action will be required in every country once the understanding of risks from the most capable AI systems has matured. However, legislating too soon could easily result in measures that are ineffective against the risks, are disproportionate or quickly become out of date.

Finally, we make clear that our approach is adaptable and iterative. We will continue to work collaboratively with the US, the EU and others across the international landscape to both influence and learn from international development.

I turn to key proposals in the Bill that the noble Lord has tabled. On the proposal to establish a new AI authority, it is crucial that we put in place agile and effective mechanisms that will support the coherent and consistent implementation of the AI regulatory framework and principles. We believe that a non-statutory central function is the most appropriate and proportionate mechanism for delivering this at present, as we observe a period of non-statutory implementation across our regulators and conduct our review of regulator powers and remits.

In the longer term, we recognise that there may be a case for reviewing how and where the central function has delivered, once its functions have become more clearly defined and established, including whether the function is housed within central government or in a different form. However, the Government feel that this would not be appropriate for the first stage of implementation. To that end, as I mentioned earlier, we are delivering the central function within DSIT, to bring coherence to the regulatory framework. The work of the central function will provide clarity and ensure that the framework is working as intended and that joined-up and proportionate action can be taken if there are gaps in our approach.

We recognise the need to assess the existing powers and remits of the UK’s regulators to ensure they are equipped to address AI risks and opportunities in their domains and to implement the principles consistently and comprehensively. We anticipate having to introduce a statutory duty on regulators requiring them to have due regard to the principles after an initial period of non-statutory implementation. For now, however, we want to test and iterate our approach. We believe this approach offers critical adaptability, but we will keep it under review; for example, by assessing the updates on strategic approaches to AI that several key regulators will publish by the end of April. We will also work with government departments and regulators to analyse and review potential gaps in existing regulatory powers and remits.

Like many noble Lords, we see approaches such as regulatory sandboxes as a crucial way of helping businesses navigate the AI regulatory landscape. That is why we have funded the four regulators in the Digital Regulation Cooperation Forum to pilot a new, multiagency advisory service known as the AI and digital hub. We expect the hub to launch in mid-May and will provide further details in the coming weeks on when this service will be open for applications from innovators.

One of the principles at the heart of the AI regulatory framework is accountability and governance. We said in the White Paper that a key part of implementation of this principle is to ensure effective oversight of the design and use of AI systems. We have recognised that additional binding measures may be required for developers of the most capable AI systems and that such measures could include requirements related to accountability. However, it would be too soon to mandate measures such as AI-responsible officers, even for these most capable systems, until we understand more about the risks and the effectiveness of potential mitigations. This could quickly become burdensome in a way that is disproportionate to risk for most uses of AI.

Let me reassure my noble friend Lord Holmes that we continue to work across government to ensure that we are ready to respond to the risks to democracy posed by deep fakes; for example, through the Defending Democracy Taskforce, as well as through existing criminal offences that protect our democratic processes. However, we should remember that AI labelling and identification technology is still at an early stage. No specific technology has yet been proven to be both technically and organisationally feasible at scale. It would not be right to mandate labelling in law until the potential benefits and risks are better understood.

Noble Lords raised the importance of protecting intellectual property, a profoundly important subject. In the AI White Paper consultation response, the Government committed to provide an update on their approach to AI and copyright issues soon. I am confident that, when we do so, it will address many of the issues that noble Lords have raised today.

In summary, our approach, combining a principles-based framework, international leadership and voluntary measures on developers, is right for today, as it allows us to keep pace with rapid and uncertain advances in AI. The UK has successfully positioned itself as a global leader on AI, in recognition of the fact that AI knows no borders and that its complexity demands nuanced international governance. In addition to spearheading thought leadership through the AI Safety Summit, the UK has supported effective action through the G7, the Council of Europe, the OECD, the G5, the G20 and the UN, among other bodies. We look forward to continuing to engage with all noble Lords on these critical issues as we continue to develop our regulatory approach.

Data Protection and Digital Information Bill

Viscount Camrose Excerpts

Committee stage
Wednesday 20th March 2024 Grand Committee

[Lord Bassam of Brighton (Lab)]

As I was saying, it is important for the framework on data protection that we take a precautionary approach. I hope that the Minister will this afternoon be able to provide a plain English explanation of the changes, as well as giving us an assurance that those changes to definitions do not result in watering down the current legislation.

We broadly support Amendments 1 and 5 and the clause stand part notice, in the sense that they provide additional probing of the Government’s intentions in this area. We can see that the noble Lord, Lord Clement-Jones, is trying with Amendment 1 to bring some much-needed clarity to the anonymisation issue and, with Amendment 5, to secure that data remains personal data in any event. I suspect that the Minister will tell us this afternoon that that is already the case, but a significant number of commentators have questioned this, since the definition of “personal data” is seemingly moving away from the EU GDPR standard towards a definition that is more subjective from the perspective of the controller, processor or recipient. We must be confident that the new definition does not narrow the circumstances in which the information is protected as personal data. That will be an important standard for this Committee to understand.

Amendment 288, tabled by the noble Lord, Lord Clement- Jones, seeks a review and an impact assessment of the anonymisation and identifiability of data subjects. Examining that in the light of the EU GDPR seems to us to be a useful and novel way of making a judgment over which regime better suits and serves data subjects.

We will listen with interest to the Minister’s response. We want to be more than reassured that the previous high standards and fundamental principles of data protection will not be undermined and compromised.

[The Parliamentary Under-Secretary of State, Department for Science, Innovation and Technology (Viscount Camrose) (Con)]

I thank all noble Lords who have spoken in this brief, interrupted but none the less interesting opening debate. I will speak to the amendments tabled by the noble Lord, Lord Clement-Jones, and the noble Baroness, Lady Jones; I note that I plan to that form of words quite a lot in the next eight sessions on this Bill. I thank them for tabling these amendments so that we can debate what are, in the Government’s view, the significant benefits of Clause 1.

In response to the points from the noble Lord, Lord Clement-Jones, on the appetite for the reforms in the Bill, we take very seriously the criticisms of the parties that he mentioned—the civil society groups—but it is important to note that, when the Government consulted on these reforms, we received almost 3,000 responses. At that time, we proposed to clarify when data would be regarded as anonymous and proposed legislating to confirm that the test for whether anonymous data can be reidentified is relative to the means available to the controller to reidentify the data. The majority of respondents agreed that greater clarity in legislation would indeed be beneficial.

As noble Lords will know, the UK’s data protection legislation applies only to personal data, which is data relating to an identified or identifiable living individual. It does not apply to non-personal, anonymous data. This is important because, if organisations can be sure that the data they are handling is anonymous, they may be able to more confidently put it to good use in important activities such as research and product development. The current data protection legislation is already clear that a person can be identified in a number of ways by reference to details such as names, identification numbers, location data and online identifiers, or via information about a person’s physical, genetic, mental, economic or cultural characteristics. The Bill does not change the existing legislation in this respect.

With regard to genetic information, which was raised by my noble friend Lord Kamall and the noble Lord, Lord Davies, any information that includes enough genetic markers to be unique to an individual is personal data and special category genetic data, even if names and other identifiers have been removed. This means that it is subject to the additional protections set out in Article 9 of the UK GDPR. The Bill does not change this position.

However, the existing legislation is unclear about the specific factors that a data controller must consider when assessing whether any of this information relates to an identifiable living person. This uncertainty is leading to inconsistent application of anonymisation and to anonymous data being treated as personal data out of an abundance of caution. This, in turn, reduces the opportunities for anonymous data to be used effectively for projects in the public interest. It is this difficulty that Clause 1 seeks to address by providing a comprehensive statutory test on identifiability. The test will require data controllers and processors to consider the likelihood of people within or outside their organisations reidentifying individuals using reasonable means. It is drawn from recital 26 of the EU GDPR and should therefore not be completely unfamiliar to most organisations.

I turn now to the specific amendments that have been tabled in relation to this clause. Amendment 1 in the name of the noble Lord, Lord Clement-Jones, would reiterate the position currently set out in the UK GDPR and its recitals: where individuals can be identified without the use of additional information because data controllers fail to put in place appropriate organisational measures, such as technical or contractual safeguards prohibiting reidentification, they would be considered directly identifiable. Technical and organisational measures put in place by organisations are factors that should be considered alongside others under new Section 3A of the Data Protection Act when assessing whether an individual is identifiable from the data being processed. Clause 1 sets out the threshold at which data—and, therefore, personal data—is identifiable and clarifies when data is anonymous.

On the technical capabilities of a respective data controller, these are already relevant factors under current law and ICO guidance in determining whether data is personal. This means that the test of identifiability is already a relative one today in respect of the data controller, the data concerned and the purpose of the processing. However, the intention of the data controller is not a relevant factor under current law, and nor does Clause 1 make it a factor. Clause 1 merely clarifies the position under existing law and follows very closely the wording of recital 26. Let me state this clearly: nothing in Clause 1 introduces the subjective intention of the data controller as a relevant factor in determining identifiability, and the position will remain the same as under the current law and as set out in ICO guidance.

In response to the points made by the noble Lord, Lord Clement-Jones, and others on pseudonymised personal data, noble Lords may be aware that the definition of personal data in Article 4(1) of the UK GDPR, when read in conjunction with the definition of pseudonymisation in Article 4(5), makes it clear that pseudonymised data is personal data, not anonymous data, and is thus covered by the UK’s data protection regime. I hope noble Lords are reassured by that. I also hope that, for the time being, the noble Lord, Lord Clement-Jones, will agree to withdraw his amendment and not press the related Amendment 5, which seeks to make it clear that pseudonymised data is personal data.

Amendment 4 would require the Secretary of State to assess the difference in meaning and scope between the current statutory definition of personal data and the new statutory definition that the Bill will introduce two months after its passing. Similarly, Amendment 288 seeks to review the impact of Clause 1 six months after the enactment of the Bill. The Government feel that neither of these amendments is necessary as the clause is drawn from recital 26 of the EU GDPR and case law and, as I have already set out, is not seeking to substantially change the definition of personal data. Rather, it is seeking to provide clarity in legislation.

[Lord Bassam of Brighton (Lab)]

I follow the argument, but what we are suggesting in our amendment is some sort of impact assessment for the scheme, including how it currently operates and how the Government wish it to operate under the new legislation. Have the Government undertaken a desktop exercise or any sort of review of how the two pieces of legislation might operate? Has any assessment of that been made? If they have done so, what have they found?

[Viscount Camrose (Con)]

Obviously, the Bill has been in preparation for some time. I completely understand the point, which is about how we can be so confident in these claims. I suggest that I work with the Bill team to get an answer to that question and write to Members of the Committee, because it is a perfectly fair question to ask what makes us so sure.

In the future tense, I can assure noble Lords that the Department for Science, Innovation and Technology will monitor and evaluate the impact of this Bill as a whole in the years to come, in line with cross-government evaluation guidance and through continued engagement with stakeholders.

The Government feel that the first limb of Amendment 5 is not necessary given that, as has been noted, pseudonymised data is already considered personal data under this Bill. In relation to the second limb of the amendment, if the data being processed is actually personal data, the ICO already has powers to require organisations to address non-compliance. These include requiring it to apply appropriate protections to personal data that it is processing, and are backed up by robust enforcement mechanisms.

That said, it would not be appropriate for the processing of data that was correctly assessed as anonymous at the time of processing to retrospectively be treated as processing of personal data and subject to data protection laws, simply because it became personal data at a later point in the processing due to a change in circumstances. That would make it extremely difficult for any organisation to treat any dataset as anonymous and would undermine the aim of the clause, significantly reducing the potential to use anonymous data for important research and development activities.

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[Lord Bassam of Brighton (Lab)]

My Lords, we on the Labour Benches have become co-signatories to the amendments tabled by the noble Baroness, Lady Kidron, and supported by the noble Lord, Lord Clement-Jones, and the noble Baroness, Lady Harding. The noble Baroness set out very clearly and expertly the overarching purpose of retaining the level of protection currently afforded by the Data Protection Act 2018. Amendments 2 and 3 specifically stipulate that, where data controllers know, or should reasonably know, that a user is a child, they should be given the data protection codified in that Act. Amendment 9 takes it a stage further and includes children’s data in the definition of sensitive personal data, and gives it the benefit of being treated to a heightened level of protection—quite rightly, too. Finally, Amendment 290—the favourite of the noble Lord, Lord Clement-Jones—attempts to hold Ministers to the commitment made by Paul Scully in the Commons to maintain existing standards of data protection carried over from that 2018 Act.

Why is all this necessary? I suspect that the Minister will argue that it is not needed because Clause 5 already provides for the Secretary of State to consider the impact of any changes to the rights and freedoms of individuals and, in particular, of children, who require special protection.

We disagree with that argument. In the interests of brevity and the spirit of the recent Procedure Committee report, which says that we should not repeat each other’s arguments, I do not intend to speak at length, but we have a principal concern: to try to understand why the Government want to depart from the standards of protection set out in the age-appropriate design code—the international gold standard—which they so enthusiastically signed up to just five or six years ago. Given the rising levels of parental concern over harmful online content and well-known cases highlighting the harms that can flow from unregulated material, why do the Government consider it safe to water down the regulatory standards at this precise moment in time? The noble Baroness, Lady Kidron, valuably highlighted the impact of the current regulatory framework on companies’ behaviour. That is exactly what legislation is designed to do: to change how we look at things and how we work. Why change that? As she has argued very persuasively, it is and has been hugely transformative. Why throw away that benefit now?

My attention was drawn to one example of what can happen by a briefing note from the 5Rights Foundation. As it argued, children are uniquely vulnerable to harm and risk online. I thought its set of statistics was really interesting. By the age of 13, 72 million data points have already been collected about children. They are often not used in children’s best interests; for example, the data is often used to feed recommender systems and algorithms designed to keep attention at all costs and have been found to push harmful content at children.

When this happens repeatedly over time, it can have catastrophic consequences, as we know. The coroner in the Molly Russell inquest found that she had been recommended a stream of depressive content by algorithms, leading the coroner to rule that she

“died from an act of self-harm whilst suffering from depression and the negative effects of online content”.

We do not want more Molly Russell cases. Progress has already been made in this field; we should consider dispensing with it at our peril. Can the Minister explain today the thinking and logic behind the changes that the Government have brought forward? Can he estimate the impact that the new lighter-touch regime, as we see it, will have on child protection? Have the Government consulted extensively with those in the sector who are properly concerned about child protection issues, and what sort of responses have the Government received?

Finally, why have the Government decided to take a risk with the sound framework that was already in place and built on during the course of the Online Safety Act? We need to hear very clearly from the Minister how they intend to engage with groups that are concerned about these child protection issues, given the apparent loosening of the current framework. The noble Baroness, Lady Harding, said that this is hard-fought ground; we intend to continue making it so because these protections are of great value to our society.

[Viscount Camrose (Con)]

I am grateful to the noble Baroness, Lady Kidron, for her Amendments 2, 3, 9 and 290 and to all noble Lords who have spoken, as ever, so clearly on these points.

All these amendments seek to add protections for children to various provisions in the Bill. I absolutely recognise the intent behind them; indeed, let me take this opportunity to say that the Government take child safety deeply seriously and agree with the noble Baroness that all organisations must take great care, both when making decisions about the use of children’s data and throughout the duration of their processing activities. That said, I respectfully submit that these amendments are not necessary for three main reasons; I will talk in more general terms before I come to the specifics of the amendments.

First, the Bill maintains a high standard of data protection for everybody in the UK, including—of course—children. The Government are not removing any of the existing data protection principles in relation to lawfulness, fairness, transparency, purpose limitation, data minimisation, storage limitation, accuracy, data security or accountability; nor are they removing the provisions in the UK GDPR that require organisations to build privacy into the design and development of new processing activities.

The existing legislation acknowledges that children require specific protection for their personal data, as they may be less aware of the risks, consequences and safeguards concerned, and of their rights in relation to the processing of personal data. Organisations will need to make sure that they continue to comply with the data protection principles on children’s data and follow the ICO’s guidance on children and the UK GDPR, following the changes we make in the Bill. Organisations that provide internet services likely to be accessed by children will need to continue to comply with their transparency and fairness obligations and the ICO’s age-appropriate design code. The Government welcome the AADC, as Minister Scully said, and remain fully committed to the high standards of protection that it sets out for children.

Secondly, some of the provisions in the Bill have been designed specifically with the rights and safety of children in mind. For example, one reason that the Government introduced the new lawful ground of recognised legitimate interest in Clause 5, which we will debate later, was that some consultation respondents said that the current legislation can deter organisations, particularly in the voluntary sector, from sharing information that might help to prevent crime or protect children from harm. The same goes for the list of exemptions to the purpose limitation principle introduced by Clause 6.

There could be many instances where personal data collected for one purpose may have to be reused to protect children from crime or safeguarding risks. The Bill will provide greater clarity around this and has been welcomed by stakeholders, including in the voluntary sector.

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[Viscount Camrose (Con)]

While some provisions in the Bill do not specifically mention children or children’s rights, data controllers will still need to carefully consider the impact of their processing activities on children. For example, the new obligations on risk assessments, record keeping and the designation of senior responsible individuals will apply whenever an organisation’s processing activities are likely to result in high risks to people, including children.

Thirdly, the changes we are making in the Bill must be viewed in a wider context. Taken together, the UK GDPR, the Data Protection Act 2018 and the Online Safety Act 2023 provide a comprehensive legal framework for keeping children safe online. Although the data protection legislation and the age-appropriate design code make it clear how personal data can be processed, the Online Safety Act makes clear that companies must take steps to make their platforms safe by design. It requires social media companies to protect children from illegal, harmful and age-inappropriate content, to ensure they are more transparent about the risks and dangers posed to children on their sites, and to provide parents and children with clear and accessible ways to report problems online when they do arise.

After those general remarks, I turn to the specific amendments. The noble Baroness’s Amendments 2 and 3 would amend Clause 1 of the Bill, which relates to the test for assessing whether data is personal or anonymous. Her explanatory statement suggests that these amendments are aimed at placing a duty on organisations to determine whether the data they are processing relates to children, thereby creating a system of age verification. However, requiring data controllers to carry out widespread age verification of data subjects could create its own data protection and privacy risks, as it would require them to retain additional personal information such as dates of birth.

The test we have set out for reidentification is intended to apply to adults and children alike. If any person is likely to be identified from the data using reasonable means, the data protection legislation will apply. Introducing one test for adults and one for children is unlikely to be workable in practice and fundamentally undermines the clarity that this clause seeks to bring to organisations. Whether a person is identifiable will depend on a number of objective factors, such as the resources and technology available to organisations, regardless of whether they are an adult or a child. Creating wholly separate tests for adults and children, as set out in the amendment, would add unnecessary complexity to the clause and potentially lead to confusion.

[Lord Bassam of Brighton (Lab)]

As I understand it, the basis on which we currently operate is that children get a heightened level of protection. Is the Minister saying that that is now unnecessary and is captured by the way in which the legislation has been reframed?

[Viscount Camrose (Con)]

I am saying, specifically on Clause 1, that separating the identifiability of children and the identifiability of adults would be detrimental to both but particularly, in this instance, to children.

Amendment 9 would ensure that children’s data is included in the definition of special category data and is subject to the heightened protections afforded to this category of data by Article 9 of the UK GDPR. This could have unintended consequences, because the legal position would be that processing of children’s data would be banned unless specifically permitted. This could create the need for considerable additional legislation to exempt routine and important processing from the ban; for example, banning a Girl Guides group from keeping a list of members unless specifically exempted would be disproportionate. However, more sensitive data such as records relating to children’s health or safeguarding concerns would already be subject to heightened protections in the UK GDPR, as soon as the latter type of data is processed.

I am grateful to the noble Baroness, Lady Kidron, for raising these issues and for the chance to set out why the Government feel that children’s protection is at least maintained, if not enhanced. I hope my answers have, for the time being, persuaded her of the Government’s view that the Bill does not reduce standards of protection for children’s data. On that basis, I ask her also not to move her Amendment 290 on the grounds that a further overarching statement on this is unnecessary and may cause confusion when interpreting the legislation. For all the reasons stated above, I hope that she will now reconsider whether her amendments in this group are necessary and agree not to press them.

[Lord Bassam of Brighton (Lab)]

Can I press the Minister more on Amendment 290 from the noble Baroness, Lady Kidron? All it does is seek to maintain the existing standards of data protection for children, as carried over from the 2018 Act. If that is all it does, what is the problem with that proposed new clause? In its current formulation, does it not put the intention of the legislation in a place of certainty? I do not quite get why it would be damaging.

[Viscount Camrose (Con)]

I believe it restates what the Government feel is clearly implied or stated throughout the Bill: that children’s safety is paramount. Therefore, putting it there is either duplicative or confusing; it reduces the clarity of the Bill. In no way is this to say that children are not protected—far from it. The Government feel it would diminish the clarity and overall cohesiveness of the Bill to include it.

[Lord Clement-Jones (LD)]

My Lords, not to put too fine a point on it, the Minister is saying that nothing in the Bill diminishes children’s rights, whether in Clause 1, Clause 6 or the legitimate interest in Clause 5. He is saying that absolutely nothing in the Bill diminishes children’s rights in any way. Is that his position?

[Baroness Harding of Winscombe (Con)]

Can I add to that question? Is my noble friend the Minister also saying that there is no risk of companies misinterpreting the Bill’s intentions and assuming that this might be some form of diminution of the protections for children?

[Viscount Camrose (Con)]

In answer to both questions, what I am saying is that, first, any risk of misinterpreting the Bill with respect to children’s safety is diminished, rather than increased, by the Bill. Overall, it is the Government’s belief and intention that the Bill in no way diminishes the safety or privacy of children online. Needless to say, if over the course of our deliberations the Committee identifies areas of the Bill where that is not the case, we will absolutely be open to listening on that, but let me state this clearly: the intent is to at least maintain, if not enhance, the safety and privacy of children and their data.

[Lord Bassam of Brighton (Lab)]

My Lords, that creates another question, does it not? If that is the case, why amend the original wording from the 2018 Act?

[Viscount Camrose (Con)]

Sorry, the 2018 Act? Or is the noble Lord referring to the amendments?

[Lord Bassam of Brighton (Lab)]

Why change the wording that provides the protection that is there currently?

[Viscount Camrose (Con)]

I assume the noble Lord is referring to Amendment 290.

[Lord Bassam of Brighton (Lab)]

I am.

[Viscount Camrose (Con)]

Okay. The Government feel that, in terms of the efficient and effective drafting of the Bill, that paragraph diminishes the clarity by being duplicative rather than adding to it by making a declaration. For the same reason, we have chosen not to make a series of declarations about other intentions of the Bill overall in the belief that the Bill’s intent and outcome are protected without such a statement.

[Baroness Kidron (CB)]

My Lords, before our break, the noble Baroness, Lady Harding, said that this is hard-fought ground; I hope the Minister understands from the number of questions he has just received during his response that it will continue to be hard-fought ground.

I really regret having to say this at such an early stage on the Bill, but I think that some of what the Minister said was quite disingenuous. We will get to it in other parts of the Bill, but the thing that we have all agreed to disagree on at this point is the statement that the Bill maintains data privacy for everyone in the UK. That is a point of contention between noble Lords and the Minister. I absolutely accept and understand that we will come to a collective view on it in Committee. However, the Minister appeared to suggest—I ask him to correct me if I have got this wrong—that the changes on legitimate interest and purpose limitation are child safety measures because some people are saying that they are deterred from sharing data for child protection reasons. I have to tell him that they are not couched or formed like that; they are general-purpose shifts. There is absolutely no question but that the Government could have made specific changes for child protection, put them in the Bill and made them absolutely clear. I find that very worrying.

I also find it worrying, I am afraid—this is perhaps where we are heading and the thing that many organisations are worried about—that bundling the AADC in with the Online Safety Act and saying, “I’ve got it over here so you don’t need it over there” is not the same as maintaining the protections for children from a high level of data. It is not the same set of things. I specifically said that this was not an age-verification measure and would not require it; whatever response there was on that was therefore unnecessary because I made that quite clear in my remarks. The Committee can understand that, in order to set a high bar of data protection, you must either identify a child or give it to everyone. Those are your choices. You do not have to verify.

I will withdraw the amendment, but I must say that the Government may not have it both ways. The Bill cannot be different or necessary and at the same time do nothing. The piece that I want to leave with the Committee is that it is the underlying provisions that allow the ICO to take action on the age-appropriate design code. It does not matter what is in the code; if the underlying provisions change, so does the code. During Committee, I expect that there will be a report on the changes that have happened all around the world as a result of the code, and we will be able to measure whether the new Bill would be able to create those same changes. With that, I beg leave to withdraw my amendment.

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[Baroness Jones of Whitchurch (Lab)]

My Lords, I am grateful to all noble Lords who have spoken on this group. Amendment 6 to Clause 2, tabled by the noble Lord, Lord Clement-Jones, rightly tests the boundaries on the use of personal data for scientific research and, as he says, begins to ask, “What is the real purpose of this clause? Is it the clarification of existing good practice or is it something new? Do we fully understand what that new proposition is?”

As he said, there is particular public concern about the use of personal health data where it seems that some private companies are stretching the interpretation of “the public good”, for which authorisation for the use of this data was initially freely given, to something much wider. Although the clause seeks to provide some reassurance on this, we question whether it goes far enough and whether there are sufficient protections against the misuse of personal health data in the way the clause is worded.

This raises the question of whether it is only public health research that needs to be in the public interest, which is the way the clause is worded at the moment, because it could equally apply to research using personal data from other public services, such as measuring educational outcomes or accessing social housing. There is a range of uses for personal data. In an earlier debate, we heard about the plethora of data already held on people, much of which individuals do not understand or know about and which could be used for research or to make judgments about them. So we need to be sensitive about the way this might be used. It would be helpful to hear from the Minister why public health research has been singled out for special attention when, arguably, it should be a wider right across the board.

Noble Lords have asked questions about the wider concerns around Clause 2, which could enable private companies to use personal data to develop new products for commercial benefit without needing to inform the data subjects. As noble Lords have said, this is not what people would normally expect to be described as “scientific research”. The noble Baroness, Lady Kidron, was quite right that it has the potential to be unethical, so we need some standards and some clear understanding of what we mean by “scientific research”.

That is particularly important for Amendments 7 and 132 to 134 in the name of the noble Lord, Lord Clement-Jones, which underline the need for data subjects to be empowered and given the opportunity to object to their data being used for a new purpose. Arguably, without these extra guarantees—particularly because there is a lack of trust about how a lot of this information is being used—data subjects will be increasingly reluctant to hand over personal data on a voluntary basis in the first place. It may well be that this is an area where the Information Commissioner needs to provide additional advice and guidance to ensure that we can reap the benefits of good-quality scientific research that is in the public interest and in which the citizens involved can have absolute trust. Noble Lords around the Room have stressed that point.

Finally, we have added our names to the amendments tabled by the noble Baroness, Lady Kidron, on the use of children’s data for scientific research. As she rightly points out, the 2018 Act gave children a higher standard of protection on the uses for which their data is collected and processed. It is vital that this Bill, for all its intents to simplify and water down preceding rights, does not accidentally put at risk the higher protection agreed for children. In the earlier debate, the Minister said that he believed it will not do so. I am not sure that “believe” is a strong enough word here; we need guarantees that go beyond that. I think that this is an issue we will come back to again and again in terms of what is in the Bill and what guarantees exist for that protection.

In particular, there is a concern that relaxing the legal basis on which personal data can be processed for scientific research, including privately funded research carried out by commercial entities, could open the door for children’s data to be exploited for commercial purposes. We will consider the use of children’s data collected in schools in our debate on a separate group but we clearly need to ensure that the handling of pupils’ data by the Department for Education and the use of educational apps by private companies do not lead to a generation of exploited children who are vulnerable to direct marketing and manipulative messaging. The noble Baroness’s amendments are really important in this regard.

I also think that the noble Baroness’s Amendment 145 is a useful initiative to establish a code of practice on children’s data and scientific research. It would give us an opportunity to balance the best advantages of children’s research, which is clearly in the public and personal interest, with the maintenance of the highest level of protection from exploitation.

I hope that the Minister can see the sense in these amendments. In particular, I hope that he will take forward the noble Baroness’s proposals and agree to work with us on the code of practice principles and to put something like that in the Bill. I look forward to his response.

[Viscount Camrose (Con)]

I thank the noble Lord, Lord Clement-Jones, and the noble Baroness, Lady Jones, for this series of amendments.

I will first address Amendment 6, which seeks to amend Clause 2. As the noble Lord said, the definitions created by Clause 2, including “scientific research purposes”, are based on the current wording in recital 159 to the UK GDPR. We are changing not the scope of these definitions but their legal status. This amendment would require individual researchers to assess whether their research should be considered to be in the public interest, which could create uncertainty in the sector and discourage research. This would be more restrictive than the current position and would undermine the Government’s objectives to facilitate scientific research and empower researchers.

We have maintained a flexible scope as to what is covered by “scientific research” while ensuring that the definition is still sufficiently narrow in that it can cover only what would reasonably be seen as scientific research. This is because the legislation needs to be able to adapt to the emergence of new areas of innovative research. Therefore, the Government feel that it is more appropriate for the regulator to add more nuance and context to the definition. This includes the types of processing that are considered—

[Lord Clement-Jones (LD)]

I am sorry to interrupt but it may give the Box a chance to give the Minister a note on this. Is the Minister saying that recital 159 includes the word “commercial”?

[Viscount Camrose (Con)]

I am afraid I do not have an eidetic memory of recital 159, but I would be happy to—

[Lord Clement-Jones (LD)]

That is precisely why I ask this question in the middle of the Minister’s speech to give the Box a chance to respond, I hope.

[Viscount Camrose (Con)]

Researchers must also comply with the required safeguards to protect individuals’ privacy. All organisations conducting scientific research, including those with commercial interests, must also meet all the safeguards for research laid out in the UK GDPR and comply with the legislation’s core principles, such as fairness and transparency. Clause 26 sets out several safeguards that research organisations must comply with when processing personal data for research purposes. The ICO will update its non-statutory guidance to reflect many of the changes introduced by this Bill.

Scientific research currently holds a privileged place in the data protection framework because, by its nature, it is already viewed as generally being in the public interest. As has been observed, the Bill already applies a public interest test to processing for the purpose of public health studies in order to provide greater assurance for research that is particularly sensitive. Again, this reflects recital 159.

In response to the noble Baroness, Lady Jones, on why public health research is being singled out, as she stated, this part of the legislation just adds an additional safeguard to studies into public health ensuring that they must be in the public interest. This does not limit the scope for other research unrelated to public health. Studies in the area of public health will usually be in the public interest. For the rare, exceptional times that a study is not, this requirement provides an additional safeguard to help prevent misuse of the various exemptions and privileges for researchers in the UK GDPR. “Public interest” is not defined in the legislation, so the controller needs to make a case-by-case assessment based on its purposes.

On the point made by the noble Lord, Lord Clement-Jones, about recitals and ICO guidance, although we of course respect and welcome ICO guidance, it does not have legislative effect and does not provide the certainty that legislation does. That is why we have done so via this Bill.

Amendment 7 to Clause 3 would undermine the broader consent concept for scientific research. Clause 3 places the existing concept of “broad consent” currently found in recital 33 to the UK GDPR on a statutory footing with the intention of improving awareness and confidence for researchers. This clause applies only to scientific research processing that is reliant on consent. It already contains various safeguards. For example, broad consent can be used only where it is not possible to identify at the outset the full purposes for which personal data might be processed. Additionally, to give individuals greater agency, where possible individuals will have the option to consent to only part of the processing and can withdraw their consent at any time.

Clause 3 clarifies an existing concept of broad consent which outlines how the conditions for consent will be met in certain circumstances when processing for scientific research purposes. This will enable consent to be obtained for an area of scientific research when researchers cannot at the outset identify fully the purposes for which they are collecting the data. For example, the initial aim may be the study of cancer, but it later becomes the study of a particular cancer type.

Furthermore, as part of the reforms around the reuse of personal data, we have further clarified that when personal data is originally collected on the basis of consent, a controller would need to get fresh consent to reuse that data for a new purpose unless a public interest exemption applied and it is unreasonable to expect the controller to obtain that consent. A controller cannot generally reuse personal data originally collected on the basis of consent for research purposes.

Turning to Amendments 132 and 133 to Clause 26, the general rule described in Article 13(3) of the UK GDPR is that controllers must inform data subjects about a change of purposes, which provides an opportunity to withdraw consent or object to the proposed processing where relevant. There are existing exceptions to the right to object, such as Article 21(6) of the UK GDPR, where processing is necessary for research in the public interest, and in Schedule 2 to the Data Protection Act 2018, when applying the right would prevent or seriously impair the research. Removing these exemptions could undermine life-saving research and compromise long-term studies so that they are not able to continue.

Regarding Amendment 134, new Article 84B of the UK GDPR already sets out the requirement that personal data should be anonymised for research, archiving and statistical—RAS—purposes unless doing so would mean the research could not be carried through. Anonymisation is not always possible as personal data can be at the heart of valuable research, archiving and statistical activities, for example, in genetic research for the monitoring of new treatments of diseases. That is why new Article 84C of the UK GDPR also sets out protective measures for personal data that is used for RAS purposes, such as ensuring respect for the principle of data minimisation through pseudonymisation.

The stand part notice in this group seeks to remove Clause 6 and, consequentially, Schedule 2. In the Government’s consultation on data reform, Data: A New Direction, we heard that the current provisions in the UK GDPR on personal data reuse are difficult for controllers and individuals to navigate. This has led to uncertainty about when controllers can reuse personal data, causing delays for researchers and obstructing innovation. Clause 6 and Schedule 2 address the existing uncertainty around reusing personal data by setting out clearly the conditions in which the reuse of personal data for a new purpose is permitted. Clause 6 and Schedule 2 must therefore remain to give controllers legal certainty and individuals greater transparency.

Amendment 22 seeks to remove the power to add to or vary the conditions set out in Schedule 2. These conditions currently constitute a list of specific public interest purposes, such as safeguarding vulnerable individuals, for which an organisation is permitted to reuse data without needing consent or to identify a specific law elsewhere in legislation. Since this list is strictly limited and exhaustive, a power is needed to ensure that it is kept up to date with future developments in how personal data is used for important public interest purposes.

[Baroness Kidron (CB)]

I am interested that the safeguarding requirement is already in the Bill, so, in terms of children, which I believe the Minister is going to come to, the onward processing is not a question of safeguarding. Is that correct? As the Minister has just indicated, that is already a provision.

--- Later in debate ---

[Viscount Camrose (Con)]

Just before we broke, I was on the verge of attempting to answer the question from the noble Baroness, Lady Kidron; I hope my coming words will do that, but she can intervene again if she needs to.

I turn to the amendments that concern the use of children’s data in research and reuse. Amendment 8 would also amend Clause 3; the noble Baroness suggests that the measure should not apply to children’s data, but this would potentially prevent children, or their parents or guardians, from agreeing to participate in broad areas of pioneering research that could have a positive impact on children, such as on the causes of childhood diseases.

On the point about safeguarding, the provisions on recognised legitimate interests and further processing are required for safeguarding children for compliance with, respectively, the lawfulness and purpose limitation principles. The purpose limitation provision in this clause is meant for situations where the original processing purpose was not safeguarding and the controller then realises that there is a need to further process it for safeguarding.

Research organisations are already required to comply with the data protection principles, including on fairness and transparency, so that research participants can make informed decisions about how their data is used; and, where consent is the lawful basis for processing, children, or their parents or guardians, are free to choose not to provide their consent, or, if they do consent, they can withdraw it at any time. In addition, the further safeguards that are set out in Clause 26, which I mentioned earlier, will protect all personal data, whether it relates to children or adults.

Amendment 21 would require data controllers to have specific regard to the fact that children’s data requires a higher standard of protection for children when deciding whether reuse of their data is compatible with the original purpose for which it was collected. This is unnecessary because the situations in which personal data could be reused are limited to public interest purposes designed largely to protect the public and children, in so far as they are relevant to them. Controllers must also consider the possible consequences for data subjects and the relationship between the controller and the data subject. This includes taking into account that the data subject is a child, in addition to the need to generally consider the interests of children.

Amendment 23 seeks to limit use of the purpose limitation exemptions in Schedule 2 in relation to children’s data. This amendment is unnecessary because these provisions permit further processing only in a narrow range of circumstances and can be expanded only to serve important purposes of public interest. Furthermore, it may inadvertently be harmful to children. Current objectives include safeguarding children or vulnerable people, preventing crime or responding to emergencies. In seeking to limit the use of these provisions, there is a risk that the noble Baroness’s amendments might make data controllers more hesitant to reuse or disclose data for public interest purposes and undermine provisions in place to protect children. These amendments could also obstruct important research that could have a demonstrable positive impact on children, such as research into children’s diseases.

Amendment 145 would require the ICO to publish a statutory code on the use of children’s data in scientific research and technology development. Although the Government recognise the value that ICO codes can play in promoting good practice and improving compliance, we do not consider that it would be appropriate to add these provisions to the Bill without further detailed consultation with the ICO and the organisations likely to be affected by the new codes. Clause 33 of the Bill already includes a measure that would allow the Secretary of State to request the ICO to publish a code on any matter that it sees fit, so this is an issue that we could return to in the future if the evidence supports it.

[Baroness Kidron (CB)]

I will read Hansard very carefully, because I am not sure that I absolutely followed the Minister, but we will undoubtedly come back to this. I will ask two questions. Earlier, before we had a break, in response to some of the early amendments in the name of the noble Lord, Lord Clement-Jones, the Minister suggested that several things were being taken out of the recital to give them solidity in the Bill; so I am using this opportunity to suggest that recital 38, which is the special consideration of children’s data, might usefully be treated in a similar way and that we could then have a schedule that is the age-appropriate design code in the Bill. Perhaps I can leave that with the Minister, and perhaps he can undertake to have some further consultation with the ICO on Amendment 145 specifically.

[Viscount Camrose (Con)]

With respect to recital 38, that sounds like a really interesting idea. Yes, let us both have a look and see what the consultation involves and what the timing might look like. I confess to the Committee that I do not know what recital 38 says, off the top of my head. For the reasons I have set out, I am not able to accept these amendments. I hope that noble Lords will therefore not press them.

Returning to the questions by the noble Lord, Lord Clement-Jones, on the contents of recital 159, the current UK GDPR and EU GDPR are silent on the specific definition of scientific research. It does not preclude commercial organisations performing scientific research; indeed, the ICO’s own guidance on research and its interpretation of recital 159 already mention commercial activities. Scientific research can be done by commercial organisations—for example, much of the research done into vaccines, and the research into AI referenced by the noble Baroness, Lady Harding. The recital itself does not mention it but, as the ICO’s guidance is clear on this already, the Government feel that it is appropriate to put this on a statutory footing.

[Lord Clement-Jones (LD)]

My Lords, that was intriguing. I thank the Minister for his response. It sounds as though, again, guidance would have been absolutely fine, but what is there not to like about the ICO bringing clarity? It was quite interesting that the Minister used the phrase “uncertainty in the sector” on numerous occasions and that is becoming a bit of a mantra as the Bill goes on. We cannot create uncertainty in the sector, so the poor old ICO has been labouring in the vineyard for the last few years to no purpose at all. Clearly there has been uncertainty in the sector of a major description, and all its guidance and all the work that it has put in over the years have been wholly fruitless, really. It is only this Government that have grabbed the agenda with this splendid 300-page data protection Bill that will clarify this for business. I do not know how much they will have to pay to get new compliance officers or whatever it happens to be, but the one thing that the Bill will absolutely not create is greater clarity.

I am a huge fan of making sure that we understand what the recitals have to say, and it is very interesting that the Minister is saying that the recital is silent but the ICO’s guidance is pretty clear on this. I am hugely attracted by the idea of including recital 38 in the Bill. It is another lightbulb moment from the noble Baroness, Lady Kidron, who has these moments, rather like with the age-appropriate design code, which was a huge one.

We are back to the concern, whether in the ICO guidance, the Bill or wherever, that scientific research needs to be in the public interest to qualify and not have all the consents that are normally required for the use of personal data. The Minister said, “Well, of course we think that scientific research is in the public interest; that is its very definition”. So why does only public health research need that public interest test and not the other aspects? Is it because, for instance, the opt-out was a bit of a disaster and 3 million people opted out of allowing their health data to be shared or accessed by GPs? Yes, it probably is.

Do the Government want a similar kind of disaster to happen, in which people get really excited about Meta or other commercial organisations getting hold of their data, a public outcry ensues and they therefore have to introduce a public interest test on that? What is sauce for the goose is sauce for the gander. I do not think that personal data should be treated in a particularly different way in terms of its public interest, just because it is in healthcare. I very much hope that the Minister will consider that.

--- Later in debate ---

[Baroness Jones of Whitchurch (Lab)]

My Lords, I am also pleased to support these amendments in the name of the noble Baroness, Lady Kidron, to which I have added my name. I am hugely enthusiastic about them, too, and think that this has been a lightbulb moment from the noble Baroness. I very much thank her for doing all of this background work because she has identified the current weakness in the data protection landscape: it is currently predicated on an arrangement between an individual and the organisation that holds their data.

That is an inherently unbalanced power construct. As the noble Baroness said, as tech companies become larger and more powerful, it is not surprising that many individuals feel overwhelmed by the task of questioning or challenging those that are processing their personal information. It assumes a degree of knowledge about their rights and a degree of digital literacy, which we know many people do not possess.

In the very good debate that we had on digital exclusion a few weeks ago, it was highlighted that around 2.4 million people are unable to complete a single basic task to get online, such as opening an internet browser, and that more than 5 million employed adults cannot complete essential digital work tasks. These individuals cannot be expected to access their digital data on their own; they need the safety of a larger group to do so. We need to protect the interests of an entire group that would otherwise be locked out of the system.

The noble Baroness referred to the example of Uber drivers who were helped by their trade union to access their data, sharing patterns of exploitation and subsequently strengthening their employment package, but this does not have to be about just union membership; it could be about the interests of a group of public sector service users who want to make sure that they are not being discriminated against, a community group that wants its bid for a local grant to be treated fairly, and so on. We can all imagine examples of where this would work in a group’s interest. As the noble Baroness said, these proposals would allow any group of people to assign their rights—rights that are more powerful together than apart.

There could be other benefits; if data controllers are concerned about the number of individual requests that they are receiving for data information—and a lot of this Bill is supposed to address that extra work—group requests, on behalf of a data community, could provide economies of scale and make the whole system more efficient.

Like the noble Baroness, I can see great advantages from this proposal; it could lay the foundation for other forms of data innovation and help to build trust with many citizens who currently see digitalisation as something to fear—this could allay those fears. Like the noble Lord, Lord Clement-Jones, I hope the Minister can provide some reassurance that the Government welcome this proposal, take it seriously and will be prepared to work with the noble Baroness and others to make it a reality, because there is the essence of a very good initiative here.

[Viscount Camrose (Con)]

I thank the noble Baroness, Lady Kidron, for raising this interesting and compelling set of ideas. I turn first to Amendments 10 and 35 relating to data communities. The Government recognise that individuals need to have the appropriate tools and mechanisms to easily exercise their rights under the data protection legislation. It is worth pointing out that current legislation does not prevent data subjects authorising third parties to exercise certain rights. Article 80 of the UK GDPR also explicitly gives data subjects the right to appoint not-for-profit bodies to exercise certain rights, including their right to bring a complaint to the ICO, to appeal against a decision of the ICO or to bring legal proceedings against a controller or processor and the right to receive compensation.

The concept of data communities exercising certain data subject rights is closely linked with the wider concept of data intermediaries. The Government recognise the existing and potential benefits of data intermediaries and are committed to supporting them. However, given that data intermediaries are new, we need to be careful not to distort the sector at such an early stage of development. As in many areas of the economy, officials are in regular contact with businesses, and the data intermediary sector is no different. One such engagement is the DBT’s Smart Data Council, which includes a number of intermediary businesses that advise the Government on the direction of smart data policy. The Government would welcome further and continued engagement with intermediary businesses to inform how data policy is developed.

[Lord Clement-Jones (LD)]

I am sorry, but the Minister used a pretty pejorative word: “distort” the sector. What does he have in mind?

[Viscount Camrose (Con)]

I did not mean to be pejorative; I merely point out that before embarking on quite a far-reaching policy—as noble Lords have pointed out—we would not want to jump the gun prior to consultation and researching the area properly. I certainly do not wish to paint a negative portrait.

[Lord Clement-Jones (LD)]

Is this one of those “in due course” moments?

[Viscount Camrose (Con)]

It is a moment at which I cannot set a firm date for a firm set of actions, but on the other hand I am not attempting to punt it into the long grass either. The Government do not want to introduce a prescriptive framework without assessing potential risks, strengthening the evidence base and assessing the appropriate regulatory response. For these reasons, I hope that for the time being the noble Baroness will not press these amendments.

The noble Baroness has also proposed Amendments 147 and 148 relating to the role of the Information Commissioner’s Office. Given my response just now to the wider proposals, these amendments are no longer necessary and would complicate the statute book. We note that Clause 35 already includes a measure that will allow the Secretary of State to request the Information Commissioner’s Office to publish a code on any matter that she or he sees fit, so this is an issue we could return to in future if such a code were deemed necessary.

[Lord Clement-Jones (LD)]

My Lords, I am sorry to keep interrupting the Minister. Can he give us a bit of a picture of what he has in mind? He said that he did not want to distort things at the moment, that there were intermediaries out there and so on. That is all very well, but is he assuming that a market will be developed or is developing? What overview of this does he have? In a sense, we have a very clear proposition here, which the Government should respond to. I am assuming that this is not a question just of letting a thousand flowers bloom. What is the government policy towards this? If you look at the Hall-Pesenti review and read pretty much every government response—including to our AI Select Committee, where we talked about data trusts and picked up the Hall-Pesenti review recommendations —you see that the Government have been pretty much positive over time when they have talked about data trusts. The trouble is that they have not done anything.

[Viscount Camrose (Con)]

Overall, as I say and as many have said in this brief debate, this is a potentially far-reaching and powerful idea with an enormous number of benefits. But the fact that it is far-reaching implies that we need to look at it further. I am afraid that I am not briefed on long-standing—

[Lord Clement-Jones (LD)]

May I suggest that the Minister writes? On the one hand, he is saying that we will be distorting something—that something is happening out there—but, on the other hand, he is saying that he is not briefed on what is out there or what the intentions are. A letter unpacking all that would be enormously helpful.

[Viscount Camrose (Con)]

I am very happy to write on this. I will just say that I am not briefed on previous government policy towards it, dating back many years before my time in the role.

[Lord Clement-Jones (LD)]

It was a few Prime Ministers ago.

[Viscount Camrose (Con)]

It was even further. Yes, I am very happy to write on that. For the reasons I have set out, I am not able to accept these amendments for now. I therefore hope that the noble Baroness will withdraw her amendment.

Medical Research Techniques

Viscount Camrose Excerpts

Monday 18th March 2024 Lords Chamber

[Baroness Bennett of Manor Castle]

To ask His Majesty’s Government what steps they are taking to promote the use of human-specific medical research techniques, such as “organ-on-a-chip” and computer modelling, in place of animal testing.

[The Parliamentary Under-Secretary of State, Department for Science, Innovation and Technology (Viscount Camrose) (Con)]

The Government provide significant funding for the development of these technologies through UKRI, primarily to the National Centre for the Replacement, Reduction and Refinement of Animals in Research. We are doubling our investment in this area next year to £20 million and this summer the Government will publish a plan to accelerate the development, validation and uptake of methods to reduce reliance on the use of animals in science.

[Baroness Bennett of Manor Castle (GP)]

I thank the noble Lord the Minister for his Answer, but of course animal testing is not working well. Less than 6% of cancer drugs proceed past the first small phase 1 trials, and more than 99% of Alzheimer’s drugs have failed. There are some very exciting possibilities, such as the liver-on-a-chip device that correctly identified 87% of drugs that caused liver toxicity after they passed animal tests. Many other countries are racing ahead on this: the USA has passed the FDA Modernization Act, the Netherlands has a transition programme and India has new rules for drug trials. Do we not need to go much further and look towards legislative change and a much bigger injection of funds to see real progress if we are to be world-leading in the future in this biotechnology field?

[Viscount Camrose (Con)]

That is a wide-ranging question, and I will do my best to cover some of those points. With respect to the effectiveness of clinical trials, on the whole they cannot take place without toxicology trials and most of those, sadly, have to be done on animals. We very much welcome any technology that allows for in silico methods of assessing toxicology and it is true that more of those are emerging, but they have to be validated in order to be assumed safe and usable in clinical trials.

[Lord Clement-Jones (LD)]

My Lords, the Government produced a previous report on a road map for non-animal technologies from six UK government funders, including MRC, EPSRC and Innovate UK way back in 2015. How will they ensure that this new road map does not get left on the shelf again? Will DSIT set up an independent strategic advisory board with the key stakeholders to provide direction and oversight, as suggested by the RSPCA?

[Viscount Camrose (Con)]

DSIT continues to be led on its approach to creating non-animal methods in clinical trials, toxicology trials and so on by the UK’s NC3Rs—the National Centre for the Replacement, Refinement and Reduction of Animals in Research—for toxicology and other scientific research, and that continues. There was a decrease of 10% in animal testing from the previous year, according to our most recent records, and that will continue. DSIT meanwhile has no plans to add a new oversight executive body to those already in existence.

[Lord Turnberg (Lab)]

My Lords, I express an interest as a past chairman of NC3Rs. During the time I was chairman, we saw a marked reduction in the number of animals used in research, and that continues with certain types of animals, such as dogs, cats and so on. It is essential, though, for new drugs to be tested on animals and regulatory authorities rely on that. Is there anything we can do to help those authorities relax a little?

[Viscount Camrose (Con)]

First, let me pay tribute to the work of the NC3Rs, which is an extremely important body. Nobody feels comfortable doing a lot of animal tests; they simply are necessary for human safety in too many cases. For example, UK REACH follows the last-resort principle where, as far as possible, it is able to waive animal tests for chemicals. That kind of work will further accelerate the work of the NC3Rs.

[Lord Kamall (Con)]

My Lords, the noble Baroness, Lady Bennett, spoke about other countries that were looking at alternatives to animal testing. What conversations has my noble friend’s department had with other countries on how they can encourage more alternatives to animal testing?

[Viscount Camrose (Con)]

DSIT continues to engage on life sciences research with a wide range of other countries, including countries that have tried to accelerate further. Recently, in particular, the Netherlands and the United States have not always been able to succeed in their goals of accelerating the date by which non-animal methods of research become the only way forward. On the other hand, steady progress towards the greater use of non-animal methods through the three Rs seems to be bearing fruit, albeit not as fast as anybody would like.

[Baroness Hayman of Ullock (Lab)]

My Lords, we know that there is a fast-growing global market for human-specific technologies. The size of that global market in 2023 was around $2 billion, so it is huge. Does the Minister have any views on the economic potential of human-specific technologies for the UK as a leader in this field?

--- Later in debate ---

[Viscount Camrose (Con)]

Yes, indeed; the economic potential is absolutely enormous. As with any medical devices, they need to be put through proper pharma-covigilance procedures, validation and testing, to make sure that by the time we are ready for clinical trials, all the toxicology testing has been properly done. Where it is possible to find an alternative to animal testing, that should always be followed. We always aim to use the minimum number of animals for the scientific benefit to be achieved and minimise the potential harm to animals for that benefit.

[Baroness Bennett of Manor Castle (GP)]

My Lords, in responding to me the Minister referred to the apparent necessity of animals for toxicity tests. Of course, the case I had cited was one where liver drugs had passed animal toxicity tests and then were found to have problems with a human-specific technology. Canada has passed a Bill to phase out animal-based chemical toxicity testing and the European Commission is committed to developing a road map in that direction. As the noble Baroness on the Front Bench said, human-specific technologies have enormous potential. Will the Government look at getting an Act to provide a framework so that the UK could get ahead in this area and end toxicology testing on animals, as other countries are looking to do?

[Viscount Camrose (Con)]

The noble Baroness mentioned an Act—there are widespread protections under the Animals (Scientific Procedures) Act. We have the three-tier licensing system, including significant training and assessment for licensees, and a range of other safeguards. Different jurisdictions are taking a range of approaches to this; I am not aware of any jurisdiction that has yet been able to set a timeline for the absolute removal of animal tests because, sadly, they do remain critical for the development of medicines.

AI: “Nudify” Apps

Viscount Camrose Excerpts

Tuesday 13th February 2024 Lords Chamber

[Baroness Owen of Alderley Edge]

To ask His Majesty’s Government whether they plan to prohibit “nudify” apps which create intimate images of other people using artificial intelligence without their consent.

[The Parliamentary Under-Secretary of State, Department for Science, Innovation and Technology (Viscount Camrose) (Con)]

My Lords, the Online Safety Act introduced new offences which criminalised the sharing of, or threatening to share, intimate images, including deepfakes, without consent. Where individuals create these images using any kind of technology and share or threaten to share them online, they may be committing an offence. The Act will additionally give online platforms new duties to tackle this content by removing it, including where it has been created via AI apps.

[Baroness Owen of Alderley Edge (Con)]

I thank my noble friend the Minister for his Answer. There has been a huge increase in the use of nudify apps and the creation of deepfake porn since the Law Commission stated that it was less sure that the level of harm caused by the making of these images and videos was serious enough to criminalise. Does my noble friend agree that the making of these images and videos without a person’s consent does in fact cause serious harm, regardless of whether a person is aware of it, and that, if allowed to continue, represents a real threat to all women?

[Viscount Camrose (Con)]

I start by acknowledging that the creation of intimate image deepfakes using AI or other means is abusive and deeply distressing to anyone concerned and very disturbing to all of us. The Law Commission consulted widely on this, looking at the process of taking, making, possessing and sharing deepfakes, and its conclusion was that the focus of legislative effort ought to be on sharing, which it now is. That said, this is a fast-moving space. The capabilities of these tools are growing rapidly and, sadly, the number of users is growing rapidly, so we will continue to monitor that.

[Lord Browne of Ladyton (Lab)]

My Lords, the applications referred to in the excellent Question put by the noble Baroness, Lady Owen, represent a dangerous and overwhelmingly misogynistic trend of non-consensual deepfake pornography. They are able to be developed and distributed only because of advances in AI, and sit alongside the use of deepfakes for political disinformation and fraud. Polling suggests public ambivalence towards AI but near unanimity around deepfakes, with 80% of people supporting a ban, according to a recent YouGov survey. Cloud computing and services hosting AI models are essential for deepfake creation, and the fact that all major cloud suppliers have a presence in the UK empowers our Government uniquely to enforce best practice. Does the Minister agree that our regulatory system should not merely ban deepfakes but go further, imposing upon the developers a duty to show how and in what way they are applying existing techniques and restrictions that could prevent their creation in the first place?

[Viscount Camrose (Con)]

An outright ban on the creation of any deepfake material presents a number of challenges, but obviously I applaud the sentiment behind the question. With respect particularly to deepfakes involved in intimate image abuse, we are clearly putting in place the offence of sharing, whether as part of the new intimate image abuse offences in the Online Safety Act that commenced two weeks ago, as part of the Criminal Justice Bill shortly to come before your Lordships’ House, or indeed under the existing child sexual exploitation and abuse offences. There are severe penalties for the sharing of intimate image abuse deepfakes, but it is a fast-moving space and we have to continue to monitor it.

[Lord Clement-Jones (LD)]

My Lords, it is quite clear that simply banning the sharing of these deepfakes is not sufficient. This is an issue that concerns us all, whether in relation to sexual images, fraud or misinformation. Can the Government not overcome their reluctance to regulate AI? What evidence would persuade them to go further and make sure that the creators of these deepfakes are liable?

[Viscount Camrose (Con)]

As regards the overall regulation of AI, I hope that noble Lords have had a chance to peruse the Government’s response to the AI White Paper consultation. It makes the argument very clearly that there will come a time when it is right to legislate to create binding rules on all creators of AI. When that time comes, due to the policies that we are putting in place, we will have an agreed risk register informing us. We will have set up monitoring and evaluation techniques, again gathering evidence. We will have working relationships with the AI labs, defined procedures for the creation of AI, and regulators trained to regulate AI within their own sectors. That means that, when we do regulate AI, it will be done in a targeted and sophisticated way, on the basis of evidence.

[Lord Bassam of Brighton (Lab)]

My Lords, the Government have been far too complacent on this issue. During the passage of the then Online Safety Bill, we warned a number of times that, given that this is a fast-moving technology, as the Minister says, the Government needed to get ahead of the game. Given the proliferation of these ghastly images and the appalling impact this has on people’s lives, does the Minister now agree that neither the emergence of these apps nor their misuse is surprising? If that is the case, why did the Government not broaden the scope of their amendments when they had the opportunity to do so? Will the Minister now look for ways in which we can plug the gaps that are clearly emerging?

[Viscount Camrose (Con)]

As the noble Lord said, it is a fast-moving space, and that requires an adaptive, agile response in legislating for it. That is the approach that we are taking. As to the argument that we can now see that it is not working, I am not sure that that is the case. The intimate image abuse offences commenced on 31 January—two weeks ago. I am pleased to see that, yesterday, we had our first cyberflashing conviction under those provisions. Using an evidence base, looking forward, we will have to consider carefully what is working before we go ahead and implement further bans.

[Baroness Foster of Aghadrumsee (Non-Afl)]

My Lords, during the last Assembly election in Northern Ireland, two female candidates from either side of the community in Northern Ireland were targeted with deepfake porn, which was solely designed to damage their chances in that election. We know the number of people who will be going to the polls in the next year. Surely the Minister and the Government need to work with the Electoral Commission to raise this issue, because it is a very important issue in democracy for female candidates.

[Viscount Camrose (Con)]

I absolutely agree, and the instance that the noble Baroness described is deplorable. I am pleased to say two things very briefly. First, the sharing she describes now carries, as a base offence, up to six months in prison; if, as in the case the noble Baroness put forward, the sharing is designed for the purposes of malice or gaining sexual gratification, that sentence goes up to two years. That regime is now live. On elections, we have set up the Defending Democracy Taskforce, with a new unit implemented last year specifically dedicated to safeguarding the election against such threats.

[Baroness Chakrabarti (Lab)]

My Lords, the noble Baroness, Lady Owen, asked a Question that was forensic, specific, nimble and agile—all adjectives that the Minister keeps using: “Why not ban these nudify apps?”. Why not ban the tools of the wicked trade, rather than waiting for individuals to misuse them? What is the positive use of this? Is it that big tech is now so deep in our politics that we do not dare regulate this technology to make sure that it is not used for ill?

[Viscount Camrose (Con)]

The reason the making is not banned is that the sharing is banned, and the reason we did that is that Law Commission—as set out very clearly in its document—made the argument that this was the most appropriate way to have a coherent and effective body of law preventing this deplorable misuse of technologies.

[The Archbishop of York]

My Lords, it would be very helpful if the Minister could explain. If I heard him correctly, he said that sharing has a six month ban but for malicious sharing it could be up to two years. Could he explain what non-malicious use would be?

[Viscount Camrose (Con)]

There is a base offence in the law of sharing intimate images without consent or the reasonable belief of consent. That can extend to two years if the intent is to cause alarm, distress or humiliation, or if the purpose is to gain sexual gratification. Crucially, there is an offence of threatening to share these materials which also carries a two-year penalty.

Combating Disinformation: Freedom of Expression

Viscount Camrose Excerpts

Tuesday 13th February 2024 Lords Chamber

[Lord Strasburger (LD) [V]]

My Lords, I draw the attention of the House to my role as chair of Big Brother Watch and beg leave to ask the Question standing in my name on the Order Paper.

[The Parliamentary Under-Secretary of State, Department for Science, Innovation and Technology (Viscount Camrose) (Con)]

Preserving individuals’ rights to freedom of expression underpins all the Government’s work on tackling disinformation. This right is upheld by the Online Safety Act, which protects freedom of expression by addressing only the most egregious forms of disinformation, ensuring that people can engage in free debate and discussion online. Under the Act, when putting in place safety measures to fulfil their duties, companies are also required to consider and implement safeguards for freedom of expression.

[Lord Strasburger (LD) [V]]

I thank the Minister for his reply. Last year, Big Brother Watch exposed worrying overreach by the Counter Disinformation Unit in its attempts to prevent legitimate criticism of the Government by MPs, journalists and academics. Following the Government’s apology, could the Minister tell the House what, if anything, has changed, apart from the unit’s name? Could he please explain why the Government refuse to allow the Intelligence and Security Committee to oversee the work of what is now called the National Security Online Information Team?

[Viscount Camrose (Con)]

First, the Counter Disinformation Unit has indeed changed its name to the National Security Online Information Team, to better reflect its role. I am not aware of the apology to which the noble Lord refers, but I will look into it. I have not heard of it. The NSOIT, as it is now called, does not target individuals, particularly not politicians or journalists. It does not even go after individual pieces of content but looks for trends across all items of content online. I will look into this case for an apology, but I am surprised by it because I am not aware of it.

[Baroness Chakrabarti (Lab)]

My Lords, the Question of the noble Lord, Lord Strasburger, requires a little further interrogation, because that report by Big Brother Watch suggested that during the pandemic, politicians, journalists and civil society campaigners from across the political spectrum were personally targeted for critiquing the Government’s handling of the pandemic. Given that report and these legitimate concerns, it would be very kind if the Minister and his colleagues would look into this further and write to the noble Lord, Lord Strasburger, and, indeed, to anyone else affected.

[Viscount Camrose (Con)]

Yes, I am very happy to write any such letter. I confirm now in front of the House that the function of the NSOIT, formerly the Counter Disinformation Unit, is to analyse attempts to artificially manipulate the information environment for purposes of national security. It is not its function—and never has been its function, regardless of its name—to go after individuals, whether they are politicians, journalists, or anybody else. It looks for at-scale attempts to manipulate the information environment.

[Lord Clement-Jones (LD)]

My Lords, it is clear we need to be assured that the rather concerning activities reported about the CDU treating political criticism as disinformation are no longer practised by NSOIT. Can the Minister explain where we can find a copy of NSOIT’s policies? Can he confirm whether it has a policy to prohibit it from flagging lawful domestic speech for terms of service violations to social media companies?

[Viscount Camrose (Con)]

Information on NSOIT is posted on GOV.UK, and I am happy to share that location with the noble Lord. I can confirm not only that it is not the role of NSOIT or the CDU to go after any individuals, regardless of their political belief, but that it never has been. NSOIT looks for large-scale attempts to pollute the information environment, generally as a result of threats from foreign states. I am happy to say in front of the House that the idea that its purpose is also to go after, in some ways, those who disagree politically with the Government is categorically false.

[Lord Bassam of Brighton (Lab)]

My Lords, the issue is much more complex than that. I am concerned that the unit to which the Minister referred seems to be concerned only about security issues now. In December, I asked the Minister about the rise of political deepfakes, which often originate from overseas and have the potential to undermine trust in political leaders and our wider democratic processes. With the Data Protection and Digital Information Bill currently before the House already containing measures on what the Government call “democratic engagement”, can I tempt the Minister to bring forward new anti-deepfake provisions to help preserve the integrity of our upcoming general election—and not just our election in a year of big elections?

[Viscount Camrose (Con)]

Indeed. It is worth reminding the House that close to 2 billion people will go to the polls over this calendar year. A great many of those elections in which they participate will come under attack from malign foreign influences. Therefore, we have implemented the Defending Democracy Taskforce, chaired by the Security Minister, which set up a new unit last year specifically dedicated to safeguarding our coming election, whenever it may be. It continues to engage with various committees of Parliament and with the Electoral Commission. We will look carefully at any proposals on deepfake provisions in the DPDI Bill. Deepfakes are already illegal today if they violate either the foreign interference offence or the false communications offence.

[Lord Fox (LD)]

My Lords, my noble friend Lord Strasburger asked about the parliamentary scrutiny of the unit. Does the Minister understand that, if there were to be proper scrutiny of the unit, some of the words that he uses to try to placate your Lordships’ House would have deeper resonance? Can he tell us why the ISC is not scrutinising the unit?

[Viscount Camrose (Con)]

NSOIT is indeed scrutinised by Ministers; it sits within DSIT and then Ministers, as we see, come before this House to explain matters. As a national security team, I dare say that we would have some concerns about a standing report to Parliament about its activities, but I can continue to reassure the House on its role.

[Lord Kirkhope of Harrogate (Con)]

My Lords, can my noble friend the Minister explain how this very interesting unit is comprised? Who are the members of the unit and from where do they come?

[Viscount Camrose (Con)]

The unit comprises civil servants who sit within DSIT, and it occasionally makes use of external consulting services. It adjusts its size and membership from within the DSIT team according to the nature of the threat at any given moment.

[Baroness Fox of Buckley (Non-Afl)]

My Lords, on transparency: we would not know about the Counter Disinformation Unit if it was not for Big Brother Watch, which we owe great thanks for its service on that. The Minister seems to know what disinformation is. Can the Government tell us how they identify what is to be labelled as disinformation? Who checks the fact checkers? For example, BBC Verify seems keen to expose everybody else’s disinformation but seems blind to its own egregious examples of inaccurate information.

[Viscount Camrose (Con)]

Well, the Government are clear, as is NSOIT, that disinformation refers to the deliberate attempt to mislead by placing falsehoods into the information environment. As part of the Civil Service, NSOIT would have robust internal measures to verify and check its own work, and indeed it reports regularly across government and to Ministers.

[Lord Kamall (Con)]

My Lords, can my noble friend the Minister explain what guidance is given to the unit to distinguish between disinformation and difference of opinion?

[Viscount Camrose (Con)]

Disinformation is a deliberate falsehood. A difference of opinion is generally something of democratic importance or of journalistic or pluralistic importance, which it is very important to protect and which the Online Safety Act took very considerable measures to safeguard over its passage.

[Baroness Jones of Moulsecoomb (GP)]

My Lords, does this unit check on government disinformation such as the Rwanda Bill?

[Viscount Camrose (Con)]

I do not believe that this unit has been working on the Rwanda Bill.

[Lord Pannick (CB)]

My Lords, if this unit consists of civil servants and external advisers, why is it impermissible for its work to be supervised by a parliamentary committee composed of privy counsellors?

[Viscount Camrose (Con)]

It was set up as an internal part of DSIT. It reports to Ministers and Ministers provide the oversight. I take the point, but it is a national security institution and, as such, the Government have a strong preference for not allowing it openly to share national security information for fear of benefiting those who wish us harm.

Digital Exclusion (Communications and Digital Committee Report)

Viscount Camrose Excerpts

Thursday 8th February 2024 Lords Chamber

[The Parliamentary Under-Secretary of State, Department for Science, Innovation and Technology (Viscount Camrose) (Con)]

I start by sincerely thanking my noble friend Lady Stowell for tabling what we must all agree is a deeply important debate on this far-ranging and critical subject of digital exclusion, which we know affects millions of people across the UK, with costs to them as individuals and, as has been pointed out, to all society. I hope to be able to reassure noble Lords on most of the very wide range of points that were made, but I look forward to continuing the dialogue. As has been observed, this is not a problem that will go away overnight, but I hope some of the things I will put forward will provide some reassurance in the meantime.

Let me take a step back by way of introduction. Our transition to the digital age in the last two decades has brought with it a period of extraordinary change. The fourth industrial revolution has transformed our economies, our public services and our day-to-day lives. We can expect that change to continue as technology continues to develop, bringing with it opportunities that would have been unimaginable for previous generations.

On the whole, the UK is well positioned to seize those opportunities by taking the lead in technological innovation. We are able to do this because, among other things, we are building on a proud history of technological development that takes us right up to the present day, from Sir Tim Berners-Lee and the world wide web to pioneers such as Dr Katalin Karikó and Dr Drew Weissman, who led the world in the development of the Covid-19 vaccine.

Across the country, we have a wealth of science and tech expertise. We are home to four of the world’s top 10 universities, and in 2022 we became only the third country in the world to have a tech sector valued at over $1 trillion. It is important that we continue this tradition of leading technological development through digital transformation. Not only will it help us boost productivity and increase all kinds of operational efficiency but, if we manage the transition properly, these innovations can deliver wider social benefits too: we can connect communities, reduce loneliness, and make public services easier and faster to access.

But—and there is always a but at this point—we absolutely must recognise the deep, genuine concern that some will be left behind. This is something that I personally, and the Government overall, take very seriously. That is why we do not want just to drive progress in tech; we want to do so responsibly and ensure that the tech we develop improves all lives across the country. Tackling digital exclusion is a fundamental part of this and a complex issue. No one department can solve this challenge; it will require close collaboration across government.

Digital exclusion negatively affects people’s lives. Individuals who are digitally excluded are less likely to be in well-paying jobs. They have worse health outcomes and overall lower quality of life. As a result, digital exclusion creates new inequalities and exacerbates existing ones, making it difficult to participate fully in society.

Rising living costs have also made it more difficult for people to afford devices and internet access, which will increase digital exclusion. Some 18.7 million people—that is 35% of us in the UK—feel that increases in the cost of living are impacting their ability to go online, and 11.5 million—22% of people in the UK—have already taken steps to reduce the costs associated with going online by seeking alternative solutions such as libraries, community centres or, indeed, as we heard, churches for free access.

The Government have been clear that ensuring that no one is left behind in the digital age is a priority and consider that credible steps have been taken to offer needed support. Encouraging more people to engage and stay online requires overcoming the barriers to access, skills, motivation and trust. Digitally excluded people also require continued support to ensure that these barriers remain lowered, and this is what we continue to focus on across government.

I thank noble Lords on the Communications and Digital Committee for their important work on the digital exclusion inquiry last year. Since the committee’s report was published, we have established, again as a number of noble Lords observed, a new interministerial group to drive progress and accountability on digital inclusion priorities across government, to set clear objectives and to monitor delivery. I thank the noble Lord, Lord Clement-Jones, and can confirm that the Minister for Tech and the Digital Economy, Saqib Bhatti, is responsible for digital inclusion and that is why he is in the position of chairing the group. The group met for the first time in September, and departments agreed to undertake departmental mapping exercises to drive work on digital inclusion. With the group meeting, as has been said, every six months, this is the first step of many in a cross-government effort.

[Lord Clement-Jones (LD)]

Does the noble Lord believe that meeting once every six months is adequate?

[Viscount Camrose (Con)]

The crux of the work is done at departmental level and that feels to me more like a board meeting. So, yes, I think that set-up makes logical sense, but we will watch with interest and adapt as necessary.

Many noble Lords raised points about a new digital inclusion strategy. As the Secretary of State for Science, Innovation and Technology said to the committee on Tuesday, the Government are focusing their resources on delivery—on the doing rather than on the writing of the new strategy. The key themes for the last strategy on digital inclusion—access, skills, motivation and trust—are still relevant today. I will point to some of this action as I go through my speech.

I agree with the point that the noble Lord, Lord Foster, made very well: the digital strategy should and does include the basis for digital inclusion. The 2022 digital strategy outlined work across government that will promote digital inclusion, including broadband rollout across the UK, essential digital skills support and legislation to tackle online harms, now the Online Safety Act. I thank the noble Baroness, Lady Jones, for raising the issue of who in government is working on digital inclusion, and my noble friend Lady Stowell for asking about the relationship between teams working on AI. My department has various teams, from the newly named Responsible Technology Adoption Unit, formerly the Centre for Data Ethics and Innovation, to AI skills feeding in to work on digital inclusion. This is alongside teams working on telecom skills and the tech sector. Given its varied nature, there are teams across government that work on policy linked to digital inclusion, including the Department for Culture, Media and Sport’s work with libraries, the Department for Work and Pensions’ work on unemployment and the Department for Education’s work on digital skills. There is a new official-level working group that sits across government to support this cross-cutting work.

Starting with the issue of access, I will focus on the affordability and availability of telecom services. UK consumers have access to one of the most competitive telecom markets in Europe. The cost of a gigabyte of data, at 50p in the UK, is less than half that of the average price in the EU, at £1.18. The headline cost of an average broadband package and mobile service has actually decreased since 2019.

Prices have fallen, but usage has increased: the average household broadband connection uses 53% more data today than it did in 2019. Mobile data consumption has increased 25% year on year. We have been working hard to ensure that people have the access to the internet and broadband that they need. In March 2021, we launched Project Gigabit, our £5 billion mission to deliver fast, reliable broadband to the hardest-to-reach parts of the UK, areas that would have otherwise been left out of commercial gigabit rollout plans without government subsidy.

In 2021, the Department for Culture, Media and Sport, in partnership with the charities AbilityNet and Good Things Foundation, launched the £2.5 million digital lifeline fund. The fund aimed to reduce the digital exclusion of people with learning disabilities by providing free devices, data and digital support to over 5,000 people with learning disabilities who cannot afford to get online.

To support children with access to devices, the Department for Education has also delivered over 1.95 million laptops and tablets to schools, trusts, local authorities and further education providers for disadvantaged children and young people since 2020. This is part of a £520 million government investment to support access to remote education and online social care services.

Once again, I thank the noble Lord, Lord Clement-Jones, for his valuable contribution and for raising the broadband universal service obligation, which the Government introduced in March 2020. This gives everyone the legal right to request a decent and affordable broadband connection of at least 10 megabits per second. The broadband universal service obligation is a safety net, providing a minimum level of service to participate in society and the economy, based on information provided by Ofcom. Given the significant changes to the broadband market since the USO was designed in 2019, we want to take this opportunity to review the broadband USO and ensure it remains relevant and up to date with the current technical standards required in practice, reflects the current and future market environment, and delivers on the policy principles set out by the Government when it was established. In October last year, the Government published a consultation on reviewing the broadband universal service obligation, and a response to it will be published in due course.

I also thank the noble Baroness, Lady Armstrong, and the noble Lord, Lord Lipsey, for their thoughtful contributions, which noted the importance of social tariffs provided by telecoms companies, and the right reverend Prelate the Bishop of Bristol for her well-made point on affordability. We recognise that cost is a barrier for many. As I have noted, prices in the UK are falling and the Government have worked closely with the telecoms industry to ensure the provision of low-cost, high-quality fixed and mobile tariffs, also known as social tariffs, for those on universal credit as well as other means-tested benefits. There is of course a balance to be struck between ensuring investment in UK telecoms infrastructure and ensuring that services remain affordable.

We have established a pro-investment, pro-competition environment and remain committed to the idea that a competitive market will deliver the best outcomes for all consumers. Social tariffs are now available from 27 providers, up from 10 in November 2022, from the likes of BT, Sky and Virgin Media and across 99% of the UK. We have seen an increase in uptake of almost 160% since September 2022, but I am afraid to say that this represents just 8% of total eligible households. I absolutely acknowledge that we need to make more progress and we will continue to look at how to accelerate that.

[Lord Clement-Jones (LD)]

Perhaps the Minister can give us just a little more detail. Is there any movement towards auto-enrolment and the kind of ideas that have come out of the committee?

[Viscount Camrose (Con)]

Yes, but I am going to have to write because that would be a multi-bullet point communication.

There is also the timely issue of contract price rises. We appreciate that households across the country are struggling with their bills because of the rise in the cost of living, and that price rises in any services will be unwelcome. That is why it is essential that important clauses within telecoms contracts, such as in-contract price rises, are clear and transparent. Consumers need to be aware of what they are agreeing to when taking up a broadband or mobile contract.

In December, Ofcom completed its review of inflation-linked in-contract price rises and launched a consultation that would end CPI and RPI increases, replacing them with a clear pounds and pence figure for what consumers will pay. For the avoidance of doubt, social tariffs do not incur in-contract prices rises.

I draw noble Lords’ attention to the commitments made by industry bosses in June 2021 to support their customers. The sector agreed to allow consumers facing financial difficulties to enter into affordable payment plans or move to cheaper plans without penalty. We have been clear that any customer who believes they are facing digital exclusion can contact their provider to discuss the support that might be available.

On VAT, as noted by the noble Lord, Lord Young, it is important to remember that decisions to deviate from the standard VAT rate of 20% have to be considered carefully and based on clear evidence, as lowering tax in one place can mean raising tax in another. Taxation policy is kept under review, and we would be happy to receive evidence of the benefits of reducing VAT on social tariffs.

In addition to the provision of social tariffs, we have increased access to gigabit internet. Approximately 80% of UK premises can now access gigabit-capable broadband—a huge leap forward from 2019, when coverage was just 6%. We are on track to meet our target of 85% coverage by 2025. We will continue to expand our mobile network too. By 2025, we will have 95% coverage through the shared rural network, and we are aiming for the majority of the population to have access to 5G signal by 2027, via the 5G Testbeds and Trials Programme.

Government cannot, and should not, be expected to tackle the issue of digital inclusion alone. We call on private sector organisations to prioritise digital inclusion in their business, which they could do by joining device donation schemes, for example. We encourage telecoms providers to continue to provide social tariffs and advertise them to eligible households. We encourage companies to adhere to the public sector bodies accessibility regulations and other government accessibility guidance, which are published and freely available online, for their websites and other publicly available information.

I thank the noble Baroness, Lady Jones, and my noble friend Lady Stowell for their thoughtful contributions and for raising the important issue of high-quality localised hubs, including libraries and banking hubs. Banking hubs are a voluntary initiative provided by the UK’s largest high street banks. I agree that it is imperative that banks and building societies recognise the needs of all their customers, including those who need to use in-person services. Over 100 banking hubs have been announced so far, and the Government hope to see these hubs open as soon as possible.

Around 2,900 public libraries in England provide a trusted network of accessible locations, with staff, volunteers, free wifi funded by the Department for Culture, Media and Sport, public PCs, and assisted digital access to a wide range of digital services. My noble friend Lady Sanderson’s An Independent Review of English Public Libraries, published in January, called for the establishment of formal links between digital-by-default public services, particularly health services and libraries, to ensure the provision of one-to-one support. In his response to my noble friend Lady Sanderson, my noble friend Lord Parkinson committed to exploring her recommendations further, as part of the development of the Government’s libraries strategy, due to be published in 2024. The noble Baroness, Lady Jones, asked for a date for that, but I will have to come back to her with the timelines, as I do not have that detail.

On access to support for those seeking work, Jobcentre Plus work coaches can provide support to eligible claimants who are not online with financial support to buy six-month broadband connections. This is administered by the Department for Work and Pensions through the flexible support fund. This cross-government approach is working to reach millions of people across the UK and to provide necessary access for the digital age.

We know that, in addition to access, the right skills are needed, as many noble Lords rightly pointed out, to be able to use and take advantage of digital content and services. Digital skills are central to the jobs of today and the workforce of tomorrow. Ensuring that the workforce has the digital skills for the future is important to meet the UK’s ambition to be a global science and tech superpower.

I thank the noble Baroness, Lady Jones, for raising the skills gap. Tackling the digital skills gap and the shortage of digital workers across the economy cannot be done by government alone, which is why the Government launched the Digital Skills Council in June 2022, bringing together government and industry to strengthen the digital workforce. The council is focused on addressing industry’s current and future demand for digital skills, including through digital apprenticeships and by increasing the amount of business-led upskilling.

I thank the noble Baroness, Lady Jones, for raising also the role of the employer to support training staff. More than 80% of those who will be in the 2030 workforce are already in the workforce today. Given the need to continually refresh digital skills, upskilling existing workers with workplace training be essential. We have put employers at the heart of our apprenticeship system, empowering them to design the standards they need. Employers in the digital sector have developed 30 apprenticeship standards in digital. These high-quality apprenticeships are in a wide range of occupations and emerging technologies, including data scientist, software developer, cybersecurity and artificial intelligence specialist.

The noble Baroness, Lady Jones, also raised investment and support for young people. For children and young people, we are supporting and inspiring the next generation of technologists. It is crucial that we challenge perceptions of what being in a tech career is all about if we are to attract diverse and high-quality talent into our digital workforce. To achieve this, we are working closely with the Department for Education, industry and academia through the Digital and Computing Skills Education Taskforce, launched last summer to increase the numbers of students choosing digital and tech educational pathways into tech careers.

We are also working in partnership with industry and other government departments to inspire and engage students before they make key subject choices at GCSE and A-level—for example, through the CyberFirst programme, which encompasses technology-focused initiatives, from free online extracurricular learning to national competitions and bursaries. This includes DSIT’s Cyber Explorers programme, launched in February 2022, which seeks to support the teaching of computing in schools and to inspire young people aged 11 to 14 to take up computer science for GCSE and the opportunities that a career in cybersecurity can offer. Over 60,000 students are registered across nearly 2,500 schools.

I thank my noble friend Lord Holmes for his question on the national curriculum. In addition to the programmes that I have just outlined, the DfE introduced computing as a statutory national curriculum subject in 2014 from key stages 1 to 4. In addition to this, we are investing a total over the Parliament of £3.8 billion in skills in England by 2024-25 and, in October, we quadrupled the scale of skills bootcamps.

I thank the noble Baroness, Lady Jones, for raising the essential digital skills framework. The Department for Education has used that framework as the basis for the national standards for essential digital skills of 2019, which set out the skills that the qualifications funded and that the adult digital statutory entitlement must cover.

I thank the noble Baroness, Lady Lane-Fox, for her important question on the links to community groups. These really are an important part of the digital inclusion landscape. The Department for Education funds community learning and other non-regulated learning, such as building confidence in essential digital skills for learners who are not ready to take a qualification.

I reassure noble Lords that I am almost at the point of closing. The secondary barriers of trust and motivation must be tackled to have a true, positive impact on digital inclusion, but these are harder to measure. We recognise that some people are hesitant to access online services for fear that they may become victims of fraud, or that it is an unsafe environment. We have introduced the Product Security and Telecommunications Infrastructure Act, which will come into force in April this year.

[Lord Foster of Bath (LD)]

My Lords, I know that time is very short, but I asked about the accountability of the cross-Whitehall group being set up. We know that it is going to meet only once every six months. One assumes that it will receive at each meeting a report of progress that has been made in a wide range of areas in the preceding six months. Could the Minister at least agree that copies of the report that will be received by the group will be made public to Members of Parliament?

[Viscount Camrose (Con)]

I can take that up with the chair of the group, my colleague Minister Bhatti, to understand his intentions for assuring accountability.

I once again sincerely thank my noble friend Lady Stowell for securing today’s debate, and all noble Lords who have spoken so well and clearly on this absolutely critical subject. With that, I conclude my remarks.

Horizon Europe

Viscount Camrose Excerpts

Tuesday 30th January 2024 Lords Chamber

[Baroness McIntosh of Hudnall (Lab)]

My Lords, on behalf of my noble friend Lord Stansgate, and at his request, I beg leave to ask the Question standing in his name on the Order Paper.

[The Parliamentary Under-Secretary of State, Department for Science, Innovation and Technology (Viscount Camrose) (Con)]

Our bespoke Horizon association deal means that UK researchers can now fully participate on the same terms as researchers from other associated countries. The Government want UK academics, researchers and businesses to seize the opportunities presented by participation in Horizon Europe. Yesterday, the Government continued our push to maximise UK participation with the launch of a campaign to encourage UK businesses, academics and researchers to apply to Horizon Europe.

[Baroness McIntosh of Hudnall (Lab)]

My Lords, I thank the Minister for a very optimistic prospect, but as he knows, negotiations for the UK to rejoin Horizon were protracted and quite difficult. While there was great relief in the research community when they were eventually successful—he may have heard the Government’s Chief Scientific Adviser Dame Angela McLean talking about this on the “Today” programme this morning—there is ground for the UK to make up. Now that we have rejoined, is the Minister confident that UK-led research bids in this new round will attract their fair share of available funding? Is he aware of any difficulties there might be with visa arrangements for EU researchers who might want or need to come work in the UK? Can he also tell the House whether the Government are formally represented in EU ministerial discussions about Horizon Europe?

[Viscount Camrose (Con)]

I thank the noble Baroness for her questions and will try to cover as much of the material as possible. First, I am pleased to say that we look forward to welcoming Commissioner Ivanova to the UK the week after next, when we will discuss many of these matters. In fact, I will be participating the following week at a ministerial meeting on Horizon in Brussels. It is historically exceptional for associate countries to attend at ministerial level, so I think it demonstrates good will on all sides. Meanwhile, we are pursuing a wide programme of activities to maximise participation. That includes supporting SMEs and others who would not traditionally have worked with Horizon, as well as a campaign launched yesterday and ministerial engagement. We remain optimistic, but, as I have said in this House, the damage has been done by protracted absence.

[Lord Johnson of Marylebone (Con)]

My Lords, there are seven years of uncertainty to recover from, but better late than never. I strongly welcome the Government’s pump-priming on behalf of applicants to Horizon Europe. In assessing the value for money of the programme, how important do the Government think it is that Switzerland also rejoins, and what efforts are they making to support Bern in that objective?

[Viscount Camrose (Con)]

A range of other countries, as the noble Lord said, are also joining on an associate basis; Horizon is the largest programme of its type anywhere in the world. The total value of the programme is £80 billion over two years, and we consider that rejoining represents a significant opportunity for us following the uncertainty of our period of non-association. As to engagement with Bern, I am afraid that I do not have an answer for the noble Lord, but I will look into it; it sounds like a valuable contribution we could make.

[Lord Hannay of Chiswick (CB)]

My Lords—

--- Later in debate ---

[Baroness Smith of Newnham (LD)]

My Lords, I pay tribute to the noble Viscount, Lord Stansgate, in his absence for persistently bringing the issue of Horizon Europe to your Lordships’ House. Today, obviously, we can be very glad that the UK has rejoined, and I declare my interest as a professor of European politics at Cambridge and as having previously received money from European Union research funding. Clearly, as an academic, I am delighted that we are back in, but how much is this blitz of information about rejoining Horizon Europe costing the Government and how far have we lost out by being an associate member and not a full member? As the Minister said, we are now treated like other associate members; what does that mean in practice?

[Viscount Camrose (Con)]

I echo the noble Baroness’s remarks about the noble Viscount, Lord Stansgate. Being an associate member in practice allows us access to all Horizon calls from 2024 onwards, with the very small-in-volume exceptions of EIC funds or what the EU has determined to be strategically sensitive areas, including quantum. I should add that we and the EU have publicly committed to working towards opening even those small areas up, so we would have very full access to the Horizon programme.

[Lord Hannay of Chiswick (CB)]

My Lords, will the Minister accept welcome for the campaign launched by the Government today to catch up with what was lost? Does he recognise that many of these programmes are multiannual, spanning quite a period, and that it would therefore be a great help if the Government could make it clear that their intention is that we should continue to be an associate member of Horizon beyond the duration of the present programme?

[Viscount Camrose (Con)]

Yes, indeed. I very much recognise the value of the Horizon programme. Of course, any Horizon programme beyond the current one does not exist yet, except conceptually in the minds of all the current participants, but obviously we would look very favourably at participating as and when its terms were made clear.

[Lord Winston (Lab)]

My Lords, until Brexit, it was clear that the United Kingdom was second only to the United States in research in science, engineering and medicine. Can the Minister be kind enough to tell the House what assessment the Government have made of the impact of the loss of the Horizon programme in terms of citations and publications?

[Viscount Camrose (Con)]

As I have said in this House before, there is no doubt that our period of non-association with the Horizon programme did lasting damage. We have to focus now on repairing that damage. It is very difficult to put a number in currency on the value of that and I am not sure I would know where to begin. I absolutely acknowledge that the damage was real and is going to take a very conscious effort to fix.

[Lord Patel (CB)]

My Lords, it is good that from 1 January 2024 we are now associate members of Horizon, with the benefits it will bring, including the citation levels, but the Treasury withdrew £1.6 billion of funding that was earmarked for research during the time when we were negotiating joining Horizon Europe, and I understand from a further report published recently that a further £1 billion was removed. Can the Minister confirm that that is not the case?

[Viscount Camrose (Con)]

As is absolutely normal practice, money ring-fenced for a purpose to which it does not go is, in order to keep budgets taut and realistic, returned to the Treasury, but that in no way indicates an intention to diminish our spend on science and R&D. The Government remain committed to spending £20 billion a year on R&D by the 2024-25 spending review.

[Baroness Jones of Whitchurch (Lab)]

My Lords, what proportion of Horizon-funded projects are now led by UK research institutions compared to our previous well-known standing in the European research field?

[Viscount Camrose (Con)]

We have only very recently reassociated to Horizon, so we will not know who bid under the Horizon 2024 programme, or who the leader is or who has been successful, for, on average, six to nine months between making the proposal and receiving word, but at that time I will keep this House up to date on that important question.

[Lord Trees (CB)]

My Lords, today is World Neglected Tropical Diseases Day. Historically, EU Horizon research funding has been hugely valuable in supporting British scientists at our world-class biomedical institutions to collaborate with Asian, African, South American and European scientists to tackle neglected tropical diseases and diseases such as malaria. Can the Minister reassure the House that with our associate membership there will still be the possibility of funding those collaborative arrangements with the global South, with scientists in Africa, Asia and South America, in order to tackle these terrible neglected tropical diseases which threaten the most disadvantaged populations in the world but also our public health?

[Viscount Camrose (Con)]

Yes, absolutely. I thank the noble Lord for bringing up such an important and interesting area of science. I can confirm that our associate membership of Horizon would give us access to any and all Horizon calls alongside any other EU member or associate member, provided they are not designated as strategically significant, which those tropical diseases would not be.

Cancer Research: Funding Gap

Viscount Camrose Excerpts

Monday 29th January 2024 Lords Chamber

[Lord Hunt of Kings Heath]

To ask His Majesty’s Government what assessment they have made of the analysis by Cancer Research UK projecting a £1 billion funding gap for cancer research.

[The Parliamentary Under-Secretary of State, Department for Science, Innovation and Technology (Viscount Camrose) (Con)]

The Government remain fully committed to tackling cancer by investing in cutting-edge cancer research. We invested almost £122 million into cancer research in 2022-23 via the National Institute for Health and Care Research, while UK Research and Innovation invests around £200 million annually. We work closely with research funders, industry, the NHS and charities to drive earlier diagnosis and improved therapies. We are confident that the Government’s unwavering commitment will lead to continued improvements for cancer patients.

[Lord Hunt of Kings Heath (Lab)]

My Lords, I am grateful to the Minister, particularly in relation to his final comment about long-term investment. He will be aware that around 62% of all publicly funded research on cancer comes from the charitable sector. The last few years have been incredibly tough for the sector in raising money. As an example, over the past five years Cancer Research UK has seen a 19% drop in real terms in the amount it can invest in cancer research. It argues that we are in danger of losing about £1 billion of investment into cancer research over the next ten years, and has called for a commission on sustainable biomedical research task force to look at how government, the charitable sector and other funders can collectively fill that gap. Are the Government sympathetic to that?

[Viscount Camrose (Con)]

Yes, entirely, and I thank the noble Lord for raising this very important issue. I pay tribute to the very important and good work done by Cancer Research UK. If its analysis—I am familiar with its basic thrust—has a flaw, it is that it makes an assumption about an ongoing linear link between the number of cancer sufferers over the year and direct government and charity sector support. This assumption neglects to bring in, first, the close work done between the Government, businesses—through business co-funding—and others, and, secondly, the growing, extensive, important research that is relevant to cancer but not specifically associated with it. In particular, many of us are familiar with the work done on radiology in AI. It is not cancer-specific but is certainly likely to help the cause of improving cancer outcomes.

[Lord Carter of Haslemere (CB)]

My Lords, according to Cancer Research UK, the US Government spend five times as much per citizen on cancer research as the UK Government. Why do the Government spend so much less?

[Viscount Camrose (Con)]

I am not familiar with this analysis, but it is very difficult to understand exactly how much is spent on cancer research, for the reason I gave earlier: so much cancer research is in areas adjacent or relevant to cancer without being specifically tagged as “cancer research”. For instance, in October 2023 the Prime Minister announced a new £100 million fund for the AI life sciences accelerator mission, which will have beneficial outcomes on cancer but is not tagged directly to cancer.

[Lord Allan of Hallam (LD)]

My Lords, I am sure the Minister receives regular representations from potential investors in medical research in the UK about what they need from the Department of Health and Social Care. Will he share with the House, and with his neighbour on the Front Bench, their key asks from the UK medical system and how he ensures a cross-government approach to entice in the maximum amount of investment?

[Viscount Camrose (Con)]

Indeed: it is so important to have not only a cross-government approach but a cross-sectoral approach. The Government work closely with academic, industry, charitable and other stakeholders. The crux of this is the healthcare missions of the Office for Life Sciences. The OLS cancer mission aims to show leadership in oncology innovation by developing further the approach first successfully used in the Vaccine Taskforce. Among other things, it has implemented the UK cancer research strategy forum, which brings together bodies of all kinds that are active in cancer research to ensure that they are effectively co-ordinated in today’s research and in future directions.

[Lord Drayson (Lab)]

My Lords, UK citizens willingly volunteer to allow excellent initiatives such as UK Biobank, Genomics England and Our Future Health to generate databases of health data that are excellent for cancer research. These databases are a sovereign UK asset funded by taxpayers, yet we allow the IP to leak abroad without any meaningful contribution to Treasury coffers. When will the Government implement an effective commercialisation policy to ensure that this leakage of wealth is stopped and directed to help fund cancer research?

[Viscount Camrose (Con)]

I cannot comment directly on leakage of either information or wealth. I noted with great interest the latest report of the Tony Blair Institute that was publicised over the weekend, which argued that we should put our healthcare data on a commercial setting for this purpose. I am not familiar with any individual allegation of leakage or undue movement of data out of the country, but I am willing to look into it and take it up with ministerial colleagues.

[Lord Stevens of Birmingham (CB)]

I declare my interest as chair of Cancer Research UK. One of the most important international research partnerships in cancer science is the Cancer Grand Challenges, which bring together CRUK, the US Government, the French Government, the Dutch and the Spanish, but not yet the British Government. I invite the Minister to consider joining the club and using the March Budget as an opportunity to stump up the membership fees.

[Viscount Camrose (Con)]

I once again pay tribute to Cancer Research UK. It is a tremendous organisation doing great work. I will look into the scheme the noble Lord brings up and take it up with ministerial colleagues.

[The Lord Bishop of London]

My Lords, as the noble Lord, Lord Stevens, will know, Cancer Research reported in its 2023 researcher survey that while 98% of respondents said that collaboration with EU-based scientists is important, 79% said that since Brexit it had been harder to begin new collaborations with EU-based researchers and scientists. What steps are the Government taking to prioritise collaboration between the EU and the UK in this area, especially with compatibility with the EU clinical trials regulatory framework?

[Viscount Camrose (Con)]

As we have just rejoined the Horizon programme as an associate, I am pleased to say that our collaboration with friends and colleagues in the EU will pick up considerably. I very much look forward to answering a Question in this House tomorrow on that exact subject.

[Baroness Jones of Whitchurch (Lab)]

My Lords, the Lord O’Shaughnessy review concluded that the UK is falling behind its peers in the internationally competitive marketplace for commercial clinical trials. Many in the research and entrepreneurial community are concerned that our most innovative researchers are going abroad. What is being done to persuade them to stay in this country?

[Viscount Camrose (Con)]

The Government and academic institutions countrywide are very focused on making sure that the country remains an attractive place to conduct research. We have four of the world’s top 10 universities in this country—a significant research base. We believe and hope that we are an outstanding place to come to live and work as a researcher. There is no doubt that we will need a significant influx of researchers if we are to meet our scientific ambitions as a nation. We continue to monitor our generous points-based immigration scheme to make sure that we can continue to attract the brightest and best.

[Lord Patel (CB)]

My Lords, much of the research, including cancer research, is carried out by universities. For that, the university has to spend money to build up infrastructure. That money mainly comes from the quality-related research or QR funding and the CRSF funding, the charity research support fund, both of which have declined, particularly as charity research funding increases and the government support does not. Is it the Government’s intention to increase QR funding in line with inflation and the CRSF?

[Viscount Camrose (Con)]

It is certainly the Government’s intention to maximise the results of conducting cancer research in universities and elsewhere. I think particularly that we do not give enough emphasis to our collaborations with business; in that respect I point to our work with BioNTech, which aims to provide 10,000 patients with immunotherapies by 2030, or the NHS-Galleri trial. As to the specific instance of the QR increase, I will happily write to the noble Lord.

Digital Markets, Competition and Consumers Bill

Viscount Camrose Excerpts

Committee stage
Wednesday 24th January 2024 Grand Committee

[Lord Bassam of Brighton (Lab)]

My Lords, I thank the noble Lord, Lord Faulks, for his neat and precise analysis of the position in which we find ourselves in the discussion on this group of amendments. This debate is a prequel to that which will follow on penalties, and we should see it in that light; the two things are very much connected, as the noble Lord, Lord Clement-Jones, made clear. Like him, I completely agreed with the noble Lord, Lord Vaizey, when he warned about using stray words. Proportionality is probably one of the most contested terms in law, and in all the 25 years or so that I have been in this House, I must have heard it in all the legal debates we have come across.

These are the first amendments seeking to restore some of the Bill’s original wording, which, as we have heard, was changed late in the day in the Commons. We are yet to receive a full explanation from the Minister of the reasons for that. The noble Lord, Lord Faulks, asked why, and we on these Benches pose the same question. Were Ministers lobbied into this and, if so, why? We support Amendments 16 and 53 in the name of the noble Lord, Lord Faulks, which, as he outlined, seek to restore the original wording of the Bill, taking out the word “proportionate”, removing proportionality as the determining factor behind a CMA pro-competition intervention and reinserting the word “appropriate”.

We have two, possibly three, sets of solutions to the problem that the Government have set. However, we also have added our names to Amendments 17 and 54, in the names of the noble Baronesses, Lady Stowell and Lady Harding, and the noble Lord, Lord Clement-Jones, with the intent of ensuring that clarifying that the condition for conduct requirements imposed by the CMA to be proportionate does not create that novel legal standard for appeals of decisions and the confusion that will flow from that. In our view, as the noble Baroness, Lady Harding, says, the original wording strikes the right balance, roughly speaking, whereas the Government’s version would weaken the intent of this part of the Bill.

The formulation of the noble Baroness, Lady Stowell, relies on prevailing public law standards—in other words, standards that are commonly understood. We take the view that we all need to know what rules we are working to, and if the Bill introduces or creates a new standard then that certainty is removed. Of course, when it comes to the issue of pre-emption, we will need to resolve the best way forward on this issue at the next stage of the Bill. For my part, I think that reversion might be the best route, but no doubt by negotiating round the Committee we can come up with a workable solution.

The amendments of the noble Lord, Lord Holmes, particularly Amendments 220 and 222, offer another way through it. However, on the face of it, for us they are useful in the context of reminding our Committee that guidance will need to be produced on the operation of this regime as it covers financial penalties and the countervailing benefits exemptions.

We have heard a lot about the new regime being flexible and participatory as a framework for regulation, and we agree with that principle. However, we think that, with this particular change, the Government strike at the heart of that and bring in a measure of uncertainty that is unwise, frankly, in this particular process. The intervention of the noble Lord, Lord Lansley, was very telling. What he told the Committee was extremely important and we should listen very carefully to what was said in that exchange of correspondence. He rather shot the Government’s fox.

In conclusion, the Minister has a bit of a difficult job on his hands here. He may feel the weight of the Committee against him. I rather hope that he can offer us a measure of reassurance and perhaps help us come to a point where the whole Committee can agree a sensible reversion or an amendment that makes the Bill as workable as it seemed when it was first drafted.

[The Parliamentary Under-Secretary of State, Department for Science, Innovation and Technology (Viscount Camrose) (Con)]

I thank the noble Lord, Lord Faulks, for raising the topic of proportionality in the digital markets regime and for doing so with such a clear and compelling analysis, which I think all of us, myself included, found deeply helpful. This is of course the requirement for the CMA to impose conduct requirements and pro-competition interventions on firms only where it is proportionate to do so.

First, I reassure my noble friend Lady Harding that this change is not about introducing a new standard or meaning of proportionality but about clarifying the scope of decisions that it applies to.

Amendments 16 and 53 from the noble Lord, Lord Faulks, seek to remove the explicit statutory requirement for PCIs and conduct requirements to be proportionate. Under these amendments, SMS firms would still be able to argue that their rights to peaceful enjoyment of property under Article 1 of the first protocol of the ECHR, or A1P1, were engaged in most cases, allowing them to appeal on the basis of proportionality. I refer noble Lords to the ECHR memorandum published by the department, which explains how the regime intersects with human rights and how this relates to property rights. A1P1 protects possessions, which can include enforceable rights such as contracts, and so regulating SMS firms under the regime would commonly affect possessions, and therefore engage A1P1.

The Government have always been clear that the CMA will need to act proportionately and comply with ECHR requirements, and that imposing obligations on SMS firms will very often engage the firm’s rights under A1P1. However, having a statutory requirement for proportionality in the Bill reinforces the Government’s expectations for how the CMA should design conduct requirements and PCIs, to place as little burden as possible on firms while still effectively addressing competition issues. This should be the case even when A1P1 property rights are not engaged, which this requirement provides for.

In particular, it is worth highlighting that A1P1 rights on their own would not amount to grounds to challenge interventions that impact a firm’s future contracts. It is right that these interventions should be proportionate. I understand the concern from many noble Lords about any extension to the grounds for appeal in the regime, but we are giving extensive new powers to the CMA to regulate digital markets.

[Lord Lansley (Con)]

Before we move away from this point, there was an interesting use of the word “reinforces”. Am I right in thinking that my noble friend is telling us that, if the original wording in the Bill were used and the word “appropriate” was there, it would none the less be his expectation that, in making decisions about conduct requirements or pro-competitive interventions, the CMA would in fact do so in a manner that was proportionate, because that is the appropriate way in which to make those decisions? Our worry is that by “reinforcing”, my noble friend is actually opening a door.

[Viscount Camrose (Con)]

I will go on to speak more about this. The intention of the Government in “reinforcing” is to bring clarity, particularly since, as I say, A1P1 is not universally applicable to these cases. It brings clarity, and therefore I hope that the effect will be as much closing the door as anything else.

[Lord Faulks (Non-Afl)]

The Minister has talked about A1P1 and the right to peaceful enjoyment of possessions. That may come into the analysis or it may not, but he has taken the view that it may not. If it does, then it is covered by the normal doctrines of judicial review, which include proportionality. If it does not, and he says it may not, why have proportionality in at all?

[Viscount Camrose (Con)]

I believe that, in most cases, A1P1 rights would be invoked, but there are cases where A1P1 would not necessarily be invoked, rare as those cases are. The intention of the Government is to treat all those cases in the same way. As I say, it is important that we also consider the safeguards around the new powers. Having an explicit requirement for proportionality, rather than just the implicit link to A1P1, sets a framework for the CMA as to how it must design and implement significant remedies. A proportionate approach to regulation supports a pro-innovation regulatory environment and investor confidence. I am also aware, of course, that later we are due to debate concerns noble Lords may have about the accountability of the CMA. Without pre-empting that debate, it is worth pointing out that setting out the requirement for proportionality explicitly will help ensure that the CMA uses its powers responsibly.

[Lord Clement-Jones (LD)]

This all sounds as though, really, the Minister should come clean and say that what he is trying to do is bring in merits by the back door.

[Viscount Camrose (Con)]

It is not my intention to bring in merits by the back door, nor is it my intention not to come clean, or to conceal from Members of this Committee any intentions of the Government. All this is about producing the clarity that we need to safely deliver the wide-ranging new powers of the CMA.

[Lord Vaizey of Didcot (Con)]

Can the Minister clarify for the Committee at some point, perhaps by letter, at what point the penny dropped within the department, with officials, that the word “proportionate” was necessary? If the word “proportionate” is removed, does this give the CMA permission to act disproportionately?

[Viscount Camrose (Con)]

I am happy to provide that information in the form of a letter, and I will leave it at that for now.

[Lord Tyrie (Non-Afl)]

Perhaps I could answer the question: the CMA never has scope to act disproportionately in law.

[Viscount Camrose (Con)]

In respect of my noble friend Lord Vaizey’s concern that proportionality will affect how the CAT conducts an appeal, the retention of judicial review in Clause 103 will still apply to the CAT, which will still have to conduct an appeal when a firm raises non-ECHR proportionality arguments in a JR style. It will not become a full merits appeal.

Amendments 33 and 52, from my noble friend Lord Holmes of Richmond, also remove the statutory requirement for proportionality but, in doing so, create greater impacts on the regime. Amendment 33 would remove the obligation on the CMA to set out, in its conduct requirement notice, the objective in relation to which it must consider proportionality. However, this is a key feature for setting a conduct requirement and it is important to include it in the notice for both the SMS firm and third parties.

Amendment 52, by removing Clause 46(1)(b), would reduce the Bill’s clarity that the primary objective of PCIs is to address competition problems. It is important that the Bill is clear on the objective that PCIs must pursue. Additionally, proportionality provisions will ensure that the CMA addresses its objectives without placing unnecessary burdens on firms and harming consumers.

I turn to my noble friend Lady Stowell’s Amendments 17 and 54. As she set out in her explanatory statement, these amendments seek to clarify that the use of “proportionate” does not create a novel legal standard. The amendment would state that it is defined in accordance with prevailing public law standards. Of course, I agree with her that it is important to be clear about what we expect from the CMA and concur with the spirit of her amendments. However, I hope my explanation of this provision as currently drafted will satisfy my noble friend’s concerns.

These amendments assume that there is a single public law definition of proportionality, when there is not. However, proportionality is also not a novel concept for either the CMA or the domestic courts to apply. There is domestic case law about how proportionality requirements have been interpreted. We expect that the CMA, the CAT and courts would follow the broad approach set out in the Bank Mellat 2 case, which considered proportionality in relation to the application of ECHR rights, as well as fundamental rights at common law. This is relevant when considering whether an infringement of a qualified ECHR right and/or a fundamental common-law right is justified. Noble Lords with an interest in this area will be familiar with the four-limb test set out by Lords Sumption and Reed. Previously, our domestic courts applied a separate, but broadly similar, test when considering proportionality under EU law.

In the event of an appeal against CMA interventions, it is the role of the courts to provide a definitive interpretation of the legislation, but they will likely give a certain amount of deference to the CMA as the expert regulator. When an intervention has engaged A1P1, there would be a clear link with the approach of the domestic courts to the ECHR proportionality requirements that I have already discussed. In the rare situation when an intervention did not engage A1P1, it seems logical that the courts would take an approach consistent with how they approach digital markets cases which do engage A1P1, although this could involve some modifications on a case-by-case basis.

The basic requirements of proportionality—that it balances private interests adversely affected against the public interests that the measure seeks to achieve—is well understood. As such, I hope my noble friend can appreciate that although I agree with the spirit of her amendments, in practice I do not believe they would provide the clarity they seek.

Amendments 220 and 222 from my noble friend Lord Holmes of Richmond would require the Secretary of State to publish guidance on how the appeals standard for financial penalties, proportionality and countervailing benefits exemption would operate. The amendments set out that the CMA could not impose conduct requirements, pro-competition interventions or financial penalties before this guidance was published.

I thank my noble friend for these amendments. He should be pleased to hear that the CMA will, as part of its approach to implementing the regime, produce guidance outlining its approach to delivering the regime before it is implemented. We expect this guidance to include the CMA’s approach to proportionality and the countervailing benefits exemption. The Secretary of State will have oversight of the CMA’s approach through the approval of that guidance. The Government feel that this approach strikes the right balance between maintaining the independence of the CMA and the CAT, and providing appropriate government oversight and clarity about how the regime will work. Suitable guidance will already be in place before the regime commences; as such, these amendments are not required.

I hope this has helped to address the concerns of the noble Lord, Lord Faulks, and my noble friends Lady Stowell of Beeston and Lord Holmes of Richmond, and that, as a consequence, they feel able to withdraw, or not to press, their amendments.

[Lord Clement-Jones (LD)]

My Lords, what harms does the Minister think the inclusion of “proportionate” is designed to prevent? What does he really think would happen if that word was not included in the Bill?

--- Later in debate ---

[Viscount Camrose (Con)]

As I said, for those cases where A1P1 cannot be engaged, they can be treated in the same way—equally proportionately to other cases under A1P1. In addition, it creates further clarity around the use of these extensive new powers for the firms that will be affected by their use. In addition, it creates another means for this newly powerful independent regulator to be held to account.

[Lord Vaizey of Didcot (Con)]

Forgive me for intervening to make what is more of a rhetorical point.

--- Later in debate ---

[Lord Bassam of Brighton (Lab)]

My Lords, if I might help the Minister, this legislation has been knocking around for some time now, so what was it that provided that blinding flash of official or ministerial inspiration to bring this amendment about “proportionate” so late in the day in the other place that it was tabled right at the end of the Commons process? What was it that was so compelling as to make that dramatic change?

[Viscount Camrose (Con)]

If noble Lords will forgive me; that was a large variety or questions. First, I can confirm right away that I have not received any lobbying from any big tech firms on this topic—none; zero. Secondly, as with any Bill, this was part of an ongoing pattern of constantly looking for means of improving the Bill, to maximise its clarity and effectiveness. I recognise the concern voiced by the Committee about this. I am very happy to set out in detail all the arguments I have attempted to make. I hope that will go some way further towards satisfying the Committee.

--- Later in debate ---

picked up by the noble Lord, are covered by much more detailed points in Clause 20(3), which talks about discrimination using positions to exercise powers. These are important, but they are very generic, and the noble Lord raises quite a good point here about whether the regulations, when they come forward, or the changes to Clause 20, if they are brought forward, will be dealt with by the affirmative resolution. Can we have a reassurance, either through amendments later to be taken or by some other measure, that the Minister will make sure that this particular section—although it is true of the whole Bill—means that the Select Committees of both Houses will have a chance to comment and think about them? This is the driving matter and the really important part of the Bill.

[Viscount Camrose (Con)]

I thank the noble Lord, Lord Clement-Jones, and my noble friend Lord Lansley for bringing these important amendments. It is enormously valuable and important to kick the tyres of Clause 20 and understand or assure ourselves that it works.

Amendment 18A, tabled by the noble Lord, Lord Clement-Jones, would create a new permitted type of conduct requirement, allowing the CMA to require an SMS firm to provide users with a way to pay for products and services that would provide consumer protection. I thank him for the amendment; it highlights the vital issue of ensuring that consumers are protected when using online marketplaces.

We feel that conduct requirements are already able to require that SMS firms have effective processes for handling complaints by and disputes with users or potential users. This will allow the CMA to intervene when competition issues arise in this area. My noble friend Lord Offord will be talking to the consumer provisions in Part 4 in a later sitting, and I will not tread on his toes here. However, those provisions put it beyond doubt that, where platforms promote or facilitate consumer transactions, they must act with professional diligence, in addition to more specific duties such as refraining from misleading omissions or actions or aggressive practices.

We recognise that public understanding of the requirements of professional diligence could be clearer, and we recently consulted on how price transparency and product information for consumers can be improved. The Government’s response to that consultation was published this morning, and, in the light of this, we will be undertaking further work with stakeholders to ensure that platforms’ obligations to consumers are more widely and easily understood. I would of course welcome the noble Lord’s input during that process.

Amendment 31, tabled by my noble friend Lord Lansley proposes to add a new permitted type of conduct requirement to deal with the issue of SMS firms attempting to stop third parties raising possible non-compliance with the CMA. I thank my noble friend for tabling this amendment and highlighting the importance of this issue, on which I have also received representation from affected firms.

Alongside information gathered through its own monitoring, the CMA will rely on information from third parties that will have direct knowledge of market conditions. It is therefore crucial that third parties have the confidence to speak to the regulator. I can provide assurances that the CMA will have strong powers to tackle discriminatory or unfair behaviour seeking to frustrate the regime or interfere with enforcement, where it occurs within the scope of a designated activity. Both conduct requirements and PCIs will be available to combat such behaviour, supported by the usual robust enforcement powers and penalties. I draw my noble friend’s attention specifically to Clause 20(3)(a), which, in addition to the conduct requirement

“on fair and reasonable terms”

in Clause 20(2)(a), can be used where relevant.

The CMA will also be able to intervene outside the designated activity, but not in an unconstrained way: it can use conduct requirements to prevent leveraging, or a PCI to address an adverse effect on competition in a designated activity.

Input from third parties will be crucial in ensuring the success of this regime. However, some stakeholders may have concerns about sharing information or experiences for fear of retaliation. The CMA has well- established processes for handling information and maintaining the anonymity of those providing evidence, whether informally or as part of an investigation. Recognising the importance of engagement, the CMA has also announced plans to expand this approach; for example, by establishing representative panels—one for consumers and civil society, and one for businesses and investors. This will facilitate input from third parties, which in turn will support the design and implementation of interventions.

I therefore hope that the noble Lord will feel able to withdraw his amendment.

[Lord Stevenson of Balmacara (Lab)]

The Minister mentioned in his address—I was grateful to him for doing so—that there was a recent announcement from the department about sneaky hidden fees or drip prices that are unavoidable, and the press report that I am reading says that they will be banned. Does not this bear directly on points made during this debate, and in particular on Clause 20? Does this mean that the Minister will bring forward amendments at a later stage?

[Viscount Camrose (Con)]

My preference would be to consider so doing once the Committee has had a chance to debate later sections of the Bill which go directly to consumers.

[Lord Stevenson of Balmacara (Lab)]

So it is not ruled out at this stage.

[Viscount Camrose (Con)]

I am ruling nothing out at this stage.

[Lord Stevenson of Balmacara (Lab)]

The Minister is very generous.

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[Viscount Camrose (Con)]

As ever, I start by thanking all noble Lords who have spoken so powerfully in this group.

I turn first to the series of amendments on the countervailing benefits exemption. I start by addressing the proposal to remove Clause 29 as drafted, Amendment 36 from the noble Baroness, Lady Jones of Whitchurch, and Amendment 38 from the noble Lord, Lord Clement-Jones—in his absence.

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[Lord Fox (LD)]

The Minister has already introduced a difference between the two. There is a difference between “there is no other reasonable or practicable way” and “indispensable”. They are not the same—they are not synonymous. If I have to prove that something is not practicable, that is not the same as indispensable. The Minister has absolutely proved the point.

[Viscount Camrose (Con)]

Again, in my opinion, the two sentences are indistinguishable in their meaning.

[Baroness Stowell of Beeston (Con)]

My Lords, one of the arguments that has been advanced—I did not make it in my remarks because I forgot—is that part of the problem with changing the word from “indispensable” to what is now in the Bill is that the current phrase has not been tested in the courts, whereas “indispensable” has. The argument that changing from “indispensable” to what we have now provides clarity is one that is really hard for people to accept, because the clarity it is providing is not, seemingly, in everyone’s interests. That is part of the problem here.

[Baroness Kidron (CB)]

I was really interested in the introduction of the word “unknown”. The noble Lord, Lord Lansley, set out all the different stages and interactions. Does it not incentivise the companies to call back information to this very last stage, and the whole need-for-speed issue then comes into play?

[Viscount Camrose (Con)]

I will revert first to the questions about the word “indispensable”. As I have said, the Government consulted very widely, and one of the findings of the consultation was that, for a variety of stakeholders, the word “indispensable” reduced the clarity of the legislation.

[Viscount Colville of Culross (CB)]

So it is not the same?

[Baroness Harding of Winscombe (Con)]

Before my noble friend answers that, can he shed some light on which stakeholders feel that this is unclear?

[Viscount Camrose (Con)]

I cannot give a full account of the individual stakeholders right now; I am happy to ask the department to clarify further in that area. My contention is that the effect of the two sentences are the same, with the new one being clearer than the old one. I am very happy to continue to look at that and listen to the arguments of noble Lords, but that is the position. Personally, when I look at the two sentences, I find it very difficult to discern any difference in meaning between them. As I say, I am very happy to receive further arguments on that.

With respect to the participative arrangements by which a decision is reached around, for example, a conduct requirement, during the period of conduct requirement design, and during the decision-making period, it is, as my noble friend Lord Lansley has stated, highly to be expected that firms will make representations about the consumer benefits of their product. During a breach investigation, on the other hand, later on in the process, a consumer benefits exemption can be used as a safeguard or defence against a finding of breach.

Sorry, but there were so many questions that I have completely lost track. Perhaps the noble Baroness, Lady Kidron, will restate her question.

[Baroness Kidron (CB)]

I think the Minister was in the middle of answering it and saying why something might be “unknown” right at the last.

[Viscount Camrose (Con)]

As many noble Lords in the debate have alluded to, we have to be clear that this is a fast-moving field, and we have to at least allow for the possibility that new technologies can provide new consumer benefits and that it is okay to argue that a new and emerging technology that was not part of the original consideration can be considered as part of the defence against a finding of breach. The fact that the intended meaning is intended to be clearer in the current drafting is aiming to provide greater certainty to all businesses while ensuring that consumers continue to get the best outcomes.

Amendment 41, from the noble Lord, Lord Clement-Jones, would change the current drafting of the countervailing benefits exemption in several ways that together are intended to ensure that the CMA is provided as soon as possible with information relating to an SMS firm’s intention to rely on the exemption. We agree with noble Lords who have spoken today that it is important that the exemption cannot be used to avoid or delay enforcement action. The conduct investigation will operate in parallel to the assessment of whether the exemption applies, meaning that the investigation deadline of six months is not affected by the exemption process. The regime has been designed to encourage an open dialogue between the CMA and SMS firms, helping to avoid delays, unintended consequences and surprises on all sides. Therefore, in many cases, if a firm intends to rely on the exemption, we anticipate that this will be clear to all parties from early on in the process.

[Lord Fox (LD)]

I appreciate what the Minister said. By “early on in the process” does he mean after the process has been instigated, or before? A lot of this information is needed in order to understand whether there needs to be a process in the first place. There is a chicken and an egg here, in that some of this information is up front before we get to actions and enforcement.

[Viscount Camrose (Con)]

Indeed. It is an important point. Right from the beginning of potential conduct requirement design or PCI design, it would be consulting very widely with all stakeholders, including SMS firms and tech challengers. As part of that consultation, consumer benefits would be expected to be stated, in what is designed to be a participative process on all sides. As I was saying, the CMA is required to consider consumer benefits early on, when setting conduct requirements. The SMS firms will therefore outline the consumer benefits associated with their conduct at that stage, long before a conduct investigation.

Finally, adding further evidential requirements risks overburdening the regulator with more documentation than necessary, and therefore potentially delaying any enforcement action. For the reasons I have set out, I hope the amendment will not be pressed.

I come now to the discussion on the powers of the CMA to enforce obligations where they have been breached by SMS firms. Amendment 43, from the noble Lord, Lord Clement-Jones, would provide the CMA with a power to impose an enforcement order requiring an SMS firm to offer fair and reasonable payment and non-payment terms to third parties for goods or services. I can confirm that, under Clause 19, the CMA already has the power to require a firm to offer fair and reasonable terms through conduct requirements, and, where these are breached, the CMA has power under Clause 31 to make an enforcement order obliging the firm to stop the breach. As such, this amendment would not give the CMA any additional powers and could risk a narrower reading of its powers by raising the question of why other types of orders are not mentioned.

Amendment 107, also from the noble Lord, Lord Clement-Jones, would allow the CMA to apply to the High Court where a firm was breaching, or attempting to breach, an obligation or one of the conduct requirement objectives set out in Clause 19(5). The objectives in Clause 19(5) are not intended to be binding on SMS firms. Their purpose is to guide the design of conduct requirements by the CMA. It would therefore not be appropriate for the CMA to find a firm in breach of these objectives.

However, I agree with the noble Lord, and others who have spoken today, that it is important that the regulator can respond quickly before irreversible harm results from SMS-firm conduct. Where urgent action is needed in relation to a suspected breach of conduct requirements, the CMA will have the power under Clause 32 to make an interim enforcement order before irreversible harm occurs. For PCIs, the CMA will be able to issue directions setting out specific steps that a firm must take to become compliant with a pro-competition order. Failures to comply with orders under either conduct requirements or PCIs can be enforced through robust penalties. There is also the possibility of affected persons applying to court to enforce relevant requirements, and to apply for injunctions under Clause 101.

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[Viscount Camrose (Con)]

I said that the purpose of Clause 19(5) is to set the parameters for the design of conduct requirements by the CMA. Its purpose is to guide the CMA, not to bind the recipients of conduct requirements.

Amendment 48 from the noble Baroness, Lady Jones of Whitchurch, would allow the final offer mechanism tool to be used earlier in the enforcement process. The final offer mechanism is a backstop tool designed to incentivise sincere negotiations about fair and reasonable payment terms between the SMS firm and third parties. It is crucial that there is room for good faith negotiation where disputes arise from sincere differences of understanding rather than deliberate non-compliance. Overly shortening the enforcement process would greatly reduce these opportunities.

We recognise, however, that some stakeholders may be concerned about SMS firms frustrating the process and refusing to comply with these conduct requirements and any subsequent enforcement. Here, the CMA could seek to accelerate the stages before the final offer mechanism, making use of urgent deadlines for compliance with enforcement orders and significant financial penalties where appropriate, ensuring that parties will also not be able to drag their feet and delay the process. In addition, interim enforcement orders can be issued on a temporary basis during a conduct investigation, before a breach has been found. They could be used to prevent significant damage, such as a company going bust, to prevent conduct that would reduce effectiveness of future remedies or to protect the public interest. Our regime aims to tackle the far-reaching power of the most powerful tech firms.

I know that my noble friend Lord Black noted the Australian legislation. Our regime contrasts the Australian legislation in that it has been designed to protect businesses and consumers across the economy including, but not limited to, news publishers. Alongside the final offer mechanism, the DMU will have other powers to tackle unfair and unreasonable payment terms via conduct requirements, ensuring that the final offer mechanism will rarely, if ever, need to be used.

Amendments 49, 50 and 51 from the noble Lord, Lord Clement-Jones, would allow parties to submit further final offers if the CMA considers that the first were not fair and reasonable. The final offer mechanism involves a binary choice between the two final offers submitted by the parties. It is the finality of the process that creates such a strong incentive for the parties to submit fair and reasonable offers. An unreasonable offer only increases the likelihood of the CMA choosing the other party’s proposal.

Introducing scope for an additional round of bidding would undermine these incentives and would only serve to delay the securing of fair and reasonable terms for the third party. As a result, we hope, for the reasons set out, that the noble Lord feels able not to press these amendments.

Finally, this group includes two government amendments, which are both minor and technical in nature, relating to Clauses 38 and 117. These amendments clarify that digital content is included in the meaning of the phrase “goods or services” when used in Part 1 of the Bill, including when mentioned under the final offer mechanism. I hope that noble Lords will support these amendments.

[Lord Kamall (Con)]

I apologise—I should have maybe intervened earlier but I did not want to join the barrage, as it were. When my noble friend the Minister writes to us, as he inevitably will, I wonder whether he can help us to understand the Government’s position on countervailing benefits by outlining what they really mean by that and giving some real or hypothetical examples of where consumers may be harmed by a pro-competitive intervention by the CMA.

[Viscount Camrose (Con)]

Yes, indeed. I thank my noble friend for repeating the question and I apologise that I did not get to it earlier. I would be delighted to write and provide such examples.

[Baroness Jones of Whitchurch (Lab)]

My Lords, I thank all noble Lords who spoke in support of our amendments. It is worth saying at the outset that it sounds like we are being very critical of the potential SMS firms. This is not about being critical but about getting the balance right. That is what we are aiming to do. A lot of the discussion that we have had in Committee today has been about feeling that that has become out of kilter. We are trying to get the very careful balance that the noble Baroness, Lady Stowell, talked about. Her committee felt, having agonised over it, that the original wording was about right. A lot of us feel that, which is why we are so anxious and testing of the changes that have come along more recently.

As we debated and identified in the previous discussion, the CMA already has a responsibility to act proportionately. This ought to apply to its judgments about countervailing benefits as well. The noble Baroness, Lady Stowell, said that it is designed as a backstop. It is important that the threshold remains high; that is one of the key issues.

The noble Lord, Lord Fox, said that because of the word “must”—that the CMA must desist if there are countervailing benefits—it becomes almost mandatory, so there will be no opportunities for the CMA to make balanced judgments. We agree that it is far too prescriptive.

I rather liked the canter through all the preceding clauses from the noble Lord, Lord Lansley, before he concluded: why do we need Clause 29, because all those provisions are already there? He made an important point about all of that.

I listened carefully to the Minister. He repeated what he said at Second Reading: that this clause on countervailing benefits is only to pick up new, unknown consumer benefits that have not been identified before. Try as I might, I have looked at the wording of Clause 29 and I do not see that it says that there. As the noble Baroness, Lady Kidron, quite rightly pointed out, as it is worded there is a danger that the SMS companies could hold back evidence to that last backstop and then start challenging at that point. It would then be very difficult for the challenger firms to come forward with different evidence. The current wording opens up a disturbing void.

We have had a really good discussion about whether the previous wording or the new wording maintains the high threshold. I think most of us remain unclear about that. I think it was the noble Baroness, Lady Harding, who said that this new wording has not been tested in the courts, so it gives us not more certainty but more uncertainty. That is the last thing that we want at this point.

The Minister said that this was put in partly because stakeholders were confused. I would push back and say that the Select Committee chaired by the noble Baroness, Lady Stowell, looked at this in a lot more detail than some of those stakeholders have and concluded that the original wording is clearer and more robust than anything he has come back with. I hope the Minister will take that point away. I do not think he was particularly convincing about why that new wording was necessary.

On Clause 48, I have considerable sympathy with the case made by the noble Lord, Lord Black, and very much support his arguments. We do not want companies to be put in a situation where they have to accept suboptimal deals because they are running out of time and money when, if we are not careful, it could take many years for the process to be completed.

The Minister tried to reassure us, because if there was an anxiety about the time we could have interim enforcement orders, for example. However, the difference is that the final offer mechanism is more of a collaborative process. When we met with representatives from the CMA, they said that that is how they like to work: they do not want to go to court, they want to reach collaborative agreements. I feel that that our Amendment 48 would allow some of that collaboration to work along the system before it gets to the final, final offer. Again, I am not convinced by the Minister’s response on all of that. We want to keep it out of court as much as we can but he is tying the hands of the CMA too much in the way this is worded at the moment.

I am sure I have not picked up all the points but I think the Minister gets the idea that he is not really taking us with him. I therefore hope that he will reflect on these issues again but, in the meantime, I beg leave to withdraw the amendment.

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I therefore look forward to the Minister explaining why this greater clarity and transparency is not already covered in the Bill, and if it is not, I am sure he will want to support these very simple and direct amendments. We find that we are in great sympathy with them, and, as other noble Lords have argued, between now and Report I am sure we will want to see this issue progressed in a way that benefits consumers, brings that greater clarity and transparency, and makes sure that we get the best from this legislation.

[Viscount Camrose (Con)]

I very much thank the noble Lords, Lord Vaux and Lord Fox, speaking on behalf of the noble Lord, Lord Clement-Jones, and my noble friend Lord Lansley for using these amendments to raise the very important and quite subtle issues of merger reporting and assessment in digital markets. I also thank the noble Lords, Lord Tyrie and Lord Bassam, and my noble friend Lady Harding for their thoughtful contributions.

Amendment 59, tabled by the noble Lord, Lord Vaux, would extend the duty to report possible mergers, provided for in Chapter 5 of Part 1, beyond firms designated with SMS to also include firms that are subject to a designation investigation. Firms can use anti-competitive mergers to further entrench their powerful market positions, especially in digital markets, where fast-acting damage to competition can be difficult or impossible to reverse. That is why SMS firms will be required to report certain possible mergers to the CMA before they complete. However—this may be a philosophical objection as much as anything else—it would not be proportionate or in keeping with the targeted and evidence-based approach of our regime to apply this duty to firms before the conclusion of a designation investigation.

I agree with the noble Lord, Lord Vaux, that firms under designation investigation may hold powerful positions in the market; some may even have been the subject of previous CMA scrutiny. Nevertheless, it is right that the duty to report should apply only once a firm has been found to have substantial and entrenched market power following a rigorous assessment and SMS designation. To reassure noble Lords, firms under SMS designation investigation will of course remain subject to the economy-wide merger regime. The CMA will be able to intervene where their mergers would harm competition in the UK.

Amendment 60 from my noble friend Lord Lansley—

[Lord Vaux of Harrowden (CB)]

Before the noble Viscount moves on to the next amendment, there seems to be a slight logical problem here, in the sense that presumably the new enhanced regime was set at the level it was because those mergers are felt to be significant for a strategic market status entity. If it were to do such a merger during an investigation, it would presumably impact potentially on whether the CMA believes that it meets the SMS, and therefore it must be important that the CMA is informed about acquisitions that could impact the investigation itself. It seems that there is a circularity here, but the noble Viscount has not addressed that.

[Viscount Camrose (Con)]

I do indeed recognise it. As I say, it is a difficult one because equally, one cannot treat undesignated firms as designated until the designation has taken place. I am very happy to carry on considering this with the noble Lord, because the point is a powerful and important one. Before moving on, I just point out that over the course of the necessary consultation activities, it would of course emerge that a firm was considering or evaluating a merger.

[Lord Vaux of Harrowden (CB)]

As somebody who spent most of his life doing mergers and acquisitions, I can say that they are not always made public.

[Viscount Camrose (Con)]

As I said, I am very happy to carry on with this; there is a sense of rounding up the usual suspects otherwise.

Amendment 60 from my noble friend Lord Lansley is intended to give the CMA jurisdiction to intervene in a merger when an SMS firm seeks to remove or absorb a smaller firm that could reasonably be expected to compete with it in future. I agree that it is important to ensure that the CMA can act against harmful mergers, including so-called killer acquisitions. I reassure my noble friend that the CMA can and does do so under the current legislative framework.

When reviewing a merger, the CMA can already consider whether it removes a potential future competitor. This can be seen in the Meta/Giphy case where, in its forward-looking assessment, the CMA found that the merger removed Giphy as a potential challenger and consequently ordered Meta to sell Giphy. The decision was upheld by the CAT, which I hope and think shows that the CMA has the necessary legislative cover.

It has been suggested that the CMA and other regulators have not scrutinised mergers by large digital firms enough in the past. However, since the Furman review, the CMA has undertaken a comprehensive review of its merger assessment guidelines and updated them in 2021 to ensure that they more clearly reflect the CMA’s current thinking and practice on digital markets, drawing on conclusions from expert reports, analysis and cases.

[Lord Tyrie (Non-Afl)]

Before the Minister leaves that point, and further to the discussion we have had about the importance of the CMA taking advantage of its powers, is he able to signal that he is sympathetic to the approach that the noble Baroness, Lady Stowell, will take later on with her proposal to give Parliament much greater powers of scrutiny of the CMA, to give us a better prospect that the CMA will continue with its more activist approach to dealing with these mergers? The risk for all of us is that there is a boost in activity for a period, with this legislation and the focus and attention that we all are giving this issue, but that, over time, the CMA slips back to the very comfort zone-oriented place it seemed to be in when it implemented a number of its statutory obligations in the past.

[Viscount Camrose (Con)]

I thank the noble Lord for raising that point. He has alluded a number of times during our conversations to ensuring that the working culture within the CMA is suitably postured to deal with a fast-moving regime. I can indicate that I certainly have sympathy with the intent of enhancing the accountability both to Parliament and government of the CMA—with this and other ends in mind, but to ensure that it remains assiduous in its identification of opportunities to intervene.

The Bill will enhance the CMA’s ability to act to prevent harmful mergers by SMS firms. The reporting requirement will improve the transparency of merger activity in digital markets. Additionally, Clause 127 in Part 2 and Schedule 4 will introduce a new acquirer-focused jurisdiction threshold, which provides an additional basis for the CMA to review mergers involving large firms, including SMS firms.

For these reasons, I hope that the noble Lords, Lord Vaux and Lord Clement-Jones, and my noble friend Lord Lansley will be reassured for the time being and not press their amendments.

[Lord Vaux of Harrowden (CB)]

My Lords, I thank all noble Lords who have taken part in this short but interesting debate. I should say that I forgot to thank the noble Lord, Lord Clement-Jones, who sadly really is not here at the moment, for supporting my amendment. He is here in the spirit of the noble Lord, Lord Fox.

We have heard some excellent points—in particular the description from the noble Lords, Lord Lansley, Lord Fox and Lord Tyrie, of how regulating acquisitions in this sector is difficult and challenging. It is a sector where even quite small and apparently insignificant acquisitions can end up having a really substantial impact; we had the description from the noble Lord, Lord Tyrie, of the change in culture that will be required at the CMA to deal with that. This is an area that the Government will have to continue thinking about. We might want to discuss this further between now and Report.

I am also grateful to the noble Baroness, Lady Harding, for correcting me on Google’s desire to co-operate with the competition authorities, which is obviously most welcome. I am grateful for her correction. She is also right that my Amendment 59 is a small one, but I think that it is important, and I very much welcome the Minister’s offer to discuss it further as the process goes on. On that basis, I beg leave to withdraw Amendment 59.

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Moved by

[Viscount Camrose]

62: Clause 81, page 50, line 7, leave out from “communication” to the end of line 8 and insert “(but this is subject to Part 2 of the Criminal Justice and Police Act 2001, as amended by section 77 of this Act).”
Member’s explanatory statement
This amendment clarifies that this subsection is subject to Part 2 of the Criminal Justice and Police Act 2001 as that Part is amended by Clause 77.

[Viscount Camrose (Con)]

I shall speak to the amendments tabled in the name of my noble friend Lord Offord. The Government have put forward some amendments in this group to support clarity and enhance predictability. These amendments will make clear the conditions of the levy that will fund the new digital markets regime and improve consistency with information-handling under the regime.

Government Amendment 62 clarifies the safeguards that will apply to the CMA’s handling of legally privileged information when using its powers to seize information. Government Amendments 74 and 75 require the CMA to address payment of the levy in its rules—for example, setting out when levy payments are due. They also ensure that the CMA is able to charge interest on late payment of levy fees.

Amendment 78 prevents existing disclosure order restrictions in the Competition Act 1998 being undermined by limiting access to restricted information for private actions brought under the new digital markets regime. This amendment will ensure that sensitive information is dealt with consistently for private actions brought under the new digital markets regime and for breaches of the Competition Act 1998. The amendment extends the same effect of existing disclosure order restrictions. It will help to maintain the integrity of CMA investigations and ensure protections for information that the CMA receives from third parties. I hope, for the reasons I have set out, that noble Lords will support these government amendments.

I turn to Amendment 70, tabled by the noble and learned Lord, Lord Etherton, which would allow private actions relating to breaches of the digital markets regime to be brought on a collective basis in the Competition Appeal Tribunal. I thank him for his amendment, and I agree that it is vital that the CMA can take a clear lead in imposing and enforcing the requirements of the new regime. The CMA works on behalf of all consumers, so a CMA-led approach to enforcement will bring the greatest overall improvement in digital markets to the benefit of all.

It is right that harmed parties should be able to seek redress, which is why we have made explicit provision to bring private actions. However, there is the risk that lengthy and complex private litigation in the early years would create uncertainty and undermine the goals of the regime as a whole, with CMA resources diverted to engaging with lengthy private actions rather than reforming digital markets. As such, it is the Government’s position that it would not be helpful to introduce collective actions at this time.

Once again, I thank the noble and learned Lord for his amendment, but I hope he will feel able not to move it.

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[Viscount Camrose (Con)]

I thank the noble and learned Lord, Lord Etherton, for his amendment and, perhaps even more, for his articulation of it today, which was extremely helpful. I also thank other noble Lords who have spoken, including my noble friends Lord Wolfson, Lady Stowell and Lady Harding and the noble Lords, Lord Fox, Lord Tyrie and Lord Leong, for their valuable and thoughtful contributions.

I will start by shamelessly stealing my noble friend Lady Harding’s metaphor from earlier. We are looking here to achieve the Goldilocks spot when it comes to private redress. We recognise that if an SMS firm breaches a requirement imposed by the CMA, this could have serious implications for businesses and individuals. It is right that recourse to redress should be available for parties suffering harm or loss as a result of that unlawful behaviour. The right of redress is a long-standing part of common law and explicit provision is part of most regulatory regimes. Our Clause 101 makes this right explicit. Doing so will also incentivise compliance and support the credibility of the regime.

At the same time, it is also important that the CMA can take a clear lead in imposing and enforcing requirements to bring effective change in digital markets. This DMU-led approach is important in providing certainty for all parties and ensuring the regime is coherent and effective and delivers the best outcomes for consumers. We want the regime to be collaborative, but not litigious. This is why we have made provision for a public-led enforcement approach, which will ensure the CMA’s central role in ensuring the consistent application and enforcement of the regime, while still making explicit provision for parties to seek redress.

Lengthy and complex litigation in the early years of the regime in particular would run the risk of creating uncertainty for all stakeholders and could undermine the delivery of the regime as a whole, particularly where CMA resources are diverted to engage with private actions rather than focusing on reform.

The noble Lord, Lord Fox, made a very serious point about the enormous disparity in size, which I duly take seriously. Our argument is that in the formative stages of the existence of this regime, the best way to deal with that disparity in size and scale is to have public-led engagements taking primacy over collective ones.

My noble friend Lady Stowell asked about Ofcom’s role in private actions under Part 2 of the Communications Act 2003. I would be happy to write to her on this important issue, as she suggested, but I will now respond briefly to her remarks in advance of that letter.

Under the Communications Act, claimants must first seek consent from Ofcom to initiate a private action for certain breaches. We have given this model consideration but concluded that it would pose difficulties in a digital markets context. It could politicise the CMA, forcing it to make a deeply contentious decision at the outset of each private action. The decision itself would also be subject to challenge in the courts through judicial review, so it would not likely bring additional certainty or clarity. These issues are less prevalent for Ofcom’s regime, where redress is more commonly sought through the Communications Ombudsman than in the courts. For these reasons, we do not think that replicating the Communications Act mechanism would be appropriate in this regime, but, as I said, I am more than happy to write and set that out in more detail.

All of that said, I hope that noble Lords are content to accept these government amendments. I thank the noble and learned Lord, Lord Etherton, for his amendment, but I hope that he will not press it.

Amendment 62 agreed.

Digital Markets, Competition and Consumers Bill

Viscount Camrose Excerpts

Committee stage
Monday 22nd January 2024 Grand Committee

[Baroness Harding of Winscombe (Con)]

My Lords, as we start this phase of the Bill, I declare my interests, in particular my husband’s close involvement with the Bill in the other place as the Member of Parliament for Weston-super-Mare. We rarely get involved in the same issues at the same time, but in this case we are.

Like other noble Lords, I am keen to see this Bill reach the statute book, but also keen to ensure that we minimise the degree of legal ambiguity. I thank the many companies that have given us briefings in advance of Committee, but note how many of them have felt incredibly uncomfortable in doing so and have sworn us all to secrecy about having even been talking to us in private, for fear that their commercial relationships will be prejudiced. We must recognise the enormous commercial power that the companies that this Bill aims to regulate already exert. Making sure that the Bill is clear, and that we are not inadvertently creating legal loopholes, is probably the most important thing that we will do in this House as we give it the degree of scrutiny that we like to give here.

Loopholes do not need to be permanent. If you have already got large market power, loopholes just need to slow the process down. When I ran a challenger business competing against a very large incumbent in telecoms, BT, we used to say all the time that BT’s regulatory strategy was to walk backwards slowly—I think that was even said in public, about 20 years ago. That was its strategy.

This is exactly what the big technology companies are doing worldwide. They know that regulation is coming to this sector but are walking backwards as slowly as they can. We see this very clearly with the EU’s Digital Markets Act where, so far, every potential SMS-equivalent firm has challenged its designation through every stage of the courts that it can. We should go into this Committee with our eyes wide open that that is exactly what will happen with this legislation as well. Giving clarity wherever possible will therefore be essential.

With that in mind, I support Amendments 1, 3, 4, 5 and 6 in their endeavour to give clarity on two important issues: first, whether the CMA can use work that it has already done; and, secondly, that it is impossible to have clarity about what will happen in technology markets over the next five years. Does my noble friend the Minister agree that it is important that the Bill gives clarity on those two issues? If the amendments as currently drafted do not achieve that, what can we do to ensure that we do not look with horror in a few years’ time when each SMS designation is in a JR, with technology companies challenging the CMA’s ability to use historic work or its lack of crystal ball-gazing, which will inevitably have come about?

I also have considerable sympathy with Amendment 7 from the noble Viscount, Lord Colville. We will come to the question of the Secretary of State’s powers in a number of parts of this Bill. In this case, I can see why we should be worried about the ability of individual companies—this is only from the media—with regulatory lobbying budgets of at least $1 billion to influence a single person because, however moral and upstanding they are, it is likely to be quite great. I have some sympathy with the amendment, but the requirement for a Secretary of State decision via the affirmative process is the strongest parliamentary scrutiny available to us. Does my noble friend acknowledge that this is a potential risk? If it is, what additional safeguards would he suggest if he does not like the removal of this power? I recognise that it is possible that we have not captured all the reasons why you might not want to designate a firm as having strategic market status.

We will come back to these issues again and again in our many days together in this Room, because this is really about giving clarity of intent. Will my noble friend confirm that he shares the intent of these amendments?

[The Parliamentary Under-Secretary of State, Department for Science, Innovation and Technology (Viscount Camrose) (Con)]

My Lords, I am pleased to speak on this first day of Committee and thank all noble Lords for their continued and valued engagement on the DMCC Bill, which, as many noble Lords have observed, will drive innovation, grow the economy and deliver better outcomes for consumers. I am grateful for noble Lords’ continued scrutiny and am confident that we will enjoy a productive debate.

I start by briefly speaking to government Amendments 11 and 12, which I hope noble Lords will support. They make the strategic market status notice provisions consistent by obliging the Competition and Markets Authority to provide reasons for its decision not to designate a firm following an initial SMS investigation.

I turn to Amendment 1, tabled by the noble Baroness, Lady Jones of Whitchurch. The amendment seeks to ensure that the CMA will be able to use, in its SMS investigations, previous analysis undertaken in related contexts. I agree entirely that the CMA should not have to repeat work that it has already done and should be able to draw on insights from previous analysis when carrying out an SMS investigation, when it is appropriate and lawful to do so.

I offer some reassurance to the noble Baroness that the Bill as drafted permits the CMA to rely on evidence that it has gathered in the past, so long as it is appropriate and lawful to do so. As she highlighted, a strength of the regime is the flexibility for the CMA to consider different harms in digital markets. I suspect that this is a theme that we will return to often in our deliberations, but being prescriptive about what information the CMA can rely on risks constraining the broad discretion that we have built into the legislation.

Amendments 3, 4, 5 and 6, tabled by the noble Lord, Lord Clement-Jones, would make it explicit that the CMA must consider currently available evidence of expected or foreseeable developments when assessing whether a firm holds substantial and entrenched market power in a digital activity. Amendment 3 would remove the duty for the CMA to consider such developments over a five-year period. The regime will apply regulation to firms for a five-year period; it is therefore appropriate that the CMA takes a forward look over that period to assess whether a firm’s market power is substantial and entrenched, taking account of expected or foreseeable developments that might naturally reduce the firm’s market power, if it were not designated.

Without an appropriate forward look, there is a risk that designation results in firms facing disproportionate or unnecessary regulation that harms innovation and consumers. However, the CMA will not be required to prove that a firm will definitely have substantial and entrenched market powers for the next five years—indeed, that would be impossible. The CMA will have to give reasons for its decisions to designate firms and support any determination with evidence. As a public body, it will also be subject to public law principles, which require it to act reasonably and take into account relevant considerations. Therefore, in our view, these amendments are not necessary.

Amendment 7, tabled by the noble Viscount, Lord Colville of Culross, seeks to remove the power for the Secretary of State to amend by regulations subject to the affirmative procedure the conditions to be met for the CMA to establish a position of strategic significance. I recognise, first, that Henry VIII powers should be used in legislation only when necessary. To the point raised by my noble friend Lady Harding, I also recognise the importance of limiting the scope for too much disputation around this and for too many appeals. In this case, however, the power helps to ensure that the regime can adapt to digital markets that evolve quickly and unpredictably.

Changes in digital markets can result from developments in technology, business models, or a combination of both. The rapid pace of evolution in digital markets, to which many have referred, means that the CMA’s current understanding of power in these markets has changed over the past decade. The concept of strategic significance may therefore also need to evolve in future, and the conditions to be updated quickly, so that the regime remains effective in addressing harms to competition and consumers effectively. The affirmative resolution procedure will give Parliament the opportunity to scrutinise potential changes. It will provide a parliamentary safeguard to ensure that the criteria are not watered down, and should address the noble Lord’s concerns regarding lobbying. For these reasons, I believe that it is important to retain this power.

[Lord Knight of Weymouth (Lab)]

To look at Clause 6 and the four conditions laid down there, they appear pretty generic, in terms of size; the number of undertakings; the position in respect of digital activity, which would allow an extension of market power; and the ability to influence the ways in which other undertakings conduct themselves. They are generic conditions, so can the Minister give us a bit more of a taste of the kind of thing that just might crop up? I know that he does not have a crystal ball, but could he tell us what might crop up that would require these Henry VIII powers to be used?

[Viscount Camrose (Con)]

I would struggle to name a particular one, but if we were to look back over the last five to 10 years we might reflect that there have been a number of developments in markets that have been largely unpredictable and that technology changes might drive further developments. The point is to create a balance between predictable and durable legislation and the ability to adapt to changes in business practice and technology as they emerge. As a thought experiment, if we were to flip it round and say, “No, we have to stick with only these four things for the duration of the eventual Act”, many of us would be concerned about an ongoing inability to adapt to change in what is a fast-moving marketplace that is likely to see an accelerating pace of change, rather than anything else.

That said, I hope my words provide the noble Baroness and noble Lords with sufficient assurance not to press their amendments.

[Lord Clement-Jones (LD)]

My Lords, the Minister rather glossed over the importance of Clause 5. In Clause 2(2), the SMS conditions are that

“the undertaking has—

(a) substantial and entrenched market power (see section 5), and

(b) a position of strategic significance”.

The conditions in Clause 6 are rather formulaic, in the way that the noble Lord, Lord Knight, talked about, but the determination, examination and assessment in Clause 5 as to whether an undertaking has substantial and entrenched market power is really important. The Minister glossed over this and said that it is not necessary to have a determination based on current evidence and that this forward-looking element must be in there.

Can the Minister confirm that he has taken advice within the department from competition lawyers who deal with this kind of potential challenge on a daily basis? He seems extraordinarily complacent about the fact that big tech will look at that assessment and say, “The evidence is not there. It’s all speculation for the next five years. You haven’t based it on the actual conduct in our market currently, or indeed an adjacent market”. No doubt we will come to that later in another group. This is absolutely at the core of the Bill, and all the advice that I get, whether from the Open Markets Institute or others, is that this is a real failing in the Bill that could open up a litigation problem for the CMA in due course.

[Viscount Camrose (Con)]

I certainly do not intend to gloss over any of these issues. I can confirm that the department receives extensive advice on these matters, as have those working on the Bill, not only from competition lawyers but from other stakeholders in the market of all different sizes and types, and indeed from the CMA itself. To turn around the noble Lord’s position, if we make a designation that is designed to last for five years, it is crucial that we take into account existing evidence and what is foreseeable today when determining whether to make that designation. Nobody is being asked to be overly speculative, but it is possible to identify existing trends and available information that can form part of the analysis, and use that to make the determination, particularly as the CMA will then have a duty to explain in detail the rationale behind its decision to designate a firm with SMS, or indeed not to do so.

[Lord Lansley (Con)]

Apologies; I had not intended to intervene on this group, but I am confused and I wonder if my noble friend might be able to help me. We have the word “entrenched”. Obviously, we are talking about “substantial and entrenched”, but “substantial” is not really in debate since, if it has strategic significance, it is likely to be substantial; the issue is with “entrenched”.

A theme that I might develop later on other aspects is to look at our legislation in the context of what has been done by the European Union in its Digital Markets Act. We are doing things differently—and better, I hope—but my point is that the European Union looks at the question of what it describes as an “entrenched and durable position”. That seems to have two aspects to it: the first, “entrenched”, is that it exists and has existed for some time; and the second, “durable”, relates to it being foreseeable that it will continue to exist in future. We have lost the word “durable” and retained “entrenched”, but we are applying it in relation only to what is foreseeable—forward-looking assessment. I am confused about why it is only a forward-looking assessment. The relevant regulation from the European Commission looks back three years to establish whether it is entrenched, and looks forward to see whether it is durable or whether there are foreseeable developments that would give rise to such an entrenched, significant market status. I am looking for both and, at the moment, I cannot see both; I see only the forward-looking part.

[Viscount Camrose (Con)]

Indeed. I am afraid that the use of the word “durable” in this context is new to me. I will very happily take that forward and consider whether it might be a valuable addition to the guidance here. To focus on the outcomes that we want here, we want a reasonably derivable position that the existing entrenched power of the potentially SMS-designated firm is likely to last for the five-year period. We want to ensure that any evidence or analysis supporting that position is presented as part of the report that details why the decision is taken. I will take forward the use of the word “durable”.

[Lord Lansley (Con)]

Would it be fair to say that the contention in this legislation is that the determination that there is a position of strategic significance also satisfies the argument of whether such substantial market power exists? This further assessment is really about whether it is likely to be entrenched and durable over the five-year period, since the designation extends for five years. This is looking forward over those five years. I think it is perhaps not absolutely clear how these two clauses are intended to be considered together for this purpose.

[Viscount Camrose (Con)]

I take note of my noble friend’s point. There may be many areas on which all of us in this Committee end up disagreeing, but one that I doubt we will disagree on is the need for absolute clarity in all these measures. I am very happy to commit to taking that away and seeing whether there is an appropriate form of words that can deliver the clarity that noble Lords are seeking.

[Baroness Jones of Whitchurch (Lab)]

My Lords, I thank all noble Lords who have spoken. I very much echo the thanks expressed by the noble Baroness, Lady Harding, to all the companies and business that have given evidence and come forward to speak to us. It is true that, for a number of them, they have taken risks to do that. It is a sad fact of life now that their very survival could be at stake if some of their concerns become public. That is why we are here today, I suppose. That is where the market has left us and there is a need to address that.

To pick up on the points made by the noble Lord, Lord Clement-Jones, and the noble Baroness, Lady Harding, about the CMA’s assessment, I think that we have had a useful discussion with the Minister around all that. I certainly want to look at Hansard and at the reassurances that the Minister has tried to give on this. I very much take the point, incidentally—as mentioned by the noble Viscount, Lord Colville, in moving his amendment—that SMS status does not mean that they have done anything wrong, so I do not want to get too hung up about giving that status in the first instance. What is important is how we follow that up and look at their behaviour going forward. As the noble Lord, Lord Clement-Jones, spelled out, there is a danger that, if we are not careful, those who are given that category will game the system. That is what we are all anxious about.

I am not sure that the wording achieves what the Minister wants. I think that we are all genuinely clear on the outcomes that we want, as the Minister said, but the current wording does not achieve that. The five-year forward plan is playing into the hands of the wrong people, and we will not come out with the outcomes that we want if we stick with the current wording, so I very much welcome the chance to have further discussion about that.

--- Later in debate ---

[Baroness Kidron (CB)]

My Lords, I too faced a glitch, having wanted to add my name to these amendments. Since we are at a new stage of the Bill, I declare my interests as set out in the register, particularly as an adviser to the Institute for Ethics in AI at Oxford and to the Digital Futures centre at the LSE and as chair of the 5Rights Foundation. I support the noble Lord, Lord Clement-Jones, who has, with this group of amendments, highlighted that job creation or displacement and the quality of work are all relevant considerations for the CMA. I think it is worth saying that, when we talk about the existential threat of AI, we always have three areas of concern. The first is the veracity and provenance of information; the second is losing control of automated weapons; and the third, importantly in this case, is the many millions of jobs that will be lost, leaving human beings without ways to earn money or, perhaps, a reason for being.

There are two prevailing views on this. One is that of Elon Musk, who, without telling us how we might put food on the table, pronounced to the Prime Minister

“There will come a point where no job is needed – you can have a job if you want one for personal satisfaction but AI will do everything”.


The other, more optimistic view is that boring or repetitive work will go, which is, in part, beautifully illustrated by David Runciman’s recent book, The Handover, where he details the fate of sports officials. In 2021, Australian and US line judges were replaced by computers, while Wimbledon chose to keep them—largely for aesthetic reasons, because of the lovely Ralph Lauren white against the green grass. Meanwhile, Carl Frey and Michael Osborne, in their much-publicised 2017 study assessing the susceptibility of 702 different jobs to computerisation, suggested that sports officials had a 98% probability of being computerised.

In fact, since 2017, automation has come to all kinds of sports but, as Runciman says,

“Cricket matches, which traditionally featured just two umpires, currently have three to manage the complex demands of the technology, plus a referee to monitor the players’ behaviour”.


Soccer has five, plus large teams of screen watchers needed to interpret—very often badly—replays provided by VAR. The NBA Replay Center in Secaucus employs 25 people in a NASA-like control room, along with a rota of regular match officials.

It would be a fool who would bet that Elon Musk is entirely wrong, but nor should we rely on the fact that all sectors will employ humans to watch over the machines, or even that human beings will find that being the supervisor of a machine, or simply making an aesthetic contribution rather than being a decision-maker, is a good result. It is more likely that the noble Lord, Lord Knight, is correct that the algorithm will indeed be supervising the human beings.

I believe that the noble Lord, Lord Clement-Jones, and his co-author, the noble Lord, Lord Knight, may well prove to be very prescient in introducing this group of amendments that thoughtfully suggest at every stage of the Bill that the CMA should take the future of work and the impact of work into account in coming to a decision. As the noble Lord made clear in setting out each amendment, digital work is no longer simply gig work and the concentration in digital markets of behemoth companies has had and will continue to have huge consequences for jobs across supply lines, as well as wages within markets and, most particularly, on terms of employment and access to work.

AI is, without question, the next disruptor. Those companies that own the technology will be dominant across multiple markets, if not every market, and for the CMA to have a mandate to consider the impact on the workforce is more than sensible, more than foresightful; it is in fact a new reality. I note that the Minister, in responding to the last group, mentioned the importance of foreseeable and existing trends: here we have one.

[Viscount Camrose (Con)]

My Lords—

[Lord Bassam of Brighton (Lab)]

My Lords, I am sure the noble Viscount has more important things to say than I have, but it falls to me to make a few comments from the Opposition Benches on this. While listening to my noble friend Lord Knight, I was reflecting that we might be the last profession ever to be dismissed or appointed by algorithm and wondering whether that is a good or a bad thing. I leave that for the Minister to ponder while I make my observations.

The noble Lord, Lord Clement-Jones, introduced these amendments with his customary skill and guile. No doubt, like the rest of us, he has been extremely well briefed by the Institute for the Future of Work; I pay tribute to my noble friend Lord Knight for his work in that regard. This group of amendments is extremely important. We know that, with algorithms, new digital technology and thinking, just as the history lesson from my noble friend showed, it is really important when technological revolutions happen that we grasp the moment to think about their wider social and economic impact—with this, in particular, the impact on the world of work.

On the face of it, these amendments would provide a valuable extension of the CMA’s remit and role and could lead to protection of consumers and workers from the adverse impacts brought about by the activities of digital companies that operate in a dominant position in the marketplace. As the noble Lord, Lord Clement-Jones, said, the near-monopoly position of some companies means that wage and price fixing are a real concern. The ability of the CMA to monitor, comment and have an impact on conduct could have a wider and beneficial impact on ensuring that the market works not only well but fairly and with equity. It is the case that social, environmental and well-being risks and impacts, including work conditions and the environment are under increasing scrutiny from consumer and corporate sustainability perspectives.

The noble Lord, Lord Clement-Jones, referenced the World Economic Forum’s Global Risks Report and the EU’s new corporate sustainability due diligence directive 2023, to be introduced later this year. They exemplify the importance and salience of the issue. As he said, this all suggests that consumer interests can extend to local supply chains, so, as a consequence, informed decision-making will need to have better information on work impacts in the future. Consumers are, as has been said, both consumers and workers, and they are bound to take much greater interest in digital workplaces. From these Benches, we therefore support, in general terms, better monitoring, intervention and information sharing by the CMA; if these amendments achieve that objective, they are certainly worthy of our support. The Minister will have to persuade us otherwise, or explain that the CMA will have the scope to use its powers to satisfy the objectives behind the amendments in the name of the noble Lord, Lord Clement-Jones.

I was intrigued by the reference by the noble Baroness, Lady Kidron, to sports officials being put out of a job. I am a big football fan, as many colleagues will know. It just seems to me that VAR is a great example of how you can generate even more activity and interest by the digitisation of assessments and the use of algorithms to judge whether something is or is not offside. We are happy to support these amendments; we think they potentially touch on a vital aspect of the CMA’s work and we look forward to what the Minister has to say about them.

[Viscount Camrose (Con)]

My Lords, I apologise to the noble Lord, Lord Bassam, for jumping the gun before his interesting words. I reflect that the algorithm that puts exactly this combination of people in this Room would be fairly complex—but a good one.

I thank the noble Lord, Lord Clement-Jones, for using several amendments to raise the important issue of the impact of technologies, such as artificial intelligence, on workers and the nature of work. I also thank the noble Lords, Lord Knight and Lord Bassam, and the noble Baroness, Lady Kidron, for their contributions to what is an important part of our deliberations.

The Government of course recognise that new technologies can create challenges and risks, as well as opportunities and benefits. I agree with noble Lords that the impact of technology on work and workers deserves attention, and I will respond to each amendment in turn. However, I also hope that noble Lords agree that it is of paramount importance that this regime is effective and focused on promoting competition for the benefit of consumers, which is the CMA’s area of expertise. I know that future amendments propose that the CMA’s focus should go beyond that, so perhaps the bulk of that can be left for that debate.

The CMA has been considering future issues in the space of competition, and indeed recently published its first horizon-scanning report on 10 trends in digital markets and how they may develop over the next five years and beyond. However, the Government feel that wider issues around the impact of digital technologies on work and workers—those that do not impinge directly on competition for the benefit of consumers—are better dealt with elsewhere.

Amendment 2 would allow the CMA to establish that there is a link to the UK for the purposes of designating a firm with SMS when a digital activity is likely to have a substantial impact on work or work environments in the United Kingdom. The CMA’s objective is, as I say, to promote competition for the benefit of consumers, and it is important that the digital markets regime is focused on competition.

The current criteria to establish a link to the UK ensure that the regime is targeted and proportionate, and draw on similar approaches in other legislation, including Chapter 1 of the Competition Act 1998. However, this amendment would allow the CMA to link a digital activity to the UK on the basis of impacts that are explicitly unrelated to competition. It would therefore detract from the aims of the regime, which are competition focused. It would also be inappropriate for the CMA to assess impacts unrelated to competition, which is its area of expertise and jurisdiction.

Amendments 18 and 23 would ensure that the CMA can require the SMS firm, through conduct requirements, to carry out and share an assessment on wider social impacts. I agree with noble Lords that it is of crucial importance that users are given the information necessary to make informed decisions about the services they use. The current objectives and list of permitted types of conduct requirements have been carefully drafted to ensure that the regime can protect consumers and businesses that rely on SMS firms via targeted and tailored rules. Conduct requirements can be imposed for the purposes of the trust and transparency objective, to ensure that those who use or seek to use the relevant digital activity have the information they need to understand the terms on which the activity is provided. This amendment would go beyond the scope and competition remit of the CMA, potentially creating new burdens and additional complexities, which could slow down effective enforcement.

Amendment 56 would expand the concept of an adverse effect on competition to include the displacement or alteration of work conditions or environments within the United Kingdom. Pro-competition interventions are designed specifically to address the root causes of the substantial and entrenched market power which gives rise to strategic market status. Where adverse working conditions intersect with or create a substantial negative impact on the competition within a particular market or industry, it may be relevant for the CMA to consider these. However, explicitly amending the definition of adverse effects on competition to include workplace conditions would skew the focus of the regulator away from competition and shift PCIs away from the established precedent of the markets’ regime. During a PCI investigation, the CMA may identify actions that other regulators or public bodies would be better placed to act upon. This may include the DMU referring issues such as workplace conditions to a relevant regulator, better placed to deal with these key issues.

[Lord Knight of Weymouth (Lab)]

Which regulators is the Minister thinking of? I am interested in Clauses 107 and 108, which are about regulatory co-ordination and information sharing, and whether there is something we should do there with those regulators. If he could give us a hint as to which regulators he is thinking of, that would be really helpful.

[Viscount Camrose (Con)]

I refer to the digital regulators themselves—the ICO or the FCA and Ofcom—or indeed regulators with oversight of employment law.

Amendment 61 would enable the CMA to require algorithmic impact assessments, to assess the impact of algorithms on society and the environment, including working conditions, if it considered such information relevant to its digital markets functions. I agree wholeheartedly with the noble Lord about the importance of understanding the impact of algorithmic systems on society, the environment and working conditions in the UK.

[Lord Bassam of Brighton (Lab)]

Is the Minister saying that it is up to the CMA to decide whether it is a relevant consideration?

[Viscount Camrose (Con)]

Yes, I think that I am saying that. The CMA, over the course of its investigations, can come across information beyond its own competitive remit but relevant for other regulators, and then could and should choose to advise those other regulators of a possible path for action.

[Lord Knight of Weymouth (Lab)]

In that sense, could the CMA ask for an impact assessment on the algorithmic harm that might be carried out? Would that be in the power and remit of the CMA?

[Viscount Camrose (Con)]

The CMA does have power and remit to request an algorithmic impact assessment. I will take advice on this, because I believe that the algorithmic assessment that it undertakes must be in the direction of understanding anti-competitive behaviours, rather than a broader purpose. I will happily take advice on that.

As the Bill stands, the CMA will already have sufficient investigatory powers to understand the impact of complex algorithms on competition and consumers. The suggested expansion of this power would fall outside the role and remit of the CMA. Moreover, the CMA would not have appropriate tools to address such issues, if it did identify them. The Government will continue to actively look at whether new regulatory approaches are needed in response to developments in AI, and will provide an update on their approach through the forthcoming AI regulation White Paper response.

I thank the noble Lord once again for raising these important issues and hope that he feels able to withdraw the amendment.

[Lord Clement-Jones (LD)]

I thank the Minister for his considered reply, and thank all those who have taken part in this extremely important and interesting debate, particularly the amplification by a number of noble Lords of some of the issues.

I was very much taken by what the noble Lord, Lord Knight, had to say about the risks for workers—hired, managed, fired. He used the word “dehumanising”, which was very powerful. The noble Baroness, Lady Kidron, referred back to some of the really interesting papers about automation from Osborne and Frey and others over the years, telling us that it is not just Elon Musk but, perhaps I might say, other more serious people who are warning us about the dangers of automation.

At the end of the day, I think the question is how relevant this is to competition. Those of us putting forward and supporting these amendments believe that monopoly, concentration and the power of big tech have the ability to determine working conditions. The Minister talks about this detracting from the CMA’s duties, saying that it is beyond its competition remit and so on. We think it is mainstream; we do not think that it is just an add-on to the CMA’s duties. There is a very strong argument for a wider focus by the CMA.

It feels rather like the Minister is passing the parcel to another regulator. It was instructive that we had to scrabble around at the back end of Clause 107 to see what other regulator might be available to deal with this, but there is nobody to pass this parcel to: this is a direct consequence of concentration and monopoly power. We should include these considerations in what the CMA does. It should have the power to insist on an algorithmic impact assessment.

I think the noble Baroness, Lady Kidron, used the word prescient. We need to be prescient and think forward to the future and the power of the algorithm, artificial intelligence and big tech. Our working population are extremely vulnerable in these circumstances. I do not get the feeling that the Government are really taking their duties to protect them seriously. I am sure that we will have further debates on this. In the meantime, I beg leave to withdraw Amendment 2.

--- Later in debate ---

[Lord Clement-Jones (LD)]

My Lords, it is a pleasure to follow the noble Baroness, Lady Kidron, whose speech segues straight into my Amendments 14 and 63. This is all about the asymmetry of information. On the one hand, the amendments from the noble Baroness, Lady Jones, which I strongly support and have signed, are about giving information to challengers, whereas my amendments are about extracting information from SMS undertakings.

Failure to respond to a request for information allows SMS players to benefit from the information asymmetry that exists in all technology markets. Frankly, incumbents know much more about how things work than the regulators. They can delay, obfuscate, claim compliance while not fully complying and so on. By contrast, if they cannot proceed unless they have supplied full information, their incentives are changed. They have an incentive to fully inform, if they get a benefit from doing so. That is why merger control works so well and quickly, as the merger is suspended pending provision of full information and competition authority oversight. We saw that with the Activision Blizzard case, where I was extremely supportive of what the CMA did—in many ways, it played a blinder, as was subsequently shown.

We on these Benches consider that a duty to fully inform is needed in the Bill, which is the reason for our Amendments 14 and 63. They insert a new clause in Chapter 2, which provides for a duty to disclose to the CMA

“a relevant digital activity that may give rise to actual or likely detrimental impact on competition in advance of such digital activity’s implementation or effect”

and a related duty in Chapter 6 ensuring that that undertaking

“has an overriding duty to ensure that all information provided to the CMA is full, accurate and complete”.

Under Amendment 14, any SMS undertaking wishing to rely on it must be required to both fully inform and pre-notify the CMA of any conduct that risks breaching one of the Bill’s objectives in Clause 19. This is similar to the tried-and-tested pre-notification process for mergers and avoids the reality that the SMS player may otherwise simply implement changes and ignore the CMA’s requests. A narrow pre-notification system such as this avoids the risks.

We fully support and have signed the amendments tabled by the noble Baroness, Lady Jones. As techUK says, one of the benefits that wider market participants see from the UK’s pro-competition regime is that the CMA will initiate and design remedies based on the evidence it gathers from SMS firms in the wider market. This is one of the main advantages of the UK’s pro-competition regime over the EU DMA. To achieve this, we need to make consultation rights equal for all parties. Under the Bill currently, firms with SMS status, as the noble Baroness, Lady Harding, said, will have far greater consultation rights than those that are detrimentally affected by their anti-competitive behaviour. As she and the noble Lord, Lord Vaizey, said, there are opportunities for SMS firms to comment at the outset but none for challenger firms, which can comment only at a later public consultation stage.

It is very important that there are clear consultation and evidence-gathering requirements for the CMA, which must ensure that it works fairly with SMS firms, challengers, smaller firms and consumers throughout the process, ensuring that the design of conduct requirements applies to SMS firms and pro-competition interventions consider evidence from all sides, allowing interventions to be targeted and capable of delivering effective outcomes. This kind of engagement will be vital to ensuring that the regime can meet its objectives.

We do not believe that addressing this risk requires removing the flexibility given by the Bill. Instead, we believe that it is essential that third parties are given a high degree of transparency and input on deliberation between the CMA and SMS firms. The CMA must also—and I think this touches on something referred to by the noble Baroness, Lady Jones—allow evidence to be submitted in confidence, as well as engage in wider public consultations where appropriate. We very strongly support the amendments.

On the amendments from the noble Lord, Lord Tyrie, it is a bit of a curate’s egg. I support Amendments 12A and 12B because I can see the sense in them. I do not see that we need to have another way of marking the CMA’s homework, however. I am a great believer that we need greater oversight, and we have amendments later in the Bill for proposals to increase parliamentary oversight of what the CMA is doing. However, marking the CMA’s homework at that stage is only going to be an impediment. It will be for the benefit of the SMS undertakings and not necessarily for those who wish to challenge the power of those undertakings. I am only 50% with the noble Lord, rather than the whole hog.

[Viscount Camrose (Con)]

I thank both noble Lords for speaking and for their thoughtful contributions. I will start by considering the amendments tabled by the noble Baroness, Lady Jones of Whitchurch, relating to information and transparency.

It is important to state from the outset that the Government agree it is vital that the Digital Markets Unit’s decisions are transparent and that the right information is available publicly. Currently, the DMU would be required to publish the key information related to its investigations in the summaries of its decisions. The amendments in this group, beginning with Amendment 8 and ending with Amendment 58, tabled by the noble Baroness, would create a new requirement for the DMU to send decision notices to firms that it assesses to be the most affected by decisions.

We agree it is vital that the DMU's decisions are transparent, and the appropriate information is accessible publicly. That is why the DMU is required to consult publicly before it imposes obligations such as conduct requirements or pro-competition orders. This gives third parties the opportunity to make representations on the design of interventions. While the precise nature of the consultation process is at the DMU’s discretion, we are aware of the imbalances in resources between different firms, as noble Lords have raised.

In its recently published overview, the CMA highlighted that engaging with a wide range of stakeholders will be a core principle of their approach. We therefore expect the DMU to put appropriate mechanisms in place for third parties to feed in. The consultation requirements are minimum requirements. As the CMA set out earlier this month, the DMU will undertake fair, inclusive and transparent engagement with third parties when designing its interventions. The participative approach will ensure that obligations are effective and appropriate, while minimising undue burdens and avoiding unintended consequences for both SMS firms and third parties.

However, requiring the DMU to identify appropriate third parties and send notices for each decision would introduce a significant burden on the DMU for minimal benefit. I think this will be a theme as we go through Committee: the burdens created by some of the proposed amendments are greater than they initially seem. For example, it could mean sending notices to potentially thousands of interested third parties in the case of app developers in the activity of app stores. Given this and the fact that the CMA will publish key information related to its decisions, we feel the burden would outweigh the benefit.

Amendment 14, tabled by the noble Lord, Lord Clement-Jones, would require SMS firms to inform the CMA before launching a digital activity that may give rise to competition issues. The Government agree that it is important that the CMA has access to information on potential competition issues in digital markets as they emerge. However, the CMA already has robust information-gathering powers under Part 1, supported by appropriate penalties for non-compliance. This amendment would create new burdens on the CMA, which could potentially be inundated with information. As a result, rather than focusing on priorities, the regulator would have to expend resources sifting the information provided. Further, it could introduce undue burdens on SMS firms looking to introduce innovative new products and services in areas that have healthy competition. It is important that obligations within the regime do not dissuade firms from developing innovations that are beneficial to consumers. I hope that sets out the position to the noble Lord.

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[Lord Clement-Jones (LD)]

My Lords, so that the Minister does not have to stand up a second time, I will just add the other side of the coin to the question from the noble Lord, Lord Vaizey. The Minister seems very concerned about the workload within an SMS, but they are an SMS for a reason.

[Viscount Camrose (Con)]

I thank noble Lords for raising those points. My response to them both is that the key is that we are trying to set a balance between the workloads—the work that has to be performed by the regulator—and the benefit of that work for competition. We can certainly come up with examples. I shared the example of how many app developers there are and how many of them would have to exchange information with the regulator, but perhaps it would be more helpful to the Committee if I committed to giving a slightly deeper analysis of what the CMA estimates would be the time consumed on such activities and why we are concerned that it would have the potential to detract from the core basis of its mission.

[Baroness Harding of Winscombe (Con)]

The challenger app developers are, in essence, the customers here, so I am quite worried that I think I am hearing that the regulator cannot cope with customer feedback, whereas that is probably the most important feedback in its process. We are looking for a way of enshrining that in the legislation that does not create some overwhelming burden. To say that customers will overwhelm the regulator with feedback is back to front: they are the people that the competition regulator should most want to hear from.

[Viscount Camrose (Con)]

In that example, I would cast the app developers as participants in the ecosystem and the customers as the users of the app, but that is perhaps an ontological problem. Perhaps the most straightforward thing, to satisfy the Committee’s concerns that we are not idly throwing out the possibility of an overworked regulator, would be to provide the Committee with a greater analysis of why we believe we have to be careful with what information we ask them to exchange with interested parties to avoid the situation in which the paperwork exceeds the value work.

[Lord Clement-Jones (LD)]

My Lords, would the Minister also agree to add the whole question about the overworked SMS in his response?

[Viscount Camrose (Con)]

Yes. The point is that we are very happy for these firms to keep delivering innovative new products in competitive markets; we are less happy about them spending their time frustrating the will of the regulator. It is more difficult for me to comment on SMS workloads but I am very happy to comment on the regulators’ workloads.

[Lord Clement-Jones (LD)]

My Lords, the foundation of the Minister’s argument is SMS workload. The issue is exactly the point that the noble Baroness, Lady Kidron, made about information being power. The SMS companies will know what they are developing. They have huge teams of developers and marketeers, and they have huge amounts of information. This is a question of the CMA trying to keep abreast of what is happening in markets which are dominated by SMS companies, so it is important that there is a proactive duty on the SMS undertaking to give information to the CMA. Maybe the Minister could, as part of this letter, explain how many people there are whose job it is to gather information from the SMS companies—maybe that is the right way around—so we can judge whether it is right to require an SMS proactively to deliver information to the CMA.

[Viscount Camrose (Con)]

Indeed. I am happy to include such analysis in my letter. However, I observe that were I to put myself in the SMS’s shoes and I had a desire to frustrate the will of the regulator, my approach would be to provide far more information than was necessary and create a significant burden on the regulator to sift that information. Any such request or any such standing order about the information coming from the SMS to the regulator must itself be quite carefully balanced.

[Lord Clement-Jones (LD)]

My Lords, all the SMS has to do is put it through one of its large language models, and hey presto.

[Lord Clement-Jones (LD)]

That is not incompatible. These are two sides of the same coin, which is why they are in this group. I suppose we could have degrouped it.

[Viscount Camrose (Con)]

Indeed, and I apologise for getting slightly sidetracked on the issue. I think the outcomes we want are that challenger tech firms should be duly informed about the information they need, whether to rebut claims set out by an SMS or to understand the implications and contribute to the process of determining what interventions the regulator should need to make. In the Bill, we are trying to develop the machinery that balances both sides of that equation most effectively, and I remain concerned that we need to manage the workload requirements of the regulator so that it is optimally focused on delivering the right outcomes based on the right information.

[Baroness Jones of Whitchurch (Lab)]

My Lords, I thank all noble Lords who have spoken. We have had an excellent debate. I very much respect the experience of the noble Lord, Lord Tyrie, on this issue. I agree that there is a challenge for us in building trust in the new regime. It is a leap in the dark and, undoubtedly, we are giving the CMA/DMU considerable new powers, so it must prove its worth and prove that our faith in it is justified. I agree that there is a danger of getting that balance wrong. During the passage of the Bill, we will look at other ways of getting parliamentary and other oversight of its activities, to ensure that we get the balance in check.

I also agree that it is important that we maintain commercial confidentiality. This is an issue about sharing information, which we were just talking about. However much information is shared, we must ensure that those who are sharing it—sometimes it is very much core to their business model—respect it and do not put it in the public domain. All that must underpin our debate.

I agreed with the noble Lord, Lord Clement-Jones, that the proposals from the noble Lord, Lord Tyrie, were a curate’s egg; I was not sure either about the independent case reviewer. I worry that it would be another loophole, or hurdle, that would allow the lawyers a field day. The noble Lord, Lord Tyrie, put it there with the very best intentions, and I am happy that we talk about it, but I am not sure about it. It worries me that we are being too prescriptive by setting it out in so much detail in the Bill, but let us get that right because there will, I hope, be other opportunities to debate this.

I thank the noble Baronesses, Lady Harding and Lady Kidron, and the noble Lord, Lord Vaizey, for their support on my amendments. The noble Baroness, Lady Harding, said it very well: the amendments illustrate the inequality of arms between the SMS and the challenger firm. There will be a wealth of evidence that the CMA needs to consider. That will be a whole lot of major anti-competitive practices, a lot of which it already knows about, but there will also be some of the more minor inconveniences that are put upon some of the challenger firms. We have met with a lot of the stakeholders; sometimes what is so annoying is the irritating, almost vindictive little actions, because you have the temerity to put your hand up and say that you do not agree with the major companies. We must ensure that we capture all of that in the round, and that it is not just the major known knowns that the CMA considers.

The noble Baroness, Lady Kidron, made the point very well: there is a danger that, based on what it knows, the CMA will make assumptions about what it can win, rather than getting under the skin of what is really going on and what is right for the consumer in all this. To get under the skin, the CMA will need a lot of information, so we must ensure that it gets the right information, at the right time, from the right people. The noble Baroness and the noble Lord, Lord Clement-Jones, made the point that, as it is set out at the moment, the incumbents have all the cards. We need transparency of information to rebalance the scales in all this.

I have listened carefully to the Minister’s response. He said that the DMU is required to consult publicly before decisions are implemented, but that is probably too late to influence the outcome. By the time that it is consulting publicly, it has already made its mind up. I am not sure that that is the right point at which that major flow of new information needs to take place. The Minister argued that the burden of sending notices to thousands of parties, et cetera, would outweigh the benefit. That is exactly the information that it needs, and the noble Baroness, Lady Harding, made that point. If we have to bite that bullet, let us bite that bullet. If that is what it takes to rebalance the scales then we need to do that.

I fully admit that we might not have got the wording right to achieve that, but I think the principle is right and I am prepared to dig in on that principle. I hope we can have a further discussion on it. I think we know what we want to do. Nobody wants the SMS companies to flood the CMA with so much information that everybody drowns. We have to get it right so that it gets the right information. I do not think we have the balance right at this time, but let us talk about it some more. In the meantime, I beg leave to withdraw my amendment.

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We look forward to the Minister’s response and hope we will hear from him that he has some sympathy with the points that have been raised today and that we can work with him to improve the Bill on these issues.

[Viscount Camrose (Con)]

I start by thanking all noble Lords who spoke so compellingly. It was a great pleasure to listen. I must say my head is slightly spinning, it is such an eclectic group of amendments, but I will do my best to respond properly to all the points raised.

I start with the discussion on the imposition and use of conduct requirements by the regulator. I thank my noble friend Lord Holmes of Richmond for tabling Amendment 15, which would remove the conduct requirement objectives—fair dealing, open choices and trust and transparency—and instead allow the CMA to impose conduct requirements for any purpose, so long as they fall within the list of permitted types. I intend to cover only the impacts of this amendment on the conduct requirement objectives, not its impacts on the proportionality requirement, as we shall be turning to that in detail later. Both the objectives and the permitted types of conduct requirement reflect extensive and expert evidence and analysis on types of harms in digital markets. These have been set out in legislation to provide clarity up front about the types of rules that designated firms could be subject to. It is right that the powers given to the CMA have clear and defined limits, and the objectives provide an appropriate framework for them to operate within. The Government feel that this clarity of objective is essential to the success of the regime, ensuring that it remains targeted and proportionate.

Amendment 19, tabled by the noble Lord, Lord Clement-Jones, would allow the CMA to gather and publish information relating to commercial deals. I sympathise with the sentiment behind his amendment and believe this regime will provide a crucial means to address the imbalance that exists between the most powerful tech firms and other parties. The CMA will already, as part of investigatory requirements, conduct requirements and the final offer mechanism process, be able to gather relevant information about payment terms and deals, and require SMS firms to share information with third parties. The CMA will also, where appropriate, be able to publish aggregated and anonymised information. As such, we do not believe that this amendment provides the CMA with any necessary additional powers.

Amendment 30 proposes that conduct requirements on unfair use of data be amended to allow the CMA to also prevent SMS firms using copyright material without permission. I absolutely agree, needless to say, with the sentiment that properly functioning, competitive markets that respect intellectual property rights have a vital role to play in stimulating growth and encouraging innovation.

I assure the noble Lord, Lord Clement-Jones, that the CMA is well equipped to address competition issues in a range of contexts, including where these issues intersect with intellectual property rights. When making interventions, the CMA will consider a range of factors, which can include the fairness of terms in issues related to copyright, where they are relevant, on a case-by-case basis. Existing permitted types of conduct requirements already allow the CMA to set requirements for unfair and unreasonable terms, which can include payment terms.

[Lord Clement-Jones (LD)]

I am sorry to interrupt the Minister but that is very general. We have heard around the Room that people are really concerned. As we go forward, so many areas of intellectual property—the ingestion of copyright material, the issues with synthesisation of performances—are being affected by artificial intelligence. The kind of language the Minister is using sounds far too generic. It needs to be much more focused if we are to be convinced that the CMA really has a role in all of this. He is the Minister for both AI and IP, so he is right at the apex of this issue; maybe he is right on the point of the whole thing. He has the ability in his ministerial role to start trying to resolve some of these issues. We have the IPO coming up with a code of conduct—

[Lord Clement-Jones (LD)]

This is a long intervention, I agree. I would just ask the Minister to focus on the fact that this is not just any old fairness of terms but something that should be explicitly stated in the Bill.

[Viscount Camrose (Con)]

There is a much broader set of work looking at issues of copyright, intellectual property and artificial intelligence together—a hugely complex piece of work with many stakeholders pulling in a range of different directions. The goal of this Bill is to address that in so far as it affects competitive markets. We may debate this, but the design of the Bill is such that, in so far as competition is affected by the misuse of intellectual property or intellectual property infringements, the CMA is empowered to intervene to drive greater competition or address issues that limit competition. It is targeted only at addressing competitive issues but, in so far as they affect competitive issues, it is empowered to address IP infringement issues, as set out here.

Existing permitted types of conduct requirements already allow the CMA to set requirements for unfair and unreasonable terms, which can include payment terms. The Government are committed to our world-leading IP regime. Copyright legislation already provides a robust framework for rights holders to enforce against copyright infringement. We will take a balanced approach to the use of AI across the press sector and departments across government are working together closely to consider the impact of AI, ensuring that AI innovators and our world-leading creators can continue to flourish.

I turn to Amendments 26, 27 and 25. I thank noble Lords for their thoughtful and considered contributions on these amendments. Amendments 26 and 27 are intended to expand the ability of the CMA to intervene outside the designated digital activity. Amendment 25 also seeks to expand this power specifically in relation to self-preferencing behaviour that takes place outside the designated activity. We agree with noble Lords that it is crucial that the CMA can deal with anti-competitive behaviour outside the designated activity where appropriate. My noble friend Lord Offord and I have had a number of representations giving further examples of this kind of behaviour and we are committed to finding the right means of addressing it.

Our current drafting has sought to balance the need for proportionate intervention with clear regulatory perimeters. The regime is designed to address the issues that result from strategic market status and is therefore designed to address competition issues specifically in activities where competition concerns have already been identified. This recognises that SMS firms are likely to be active in a wide range of activities and will face healthy competition from other firms in many of them.

I assure noble Lords that the power to prevent self-preferencing is already sufficiently broad. It can apply where an SMS firm is using its power in the designated activity inappropriately to treat its own products more favourably, but without a need for those products to be linked to the designated activity. In addition, the existing power outlined in Clause 20(3)(c) to intervene in non-designated activities, which noble Lords are referring to as the whack-a-mole principle, has been carefully calibrated. It is available only where the conduct has a material impact on the strategic market status in respect of the designated activity.

The same conduct in respect of a different activity may not have the same impact on the market. It will not always be anti-competitive and may instead form a part of normal business practice in a more contestable market. The DMU will therefore take a targeted, evidence-based approach when considering intervention. The DMU can intervene via conduct requirements outside the designated activity to prevent leveraging into the designated activity or via PCIs to address an adverse effect on competition in a designated activity. Therefore, the Government’s view is that broadening the CMA’s powers would risk over-intervention, creating uncertainty for businesses and risks to innovation and investment.

[Baroness Jones of Whitchurch (Lab)]

Before the Minister moves on, do I understand from the beginning of that contribution that he is still looking at the wording—in other words, that he not wedded to the wording and is there some scope for either the amendment from the noble Lord, Lord Vaizey, or our amendment, or to work with him to see if we can achieve what we are trying to achieve through this or other means?

[Viscount Camrose (Con)]

Throughout this group, I am convinced that we are trying to achieve the same thing. I remain concerned that we have to design safeguards against regulatory overreach to enter into markets that are currently healthy, but beyond that I am very happy to explore the right form of wording or design that achieves the end that all sides are keen to establish.

Amendment 24 is intended to clarify the meaning of information being accessible. I thank my noble friend Lord Holmes for the amendment, and for the rigour and passion he demonstrated when making his points. I agree that the question of online accessibility is of great importance. All kinds of technology should be for everyone. I can provide assurance that the CMA can already consider the concept of accessibility in the broadest sense, and in a way that includes—but is not limited to—compatibility with assistive technology. I agree that it is crucial that all members of our society have the right to accessible information. The Bill as drafted provides for this and can encompass, for example, a requirement to have terms and conditions that are easily accessible on a website, in easy-to-understand language, and compatible with assistive technology.

Amendments 32 and 22 would remove the power that enables the Secretary of State to update the list of permitted types of conduct requirement and replace it with an additional open-ended type of conduct requirement. I thank noble Lords for their amendments and agree that digital markets are fast-moving and unpredictable. Future innovations are hard to foresee and will likely give rise to a range of new behaviours and ensuing harms. Although the Government have endeavoured to make the list of permitted types of conduct requirements fully comprehensive, it could become out of date in the future. The noble Viscount’s proposal to add an open-ended type of conduct requirement would, we feel, grant too wide a power to the CMA and undermine the safeguards we have set by creating a clear framework for the CMA to operate within.

It is right that both government and Parliament have appropriate oversight and scrutiny over the significant powers being granted to the CMA. Therefore, the delegated power to allow the Secretary of State, subject to parliamentary scrutiny, to update the legislation provides the most appropriate way to future-proof the regime, ensuring that it can intervene effectively and promptly on the right issues. In addition, I note that the Delegated Powers and Regulatory Reform Committee has not queried the need for this power.

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[Lord Clement-Jones (LD)]

My Lords, we are getting on in the Committee, but I was really interested in the Minister’s interpretation point, because quite a lot hangs on that. The noble Lord, Lord Lansley, illustrated extremely well the difference between promoting and not restricting, so to speak—that is a crucial distinction. The Minister prayed in aid Clause 20(2) versus (3), but could he write on that in due course?

[Viscount Camrose (Con)]

I am very happy to do so. As I say, anything that ensures the clarity of the Bill is valuable and important.

On the reference to international technical standards, these can be an important tool in supporting good regulatory outcomes, and we expect the CMA to pay due regard to these, along with other relevant considerations.

Finally, Amendment 34 would place a duty on the DMU to consider opening a PCI investigation when reviewing the effectiveness of, and an SMS firm’s compliance with, conduct requirements. Conduct requirements are tailored rules to manage the effects of an SMS firm’s market power and prevent harms before they occur. PCIs will tackle the sources of SMS firms’ market power, which can arise from both structural features of a market and SMS firms’ conduct. These are different but complementary tools, and the CMA will need to carefully decide when it is appropriate to use each tool, depending on the specific competition issue at hand. This amendment risks narrowing and reframing PCIs as a tool of last resort for non-compliance with conduct requirements.

I hope noble Lords feel assured that the issues they have raised have been carefully considered and reflected throughout the Bill, and I hope that the noble Lord will be able to withdraw his amendment.