Grand Committee

Monday 7th December 2015 Grand Committee

Monday, 7 December 2015.

Arrangement of Business

Monday 7th December 2015 Grand Committee

Announcement

15:30

[The Deputy Chairman of Committees (Lord Brougham and Vaux) (Con)]

My Lords, if there is a Division in the Chamber, the Committee will adjourn for 10 minutes.

Non-Domestic Rating (Levy and Safety Net) (Amendment) (No. 2) Regulations 2015

Monday 7th December 2015 Grand Committee

Motion to Consider

15:30

Moved by

[Baroness Williams of Trafford]

That the Grand Committee do consider the Non-Domestic Rating (Levy and Safety Net) (Amendment) (No. 2) Regulations 2015.

Relevant document: 8th Report from the Joint Committee on Statutory Instruments

[The Parliamentary Under-Secretary of State, Department for Communities and Local Government (Baroness Williams of Trafford) (Con)]

My Lords, beginning in 2013-14, this Government and their predecessors have brought major reform to the way local authorities can support local growth. The previous system meant that councils saw no benefit from additional business rates income in their area, even when they introduced policies to support businesses and encourage new investment. To correct this, from 1 April 2013, we acted to allow local government to retain 50% of its business rates. This means that those authorities which see it as their role to support business are rewarded with a share of the additional business rates income that growth creates.

Despite being only two years into our reforms, their success is already apparent. The latest statistics on business rates show that 63% of authorities have seen additional business rates income as a result of the local retention scheme in 2014-15 and, based on their own estimates, this figure is set to rise to over 90% in 2015-16. Furthermore, the scheme is benefiting a wide range of authorities with different service pressures, including those with high levels of deprivation, and both rural and coastal authorities.

Earlier in the year, the Chancellor announced measures to strengthen the incentive in Manchester and Cambridge by allowing those councils to retain 100% of the growth in business rates in their area, and by the end of this Parliament local government will retain 100% of its local taxes, including all £26 billion of its business rates.

The levy and safety net regulations contained in the statutory instrument include some technical amendments to the operation of the current rates retention scheme. They ensure that the payments made between local government, central government and precepting authorities are all correct and can be reconciled accurately. The safety net is designed to protect those authorities that have seen their rates income drop by more than 7.5% below their baseline funding level. It is funded by a levy on other authorities that have seen business rates growth in that year.

However, the calculation is not straightforward. It needs to include a series of adjustments to ensure that authorities are not compensated twice for giving particular reliefs—once through the compensation grants to which they are entitled outside the rates retention scheme, and then again through safety net payments inside the scheme.

Technically, these regulations do this by ensuring that authorities are required to add back the cost of the doubling of small business rates relief. This means that half the cost of the relief granted to ratepayers in 2015-16 will not be included in the calculation of their safety net. Nor will adjustments to certain reliefs made in 2015-16 that are in respect of previous years dating back to the introduction of the scheme. In both cases, authorities will be fully compensated for the relief they have given outside the rates retention scheme through compensation grants, so that they will financially be no worse off.

These are, by necessity, complex technical amendments, but they avoid double counting certain reliefs and ensure that authorities cannot be compensated twice. I can assure the Committee that all these technical changes have been agreed with local government officers on a working group set up to advise on the detailed implementation of the scheme, as well as with the Local Government Association and the Chartered Institute of Public Finance and Accountancy. I commend these regulations to the Committee and I beg to move.

[Lord Beecham (Lab)]

My Lords, I have memories— I cannot necessarily describe them as fond—of dealing with business rates during my period as leader of Newcastle City Council, which ran to some 17 years, five years of which saw me as chairman of the finance committee. It is revisiting old, if somewhat modified territory for me to speak to these regulations.

It is perfectly right that, as the Minister said, the scheme has incentivised business development, although perhaps in a somewhat uneven fashion. The redistribution elements of the scheme have, to a degree, helped to modify this and, indeed, in the ward I represent—and to which the Minister today paid a visit—there is evidence of that early collaboration. To the south of the housing development there is a building that now houses a large engineering company. It formerly housed British Airways and, before that, Vickers. With the Urban Development Corporation in the 1980s, the local authority and the Government were, working together, able to contribute significantly to the development of that employment.

There are, however, some questions I would like to ask, which perhaps go slightly beyond the remit of the regulations. The first relates to outstanding rating appeals. The noble Baroness will not, I suspect, be in a position to update me on this issue today but perhaps she could do so in the future because this has been a considerable problem for local authorities up and down the country. The Government, having collected all the money from business ratepayers, do not expect, in the event of successful appeals, to refund it all. That is something which ought to be addressed. Equally—although I am not up to date with the position—it is said that the time for these appeals is being reduced, but in many cases they still go back some years, which is a considerable worry for local authorities and has an impact of what they can do.

The Minister said that there has been consultation and I assume that there were no reservations on the part of those consulted; perhaps she would confirm that. However, the landscape is changing in a very material respect in many parts of the country, including the parts from which the Minister and I hail. Under the devolution programme, we will have a different structure with economic and related functions carried out by a new authority, which, if the Government have their way, will be headed by an elected mayor. In any event, the new authority will, by definition, extend across a much wider area than any individual local authority. I wonder what the impact of the current scheme will be in those circumstances, even as modified.

The Explanatory Memorandum refers to the position of precepting authorities. It is unclear whether, in the new structure, what I will call a “combined authority”—with or without an elected mayor—is to be regarded as a precepting authority. Of course, if a single body is not levying the business rate, there will be differential collections, relative to population, between the constituent authorities within the new devolved structure. Obviously my thoughts have been anticipated; I congratulate the Minister on her advisory team. The question then arises of who is to determine the business rate. Will that still be at the level of the individual local authority or will it be at the higher level? If it is at the higher level, what is to prevent there being a differential application of the business rate across the constituent authorities? We might be entering an area of some complexity here. I do not blame the noble Baroness if she cannot deal with that today, but perhaps I could hear from her in due course.

The other issue I would like to ask about is the enterprise zones because presently these are in some but not all the authorities in a combined authority area. Again, the question arises of whether, for the Government’s purposes, the proceeds of business rates from this category of property are to be regarded as belonging to the individual authority or, in the event of there being a combined authority or under the new devolution proposals, it is to be regarded as belonging to the whole authority. In any event, how long is it anticipated that the enterprise zone relief, if I might call it that, will continue? Is it indefinite or is there a timescale for that?

My only other reservation is the provision in paragraph 10 of the Explanatory Memorandum, which says:

“An impact assessment has not been produced for this instrument because it amends an existing local tax regime. Publication of a full impact assessment is not necessary for such legislation”.

I do not think that is a very good procedure. If there is to be a change, there should be an impact assessment, whether or not one is formally, legally required, particularly given the changing landscape to which I have referred. This might have pre-empted some of the questions I feel obliged to raise today. I hope, in future, that an existing regime being amended will not be justification for not providing an impact assessment, given the variation of circumstances between individual authorities.

Having said that, I am not minded to resist the regulations. I look forward to hearing further from the Minister in due course. In the event that she should revisit Newcastle, I would be very glad to show her round my ward and, indeed, the city.

[Baroness Williams of Trafford]

I thank the noble Lord for his remarks. I look forward to being shown round his ward, perhaps when phases 2, 3 or even 4 of The Rise are completed.

The noble Lord first asked whether there were any reservations during the consultation process. There were none that I know of. If I am wrong, I will correct that statement but, as far as I know, there were none.

The noble Lord also asked whether the reforms would increase the level of risk in terms of appeals for local authorities. We are looking at the level of risk and reward in the new system and will work with the sector over the coming months in developing the design of the new system. As for the appeals system, I think there is an acceptance that the current system is not working for businesses, hence the point he made. Too many appeals are held up for far too long in the system, creating cost and uncertainty for businesses. Change is definitely what is needed and that is what we are attempting to do. We need a much more structured, rigorous and transparent system. Ratepayers will set out their issues fully and clearly early in the process, so that they can be responded to quickly and cases can be resolved far more quickly than at present.

The noble Lord also made the point about changes in local authorities’ needs. Again, the department will be consulting widely and openly to design a system that provides local authorities with the funding they need to deliver local services and nobody should lose out under the new scheme.

Perhaps I might write to the noble Lord about impact. Yes, the Explanatory Memorandum says that there was no legal requirement. Perhaps I could expand on that point. I will look into it.

The noble Lord asked about enterprise zones. Currently, the income from enterprise zones is guaranteed for 25 years. We will need to consider how enterprise zones fit into the system, as he pointed out. Once we move to 100% business rates retention, we will consult with businesses and local government on the other aspects. I think I have answered everything he asked.

Motion agreed.

Equipment Interference (Code of Practice) Order 2015

Monday 7th December 2015 Grand Committee

Motion to Consider

15:45

Moved by

[Lord Bates]

That the Grand Committee do consider the Equipment Interference (Code of Practice) Order 2015.

Relevant documents: 14th Report from the Secondary Legislation Scrutiny Committee, 11th Report from the Joint Committee on Statutory Instruments (Special attention drawn to the instrument)

[The Minister of State, Home Office (Lord Bates) (Con)]

My Lords, with the leave of the Committee I will also speak to the Regulation of Investigatory Powers (Interception of Communications: Code of Practice) Order 2015.

Members will know that on 4 November 2015 the Government published draft legislation relating to the security, intelligence and law enforcement agencies’ use of investigatory powers for pre-legislative scrutiny by a Joint Committee of Parliament. The intention is for the Bill to be introduced early in 2016 and enacted before the sunset provision in the Data Retention and Investigatory Powers Act 2014 takes effect on 31 December 2016. In the mean time, the Regulation of Investigatory Powers Act 2000 and the codes of practice made under it provide the legal basis for the essential investigatory techniques necessary to acquire the communications of those who mean us harm. Today we debate two codes of practice made under the existing legislation: an update of the existing code of practice on the interception of communications and a new code on equipment interference.

Interception is a vital tool that helps law enforcement and intelligence agencies to prevent and detect serious or organised crime and protect national security. It is also among the most intrusive powers available to law enforcement and the security agencies. For that reason, it is subject to strict safeguards in the Regulation of Investigatory Powers Act 2000 and the code made under it. Interception warrants are issued and renewed by the Secretary of State for a small number of agencies and for a strictly limited range of purposes. RIPA also provides for independent oversight by the Interception of Communications Commissioner and an impartial route of redress through the Investigatory Powers Tribunal.

The interception of communications code of practice first came into force in 2002 and needs updating. There is now far more that can be said about the safeguards that apply to security and law enforcement agencies’ exercise of interception powers and the revised version of the code includes that extra detail. On what is new in the code of practice, the safeguards described in these codes are not new in themselves. In respect of the interception code, the law enforcement and intelligence agencies have always had robust internal arrangements, overseen by the Interception of Communications Commissioner. The draft code provides more detail about those arrangements.

First, it provides additional information on the safeguards that exist for the interception and handling of external communications under Section 8(4) of RIPA—that is, the ability to undertake bulk interception. Secondly, it sets out further information on the protections afforded to legally privileged material and other confidential material. To give an example, the code requires the Secretary of State personally to consider the likelihood that privileged material will be intercepted when determining whether it is necessary and proportionate to grant a warrant. It also requires additional internal safeguards to be applied in cases where legally privileged material is intercepted, including that where such material is retained it must be reported to the independent Interception of Communications Commissioner. Thirdly, it includes minor changes to reflect developments in law and practice since the code first came into force in 2002. For example, it reflects regulations introduced in 2011 which amended RIPA to create the power for the interception commissioner to impose a fine for certain kinds of unlawful interception. Much of the new material on the safeguards that apply to the exercise of interception powers reflects information disclosed during legal proceedings in the Investigatory Powers Tribunal, and it is right that this information is included in codes of practice so that it easy for members of the public to access it.

The equipment interference code of practice is new. Equipment interference is a set of techniques used to obtain a variety of data from equipment. This includes traditional computers or computer-like devices such as tablets, smartphones, cables, wires and static storage devices. Equipment interference can be carried out either remotely or by physically interacting with equipment. It allows the security and intelligence agencies in particular to keep pace with terrorists and serious criminals, who increasingly use sophisticated techniques to communicate covertly and evade detection. Equipment interference has been instrumental in disrupting credible threats to life, including those against UK citizens. MI5 has relied on this capability in the overwhelming majority of high-priority investigations it has undertaken over the past 12 months.

The Security Service Act 1989 and the Intelligence Services Act 1994 provide the legislative basis for the security and intelligence agencies to interfere with computers and communications devices. Warrants may be issued by the Secretary of State only when he or she considers the activities to be authorised are necessary and proportionate. The use of the powers is subject to independent oversight by the Intelligence Services Commissioner. Prior to the draft code, which we are debating today, equipment interference powers have not had their own bespoke code of practice.

The code does not confer new powers, but simply makes public the robust internal safeguards that the intelligence agencies already apply. It brings greater transparency to the robust processes that the agencies adhere to when interfering with computer equipment to prevent terrorism, disrupt serious crime and identify and stop others who seek to harm us and our country. For the first time, this code of practice publicly sets out the stringent safeguards that the intelligence agencies apply to their use of equipment interference. This includes strict rules on how data acquired through equipment interference must be handled, how they must be securely and safely stored, and how they must be destroyed when it is no longer necessary or proportionate to hold them. The code also explains the consideration of necessity and proportionality that the Secretary of State must take before authorising any use of equipment interference. That ensures that this vital capability may be used only when the scope of the interference has been carefully considered and compared to the potential benefits of the operation. Furthermore, the code explains that equipment interference should not be considered a proportionate power if other less intrusive methods of acquiring the same data are possible.

Akin to the interception code of practice, this document also provides reassurance that the acquisition of legally privileged and confidential information is subject to even greater oversight and safeguards. The code sets out a series of tests that must be applied before any authorisation is granted and then the subsequent handling arrangements, should confidential material be acquired.

Finally, the code also provides information regarding the use of equipment interference targeted at equipment outside the British Isles. This section ensures that the public have a comprehensive guide to the use of equipment interference powers by the intelligence agencies and the range of safeguards and oversight that applies to such important activity.

The codes of practice contain no new powers; instead, they reflect the current safeguards applied by the relevant agencies. The purpose of the codes is to make more information publicly available about the stringent safeguards that the agencies apply in their use of investigatory powers. They ensure that the powers can be used only when it is necessary and proportionate and when it will help keep us safe from harm. I commend the orders to the House.

[Lord Paddick (LD)]

My Lords, I must first say that I am not an expert in this area. Our expert on this matter is on the Joint scrutiny Committee, which is about to sit. That is why he is not here. For this to come up when the people considering the draft investigatory powers Bill are elsewhere and engaged in that business is rather an unfortunate clash of tabling.

We are very concerned about interception, but that is and has been a widely known and accepted practice over the years, although the nature of that interception has obviously changed as means of communication have changed. It tends to be specific and targeted at particular individuals who, as the Minister said, intend to cause us harm or who are involved in serious crime. The code of practice on interception, which, as the Minister said, is an updated code of practice rather than a completely new one, is not the major area of concern for us.

We are very concerned about the use of equipment interference and the fact that very little—if any—debate has taken place, in Parliament or outside, about the use of these powers. While the Minister points to legislation that the security services rely on to carry out equipment interference, explicitly setting out what that means was not part of the discussion when those pieces of legislation were presented to Parliament. While what interception of communications involves is reasonably straightforward, equipment interference potentially means gaining complete access to a computer, for example. Speaking for myself, my life is on my computer. Therefore, if there were intrusion through equipment interference on to my computer, practically everything about me would be learnt by the security services, including websites I had visited and passwords that would give access to, for example, online banking. It is a much more intrusive power for the police and the security services than interception.

Hacking into computers and mobile phones was made an offence in the Computer Misuse Act 1990. My understanding is that a clause introduced in the then Serious Crime Bill 2015 exempted the police and the security services from that provision. Does the Minister accept that engagement in equipment interference by the police and the security services between 1990 and 2015 must therefore have been illegal because it was an offence under the Computer Misuse Act 1990, the exemption not coming in until 2015?

As far as I can see, the equipment interference code of practice relates only to the security services. There is no mention of equipment interference being used by the police. Again, I am not an expert on this, but it would appear that the police have to rely on legislation that allows them to interfere with property. That was intended for planting bugs in homes or offices—that sort of thing—rather than interfering with computers. Will the Minister say what the code of practice is for police use of equipment interference, as opposed to that of the security services?

There is also serious concern about general warrants being issued for equipment interference, rather than for named individuals. Indeed, the Intelligence Services Commissioner’s latest report expressed concern that GCHQ was using thematic warrants for equipment interference. How many thematic warrants have been issued?

I have another question for the Minister: why are the Government bringing forward these orders now, when the primary legislation on which they are based is currently being completely reviewed? As he said, the Joint Committee on the Draft Investigatory Powers Bill is currently looking at the primary legislation, so why now?

Among other things, the Government have produced HM Government Transparency Report 2015: Disruptive and Investigatory Powers. I cannot find any reference in it to equipment interference. As the Government are being transparent about these things, can the Minister assist me with where we can learn how much equipment interference has been going on?

16:00

[Lord Jones (Lab)]

My Lords, I support the proposals, which were conscientiously and effectively explained by the Minister. I recollect him in another guise in another place, where he practised, to a degree, the black arts and would have been pleased by a depleted Committee on a Monday when many Members are travelling.

I rise to support the measures and to emphasise a truth with regard to measures such as these. The existence of secret services in a parliamentary democracy always requires debate and scrutiny, which is why we are in Committee this afternoon. We debate and argue, at length, sometimes, as is our duty. We need our secret services. It was possible for our sovereign to attend the 2012 Olympic Games in total safety because of the successful, thorough and patriotic work of our secret services and the allied services alongside them. They always aim to prevent terrorism and to fight it by all means. Praise should go to the then director of MI5, Jonathan Evans—now the noble Lord, Lord Evans of Weardale—and the many people in other services alongside him in that successful approach to the 2012 Olympic Games.

To give noble Lords a little history, I had the honour of chairing the Standing Committee in another place that gave legitimacy and birth to the Intelligence and Security Committee, which is referred to in the measures before us. It was necessary to bring the security services into the public domain because of a hearing in the Strasbourg court. My constituent, when I was in another place, required the legislation. That case brought forward the legislation that brought into being the IS Committee. Later, having taken the chair for that legislation, the late John Smith nominated me to join the Intelligence and Security Committee as a founder member. For something like 10 years I found myself travelling to Washington, Ottawa and European capitals as a member of that committee. As a result of those experiences, I see the relevance of what the Minister has put to this Committee, and I offer it my modest support.

Noble Lords may know that the witnesses at that IS Committee were former Prime Ministers, former Foreign Secretaries, even the onetime archivist of the KGB, many Permanent Secretaries and directors of the secret services. The committee I served on was very ably chaired by the noble Lord, Lord King, who in another place was Tom King MP. Bringing these matters up to date, I note that there was a previous Joint Committee of both Houses that considered legislation not dissimilar from some of the measures referred to by the Minister. I served on that Joint Committee and I noted the evidence given, firmly but politely, by the Home Secretary.

I emphasise that the orders before us are very necessary but they will need to be stringently and carefully examined and debated from time to time, and that is the process in which we are engaged today. I heard the Minister talking about stringent conditions. With regard to the investigatory powers, members of the Joint Committee were able to meet the Commissioner of the Metropolitan Police, the then assistant commissioner, Cressida Dick, and the considerable, able and conscientious team working under their leadership at the offices on the other side of the Thames. I have no doubt whatever that the conditions are stringent and it was right that the Minister made that point.

[Lord Kennedy of Southwark (Lab)]

My Lords, the orders before us today are important. They are tools to obtain evidence of suspected wrongdoing. I can tell the noble Lord that the Opposition support both orders, although we have some concerns. There has to be a balance between the scope of the powers exercised by the state and the rights of individuals who are subject to the exercise of those powers.

The noble Lord will, I am sure, be aware of the concerns raised by the Bar Council in relation to legal privilege. It would be helpful if he could say something about the safeguards against interference with privileged communications and, in particular, how the equipment interference order could result in the acquisition of matters subject to legal privilege, as well as what steps are being taken to mitigate such a risk. What I am looking for today from the noble Lord, Lord Bates, is more reassurance that the balance has been properly fixed. Clearly, technology is moving very fast and I am supportive of the Government ensuring, on the one hand, that the powers are appropriate and up to date and, on the other, that the procedures are properly codified and people’s rights are respected. I also understand that the orders are likely to be in force for only a short time, as of course we will be having the new Bill, which has to be on the statute book by the end of next year.

It would be helpful if the noble Lord could explain to the Committee a bit more about the safeguards that are in place, particularly in relation to the interception of communications code. Can he also say a bit more about the equipment interference code? As he said, it confers no new powers but simply sets out those powers and the safeguards that are in place. The noble Lord, Lord Paddick, suggests that new powers are being conferred, so the comments of the two noble Lords contrast somewhat. Therefore, we need to be clear about whether there are new powers in this code. If the noble Lord says that there are not, can he set out for the Committee why he believes that he is correct and the noble Lord, Lord Paddick, is wrong in that respect? Having said that, the Opposition support the orders.

[Lord Bates]

First, scheduling business is a matter entirely in the inscrutable hands of the Whips’ Office and usual channels. The Home Office has no influence on that. I take it that the noble Lord, Lord Paddick, was referring to the noble Lord, Lord Strasburger, who plays a very important role in the pre-legislative scrutiny of the investigatory powers Bill at present. Of course, we appreciate his expertise in this area. I am sure he will bring that fully to bear when the Bill comes before your Lordships’ House later. Let me try to deal with some of the points that the noble Lord, Lord Paddick, raised.

One was: why choose to do this now when we have legislation going through? I alluded to part of the reason in my opening speech, relating to current or recent cases that have gone through the Investigatory Powers Tribunal service. There is always a balance to be struck there. The legislation proposed is just that: it is proposed—it is not on the statute book. We need to make sure that the powers are in place appropriately and that the code is kept up to date for the purposes of activities that happen in the interim.

That is an important element as well, which I would convey through the noble Lord, Lord Paddick, back to the noble Lord, Lord Strasburger. Given the noble Lord’s strong interest in these areas, I assume he would welcome these codes of practice being kept up to date in the light of case law going through the tribunal and, in particular, in relation to equipment interference. Effectively, there are now 18 pages of guidance that were previously not in the public domain. Those can now be scrutinised and reviewed. They are there to be reviewed by the committee currently sitting, should it so wish. All the way through this process with investigatory powers legislation, we are trying to make sure, at the same time, that the security services have the tools they need to do their job and that we keep the public on our side in feeling that the powers exercised—which are intrusive in certain cases—are necessary and proportionate.

I pay tribute to the work of the noble Lord, Lord Jones, on the Intelligence and Security Committee in the other place. He knows all too well about the work going on. In that context, he will be aware that the powers we are talking about are not notional or academic. Elements of investigatory powers are deployed in response to the majority of serious and organised crime, such as the seven terrorist acts over the past year prevented by the security services. I certainly join the noble Lord in paying tribute to the work those services do to keep us safe.

I shall deal with some of the other issues raised. I will come back to the point raised by the noble Lord, Lord Kennedy, that in a sense our argument is that there is nothing new here and, at the same time, we are introducing some new measures. I will be able to tell him what is new in this.

The noble Lord, Lord Paddick, asked if, before now, it was an offence under the Computer Misuse Act to interfere with equipment. The answer is no. The powers to undertake equipment interference are contained in the Intelligence Services Act 1994 and the Police Act 1997, so we do not believe that at any point the police or security services have operated outside their powers. The noble Lord asked about the number of thematic equipment interference warrants that have been requested. That information is not collected centrally at present. Of course, we also have as part of the investigatory powers a quite sophisticated system of commissioners who oversee these processes, to whom those who feel that their rights have been trespassed on wrongly can go to seek redress—either directly through the commissioner or through the tribunal. Of course, that happens.

16:15

The noble Lord asked whether the police use these powers, too, and why the code does not apply to them. The police use equipment interference alongside other intelligence-gathering and surveillance techniques necessary to investigate serious crime. Activities are currently carried out under property interference authorisations under Part III of the Police Act 1997, alongside other authorisations as appropriate. The code of practice for covert surveillance and property interference refers to these powers for law enforcement use. The use of search warrants and production orders is well understood by Parliament and the public, and these powers are subject to strict safeguards and robust oversight. The investigatory powers Bill referred to both intelligence agencies’ and law enforcement agencies’ use of these powers.

As for whether the power on equipment interference is a new one that has not been debated by Parliament, no, we believe it is an existing power. I have covered that point before. It is currently authorised under Sections 5 and 7 of the Intelligence Services Act 1994 and can be used only when it is necessary and proportionate so to do.

As I said on opening, the safeguards described in the codes are not in themselves new. In respect of the interception code, the law enforcement and intelligence agencies have always had robust internal arrangements, as the noble Lord, Lord Jones, said, overseen by the Interception of Communications Commissioner. The draft code provides more detail about those arrangements. First, it provides additional information on the safeguards that exist for the interception and handling of external communications under Section 8(4) of RIPA, particularly the ability to undertake bulk interceptions. Secondly, it sets out further information on the protections afforded to legally privileged material. Both elements were key concerns when we previously debated the matter in your Lordships’ House. With those reassurances, I hope that the Committee feels able to accept these orders.

Motion agreed.

Regulation of Investigatory Powers (Interception of Communications: Code of Practice) Order 2015

Monday 7th December 2015 Grand Committee

Motion to Consider

16:17

Moved by

[Lord Bates]

That the Grand Committee do consider the Regulation of Investigatory Powers (Interception of Communications: Code of Practice) Order 2015.

Relevant documents: 14th Report from the Secondary Legislation Scrutiny Committee, 11th Report from the Joint Committee on Statutory Instruments (Special attention drawn to the instrument)

Motion agreed.

Police and Criminal Evidence Act 1984 (Codes of Practice) (Revision of Code E) Order 2015

Monday 7th December 2015 Grand Committee

Motion to Consider

16:17

Moved by

[Lord Bates]

That the Grand Committee do consider the Police and Criminal Evidence Act 1984 (Codes of Practice) (Revision of Code E) Order 2015.

Relevant documents: 9th Report from the Joint Committee on Statutory Instruments

[The Minister of State, Home Office (Lord Bates) (Con)]

My Lords, this statutory instrument brings into effect a revised Code of Practice E, issued under the Police and Criminal Evidence Act 1984, or PACE. It is laid under Section 67(7) of PACE and governs the procedures for recording interviews under caution of individuals suspected of committing an indictable offence.

Police work is a difficult balancing act. Its main purpose is to prevent, detect and investigate crime; however, the powers needed for this—for example, to stop and search and arrest—require appropriate safeguards to protect the citizen. The Police and Criminal Evidence Act 1984 and its codes of practice are designed to strike this difficult balance between the need for police to have powers to tackle crime on the one hand with the need for safeguards for suspects and members of the public on the other. It is to maintain this balance that these changes are being proposed.

Code E has been revised explicitly to exempt the audio recording of voluntary interviews under caution that are conducted outside a custody suite, referred to as “on the street” interviews, for four specific offence types: possession for personal use of cannabis or khat, low-level theft, and low-level criminal damage. These revisions support the Government’s commitment to put in place necessary protections for members of the public while ensuring that the police have flexibility to deal with low-level offending proportionately on the spot by way of an out-of-court disposal, rather than in a police station in the police custody context. I make it clear to noble Lords that the Government intend to maintain the critical safeguard of a written record and the revised code strictly prescribes the circumstances in which this exemption applies.

PACE Code E was previously revised in October 2013. Those revisions substantially extended the requirement on the police to audio record interviews for indictable offences so that it also applied to suspects who attended the interview voluntarily, as opposed to being under arrest, and to interviews that took place outside a police station. Prior to 2013, the requirement to audio record interviews under caution was confined only to interviews for indictable offences where the suspect had been arrested and which took place at police stations.

The 2013 extension of Code E was done to complement and support substantial revisions in 2012 to other PACE codes, namely Code C, which concerns the detention of individuals in police custody, and Code G, which concerns arrest. Combined, the purpose of these revisions was to promote the wider use of voluntary interviews, particularly for less serious offences, but to ensure that the same safeguards, including the right to free legal advice, applied. However, as a result of the 2013 revisions to Code E, whereby all interviews under caution taking place at a location can be audio recorded, the Government were made aware of situations where the use of out-of-court disposals to dispose of low-level offending swiftly was being undermined. Noble Lords will appreciate that there are certain types of low-level offending that are entirely appropriate to deal with outside of the police station and in the context of an out-of-court disposal.

I will focus on voluntary interviews for four particular offence types: possession of cannabis or khat for personal use; low-level theft; and low-level criminal damage. Given that these are regarded as high-volume, low-level offences, it is right that the police have the ability to deal with them swiftly and the Government do what they can to maintain this. However, the requirement to audio record these voluntary interviews impeded that ability. Combined, there were almost 130,000 of these four offences disposed of by the police by way of an out-of-court disposal between April 2014 and March 2015. The 2013 change of Code E meant that the police had to record on-the-street interviews in every instance. Given the lack of portable audio recording equipment, the recording requirement meant that forces often had to bring suspects into the police stations to comply with this requirement.

These offences are less serious in nature and are common in the sense that the police deal with many of them on a daily basis. While there has been an indictable offence committed under criminal law, the police do not necessarily need to detain the suspect and bring them to the police station. Instead, they can and should deal with these offences quickly and non-bureaucratically on the spot when appropriate to do so.

The offences of drug possession for personal use are dealt with by a cannabis or khat warning for first-time possession offences only. Those of low-value retail theft and criminal damage can be dealt with by a community resolution. These are usually used in instances where the victim does not want the police to take more formal action. They are also often used in cases of young offenders to help them face up to the impact of their behaviour. The Government believe that it is entirely appropriate for such offences to be dealt with in this way, which is the reason for the proposed revision before the Committee. In seeking to exempt voluntary interviews for the offences I have outlined, the Government seek to address an unforeseen consequence of the changes made in 2013.

I point out to the Committee that the police, in their response to the statutory consultation on these revisions, requested a broader exemption that removed the requirement for audio recording of voluntary interviews elsewhere than at a police station for a much wider range of offences. However, in the absence of a firm evidence base, the Government have made it clear that this request would not be supported.

As I have already said, safeguards are central to PACE. It is for this reason that the revision to PACE Code E relates to voluntary interviews for a limited and specified range of offences. Furthermore, the revised code makes it clear that officers are required to make a written record of the interview and to ask the person whether they want to exercise their right to free legal advice before they are questioned. Given the nature of the offences, this approach is considered proportionate and appropriate. Additionally, the circumstances in which the exemption can be used will be limited. For example, where the individual involved is vulnerable and in need of an appropriate adult, the exemption will not apply.

Committee members should be aware that the Government are currently working with the police to identify whether there are other low-level, high-volume indictable offences that it would be appropriate to dispose of on the street and which would thereby require a further exemption to the audio recording requirement. Furthermore, the Government are working with the College of Policing and police forces to examine the possibility of using portable audio recording technology for evidence-gathering, which would include the recording of interviews on the street. This may mean that the need for a written record of an interview under caution can be removed in all cases where offences are disposed of on the street.

For now, the proposed revisions are the right way to strike a balance between the need to safeguard the rights of suspects while supporting the operational flexibility of the police to deal with low-level offending proportionately and swiftly, away from the custody setting. I therefore urge noble Lords to support the revision to PACE Code E and commend the order to the Committee.

[Lord Paddick (LD)]

My Lords, having been a police officer for more than 30 years, I feel qualified to speak on this subject. This is a welcome approach that will cut down on unnecessary bureaucracy. It seems counterproductive that we allow police to dispose of minor offences on the street but PACE, in its previous incarnation, required an audio recording of the interview, which is clearly not practical in many cases—although, with the increasing use of body-worn cameras by police officers, this may become less of a problem.

As for possession of cannabis, having been instrumental in the move towards street disposal of that offence, I cannot help but be supportive. My only concern is about theft offences. This offence involves dishonesty and, therefore, there are implications for the future of the individual. Because the individual is perhaps dealt with informally—it will be a formal disposal but on the street—additional safeguards may be necessary. But again, on low-level criminal damage, I do not have too many concerns. I also appreciate that there are safeguards, for example, in the case of vulnerable people, where an appropriate adult would need to be present and these changes would not apply. Generally, we support these changes.

[Viscount Simon (Lab)]

My Lords, first, would I be right in thinking that the only way one can check the records for a first-time offence is via the police radio? Secondly, on cannabis, how will the police establish whether it is first-time use? Otherwise, I support this order.

[Lord Kennedy of Southwark (Lab)]

My Lords, this order, which the Opposition support, makes important changes by excluding four offences from the code, as referred to by the noble Lord, Lord Bates, in his opening remarks. It will allow officers to deal with the offence at the scene of the crime rather than by bringing people to the station, if the officer deems that to be the correct course of action. Will the noble Lord confirm whether this has been piloted? If so, why have we not waited until we have the results of those pilots? I would be interested to find out about that.

Will the Minister tell us a bit more about why these four offences were selected and which offences were not selected? I know the Minister said there was a review, but it would be interesting to know the thinking on that.

Finally, will the Minister comment on the pilot scheme on body-worn cameras which was referred to by the noble Lord, Lord Paddick? In future, concerns about the lack of a definitive record may be resolved by the record on camera at the scene of the offence. However, we fully support the order.

16:30

[Lord Bates]

On the previous orders we considered in Grand Committee today there was some question about whether the person with the relevant expertise was present, but the noble Lord, Lord Paddick, is here and, with 30 years’ service under his belt, his expertise is beyond doubt. As he was talking, I could see the smile on his face. I recall our exchanges on the Psychoactive Substances Bill. I know that in London he pioneered a low-level police response to low-level crime. However, there were high volumes.

The pilot to which the noble Lord, Lord Kennedy, referred was in relation to body-worn cameras. It is still taking place. As I mentioned in my introductory remarks, that important pilot could revolutionise a lot of community policing. We are talking about 113,000 offences. When I have been out on patrol with the police, situations where there is a need to intervene but where there is no recording equipment require the police officer and others to go back to the custody suite for that process to be undertaken, so there will be a significant saving of police time to focus on serious crimes while not letting up on these points.

The noble Viscount, Lord Simon, went to the heart of it with two succinct questions, to which I shall try to respond. As a distinguished Member of your Lordships’ House, he will have spotted that I am taking a little extra time to make sure that we have the responses, and inspiration has now arrived. The police background check is recorded on the police national computer. If an individual has offended before, there will not be an on-street disclosure. The short answer is that the police national computer will be accessed in the location of the individual who is stopped and that would show whether the individual had been stopped before and whether it was a first offence. If either of those circumstances was not the case, further action of a more formal nature would need to be taken.

On theft and dishonesty, it is important to note that legal advice remains for someone who is accused of theft. Accordingly, a person can obtain advice from a lawyer regarding further information. Some people would regard drug offences as equally serious but both offences are deemed low-level.

The noble Lord, Lord Kennedy, asked why there are only four offences. These four offences cover the highest volume of indictable offences disposed of on the street. Other offences were low-level violence and arson, and we believe they should be dealt with in the custody suite.

The revision of the code was the subject of a formal consultation, as your Lordships would expect, and we got quite a lot of feedback. Quite a vigorous discussion took place. Although the revised code that was produced does not accede to all the representations that were made by the police, as I alluded to, it reaches a point where both parties recognise that this is a significant step forward while we wait and see what happens with further trials that are taking place, particularly with body- worn cameras.

With those answers and reassurances, I commend the regulations to the Committee.

Motion agreed.

Armed Forces (Service Complaints Miscellaneous Provisions) Regulations 2015

Monday 7th December 2015 Grand Committee

Motion to Consider

16:36

Moved by

[Earl Howe]

That the Grand Committee do consider the Armed Forces (Service Complaints Miscellaneous Provisions) Regulations 2015.

Relevant document: 11th Report from the Joint Committee on Statutory Instruments (Special attention drawn to the instrument)

[The Minister of State, Ministry of Defence (Earl Howe) (Con)]

My Lords, my department has laid a single instrument for the Committee’s consideration today. These regulations are required as part of a package of measures to implement a new service complaints process and a Service Complaints Ombudsman for the Armed Forces.

The new legislation is designed to provide a streamlined and more effective internal redress system for our Armed Forces, and new, strengthened external oversight through an ombudsman. It will come into being on 1 January 2016. The new system is provided for in new Section 365B and Part 14A of the Armed Forces Act 2006, as inserted by Sections 1 to 3 of, and the schedule to, the Armed Forces (Service Complaints and Financial Assistance) Act 2015.

This instrument is intended to promote fairness in the new system by preventing conflicts of interest and ensuring that complaints are dealt with by those who have the right experience and knowledge to properly assist the complainant. It also covers procedural matters that provide essential safeguards and aspects of independence for our Armed Forces personnel.

The regulations include four important things, which I shall deal with in turn. First, as for the existing system, we have made rules on who cannot be appointed to deal with a service complaint; for example, because they are implicated in the matters complained about. The second important aspect of the regulations is that we have set out those matters that cannot be raised as a service complaint. This is not a new aspect to the complaints process. These are provided for in the regulations that cover the current system, and have been updated in this instrument to take account of the new process and of experience.

We are excluding for the first time challenges to decisions made in the internal redress system because under the new legislation the ombudsman will be able to review or investigate them. Similarly, the regulations exclude complaints about decisions made by the ombudsman. It is the ombudsman who provides external oversight of the complaints system so it would be contradictory for the complaints system to be able to overturn decisions of the ombudsman. Challenges to the decisions of an external ombudsman are best made in the courts.

A newly excluded matter, which I should mention in particular, is that we have decided to exclude complaints alleging clinical negligence or personal injury against the Ministry of Defence, so these have been added to the list of excluded matters. The redress system is not appropriate for deciding the complex, specialised medical and legal issues that can arise in clinical negligence and personal injury cases. It will remain possible, however, to make a service complaint if a person believes that we have not provided medical care when it was our responsibility to do so. As under the existing system, the regulations also exclude matters for which there are more appropriate alternative remedies. For example, challenges to decisions made at court martial are best decided through the appeals system.

The third important effect of these regulations is to set out when at least one independent person must be appointed for deciding a service complaint. The main circumstance is where a complainant alleges bullying or similar misconduct. This is the same as under the current system and it is there to provide an extra safeguard for fairness in such sensitive cases, and to give a measure of external oversight as part of the internal system.

The fourth main effect of the regulations is the setting out of the matters that must be reported to the Service Complaints Ombudsman when an allegation of a wrong suffered by a service person has been referred by the ombudsman to the chain of command. As with the Service Complaints Commissioner now, the ombudsman will be able to receive allegations of wrongs done to service personnel. For example, a family member of a service person will be able to approach the ombudsman with their concerns. The ombudsman will be able to refer those cases to the chain of command and to track what happens. The regulations will ensure that the ombudsman is kept updated on progress and is able to respond to queries, if raised, without compromising her investigative role.

The Joint Committee on Statutory Instruments has scrutinised this draft instrument and, in doing so, has brought to our attention three drafting points, which we will seek to correct at the earliest available opportunity. However, we do not expect that these points will affect the practical working of the regulations.

On the first point that has been raised with us, we accept that the definition of the expression “in writing” has been included unnecessarily in Regulation 2(1).

On the second point that the committee has brought to our attention, we will seek to provide further clarity at Regulation 6. This regulation provides for the start of the three-week period within which the ombudsman is to be notified of certain events in connection with the progress of a matter that has been referred by the ombudsman as a potential service complaint. It also provides that the ombudsman is to be notified of each event that is listed in the regulation. We will seek to clarify the exact moment of the day from which the three-week period applies and to clarify that the period applies separately to each event that appears in the list.

The third of the JCSI’s points relates to a provision in the schedule to these regulations that excludes a right to make a complaint where there is a right of review as to certain service police or prosecution matters. The committee has said that the regulations refer incorrectly to those rights of review being “under” the code in which they appear, rather than being mentioned “in” that code. Again, we will look to make the correction at the earliest available opportunity.

I hope noble Lords will support these regulations. I beg to move.

[Lord Tunnicliffe (Lab)]

My Lords, I thank the Minister for introducing this instrument, which effectively—with, I believe, four other negative instruments—gives effect to the Service Complaints Ombudsman, established by the 2015 Act, which some of us were privileged to flog through a few months ago.

The concern goes back to the tragic deaths at Deepcut between 1995 and 2002 and the subsequent inquiry. The outcome of that inquiry was the creation of the Service Complaints Commissioner. That role was taken up by a splendid lady, Dr Susan Atkins, who, having taken up the role, declared it not effective, efficient or fair. I commend the Government for reacting to her criticism. My party has long been calling for the introduction of an Armed Forces ombudsman, so we welcome the Act and the instruments designed to put it into effect. Labour is determined that all members of the Armed Forces who serve this country with such professionalism and distinction should be saved from bullying, harassment and other inappropriate or illegal behaviour. Ensuring that this is achieved forms a core component of the Armed Forces covenant. Hence, we support not only this affirmative SI but the negative SIs that go with it.

16:45

However, I have studied the Explanatory Memorandum, the regulations and the Act, and I have to say that it is all stunningly obscure. I did some research to try to find out what we were trying to achieve. Interestingly enough, the office of the Service Complaints Commissioner set out in an information sheet how she will be different from the ombudsman. She says that the extra powers allow her to:

“review and overturn decisions by the chain of command to exclude a complaint or not allow a complaint to proceed, for example, for being out of time … review the handling of a Service complaint once it has finished the internal process, if the complainant feels something is wrong with the way it was dealt with … in certain circumstances, investigate the substance of a complaint once it has completed the internal process”,

and finally to,

“recommend action to the Defence Council to put matters right”.

In the round, put like that, this is a commendable package, but Her Majesty’s Official Opposition have to ask whether the regulations achieve those objectives—to use what I believe is a military term, do they do what it says on the can? I therefore felt a need to probe into them and understand them. Why is it particularly important in this case? It is important because service personnel, of course, have no trade union. Similarly, there was no formal consultation even for these instruments, because in many ways there was nobody to consult. Therefore, it is more important that the limited parliamentary scrutiny we have is of reasonable depth.

I could have looked at every bit of the regulations to see how they cross-referred but I did not have the energy or the time. However, I lighted upon Regulation 3(2), which says:

“A person may not make a service complaint about—”.

However, Regulation 3(2)(a) says that,

“a decision under regulations made for the purposes of section 340B(4)(a) (admissibility of the complaint)”.

Superficially, that looked rather worrying. I then went into the 2015 Act because, while the regulations refer to the 2006 Act, the 2015 Act introduced the new sections into the 2006 Act. New Section 340B(4)(a) says:

“Service complaints regulations must make provision … for the officer to whom a service complaint is made to decide whether the complaint is admissible and to notify the complainant of that decision”.

Superficially, these two things seem to contradict each other. We have a paragraph that says “you cannot make a service complaint about” and refers to Section 340B(4)(a), which says you are unable to make a complaint about the officer who decides that a complaint is not admissible.

Fortunately, I came across Mr Morrison, who has been my tutor on service law over a number of years—on all occasions on the end of the telephone; nevertheless, what little I know he helps me with. He points out that you have to read Section 340B(4)(a) with paragraphs (b) and (c). Subsection (4) states:

“Service complaints regulations must make provision”—

and paragraph (b) of that subsection states:

“for the Service Complaints Ombudsman, on an application by the complainant, to review a decision by the officer to whom a service complaint is made that the complaint is not admissible”.

So you have to read Section 340(B) with paragraphs (a), (b) and (c), and paragraphs (b) and (c) come to life only under the negative instruments which we do not have before us—perhaps we should have done—and therefore paragraph (a) does not contradict itself internally and they all fit together.

I go through all that only to illustrate how incredibly obscure the legislation is at face value. There is clearly a difference between a complaint and an appeal. Essentially, the ombudsman is an appeal service where the complainant is able to appeal the way his complaint is handled. I think that is right. Will the Minister assure me that I have that roughly right—I hope that someone can generate a quick note that says yes—and agree that the regulations are deeply obscure? The problem of the complexity of the detail was illustrated by the JCSI’s concerns. The Minister handled that point by saying that he accepts its criticism and will revise it at a suitable date.

How will this be presented to the average sailor, soldier or airman? You cannot refer him to these regulations. I understand that they will end up in joint service publications and that there will be other material. Will the Minister affirm that there will be a considerable effort to consolidate the legislation into a workable document so that members of the Armed Forces are able to take advantage of the new Act and so that this important step in the creation of the ombudsman is not wasted by the fact that the average person it might affect cannot understand how it works? How can we be assured that the translation into plain language, for want of better, does not defeat the intent of the legislation—in other words, that the strength of the Act is fully clear to the service person?

I assume that the Minister will refer to the commissioner, Nicola Williams, who seems to be an equally splendid lady. I hope he will assure me that she will be fully consulted in the generation of the appropriate joint service publication and any material which is generated to ensure that members of the Armed Forces understand what new capabilities they have. I hope he will also assure me that she will be absolutely satisfied that that material treads what is for any normal human being an extremely difficult path in moving from the legislation, which amends a previous Act, to the order through all four instruments to a situation where the objectives are achieved and expressed in terms that people can understand without in any way diminishing the power of the two Acts and the orders.

Finally, almost in passing, I mention that the previous commissioner from time to time expressed her concerns about the extent to which she had sufficient resources to do this job. I would value an assurance from the Minister that he is confident that there will be sufficient resources for the new office so that this new and important capability—the new ombudsman function—will be able to operate satisfactorily.

Assuming that I receive appropriate assurances on all those points, I enthusiastically welcome the instrument. After the Deepcut tragedy and the issues of bullying, which even now one gets a little hint of but way back was all too prevalent, the Government have moved in the right direction—the direction we pressed for in our amendments in the other place—to a good position. I know that there is a very delicate balance in introducing an ombudsman in the military but I think we are quite close to the right place. It is important that the ombudsman is effective and properly resourced and that the intent is communicated to all service personnel.

[Earl Howe]

My Lords, I am very grateful to the noble Lord, Lord Tunnicliffe, for setting out his concerns so clearly. I am the first to agree that he has raised a very important issue in relation to Regulation 3(2) and the need for clarity for service personnel. Clearly, there must be a fair system for checking whether a decision that a complaint is inadmissible has been properly taken. I agree that the effect of the regulations may not be self-evident to the casual reader. In my experience, that is not unusual, but it is certainly a real issue.

The regulations exclude a complaint being made about a decision by the relevant officer, usually the commanding officer, that a complaint was inadmissible because, for example, it was excluded under these regulations or it was made too late. However, such complaints are excluded only because the main regulations which set out the procedures for making and handling a service complaint provide instead for the complainant to go straight to the ombudsman, who can review any decision made by the officer to rule a complaint inadmissible.

There is a duty to make regulations to provide for this under new Section 340B(4)(b) of the Armed Forces Act 2006, which the noble Lord rightly mentioned. The provision is in the Armed Forces (Service Complaints) Regulations 2015, but these are part of a suite of regulations subject to the negative procedure so they are not being debated today. The noble Lord was absolutely right to draw attention to those regulations and to say that they should be read with the regulations we are now considering.

It is fully recognised that it would be difficult and unacceptable for service personnel to have to navigate the different sets of regulations in order to find out what they were entitled to do. To make things clear, there will be a joint service publication explaining the entire process, including how to make a service complaint and the right to go to the ombudsman. The aim in that regard has been to make the language as straightforward and accessible as possible. I can tell the noble Lord that the ombudsman will indeed be consulted and will provide advice. Moreover, I can reassure him that the current commissioner, who will in turn become the new ombudsman, has been closely involved in considering all the regulations and the joint service publication to ensure that the details of the system will be clear and will meet expectations. So I hope the noble Lord will be reassured that his point is well made and well received.

The noble Lord asked whether the ombudsman will be sufficiently resourced for implementation in January. The commissioner has assessed the likely volume of cases that will come her way in the first quarter of 2016 and has structured her new team to meet that expected demand. This year she has recruited an additional 15 staff, of whom 11 are investigators. The commissioner is pleased to acknowledge that the MoD has met her requests this year for additional resource to carry out the new role. The ombudsman is responsible for determining her own staffing needs. Having said that, her office will be keeping the staffing numbers under review as they gain experience of carrying out the new role. However, we believe that the ombudsman-to-be is satisfied that all is in place to handle the likely volume of cases that she will be required to consider.

I hope that that answers the noble Lord’s questions satisfactorily and that he will be sufficiently reassured to be able to give these regulations his approval. I am grateful to him for his general welcome of the instrument.

Motion agreed.

Disclosure of Exporter Information Regulations 2015

Monday 7th December 2015 Grand Committee

Motion to Consider

17:01

Moved by

[Lord Ashton of Hyde]

That the Grand Committee do consider the Disclosure of Exporter Information Regulations 2015.

Relevant document 10th Report from the Joint Committee on Statutory Instruments

[Lord Ashton of Hyde (Con)]

My Lords, these regulations, which were laid before both Houses of Parliament on 17 November this year, seek to allow Her Majesty’s Revenue and Customs to disclose a limited set of information relating to individual UK exporters and the goods they export. The following information will, I hope, help noble Lords to place this in context.

This legislation promotes the Government’s growth agenda and their efforts to support both UK exporters and small businesses in the UK. It is also in line with the Government’s open data strategy. This seeks to place as much relevant data into the public domain as is reasonable and to reuse collected data for more than one purpose where it is efficient to do so.

By bringing accurate, reliable information about exporters and their products into a single, easily accessible place, the regulations will enable those who provide export services to identify their customers and make it easier for foreign buyers to identify UK suppliers and buy their products. It will also help to increase the export potential of small businesses.

The information to be disclosed will be limited to the following items: business name and address; a code to identify the types of goods exported, known as the “commodity code”; a description of the goods covered by the commodity code in question; and the month and year of export. Similar information in relation to importers has been available to the public for many years, and this measure seeks to bring exporter information into line with that.

The information originates from customs declarations made to HMRC at the time the goods are exported and will be made available via a unique HMRC website called uktradeinfo.com. There will be no charge for accessing it. The same legal disclosure standards relating to importer information will be applied and the same website will be used to disclose the information. Commercial confidentiality will be protected to avoid disclosure when fewer than three exporters export goods under the same commodity code in the same month. Again, this mirrors the arrangement in place for importers. Information relating to the export of sensitive or strategic goods will similarly be protected from disclosure. Again, this mirrors what is already in place for importers. At present, importers may write to HMRC to request removal or opt-out from the disclosure of importers details. HMRC plans to match this opt-out facility for exporters. The opt-out will not be granted automatically. Consideration will be given when the exporter feels disclosure may compromise them or their business interests. This measure was subject to a formal consultation; out of a total of 15 responses, five respondents expressed concerns over disclosure of their information. The measures that I have set out will provide adequate safeguards against such unwanted disclosure. I beg to move.

[Lord Tunnicliffe (Lab)]

My Lords, I thank the noble Lord for introducing this order so thoroughly and informatively. The draft Disclosure of Exporter Information Regulations permit the sharing of certain information on exports for use by both the public and private sectors. We will not oppose these regulations today as we want a more productive and effective export system, but the Minister will not be surprised to hear that I have a number of questions and points of clarification, which I hope he will be able to address in his closing remarks.

HMRC has previously not been allowed to share this information publicly. However, the Small Business, Enterprise and Employment Act 2015 provided it with a power to make these regulations and it authorises the disclosure of specific data in relation to the export of goods. The categories of information are: a business’s name and address; commodity code; description of the commodity code covering the goods; and the month and year of export. Can the Minister explain the criteria for why these areas of information were chosen and what information was ruled out of being made available?

A separate but related point concerns the issue of confidentiality. What measures are in place to ensure that the confidentiality of data is maintained? We have seen in recent months that the UK is susceptible to online breaches, so I am sure that businesses would be grateful for any reassurances that the Government can give. Furthermore, do the Government have any means of putting at ease the concerns raised by one respondent that publishing details would lead to them receiving unwanted marketing mail?

Any measures that could help to improve Britain’s export market are welcome. The latest figures show that these efforts are sorely needed. Last year, the number of UK companies who sell their goods and services abroad fell. Yet in 2011, the Prime Minister said that he intended to increase the number of UK exports by the end of the decade. Are we on course to meet those targets? According to the British Chambers of Commerce, at the present rate of progress it will take until 2034 to double exports. Who does the Minister think is more accurate—the Prime Minister or the British Chambers of Commerce?

A clear area where improvement can be made—extremely apt since this past weekend was Small Business Saturday—is in supporting small businesses access the export market. While more than 40% of larger companies are exporters, only one in 10 small businesses sell their goods and services abroad. How will the regulations we are debating today assist, in particular, SMEs?

Turning to some of the specifics, it will be possible for exporters to opt out of the publication of this information by contacting HMRC. Have the Government an indication of how many businesses will opt out of the disclosure of information? Further, what criteria will the Government or HMRC use to judge whether an opt-out request is valid other than whether an exporter is moving goods of a nature which might give rise to security concerns?

There is no specific time or date at which the Government will review this policy. It seems that the first review should certainly be conducted swiftly to assess and evaluate the take-up. All this, of course, will mean more work for HMRC, at a time when its budget is being cut by 18%. It will make a hard job even harder.

Finally, I will briefly mention the consultation. I would like to put on record how grateful I am to the Delegated Powers and Regulatory Reform Committee for the additional information that it provided from HMRC about the Government’s consultation and for the more detailed analysis. The consultation ran from June to September last year and during this time the Government received 15 responses. Of those, only five were from businesses. Does the Minister really believe that this small number is enough to gauge public opinion? I look forward to his response.

[Lord Ashton of Hyde]

My Lords, I thank the noble Lord, Lord Tunnicliffe, for his support and for his interesting questions. I will answer them as well as I can, perhaps with a little help from my friends, but I may need to write to him about some of them.

On the areas chosen for inclusion on the website, these were selected following discussion with the Cabinet Office and they mirror the information that is currently published in respect of importers. Any more than that would allow confidential details of values, markets and customers to be transparent and would put HMRC at odds with other legal obligations towards data protection.

The noble Lord asked about confidentiality and the measures in place to ensure it, which, of course, is extremely important. Again—this will be a recurring theme—the same safeguards are in place as for the website for importers, which have been in place for 25 years. A lot of these features are merely replicating—

[Lord Tunnicliffe]

The noble Lord will allow that in 25 years the cyberworld has changed a little.

[Lord Ashton of Hyde]

I understand that and am not suggesting that it is as it was 25 years ago. I am merely saying that the importer system has been in place for 25 years and has been operating well, as I will show in a minute.

We will not publish things like national strategically sensitive data, such as data about armaments exporters and their products, or commercially sensitive data. For example, we will not publish data where there are only a small number of exporters of a given product and actual levels of trade could be identified or deduced. There is also the opt-out, which is possible for those exporters not covered by the exceptions I have mentioned. They will be able to ask HMRC to opt out in the same way that importers can. As far as online breaches are concerned, the idea of the website is to let people see this limited amount of information. We want them to see it.

The noble Lord mentioned unwanted marketing mail. We are not disclosing email addresses, although we will include a mail address. It is possible that some marketing mail will be received as a consequence of this development but, of course, part of the reason for introducing this measure is to help exporters market their goods to a wider audience.

The noble Lord talked about exports. The export target set by the Prime Minister for 2020 was ambitious and it remains so. We are one of the most open economies in the world so external weakness, particularly in our biggest export market, Europe, does reduce demand. The slowdown in world trade is expected to continue, resulting in the OBR forecasting a weaker outlook for UK export markets. We still think it is right to set a stretching ambition that will motivate us all to do everything possible. This is one small part of the strategy to help encourage exports.

17:15

These measures are also part of the strategy to help SMEs. The primary intention of this measure is to assist all UK exporters. Of course, if the exporter is an SME, we hope it will be able to take advantage of the benefits of this website, for which there is no charge.

The noble Lord mentioned the opt-out, which I also mentioned. It is an important safeguard. Only 18 importers out of a population of 105,000 are opted out from the provision of importers’ details. There are approximately 75,000 exporters and we hope the number will be roughly proportionate, particularly when the system has been under way for a few years. In deciding to accept an opt-out HMRC will take into account the impact that disclosure might have in the business in question. For example, if there is genuine concern that disclosure would endanger the health or personal safety of directors, partners or proprietors, their employees or their premises, it will receive sympathetic consideration. Examples include those who deal with precious, high-value commodities, armaments or animals, but that list is not exhaustive.

The noble Lord alluded to the consultation process to which there were 15 responses and questioned whether that was an adequate survey of public opinion. The survey was done in line with the required protocols. We take the view that it is not a matter of huge concern, and the importer website is working well. HMRC circulated the details of the consultation widely among the standing group for trade consultees, which is known as the Joint Customs Consultative Committee. Trade sectors are represented on that committee and it distributes details to its members.

I thank the noble Lord for his support. I hope that I have answered his questions. I commend the regulations to the Committee.

Motion agreed.

Payment Accounts Regulations 2015

Monday 7th December 2015 Grand Committee

Motion to Consider

17:17

Moved by

[Lord Ashton of Hyde]

That the Grand Committee do consider the Payment Accounts Regulations 2015.

Relevant document: 10th Report from the Joint Committee on Statutory Instruments

[Lord Ashton of Hyde (Con)]

My Lords, I am pleased to introduce these draft regulations which aim to ensure the UK’s compliance with the EU payment accounts directive. The directive sets common standards across member states that payment service providers—in this context, principally banks and building societies—must meet. First, for the account that we use for day-to-day transactions—in most cases, a current account—the directive aims to make fees and charges clearer and more comparable. Secondly, it seeks to make it easier to switch to another provider of such an account in order to facilitate competition. Thirdly, the directive creates a right of access to a payment account with basic features for all consumers legally resident within the EU—these accounts are more commonly known as basic bank accounts in the UK.

The Government supported the directive and had already taken action in many of these areas. Agreements with industry already aim to improve the transparency of fees and charges. We have established the seven-day current account switch service and for more than 10 years our largest banks have offered basic bank accounts and have recently committed to improve that offer even further. The regulations that we discuss today comply with the directive where necessary, but minimise negative impacts on industry and consumers, and preserve structures that are already working well in the UK.

I shall start with a few words on the scope of the directive—namely, the definition of the term “payment account”. For the avoidance of doubt, where I refer to a payment account, I am doing so in line with the definition used in the draft regulations. The definition of this term in the directive could capture very simple types of payment account, well beyond the types of account used for day-to-day transactions that were discussed in negotiations. However, the recitals to the directive make it clear that savings accounts, credit card accounts where funds are usually paid in for the sole purpose of repaying a credit card debt, current account mortgages or e-money accounts should in principle be excluded. The exception to this is when such accounts are used for day-to-day payment transactions. Accordingly, the Government defined payment account in these draft regulations in a way that uses this language to describe and clarify the accounts that will be in scope. It is the Government’s view that this definition should be sufficient to limit the application of PAD to current accounts, or accounts that have functionalities directly comparable to those of current accounts, in the UK.

The Government have given as much clarification as the text of the directive allows. To go further, and entirely exclude some types of account, would be to risk a failure to comply with the directive. It will be for firms themselves to determine whether each of their products falls within the scope of the regulations, and whether the regulations therefore apply to them. The Financial Conduct Authority will supervise and enforce most of the requirements set out in the draft regulations.

When firms offer a payment account in line with the draft regulations, they will need to make new documents available to consumers: a fee information document, which sets out the fees that may be charged before the consumer decides to enter into a contract; an annual statement of fees, provided each year to explain the fees that have been charged; and a glossary to explain the main terms used in the documents, and their definitions. Some of the terminology used in these documents, and in related contractual, commercial and marketing information, will be standardised at European Union level. The process for carrying out this standardisation is rather involved, but is already under way.

As required by the directive, the Financial Conduct Authority established a provisional national list of the most representative services that are linked to current accounts in the UK and subject to a fee. Each member state submitted its list to the European Commission and the European Banking Authority, so that they can develop EU standardised terminology for the services that appear on a majority of member states’ national lists. After the European Commission adopts the EU standardised terminology, the FCA will integrate the standardised terminology into its provisional national list when necessary, and publish the final list for UK payment service providers to use. In addition, the Money Advice Service will operate a comparison website that allows consumers to compare at least the fees that appear on this final list.

The directive also requires action on packaged accounts—that is, payment accounts that offer an additional service or services, such as insurance or car breakdown cover. Consumers will now need to be informed whether the account is available without the additional services. If any of the additional services can be purchased separately from the same firm, the firm should tell the consumer how much each of those additional services would cost. Taken together, these measures should help consumers to understand and compare how much they are charged.

I shall move now to set out the approach to account switching. As I have mentioned, the UK already has a world-leading Current Account Switch Service, which has been recognised by the European Commission. It is managed and operated by BACS, a not-for-profit organisation. But not all member states are in this position, so the directive sets out some rules that all EU payment service providers must abide by when a customer wishes to switch to another payment account in their member state. When a UK payment service provider is not a member of the Current Account Switch Service, and it offers a current account-type product, it must at least follow these rules. However, for the vast majority of the current account market, the regulations allow our Current Account Switch Service to continue to work as it does today.

Compared to the switching rules set out in the directive, our Current Account Switch Service must meet three very simple criteria. It must continue to be in the interest of the consumer, present no additional burden to the consumer and be at least as fast. As the directive makes clear, we can maintain existing services where they meet these three criteria. There is no requirement to exactly mirror the switching rules set out in the directive.

The Government’s clear view is that the Current Account Switch Service that we have now exceeds the three criteria. However, the UK’s compliance with the directive has to be beyond question. That is why the independent Payment Systems Regulator will be responsible for confirming that the Current Account Switch Service meets, and continues to deliver against, the three criteria. We have agreed a proportionate set of powers for the PSR as a competent authority to use, should it ever become necessary, in this limited role. The PSR will provide further information on the designation and monitoring process in due course.

I move on to the provisions in the draft regulations on basic bank accounts. Basic bank accounts help to ensure that everyone is able to access essential banking services. They should be without fees and not offer an overdraft or cheque book. The draft regulations on basic bank accounts reflect the UK’s existing basic bank account policy, particularly where that is more advantageous to consumers, but they bring the UK into line with the requirements in the directive where necessary.

As noble Lords may recall, in December last year the Government reached a new agreement on basic bank accounts with the nine largest providers of current accounts. That agreement clarifies who should be eligible for a basic bank account and brings to an end the widespread practice of charging basic bank account customers for a failed payment, such as a failed direct debit or standing order.

We have taken action in these regulations to ensure that we do not move backwards as a result of implementing the directive. For example, the directive would allow us to establish arrangements that would be less advantageous to UK basic bank account customers by allowing banks to charge fees. However, the Government believe that a basic bank account and its standard services should continue to be provided free of charge provided that the services are provided in sterling. Nor should basic bank account customers be charged for failed payments or for overrunning, given that a key principle underpinning these accounts in the UK is that they should not be offered with an overdraft.

The directive would also allow us to restrict these accounts to only the “unbanked”. However, we are clear that basic bank accounts are also necessary for access to banking for those who may already be “banked” but are unable to use their existing account due to financial difficulty. That is why the eligibility criteria in the draft regulations establish that a consumer should be offered at least a basic bank account if they are unbanked or if they do not meet the bank’s stated eligibility criteria for a standard current account.

As I said, we do not want to move backwards but we also have to ensure that the UK can demonstrate its compliance with the directive. For example, we have had to legislate in order to establish a clear legal right of access to a basic bank account and a right to challenge banks’ decisions before a court. A voluntary agreement could not establish these rights with sufficient legal certainty.

We have also had to limit and make more specific the reasons why a bank may refuse an application for a basic bank account or close one. However—I recognise that there has been some concern from the industry on this point—no bank is required to open an account, or to continue to operate one, where it would otherwise be unlawful to do so.

I hope that I have assured the Committee that these regulations meet the UK’s obligations in implementing the directive in a sensible and pragmatic way, and that all noble Lords will therefore support the Motion. I beg to move.

17:30

[Lord Tunnicliffe (Lab)]

My Lords, I thank the Minister for outlining the regulations before us today. I listened to his presentation with some care. Of course, realistically, I prepared my remarks in advance, so there may be a little overlap.

The theme that came through, which I found almost joyous, was the way in which the European regulations have been gold-plated. I personally have no objection to regulation; I am a great believer in regulation provided it is good regulation that does good things without disproportionate costs. I think I heard the Minister say, over and again, “We could have introduced a lower standard in this area, but we do not believe we should go back to that lower standard. We should retain and, in one or two cases, enhance the standards in the UK regulations because the EU regulations allow permissions in certain areas”. I would like the Minister, when he has contemplated this, to assure me that there has been a little bit of gold-plating, that it is very fine gold and that it meets the key test of regulation which is that it is good for consumers and for the markets they are in.

The EU payments account directive has three main principles: first, to improve the transparency of fees relating to accounts that are principally personal accounts; secondly, to make it easier for consumers to switch accounts; and, thirdly, to ensure that all EU consumers can access banking services by ensuring that a sufficient number of accounts with basic features are available.

I will start by picking up a point raised in the Explanatory Memorandum. The Government say that they are content with the definition of “payment service providers”, despite representations for further clarification of the scope of the term. The Government state that,

“the definition of the term ‘payment account’ that is used in this instrument gives as much clarification as the text of PAD allows, and that the term covers what are generally referred to as current accounts in the United Kingdom or accounts that have functionalities directly comparable to those of current accounts”.

I think the Minister went on to say that it is for individual firms to determine whether their products are covered, and that the FCA has the role of checking that they have made the right decisions. Perhaps the Minister can confirm that I understood that correctly. If the Treasury will not publish further information on the scope of the term, will the Minister at least say what bodies, aside from banks and building societies, the Government believe will be affected by these regulations?

Quite rightly, the Government emphasise the need for existing initiatives, such as the Current Account Switch Service and the new payment accounts directive, to accept that they may have to be adapted in order to achieve the best outcomes. I think the Government have tried to do that. Therefore, in the relevant sections the Government have said that a copy-out approach has not been taken. With this is mind, how do the Government anticipate that the Competition and Markets Authority’s report on the banking sector will be integrated into this framework? The issues being investigated in its review have a great deal of crossover with what is set out in these regulations. The integration of a further framework could prove challenging. Can the Minister say how each of the important pieces of the jigsaw will fit neatly together?

One particularly important aspect of the regulations relates to the transparency of fees. Research from TSB suggests that banks in the UK make between £7 billion and £8 billion a year from supposedly free current accounts. Any measures that could contribute to helping to make the customer more aware of these fees are important, and we welcome them. It is often in packaged bank account deals that hidden fees are found and under the Payment Accounts Regulations 2015 providers of packaged bank accounts will be required to inform the consumer whether it is possible to purchase the payment account separately from the same provider. If so, customers will need to be provided with separate information regarding the costs and fees associated with each of the other products and services offered in the package that can be purchased separately from that provider.

In the consultation response the Government confirmed that:

“If the payment account is available separately, the payment service provider must provide separate information regarding the costs and fees associated with each of the other products and services offered in the package that can also be purchased separately … The government therefore does not consider that the assumption made by certain firms, i.e. that they will not be required to disclose the costs and fees of products and services available separately because they are not offered on identical terms and conditions, is correct”.

That is welcome news. However, the consultation made clear that a number of firms incorrectly considered themselves exempt from the draft regulations concerning packaged bank accounts. I know the Government made changes to the original wording of the regulations but how else do they intend to communicate these changes to banks to ensure that they are aware of their responsibilities?

A broader concern for payment service providers and trade associations is the limited time available for implementing changes. Payment services providers will have more time to implement these changes as the Government extended the deadline to six months after the FCA publishes the linked service list. When do the Government anticipate that the linked service list will be published and what more can the Government do to assist PSPs in the interim?

On the issue of switching, research conducted for the Competition and Markets Authority found that 37% of people had been with their bank for more than 20 years and that a further 20% had had an account for between 10 and 20 years. Have the Government undertaken analysis into this? If so few people change banks, as has been suggested, then is failing to extend these regulations to cover existing customers undermining the effectiveness of these regulations?

The Money Advice Service will be required to operate a comparison website. Can the Minister go into more detail about the timescale? When does he expect this resource to be available to consumers?

Finally, during the consultation no information was received regarding the anticipated costs to non-Current Account Switch Service members as a result of the proposed approach on switching, nor did the responses address the costs or benefits to consumers as a result of the proposed measures. Will the Minister comment on these issues?

As I said at the beginning of this speech, we do not oppose these measures. Indeed, we feel they are good and that the enhancements and nuances included are to the benefit of consumers. Nevertheless, the UK does not have public confidence in the banking system, and that needs to be addressed urgently. We will support any measures that seek to do that.

[Lord Ashton of Hyde]

My Lords, once again, I thank the noble Lord, Lord Tunnicliffe, for his support and in-depth scrutiny of these rather extensive regulations. I will try to answer as many of his questions as possible.

The noble Lord felt some joy over my remarks. I am always anxious to give noble Lords as much joy as I can—and hope I always do so. However, in this case I will disappoint the noble Lord a bit. We do not think that these regulations have been gold-plated, if by gold-plating we mean making the regulations more onerous than they need to be, either by commission or omission. We used the latitude available to the UK within the directive to maintain existing policies on financial inclusion, such as on fees. For example, the directive allows banks to charge reasonable fees for basic bank accounts but we are not doing that because the existing agreement does not do it and so it would be to consumers’ detriment. We are using the flexibility not to do that.

We could have required all banks to offer basic bank accounts, but we chose not to do that because we want to maintain access to basic bank accounts for UK customers without discouraging newer, smaller entrants. That point has been raised in other debates. We welcome competition in banking and want to help challenger banks. I am glad to say that at the moment 25 are applying for licences. We want to limit the impact on the industry wherever possible.

The noble Lord asked what types of firm, other than banks and building societies, might be within the scope of these regulations. We want to minimise any negative impact. The directive allows member states to exempt certain entities from the application of all or part of its provisions, so we have used that flexibility where organisations offer some form of payment service, such as for credit unions, municipal banks, National Savings and the Bank of England. Ultimately, it will be for firms themselves to determine whether each of the accounts they offer falls within the scope of the regulations and whether the regulations therefore apply to them. We have been as clear as we can within the directive to determine what payment accounts are covered, but we have used the recitals to explain some of the accounts that are excluded, and broadly, the Government’s view is that current accounts or any other account that is used for normal day-to-day payment purposes are covered.

[Lord Tunnicliffe]

What would be the process if a firm made a misdetermination of an account? In other words, if it took a view that a particular product was not covered by the regulations but the correct interpretation of the regulations would be that it should be, what process would come into play to require that firm to correct that decision?

[Lord Ashton of Hyde]

The competent regulator is the Financial Conduct Authority. Ultimately, enforcement action could apply, but in the normal course of dealings, particularly with new regulations, I would expect a conversation to take place with the regulator if there was any doubt. For the vast majority of current accounts, it will be straightforward, but if there were a grey area around the edges, I would expect a sensible conversation to take place with the FCA. In the normal course of events, banks and other financial institutions are required to have an ongoing relationship with their regulator. I would expect that to apply unless something serious went wrong, in which case enforcement action could take place.

Action to comply with the payment accounts directive will certainly not prevent the UK pressing ahead with domestic initiatives to improve competition in banking, provided that the initiatives remain consistent with the regulations. The CMA’s provisional findings, which were published at the end of October, still need to be consulted on. It will issue its final report next spring, and the Government stand ready to take action as appropriate once we have those final recommendations.

I turn to packaged accounts, which also offer separate services such as car insurance, breakdown insurance or something like that. The consultation the Government produced set out the Government’s intended approach to packaged accounts in the draft regulations, which firms scrutinised and commented on. After these regulations have been made, if they are agreed to, the FCA will also consult in the usual manner on any changes to its handbook that it considers necessary to give effect to those regulations, including on packaged accounts.

In addition to its public consultation, the FCA will continue to engage with relevant industry stakeholders to discuss the implementation of the measures, including the extent to which services and their terms and conditions need to be identical to be caught.

The noble Lord referred to the Money Advice Service and asked when the comparison website that it has to set up will be ready. The comparison website will need to use, where applicable, the terms set out in the linked services list. We expect the final list to be published by the FCA during the first half of 2017, once the EU-wide standardised terms and definitions have been adopted by the European Commission. Although the Money Advice Service may choose to set up the website sooner, there is no obligation for it to do so until six months after the FCA publishes the final linked services list.

17:45

The noble Lord asked about current account users whose payment service provider is outside the Current Account Switch Service. Consumers who currently bank with firms outside CASS may benefit from being able to switch in line with the new rules set out in Schedule 3. However, given that only about 1% of the current account market is not covered by CASS and that only a proportion of those customers are likely to switch accounts, we do not expect those benefits to be very significant. Therefore, we would also expect the costs to be minimal.

In bringing forward these regulations, I believe that the Government have sought to minimise any negative impact on the industry and on the consumers who rely on these services. I am grateful for the noble Lord’s questions and I commend these draft regulations to the Committee.

Motion agreed.

Exclusivity Terms in Zero Hours Contracts (Redress) Regulations 2015

Monday 7th December 2015 Grand Committee

Motion to Consider

17:47

Moved by

[The Earl of Courtown]

That the Grand Committee do consider the Exclusivity Terms in Zero Hours Contracts (Redress) Regulations 2015.

Relevant document: 7th Report from the Joint Committee on Statutory Instruments

[The Earl of Courtown (Con)]

My Lords, on 26 May this year, the Government commenced the provision introduced by the Small Business, Enterprise and Employment Act 2015 which renders unenforceable the use of exclusivity terms in zero-hours contracts. As a result, individuals can now ignore any exclusivity term in their zero-hours contract. Once these regulations commence, any employer who treats someone on a zero-hours contract unfairly simply for taking a job elsewhere could face an employment tribunal and the possibility of paying compensation.

The use of exclusivity clauses in zero-hours contracts is wrong. No one on this type of contract should be prevented from boosting their income if they want to. While the Government anticipate that only a minority of employers are likely to ignore the ban, I am confident that we all agree that a route of redress is a welcome measure. The regulations before the Committee create a route of redress for an individual on a zero-hours contract who suffers a detriment or is unfairly dismissed as a result of doing work under another contract or arrangement. They allow that individual to make a complaint to an employment tribunal and be awarded compensation if their complaint is upheld.

These regulations have been drafted as a result of the Government’s consultation. A clear majority of 71% of respondents to last summer’s consultation supported redress via an employment tribunal. The regulations create a deterrent for employers, making them think twice about ignoring the law. In addition, we will be laying an order that will ensure that those individuals on zero-hours contracts wishing to make a complaint will benefit from the early conciliation regime. This is in line with other employment protections.

Zero-hours contracts have a place in today’s labour market. For individuals who cannot commit to regular hours, they can provide a pathway into employment. That is why many people, young and old, choose to work in this way. These contracts provide choice and the ability to combine work and other commitments. But the use of exclusivity clauses in these contracts is wrong and that is why Government have banned them. These regulations strengthen that ban, adding another layer of protection for individuals and ensuring that employers cannot simply ignore the law. By creating a route of redress, individuals will have the right to make a complaint to an employment tribunal if they are dismissed or treated unfairly as a result of their employer attempting to demand exclusivity. I commend these regulations to the Committee.

[Lord Stevenson of Balmacara (Lab)]

My Lords, I am grateful to the Minister for introducing these regulations. He was not, I think, involved in the previous Government’s detailed work on the Bill from which these regulations stem. In that sense perhaps he could be forgiven for not really getting to the heart of the issue before us. While I reluctantly agree that these regulations are a step in the right direction, I hope to persuade him that they are nothing like what was intended when the matter was debated in the Bill to which he referred. The Small Business, Enterprise and Employment Act should have outlawed people being discriminated against for having more than one zero-hours contract. Instead, it offers a false choice for those who are affected to seek redress—at their cost, let us be clear—through the employment tribunal system.

The key issue I would like the Minister to focus on is that these regulations do not in fact ban exclusivity clauses. They will exist after these regulations go through and I would be grateful if the Minister would confirm that. Individuals will not have many rights in terms of how they get redress against that, as I will explain. As I said, the regulations represent a small step in the right direction but they will not provide zero-hours workers with effective protection. The Government’s proposals really fail to address the main abuses expressed by those who have studied this issue—and, indeed, the points that were raised when the Small Business, Enterprise and Employment Bill was discussed. They are little more than window dressing. The Minister said that the abuse of zero-hours contract workers seeking a second job was wrong but he has not taken the opportunity to outlaw it.

There are a number of points worth making. The regulations use a much narrower definition of zero-hours workers than is allowed for in the Act. I would be grateful if the Minister will confirm that the Act would permit the Government to extend the ban to individuals who are employed in freelance arrangements, for instance, but are economically dependent on a limited number of employers. The Government have decided not to act to protect this group—perhaps the Minister will explain why.

In March 2015, the coalition Government indicated that they were minded to extend the ban on exclusivity clauses to all workers, not just those on zero-hours contracts, who earn less than £20 an hour. The aim expressed then was to ensure that those employed in more insecure and lower-paid forms of work could not be forced to remain available for one employer but could seek employment from a range of employers. This is a very good idea and we welcomed it at the time. The Government seem to have backtracked on that approach. Will the Minister explain the thinking behind that decision?

The Government claim that providing a right for zero-hours contract workers to go to an employment tribunal and, after the next regulations come forward, a chance to go into conciliation services using a fast-track system, will actively deter employers from using exclusivity clauses. I think the Minister said that it would make employers “think twice” before acting. That seems a very weak form of protection. They should not be thinking about this at all. The idea that they should think twice about it is rather risible.

We are talking here about very poorly paid employees—who often are not paid at all because they do not get called in for work—and about those employed on zero-hours contracts in any way having to pay up to £1,200 for any claim for unfair dismissal. As well as being low-paid and not being offered the right possibility of a range of work, they will have to pay £1,200 upfront in order to take this forward. Obviously, if they want to do a detriment claim it is £390, but I think even that would be difficult.

The MoJ statistics reveal that only around two-fifths of individuals who have applied for a remission in employment tribunals have been successful. This low success rate is well understood to be due to the fact that remission claims have to be based on household income rather than the income of the individual concerned. The individual has a choice to make if he or she has a partner who is working because the cut-off point at which they will be able to do a remission may well have been breached by the partner’s earnings, and the cost of going themselves is £1,200. It is a rock and a hard place.

Finally on this catalogue of defects in the process, the regulations make it clear that any compensation awards will actually be very limited because they have to be linked to losses or expenses which the individual incurred as a result of the employer’s actions. A zero-hours contract worker is going to find it rather difficult to prove that they incurred any loss. Individuals such as hotel and bar staff, many of whom make up this group, are often working on a series of zero-hours contracts with different employers. Under these contracts, they have no legal rights to ongoing employment so it is very difficult for them to prove that if they had not remained available to work for employer A they would have been guaranteed a certain amount of pay from employer B. This test will also trip up a number of people.

A lot of rethinking is required in this area if we are going to make this stack up in any sense to the issues that were raised by the Minister. He thought that these regulations have resolved matters but I think they are actually making things worse. What is needed is a new think about redress in matters of this nature. What we really need is legislation that includes those on zero-hours contracts, as well as other people in casual employment, to make sure that they have the basic employment rights—including, for example, redundancy pay, the right to request flexible hours, and the right to return to work following maternity or paternity leave—which are often not available in these areas because of a misunderstanding of the law, although technically employees are entitled to them. That could be rolled back into an overarching arrangement around issues to do with exclusivity terms. As I said, these regulations are a step in the right direction but it is really a very small step.

[The Earl of Courtown]

My Lords, I thank the noble Lord, Lord Stevenson, for even reluctantly agreeing that this is a step in the right direction. He made a number of points, which I will deal with. If I do not deal with them, I will of course write to him. We agree that these regulations are a welcome step for those on zero-hours contracts. We must, however, send a message to the minority of employers who may attempt to ignore the exclusivity ban. As such, it is important that the Government create this additional layer of protection for individuals.

The noble Lord, Lord Stevenson, suggested that exclusivity still exists. No, an individual cannot be prevented from looking for work elsewhere and should simply ignore the exclusivity terms made by the employer. The individual has no obligation to inform the employer. We understand that employers could potentially offer no further work as a result of finding out that the individual has worked elsewhere, and that is why it is important that these redress regulations create a route of redress for individuals who suffer a detriment in such a case.

The noble Lord also asked why we have backtracked on the income threshold. This Government’s first priority was to introduce the ban on exclusivity clauses in zero-hours contracts. As I said earlier, we did this on 26 May this year. Our next priority was to introduce a route of redress to ensure that individuals on zero-hours contracts with exclusivity clauses were protected from employers who dismissed them or subjected them to unfair treatment if they sought work elsewhere. We are introducing that route of redress now.

18:00

[Baroness Burt of Solihull (LD)]

I am grateful to the Minister for giving way. This is the first time that I have taken part in a Grand Committee. He said that pressure is put on people to comply, and an ordinary worker may find the legal redress a little confusing. Do the regulations contain a provision to deal with situations where emotional pressure is put on an individual who may not have an official exclusivity contract but it is understood that if they contravene the contract and go to work elsewhere they will not be asked to work again?

[The Earl of Courtown]

I think that, in a nutshell, the noble Baroness is talking about protection for the vulnerable worker. I cannot give her an answer at this moment but I will write to her.

Concerning the income threshold, during the last Parliament the Government announced the idea of extending the ban on exclusivity clauses to contracts that did not guarantee a set income threshold. We will now look at this aspect further, considering any evidence of avoidance of the ban. To date, the Government have seen no evidence of employers finding ways to get round the ban on exclusivity clauses.

The noble Lord, Lord Stevenson, asked why the self-employed are not covered. The exclusivity ban protects all employees and workers who have exclusivity terms included as part of their zero-hours contract—that is, a contract which does not guarantee paid hours of work. These provisions do not cover those who are genuinely self-employed and undertake work on a zero-hours contract arrangement. For example, a self-employed contractor might take up work offered on a zero-hours basis from a number of regular clients but remain self-employed. This is because self-employed individuals will negotiate their own terms as part of their contractual arrangements with their clients.

The noble Lord also raised the important issue of employment tribunal fees and said that they represented a prohibitive cost for those on zero-hour contracts. As in the case of any other complaint submitted to an employment tribunal, anyone who feels that they cannot afford to pay the associated costs can make an application for a fee remission—that is, to have the fees waived or reduced. An individual can apply for remission of the fee-paying stage and so would not be out of pocket. Complainants who are in receipt of universal credit and have less than £3,000 in savings and gross annual earnings of less than £6,000 would automatically qualify for remission of fees. Complainants will qualify for full remission of their employment tribunal fees if they have savings of less than £3,000 and are in receipt of certain qualifying benefits, such as income-based jobseeker’s allowance or income support. They may also qualify for full or partial remission if their household savings and gross income fall below or within a specified threshold.

The noble Lord also mentioned compensation. We do not believe that the regulations should stipulate the level of compensation to be awarded. This is a matter that the court should decide, given the individual circumstances of each case.

The noble Lord, Lord Stevenson, also mentioned the rights of those on zero-hours contracts and on other casual contracts. There is a misconception that those on a zero-hour contract do not have employment rights or have fewer rights than those on other types of contract. Everyone, regardless of contract type, has employment rights. The employment status of an individual will determine whether they are an employee or a worker; employees and workers have different employment rights. However, let me be clear that people working under a zero-hours contract have the same day one rights as any other worker or employee. When there is a qualifying period for certain rights—for instance, entitlement to maternity pay—they must meet this condition, just as with any other worker or employee.

I welcome the noble Baroness, Lady Burt, to the Moses Room. She asked whether emotional pressure could be taken into account. It would be a matter for the court to consider what the detriment is in each case.

Finally, I reiterate that the Government are committed to ensuring that exploitative practices identified around zero-hours contracts are eradicated, so that those on this side of the contract have a fair deal. The regulations are supported by the majority who responded to a consultation period on this matter. I commend the regulations to the Committee.

Motion agreed.

Legislative Reform (Further Renewal of Radio Licences) Order 2015

Monday 7th December 2015 Grand Committee

Motion to Consider

18:06

Moved by

[The Earl of Courtown]

That the Grand Committee do consider the Legislative Reform (Further Renewal of Radio Licences) Order 2015.

Relevant documents: 1st Report from the Regulatory Reform Committee

[The Earl of Courtown (Con)]

My Lords, the effect of this order will be to allow the holders of certain types of analogue radio licences to renew those licences for a further five-year period. The changes cover the three national analogue radio licences—the national FM licence held currently by Classic FM, and the two AM national licences held by Bauer, for Absolute Radio, and UTV, for Talksport. All three licences were renewed in 2011 under Section 104A of the Broadcasting Act, and local licences were renewed under Section 103A of the Broadcasting Act; they include some names from the list. For stations that have not yet had their licences renewed under Section 103B or Section 104AA, the net effect is to substitute the seven-year licence renewal period introduced into the Broadcasting Act by the Digital Economy Act with a 12-year period.

The measure meets the tests set out in the Legislative and Regulatory Reform Act 2006 and has been approved by the Lords committee and by the Regulatory Reform Committee in another place as being appropriate for a legislative reform order with the affirmative procedure.

In all, around 60 commercial analogue licences, including the three national licences, are due to expire between 2017 and 2021 and will benefit from this measure, though licences that expire after that date will also benefit from the change. This is a change that is strongly supported by Radiocentre, the Commercial Radio Companies Association, and most of the radio industry. Before I get into the detail of the measure, it is probably worth me taking noble Lords through the background to these proposed changes.

In 2009, the previous Labour Government set criteria for a future switchover of digital radio in their Digital Britain report. Their criteria were that DAB coverage should match the coverage of national and local services in analogue, as the case might be, and that digital listening should reach 50% of all radio listening. In July 2010, the coalition Government adopted these criteria.

To facilitate a future switchover, the Labour Government included in the Digital Economy Act 2010 various measures to facilitate a future switch-off of analogue radio services. They include providing Ofcom with the power to terminate analogue radio licences with a minimum of two years’ notice. A key measure in the migration to digital radio by encouraging commercial radio to continue to support the development of DAB was the new powers for Ofcom to grant licence renewals for FM and AM stations. The effect of these changes was that radio stations licenced on or after 8 April 2010, or which had already been renewed for 12 years under Section 104A or Section 103A of the Broadcasting Act 1990, were able to apply to Ofcom to renew their licence for one further period of seven years. To qualify for the renewal, licensees were required to simulcast—that is to broadcast on analogue as well as digital—the service on an appropriate DAB multiplex.

In July 2010, the coalition Government launched the digital radio action plan. The purpose was to bring together the various interested parties to help drive uptake in digital radio. Through this process, a number of key barriers to radio’s transition were dealt with. First, the issues surrounding limited DAB coverage have been tackled: the BBC, Government and commercial radio agreed to support investment collectively to extend local DAB coverage from 72% in 2013 to more than 91% by the end of 2016, so matching the existing coverage of local commercial FM services.

Secondly, through the digital radio action plan real progress was made on cars. In 2010 fewer than 5% of new cars had DAB installed as standard. Through the collective efforts of the Society of Motor Manufacturers and Traders and the radio industry, almost 75% of new cars now have DAB radios fitted as standard—a figure we expect to increase to close to 100% in two years. Some 20% of radio listening in cars is now to digital.

However, even with this momentum, it was clear by December 2013 that while steady progress had been made it was not the right time to commit to a radio switchover for the UK or to set a firm or indicative timetable for a future switchover. Building on the momentum created by the action plan in 2013, the Government announced a package of measures to support UK radio’s transition. This included a £7.75 million commitment to extend the local DAB network to match current commercial FM equivalents, funding for feasibility work by Ofcom to help more small stations go digital, support for the radio industry’s digital radio tick scheme and efforts to accelerate DAB car conversion.

However, a consequence of the Government’s decision in December 2013 was that the licences of more than 60 radio stations renewed under the 2010 Act’s provisions will expire between 2017 and 2021. This is before the date when a switchover will be possible. It is this issue that the order seeks to deal with. At the time that the Digital Economy Act 2010 was passed, the Government and commercial radio anticipated that a timetable for switchover could be set as early as 2015 and that, with good progress, a switchover might even be completed in 2017 or 2018. The proposed seven-year duration for FM and AM licence renewals in the 2010 Act reflected that expectation. However, the reality is that the assessment made in 2009 and 2010 was too optimistic.

The Government strongly support a digital future for radio and want to ensure that policy continues to support the investment in extending choice and services. In November 2014, we launched a consultation to look at the issue and set out three options. First, there was to do nothing, not to legislate but instead to allow licences to expire and to be readvertised in the usual way by Ofcom. Secondly, we could allow the renewal for a further five-year period of licences renewed under Section 103B and Section 104AA of the Broadcasting Act 1990 and for 12 years for stations that had not yet been renewed under those sections. Finally, we could allow the renewal of licences for a longer period of time not specified above.

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Having fully considered all the consultation responses, both written and oral, we concluded that option 1, allowing licences to lapse, could impose significant costs on commercial radio at a time when we are trying to maintain certainty of direction and encourage the sector to maintain investment in DAB. As we set out in the impact assessment, our estimation is that these costs are likely to outweigh any potential benefits of allowing licences to be readvertised. More importantly, this option would run the risk of sending mixed signals to the radio industry about the future transition to digital radio at a time when it faces challenges from online aggregators such as Deezer and Spotify.

While there are some merits to option 3, a longer renewal period, including that it would provide licensees with absolute certainty until the point of a future switchover, we believe it would be a fundamental change to the regulatory framework for commercial radio. As noble Lords will recognise, this is something which requires much more detailed examination, and the Government announced in October that we and Ofcom have started work on that. In our view, allowing an extension for a further five years, which is option 2, is the best approach to support the policy objective of working towards a digital future for radio and supporting industry through this transition. In particular, it maintains the incentives for commercial radio to invest in digital radio and develop new services.

We believe the analogue radio licence extension set out in the order strikes the most effective balance between addressing the issues arising from the slower than expected digital radio migration while at the same time reducing the burdens on commercial radio that would otherwise arise if no steps were taken. I beg to move.

[Lord Stevenson of Balmacara (Lab)]

My Lords, I thank the Minister for the quick transition from department to department, the fluency with which he adopts his new brief and the quality of his representation which I have much enjoyed.

However—there is always a however—the reason for this legislative reform order, which is an interesting choice of vehicle for the process, although I do not disagree with it, is because the previous coalition Government and this Government are shooting themselves in the foot on this matter. There would not be a problem if the Government would face up to the fact that what is required is an early and specific date for digital switchover. That would drive the responsibilities of commercial and public service broadcasting and would build on the very successful change that has already happened in the automotive industry from FM and analogue radio to digital radio. The huge majority of new cars sold in this country now have digital radio.

It is all there for the taking. Covered in glory, crowned in his new raiment and wearing the arm of the digital reformer that at heart he surely is, the noble Earl could rise from his seat and proclaim to the world that at last there was a decision from a department not known for giving many decisions— or if it does, they are not very good ones—and we could all get back to normality. Is it not true that the emperor has no clothes and that this is a stop-gap measure? Choosing to extend radio licences in the commercial sector for five years—we are talking about three national radio stations and more than 60 local radio stations, which is a fair whack of the radio stations in this country—is simply going to repeat the uncertainty and chaos that has bedevilled us over the past five years and we will have to be back here in five years’ time extending this yet again. Who knows what we will do the next time? Will we be standing here suggesting that we just give them a permanent licence to print money, a permanent licence for radio broadcasting in order to continue to serve, I suppose faithfully, the 80% of people who say they are satisfied with what they have? I do not know, but the Government are making a mess of this and they ought to ’fess up and set a date, even at this late stage, which will give everybody a chance to work together to make it the success that the television changeover was.

Having said that, I enjoyed the document that was provided, and I thank the officials for it. It is one of the best I have seen in terms of explaining what the issue is and of setting out the context in which the decision has been reached. I do not agree with a lot of things said in it, but that does not take away my admiration of the way in which it attempts to be as transparent as possible. I recognise that and I am glad it is being minuted. Too often these things are just passed over.

I have five issues that I want to log at this stage. Our feeling on this side of the Committee is that this is the wrong way to go. We should set a date for digital switchover, stick to it and put all our effort into making that a success. If we are not going to do so, the proposal made is probably the least worst of the options presented.

First, will the noble Earl be a little more transparent than he has been about what will happen if there is no switchover by 2021? The order is effectively a five-year pause in a process that has an ineluctability about it. Will he give us any idea about what he thinks will happen in 2021? A lot of the evidence from the consultation meetings reflected on the fact that the worst thing for those involved in this area is uncertainty. While they will get certainty now as a result of the order, it will be for only a limited term. Many will have to think very hard about their business plans and whether they will extend beyond 2021.

Secondly, I am not at all clear that the explanatory document is right in suggesting that the issues that have swayed thinking on this were based on the possibility that, by advertising these licences now, there would be a churn, fuelled mainly by competition, that could be a stipulation on the product that comes out of the radio system as a whole. Those are my words, not exactly how it is put in the document. The Government—and the Opposition, too—believe that competition is a great spur to creativity. If we are interested in a broader and more successful creative economy, surely the right thing to do is to seek all the opportunities we have for competition, not to avoid them. Here we have an option where, although it would have been extra work for Ofcom—poor Ofcom—it could, in a reasonably short period of time, have advertised and received submissions from those who currently have licences and those who want them, in order to try to redraw the map of radio as we currently have it.

The document reflects a failure of the process. It says:

“Whilst there is little to no quantitative evidence on how many, and which, new entrants, might bid for any re-advertised licences, research by Value Partners demonstrated anecdotally that, should these licences be re-advertised, there would be some interest in them from new entrants particularly for the national and large city licenses”.

So we have some evidence that there would be interest in the larger franchises—even in some of the local ones. That would have provided some change. The document goes on to explain that that might have been about 10%. A 10% increase in competitiveness and creativity is not to be sneered at. If we had that in other industries we would be quite pleased with it. However, the document—signed off by Ministers—says:

“We do not believe that the hypothetical benefit to listeners and industry of a small number of new services outweighs the cost to the wider industry and to listeners of a wholesale re-advertisement process. We therefore consider that, taken as a whole, the provision in the draft Order strikes a fair balance between the public interest and the interest of any person who might be adversely affected by it”.

Not to readvertise is quite a big decision. I hope the noble Earl will not take it wrong when I say that this bit is a bit thin. We could have had more evidence. He could have sent this document back to officials and said, “I think if I’m going to stand up here and try to defend this against the fearsome Lord Stevenson, I need better evidence than just simply saying ‘anecdotally’ and ‘on balance’”.

I mentioned my concerns that some of this decision has been driven by worries that Ofcom might be troubled by having to do all this work. Ofcom is, of course, a body that covers most of its costs by recouping them from those concerned. Therefore, it is not a cost issue, but a volume or process issue. That is really in the hands of government. Again, it is infelicitous to blame Ofcom, which might be too busy to do this, for a decision that is being taken for different reasons. I would be interested to hear the noble Earl’s responses on that.

If we are not minded to support competition and creativity, we are worried about poor little Ofcom and we are not concerned about having to do this again in five years’ time, what are the other issues? There are two things I want to mention. The first relates to the paper provided in support of the LRO, which goes through the things that Ministers must decide. One of the things that Ministers must decide, as I am sure the Minister is aware, is whether or not the provision is of constitutional significance. The Government cannot be serious about this, surely. We are talking here about a range of diverse views and opinions; the ability of people up and down the country to receive news, comment and opinion; and the freedom of the press, independence and plurality. For the document to say the provision is not of constitutional significance does not bear scrutiny. I really think that is something that the Government should think very hard about. If they do not have that view about commercial radio on a national basis, why are they bothering? They may as well just give operators’ licences in perpetuity because it is obviously not important enough for them to be concerned about. I disagree. I think this is really important, and as part of our understanding of how the constitutional process works we need the contribution of a free and independent press, including radio and television, and a plurality of voices in order to make good decisions about that.

My final point is about the consultation process. There are many good things about the document but the best thing is the fact that at last we see some of the notes from the various meetings that have been held. Reading these through, there is just a slight feeling that we were talking to the establishment rather than the wider context. I did not see much there from people who might have been considered to be applicants for radio licences. Obviously, we might not know who they are but looking at the lists of people who were invited to these consultation meetings in Edinburgh and London, they were largely the establishment of radio. Again, looking at the written responses, we did not get much of a range of the general public. There were one or two freelance media consultants, I note, but not very much from the wider public. The Minister praised Radiocentre for supporting this proposal. Actually, it did not support the proposal in its evidence; it supported option 3, not option 2. It subsequently said that it supports option 2 and wishes it to go through—it would, wouldn’t it? It is involved in part of this process.

But enough from me—we are faced with a fait accompli in this matter because without a digital switchover date there is not much we can do about it. But I hope these points might be considered.

[The Earl of Courtown]

My Lords, I thank the noble Lord, Lord Stevenson, for his comments. Although he had concerns, I think he was generally supportive of the move. I do not want to put words in his mouth.

[Lord Stevenson of Balmacara]

I said that we are facing a fait accompli, which is certainly not the same thing as being supportive.

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[The Earl of Courtown]

I withdraw my remark. I also thank him for his congratulations to the officials in the department on the work they have done and the document that he received.

The noble Lord mentioned a number of different points. Once again, if I do not cover them all, I will ensure that I write to him. He mentioned a number of points relating to when the Government will make a decision on when the switchover will actually take place. He felt that it would be far better if we made a firm decision on that. Our position on the switchover decision remains the same. A decision about the timetable for a future switchover will be considered only once the listening and coverage criteria have been met; for example, when at least 50% of all listening is through digital, national DAB coverage is comparable to FM, and local DAB reaches 90% of towns. The noble Lord also asked when that stage will be reached. According to the radio industry source, on current trends digital listening should reach the 50% threshold sometime in late 2017 or 2018. We have always linked switchover to listener take-up and that has not changed.

The noble Lord also commented on the research commissioned from Value Partners and its findings. The research we commissioned on the various options for addressing the expiry of analogue licences was extremely useful as a starting point for a more detailed consideration of the future of radio licensing. However, we believe its conclusions are only partially developed, particularly when it comes to assessing the level of interest there will be around contesting commercial analogue radio licences in the open market. We concluded that the wider disruption caused by a major licensing round would outweigh the benefits of new entrants to the market. There is scope, as the noble Lord mentioned, for new entrants, through acquisition of existing stations or the development of services on DAB online. The launch of the second national multiplex in March 2016 will open the way to new providers coming into the UK radio market.

The noble Lord also asked why we are not setting a firm date for 2022 or 2023. We have always said that a switchover must be listener-led. If progress with listener take-up of digital radio continues, it is quite possible to envisage a scenario where a switchover takes place in the early 2020s, although the exact timing and process is something that will need to be carefully considered by the radio industry and the Government. I stress that we will not be in a position to commit to a switchover unless or until listeners are ready.

The noble Lord also mentioned the situation of smaller radio stations following a switchover. The Government recognise the vital role that local stations play in supporting the communities they serve. That is why we have always said that, in the event of a future switchover, part of the FM spectrum will be retained for smaller, independent local and community radio stations for as long as it is needed. At the same time, we recognise that some smaller stations want more choice in terms of broadcasting on the DAB platform and are concerned about being left behind as more radio goes digital. That is why DCMS has provided £500,000 to Ofcom to support further feasibility work on small-scale DAB solutions to enable smaller stations to broadcast on digital.

The noble Lord, Lord Stevenson, also asked why we are afraid of an open licence competition. We agree that there is a difficult balance. Stations can start on digital and online and broaden the market that way. He also drew attention to Ofcom as a resource that could undertake a licence reapplication process. Not at all—relicensing will create a period of instability for radio and this will make a future switchover decision harder.

The noble Lord, Lord Stevenson, also said that the subject of the order is not of constitutional significance. That is why we have opted for the smallest possible change: a five-year renewal. The scrutiny committee of both Houses, as I said, agree that it is not of constitutional importance. We are not seeking to restrict access to news or radio. I thank the noble Lord for his contribution, all the same. He certainly raised a number of important points. I commend the order to the Committee.

Motion agreed.

Committee adjourned at 6.34 pm.