Wednesday 29th March 2017
(7 years, 8 months ago)
Lords ChamberDigital Economy Act 2017 View all Digital Economy Act 2017 Debates Read Hansard Text Amendment Paper: HL Bill 102-III(Further Rev) Further revised third marshalled list for Report (PDF, 183KB) - (27 Mar 2017)
Baroness Howe of Idlicote
“Duty on Ofcom to report on filtering by internet access providers
(1) Ofcom must prepare a report for the Secretary of State, every two years from the date on which this Act is passed—(a) on the number of providers of an internet access service who are preventing or restricting access on the service to information, content, applications or services, for child protection purposes;(b) on the number of providers of an internet access service who are not preventing or restricting access on the service to information, content, applications or services, for child protection services; and(c) describing the actions that are being taken by providers of an internet access service to—(i) prevent or restrict access on the service to information, content, applications or services, for child protection purposes;(ii) provide and improve child protection via other means other than those listed in sub-paragraph (i); and(iii) provide relevant information to parents.(2) The report produced under subsection (1) must be laid before each House of Parliament.(3) In this section “internet access service” has the same meaning as in section 91.”
Baroness Howe of Idlicote (CB)
My Lords, I rise to speak to my Amendment 33ZLA on adult content filters. After all the lengthy discussions about age verification, some might be tempted to think that filters have been overtaken and eclipsed by age verification checks. However, that is not the case. The age verification checks in Part 3 relate narrowly to pornography and not to other non-pornographic adult content. This leaves out any protections in Part 3 on violence, self-harm, gambling and so on. In another place there was a debate about extending age verification checks to other forms of adult content and this is something that I think is worthy of further consideration, perhaps in the forthcoming Green Paper on internet safety.
In the short term, however, it seems to me that we should make better use of adult content filters. The Government have asked Ofcom to produce a series of reports on the filtering provisions and practices of the four largest ISPs. These reports have helpfully provided objective analysis of the way each of the four ISPs have approached adult content filters, the standards to which they have subscribed and the extent to which customers have used them. This information has been very useful for policymakers and parents. If we concede that it is important to understand what ISPs are doing in relation to adult content filters, however, it simply makes no sense to look only at the conduct of some ISPs. Indeed, if Ofcom was only going to look at the conduct of some ISPs, it would make more sense for it to shine the spotlight on the conduct of the smaller ISPs as they are not party to the family-friendly filtering agreement between the big four ISPs.
There is no public clarity about the conduct of smaller ISPs in terms of whether or not they provide adult content filtering options, how they provide these options or what filtering standards they apply. Far from making for transparency, this generates confusion for both parents and policymakers. My amendment would end this very unsatisfactory state of affairs and require Ofcom to assess the conduct of all ISPs in relation to adult content filters.
In making this argument, I am mindful that some have suggested that the smaller ISPs primarily service businesses rather than homes, which might cause them to conclude that it is not relevant to assess their conduct in relation to adult content filters. In the first instance, even if it were true that the smaller ISPs primarily service businesses, to the degree that they would not do this exclusively and would also service homes, there would be a clear need to assess their conduct in relation to adult content filters. After all, every child matters.
Secondly, and more importantly, while I certainly acknowledge that some small ISPs such as Claranet focus only on business customers, that is not the case for others such as KCOM, the Post Office and Plusnet. There is a sense in which the different assessment as to whether the smaller ISPs service businesses or homes highlights all too well the lack of clarity about the smaller ISPs, demonstrating the need to ask Ofcom to review their conduct in relation to adult content filters, as well as that of TalkTalk, Sky, Virgin and BT. I believe in transparency, and that we particularly need greater transparency in relation to the conduct of the smaller ISPs. This will serve two important ends. In the first instance, it will help service a clearer public policy debate about child safety online and on the role of filters, which I believe would greatly assist the Green Paper process. In the second instance, the data gathered could be made available to help parents wanting to have a good objective understanding from an official source of the kind of filtering options that an ISP provides and of the filtering standards to which it subscribes. This would help empower parents as they seek to rise to the challenge of helping to keep their children safer in a digital age.
In closing, I thank the Minister for meeting me to discuss the conduct of the smaller ISPs and for the conversations that he had subsequently about the approach of smaller ISPs with the Internet Service Providers’ Association. I very much welcome the fact that ISPA has now agreed to introduce a new step in its members’ sign-up process, which requires members to consider whether online safety tools are suitable for their customers. This provision, together with my amendment, would certainly help to move things forward. I beg to move.
Lord McColl of Dulwich (Con)
My Lords, I am very pleased to have been able to put my name to this amendment, which is also in the names of the noble Baroness, Lady Howe, and the noble Lord, Lord Collins. I commend the noble Baroness, Lady Howe, for all the work she has done in this important area and for her persistence in ensuring that we have the best internet filtering options available.
The noble Baroness’s amendment comes only a week after the House of Lords Communications Select Committee published its report, Growing up with the Internet. Most of us will need to read it carefully, as it has some important things to say about internet filtering which I hope the Government will consider as they put together their promised Green Paper on internet safety. I am concerned that the committee’s report says on page 3 that,
“self-regulation by industry is failing”.
Indeed, it makes me wonder whether we will need to revisit Clause 91 at some point so that it goes further in mandating all internet service providers to provide filtering.
For the time being, I am glad that the Government have taken measures to ensure that family-friendly filtering can continue to operate under the EU rules on net neutrality for both internet service providers and mobile phone operators. I am also glad that they will be hosting conversations which will be influenced by the noble Lords’ report on what is needed to ensure the best interests of children.
The internet, mobile phones and young people go together. If they did not, we would not have needed the age verification plans that the Government have introduced under Part 3. Last year, Ofcom’s annual report on children’s media use showed that, for the first time, children’s internet use overtook their use of TV. Some 79% of 12 to 15 year-olds own a smartphone. This is technology in our teens’ pockets with no 9 pm watershed. While there is an automatic adult bar in place on smartphones, 46% of parents of 12 to 15 year- olds do not know whether it is in place or not.
Internet network filtering is another option for parents as they raise digital natives. While Part 3 seeks to tackle children’s access to pornography, filters on both mobile phones and home broadband can target other adult content, including violence and drugs. The ISPs offer customised filtering and different variations of the filtering options. When the big four ISPs agreed to provide family-friendly filtering, the Government asked Ofcom to produce a series of reports on how their commitment was progressing. Amendment 33ZLA is an extension of that requirement and would apply to all ISPs for the first time—big and small—and to mobile phone operators.
My noble friend Lady Shields described internet filters as,
“a vital tool for parents”.—[Official Report, 5/11/15; col. 1799.]
I agree, but I am concerned about the transparency of options for parents, especially in relation to the smaller ISPs. A mystery shopper exercise revealed that, when asked on the phone about filtering provision, some smaller ISPs were able to say whether filtering was offered, but seven were unable to confirm either way.
In this context it seems to me that, having conceded that Ofcom should report on some of the filtering policies of some ISPs, it makes no sense not to cover the smaller providers. Indeed, it is in respect of them that the need for a review is greatest—although the review of the four larger providers is vital and must continue. The findings of the last report were very useful.
These options need to be clearly set out to parents, and I support the requirement in Amendment 33ZLA that Ofcom should produce a report every two years setting out what all the mobile phone operators and ISPs are doing—or not doing—on internet filtering. This state-of-the-nation filtering report would serve two key purposes. First, it would help to bring greater clarity and transparency, which would be invaluable for policymakers, especially in the context of the Green Paper and beyond. Secondly, the data could also help inform parents of their options for filtering, so that they would not have to go to multiple websites, with differing levels of transparency, and try to work out the differing options.
I hope that, if this information is more accessible to parents, it will empower them to make the right ISP choice for their family and will increase their take-up of filters. The use of home network filters has been increasing over the last few years but they are still used by only about a third of parents. There are 7.96 million families with dependent children in the UK, and 99% of these households have fixed broadband. By my calculations, that means that 5.25 million households do not use internet filtering. Some parents have deliberately chosen not to use filtering, but 42% of parents of 12 to 15 year-olds do not know about internet filters. I hope that our Amendment 33ZLA will help provide the support and information they need.
This proposal is quite modest and fully in line with the intentions of the Government’s Green Paper on internet safety, which has as an objective,
“helping parents face up to the dangers and discuss them with children”.
Indeed, it is difficult for the Government to argue against this, given that they have established the relevant precedent by helpfully asking Ofcom to review some of the ISPs’ filtering practices. I hope that the House will support Amendment 33ZLA to ensure that Ofcom reports on all ISPs, big and small.
Baroness Benjamin (LD)
My Lords, I support Amendment 33ZLA, which would require Ofcom to report on internet filtering. I, too, thank the noble Baroness, Lady Howe, for persistently raising this issue in the House, and I welcomed the Government’s proposal at Second Reading to bring forward an amendment on filtering.
As we have already heard, last week the Communications Select Committee, on which I sit, published its report, Growing up with the Internet, which covered the important subject of internet filters.
We should not be lulled into complacency by Part 3 of the Bill. Although it is very welcome, it deals only with children’s access to pornography and not to any of the other subjects covered by internet filtering. The Select Committee heard of a,
“worrying rise in unhappy and anxious children emerging alongside the upward trend of childhood internet use”.
This is a sobering reminder that there are many challenges ahead of us.
I hope that the Government will read our report carefully as they prepare their Green Paper on internet safety. In doing so, I particularly hope that they will review the committee’s two recommendations on internet filters. On page 60, the report recommends that,
“all ISPs and mobile network operators should be required not only to offer child-friendly content control filters, but also for those filters to be ‘on’ by default for all customers. Adult customers should be able to switch off such filters”.
We also recommend:
“Filter systems should be designed to an agreed minimum standard”.
In this context, while the Government’s Committee stage amendment, which basically says to ISPs, “You may provide filtering if you want to, but, equally, you don’t have to if you don’t want to”, is clearly problematic. As we move towards the Green Paper we must look to require all ISPs that service homes among their customer base to provide unavoidable choice—or, better still, default-on adult-content filtering options.
I know that the Minister gave us assurances that the Internet Service Providers’ Association was going to encourage its members to consider what was appropriate for their customer base. But, given the strong messages in our report for child-centred design, I am not convinced that that is enough—unless an ISP is solely for businesses.
I hope that the Government will review their position on internet filtering in the light of our report and that, in the meantime, they will support this modest but important amendment. It will give policymakers a clear picture of the landscape of what is and is not being provided by ISPs. Having conceded that it is appropriate to ask Ofcom to review the approach of some ISPs to adult-content filters, logically they should be looking at the conduct of all ISPs that service homes. This is especially important in relation to smaller ISPs whose practices and standards are often less accessible. This will really help the preparation for the Green Paper.
The information should also be provided to consumers on the Ofcom website on the web page Advice for Consumers. We need to put as many tools as we can in the hands of parents to help them navigate the complexities of filters. Of course, if the Government adopted the committee’s recommendation that there should be minimum standards for filtering, we would make parents’ lives much easier. I look forward to discussing this further with the Minister in one of his round tables on the Green Paper and I very much hope that noble Lords will support Amendment 33ZLA. It is a vital step towards greater industry transparency with respect to child protection online.
Lord Collins of Highbury (Lab)
My Lords, I too thank the noble Baroness, Lady Howe, for this amendment. I added my name to it and support very much the principles contained in it. As she said in her introduction, this is not simply about pornography or about age verification, where we have addressed those issues. It is about giving parents the tools for the job so that they can be sure that their children are accessing the internet in a responsible way. That is a key issue because we have just had an hour-long debate on gambling; we know that access to gambling is on the internet nowadays. We have controls in casinos and age limits in betting shops, but we also know that someone can bet huge amounts on mobile phones using the internet. We need to give parents those tools. That is what the House of Lords Communications Committee resolved. The report is excellent and I welcome noble Lords’ references to it.
The Minister will no doubt reassure the House about what we are doing with the major ISPs and how Ofcom will be reviewing that, but if, as the noble Baroness said, 10% or potentially even 15% of the market is not covered by that review, we are not addressing the full picture. What we need to aim for in this highly competitive market is an industry standard so that consumers understand that, wherever they go to get the best price for access to the internet, the whole industry will be applying the same standards in terms of the ability of parents to ensure that their children are accessing the internet in a responsible way.
Reference has been made in this discussion to the review being conducted by Ofcom. Will the Minister consider whether that review could be extended to all ISPs? He has the authority and he does not need this amendment to be approved, but he could reassure us that we will not simply rely on the letter from the industry saying, “we will approach the other ISPs and seek their co-operation”. He can ask Ofcom to do this and I urge him to give noble Lords that reassurance.
The Parliamentary Under-Secretary of State, Department for Culture, Media and Sport (Lord Ashton of Hyde) (Con)
My Lords, I thank all noble Lords who have contributed to the debate. I will start by saying that the noble Baroness, Lady Howe, has been a consistently strong voice in this House in favour of protecting children online and we pay tribute to that. As noble Lords know, we introduced Clause 91 in Committee on the provision of family-friendly filters, clarifying that internet service providers may restrict access to information, content, applications or services where that is in accordance with the terms of service agreed by the end user. That clause gives a reassurance to providers that such filters are compliant with EU net neutrality regulations, so the debate on that has been had in this Bill.
The noble Lord, Lord Collins, my noble friend Lord McColl and the noble Baroness, Lady Benjamin, referred to the report of the House of Lords Communications Committee, Growing up with the internet, which was published on 21 March. The noble Baroness, Lady Benjamin, hopes that we will take careful note of it. She knows that we listen to her—she had an amendment accepted. Among the many recommendations in the report, there is a call for a mandatory default on filters set to a minimum standard to be a requirement made of all ISPs and mobile network operators. Of course I can confirm that we will consider the recommendations in the report carefully as part of our developing work on the new internet safety strategy, and we will respond to it formally in due course.
However, we believe that the current voluntary approach on filters works well and that a mandatory approach would run the risk of replacing the current user-friendly parental control tools with a more inflexible top-down system. As has been noted by several noble Lords, the Internet Service Providers’ Association, the trade body for the industry, is taking further action to encourage smaller ISPs to consider online safety issues and parental control filters for their customers where appropriate. But having said that, I can make the commitment that we will listen to what the committee has said on this subject and, as I say, we will respond in due course. This amendment would require Ofcom to report to the Secretary of State every two years on the number of internet access providers which do or do not offer filters and to describe the actions being undertaken by them in relation to child protection.
As noble Lords will know, in 2013 the previous Prime Minister announced our agreement with the big four ISPs—Sky, Virgin Media, BT and TalkTalk—that they would offer network-level family filters to all customers by the end of December 2014. Ofcom was asked to produce reports on this rollout and did so in four reports issued between January 2014 and December 2015 covering the detail on the provision of filters and child protection measures by the big four ISPs, covering 88% of the fixed broadband market. The vast majority of consumer-focused broadband is therefore a matter of public record. The Ofcom reports also cover data on take-up and usage by parents of these filters. The data are now updated annually in Ofcom’s Children and Parents: Media Use and Attitudes reports, which provide statistics on parental usage and awareness of filters and experience of online safety. In respect of ISPs other than the big four, which run into hundreds, the vast majority of these are SMEs and micro-businesses, as noble Lords may be aware, offering niche, specialist and business-to-business services to small subscriber bases.
With that in mind, it is not clear from the amendment how Ofcom would gather the information it would need to prepare the statutory reports. It is likely that Ofcom would need to identify and ask providers for this information. This would be a very big task for Ofcom as ISPs enter and leave the market constantly and there is no requirement for them to register with Ofcom. It would also be disproportionate for the majority of ISPs, most of which are not focused on the mainstream consumer market, to be asked to provide this information.
The information covered by the existing Ofcom reporting ensures that the most relevant data are sourced on the actual usage of filters by parents, without disproportionate costs or impact on SMEs and micro-businesses. A statutory approach could also unnecessarily limit the scope and focus of reporting moving forward, as technology and the market changes.
On that basis, we consider it more appropriate for Ofcom’s reporting to be on a non-statutory basis to allow greater flexibility. Therefore, I hope that in light of that the noble Baroness will withdraw her amendment.
Baroness Howe of Idlicote
My Lords, I am most grateful to all noble Lords who have taken part in this debate and raised all these extremely important issues, and to the Minister for setting out his views on what has been achieved and some of what he considers the danger of asking Ofcom to do rather more than at present, therefore perhaps limiting some of the other work. I would certainly like to see rather more progress being achieved, but on the other hand I understand the extent to which steps have been taken. In the circumstances I will not press the amendment further, but I hope that the Minister will keep the whole issue under review and let us know as and when he becomes even more satisfied with what has been achieved, remembering that at the back of all this it is the small users, such as the parents and children, who we are really concerned about protecting. Having said that, I will withdraw my amendment.
Lord Ashton of Hyde
“Regulations about charges payable to the Information Commissioner
(1) The Secretary of State may by regulations require data controllers to pay charges of an amount specified in the regulations to the Information Commissioner.(2) Regulations under subsection (1) may require a data controller to pay a charge regardless of whether the Information Commissioner has provided, or proposes to provide, a service to the data controller.(3) Regulations under subsection (1) may make provision about the time or times at which, or period or periods within which, a charge must be paid.(4) Regulations under subsection (1) may make provision—(a) for different charges to be payable in different cases;(b) for cases in which a discounted charge is payable;(c) for cases in which no charge is payable;(d) for cases in which a charge which has been paid is to be refunded.(5) The Secretary of State may by regulations make provision—(a) requiring a data controller to provide information to the Information Commissioner, or(b) enabling the Commissioner to require a data controller to provide information to the Commissioner,for either or both of the purposes mentioned in subsection (6).(6) Those purposes are—(a) determining whether a charge is payable by the data controller under regulations under subsection (1);(b) determining the amount of a charge payable by the data controller.(7) The provision that may be made under subsection (5)(a) includes, in particular, provision requiring a data controller to notify the Information Commissioner of a change in the data controller’s circumstances of a kind specified in the regulations. (8) In this section “data controller” means a person who, alone or jointly with others, determines the purposes and means of the processing of personal data.(9) In subsection (8) “personal data” means any information relating to an identified or identifiable individual.(10) For this purpose an individual is “identifiable” if the individual can be identified, directly or indirectly, in particular by reference to—(a) an identifier such as a name, an identification number, location data or an online identifier, or(b) one or more factors specific to the physical, physiological, genetic, mental, economic, cultural or social identity of the individual.(11) Where the purposes and means of the processing of personal data are determined by or on behalf of the House of Commons or House of Lords, other than where they are determined by or on behalf of the Intelligence and Security Committee of Parliament, the data controller in respect of those data for the purposes of this section is the Corporate Officer of that House.”
Lord Ashton of Hyde
My Lords, the government amendments in this group seek to give the Secretary of State the power to make regulations introducing new charges to fund the regulatory functions of the Information Commissioner for data protection. The charges will replace the existing notification fees set out in regulations made under Sections 18 and 26 of the Data Protection Act 1998.
The amendments will also repeal Part 3 of the Data Protection Act, which imposes an obligation on data controllers to notify the Information Commissioner of certain types of data processing. The commissioner maintains a register of all data controllers. The General Data Protection Regulation removes the obligation on data controllers to notify the Commissioner, so it is necessary to repeal Part 3. The GDPR will become part of UK law on 25 May 2018.
The amendments seek to replicate the substance of the fee-raising powers in the Data Protection Act 1998. I can confirm that charges will continue to be based on the principle of full cost recovery and, in line with the current model, fee levels will be determined on size and turnover of organisation, but will also take account of the volume of personal data being processed by organisations to recognise the additional risk of a breach occurring when an organisation processes large volumes of sensitive personal data.
Although organisations will no longer be required to notify the Information Commissioner that they are processing personal data, they will continue to receive a range of services from the Information Commissioner’s Office in return for the charge. This includes good practice guidance on organisations’ obligations under the data protection framework and how to comply; online training videos; free voluntary audits of organisations’ data protection practices to support improved compliance; and advisory visits.
The Government have considered the DPRRC’s recommendations on these clauses and have responded. We agree with the committee that regulations made under the new charging powers should be subject to appropriate external consultation and parliamentary oversight. We will therefore bring forward an amendment at Third Reading to require the Secretary of State to consult,
“such representatives of persons likely to be affected by the regulations as the Secretary of State thinks appropriate and such other persons as the Secretary of State thinks appropriate”,
in addition to the Information Commissioner. We will also bring forward an amendment to require the Secretary of State to use the affirmative procedure when making regulations under the new power, except in the case of purely inflationary increases, where the negative procedure will apply.
We have considered carefully the committee’s recommendation to require the Secretary of State to ensure that the income from the charges does not exceed the reasonably anticipated costs of discharging the specified functions of the Information Commissioner and Secretary of State related to data protection. It is the Government’s view that the limited flexibility given in the government amendments is necessary, given rapid developments in the digital economy and to manage the inevitable period of transition as the ICO takes on additional responsibilities under the forthcoming general data protection regulation. The language used in the Government’s amendment mirrors that in the existing Data Protection Act. Parliament has not expressed any concerns about how the existing powers have been exercised and we believe that by subjecting each exercise of the power to the affirmative procedure, we are putting in place sufficient parliamentary safeguards to ensure the powers will be exercised in a rational and responsible way in the future. We therefore do not intend to table an amendment to address this recommendation. I beg to move.
Amendment 33ZN (to Amendment 33ZM)
Lord Clement-Jones
Lord Clement-Jones (LD)
My Lords, I thank the Minister for that introduction but I must confess to being somewhat baffled by it. I am very happy that he has taken on board some of the Delegated Powers and Regulatory Reform Committee’s recommendations. However, he read out word for word from his letter to us of 22 March why he is not agreeing to table an amendment similar to Amendment 33ZP, which is in my name and that of my noble friend Lady Hamwee, yet in his introduction, he assured us that the actual charges would be no more than full cost recovery. I therefore do not really understand what his objection is to enshrining that in primary legislation. I certainly do not understand the paragraph that begins:
“It is the Government’s view that the limited flexibility given in the Government’s amendments is necessary given rapid developments in the digital economy and to manage the inevitable period of transition”.
Full cost recovery is full cost recovery—I cannot see any ambiguity or any need to be particularly flexible going forward. Just because the language used in the Government’s amendment mirrors the existing Data Protection Act does not mean that we cannot improve on it.
This is a bit of a curate’s egg. Although I am of course pleased that the Minister is responding to two-thirds of the committee’s report, the really important bit—making sure that the ICO does not overcharge— is not catered for. A bit more explanation from the Minister is needed as to why he cannot simply enshrine that in a third amendment at Third Reading.
Lord Collins of Highbury
I have tabled Amendment 33ZPA, which deals explicitly with the Delegated Powers Committee’s recommendation. As the Minister will know, immediately on seeing the government amendments I approached him and wanted a discussion, because I was anxious that items were suddenly being put in the Bill of which no mention had been made before. We had had amendments relating to the Government’s willingness to implement the GDPR and they were reluctant to address that issue in the Bill, but suddenly the GDPR was to come into force on 18 May and we needed time to ensure that charges could be properly accommodated. I was concerned that suddenly all this was happening. The Minister wrote to me after our meeting and I was happy to learn that the Delegated Powers Committee had come up with the same concerns as me.
I want to be clear that my amendment specifically picks up the words of the committee. This is not simply about covering costs—I am sure that the Minister will reassure us about that; it is also about creep. It is about whether the Government will ask the ICO to undertake other things for which charges will suddenly become applicable, as was referenced in the report. It cited,
“broadly similar legislation enabling the Government to prescribe enhanced court fees, which they are relying on to introduce large increases in probate fees”.
We know that the ICO wants to extend its powers—quite rightly in some respects—but it should not do so without proper parliamentary scrutiny. I want the Minister to give me a clear assurance that the specific example given by the committee will not be applicable in relation to these charges. The “limited flexibility” of which he spoke gives the Government much wider powers. Why do they need limited flexibility when they are introducing a charging regime to meet the requirements of the GDPR and the specified responsibilities of the ICO? If they are to go beyond that and say that they need wriggle room in the form of what are described as limited powers, Parliament deserves the opportunity properly to scrutinise such changes. I reserve the option of tabling amendments at Third Reading that bring forward the recommendations of the Delegated Powers Committee. I hope that the Minister can reassure me about the limited power or wriggle room that he says the Government need. I want to know why they need it.
Lord Ashton of Hyde
My Lords, I listened with interest and a certain amount of apprehension to this debate and the contributions made by noble Lords. As I said in my opening remarks, the Government intend to bring forward at Third Reading amendments to address the intentions of Amendments 33ZR, 33ZS, 33ZT and 33ZV tabled by the noble Lord, Lord Clement-Jones, and the noble Baroness, Lady Hamwee.
I listened to the arguments in support of Amendments 33ZN, 33ZP and 33ZPA. However, we need the existing flexibility in the government amendments because there is rapid development in the digital economy. That means that the role of the data protection regulator is continually evolving. We want to allow flexibility to manage the period of transition as the ICO takes on additional responsibilities under the forthcoming GDPR. For example, in our amendment we specifically refer to discounts to certain organisations.
I understand why noble Lords are worried about giving additional powers to the ICO. The noble Lord, Lord Collins, talked about “creep” on this. I reassure noble Lords that this will be on a full cost recovery basis and it is in line with the current charging regime, so the fees will be determined by the size and turnover of the organisation, as I said at the beginning. We will consult data controllers on the shape of the new regime before laying regulations to introduce new charges. I repeat that the new model will continue to be based on the full cost recovery principle. On parliamentary scrutiny, the affirmative procedure will allow that scrutiny in Parliament.
The other reason for this is that the ICO fees regime needs to be in place by 1 April, ahead of the GDPR. In advance of this, it will be necessary to consult organisations on the proposed fees levels and lay the fees regulations in sufficient time for the start of the 2018-19 financial year. We would not be able to do that in the third Session.
To answer the noble Lord, Lord Clement-Jones, on the language in the proposed new section, the nature of the ICO role is changing with the changes in electronic communications—for example, in the regulation on cookies. We need some flexibility without the restrictive language of the noble Lord’s amendment.
I hope noble Lords will agree that subjecting regulations made under these powers to consultation and the affirmative procedure offers the necessary safeguards to ensure the powers are used proportionately. I therefore respectfully ask that the noble Lord withdraws the amendment.
Lord Collins of Highbury
Bearing in mind the comments I made, would the Minister take the opportunity to meet me and other interested Peers before Third Reading so that we can be clear and reassured that those points are covered by the government amendments?
Lord Ashton of Hyde
It is always a pleasure to meet the noble Lord and I give that undertaking.
Lord Clement-Jones
My Lords, I thank the Minister for that undertaking, which would be extremely helpful and sensible in the circumstances. We will have rather a limited amount of business at Third Reading, no doubt in prime time. We might well want to take this issue forward if we have not had satisfactory discussions in the meantime. No doubt, that can take place early next week if Third Reading takes place on Wednesday.
Lord Ashton of Hyde
I am very happy to meet. Obviously, I make no commitments as to what will emerge from that meeting.
Lord Clement-Jones
My Lords, I would not expect the Minister to make commitments at this stage, just to listen to the arguments that we have already made and will no doubt make again in the meeting. I am very grateful to the Minister. We have Third Reading where we can—
Lord Stevenson of Balmacara (Lab)
I am abusing the system. I apologise for interrupting. I am grateful to the noble Lord for giving way. My question is directed at the Minister through the noble Lord, to maintain some semblance of protocol. I think the question my noble friend was trying to ask was, given that the Minister has committed to bringing back an amendment which covers much of the ground that has been discussed today, because there are issues he wishes to solidify, the assumption is that the points that have been raised may be raised again at Third Reading. He is not asking him to concede any additional work. I make it absolutely clear, because of the need for the clerks to be sure about this, that there will be a discussion at Third Reading on the substantive points that have been made so far.
Lord Ashton of Hyde
What the noble Lord, Lord Collins, asked me to do was to meet to discuss these issues before Third Reading. I agreed to meet him and the noble Lord, Lord Clement-Jones, if he wants to do that. I said that we were going to bring forward two amendments and we will continue to do that. I think it is the other one, where we have agreed not to do that, that he wants to talk about, but I am happy to talk about all of them. We will bring forward the two amendments at Third Reading. Obviously, I can make no commitment about any extra amendments but I am happy to talk about it.
Lord Clement-Jones
I completely understand that but, as the Minister is fully aware, because it is Third Reading, our ability to discuss is limited by the rules. But we could do it by way of an amendment to the Minister’s amendment. That is our assumption, I think, in the circumstances. On that basis, I am happy to withdraw Amendment 33ZN.
Lord Ashton of Hyde
“Functions relating to regulations under section (Regulations about charges payable to the Information Commissioner)
(1) Before making regulations under section (Regulations about charges payable to the Information Commissioner)(1) or (5) the Secretary of State must consult the Information Commissioner.(2) In making regulations under section (Regulations about charges payable to the Information Commissioner)(1), the Secretary of State must have regard to the desirability of securing that the charges payable to the Information Commissioner under such regulations are sufficient to offset—(a) expenses incurred by the Commissioner in discharging the Commissioner’s functions— (i) under the Data Protection Act 1998,(ii) under or by virtue of the Privacy and Electronic Communications (EC Directive) Regulations 2003 (SI 2003/2426),(iii) under the General Data Protection Regulation,(iv) under regulations which implement the General Data Protection Regulation or the Criminal Data Directive,(v) by virtue of section (Regulations about charges payable to the Information Commissioner), and(vi) under this section,(b) any expenses of the Secretary of State in respect of the Commissioner so far as attributable to those functions,(c) to the extent that the Secretary of State considers appropriate, any deficit previously incurred (whether before or after the passing of this Act) in respect of the expenses mentioned in paragraph (a), and(d) to the extent that the Secretary of State considers appropriate, expenses incurred by the Secretary of State in respect of the inclusion of any officers or staff of the Commissioner in any scheme under section 1 of the Superannuation Act 1972.(3) In subsection (2)—“the Criminal Data Directive” means Directive (EU) 2016/680 of the European Parliament and of the Council of 27 April 2016 on the protection of natural persons with regard to the processing of personal data by competent authorities for the purposes of the prevention, investigation, detection or prosecution of criminal offences or the execution of criminal penalties, and on the free movement of such data, and repealing Council Framework Decision 2008/977/JHA;“the General Data Protection Regulation” means Regulation (EU) 2016/679 of the European Parliament and of the Council of 27 April 2016 on the protection of natural persons with regard to the processing of personal data and on the free movement of such data, and repealing Directive 95/46/EC (General Data Protection Regulation).(4) The Secretary of State may from time to time require the Information Commissioner to provide information about the expenses referred to in subsection (2)(a).(5) The Information Commissioner must keep under review the working of regulations under section (Regulations about charges payable to the Information Commissioner)(1) or (5) and may from time to time submit proposals to the Secretary of State for amendments to be made to the regulations.(6) The Secretary of State must review the working of regulations under section (Regulations about charges payable to the Information Commissioner)(1) or (5)—(a) at the end of the period of five years beginning with the making of the first set of regulations under that section, and(b) at the end of each subsequent five year period.”
Lord Ashton of Hyde
“Supplementary provision relating to section (Regulations about charges payable to the Information Commissioner)
(1) Regulations under section (Regulations about charges payable to the Information Commissioner)(1) or (5) are to be made by statutory instrument.(2) A statutory instrument containing regulations under section (Regulations about charges payable to the Information Commissioner)(1) or (5) is to be laid before Parliament after being made.(3) Regulations under section (Regulations about charges payable to the Information Commissioner)(1) or (5)—(a) may make different provision for different purposes;(b) may make transitional, transitory or saving provision;(c) may make incidental, supplemental or consequential provision.(4) Regulations under section (Regulations about charges payable to the Information Commissioner)(1) or (5) may bind the Crown.(5) But regulations under section (Regulations about charges payable to the Information Commissioner)(1) or (5) may not apply to—(a) Her Majesty in Her private capacity,(b) Her Majesty in right of the Duchy of Lancaster, or(c) the Duke of Cornwall.(6) For the purposes of section (Regulations about charges payable to the Information Commissioner) each government department is to be treated as a person separate from any other government department.(7) In subsection (6)“government department” includes—(a) any part of the Scottish Administration;(b) a Northern Ireland department;(c) the Welsh Government;(d) any body or authority exercising statutory functions on behalf of the Crown.”
Lord Ashton of Hyde
“Amendments relating to section (Regulations about charges payable to the Information Commissioner)
(1) The Data Protection Act 1998 is amended in accordance with subsections (2) to (7).(2) Omit Part 3 (notification by data controllers).(3) In section 33A(1)(manual data held by public authorities) omit paragraph (e)(but not the “and” following that paragraph).(4) In section 71 (index of defined expressions) omit the entries relating to “address”, “fees regulations”, “notification requirements”, “prescribed” and “registrable particulars”.(5) In Part 2 of Schedule 1 (interpretation of the data protection principles) in paragraph 5 omit paragraph (b) and the “or” preceding that paragraph.(6) In Part 1 of Schedule 5 (the Information Commissioner) in paragraph 9(1)(destination of fees etc) after “the Freedom of Information Act 2000” insert “and all charges received by the Commissioner under regulations under section (Regulations about charges payable to the Information Commissioner) (1) of the Digital Economy Act 2017”.(7) In Schedule 14 (transitional provisions and savings) omit paragraph 2 (registration under Part 2 of the Data Protection Act 1984).(8) In regulation 5(3)(b) of the High Court Enforcement Officers Regulations 2004 (SI 2004/400)(application procedure) omit paragraph (iii). (9) In consequence of the repeal in subsection (2) the following are repealed or revoked—(a) section 71 of the Freedom of Information Act 2000;(b) in paragraph 6 of Schedule 2 to the Transfer of Functions (Miscellaneous) Order 2001 (SI 2001/3500)—(i) in sub-paragraph (1), paragraphs (h) to (m), and(ii) sub-paragraph (2);(c) in paragraph 9(1)(a) of Schedule 2 to the Secretary of State for Constitutional Affairs Order 2003 (SI 2003/1887), the words “16, 17, 22, 23, 25, 26,”;(d) Part 1 of Schedule 20 to the Coroners and Justice Act 2009;(e) paragraph 26 of Schedule 2 to the Transfer of Tribunal Functions Order 2010 (SI 2010/22).”
Lord Ashton of Hyde
“PUBLIC SERVICE DELIVERY: SPECIFIED PERSONS FOR THE PURPOSES OF SECTION 311_ The Secretary of State for the Home Department.2_ The Secretary of State for Defence.3_ The Lord Chancellor.4_ The Secretary of State for Justice.5_ The Secretary of State for Education.6_ The Secretary of State for Business, Energy and Industrial Strategy.7_ The Secretary of State for Work and Pensions.8_ The Secretary of State for Communities and Local Government.9_ The Secretary of State for Culture, Media and Sport.10_ Her Majesty’s Revenue and Customs.11_ A county council in England.12_ A district council in England.13_ A London borough council.14_ A combined authority established under section 103 of the Local Democracy, Economic Development and Construction Act 2009.15_ The Common Council of the City of London in its capacity as a local authority.16_ The Council of the Isles of Scilly.17_ The Greater London Authority.18_ A metropolitan county fire and rescue authority.19_ The London Fire Commissioner.20_ A fire and rescue authority in England constituted by a scheme under section 2 of the Fire and Rescue Services Act 2004 or a scheme to which section 4 of that Act applies.21_ A fire and rescue authority created by a scheme under section 4A of the Fire and Rescue Services Act 2004.22_ A chief officer of police for a police area in England and Wales.23_ The proprietor of a school within the meaning of the Education Act 1996.24_ The proprietor of an Academy within the meaning of that Act.25_ The responsible person in relation to an educational institution as defined by section 72(5) of the Education and Skills Act 2008 (other than a person within paragraph 23 or 24). 26_ The Gas and Electricity Markets Authority.27_ The Chief Land Registrar.28_ A person providing services in connection with a specified objective (within the meaning of section 31) to a specified person who is a public authority.”
“PUBLIC SERVICE DELIVERY: SPECIFIED PERSONS FOR THE PURPOSES OF SECTIONS 32 AND 331_ The Secretary of State for Business, Energy and Industrial Strategy.2_ The Secretary of State for Work and Pensions.3_ The Secretary of State for Communities and Local Government.4_ Her Majesty’s Revenue and Customs.5_ A county council in England.6_ A district council in England.7_ A London borough council.8_ A combined authority established under section 103 of the Local Democracy, Economic Development and Construction Act 2009.9_ The Common Council of the City of London in its capacity as a local authority.10_ The Council of the Isles of Scilly.11_ The Greater London Authority.12_ A metropolitan county fire and rescue authority.13_ The London Fire Commissioner.14_ A fire and rescue authority in England constituted by a scheme under section 2 of the Fire and Rescue Services Act 2004 or a scheme to which section 4 of that Act applies.15_ A fire and rescue authority created by a scheme under section 4A of the Fire and Rescue Services Act 2004.16_ The Gas and Electricity Markets Authority.17_ The Chief Land Registrar.18_ A person providing services in connection with a fuel poverty measure (within the meaning of section 32) to a specified person who is a public authority.”
“PUBLIC SERVICE DELIVERY: SPECIFIED PERSONS FOR THE PURPOSES OF SECTIONS 34 AND 351_ The Secretary of State for Work and Pensions.2_ The Secretary of State for Communities and Local Government.3_ Her Majesty’s Revenue and Customs.4_ A county council in England.5_ A district council in England.6_ A London borough council.7_ A combined authority established under section 103 of the Local Democracy, Economic Development and Construction Act 2009.8_ The Common Council of the City of London in its capacity as a local authority.9_ The Council of the Isles of Scilly.10_ The Greater London Authority.11_ The Chief Land Registrar.12_ A person providing services in connection with a water poverty measure (within the meaning of section 34) to a specified person who is a public authority.”
“SPECIFIED PERSONS FOR THE PURPOSES OF THE DEBT PROVISIONS1_ The Secretary of State for the Home Department.2_ The Lord Chancellor. 3_ The Secretary of State for Justice.4_ The Secretary of State for Education.5_ The Secretary of State for Business, Energy and Industrial Strategy.6_ The Secretary of State for Work and Pensions.7_ The Secretary of State for Transport.8_ Her Majesty’s Revenue and Customs.9_ The Minister for the Cabinet Office.10_ A county council in England.11_ A district council in England.12_ A London borough council.13_ The Common Council of the City of London in its capacity as a local authority.14_ The Council of the Isles of Scilly.15_ The Greater London Authority.16_ The Student Loans Company.17_ A person providing services to a specified person who is a public authority in respect of the taking of action in connection with debt owed to a public authority or to the Crown.”
Lord Ashton of Hyde
“SPECIFIED PERSONS FOR THE PURPOSES OF THE FRAUD PROVISIONS1_ The Secretary of State for the Home Department.2_ The Secretary of State for Defence.3_ The Lord Chancellor.4_ The Secretary of State for Justice.5_ The Secretary of State for Education.6_ The Secretary of State for Business, Energy and Industrial Strategy.7_ The Secretary of State for Work and Pensions.8_ The Secretary of State for Transport.9_ The Secretary of State for Communities and Local Government.10_ The Secretary of State for the Environment, Food and Rural Affairs.11_ The Secretary of State for International Development.12_ The Secretary of State for Culture, Media and Sport.13_ The Minister for the Cabinet Office.14_ Her Majesty’s Revenue and Customs.15_ The Export Credits Guarantee Department.16_ A county council in England.17_ A district council in England.18_ A London borough council.19_ The Common Council of the City of London in its capacity as a local authority.20_ The Council of the Isles of Scilly.21_ The Greater London Authority.22_ The Chief Land Registrar.23_ The Big Lottery Fund.24_ The Nuclear Decommissioning Authority.25_ The Environment Agency.26_ The Homes and Communities Agency.27_ The Higher Education Funding Council for England. 28_ The Historic Buildings and Monuments Commission for England.29_ The Student Loans Company.30_ The British Council.31_ The Arts Council of England.32_ The English Sports Council.33_ The Technology Strategy Board.34_ The Arts and Humanities Research Council.35_ The Medical Research Council.36_ The Natural Environment Research Council.37_ The Biotechnology and Biological Sciences Research Council.38_ The Economic and Social Research Council.39_ The Engineering and Physical Sciences Research Council.40_ The Science and Technology Facilities Council.41_ A person providing services to a specified person who is a public authority in respect of the taking of action in connection with fraud against a public authority.”
Lord Ashton of Hyde
“Guarantee of pension liabilities under Telecommunications Act 1984Guarantee of pension liabilities under Telecommunications Act 1984
(1) The Secretary of State may make regulations modifying or supplementing section 68 of the Telecommunications Act 1984 (liability of Secretary of State in respect of British Telecommunications public limited company’s liabilities as successor for payment of pensions) in accordance with subsection (4).(2) Subsection (4) applies in relation to relevant employees of British Telecommunications public limited company (“BTplc”) becoming employees of another company (a “transferee”) in connection with any part of the undertaking of BTplc being transferred or outsourced (whether or not to the transferee).(3) Employees are relevant if the liability of BTplc for the payment of pensions which vested in it by virtue of section 60 of the Telecommunications Act 1984 included, immediately before the employees ceased to be employees of BTplc, liability for the payment of pensions to or in respect of those employees.(4) The regulations may provide for the Secretary of State (in addition to any liability apart from the regulations) to become liable—(a) on the winding up of BTplc, to discharge any outstanding liability of BTplc for the payment of pensions to or in respect of relevant employees of the transferee or a successor;(b) on the winding up of the transferee or a successor, to discharge any outstanding liability of the transferee or successor for the payment of pensions to or in respect of relevant employees.(5) The regulations may provide for any liability that the Secretary of State is liable to discharge under the regulations not to include liability arising by virtue of a person’s employment on or after a specified date, or by virtue of anything else occurring on or after a specified date. (6) The specified date must be not earlier than the date on which the regulations come into force.(7) The power to make regulations under this section is exercisable so as to—(a) make provision in relation to all cases or circumstances to which the power extends or in relation to specified cases or circumstances;(b) in particular, make provision in relation to all employees to whom the power extends or in relation to employees of a specified description;(c) make different provision for different purposes.(8) The regulations may—(a) amend section 68 of the Telecommunications Act 1984;(b) re-enact any provision of that section with or without modifications.(9) In this section references to the winding up of a company are references to—(a) the passing of a resolution, in accordance with the Insolvency Act 1986, for the voluntary winding up of the company, or(b) the making of an order for the winding up of the company by the court under that Act.(10) In this section—“specified” means specified in regulations under this section;“successor” means—(a) where relevant employees of a transferee become employees of another person, that person, and(b) where relevant employees of a successor within paragraph (a) or this paragraph become employees of another person, that person.”
Lord Ashton of Hyde
My Lords, Amendments 33ZYE and 33ZYF confer a power on the Secretary of State to modify Section 68 of the Telecommunications Act 1984, which put in place a Crown guarantee covering the BT pension scheme when BT was privatised. This is essential so that the Government can continue to guarantee the BT pension scheme liabilities relating to employees transferred to a separate Openreach.
This amendment is necessary following the announcement on 10 March of a voluntary deal between BT and Ofcom legally to separate BT and Openreach, making Openreach a wholly-owned subsidiary of BT. Ofcom has identified an issue concerning the Crown guarantee as a barrier to the implementation of that deal. This amendment removes that barrier.
When BT was privatised in 1984, the Government legislated that BT plc’s pension liabilities were subject to a Crown guarantee. This meant that government would stand behind the BT pension scheme if BT entered insolvent winding-up. However, if that legislation were to remain unamended, the protection of the Crown guarantee would be removed from BT pension scheme members who transferred to a separate Openreach.
The welfare of BT pension scheme members is a critical consideration for the separation deal. That is why this amendment will enable the Secretary of State to ensure that the Crown guarantee can continue to apply to the pensions of all the staff who benefited from it before separation. The Government are clear that maintaining existing pension protections for BT and Openreach employees is vital. We intend to use the power to do that. Dialogue and consultation with the trustee on the exact exercise of this power will therefore be crucial, and we will engage with it before and during the creation of the implementing regulations.
This power also ensures that the Government can respond to a range of potential outcomes. It would not be right to amend the Telecommunications Act 1984 directly at this stage, when many technical details of the transfer of employment to Openreach and the management of the BT pension scheme after separation are unknown or unclear. That is why we need to take a power so that we can get the detailed secondary legislation on the Crown guarantee right.
The power taken under this amendment has a comprehensive set of safeguards on its use, including a duty to consult appropriate stakeholders: the trustee of the BT pension scheme, the Pensions Regulator and the companies involved. The power may be exercised only with the consent of the Treasury, and a draft of the instrument must be laid before, and approved by resolutions in, both Houses of Parliament.
The separation of BT and Openreach lays the ground for a more competitive broadband market that will improve the speed and reliability of our nation’s broadband services to the benefit of businesses and consumers. Ofcom has also stated that separation will promote investment in next-generation full-fibre infrastructure, and I hope that noble Lords will join me in calling on BT to make that a reality and deliver the connectivity that our nation needs. Further, I hope noble Lords will support this necessary amendment so that Ofcom can implement a more separate Openreach without delay, and so that the welfare of all BT pension scheme members may be safeguarded. I beg to move.
Amendment 33ZYEA (to Amendment 33ZYE)
Baroness Drake
Baroness Drake (Lab)
My Lords, Amendments 33ZYEA and 33ZYEB, which are in my name and that of my noble friend Lord Mendelsohn, amend the Government’s Amendment 33ZYE on the Crown guarantee for pensions liabilities in BT plc. I am not a member of the BT pension scheme, but for some years as a trade union official I represented the majority of BT employees, including on pension matters. In March this year, BT and Ofcom announced agreement on a regulatory settlement that would see Openreach become a distinct, legally separate company within the BT group. Once the agreement is implemented, around 32,000 employees will transfer to the new Openreach Ltd, following TUPE consultation and once pension arrangements are in place. This transfer is expected to be the largest TUPE transfer in UK corporate history and is an important pillar of the agreement between BT and Ofcom.
My amendments seek to address causes of concern for employees who will be transferred and to seek assurances that they and the BT pension scheme trustees need. As the noble Lord mentioned, the BT pension scheme currently has a Crown guarantee of BT’s obligations to the liabilities of the scheme provided for in the Telecommunications Act 1984. The implementation of the agreement between BT and Ofcom is subject to the satisfaction of certain conditions, which include new legislation providing for Openreach pension liabilities to be covered by the maintenance or equivalence of the current BT plc Crown guarantee, so ensuring that employees who are BT pension scheme members will not lose that protection on transfer to Openreach—in effect, ensuring maintenance of the existing Crown guarantee for both BT plc and the new Openreach Ltd pension liabilities.
I believe government Amendment 33ZYE does not make explicit provision for Openreach pension liabilities to be covered by the maintenance or equivalence of the current Crown guarantee for two reasons. The purpose of my two amendments is to address each of those two reasons. Amendment 33ZYEB addresses the first reason, which goes to the future scope and operation of the Crown guarantee covering Openreach pension liabilities, which I believe is of material concern to the scheme members and the trustee.
New subsection (5) proposed in the Government’s amendment—which my amendment would delete—sets out that any regulations made under the proposed new clause may provide for the Secretary of State’s liabilities to be limited so that the Crown guarantee does not cover pension liabilities arising in Openreach Ltd after a future date, whether such liabilities arise because of a person’s continuing employment or indeed from anything else occurring. The Crown guarantee covering Openreach Ltd would be more restricted than the current Crown guarantee covering BT plc—they would not be equivalent.
The trustee’s engagement in the Ofcom review was on the understood basis that affected employees of BT plc who transfer to Openreach will continue to benefit from the same Crown guarantee protections as they would have done with BT plc—that the guarantee in respect of Openreach pension liabilities would be,
“equivalent in operation and scope”,
to the current Crown guarantee. The DCMS press release of 15 March states that the Government’s intention in bringing forward this amendment is to,
“maintain pension protections for BT Pension Scheme members … and provide peace of mind to affected workers”.
The power to restrict the guarantee to exclude Openreach pension liabilities arising after a future date is problematic for several reasons. First, it does not maintain equivalent Crown guarantee protection, as there is no provision in legislation for the current Crown guarantee to be so curtailed. Secondly, restricting the Crown guarantee will cause significant concern to the trustees and employees affected. It would not maintain existing pension protections and is outside the understood implementation of Openreach Ltd.
If Ofcom has reserved revisiting full separation of Openreach from BT if it considers functional separation not to be working appropriately, the implications of full separation would need to be addressed at that time. BT workers who are members of the BT pension scheme have the security of a Crown guarantee to all their service. These rights were confirmed by the Court of Appeal. To remove them is wrong and in no way required by this regulatory settlement between Ofcom and BT plc.
For the Government to give themselves, through proposed new subsection (5) in their amendment, a power now to limit the Crown guarantee adds to the trustees’ uncertainty, fails to reassure employees and provides an unhelpful backdrop to the scheme’s 2017 triennial valuation. Proposed new subsection (5) seems to allow regulations that enable the Secretary of State to turn off the tap of the Crown guarantee to Openreach from a future date. That would not be maintenance of the Crown guarantee or provide peace of mind to affected workers—the Government’s promised intention. Proposed new subsection (5) could also inhibit employees moving freely between employment with BT and with Openreach, because the security of their pensions could be prejudiced, and deny Openreach access to skilled people in BT plc.
My amendment deletes proposed new subsection (5) in the government amendment, which is not required to implement the Ofcom-BT agreement on Openreach. Proposed new subsection (5) has also caused lingering anxiety about the Crown guarantee for BT plc pension liabilities. The Government have said that they intend to maintain the Crown guarantee for BT pension scheme members who transfer from BT plc to the new Openreach company and those whose employment may move in future between the two companies, but their amendment does not expressly commit them to maintain the current Crown guarantee to cover Openreach pension liabilities.
Will the Minister give a categorical assurance that relevant employees can move over to Openreach knowing that the pension liabilities, including those arising from future service of Openreach—a legal entity created as a result of the new regulatory settlement between BT plc and Ofcom—will continue to be covered by the current Crown guarantee, maintained for all members of the BT plc pension scheme?
The Minister will be aware of the extensive litigation on the interpretation of the Crown guarantee and will understand that members of the BT pension scheme will be anxious to ensure that no changes could be made to the Crown guarantee which, whether deliberately or inadvertently, might reduce or alter its scope or coverage in so far as it relates to the pension liabilities of BT plc. My understanding is that the amendment is not intended to have that effect. There are circa 330,000 members of the BT pension scheme. Many are pensioners. Will the Minister confirm that my understanding is correct and that it is not possible for any regulations made under the powers arising from the government amendment to disturb or reduce the scope for effect of the Crown guarantee as it applies to the pension liabilities of BT plc in any way?
My Amendment 33ZEA addresses my second reason for concern. Proposed new subsection (2) in the Government’s amendment sets out the circumstances in which regulations may extend the coverage of the Crown guarantee. It states that the relevant circumstance is one where relevant BT plc employees become employees of another company,
“in connection with any part of the undertaking of BTplc being transferred or outsourced”.
Proposed new subsection (2) is important because how existing BT plc employees switch to become employees of the new Openreach Ltd needs to fall within the circumstances set out in that subsection.
Lord Clement-Jones
The noble Baroness, Lady Drake, has asked a number of very pertinent questions, but I have one question—probably because I am a bear of small brain in these circumstances. Would the new section apply on full structural separation of Openreach from BT, if that were to arise in future?
Lord Mendelsohn (Lab)
My Lords, this group of amendments addresses two crucial issues—first, the Crown guarantee on BT pensions and, secondly, the relationship between Openreach and BT. In relation to the Crown guarantee, I have added my name to Amendments 33ZYEA and 33ZYEB in the name of my noble friend Lady Drake. These Benches support her arguments completely, and I hope that the clear, comprehensive and compelling case that she made will receive a good reception across the whole House. I thank her for her excellent and assiduous work on this matter.
It is clear that these government amendments do not yet have the robustness that assures this House, and I think that my noble friend’s unequalled expertise has come up with an impressive formulation. I look forward to hearing the Minister respond to these issues and would wish to hear some specific reassurances, if he is not minded to accept her amendments. It is important that nothing weakens the covenant on pensions; it is extremely important that the Crown guarantee is carried across and that nothing undermines the responsibilities of the trustees in exercising their duties properly. It is a colossal task. BT has the second-worst-funded pension scheme in the world, according to the MSCI survey of 5,000 company pensions, second only to Du Pont, which is the subject of a merger which will make it better funded, so BT will become the worst-funded pension scheme in the world. In addition to uncertainties about the Crown guarantee, that will put trustees in an impossible position, if these amendments are not addressed as my noble friend suggested. The Government and all those concerned in this discussion should be in a position to confirm—as indeed Matthew Hancock, the Minister responsible, did in a meeting with Members of this House—that the proposed arrangements for the pension scheme should ensure long-term assurance to pension holders whether Openreach is legally or structurally separated.
This brings us to Amendment 33M in my name and that of my noble friend Lord Stevenson of Balmacara, which proposes the structural separation of Openreach. I will make a few very brief points to support this view. This is not a negative statement about BT, which is an excellent British company and one that we hope will continue to grow and thrive. There are many keen to criticise BT’s behaviour in relation to the supply of broadband but this must be properly balanced by the realities of the regulatory framework and policy context it was given to operate in and which has incentivised and guided its approach. It is slightly unfair to create such arrangements and then criticise someone for following them, and many of the criticisms of BT have been unfair and misdirected.
The differences between the benefits of legal and structural separation are important to note. Legal separation, which has been proposed by Ofcom, is where the upstream business is established as a separate legal entity within the wider group but remains under BT’s complete ownership. It includes functional separation with independent governance. There is a clear benefit to a regulator that would lend itself to suggesting this approach. It certainly makes the regulatory task of overseeing this arrangement much more economic. But having one place to look at is a benefit only for the regulator. The alternative is structural separation, where the vertically integrated operation is split with no significant common ownership and “line of business” restrictions to prevent them re-entering each other’s markets. There are some issues that people think are reasons to achieve separation, such as improvements to service levels, broadband speeds and end-customer services, but these are not dependent on separation.
BT has contributed massively to getting us to where we are now, where we have—in relative terms to international peers—availability of superfast average speeds and lowish prices. But the challenge is the future, and this is where investment needs to be higher. Crucially the UK is lagging in fibre to the premises; the majority of the network is either fibre to the cabinet or cable. The future will require us to commit to FTTP. Other solutions such as G.fast will not keep us as a leading nation. Structural separation is the only mechanism that can sufficiently address the investment issues, and this was the matter that Ofcom did not adequately address in its proposal. The legal separation does not address the problem that strategic decisions on investment will still be dependent on BT, even though I hope that it takes note of the Minister’s exhortation for it to do better.
Ofcom’s statement of reasons for its approach says that this will provide improved investment outcomes from new models of investment such as co-investment and risk sharing. But BT has never lacked access to capital, which is why even Ofcom acknowledges that this model will be reviewed in order to ensure that the new structure achieves its objectives. This is not an equivocal “may” or “could”, but an emphatic “must” and “should” be reviewed. I hope that the Minister can confirm that this will be done and a broad timetable for it.
Our concern is that policy is drifting and opportunities to ensure that we maintain a leading position in the new communications technologies are being weighed down by compromise, confusion and a terrible lack of clarity. It is surely better to provide leadership and certainty by choosing the only arrangement that will ensure the necessary level of investment to make our broadband fit for the future.
Lord Ashton of Hyde
My Lords, I thank the noble Baroness, Lady Drake, for the time and effort that she has put into examining this matter and meeting with me and my officials to explore the details. The noble Baroness is an expert in pension matters and we have all benefited from her advice, and I am very grateful. Government Amendment 33ZYE is explicitly designed to ensure the continuation of the Crown guarantee for those transferees from BT plc to a future Openreach or other successor company. Amendment 33ZYEA is a technical point and concerns the adequacy of the word “undertakings”. I believe that our existing wording on undertakings is sufficient and would cover any transfer of staff, including one that was consequential on the application of the TUPE regulations about the movement of activities from one company to another. The “activities”, suggested by the noble Baroness, if moved to another company, are part of the undertaking of BT.
We agree with the noble Baroness on the policy intent. We intend to cover all ways by which BT staff might be transferred to the new Openreach company, but technical detail is important here, and I will table a technical clarification for Third Reading.
Amendment 33ZYEB seeks to delete a subsection of the Government’s amendment that provides a power to vary the Crown guarantee. I understand the reasoning behind this amendment but want to remind noble Lords that the Government have been clear that we are providing a power to ensure that, following Openreach’s separation, the extent of protection afforded by the Crown guarantee is no less and no more than at present. I reassure noble Lords that nothing in the Bill or in the delegated powers it gives to the Secretary of State will change or alter the Crown guarantee to BT plc pension liabilities.
We have seen the documents published by BT and Ofcom that outline plans for a legally separate Openreach Ltd. On the basis of those, the Government fully intend to ensure that the Crown guarantee protection continues to be maintained for all current members of the BT pension scheme, including those who will become part of the wholly owned subsidiary Openreach Ltd. So, our clear intention is that the protection of the guarantee provided to BT pension scheme members should be maintained. That is why the power includes an ability to define that protection in secondary legislation so that it may be neither wider nor narrower than existing protections. However, until we see the detail of the agreement on Openreach separation, and how the liability for payments to the BT pension scheme will be divided between BT plc and the new Openreach, we cannot say that the power defined in new subsection (5) will not be required. In applying the Crown guarantee to the pension liabilities of the new company, we are creating new risks. There is the potential for unintended consequences, which concerns us particularly. This power helps guard against them, while enabling the Government to maintain Crown guarantee protections for pension scheme members in line with our clearly stated intention to do so.
New subsection (5) gives the power for the Secretary of State to consider whether to maintain the Crown guarantee for any staff who then move on to spin-off companies: for example, if part or all of Openreach were sold. I believe that the need for this power is clear. I reiterate that it is the Government’s intention to ensure that current members of the scheme who transfer to Openreach are certain that their pension rights will continue to be safeguarded by a Crown guarantee.
I turn now to Amendment 33M, which seeks to place obligations on the Secretary of State to direct Ofcom to begin the process of “legal and functional separation” of Openreach from BT plc. Functional separation of Openreach and BT has been in place since 2006 by means of undertakings that BT gave to Ofcom pursuant to the Enterprise Act 2002. On 10 March 2017, Ofcom and BT announced that they had agreed on a legal separation. By the end of this year “legal and functional separation”, as required by the noble Lord’s amendment, should have been achieved, according to Ofcom. On that basis, if the timetable set out in Amendment 33M were to be followed, separation would take much longer. Ofcom is currently consulting on the details of the transition to a legally separate Openreach. This consultation closes on 14 April and the timetable for completion should be achievable. Moreover, if Ofcom had to impose its decision on BT rather than having a voluntary agreement as now, the decision would have to be referred to the European Commission under the electronic communications framework directive. The remedy of separation has never been used before, so the timetable for a response from the Commission is unknown. It could be nine months or more. It is also possible that BT would appeal against forced separation, further delaying the process. A long delay would be likely to inhibit investment in the sector at a time when we all want to see great strides being made in the UK’s broadband coverage and quality.
The purpose of having our independent communications regulator, Ofcom, is to make exactly these assessments. It is Ofcom’s duty and role to take decisions and regulatory interventions on the strength of its expert analysis of competition in the market. As such, it is our view that it would not be appropriate for the Government to legislate in this way in view of the independence of Ofcom from government. It is therefore not necessary or right for government to legislate on this matter both because Ofcom can take such decisions and because it has already done so, specifically in respect of the separation of Openreach. With that explanation, I hope that the noble Baroness will withdraw the amendment.
Baroness Drake
My Lords, amendments on the matter of Openreach and the Crown guarantee were not tabled until Report—which is understandable, given the timing of the discussions with Ofcom. I was therefore unable to have the benefit of being able to probe in Committee, so I ask noble Lords to forgive me for taking some time now. I also thank the Minister for his courtesy in meeting me and for his consideration of my concerns, and I thank the civil servants in the DCMS, who were so patient in dealing with my questions and queries.
I welcome the Minister’s statement that there will be a technical amendment at Third Reading to remove any ambiguity about what is covered under any transfer of undertaking under proposed new subsection (2). I also welcome the unequivocal assurance that the powers arising from the amendments to the Bill will not disturb the existing Crown guarantee relating to BT plc pension liabilities.
On the issue of the protection of the pension liabilities on behalf of those members transferred into Openreach —the Openreach created as a result of the regulatory settlement—obviously I will read the detail in Hansard, because I was trying to take all the words in. That provides quite a lot of assurance to the members and the trustees, but I would like to read it and, if I may, reserve any concern I may have in that reading. However on first hearing it seems to confirm that the Government’s intention is that the existing Crown guarantee will be applied in all respects to those people transferred to Openreach under the regulatory settlement agreed with Ofcom. On that basis, I beg leave to withdraw the amendment.
Lord Ashton of Hyde
“Regulations under section (Guarantee of pension liabilities under Telecommunications Act 1984)
(1) The power to make regulations under section (Guarantee of pension liabilities under Telecommunications Act 1984) is exercisable by statutory instrument.(2) That power is exercisable by the Secretary of State only with the consent of the Treasury.(3) A statutory instrument containing regulations under that section may not be made unless a draft of the instrument has been laid before and approved by a resolution of each House of Parliament.(4) Before making regulations under that section the Secretary of State must consult—(a) the Pensions Regulator;(b) BT plc;(c) the trustees of the BT Pensions Scheme;(d) any transferee or successor to which the regulations apply;(e) any other persons the Secretary of State considers it appropriate to consult.”
Baroness Janke
“Duties on providers of social media services
After section 131 of the Communications Act 2003 (statement of policy on persistent misuse) insert—“131A Duties on providers of social media services(1) In this section “social media service” means a website or application that enables users to create and share content, to communicate publicly and privately with other users, and to participate in social networking.(2) Social media services have a general duty to respond to reports of material shared or communicated via their website or application (“the content”) that passes the “criminal test” set out in subsection (3).(3) The criminal test is whether the content would, if published by other means, or communicated in person, cause a criminal offence to be committed.(4) Social media services have a duty to provide a means for users to report content which, in the view of the user, meets the criminal test.(5) Social media services have a duty to remove content which demonstrably meets the criminal test within the prescribed period, and to inform the police.(6) The prescribed period must be set out in regulations made by the Secretary of State within 120 days of the commencement of this section.(7) Regulations under subsection (6) may prescribe different periods for different categories of social media services, to be determined by the number of users that service has at the time a report is made under the provisions of subsection (4).(8) Regulations made under this section must be made by statutory instrument, and may not be made unless a draft of the instrument has been laid before and approved by a resolution of each House of Parliament.”
Baroness Janke
My Lords, this amendment has already been debated. Although the assurances the Minister gave in the previous debate were very interesting and will bring forward some new issues and some reassurances, this is a very urgent matter and I would like to hear what he has to say. I therefore beg to move.
Lord Ashton of Hyde
My Lords, as the noble Baroness said, this has been debated. However, I will respond briefly. First, on 27 February the Government announced work on an internet safety strategy which aims to make the UK the safest place in the world for children and young people to go online. With the help of experts, social media companies, tech firms, charities and young people, we aim to publish a Green Paper in June. We need the time to do this.
Secondly, on 20 March this House agreed the amendment in the name of the noble Baroness, Lady Jones, on a code of practice for social media. The House has already debated this issue. To accept Amendment 33A would create overlap and duplication between the two amendments. It simply does not make sense to have agreement to both amendments.
Thirdly, defining “social media service” is difficult, but I regret that the noble Baroness’s definition is very wide, and therefore unworkable and disproportionate.
Finally, and perhaps most importantly, it should not be left to social media companies or their users to judge whether or not content is criminal.
However, we know that there is more to do and I give a firm commitment to the House that we will consider all available options through our internet safety strategy, which will be published in June, and that we will implement its proposals as quickly as possible.
Baroness Janke
I thank the Minister for his comments. The difference between this amendment and the one that he mentioned is that the previous amendment referred to children, whereas this amendment covers a much wider range of adults, particularly vulnerable adults and adults who are subject to bullying, criticism and unfair treatment on the internet.
Having heard what the Minister said, I look forward to the Green Paper and to participating in discussions on it. I hope that the Government see this as a very serious issue and that they are committed to doing something about it. Having said that, I beg leave to withdraw the amendment.
Lord Lansley
“Definition of media enterprise
(1) The Enterprise Act 2002 is amended as follows.(2) In section 58A(1) (construction of consideration specified in section 58(2C)) for “broadcasting” substitute “the provision of television, radio and other services through which audio-visual content is made generally available to the public, whether by subscription, for payment or otherwise”.”
Lord Lansley (Con)
My Lords, as we turn the final bend, I hope that this group of amendments will be worthy of your Lordships’ patience. This group of five amendments in my name and those of my noble friends Lord Puttnam and Lord McNally all concern aspects of the public interest test on media mergers.
My co-signatories to these amendments and I worked together during the passage of the Communications Act 2003, when your Lordships successfully put the public interest test for media mergers into statute. That has proved a necessary and valuable intervention. Fourteen years on, the media landscape has greatly changed and with it, in our view, has come the need to review, strengthen and future-proof this important legislative measure. I am very grateful to my noble friend Lord Puttnam, who initiated this debate in Committee. Your Lordships who were present will recall that debate, which has permitted us to refine the amendments for Report and, indeed, has led to a positive and constructive engagement with the Secretary of State, the Minister and officials. I am very grateful, as I know my colleagues are, for all that engagement and discussion.
I should emphasise that the amendments are not occasioned by, nor intended directly to affect, the current intervention notice and review by Ofcom, which is expected to be considered under existing legislation. Our concern is to strengthen and future-proof the legislation.
So what is the purpose and effect of the amendments? Amendment 33F would widen the definition of “media enterprises”, to which the public interest test refers. Currently the definition is that,
“an enterprise is a media enterprise if it consists in or involves broadcasting”.
Broadcasting, as one will see under the Broadcasting Act, means television and radio services, and therefore does not include enterprises such as Google, including YouTube, Facebook, Twitter, Snap and many others, which are, as Martin Sorrell said the weekend before last, not technology enterprises but media enterprises.
Many people take more of their audio-visual content off YouTube than off conventional broadcast channels, or they seek their news through Twitter or take their news from apps on smartphones, not necessarily through broadcast platforms or channels. If a public interest can be engaged by the dominance or inappropriate control of a broadcast channel, why not therefore of a platform or channel through which social media is offered, delivering large-scale news-related and other material to the whole population? Therefore, this amendment widens the definition of a media enterprise to include those which involve the control of audio-visual content made generally available to the public.
Amendment 33G would give Ofcom the same powers—that is, powers when carrying out an Enterprise Act competition function—as would be available to the Competition and Markets Authority, and most specifically the power to require the attendance of witnesses and the production of documents as specified under Section 109 of the Enterprise Act 2002.
Amendment 33H relates to one of the existing grounds for a public interest intervention notice—namely that of the,
“commitment to the attainment in relation to broadcasting of the standards objectives”.
The standards referred to are broadcasting-related standards: they relate to television and radio services. The amendment therefore enables further standards to be prescribed that may relate to media extending beyond television and radio. The amendment therefore also refers to the commitment to the attainment of standards as evidenced through the control of media enterprises, linking back to Amendment 33F. Media enterprises in that context would be more widely construed. This test therefore, suitably widened in scope, would give a clearer basis for examining the behaviour of a person and their commitment to standards across media more generally. It would eliminate the risk that behaviour outside the scope of television and radio and beyond the specifics of the broadcasting standards code would not be able to be drawn in aid in determining whether the grounds for an intervention are met.
Amendment 33J adds to the reasons why a public interest intervention notice on a media merger may be issued by reference to three additional grounds. The first is that the control of a media enterprise which includes a Broadcasting Act licence should be exercised by someone who is a fit and proper person to hold such a licence. In the current media merger referral, Ofcom has chosen to conduct a fit and proper person test under the Broadcasting Act alongside the review of the Enterprise Act and including therefore the actions in corporate governance. It was not required to do so and it is possible that control of a media enterprise may therefore be disassociated from the fit and proper person test relating to the holding of a Broadcasting Act licence. The amendment is designed to align the public interest test under the Enterprise Act with the Broadcasting Act test at the point at which control may be acquired over a regulated broadcaster. To that extent, it is intended to be necessarily proactive in relation to the control of enterprises and not necessarily reactive.
Amendment 33L in the name of the noble Lord, Lord Stevenson of Balmacara, introduces a further limb to the question of what “fit and proper” means in this context. In our amendment, we propose to specify to some extent what it means beyond the tests already included in the media merger public interest test. What the noble Lord says in his amendment is reminiscent of what the Financial Conduct Authority says in relation to its fit and proper person test. He may not have intended it to be, but it is very similar. Indeed, other economic regulators, when they apply a fit and proper person test, have in a number of instances been more specific than Ofcom has about what it means by a fit and proper person. The time may well have come—it is implied by our amendment and that of the noble Lord, Lord Stevenson of Balmacara—when we need to be more specific about what “fit and proper person” means in relation to the control of media enterprises. This is a helpful way of stimulating that debate and potentially, if not putting it in statute, clearly putting it in guidance from Ofcom.
The second limb of Amendment 33J is to protect the editorial freedom of the news services of media enterprises and see that safeguards are in place. In a nutshell, media plurality—the plurality of ownership—does not necessarily mean that in relation to that ownership editorial freedom is protected and safeguarded. That is what the amendment is directed to achieve.
The third limb would extend that plurality test beyond television and radio and therefore beyond the platforms, channels and the plurality of news, which the test is currently focused on, to the plurality of control of rights, talent and cultural assets. On the principle that content is king, this would give the power to intervene where an unwarranted and undesirable dominance would otherwise be created in relation to any significant category of cultural assets.
We had a useful and full debate in Committee. I hope that we have made explicit in these amendments the kind of questions that changes to the legislation now need to answer. First, how do we protect the public interest in media plurality rather than just news plurality, given the emergence of new dominant social media platforms and channels? Secondly, how do we ensure that those with control of the media, especially news media, are committed to high standards across all media and in their wider business dealings? Thirdly, how do we ensure that plurality is maintained in the control not only of news content, but of significant content of a cultural nature relating to both rights and assets? Lastly, how can we ensure not only the plurality of news but the editorial freedom applying to news?
We have greatly appreciated the engagement of Ministers and officials and I look forward to a positive response. I hope that we may be able to see a positive answer to these questions incorporated into legislation very soon. I beg to move.
Lord McNally (LD)
My Lords, earlier today we had a Question on divorce. Sir James Munby, the president of the Family Division, was quoted as saying that the law that he had to administer and make judgments on showed hypocrisy and a lack of intellectual honesty. That is a good example of what happens when, as in this case, a 44 year-old law does not reflect the society and the social mores that now exist. In a way, what we are doing here is similar. In 2003 we tried to persuade the then Government—with partial success—to give Ofcom some teeth in terms of the fit and proper person test. Our allies included the Minister herself: she was in that fray, as were the noble Lords, Lord Crickhowell, Lord Lansley and Lord Puttnam. I think that we can be proud of our work at that time.
Earlier today the noble Viscount, Lord Colville, referred to Ofcom as a world-class media regulator, and I think that that is true. The debates at the time reflected a degree of uncertainty about whether Ofcom would prove to be up to the job. Would it not be swamped by the massed ranks of corporate lawyers from the big media companies? In fact, at the time we did not want to give the BBC to Ofcom because we thought, again, that that would be too big a burden for it. Now there is general agreement that it is a very satisfactory place to put the BBC in terms of regulation —so it has done a good job.
What these amendments are about, as the noble Lord, Lord Lansley, explained so ably, is trying to make our current laws ready to give Ofcom powers that are clear, robust and wide-ranging. In terms of what we gave Ofcom in 2003, one former CEO of Ofcom was quoted as saying that somebody would have to commit a murder before he would fail the fit and proper person test. That is the problem. The Secretary of State very correctly clings to her quasi-judicial responsibilities. She does not want to be seen to be making political judgments, but we cannot escape entirely from doing that in carrying out our responsibilities. I think it was the noble Lord, Lord Saatchi, who said that media companies are not like tins of beans. That reminds us that they are an integral part of the social, political and cultural life of our country. Government has a duty to protect the ecology of our media to ensure that diversity of service and plurality of ownership are encouraged and sustained.
We enjoy many benefits from our sharing of the English language with the United States, but it also makes us particularly vulnerable to predatory activity by companies whose ethos and cultural values are embedded in the United States. This is particularly so when there is no reciprocity in terms of a two-way street in media ownership.
When I questioned the noble and learned Lord, Lord Keen, on these matters a week or so ago, I cited the support of those great standbys of our law—the man and woman on the Clapham omnibus. They will make short shrift of politicians hiding behind quasi-judicial status, pleading that rules and regulations are so tightly drawn that they are impotent and then allowing organisations or individuals into our media who threaten the ecology, diversity and quality. Nye Bevan’s great advice, “Why look into the crystal ball when you can read the book?”, is apposite here. We see constant attempts to intimidate the BBC. Although this does not affect the present problem, the Murdochs are an ever-incoming tide—as the noble Lord, Lord Lansley, referred to it. As he also said, there are possibly even bigger fish in the pool now.
So there is a need to pass the Clapham omnibus test and to strengthen and future-proof the legislation. The intention is to protect the integrity of our media ecology, but we must give the regulator the power and teeth to be able to do that.
Lord Puttnam (Lab)
My Lords, I am very happy to add my name to the amendments set out so ably by the noble Lord, Lord Lansley. I will build on what has been said by the noble Lord, Lord McNally. Today of all days it cannot be an overstatement to claim that these amendments go somewhat to the heart of a fundamental question: what kind of society do we wish to become, or, more importantly, what kind of society do we wish to leave to our children and our grandchildren? Is it one that is well informed, thoughtful and compassionate? Or, as an alternative, is it one that is easily manipulated, fearful and grasping at simple answers to ever more complex questions?
In answering that, I will quote at some length from a speech by the noble Lord, Lord Crickhowell, who I am delighted to see in his place this evening. He made it in this House on 2 July 2003 and it can be found in Hansard. He was speaking to an amendment on so-called foreign ownership, which he had co-signed with the now Lord Speaker, the noble Lord, Lord Fowler. The purpose of their amendment was to place a pause on the possibility of UK broadcasting assets being bought by foreign media owners, at least until a proper assessment of the impact of such ownership changes could be investigated and reported on by the then newly created regulator, Ofcom.
In this speech I believe that he nailed the issue that has bedevilled the creation of good legislation on this. Towards the end of his speech the noble Lord said:
“Public service broadcasting is now comprehensively defined … in legislative language. We are talking about creativity, diversity and standards … When my noble friend the Chief Whip circulates a note saying that we are being watched closely—minute by minute and in detail—by the media and that the most careful consideration has been given to the issues by senior colleagues in both Houses, I know that those who tell me that heavy pressure has been applied by media moguls are right. My reaction is not to climb down in the face of such pressure but to feel even more strongly that the Bill needs strengthening, not weakening”.
He concluded by saying:
“I hope that there will be many in all parts of the House, and a substantial number in my party, who will feel as I do and will insist on retaining effective … standards that are immensely valuable and need our protection”.—[Official Report, 2/7/03; cols. 928-29.]
Fourteen years later, that is essentially the purpose of these amendments: to strengthen and, as noble Lords have heard, future-proof the legislation, along with the definitions that drive it, in such a way as to enhance the clarity and conviction with which Ofcom can make its judgments. This in turn should have the effect of helping depoliticise the position of this or any other Secretary of State in making a final quasi-judicial decision on mergers and takeovers.
The word “sovereignty” has rippled around this Chamber more in the past few weeks than at possibly any time in living memory. One of the underpinnings of sovereignty is the integrity of our media, through which we see a daily reflection of ourselves at our best—and sometimes, I am afraid, at our very worst. We are at present a nation at odds with one another, to a greater degree than I can ever remember. As the Prime Minister stressed in her Statement to the House today, the need to focus on the things that bind us, the values we share and a belief in a future that is better and fairer than the past has surely never been more important.
Without confidence in an honest and truthful media, how can we ever develop sufficient trust in each other to help steer society towards a sustainable, let alone successful, post-Brexit future? Only Parliament, through its statutory regulatory bodies, can insist on a commitment to the standards that the noble Lord, Lord Crickhowell, referred to 14 years ago: those of truthfulness, justice, compassion and tolerance—values which I suspect all believe to be an essential aspect of a truly civilised society. The very idea of licensing any broadcast media organisation that does not demonstrably embrace and adhere to those values would in my judgment be an act of wilful national self-harm. These amendments, set out in the names of the noble Lords, Lord Lansley and Lord McNally, and myself, are intended to make any such act of self-harm that much more unlikely.
Lord Crickhowell (Con)
My Lords, I have not taken any part in the debates on this Bill, but in view of the fact that a speech I delivered 14 years ago and which I had entirely forgotten has been quoted at some length today, I hope I may be allowed to say that, on having reread it, I am rather proud of it and stand by every single word I said on that occasion. For that reason, I wholly support the general principles being advanced by my noble friend Lord Lansley and others who support the amendment. If it cannot be accepted tonight, I hope the Minister will at least indicate that the Government will follow this up with some very serious consideration indeed of the principles being advanced.
Viscount Colville of Culross (CB)
I too rise to support these very well-crafted amendments, particularly Amendments 33J and 33L, which are crucial in ensuring that Ofcom’s fit and proper test is extended to not just existing licence holders but prospective ones.
The amendments come as the proposed 21st Century Fox merger with BSkyB goes for the Ofcom fit and proper review. At the moment, I fear that the regulator can look only at the present situation, with Fox holding a 39% stake in BSkyB. Surely, that test should concentrate on what would happen if the merger went ahead and Fox took 100% control of BSkyB. Such a test would look at the assessment of James Murdoch. I refer your Lordships to the 2012 Ofcom report on “fit and proper assessment of Sky”. It said:
“In our view, James Murdoch’s conduct in relation to events at NGN repeatedly fell short of the exercise of responsibility to be expected of him as CEO and chairman”.
At the time, Murdoch was not chairman of BSkyB, merely a non-executive director, and therefore junior enough for Ofcom to conclude that the finding did not affect BSkyB as a fit and proper licence holder. But last year, he was appointed chairman of BSkyB. The prospective merger with 21st Century Fox would give him massively increased power, with the full backing of a 21st Century Fox-appointed board. Ofcom surely should have the power to investigate what would happen in mergers such as these.
I am also concerned by developments with the federal grand jury sitting in Manhattan which is investigating the business practices of Fox News and claims by the Attorney’s Office that Fox News violated securities laws by not reporting to the Securities and Exchange Commission a series of massive settlements to employees. If Fox News is found guilty, there will be an American investigation into whether it is fit to hold a broadcasting licence. I ask the Minister, would it not be strange if the UK Government went ahead and granted 21st Century Fox a merger with BSkyB in this country, at a time when the sword of Damocles hangs over Fox News in America?
I look forward to the Minister reassuring me on these matters.
Lord Stevenson of Balmacara
My Lords, it is clear that we have saved the best till last. It has been a terrific debate. The hour is late and I shall not delay the House too long, but it is worth reflecting that a 14 year-old speech can be brought out, dusted down, given the once-over and realised to be fit for purpose and continue to have relevance today.
I support the amendments tabled by the noble Lords, Lord Lansley, Lord Puttnam and Lord McNally. They are absolutely right; they are on the mark. They are matters that need to be addressed now but also for the long term. The Government need to take them away and come back with some proposals as soon as possible.
The noble Lord, Lord Lansley, was right that the existing legislation, stemming from a variety of sources but crystallising around the Enterprise Act 2002, is strong, but it needs to be looked at in light of technological change, of developments and of the new way in which the world receives its information. Many things have not changed. We want to be sure that by moving around some of the architecture, we do not lose something, but it is clear that we need to widen the definition of a media enterprise—as the noble Lord said, broadcasting is far too narrow a definition for the way in which we consume and rebroadcast our information today. Ofcom needs powers equal to those of the CMA, in terms of getting papers and material in front of it so that it can have exactly the same authority in its work. It is not clear that it has those at the moment.
We need to think about the term “broadcasting standards” and make sure that it is fit for purpose in respect of the various companies now operating, which are definitely media companies and not technology companies, as many would argue. Certainly, all those involved in the current merger arrangements need to be considered closely in terms of the impact both of individuals and of the corporate structures which they employ.
The questions raised in our amendments to Amendment 33J, as was picked up by the noble Lord, Lord Lansley, are based closely on the model offered by the FCA in its fit and proper person test. If the noble Lord detected a similarity, it is because 90% of the words are the same—and well spotted. However, it shows that there is a commonality of approach which would repay some discussion and debate. Everyone will say that it is different in financial regulation, but some of the words copied out in Amendment 33L, for instance, which are taken straight from the FCA with only a couple of points lost, are appropriate. There are other examples and I commend them to the Minister when she comes to consider this matter, perhaps away from this sitting.
A point well made by the noble Lord, Lord Lansley, was that the work done in 2010 and 2011 is worth revisiting in some detail. In particular, a section on page 15 of the Report on Public Interest Test produced by Ofcom and published in 2011—to no significant media comment at that time because, by that stage, the Milly Dowler case had broken and the merger then in proposal had gone, so the public’s attention moved away—deals with:
“Concerns about wider market developments and sufficient plurality”.
It is incredibly relevant for today—I shall not read it all; I want to touch on just a few things. The point is made that,
“the current statutory framework may no longer be equipped to achieve Parliament’s policy objective of ensuring sufficient plurality of media ownership”.
The market developments have changed so much and some consideration of that broader issue must be given. The report identifies the problem that, at present, the regulations require that,
“a public interest consideration can only be triggered by a specific corporate transaction”,
such as merger proposals, but that can be done by organic growth and change. It is important that we have something in the regulations which allows Ofcom to use judgment over whether it is time to intervene, particularly on the fit and proper person test.
The report expresses concern about the differential arrangements for remedying competition concerns. Such concerns are not carried forward into considerations about whether transactions are operating in the public interest depending on plurality. In other words, the narrow competition concerns largely operated through the CMA are on one side of the calculation, but those that deal with media mergers are not given the same weight. Therefore, there is a discrepancy of approach.
Finally, the point is made that,
“a more fundamental review and possible reform of the current … framework”,
is probably necessary. This was said in 2010 and published in 2011. I do not think much work has been done on this since then. It is overdue time for us to look at it.
Specifically on Amendment 33L and the questions it raises, it is important that we think harder about what this phrase, a “fit and proper person”, should aim for. As I said, the wording of Amendment 33L is not necessarily perfect but it points us further down this track. I have heard it said that the problem with the fit and proper person test and the work operated under Ofcom is that precedents in relation to media come from earlier times under earlier regimes, such as the old ITC regime, which must be nearly 30 years old. Since it is not used very often, there are only occasional examples of it. We have a problem in ensuring there is a join-up between the considerations that should be brought into play today and what happened in the past. It was said—perhaps slightly light-heartedly but it makes the point—that it would be difficult in today’s world if one were using the tests provided by the ITC in the early 1980s and 1990s, as you would be able to prove that someone was not a fit and proper person to hold a broadcasting licence only if they had been not only charged with a crime of murder but also put away for it. That is probably too high a standard. Generally, most people would accept that. If it is true, there is a bigger question here.
It may be that the territory is such that we must be a bit more concerned about fit and proper persons in a more generic sense. In a time of fake news and with what is happening across America, we have difficulties enough coming our way. We also read in today’s papers that Andy Coulson, no less, is about to be hired as the PR consultant for a well-known daily newspaper on the very far right of the political spectrum. If it is right that his brief is to make people believe that the paper is authoritative and truthful, we have problems.
Baroness Buscombe
My Lords, I agree that the best is left until last. I start by thanking my noble friend, Lord Lansley, and the noble Lords, Lord Puttnam and Lord McNally, for the constructive way they engaged in discussions with the Secretary of State and me, and with the department’s officials, on seeking a common understanding on the very important issues raised in this debate.
As noble Lords said, in particular the noble Viscount, Lord Colville, the Secretary of State issued a European intervention notice in relation to the Fox/Sky merger on 16 March. She did so on two grounds: media plurality and commitment to broadcasting standards. Ofcom also announced on 16 March that it will conduct its fit and proper assessment at the same time as it will consider the public interest considerations raised in the intervention notice.
It is now time to leave the independent regulators, Ofcom and the Competition and Markets Authority, to carry out their reviews as set out in legislation. Under the terms of the intervention notice, both will report back to the Secretary of State within 40 working days—by 16 May. For the avoidance of doubt, the Secretary of State’s quasi-judicial role in respect of that merger continues and it would therefore be inappropriate for me to comment on the merits of that case. I am able to address the important issues raised by these amendments on future mergers.
As my noble friend Lord Lansley made clear, the purpose of these amendments is to future-proof the issue when it comes to media mergers. I listened carefully to the noble Lord, Lord McNally, talk about the changes over the past 14 years in terms of social mores and societal changes. The noble Lord, Lord Puttnam, referenced the need to talk about trust in each other, truthfulness, justice, compassion and tolerance. Of course, there was the reference to my noble friend Lord Crickhowell, whom I well remember speaking in those debates on foreign ownership. They were controversial at the time. There were some real difficulties in accepting what my noble friend sought to achieve but times have changed. We have moved on and learned a lot, and we have built a great deal of trust in the ability of Ofcom to do its work and do it well.
The first point I want to deal with is the amendment on Ofcom’s powers. In a phase 1 assessment of any media merger, Ofcom’s role is not to conclusively decide whether concerns about the merger have been established but rather to advise on whether or not they warrant a more thorough, phase 2 review. In our view, the timing and nature of Ofcom’s phase 1 review simply do not necessitate the powers that Amendment 33G is proposing. Phase 2, if this is needed, is a more in-depth review that the CMA carries out over a longer period of 24 weeks. At this stage in the process, the CMA does need more extensive powers and this is already provided for under the Enterprise Act 2002. It is at the end of this review that a decision is made by the relevant Secretary of State on whether the merger operates against the public interest and whether it should be able to proceed.
If a party to a merger does not co-operate with Ofcom in its phase 1 review, Ofcom can, and indeed should, draw out that point—and the behaviour of the parties—in its report and conclusions, which will be published. The provision of false or misleading information by anyone to Ofcom or the CMA is a criminal offence under Section 117 of the Enterprise Act. Our conclusion, therefore, is that extending the powers to Ofcom in phase 1, as Amendment 33G seeks to do, is not necessary and indeed changes the nature of what is a first-phase review to decide whether a fuller, much more thorough investigation is warranted.
As noble Lords have said, the media landscape is changing at a faster and faster rate and the tests set down in 2003 may no longer fully cover all the public interest considerations needed in media mergers. We have heard arguments throughout the passage of the Bill that the fit and proper assessment needs to be baked into the media public interest test. As the Secretary of State made clear in her Statement of 16 March, Parliament has given Ofcom a duty to assess on an ongoing basis the question of fit and proper for all organisations applying for broadcast licences. For corporate bodies, Ofcom’s assessment will cover controlling directors and shareholders.
Both the Secretary of State and Ofcom have said that while many of the same issues will be relevant to both the assessment of the commitment to broadcasting standards’ public interest ground and to an assessment of the fitness and propriety of licence holders, it is right that the latter—the fit and proper test—sits with an independent regulator. The current grounds for intervention in media mergers are all linked to the important public interest consideration of media plurality: plurality of ownership, plurality of content, and a commitment to standards that support plurality of views and content.
Although I acknowledge that, in a quasi-judicial role, political considerations do not come into play, adding fit and proper as a ground of intervention goes beyond the plurality test into questions of character and fitness, and puts the ultimate decision on those questions in the hands of a politician. Notwithstanding what the noble Lord, Lord McNally, said about the Government having a duty to protect the ecology of our media, this is a different position. We are very clear that the decision on fit and proper should be made by an independent authority; that is, Ofcom. This cuts entirely across what is generally the role of an independent regulator and, in my view, takes the grounds of intervention a step too far.
On the general premise that the media merger public interest consideration may not fully capture future shifts, we agree that it is time to consider this. Amendment 33F seeks to broaden the definition of media enterprise to take account of new forms of delivery and distribution. Amendment 33J, although introducing a media public interest test around fit and proper in proposed new subsection (2CC), adds a new media public interest test to cover access to cultural and performing rights, talent and other expression available to UK audiences in terms of media plurality.
Lord Lansley
My Lords, I am very grateful to all noble Lords who have participated in this debate. Every contributor added something of significant value to the debate as a whole. It is a very good debate with which to conclude—practically conclude—our proceedings. I am sure noble Lords will forgive me if I say a special thank you to my noble friend Lord Crickhowell for coming and reiterating his remarks of 14 years ago. I, too, remember them very well, even if I was in another place at the time.
I am very grateful for the engagement of the Secretary of State, the Minister and officials and for the Minister’s response tonight. On Report, one is often pressing very hard because the window of opportunity is about to slam shut. As the Minister quite rightly said, in relation to some of the very important issues that we are putting forward relating to the definition of media enterprises and the nature of the grounds on which a public interest test can be triggered under the specified considerations in the Enterprise Act 2002, there is a power in Sections 58(3) and 58A(9) for those specified considerations to be amended by order.
The debate that has been given life during the passage of the Bill does not stop with the passage of the Bill, and I am therefore very grateful for the way in which the Minister has said that she and her Secretary of State and colleagues are going to take these issues forward and look at how they may be given life beyond here, in orders or in future primary legislation. The point about competition is important.
I neglected to refer to Amendment 33K, which was tabled by the noble Lord, Lord Stevenson of Balmacara. He illustrated very well what he was about. I am sure he will accept that inserting “any other reason” into merger control would be a jarring legislative intervention into a merger regime, but the point he makes is a very good one. When one is looking at the abuse of a dominant position under competition legislation, the nature of the abuse is not necessarily simply that there is consumer detriment. There may be wider detriments to the public interest which are not necessarily reflected in the nature of that abuse of the dominant position, so it is a very proper issue to be further considered.
Given what my noble friend the Minister said, and the ability to engage with her and the Government in looking at this in the months rather than years ahead, I hope that colleagues will accept that I should at this stage beg leave to withdraw the amendment.
Lord Ashton of Hyde
“( ) sections (Guarantee of pension liabilities under Telecommunications Act 1984) and (Regulations under section (Guarantee of pension liabilities under Telecommunications Act 1984));”
Lord Ashton of Hyde
“( ) section (Provision of children’s programmes);”
“( ) section (Televising events of national interest: power to amend qualifying conditions);”
“( ) The provisions mentioned in subsection (4)(a) and (c) come into force on whatever day the Welsh Ministers appoint by regulations made by statutory instrument.”
Lord Ashton of Hyde
“(9) The appropriate authority may by regulations made by statutory instrument make transitional, transitory or saving provision in connection with the coming into force of any provision of this Act.(10) Subsection (9) does not apply to section 4 or Schedule 1 (for which see section 5).(11) The appropriate authority, subject to subsection (12), is the Secretary of State.(12) The appropriate authority in relation to Part 5 is—(a) the Secretary of State, in relation to Chapter 2;(b) the Welsh Ministers, in relation to— (i) Chapter 1 so far as relating to the disclosure of information to or by a water or sewerage undertaker for an area which is wholly or mainly in Wales, and(ii) Chapters 5 and 6 so far as relating to the disclosure of information by the Welsh Revenue Authority;(c) otherwise, the Secretary of State or the Minister for the Cabinet Office.”
Lord Ashton of Hyde