The Parliamentary Under-Secretary of State for Digital, Culture, Media and Sport (Matt Warman)

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It is a pleasure to be back under your chairmanship, Mr Hollobone. As we discussed during the debate on amendments to this clause in our previous sitting, clause 6 inserts proposed new sections 105N to R, providing Ofcom with strengthened powers to assess whether providers of public electronic communications networks and services are complying with their security duty. These powers are vital to enable Ofcom to fulfil its expanded and more active role, giving it the tools to monitor and assess providers’ compliance with the new telecoms security framework and providing the basis for commencing any enforcement action.

Proposed new section 105O provides the power to give assessment notices to a provider. Assessment notices may impose a duty on a provider to do a number of different things, which I will briefly summarise. First, providers can be required to carry out, or arrange for another person to carry out, technical testing in relation to their network or service. Secondly, they can be required to make staff available to be interviewed, enabling Ofcom to gain insights into how a provider’s security practices and policies are implemented.

Thirdly, providers can be required to allow an Ofcom employee or an assessor authorised by Ofcom to enter their premises to view documents or equipment. I recognise that that is a significant power, but it is necessary. It is subject to certain restrictions to protect legally privileged information and to limit entry to non-domestic premises only. To provide clarity for telecoms providers, Ofcom will also publish guidance setting out how and when it will use the power. Importantly, providers have a right of appeal.

The powers of assessment set out in the clause are key to enabling Ofcom to carry out the effective and extensive monitoring and assessment of providers’ security practices that is necessary.

Matt Warman

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I will seek to move relatively rapidly through these four clauses.

Clause 7 provides Ofcom with enforcement powers in relation to providers’ security duties. The Bill gives Ofcom new powers to impose tough financial penalties on providers who breach their security duties. The penalties range to a maximum fine of 10% of a provider’s annual turnover, which is in line with the maximum fines available for breaching other regulatory requirements. For continuing contraventions, Ofcom can levy a daily penalty of up to £100,000. Penalties that are generally lower than that but still significant will also apply for contravening information requirements, which are subject to a maximum penalty of £10 million or, for a continuing contravention, a penalty of up to £50,000 per day. These penalties ensure that there will be a real financial deterrent to poor security practices. I should also say that, in the most serious cases, or in cases where a provider repeatedly contravenes its security duties, Ofcom would be able to use existing powers to suspend or restrict the provider’s entitlements to provide a network or service. Clearly, that is a step that we hope the regulator will never need to take.

The clause also gives Ofcom an important new power to take action where security is being compromised or is at imminent risk of being compromised. Proposed new sections 105U and 105V of the Communications Act 2003 would enable Ofcom to direct a provider to take interim steps to secure its network or service while Ofcom investigates or pursues further action. This power recognises that contravention of a security duty could result in a security compromise that causes real damage to users of that network or service. Where Ofcom uses that power, it will be required to commence and complete the enforcement process as soon as is reasonably practicable. The clause gives Ofcom the tools it needs to effectively enforce compliance with the new security framework.

Clause 8 sets out the position for bringing civil claims against providers who breach their security duties, which is a matter we touched on in earlier debates. It enables providers to be held accountable not just by Ofcom but by service users, such as members of the public, in cases where loss or damage is sustained by those users as the result of a breach of a duty. Providers owe a duty to any person who may be affected by a contravention of their security duties to take security measures, to comply with specific security duties in any regulations and to inform users of security compromises.

This clause allows any affected person to take legal action should providers breach those security duties. However, any affected person can bring legal proceedings against a provider only with the consent of Ofcom, which may be subject to conditions relating to the conduct of the legal action. This reflects the existing position in the Communications Act 2003 and ensures that providers face legal action only in appropriate circumstances. The clause also makes providers responsible to their users, providing another source of accountability. It allows users to bring legal claims for any losses they have suffered, which is only fair and reasonable.

Clause 9 addresses the interaction between provisions in the Bill and other legislation, specifically national security, law enforcement and prisons legislation. The security duties created by the Bill do not conflict with duties imposed on communications providers by other legislation via these clauses. Equally, we do not want the Bill to affect adversely the important work carried out by our law enforcement agencies, criminal justice authorities and intelligence agencies. The clause gives that clarity to providers about their responsibilities.

Finally, clause 10 requires that Ofcom publish a statement of policy about how it will fulfil its general duty and use specific powers to ensure that providers comply with their security duties. This will provide welcome clarity to industry about the expected use of important new powers. I beg to move that these clauses stand part of the Bill.

Matt Warman

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I welcome the spirit of the amendment. I think that the hon. Lady and I share the same ambition. I know that she wants to have the proper debate later, so we look forward to that.

Clause 11 inserts into the Communications Act 2003 proposed new section 105Z, which deals with Ofcom’s reports on security. It requires Ofcom to produce such reports within two years of the Bill receiving Royal Assent and every 12 months thereafter. As the hon. Lady said, amendment 14 is similar to the amendment to clause 6 that we discussed previously. Ultimately, when considering Ofcom’s role and specifically its reporting function, we should note that proposed new section 105Z(2) requires Ofcom security reports to include such information and advice as Ofcom considers may best assist the Secretary of State in the formulation of policy on telecoms security. That could go beyond the list in proposed new subsection (4) to include other relevant information, such as that related to diversification. The Secretary of State can also direct Ofcom to include information that goes beyond that list.

As the Committee and, indeed, Ofcom will be well aware, the Government have recently published a targeted diversification strategy, which will deliver lasting and meaningful change in the 5G supply chain and pave the way for a vibrant, innovative and dynamic supply market. We heard widespread support for the strategy from witnesses during the oral evidence sessions. The strategy demonstrates our commitment to building a healthy supply market and is backed by a £250 million initial investment.

We have publicly announced that the Government will be funding the creation of a UK telecoms lab to research and test new ways of increasing security and interoperability, and we are already partnering with Ofcom and Digital Catapult to fund the industry-facing test facility SONIC—the SmartRAN Open Network Interoperability Centre. Both of those will play a key part in our investment in diversification and demonstrate Ofcom’s existing part in it.

As already mentioned, amendment 14 would require Ofcom to include in its security reports

“an assessment of the impact on security of”

any

“changes to the diversity of the supply chain for network equipment”.

As that requirement is already essentially covered by Ofcom’s existing powers, the amendment is not necessary. The inclusion of any such information is already within Ofcom’s discretion, but I am sure that we will discuss it more later on, as the hon. Lady said.

Clause 12 expands Ofcom’s information-gathering powers for the purposes of its security functions and enhances its ability to share the information with the Government. It enables Ofcom to require a provider to produce, generate, collect or retain security information, and then to analyse that information. Any information sought using this power must always be proportionate to how Ofcom will use it.

Clause 13 makes provision in connection with the standard of review applied by the Competition Appeal Tribunal in appeals against certain of Ofcom’s security-related decisions. Ofcom’s regulatory decisions are subject to a right of appeal to the tribunal, and that will also be the case for most of Ofcom’s decisions relating to the exercise of its regulatory powers conferred by the Bill. This clause makes provision to ensure that the tribunal is not required to modify its approach in appeals against relevant security decisions, and should instead apply ordinary judicial review principles.

I hope that I have sufficiently explained to the Committee why amendment 14 is unnecessary and why clauses 11 to 13 as drafted should stand part of the Bill.

Matt Warman

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I listen with interest to the points that the hon. Lady makes, and to the assertion that she is a member of the party of national security. I welcome her to this side of the House, if that is the case. [Interruption.] Thank you, but no.

As the hon. Lady says, clause 14 is a review clause requiring the impact and effectiveness of clauses 1 to 13 to be reviewed at least every five years by the Secretary of State. The review report must be published and laid before Parliament, but it is by no means the only source of parliament scrutiny, as she knows. Her amendment would increase the frequency of these reports to every year for the first five years after the Bill is passed and then every five years thereafter.

Increasing the frequency of the reports would bring its own challenges for a number of reasons. First, the framework is considerably different from the previous security regime in the Communications Act 2003. It seems to me that we will not be able fully to assess the impact and effectiveness of the new security regime instituted by clauses 1 to 13 until all parts of the framework, including secondary legislation, codes of practice and other things, have been in place for a reasonable period of time. The code of practice that will provide guidance on the detailed security measures that telecoms could take is intended to set clear implementation timelines. Some measures may require significant operational change, as we heard in the evidence sessions for telecoms providers, and we are aware that that may be costly. For that reason, we cannot reasonably expect all changes to be implemented instantly or, indeed, all necessarily at the same time.

There is a further practical difficulty with the amendment. If the first report is to be produced 12 months after Royal Assent, it will require the review to be undertaken well in advance of that deadline. That means that the report will represent an incomplete picture of the Bill’s impact, even at its very first production. Some measures will not even have been implemented by telecoms providers.

My hon. Friend the Member for Hyndburn was exactly right that the current requirement for publishing reports is at least—rather than at most—every five years. We have been deliberate in our choice of this timeframe because five years is the reasonable point by which we expect the majority of telecoms providers to have implemented most, if not all, changes. It is therefore considered appropriate to require a report on the impact and effectiveness of the framework by that time. I recognise that five years is a long time. That does not mean that the framework will be free from scrutiny in the intervening period. As clause 11(3) sets out, the Bill amends section 134B of the Communications Act so that Ofcom’s regular infrastructure reports will include information on public telecoms providers’ compliance with the new security framework. Ofcom publishes the reports annually, rendering the amendment unnecessary.

Matt Warman

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No is the short answer, because while this is a progress report, five years from 2021 is 2026—the deadline is 2027, even at the most extreme end, which is not where we anticipate it will end up—and it would be before the point that she identifies.

The infrastructure reports from Ofcom will help to provide Parliament and the public with a view on how telecoms providers are progressing with compliance with the new framework. As I alluded to earlier, they are not the only means of parliamentary scrutiny. We have the Intelligence and Security Committee and we have Select Committees. I suspect that there might be one or two debates on this matter over the next five years as well. To pretend that this is the only method of parliamentary scrutiny is not accurate.

Matt Warman

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The hon. Lady asks me to predict what is in a report that has not been written yet by an organisation that is not a Government Department. I agree with the principle of what she is saying. This is an important aspect and one would reasonably expect it to be reflected in the reports that we have talked about. It is, however, important overall to say that Ofcom’s own regular infrastructure reports will, as I have said, include information on public telecoms providers’ compliance with the new security framework, which is the broadest interpretation and gives a huge amount of latitude for the sorts of information that she seeks. I hope that those infrastructure reports will help to provide Parliament with the kind of scrutiny that she seeks, and the public with the kind of scrutiny that we all seek. [Interruption.] For those reasons I hope that she will withdraw the amendment.

Matt Warman

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I thank the right hon. Gentleman for his contribution to the debate. He has talked so much about my impermanence that I felt lucky to come back today, never mind any time in the future. He makes a reasonable point, with which I broadly sympathise. As this is a broad grouping that covers clauses 15 and 16 and the amendments to clauses 15, 16 and 17, I will discuss the policy intention behind the clauses in sequence, and address the amendments.

As the right hon. Gentleman said, it is obviously an opportune moment to pay tribute to the heroic work of our national security services. The Bill emphasises the importance of their advice, and it empowers the Government to manage the presence of high-risk vendors in our networks. The report to which he refers is important, but it is also important to say that it was published, as he said, in 2013. It related almost entirely to events that took place under Labour, and it predates the existence of the National Cyber Security Centre, so we are dealing to some extent with a different world. I will go into a bit of detail on that.

As the right hon. Gentleman knows, the Government announced in January last year that new restrictions should be placed on the use of high-risk vendors in the UK’s 5G and full-fibre networks. In July 2010, the Government worked with the NCSC to update the guidance following action taken by the US Government in relation to Huawei. Clauses 15 to 17 provide the principal powers that the Government need to manage the risks posed by high-risk vendors. Without such powers, the guidance issued to industry will remain unenforceable and therefore present a risk to national security.

Matt Warman

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In short, the right hon. Gentleman is challenging the fundamental effectiveness of Government and the judgments that were made by officials at the time. I simply say that it is the duty of Government to ensure that such errors are not made in future. That cannot be done solely by legislative means; it must be done by custom and practice. The right hon. Gentleman understands, through his work on the ISC, that the role of those close working relationships is in some ways far more important in the day-to-day security issues that we are dealing with. Perhaps we can return to that point later.

The Bill will allow the Secretary of State to issue designated vendor directions, imposing controls on the use of goods, services or facilities that are supplied, provided or made available by designated vendors. The Secretary of State may issue such directions only where it is necessary to do so in the interests of national security and proportionate to the aims sought to be achieved.

Amendment 16, which would amend clause 15, seeks to place a statutory requirement on the Secretary of State to take into account advice from our intelligence services when considering whether to issue a designated vendor direction. Amendment 17, which would amend clause 16, seeks to place a similar requirement when considering a designation notice.

I should reassure hon. Members that the Secretary of State, as the right hon. Member for North Durham knows, has every intention of seeking the advice of our security and intelligence services, as would any Secretary of State, in particular the NCSC, when considering whether to issue a designated vendor direction or designation notice.

It is also worth saying, from a scrutiny point of view, that the Department for Digital, Culture, Media and Sport maintains an excellent relationship with the NCSC. We are scrutinised by the Select Committee on Digital, Culture, Media and Sport and I have appeared before the Intelligence and Security Committee, as the right hon. Gentleman knows. There are many examples in the Bill where the NCSC’s expert advice has been taken into account.

The UK telecoms supply chain review, on which the Bill is based, was the product of the close working relationship between the Department for Digital, Culture, Media and Sport and the NCSC. In a sense, that close working relationship demonstrates that matters have moved on substantively since 2013.

I draw hon. Members’ attention to the illustrative notices that we published in November last year. The NCSC was closely involved in the drafting of those illustrative notices. It will also be involved in the drafting of direction and designation notices once the Bill has been enacted . Given the demonstrable success of our collaboration with the NCSC thus far, I hope that the right hon. Gentleman will be satisfied with that explanation, although I appreciate that he introduced a probing amendment.

Clause 15 would create the new power for the Secretary of State to issue designated vendor directions to public communications providers, in the interests of national security. Although clauses 15 and 16 are distinct, they are complementary. Directions cannot be issued without identification of a designated vendor and designations have no effect unless directions are given to public communications providers. Clause 15 inserts new sections 105Z1 to 105Z7 into the Communications Act 2003 and amends section 151 for that purpose.

The clause will enable the Government’s announcements in 2020 on the use of high-risk vendors to be given legal effect. Those announcements include advice that require a public telecoms provider to exclude Huawei from their 5G networks by 2027, and stop installing new Huawei goods, services or facilities in 5G networks from September 2021. It will also enable the Government to address risks that might be posed by future high-risk vendors, helping to ensure our telecoms networks are safe and secure.

Proposed new section 105Z1 sets out the direction power. It would allow the Secretary of State to give a designated vendor direction to a provider, imposing requirements on their use of goods, services or facilities supplied by a specified designated vendor. Proposed new section 105Z2 provides further details on the types of requirements that may be imposed in a designated vendor direction. Proposed new section 105Z3 sets out the consultation requirements and expectations for public communications providers. Proposed new section 105Z4 sets out a requirement for the Secretary of State to provide a copy of a direction to the designated vendor or vendors, specified in a direction and, hence, affected by it. Proposed new sections 105Z5 and 105Z6 set out when and how the Secretary of State may vary or revoke a direction. Lastly, 105Z7 enables the Secretary of State to require a public communications provider to provide a plan setting out the steps that it intends to take to comply with any requirements set out in a direction and the timings of those steps.

Although the Government have made specific announcements on Huawei, the high-risk vendor policy has not been designed around one company, country or threat. The designated vendor direction power, as set out in these provisions, is intended to be an enduring and flexible power, enabling the Government to manage the risks posed to telecoms networks both now and in the future.

Clause 16 includes a non-exhaustive list of matters to which the Secretary of State may have regard when considering whether to issue a designation notice. Amendment 18 seeks to amend that clause by adding a person’s control of data flows to the list of matters to which the Secretary of State may have regard. However, nothing in the clause prevents the Secretary of State from considering control of data flows before issuing a designation notice already, if the matter were deemed relevant to the assessment of national security. It is already covered and so is not required as a stand-alone measure.

The clause creates a power for the Secretary of State to issue a designation notice, which designates a vendor for the purposes of issuing a designated vendor direction. Proposed new section 105Z8 is the principal measure of the clause, and sets out the power for the Secretary of State to designate specific vendors where necessary in the interests of national security. A designation notice must specify the reasons for designation unless the Secretary of State considers that doing so would be contrary to the interests of national security. The proposed new section also lists the primary factors that may be taken into account by the Secretary of State when considering whether to designate a vendor on national security grounds.

Finally in this group, amendment 19 would require the Secretary of State, when laying a designation noticed before Parliament, also to lay before Parliament a report detailing the impact that the designation notice might have on the diversity of the UK’s telecoms supply chain. The effect of the amendment would be to require the Secretary of State to lay a report purely on the impact of the designation notice, but a designation notice simply notifies vendors that the Government consider them a risk to national security.

Only when the designation notice is issued alongside a designated vendor direction are controls placed on the use of a designated vendor’s goods, services and facilities by public communication providers, so it is those controls that might have an impact on the diversity of the supply chain. I can reassure the Committee that the Government will consider the diversity of the supply chain before issuing designation notices and designated vendor directions. A lack of diversity is in itself a risk to the security of a network. I hope that answers the question that the hon. Member for Newcastle upon Tyne Central asked in regard to an earlier amendment. It is right that the Government consider that risk before deciding whether to issue designation notices and designated vendor directions.

To conclude, clauses 15 and 16 provide us with the ability to improve the security of our telecommunications networks and to manage the risks relating to high-risk vendors, both now and in the future.

Matt Warman

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I pre-emptively covered a lot of the hon. Lady’s questions, but I will say two brief things. She talked about consolidation in the cloud sector. While the Bill is very much a national security Bill, the National Security and Investment Bill would cover consolidation in that sort of sector, rather than this one. Obviously they do work together.

Matt Warman

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The hon. Lady is not wrong, obviously, in the sense that there is a potential conversation to be had about when a cloud provider is a telecoms provider and vice versa, if I can put it like that, although it is not the most elegant way of doing so. However, the point is that the reason we have comprehensive coverage of the landscape is because we have both the National Security and Investment Bill, which she debated recently, and this Bill. The broad powers that she described are intended to provide precisely that sort of coverage.

Similarly, the hon. Lady referred to the length of the list in clause 16 of matters that can be taken into consideration. That relates to the point I made previously, namely that the sorts of issues that she is talking about, such as data flows, are already covered in the long list. The list is as long as it is because it is intended to look to the future. Therefore, being prescriptive in the way that she describes is fundamentally unnecessary. We are not excluding what she wants to be on the list. A matter is already very much there if it is pertinent to national security. For that reason, I do not think there is a compelling case to add that single topic to the list, both because it is already there and because if we start going down that route, we could make the case for adding a host of other things that are already covered but that people might want to be mentioned specifically.

As I said earlier on the convergence of the two sectors, the point is that we have comprehensive coverage through both Bills. It will be for the NCSC, Ofcom and the Government to make a judgment as to whether any consolidation in a sector poses a national security risk.

Matt Warman

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I welcome the second salvo in the campaign to address this matter by the right hon. Member for North Durham. He said it would be an ongoing campaign.

This group of amendments would require the Secretary of State to provide information relating to a designated vendor direction or designation notice to the ISC. The amendments would require the Secretary of State to do this only where directions and designation notices had not been laid before Parliament, whether in full or in part, as a result of the national security exemptions in clause 17. It will not surprise the right hon. Member for North Durham or other Opposition Members that some of these short remarks will overlap with the conversation that we had earlier on a similar matter.

Amendment 20 would require designated vendor directions or designation notices to be provided to the ISC. Amendments 22 to 25 would require the Secretary of State also to provide the ISC with copies of any notifications of contraventions, confirmation decisions and so on. Although I recognise some Members’ desire for the ISC to play a greater role in the oversight of national security decision making across government, including in relation to this Bill, the amendments would, as the right hon. Member for North Durham knows, extend the ISC’s role in an unprecedented way. None the less, I thank his welcome for my unprecedented appearance.

As I said in the debate on amendment 9, the ISC’s primary focus is to oversee the work of the security and intelligence agencies. Its remit is clearly defined in the Justice and Security Act 2013, and the accompanying statutory memorandum of understanding, to which the right hon. Gentleman referred. I do not think he thinks it is my place to take a view on that role, and I do not think this Bill is the place to have that debate.

Matt Warman

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I will come on to that. Accepting any of these unilateral amendments to this Bill is not the appropriate place to achieve an overall enhanced role for the ISC—

Matt Warman

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Absolutely. Members of the Committee should note that in exercising the powers created by this Bill, the Secretary of State will be advised by the NCSC on relevant technical and national security matters. The NCSC’s work already falls within the Intelligence and Security Committee’s remit, so the right hon. Gentleman has found his own salvation.

In that context, the amendment seems to duplicate that existing power, while also seeking to do something that is better done in reform of a different Act, if that is what the right hon. Gentleman seeks. I am sorry to disappoint him again. I think he knew already that I would do that, but I look forward to his third, fourth and fifth salvos in his ongoing campaign.