Grand Committee
Product Regulation and Metrology Bill [HL]
Monday 25th November 2024
(1 month ago)
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The Deputy Chairman of Committees (Viscount Stansgate) (Lab)
My Lords, in the unlikely event of a Division, the Committee will be adjourned for 10 minutes. Much more likely is that some Members may have been adversely affected by Storm Bert and may not be able to join us for this session.
Clause 1: Product regulations
Amendment 11
Lord Sharpe of Epsom
“(4A) The Secretary of State must also by regulations make provision aimed at promoting investment, fostering innovation, and encouraging economic growth in relation to the marketing or use of products in the United Kingdom.(4B) Regulations under subsection (4A) must support—(a) the creation of economic incentives for businesses that contribute to economic growth, and(b) the alignment of product regulations with the strategic aim of positioning the United Kingdom as a global leader in innovation”Member’s explanatory statement
This amendment ensures that the regulations in the Bill prioritise economic growth and the United Kingdom’s role in innovation and economic expansion.
Lord Sharpe of Epsom (Con)
My Lords, in moving Amendment 11, I shall speak also to Amendments 104A and 124A in my name.
As highlighted by the Delegated Powers and Regulatory Reform Committee, Clause 1 in its current form should be removed—a theme that we have explored already and to which we will no doubt return. This amendment, however, directly addresses a critical gap in the current Bill by ensuring that regulations do not focus merely on product safety, environmental concerns and operational efficiency but actively promote investment and foster innovation.
The news coming from today’s CBI conference makes sobering reading. The chief executive of the CBI has said that employers have been forced into “damage control mode”. The head of the company that makes McVitie’s digestive biscuits said that
“it’s becoming harder to understand what the case for investment is … to make a difference in the growth rate of the economy”.
Again, the chief exec has said that CFOs are asking, “Can we afford to invest?”
I have no wish to talk down the economy or try to score cheap party-political points, but the fact is that life has got harder for big business recently. No doubt noble Lords opposite will say, “Well, they would say that, wouldn’t they?” But they are also committed to providing an environment that fosters growth and I know them to be sincere in that ambition, so we should all take these comments seriously.
It is not just big business. Last week, analysis by the Altus Group said that the planned reduction in business rates relief would lead to a more than doubling of rates for shops, pubs and restaurants next year. Coupled with rises in national insurance contributions and other operational pressures, SMEs are facing difficult times. But they represent the heartbeat of our economy and some of them will hopefully go on to become big businesses.
In today’s competitive global economy, economic growth cannot be secondary. The Bill should prioritise creating an environment where businesses can thrive, develop new technologies and compete internationally. It is vital that our regulations should be aligned with the strategic aim of positioning the United Kingdom as a global leader in innovation. In the post-Brexit world, the UK’s economic success is intrinsically tied to its ability to lead in innovation, which is why my Amendment 11 is critical. It ensures that product regulation supports the creation of an environment conducive to technological advancement and cutting-edge industrial leadership. It strengthens the Bill by ensuring that it is not about just managing risks or regulating product use but about creating a dynamic, forward-thinking market where businesses have the tools, resources and incentives to innovate and expand. Without these provisions, there is a risk that the UK could fall behind in the global race for innovation and business growth. If we do not explicitly ensure that our regulations align with our growth objectives, we could inadvertently stifle entrepreneurship and technological progress.
So how are we to become a global leader? The answer surely lies in aligning ourselves with the strongest global partners in the world today. If we are to maintain and enhance our position as a leading economy, we must look beyond a single trading bloc, particularly one whose economic influence is shrinking on the global stage—a theme we explored in debate last Wednesday. For example, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, the CPTPP, represents some of the fastest-growing economies in the world. Countries such as Japan, Australia, Canada and New Zealand, as well as emerging markets in Asia, are showing much more significant economic growth potential than others.
To lead the world, the UK must be flexible in its approach to trade and regulation. We need to reduce barriers and align ourselves with the economies that will drive future growth and innovation, rather than being tethered to a bloc that is not growing as fast as others. Amendment 11 in my name will enable us to do just that: focus on fostering global partnerships with the most dynamic economies.
Regarding Amendment 104A, a regulatory sandbox means an environment that allows businesses to explore and experiment with new, innovative products under regulatory supervision. This amendment is important for the development of innovative products affected by the Bill. It is an important step forward in fostering a regulatory environment that encourages creativity and innovation while ensuring safety and compliance. Regulatory sandboxes are an effective and proven model used to support businesses in testing innovative ideas. By introducing the importance of regulatory sandboxes in the Bill, we are not just helping businesses to navigate regulatory hurdles but promoting innovation by giving businesses the space to trial and refine their ideas.
Regulatory sandboxes will create a framework in which businesses can develop and test new products, contributing to the growth of the economy and the success of British businesses in the global marketplace. I urge noble Lords to support this amendment to pave the way for more innovation, more competitive businesses and, ultimately, a stronger economy.
I thank my noble friend Lady Lawlor for bringing forward Amendment 11A. The amendment is a clear and strong signal that we are committed to ensuring that our regulations actively foster economic growth, innovation and the global competitiveness of UK businesses. By encouraging the marketing and use of products in domestic and foreign markets, we are helping to open doors for UK businesses to grow their customer base, create jobs and increase exports. I commend my noble friend for this amendment. I look forward to a positive reception for all these amendments from the Government. I particularly look forward to the positive impact that they will have on businesses across the United Kingdom. I beg to move.
Baroness Lawlor (Con)
My Lords, I shall speak to my Amendment 11A, which would insert a new subsection to the effect that regulations
“must promote growth and effective production, foster innovation and encourage the use and marketing of products in the UK’s domestic and foreign markets”.
I declare an interest in that I have commissioned a number of studies and analyses at Politeia, the think tank where I am research director, which aim to examine and promote UK international trade and the UK economy. I support the aims of safety, containing costs and compliance with safety regulations, but I urge that we think about products having to operate efficiently and effectively. The problem we face is how best to do this consistent with promoting the entrepreneurial and innovative instincts of those bringing new products to the market, who my noble friend Lord Sharpe mentioned, and the growth this allows. I support my noble friend’s amendment to put growth at the heart of this measure.
During the consultation process for a product regulatory framework since 2021, of which this Bill is the outcome, producers and their representatives stressed their priorities for regulation. I am grateful to the Government for their response to this long consultation process. Producers stressed that it should be outcomes-focused and risk-based, should have greater simplicity, proportionality and consistency across legislation and powers and should deal with the serious challenges and opportunities that this country now faces. A further consultation to develop the product safety regime took place in August 2023, with businesspeople and business representatives that are listed in the Government’s helpful response. It found broad agreement on the need for a regulatory approach that promotes a regime ready to respond to hazards but that allows temporary derogation during emergencies for supplying essential products—in other words, it is dynamic—and makes for safer online shopping and promotes digital labelling and an enhanced national regime.
The Minister said at Second Reading and has reiterated to this Committee that the Government have listened to business. Their priorities are summarised in the Government’s consultation document. They are designed to allow for effective operations and to promote growth as a priority, which I and my noble friend Lord Sharpe are urging we need. The rules should be demand-led and reflect the capacity of our businesses to innovate, be entrepreneurial and grow their workforces and their range of products along with the high standards and competitive costs that consumers want.
Nowhere in the Government’s response document do we find businesses wanting a regulatory regime that brings greater rigidity in process rather than being outcomes-led, one that is risk-averse rather than equipped to deal with the real level of risk posed by products or processes, one that treats every product as bearing the same risk or being under a one-size-fits-all rule, or a regime that is disproportionate, untargeted and unduly complex. Yet that scenario, rejected by business, is inherent in the EU legal arrangements that the Government wish to be able to adopt for our businesses under Clause 1(2), to which my amendment is addressed. That can only stymie growth, contrary to the express wishes of the Government. For those reasons, I propose that growth should take priority over the arbitrary exercise of power to introduce the rigidity and complexity of an EU system which is not outcomes-focused or risk-based; nor is it proportionate or known for simplicity.
I will give your Lordships an illustration, for which I owe thanks to Professor David Collins, who holds the chair of international economic and trade law at City, University of London. He draws attention to the unnecessarily burdensome EU REACH regulation—on the registration, evaluation, authorisation and restriction of chemicals. Collins explains that it has extensive requirements for registering very low-risk substances. For example, certain food-grade natural substances that have been used safely for centuries will require expensive registration. Under the EU’s REACH, if a company uses more than one tonne per year of natural fruit extracts or oils, and products such as soaps or cosmetics, it needs full registration, including extensive safety data packages, even when these substances have been safely used in food for ages. This can cost tens of thousands of euros per substance. The relevant EU legislation is Regulation (EC) 1907/2006 REACH, and the key sections on registration requirements are primarily in Title II, Articles 5/24.
The EU’s post-Brexit UK REACH maintains similar core principles but has proposed a more proportionate approach for these well-established natural substances, with simplified registration requirements planned for ingredients with long histories of safe use. Although the overall goal of chemical safety is vital, requiring extensive registration for substances such as olive oil or lemon extract when used in non-food products adds to cost without proportionate safety benefit, and it is not needed. The safety of these materials could be adequately assured through simpler mechanisms. The UK REACH regulation, created through the REACH etc. (Amendment etc.) (EU Exit) Regulations 2019, Statutory Instrument 2019/758, aims to do this and does it very effectively.
Moreover—I refer to my noble friend Lord Sharpe urging that we align the UK economy with the strongest, most dynamic economies in the world—by relying on our own laws it will not only help our businesses but will allow us to do exactly that. My noble friend Lord Sharpe mentioned the CPTPP agreement; as Professor Collins says, it
“does not mandate blanket mutual recognition of conformity assessments for food safety among its members”
but it does
“include provisions that encourage members to accept other members’ conformity assessment results. It also facilitates acceptance of conformity assessment results through mechanisms like technical discussions and explanations of requirements. It also allows for sector-specific mutual recognition arrangements to be negotiated between members”—
which are very important. Professor Collins continues:
“So the CPTPP promotes regulatory cooperation and transparency but preserves each member’s right to maintain their own food safety standards and assessment procedures. Members must ensure their requirements are based on science and international standards where they exist, but aren’t required to automatically accept other members’ assessments. This is similar to what the WTO TBT Agreement does, but it goes further in terms of cooperation”.
Lord Kirkhope of Harrogate (Con)
My Lords, I came here full of hope and expectation this afternoon; indeed, I even indicated to my noble friend Lord Sharpe that, on this occasion, I was here to support his Amendment 11 and Amendment 11A in the name of my noble friend Lady Lawlor, because, as one reads them on the page, they seem to have a lot of merit. However, I regret that, as my noble friends have spoken, they have in their speeches used these amendments to diminish the importance of our major market in Europe and our relationship with the European Union. Noble Lords will be delighted to know that I am not, therefore, going to concentrate any further on those matters but shall instead turn immediately—to my own relief and that of those parties—to Amendments 104A and 124A.
I want to refer in particular to sandboxes, a very interesting area that most members of the public probably do not have a clue about, other than from their visits to coastal regions during the summer holidays. Of course, sandboxes are terribly important in the context of this Bill. My noble friend Lord Sharpe was right to allude to them and to say how important they are; indeed, there are already in place regulations referring to their use, to how IP can be protected, as has been mentioned to me, and so on. However, I want to broaden this issue out a tiny bit. In winding up on this group, can the Minister clarify the way in which sandboxes are protected and how, from the point of view of UK plc, we can make use of them without danger either to the thinking that goes into innovation in them or to the overall position of this country apropos markets, wherever they may be in the world?
I am particularly interested—I know that other noble Lords present this afternoon may well speak on this—in sandbox use in the development of technology and AI. This is an area in which this country has every opportunity to lead the world. Certainly, sandboxes are one way that one can experiment and bring in new ideas without the risk or danger of them being exploited by others, against the interests of this country. I merely say that I support Amendments 104A and 124A, in the principles that they debate, but I would like the Minister to clarify how we can bring together sandboxes, in whichever field they may be deployed, to the benefit of the country.
Lord Lansley (Con)
My Lords, I apologise that I was not able to be with the Committee on its first day, nor will I for much of this afternoon, but I look forward to returning for my amendments on Wednesday. I support my noble friend Lord Sharpe’s amendment.
When we debated the regulation of medical devices in the Medicines and Medical Devices Act 2021, we established that safety and safeguarding public health was its overriding objective. However, we went on to say in what is now Section 15(3) of that Act that in considering whether regulations should be made, and whether they would contribute to the objective of safeguarding public health,
“the Secretary of State must have regard to”—
I commend that language to my noble friend, rather than “must support”, which I think takes it a bit far and creates conflicting duties—
“the safety of medical devices … the availability of medical devices … the likelihood of the United Kingdom being seen as a favourable place in which to … carry out research relating to medical devices … develop medical devices, or … manufacture or supply medical devices”.
I draw attention to the third of those. The structure of the existing legislation on the product requirements for medical devices already incorporates an expectation that we consider economic activity, economic growth and our comparative position in the manufacture or supply of such products. I say to my noble friend that that is an alternative formulation which thoroughly supports, through the precedent of a very closely related area of regulation, the idea that economic activity of that form should be part of the consideration of whether and how regulations should be made.
Lord Leong (Lab)
My Lords, I thank the noble Lord, Lord Sharpe, and the noble Baroness, Lady Lawlor, for their contributions on Amendments 11 and 11A, which specify that regulations made under the Bill should promote investment, foster innovation and encourage economic growth and investment. This Government are committed to attracting investment, as illustrated by the £63 billion pledged at the recent international investment summit. Britain is open for business.
I assure noble Lords that growth is the number one mission of this Government and our new industrial strategy, to be published in the spring, is central to it. The strategy will focus on tackling sector-specific and cross-cutting barriers to growth for our highest-potential growth-driving sectors and places, creating the right conditions for increased investment and high-quality jobs and ensuring a tangible impact in communities right across this country.
I also thank the noble Lord, Lord Sharpe, for his Amendments 104A and 124A, which seek to create regulatory sandboxes where new products could be trialled under regulatory supervision, as indicated by the noble Lord, Lord Kirkhope. I recognise and welcome the intention behind the amendments, which seek to encourage innovation. The Office for Product Safety and Standards within my department already works to provide businesses with guidance and support as they develop and market products. We also support local authorities in their work as primary authorities. This allows businesses to receive assured and tailored advice on meeting environmental health, trading standards or fire safety regulations from a single local authority, then applying this advice nationally. The underpinnings of our product safety regime are based on extensive engagement with businesses. Whether it is on regulatory change, the development of standards or the work of the OPSS as a regulator, the relevant bodies consult extensively across industry.
I am always open to new ideas on how to support businesses to innovate. I understand that in 2022 the Office for Product Safety and Standards supported the Home Office in a regulatory sandbox trialling electronic ID for alcohol sales. However, I am concerned about mandating regulatory sandboxes in the Bill. Product safety is, after all, about avoiding potentially serious risks to people and their property, and anything that would relax regulations in this way, even as a trial, would need careful consideration. It could also commit local responsible authorities to run trials in their areas without sufficient consultation or preparation. This could place an undue burden on local authorities, diverting resources and capacity from their primary responsibilities.
This Government are committed to ensuring that any regulations made under this Bill will support the interests of UK businesses and consumers, providing regulatory certainty and creating the conditions for investment, innovation and economic growth. The Government are always open to debate to ensure that we can support businesses to deliver safe and effective products. I hope I have demonstrated to the noble Lord the extent to which regulators already work closely with businesses to achieve this.
In response to the point from the noble Lord, Lord Sharpe, about SMEs, I was an SME once; we do not want to burden SMEs with additional regulatory or financial cost, if possible. This Government are pro-business and pro-worker and have provided certainty, consistency and confidence—for which investors have been looking for a very long time. Massive tax reliefs are available to investors through the EIS, the SEIS, VCTs and all kinds of grants, including patent grants for any new industries. The Government have shown that we are committed to investment and growth.
I hope that I have been able to reassure noble Lords that the Government are committed to fostering growth through all our policies. This will be set out in more detail in the forthcoming industrial strategy, which we will publish in the spring. I therefore ask the noble Lord to withdraw his amendment.
Lord Sharpe of Epsom (Con)
My Lords, I thank all speakers, in particular my noble friend Lady Lawlor for so eloquently introducing her amendment. I say to my noble friend Lord Kirkhope that my remarks are in no way meant to diminish any of our trading relationships; the point is that these amendments are designed to look after our national interest. It may well be that aligning with the EU is in our national interest, in which case we absolutely should, but if it is not, then we should not, and any reference to relative economic growth is merely factual. I thank my noble friend very much indeed for his supportive remarks on Amendments 104A and 124A.
I also thank my noble friend Lord Lansley for his perspective, which will be very helpful when we come to later stages of the Bill. I also thank the Minister for his remarks, which provided helpful clarity. I take comfort from the fact that he remains open to new ideas. We will consider his remarks carefully but are very pleased to hear his reassurances regarding SMEs. For now, I beg leave to withdraw my amendment.
Baroness Crawley
Member’s explanatory statement
This amendment would broaden the definition of items subject to the new regulatory framework of product regulation to ensure that all digital as well as non-digital products are within scope.
Baroness Crawley (Lab)
My Lords, in moving Amendment 12 in my name and those of the noble Earl, Lord Lindsay, and the noble Lord, Lord Foster of Bath, I also support the amendment from the noble Lord, Lord Fox. I welcome the noble Lord, Lord Sharpe of Epsom, to his new post and thank my noble friend the Minister for his courtesy in organising several meetings for Peers and organisations interested in this Bill; it was remiss of me not to do so earlier.
Lord Foster of Bath (LD)
My Lords, this is an important group of amendments. No doubt, the noble Lord, Lord Sharpe, will shortly set out his amendments but, as I understand them, by deleting bits of the Bill they provide an opportunity for us to have a debate on what is meant by a “product” and by the “use of products”. The other two amendments are in the names of the noble Baroness, Lady Crawley, and my noble friend Lord Fox and have a similar purpose. My noble friend cannot be with us today because he is abroad on parliamentary business in connection with NATO. These amendments will help us to get more clarity on what is covered by a “product” and its use and will help to future-proof the legislation, in the case of Amendment 12 by ensuring that all digital and non-digital products are within scope and in the case of Amendment 13 by ensuring that all operating systems and internet-connected products are within scope.
The noble Baroness, Lady Crawley, very clearly set out the arguments for why this is needed, and I fully support her, but my noble friend Lord Fox’s amendment, which is also a probing amendment, seeks to find out whether the Government’s intention is that operating systems and interconnected products will be covered by the provisions of the Bill. Some may recall that in an earlier grouping I expressed concern about what appears to be the limited way in which the Government consider products as just things. I sought to explain that we cannot always consider a product in isolation as some products are installed as part of a system, and I argued that we should take the whole system into account.
My noble friend’s amendment expresses a similar point. It seeks to ensure that the Bill recognises that the operational characteristics of many products are, effectively, changeable. For instance, household products are increasing controlled by operating systems that can be and are controlled by the vendor remotely. The legislation needs to take this into account in two separate ways. The first, and most simple, is that there should be a clear obligation on the vendor to demonstrate good faith in ensuring its products’ operating systems are up to date and are protected, for example, from external malign attack. Secondly, there needs to be a process whereby material changes in the characteristics of a product continue to meet regulations that they met before the changes.
Many noble Lords will already have heard my noble friend Lord Fox’s particular concern about references to the health and safety of domestic animals in the Bill. He has picked it up on several occasions. He sought to explain his amendment to me in relation to those references. He pointed out that, for example, a remote vacuum cleaner may be programmed to behave in a way that ensures that family pets are not in danger of being harmed by it. He went on to point out that a remote change might disregard this safeguard and so endanger the health and safety of domestic animals. My noble friend argues that without his amendment, or something similar, it would appear that there is no way in which the measures in the Bill could enable the policing of such remote revisions to product properties.
More generally, these amendments in this group seek to probe the Government further on what they believe are covered by “products” and which uses of products are covered by the proposed legislation. I very much look forward to hearing the Minister’s response on those issues and to hearing the noble Lord, Lord Sharpe, explain his amendments more effectively than I have sought to do.
Lord Sharpe of Epsom (Con)
My Lords, I thank the noble Baroness, Lady Crawley, for her remarks. Obviously, defining “products” is a key consideration in much of what we have to discuss in this Bill. It is a subject to which we will return later today. I thank the noble Lords for introducing their amendments. It was very eloquently done. They certainly deserve consideration and comprehensive answers from the Government.
I will speak to Amendments 18 and 19 standing in my name. The Bill as it stands—and I am afraid this is going to be rather labouring a point that we discussed a lot last week—has been widely criticised for being skeleton legislation with much of the substance being delegated to Ministers through statutory instruments. The Delegated Powers and Regulatory Reform Committee has rightly pointed out that this leaves “almost no substance” or perhaps, as the noble Baroness, Lady Crawley, described it, no clear markers in the Bill, giving Ministers excessive and unaccountable discretion to regulate in important areas, such as product marketing and safety, without sufficient parliamentary scrutiny or oversight.
Clause 2 is a prime example of this, because it grants wide powers to Ministers to make regulations on a wide range of product characteristics—but without any clear or substantive detail. By keeping paragraph (a), the Bill opens the door to the possibility of Ministers creating regulations that lack transparency or specificity. I find the wording concerning and unnecessarily vague. For example, the phrase “other characteristics of products”—or, as the noble Lord, Lord Foster of Bath, described it, “just things”—is far too broad and could allow the Government to regulate anything under this clause, with little or no clear limit or definition.
The lack of clarity here is a significant issue, not least because businesses and producers rely on clear, specific regulations to know what is expected of them and to ensure that they remain compliant. Under this clause, they are left in the dark. What exactly are we talking about when we refer to “other characteristics”? Are we talking about the design of products, marketing methods or even the raw materials that are used in manufacturing? Small businesses and start-ups are especially vulnerable to such unclear regulations, as they may struggle to interpret or comply with such an open-ended provision.
This provision, in effect, gives Ministers the power to define and change the scope of regulations without sufficient clarity or transparency. Ministers could, under this clause, make regulations to cover an incredibly wide range of product characteristics, creating significant uncertainty for the market. We believe that this is an unacceptable level of ministerial discretion. With such a clause, the Government could, in effect, regulate anything and everything related to products. We do not think that we can afford to pass a Bill that leaves businesses and consumers in the dark and subject to the whims of ministerial power. This clause should be completely rewritten or removed. If the Government cannot provide a more specific targeted framework for these regulations, we must consider removing it entirely on Report.
With Amendment 19, there are the same issues. At present, there is no clear definition of what constitutes the “use of products”, nor any explanation as to how the Government intend to regulate it. This lack of clarity presents a significant issue, as it allows Ministers broad and undefined discretion to determine how products should be used and how they are to be regulated. This could easily lead to overreach, and, given how the Government have argued so far in some areas, regulations could be imposed with little or no accountability or scrutiny, leaving businesses uncertain about the future of their operations.
I am very pleased that the Minister has talked repeatedly about giving businesses certainty, particularly in aligning with EU regulations. However, we need more in the Bill to suggest certainty in the areas that I have just described, and I hope that he will be able to provide some reassurance.
Lord Leong (Lab)
My Lords, as technology and regulation continue to develop, we need new powers to address future threats and hazards and to ensure a continued supply of safe, accurate and compliant goods.
I thank my noble friend Lady Crawley and the noble Lord, Lord Fox, for their Amendments 12 and 13, and the noble Lord, Lord Foster, who introduced the latter. I agree that we need a robust product safety framework that can reflect the latest risks and hazards and keep consumers safe and protected. The Government have worked hard to ensure that the powers in the Bill capture the multitude of products that fall within our product safety framework, as well as new products that might be placed on the market and present risks to consumers in future.
For the purposes of the Bill, products are defined as
“tangible items that … result from”
a “method of production”. This definition ensures that we can capture a wide range of manufactured products marketed or used in the UK, from cosmetics to complex machinery. There are a number of instances where our current regulation and product safety work covers software: for example, where certain products are reliant on software, or our work to enforce certain software security requirements under telecommunications legislation. Following my noble friend Lady Crawley’s comments on smart doorbells, I confirm that an app connected to a smart doorbell would be covered by the Bill where it affects the physical safety of the product. The Product Regulation and Metrology Bill would ensure that our general ability to regulate the safety of all products can take account of software, as well as the impact of software on the performance of any particular product.
Let me assure noble Lords that we have carefully considered the scope of products that we seek to cover, and we are future-proofing as much as we can by allowing regulations to also cover intangible components of physical products. This includes things such as software, as I mentioned, where they form part of a tangible product. As such, the Bill will allow us to regulate interconnected products in so far as the safety of the physical product is affected. In this way, we can ensure that we are able to regulate the role of these intangible components in the risk that physical products may present.
Lord Foster of Bath (LD)
I am grateful, because this takes this back in a sense to an earlier group. The Minister has again referred to the issue of installation. Can he say categorically, on the issue of use, whether use will always include installation—or is it that it “may” include installation, as he said? Is it “will” or “may”?
Lord Leong (Lab)
I can give the noble Lord the assurance that it is “will”.
Baroness Crawley (Lab)
My Lords, I thank my noble friend the Minister and the noble Lords, Lord Sharpe and Lord Foster, who have contributed to this short but useful debate.
I will not repeat the valid and important points that have been made, but I ask the Minister to have another look at the Bill’s definition of “product” in the light of our discussion this afternoon. However, I accept his explanation of software regulation going forward: that was an important point he made. For now, I beg leave to withdraw the amendment.
Lord Holmes of Richmond
Lord Holmes of Richmond (Con)
My Lords, it is a pleasure to take part in this second day of Committee on the Bill, and a pleasure to speak on this group of amendments. I will move Amendment 14 in my name and speak also to Amendments 54, 75 to 78 and 99 to 101. In doing so, I declare my interests, not least my technology interests, as set out in the register, in particular as an adviser to Socially Recruited, an AI company.
The purpose of these amendments is to bring greater clarity to consumers, citizens and indeed our whole society and economy when it comes to the interaction of AI across so many sectors of our lives, not least in product production, deployment and use. Each amendment has a specific focus. When taken as a suite, they would make a significant difference to citizens’ and consumers’ understanding of where AI has been used in the production of a product or is inherent to the deployment and use of that product—which can only be a positive thing.
Amendment 14 seeks to amend the definition of “production” to highlight where AI has been involved in the production process. As with the previous group of amendments, I could just as easily have drafted an amendment expanding the definition of “product”, because it seems that, with the Bill as drafted, we have a product regulation regime and a production of product regime that do not really fit the economy, society and methods of production we now have across our daily experience.
I will give another example. We have had doorbells and out-of-control vacuum cleaners, potentially. Now let me give you the Minister’s fridge. After a hard day in Committee, the Minister returns home and takes out a lovely piece of soft cheese. Unfortunately, because the AI involved in that fridge has decided, for whatever reason—we know not—to increase the temperature in the fridge to 25 degrees, the Minister becomes very ill as a result of his midnight snack. How does the Bill help the Minister in his travails? The fridge is clearly a product and would be covered, but in no sense can the safety, operation and use of the fridge be of any benefit in the set of circumstances that resulted from AI acting in the way it did. That is what Amendment 14 is all about and I look forward to the Minister’s response on how the Bill could be amended to give better protection, certainty and understanding where AI is involved in the production of products, and indeed in the products themselves.
Similarly, that theme continues through Amendment 54. I believe that, if we are to have greater clarity and consistency, it would be helpful for the Government to undertake a review of all product legislation and regulation, both to see how it would deal with all the issues, opportunities and challenges around artificial intelligence and to assess all that statute and regulatory framework’s ability to look at competency in addressing AI, in terms of how it is operating and having an impact on so many people’s lives because of the products in which it is already embedded, whose use it is part of and which it controls. Oftentimes, it has an impact on people without them even knowing that AI is in the mix. I look forward to the Minister’s response on this potential review.
Amendments 75 to 78 look at labelling. I thank the noble Baroness, Lady Bennett, for signing Amendment 75; similarly, I should have thanked the noble Viscount, Lord Trenchard, for co-signing Amendment 14. If consumers are to have greater understanding of the products they are buying, it would seem helpful for there to be labelling of that product—simple labelling stating that AI was involved in the production of the product and/or is involved in the product. By this, I mean not only a simple label to alert consumers if that is the case but a QR code with far more detail so that all consumers can be aware of the AI elements of a product’s production, particularly in terms of its power usage, water usage and compute usage. Clause 5 of my Artificial Intelligence (Regulation) Bill, to which the Minister in opposition gave full-throated support, covers a number of these issues. I am interested in the Minister’s response to the concept of labelling around product where AI has been involved in the production of a product or is involved in its use.
Amendment 76 goes specifically to the music industry, where artificial intelligence itself has created music products. Again, to my mind, this should be labelled so that consumers know how music has come into being—that is, if it is simply AI-generated with no human involvement.
Amendment 77 offers a statutory option for the Minister to consider amending the Consumer Rights Act 2015, which would give far greater clarity to musicians—indeed, to all creatives across our economy and our society. The current situation is that many creatives find themselves on the wrong end of AI usage of their creative works, with no respect, no consent and no remuneration.
Amendment 78 moves us on and takes us into the areas of likeness and other elements of our personal IP. If AI products take such IP rights, this is not currently covered. I am interested in the Minister’s response as to how we can give our creative community greater clarity, greater comfort and greater support—and, through such labelling and statutory amendment, give far greater legislative cover not just to musicians but to all of our creatives, right across our society and our economy.
Amendments 99 to 101 look at potentially developing new metrology standards for AI data centres and search. Again, they cover these recurrent themes of consumer knowledge, consumer understanding and clarity around what is involved in AI-created products and products with AI in them. It is unlikely that many people who conduct an AI search or query, particularly on the new generative AI models, know the impact of every search in terms of its power usage, its water usage and its compute usage. Similarly, how many of us consider the water usage and compute power of what might seem like a more heritage search—that is, how much is involved in each and every one of those searches? Does the Minister agree that it would be helpful for the Government to undertake a programme of consultation to see whether new metrology standards could be developed? This would be helpful for consumers, businesses and developers in delivering clarity around what is involved in these new product creations.
Baroness Brinton (LD)
I am very grateful for the explanation from the noble Lord, Lord Holmes, of his amendments on AI and digital products, which are particularly appropriate, given the comments from the noble Lord, Lord Lansley, on the first group when we were discussing sandboxes, because of his experience during the passage of the digital medicines Act three or four years ago. A number of noble Lords in this Grand Committee worked on that—I am looking at the noble Lord, Lord Hunt, in particular.
I raise this because one area that concerns me about new products, especially those using AI, is that we do not have the same mechanisms that we have, full of fault though they are, for being able to allow our personal information to be used and to give our consent. I have mentioned before the issue of my dentist. Before you go to see your dentist, you have to go online to fill in a consent form, and at some point mid last year I noticed that there was something about the IT suppliers and it said, “It is assumed you give your consent”—and 10 layers further down they had a completely different set of consents that breached UK GDPR law. Had I not been working on another Bill about digital consent, I would not have looked much further. I have to say that the moment my dental surgery was aware of this, that firm was not just told to change it but was sacked. My problem with AI is that none of that work is visible; it is completely invisible.
My question to the Minister is, in the discussion about sandboxes but also about products that will come under this Bill: will he ensure that our current GDPR laws—and indeed our copyright laws in relation to music—are complied with at all times, so that there would not be any freedom for somebody using AI to develop a product to breach those? I say that in light of the final remark the noble Lord, Lord Holmes, made about consultation. Two sets of Government Ministers have had a very bitter time about patient data and care.data—the noble Lord, Lord Hunt, is smiling at me—when the public were not fully informed about what was going on, and in both cases the proposals had to be abandoned.
Lord Foster of Bath (LD)
My Lords, the first amendment of the noble Lord, Lord Holmes, Amendment 14, seeks to ensure that the production reliance on software and artificial intelligence are included in the scope of the Bill. Clearly, all our remarks are somewhat irrelevant if the Minister gets up and says, “No, they are not”. However, on the assumption that the Minister is going to say, “Yes, they are”, I draw particular attention, if I may, in supporting all the noble Lord’s amendments, to Amendments 75 to 78, on the issue of labelling. This seems to me to be an opportunity for real joined-up government thinking.
The Minister will be well aware that the Communications and Digital Committee, on which I had the opportunity to serve at the time of this, produced a very detailed report on the development of LLMs, large language models, and AI. In so doing, we particularly raised concern about the way in which these large language models were being trained by scraping tons of data from a variety of sources, then creating products over which they were then able to get intellectual property coverage. In so doing, they had scraped a great deal of data.
Amendment 78 in the name of the noble Lord, Lord Holmes, in respect of the labelling and so on, requires the Secretary of State to lay
“regulations to ensure no product or content … uses an individual’s image, likeness or personality rights without that individual’s express consent”.
Had I been drafting the amendment, I would have gone much further, because it seems to me that a large amount of other data is scraped—for instance, novels written by authors without their permission. I could go on; it is well worth looking at the Select Committee report.
Does the Minister accept that this is a real opportunity to have joined-up thinking, when the Government finally decide what their position is in relation to the training of LLMs and people being required to get the permission of all data owners before they can bring their product to market? Does he agree that the labelling of such products, when developed, should include specific reference to them having gained the appropriate permission, paid the appropriate fee or got the appropriate licence to make use of the data that was made use of in the training of those AI products?
Baroness Freeman of Steventon (CB)
My Lords, I shall speak briefly to Amendment 75, which was very eloquently introduced by the noble Lord, Lord Holmes. My academic background is in the research of communication and how people make decisions based on information that they are given. That touches quite a lot on how people assess the reliability and trustworthiness of data.
Amendment 75, on the labelling of AI-based products, includes a proposal about communicating the data used in the training of the AI. I think it is really important that people who have products that provide information on which they might be making decisions, or the product might be acting, are able to know the reliability and trustworthiness of that information. The cues that people use for assessing that reliability are such things as the size of the dataset, how recently that data was gathered and the source of that data—because they want to know if that data, to use the example of the noble Lord, Lord Holmes, is on American cheeses, British cheeses or Italian cheeses, all of which might need a different temperature in your fridge. I urge the Minister to look at this, because the over-trust or the under-trust in the outputs of data make such a difference to how people respond to products. I think this is very important.
Lord Kirkhope of Harrogate (Con)
My Lords, as one of the unfortunate authors of the GDPR, I am very interested to hear the remarks that have been made about possible abuse of the use of data. First, I thank my noble friend Lord Holmes very much for his amendments because, obviously, without proper consideration of the effects in technology and the fast-moving developments of AI, no legislation, particularly the sort of legislation, will really pass muster, so I support his amendments very much.
However, as far as GDPR is concerned, we brought into all of that a term that many of our European Union friends were not going to include at the time: proportional. In relation to how we deal with alleged data abuse, whether or not it is simply a question of small areas of data that have been used for good purposes or otherwise, it is important that we remember at all times that the heavy hand must be looked at carefully and that proportionality must always be remembered as being relevant to the way in which we deal with the use of data.
Lord Sharpe of Epsom (Con)
My Lords, I thank my noble friend Lord Holmes for his superb introduction to this group. I also thank the noble Baroness, Lady Brinton, for confirming my suspicion of dentists.
I shall speak in general terms because I cannot improve on the eloquence with which my noble friend Lord Holmes put his arguments. To return to the point, these amendments illustrate the limitations of Clauses 1 and 2, I am afraid. These amendments have considerable merit on a stand-alone basis but, in aggregate, they—Amendments 75 to 78 in particular—would in effect seek to define artificial intelligence. This is obviously a fast-moving and rapidly evolving subject; frankly, it deserves a national, never mind parliamentary, debate, as my noble friend Lord Holmes eloquently argued. AI will clearly demand definition and regulation, as the noble Lord, Lord Foster, rightly pointed out. Philosophically, I am not even sure that it qualifies as a product in the traditional sense; frankly, what is in this Bill suggests that we do not really know.
I cannot help thinking that some of the arguments made by the noble Lord, Lord Leong, in our debate on the previous group reinforce this point to some extent. AI can be benign, obviously, but the same application might not be. So, how do we define risk in these terms, even if it regards only the temperature of cheese? I therefore question whether this Bill is the right vehicle for these amendments or whether AI deserves a stand-alone debate and argument. The fact that they are in scope again illustrates, as I said earlier, the inherent weaknesses of Clauses 1 and 2. They are too broad and lack definitions. Ideally, they should be removed; at the very least, they should be extensively rewritten and tightened. I hope that the Government will listen but, if they do not, I will certainly have conversations with my noble friend Lord Holmes about what we shall do next.
Lord Leong (Lab)
My Lords, I thank all noble Lords and noble Baronesses who have spoken. The use of software and AI in physical products covered by our product regulation regime is still in its early days. It is important to take the opportunity of this Bill to ensure that future regulation can keep pace with technological change.
The amendment tabled by the noble Lord, Lord Holmes, would require a review of all product regulations in terms of how AI may impact them and a specific labelling requirement for AI. The Bill gives powers to ensure that product regulation can be updated or new regulations can be passed to cover emerging risks. They include measures such as labelling and verification requirements. However, mandating specific measures in the Bill would limit our ability to determine the most effective ways to protect consumers. A more flexible approach will allow us to adapt as this technology evolves and to ensure that protections remain robust and relevant.
To be clear, this Bill does not seek to regulate digital products or artificial intelligence in and of themselves; it is focused on the regulation of physical products and future-proofs our ability to keep product and metrology regulation up to date with emerging technologies. The Government have a wider programme of work on the regulation of artificial intelligence, where, in most cases, the UK’s expert regulators are responsible for enforcing the rules on AI in their domains; we are working with regulators to ensure that they have the resources and expertise to do this effectively.
Additionally, as set out in the King’s Speech, the Government will bring forward separate legislation to ensure the safe development of AI models by introducing targeted requirements on companies developing the most powerful AI systems. We will undertake a full public consultation to hone these proposals before presenting them to Parliament in due course.
The noble Lord, Lord Holmes, raised the issues of data protection and intellectual property. As we know, UK GDPR and the Data Protection Act 2018 form the legal framework for protecting personal data in the UK; this already covers things such as personal data, photographs and voice recordings.
Lord Holmes of Richmond (Con)
My Lords, I thank everybody who took part in this debate and the Minister for his response. I am convinced that there will be a number of issues to discuss between Committee and Report—certainly to return to when we reach Report—but, for now, I beg leave to withdraw my amendment.
Baroness Brinton
“(c) EU REACH regulation restrictions that are applied to the manufacture, placing on the market, and use of certain chemicals to mitigate unacceptable risks to human health or the environment;”Member’s explanatory statement
The amendment ensures that EU REACH regulations covering certain chemicals are included in the Bill.
Baroness Brinton (LD)
My Lords, REACH regulations cover the safety of chemicals. We simply ask: how can the Bill regulate cosmetics without considering the safety of the chemicals used to manufacture them? I do not buy the idea that Defra is in charge of chemical regulations—in the same way that the DWP is in charge of the chemicals database, other than via its responsibilities in managing the Health and Safety Executive. I will come back to a regulation that the DWP presented to the Grand Committee last year. So, should the Bill ignore chemicals or not? We need an explicit reference in the Bill to cover it. We have talked a lot about AI but the use of chemicals is equally important, particularly in online marketplaces.
I am sure that the selection of EU REACH rather than British REACH will raise certain hackles. I would grab any REACH in a storm, but the EU one is a system that functions, unlike its British cousin, which has proved expensive to business and is failing to react to new challenges.
Over a year ago, I was substituting for my noble friend Lord Fox when the biocidal products regulations 2022 were being discussed in Grand Committee. I think that none of us, including the then Minister, if she were honest, knew very much of what we were talking about. However, it was the most illuminating regulation that I have ever taken part in. We discovered that this was, in essence, a time extension for the use of the EU chemicals database, because Whitehall had not understood that the day we left the EU, we would lose access to the chemicals database. As a result, the Health and Safety Executive had to take on a very large number of staff. Its chemicals sections had increased by 30% to try to rewrite the chemicals database while also consulting with users, whether they were manufacturers importing, exporting or creating in this country. We know that there are systems out there that work but because of our bizarre structures, we tend to have government departments that are not focused on chemicals.
The cosmetics industry imports many of its ingredients from the EU, and often in very small quantities. These would certainly be covered by EU REACH, because these sales represent such a tiny proportion of total production. If there were a substantive difference between EU REACH and British REACH, it is unlikely that the manufacturer would invest in accrediting its products in the UK, causing the UK cosmetic manufacturer either to stop making its product or to move manufacture to the EU—hence my noble friend Lord Fox’s proposal about REACH in this amendment.
Can the Minister confirm whether, under the terms of the Bill as it stands, if a product contains a chemical that was allowed by EU REACH but blocked by British REACH, and yet it conformed to QC standards, it would be legal in Britain? That is what this amendment seeks to clarify. Given the interconnected nature of the UK and EU chemicals industries, it offers a route for aligning the UK chemical regulation with that of the EU. But perhaps the Minister thinks that the current wording of Clause 1(1) means that it could be used to amend and update UK REACH to align with EU REACH. I beg to move.
Lord Browne of Ladyton (Lab)
My Lords, I will speak to both amendments in this group, and I thank the noble Baroness, Lady Brinton, for her introduction of them.
When examining the purport of these amendments and considering whether to include provisions that require us to adopt regulations that correspond with the EU’s REACH provisions, I suggest that the metric by which we should judge that is simple. Would doing so make the people of this country safer? Every other consideration should be secondary to that.
As I said both at Second Reading and in Committee last week—I apologise to those who have heard this before, but it is worth repeating—the past few years have seen a significant divergence between the UK’s approach to chemical regulation and that of the EU. The previous Government decided to leave REACH—the EU’s body responsible for the registration, evaluation, authorisation and restriction of chemicals and their regulations—and to set up a parallel organisation.
Since then, we have not adopted a single registered restriction on a harmful substance, compared with 10 new protections offered by EU regulation, including on harmful microplastics deliberately added to products. While REACH has regulated PFAS in the EU, not a single river or water body in England is in good chemical health. Since we left REACH, the EU has initiated 23 risk assessments related to harmful substances, while we have initiated three.
In considering why that is the case, I point to two contextual factors. This is not a function of the legislative constraints. The Government have the power under the EU withdrawal Act and Schedule 21 to the Environment Act to adopt new restrictions and controls where necessary. However, reviews undertaken by the NAO and the Public Accounts Committee in 2022 pointed to a lack of operational capacity and insufficient data as factors that have hampered the ability of the UK’s chemical regulator properly to do its job. For instance, brominated flame retardants were identified as a risk to health and globally significant exposure rates were identified in this country. Indeed, they were identified as a regulatory priority over two years ago and a review was promised. So far, no review has been published and it is difficult to discern how this apparent priority has been acted upon, if at all.
However, while the EU has added eight flame-retardant chemicals to its list of substances of very high concern, no substances in this category have been added to the parallel UK list. The EU restrictions road map has proposed a ban on brominated flame retardants while no equivalent step has been proposed, let alone planned. This is not because we have data which diverges from that upon which the EU has based its conclusions but because we are working more slowly. I vividly remember the promises of greater regulatory agility and speed which would inevitably result once we were free of the sclerotic influence of the EU. This example is but one of many—including lead in PVC, polycyclic aromatic hydrocarbons in synthetic football pitches and formaldehyde in wood furniture—which suggest that far from being more agile and responsive, our current system of chemical regulation is slower, less efficient and consequently less safe than its predecessor.
In April this year, Hazards magazine published a parallel analysis of the 25 new standards that have been introduced across the EU since our departure in 2020 and the UK’s response. Of the 25 standards, 12 were identical. There were 10 in which the UK’s standard was weaker, sometimes significantly. Only in one case has the UK adopted more protective measures than the European standard. Again, this is suggestive of regulatory incapacity as much as a deliberate exercise of our power independently to regulate.
Fiscal stringency creates significant challenges in remedying this situation, but both these amendments obviate the need for the otherwise necessary significant increase in investment in our chemical regulator. Ensuring that our domestic regulations correspond with those of REACH not only offers greater safety but removes a barrier to trade and promises to ease the burden on our chemical regulator which, as I said earlier, the NAO and Public Accounts Committee suggested has compromised its ability to work with appropriate speed.
At Second Reading, my noble friend the Minister said, in response to a question from the noble Baroness, Lady Brinton, that the Government are currently considering the best approach to chemical regulation in the UK separately to this Bill. In deciding our approach to these amendments, it would be extremely useful if my noble friend who is responding to this debate could at least give us an idea of the direction of travel on this. The noble Lord, Lord Fox, made the point also at Second Reading that the absence of such a Bill from the King’s Speech makes it unlikely that we will see it in this Session. That being so, what plans do the Government have, in the absence of adopting the amendments that are the subject of this discussion, to exercise the powers in Clause 2(7) to ensure that we catch up and keep pace with the EU chemical regulation?
Baroness Lawlor (Con)
My Lords, I will make a very brief intervention because I want to repeat my illustration from the first group about the REACH regulations. I have concerns about including this amendment to Clause 1 at line 13 of page 2 of the Bill as I do not agree that the EU REACH regulations are necessarily better equipped to target sectors and individual products than UK regulations. I will not go through the reasons I gave earlier. The noble Baroness, Lady Brinton, whose introduction I learned a great deal from and am very grateful for, mentioned cosmetics. In my earlier intervention I pointed to the use of olive oil and lemon in some soaps and said that UK REACH regulations recognise that these products can be eaten safely and, indeed, have been used for a long time. Requiring, as EU REACH does, that they go through stringent chemical REACH processes and labelling is a bit over the top and would put expense on our producers. I urge us to think of the wider implications of unsensitive or disproportion regulation where we can.
Lord Sharpe of Epsom (Con)
My Lords, I thank noble Lords who have spoken in this debate. I will speak to Amendment 16 in the name of the noble Lord, Lord Fox, which was introduced by the noble Baroness, Lady Brinton.
Regarding the EU’s REACH scheme, I shall refer to a specific example which relates to my time at the Home Office in the previous Government. It relates to cosmetics, as outlined by the noble Baroness, Lady Brinton, and my noble friend Lady Lawlor. In 2019, the Home Office aligned UK policy with two decisions by the European Chemicals Agency board of appeal which related to the testing on animals for the registration of cosmetics-only substances—specifically homosalate and 2-ethylhexyl salicylate. The marketing of cosmetics tested on animals is banned in the EU under cosmetics products regulation, but the ECHA—the European Chemicals Agency—confirmed that under REACH substances used solely in cosmetics may sometimes be tested on animals, as a last resort, to prove their safety for workers or the environment.
An NGO called Cruelty Free International, quite rightly, in my view, took the Government to court arguing that the UK’s alignment in effect led to the weakening of the long-standing—I think it was a 25-year—ban on animal testing of cosmetics and cosmetic ingredients. The UK court found in the Government’s favour but as the then Minister for Animals in Science, which somewhat surprisingly sits with the Home Office, the Home Secretary and I were firmly of the opinion that this was unjustified, so as of May 2023 we decided that no new licences should be issued to carry out this function. A small number of licences had been issued between 2019 and 2022.
The noble Baroness, Lady Brinton, and the noble Lord, Lord Browne, made persuasive arguments about why it might be in this country’s interest to align with the EU but, equally, it might not be, and this is a very nuanced subject. Failings of the domestic chemicals regulator—real or imagined—are an entirely separate subject. Alignment with, or invention of, our own rules that suit our national and public interest most definitely is in our interest. When I say public interest, in this case 76% of the public are against animal testing according to the RSPCA. So can I ask the Minister to guarantee that this ban on new licences in these cases will be maintained? I am disappointed that the noble Lord, Lord Fox, is not here because I was going to ask him if, in the spirit of nominative determinism, he would withdraw his Amendment 16. However, I say to the noble Baroness, Lady Brinton, that it certainly raised hackles, not necessarily human ones.
On the subject of dynamic alignment, I have two questions for the Minister about an apparent contradiction in our debates last Wednesday. I pored over Hansard, and I found that he said:
“If the UK makes a sovereign decision to mirror EU provisions, the Bill provides the mechanism and flexibility, on a case-by-case basis, to do so. This would avoid primary legislation each time technical changes are needed and would increase the certainty that businesses are crying out for”.—[Official Report, 20/11/24; col. GC 74.]
However, he went on to say:
“The powers in the Bill do not allow regulations to make automatic or ambulatory references to changing EU law. I reassure noble Lords that the Government will return to Parliament to make any changes to references to EU law within our regulations”.—[Official Report, 20/11/24; cols. GC 74-5.]
On careful reading, these statements seem a bit contradictory. So, although I am totally willing to be persuaded otherwise, perhaps the Minister could write to explain to the Committee exactly what is proposed and what was meant. If I am being particularly thick, I would be very happy for him to explain why.
The Minister of State, Department for Energy Security and Net Zero (Lord Hunt of Kings Heath) (Lab)
My Lords, I thank noble Lords who have spoken, particularly the noble Baroness, Lady Brinton, who spoke to the amendment in the name of the noble Lord, Lord Fox.
From listening to the debate, I suggest that the defects identified are not so much in this Bill or other legislative provisions that we have in place but more, as my noble friend suggested, in the energy with which the previous Government used the provisions at hand., I shall first explain why this is covered in existing legislation, and then I will come on to the energy, if you like, with which this Government will approach these important matters. I shall also set out the distinction between the regulation of chemical substances under REACH and other regulations, and the regulation of consumer products that contain chemicals.
The UK has a comprehensive regulatory framework for the use of chemicals. The REACH—registration, evaluation, authorisation and restriction of chemicals—regulation controls the manufacture, import, supply and safe use of chemical substances. The CLP—classification, labelling and packaging—regulation requires companies to classify, label and package their hazardous chemicals before placing them on the market. The REACH model operates in both the UK and the EU, but the systems have been independent since UK REACH entered into force on 31 December 2020, after we left the EU, and the EU REACH regulation was brought into UK law. So the regulation of chemicals must be managed separately under UK REACH and EU REACH.
REACH ensures a high level of protection for human health and the environment from risks imposed by chemicals. This includes minimising harm to workers who may handle chemicals during manufacturing processes, as well as minimising health impacts on our population and environmental damage from chemical substances. Chemical safety is governed by several interacting regimes. For example, certain products regulated by sector-specific regulations, such as cosmetics or toys, may contain chemicals that are also regulated by REACH and CLP. One of the aims when applying these regimes is to avoid putting in place overlapping or conflicting duties, which is the issue that we would have with the amendment in the name of the noble Baroness, Lady Brinton. That amendment risks having overlapping or conflicting duties.
I know that the noble Baroness mentioned Defra, but the Secretary of State for Defra already has powers to amend UK REACH through the Environment Act 2021 and through REACH itself, which sets out a bespoke regime for imposing restrictions and other regulatory controls on chemical substances. The primary statutory purpose of UK REACH is to ensure a high level of protection for human health and the environment from substances that contain chemicals. In some cases, animal studies may be necessary to understand these human health or environmental hazards but, of course, I very much take on board the noble Lord’s point about animal testing, and I know of no plans to change the rules laid down by previous Ministers on that.
The Bill, as we know, relates to consumer products, and the definition of “product” stated in the Bill means that many of the substances regulated under REACH, and the ways they are used, are out of scope of the powers, regardless of these amendments. It should also be noted that the provision in Clause 1(2) is limited to the mitigation of the environmental impact of products. This limitation is reinforced in Amendment 51. As I have already commented, changes to REACH may be prompted by human health and safety, rather than environmental, considerations. The UK REACH work programme, published annually, sets out the work that has been done under UK REACH.
The fact is that the amendment would not provide the Secretary of State with the powers sought by the noble Baroness. We think the powers within UK REACH enable human health and environmental concerns to be considered alongside each other, where necessary. Existing sector regulations, such as those for cosmetics and toys, already include powers for the Secretary of State to regulate the use of chemicals in specific products beyond the overarching restrictions that can be applied under UK REACH. These powers can be, and already have been, used to make provision by regulation in UK law that corresponds, or is similar to, provision in relevant EU law. Such changes to UK regulations have been informed by independent expert scientific advice provided to the Office for Product Safety and Standards by the scientific advisory group on chemical safety for non-food and non-medicinal consumer products.
We have used these powers to make regulatory changes based on advice from that advisory group, following the EU’s introduction of new or amended prohibitions on the chemicals used in cosmetics and toys. My understanding is that, in some circumstances, the Government implemented scientific advice that was different from advice received by the EU. I am sure that the previous Government would have said that this demonstrated regulatory sovereignty to choose what products can be placed on the GB market and also demonstrated our status as a global leader in product regulation, supporting businesses and protecting consumers.
Powers in the Bill, alongside existing sector regulations, will ensure that we are able to regulate the use of chemicals in consumer products, including cosmetics and toys, as well as other consumer products with similar chemical exposure risk, so we will be able to continue to protect consumers from product-related harm. The noble Baroness, Lady Brinton, asked whether chemicals blocked in Britain but permitted in the EU would be available for use in this country. If we decided to ban chemicals that the EU continued to permit, those chemicals would not be permitted to be used for the GB market, because we have sovereignty.
I will confirm the point made by the noble Lord, Lord Sharpe, on animal testing. The ban on using animals to test cosmetic products or ingredients has been in place, as he said, since 1998. We do not wish to revise the ban and do not wish to risk any unintended consequences that might result from bringing REACH within scope of the Bill.
On my noble friend Lord Browne’s point on the pace of reform, at the moment the Government are pursuing a programme of work on a wide range of hazardous substances to gather evidence of risk and exposure pathways. Publishing the work programme 2024-25 late in the financial year has not prevented the continuing development of ongoing streams. Obviously, the UK work programme 2024-25 was prepared under the previous Government. Once approved by Ministers, it will be published on the Health and Safety Executive’s website. But let me say that I understand the essential point that has been raised. My point is that there is nothing wrong with the legislative framework. The point of contention is the vigour with which any Government use their sovereign powers in the way that noble Lords want.
Lord Browne of Ladyton (Lab)
If I have understood my noble friend’s response to this debate, do the Government accept the NAO and Public Accounts Committee’s assessment that UK REACH lacked capacity to do its job? If so, has Defra allocated sufficient funding to bring it up at least to the productivity of EU REACH in the quantity of assessments, recommendations and decisions that it makes? The statistics show that it is not doing anything much in this space.
Lord Hunt of Kings Heath (Lab)
My Lords, the quick answer is that these matters are being considered by Ministers at the moment, but I will feed back to them what noble Lords have raised today.
Lord Hunt of Kings Heath (Lab)
I would be glad to give way to the noble Baroness, but as we will come back to her in any case—
Baroness Brinton (LD)
I have a question. I am very grateful for the Minister’s response, but he has not yet responded to my final question and, following his reply to the noble Lord, Lord Browne, I need to repeat it to check. I said that this was a probing amendment to clarify the interconnected nature of, and differences between, the UK and EU chemicals industries. Under its current wording, Clause 1(1) says:
“The Secretary of State may … make provision, in relation to”.
Could that be used to amend and update UK REACH to align with EU REACH? I ask this in light of the letter that the noble Lord, Lord Leong, wrote to colleagues on 17 October:
“Though the Bill is not intended to cover REACH specifically, chemicals have not been excluded from its scope … We are currently considering the best approach to chemicals regulation in the UK and will set out priorities”.
That is the fundamental bit of this amendment. We can debate EU REACH and UK REACH, but it is about the influence on this Bill.
Lord Hunt of Kings Heath (Lab)
My Lords, the quick response is that we do not envisage it being used in that way because we already have separate legislation to deal with that. I will follow up with a more detailed response, but I do not believe that the provisions would allow that to happen. However, I will double-check and clarify that.
On my noble friend’s point, I have listened to the debate and understand the concerns. I know that Ministers are considering this, and I will ensure that the strong points raised here are put to them as they consider how to take forward this work.
Baroness Brinton (LD)
I am grateful to all noble Lords who have spoken in the short debate on this group. I am particularly grateful to the noble Lord, Lord Browne, for covering the 10 restrictions adopted in the EU but not in the UK, since it left the EU. I was debating whether to raise them or not; I am glad that I left them to him. He pointed out the cost-benefits of using REACH. Manufacturers have made it very clear that they want things as simple as possible and, usually, would prefer one form of REACH—the one to which they are likely to export or from which they will have products coming in. I recognise that other Members of the Committee will disagree with that. I am grateful for the comments of the noble Baroness, Lady Lawlor; lemon and lavender sound like a lovely, simple way of looking at it, but cosmetics are much more complicated. We need to be very careful about that. I look forward to hearing from the Minister but, in the meantime, I beg leave to withdraw the amendment.
Lord Lucas
Member’s explanatory statement
This amendment will enable discussion of what information might usefully be marked on the product, such that the liability for regulations and charges can be clearly established.
Lord Lucas (Con)
My Lords, I rise to move Amendment 20 and speak to the others in this group. Each of these amendments has a role, I hope, in improving or at least elucidating the provisions of the Bill, but they are also put together from the point of view of “Let’s collect the tax”.
This Government have not been shy of hurting people in pursuit of a few hundred million pounds in tax per year. They have threatened the basis of family farms, chucked children out of school in the middle of their exam years and frozen old age pensioners. Why, then, are they leaving a billion pounds a year lying on the floor, uncollected, from scamming Chinese and other—Asian, by and large—traders? It is quite extraordinary. It not only fails to collect the tax but damages the British businesses that would be doing the business if we were not giving a 20% price advantage to the likes of Shein and Temu. Now we see that Amazon has to follow them down this track because it has been so damaged by Shein and Temu that it has to go into the same business. This is economically illiterate and ridiculous.
I am very grateful to the noble Lord, Lord Leong, for arranging a meeting to discuss this. He very kindly invited a Treasury official along. I have had a reply now from the Treasury saying basically, “Don’t ring us, we’ll ring you”. I find this extraordinary, but I do not particularly blame this Government. The last Government was just as bad on it. However, it is extraordinary not to collect tax when the Government are going to such lengths to collect additional tax now.
I will add one more thing: for goodness’ sake, make the marketplaces liable for VAT. Stop trying to make the individual traders liable for VAT. They are here today, gone tomorrow, registering 500 new companies with Companies House, with lots of new VAT numbers. As soon as you put your finger on them, they are gone. Make the marketplaces collect VAT. It would be simpler and easier for them and for us, and much more effective.
Amendment 20 asks that we get a sensible amount of information on the origin, the identity of the local representative, the value and the beneficial ownership of the goods, so that everybody involved can see where the liability for product regulation sits, where the liability for any charges can sit and how things can be enforced. The more difficult you make it to track down who should be collared, the less it will happen. In these regulations, we must make it easier to chase people.
Amendment 24 basically says, “Make sure the representative who is appointed has the financial strength to stand behind what’s going on”. If the Minister cares to browse Amazon when he has the time and looks for, say, a three-terabyte drive—the sort of thing I shall need to pack up my 30 years in this place and carry it away with me—he will find that there are some very reputable products on the market for around a hundred quid. That is astonishing. I remember buying my first serious computer, which had 20 megabytes of hard drive, and thinking that was extraordinary. So—three terabytes for a hundred quid from a good manufacturer.
However, there are also products on the market for fifty quid from weirdly named companies. The game being played there is that the products do not contain three terabytes. They probably contain only 256 megabytes. But it does not show on the outside and by the time that anyone gets around to complaining and putting bad reviews in place, the company has changed; it has gone; it is someone else and there is no one to pursue. With a product such as a hard drive, it takes a while for someone to realise that it has been mis-sold. If you are going to pursue these people properly, you need to know that you can go after them for several months of turnover and succeed, which means that the representatives in the UK have got to be good for the money. Otherwise, you just do not have effective product regulation.
Amendment 25 also relates to “Let’s collect the tax”, since we are creating these structures to look after product quality, which could quite easily be used to help collect tax. Amendment 26 says, “Look, we’ve got a trading standards system that is really short of money, so let’s make it easier for us to extract money from the process we are creating in the Bill and feed it through to trading standards so that we get an effective and efficient system of enforcement”. I beg to move.
Lord Sharpe of Epsom (Con)
My Lords, I thank the noble Lord, Lord Lucas, for his proposed amendments to Clause 2, which, as highlighted by the Delegated Powers and Regulatory Reform Committee, has been recommended for removal due to the broad and vague nature of the powers it grants. The liability for regulations and charges related to products is a matter of extreme importance. Without clear guidelines and transparent information, businesses could face significant uncertainty, which in turn undermines their ability to comply effectively.
The Government’s focus on clarity in other areas will ring hollow if they fail to address the critical need for clarity in liabilities—an issue that the amendments in the name of the noble Lord, Lord Lucas, seek to address directly. Regarding Amendment 20, by ensuring that products are marked with clear and comprehensive information, such as origin, local representation and ownership, we can establish clear responsibility for product compliance. This would not only improve regulatory transparency but foster trust with consumers and businesses alike.
I urge the Government to take this opportunity to acknowledge the importance of clear liability and responsibility frameworks. Although these amendments are to Clause 2, and we continue to discuss its broader issues, nevertheless the noble Lord’s proposed changes are a necessary step towards ensuring both accountability and transparency in product regulations.
Lord Hunt of Kings Heath (Lab)
My Lords, I am grateful to the noble Lords, Lord Lucas and Lord Sharpe, for their comments in this interesting debate. I am glad that the noble Lord, Lord Lucas, was able to meet my noble friend and officials. I am sure they have taken note of his concerns, although he obviously has some reservations about that. I have also noted the comments of the noble Lord, Lord Sharpe, about the shape of the Bill, which we have already well debated and no doubt will continue to do so.
Despite the noble Lords’ concerns about the Bill, the fact is that we are trying to produce a workable yet robust framework for regulating product safety in what I think we all acknowledge is a rapidly changing and evolving marketplace. We want to ensure that businesses, whether operating through traditional channels or online marketplaces, are held accountable for the safety of the products they distribute. The Bill’s approach is targeted, addressing the need for traceability and enforcement while avoiding excessive regulatory burdens that could stifle innovation and growth. I believe most noble Lords think that is the right balance, although some are somewhat critical of the way in which we have sought to do it in the Bill.
Amendments 20 and 24 in the name of the noble Lord, Lord Lucas, propose to allow regulations to make requirements in relation to the marking of products, including their origin, the identity of the local representative, their value and their beneficial ownership, while also allowing regulations to require authorised representatives to accept liability and demonstrate financial strength. The amendments reflect important concerns, particularly around traceability and accountability, especially in the context of online marketplaces: for example, where a product creates a consumer safety concern, or the circumstances which the noble Lord mentioned in his introductory speech. Our view is that Clause 2(2)(e)(ii) and Clause 2(3) already provide the necessary mechanisms to ensure that authorised representatives and other relevant parties carrying out activities in relation to a product can clearly be identified for product safety purposes.
While I can see where the noble Lord is coming from with the proposed additional requirements, such as marking the product’s value or beneficial ownership, they would create an additional administrative burden for businesses without providing significant additional benefits for consumers or enforcement. The Bill as drafted aims to ensure that sufficient information is available for product safety and enforcement and we are not convinced that the extra information would offer clear advantages in those areas.
Lord Lucas (Con)
My Lords, I am very grateful for the Minister’s comprehensive reply. On Amendment 24, I remain unclear whether the powers in the Bill allow for representatives to have to demonstrate deep pockets. I would be happy to be written to if the Minister cannot reply now. If he could point me in the direction of homework related to Amendment 25, such as the OBR analysis and so on, I would be most grateful.
Lord Lucas
Member’s explanatory statement
This amendment is to ensure that people are aware that they are often buying from China when buying on Amazon/eBay and the product hasn’t undergone any quality checks.
Lord Lucas (Con)
I will also speak to Amendment 22. Amendment 21 is fairly self-explanatory. It asks that people be made aware of where the goods they are buying come from and, therefore, what confidence they can place in their quality. Secondly, it explores whether we might place liability on marketplaces for the quality of the products they allow to be listed there, which is clearly not the case at the moment.
My view is that Amazon makes a great deal of money out of selling what are, essentially, counterfeit products. This is not a satisfactory state of affairs. Amazon is quite well enough off to do a bit of investigation, which does not take long with these products, to make sure that they are what they say they are. This would result in greater stability and higher quality of companies doing business through Amazon. I do not think it would lose Amazon any business, but I am prepared to be shocked to find that the Government disagree with me. For now, I beg to move.
Baroness Brinton (LD)
My Lords, Amendment 45 in this group is in my name. I also support my noble friend Lord Foster’s Amendments 117 and 122.
I come back to an issue debated at some length on the first day of Committee. I am particularly pleased to see the noble Lord, Lord Jackson of Peterborough, in his place because my amendment relates directly to his Amendment 33, which questions whether Clause 2(3)(h) should stand part of the Bill; my amendment also looks at paragraph (h). He spoke about it in the context of parliamentary scrutiny and consultation, but my focus is a different one: I am trying to look at how it will work in practice. During our debate last week, my noble friend Lord Fox said that
“the wording of Clause 2(3)(h) is ‘any other person carrying out activities’. All the other items refer to the activity of the sale and marketing of that product. This does not refer to it but any person carrying out activities unspecified”.—[Official Report, 20/11/24; col. GC 40.]
We are moving from products to people in this debate.
At Second Reading, I asked the Minister who is caught by this very wide, catch-all paragraph. In his letter of 17 October, in which he responded to issues that he did not have time to cover at Second Reading—I thank him for it—he said:
“These supply chain roles may be undertaken by individuals as well as by businesses. The Bill will enable the responsibilities of supply chain actors to be rationalised and modernised, including to reflect the development of new business models that were not anticipated by current legislation, such as online marketplaces”.
I read his reply carefully, but it did not answer my question. That is partly because “actors” could mean anybody; it does not necessarily mean somebody mentioned in one of the clause’s previous paragraphs. I remain concerned about that in the context of Clause 2(3), which identifies the
“persons on whom product regulations may impose product requirements”.
It appears that paragraph (h) can include absolutely anyone involved in selling a relevant product, without limitation. This matters because a private individual selling an item with a lithium-ion battery, for example, on eBay or Vinted may be an actor at the very end of a long supply chain, but that does not mean they are a professional in the business. The wording is important.
Where does the responsibility for satisfactory compliance lie? In our Second Reading debate, there was some discussion about online marketplace platforms having responsibility for ensuring compliance but, frankly, eBay and Vinted cannot check the detail of a regulated item—in the case I gave, a lithium-ion battery in a bicycle—or how it meets the regulations. Also, the individual at the end of the supply chain has no obvious way of finding out whether they are responsible for ensuring that the item they wish to sell meets the regulations. Of course, there is a future actor in all of this: the person who buys it.
Which?, in its very helpful briefing prior to Second Reading, pointed out that the Bill needs strengthening in a number of areas, including clearer definitions of key terms, so that existing and future online marketplaces cannot take advantage of gaps to avoid responsibility. Clause 2(3)(h) is one such area. Will the Minister help by making it clear who is covered? Can he also explain exactly how the online marketplaces can manage the extension of liabilities for defective products sold by individuals, which those online marketplaces have not seen themselves? Alternatively, if individuals selling items are covered by Clause 2(3)(h), how do those individuals become aware of their responsibilities under the Bill for ensuring that the goods they sell meet the requirements and are not defective? Frankly, eBay sending them an email saying, “You are entirely responsible” is not good enough for compliance. If this is not clarified, we have a gaping hole in the Bill.
Baroness Crawley (Lab)
My Lords, I will speak to Amendments 48, 71, 118, 119, 120, 121, 123 and 124 in this group, on the topic of online marketplaces, which are in my name and those of the noble Lord, Lord Foster of Bath, and the noble Earl, Lord Lindsay.
Turning first to Amendment 48, I recall that, in the King’s Speech, the Government made a commitment to ensure that the responsibilities of those involved in the supply of products, such as online marketplaces, are clear. That commitment is to be welcomed, but the clarity and detail will be in the secondary regulations after the Bill is passed and not in the Bill itself. As set out in the explanatory statement, the proposed new clause in the amendment
“provides a non-exclusive list of duties that must be imposed upon online marketplaces by regulations made by the Secretary of State … to be made to Parliament within 3 months of Royal Assent regarding the exercise of the duties conferred by this section”.
These duties include an explicit provision to place a duty on online marketplaces to take the necessary measures to ensure the safety of products offered on their platforms and a commitment to publish any draft secondary legislation on how this duty and related provisions will work in practice in good time before the measures are due to come into force. Finally, there is a duty to consult with key stakeholders on the design of these regulations.
I make it clear to my noble friend the Minister that the duties in this amendment are about the transparent process by which the Government will ensure a safer online marketplace, rather than a long list of possible actions taken to bring this about. The Office for Product Safety and Standards, in its 2021 research, found that 81% of the products it found online failed safety tests. I am sure that the figure would probably be far higher if they were tested today. Which? tells us that around 23.4 million consumers in the UK make monthly transactions on these marketplaces, yet they are unwittingly putting themselves at risk because, at present, they do not have the same protections as they have come to expect when buying from traditional high-street retailers. This evidence should encourage us to reform online marketplace regulations as urgently as possible.
Amendment 71 allows for regulations to provide liability of online marketplaces for defective and unsafe products and to ensure redress for those harmed by these unsafe and defective products, including civil litigation. It is important that the law on product liability can be updated to take account of the responsibilities of online marketplaces and others in the supply chain, and to provide effective redress for consumers who suffer harm from these dangerous products. We know that online marketplaces have become a mainstream method for people to shop, particularly when they are looking for value for money in these difficult economic times. This amendment seeks to ensure that there is redress for those online shoppers if they buy unsafe or faulty goods.
From the briefing sent to us by the London Fire Brigade we know that e-bikes and e-scooters are one of the capital’s fastest-growing fire risks. On average, there was a fire every two days in 2023. Sadly, deaths and injuries have resulted. Many of these fires are caused by incompatible chargers and faulty products that are purchased online. The London Fire Brigade believes, as many of us do, that product innovation has gone far ahead of proper safety standards and that there is inadequate regulation, especially for conversion kits, batteries and chargers. A strengthened version of the Bill would go a long way to answering these safety gaps online.
Lord Jackson of Peterborough (Con)
My Lords, I support the probing Amendment 45 from the noble Baroness, Lady Brinton, as she referenced my earlier Amendment 33. She expressed in a more erudite and articulate way what I should have said last week on Amendment 33. However, I think we have both alighted on the fundamental problem in that subsection, which is that despite its opacity and the fact that it is drawn very widely, it does not achieve what we all hope it will achieve—in other words, to point out the obligations on buyers and sellers. The noble Baroness quite rightly pointed out the lacuna inherent in that.
My very brief question to the Minister is whether it might be possible—this is not a criticism but merely an observation in respect of the drafting—for this subsection to be redrafted before Report so that that confusion that we see now, which could potentially give rise to substantial amounts of litigation, is ameliorated and we could have tighter wording to address some of the issues that the noble Baroness and I have pointed out.
Lord Foster of Bath (LD)
My Lords, so many of our deliberations in our various sittings have been seeking to put some flesh on to the skeleton nature of the Bill before us; I have done that on a number of occasions, as have many other noble Lords. For instance, in our last-but-one grouping, I proposed that we seek to use the Bill to address concerns about data scraping for the development of new AI products. I gently point out to the Minister that he told me that this would be covered by the Data (Use and Access) Bill. I have double-checked Hansard and can tell him that at the end of the debate on that Bill, when this was raised with the noble Baroness, Lady Jones, the Minister responsible, she replied that this issue was not covered by that Bill and that DCMS and DSIT Ministers are jointly working and looking forward to bringing forward proposals in due course. She ended by saying:
“We will announce more details in due course”.—[Official Report, 19/11/24; col. 197.]
So it is not covered, and this is a good opportunity to do it.
As the noble Baroness, Lady Crawley, and other noble Lords who have spoken have pointed out, this is an area, in terms of online marketplaces, where there is an urgent need to put flesh on the bones and to have a clearer understanding of the definition of an online marketplace and of what regulations should apply to them. I have frequently raised in your Lordships’ House my concerns that consumers have far less protection from faulty products bought online than they have when they purchase them on the high street.
It simply cannot be right, as we have seen from all the evidence that we have all received from various organisations, such as the British Toy & Hobby Association, Which? and Electrical Safety First, as well as others, that so many unsafe products are available for sale online. In an earlier contribution, the noble Baroness referred to the fact that 86% of toys sold online do not comply with UK safety requirements. I have referred to the sad fact that many electrical appliances purchased online do not meet appropriate safety requirements and, sadly, have led to loss of life and damage of a great deal of property.
It certainly cannot be right that products that have been withdrawn by a manufacturer, often because of concerns about safety, can still be purchased online, and it certainly cannot be right that consumers have not only less protection but fewer opportunities for redress when purchasing products online compared to what they have when purchasing them on the high street. I support all the amendments addressing those concerns because collectively they would improve consumer protection by ensuring accountability by imposing a clear and enforceable duty on online marketplaces to ensure the safety of products sold on their platforms, especially those coming from third-party sellers overseas. Incidentally, I shall later propose an amendment that would strengthen the extraterritoriality covered by the Bill.
The amendments that we have before us further protect consumers by removing anonymity so that third-party sellers can no longer hide behind platforms to evade product safety regulations and by making it easier for them to seek any form of redress. It establishes direct liability on platforms for unsafe products sold throughout them, which leads to the opportunity for much greater fairness in terms of redress because, at the moment, consumers dealing with faulty high street products expect and receive a full refund or replacement, but when problems arise with online purchases, particularly from overseas sellers, consumers often seem to have no recourse. Amendments in this group deal with that issue. Finally, the amendments would clarify something that is lacking in the Bill at the moment: the issue of accountability. Who is actually accountable in the multinational marketplace structures that we have to deal with now?
Given that these platforms are evolving at an incredibly rapid rate, with people almost daily finding new ways to market their products, we need amendments that ensure that there is no room for manoeuvre to get around the regulations by online marketplaces now and, crucially, in future. We need a clearer definition of what we mean and what is covered by an online marketplace, and I welcome and support the amendments in the group that do just that.
I add one additional point. In Clause 10, the definition of an online marketplace includes,
“any other platform by means of which information is made available over the internet”.
Clause 10 does not define “the internet”, despite quite a point being made of doing so in other legislation. Indeed, other pieces of legislation prefer the phrase “internet service”, not just “internet”. To avoid further ambiguity, I have proposed in Amendments 117 and 122 that the Bill uses “internet service” instead of “internet” and that the definition of “internet service” is exactly as set out in the Online Safety Act 2023.
Given, for instance, that the Tobacco and Vapes Bill has this definition simply copied and pasted into it, I see no reason why this Bill could not do the same. Failing to do so would unhelpfully leave the definition to common law. We should be aiming to ensure that levels of protection and redress are as powerful online as they are on the high street. Amendments in this group will achieve this and will also ensure that we have a future-proofed definition of “online marketplace” and that clear duties and responsibility towards consumer protection are imposed on all relevant bodies. On these Benches, we certainly support them.
Lord Sharpe of Epsom (Con)
My Lords, I thank all noble Lords for introducing their amendments in this group. I shall briefly speak in favour of Amendments 48 and 71. I thank the noble Baroness, Lady Crawley, for bringing attention to the critical issue that addresses the responsibilities of online marketplaces and also, if I may, pay tribute to her wider work in this area as well as that of my noble friend Lord Lindsay, who is not in this place but whose exemplary work as president of the Chartered Trading Standards Institute deserves a mention.
This sector has grown exponentially in recent years and plays a dominant role in modern commerce. This amendment, therefore, highlights essential duties for online marketplaces. For example, a 2023 TSB study found that Facebook Marketplace accounted for 73% of purchase fraud cases. If you think about fraud and its growth in terms of the British crime statistics, that is a significant percentage of British crime, not just online crime. Over one-third of adverts on Facebook Marketplace are scams, we are told, so this amendment would help to level the playing field by ensuring that online marketplaces meet the same safety standards as physical retailers. This would foster fair competition and ensure that businesses prioritising consumer safety are not undermined by unscrupulous practices.
It is vital that we ensure online marketplaces, which facilitate the sale of billions of products, do not become conduits for unsafe goods or fraudulent activity, as all noble Lords have rightly highlighted. Without robust regulations, consumer trust and market integrity are at significant risk. We ask noble Lords to take seriously this amendment to uphold consumer protection, market fairness and safety standards, and think that the Government ought to recognise the urgency of addressing these concerns and act decisively.
On Amendment 71, I support it as a necessary step to protect consumers in the rapidly growing online marketplace sector. The extension of liability to online marketplaces and others under Section 2(3) ensures that those who facilitate the sale of unsafe or defective products are held responsible. Such measures are crucial to maintaining consumer confidence, especially as online shopping becomes so dominant.
We think it is essential that the Government protect consumer rights in all the marketplaces, especially online. We urge the Government to listen to those two amendments in particular but, frankly, there is merit in all the amendments we are debating in this group, and I hope to hear some positive news from the Minister.
Lord Leong (Lab)
My Lords, before I respond to this group, I say to the noble Lord, Lord Sharpe, that I will write to him in respect of the points he has raised.
I thank all noble Lords for their contributions to this debate and for Amendments 21, 22, 32, 45, 48, 71 and 117 to 124. These amendments have raised important points on the scope and application of the Bill’s powers, and I hope to provide clarity and reassurance. Around one-third of UK retail sales are now conducted online, but our product safety legislation has not kept pace with changes in shopping habits, in particular the development of online marketplaces and other platforms.
Online platforms may sell goods themselves and/or provide a platform for third-party sellers—in the UK or aboard—including consumers, to sell goods. The most well-known online marketplaces in the UK are probably Amazon, eBay, ASOS and Etsy, and others are widely used. The online marketplace industry in the UK is booming. In 2023, the UK e-commence market was valued at close to £137 billion and is projected to grow to £152 billion this year. I thank the noble Lord, Lord Sharpe, for setting out the landscape of online fraud and scams on online marketplaces; we really need to take note of that.
Baroness Brinton (LD)
I thank the Minister very much for the detail he has gone into in his answer, but there are two types of regulation. The one he has described is the one that you would expect the Government, trading standards and other bodies to take. But, in litigation terms, if somebody bought an electric bike in good faith, who would they sue? Paragraph (h) does not make it clear. This is not purely about the parameters of the products and the Bill; it is about the consequences of having something that is very general. I think platforms will say, “It’s nothing to do with us”, and the individuals will say, “But I’m not part of the chain, as described”. I am genuinely struggling to understand and I wonder whether the Minister can help me.
Lord Leong (Lab)
I thank the noble Baroness for that; I will come to it. We are talking about product liability to some extent; I have a paragraph on it in my brief, if she will bear with me for a moment.
Amendments 32 and 45 highlight some of the different actors in online supply chains that may need to be captured appropriately in these new requirements. The Bill gives powers to introduce requirements on online marketplaces to improve the safety of products sold online. These requirements can be tailored and updated appropriately to reflect the wide range of online marketplace models, and other relevant supply chain actors and their activities, now and in the future. Clause 2(3) is therefore sufficiently broad to enable requirements to be introduced on any persons carrying out activities in relation to a product. This could include, where appropriate, private individuals selling products via online marketplaces, whether in return for payment or free of charge.
I will now focus on Amendments 117 to 124, which seek to broaden the definition of online marketplaces. The definition of online marketplaces in the Bill has been created in a way that is broad enough to capture the full range of online marketplace business models, including social media platforms such as TikTok Shop, which was mentioned earlier. I assure the Committee that all the changes proposed in the amendments are captured within the existing definition. For example—and of relevance to Amendment 123—the expansion of the term “marketing” within the definition of an online marketplace is not required due to the definition of “marketing” within the Bill, meaning the “making available” of products. This in turn is defined as goods
“supplied or advertised for distribution or use on the market, whether in return for payment or free of charge”.
Amendments 117 and 122 in the name of the noble Lord, Lord Foster, seek to change the definition of an online marketplace, replacing “internet” with “internet service”, as defined in the Online Safety Act 2023. The definition we have used in the Bill includes a service on any other platform by means of which information is made available over the internet. We are therefore confident that the issue the noble Lord raises in his amendments is covered by the Bill as drafted.
I also thank the noble Lord, Lord Foster, for his clarification about data and GDPR being captured by the Data (Use and Access) Bill. I shall read Hansard and confirm accordingly. I totally agree with him that all unsafe products should never be allowed to be offered for sale on any online marketplaces, whether original or second-hand. We have to address his point about accountability. Who is accountable to be held responsible for some of these unsafe products?
The Bill also includes a power in Clause 10(2) that allows for the definition to be amended later by regulations, if this were necessary to capture any future models not captured by the current definition. I will come back to the issue of product liability.
Amendment 71, tabled by my noble friend Lady Crawley and spoken to by the noble Baroness, Lady Brinton, would allow the Secretary of State to make provisions to ensure that online marketplaces can be held liable for products purchased via their platforms. The primary route to seek damages for harm caused by defective products is through the Consumer Protection Act 1987. Depending on the specific facts, an online marketplace may have responsibility under this legislation. The Government are currently reviewing this legislation and we will consider the UK’s product liability regime holistically, including the question of how it should apply to online marketplaces. This is not a change that we would seek to make without considering all the evidence, so we do not want to pre-empt this important work by adding to the scope of the Bill.
Product liability also covers products that extend beyond the scope of the Bill, including, for example, food and medical devices. A considered review of this area would be the most appropriate way to ensure that our product liability laws are up to date and fit for the future and to take account of the broad-ranging interests in this body of law. I will keep the Grand Committee updated on the Government’s progress with this review and plans for wider engagement.
I say to the noble Lord, Lord Jackson, and other noble Lords: we have listened to the debate and reflected on all the points made. We are aware of the Grand Committee’s strength of feeling on a number of points, including the scrutiny of secondary legislation. With that, I hope that I have been able to reassure noble Lords that these amendments are therefore not required to achieve their laudable aims. Consequently, I would ask for the amendments in this group not to be pressed.
Baroness Brinton (LD)
Clause 1(5) says that
“‘marketing’ means making available on the market”,
which is a much shorter definition than the one that the Minister just read out at the Dispatch Box. Is he telling me that I am not correct in saying that I market a product on eBay when I put it up on eBay?
Baroness Brinton (LD)
This is very important, because this is partly about liability and partly about the clarity in the Bill about who has responsibility. Whether it is a buyer or, as I think the Minister argued, an individual seller, someone has to tell them that they have to follow the regulations, and they need to know how to do that. When he read out the definition of marketing in his speech, he gave a whole sentence more than is included in the definition in the Bill, which very simply says,
“‘marketing’ means making available on the market”.
It goes on to discuss “related terms”, but they are not relevant to my problem. While he ponders between Committee and Report, can he look at that? More than one of us is likely to come back with amendments on Report on this issue.
Lord Leong (Lab)
I thank the noble Baroness. We are trying not to be too prescriptive because it is constantly changing. I am sorry about this, but the Bill defines “marketing” as
“making available on the market”.
Clause 10, line 8, states,
“a product or goods … supplied or advertised for distribution or use on the market”—
Baroness Brinton (LD)
That is exactly what happens with a private individual. They will advertise an item on eBay. The language the Minister is using is what I would describe as the old-style manufacturing and business model. It does not take into account all the comments that people have made about where online marketing is in the 21st century. Therein lies the problem, and I would be very grateful if the noble Lord would look at that.
Lord Leong (Lab)
I thank the noble Baroness for that as well. Online marketplaces are changing overnight. I have just learned over the weekend of dropshipping. Dropshipping means that if someone orders a product on eBay, the person supplying it is not eBay or whoever claims to be on eBay. It is dropshipped by AliExpress straight to that buyer’s home. How are we going to control that? How are we going to capture that? That is why we cannot be too prescriptive. We need to have the flexibility to address ever-changing marketplaces. That is what this Bill is trying to do. If the noble Baroness is still unclear or unsure about this, perhaps we can have another follow-up meeting so we can discuss this in depth.
Baroness Brinton (LD)
I think a number of noble Lords who have participated in this debate might be interested in a meeting, if that is okay. I shall very briefly respond to the Minister to say that flexibility is fine, until the point at which there is nobody to hold accountable. That is the problem.
Lord Leong (Lab)
The Bill is drafted in this way to address who is going to be accountable. My invitation to all noble Lords to a meeting stands, and I welcome each and every one of them. I hope this amendment can be withdrawn.
Lord Lucas (Con)
My Lords, I am very grateful for the long and detailed reply given by the noble Lord, Lord Leong. I recommend a meeting with him to anybody. He is a most welcoming and courteous Minister, and you get good results out of a meeting with him. If, on rereading what he has said, I have any further questions, I shall attend the meeting. For now, I beg leave to withdraw the amendment.
Lord Hunt of Kings Heath (Lab)
My Lords, this might be a convenient moment to adjourn the Committee.