Draft Online Safety Act 2023 (Qualifying Worldwide Revenue) Regulations 2025
(1 day, 13 hours ago)
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The Chair
Before I call the Minister to move the motion, I point out that the regulations before us are fairly narrowly drafted and this is therefore not the place for a more discursive debate on the Online Safety Act 2023.
The Parliamentary Under-Secretary of State for Science, Innovation and Technology (Feryal Clark)
I beg to move,
That the Committee has considered the draft Online Safety Act 2023 (Qualifying Worldwide Revenue) Regulations 2025.
It is a pleasure to serve under your chairmanship, Dr Murrison. I will first give a very brief background to why the Government are laying this statutory instrument. As the Online Safety Act sets out, Ofcom may make regulations setting out how the qualifying worldwide revenue of a provider of a regulated service is to be determined, and the corresponding qualifying periods. The Act requires that Ofcom sends a draft to the Secretary of State for Science, Innovation and Technology; the Secretary of State’s role is limited to laying the draft before Parliament. As such, the Secretary of State laid these regulations before Parliament on 26 June.
The draft regulations are a critical component of establishing the fee regime whereby providers of regulated services pay a fee to Ofcom to fund the costs of online safety regulation. They are also an integral part of informing a penalties regime that will act as a suitable deterrent to non-compliance.
The qualifying period for calculating the QWR is defined as the calendar year two years prior to the fee-charging year. For example, for the 2026-27 charging year, the qualifying period will be 1 January to 31 December 2024. Under the Act, non-compliant providers may be subject to penalties of up to £18 million or 10% of their QWR, whichever is higher.
The Government are committed to a fee regime that ensures that the burden of paying for online safety regulation falls not on the taxpayer, but on the providers in scope of the Act—a principle that was discussed in great detail and that received cross-party support during the passage of the legislation through Parliament. In a policy statement that was published on 26 June and was informed by a public consultation, Ofcom recommended to the Secretary of State a qualifying revenue threshold of £250 million, saying that this
“strikes the right balance between proportionality and workability, spreads the fee burden across a range of providers and serves the objective of limiting the impact on SMEs.”
The Secretary of State will consider that advice carefully and set the final threshold in a separate SI later this year.
The Secretary of State will also consider any exemptions to the fee paying, as recommended by Ofcom. Ofcom will then set out its final policy decision and a statement of charging principles, and publish final guidance to providers. It intends to begin invoicing providers for fees in 2026-27.
The Act gives Ofcom, as the independent regulator, the responsibility for drafting these regulations. The Government are committed to establishing a fee regime to ensure that the cost of online safety regulation is borne by the companies that receive revenue from the regulated online services. These regulations are fundamental to allowing Ofcom to do that. If approved today, they will come into force later this year. With that, I commend the draft regulations to the Committee.
Dr Ben Spencer (Runnymede and Weybridge) (Con)
It is a pleasure to serve under your chairmanship, Dr Murrison. Thank you for your guidance at the start of the debate. Given the narrow scope of this SI, I will make some very brief introductory remarks about the Online Safety Act before going into the detail of the SI.
Nearly two years ago, under the last Government, the groundbreaking Online Safety Act was enacted with the purpose of protecting people online. Rightly, the strongest protections in the Act were designed for children. Every day, children are subjected to harmful content affecting their views of society, relationships and themselves. The Online Safety Act is an essential tool to address that. It has faced much opposition and still faces challenges today, but it provides the template for the most robust online safety framework in the world. It is a measure that I am very proud of, but we must now work to ensure that the provisions are implemented and enforced effectively.
Realising the essential protections built into the Online Safety Act is dependent on high levels of industry compliance. I hope that we will have future opportunities to debate the wider provisions of the Act, including the effectiveness of age verification and the definition of “harmful content”, but today we rightly focus on fees and enforcement. The draft regulations set the parameters for how we define and calculate companies’ turnover in order then to then calculate both fees and maximum penalties, should they be incurred. The SI is therefore very technical in scope, but important.
The Act requires that Ofcom’s operating costs for the online safety regime are covered by providers of regulated services through a fees regime, and it is vital that that is apportioned fairly. Fines are powerful sanctions available to Ofcom, but they must be proportionate to the company and the scale and breadth of the infringement, so that companies in breach of their duties under the Act can be held to account in a way that will not only penalise non-compliance but encourage a material change in operation.
Sir John Hayes (South Holland and The Deepings) (Con)
I know that the purpose of these regulations is to clarify and provide for the definition of revenue in accordance with the original legislation. I simply say to the Minister that this is a helpful further step, building on the progress that my hon. Friend the shadow Minister has described. It is vital that we ensure that these measures are implemented by Ofcom regularly and with enthusiasm where online providers are doing damage; that is their purpose. Parliament as a whole took too long to regulate the internet. The last Government did the right thing in doing so, and now we need to use this instrument to its full effect.
Victoria Collins (Harpenden and Berkhamsted) (LD)
Keeping children and vulnerable people safe online is vital. For far too long, the online world has been a wild west, where children are subject to a torrent of harmful content, from pornography to suicide promotion. The call for this measure has come not only from parents, teachers and experts, but during my safer screens tour in Harpenden and Berkhamsted, young people themselves told me that the algorithms are pushing explicit and harmful content that they do not want to see. The topic is so important that students from Ashlyn’s and Berkhamsted schools have joined forces to lead the work themselves.
Today this Committee looks at qualifying worldwide revenue, which is important as it is linked to the level of fines. With the roll-out of the Act, the Lib Dems call on the Government to ensure a review of Ofcom fines to ensure they are enforceable and act as a true deterrent, especially given the pushback already seen from companies. We also ask Government to ringfence the fines generated by Ofcom under the Online Safety Act, for purposes including funding the provision of stand-alone education on online safety and safer screens for all school children.
Overall, it is important to highlight that the Online Safety Act contains vital safeguards against priority illegal content, requiring online platforms to tackle material depicting offences including child sexual abuse, intimate image abuse and sexual exploitation, but we know that concerns have been raised by many about the implementation of the Act, including about its effectiveness in preventing online harms and its impeding access to educational sites and important informational forums. Concern has also been voiced that age-assurance systems may pose a data protection or privacy threat to users. We therefore believe Parliament should have the opportunity to properly scrutinise Ofcom’s implementation. We use this opportunity to again call on the Government to conduct a full and urgent parliamentary review of the Act, to ensure that it meets its stated aim of keeping children and other vulnerable groups safe online, and to determine whether the Act is fit for purpose.
Michael Wheeler (Worsley and Eccles) (Lab)
It is a pleasure to serve under your chairmanship, Dr Murrison. I have a couple of questions about the SI. Having worked for a regulator that was similarly funded by a charge on those regulated and the ability to levy fees, I question what power we are giving Ofcom to collect the fees charged. Is it explicit in the Act? It does not seem to be explicit in the SI. How is the penalties regime, albeit it relates to a different percentage of global revenue, actually worked out? Is global revenue worked out on the same method as that for the GDPR, under which companies can similarly be charged a proportion of global revenue if they get things wrong?
Feryal Clark
I thank both Opposition spokespeople, the hon. Member for Harpenden and Berkhamsted and the hon. Member for Runnymede and Weybridge, for their very positive approach and their comments on the SI. I also thank the right hon. Member for South Holland and The Deepings for his contribution. The Government appreciate the wealth of knowledge that the House brings to debates on online safety. Members made a vital contribution to the Online Safety Act during its passage, and they continue to dedicate their time and expertise to ensure that the Act is implemented to its full potential.
Today, many of Ofcom’s powers are in effect and platforms are now legally required to protect children from harmful content. This includes rolling out highly effective age assurance to tackle pornography and content relating to suicide and self-harm, and eating disorders. The instrument will bring us one step closer to a fully implemented online safety regime by ensuring that companies raising revenue from online services cover the costs of regulation, not the taxpayers, and that those companies take responsibility for keeping children safe online. The hon. Member for Newton Abbot asked about similarities with GDPR. I was not around when the legislation went through, so I shall have look into that and get back to him in writing.
I will take no more of the Committee’s time. I hope the Committee agrees with me on the importance of introducing regulation to implement the fee regime.
Question put and agreed to.