Future of the Post Office

Baroness Jones of Whitchurch Excerpts

Monday 18th November 2024 Lords Chamber

[Lord Stoneham of Droxford (LD)]

My Lords, I welcome the noble Lord, Lord Sharpe, to his new Front-Bench role. The Post Office organisation is another problem area left by the previous Government. The Horizon compensation payments are still moving too slowly; there is confusion over the new IT systems in the Post Office; and the Post Office has been suffering from a lack of leadership for an organisation dealing with severe competitive pressures. Now we face, in recognition of high overhead costs, the announcement of the possible closure of 115 Crown post offices, with further damage to our high streets.

I have two initial questions. First, are the Government looking at simplifying the Horizon compensation process and speeding up decision-making? Secondly, is the expectation that many of the Crown post offices will be replaced by sub-post offices and franchise operations? On high streets and in rural areas, long-term sustainability of the post office network is vital to many communities, not least for those who cannot currently use digital alternatives to the post office services for cash, banking and financial services. Liberal Democrats have put forward proposals for the mutualisation of the Post Office. This would also give sub-postmasters more independence and control. It is welcome that the Government have announced broader reforms for the organisation and will publish a Green Paper next year. Can the Minister assure the House that this will include consideration of how mutualisation could ensure that the Post Office is fit for the future?

Will the Government also take this opportunity seriously to consider how to strengthen the role that post offices play in our communities so that they can offer more local services, from community banking to government services?

During many of the Horizon debates, when the Government were on the Opposition Benches, speakers often reminded us that then Ministers were the owners of the Post Office. The Secretary of State has levers to pull, so the fundamental question is how the Government choose to use this leverage now. Can the Minister confirm that the Government will use this ownership to ensure that, whatever happens, local communities will continue to have long-term access to Post Office offerings—all the services, including DVLA and passport services, that currently are on offer?

[The Parliamentary Under-Secretary of State, Department for Business and Trade and Department for Science, Information and Technology (Baroness Jones of Whitchurch) (Lab)]

My Lords, I also welcome the noble Lord, Lord Sharpe, to his new role. I look forward to working with him on the many issues that we will no doubt discuss. I am pleased to have this opportunity to keep the House updated on the future of the Post Office, but before I start it is worth reiterating the point made in the Statement:

“the Government inherited a Post Office that is simply not fit for purpose, following”,

frankly,

“disinterest from the previous Government, a toxic culture in head office and years of under-investment”.—[Official Report, Commons, 13/11/24; col. 806.]

That is the legacy we are now grappling with.

I would like to keep the House updated on the need very urgently to ensure that all postmasters who have been victims of the Horizon scandal get full and fair redress. Anyone who has heard some of the individual stories will know how difficult it has been for affected postmasters. It is important that the Government deliver on this commitment to speed up the delivery of redress. This issue is occupying us, and we are determined to resolve it.

Noble Lords will know that the number of cases settled with full and fair compensation has nearly doubled in the past four months since the Government came to power, compared with the four months prior to that. We have also taken steps to make it easier for postmasters who were victims in this scandal to get full and fair redress quickly, not least by fixing some payments for those applying under the Horizon shortfall scheme and for those applying under the Horizon convictions redress scheme, which was launched in July. Nevertheless, we need to do more, and I assure noble Lords that we have our foot on the accelerator.

The noble Lord, Lord Sharpe, asked about the Budget. Clearly, we had to make tough choices in the Budget to fix the foundations of our economy and restore economic stability. We make no apology for that. The alternative to taking action was more economic instability, more austerity and more decline. There are mitigations in place to protect small businesses. These include an increase in and expansion of the employment allowance to simplify and reform employer national insurance contributions. There is also a permanent reduction of 40% of business rates relief for eligible retail properties.

On who was consulted and whether the Government engaged with the Post Office on its strategic review, Ministers have of course been kept informed and have met with Nigel Railton, the new chair. His announcement clearly sets a useful ambition for the future of the Post Office, but these changes depend on funding, which will be discussed through the spending review. The noble Lord, Lord Sharpe, asked who will be consulted. As we have made clear, it will be all stakeholders. That will include any of the communities that might be affected, but no decision has been made on any of those potential closures. We very much hope that alternative activities can be found for all those post offices so that they can remain in business, but the noble Lord will know the difficulties in all that because they are currently making a considerable loss. Nevertheless, we will consult.

The Government have a manifesto commitment to look for ways to strengthen the Post Office network, in consultation with sub-postmasters, trade unions and customers. The Post Office is required by government to maintain a network of 11,500 branches; the Post Office has confirmed that its transformation plan will not impact that commitment.

On the long-term future of the Post Office, the Government are clear that there is more that can be done and we will be considering what customers, communities and postmasters would like to see from a modern Post Office network. The noble Lord rightly said that there is a future; we see a good future for post offices, not only increasingly as banking hubs, potentially, but in providing a means for people to access all the public services the noble Lord mentioned. So there is a good, strong future if we can get the Post Office’s finances on an even keel.

The Post Office’s directly managed branches, which are the loss-making element, need to be addressed. The Post Office is in dialogue with the unions and postmaster representation bodies about future options for those branches. As I say, no decision has been taken by the Post Office on any specific locations and, whatever the outcome, the Post Office will continue to deliver a network of at least 11,500 branches, as required by the Government.

The need for rural provision is a point well understood by the Government. We recognise the important role that post offices play in their communities, and it is clear that branches in some rural areas often play a particular role as community hubs. Mr Railton’s announcement is not about changing the access criteria that the Government set for the Post Office, which would ensure a network of branches across the country, including in rural areas.

Finally, the noble Lord raised the issue of mutualisation. The Government have made it clear in our manifesto that we will look for ways to strengthen the Post Office network in consultation with sub-postmasters, trade unions and customers. Our department is working on this at an early stage, and a wide number of options are being explored, including long-term structural options such as mutualisation.

I stress again to noble Lords that we see a positive future for the Post Office network. This is not a question of managed decline; it is a positive vision for the future. We just need to get the nuts and bolts right at this stage.

[Lord Arbuthnot of Edrom (Con)]

My Lords, like the Minister, I believe in the Post Office. I see its future as a network of essential hubs spread throughout the country, holding communities together and giving people the chance to do their banking, to meet on a social basis, and to interact with the Government, other agencies and more services, including healthcare. That future would build up the country’s resilience. If that is right, should we not be expanding the network rather than reducing it?

[Baroness Jones of Whitchurch (Lab)]

First, I pay tribute to the noble Lord for all the work he has done on this over the years. Nobody knows the challenges better than he does, and I absolutely agree: there is potentially a rosy future for post offices in exactly the way he described—as a network of basic service provision hubs, in addition to the banking hubs that we also see expanding. We need to ensure that we get the finances of this right, but we can all see the potential of the Post Office network to provide far more than it already does. It can provide a community hub, in the way that we were just talking about, but also a public service hub. Particularly as we move towards a lot of services being digital and online, post offices will have a role to provide for people who are digitally excluded in some way, so that they have that point of contact and a person can help them access those services, face to face. They have an essential role in the future, in the way that the noble Lord talked of.

[Lord Beamish (Lab)]

My Lords, I declare my interest as a member of the Post Office Horizon Compensation Advisory Board. Along with my good friend the noble Lord, Lord Arbuthnot, I have been campaigning on this for over 15 years, and the toxic culture of the Post Office is very clear to me. It goes very deep. From the Post Office inquiry, it is clear that individual investigators pursued individual sub-postmasters in a vicious way.

What has been done to ensure that those individuals no longer work for the Post Office? Separately, what role have the Government taken regarding Fujitsu? Have they approached Fujitsu to ensure that it pays proper compensation for its role in this national scandal?

[Baroness Jones of Whitchurch (Lab)]

I pay tribute to my noble friend for his considerable work campaigning on this issue. We all owe him a debt of gratitude for that. He is right that there is a toxic culture from the top down. I, and my department, believe that the new leadership at the Post Office will address that issue from the top down. That is partly to do with some of the individuals who are still there, and we are waiting for the result of the inquiry before we can potentially take any action against them. There are issues too about the senior pay of too many people at the Post Office. Quite frankly, we need to rationalise it and make it fit for the 21st century from the top down. That is the way we are approaching this issue.

With regard to Fujitsu, again, my noble friend will know that we are trying to find a way to embed a new system that will replace Horizon. Work is ongoing to make sure that this is happening; it is not happening as quickly as we would like. Fujitsu is, in a sense, still providing some of the services because we do not have an alternative to provide them at the moment. The sooner we can get a modern IT system that is fit for purpose into the Post Office the better. We are working towards being able to do that.

[Viscount Brookeborough (CB)]

My Lords, the Minister appears quite optimistic, but does she not accept that the withdrawal of some of these post offices through closures hits the most vulnerable people in rural communities? It is no good saying that this will be coped with; withdrawal means that many people will not have these services available.

I was on an inquiry to do with financial services a few years ago. When bank branches were closing, we were assured that post offices would be able to do the banking job for small businesses. Nobody really knew what was going on at the time but they were told that they would have to cope. We are, however, now closing post offices. Talking of consultation, we asked every bank whether they had consulted and they said yes. We could not find one branch that was not closed as a result of consultation yet there is simply nobody who will say that local financial services should be closed.

The Minister talks about the ambitions of the Post Office. What about the ambitions of the clients and the public? This is very serious, because the banks and the Post Office are bouncing off each other and reducing services one by one. It is unacceptable.

[Baroness Jones of Whitchurch (Lab)]

I reiterate that we are ambitious for the Post Office. No decision has been taken about any potential closures of any post offices. There is a consultation taking place and we are trying to find a way to keep those post offices open in whatever way we can, whether that is providing different services or under different management. There is a guarantee that in both rural and urban areas a minimum provision of post offices must be provided, and the Post Office has confirmed to us that it will maintain that agreement, so it is a mistake to assume that they will close. I do not think there is any evidence of that at the moment. We are trying to find an alternative way to keep them open.

[Lord Wigley (PC)]

In an earlier answer the Minister used the words “including rural areas”, but I ask her to think in terms of “especially rural areas”. The reality is that in many rural areas the banks have closed down; this is certainly true in rural Wales. Some of the most vulnerable people in the community need access to post offices with a whole range of services, not just those available in shops. Will she please give a special place to rural areas in her consideration?

[Baroness Jones of Whitchurch (Lab)]

I hear what the noble Lord says. I reiterate that we absolutely understand the important role that post offices play in their communities in rural areas. We are aware of the role that they play as community hubs, if nothing else. The Post Office’s proposals are not about changing the access criteria that the Government have set for the Post Office, so those criteria will continue. That will ensure a network of branches across the country, particularly in rural areas.

[Lord Swire (Con)]

My Lords, the way that services are to be provided is changing, from banking services to remote GP diagnostics, so the Post Office and its invaluable network should change and adapt as well. Will the Government look at some innovative ways where we can, for instance, co-locate post offices in shops or pubs and do much more, rather than looking at them as some kind of rather outdated form of delivery, particularly for rural communities?

[Baroness Jones of Whitchurch (Lab)]

The noble Lord is right that we need to look at innovative ways where post offices can be co-located. A lot are already co-located in other retail shops. Those the ones that are more profitable, as far as I understand it, so that may well be the future, but there is probably more that we can do to expand that innovation, bearing in mind the community role that we see for them for the future and how important that will be. We have an open mind. The Green Paper that we are launching next year will allow all that debate to take place. We do not want to rush a solution. However, I reiterate that we see a positive role for the Post Office in the future, but let us make sure that we consider all the proposals, get them on the table and work with consumers and the unions, and then everyone can sign up to the proposals for the future.

[Lord Sahota (Lab)]

My Lords, last week there was a long, well-researched report on the “News at Ten” that some of the managers who were there at the height of the Horizon problems are still there and still bullying some of the sub-postmasters, which is quite sad. Are the Government aware of that?

[Baroness Jones of Whitchurch (Lab)]

As I say, it is true that some of the individuals are still there. We await the outcome of the inquiry—it is about to come to an end—before we consider whether any further action needs to be taken against any individuals. In the meantime, a restructuring is taking place at the head office. Obviously some jobs may need to go as a result of all that, but we need to make the head office fit for the 21st century. It needs to be a leaner organisation at that point.

[Baroness Wheatcroft (CB)]

My Lords, given the structure of the Post Office at the moment as an arm’s-length body and the acceptance of it as an important part of the community and the country, is the Minister convinced that this arm’s-length structure, which failed so dismally in the past, is appropriate for the future?

[Baroness Jones of Whitchurch (Lab)]

The Green Paper will enable us to look at all those issues. As I said, we said in our manifesto that one of the options we are considering is mutualisation, which may be a way forward, so nothing is off the table at this point. We will consider any option for a more efficient way of organising the Post Office, to make sure that the guarantees we think are essential for its long-term future are built into it but that it can be profitable.

[Lord Bellingham (Con)]

My Lords, following the question from my noble friend Lord Arbuthnot, I declare an interest as a former MP representing a number of sub-postmasters. Some of them were unfairly accused and investigated of wrongdoing but, rather than fighting their corner, gave up the lease and paid out money that, with hindsight, they never owed. Is there a way of trying to identify that cohort and including them in the compensation scheme?

[Baroness Jones of Whitchurch (Lab)]

I will need to double check that. One of the complications is that there are already four schemes running on different principles. I will need to double check the definitions of the groups the noble Lord is talking about, but I believe that they are included. If I am mistaken, I am sorry, but I believe they are included in one of the schemes. I understand that people who left before the Horizon scandal came to light—I apologise if I have got this wrong—will be included in one of the schemes.

[Baroness McIntosh of Pickering (Con)]

My Lords, I add my voice to others speaking up for the rural network. Could the noble Baroness examine the model currently on the table, which seems defective? The price of stamps has gone up incrementally over the past two years, yet the service has gone down. Saturday deliveries have been taken away and I understand that posties, who are the heroes on the ground delivering the post in all weathers, have been told they can have no overtime this autumn. Could she use her good offices to examine that and make sure that we have a rural network that is fit for purpose?

[Baroness Jones of Whitchurch (Lab)]

The noble Baroness is talking about the Royal Mail service, rather than the Post Office. I know that there are separate discussions with the Royal Mail about the future delivery programme. I do not have the details in front of me, but if I can find details, I will write to the noble Baroness.

[Lord Desai (CB)]

Could the noble Baroness make sure that, for villages where there is no post office, there will be a mobile service at least twice a week? That would help residents to have some access to postal services.

[Baroness Jones of Whitchurch (Lab)]

The noble Lord makes a very good point and I hope that that can be included in the Green Paper as one aspect of this. I reiterate that we see a future for community hubs. It may be that we need fixed premises for that to work in practice, rather than for it to be something that just visits. For more isolated communities, that may well be a solution. Whatever happens, we want to guarantee to all communities in the UK that they will be able to access a post office to do the business that they need to do in order to access public services, driving licences and all the things we were talking about earlier. They will need to have some form of post office within easy reach. That is certainly one way of looking at it.

[Lord Holmes of Richmond (Con)]

My Lords, I declare my financial services and technology interests, as set out in the register. Would the Minister agree that the country is suffering from an epidemic of financial exclusion and digital exclusion, with the two often walking painfully hand in hand? Would not the golden principles of financial inclusion and digital inclusion be two excellent elements on which to fund the Post Office going forward?

Would she also agree that a significant part of the difficulties experienced by sub-postmasters and sub-postmistresses was that computer evidence was taken almost on the nod? Would she agree that it is high time we reversed the burden of proof with computer evidence to what it was pre changing it to this iniquitous position?

[Baroness Jones of Whitchurch (Lab)]

My Lords, I think we have all learned the lesson from the Horizon scandal that you cannot assume that the computer is always right. I absolutely agree with the noble Lord that we need to be much more sceptical when presented with that kind of evidence in future.

On digital exclusion, the noble Lord is absolutely right. It is a huge issue for the Government and we are taking it very seriously. A huge piece of work is going on around this. Obviously, our ambition is to make sure that everybody has the skills and capacity to go online and access services, because it is to their benefit; it makes their life easier. The proposals we have—for example, the Government’s One Login service, will always have the option for individuals to go in person to a post office to access those services as an alternative. We will make sure that people are not excluded. But the real challenge relates to the discussion we were having earlier with the noble Baroness, Lady Smith, about education and skills; it is our intention to make sure that people have the skills, education, capacity and equipment to go online and have all the advantages that the digital world will offer them.

[Baroness Lawlor (Con)]

My Lords, I understand that no joined-up assessment has been made of the impact of potential closures on local economies. Could the noble Baroness correct me if I am wrong? I ask her to commit to making an impact assessment of the Budget adding £25 billion to employers’ employment costs, which will drive down confidence, especially in small businesses, for either awarding pay rises or hiring staff. This will have a great impact on local post offices—added to this new question of insecurity. Could the noble Baroness commit the Government to making an impact assessment of local employment prospects should these closures go ahead, and to bringing that impact assessment to this House?

[Baroness Jones of Whitchurch (Lab)]

My Lords, this is a matter for the Post Office and the strategic review it has carried out. It will have to make the decisions about the cost-effectiveness of its proposals. We are talking and liaising with them, and I reiterate the point I made earlier: no decision has been taken yet. A full consultation is taking place with, among others, the unions about the future of these properties that are potentially on the line. We are looking for alternative ways to keep those post offices open.

On the issue of the Budget, as I said earlier, we had to make some difficult choices, but we have increased the employment allowance to simplify and reform employers’ national insurance contributions, and we have delivered a permanent reduction of 40% in business rates relief for eligible retail properties, which will include a lot of high street post offices as well.

[Baroness Scott of Bybrook (Con)]

My Lords, have any discussions taken place on the future of the post office in Parliament? This is a very valuable service to all of us who work in the Palace.

[Baroness Jones of Whitchurch (Lab)]

I agree with the noble Baroness. I think we would all agree with her that that post office provides a very valuable service. I hope it is on the list of the 11,500 we have been promised that we can keep. I will certainly join with the noble Baroness to make sure it is included.

Insurance Distribution (Regulated Activities and Miscellaneous Amendments) Regulations 2024

Baroness Jones of Whitchurch Excerpts

Monday 18th November 2024 Grand Committee

Moved by

[Baroness Jones of Whitchurch]

That the Grand Committee do consider the Insurance Distribution (Regulated Activities and Miscellaneous Amendments) Regulations 2024.

Motion agreed.

Collective Investment Schemes (Temporary Recognition) and Central Counterparties (Transitional Provision) (Amendment) Regulations 2024

Baroness Jones of Whitchurch Excerpts

Monday 18th November 2024 Grand Committee

Moved by

[Baroness Jones of Whitchurch]

That the Grand Committee do consider the Collective Investment Schemes (Temporary Recognition) and Central Counterparties (Transitional Provision) (Amendment) Regulations 2024.

[The Parliamentary Under-Secretary of State, Department for Business and Trade and Department for Science, Information and Technology (Baroness Jones of Whitchurch) (Lab)]

My Lords, in moving this order, I shall speak also to the Insurance Distribution (Regulated Activities and Miscellaneous Amendments) Regulations 2024.

The regulations we are introducing today will ensure that the regulatory framework for financial services is aligned with the UK’s needs following our exit from the European Union. They ensure that UK businesses and individuals can continue to access the products and services they need, even where these originate from outside the UK, and that UK authorities have appropriate control over which firms can access our markets. They also ensure that the statute book is clear, comprehensible and relevant to our domestic market.

I turn first to the instrument on collective investment schemes and central counterparties. UK investors and firms rely on a wide range of financial products and services to meet their needs, ranging from individuals saving for a rainy day all the way to multinational corporations needing to settle multi-million pound transactions. In a highly international industry, many of these products and services originate from outside the UK. Ensuring continued access for UK investors and businesses is therefore critical to the continued functioning of our economy. This instrument deals with two such areas of global market access: the ability of collective investment schemes or funds to market to UK retail investors; and the ability of overseas central counterparties to provide services to UK firms. I shall now speak to each of these in turn.

The Government previously introduced a new route for overseas funds to become recognised for marketing to UK investors—the overseas funds regime. In July this year, the first equivalence decision under this regime came into force. This means that certain retail schemes from the European Economic Area will be able to market to UK investors on an ongoing basis. Funds from the European Economic Area had been able to passport freely into the UK prior to the UK’s exit from the European Union; a temporary regime was introduced to allow these funds to continue doing so. These temporary arrangements were due to end in December 2025.

The overseas funds regime represents a more permanent solution. However, it will take time to transition the more than 8,000 funds with temporary access to the new regime. Therefore, this instrument extends the temporary regime for a further year, until 2026, to allow for a smooth transition and avoid any cliff-edge risks. It is important that the temporary regime continues to work as intended for those funds still using it—namely, those funds not in scope of the Government’s equivalence decision. At the same time, the temporary regime should wind down in an orderly fashion. This means that funds in scope of the equivalence decision should be directed towards the overseas funds regime and, if they fail to apply or become recognised under that route, they should lose their ability to market freely to UK investors.

This instrument also makes technical changes to ensure that that is the case and that sub-funds in the temporary regime are treated appropriately depending on their characteristics. These two changes combine to ensure that the Government’s decision under the overseas funds regime and the transition from the temporary arrangements will be implemented smoothly, without unintended consequences for investors or fund operators.

I turn to the second set of changes delivered by this SI, relating to overseas central counterparties. Central counterparties, or CCPs, are vital market infrastructure firms that help make markets safer and more efficient. They sit between the buyers and sellers of certain financial instruments, providing assurance that contractual obligations will be fulfilled. The process of transacting through a CCP is known as clearing.

During EU exit, the Government set up the temporary recognition regime, or TRR, which allowed overseas CCPs that were recognised by the EU before the end of the transition period—and which, therefore, had market access to the UK—to continue to provide services to UK firms. This allowed UK authorities the time to start putting in place longer-term market access arrangements for these overseas CCPs after EU exit. The TRR has largely functioned well and ensured that EU exit did not disrupt the provision of clearing services into the UK.

However, as it stands, a CCP in the TRR automatically loses its right to remain in the regime if its EU recognition is withdrawn. This has meant that, since EU exit, several CCPs have exited the TRR and moved into the UK’s accompanying run-off regime, as a result of decisions taken by authorities outside the UK. There are a variety of circumstances that could lead to EU authorities withdrawing EU recognition from overseas CCPs, but these circumstances may not always be relevant to the UK. For instance, EU recognition has previously been withdrawn because co-operation arrangements have not been agreed between ESMA and the relevant national regulator of the overseas CCP. This statutory instrument therefore removes EU recognition as a condition for remaining in the TRR. This, combined with the Bank’s continued ability to move a CCP out of the TRR for financial stability reasons, ensures that UK authorities have appropriate control over which overseas CCPs can provide services to UK firms.

I now turn to the Insurance Distribution (Regulated Activities and Miscellaneous Amendments) Regulations 2024. The UK’s financial services sector is central to driving growth in the UK economy, and insurance is a fundamental contributor. Effective and proportionate regulation is key to this; therefore, we must ensure that domestic regulation is clear and not burdensome to understand. This statutory instrument makes technical legislative changes that remove or amend references to insurance-related EU directives. It is no longer necessary to refer to them now that the UK is not part of the EU and now that the regulatory regime for insurance distribution is set out entirely in UK law and regulatory rules.

This instrument amends the Terrorism Act 2000; the Proceeds of Crime Act 2002; the Counter-Terrorism Act 2008; and the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017. It replaces insurance distribution directive-related references with references to the equivalent provisions in the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001.

This instrument makes similar amendments to the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001. It changes the monetary threshold in Article 72B of that order below which a person whose main business is not insurance distribution is excluded from regulation by the Financial Conduct Authority. This instrument provides that the threshold will now be denominated in sterling rather than the euro. The scope of the exclusion on the distribution of sterling-denominated insurance policies will no longer be dependent on changing exchange rates.

--- Later in debate ---

[Baroness Jones of Whitchurch (Lab)]

I thank both noble Baronesses for their comments. I very much welcome the noble Baroness, Lady Neville-Rolfe, to her new role—I am sure that she will carry it out extremely well. I am pleased to hear that the noble Baroness, Lady Bowles, approves of something we are doing, for a change. Getting approval from her takes some doing, so it is good to hear.

The noble Baroness, Lady Kramer, made some more serious points, which I will have a go at addressing. First, she asked whether risk was being compromised here. We agree that we do not want to deregulate in this area; if anything, the UK Government have committed to maintaining and strengthening our high standards for CCP regulation. Of course, the Bank of England regulates these firms anyway, in accordance with its financial stability objective, so there are checks and balances already in place. We do not believe that risk is being compromised. On equivalence being a unilateral decision for the EU, we have been clear that we are committed to high standards and that we do not believe this SI gives the EU any cause for concern or reason not to extend CCP equivalence further.

The noble Baroness, Lady Kramer, asked about the role of ESMA. Of course, a variety of circumstances could lead to ESMA withdrawing EU recognition from overseas CCPs. These circumstances may not always be relevant to the UK; therefore, UK authorities may not wish to take similar action. This might be the case if, for instance, ESMA withdrew recognition because it had not agreed co-operation arrangements with other relevant national authorities. Whatever the reasons for withdrawing, the Bank is able to remove a firm from the TRR, if it deems that the CCP presents a financial security risk.

The noble Baroness also asked whether insurance companies would fall outside the regulatory perimeter. There is no policy change here. Premium thresholds will be denominated in sterling rather than the euro. The current exchange rate was used, with denominations rounded to the nearest £25; this is just to make it easier and clearer for people using the services. We will keep the operation of these thresholds under review, but this measure was simply to make the process more simplified.

I thank the noble Baroness, Lady Neville-Rolfe, for her welcoming of many of the proposals before us. She asked about impact assessments. They are standard practice; if we do not have an impact assessment, there must be a very good reason why that is the case. The noble Baroness will know from her past experience of the sorts of cases where that might occur. These measures are all covered by the better regulation framework anyway, if the impact is more than £10 million—so we think that, one way or another, they are covered.

The noble Baroness asked about us taking out all references to the EU. All I can say is that that is a work in progress. We would probably like to do it more quickly than we are, but we are working on it. We are looking back at the legislation. The purpose of this particular piece of legislation was to make it clearer to people. I do not think there is a legislative danger in the current wording, if it already exists in other bits of legislation; this was just to avoid confusion. We all want to do that, of course; where we can, we will. If we revisit bits of legislation in any way, that will be an ideal opportunity to correct these references so that they do not cause confusion in future.

I have a feeling that I probably have not answered all the questions asked by the noble Baroness, but that is my best stab at it. I thank both noble Baronesses.

[Baroness Neville-Rolfe (Con)]

My question about the impact assessment was actually about the de minimis impact assessment. Proper impact assessments have to be done at about £10 million, or whatever the level now is, but I was congratulating the Minister on having done an impact assessment for something that was in effect smaller. I would like to know whether that will be adopted by the Treasury, which I think has an interest in it, and whether it will be adopted more broadly by other departments. Perhaps the Minister could follow up on that, especially on the broader point, given her role on legislation.

As for the point about the plan going forward, it would be good to know whether there is a published source of what is still to come and what amount of time that will take. People will be very glad to know that we are nearly at the end of this process of bringing in our own regime on financial services, so that our excellent sector can feel that the roundabout has stopped and that it can get on with serving Britain. London is still such an important centre for financial services, and I am very keen to support the Government in supporting that.

[Baroness Jones of Whitchurch (Lab)]

I thank the noble Baroness for that question. I can confirm that it is standard practice for the Treasury to produce de minimis impact assessments—I have got a nod from the team behind me, so I say that with some confidence.

The noble Baroness asked about the next steps for repealing assimilated law. The Government are committed to securing the benefits that the repeal and replacement of assimilated law can bring, creating a more agile and responsive regulatory regime. That means progressing work on files such as the European market infrastructure regulation and alternative investment fund managers directive. To be more specific, we will write to the noble Baroness to clarify any further information that we have on this. With that, I hope that noble Lords will approve the regulations.

Motion agreed.

Trade Union and Labour Relations (Consolidation) Act 1992 (Amendment of Schedule A2) Order 2024

Baroness Jones of Whitchurch Excerpts

Monday 18th November 2024 Grand Committee

Moved by

[Baroness Jones of Whitchurch]

That the Grand Committee do consider the Trade Union and Labour Relations (Consolidation) Act 1992 (Amendment of Schedule A2) Order 2024.

[The Parliamentary Under-Secretary of State, Department for Business and Trade and Department for Science, Information and Technology (Baroness Jones of Whitchurch) (Lab)]

My Lords, this order will allow the tribunal to apply an uplift to the amount that can be awarded where employers do not meet their collective consultation obligations when dismissing employees. The tribunal will be able to apply this uplift where an employer has unreasonably failed to comply with the code of practice on dismissal and re-engagement in cases where the code applies. A tribunal will be able to increase any award made in relation to affected employees by up to 25%, which will increase the deterrent effect of the code and strengthen protections for employees.

I will now set out how this is achieved through the order. A protective award is an award which can be made by an employment tribunal when an employer does not meet its collective consultation obligations. These obligations currently apply where an employer is proposing to dismiss 20 or more of employees within any 90-day period at a single establishment. Schedule A2 to the Trade Union and Labour Relations (Consolidation) Act 1992 Act sets out the list of claims for which an employment tribunal can make a 25% adjustment to compensation if one of the parties has unreasonably failed to comply with a relevant code of practice.

The code of practice on dismissal and re-engagement will be a relevant code of practice for this purpose. The change will mean that where an employment tribunal is making a protective award in a case where the code applies and it appears to the tribunal that the employer has unreasonably failed to comply with the code, the tribunal may increase that award by up to 25%, increasing the deterrent effect of the code. This is a fair and proportionate measure that will give the tribunal greater discretion to take individual behaviours into account when making an award.

Last year, the previous Government published the code and, alongside it, laid a previous version of this statutory instrument. However, it timed out in the pre-election period. This Government are committed to going much further and have brought forward the Employment Rights Bill within our first 100 days in government to put an end to unscrupulous fire-and-rehire practices that have no place in a modern labour market. In the meantime, before the Employment Rights Bill completes its passage and comes into force and to avoid disruption for workplaces, we decided to continue with the previous Government’s code of practice, which came into force earlier in the summer. This is also why we are re-laying this legislation. It will come into force in January 2025, subject to it being debated and approved in both Houses. It will at least provide an additional level of protection for workers as a stepping stone to the much-needed reforms set out in our plan to make work pay.

I move on to the Government’s ambitions to deliver the biggest upgrade to workers’ rights in a generation. The Employment Rights Bill is the first phase of delivering our plan to make work pay, supporting employers, workers and unions to get Britain moving forward. The Bill will support the Government’s mission to increase productivity and create the right conditions for long-term sustainable, inclusive and secure economic growth by giving the British public the work, wages, prosperity, security, dignity and living standards that everyone in Britain needs and deserves. In the Employment Rights Bill, this Government are bringing forward a measure that will end unscrupulous fire-and-rehire tactics that leave workers at the mercy of bullying threats. Employers will be able to use the practice only where they genuinely have no alternative or where they are in financial difficulties that threaten their business. This means that employers will be able to use the practice where necessary to save jobs and prevent redundancies.

Additionally, in the Employment Rights Bill, we are strengthening collective redundancy rights and protections. This will ensure that the right to collective redundancy consultation is determined by the number of people impacted across the business, rather than in one workplace. This will ensure that employers must always collectively consult when proposing to make 20 or more employees redundant. This measure additionally amends notification requirements so that employers have to notify the Government when they are proposing to make 20 or more employees redundant, regardless of whether the redundancies are taking place in one establishment.

--- Later in debate ---

[The Earl of Effingham (Con)]

My Lords, as noble Lords will know, this order—the Trade Union and Labour Relations (Consolidation) Act 1992 (Amendment of Schedule A2) Order 2024—was originally laid by the previous Conservative Government. It is short, so I will keep my remarks brief.

This order will increase the protective award for non-compliance with collective consultation requirements, meaning that where an employer has unreasonably failed to comply with a relevant code of practice an employment tribunal making a protective award may increase the employee’s award by up to 25%. Conversely, where an employee has failed to comply with the relevant code, their award may be decreased by 25%. The policy context for this is to prevent fire and rehire, which attracted significant media attention during the Covid-19 pandemic. This order will ensure that employers take all reasonable steps to explore alternatives to dismissal and re-engagement and that they do not use this as a threat or pressure tactic when implementing changes to employment contracts.

His Majesty’s Official Opposition welcome this statutory instrument. We hope that it will improve working practices in the United Kingdom, particularly for those who find themselves in vulnerable or precarious employment situations and need all the help they can get.

[Baroness Jones of Whitchurch (Lab)]

My Lords, I am grateful for the noble Earl’s support for these amendments to the Trade Union and Labour Relations (Consolidation) Act 1992. As I have said, this order will add the protective award for non-compliance with collective consultation requirements to Schedule A2 to the 1992 Act. This will mean that, when a protective award is made against an employer for failing to comply with their collective consultation requirements, the employment tribunal may increase the protective award by up to 25% if the employer unreasonably fails to comply with the code of practice on dismissal and re-engagement.

As I said, the Government are committed to ending unscrupulous fire-and-rehire practices through the employment Bill; we will of course return to debate that in more detail. In the meantime, I commend this order to the Committee.

Motion agreed.

Radio Equipment (Amendment) (Northern Ireland) Regulations 2024

Baroness Jones of Whitchurch Excerpts

Monday 18th November 2024 Lords Chamber

Moved by

[Baroness Jones of Whitchurch]

That the draft Regulations laid before the House on 9 October be approved.

Relevant document: 4th Report from the Secondary Legislation Scrutiny Committee. Considered in Grand Committee on 11 November.

Motion agreed.

Listed Investment Companies (Classification etc) Bill [HL]

Baroness Jones of Whitchurch Excerpts

2nd reading
Friday 15th November 2024 Lords Chamber

[The Parliamentary Under-Secretary of State, Department for Business and Trade and Department for Science, Information and Technology (Baroness Jones of Whitchurch) (Lab)]

My Lords, I congratulate the noble Baroness, Lady Bowles, on securing this important Second Reading, and thank her for her engagement on this issue so far. The Bill seeks to address an important concern for the sector which arises from assimilated EU law, and I am grateful for her work, and that of other Members of this House, to raise awareness of this issue.

Representing over 30% of the FTSE 250 and investing in over £250 billion of assets, investment trusts are a British invention dating back 150 years, which nevertheless play a significant role in the Government’s growth mission. Having said that, I must express reservations about the Bill.

As the noble Baroness has rightly identified, EU-derived legislation related to retail disclosure is not fit for UK markets. This is something on which the Government, the Financial Conduct Authority and many Members of this House agree. It is also an area in which the Government are already taking forward action at pace, to address industry concerns.

The packaged retail and insurance-based investment products regulation— PRIIPs—was originally meant to provide more transparent and standardised disclosure for retail investors across the European Union. There are many problems with PRIIPs, as the noble Baroness, Lady Bowles, stressed, and as this House is well aware. It is prescriptive, misleading to retail investors, and prioritises comparability at the expense of consumer understanding.

The Government are therefore committed to replacing the PRIIPs regulation with a new framework for consumer composite investments, and laid legislation to deliver this last month. This will provide the FCA with the appropriate powers to deliver a new disclosure regime which is more proportionate and tailored to UK markets and firms, including for investment trusts.

However, I recognise concerns from industry that PRIIPs cost disclosure requirements have had unintended consequences for the investment trust sector and its ability to fundraise. This is why the Government have also taken exceptional action to temporarily exempt investment trusts from cost disclosure regulation under PRIIPs. Legislation to deliver this reform was debated by this House earlier this week and I know that a number of noble Lords here were part of that debate. As the noble Baroness will know, the House passed the Government’s legislation on this yesterday. I urge all noble Lords who continue to have concerns to embrace the FCA consultation that will follow the adoption of those SIs.

This approach is intended as an interim measure to support firms as we finalise the replacement CCI regime. Recognising that the pace of legislative reform can be slow, the FCA had already implemented regulatory forbearance, so that firms were able to take advantage of this in advance of legislation taking effect. Given that investment trusts market directly to retail investors, it is right that they must provide tailored disclosure on costs, risks and performance to support consumer understanding. Like open-ended funds, investment trusts have management fees and an active investment strategy, which influence the returns provided to investors. While I agree that the current system of cost disclosure is not fit for purpose, in the long term, our reforms under the CCI regime will create bespoke and tailored rules for investment trusts.

Ensuring that retail investors can make informed investment decisions is an important part of ensuring healthy capital markets. Together, the instruments which the Government have already debated will enable the FCA to holistically reform cost disclosure, addressing issues with current disclosure requirements, including for costs. Meanwhile, I can assure the noble Lord, Lord Hodgson, that we are on the same page on the need to deliver economic growth and we believe that the measures we are taking in support of these actions will help the sector to become more competitive.

I hope that that brief summary will provide noble Lords with some reassurance, but there were some specific questions which I will attempt to respond to. Going back to the issue of the FCA’s forbearance statement, which I know the noble Baroness, Lady Bowles, and the noble Lord, Lord Hodgson raised, following the Government’s announcement that we would exclude investment trusts from PRIIPs in the interim, the FCA issued a statement on its own forbearance, in line with these intended reforms. As the FCA has stated, its forbearance is intended to apply along the distribution chain to any firm carrying out business relating to these products, including manufacturing, distribution or marketing.

All firms must, however, continue to comply with other relevant rules and regulations, including the consumer duty and the requirement to ensure that communications are fair, clear and not misleading. The PRIIPs (Retail Disclosure) (Amendment) Regulations will give legislative certainty to firms ahead of the implementation of the new CCI regime. While I recognise that there may be some frustrations in the sector, the operation of the FCA’s forbearance is, at the end of the day, a matter for industry and the regulator.

The noble Baronesses, Lady Bowles and Lady Altmann, stressed concerns about misleading disclosures. As noble Lords will know, investment trusts, like open-ended trusts and unlike shares in other companies, have an active investment strategy and associated fees. It is right that these costs should be disclosed to retail investors through tailored disclosure. Nevertheless, the Government recognise that the prescriptive cost disclosure methodology required by the PRIIPs regulation does not reflect the actual cost of investing in these closed-end funds. The proposed new CCI regime will provide more useful and relevant disclosure to retail investors and more flexibility for tailored disclosure to clients, and will be less burdensome for firms to produce.

The noble Baroness, Lady Altmann, asked why investment trusts are going to be subject to the CCI regime. The proposed new CCI regime will provide more useful and relevant disclosure to retail investors, more flexibility to tailor disclosure to clients, and will be less burdensome for firms to produce. It is right that investment trusts, like other products which directly market to retail investors, must provide tailored disclosure on costs, risks and performance for retail investors. The FCA will use the flexibility provided by the statutory instrument to ensure that those disclosures are tailored to reflect UK markets and firms, and to meet the needs of investors.

In response to the specific question of the noble Baroness, Lady Altmann, this regime will apply to all investment trusts, and they will be required to provide disclosure to retail investors.

I hope I have answered all the questions. I thank the noble Baroness, Lady Bowles, and all noble Lords for their broad support for what the Government are doing. I understand that they want to take this issue further, but I hope I have managed to answer the questions raised today. I echo where I started: I am grateful to the noble Baroness for her continued championing of the investment trust sector and for bringing her concerns to the Government’s attention. However, I hope that, on the basis of the specific issues and reassurances I have outlined today concerning the Government’s ongoing legislative programme, she will agree not to pursue her Bill.

Radio Equipment (Amendment) (Northern Ireland) Regulations 2024

Baroness Jones of Whitchurch Excerpts

Monday 11th November 2024 Grand Committee

Moved by

[Baroness Jones of Whitchurch]

That the Grand Committee do consider the Radio Equipment (Amendment) (Northern Ireland) Regulations 2024.

Relevant document: 4th Report from the Secondary Legislation Scrutiny Committee

[The Parliamentary Under-Secretary of State, Department for Business and Trade and Department for Science, Information and Technology (Baroness Jones of Whitchurch) (Lab)]

My Lords, I begin by setting out the background to this instrument. The radio equipment directive—directive 2014/53/EU—establishes a framework of regulatory requirements for specific categories of electrical and electronic equipment that are placed on the EU market or put into service in the EU. When we were in the EU, the UK’s Radio Equipment Regulations 2017 implemented the radio equipment directive in domestic law on a UK-wide basis.

In November 2022, the EU formally adopted the common charger directive, which amended the radio equipment directive. The common charger directive requires, among other things, a common charging solution—based on USB-C—for smartphones and certain other portable electronic devices that use wired charging from December 2024, and for laptops from April 2026. To provide for its continued unique dual access to the UK internal market and the EU single market, certain EU legislation continues to apply in Northern Ireland—including the radio equipment directive, under the terms of the Windsor Framework. This instrument will therefore amend the UK’s Radio Equipment Regulations 2017, in order to implement these latest changes in Northern Ireland and enable them to be legally enforced.

Before I move on to the specific detail of the instrument, I want to explain at the outset that this instrument is expected to have a limited impact in practice. The reason for this is that many manufacturers have already moved to USB-C to continue to supply the EU market. As a result, USB-C has, in effect, already become the industry default in Europe. The industry tells us that it is also using USB-C for devices supplied for the whole of the UK in order to avoid supply chain complexity. Devices that comply with common charger requirements will also be able to be legally placed on the GB market. So we consider it highly likely that the same devices with USB-C charger ports will be available across the whole of the UK.

I also want to explain that the common charger measures aim to reduce environmental waste, increase consumer convenience and save money for consumers, as they will not need to buy separate chargers for each device. We consider that it would potentially help businesses, as well as deliver consumer and environmental benefits, if we were to introduce similar standardised requirements across the UK. We have, therefore, launched a call for evidence at the same time as laying this instrument before the Committee. The implementation of common charger measures in Northern Ireland also ensures our compliance with international law, which facilitates Northern Ireland’s continued unique dual access to both the UK internal market and the EU single market.

Having set out the context, I will now move on to the detail of the instrument. This instrument introduces new regulatory requirements for specific categories of electrical and electronic equipment that use wired charging and are placed on the Northern Ireland market. It amends the Radio Equipment Regulations 2017 to provide for the following: simplified charging whereby USB-C will be the common charging port, meaning that one charger will work for multiple devices and bringing cost savings and environmental benefits; standardised fast charging technology, meaning that charging speed is the same when using any compatible charger for a device; unbundling the sale of a charger, meaning that consumers will have the option to purchase new devices without a charger, thereby reducing electronic waste and costs; and additional visual and written information about charging characteristics, the power the device requires and whether it supports fast charging, thereby improving the information available to consumers. This will help consumers understand whether their existing chargers meet new devices’ requirements and help consumers select compatible chargers. The common charger measures will apply to certain categories of handheld devices, including smartphones that use wired charging, from 28 December 2024, and to laptops from 28 April 2026.

I turn to offences and enforcement. Offences will be amended to cover the common charger requirements already mentioned, including to ensure that consumers are offered the choice of purchasing specific categories of electrical and electronic equipment without a charging device if they wish; and that the equipment is accompanied by visual information showing whether a charging device is included. However, I assure noble Lords that enforcement authorities will continue to take a proportionate approach to compliance and enforcement activities in accordance with the Regulators’ Code. In almost all cases, we expect that, by working with and supporting businesses, compliance will be achieved without recourse to the use of criminal penalties. The Northern Ireland Department of Justice has confirmed that it considers that the offences provided for by this instrument are consistent and proportionate, and will have no negative effect on the criminal justice system in Northern Ireland.

We are taking action to help industry with these new requirements. My officials in the Office for Product Safety and Standards will provide industry guidance to ensure that businesses have the information they need on how to comply with the new requirements. My officials are also liaising with the Northern Ireland district councils, which are responsible for enforcing the Radio Equipment Regulations in Northern Ireland, ensuring that they have all the necessary information they require in order to do so.

With USB-C charging becoming the industry default, in effect, it is the Government’s view that, by providing regulatory certainty, it would potentially help UK businesses and deliver consumer and environmental benefits if we were to introduce similar requirements across the whole of the UK. We therefore launched a call for evidence at the same time as laying this instrument in the House.

We expect this instrument to bring consumer and environmental benefits in Northern Ireland. It also ensures our compliance with international law, which facilitates Northern Ireland’s continued dual access to the UK internal market and the EU single market. I am pleased to commend these draft regulations to the Committee. I beg to move.

[Lord Sandhurst (Con)]

My Lords, I thank the Minister for her helpful explanation. This is an important legislative instrument to regulate electronic devices in Northern Ireland. It implements the common charger directive, which in turn amends the existing radio equipment directive 2014/53/EU. The purpose now is to standardise the charging solutions for electronic devices, ensuring that they use a common USB-C charging solution. It aims to improve consumer convenience, reduce electronic waste and streamline the tech ecosystem across the EU and Northern Ireland.

At face value, the intention behind these changes should benefit consumers by simplifying charging and reducing the environmental impact of electronic waste, but the question remains: what will be the effect on UK businesses, particularly small and medium-sized enterprises, of complying with them? The Government assert that these changes will support innovation and enhance consumer choice. That will be good if it is the effect but the impact on businesses, particularly smaller ones, must be carefully considered. What will be the impact on production costs in particular, and thence on competition?

The Government have announced that they intend to include provisions in the Product Regulation and Metrology Bill to allow Ministers to amend the Radio Equipment Regulations 2017 to a similar end. It is crucial that the findings of the Government’s call for evidence on radio equipment, which began at the beginning of October, are published before any further action is taken in this jurisdiction. The Government must ensure that any regulatory framework proposed is evidence-based.

In considering whether these common charger regulations should be rolled out further across the United Kingdom, it is essential first to assess the impact on businesses, particularly SMEs. Costs related to product redesign, new testing requirements and potential delays in getting products to market could harm competition. We must first be confident that the benefits of this charging standardisation outweigh any burdens placed on manufacturers in this country.

Furthermore, the regulations introduce stricter penalties for businesses that fail to comply with the new rules. These include possible imprisonment. The exact terms of these penalties have not yet been fully clarified. Given the scope of the changes and the potential for confusion about what constitutes full compliance, the Government must first ensure that the enforcement mechanisms are clear in order to ensure fairness.

--- Later in debate ---

[Lord Morrow (DUP)]

My Lords, I agree entirely with what my two colleagues said. However, can the Minister give us the commencement dates, please? I think she said this but I missed it; I am not sure whether she said 2025 or 2026.

We are also told that the Northern Ireland Assembly will have a vote, albeit a type of vote that has not happened in Northern Ireland for over 50 years, because we do not do majoritarianism any longer in Northern Ireland. That is not the way it is done, but it is very clear that the process is that it will be a majority vote. That is a complete departure from what the Belfast agreement says on how Northern Ireland will proceed and go forward.

If this measure comes into force before there is a vote in the Northern Ireland Assembly, will it just be another example of saying, “You folk over there, you don’t really count. We’re not too much interested in democracy; we’re just doing this because of an agreement with Europe”? We were told that Northern Ireland’s position within the United Kingdom would be decided by the people of Northern Ireland. I suspect that, with all those decisions, whether they are being done by statutory instruments or not, this is a substitute for a proper Bill and a proper debate. This is all coming through piecemeal.

To be very fair and honest, I do not so much blame the present Government for this, although they are now the Government and have the authority and power to make legislation and change things. However, I would be grateful if the Minister would go over those points again. I accept that she may already have said it, but I hope that she will indulge me.

[Baroness Jones of Whitchurch (Lab)]

My Lords, I thank noble Lords for their consideration of this instrument, and for their excellent questions and contributions to this debate. This instrument will implement common charger measures in Northern Ireland but, in practice, as I hope that I explained in my opening statement, it will have a very limited impact, because the USB-C has effectively become the industry default, not only across Europe but, increasingly, across the world. We consider that similar measures introduced across the UK would potentially help to deliver business benefits and environmental and consumer savings.

To pick up on a few of the questions that have been raised, I thank the noble Lord, Lord Sandhurst, for his comments about the consumer and environmental benefits. That is a very strong point. All too often, we find that we are forced to buy another charger, even though we already have one, because they all come as a package. Like most people, we end up with an awful lot of chargers lying around the house that no longer charge anything, and we do not know what to do with them and it is all very frustrating. The fact that these are now being streamlined into one standard benefits consumers and, as the noble Lord said, will cut down on environmental waste, which has to be a good thing.

The noble Lord asked that, when we do the call for evidence for the UK, we make sure that it is evidence based. He makes an important point there. We do not want to rush this; we want to make sure that we get it right.

We judge that the measure will not have a huge impact on small businesses. The producers of this equipment are mainly the big multinationals, so the cost to small and micro-businesses will be very small.

The noble Lord, Lord Browne, made the point that chargers should be safe. I absolutely agree with that; we all know of the awful cases where these materials are misused or mis-sold, causing fires. As we know, my noble friend Lord Leong is taking the product safety Bill through the Lords, and it will address some of those safety issues.

I was asked whether the measure would apply to the whole of the UK. We hope that it will apply to Northern Ireland and the rest of the UK. That is what our call for evidence is about. Although the timeframe is slightly different, we hope that this will happen to everybody across the board; there will not be a distinction between Northern Ireland and the rest of the UK. If things go to plan—and I think that businesses will support this—we will have a standardised process across the UK that uses the USB-C, a standardised thing that we will all use. It is a standard system and most companies are already producing this equipment to that standard; we are not trying to impose something different on Northern Ireland from what will happen everywhere else. To my mind, that is a bit of a no-brainer, although I understand the concerns of colleagues in Northern Ireland. But we will be catching up with you, rather than the other way around—we will catch up with you very soon, I hope.

The noble Lord, Lord Morrow, asked about commencement dates. For portable electronic equipment the date is December 2024 and, for laptops, it is April 2026, so there is a fairly tight timescale for portable equipment to bring us in line with the EU. But as I say, Northern Ireland is the forerunner of what will happen anyway; it is increasingly standard throughout the world, and I hope that you will have nothing to fear from that. I hope that I have persuaded noble Lords—maybe I have not, but there are huge consumer benefits to this move. I do not think that businesses feel any concern about this measure, as they are increasingly beginning to produce equipment that meets these standards. This will be the new standard and we have to make sure that we grow it in the right way. I hope that I have persuaded noble Lords on this issue, and am therefore pleased to commend the SI to the Committee.

Motion agreed.

Generative AI: Intellectual Property Rights

Baroness Jones of Whitchurch Excerpts

Monday 11th November 2024 Lords Chamber

[The Parliamentary Under-Secretary of State, Department for Business and Trade and Department for Science, Information and Technology (Baroness Jones of Whitchurch) (Lab)]

My Lords, the AI and creative sectors are both essential to our mission to grow the UK economy. Our goal is to find the right balance between fostering innovation in AI while ensuring protection for creators and our vibrant creative industries. This is an important but complex area and we are very aware of the need to resolve the issues. We are working with stakeholders to understand their views and will set out our next steps soon.

[Lord Clement-Jones (LD)]

My Lords, I thank the Minister for that reply, but the Prime Minister, in a recent letter to the News Media Association, said:

“We recognise the basic principle that publishers should have control over and seek payment for their work, including when thinking about the role of AI”.


Will the Minister therefore agree with the House of Lords Communications and Digital Committee and affirm the rights of copyright owners in relation to their content used for training purposes on large language models? Will she rule out any widening of the text and data-mining exception and include in any future AI legislation a duty on developers to keep records of the material and data used to train their AI models?

[Baroness Jones of Whitchurch (Lab)]

My Lords, I pay tribute to the Lords committee that has considered this issue. We are keen to make progress in this area but it is important that we get it right. The previous Government had this on their table for a long time and were not able to resolve it. The Intellectual Property Office, DSIT and DCMS are working together to try to find a way forward that will provide a solution for creative media and the AI sectors. Ministers—my colleagues Chris Bryant and Feryal Clark—held round tables with representatives of the creative industries and the AI sector recently, and we are looking at how we can take this forward to resolve the many issues and questions that the noble Lord has quite rightly posed for me today.

[The Earl of Devon (CB)]

My Lords, in the absence of legislation or policy it is left to the courts to wrestle with whether the training of large language models infringes copyright. For over two years now, cases have been progressing in the US, in Europe and in the UK. A German first-instance decision recently found in favour of the machines—it will be appealed. Noting my interests as an IP litigator, do the Government believe, as I do, that English common law is capable of resolving this tricky issue?

[Baroness Jones of Whitchurch (Lab)]

My Lords, the Government are clear that copyright law must be respected when content is used to train AI models. If copies are made of protected work, licences must be required from the copyright owner unless a specific copyright exception applies. The problem is that the law does not yet apply equally to generative AI models, and that is the issue we are grappling with. Our view is that this should not necessarily be left to the law; unfortunately, it takes a long time for these legal cases to be resolved. We are trying to find a way forward that will be fair to everybody but that does not require the long legislative process that I know the noble Earl is all too aware of.

[Lord Holmes of Richmond (Con)]

My Lords, I declare my technology interests as set out in the register. Does the Minister agree that this is not just a question of fairness? We must have a respected, remunerated, consented, dynamic licensing market for IP and copyrighted works for both the benefit of IP and creatives and for a flourishing AI market in the UK.

[Baroness Jones of Whitchurch (Lab)]

The noble Lord is quite right: we have to find a way forward that reflects the importance of both these sectors to our economy. The creative industries are one of the UK’s most powerful economic activities, worth £124 billion in GVA at the moment, so they are hugely important. We know that we have to respect the creative sector and the journalists working in it, but equally, we know that the future will be about an enhanced AI system. More and more businesses in the UK are now using AI, so that is the way forward and we have to find a way through this, but there is not a simple answer. I assure noble Lords that my colleagues, particularly Chris Bryant and Feryal Clark, are very aware of this issue. It has to be resolved but we would just ask for a little bit more space to allow us to make some progress.

[Lord Spellar (Lab)]

My Lords, the Minister rightly referenced the importance of the cultural sector not only to our national life but particularly to our economy. Does not the music sector, in particular, require a pipeline of talent and the protection, therefore, of the original work to enable people to develop their skills but also to make a living? Should this not be a crucial part of any such policy?

[Baroness Jones of Whitchurch (Lab)]

My noble friend makes a very good point, and I can assure him that my colleague Chris Bryant is very aware of this; he will know of his passion for this issue. We are working on finding a way forward, and I can assure my noble friend that no stone will remain unturned as we try to do so. I hope to come back with a further progress report in the very near future.

[Noble Lords]

My Lords—

[Baroness Stowell of Beeston (Con)]

I am very grateful to the noble Lord. Copyright clearly affects a lot of different sectors, but given the value of real-time news to the AI platforms, particularly in the production of services and products that they offer to consumers, what steps are the Government taking to ensure that there is a mutually beneficial deal between the platforms and news organisations, so that we can safeguard the content that will be so important to the continuing advancement of this technology?

[Baroness Jones of Whitchurch (Lab)]

The noble Baroness will know that there was an attempt to come to a voluntary agreement on this under the previous Government that would have been a way forward for both sectors. Unfortunately, that voluntary agreement did not work out, so the ball has bounced back into our court. The noble Baroness is absolutely right about journalism: if we do not have a vibrant journalistic bedrock for this society, we do not really have a democratic society; we need to know what is going on in the UK and the world. The noble Baroness is right that we need to protect journalists: we need to ensure that their work is rewarded and paid in the right way. We are working on this. I am sorry that I am beginning to sound a bit like a stuck record, but I assure noble Lords that we are working at pace to try to resolve these issues.

[Viscount Colville of Culross (CB)]

My Lords, many creators sold their IP rights to big publishers before the advent of large language models. Since then, those publishers have been exploiting creators’ work for the training of large language models and the creation of new AI performances, but they have failed to recompense the original creators. Does the Minister think that creators’ performance and moral rights should be updated in the face of the new use by AI of their work?

[Baroness Jones of Whitchurch (Lab)]

That is exactly what we are trying to achieve. Creatives need to be properly respected and rewarded for their activities. We need to make sure that when scraping and web-crawling takes place, there is transparency about that and the originators of the material are properly recognised and rewarded.

[Lord Markham (Con)]

My Lords, as the Minister knows, AI model training and associated copyright infringement can occur anywhere in the world, effectively offshoring copyright infringement. So while we welcome the Minister for AI’s statement that the Government will end uncertainty around the use of copyright content for AI, I am afraid I have another tricky question to add. How do we intend to do that in the space of protecting UK content from international offshoring?

[Baroness Jones of Whitchurch (Lab)]

The noble Lord is quite right: not only is our material used internationally, but UK-based AI sites are using internationally created material. So this is an international problem—we cannot resolve it just within the UK. We are working closely with international partners, and it is a shared priority for Governments across the world. The Intellectual Property Office is engaging with international partners and other offices, including the World Intellectual Property Organization, to try to advance discussions on this issue. As the noble Lord said, it is an important international issue. We cannot resolve it on our own.

Communications Act 2003 (Disclosure of Information) Order 2024

Baroness Jones of Whitchurch Excerpts

Wednesday 30th October 2024 Lords Chamber

Moved by

[Baroness Jones of Whitchurch]

That the draft Order and Regulations laid before the House on 9 and 12 September be approved.

Considered in Grand Committee on 28 October.

Motions agreed.

Social Media: Catfishing

Baroness Jones of Whitchurch Excerpts

Wednesday 30th October 2024 Lords Chamber

[Baroness Ritchie of Downpatrick]

To ask His Majesty’s Government what steps they are taking to address ‘catfishing’ on social media platforms.

[The Parliamentary Under-Secretary of State, Department for Business and Trade and Department for Science, Information and Technology (Baroness Jones of Whitchurch) (Lab)]

My Lords, the impact of catfishing can be devastating for victims, but the online world is not a lawless environment. Already, if you commit a crime online, you will face the consequences. Social media companies also have a clear responsibility to keep people safe on their platforms. The Online Safety Act will provide additional protections requiring platforms to take action to protect users from illegal content and activity that is harmful to children online.

[Baroness Ritchie of Downpatrick (Lab)]

My Lords, I thank my noble friend for her Answer. Only last Friday in the High Court in Belfast, a man from Northern Ireland was sentenced for the manslaughter of a child from North America he had groomed and targeted. As a result of that, she took her own life. There were many other examples of his online bullying, amounting to over 3,000. Therefore, I would like some assurances from my noble friend. What steps are the Government taking to sanction social media platforms such as Meta, which fail properly to monitor contact and access to adult sites by children under 16, in the context of the Online Safety Act? Will any new legislation or statutory regulations be required to update the legislation in respect of last week’s legal matter?

--- Later in debate ---

[Baroness Jones of Whitchurch (Lab)]

My Lords, I express my deepest sympathy to the family of the victims of this appalling case. In addition to the existing criminal laws, social media companies already have a duty to keep people safe from these abhorrent crimes on their platforms. The Government obviously share the noble Baroness’s commitment to keeping children safe. When the Online Safety Act is fully implemented, it will require user-to-user services to take steps to protect children from accessing that sort of harmful content. Ofcom will have robust enforcement powers to use against companies that fail to fulfil their duties, and responsibilities to introduce age-appropriate measures via the platforms. At the moment, our priority has to be to implement that Act so that those who use social media, particularly children, can feel safe. But, as I have said before at the Dispatch Box, we are keeping this under review in case any further legislation is required.

[Baroness Foster of Aghadrumsee (Non-Afl)]

My Lords, I am sure the Minister is aware of the work of Jim Gamble, the founding CEO of CEOP. He has proposed an innovative five-point plan to deal with cases such as that mentioned by the noble Baroness, Lady Ritchie. Will the Minister consider meeting Mr Gamble to discuss his innovative five-point plan? Can she also tell the House about the investment made in classrooms to engender digital proficiency among our young people?

[Baroness Jones of Whitchurch (Lab)]

I am of course happy to meet the gentleman the noble Baroness mentioned. We are open to all suggestions about how we can improve this legislation. None of this is 100% secure—we absolutely know that—and we know that, as technology is moving forward, we need to move forward too. It seems that the criminals are always one step ahead of us, so we need to catch up and make sure that we take all the appropriate action we can with the new technology that is being used. The noble Baroness also made an important point about education. Ofcom already has an important media literacy strategy that it is rolling out, and that includes education in schools and with young people. But we all have a responsibility—every parent has a responsibility to say to their child, “What you see on your social media platform may not be what you think you’re seeing”. We need to make sure that they are made aware of those dangers.

[Baroness Brinton (LD)]

My Lords, Naomi Long, the Justice Minister in Northern Ireland, has said that Westminster’s legislation on online crimes, including catfishing, is not strong enough, particularly on unverified social media accounts. Worse, 87% of those who report online crime to the police get an immediate response of “no further action”. What will the Government do to ensure that police forces and the CPS have the right information to make sure that that appalling figure is reduced?

[Baroness Jones of Whitchurch (Lab)]

We are working closely with the Home Office and the Ministry of Justice on the implementation of the existing legislation because, as I say, a number of pieces of legislation are already on the statute book. Some capture fraud offences —I note the Fraud Act—and others capture online frauds, including romance frauds on dating apps and so on, which, sadly, are all too widespread. Those actions are being taken. We are talking about this to the Home Office, which is also on a learning curve in relation to how it can tackle these issues more robustly. We are carrying on our dialogue with it.

[Lord Vaux of Harrowden (CB)]

My Lords, the noble Baroness mentioned romance fraud and other frauds. Approximately 70% of fraud arises on social media platforms, particularly Meta, yet the reimbursement for fraud is all placed on the banks, and no liability applies to the social media platforms. What plans do the Government have to make social media platforms pay for their share of the frauds in order to incentivise them to do something to stop them?

[Baroness Jones of Whitchurch (Lab)]

We are acutely aware of this issue. We know that there is a live ongoing argument about it and we are talking to our colleagues across government to find a way through, but we have not come to a settled view yet.

[Viscount Camrose (Con)]

My Lords, catfishing is, of course, one of the misuses of technology in respect of which AI is rapidly enhancing both the attack and the defence. Does the Minister agree that the most effective, adaptive and future-proof defence against catfishing is actually personal awareness and resilience? If so, can the Minister provide a bit more of an update on the progress made in implementing this crucial media literacy strategy, which will be such an important part of defending us all against these attacks in future?

[Baroness Jones of Whitchurch (Lab)]

Ofcom published its latest vision of the media literacy strategy just a couple of months ago, so its implementation is very much in its infancy. The Government very much support it and we will work with Ofcom very closely to roll it out. So Ofcom has a comprehensive media literacy strategy on these issues, but as we all know, schools have to play their part as well: it has to be part of the curriculum. We need to make sure that children are kept safe in that way.

The noble Viscount referred to AI. The rules we have—the Online Safety Act and so on—are tech-neutral in the sense that, even if an image is AI generated, it would still fall foul of that Act; it does not matter whether it is real or someone has created it. Also, action should be taken by the social media companies to take down those images.

[Lord Stevenson of Balmacara (Lab)]

My Lords, as a survivor of the seven-year long period during which the Online Safety Act was developed, I have to confess that I do not think we ever came across the word “catfishing”. In a quick moment, I looked it up on Google—and, of course, it has not even reached Google yet. It talks about those who wish to catch fish, rather than catfishing. I make a joke, but this is a serious issue and the Minister is trying to address it very fairly. The problem is that the technology is so efficient and quick that the offences are moving ahead of our ability as legislators to make the necessary laws. The key element of the Online Safety Act is that that which is illegal offline is also illegal online. When will we see the necessary offence on the statute book?

[Baroness Jones of Whitchurch (Lab)]

My noble friend is quite right about the expression “catfishing”. I had to check the definition before I came here today, and for anyone who wants that clarification, it is when someone sets up a fake online identity and uses it to trick and control others. It covers a whole range of offences, including scamming people out of money, blackmailing them or trying to harm them in another way.

On my noble friend’s general point, yes, we are of course looking at how we can match online safety with offline safety; that is part of ongoing work. But for the time being, as I have said several times from the Dispatch Box, rolling out the Online Safety Act is the crucial thing. We are within touching distance, and it will make a huge difference when it is fully implemented. That is our priority at this time.