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.

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.

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.

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.

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.

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.

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.

Whistleblowers

Baroness Jones of Whitchurch Excerpts

Monday 28th October 2024 Lords Chamber

[Baroness Kramer]

To ask His Majesty’s Government what assessment they have made of the current capacity and efficacy of the law to provide confidentiality for whistleblowers and to protect them from retaliation.

[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, whistleblowers play an important role in shining a light on wrongdoing in public life. They need confidence that they will be taken seriously and will have legal recourse if subjected to detriment or dismissal for making a protected disclosure. There are already day-one rights for workers, but we intend to strengthen whistleblowers’ protections.

[Baroness Kramer (LD)]

My Lords, whistleblowers who are defined as workers, and therefore protected by the existing law, still fail to win 96% of their cases in employment tribunals because of evidentiary requirements. They are financially ruined by cases that can drag on for years and, even if they win, their careers are destroyed because the tribunal does not acknowledge blacklisting. Will the Minister commit to an office of the whistleblower to ensure genuine protection for whistleblowers and proper investigation of tip-offs—to avoid a repeat of Horizon Post Office, Grenfell, financial mis-selling, Letby and Al Fayed, to name but a few?

[Baroness Jones of Whitchurch (Lab)]

The noble Baroness is absolutely right to raise those cases. We all take those issues very seriously, and we have debated them here in the Chamber on many occasions. There should not be a need for anybody to whistleblow; people should have their concerns taken seriously in the first place. This Government are absolutely determined, from the top, to make sure that people who have concerns at the workplace are able to raise them without the detriment to which the noble Baroness refers. With regard to an office for the whistleblower, there are a number of ideas around this. We are looking at the role and remit that such a body could have. There will be a need to look at the cost, role and function of a potential new body, but we are looking at all the ways we can ensure that whistleblowers are protected at the workplace, as they should be.

[Lord Browne of Ladyton (Lab)]

My Lords, alongside the essential statutory protection of whistleblowers, the current director of the Serious Fraud Office has repeatedly emphasised the importance of offering incentives to the whistleblowers. My noble friend will be aware that my right honourable friend the Foreign Secretary, in May, when he was talking about a crackdown on money laundering and corruption, stated that a Labour Government would

“launch a new whistleblower reward scheme to incentivise and encourage sources to step forward”.

Can my noble friend the Minister outline where the Government’s thinking is on balancing the need for these incentives, as well as the existing legal protection?

[Baroness Jones of Whitchurch (Lab)]

My Lords, we are continuing to look at the whistleblowing regulations. We understand that there may be a need to review them further; a review was carried out by the previous Government. But I reiterate the point I made earlier: there should not be a need for whistleblowers to come forward; they should be protected in the workplace to come forward with their concerns. This requires leadership from the top in every department to make sure that those concerns are heard and acted upon properly. That is what we intend to do across government—make sure that people do not have to resort to whistleblowing to make sure the terrible incidents they are shining a light on finally come to light.

[Lord Cromwell (CB)]

My Lords, non-disclosure agreements are protective of the confidentiality of wrongdoers. They are frequently employed against whistleblowers. Is the Minister confident that non-disclosure agreements that are not consistent with the public interest, including those concealing criminal activity, are and will be non-enforceable in our courts? If she is not confident of that, will the Government bring forward appropriate legislation?

[Baroness Jones of Whitchurch (Lab)]

The noble Lord is right, but we have already noted the concerns about the misuse of non-disclosure agreements. We share his concern, because they are being used to silence whistleblowers and cover up sexual harassment and discrimination. I stress that there are existing legal limits to how NDAs can be used in an employment context, which means they are void and unenforceable in certain circumstances. The use of NDAs is not something we would support and, if there were ways of limiting it, we would do so.

[Baroness Jones of Moulsecoomb (GP)]

My Lords, is it possible to ensure with legislation that any company that victimises whistleblowers or trade union members could be banned from taking any public sector work in future?

--- Later in debate ---

[Baroness Jones of Whitchurch (Lab)]

We are looking at the way we give future government contracts; that is a huge piece of work that is taking place. I will certainly take the noble Baroness’s point on board and see whether that has a role. We want to make sure that the allocation of public funding to organisations is done on a fair and transparent basis.

[Lord Johnson of Lainston (Con)]

My Lords, this is not just a situation facing the private sector; the public sector also has significant issues of whistleblowing. This year the Secretary of State for Health and Social Care pledged before the election—I am aware that plenty of pledges were made before the election, so the Minister may be confused about this—that NHS managers who silence and scapegoat

“will never work in the NHS again”.

Has that goal been achieved? If not, when do the Government intend to achieve it?

[Baroness Jones of Whitchurch (Lab)]

As I say, we are absolutely committed to lead from the top on this issue. That includes in the health service where, as the noble Lord said, there have been some terrible examples of professional staff being discriminated against and losing their jobs. I am sure that the Secretary of State for Health is working on this issue, and I hope to be able to come back to the House in due course and update noble Lords on the progress being made.

[Lord Berkeley (Lab)]

My Lords, last week I chaired a meeting upstairs with about two dozen whistleblowers, who each spoke about their experiences in the public sector and the private sector and their appalling treatment from their employers. Many of them lost their homes, partners and jobs, and there was no fair trial or hearing. Does my noble friend not agree that more needs to be done? Will she look carefully at the Bill promoted by the noble Baroness, Lady Kramer, to set up a whistleblowing office so that everybody knows where to go? Otherwise, we are never going to have a one-stop shop that is safe for whistleblowers, which is surely what we need.

[Baroness Jones of Whitchurch (Lab)]

As I say, we are looking at the calls for an office for the whistleblower. It is a proposal that I know attracts a great deal of support. We are considering other ideas as well, but we want to make sure that all the individuals my noble friend talks about have somewhere they can go and have their complaints taken seriously. We understand that. That requires changes in process and in procedure, but ultimately in culture so that these individuals are taken seriously. We will drive that forward and we will require employers to take these issues seriously, but for the moment we are still working on whether we need a specific office for the whistleblower.

[Lord Shipley (LD)]

My Lords, on 29 July I submitted a Written Question to His Majesty’s Government to ask

“what payments they have made to whistleblowers in the NHS in each of the last five years (1) as part of non-disclosure agreements reached through out-of-court settlements, and (2) as the result of a decision by an employment tribunal”.

I was very surprised by this part of the reply on 6 August:

“The Department does not hold the information requested. National Health Service organisations are independent employers and have their own policies and procedures in resolving workplace disputes, which should be aligned to current employment law and good human resources practice”.


Does the Minister agree that such an approach does not meet the need for public accountability and public audit, and that the Government and the public should know what sums are being spent, including legal costs?

[Baroness Jones of Whitchurch (Lab)]

The noble Lord makes an interesting point. I will take that back to the Secretary of State and discuss it with him further.

[Lord Patel of Bradford (Non-Afl)]

My Lords, if we go down the road of an office of the whistleblower, which is an excellent idea, could the Minister take back that we need to put something in legislation to protect whistleblowers who are attacked in a vile way on social media, to the point of almost committing suicide? We need really strong protections.

[Baroness Jones of Whitchurch (Lab)]

My noble friend makes an important point. I cannot emphasise enough how important these things are. We need to protect whistleblowers and make sure that their concerns are taken seriously, and we need to create a culture in which their views are respected rather than denigrated.

Communications Act 2003 (Disclosure of Information) Order 2024

Baroness Jones of Whitchurch Excerpts

Monday 28th October 2024 Grand Committee

Moved by

[Baroness Jones of Whitchurch]

That the Grand Committee do consider the Communications Act 2003 (Disclosure of Information) 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 was laid before the House on 9 September this year. The Online Safety Act lays the foundations of strong protection for children and adults online. I am grateful to noble Lords for their continued interest in the Online Safety Act and its implementation. It is critical that the Act is made fully operational as soon as possible, and the Government are committed to ensuring that its protections are delivered as soon as possible. This statutory instrument will further support the implementation of the Act by Ofcom.

This statutory instrument concerns Ofcom’s ability to share business information with Ministers for the purpose of fulfilling functions under the Online Safety Act 2023, under Section 393 of the Communications Act 2003. This corrects an oversight in the original Online Safety Act that was identified following its passage.

Section 393 of the Communications Act 2003 contains a general restriction on Ofcom disclosing information about particular businesses without consent from the affected businesses, but with exemptions, including where this facilitates Ofcom in carrying out its regulatory functions and facilitates other specified persons in carrying out specific functions. However, this section does not currently enable Ofcom to share information with Ministers for the purpose of fulfilling functions under the Online Safety Act. This means that, were Ofcom to disclose information about businesses to the Secretary of State, it may be in breach of the law.

It is important that a gateway exists for sharing information for these purposes so that the Secretary of State can carry out functions under the Online Safety Act, such as setting the fee threshold for the online safety regime in 2025 or carrying out post-implementation reviews of the Act required under Section 178. This statutory instrument will therefore amend the Communications Act 2003 to allow Ofcom to share information with the Secretary of State and other Ministers, strictly for the purpose of fulfilling functions under the Online Safety Act 2023.

There are strong legislative safeguards and limitations on the disclosure of this information, and Ofcom is experienced in handling confidential and sensitive information obtained from the services it regulates. Ofcom must comply with UK data protection law and would need to show that the processing of any personal data was necessary for a lawful purpose. As a public body, Ofcom is also required to act compatibly with the Article 8 right of privacy under the European Convention on Human Rights.

We will therefore continue to review the Online Safety Act, so that Ofcom is able to support the delivery of functions under the Act where it is appropriate. That is a brief but detailed summary of why this instrument is necessary. I should stress that it contains a technical amendment to deal with a very small legal aspect. Nevertheless, I will be interested to hear noble Lords’ comments on the SI. I beg to move.

[Lord Clement-Jones (LD)]

My Lords, I thank the Minister for her introduction and for explaining the essence of the SI. We all have a bit of pride of creation in the Online Safety Act; there are one or two of us around today who clearly have a continuing interest in it. This is one of the smaller outcomes of the Act and, as the Minister says, it is an essentially an oversight. I would say that a tidying-up operation is involved here. It is rather gratifying to see that the Communications Act still has such importance, 21 years after it was passed. It is somewhat extraordinary for legislation to be invoked after that period of time in an area such as communications, which is so fast-moving.

My question for the Minister is whether the examples that she gave or which were contained in the Explanatory Memorandum, regarding the need for information to be obtained by the Secretary of State in respect of Section 178, on reviewing the regulatory framework, and Section 86, on the threshold for payment of fees, are exclusive. Are there other aspects of the Online Safety Act where the Secretary of State requires that legislation?

We are always wary of the powers given to Secretaries of State, as the noble Viscount, Lord Camrose, will probably remember to his cost. But at every point, the tyres on legislation need to be kicked to make sure that the Secretary of State has just the powers that they need—and that we do not go further than we need to or have a skeleton Bill, et cetera—so the usual mantra will apply: we want to make sure that the Secretary of State’s powers are proportionate.

It would be very useful to hear from the Minister what other powers are involved. Is it quite a number, were these two just the most plausible or are there six other sets of powers which might not be so attractive? That is the only caveat I would make in this respect.

--- Later in debate ---

[Viscount Camrose (Con)]

My Lords, I thank the Minister for setting out this instrument so clearly. It certainly seems to make the necessary relatively simple adjustments to fill an important gap that has been identified. Although I have some questions, I will keep my remarks fairly brief.

I will reflect on the growing importance of both the Online Safety Act and the duty we have placed on Ofcom’s shoulders. The points made by the noble Lord, Lord Clement-Jones, about the long-standing consequential nature of the creation of Ofcom and the Communications Act were well made in this respect. The necessary complexity and scope of the work of Ofcom, as our online regulator, has far outgrown what I imagine was foreseeable at the time of its creation. We have given it the tasks of developing and enforcing safety standards, as well as issuing guidance and codes of practice that digital services must follow to comply with the Act. Its role includes risk assessment, compliance, monitoring and enforcement, which can of course include issuing fines or mandating changes to how services operate. Its regulatory powers now allow it to respond to emerging online risks, helping to ensure that user-protection measures keep pace with changes in the digital landscape.

In recognising the daily growing risk of online dangers and the consequent burdens on Ofcom, we of course support any measures that bring clarity and simplicity. If left unaddressed, the identified gap here clearly could lead to regulatory inefficiencies and delays in crucial processes that depend on accurate and up-to-date information. For example, setting appropriate fee thresholds for regulated entities requires detailed knowledge of platform compliance and associated risks, which would be challenging to achieve without full data access. During post-implementation reviews, a lack of access to necessary business information could hamper the ability to assess whether the Act is effectively achieving its safety objectives or whether adjustments are needed.

That said, I have some questions, and I hope that, when she rises, the Minister will set out the Government’s thinking on them. My first question very much picks up on the point made—much better than I did—by the noble Lord, Lord Stevenson of Balmacara. It is important to ensure that this instrument does not grant unrestricted access to business information but, rather, limits sharing to specific instances where it is genuinely necessary for the Secretary of State to fulfil their duties under the Act. How will the Government ensure this?

Secondly, safeguards, such as data protection laws and confidentiality obligations under the Communications Act 2003, must be in place to guarantee that any shared information is handled responsibly and securely. Do the Government believe that sufficient safeguards are already in place?

Thirdly, in an environment of rapid technology change, how do the Government plan to keep online safety regulation resilient and adaptive? I look forward to hearing the Government’s views on these questions, but, as I say, we completely welcome any measure that increases clarity and simplicity and makes it easier for Ofcom to be effective.

[Baroness Jones of Whitchurch (Lab)]

I thank noble Lords for their valuable contributions to this debate. It goes without saying that the Government are committed to the effective implementation of the Online Safety Act. It is critical that we remove any barriers to that, as we are doing with this statutory instrument.

As noble Lords said—the noble Viscount, Lord Camrose, stressed this—the Online Safety Act has taken on a growing significance in the breadth and depth of its reach. It is very much seen as an important vehicle for delivering the change that the whole of society wants now. It is important that we get this piece of legislation right. For that purpose, this statutory instrument will ensure that Ofcom can co-operate and share online safety information with the Secretary of State where it is appropriate to do so, as was intended during the Act’s development.

On specific questions, all three noble Lords who spoke asked whether the examples given were exclusive or whether there are other areas where powers might be given to the Secretary of State. The examples given are the two areas that are integral to implementation. We have not at this stage identified any further areas. The instrument would change to allow sharing only for the purposes of fulfilling the Secretary of State’s functions under the Online Safety Act—it does not go any broader than that. I think that answers the question asked by the noble Viscount, Lord Camrose, about whether this meant unlimited access—I assure him that that is not the purpose of this SI.

My noble friend Lord Stevenson asked whether this relates only to the powers under the OSA. Yes, the instrument allows Ofcom to share information it has collected from businesses only for the purposes of fulfilling the Secretary of State’s functions under the Act.

On the question of devolution, the powers of Scottish, Northern Ireland and Welsh Ministers primarily relate to the power to define the educational establishments for the purpose of Schedule 1 exemptions. There are also some consultation provisions where these Ministers must be consulted, but that is the limit of the powers that those Ministers would have.

I am conscious that I have not answered all the questions asked by the noble Viscount, Lord Camrose, because I could not write that quickly—but I assure him that my officials have made a note of them and, if I have not covered those issues, I will write to him.

I hope that noble Lords agree with me on the importance of implementing the Online Safety Act and ensuring that it can become fully operational as soon as possible. I commend these regulations to the Committee.

Motion agreed.

Online Safety Act 2023 (Priority Offences) (Amendment) Regulations 2024

Baroness Jones of Whitchurch Excerpts

Monday 28th October 2024 Grand Committee

Moved by

[Baroness Jones of Whitchurch]

That the Grand Committee do consider the Online Safety Act 2023 (Priority Offences) (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, these regulations were laid before the House on 12 September this year. The Government stated in their manifesto that they would

“use every government tool available to target perpetrators and address the root causes of abuse and violence”

in order to achieve their

“landmark mission to halve violence against women and girls in a decade”.

Through this statutory instrument, we are broadening online platforms’ and search engines’ responsibilities for tackling intimate image abuse under the Online Safety Act. More than one in three women have experienced abuse online. The rise in intimate image abuse is not only devastating for victims but also spreads misogyny on social media that can develop into potentially dangerous relationships offline. One in 14 adults in England and Wales has experienced threats to share intimate images, rising to one in seven young women aged 18 to 34.

It is crucial that we tackle these crimes from every angle, including online, and ensure that tech companies step up and play their part. That is why we are laying this statutory instrument. Through it, we will widen online platforms’ and search engines’ obligations to tackle intimate image abuse under the Online Safety Act. As noble Lords will know, the Act received Royal Assent on 26 October 2023. It places strong new duties on online user-to-user platforms and search services to protect their users from harm.

As part of this, the Act gives service providers new “illegal content duties”. Under these duties, online platforms need to assess the risk that their services will allow users to encounter illegal content or be

“used for the commission or facilitation of a priority offence”.

They then need to take steps to mitigate identified risks. These will include implementing safety-by-design measures to reduce risks and content moderation systems to remove illegal content where it appears.

The Online Safety Act sets out a list of priority offences for the purposes of providers’ illegal content duties. These offences reflect the most serious and prevalent online illegal content and activity. They are set out in schedules to the Act. Platforms will need to take additional steps to tackle these kinds of illegal activities under their illegal content duties.

The priority offences list currently includes certain intimate image abuse offences. Through this statutory instrument, we are adding new intimate image abuse offences to the priority list. This replaces an old intimate image abuse offence, which has now been repealed. These new offences are in the Sexual Offences Act 2003. They took effect earlier this year. The older offence was in the Criminal Justice and Courts Act 2015. The repealed offence covered sharing intimate images where the intent was to cause distress. The new offences are broader; they criminalise sharing intimate images without having a reasonable belief that the subject would consent to sharing the images. These offences include the sharing of manufactured or manipulated images, including so-called deepfakes.

Since these new offences are more expansive, adding them as priority offences means online platforms will be required to tackle more intimate image abuse on their services. This means that we are broadening the scope of what constitutes illegal intimate image content in the Online Safety Act. It also makes it clear that platforms’ priority illegal content duties extend to AI-generated deepfakes and other manufactured intimate images. This is because the new offences that we are adding explicitly cover this content.

As I have set out above, these changes affect the illegal content duties in the Online Safety Act. They will ensure that tech companies play their part in kicking this content off social media. These are just part of a range of wider protections coming into force next spring through the Online Safety Act that will mean that social media companies have to remove the most harmful illegal content, a lot of which disproportionately affects women and girls, such as through harassment and controlling or coercive behaviour.

Ofcom will set out the specific steps that providers can take to fulfil their illegal content duties for intimate image abuse and other illegal content in codes of practice and guidance documentation. It is currently producing this documentation. We anticipate that the new duties will start to be enforced from spring next year once Ofcom has issued these codes of practice and they have come into force. Providers will also need to have done their risk assessment for illegal content by then. We anticipate that Ofcom will recommend that providers should take action in a number of areas. These include content moderation, reporting and complaints procedures, and safety-by-design steps, such as testing their algorithm systems to see whether illegal content is being recommended to users. We are committed to working with Ofcom to get these protections in place as quickly as possible. We are focused on delivering.

Where companies are not removing and proactively stopping this vile material appearing on their platforms, Ofcom will have robust powers to take enforcement action against them. This includes imposing fines of up to £18 million or 10% of qualifying worldwide revenue, whichever is highest.

In conclusion, through this statutory instrument we are broadening providers’ duties for intimate image abuse content. Service providers will need to take proactive steps to search for, remove and limit people’s exposure to this harmful kind of illegal content, including where it has been manufactured or manipulated. I hope noble Lords will commend these further steps that we have taken that take the provisions in the Online Safety Act a useful further step forward. I commend these regulations to the Committee, and I beg to move.

[Lord Clement-Jones (LD)]

My Lords, I thank the Minister for her introduction. I endorse everything she said about intimate image abuse and the importance of legislation to make sure that the perpetrators are penalised and that social media outlets have additional duties under Schedule 7 for priority offences. I am absolutely on the same page as the Minister on this, and I very much welcome what she said. It is interesting that we are dealing with another 2003 Act that, again, is showing itself fit for purpose and able to be amended; perhaps there is some cause to take comfort from our legislative process.

I was interested to hear what the Minister said about the coverage of the offences introduced by the Online Safety Act. She considered that the sharing of sexually explicit material included deepfakes. There was a promise—the noble Viscount will remember it—that the Criminal Justice Bill, which was not passed in the end, would cover that element. It included intent, like the current offence—the one that has been incorporated into Schedule 7. The Private Member’s Bill of the noble Baroness, Lady Owen—I have it in my hand—explicitly introduces an offence that does not require intent, and I very much support that.

I do not believe that this is the last word to be said on the kinds of IIA offence that need to be incorporated as priority offences under Schedule 7. I would very much like to hear what the noble Baroness has to say about why we require intent when, quite frankly, the creation of these deepfakes requires activity that is clearly harmful. We clearly should make sure that the perpetrators are caught. Given the history of this, I am slightly surprised that the Government’s current interpretation of the new offence in the Online Safety Act includes deepfakes. It is gratifying, but the Government nevertheless need to go further.

--- Later in debate ---

[Viscount Camrose (Con)]

My Lords, I shall also start on a positive note and welcome the ongoing focus on online safety. We all aim to make this the safest country in the world in which to be online. The Online Safety Act is the cornerstone of how all of us will continue to pursue this crucial goal. The Act imposed clear legal responsibilities on social media platforms and tech companies, requiring them actively to monitor and manage the content they host. They are required swiftly to remove illegal content and to take proactive measures to prevent harmful material reaching minors. This reflects the deep commitment that we all share to safeguarding children from the dangers of cyberbullying, explicit content and other online threats.

We must also take particular account of the disproportionate harm that women and girls face online. The trends regarding the online abuse and exploitation that disproportionately affect female users are deeply concerning. Addressing these specific challenges is essential if we are to create a truly safe online environment for everyone.

With respect to the Government’s proposed approach to making sharing intimate images without consent a priority offence under the Online Safety Act, this initiative will require social media companies promptly to remove such content from their platforms. This aims to curb the rise in abuse that has been described as “intolerable”—I think rightly—by the Secretary of State. The intent behind this measure is to prevent generations becoming “desensitised” to the devastating effects of online abuse.

Although this appears to signal a strong stance against online harm, it raises the question of what this designation truly accomplishes in practical terms. I am grateful to the Minister for setting this out so clearly. I am not entirely sure that I altogether followed the differences between the old offences and the new ones. Sharing intimate images without consent is already illegal under current laws. Therefore, can we not say that the real issue lies in the absence not of legal provision but of effective enforcement of existing regulation? We have to ensure that any changes we make do not merely add layers of complexity but genuinely strengthen the protections available to victims and improve the responsiveness of platforms in removing harmful content.

With these thoughts in mind, I offer five questions. I apologise; the Minister is welcome to write as necessary, but I welcome her views whether now or in writing. First, why is it necessary to add the sharing of intimate images to the list of priority offences if such acts are already illegal under existing legislation and, specifically, what additional protections or outcomes are expected? The Minister gave some explanation of this, but I would welcome digging a little deeper into that.

Secondly, where consent is used as a defence against the charge of sharing intimate images, what are the Government’s thoughts on how to protect victims from intrusive cross-examination over details of their sexual history?

Thirdly, with respect to nudification technology, the previous Government argued that any photoreal image was covered by “intimate image abuse”—the noble Lord, Lord Clement-Jones, touched on this issue well. Is there any merit in looking at that again?

Fourthly, I am keen to hear the Government’s views on my noble friend Lady Owen’s Private Member’s Bill on nudification. We look forward to debating that in December.

Fifthly, and lastly, what role can or should parents and educators play in supporting the Act’s objectives? How will the Government engage these groups to promote online safety awareness?

[Baroness Jones of Whitchurch (Lab)]

My Lords, I thank noble Lords for their contributions to this debate. This is, as I think all noble Lords who have spoken recognise, a really important issue. It is important that we get this legislation right. We believe that updating the priority offences list with a new intimate image abuse offence is the correct, proportionate and evidence-led approach to tackle this type of content, and that it will provide stronger protections for online users. This update will bring us closer to achieving the commitment made in the Government’s manifesto to strengthening the protection for women and girls online.

I will try to cover all the questions asked. My noble friend Lord Stevenson and the noble Baroness, Lady Owen, asked whether we will review the Act and whether the Act is enough. Our immediate focus is on getting the Online Safety Act implemented quickly and effectively. It was designed to tackle illegal content and protect children; we want those protections in place as soon as possible. Having said that, it is right that the Government continually assess the law’s ability to keep up, especially when technology is moving so fast. We will of course look at how effective the protections are and build on the Online Safety Act, based on the evidence. However, our message to social media companies remains clear: “There is no need to wait. You can and should take immediate action to protect your users from these harms”.

The noble Baroness, Lady Owen, asked what further action we are taking against intimate abuse and about the taking, rather than sharing, of intimate images. We are committed to tackling the threat of violence against women and girls in all forms. We are considering what further legislative measures may be needed to strengthen the law on taking intimate images without consent and image abuse. This matter is very much on the Government’s agenda at the moment; I hope that we will be able to report some progress to the noble Baroness soon.

The noble Lord, Lord Clement-Jones, and the noble Baroness, Lady Owen, asked whether creating and making intimate image deepfakes will be an offence. The Government’s manifesto included a commitment to banning the creation of sexually explicit deepfakes. This is a priority for the Government. DSIT is working with the Home Office and the Ministry of Justice to identify the most appropriate legislative vehicle for ensuring that those who create these images without consent face the appropriate punishment. The Government are considering options in this space to protect women and girls from malicious uses of these technologies. The new sharing intimate images offence, which will be added to the OSA priority list through this SI, explicitly includes—for the first time—wholly synthetic manufactured images, such as deepfakes, so they will be tackled under the Online Safety Act.

The noble Baroness, Lady Owen, asked about the material that is already there and the ability to have a hash database to prevent those intimate images continually being circulated. We are aware that the technology exists. Strengthening the intimate image abuse priorities under the Act is a necessary first step to tackling this, but we expect Ofcom to consider this in its final draft illegal content codes and guidance and to give more information about both the codes of practice and the further measures that would need to be developed to address this issue.

Several noble Lords—the noble Viscount, Lord Camrose, the noble Lord, Lord Clement-Jones, and my noble friend Lord Stevenson—asked for more details on the new offences. As I tried to set out in my opening statement, the Online Safety Act repeals the offence of disclosing private sexual photographs and films with the intent to cause distress—this comes under Section 33 of the Criminal Justice and Courts Act 2015 and is commonly known as the revenge porn offence—and replaces it with four new offences.

First, there is a base offence of sharing an intimate image without consent, which carries a maximum penalty of six months’ imprisonment. Secondly, there are two specific-intent offences—the first is sharing an intimate image with intent to cause alarm, humiliation or distress; the second is sharing an intimate image for the purpose of obtaining sexual gratification—each of which carries a maximum penalty of two years’ imprisonment to reflect the more serious culpability of someone who acts without consent and with an additional malign intent. Lastly, there is an offence of threatening to share an intimate image, with a maximum penalty of two years’ imprisonment. This offence applies regardless of whether the image is shared.

These offences capture images that show, or appear to show, a person who is nude, partially nude, engaged in toileting or doing something sexual. These offences include the sharing of manufactured or manipulated images, which are referred to as deepfakes. This recognises that sharing intimate images without the consent of the person they show or appear to show is sufficiently wrongful or harmful to warrant criminalisation.

The noble Viscount, Lord Camrose, asked what is so different about these new offences compared to those in the Act. I stress that it is because they are being given priority status, which does not sound much but gives considerable extra powers under the Act. There will be new powers and new obligations on platforms. The key thing is that all those offences that already exist are being given priority status under the Online Safety Act. There are thousands of things that Ofcom could address, but this is now in the much smaller list of things that will place very specific obligations on the platforms. Ofcom will monitor this and, as I said earlier, companies can be fined huge sums of money if they do not act, so there is a huge obligation on them to follow through on the priority list.

I hope that I have answered all the questions and that noble Lords agree with me on the importance of updating the priority offences in the Online Safety Act. The noble Viscount, Lord Camrose, asked about parents and made an important point. This is not just about an Act, it is about everybody highlighting the fact that these activities are intolerable and offensive not just to the individuals concerned but to everybody in society, and parents have a responsibility, as we all do, to ensure that media literacy is at the height of the education we carry out formally in schools and informally within the home. The noble Viscount is absolutely right on that, and there is more that we could all do. I commend these regulations to the Committee.

Motion agreed.