Large Language Models and Generative AI (Communications and Digital Committee Report)

Baroness Stowell of Beeston Excerpts

Thursday 21st November 2024 Lords Chamber

Moved by

[Baroness Stowell of Beeston]

That this House takes note of the Report from the Communications and Digital Committee Large language models and generative AI (1st Report, Session 2023-24, HL Paper 54).

[Baroness Stowell of Beeston (Con)]

My Lords, it is a great honour to open a debate in your Lordships’ House but an even bigger one to chair one of its Select Committees. Indeed, it is a pleasure to work with colleagues from around the House as we investigate important areas of public policy, and our inquiry on large language models and generative AI was no exception.

Several committee members are here today, and I thank them and all my colleagues for their commitment and contribution to this work. We received, and were grateful for, specialist and expert advice from Professor Mike Wooldridge. We were also supported brilliantly, as ever, by our excellent committee team. I will not run through them all individually but I take this opportunity to make a special mention of our exceptional clerk, Daniel Schlappa. After three years with the Communications and Digital Select Committee, he has this week moved on to the Intelligence and Security Joint Committee. We all owe Dan our sincere thanks and wish him well in his new role.

When we published our report on foundation models in February, we said that this technology would have a profound effect on society, comparable to the introduction of the internet. There has been a lot of hype and some disappointment about generative AI but our overall assessment looks sound. It is not going to solve all the world’s problems but nor is it going to drive widespread unemployment or societal collapse, as some of the gloomiest commentators suggest. However, it will fundamentally change the way that we interact with technology and each other, and its capabilities and the speed of change are astounding. Generative AI models are already able to produce highly sophisticated text, images, videos and computer code. Within just a few months, huge advances have been made in their ability to perform maths and reasoning tasks, and their ability to work autonomously is growing.

The committee was optimistic about the benefits of this new technology, not least because its implications for the UK economy are huge. The Government’s recent AI sector study notes that there are more than 3,000 AI companies in the UK generating more than £10 billion in revenues and employing more than 60,000 people in AI-related roles. Some estimates predict that the UK AI market could grow to over $1 trillion in value by 2035. However, to realise that potential, we have to make the right choices.

Capturing the benefits of AI involves addressing the serious risks associated with the technology’s use. These include threats to cybersecurity and the creation of child sexual abuse materials and terrorism instructions. AI can exacerbate existing challenges around discrimination and bias too. That all needs addressing at pace. We also need better early warning indicators for more catastrophic risks such as biological attacks, destructive cyber weapons or critical infrastructure failure. That is particularly important as the technical means to produce autonomous agents intensifies, meaning that AI will increasingly be able to direct itself.

I am pleased that the Government took forward some of the committee’s suggestions about the AI risk register. However, while addressing the risks of AI is critical, we cannot afford to let fear dominate the conversation. The greatest danger lies in failing to seize the opportunities that this technology presents. If the UK focuses solely on managing risks, we will fall behind international competitors who are racing ahead with bold ambition.

I do not mean just what is happening in the US and China. Government spending on AI in France since 2018 is estimated to have reached €7.2 billion, which is 60% more than in the UK. Here the Labour Government, since they were elected, cancelled investment in the Edinburgh exascale computing facility. This sends the wrong message about the UK’s ambition. Unless we are bolder and more ambitious, our reputation as an international leader in AI will become a distant memory. Our new inquiry into scaling up in AI and creative tech will investigate this topic further.

To lead on the global stage, the UK must adopt a vision of progress that attracts the brightest talent, fosters ground-breaking research and encourages a responsible AI ecosystem. I hope that the Government’s long-awaited AI opportunities action plan will be as positive as its title suggests. However, I have also heard talk of closer alignment with EU approaches, which sounds less promising. I will say more about this in a moment. I hope the Minister will confirm today that the Government will embrace a bold, optimistic vision for AI in the UK.

With that ambition in mind, let me highlight three key findings from our report, which are particularly pertinent as the Government formulate their vision for AI. These are: the importance of open market competition, the need for a proportionate approach to regulation, and the urgent issue of copyright.

I will start with competition. Ever since the inception of the internet, we have seen technology markets become dominated by very few companies, notably in cloud and search. The AI market is also consolidating. As Stability AI told us last year, there is a real risk of repeating mistakes we saw years ago. No Government should pick winners, but they should actively promote a healthy and level playing field and make open competition an explicit policy objective for AI. Lots of indicators show that the transformational benefits to society and our economy will be at the application layer of AI. We must not let the largest tech firms running the powerful foundation models create a situation where they have the power to throttle the kind of disruptive innovators that will power our future growth.

I was concerned to see the Secretary of State advocating for tech companies to be treated as if they were nation states. I appreciate that their economic heft and influence is extraordinary. Of course we value and want to attract their investment, but we need to be careful about what kind of message we send. Do we really want to say that private companies are on an equal footing with democratically elected Governments? I do not believe we do. I would be grateful if the Minister would reassure the House that the Government intend to deter bad behaviour by big tech companies, not defer to it.

Moving on, the committee called for an AI strategy that focuses on “supporting commercial opportunities”, academic research and spin-outs. As the Government consider AI legislation, they should ensure that innovation and competition are their guiding focus. They must avoid policies that limit open-source AI development or exclude innovative smaller players. When some of us were in San Francisco, we heard about recent efforts to legislate frontier models in California, which sparked varied concerns from stakeholders, ranging from big tech to small start-ups. We understand that getting these things right is a challenge, but it is one that must be met.

Future safety rules are a good example. Our report called for mandatory safety tests for high-risk, high-impact models. But the key thing here is proportionality. It is important for the riskiest and most capable models to have some safety requirements—just look at the pace of progress in Chinese LLMs, for example—and the AI Safety Institute is making progress on standards. But if the Government set the bar for these standards too low and capture too many businesses, it will curb innovation and undermine the whole purpose of having flexible rules. Again, I would be really grateful if the Minister would reassure me and the House that the Government will ensure that any new safety tests will apply only to the largest and riskiest models, and not stifle new market entrants.

Many US tech firms and investors told us the UK’s sector-led approach to AI regulation is the right route. It strikes a balance between ensuring reasonable regulatory oversight while not drowning start-ups and scale-ups in red tape. In contrast, some investors said the EU’s approach had given them pause for thought. Regulatory alignment with the EU should not be pursued for its own sake. The UK needs an AI regime that works in our national interest. Again, it would be helpful if the Minister could assure the House that he will not compromise the UK’s AI potential out by closely aligning us with Europe in this area. Our regulatory independence is a real advantage we must not lose.

Relying on existing regulators to ensure good outcomes from AI will work only if they are properly resourced and empowered. The committee was not satisfied that regulators were sufficiently prepared to take on this task. On that, we drew attention to the slow pace of setting up the Government’s central support functions which are supposed to provide expertise and co-ordination to the regulators and check they have the right tools for the job. It would be good to hear from the Minister that progress is being made on all these fronts.

We must also be careful to avoid regulatory capture by the established tech companies in an area where government and regulators will be constantly playing catch-up and needing to draw in external business expertise. I was pleased to see that DSIT has published the conflicts of interest for key senior figures. That sort of transparency within government is much needed and sets a really good example to everyone else.

Finally, I turn to copyright and the unauthorised use of data—a topic that the committee has continued to investigate in our current inquiry on the future of news. We were disappointed by the previous Government’s lack of progress on copyright. It is crucial that we create the necessary conditions to encourage AI innovation, but this should not come at the cost of the UK’s creative industries, which contribute over £100 billion a year to the UK economy. The approach of setting up round tables, led by the Intellectual Property Office, was not convincing and, predictably, it has not solved much.

But I have not been impressed with the new Government’s approach so far either. There has been little action to address this period of protracted uncertainty, one which is increasingly entrenching the status quo with negative consequences for rights holders and AI start-ups. A handful of powerful players continue to dominate and exploit their position with impunity. It is good to see more licensing deals emerging. Advocates say this is a positive development which recognises news publishers’ contribution. But critics argue that the deals are effectively an insurance policy which further cement big tech’s position. More scrutiny of this is needed. I very much hope that the Minister will tell us today when the Government will set out their next steps on copyright. We must find a way forward and one that works for the UK.

I note that the Minister in a previous role has before advocated for an opt-out approach to text and data mining. He will know that the previous Government did not adopt that approach because of how badly it went down with the content creators. Rights holders must have a way of checking whether their request to block crawlers has been respected. There need to be meaningful sanctions for developers if the rules are not followed. At the moment, the only option is a high-risk court case, probably for a very limited payout. This is not a satisfactory solution, especially when a huge disparity of legal resources exists between the publisher and tech firm. Unless these fundamental shortcomings are resolved, a new regime will be woefully inadequate. I will be disappointed if the Minister proposes an opt-out regime without also providing details of a transparency framework and an enforcement mechanism. If the Government intend to pursue that path, could the Minister explain how he has addressed the concerns of the publishers, when the previous Government could not? It is important to note—and I am very pleased to see this—that the industry itself is coming up with solutions, whether through partnerships or the development of new AI licensing marketplaces. Indeed, there have been some announcements only this week.

All that brings me back to the point that I made at the beginning. Large language models and generative AI offer huge opportunities for innovation. In turn, we must remain innovative ourselves when considering how to harness the potential impact of this technology while also mitigating the risks. We must ensure that our minds and our markets remain open to new ideas. I look forward to hearing everyone’s contribution to today’s debate, both committee members and others with an interest in this area. I am especially looking forward to hearing from the Minister and learning more about his Government’s approach to this critical technology. I beg to move.

--- Later in debate ---

[Baroness Stowell of Beeston (Con)]

My Lords, I am very grateful to all noble Lords who have contributed to this debate. I thank all noble Lords who made such very kind and generous remarks about me and the committee’s work. I will pick up on just a couple of things because I do not want to take up much time.

As far as some of the things that the Minister has just said, I thank him very much for his comprehensive response. I will read it properly in Hansard tomorrow because there was obviously a lot there. I was pleased to hear that the action plan is coming very soon. He emphasised “very” before he said “soon”, so that was encouraging. Clearly, we should learn some more from that about plans for computing power, as he said.

As was mentioned by most noble Lords contributing today, we know that computing power is essential. I understand the point that the Minister made about exascale being different from AI-specific computing power. What the Government are doing on the latter is where it really matters in the context of this debate. It is important none the less not to forget that when commitments to compute, which people see as a signal of the country’s ambition, get cancelled that sends a rather confusing and mixed message. That was the point we were trying to emphasise.

On regulation, I hear the Minister in that there will be extensive consultation about the AI Bill. As he has heard me say already, it is clearly important in my view and that of the committee that we do not rush to regulation. It is better that it is got right.

I will say a couple of things about copyright, which many noble Lords have mentioned today, that gets such emphasis in this debate, perhaps sometimes to the surprise of the large tech businesses that are US companies. I think it does because it is a reflection of our very mixed economy over here. We are not in a position where we can put all bets on tech and know that that is where we will see growth so that we do not need to worry about anything else. As the Minister said, which will give some people in the content-creating community comfort, this technology cannot develop without content. Hearing that that is well understood by the Government is important to content creators. However, as much as it will be good to have a serious consultation on whatever proposals the Government come forward with, it is none the less essential that we get a move on on this because a lot of businesses are starting to feel very threatened by all that.

The only other thing I would add is on the question of risks. In this debate, there has been broad consensus about the opportunity of this technology and its importance. The noble Lords, Lord Strasburger and Lord Griffiths, talked about existential threat, and that was mentioned by the Minister in his reply.

Risk was not something that we treated with any lack of seriousness at all when we carried out our inquiry. The noble Lord, Lord Griffiths, is right: it is important that we listen to the range of voices that have knowledge and experience in this area. However, it is important to recognise—we took this seriously as a committee when conducting our inquiry—that this technology has been subject, and probably is continuing to be subject, to quite a significant power struggle. At the start of our inquiry, the debate about existential threat was very live. One thing that we learned throughout our inquiry was about the divide within the tech world on this debate, and how you had to be really quite tuned in to where these different threats and messages were coming from, so that we did not get sucked down a path which ended up allowing a concentration of power that was also not what many noble Lords wanted.

Overall, our view and certainly my personal view is that, with something as important as this new general-purpose technology—as the Minister said, these things come along very rarely—we make sure that we are driven by the opportunities mitigating the risks as we go along, and are not driven by the risks and miss out on the opportunities that this technology will provide. All of us today have been able to agree on that, and it is a most important conclusion for us to take away from this debate. I certainly look forward to studying again the proposal of the noble Lord, Lord Tarassenko, which sounded interesting in terms of any sovereign LLM concentrating on health issues. I am very grateful to noble Lords.

Motion agreed.

Artificial Intelligence: Regulation

Baroness Stowell of Beeston Excerpts

Thursday 17th October 2024 Lords Chamber

[Lord Vallance of Balham (Lab)]

As the noble Viscount points out, the EU regulation has gone in a somewhat different direction in taking a very broad approach and not a sector-specific approach. In contrast, the US looks as though it is going down a similar sort of route to the one that we are taking. Of course, there will be a need for interoperability globally, because this is a global technology. I think that there will be consultation and interactions with both those domains as we consider the introduction of the AI Act, and we are starting an extensive consultation process over the next few months.

[Baroness Stowell of Beeston (Con)]

My Lords, I am somewhat concerned by the Minister’s reference to regulating the most powerful and general purpose models, because I fear that that is a pathway to closing down markets and preventing access to challenger firms. But, in the context of copyright, which is of concern to all content creators and certainly to publishers, are the Government considering a mandatory mechanism to ensure transparency, so that those publishers that choose to opt out their data from the training purposes are able to do so?

[Lord Vallance of Balham (Lab)]

In passing, I will just reference the first part: even Eric Schmidt, at the investment summit on Monday, made the point that some sort of guard-rails and some sort of certainty for business are required in order to grow those most important models. There is a demand for something there and that is what we want to try to get right. It is not right to leave nothing as these models progress. I am sorry, I have completely forgotten the second point.

[Baroness Stowell of Beeston (Con)]

Transparency.

[Lord Vallance of Balham (Lab)]

Yes—the question of intellectual property and transparency is important. We are consulting widely on this with the creative industries and with others. Indeed, in my own review, which I did for the previous Government when I was in my post as the Government Chief Scientific Adviser, I made the very clear point that we need to distinguish between the inputs to these models and what is required for intellectual property control there, and the outputs of the model, which goes back to the question about watermarking and understanding what component of the output is derived from which part of the input.

King’s Speech (4th Day)

Baroness Stowell of Beeston Excerpts

Monday 22nd July 2024 Lords Chamber

[Baroness Stowell of Beeston (Con)]

My Lords, I am very pleased to congratulate the noble Lord, Lord Vallance, and welcome him to this House, and to congratulate his fellow Ministers on their new appointments to the Government Front Bench. I also congratulate my noble friend Lord Petitgas on his absolutely barnstorming maiden speech; he is going to be an excellent addition to our Benches and I am so pleased that I was in the Chamber to hear him

Today, I want to focus on the future—specifically, the role of generative AI in producing economic growth. As other noble Lords have said, the UK is among the world leaders in the development of this technology. Indeed, there has been a recent rush of inward investment. During just one week in May this year, CoreWeave announced $1 billion of investment in data centres; and Wayve, the British autonomous vehicles business, raised over $1 billion in funding. Alongside CoreWeave, other AI businesses such as Scale AI, OpenAI, Anthropic, Palantir and Cohere have all chosen the UK to locate their European headquarters. The biggest Silicon Valley venture capital firms have opened offices in London. Alongside the appeal of our homegrown talent and their innovations emerging from incubator universities, these firms are coming here because we have not followed Europe and rushed to regulate AI.

In our report, Large Language Models and Generative AI, earlier this year, the Communications and Digital Select Committee, which I chaired in the last Parliament and hope to start chairing again soon, highlighted the risks of the Government getting the balance between safety and innovation wrong. We were concerned about the serious risk of regulatory capture and of introducing legislation that entrenched the market dominance of big tech. We said that the markets for AI must remain open, and that not creating barriers to entry but supporting innovation should be the Government’s priority when considering any new regulation.

One of my personal fears with this new technology is not some existential risk to the human race; it is repeating the same mistakes which led to a single firm dominating search, no UK-based cloud service and a couple of firms controlling social media. Only on Friday, the worldwide disruption caused by CrowdStrike’s update to Microsoft Windows showed us just how vulnerable we are to concentration in the market. It was therefore music to my ears when Rishi Sunak declared in May that the Government were pro-open source, which is critical if we are to avoid a new oligopoly, and confirmed that they would not be legislating. However, I was dismayed, if not surprised, to read in the Financial Times ahead of the gracious Speech that, by contrast, the Labour Government would introduce new AI regulation. I was then confused to read on the day of the King’s Speech—in the FT again, so it must be true—that following a last-minute tussle between DSIT and No. 10, the Government would not be announcing a Bill but launching a consultation instead.

Today, the noble Lord, Lord Vallance, said that the Government would bring forward

“binding regulations on the handful of companies that are developing the most powerful AI models”.

This is precisely what these big tech firms want, because it assumes that the technology is static and no one else can or will enter the market. That is so very wrong and risks closing the door on more innovation and growth. Will the Minister who is winding up the debate please clarify the Government’s position on regulating this important new technology? Are the Government pro-open markets? Are they pro-open source? What is their position on copyright in the context of AI? Copyright is the most significant issue of contention, where clarity is needed urgently so that our news and creative industries are properly recognised for their vital contribution to this technology’s development.

In short, can the noble Lord confirm that his Government will not adopt a similar approach to that of the EU, or seek regulatory alignment with the EU, when it comes to regulating AI? I worry that when it comes to generating economic growth, this Government’s vision of the future will soon look uncannily like the past. While some Members of this House would be rather pleased if it did, when it comes to maintaining our position in the world in developing and deploying AI, and the potential of what some now refer to as little tech, believe me, a new version of “Back to the Future” would not be good for UK economic growth.

AI: Intellectual Property Rights

Baroness Stowell of Beeston Excerpts

Thursday 9th May 2024 Lords Chamber

[Lord Ranger of Northwood (Con)]

My Lords—

[Baroness Stowell of Beeston (Con)]

My Lords, I am grateful to my noble friend for giving way. As I said in my letter last week to the Secretary of State on behalf of the Communications and Digital Select Committee, the Government’s reluctance to take a clear position on copyright in the context of AI and large language models is leading to

“problematic business models … becoming entrenched and normalised”.

The Government urgently need to take a clear position, and soon. On a practical basis, what support are they giving to market-led initiatives to improve licensing deals for news publishers and to get collective licensing regimes off the ground, to ensure that smaller rights-holders are also not left behind?

[Viscount Camrose (Con)]

I thank my noble friend and her committee for that important letter. First, we must not underestimate the difficulty and complexity of the issues involved in resolving this question; there are very problematic jurisdictional and technical issues. That said, the Government greatly welcome any arrangement between private sector organisations finding a way forward on this; we can all learn a great deal from the success of those arrangements. We believe that a collaborative way forward on both sides, in partnership, will be a very important part of the eventual solution.

Data Protection and Digital Information Bill

Baroness Stowell of Beeston Excerpts

Committee stage
Monday 25th March 2024 Grand Committee

[Baroness Stowell of Beeston (Con)]

My Lords, I rise briefly to support the amendments in the name of my noble friend Lady Harding and the others in this group. She has comprehensively explained their importance; they may not be philosophical, as she says, but they have practical importance. One of the most compelling reasons for us to act is as she so precisely described: if we do not, we create a situation in the real world that the Bill seeks to address in the digital world.

Although this is about direct marketing, allied to it are pressures on advertising revenues and the greater control that is being taken by the larger platforms in this area all the time. The effect that has on revenues means that this is an important issue that deserves a proper response from the Government. I hope that my noble friend the Minister acts in the way that we want by, if not accepting one of these amendments, coming forward with something from the Government.

[Baroness Jones of Whitchurch (Lab)]

My Lords, I can also be relatively brief. I thank all noble Lords who have spoken and the noble Baroness, Lady Harding, and the noble Lord, Lord Clement-Jones, for their amendments, to many of which I have added my name.

At the heart of this debate is what constitutes a disproportionate or impossibility exemption for providing data to individuals when the data is not collected directly from data subjects. Amendments 29 to 33 provide further clarity on how exemptions on the grounds of disproportionate effort should be interpreted —for example, by taking into account whether there would be a limited impact on individuals, whether they would be caused any distress, what the exemptions were in the first place and whether the information had been made publicly available by a public body. All these provide some helpful context, which I hope the Minister will take on board.

I have also added my name to Amendments 27 and 28 from the noble Baroness, Lady Harding. They address the particular concerns about those using the open electoral register for direct marketing purposes. As the noble Baroness explained, the need for this amendment arises from the legal ruling that companies using the OER must first notify individuals at their postal addresses whenever their data is being used. As has been said, given that individuals already have an opt-out when they register on the electoral roll, it would seem unnecessary and impractical for companies using the register to follow up with individuals each time they want to access their data. These amendments seek to close that loophole and return the arrangements back to the previous incarnation, which seemed to work well.

All the amendments provide useful forms of words but, as the noble Baroness, Lady Harding, said, if the wording is not quite right, we hope that the Minister will help us to craft something that is right and that solves the problem. I hope that he agrees that there is a useful job of work to be done on this and that he provides some guidance on how to go about it.

Artificial Intelligence (Regulation) Bill [HL]

Baroness Stowell of Beeston Excerpts

2nd reading
Friday 22nd March 2024 Lords Chamber

[Baroness Stowell of Beeston (Con)]

My Lords, it is a great pleasure to follow the noble and learned Lord, Lord Thomas, and his interesting speech. I remind noble Lords that the Communications and Digital Committee, which I have the privilege to chair, published our report Large Language Models and Generative AI only last month. For anyone who has not read it, I wholeheartedly recommend it, and I am going to draw heavily on it in my speech.

It is a pleasure to speak in a debate led by my noble friend Lord Holmes, and I congratulate him on all that he does in the digital and technology space. As he knows, I cannot support his Bill because I do not agree with the concept of an AI authority, but I have listened carefully to the arguments put forward by the noble and learned Lord, Lord Thomas, a moment ago. But neither would I encourage the Government to follow the Europeans and rush to develop overly specific legislation for this general-purpose technology.

That said, there is much common ground on which my noble friend and I can stand when it comes to our ambitions for AI, so I will say a little about that and where I see danger with the Government’s current approach to this massively important technological development.

As we have heard, AI is reshaping our world. Some of these changes are modest, and some are hype, but others are genuinely profound. Large language models in particular have the potential to fundamentally reshape our relationship with machines. In the right hands, they could drive huge benefits to our economy, supporting ground-breaking scientific research and much more.

I agree with my noble friend Lord Holmes about how we should approach AI. It must be developed and used to benefit people and society, not just big tech giants. Existing regulators must be equipped and empowered to hold tech firms to account as this technology operates in their own respective sectors, and we must ensure that there are proper safety tests for the riskiest models.

That said, we must maintain an open market for AI, and so any testing must not create barriers to entry. Indeed, one of my biggest fears is an even greater concentration of power among the big tech firms and repeating the same mistakes which led to a single firm dominating search, no UK-based cloud service, and a couple of firms controlling social media. Instead, we must ensure that generative AI creates new markets and, if possible, use it to address the existing market distortions.

Our large language model report looked in detail at what needs to happen over the next three years to catalyse AI innovation responsibly and mitigate risks proportionately. The UK is well-placed to be among the world leaders of this technology, but we can only achieve that by being positive and ambitious. The recent focus on existential sci-fi scenarios has shifted attention towards too narrow a view of AI safety. On its own, a concentration on safety will not deliver the broader capabilities and commercial heft that the UK needs to shape international norms. However, we cannot keep up with international competitors without more focus on supporting commercial opportunities and academic excellence. A rebalance in government strategy and a more positive vision is therefore needed. The Government should improve access to computing power, increase support for digital, and do more to help start-ups grow out of university research.

I do not wish to downplay the risks of AI. Many need to be addressed quickly—for example, cyberattacks and synthetic child sexual abuse, as well as bias and discrimination, which we have already heard about. The Government should scale up existing mitigations, and ensure industry improves its own guard-rails. However, the overall point is about balance. Regulation should be thoughtful and proportionate, to catalyse rather than stifle responsible innovation, otherwise we risk creating extensive rules that end up entrenching incumbents’ market power, and we throttle domestic industry in the process. Regulatory capture is a real danger that our inquiry highlighted.

Copyright is another danger, and this is where there is a clear case for government action now. The point of copyright is to reward innovation, yet tech firms have been exploiting rights holders by using works without permission or payment. Some of that is starting to change, and I am pleased to see some firms now striking deals with publishers. However, these remain small steps, and the fundamental question about respecting copyright in the first place remains unresolved.

The role for government here is clear: it should endorse the principles behind copyright and uphold fair play, and should then update legislation. Unfortunately, the current approach remains unclear and inadequate. It has abandoned the IPO-led process, but apparently without anything more ambitious in its place. I hope for better news in the Government’s response to our report, expected next month, and it would be better still if my noble friend the Minister could say something reassuring today.

In the meantime, I am grateful to my noble friend Lord Holmes for providing the opportunity to debate such an important topic.

Digital Exclusion (Communications and Digital Committee Report)

Baroness Stowell of Beeston Excerpts

Thursday 8th February 2024 Lords Chamber

Moved by

[Baroness Stowell of Beeston]

To move that this House takes note of the Report from the Communications and Digital Committee Digital exclusion (3rd Report, Session 2022-23, HL Paper 219).

[Baroness Stowell of Beeston (Con)]

My Lords, it is a great privilege to open this debate, just as it is a privilege to chair the Communications and Digital Committee of your Lordships’ House. I am hugely grateful to all members of the committee who contribute so much through their expertise and dedication to our work. I know that they would all want me to pay the greatest tribute to the team who support us and deserve so much credit for the quality of our output: Dan Schlappa, Rita Cohen, Owen Williams and, until last autumn, Emily Bailey Page, who left us on promotion and has recently been replaced by Anna Herzog. They are all brilliant and work so hard. On behalf of all members of the committee, I put on record our sincere thanks to them.

It has been a busy week for tech policy. On Friday, the committee published our report on large language models and generative AI, looking at what needs to happen to ensure that these new technologies benefit people and our society. On Monday, the Government published their AI White Paper response, and, on Tuesday, we took evidence from the Secretary of State for DSIT about AI digital exclusion and skills. On Wednesday, I spoke at a conference emphasising the importance of ensuring that technology benefits us all, not just the big tech firms. Today, we are debating my committee’s report on digital exclusion. Some of us, including the Minister, have also been busy on the Digital Markets, Competition and Consumers Bill.

I say all that not to complain—I love my work and I am privileged to have the opportunity—but to illustrate how quickly developments in technology are happening, how wide-ranging the impacts are for all sectors of society, how closely they are all connected and how difficult it is for us all to keep pace with the vast array of issues. The pace of change, and the huge social and economic implications, underscore the need for more action on digital exclusion. Technology policy, particularly on AI, is a major government priority; the consequences of those changes must be, too. Digital divides are deepening, and basic skills gaps persist, yet our inquiry found that the Government are not paying nearly enough attention.

It is important to see the big picture here. Digital exclusion is not just about old people, although many of them are seriously affected. It can affect people from all age groups and all walks of life. Some 2.5 million people in the UK cannot do a basic digital task. Digital exclusion is not about asking for government handouts or about giving everyone free internet. It is about making sure that everyone benefits from technological change and ensuring that people are not left behind. It is about ensuring we do not create second-class citizens who cannot use online banking, NHS services such as making a GP appointment, or any public service such as submitting tax returns, applying for benefits, a new passport or a blue badge parking permit. It is also about making sure that there are not some people who cannot apply for jobs, 90% of which are now only advertised online.

Digital inclusion is about ensuring that we do not exclude people from things that most people take for granted but which require basic digital skills, a working device and a decent internet connection. It is also about economic prosperity and efficiency. We cannot hope to become a science and tech superpower if 5 million employed adults are unable to complete all the main digital tasks expected at work, and the same number are expected to be acutely underskilled by 2030. It is worth pausing to reflect that the shortage of digital skills is costing the UK economy £63 billion a year.

We cannot hope to achieve public sector efficiencies by digitising services without simultaneously addressing digital divides. Otherwise, we will end up creating a two-tier system where digitally engaged citizens get increasingly better service than those who struggle.

The main recommendation from our report was for the Government to acknowledge the challenge by updating their digital exclusion strategy, last published a decade ago. The strategy’s delivery partners have not existed for years, and updates to it now sit in the National Archives, none of which inspires much confidence.

On Tuesday, the Secretary of State for DSIT told us she was not a fan of updating strategies, saying that they consume government time which could be better employed delivering progress. That would be fine if there had been a lot of progress. However, the Government’s response to our report declined to give a structured update or set out clearly defined targets. I can sympathise with the Secretary of State if officials spend time writing strategies, believing a document is an end in itself. However, I do not agree that they are a waste of time if the point of the strategy is to bring together all the disparate parts of government and to make sure they are delivering valuable work.

DSIT has plenty of strategies for other things, so I am afraid that we suspect its reluctance to publish one for digital exclusion is because there is not much to put in it and it is not a priority. This is odd, because digital exclusion is linked to deep-seated structural challenges and is holding back progress on key government pledges, on levelling up, education inequality, digitised healthcare and productivity. Having a joined-up plan to get to grips with this would be helpful. We heard that there is now an interministerial group to consider digital exclusion across government, which is good, but we were not entirely clear what outcomes this had achieved, and without high-level political attention and clear objectives, it will not achieve very much.

If the Government are averse to strategies, perhaps we could push for a public action plan instead, which could start by covering the recommendations we made in our report. I will go through the headlines. First, it should tackle basic skills gaps. Schemes offering certificates and qualifications get lots of the attention, but these are often poorly suited to the target demographic. Instead, there should be more focus on long-term support for community organisations.

Secondly, more effort is needed to create place-based local digital inclusion hubs, with basic facilities and people on hand to help. Libraries are bearing the brunt of this expectation but they cannot solve everything. Demanding that high-street banks accelerate the long-promised banking hubs, which are becoming increasingly urgent in towns losing bank branches, and working with the banks to make them digital hubs would be my personal suggestion. I raised this idea with the Minister, my noble friend Lady Neville-Rolfe, during an Oral Question in December; I would be interested to know from the Minister today, my noble friend Lord Camrose, what discussions there have been in government on this topic since then.

Thirdly, the Government should be much more proactive in ensuring that public services are not excluding people. Often, it is the people who need help the most who struggle to get it; helping them early on saves on costs later down the line. The same is true for the private sector. Of course, offline alternatives remain essential—I will come back to this later.

Fourthly, the Government should cut VAT on social tariffs to make them more affordable. Too many people struggle to afford internet in the first place; cutting VAT would help. The Government could also do more to ensure that telecoms firms are advertising their social tariffs prominently.

Fifthly, the Government should do much more to help scale up existing good ideas. The public sector has vast numbers of devices that, with a bit of imagination and security work, could be donated. Internet voucher schemes are a great way to help people, in particular jobseekers, get a temporary boost if they are struggling. There are plenty of other good ideas out there, including something called wifi in a box.

Sixthly, the Government should keep paying close attention to the value of alternative network providers. These are smaller, local internet providers that deliver huge value to poorly connected communities, including plenty of doorstep support to people who need it most. They are a good demonstration of what can be achieved when companies put people first. They must not be forgotten as Openreach continues to build out its network.

Lastly, I emphasise that the whole point of new technologies is supposed to be making life better. Making services digital is not an end in itself; it should be about improving the experience for users, not a cost-saving exercise that benefits bosses but leaves everyone else dissatisfied. I recently read an article by Jamie Bartlett on the website UnHerd about something that he calls techno-admin. He coined the phrase; it captures this issue well. He said that it is

“a pervasive phenomenon, whereby we customers are forced into infuriating, confusing, absurdly time-consuming and bleakly unrewarding tasks by a machine”.

I am sure that we all have experienced the same more often than we should. Moreover, the Post Office scandal shows how important it is for new technologies to be designed and used in ways that benefit people, and to have humans in the loop rather than putting blind faith in automated processes. To avoid becoming strategically reliant on a small number of tech firms, with no alternative providers, we must prioritise open-market competition and diversify our service providers. I am optimistic about new tech but we need to ask companies and government to ensure that their systems put people first.

I would like to conclude by emphasising the need for joined-up thinking across government, particularly on AI policy and digital exclusion. AI is introducing major changes to our society. Large language models, such as ChatGPT in particular, will drive ground-breaking scientific advances, provide huge boosts to productivity and fundamentally reshape our relationship with machines. Widespread AI-related unemployment is not likely. That said, some industries and sectors will inevitably be disrupted and some people will lose out, but new jobs will also be created. The problem is where those new jobs will be. Unless we invest much more effort in supporting disrupted sectors to transition and upskilling those who are losing out from the AI boom, we will create a whole set of people who see technology as a threat rather than an opportunity.

If they lack the skills to get one of the new jobs which the economic experts promise are coming, or to use the fancy new chatbot services, then why would they feel positive about technological change? Digital exclusion is the flip side of all the good things about technological progress. Being included is a constantly moving target. People who have the skills to get by today may struggle in the future.

I hope that the Minister can provide reassurance today on these matters. In particular, I would like to know why the Government are so averse to having a coherent public plan about what they are going to do. The sad fact is that we are not confident that the Government are taking this seriously, and that is unlikely to change until we see an updated plan or strategy. I would also welcome reassurance about how the Minister is ensuring that the teams working on AI policy and digital exclusion are working together and engaging other departments to ensure a properly joined-up approach to this challenge. I look forward to not only my noble friend’s response but all the contributions from noble Lords participating in today’s debate. I beg to move.

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[Baroness Stowell of Beeston (Con)]

My Lords, I am very grateful to my noble friend the Minister. I have not envied him this afternoon, knowing that he would have to respond to a series of quite hard-hitting and critical speeches on this important topic. I will speak briefly, because I know noble Lords’ patience will be tested if I go on too long.

We have heard some very powerful illustrations of what being digitally excluded means for those who are. To be positive for a moment, it is important to acknowledge that, on a macro level, there has been an awful lot of progress since the time when the noble Baroness, Lady Armstrong, was a Minister in the Cabinet Office. On the micro level, I agree with some of what the noble Lord, Lord Young said. My own parents, who are well into their 80s, are testament to the fact that we must not fall into the trap of believing that all old people are incapable online. In fact, they were very early adopters of iPads and iPhones. The other point worth keeping in mind is that, as that technology develops and becomes much more intuitive to the user, it is in fact easier than it might otherwise have been for people to become included.

As has been stressed in the course of this debate, the point is that digital exclusion is a moving target. Inclusion is not something that will ever be completed; it is an ongoing and critical foundation to everything that any Government must do, never mind what they might want to do. The Prime Minister is ambitious about the potential for technology to be the solution to so many problems and for the UK to be a technology superpower. My noble friend the Minister has delivered a similar message today, and it is one that I agree with and support. But as my noble friend has also said—and as has been the very clear message from everyone who has contributed today—we cannot leave people behind. This is not an ambition from which only some people can benefit and enjoy, while others feel that they are not part of it or that it is happening at their expense.

We cannot will the ends without the means, and, as my noble friend made clear in her contribution, real leadership has to be shown here. My noble friend the Minister compared the ministerial group meeting every six months with the frequency of a board meeting. I point out to him that we expect this ministerial group to drive action. Any committee that is responsible for driving progress and action does not meet only twice a year—it meets more often than that. I urge my noble friend, following this debate, to take back the message to the department that the emphasis we have put on the need for progress is because we want the Government to deliver on the ambitions that they have set out. We know how important this is. As my noble friend Lady Harding said, this is about prioritising addressing digital exclusion because it makes economic, social and political sense. It is critical to everything that we are trying to achieve.

I am grateful to all noble Lords who have spoken today and to my noble friend the Minister. I ask him to deliver the powerful message that has come from all of us in this debate.

Motion agreed.

Digital Markets, Competition and Consumers Bill

Baroness Stowell of Beeston Excerpts

Committee stage
Wednesday 24th January 2024 Grand Committee

[The Deputy Chairman of Committees (Baroness Fookes) (Con)]

I add at this point that, if Amendment 16 were to be agreed, I could not call Amendment 17 by reason of pre-emption.

[Baroness Stowell of Beeston (Con)]

My Lords, I am hugely grateful to my noble friend Lord Faulks, if I can still call him that—in real life, he is my friend, even if he now sits on another Bench—both for tabling his amendments and for the incredibly comprehensive and thoughtful way in which he has introduced this group. To have the noble Lord’s expertise on this topic is incredibly valuable. I have signed his Amendments 16 and 53 but have also tabled my own in this group: Amendments 17 and 54. I am grateful to the noble Lords who have signed mine.

By way of some background to add to what the noble Lord has said, as I mentioned on the first day in Committee, and indeed at Second Reading, the Communications and Digital Select Committee held hearings on the Digital Markets, Competition and Consumers Bill during the summer of last year. We took evidence from the large tech firms as well as a range of challenger firms. We focused on Parts 1 and 2 of the Bill, which is what we are discussing at this time.

As my noble friend the Minister acknowledged when he spoke at Second Reading, we as a committee found that the Bill as it stood at that time—as introduced to Parliament—struck a careful balance. We felt that, overall, it was proportionate and would deliver on the outcomes that we were seeking to achieve and all felt were necessary for this legislation—namely, a level playing field for the various different businesses that now seek to operate in digital markets. We were careful to acknowledge that striking that balance was hard to achieve; it was not an easy thing. We commended the Government for that. We were also clear, however, that any further changes, particularly to some contentious areas, such as the appeals process, could cause significant problems.

As the noble Lord, Lord Faulks, said, we will come on to the question of appeals in a later group. The insertion of the word “proportionate” in the Bill, in the context of the conduct requirements that the CMA may impose, or the specific pro-competition interventions, has the potential to create a question and introduce a loophole that could be exploited during the appeals process. This is making people nervous—it is certainly making me nervous.

The noble Lord’s amendment would change the Bill back to its original wording. I have signed the amendment based on the way he, as a legal expert, has explained it, which seems to me to be the best way forward. However, my Amendments 17 and 54 try to make it clear to any tribunal hearing down the line that, by including the word “proportionate”, Parliament has not intended to create any new, novel or different opportunity for anybody to interpret what the CMA should always be doing, which is being proportionate in the way in which it goes about its duties. My amendments are, if you like, a safeguard, but I think what the noble Lord, Lord Faulks, has proposed is clearer and neater. Like him, I look forward to the Minister’s reply. This is an area which is causing quite a lot of concern and on which we need a clear response from the Government.

[Baroness Harding of Winscombe (Con)]

My Lords, it is an honour to follow such an esteemed legal brain and parliamentary brain. I am neither, but I have put my name to my noble friend Lady Stowell’s two amendments and I want to make two points in support of her arguments.

The common-law concept of proportionality is important in this legislation. I am not supporting these amendments in any spirit other than wanting to make sure that we are proportionate in the way we regulate the technology sector. After our first day in Committee, I was reflecting a little that perhaps all of us got a bit carried away—certainly I did—with some of our oratory about the importance of mitigating the downsides of the technology sector. I want to put it on the record that I recognise the upsides, too. Therefore, a proportionate path is important. I sit on the Communications and Digital Select Committee that my noble friend so ably chairs and, as she said, we felt that the Bill as introduced into the Commons got that proportional balance right.

We have been in this place before, having a very similar argument. A number of us here today are part of the Online Safety Act gang. I had a look at Hansard and on 19 July, during the last group on Report on the Online Safety Bill, I proposed a group of amendments in the name of the noble Baroness, Lady Kidron, which sought to clarify how non-content-related harms would be captured in the Bill. The argument made by the Minister, my noble friend Lord Parkinson of Whitley Bay, was that, by trying to define it in the Bill, we would create legal uncertainty because that concept was already defined. Now we find ourselves on the opposite sides of the same argument, where I think I am hearing the Government say that there is no intention to bring in any different definition of proportionality than that which already exists—that the CMA is already mandated to give significant consideration to proportionality—yet they want to put the word back in the Bill in the way that they resisted firmly in the Online Safety Bill, when a number of us were seeking a different form of clarification. I do not think that you can have it both ways quite so quickly in related legislation. Either the Government mean something different from the existing requirements of proportionality that the CMA is under, or we should simply take out this additional complexity and reduce the risk of further legal disputes once the Bill is enacted.

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[Baroness Stowell of Beeston (Con)]

My Lords, I support Amendments 39 and 40 in the name of the noble Baroness, Lady Jones, which are about countervailing benefits. I have added my name to them. Before I make my remarks about those amendments, it is worth noting that my noble friend Lord Black gave quite a compelling argument in support of Amendment 48, describing how it would not drive a coach and horses through what the Bill is trying to introduce by virtue of the final offer mechanism but would strengthen it further. I will be interested to hear what my noble friend the Minister has to say in reply to that.

In response to the debate on a previous group of amendments, my noble friend the Minister said that, by virtue of the process of parliamentary scrutiny, or just making laws, we should improve Bills, in the sense that the way in which they are first introduced to Parliament does not mean that they cannot be changed. He is absolutely right: doing our jobs should lead to stronger, better and more effective legislation.

In the few amendments I have tabled I have tried not to unpick what has already been changed in the Commons but to add clarification where I felt that the changes were going in the wrong direction. On the topic of countervailing benefits, I added my name to Amendments 39 and 40, which revert Clause 29 back to its original wording at the point of the Bill’s introduction to Parliament, because I could not think of another way to secure the important purpose of Clause 29.

If I may, I again return to the way in which the Communications and Digital Committee scrutinised the Bill when it was first introduced. Countervailing benefits was one of the topics that we identified as an area of contention. In the course of our hearings, we heard a range of views on this clause. As other noble Lords have voiced in this debate, some wanted to see Clause 29 removed and others wanted it strengthened. The committee found that it should remain as it was; that it did not need to be changed and should remain in the Bill. We noted that the countervailing benefits exemption is

“designed as a backstop rather than an initial enforcement measure: the CMA is expected to take consumer benefit into account throughout its work”.

In conclusion, we said that the exemption

“provides a proportionate backstop as long as the threshold for using it remains high. The Government should resist any changes that would lower the threshold”.

Contrary to those who argued either to take out Clause 29 or to raise its threshold even further, my view is that, as it stood, it was fair and proportionate. Some of the big tech firms did not like it at all, but we thought none the less that it was an appropriate measure. Therefore, it would be fair to all parties for us to revert to the original text.

[Baroness Harding of Winscombe (Con)]

My Lords, I, too, wish to speak to Amendments 39 and 40, to which I have added my name. First, it is worth dwelling briefly on what the countervailing benefits exemption is: quite a “get out of jail free” card. To be clear: the company in question will have been found to have SMS, conduct requirements will have been imposed and the company will have been found to be breaching them and be on its way to jail. The countervailing benefits exemption is a “get out of jail free” card because the benefits that the new product or functionality brings are so good that it is worth breaching this set of fundamental competition principles.

That exemption is a really powerful tool that gets you completely out of jail. It can also enable you to simply slow down the process by arguing that it should be used, even if you will not succeed in getting out of jail. The process of slowing down being sent to jail is also very powerful for the big tech firms. This is a big weapon in the Bill.

However, I can also make the case, as many of the tech companies did at our Select Committee—as my noble friend Lady Stowell just said—that the exemption is an important tool to have in the Bill because we do not want to live in a world where large monopolists are not encouraged to innovate at all. There is an argument that we need to find the Goldilocks spot, if noble Lords will forgive me mixing my metaphors. I sit on my noble friend’s committee and, as she said, we have heard from the companies that would like this removed and from the companies that would like it strengthened. I share her view that the Bill as introduced to the House of Commons got that spot just about right.

Does my noble friend the Minister think that the new wording, introduced at a late stage in the Commons, of

“could not be realised without the conduct”

is the same as “indispensable”, or does it set a higher or a lower threshold to be able to use the “get out of jail free” card? I do not think he is going to argue that it sets a higher threshold; I think it is either the same as or a lower threshold. If it is a lower threshold, why do we really think that we need to make it easier for people who are on their way to jail to get out? If it is the same then we are right back to where we were two hours ago. Why do we need to define something differently that is already well enshrined in law as “indispensable”?

--- Later in debate ---

[Viscount Camrose (Con)]

Again, in my opinion, the two sentences are indistinguishable in their meaning.

[Baroness Stowell of Beeston (Con)]

My Lords, one of the arguments that has been advanced—I did not make it in my remarks because I forgot—is that part of the problem with changing the word from “indispensable” to what is now in the Bill is that the current phrase has not been tested in the courts, whereas “indispensable” has. The argument that changing from “indispensable” to what we have now provides clarity is one that is really hard for people to accept, because the clarity it is providing is not, seemingly, in everyone’s interests. That is part of the problem here.

[Viscount Colville of Culross (CB)]

If “indispensable” and purely “benefit” are the same, why was the change made on Report in the Commons?

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[Lord Wolfson of Tredegar (Con)]

My Lords, it is a pleasure to support the noble and learned Lord, Lord Etherton, in this amendment, which he has proposed extremely clearly; I can therefore be relatively brief. However, I probably have the most difficult feat of advocacy ahead of me. Normally in these circumstances one is trying to persuade the Minister to depart from the written brief in front of him, but now I have to persuade him to depart from the written brief which he has already read out, so I feel as though we know the answer to the question I am about to pose. None the less, I will proceed. I refer to my interests in the register as a practising barrister, including, as I will mention in a moment, practising in the Competition Appeal Tribunal, popularly known as the CAT.

It is a fundamental principle of the rule of law that there ought to be an effective means for legal rights to be vindicated. Having a legal right without the ability to vindicate it is not of much use. There are areas of law where a breach of legal duty may affect many consumers, but it is likely to affect each of them minimally. Although such affected consumers can in theory bring a claim for damages, it is rarely worth their while because of the small amount of each individual claim. The irrecoverable legal costs—I again declare my interest—will swamp any damages recovered, even if the claim is successful. There is also the risk of an adverse costs order if the claim fails. The real-world effect is that these claims are brought only by large claimants who have suffered large losses. That means that legal rights are not in practice vindicated. That is, in effect, a gap in our justice system.

In order to make access to justice possible for consumers in these cases, and to create a means of effectively enforcing competition law, a class action regime was introduced into the Competition Act 1998, in Section 47B. That section does not create any new rights; it creates a new process for the more effective enforcement of existing rights. It does this by enabling individual claimants to pool their claims and have them brought by a class representative. The class representative does the running in terms of preparing, funding, and bringing the action. The individual class members tend to have very little to do, other than to receive their damages when they are awarded. Importantly, there is no exposure to adverse costs orders.

This regime has been very successful. There is a high degree of expertise, both procedural and economic, in bringing such claims, and for that reason, the Competition Appeal Tribunal is the only forum in which such claims can be brought. I am instructed in such cases in the CAT, both for potential claimants, through the class representative, and also for defendants. While there are a few rough points which need to be smoothed out, as in any new jurisdiction, there is no doubt that the jurisdiction is bedding down extremely well. There are specialist judges sitting in the CAT, and there is now a range of specialist practitioners, in London and elsewhere, who appear in it.

Clause 101 creates a new data right, which is unlikely to see much use, I suggest, unless it is collectivised—in other words, brought subject to the same regime so that right can be vindicated in the same way. The main thrust of the amendment to which I have added my name is that the class action regime in Section 47B be expanded to include such claims, which would benefit from better access to justice, and, really importantly, would avoid leaving claimants with a right but with no effective remedy.

[Baroness Stowell of Beeston (Con)]

I wanted to intervene briefly. I do not have an amendment in the group, I have not signed my name to any, but I wanted to piggyback on the introduction of the issue of private litigation to ask a question that has been put to me by one of the big tech firms. I thought it was a reasonable question, even though it was not one I felt moved to table an amendment on. I suggest to my noble friend the Minister that he might find it easier to reply by means of a letter to me that he can put in the Library of the House, rather than taking up time.

The question is why, in this Bill, if somebody wants to bring a private litigation, there is no provision for the CMA to be required to give consent before an action can be taken by way of private litigation. In contrast, in the Communications Act 2003, Ofcom’s consent is required before private litigation is taken on a matter that refers to conditions imposed on the various companies that come under its auspices. The relevant part of the Communications Act is Section 104, where claimants must obtain permission from Ofcom to bring private enforcement claims alleging a breach of the conditions that have been set by Ofcom: they cannot simply file a claim whenever they wish. The Act says:

“The consent of OFCOM is required for the bringing of proceedings by virtue of subsection (1)(a)”.


The purpose of this is to give Ofcom a sort of gatekeeping role and prevent overlapping, or private litigation happening while something is being carried out by the regulator.

I thought it was a worthwhile question and I am happy to ask it. The other issue that has been raised with me is that in these private litigations, the contentious countervailing exemption that we discussed in an earlier group is not available to the big tech firms in the same way that it is available to them in the procedure that is set out in the Bill.

I have given the Bill team notice of these questions. I know that they have some very good answers, and I suggest to my noble friend that he asks his officials to convert that into a letter that he can put into the public domain.

[Lord Fox (LD)]

My Lords, the hyperactive pen of my noble friend signed up to this amendment as well. It is a great pleasure to support the noble Lords, and particularly to get cover from the noble Lord, Lord Wolfson—it is not usually like that. I am very happy to support this amendment, or the principle of this amendment: if not these words, some others.

Just to emphasise, when I was speaking to the last group of amendments, I set out a group of the major tech companies and said that in 2022, they had a revenue of nearly £400 billion, which is twice the size of the Ukrainian economy. That is the scale of the opponent that we are asking citizens to take on. To deny them the opportunity to band together, which in itself would still be a formidable challenge, is really to deny them justice. It is unrealistic to expect any individuals bar a few—and they are probably the ones who own the companies in the first place—to have sufficient resources to take on businesses of this scale. I would like the Minister at least to acknowledge that point. Perhaps we can go away and work out the best way to enable the reality of individuals being able to bring cases, because at the moment it is merely an idea; it cannot possibly happen.

Digital Markets, Competition and Consumers Bill

Baroness Stowell of Beeston Excerpts

Committee stage
Monday 22nd January 2024 Grand Committee

[Viscount Colville of Culross (CB)]

My Lords, I tabled Amendment 32 in my name, and I thank the noble Baroness, Lady Jones, and the noble Lord, Lord Clement-Jones, for adding their names. I also thank the organisations that helped me work on these amendments. Amendment 32 to Clause 20 would stop the Secretary of State from revising the criteria for the conduct requirement process. These criteria are already very broad, but subsections (4) and (5) give the Minister huge scope to alter the types of behaviour expected from the SMS as part of the CR process.

Amendment 22, in my name and that of the noble Lord, Lord Clement-Jones, aims to respond to government concerns about removing Clause 20(4) and (5), which are that it will prevent the Minister future-proofing the CR criteria by allowing the CMA leeway to alter criteria in Clause 19, which will open the way for the imposition of conduct requirements.

I also support attempts to encourage interoperability between user and digital activity in any way possible, so I support Amendment 20, in the name of the noble Lord, Lord Lansley, and Amendment 21, in the name of the noble Lord, Lord Clement-Jones.

On my Amendment 32 in Clause 20, the conduct requirements for the process will be hard-fought by the tech companies. The collaborative nature of the Bill will mean that the SMS will be very involved in setting up the regime, but it will also be following every possible avenue to ensure that the requirements are not burdensome to its businesses. However, subsection (4) gives the Secretary of State broad and unlimited time to be subject to lobbying and to change the nature of the contact requirements.

I have already given an example in my speech on Amendment 7 to show the lengths to which tech companies will go to affect the decisions of politicians in establishing an SMS designation. This amendment will have a similar effect of thwarting their attempts to interfere in the CR process. Over the last decade, a number of cases have been brought against the big tech companies by the EU anti-competitive regimes. As part of that process to rectify the anti-competitive behaviour, the regulators have laid out behaviour for the companies under investigation. These are sets of rules aimed to force the companies to change their conduct and reduce their dominance in the market.

The process is very complicated, and small tweaks can make the difference between success and failure of the rules and their ability to control anti-competitive behaviour. Implementation takes time. Consultation on the rules between the DMU, the SMS and other stakeholders can mean it takes up to six months to put into action, then it takes another several months before the market study on how the new conduct regime criteria are working can be assessed. In the meantime, the SMS continues to make huge profits, while the smaller competitors continue to suffer the loss of market activity.

My concern about the clause is that, even if the CMA comes across a new type of harm and can see clearly what remedy would apply, it cannot create its own remedy under the clause. This is most unusual for a regulatory body. Usually, the breach of law is investigated, and the remedy tailored by that body to proportionately fit the harm identified. The regulator is usually granted the power to craft the remedy itself.

The Government are keen to build a system which is speedy and effective, and so there is the list of tools that can be used as remedies in Clause 20, which is useful, but, instead of a speedy, sensible mechanism which would be in the hands of the expert regulator of digital markets, an additional step has been put in place. That additional step—going back to the Secretary of State to create regulations—is a slower and more complicated way to craft this remedy. The DMU must be left to use its professional expertise to set these rules.

At a later stage, we will be talking about the suggestion of the noble Baroness, Lady Stowell, to have some parliamentary committee involvement. I wonder why on earth we cannot have parliamentary committee involvement when looking at these particular Secretary of State powers and the way that the DMU would use them.

To deal with the concerns that the Minister might have about the lack of future-proofing, I also tabled Amendment 22. Its aim is to respond to claims by the Government that the removal of Secretary of State powers in Clause 20 will stop the future-proofing. Noble Lords know that, in the fast-changing digital world, even the most comprehensive list of criteria might not include all possible eventualities; my amendment deals with those concerns. It stems from the powers of the CMA to look at the objectives of the conduct requirements in Clause 19(5), which are comprehensive: they cover “fair dealing”, “open choices” and “trust and transparency”. Only conduct requirements of the permitted type in Clause 19(5) can be imposed under Clause 20 on the CR regime.

Clause 20 is currently a permitted list for the regime; in future, the CMA may want to change the criteria needed to achieve the objectives of Clause 19(5) as markets inevitably change. I suggest to noble Lords that Amendment 22 will achieve that. I have argued that the fear of the Secretary of State succumbing to the lobbying powers of the big tech companies is something to worry about. This small amendment will solve that problem and give flexibility to the CR process, without the danger of political interference.

[Baroness Stowell of Beeston (Con)]

My Lords, as this is the first time I have spoken in Committee, I declare that I chair the Communications and Digital Select Committee—but I am speaking in a personal capacity. This is quite an eclectic group of topics; it makes me wonder what will be in the group labelled “miscellaneous”.

I will talk about the leveraging principle, but before doing so, I acknowledge what has already been said about parliamentary accountability and the fact that I have an amendment in a later group. To pick up a point that the noble Viscount, Lord Colville, just made about his amendment to Clause 20, if we were to have a new Select Committee, there is no reason why, in the course of its business, it would not look at regulations being brought forward. I would expect there to be that sort of role for a Select Committee, but it would not replace the role of the Secretary of State in this context. We will come back to that when we get to the specific amendment.

The amendment on copyright is very interesting to me, not least because the Communications and Digital Committee is currently carrying out an inquiry on large language models. We are in the final stages of that inquiry and will publish our report very soon. We will have, I hope, some interesting things to say about copyright at that time.

I turn to my point on the leveraging principle; in particular, I will pick up on Amendments 26 and 27 in the name of the noble Baroness, Lady Jones. When the Communications and Digital Committee carried out our scrutiny of the Bill and held hearings in the summer, we looked at the leveraging principle and concluded that what was in the Bill was adequate; we did not propose any further changes being necessary. Noble Lords may remember that, at Second Reading, I raised concerns about how the Government had diluted various bits of the Bill that we, as a committee, had said, “Do not do that”. As I understand it, they have not diluted the leveraging principle. However, I am a great believer in judging people by their actions rather than by what they say. Over the last few weeks, I have been very interested in the various representations that have been made to me and others from the different challenger firms and industry bodies in this area. I see and am sympathetic to their concerns on this topic.

Only today, I was interested to read the Bloomberg daily newsletter on tech matters, which refers to the recent case in the US in which Apple has been forced to make some changes to its 30% fee policy. It has already started introducing things that make that almost meaningless to those who might benefit from it. The newsletter explains what people have to do to use a different payment system from Apple’s and avoid the 30% fee. It says:

“In order for developers to include a website link in their apps to an outside payment system, they’ll first need to submit a request form to Apple. If approved, the link can only be displayed once within the app. It must look like a text URL—meaning it can’t be a candy-colored button that says ‘Use PayPal’—and the text itself must match one of seven templates”.


It continues:

“When clicked, the link will surface a warning from Apple about the risks of transacting with third-party websites, with ‘continue’ or ‘cancel’ buttons. The website has to open in the device browser, rather than from a pop-up within the app, where, depending on the type of service, a user can sign in or register for a new account”;


in other words, you will not bother by the time you have got through all that.

That was a long-winded way to say that I am minded to support what the noble Baroness, Lady Jones, is seeking to do with the leveraging principle here. A safeguard is necessary, but, as I said at the beginning, I am speaking in my own personal capacity.

[Lord Vaizey of Didcot (Con)]

My Lords, I will slip in here quickly, since I have Amendment 25 in this group. I follow my noble friend Lady Stowell in supporting tightening up the leveraging principle as much as possible. We would have a lot more fun in this Committee if we stopped referring to the leveraging principle and started referring to the whack-a-mole principle, which is the same thing. From now on, that is what I will do.

As my noble friend said, it is absolutely critical to the success of the pro-competition regime. We all know how it works and may have used it in our own commercial lives. After years of litigation, you concede a point to the competition authority and reduce the headline prices you are charging for the app to appear on your platform, and then you slip in a new way of charging, as was so ably set out by my noble friend Lady Stowell. You find a different way to charge in order to generate exactly the same revenue.

I tabled Amendment 25 simply to strengthen the anti-whack-a-mole conduct requirement so that designated undertakings cannot shift their anti-competitive behaviour to non-designated activities, even if their ability to do so is directly linked to their strategic market status in a designated activity. Without this change, there is a danger in the current drafting of the CMA having to constantly designate new activities and play catch-up with the SMSs—or it may not be able to combat anti-competitive behaviour in any way at all.

The key point here is that Clause 20 allows the CMA to intervene only when an SMS firm’s conduct

“is likely to materially increase the undertaking’s market power”.

It is too narrow, and it gives these SMS firms broad opportunities to avoid compliance. For example, if Apple News was not designated, as things currently stand, Apple could impose unfair terms on news publishers via contracts, circumventing the terms where it holds the market power, where the action has been taken which would be in the App Store. To appear in Apple News, you would go one step behind, in terms of the contracts with the news publishers, and therefore avoid any remedy.

My amendment seeks simply to close potential loopholes. As I said, my noble friend Lady Stowell has ably set out what the whack-a-mole principle is all about: generating exactly the same revenues but being very creative in how you do so as you play this game with the competition regulator.

King’s Speech

Baroness Stowell of Beeston Excerpts

Tuesday 14th November 2023 Lords Chamber

[Baroness Stowell of Beeston (Con)]

My Lords, I am delighted that the long campaigned for Media Bill will be part of this Session’s legislative agenda. But today I want to concentrate on other issues that the Select Committee on Communications and Digital, which I chair, has examined recently, which relate to other Bills or government activity mentioned in the gracious Speech: namely, digital competition, how to deal with frontier AI and digital exclusion.

I start by emphasising the importance of the UK’s digital economy. Big tech firms have developed platforms and tools that are used and enjoyed by millions. We have countless digital and tech SMEs flourishing across the country. Consumers rely on services that are rapidly moving online. A well-functioning digital economy relies on healthy competition. Indeed, it is central to many of the Government’s core ambitions—especially being a tech superpower. But there is extensive and conclusive evidence that digital competition is not working properly. A handful of big tech firms dominate massively, and this is distorting markets.

In most cases we should let markets take care of themselves—I am no fan of regulation for the sake of it—but where there is clear evidence of market failure and distortion, regulators should step in to ensure a level playing field.

The Government’s proposed Digital Markets, Competition and Consumers Bill aims to do just that. However, I am concerned by reports that the Government are backtracking in the face of big tech lobbying. This gets a bit technical, but the key issue is how big tech companies can appeal against remedies the regulator decides. What is currently proposed is a judicial review, which is a widely respected and used form of appeal process in many comparable settings. It is quick, so decisions remain relevant to market conditions, it is fair and it is robust. Most importantly, it encourages a non-adversarial approach, so all parties have incentives to engage in good faith early on. That is how good regulation should work.

The Government are considering changes to this that would open up more extensive avenues for legal appeal, but we must seriously ask ourselves: who benefits, and what is the price? Expanding the grounds for legal challenge does not in itself make the process fairer, but it does favour those with the deepest pockets and creates incentives for protracted litigation to be the goal from the outset.

Big tech firms say there will not be proper checks on the regulator’s work, but that is the job of Parliament and we need to ensure we do it. It is accountability to Parliament, not toothless regulators, that will give us the better outcome. It takes courage to stand up to big tech firms, as my committee has seen from the growing number of SMEs engaging with us and speaking out. The Government got this one right the first time around, so I would be grateful if my noble friend could confirm that the Government will not change the Bill and will stand up for fair digital competition and the interests of UK businesses.

Digital competition is also a central theme of our inquiry into frontier AI large language models. Our evidence suggests that these models are laying the groundwork for epoch-defining shifts in the way our information environment works, the power of big tech firms, and global approaches to digital regulation. At the heart of this is a multi-billion dollar race between operators of closed source and open source models. Unsurprisingly, we are seeing some big tech firms dominating the field already.

Governments have a rare moment of steerage here. Government and Parliament will not be leading the AI research field, but we can determine what sorts of companies are allowed to flourish and within what parameters. We need to get this right. Today, the committee heard from Meta and Microsoft, and it will take evidence from OpenAI and Google DeepMind next week. By the way, on this country’s potential to compete, it is worth remembering that DeepMind was originally a British firm that has since been acquired by Google. Recognising the urgency of this, the committee is working at pace and will publish its report early in the new year.

Finally, I repeat our call for the Government to take digital exclusion more seriously. It is clear that the world is moving online at an unprecedented rate. Lots of this is positive, but not for those who cannot keep up. We must not let people’s ability to connect and use digital services become another dividing line. However, I am sad to report that the Government have refused even to update their decade-old digital exclusion strategy, which is so out of date that many of the organisations it cites no longer exist and its progress updates are in the National Archives. Sorting this out is low-hanging fruit. The economic case is sound and the practical suggestions have been developed. What is needed now is ministerial attention. Will my noble friend refer this again to the Secretary of State and ask that she reconsiders my committee’s key recommendations?

I share the Prime Minister’s ambition for the UK to be a tech superpower. We have the talent and the potential. We just need to remove some obvious obstacles so that we spread the opportunities, correct the current imbalance of power and ensure that we bring everybody with us.

--- Later in debate ---

[Lord McNally (LD)]

My Lords, it is always a pleasure to follow the noble Lord, Lord Knight of Weymouth, although I shall not try to match his skills as a barista. I was very interested but slightly disappointed in the speech by the noble Baroness, Lady Stowell—not that it was not, as always, a well-informed and pertinent speech, but I had hoped that she would speak about the Media Bill. We cannot fill in everything, I know, but I put it to her that both her experience in her committee and her past experience will make her a powerful influence in this House in getting the Media Bill right; I look forward to working with her on that Bill.

[Baroness Stowell of Beeston (Con)]

I thank the noble Lord for giving way. I did welcome the Media Bill. I did not want to go into detail because there is not time to talk about every Bill that is relevant to the work of the committee, but I can assure him that I will definitely play a part in the passage of that Bill.

[Lord McNally (LD)]

I never doubted it. One thing that has come up already is that these chances do not come along every day. I was on the 2003 media Bill, which has been mentioned, 20 years ago. No matter how eager Ministers may be later to tweet their handiwork, government business managers are not enthusiastic about giving more time to a matter that they think Parliament has got done and dusted, so we have to get this Media Bill right.

I am particularly interested in making sure that our public service broadcasters are well provided for—as the Minister said—in that Bill. We are very lucky in that little cluster of public service broadcasters which play such an important role. In a way, ITV retains many of its old regional strengths from its federation origins. Although it was not always realised at the time, Channel 4 gave an immense boost to our independent production; thank goodness we saved Channel 4 from privatisation.

For me, the BBC has always been the iron pole around which we build the credibility of our public service broadcasting. One thing that could be done, even at this late stage in the Parliament, is to end the endless war against the BBC from the Conservative Benches. It is a national asset. I always think of a comment by one of the great titans of American broadcasting when Reagan was deregulating public service broadcasting in the United States: “We will only know what we have lost once it’s gone.” That is one of the things that still motivate me to come to this House: the determination that we pass on to the next generation a BBC that is, as it is today, the envy of the world.

The other factor in the media section is the repeal of Section 40. I am pleased to see the noble Lord, Lord Black, in his place. I am quite sure that he has the same speech that he has been delivering for 20 years, but it is none the worse for repetition. We will come to that. I draw noble Lords’ attention to the letter sent today to Members from the Press Recognition Panel, which sets out the facts about Section 40. It is interesting that the politicians and the newspapers that have reported on the repeal of Section 40 have all presented it as a draconian issue whereby the winner has to pay both sides in a loss. They always omit to say that this would never apply if only our press would follow what was promised in Leveson and go through a proper media regulator. That offer is still on the table.

If the noble Lord, Lord Black, who has influence in these areas, can exert some of it, it is still possible to implement Leveson in full. That would provide a much healthier approach. We should not be waiting for princes of the blood royal and those enemies of the people, the judges, to regulate our press. That regulation should come from an industry confident enough to set up a proper regulator. On the repeal of Section 40, and if the Minister wants the background, I was the Minister in the Lords at that time. The Foreign Secretary will tell him what a double-dealing stab in the back it was by the Conservatives once they were free of the moderating hand of the Liberal Democrats and free to abandon Section 40.

The only other thing I will mention is that as a lifetime football lover and vice-president of St Albans City Football Club—a declaration of interest—I think this is a chance to get our national game into good order. I look forward to the words of my noble friend Lord Addington. Before him came David Mellor, Tracey Crouch and now the Fair Game campaign—all encouragement for us to get it right.