Undersea Cables
Lord Fox Excerpts(2 weeks, 5 days ago)
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Lord Vallance of Balham (Lab)
There are two vessels. The “Sovereign” is the repair vessel I referred to, which the cable companies pay for and is on standby 24/7 to repair the cables. “Proteus” has a different purpose; it is an MoD vessel that can take account of all underwater structures. It is not a DSIT vessel but an MoD vessel with broad responsibilities.
Lord Fox (LD)
My Lords, one way to mitigate risk is to have redundancy in the capacity of the cables, but redundancy costs money for the commercial organisations that own those cables. What is DSIT doing to ensure that there is sufficient redundancy to give us the protection that we need?
Lord Vallance of Balham (Lab)
I thank the noble Lord for a very important question. As I said, there are some 64 cable systems and 116 cables. We have a lot of redundancy in the system. Despite getting 10 to 20 breaks every year, they do not lead to an interruption because of that redundancy. Three things are important for the redundancy: the number of cables, the geographical diversity or spread of the cables—which provides protection—and the 24/7 emergency repair capability, with a planning consent that allows the vessel to get in very quickly.
Specialised Research Units: Closures
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Lord Vallance of Balham (Lab)
The noble Lord will be unsurprised that I am a strong supporter of R&D funding and know the importance of its links to economic growth. It is crucial that we look at the spread of R&D funding. It is the case that it will be necessary, from time to time, to shut some things and open new things—that has always been the case—otherwise things become ossified and you never end up with new programmes. I fully expect there to be a continued pattern of renewed support for some areas and a closing down of others. What is important in the context of this particular scheme is that the same proportion of MRC funding will be spent on these new centres as was spent on the old units and centres.
Lord Fox (LD)
My Lords, the Minister will be aware that there has been both veiled and explicit criticism of the way in which UKRI conducts its work, particularly work of a bureaucratic nature. Will the Minister tell your Lordships’ House what conversations are being had between UKRI and his department, and indeed himself, to clear up those issues?
Lord Vallance of Balham (Lab)
I will speak about these particular schemes first. These are seven years plus seven, with one review at the beginning and one review at six years. The whole idea is to reduce bureaucracy and make this simpler. UKRI is undergoing a full review of all its activities, with the aim to reduce bureaucracy, following the Grant review. I have discussed this with the CEO of UKRI and will keep a very close eye on it. I believe it is important that scientists get as much time as they can to do science.
Horizon Europe
Lord Fox Excerpts(2 months, 2 weeks ago)
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Lord Vallance of Balham (Lab)
Any underspend on Horizon in the last year has been fully kept within the department.
Lord Fox (LD)
My Lords, following the answer on visas, I think we all know that it is harder now for scientists to come in, and to bring their families, to work in the United Kingdom. We also know that Horizon projects have to be multinational, or have the most success by being multinational. Anecdotally, we hear that progress being made on Horizon is difficult and slow. How much of that slow progress does the Minister attribute to visa issues? In his conversations with the Home Office, what is the ask of that department to speed those visas up?
Lord Vallance of Balham (Lab)
There are, of course, a number of visa programmes—it is a points-based system—including the global talent visa and the skilled worker visa. We know that the number of applications for the global talent visa increased by about 16% between 2023 and 2024, so that we had 8,000 or so in 2024. It is important that the costs of those, including the immigration health surcharge, can be put on to the grants. The noble Lord is absolutely right that it is also important that it is as easy as possible to get these things done. We rely, and always have relied, in this country on immigration of talented scientists and exchange of people, and I hope that that will continue and be as easy as possible.
King’s Speech (4th Day)
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Lord Fox (LD)
My Lords, it is with great pleasure that I welcome the Ministers to their new positions and congratulate the noble Lord, Lord Vallance, on his excellent maiden speech. I have to say that I am having to readjust; I spent so long looking opposite and finding the noble Lord, Lord Callanan, arguing. However, it is good to see that, in crossing the Chamber, he has lost none of his customary charm.
After years of an out-of-touch Conservative Government who took people for granted and left so many things needing to be done, this King’s Speech is very much being portrayed by the Government as a start to putting things right. The people who voted either Labour or Liberal Democrat crave these changes, so we welcome the intentions articulated in this King’s Speech and agree that the commitment to uniting the country is vital.
Given the paradoxically marginal nature of the Government’s overwhelming majority, unification should come, wherever possible, by reaching across the aisles. We have to reach agreement and work for the stability that we all crave. These Benches will work with the Government where we can to help deliver the changes that our voters so eloquently articulated, in that election.
I will focus briefly on stability, investment, infrastructure and skills, and leave it to others to talk about the important need to better facilitate trade with the European Union, and some technology issues.
The Government have quite rightly made growth their primary objective, and recognise that stability is needed to create the ground on which this can flourish. With the Budget Responsibility Bill, the Government are seeking to anchor economic responsibility into law. This is the anti-Liz Truss Bill and we look forward to the debate when it comes.
However, stability is more than just a law. Stability is projected by how the Government behave, how they make decisions and how they co-operate in the public and private spheres. That is where stability will come, so we very much welcome the news of a statutory industrial strategy council to oversee industrial policy.
At the same time, this King’s Speech tacks very much towards bigger government, with state intervention on energy, transport and planning. As I am sure Ministers opposite recognise, success will depend on getting the balance of government involvement right because, in the end, it is private investment that will deliver the growth that we need. For all the potential money in the national wealth fund, meaningful growth will come only if private investment flows. Unlocking that flow of investment is absolutely crucial.
Given we already have a UK Infrastructure Bank and the British Business Bank, and the Government say that they will start by operating through one of these anyway, I would be grateful if the Minister can explain why a third institution is needed to focus what is going on. Can the Minister say what, typically, will the national wealth fund be used for? How will its investments be decided? Will decisions be purely commercial or will strategic issues be included? Will the fund take stakes in businesses? How will those stakes be used—passively or actively?
As we have heard, infrastructure is crucial to delivering growth. To date, much of the commentary around the planning and infrastructure Bill has focused on housing. Of course housing is vital, but when it comes to national productivity it is going to be transport, energy and digital infrastructure that will drive that productivity.
Past Governments have made similar, perhaps less ambitious, plans to tackle the infrastructure challenges we face, but inevitably there is a big time lag before things start to happen. For all the talk of shovel-ready projects, these are few and far between. Ironically, the one shovel-ready project with a proven positive effect on national productivity is the northern leg of HS2, which the Government seem to have decided not to revive. Perhaps the Minister can explain why.
On a wider point, the Government’s planning proposals will be challenging to put in place, and we believe that planning must properly involve in some way the communities it affects. The delivery of big infrastructure projects is also an issue, as I am sure all of us in your Lordships’ House note. It was surprising that the Government decided not to give the National Infrastructure Commission a statutory role in overseeing national projects. Can the Minister explain how the commission, the UK Infrastructure Bank and the national wealth fund will work together, first in the creation of the long-term plan that was discussed during Questions today and then to improve project delivery once these projects are undertaken?
Finally, I turn to skills. The central question I have on the whole government agenda is: for all the Government’s targets, who will lay the bricks, insulate the houses and bring the electricity grid into the modern era? The Skills England Bill seems to lack urgency. Can the Minister explain the timetable for the development of both a plan for skills in this country and its implementation? When will we see any effect from it on the actual workforce?
In coming from the cafeteria today I caught sight of the Prime Minister talking about a migration strategy around skills. It seems clear that, at least in the short term, a sector-based migration strategy will be needed. It would be helpful if the Minister could explain what the Prime Minister was talking about.
I have one other quick win for the Government: they could turn the apprenticeship levy into a wider, more flexible skills levy straight away. We do not need consultation. Everybody who comments on this knows that this is what needs to happen, so why not do it now, and start the process of retraining a broader group of people? There is money left over from the apprenticeship levy that is not being used for skills.
It remains for me only to repeat that uniting the country requires a broad approach to deliver both benefits and stability across our country. We on these Benches will engage positively in all the discussions from this King’s Speech and beyond to assist in delivering the stability that this country needs.
Combating Disinformation: Freedom of Expression
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Viscount Camrose (Con)
Indeed. It is worth reminding the House that close to 2 billion people will go to the polls over this calendar year. A great many of those elections in which they participate will come under attack from malign foreign influences. Therefore, we have implemented the Defending Democracy Taskforce, chaired by the Security Minister, which set up a new unit last year specifically dedicated to safeguarding our coming election, whenever it may be. It continues to engage with various committees of Parliament and with the Electoral Commission. We will look carefully at any proposals on deepfake provisions in the DPDI Bill. Deepfakes are already illegal today if they violate either the foreign interference offence or the false communications offence.
Lord Fox (LD)
My Lords, my noble friend Lord Strasburger asked about the parliamentary scrutiny of the unit. Does the Minister understand that, if there were to be proper scrutiny of the unit, some of the words that he uses to try to placate your Lordships’ House would have deeper resonance? Can he tell us why the ISC is not scrutinising the unit?
Viscount Camrose (Con)
NSOIT is indeed scrutinised by Ministers; it sits within DSIT and then Ministers, as we see, come before this House to explain matters. As a national security team, I dare say that we would have some concerns about a standing report to Parliament about its activities, but I can continue to reassure the House on its role.
Digital Markets, Competition and Consumers Bill
Lord Fox ExcerptsWednesday 24th January 2024
(10 months, 4 weeks ago)
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Viscount Colville of Culross (CB)
My Lords, I have put my name to Amendment 48 in the name of the noble Baroness, Lady Jones of Whitchurch, and I support dropping Clause 29 from the Bill.
These amendments are also about speeding up the process of stopping anti-competitive behaviour by the tech companies. It is essential that no hostages to fortune are given for tech company lawyers to drag out the process, as many noble Lords said, particularly in the first group.
I want noble Lords to bear in mind that, for every big tech company, every week they succeed in delaying a decision against their anti-competitive practices is one in which they earn millions of pounds, while their competitors are left struggling in so many areas. Speed is of the essence.
As a former newspaper journalist, my most immediate field of concern is local and regional media, which are suffering from the anti-competitive behaviour of the tech companies. There has been a collapse in local newspapers over the past decade and in the next three years this will turn in to a major exodus, with huge areas of the country becoming local news deserts with nobody reporting on local councils, courts and other important civic activities.
The Digital Markets Taskforce study on digital advertising found that the tech companies had used network effects and economies of scale to dominate the market. It concluded that the “more vibrant competition” in the market would improve
“the bargaining power of online news publishers”,
which would
“improve the health and sustainability of journalism in the UK”.
In turn, this would
“contribute positively to the effectiveness and integrity of our democracy”.
On top of this, much of the news content generated by these media companies is used by tech platforms either for free or for little remuneration.
I have long campaigned for the final offer mechanism to be available to the CMA as a powerful deterrent against anti-competitive behaviour by the tech companies, but surely all deterrents are more effective if there is a realistic chance that they will be deployed, and in a short time. Once the CR requirements on an SMS have been imposed, breached and reported, the CMA should be in a good position to know whether the designated SMS company will take the long or short road to a solution. Amendment 48 would allow the CMA to issue an enforcement order, decide whether that has been breached and investigate the breach, if it feels that it will lead to a satisfactory resolution to the company’s behaviour. However, if, earlier in the process, the solution is not going to be possible, the regulator needs the power to bring forward its ultimate deterrent. No SMS will want to have the final offer mechanism imposed on it, and I understand that the CMA is equally reluctant to deploy it, but the more pressing the threat the more likely it is that the DMU investigation will be brought to a quick and effective resolution.
I know that these companies will fight tooth and nail to preserve their massive profits resulting from the anti-competitive behaviours. It might be useful for the Committee if I give just one really shocking example of how effective these delaying actions can be. The salutary lesson is the story of a nascent shopping comparison site, Foundem, based in London and founded in 2005, which was doing very well until 2008, when it was massively deprioritised on Google Search, at about the same time that Google Shopping, the search engine’s own shopping comparison site, was set up. Foundem issued a complaint to the EU Commission in 2009 about anti-competitive behaviour by Google. The Commission set up an investigation and, three years later, after many legal arguments, Google was given a preliminary assessment—similar, I imagine, to an SMS designation. Rules were then laid down for the company to follow, but within six months market tests revealed that it was not tackling the anti-competitive behaviour. The response was dragged out by Google until 2016, when it was given a supplementary statement of objectives, which were also heavily fought by the search engine.
Finally, on 27 June 2017, the EU imposed a record €2.4 billion fine on Google for violating EU competition law. However, the company appealed, first to the EU General Court and then to the Court of Justice of the European Union. Final judgment on the case has yet to be issued. Meanwhile, Foundem exists in order to fight the case, but it suspended all its services eight years ago. This is a 15-year David-versus-Goliath battle with a company, some of whose activities CMA might have to designate. This legislation must be drafted to ensure that the process brings results, and fast, if small digital competitors are to have a chance of surviving.
Already the CMA estimates that the designation process will not become operational until June 2025. I know that the hope is to set up a designation process at the same time as negotiating the conduct requirements, but that could still take up to nine months to implement on the SMSs. Meanwhile, many of the smaller media outlets I talked about earlier will have gone under.
The same arguments for legal delay by tech companies must apply to Clause 29, which introduces the concept of countervailing benefits. I do not understand the need for Clause 29. Clearly, the balance between consumer benefit and anti-competitive behaviour will have been looked at as part of the SMS designation process, which is clearly set out in the Bill. Does the Minister think that our world-class regulator will ignore these considerations in the initial process? If they will be considered then, why introduce this clause for consideration all over again? I have already explained the need for speed in the CMA’s process. This exemption can only play into the hands of the tech companies to draw out the processes and hold up the prospect of many more companies like the start-up shopping search website Foundem being littered by the digital wayside. I ask the Government to seriously consider taking Clause 29 out of the Bill.
However, I support the fallback in Amendment 40, to have the word “indispensable” inserted into the clause. Your Lordships’ Committee has heard that “indispensable” was taken out on Report in the other place. The Minister has said that the simple threshold of “benefit” is already established in Section 9 of the Competition Act 1998 and Section 134(7) of the Enterprise Act. However, the former talks of an “indispensable benefit” and the latter just of a “benefit”. The Minister says that the two thresholds are the same; clearly, they are not.
The new definition of the grounds on which anti-competitive conduct can be permitted states that
“those benefits could not be realised without the conduct”.
It requires only that anti-competitive conduct be necessary, rather than indispensable, which means that anti-competitive behaviour is the only way to achieve the benefit. Surely, if that is the case, it would be better for the consumer, in whose name the Bill is being enacted, to have the highest possible threshold of benefit.
The Explanatory Notes open up avenues for further legal wrangling by lawyers, as they say the definition of benefit will be similar to that in the Competition Act and the Enterprise Act. As the two Acts use “benefit” in different ways, that will surely lead to confusion. Is the use of the word “similar” because it is not possible to say “same”, in the light of the divergent terms that appear in these two Acts? Without it, there seems to be room for legal ambiguity. At the very least, there should be an explanation in the Bill that establishes “benefits” as having the same definition as in the Competition Act.
I know that all noble Lords want the Bill to be implemented and effective with all possible speed, to make this country a world leader in digital start-ups. However, it needs to be amended to avoid legal confusion and unnecessary delay by world players that have everything to gain from protecting their dominant position in markets.
Lord Fox (LD)
My Lords, on the pretext that he would not be here, my noble friend passed responsibility for this group on to me. As noble Lords can see, he is “not” here. This is a long group and my noble friend managed to attach his name to every amendment in it, with the exception of the two proposed by the Minister, so I apologise if I give a slightly long speech on his behalf.
I spoke at Second Reading, but I was not here for the first day in Committee, as I was in the Chamber speaking to the main business there. My noble friend has tabled Amendments 38 and 41, on countervailing benefits; Amendment 43, on goods and services; Amendments 49, 50 and 51, on final offers; and Amendment 107, on injunctions. He also supports Amendments 36, 39 and 40 from the noble Baroness, Lady Jones, which seek to restore the status quo of Clause 29.
In Clause 29, as we know, there is an overarching provision that enables SMS designated firms to push back on regulatory decisions through a countervailing benefits exemption. This is, in our opinion, a potential legal loophole for big tech to challenge conduct requirements through lengthy, tactical legal challenges. We just heard an example of how similar measures can be employed. This is a significant loophole, not a small one, and it would require the CMA to close a conduct investigation into a breach of conduct requirement when an SMS firm is able to prove that the anti-competitive conduct in question produces benefits which supposedly outweigh the harms, and that the conduct is “proportionate”—that word again—to the realisation of those benefits. It has the potential to tie up CMA resources and frustrate the intent of the legislation. It is critical that these provisions do not inadvertently give designated firms immunity from CMA decisions. We heard from other speakers that the scale of resources at the command of these companies far outweighs the resources that the CMA would be capable of summoning. That inevitably leads to the ability to clog things up.
As the noble Baroness, Lady Jones, explained, the Government added amendments to the Bill on Report in the Commons that could further weaken the ability of the DMU to push back against spurious claims of consumer benefit. The removal of the term “indispensable” may weaken the regulator’s ability to rebuff these claims as, by analogy with competition law, the use of the term “indispensable” is likely to require a high standard for firms to meet; therefore, the standard is now lower.
Lord Fox (LD)
The Minister has already introduced a difference between the two. There is a difference between “there is no other reasonable or practicable way” and “indispensable”. They are not the same—they are not synonymous. If I have to prove that something is not practicable, that is not the same as indispensable. The Minister has absolutely proved the point.
Viscount Camrose (Con)
Again, in my opinion, the two sentences are indistinguishable in their meaning.
Viscount Camrose (Con)
As many noble Lords in the debate have alluded to, we have to be clear that this is a fast-moving field, and we have to at least allow for the possibility that new technologies can provide new consumer benefits and that it is okay to argue that a new and emerging technology that was not part of the original consideration can be considered as part of the defence against a finding of breach. The fact that the intended meaning is intended to be clearer in the current drafting is aiming to provide greater certainty to all businesses while ensuring that consumers continue to get the best outcomes.
Amendment 41, from the noble Lord, Lord Clement-Jones, would change the current drafting of the countervailing benefits exemption in several ways that together are intended to ensure that the CMA is provided as soon as possible with information relating to an SMS firm’s intention to rely on the exemption. We agree with noble Lords who have spoken today that it is important that the exemption cannot be used to avoid or delay enforcement action. The conduct investigation will operate in parallel to the assessment of whether the exemption applies, meaning that the investigation deadline of six months is not affected by the exemption process. The regime has been designed to encourage an open dialogue between the CMA and SMS firms, helping to avoid delays, unintended consequences and surprises on all sides. Therefore, in many cases, if a firm intends to rely on the exemption, we anticipate that this will be clear to all parties from early on in the process.
Lord Fox (LD)
I appreciate what the Minister said. By “early on in the process” does he mean after the process has been instigated, or before? A lot of this information is needed in order to understand whether there needs to be a process in the first place. There is a chicken and an egg here, in that some of this information is up front before we get to actions and enforcement.
Viscount Camrose (Con)
Indeed. It is an important point. Right from the beginning of potential conduct requirement design or PCI design, it would be consulting very widely with all stakeholders, including SMS firms and tech challengers. As part of that consultation, consumer benefits would be expected to be stated, in what is designed to be a participative process on all sides. As I was saying, the CMA is required to consider consumer benefits early on, when setting conduct requirements. The SMS firms will therefore outline the consumer benefits associated with their conduct at that stage, long before a conduct investigation.
Finally, adding further evidential requirements risks overburdening the regulator with more documentation than necessary, and therefore potentially delaying any enforcement action. For the reasons I have set out, I hope the amendment will not be pressed.
I come now to the discussion on the powers of the CMA to enforce obligations where they have been breached by SMS firms. Amendment 43, from the noble Lord, Lord Clement-Jones, would provide the CMA with a power to impose an enforcement order requiring an SMS firm to offer fair and reasonable payment and non-payment terms to third parties for goods or services. I can confirm that, under Clause 19, the CMA already has the power to require a firm to offer fair and reasonable terms through conduct requirements, and, where these are breached, the CMA has power under Clause 31 to make an enforcement order obliging the firm to stop the breach. As such, this amendment would not give the CMA any additional powers and could risk a narrower reading of its powers by raising the question of why other types of orders are not mentioned.
Amendment 107, also from the noble Lord, Lord Clement-Jones, would allow the CMA to apply to the High Court where a firm was breaching, or attempting to breach, an obligation or one of the conduct requirement objectives set out in Clause 19(5). The objectives in Clause 19(5) are not intended to be binding on SMS firms. Their purpose is to guide the design of conduct requirements by the CMA. It would therefore not be appropriate for the CMA to find a firm in breach of these objectives.
However, I agree with the noble Lord, and others who have spoken today, that it is important that the regulator can respond quickly before irreversible harm results from SMS-firm conduct. Where urgent action is needed in relation to a suspected breach of conduct requirements, the CMA will have the power under Clause 32 to make an interim enforcement order before irreversible harm occurs. For PCIs, the CMA will be able to issue directions setting out specific steps that a firm must take to become compliant with a pro-competition order. Failures to comply with orders under either conduct requirements or PCIs can be enforced through robust penalties. There is also the possibility of affected persons applying to court to enforce relevant requirements, and to apply for injunctions under Clause 101.
Lord Fox (LD)
I appreciate the Minister giving way again and his answers. I am slightly confused; I either misheard or misunderstood, but did the Minister say that Clause 19(5) is, in essence, unenforceable by the CMA and is merely an advisory action?
Lord Fox (LD)
My Lords, clearly the noble Lord’s days on the standing committee were not wasted; we thank him for his incredibly cogent set of arguments. He has said some of what I was going to say, which is good, so I will not repeat it.
It is worth remembering that there is a point of scale here, and it is scale that creates the issue. Alphabet, Amazon, Microsoft, Meta and Apple, in 2022, together had revenues of nearly £400 billion. How did they get there? Of course, they had their initial offering and their services and were able to attract customers, but then there is the law of networks and then predatory acquisition. The two feed off each other; one boosts the other and gives the finances and so on. Predatory acquisitions add to the network scale, and the network scale then makes the offer.
As we have heard, there has been a huge number of such acquisitions—not mergers—across those platforms, and they have very much been part of the strategy for those businesses. Few, if any, were questioned in time because, in classic competition terms, the scale of one outweighed the significance of the other in the short term.
The noble Lord pulled out the question of the acquisition of Activision. That was a departure—it did not go to court, but it did lead to a different way of looking at an acquisition by Microsoft. It was interesting that the authorities in the EU and the US did not take the same view. It was notable that the CMA stood apart and made that decision. It is a small step, and one that will clearly need much more support in order for the aims of this Bill to be properly supported.
The Bill introduces a requirement for SMS firms to report mergers, which is a start. They have to meet criteria relating to share ownership, voting rights, relevance to the UK and transaction value. This will help ensure that problematic acquisitions by dominant tech firms do not fly under the radar, but the Bill does not give the regulator additional powers, as such, to intervene in those deals.
Existing merger control practice in the UK and elsewhere has struggled to grapple with tech acquisitions, which can appear relatively harmless in the present, as we have said, while resulting in serious competition, as was elegantly illustrated by the noble Lord, Lord Lansley. In the UK, the CMA can intervene in a merger only if it proves that the deal is “more likely than not” to result in a “substantial lessening of competition”. Of course, that was not tested with the Microsoft acquisition. To address this, the Bill should be amended to give the CMA greater scope to block or impose remedies on SMS acquisitions. The Bill should introduce a tougher merger control regime for acquisitions by SMS firms, in the sectors where they have been designated as SMS firms.
On that basis, we support both Amendment 59, in the name of the noble Lord, Lord Vaux, relating to where an investigation is ongoing, and Amendment 60, in the name of the noble Lord, Lord Lansley, to Clause 57. As we have heard, it would amend the merger regime in the Enterprise Act. We think that may be a way of reaching in and giving the powers that the CMA will obviously need.
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.
Baroness Harding of Winscombe (Con)
I will just add a couple of questions to the ones that my noble friend Lady Stowell just posed, and I am sorry that I have not been organised enough to share these with the Bill team in advance. Both relate to the importance of the collaborative nature of this legislation and how important it is that the tech companies are actually incentivised to work with the CMA as they go through this process. I too have had a couple of questions posed to me, in addition to what I would describe as the Ofcom-model question that my noble friend raised.
First, should the legislation require courts to avoid judgments that conflict with the DMU’s existing decisions? Otherwise, I think there is potentially a risk that you get two jurisdictions coming to contradictory conclusions. Secondly, how can we avoid litigation undermining existing DMU resolutions and therefore just extending and delaying any implementation? In both cases, there is a risk—although I defer to the huge expertise in the Committee on the need for the civil proceedings. We have to make sure that we do not undermine the very principle of trying to incentivise the SMS firms to engage in constructive dialogue through the process.
Data Protection (Adequacy) (United States of America) Regulations 2023
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Baroness Jones of Whitchurch (Lab)
My Lords, I am grateful to the noble Lord, Lord Clement-Jones, for raising his concerns about this SI this evening, and for the diligent work of the Secondary Legislation Scrutiny Committee in drawing to our attention the inadequacy of the original Explanatory Memorandum attached to it. In fact, had the details been included in the proper form in the first place, it could have saved me a lot of chasing around to establish what had been tabled when; as the noble Lord pointed out, it was not immediately clear.
For example, the Secondary Legislation Scrutiny Committee criticised the lack of an impact assessment, a variation of which has now finally been attached to the SI. As the noble Lord made clear, the original Explanatory Memorandum recorded that the impact assessment was not ready to be published as it had to be submitted to the Regulatory Policy Committee for its review. We now know, thanks to the work of the Secondary Legislation Scrutiny Committee, that the RPC judged the original impact assessment as not sufficiently robust, identifying areas of improvement which, if not addressed adequately, would generate a red-rated opinion. It reports that a revised IA was submitted to the Regulatory Policy Committee on 20 September. Can the Minister confirm whether this revised IA has now received a green rating from the RPC?
I agree with the Secondary Legislation Scrutiny Committee that, sadly, the failure to produce this proper documentation in a timely manner occurs all too often. It makes it difficult for Parliament to carry out our scrutiny role and reflects a wider decline in drafting accuracy. I understand that the staff work under intense pressure but, in this case, I see no reason why all the checks could not have been carried out before the SI was laid, even if this resulted in a slight delay.
The Secondary Legislation Scrutiny Committee also quite rightly raised concerns about the lack of contextual information in the original Explanatory Memorandum. I absolutely agreed with them on this. It was not until I read the impact assessment that the background and intent of the SI became clear. There is now a revised EM but the original printed version of the SI, which I collected from the Printed Paper Office, as I suspect the noble Lord did as well, contained the original Explanatory Memorandum, which again underlines the inadequacy of the processes adopted by the department.
In this context, I have some questions which arise from the impact assessment rather than the EM. First, is it the case that the only adequacy regulations currently in existence are with the Republic of Korea? As this is the first such agreement, how are the provisions of the regulations being monitored, and have any data breaches been identified? I hope that we would learn from that first experiment, if you like, with the Republic of Korea. Any information on how that is working would be appreciated.
Secondly, what criteria do the Government use for prioritising other potential data partnerships, as listed in the IA? Are any others near completion?
Thirdly, since Brexit and the failure of the EU privacy shield, the EU and the US have developed the data privacy framework, and we have signed up to the UK extension of that framework. In what ways does the extension vary from the EU-US agreement? If the European Commission varies that agreement, can we be assured that the UK extension will seek to reflect those changes? This would make it considerably easier for businesses to navigate the rules in the longer term.
Fourthly, since there is some sensitivity around this currently, today’s announcement that the NHS has handed US spy tech firm Palantir a contract to create a huge new data platform has rightly caused concern. Does this agreement come under the new data adequacy rules covered by this SI? Is it the case that individuals cannot opt out of the scheme, as reported in the press? What would prevent Palantir selling on the data to other US companies, provided they signed up to the US Department of Commerce’s self-certification scheme?
Incidentally, I could not see in the impact assessment any assessment of the robustness of the US rules. For example, how many data breaches are there per annum and what sanctions are taken against those who breach the rules? It is all very well having an adequacy rule, but we want to know how it is working in practice and what the US’s history has been on this. Does the Minister have any information on this?
My last question leads on to the Secondary Legislation Scrutiny Committee’s last recommendation, which has also been highlighted by the noble Lord, Lord Clement-Jones. The UK public are understandably suspicious about how their personal data could be misused or monetised by big corporations, both here and abroad. If they have nothing to worry about in this instance, it would have been helpful to hold a public consultation to provide reassurance and build confidence in the policy. As it stands, there are bound to be concerns about the underlying consequences of this proposed agreement. As the Secondary Legislation Scrutiny Committee points out, an increasing number of experts and specialist lawyers could have contributed to the development of this policy, particularly as it may be a model for other agreements in the future.
I hope the Minister can reflect on these concerns and take them back to the department. I hope that he can also address the specific questions I have raised, and that he can assure us that the lessons about the way documentation is presented to Parliament for approval in the future will be taken on board.
Lord Fox (LD)
My Lords, it is a pleasure to follow the noble Baroness and, indeed, my noble friend Lord Clement-Jones. Their commentary on the process so far is quite damning. I share my noble friend’s fear that this is in danger of selling short what is an important aim of creating a viable data bridge between these two jurisdictions.
I am not going to go over the process; I will pick out a number of points from what I think is the right Explanatory Memorandum but may, of course, be the wrong one. I am acting in good faith; I think I picked it up from the table at the right nanosecond when the correct document was there.
Paragraph 7.2 of the EM says:
“DSIT officials have been working closely with counterparts in the US”.
Paragraph 25 of the Secondary Legislation Scrutiny Committee’s report says that DSIT told the committee:
“The US does not have a comprehensive data protection framework”.
The report points out, as noble Lords have said, that this framework tends to be based on a sector or state- level requirement. So who are the counterparts that DSIT talked to? There are no counterparts equivalent to DSIT who can have that competent conversation.
In practice, can they know that the treatment of data will be the same in California as it will be in Florida? If they know the answer to that question, how do they know it—who did they talk to in order to gain that information? It seems to me that the complications of data in the United States are not reflected in the Explanatory Memorandum in my hand.
That is the first point. Moving on, if you look at paragraph 7.6 in the Explanatory Memorandum, you see that it is very clear that this is a self-certifying annual process. Self-certifying is another word for ticking boxes. So, once again, how can the department be sure that this process is being properly dealt with and monitored? When we come to the enforcement of this self-certification process, is it the Department of Commerce that will be checking that this self-certification has happened? Will it be the state legislatures? Who will be the bodies in charge of this self-certification? Will there be an annual report, so we know that all these bodies are certified? Indeed, if I am giving my data to a particular organisation that is then sending that information across the United States, how do I know that that process is properly certified? It seems that these are good words but, unless they are backed up with a system and a process, they are to all intents and purposes meaningless.
The next point is picked up in paragraph 7.12 of the Explanatory Memorandum, where we talk about processors and transfers, and people in the United States who are
“indicated on the Data Privacy Framework List as participating in”
this bridge. If there is a violation from an organisation in the United States that is picked up by the Information Commissioner in the United Kingdom, what happens next? Who does what, in terms of prosecuting the organisation in the United States for wrongfully dealing with that data? Who is liable? At a corporate level, where is this dealt with? Is there some sort of corporate veil to the US company which means that the UK company is not liable? How in companies law will this operate? It seems to me that there is not the information here to answer those questions and I wonder, frankly, whether they have actually been considered.
It is quite clear that this could not have happened without the hard work and endless negotiation of the EU-US group. This rides on the back in a rule-taking process that I suppose we are going to have to get used to as things go forward. My noble friend’s point about Schrems is very true; Schrems III is coming soon, so what will the Government’s position be if it finds against the EU part of this bridge? Will we also automatically cancel the bridge? How does that then affect companies that have already transferred their data and made that decision?
There are couple of ancillary questions which are, I guess, slightly off the wall. There is an industry in this country that involves having servers and creating a UK-based server place as a safe harbour for British data. I assume the department has done an analysis of the industrial effect on those servers, because clearly many of them will be no longer needed, and data can be sent back to the United States rather than living in what are euphemistically called “clouds” but are actually server farms in the United Kingdom.
I have a final question. As the Minister knows, political parties tend to knock on doors, collect data and put that data into databases. Can he tell us what the position is on electoral databases in terms of using US-based servers to retain that data? At the moment, that is not done. Will political parties be able to move that data from servers in this country to perhaps their counterparts, assistants or supporters in the United States, in order to do analysis, targeting and whatever, or do the current rules of safe harbour still exist for electoral data?
Artificial Intelligence: Regulation
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Baroness Williams of Trafford (Con)
It is the turn of the Liberal Democrat Benches.
Lord Fox (LD)
I thank your Lordships’ House. I will follow on from the point made by the noble Lord, Lord Holmes. Huge commercial benefits are possible from AI. We have talked about the dangers, but there are benefits as well. However, as the Made Smarter Review made clear, the management skills to implement the digital opportunities of today are insufficient, so they are quite clearly not going to be there to implement the benefits of the future. In conjunction with his colleagues in the business department, what is the Minister doing to make sure that we have the skills to be able to take advantage of this technology?
Viscount Camrose (Con)
Yes, I thank the noble Lord for his point, which is a really important one. There is no defined curriculum of skills for AI anywhere, and there is such a very large range of different types of skills from data science, analytics and computer science, among others, to do that. I do not believe that anyone has produced what might look like a core curriculum of those things. We are, on the other hand, investing very serious funds into education at all levels, from school age to college age and advanced studies as well. I very much take the point, and driving global acceptance and adoption of AI is absolutely key to realising its value.
Semiconductors Manufacturing
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The Parliamentary Under-Secretary of State, Department for Science, Innovation and Technology (Viscount Camrose) (Con)
The national semiconductor strategy sets out the Government’s plan to build on the UK’s strengths to grow our sector, increase our resilience and protect our security. We will also announce plans by the autumn to further support the competitiveness of the semiconductor manufacturing sector, which is critical to the UK tech ecosystem and our national security. We have engaged, and continue to engage extensively, with industry. The Government’s new semiconductor advisory panel met last week to inform our approach.
Lord Fox (LD)
I thank the Minister for his Answer. I think the concern lies around the rhetoric that has surrounded the May announcement, which very much focused on research and design while coupling that to resilience. As the Minister knows, good design companies and good research get bought and leave the country, and they do not necessarily contribute to resilience, whereas manufacturing does. As the Minister said, we in this country are home to some very innovative, lower-cost, niche manufacturers, but for those investors to have the confidence to further those companies, a strategy needs to be set out. Can the Minister assure your Lordships’ House that his department is putting maximum pressure on the Chancellor so that, when his Autumn Statement comes out, a proper manufacturing strategy for semiconductors in this country will be forthcoming?
Viscount Camrose (Con)
The noble Lord raises, as ever, an interesting point, but to build an advanced silicon fab would, first of all, cost tens of billions of pounds. It would run into not only costs of operation but substantial risks of uncompetitive yields and, as we have seen several times historically, shifts in demand for semiconductors. I remind the House that, although 40% of the value chain of semiconductors is represented by manufacturing, 30% is represented by design. It makes sense that our strategy should build on the country’s strengths, particularly in design.
EU Programmes
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Baroness Lawlor (Con)
I say to the Minister that there are strings attached. Will he reassure the House and ask the Government not to allow the pressure from the Windsor Framework to inhibit our freedom to pursue scientific research, and get a cast-iron guarantee that it will not be used politically against us?
Viscount Camrose (Con)
First, as I was obliged to explain to the House at the time, I was unable to comment on ongoing negotiations for fear of prejudicing their outcome. The initial position of the EU was that we had to pay for the entirety of 2023, despite the fact that it was already March by the time this agreement was made, there were no mechanisms in the place for clawback, which I will come to in a moment, and it was all or nothing. I am pleased to say that thanks to the negotiations we have reached a deal that works for both sides.
On the clawback scheme, the preferred outcome is not to require a clawback. In common with every previous Horizon programme, we have gained more from the programme than we have put in, and we have every reason to believe that that will be the case, but there is always a risk that, because we are entering this particular Horizon programme late and many of the bids and activities will already have been allocated to different parties, we will not on this occasion be able to make as much money back for our institutions as we put in. In that instance, the clawback mechanism negotiated by our team mitigates that risk somewhat for any really significant disparity.
Lord Fox (LD)
My Lords, without overegging the pudding, the whole point of Horizon is that there is international co-operation. There are issues with visas because we are going from the free movement of people to a visa-based system, so that is fundamental to how this works. However, my question is about Copernicus. We have not heard much today about that, so will the Minister tell your Lordships’ House where we are on that and how the deal reflects on that?
Viscount Camrose (Con)
I will come back to the question of visas, and I take the point. I am pleased to say that we are also reassociating with Copernicus. It is such an important programme for the earth observation sector. Geospatial is in my portfolio as a Minister. I am a great believer in the value that it can bring. What particularly pleases and excites me about the association with Copernicus is access to the EU’s very comprehensive dataset that could help to kick-start our work and the work done in the EU. I am extremely positive about that.