Data Protection and Digital Information Bill

Lord Lucas Excerpts

Committee stage
Monday 22nd April 2024 Grand Committee

Moved by

[Lord Lucas]

199: Clause 109, page 133, line 21, leave out “(2D)” and insert “(2F)”

[Lord Lucas (Con)]

My Lords, in moving Amendment 199, I will also speak to the other amendments in this group. In so doing, I declare an interest as the principal proprietor of the Good Schools Guide; we make a lot of use of cookies on our website.

I am completely in favour of what the Government are doing in this part of the Bill as an attempt to reduce cookie consent pollution. It is a tiresome system that we all go through at the moment. The fact that it is tiresome means that, most of the time, we just click on it automatically rather than going through to the details. In a way, it is self-defeating. What the Government are trying to do will very much improve the quality of people’s response to cookies and will make them more aware, in situations where they are asked for consent, that this is important.

However—this will be the request at the end of my speech—between Committee and Report, I would really like to sit down with any noble Lords who are interested and are representatives of the relevant industry to discuss how we should deal with cookies that relate to supporting advertisement delivery. A lot of the web relies on advertisements for the revenue to support itself. By and large, for a lot of sites that you are not asked to pay but from which you get a lot of value, that value is supported by advertising. As a website, if you are going to charge someone for delivering advertising, you have to be able to prove that the advertisement has been delivered and to tell them something about the person to whom you are delivering it. In this process, you are not interested in having individual information. What you want is collective information; you want to know that you have delivered 24,000 copies of this advertisement and know what the audience looks like. You absolutely do not want to end up with personal information.

Within that envelope—absolutely excluding the sorts of cookies that chase you around the internet saying, “Do you want a deckchair?”, just because you bought one two days ago—this is a vital part of the way the internet works at the moment. In Amendments 199 to 201, I suggest ways in which the clauses could be adapted to make sure that that use of cookies—as I say, it does not involve the sharing of personal information; it very much involves collective information—is allowed to continue uninterrupted.

[The Deputy Chairman of Committees (Baroness Garden of Frognal) (LD)]

My apologies to the noble Lord but his microphone does not seem to be working. I wonder whether he could speak more clearly.

[Lord Lucas (Con)]

I am sorry. I assumed that my microphone was on.

[The Deputy Chairman of Committees (Baroness Garden of Frognal) (LD)]

It is but I do not think it is working. I do not know whether anybody else is having problems with it.

[Lord Lucas (Con)]

Okay. It does not quite reach me up here; I could sit down if that would be helpful.

[The Deputy Chairman of Committees (Baroness Garden of Frognal) (LD)]

No, carry on.

[Lord Lucas (Con)]

I will try to line up with it better. Amendments 202 to 205 flag concerns with proposed new Regulation 6B, which sets out to remove cookie banners automatically when the technology is available. The concerns very much relate to that last phrase: “when the technology is available”. How will this work? How is it to be managed? There is only a thin layer of controls on the Government in the way that they will use these new powers; it is also unclear how this will affect consumers and advertisers. There could be some far-reaching effects here. We just do not know.

I am looking for, and hope the Government will agree to, wide consultation because, on something such as this, it is never true that everybody knows everything. You want to put the consultation out to a lot of different people with a lot of different experiences of how to use the net to make sure that what you are doing will have the sort of effects that you want. I want to see proper, thoroughgoing impact assessments, including of the impact on competition and on the economic health of participants in the net. I would like to see a real analysis of the readiness of the technology, not just an assumption that, because somebody likes it, it will work, but a real, critical look at whether the technology is actually up to what it is hoped it will do, and proper testing, so that, in giving the Government the carte blanche that they have asked for with these clauses, we do not end up letting ourselves in for a disaster.

As I said, most of all, I am looking for a meeting between now and Report, so that I can go through these things in detail, and we can really understand the Government’s position on these matters and, if necessary, discuss them further on Report. I beg to move.

[Viscount Chandos (Lab)]

My Lords, I will speak briefly in support of the amendments in the name of the noble Lord, Lord Lucas, to which I am pleased to have added my name. I apologise for not being able to speak at Second Reading, but I understand from other Members of the Grand Committee that an occasional guest appearance and a different voice are welcome.

I declare an interest, as set out in the register, as a director of RSMB Ltd, a company specialising in the methodology of audience measurement, cross-media measurement and data integration. More fully, I am nominated and remunerated by the advertising group Havas, which owns the company jointly with Kantar Media.

As the noble Lord, Lord Lucas, so clearly set out in his introduction, these simple and uncontroversial amendments would bring greater clarity and certainty to the key measurement of users, readers and audiences of digital websites and platforms. By including the measurement of aggregate audiences online in the list of cookies that would not require specific consent, these amendments would protect and enhance the interests of both consumers and businesses: consumers because, as the noble Lord, Lord Lucas, said, with the maintenance of advertising revenue funding, websites that provide news, entertainment and a wealth of other services would otherwise cost those consumers much more in subscriptions; and businesses, as through the quality of anonymised, aggregated data, they can build better offers to consumers and advertisers, as well as increase their financial resilience.

The Minister brings profound knowledge and understanding of this field, so he well knows how important the digital advertising market is and how innovative and respected UK companies are in the global industry. That applies not only to the websites, platforms and advertisers but to the research, quality audit and measurement companies specialising in this area. These amendments would support this growing and productive high-tech data, research and measurement sector in reinforcing its world-leading position.

As in so many industries and sectors of the economy, long-term stability is vital to rapidly evolving digital markets. Including these amendments in the Bill, rather than relying on secondary legislation and regulation to flesh out details in the future, will enhance that stability.

Likewise, the amendments relating to the implementation of centralised opt-out controls are intended also to promote that long-term stability, as well bringing enhanced transparency and scrutiny. The interests of consumers and businesses are not in conflict with each other in relation to audience measurement and data quality. They are constructively interactive.

--- Later in debate ---

[Lord Harlech (Con)]

I take the noble Lord’s point. We are working with industry and will continue to do so. For the benefit of the Committee, we are, as I said, happy to write and explain the points of view, including those from Data: A New Direction. In response to the noble Lord, Lord Bassam, power ultimately lies with Parliament via the affirmative resolution procedure for the Secretary of State power.

I will go back to the amendments we were discussing. This regulation applies to complex and technical markets. The very reason we have taken a delegated power is so that the new exemptions can be carefully created in consultation with all affected stakeholders. As I explained, the Bill includes a requirement to consult the Information Commissioner, the Competition and Markets Authority and any other relevant stakeholders, which would include trade associations and consumers or web users.

Amendment 201 would widen the application of the “strictly necessary” exemption. Currently, it applies only to those purposes essential to provide the service requested by the user. Amendment 201 would extend this exemption so that it applies to the purposes considered essential to the website owner. We do not think this would be desirable, as it would reduce a user’s control over their privacy in a way that they might not expect.

For the reasons I have set out—and once again reaffirming the commitment to write to noble Lords on how the weighting was worked out—I hope my noble friend and the noble Baroness will not press their amendments.

[Lord Lucas (Con)]

Might I also hope for the meeting that I referred to?

[Lord Harlech (Con)]

My Lords, my noble friend makes a good point. I can promise all Members that there will be thematic meetings between Committee and Report.

[Lord Lucas (Con)]

My Lords, I am grateful for that assurance from my noble friend.

On the first amendments, clearly, we are dealing with something that is quite tricky and technical. My noble friend sees these amendments in a different light to me. It is possible that my drafting may be imperfect; that has never happened before, of course, but there is always a first time. Therefore, I seek an opportunity to look at this issue in detail. It is absolutely not my objective to engage the objections; this is something where my noble friend’s objections are valid. My amendment is not intended in any way to allow tracking or profiling. If I am wording things imperfectly or imagining something that just cannot be achieved in practice, the best way to deal with these matters would be to hammer them out in a technical discussion, not in Committee. I would happily look to an opportunity to do that between Committee and Report.

When it comes to new Regulation 6B and its ramifications, as the debate has gone on, I have found myself favouring more and more the amendment in the name of the noble Baroness, Lady Jones of Whitchurch. This is an uncontrolled bit of power that we are looking to give the Government, with some serious implications. It should not be done. We should wait until the technology is available and then do something when we can really take our time to look at the options. Again, this is something that we will have a chance to talk through.

It is really important that, in doing what seems to be convenient—as my noble friend put it, it is about getting rid of an irritation and making the whole process of giving permission much more effective; I am absolutely with him on that—we make sure that we are not letting ourselves in for some greater dangers. I personally want to make sure of that. The oldies among us—most of us, I suspect—will remember when Google said, “Don’t be evil”. I wish that it had kept to that.

For now, I beg leave to withdraw my amendment.

Amendment 199 withdrawn.

Apprenticeships

Lord Lucas Excerpts

Wednesday 26th March 2014 Lords Chamber

[Lord Lucas (Con)]

My Lords, I must declare an interest because I am running a social enterprise in this patch, the Good Careers Guide, which you can bing if you do not want to google. We have been having a wonderful time with companies. There is such a spirit of collaboration abroad—with them, with their organisations and with schools organisations, too—and there is a real determination to get together and solve the problems of how kids comprehend careers, of how businesses get on with schools and of how apprenticeships become valued as a decent alternative to academic education. I say to the noble Lord, Lord Best, that the construction industry is as enthusiastic as any other, and I shall look forward to his conference and hope that we may end up as part of it.

To return to the subject in hand, which is on how to increase the number and quality of apprenticeships for 16 to 18 year-olds, I think the answers are about information, appreciation and support. It is very hard within the context of a school to find that out what 16-to-18 apprenticeships are out there. We need a place where people can go to find out—but not, as the Deputy Prime Minister said, a UCAS, which is a horrible, inward-facing and unco-operative organisation. What we need is something that is facing outward and that sees its business as running an API, not a fortress, so that all sorts of institutions that have contacts with young people can easily get at the information on apprenticeships which they need to advise them. I think that would be a great way forward and I very much hope, if Mr Clegg has anything to do with it, that is the direction that he eventually takes.

Second is appreciation. There is a general feeling that apprenticeships are of mixed quality. That is not good. That is how we came into the business of the Good Careers Guide, taking the genetics of the Good Schools Guide and seeing what we could do for apprenticeships. It is proving immensely popular with companies, I am delighted to say. They really see the need to be seen as quality providers. It is important to parents particularly, and to others who are advising young people, that they understand where an apprenticeship leads to. How will it be rated by other employers once it is completed? Where will it lead to in terms of a career? The progression is immensely important, as the noble Lord, Lord Young, commented.

In that context, it is important to say to the Government that they are on the wrong track when they say that,

“once the reformed GCSEs are implemented, all apprentices will use GCSEs … to meet the English and maths requirements”.

What is important is context. If you are in an apprenticeship, what is motivating you is the context. The mathematics and English you use must fit in with that context. English and maths GCSEs are designed to move people on to A-levels; they are not designed for the whole variety of employments and apprenticeships that are out there. What is important is that the English and maths that one learns in an apprenticeship is part of a progression which leads—as, again, the noble Lord, Lord Young, said—to recognised professional qualifications. The English and maths should be sufficient for that, but there should be no barriers on the progression of apprentices. They should be able to move on to degrees and what they have achieved as an apprentice should be recognised as sufficient for that. I hope that the NHS will wake up to the idea that you can start as an apprentice and end up as a nurse, which does not seem too hard to ask when you can start with Barclays as a NEET who has just come from jail and end up as a bank manager. There are companies out there which take progression seriously, and it is time that our public sector did so, too. We must pay apprentices properly; they should not be seen as a source of cheap labour but should receive proper remuneration.

We should also concentrate on support. Most of our employment comes from small and medium-sized enterprises, but it is difficult for them to take on the bureaucracy and the responsibility of an apprenticeship. The big companies can manage it—they have big HR departments, which can do what is required. We need to build up for smaller companies a structure of training providers which not only provide the training but do the pastoral care, too, looking after every aspect of the apprentice’s needs. The SME will then be able to concentrate on giving them a job and will not be asked to do things which go beyond its capacity. That is happening: PricewaterhouseCoopers organises it for the smaller companies and the financial industry; several of the sector skills councils have similar schemes; and QA, which is one of the training providers, is in that business. We are beginning to see that happening, and it needs to happen much more widely.

To quote one of the senior executives of a company whose training provision we were reviewing: “Apprentices are a total delight. They are quickly very productive, excited, eager, and bring new life to the business”. If tired old people like us can be cheered up by taking on apprentices, let us do more of that.

25th Anniversary of the World Wide Web

Lord Lucas Excerpts

Thursday 16th January 2014 Lords Chamber

[Lord Lucas (Con)]

My Lords, I confess an interest in that I earn most of my income from the web and that the social enterprise I am promoting at the moment, which is called The Good Careers Guide, depends for its potential success entirely on web technologies, so I am perforce an optimist for the web but, I hope, a rational one.

As the noble Lord, Lord Giddens, said, we are in the middle of an unprecedented upheaval, but we probably do not yet realise the size of its consequences. I am optimistic that this will lead to a far better world than we have at the moment, but we will have to work hard to make sure that it does. We in Parliament have a very important role to play in that, acting in the interests of citizens and the country to tame the forces which might otherwise overwhelm us.

The noble Baroness, Lady Lane-Fox, talked about the importance of education and of including all our citizens in the benefits of the internet. Doubtless, the noble Lord, Lord Puttnam, will also speak about that. I entirely agree with that.

I hope, too, that we will take a stand against those parts of the internet which have become, or seem to be becoming, more powerful than states. We should stand beside Sherlock Holmes in confronting our digital Charles Augustus Magnussens and the amoral, all-knowing Amazon, Google, Facebook and others. I think we should stop short of Sherlock Holmes’s solution of actually shooting them, but we should stand up to them. We should not allow them to use legal tax avoidance to destroy our own domestic companies which cannot take advantage of the routes that the international companies do.

We also have to take a strong look at ownership. I own my library, which was my parents’ library and my grandparents’ library and beyond that, but my children will have no library. All they are being offered at the moment is the opportunity to rent, and they will have nothing to give to their children. That is the other side of the point raised by the noble Lord, Lord Berkeley. Why I do not approve of piracy is because the owners of copyright are trying to deprive us of the right of ownership once we have paid for it. We need something along the lines of an information right—something to give us as citizens the right over our own information against the all-powerful organisations which have made themselves a necessary part of life and demand all our information and all power over it if we are to use their services.

Politics and politicians have a very important part to play in the future of the internet. I very much hope that the Government will face up to that.

Enterprise and Regulatory Reform Bill

Lord Lucas Excerpts

Thursday 31st January 2013 Grand Committee

[Lord Lucas]

My Lords, I rise not least for the pleasure of supporting entirely what my noble friend Lord Clement-Jones and the noble Lord, Lord Stevenson of Balmacara, have just said. This is a very present problem in the way that the world is developing. We are getting some very large corporations controlling a lot of the flow of copyright material. The noble Lord mentioned the likes of Facebook but Amazon is just as bad, given the rights you are left with as an author as it moves into the publishing of e-books. If you put an e-book through to Amazon, you have to sign over to Amazon the entire control over what your work is sold for. The terms that it goes for are most astonishing. Generally, we need to remember that copyright is about enabling people to create and remunerating them properly for it, not enabling vast corporations to reap the benefits that we intend for the creators. I entirely support this change and very much hope that the Government, if not accepting this exact amendment, will see their way to doing something equivalent.

[Viscount Younger of Leckie]

My Lords, a change to the scope of the Unfair Contract Terms Act 1977, as envisaged by this amendment, would warrant considerable investigation and public consultation. For example, contracts governing copyright are specifically excluded from that Act. The Government would need to assess the potential implications of amending the Unfair Contract Terms Act to insert copyright within the scope of that Act. We believe that we understand the intent behind this amendment, which is to address issues surrounding contracts between individual creators and other businesses. However, it is unclear whether the amendment achieves this, since some parts of the Unfair Contract Terms Act would not apply to business-to-business contracts. I would be very happy to have further discussions on this complex matter with my noble friends Lord Clement-Jones and Lord Lucas, and indeed with the noble Lord, Lord Stevenson. I hope that in the light of the above, my noble friend Lord Clement-Jones will be able to withdraw his amendment.

Enterprise and Regulatory Reform Bill

Lord Lucas Excerpts

Wednesday 12th December 2012 Grand Committee

[Lord Whitty]

My Lords, we now come to a part of the Bill which, at Second Reading, I said I regarded as in the “relatively good” category compared with some other parts of the Bill that we will be debating. Broadly speaking, that means that we approve of the objectives of this part of the Bill concerning the rationalisation of the competition structure. As we go on, I think we will find that the Government may well have overcomplicated some bits and missed out others, but in principle the merger between the CMA and the OFT will receive general support from this side—in particular, the prospect of it dealing with some of these issues more coherently, both within the new structure and in time, as well as with regard to the relationship between the new competition authority and the concurrent regulators, although we will have a number of queries on that.

Before we make the new organisation work, we need to know what it is there for. As with many Bills introduced by all Governments setting up new organisations, two or three years down the line it is not always easy to derive from the Bill or Act why the organisation was set up. We need an objective so that business knows how to relate to the organisation, so that there is some transparency for the public about its role and so that in particular—I emphasise this, as will my noble friend Lady Hayter—there is clarity about the role of consumers and the ultimate objective of the new organisation to provide choice, customer care and a generally consumer-friendly market in which to operate. The central means in achieving that market is enhancing competition. The organisation also has to be realistic about, and proactive in, responding to market failures.

However, there is one area where I think that the role of the body has been underestimated and that is in relation to explicitly referring to the benefit or detriment of consumers. The aim of the two amendments in this group which are in my name is to tell the public and the organisation what its role really is. Government really does need to set the objectives and scope of this new body, otherwise in 10 years’ time no one will know what is expected of it and we will no doubt be back here within that 10 years looking at whether the competition regime is working. In the mean time, Governments will have to assess its importance, its resourcing and its priorities for the coming few years, and therefore there will be reviews, which will need to go back to the objective of the organisation.

We have attempted to set out in Amendments 24ZA and 24ZC some of those objectives. The first one, in Amendment 24ZA, relates to the CMA’s role in establishing competition and examining market failure and market distortion. We often talk about monopolies in this situation, and mostly it is about monopoly, oligopoly and dominant positions in providing goods and services in particular markets. However, it is also necessary to refer to monopsony. The first competition or anti-trust Acts in this country in the 1940s were very insistent on that point, and there are situations where a potential distortion of the market or abuse of a dominant position relates to the buyer’s market as much as the seller’s market. The Government have indeed recognised this—somewhat belatedly, under both this and the previous Government—in the groceries code, for example, where the power of the oligopoly structure of the supermarkets has a tremendous effect on relatively small companies which are, directly or indirectly, suppliers to those sectors. Therefore, the issue of buying power, as well as of provision of goods and services, is important and that is what these two amendments address.

Amendment 24ZA spells that out briefly and Amendment 24ZC defines it in more detail. Mergers are obviously one distortion of a market, but there is a broader issue of dominant position in a market. We all know that there is no such thing as a perfect market, because all the players in that market are not equal, either in their resources, their skills or their knowledge. Therefore, an unusually dominant player in the market distorts the market as a whole and we need to provide for the new organisation to focus clearly on a dominant position which may not, strictly speaking, be a monopoly or create a monopoly through a new merger.

We need to broaden it a bit and if we look at the areas which are probably those of most frequent consumer complaint, they are dominated by relatively few players. Consumers may experience different effects of the abuse of that market power in different sectors. There are so many sectors now in which there are, effectively, between four and eight companies which dominate and which—if there is not, strictly speaking, any provable cartel—tend to move in unison rather more frequently than a proper market would allow. There is an obvious current example in the energy market; the banking sector is similar. I have mentioned the supermarkets, which work both ways for customers and suppliers. There are other markets, such as the mobile phone market, in which not that many players dominate the market and quite a lot of apparent choice actually limits the range and scope of consumers’ choice.

I think that we need to define this, as I say, so that future generations will understand why it was set up. We need to define it for the new governance of the organisation, and we need to define it for the Minister, successive Ministers—although I wish Ministers a long life in these responsibilities—and for Parliament and the public, so that the new body can be held to account. I am not saying that the form of words we have used here is the be-all and end-all, but I want the Government to consider putting in such a clause to define the role of the organisation. I beg to move.

[Lord Lucas]

My Lords, I address my amendment in this group, Amendment 24ZCA. I am not sure that we really know how to deal with monopsonies, it has been so long since we had one that was truly powerful. I am not sure that the Bill gives us the ability to deal with them properly. My amendment will make sure that we can, because we can now observe one of these monopsonies in action and in the process of growing, and that is Amazon.

Amazon now has some 90% of the e-book market in the UK; it has something like 50% of the entire book market, e-books and physical books, in the US and close to that in the UK. However, when I have asked the OFT if it will look at some of the practices that Amazon employs in getting to where it is, it says, “No, because none of the major publishers has brought us any evidence”. The publishers will not even come into this House to have tea with me to discuss what is going on. They will not talk to the Guardian. They will not talk to anyone because Amazon is rough, hits hard, has its teeth into publishers’ necks and is sucking their lifeblood. There is no answer. If we are to do something as a nation, we need to equip ourselves with a system that is capable of going to the publishers and saying, “We think there might be something going on here. Please give us some evidence”. At the moment, the OFT is hamstrung and cannot do that. It has to wait until someone brings evidence to it. I would like to see a situation whereby this new body had the power to go out and look on its own account and not wait for evidence to be brought to it, because it is in the nature of monopsonies, particularly the powerful ones, to tie up the people who are involved in them and make it extremely difficult for any of those people to bring a complaint or evidence to the OFT, as it is, on their own accord.

Amazon is no friend to the UK. We may all think that it is a great place to buy—indeed it is, and I am having an interesting Christmas not buying from it. It treats us just as a distribution depot. It is not building a business here. It has no interest in the great history of British intellectual content. It is not like our publishers, who have a care for the nation and the part that the UK played in the world of books. We are just a source of a commodity to Amazon. It pays no tax, as is well known. It abuses VAT whenever it gets the opportunity. It has had a scam going on in Luxembourg for ages, which, thank goodness, the European Union is putting an end to, whereby it paid only 3% tax, rather than 20%. The company has been allowing sellers to hide their identities, so that they can operate VAT scams. It was an active participant in the abuse of low-value consignment relief. It is not a company with morality and it is not a nice organisation. As was said by the publisher who spoke anonymously to the Guardian, you dare not go against it because it would kill you.

Amazon’s terms on e-books are fascinating. As a publisher, you can get 35% of the price that it sells for, if you set the price. If you want more than that, Amazon gets to choose the price and you end up with less. If you are a big publisher, you may end up with only 10% of the price that Amazon is charging for an e-book. If you are selling through Amazon Marketplace, Amazon gets to know your customers, suppliers, prices and volumes; and if something is selling well, Amazon then does it itself. It goes straight to the manufacturer and undercuts you. That is all based on Amazon’s knowledge of your business. If you are selling on Amazon Marketplace, you are forbidden to sell anywhere else at a lower price or you are chucked off. Amazon is a very difficult company to live with.

What we are seeing is a monopsony in its growth phase. It is running on very low net margins in order to destroy the competition and increase its market power. If we act now, there are viable alternatives that will spring up to compete with it. If we leave it, we risk a situation where there is no competition, where there are no publishers any more because Amazon is the only place to publish direct, and where there is no ability to sell e-books other than through Kindles because Amazon controls them, and you cannot put outside software on them. We must give ourselves an opportunity to act, and act sensibly, and we cannot hamstring ourselves by sitting here and waiting for one of this company’s victims to complain before we act.

Social Security (Claims and Payments) Amendment (No. 2) Regulations 2010

Lord Lucas Excerpts

Monday 21st June 2010 Lords Chamber

Moved By

[Lord Lucas]

To move to resolve that this House regrets that the Social Security (Claims and Payments) Amendment (No. 2) Regulations 2010 (SI 2010/870) have been based on an inadequate design which will be unable to produce reliable evidence.

Relevant documents: 17th Report, Session 2009–10, from the Merits Committee.

[Lord Lucas]

My Lords, I start by thanking my noble friend Lord Freud for turning up to respond to this Motion. The instrument that I am praying against is not of his genesis and if I get hot under the collar I hope he will accept that I am not aiming at him in any way.

The instrument first appeared before your Lordships’ Merits of Statutory Instruments Committee with a very inadequate Explanatory Memorandum. When the committee challenged them we were given more data that not only amplified what had been there before but indeed said different things. The first thing I want to say is that I very much hope that my noble friend will see the importance of making sure that Explanatory Memoranda accurately and fully reflect the intentions and details of the instruments concerned.

Secondly, although this is not in my Motion, I wanted to take the opportunity to question my noble friend on whether he really thinks that the proposals in this instrument are an appropriate use of the department’s time. It seems odd to be conducting research into what is effectively how to shift money from one government pocket into another. Here we are concerned with people on benefits. Even with the generosity of the past 13 years, benefits are still pretty marginal. If we consider the list of deductions that are generally allowed, such as mortgage payments, rent arrears, fuel and water charges, child support arrears, and so on, they are pretty important and essential to life. Yes, we allow fines to be deducted too, but that is when a court pronounces that there is a serious punishment involved. I do not think that debts to the Inland Revenue rank alongside that. Given that social security payments are basically set so that a person can meet life’s essentials, how is someone supposed to find 15 per cent of their income spare to repay the Inland Revenue? They can end up only in a worse position by having to rely on the state to a greater extent. Hence my feeling that this is just shifting money from one pocket to another.

There are other problems with this. We are not looking at large debts, but what will be the cost of recovery of these debts? Are we not looking at a system that actually costs more in its administrative functions than the money that it will recover? Is that an appropriate use of time when it comes to poor people? What is a tax debt anyway? If one is moving in and out of employment, a tax debt varies with the month. You can start off appearing to owe the Inland Revenue a good deal of money because you have not paid. You are then unemployed for six months and your allowances accumulate and you end the tax year with the Inland Revenue owing you money. It is not at all clear whether we are talking about debts that are in some way established or whether they just appear to be debts at a particular moment but may well not be debts six months later. It is an odd thing to be spending time on. This is persecuting poor people when the department ought to be trying to extract money in ways that are more efficient and have less of an impact on the very poorest.

My reason for bringing forward this Motion is the statistical inadequacy of what is proposed even with the additional explanation that I have been provided with. I know, or at least I believe I know, that the Department for Work and Pensions has a number of good statisticians—I am assured by no less than Andrew Dilnot that this is the case—but they do not appear to have been involved in the design of this research. The first thing we get is that about 5,000 tax credit customers and 5,000 self-assessment customers will be approached to volunteer to take part in the trial. Those 10,000 will then be divided into those who agree and those who do not agree. Those two groups are fundamentally different. The group which agrees will have one set of motivations and the group which does not agree will have another set. You immediately get into deep statistical water in trying to draw any conclusions when comparing two groups with different motivations. There is an attempt in the design of this experiment to compensate for that by having a third group—a control group. Presumably one could try to work out the behaviour of the first group—those who volunteer for the trial—by subtracting the behaviour of the second group from the control group and supposedly having a control for the first group.

Given the wide diversity of circumstances, we are looking at a sample that to my mind is far too small to allow that kind of second-hand approach to generating reliable results. It is a daft way of going about it when we have a perfectly good and statistically valid way of doing it, which is to double the number who agree to take part in the trial and then put only a randomised half of them through it. You would then have a matched group which will give some pretty statistically valid results. Even then the experimental design will tell you how well it works only for those who are motivated to take part in the trial. It tells you nothing about the behaviour and circumstances of those who are not motivated to take part in the trial. We are not dealing with mere mechanics; we are dealing with the effects of different methods of reclaiming money on people’s behaviour, the trouble they get into, compliance, and so forth. We are dealing with human characteristics and you cannot read those across from one group to another when you have already separated them on the basis of a fundamental characteristic such as motivation. If you wanted to find out something about the second group—those who refuse, who I suspect will be the large majority—you have to conduct a pilot that is not sample-based but area-based. The previous Government did that on several occasions. I can remember the pilots coming through the Merits Committee. A particular office would switch to a new system and would compare its results with a neighbouring, similarly placed office’s results. If you have enough other data on your claimants, you can make that reasonably statistically reliable. You could even run a randomised control through an office. But what is proposed here would not yield any useful information on the behaviour of the second group—those who refused to take part in the trial—were they to be moved to be compelled to under the new proposed system.

There is no defence in the documents that I have seen of sample size, no discussion of anticipated errors, no discussion of what are the real targets, what is expected to be achieved and what are the expected problems. There is no demonstration of the validity of the methods being set out. We have here a simple case of garbage in, garbage out. A trial on those lines will not yield any useful results. If we proceed on the basis of the results that it yields, we will have no clue whether the full, scaled-up system will work. I am comforted that the Social Security Advisory Committee, at paragraph 4.16 of its report, shares my view.

I welcome trials—they are an excellent way to make progress in the area of benefits and social security, to find out what works before one commits oneself to a whole system—but I ask the Minister to ensure that the people who really understand what are the same sort of statistical operation as drug trials have control over what goes on, make sure that what is designed is fit for purpose and ensure that the data that the trials produce can be relied on for policy formation. I beg to move.

[Baroness Thomas of Winchester]

My Lords, I thank the noble Lord, Lord Lucas, very much for the comprehensive way in which he introduced his Motion and welcome him to this most exclusive of gatherings in London; the tiny number of us in this House who speak on DWP orders and the even tinier number who table regret Motions to them.

Before going any further, we have discovered from the response given by my right honourable friend Steve Webb to a letter from the chairman of the Merits Committee last Session that the new Government may decide not to go ahead with this pilot, but I suppose that we must carry on as though they will go ahead at this stage, unless the Minister wants to interrupt at this point to say that they will not. There is no interruption, so I shall carry on.

First, I am glad that the Government have listened to the Social Security Advisory Committee's recommendation, which urged them to bring the list of benefits from which HMRC debt recovery repayments can be made into line with the current list of benefits from which priority debts can be deducted. In other words, any deductions would be from means-tested and not contribution-based benefits. I take the point made by the noble Lord, Lord Lucas, about that being money from the poorest people in the country, whichever benefit it is from.

I am also glad that the SSAC highlighted the vital point that claimants understand the voluntary nature of the trial and the impact on their income of signing up for the trial. A lot of people will not know what “voluntary” means—although they may pretend that they do. The Government have responded positively to that point, saying that they will share copies of the letters sent to claimants with the committee, and that they will ensure that the letters, and contact centre staff, will direct the claimant, or customer, to the availability of independent advice.

The SSAC understandably believes that there is scope for confusion among claimants who receive letters from HMRC. Just seeing that letterhead is likely to lead to many claimants into thinking they are being hounded for recovery of their tax credit overpayments, whatever the letter actually states. If claimants then telephone HMRC, is the Minister satisfied that they will be told in every case that they do not have to repay their debts by having them deducted from their benefits? Will they be told in all cases that they might want to take independent advice, which might lead to some of their debt being overturned or even written off?

Before leaving the subject of letters from HMRC, perhaps the Minister can tell us why it does not provide an explanation of a tax credit overpayment to claimants in all cases; that seems not to be provided as a matter of routine. I cannot think why not. I know that the Minister does not speak for HMRC, but as this SI is a joint project between the two departments, I make no apology for asking him that on this occasion.

We must remember that the Government did not agree with the SSAC that repayment should be at a lower level than they are proposing in this trial, which is three times the normal amount per week. As the noble Lord, Lord Lucas, pointed out, benefits are not generous, and there are rumours that they will not be uprated as usual—we shall hear more in tomorrow's Budget. If claimants in debt have no other source of income except their weekly benefits, many of them will suffer severe hardship if they are being encouraged to repay their tax credit overpayment from those pretty meagre benefits. I may have got the wrong end of the stick here, but I find it horrifying that the SSAC understands that HMRC staff may suggest that debtors apply for a commercial loan to pay off debts—presumably they would never suggest a commercial loan to pay off a tax credit overpayment.

Turning to the design of the pilot, and first, to the aim of the pilot, this appears to be twofold: to find out if there is a demand from claimants for this method of repayment—that sounds almost like an oxymoron—and to see if the scheme is cost-effective. There is more information in the answers to questions from the ever-vigilant Merits Committee about how the scheme will operate. As the noble Lord, Lord Lucas, said, there are to be three groups for evaluation purposes. The first group will be those who volunteer to take part in the trial. The explanation goes:

“The evaluation will look at how much was recovered, the spread of weekly deduction rates, how long a person is in receipt of a relevant benefit and what could have been recovered had they been taking part in the trial for the whole two years taking account of expected levels of movement on and off benefit”.

That sounds fiendishly complicated with so many permutations that you wonder whether any comparisons will really make sense. The next two groups are about those who declined to take part in the trial who will form the control group. First, they have to agree to respond to a letter asking them to take part. I wonder how many will be keen to do that. Not very many, I imagine. Therefore, a key question is: how small does the sample size have to be to produce robust data? I note that the Government say:

“We accept that the smaller the sample, the less able we will be to draw definitive conclusions."

I also note what the Government say about those who go off benefit during the pilot period; namely, that there is no minimum number of weeks for which deductions have to be made in order to regard the participant and repayments made as significant for evaluation purposes. I would have thought that was a rather significant fact.

Perhaps the most encouraging sentence in the whole explanation is:

“In addition the performance of new joined up operational processes between HMRC and DWP will be assessed”.

Is the Minister really confident that this trial will produce a reliable result, in view of all the problems that the SSAC and others have pointed out?

--- Later in debate ---

[Lord Freud]

I will not rise to that.

My noble friend Lord Kirkwood asked when the trial was due to start. It will start next month, and the first letters will go out then. We do not intend to cancel this trial; we will go ahead with it, although we will extend it only if it is successful.

The noble Lord, Lord McKenzie, asked whether other methods of repayment would be available. Clearly, if the customer signs up for the trial, no other method will be used. If the customer does not sign up, the repayment methods could be lump sum or instalments by direct debit or standing order. He also asked whether the new Government stand by the decision to deduct at three times the 5 per cent rate. Yes, we stand by that, but it is the maximum rate and participants can choose a lower rate. Finally, he probed the question of other ways of applying sanctions. This is, of course, not a sanction—it is a repayment of a debt—although I can tell him that we are exploring non-financial sanctions.

I commend the principle of the trial as a convenient alternative repayment method for those who wish to use it and as an example of joint working. The design of the trial is adequate, but I accept the criticisms of the Merits Committee and of my noble friend Lord Lucas. We need to get this right in the future. We need to make sure that all our regulatory changes meet the standard expected by the Merits Committee and that we provide all the necessary supporting information in good time.

[Lord Lucas]

My Lords, I am extremely grateful to my noble friend for that comprehensive and helpful reply. I shall not trade blows with him on matters to do with welfare, as I am merely an extremely junior acolyte at his feet. This has been a fascinating debate for me and I shall feel tempted, now that we have a Minister in this House who is so much at the forefront of welfare reform, to sit on the Benches and, at least, to listen. However, I am quite happy to trade blows with his statisticians.

The Minister has made me understand one thing that I did not understand before. The trial is clearly voluntary, but is he saying that the rollout will also be voluntary, even if the trial is a success? That certainly would remove a lot of my worries. However, the effort being expended to create a control group and to look at what is happening in the second, probably larger group of those who will not take part in the trial rather suggests to me that there was an intention—noble Lords opposite may know whether this is the case—that this should be a compulsory way of reclaiming HMRC debts.

If you want to understand how to operate this effectively with people who volunteer, you do a randomised control trial just with those people. You go on until you have a couple of thousand volunteers and you assign them randomly—half you monitor under the current system and half you monitor under the new system. You then have a conventional and statistically robust way of comparing behaviour. It might be fun and informative, and it might have a peripheral virtue to try to understand why the people who have not volunteered have not done so and to try to find out how to encourage them to do so in future, but you certainly would not bother with this functionless control group that sits as an appendage at the bottom.

As I say, there is a simple and statistically robust way of dealing with this if the trial is for a voluntary system, which would not have all the characteristics of the trial that has been put in front of us. If the Minister is prepared to set up a meeting with his statisticians, I should enjoy it very much, because I do not think that they have come up to the mark on this occasion if, as I say, this is a trial for a voluntary system. If I am wrong and this was designed as a trial for a compulsory system, I come back to my old criticism that it does not function as that. You do not get enough information on the likely behaviour of the people who have declined to take part in the trial to be able to predict how they would react if they were compelled to take part.

However, I cannot be churlish when I have received such a good reply from my noble friend, particularly if he sets me up with a tea date with his statisticians—and how could any statistician refuse tea in the Lords? Whatever the circumstances, I happily beg leave to withdraw the Motion.

Motion withdrawn.