Artificial Intelligence: Intellectual Property Rights

Damian Collins Excerpts

Wednesday 1st February 2023 Westminster Hall

[Damian Collins (Folkestone and Hythe) (Con)]

It is pleasure to serve under your chairmanship, Mr Robertson. I do not wish to speak for a long time. I congratulate the hon. Member for Richmond Park (Sarah Olney) on her excellent opening speech. She made some powerful and important points.

Last year, I was briefly the Minister for tech and the digital economy, and this issue came within my remit. It sits between the Department for Digital, Culture, Media and Sport and the Minister’s Department, the Department for Business, Energy and Industrial Strategy. I was surprised then, and I am surprised now, by the result of the Government’s consultation. The recommendation that was made is the most extreme of the options considered. It is unsurprising when we read the responses that, on the whole, rights holders complained that the general exemption was a bad thing, and researchers and developers who wanted to do it thought it was a good thing. However, the Government’s response seems to completely dismiss the concerns raised by rights holders and entirely favour the people who wish to exploit this data for their own benefit.

It is quite clear that people are seeking to extract value from data that other people have created in order to create products and tools from which they themselves will benefit commercially. There are already lawsuits in the music industry between musicians who claim someone else has listened to and copied their work and sought to benefit from it commercially. For example, someone could take the back catalogue of every track ever written by the Beatles to learn the techniques and methods. From that, they could create new music composed in the same style, as if the group was at its peak of writing and recording today. They would do so without the consent of the rights holders of that content, and they would make money out of it for themselves.

We can easily see how that kind of passing off could occur at scale, without any licence or exemption, or any benefit for the original creators. We should be concerned about the impact that will have on the creative economy. Many experts believe we are already very close to the day when AI will be capable of creating a new No. 1 download track or even a hit movie.

[Sarah Olney]

The example of the Beatles is an excellent one that we can all relate to. However, the Beatles have already generated a great deal of wealth from that back catalogue. Does the hon. Gentleman not think it would be a greater threat to new and emerging artists, who perhaps have not yet achieved the reach of the Beatles, that their copyright could be breached and their music replicated before they have even had a chance to establish themselves as an artist and as the correct owner of that work?

[Damian Collins]

The hon. Lady is completely right. It has an impact on new artists in two ways. First, they are competing against AI-generated generic music from legendary artists. Secondly, the technology could be used to spot new and emerging artists who may be gaining in reputation and popularity, to quickly copy their style and techniques by analysing the data and text from their works, and creating new works from that. It opens the door to the machines really taking control of the creative process, to the detriment of original artists.

The important point of principle is that when people have created works, they should have the say on how those works are exploited. It is detrimental for another organisation that sees value in that work to take it, mine it, create something from it and claim it as its own. It would be rather like saying, when radio launched, “Well, we don’t really think that we should pay artists any money for playing their music on the radio because the radio creates a new audience for their work; more people are likely to buy records as a consequence, and charging for music would inhibit the growth of radio and radio stations, which have a huge benefit to the country.”

As technology has developed, we have decided to recognise that, with technological advances, we must reward the creators as well. Their work is exploited through those technologies to entertain and engage people, and it has a value too. If we deny them access to that value, we will restrict their work and the future work that will come from it.

I think that it is very important that there is at least an opt-in or an opt-out. The Intellectual Property Office cites other jurisdictions in the world where exemptions exist. In its preamble, it cites the EU as one of them, but what it does not say is that there are pretty fundamental differences between the way that it works in the EU and the proposals for the UK. The IPO has also taken the most extreme option of having very general exemptions.

It is very important to think about the remit of AI, because we can already see how important AI will be to shaping people’s experiences of content. Probably the best live example of AI at work today is in the way that people play video games—the way that they are designed around the user as they play them—or the way that content is recommended to people on social media platforms. That is AI-driven recommendation tools learning from the things that people like and engage with—how long they look at things and what they listen to—and pushing new content at them based on that.

When we think about metaverse and virtual-reality experiences, that will all be based on machine learning and data mining to create new experiences for people. If people doing that mining can benefit from the creativity of others to create those experiences and create those new images, and can do so without any recourse or compensation to the original creators, then that is a big power shift in the creative economy, away from creators to people who drive systems—away from the artist to the data broker and data miner.

As we see the central role that AI will play in shaping people’s experiences in the future, it would be a big mistake, at this point, to completely cut out the creatives and see their data and content exploited by somebody else without any compensation at all. I look forward to hearing what the Minister has to say. This is an urgent issue that requires a new think.

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[Damian Collins]

My hon. Friend is right that there are exemptions in other jurisdictions, but none is as wide as the ones that we have set. The most comparable jurisdiction is Singapore. While Singapore has many great qualities, it is not a net exporter of music, nor does it have a creative economy on the same scale as ours. We have been discussing the Intellectual Property Office’s response to a consultation, in which it recommended introducing these measures. Am I right to take from what the Minister said that the Government are now minded not to introduce these measures, and so that for the time being, the status quo prevails until such other proposals may be considered?

[George Freeman]

That is exactly right. I will come to some of the lessons from that in a moment, but I am happy to confirm that.

In the consultation carried out by the Intellectual Property Office, a number of consultees made the case that UK copyright law was too restrictive, and was impeding investment in AI. The point was made about text and data mining exemptions in other countries, but I absolutely agree with my hon. Friend the Member for Folkestone and Hythe. He has a distinguished record in these affairs as a former Chair of the Digital, Culture, Media and Sport Committee, and through his career. The regulations must be proportionate and reflect the economy that we are regulating. We have an incredibly strong digital creative industry and non-digital creative industry, and we must ensure that that is appropriate.

We heard rights holders arguing that no change should be made in the UK, and we also heard not just the big AI and tech firms but researchers in the life sciences and social sciences making the case that many of them were increasingly finding problems, not with negotiating with the obvious rights holders when it was clear who they were, such as universities, but with material available on the internet. They were finding it difficult to find the person to get permission from them, and that was holding back research, especially when working with multiple rights holders. While I am happy to concede that the proposals perhaps were not correctly, fully or properly drafted, there are some issues that are still worth pursuing. The Intellectual Property Office was asking the right questions, but it is more complex than the original proposals suggested. That is why we have committed to continuing that consultation.

Yesterday, I was with the all-party parliamentary group. I have instructed the Intellectual Property Office to share its analysis of the consultation findings, so that we can sit down together and go through what the issues are that we still need to deal with, and can get the balance right. As was said by a number of colleagues from across the House, when I say “get the balance right”, there is clearly a difference between those small and sometimes voiceless creatives—whether analogue or digital, but particularly if they are not in the digital creative economy—because some may want to completely opt out and say, “I just never want to see my image turned into an avatar, ever.” People need the ability to just opt out. People also need the ability to license, to be on the front foot, and to negotiate terms, which happens.

What the Intellectual Property Office picked up on from both sides is that there is a middle ground: there are those without a strong organisational platform through which they can set out the terms on which they are prepared to have their material accessed, and there are digital creators using intermediary AI technologies to create digitally, which is a legitimate activity, and who are struggling to find that interface and make it work. It is in that space that we particularly need to look to get the balance right between our creative, digital and AI sectors. Many in those sectors are small, extraordinarily dynamic and entrepreneurial.

In Coventry, I recently met a fantastic, almost underground coding community of teenagers doing amazing things. We need to be careful to ensure that the creative industry can flourish, and that the rights of the creators, who may or may not want their material to be used, are not trampled over. If they do want their material to be used, that takes us to a second issue: fair remuneration. I have stood here and discussed this with the hon. Member for Cardiff West (Kevin Brennan) before. There are issues about rights and about remuneration. How should we ensure that small creators are properly remunerated? There are issues that we need to deal with. As a number of colleagues have said, this is about the balance between rights, responsibilities and remuneration in the world of digitalisation of content and creativity.

There are two big lessons from last summer. One is that data is important. I have started a conversation with the Intellectual Property Office to ask if we could not do more to ensure that we have better datasets on exactly what the situation is with new, emerging revenue streams, new providers and new creators. The industry is moving very fast, and when it comes to which bits of the market are working well and which are not, there is a slight lack of data on which to base policy. Creating market conditions in which everyone can have confidence is the real challenge for the Government and for me as Minister.

I tentatively suggest that there may be another lesson, which is that we should harness the power of digital technologies and digitalisation when doing consultations. I am not quite suggesting that we should have run the AI-ometer over the consultation responses, but given the number of analogue Government processes, harnessing smart intelligence systems may provide us with a good way of identifying better clusters of feedback in consultations, and help to democratise the process of consultation. It is a slightly left-field point, but I am trying to signal that as we think about these industries, we have to ensure that we are not just talking to the same people, but driving new methods of consultation to keep up with the pace of the industry.

I have probably detained you, Mr Robertson, and other Members long enough. I hope it is clear that we have listened and heard, and we are absolutely committed to making sure that we get this right. Although the Government need to be on the front foot in anticipating the regulatory framework and getting it right, the proposals have clearly elicited a response that we did not hear when they were being drafted. We have taken the responses seriously. The Minister responsible for this area—my hon. Friend the Member for Hornchurch and Upminster —and I have made it clear that we do not want to proceed with the original proposals. We will engage seriously, cross-party and with the industry, through the IPO, to ensure that we can, when needed, frame proposals that will command the support required.

Penrose Review: UK Competition and Consumer Policy

Damian Collins Excerpts

Tuesday 8th March 2022 Westminster Hall

[Damian Collins (Folkestone and Hythe) (Con)]

It is a pleasure to serve under your chairmanship, Mr Efford. I congratulate my hon. Friend the Member for Weston-super-Mare (John Penrose) on his report and on securing this important debate. I particularly want to address his comments on the digital markets unit, which he says has been set up in shadow form. We eagerly anticipate the Queen’s Speech to see whether there is legislation in the next Session to give the unit the power that it needs.

So much of our commerce and consumer interaction takes place through digital services. We have seen that more than ever during the pandemic. They are an integral part of the economy. It is right that we question and challenge whether digital markets are truly competitive, and whether the very large players that dominate them are guilty of abuse of market power, given the great positions that they hold.

It is tempting to think, “There are a lot of big digital companies; presumably they all compete against each other, and that creates a fair market.” When we break that market down, we see a series of monopolies in each sector. Unsurprisingly, Google has 92% of the world’s search business; Chrome, which is owned by Google, has 62% of the browser market; and Facebook and Google together control about 70% of the digital display advertising market worldwide.

Mobile phones run on one of two operating systems: 70% run on the Android operating system, which is owned by Google, and 30% on iOS, which is owned by Apple. You might think, “Well, at least there is a market split there,” but they are both monopolies. Apple customers —I am one; I have an iPhone—have no choice but to purchase apps through the App Store; there is no interoperable or alternative system. I cannot use a different app store system, such as the Google app store, to download apps on to an Apple product, or the other way around. The mobile communication devices market, which is central to the world economy, is dominated by only two operating systems, both of which are monopolies for their users.

As for the messaging app market in the UK, WhatsApp has 75% market penetration. The next most popular messaging app is Facebook Messenger, which has nearly 60% market penetration—that is, 60% of people in this market use it. Of course, people have multiple messaging apps. Both are owned by the same company. Across digital markets, there are these relative monopolies.

Is there evidence of abuse of market power? There is certainly evidence of these companies treating customers differently. There is evidence that Apple has different policies on charges for selling through the App Store for different companies. It does not charge everyone the same amount. Facebook has allowed different businesses to acquire different levels of Facebook data to help them drive their business through the Facebook systems, depending on the value of the commercial relationship to Facebook. When I chaired the Digital, Culture, Media and Sport Select Committee, we published evidence that we secured from an American app developer that showed that Facebook sometimes made arbitrary determinations about whether an app developer should have access to the Facebook graph at all; it depended on whether Facebook thought that the product that the company was developing was a threat to its business.

Some people may remember from the dim and distant past the short film app called Vine, which was very popular. People uploaded very short films to it. Mark Zuckerberg personally decided that Vine was acquiring too much Facebook data, so Facebook kicked Vine off the platform. An email was published in which Mark Zuckerberg was asked to confirm that he wanted to do that, and he replied, “Yup, go for it.” In our report, the creators of Vine said they remembered that moment as though it were yesterday, because it was the moment that effectively killed their business. The chief exec of a global tech company can, like the Emperor Augustus, put their thumb up or down, and determine whether a business is allowed to succeed, based on his assessment of whether that business is a competitor to his.

We often say, “Why is it that, particularly in the tech sector, although the UK produces brilliant, thriving companies, they do not go to scale?” One of the reasons is that if they are too successful, they are squeezed out of the market by bigger, dominant players, which either deny them fair access to customers through their platform, give them the option of being acquired, or drive them out of business altogether.

There have been competition investigations into preferential ranking on Apple and Google systems, to see whether Google search results favour businesses with which Google has a commercial relationship, with to the detriment of others that it sees as competitors. Amazon can monitor whether a product is successful, who is buying it, and, if it is too successful, whether it should copy it and launch its own product. Amazon does not give customer purchase data to businesses that sell through Amazon. Amazon is both the creator of the infrastructure through which businesses sell to their customers, and sells its own products alongside them, giving it immense market power.

We need a digital markets unit that ensures not only that consumers are treated fairly, that they have fair pricing and that there is fair competition among products, but that businesses that reach their customers through other tech platforms are treated fairly. It should ensure that businesses pay a fair rate for advertising, have fair access to data relative to other businesses, and are not a victim of aggressive pricing against them by the platform, or dis-ranked or downgraded through pure prejudice. All those aspects are central to the working of the digital economy today, and that is why it is important that we have a digital markets unit with the ability to launch investigations for evidence of tech platforms abusing their market power over other businesses, to the detriment of consumer interest.

Economic Crime (Transparency and Enforcement) Bill

Damian Collins Excerpts

Committee stage
Monday 7th March 2022 Commons Chamber

[Dame Margaret Hodge]

There are already arrangements for the sharing of information and data, but it is not enough. It is absurd. When I talk to the enforcement agencies and the anti-money laundering people working in the banks, they tell me that they cannot share information. If one bank has information that makes it suspicious about a particular client, it ought to be able to share it around the banking system so that they can all take action. There are pragmatic steps that we could take to share information and knowledge across jurisdictions, from America through to Europe to us, which would massively improve things and actually bring in money.

Let me take one example that came out of the FinCEN files. Standard Chartered Bank is a British bank. In 2019, it was fined by both America and ourselves for poor money laundering controls and other offences, including breaching sanctions in Iran. The British bank was fined £842 million in America, but only £102 million here by the Financial Conduct Authority in the UK. The Americans have got it right. There are lessons that we can learn from them. There are also ways in which we could properly resource all the enforcement agencies. We could perhaps reduce them as well—we do not need all these people. Every time I refer a matter, whether it is for a corrupt or an illegal activity, to one enforcement agency, I am either told that it is the responsibility of another agency or it goes into a big black hole and I never see anything arising out of it again. That situation is completely and totally unacceptable.

[Damian Collins (Folkestone and Hythe) (Con)]

On this point about information sharing, which is so important, we have an established financial system to do that. Does the right hon. Lady share my concern that many people who are affected by these sanctions may use cryptocurrency both to hide money and to move money, and that many of the cryptocurrency exchanges are saying that they will not take enforcement action against, say, Russian nationals, only against named individuals on the sanctions list?

[Dame Margaret Hodge]

Cryptocurrency has become the new way in which money is laundered. Corrupt and stolen money ends up in the pockets of one individual, and then gets back into the system for them to spend it elsewhere. I completely agree with the hon. Gentleman: it is important that we get our heads around cryptocurrency and that we legislate appropriately to tackle it.

The other way of looking at this issue, and the reason why we have tabled the new clause, is that our law enforcement bodies, while they are not as good as the Americans’, bring resources back to the UK through fines. Between 2016 and 2021, the law enforcement bodies brought £3.9 billion back into the UK coffers. If that money had been reinvested, which is one of the ideas for funding the enforcement agencies, it could have brought an extra three quarters of a billion pounds to be spent on enforcement by all those agencies. That is a lot of money, and it would have been effective; it would have had a snowball effect of increasing our budget.

New clause 2 is there to ensure that we get the enforcement right—that we have not only the powers but the resources we need to make sense of and put into effect the important legislation we are passing today. I hope it will have support right across the Committee; it certainly has support among Back Benchers, and I would love it if the Government accepted it and it became part of the Bill.

Economic Crime: Planned Government Bill

Damian Collins Excerpts

Wednesday 26th January 2022 Commons Chamber

[Paul Scully]

I come back to this point: there is no reluctance to act. What I cannot do is pre-empt Her Majesty. Our appetite, as I say, remains undiminished. It is just a shame that the right hon. Gentleman hides behind Intelligence and Security Committee papers to throw political accusations when what we are trying to do is make sure that the taxpayers of this country get value for money and are not losing money, that the number of victims of economic crime is reduced and that they get their recoveries. Let us not make it a party political issue.

[Damian Collins (Folkestone and Hythe) (Con)]

Does my hon. Friend agree with the recommendation of the Joint Committee on the Draft Online Safety Bill that online platforms such as Facebook should not be allowed to profit from the advertising of known frauds and scams? As part of the online safety regime, they should be required to proactively block and withdraw advertising that promotes known frauds and scams.

[Paul Scully]

We are really aware of the issues and we appreciate the comments in that report. As that Bill progresses, we will consider them with all due process.

Small Modular Reactors and Energy Security

Damian Collins Excerpts

Wednesday 19th January 2022 Westminster Hall

[The Minister for Energy, Clean Growth and Climate Change (Greg Hands)]

I congratulate the hon. Member for Ynys Môn (Virginia Crosbie) on securing this important debate. She made a fantastic speech. It was a real tour de force around the whole sector. I thank her for her hard work in setting up the all-party parliamentary group on small modular reactors, which has already been an effective voice in Parliament. The hon. Member for Ynys Môn is one of the two original atomic kittens, along with my hon. Friend the Member for Copeland (Trudy Harrison). It is good to see other new members of the group, including my hon. Friend the Member for Hartlepool (Jill Mortimer), here today.

I was delighted to take on responsibility for the nuclear sector when I was appointed as Energy Minister in September, having been a champion for investment in nuclear energy during my time at the Department for International Trade, as I was before that. You and I, Mr Bone, during the 2005 to 2010 Parliament, were recorded as being part of a group called the atomic eight—a group who voted more strongly in favour of nuclear than the parliamentary Conservative party as a whole. I am looking forward to visiting my hon. Friend the Member for Ynys Môn’s constituency later this year—hopefully sooner—as the home of the former Wylfa nuclear power station and the site of the proposed Wylfa Newydd plant. Before getting into my hon. Friend’s excellently made points, I will address some other points mentioned.

My hon. Friend the Member for Copeland is not here in person but is very much here in spirit. My hon. Friend the Member for Stone (Sir William Cash) gave a very supportive intervention. The hon. Member for Caithness, Sutherland and Easter Ross (Jamie Stone) made very strong points on the importance of both nuclear and renewables in producing hydrogen; I ask him to have a word with his hon. Friends, who are still opposing the Nuclear Energy (Financing) Bill, which will cheapen the cost of nuclear, and ask the Liberal Democrats to reconsider and vote for it. We heard from my hon. Friend the Member for Aberconwy (Robin Millar) on the important role that nuclear could play in reducing bills. The Nuclear Energy (Financing) Bill will reduce the cost of a gigawatt nuclear power station by in excess of £30 billion overall. On a present-value basis, that is about £10 per bill payer—a very significant reduction.

Two months ago, the UK hosted the COP26 summit in Glasgow, which focused the world’s minds on the role of clean energy in tackling climate change. It was there that I had the privilege of opening a nuclear innovation event at the UK’s presidency pavilion, highlighting the largest ever nuclear presence at COP. It is great to be joined by the Exchequer Secretary to the Treasury, my hon. Friend the Member for Faversham and Mid Kent (Helen Whately), who I know has just come back from a visit to Hinkley Point C, and is also an enthusiast for the sector.

In April last year, the UK Government set into law the world’s most ambitious climate change target, through our carbon budget 6, in which we aim to achieve a 78% reduction in our emissions by 2035 compared to 1990 levels. In order to achieve this commitment, the UK will need to use a wide range of green technologies, of which nuclear is undoubtedly going to play a key role. The recently published net zero strategy sets out how the UK will deliver our commitment to reach net zero emissions by 2050, and it is clear that nuclear is an important part of our plans to achieve that.

I welcome the enthusiasm of my hon. Friend the Member for Ynys Môn for new nuclear. We will aim to bring at least one large-scale nuclear project to the point of final investment decision by the end of this Parliament, and we will take measures to inform investment decisions on further nuclear projects. SMRs will be important in delivering new nuclear for the UK. The smaller size of SMRs and their factory-based modular build potentially allows for more flexible deployment options—that is stating the obvious. My hon. Friend the Member for Hartlepool put in a bid for not just one, but two SMRs, and made the strong point that nuclear always goes down best in communities that are used to hosting nuclear. That has always been the case in our country, and Hartlepool is very much in that category.

[Damian Collins (Folkestone and Hythe) (Con)]

On that point, the Dungeness A power station in my constituency is in advanced decommissioning. The site is owned by the Nuclear Decommissioning Authority. I reinforce the point made by my hon. Friend the Member for Ynys Môn (Virginia Crosbie) that it would be helpful for the Department for Business, Energy and Industrial Strategy to give direction to the NDA that it can enter into negotiations with Rolls-Royce about the use of sites like Dungeness A, which may well be very suitable—indeed, ideal—for small modular reactors.

[Greg Hands]

I am always happy to meet the hon. Gentleman to discuss that. It is important at this stage that we are not too prescriptive about sites for SMRs; it would be too early for us to do that. I am very happy to meet him and discuss what might be done about the general position of Dungeness.

Corporate Insolvency and Governance Bill

Damian Collins Excerpts

2nd reading & 2nd reading: House of Commons
Wednesday 3rd June 2020 Commons Chamber

[Damian Collins (Folkestone and Hythe) (Con)]

I start by congratulating my hon. Friend the Member for Heywood and Middleton (Chris Clarkson) on an excellent maiden speech. It made me feel slightly nostalgic, because I made my maiden speech—I was trying to work it out— 10 years and one week ago. In addition to that, I made my maiden speech immediately following the hon. Member for North Antrim (Ian Paisley), who has just spoken. The right hon. Member for Doncaster North (Edward Miliband) opened for the Opposition on that occasion as well, so there are a lot of similarities even though we are talking about a different topic today.

I rise to speak in support of the Bill. It has a lot of practical and important measures to support businesses, particularly in my coastal constituency which has many businesses in the hospitality sector. They are particularly badly affected because trade cannot resume as normal. As many Members will know, businesses in the hospitality sector do not necessarily make all their money at an even pace every month throughout the year. They are effectively losing much of the summer season when they would usually seek to raise the revenue that sees them through the rest of the year. Extra financial support at this time is therefore particularly important for businesses in that sector and I welcome it strongly for that reason.

I would like to speak about one sector that is not covered by the provisions in the Bill. I do not believe it is covered by any of the measures that have been put in place so far. It does have rather unique circumstances, but I believe it is a very important sector because of the unique role it plays in our national life—professional football. Professional football clubs are unusual businesses. They have very high turnovers but operate at very small margins. Many people would say that the big clubs in the premier league have a huge amount of money that they spend on players, but most of the income they receive is tied up in the contracts of the players who play for them. They do not necessarily have very much cash.

Clubs in league one and league two are particularly vulnerable because their revenues do not come from broadcasting. Most of the income for big clubs such as Manchester United, Manchester City or Liverpool comes from people around the world watching them play on television. For them to play behind closed doors and receive that broadcasting money gives them the money to succeed. However, for clubs that play in tier 3 and tier 4 in league one and league two, the vast majority of their income comes from playing live in front of spectators. Without that income, they have no revenue. What they have is a series of fixed costs.

The reason professional football clubs have fixed costs is that, unlike almost all other businesses in this country, they cannot restructure their debts and finances by going into administration. They are bound by the laws of their leagues to pay all their football debts in full, including player salaries and transfer fees. Unless they can meet all those costs, they will be expelled from the league. This is an application of a rule that has been the subject of court cases by HMRC and of much debate on matters to do with football club insolvency in this House in my 10 years here. That is a rule called the football creditors rule. It is a rule created by the football leagues for competition reasons to ensure that clubs cannot over-extend themselves, buy better players that they cannot really afford, go into administration to clear their debts and then resume. They have to be consistent in what they can afford through the season, but it does mean that they do not have the option of restructuring their debts. Their obligations and major outgoings are largely going to be the fixed costs of paying players.

There have already been a number of warnings that we will see this summer, because of the financial distress of lots of clubs, the mass release of a large number of players. It has been estimated that up to 1,400 players may be released without being re-signed. We had a small foretaste of that in Scotland last week when Dunfermline Athletic released 17 players.

More troubling over the next few weeks will be the fact that many smaller clubs supplement their income during the summer months when they are not playing through advance sales for the following season. Advance sales of season tickets normally come through in June, which is also when advertisers will make bookings, as will people taking out matchday hospitality packages. That money comes in in June and July and keeps the clubs going while they are not playing, but it is not going to come through now because these would be advance sales for a season that has no start date and no one knows how long it will be before things go back to anything like normal. That affects the whole hospitality sector. As I said, it is less of a problem for those in the premier league, because as long as they are playing on television, although there will be some loss of income because the package is not quite the same as it would normally be, they will still be getting their money in that way, whereas other clubs will not. There is a severe danger that some clubs will simply run out of cash in the next weeks.

[Kevin Hollinrake]

My hon. Friend is making an important point. Is he aware that some banks have a blanket restriction on lending money to football clubs and are applying that restriction to CBILS as well, so even though the Government support is not supposed to have a sector-based restriction, this is being applied to football clubs?

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[Damian Collins]

My hon. Friend makes an incredibly important point, which has pre-empted what I was going to come on to say, although I would not make the point in quite that way. There is no doubt that football clubs would count as businesses in difficulty for a lot of lenders. The clubs that will be the most severely affected will be those that are probably trading at a loss, that have a history of debt and that rely on owners’ loans to make ends meet. They are going to be in a position soon where the cash that normally comes into the business has dried up, and even if the owner has the capability they are probably left trying to put money back into the club so that it can carry on paying the players, even though the players are not playing. The furlough scheme is great for ground staff, but it covers only a small percentage of a player’s wages, even for some of those playing in league one. So these businesses, such as they are, are going to be drained of cash, with no ability to supplement it, and they will be being asked to compete in sporting competitions and leagues where unless they pay these bills they will be kicked out.

Administrators and company voluntary arrangements for football clubs have always faced that problem, whereby even if they try to honour all the creditors at the same amount and they do not pay all the football debts in full, the club loses it golden share to play and therefore the business is almost worthless. So the administrator will honour the rules of the league, which also has the dire consequence of meaning that other local businesses that supply the club get almost nothing when a club goes bust. What we saw with Bury last year is that if no one will come and put the money in, nothing can be done and the club is expelled from the league. That is the position we are going to be in. How attractive is it going to be for an owner or a new owner to put money into a club that is running at a loss, and that has no income and no prospect of any income any time soon—perhaps for another year?

Even the idea of simply mothballing these organisations until competitive football can restart is not going to be viable, because they are bound by their contracts to their playing staff and other people, which are high. I was told by someone from the Premier League that it will probably lose £300 million in broadcasting from this season, which it will have to repay. There are liabilities in transfer payments to other clubs, in this country and around the world, of more than £1 billion, which will nevertheless have to be fulfilled. So there are real problems ahead and no ready solutions on the table for these clubs. We do need a credible plan on this. The Government could initiate a conversation with the football authorities to say that the suspension of the football creditors rule, to help clubs restructure their finances, alongside some support, would be the moment for genuine reform.

What I do not believe we should do with these businesses is chuck good money after bad. Some clubs have been poorly run and in financial distress for many years, and supporting them in that way would simply be throwing good money after bad. This is an opportunity to give many clubs the support they will need to get them through the next few months, recognising that football clubs in leagues one and two are community businesses and organisations. They are valued by and at the heart of their community, and they mean a lot to their community. These clubs should be sustained because they are very important to those communities.

What I suggest—this was referred to early in the debate when Project Birch was mentioned—is that we could look at acquiring, with public money, minority stakes in football clubs, which will give them the cash injection they need to keep going. I suggest creating an independently run fund with some public money and some money from the football bodies, in a similar way to how the Football Foundation operates to fund grassroots football. With those equity stakes to keep clubs going, there should be an opportunity for a supporters trust or a community organisation to then acquire those stakes. That would give the public resources the money back and would give the communities an opportunity to acquire a stake in the club and have much greater oversight of how it is run.

With a mechanism such as that, independent directors could be appointed to the boards of clubs, to have proper oversight and real-time financial information about how these clubs are being run. One reason why clubs are constantly in debt and difficulty is that they manage to get around the rules set for Football League clubs. Clubs in leagues one and two are supposed to spend only about 60% of their income on player salaries, but last year’s report by Deloitte showed the real figure is more like 80% or 90%. With much closer scrutiny of how they are spending their money, and with oversight by independent directors, we could start to put some of those issues right.

Football probably needs an independent body—an independent financial authority—to oversee these issues. One perennial problem in football, particularly in the Football League, is that it is really run by the chairmen of the 72 clubs in it and they are not that interested in having close oversight and scrutiny of what they do. The executive of the Football League has no real power, as these people report back to the chairmen. Therefore, an independent body to oversee all that could be important. We need to think of a creative solution that will not only provide financial stability, but create reform in the finances of football to put these clubs on a more even keel and create an opportunity for community investment and ownership in the longer term as well.

Whatever model we choose, coming fast down the track will be the problem that multiple clubs will start running out of money very soon. The problems that we saw last summer with Bury and Bolton and other communities in Portsmouth, Hereford and Darlington that have been through this before could be repeated by one club after another in the next few weeks. We need to know what the plan is, because the plan is not in this Bill—great though this Bill is. It is not in the measures that have been introduced elsewhere by Government. This is a big loophole that has to be closed.

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[Richard Fuller]

I am grateful for my hon. Friend’s clarification, but my concern—I may well have read the Bill incorrectly—is that we are talking not just about majority or minority, but about where the majority or minority lies. At the moment, the majority has to be within every class of creditors, and there might be a disabusing minority within those instances. Under this legislation, an entire class of creditors could become a minority, and even though they all agree that they do not like the arrangement, for example, they will be forced to accept it. I think that that is a difference of approach. If we are giving that power to the courts, it is important for us and for the Government to be clear about the pattern that is likely to emerge, because in that respect the provision is different and new.

I think that the Secretary of State has answered my next question, but I will ask it again if I may. Will the clauses that are designed to be temporary measures sunset automatically without a subsequent affirmative statutory instrument proceeding in the House? Will they be subject to the negative procedure, or continue without an SI to cancel them? I would be grateful if the Minister could clarify that at some point, perhaps in his closing remarks if he has the time.

It is relevant to raise the issue of companies and sectors that may take time to recover, beyond the relevant period. I think that is addressed in Opposition amendments 3 to 6. What if the directors themselves cannot reach a clear judgment that fully escapes the risks of wrongful trading? What is the position of someone on a directorship in this situation who reaches a dissenting opinion to the majority of directors on the important issue of whether the organisation is able to continue trading? That is another issue of detail that the Minister may wish to address in Committee.

The impact assessment for the Bill does not appear to address the cost of debt from these changes, essentially assuming that changing what has historically been a situation that favoured senior debt to one that is a little bit looser between different classes of debt would have no impact on how much that debt might be priced at in the future. But it is my understanding that increasing risk on an instrument might cause an increase in the price on it. That may have been considered in the impact assessment and have been negligible, but it would be interesting to see what the Government have to say.

I am interested in what happens in the circumstances that arise under the chapter 11 equivalent proceedings when the Government are a debtor or a shareholder in a business. Do the Government have a voice that is different from any other creditor? The contribution of my hon. Friend the Member for Wimbledon (Stephen Hammond) was interesting in this regard, as he highlighted the part of the Bill where HMRC becomes a preferred creditor. Well, those of us who have had to deal with HMRC as a creditor in the past would not mark it down as one of the most amenable of creditors when it comes to its own interests, and that is putting it lightly. In fact, as we are seeing in this Parliament already, HMRC is acting, both in the Treasury and in general, somewhat as a bovver boy in British industry. It does not seem to like people who are self-employed and it certainly does not like people who have a loan charge. Now it seems to want to have priority in the debt structures of our companies. Where will its ambitions end? Where will this Government’s facilitation of the taxman’s ambitions end? As a Conservative, I would have hoped that they would have ended some time ago. Perhaps I can tempt my hon. Friend the Minister to comment on that.

[Damian Collins]

I am following my hon. Friend’s remarks closely. Given his opening remarks, might it not be better, if we believe in backing British business, for us to have some skin in the game? We might not get our money back every time, but overall we probably would.

[Richard Fuller]

After my hon. Friend’s comments about association football, of which I have absolutely no understanding at all, I will bow to his better judgment on this topic too, but generally I am not really in favour of the Government having skin in the commercial game. When they get active in the economy, they tend to blunder around and probably, with the best of intentions, make things worse. I am not saying that they should not have their role; certainly, right now, many people will want the Government to have a role. Many Members have rightly looked at the measures the Government have put in place to support business and praised them.

Of course, people need not just take our word for that. Ask people around the world which country’s Government have responded best to the economic consequences of the virus and they will say that the United Kingdom Government are No. 1, with Japan, America and Germany in the United Kingdom’s wake. That is a tremendous credit to Ministers, but I would not like to encourage them to make that participation any longer than it needs to be.

On the guidance for going concern judgments, the Department will have spoken with auditors about how they are approaching their going concern judgments this audit season. Does the Bill have any impact on those judgments? Does the Department already think that it might need to bring forward any other measures based on the independent judgments of those auditors?

I raise that because in the 2007 crisis, there was a feeling that the rating agencies had been captured by their corporate clients and were giving ratings that perhaps did not reflect the true underlying status of businesses. We are fortunate in this country already to have embarked on reforms of accounting and on the separation of accounting and other activities to limit that risk, but I just caution that we ought be aware of that in a year’s time when we look at those going concern judgments. We would not like those to come back on our accounting firms, which are doing the best they can.

In Committee, the Minister would be wise to give a few more details about the role of the monitor—my hon. Friend the Member for Huntingdon (Mr Djanogly) raised that issue—and what role the Department will have in monitoring the monitors. Is any change expected to that?

One other concern I have is that facilitating businesses to continue trading at a time when the economy as a whole may be recovering and uncertain has a hint about it of creating some form of zombie businesses, where people are compelled to provide supply, as is required under the Bill, but there is the increasing sense that those businesses are not going to make it. I may be expressing a concern based on widespread use of the insolvency practice, which may not come to fruition—let us hope that for many people it does not—but I wonder what the Government’s thoughts are about the risk of businesses existing in name but not actually being able to create a long-term future for themselves or their employees.

I mentioned the Opposition’s amendment 1, on the voice of employees on obtaining a moratorium. If that were tweaked, it would be an interesting issue for the Government to consider. I also mentioned in an intervention the powers of the small business commissioner. The Secretary of State was right to say, “Hold on a minute; that’s something that we will come back to,” particularly as we are going through this in one day. It is probably not something that we would want to put through so fast. Similarly the calls by the Leader of the Opposition—[Interruption.] I did it again. I am so sorry. It is so hard to forget that time.

Budget Resolutions

Damian Collins Excerpts

1st reading: House of Commons
Tuesday 28th November 2017 Commons Chamber

[Greg Clark]

It is my view that we need to have a broad base of power supplies for our security in the future. We are now the world leader in offshore wind, which demonstrates that one comes not at the expense of the other, and that is the right and prudent way to proceed.

We have many world-leading industries, from financial services to advanced manufacturing, from the life sciences to the creative industries. In many cases, they are at the forefront of the technological revolution that is sweeping the world.

[Damian Collins (Folkestone and Hythe) (Con)]

What further assistance are the Government planning to give to research and development for small modular reactors as part of the nuclear sector, potentially a very important and useful source of energy? What consideration has the Secretary of State given to the suitability of existing nuclear sites, such as Dungeness in my constituency, as locations for SMRs?

[Greg Clark]

I know that my hon. Friend takes a great interest in this. We have an energy innovation programme, about which we will make some announcements before long. That will address the question of what types of technologies should be moved along from research to development and implementation. He will have an interest in that and I will make sure that he is given the details.

To capitalise on our strengths, we need to reinforce them and project them into the future. We also need to address our weaknesses. We are proud of the fact that more people are employed in this country than ever before—an extraordinary achievement, with 3 million extra jobs created in a time when the Labour party predicted that millions of jobs would be lost. But compared to some of our competitors, on average, we work harder and longer to produce at the same level as they do. We need to raise our productivity, as the Chancellor made clear in his Budget statement.

As the House knows, to a large extent, it is a problem of disparities, rather than a uniform picture. We have industries, companies, people and places that are among the most highly productive on the planet, but we have what the Bank of England has called an unusually long tail of companies and places whose level of productivity is below that of the top performers. The challenge is clear: to reinforce the performance of the top and build on those strengths, while spreading that excellence throughout the economy and the country. That is exactly what the Budget and our industrial strategy White Paper will do, by reinforcing strengths and addressing weaknesses in areas across the board. We talk about innovation, skills, infrastructure, the business environment and local economies.

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[Damian Collins (Folkestone and Hythe) (Con)]

I rise to speak in support of the Budget and, in particular, the key strategic priority it places on the housing market and increasing housing supply. The Chancellor was right to say that we should have a national target for new home completions of 300,000 a year, but that number should not be a mere aspiration; it is an absolute necessity.

For many people in this country, getting on the housing ladder is becoming increasingly difficult. The prices of new homes to buy are rising much faster than people’s earnings. That has been the case for a long time. It is therefore no surprise that the percentage of people who are able to own their own home has declined. We are not looking at investment in the housing market just for homes to purchase. We need to build a lot more units that are affordable to buy and to rent, and we need a much more active strategy to do that. I was pleased that the Government announced that as part of the Budget.

I have supported the proposed development of the Otterpool Park garden town in my constituency, which would create up to 12,000 new homes. Any planning decision involves a degree of difficulty and it is important that we get the local consultation right, but we do need to prioritise building a lot more homes.

Building creates not only new places for people to live, but a considerable number of jobs in the construction sector. Many people who work in construction say that even now, it is difficult to find the people to do the work that is available. Therefore, it was right that a strong priority was placed on training people to work in the construction sector.

I welcome the Chancellor’s announcement of the £3 billion resilience fund to be spent over the next two years on preparations for Britain leaving the European Union. My constituency of Folkestone and Hythe contains the channel tunnel. Investing in preparedness to manage cross-border trade is a necessity. Anything that, for whatever reason, slows the progress of road freight in and out of the country will cause congestion and delay. That is bad for the economy and has a detrimental impact on people’s quality of life and the businesses in my constituency and elsewhere in Kent.

For me, a key priority in building the physical resilience we will need is not only to manage the electronic processing of freight as it passes in and out of the country, but to ensure that we have the physical infrastructure to hold lorries if they have to queue before leaving the country or if there is any requirement for customs checks as they arrive. The delivery of the lorry park on the M20 at Stanford West that was envisaged and proposed two years ago as a relief for Operation Stack is a vital piece of national infrastructure. I was disappointed that the Government had to withdraw their planning application to build it because of a judicial review, but I know that it is being looked at again. I see that the Financial Secretary is in his place. I raised this matter with him last week and welcome the letter he sent me to confirm that the ring-fenced budget of £250 million that the Government allocated for the delivery of that lorry park is still there. It is a vital piece of infrastructure and we need to ensure that it is delivered.

On the other spending commitments in the Budget, I welcome the additional £2 billion this year and into next year for the national health service. It is important that that reaches the places that need it most. The Health Secretary is not here, but I believe that greater consideration needs to be given to GP services and primary care in coastal communities, where the often complex, unique and challenging requirements have led to the average number of patients per GP being much higher than the national average. We are struggling to recruit GPs in such areas. I have spoken to the Health Secretary about that issue on numerous occasions and know that it is a priority for him. However, we need to ensure that the extra money for the health service goes to the parts of the country where it will make the biggest difference.

There has been a lot of talk about increasing investment in research and development and about increasing the research and development credit. That is incredibly important for the future of the economy, and I want to touch on artificial intelligence, which will be an important driver of growth in the future, as the Secretary of State set out in his remarks. Effectively, artificial intelligence is the robotic harvesting of the data footprint that we leave as we increasingly conduct our lives online and the designing of new products and technologies around that to meet people’s needs. That throws up a number of ethical issues.

Algorithms that run programmes are private property—they are copyrighted; they are not shared, and many platforms, such as Google and Facebook, fiercely guard the information—but we need to make sure that, when new services are designed based on our data footprint, companies behave ethically and responsibly and that we are able to check they are safeguarding the interests of the people they seek to serve through that technology. That is why the announcement of the creation of the centre for data ethics and innovation is incredibly important. The Digital, Culture, Media and Sport Select Committee, which I chair, will be looking at the distribution of disinformation and how companies’ algorithms either support or could act against it. There is, however, an important ethical question about the right of third-party organisations to check the work being done. Innovation through AI can, then, transform the economy, but it throws up some ethical issues that we have to get right.

The Government have taken an interest in driverless cars, but driverless cars, though an exciting technology, do not work without a signal to allow them to receive the information they need, which is why the creation of the national 5G network is so important. Without a signal, a driverless car would suddenly stop in the middle of the road. The investment in the 5G network requires investment not just in poles and masts but in fibre infrastructure. A key part of the industrial strategy has to be the move to a full fibre economy as quickly as possible. We simply cannot deliver on massively important new technologies such as 5G for the whole nation without that infrastructure to support it.

As an adjunct to that, I know that my right hon. Friend the Minister for Digital has talked about whether there should be a universal service obligation for 3G mobile signal. In many parts of the country, including Elham valley in my constituency, the 3G signal is weak. Ofcom will shortly be publishing a study on the real level of service delivery by mobile phone operators and whether it falls below the requirement stated in their licences. If it does, there will have to be some further inducement to act to make sure that basic coverage is better than it is. In the longer term, however, we need investment in a 5G network.

Finally, the joint working between the Government, the CBI and the TUC on retraining is crucial. Technology means that people’s jobs will change faster and faster throughout their lives, and people need the ability to retrain throughout their working careers to take advantage of this.