Product Security and Telecommunications Infrastructure Bill

Earl of Devon Excerpts

Report stage
Wednesday 12th October 2022 Lords Chamber

Moved by

[The Earl of Devon]

19: Clause 61, page 46, line 14, at end insert—
“(4A) Where the assumptions in subsection (4) cause the market value of a landlord’s agreement to decline, the consideration payable under a new tenancy granted by order of the court under this Part may not decline by more than 50% relative to the previous consideration for the period of five years beginning with the day on which the new tenancy is agreed.(4B) Where subsection (4A) applies, the consideration must be reduced in even increments over the course of five years, from the level of the previous consideration to the level of the new court consideration.”

[The Earl of Devon (CB)]

My Lords, in the absence of my noble friend Lord Lytton, I rise to move Amendment 19, to which I added my name somewhat late. I shall speak also to Amendments 20, 21, 22 and 24 in this group to which I added my name too late to appear on the Marshalled List.

The valuation provisions of the Electronic Communications Code as extended in 2017 are not working well. I think we are all agreed on that. The number of disputes coming before the lands tribunal has increased from approximately 40 to more than 120 already this year, and we have no idea how many additional disputes are taking place in county courts. This is because we have no record. The Government have not consulted on this issue before proposing this far-reaching, retrospective legislation. Indeed, the Bill has been introduced based upon a cacophony of anecdote, conjecture and vested misinformation. It seeks to address the issue not by improving the damaging “no scheme” valuation provisions but by extending their application to approximately 15,000 long-established and well-settled 1954 Act leases. This is a mistake, and it will have a chilling effect on the rollout of digital infrastructure which we will regret.

My noble friend Lord Lytton is, as I said, unfortunately committed elsewhere today and we are therefore deprived of his wisdom and subject matter expertise. I am by no means an adequate substitute and refer your Lordships to his excellent contributions in Committee.

I also remind the House of my own interests, and particularly note that while formerly a property barrister I now work as a technology litigator for a firm that represents telecoms companies as well as site owners. As a Devon resident with poor mobile coverage, I am desperate to see an increase in rural connectivity, with the social and economic benefits that flow therefrom. As a farmer, I am also a site owner of a 1954 Act telecoms lease granted many years ago. This has been bogged down in renewal due entirely to the uncertainties of this legislation. I see this issue therefore from many sides, both personal and professional.

I too welcome the noble Lords, Lord Kamall and Lord Harlech, to their new roles and thank them and the whole Bill team for their time in discussing these issues. It is not ideal to change Ministers half way through the Bill’s progress, and I am disappointed that between Committee and Report we have not been provided with information that was requested. Despite no formal consultation, I understand the Government are confident that the valuation issue is now settling down and that the provisions in the Bill are largely welcomed by stakeholders. We have not seen the information relied on to reach these conclusions because it is cloaked in confidentiality.

From recent discussions, it appears that this evidence has largely been provided by the telecoms mast operators. It is no surprise that they approve of Clauses 61 and 62, as these will allow them to decrease rents payable on historic leases by over 90%, which is a huge cost saving; yet they provide no concurrent obligation on them to pass those savings on to phone companies and their consumers. The result will be that infrastructure companies benefit financially while owners see dramatic rent decreases and are discouraged from letting sites for telecoms masts, and consumers see no financial benefit and, more importantly, no increased coverage. There is a risk that only the corporate middlemen, who often take their profits overseas, will benefit. Surely this cannot be the Government’s intention.

There are other beneficiaries: the professionals, lawyers and surveyors advising those in dispute. Judges dealing with the Electronic Communications Code have criticised the intensity of these disputes and the Institute of Economic Affairs recently noted that since 2017

“there has been much litigation, apparent ill-will, and consequential delays”.

At the 2021 RICS Telecoms Conference it was shown that, while site payments have indeed reduced since 2017, the costs of transacting for sites have more than doubled in that time, meaning that the decrease in site rents has actually resulted in no savings at all for the market.

The 2017 amendments made parties increasingly antagonistic, and the provisions in this Bill will only add to that. The amendments in this group seek to address this. Amendments 20 and 21 from the noble Baroness, Lady McIntosh, seek to remove Clauses 61 and 62 entirely. Given what I have said, this is my preferred solution. Unless and until a proper consultation is undertaken and the impact of the “no scheme” valuation methodology is properly understood, we should not be extending it to 1954 Act leases and undermining long-established landlord and tenant relations. This is government by diktat, riding roughshod over private contractual interests at the behest of undisclosed and well-funded commercial enterprises. It is not in the public interest.

Amendments 19 and 22 propose alternative remedies to ameliorate the problem of dramatic and sudden decreases in rents payable under telecoms leases. As currently drafted, site owners, many of which are community centres, charities, sports clubs, farmers and small businesses, will see a collapse in rental income that could be very damaging. Amendment 19 proposes that this decrease be limited to 50% of the current rent within the first five years, while Amendment 22 requires that the rent is decreased in even increments during that same period. Neither amendment seeks to prevent the “no scheme” valuation methodology that the Government prefer, they simply soften the impacts to protect the interests of the individual landlord. These are modest and, I suggest, sensible proposals and they should be adopted if Clauses 61 and 62 are to remain.

Meanwhile, Amendment 24 seeks to avoid the invidious prospect of backdated rent decreases which may result in landlords having to pay substantial sums back to telecoms mast operators under interim orders applicable to 1954 Act tenancies. As currently drafted, rent decreases take effect from the date the notice is served, not from the date the new lower rent is determined. A contentious lease renewal can take many years to resolve and, as we have heard, the decreases in rent can be more than 90%. This means that a poor landlord may be obliged to pay back many thousands of pounds in rent previously received, which may not be possible if that money has been budgeted for and spent. This could drive small enterprises and individuals into bankruptcy. Is this what the Government intend? Amendment 24 would ensure that this will not happen, and that the newly decreased rent is not backdated but payable from the date of the court order. Backdating the rent only adds insult to injury.

I urge the House to consider and support these important amendments. If the Bill is unamended, no landowner will welcome telecoms infrastructure and our digital rollout will fail. I beg to move.

--- Later in debate ---

[Lord Kamall (Con)]

I thank the noble Lord for his question. I am interested in the point he makes about the amount or proportion of rent in the overall agreement. Whatever happens in this debate, I would be very happy to continue that conversation with him and my officials to make sure that we can close any gap in understanding.

The noble Lord will recognise that I have to defend the Government’s position as the Minister, so I continue to say that the Government cannot accept these amendments, but we hope, perhaps vainly, that the noble Lords who tabled them will consider not pressing them.

[The Earl of Devon (CB)]

I thank noble Lords for the unified support from across the House. It came from all Benches, it seems, other than perhaps one—and even that Bench seemed to be wavering a little at the end there.

I am surprised that a Conservative Government extolling growth want to undermine property rights and cost the economy billions of dollars. There is no explanation given other than the whispers of these undisclosed stakeholders. The Minister kindly explained that he has been listening and that there have been discussions and workshops, but we simply have not seen what those were and what the stakeholders said. I have to ask where they are holding the stake to convince the Government to persevere despite your Lordships’ consistent opposition to these provisions.

I note the Minister’s desire for fairness. As the noble Lord, Lord Cromwell, has just noted, it seems that the Government want this provision to be equally unfair to every single site owner across the country.

The Minister also noted that the Government are trying to avoid costs going up. However, as we have seen, and as the RICS report stated, costs have risen exponentially as a result of the 2017 amendments, and here we are, doubling down on those, therefore only to increase costs further.

I think I heard the Minister accept that it will impact landowners’ desire to provide sites. I think he also noted that when you enter a lease you do so with the knowledge that the market might change and therefore the rent might change. I do not think that anyone entering a 1954 Act lease in 2015 would have expected that the rent would decrease by over 90% by 2022. I am sorry, but if the Minister suggests that that was a real expectation of the parties, it is simply not true.

--- Later in debate ---

[The Earl of Devon (CB)]

My Lords, I will speak briefly. It is wise for the Government to make this amendment, given the dangers that have been identified to national security infrastructure of unfettered telecoms operator access.

This necessary amendment highlights two key issues. First, it highlights the broad powers conferred by the ECC on mast operators to access to public and private property and undertake works on it. It is not just the national security infrastructure that is threatened by the code provisions but private and public interests of many types. Secondly, the fact that the Government have become aware of this important concern only now, in the final stages of the Bill’s passage, is a compelling illustration of how totally inadequate the consultation process has been and how essential it is to conduct a proper review, an issue that we will come back to.

[Lord Fox (LD)]

My Lords, the noble Lord, Lord Kamall, has demonstrated a prodigious ability to outsource the responsibility for presenting the government amendments. We welcome the noble Lord, Lord Sharpe, to this Bill.

As the noble Earl, Lord Devon, pointed out, this is late to the party. It is also the first time we have heard the explanation for this Bill, though others may have been lucky in having it. We had a meeting with the noble Lord, Lord Kamall. No one from the Home Office was there to give us the information we have just received, so I am absorbing it for the first time—a relatively unsatisfactory process. That said, this is an important area. I am surprised that the code has somehow been allowed to continue for as long as it has without this issue cropping up. Have there been specific issues which have caused this to happen, or is it still a hypothetical matter that the Government are seeking to deal with?

Everybody can appreciate the problems of sticking a 5G tower on top of GCHQ. No one wants to see it, but I can imagine that the reality is a more subtle set of problems. We on these Benches seek a better sense of the real-life cases which the new clause seeks to stop. The Minister singled out technical risks in particular. Those exist beyond the site itself, on the environs. I am interested to hear from the Minister how the clause deals with a 5G site put adjacent to a security site. What thresholds are the Government going to expect its security services to run when it comes to implementing the clause? It will not just be on the site itself.

I understand that quite a lot of this will be enshrined in a digital toolkit. It would help us all if the process of developing that digital toolkit was one with a collaborative approach. The noble Earl, Lord Devon, also highlighted that this problem of overriding access from the operators extends beyond the security environs. This is not just a security issue; it spreads into other places. Like many other Peers, I received a letter from the fire and rescue service. While this is not a security issue, it falls within the purview of the noble Lord, Lord Sharpe, and the Government should consider it, because it raises the problems of putting network equipment on fire and rescue service land and the fact that it would impede the training and preparation of that service.

This is even later than the Government’s amendment, and I recognise that it is not even part of this amendment, but it is a specific concern, and the Minister would do well to undertake to your Lordships’ House to talk to the fire and rescue service, to understand their problem and, if necessary, I am sure that we would all tolerate a late insertion at Third Reading. I say this without having spoken to the Opposition, but if it was an issue, I think that we would discuss it.

We understand that national security issues must be taken into consideration. We do not understand how this will work, what the thresholds will be, and what sort of cases it is seeking to avoid. More explanation is required.

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[Baroness McIntosh of Pickering (Con)]

My Lords, I am grateful for the opportunity to raise what is quite a difficult situation in Amendments 25, 26, and 27. What I seek to address here is the fact that while it is welcome that there is an alternative dispute resolution process, it would be preferable that this was mandatory. I would also like to raise other issues, such as the imbalance between the funds available to operators bringing such a case and to landowners, who may be of quite modest means and modest size in being able to defend against such actions.

I welcome the inclusion in the Bill of an alternative dispute resolution mechanism. Could my noble friend the Minister take this opportunity to explain why it is merely optional for operators to use it, given—as I referred to a moment ago—the disparity in resources between operators and landowners in many cases? Is he not concerned that the incentive to use such an alternative dispute resolution mechanism for operators is low, given that they have the resources to take potentially multiple landowners to tribunal? Also, while the overall market for new sites for masts has slowed down, some small landowners have been unable to afford the cost of being taken to a tribunal to seek to defend their property rights. They have essentially been forced to agree to host mobile apparatus on unfavourable terms.

I propose Amendments 25, 26 and 27 to make it mandatory for telecoms operators to engage with an alternative dispute resolution mechanism before threatening to take a landowner to court for an agreement to be imposed. I beg to move.

[The Earl of Devon (CB)]

My Lords, I strongly support these amendments, to which I have added my name. As I have said, I am a litigator, and it is a tremendous help to get parties together in some form of alternative dispute resolution before a matter is litigated. Compelling ADR as step 1 in an escalating dispute is common, and indeed is often to be found within contractual obligations themselves, particularly between parties of disparate size and resource. Given all that has been said about the fractious and broken market, and the huge number of disputes that are occurring, the more that can be done to head these off before litigation costs escalate, the better.

I was referred to a decision this morning of the Lands Tribunal where a lease negotiation had been settled at the door of court: the decision focused only on the issue of costs. The tribunal awarded £5,000 in costs, but the total bill was over £100,000. Litigation costs can be huge and, as the noble Baroness, Lady McIntosh, has indicated, that can keep small site owners out of litigation: they have to just roll over. ADR can occur in the form of mediation, arbitration or simply expert determination on a specific technical or legal issue in contention. It is key to greasing the wheels of these challenging transactions and, given the difference in size and resource between site owners and telecoms operators, it would be most helpful.

[Lord Cromwell (CB)]

My Lords, I was in two minds about these amendments, but I will support them in the final analysis. ADR is of course a good thing if it avoids lengthy and costly court proceedings. My concern is that it can also become a token activity, backed by the threat of subsequent court action to intimidate site owners, reflected in the inequality of arms between the parties, which others have already referred to.

I would greatly prefer an outcome where disputes can be resolved between the parties, and perhaps their respective agents, where the balance of negotiation is fair. I made a proposal in my earlier remarks on this, to which I have received no response.

The Bill, as drafted, sets site owners and operators needlessly on a collision path. No disputes will be resolved; they will simply be won by brutal compulsion that will lead to delay and protracted proceedings. If the Bill goes ahead as is, ADR should be mandatory as a first step in at least seeking some resolution. I therefore support the amendments in this group.

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[Baroness Merron (Lab)]

My Lords, I am pleased to speak to Amendment 28, which we have tabled in an attempt to find a constructive way forward to perhaps the greatest area of discussion throughout this Bill which has not yet been resolved—how we bring together the balance, the fairness and the efficiency that we all say we are looking for. This amendment is an attempt to amalgamate various others that were debated at Committee stage. I am very grateful to colleagues across your Lordships’ House who have worked with us on the draft or have indicated their support for this approach. In particular, I thank the noble Lord, Lord Fox, for adding his name, and, of course, my noble friend Lord Bassam.

Since taking office, the new Prime Minister has made a lot of her commitment to rolling out high-speed broadband and 5G. We welcome that commitment and would like to see it come into reality, particularly as, regrettably, the former Prime Minister repeatedly watered down the targets. We want to see modern infrastructure installed and want that to happen quickly, but we also want the system to be fair—to operators, yes, but also to the landowners who host equipment and consumers who are in the midst of a cost of living crisis.

The Government, we understand, will say—and I hope the Minister will not be going down this road—that a review as proposed in this amendment would only slow things down. Let me deal with that. This amendment does not prevent any of the Bill’s provisions coming into force. The Government, we understand, are also minded to say that they are confident in their approach in this area and therefore no review is necessary. If that is the case, I suggest that an independent review would give their policies a clean bill of health. However, I suspect an independent review would conclude that all is not as well as has been presented, and its recommendations could therefore be a very helpful resource for the new Secretary of State and the Government.

We see no reason why the Government could not simply accept this amendment and get on with appointing somebody independent to lead a review. If the Government are not willing to do that, we will be minded to test the opinion of the House. I beg to move.

[The Earl of Devon (CB)]

My Lords, I added my name to this amendment at the last minute and I am very pleased to support it. From my earlier contribution, the House will be aware of my concerns about the lack of consultation prior to the passage of this Bill. The contributions of many noble Lords and the Ministers’ responses have only increased those concerns. I did not push for a vote on the prior amendments regarding valuation and ADR because I believe those issues will properly be considered in the context of this independent review.

The Government have suggested in discussions that a review will unduly impact the market and slow the rollout of digital infrastructure. This is not possible. We have established that the market is already broken and the costs of transacting telecoms sites have more than doubled since 2017, as reported in the RICS conference, and the number of cases before the lands tribunal has more than tripled. The ECC is not working and expanding its broken application to historic 1954 Act leases will only increase the challenges. A review is urgently required, and I urge that this be voted on.

[Lord Northbrook (Con)]

My Lords, I speak in support of this amendment. The noble Baroness has rightly underlined the importance of ensuring that the code is actually having the impact the Government tell us it is having.

This legislation is controversial because it proposes to erode property rights in the public interest. For this to be a viable proposition for a Government who support individual rights and freedoms, it must be absolutely clear that the public benefits considerably outweigh the private cost and the resulting redistribution is as fair and equitable as it can be. Any such policy must therefore be based on robust evidence.

A recent contentious legal ruling in a case brought by Vodafone has underlined that the Electronic Communications Code does not reach this bar. As a brief summary, the legal judgment has created significant real-world issues for the ability of landowners to develop sites, damaging local economic growth but also disincentivising site owners from agreeing to host telecoms sites at all. This risks stalling the rollout of new telecoms sites, putting in jeopardy the Government’s ambitious 5G targets. The judge said that this ruling identified a “potentially important structural defect” in the code. I am aware that this case has been brought to the attention of the Government, but they have chosen not to act. Issues such as this illustrate precisely why the review proposed by this amendment is vital.