Online Safety Act 2023 (Qualifying Worldwide Revenue) Regulations 2025

Lord Stevenson of Balmacara Excerpts

Monday 8th September 2025 Grand Committee

[Lord Stevenson of Balmacara (Lab)]

My Lords, I welcome this SI, although I have some questions about it. I would be grateful if the Minister could respond to them and, if not, write to me about them.

It is good to see progress being made on these issues. This was an area of considerable discussion and debate during the passage of the Bill, which some present will remember, mainly because we had no real certainty about the ambitions regarding whether those who were benefiting from Ofcom’s work would actually be prepared to pay for it. Even if they were prepared to pay for it, there was no certainty that they could be made to pay for it. Even so, despite the wording and deep thought that has gone into this particular piece of paper before us today, I still have some doubts about whether it will get the effect it wants.

Can the Minister say whether there is a back-up plan should the fees not meet the requirements of Ofcom in its vital role, which increases day by day? What would happen then? If the main companies involved—99% of them are at least operating outside the UK, and most of them are established outside the UK—refuse to play ball and are able to find a way around this process, we may face a bit of a difficulty, and quite an expensive one at that. So, my first point is to congratulate the department on bringing this forward, but I worry a little about whether it will be able to achieve its aims and objectives in a way that will be satisfactory for those of us who are concerned about the generality of this issue and also for those who are directly affected by some of the work done by these companies.

My second point is a bit technical, but that may just be because I am an accountant. The choice that has been made here in assessing the QWR is that it should be “just and reasonable”. These are fine words, but they are not very common. The words used in most accounting systems across most of the world—unless there are areas that I have yet to experience—are “true and fair”. Accountants have not loved those words, have often argued about them and constantly disagree about what they mean, but they are what works in assessing the effective financial position of any publicly owned company: most companies that wish to receive investment have to prove to a “true and fair” standard that their accounts reflected the true situation in that company.

Why have the Government agreed with Ofcom in going for these other words, which must be deliberately chosen? If they are deliberately chosen, will the Minister explain why “just and reasonable” is in any way equivalent to “true and fair” and, if it is not, as I suspect, why that choice was made? I do not say that it is wrong; whether the calculations on which financial results are being made are just and reasonable is a perfectly good way into any discussion with any organisation or company. It would be a good way of testing whether contributions to be made by companies in scope of Ofcom are just, in the sense, I suppose, of being justified, and reasonable in the sense of being able to be made to an apportionment that is sensibly aligned to the actions that will be taken by Ofcom against that company, very often against its economic interests. But I am intrigued by it. There is a perfectly good system that operates in the accounting world; “true and fair” has been used for years and years. We do not like it, but we have learned to live with it. Why have they not taken it forward in this sense?

--- Later in debate ---

My noble friend Lord Stevenson also asked about scrutiny of—

[Lord Stevenson of Balmacara (Lab)]

I am grateful to my noble friend for trying to explain the “just and reasonable” approach. Just to unpick what he said, what is Ofcom consulting about? There seems a disjuncture in what we are trying to do here. We are going to pass this regulation tomorrow—it will be in force in a couple of weeks, according to Ofcom—yet we still do not know whether Ofcom has completed its discussion about whether companies are prepared to accept “just and reasonable”. Is that a fair summary of where we are?

[Lord Leong (Lab)]

My noble friend makes a good point. Ofcom is consulting on the guidance to help providers understand the ways of apportioning revenue in a “just and reasonable” manner. Its guidance will hopefully be published in the last quarter of this year. Until such time, I am sure there will be further guidance for providers along the way.

To come back to the scrutinising of legislation, ongoing parliamentary scrutiny is crucial. Indeed, the Online Safety Act requires Ofcom’s codes to be laid in Parliament for scrutiny. The Secondary Legislation Scrutiny Committee continues to provide vital scrutiny of statutory instruments and has drawn special attention to several instruments that my department has laid in the past few months. It identified the instrument we are debating today as an instrument of interest. The Science, Innovation and Technology Select Committee and the Lords Communications and Digital Committee also play a vital role in scrutinising the regime.

Finally, the Secretary of State is required under Section 178 of the Act to review the effectiveness of its regulatory framework between two and five years after key provisions of the Act come into force. A report of the outcome of this review will be published and laid before Parliament.

Ofcom has said in response to the SLSC that it will review the information from providers and is able to use its powers to require further information under Section 100 of the Act should it need further details to scrutinise the approach taken by the provider—that is to do with the “just and reasonable” method. Ofcom has stated that it has access to sufficient expertise to make this assessment.

The noble Viscount, Lord Camrose, asked about exemptions. Under the Act, Ofcom has the power to make or revoke exemptions and this must be approved by the Secretary of State. Ofcom is proposing to exempt service providers whose UK referral revenue is less than £10 million. We will consider that carefully before deciding whether to approve the exemption. I am sure noble Lords will know that about 60 companies would probably fall within the bracket of the Ofcom fees regime—the majority of which are non-UK companies. I am sure noble Lords will also know that most of these companies have revenues in excess of £250 million. I would have thought that there are not many companies with revenue of less than £10 million.

In the last 12 months, we have seen key elements of the Online Safety Bill progressed and implemented. Many of Ofcom’s powers are now in effect. Platforms are now legally required to protect children from harmful content, including rolling out highly effective age assurance to tackle pornography, suicide, self-harm and eating disorder content. This instrument will bring us one step closer to a fully implemented online safety regime, ensuring that companies raising revenue from online services cover the cost of regulation—not taxpayers—and take responsibility for keeping our children safe online.