Online Safety Act 2023 (Qualifying Worldwide Revenue) Regulations 2025

Viscount Camrose Excerpts

Monday 8th September 2025 Grand Committee

[Baroness Humphreys (LD)]

My Lords, we on these Benches support the draft regulations. They represent a crucial step in implementing the Online Safety Act, aiming to foster a safer online environment. The principle that the financial burden of regulating the vast and complex online landscape should fall on those service providers that generate substantial qualifying worldwide revenues, rather than the UK taxpayer, is one that we wholeheartedly endorse.

In our view, Ofcom has articulated a robust and pragmatic rationale for basing fees and penalties on global rather than UK-only revenues. This approach, defining qualifying worldwide revenue as the total revenue referable to the regulated parts of a service, is designed to ensure that major multinational operators are appropriately deterred from non-compliance and contribute their fair share to user safety. We believe that such a model strengthens enforcement and promotes regulatory fairness.

However, we also acknowledge the concerns raised by industry stakeholders and examined by the Secondary Legislation Scrutiny Committee. Issues such as the aggregation of revenues across complex business groups, while providing consistency, may create anomalies for certain providers. Questions persist regarding the calculation and apportionment of revenue, especially when services are bundled or operated internationally, and how Ofcom will assess the provider’s just and reasonable approach to apportionment.

Furthermore, the practical impact on smaller providers if fee thresholds are set too low is a significant consideration, despite the current expectation that small and micro-businesses, charities and public sector bodies are unlikely to be affected. I therefore seek assurance from the Minister regarding the practical impact of these regulations. Specifically, is he satisfied that, when setting the crucial fee thresholds for providers required to notify their qualifying worldwide revenue, the regime will remain proportionate and workable so the burden falls primarily on major enterprises and not disproportionately on smaller providers? Furthermore, is he satisfied by Ofcom’s core rationale for adopting a worldwide revenue approach as vital for effective deterrence and regulatory fairness?

I also urge the Government to commit to ongoing review of this framework, particularly given Ofcom’s intention to provide further guidance on just and reasonable apportionment. We support these regulations but expect further scrutiny, coupled with the Government’s commitment to address these assurances.

[Viscount Camrose (Con)]

My Lords, this statutory instrument forms a key part of the regulatory framework underpinning the Online Safety Act 2023, a significant and necessary piece of legislation that forms part of my party’s legacy in government. I am very proud of the small contribution that I made to its passage through your Lordships’ House. That Act’s core aim is to make the online world safer, particularly for children and vulnerable users—an aim that all of us in this Committee support fully.

That said, let me make a brief point; it does not go directly to this instrument but it is, I think, a point worth making. I am concerned by how controversial the Bill seems to have become in certain quarters—indeed, much more controversial than it deserves to be. Part, though not all, of that is perhaps due to the previous Secretary of State’s rather aggressive rebuttal of some of the claims made about it. So I express my hope and wish that the new Secretary of State will be more emollient in his debate in order to carry people with him, because it is so important that the public come along with the Bill.

This instrument sets out how Ofcom will calculate the qualifying worldwide revenue of regulated service providers. As the Minister has outlined, this matters for two reasons: first, to determine Ofcom’s fees and, secondly, to establish maximum penalties for breaches of up to 10% of global revenue or £18 million, whichever is higher.

Most notable, of course, is the use of worldwide revenue as the basis for both fees and penalties. Although this ensures consistency and deters underreporting, the concern was raised during the public consultation that it can prove disproportionate for providers with only limited UK operations. I hope that, when he comes to speak, the Minister can give a bit more clarity on this point. Has a formal assessment been carried out in this specific area? What safeguards exist to prevent excessive penalties in cases of genuine error?

There is also the question—the noble Lord, Lord Stevenson of Balmacara, set this out clearly so I will not go into it much—of the interpretation of terms such as “just and reasonable”, particularly in revenue apportionment and currency conversion. Consistent application will of course be critical. How will disagreements be resolved and what guidance will providers receive?

I would also be grateful for clarification on Regulation 4(3)(b), which refers to

“parts where search content may be encountered (in the case of search services and combined services)”.

Ofcom has indicated that both “search” and “user to user” can include the functionality of AI chatbots. I am pleased that it has clarified this point but, if that is so, it raises an important issue: in cases where an entity is to be fined for an unsafe AI chatbot, which service is considered referable? Is it the chatbot service itself, or is the chatbot to be considered an amalgam of a user-to-user service and a search service?

If it is to be just the chatbot service—these are, of course, increasingly being used as search services—many of them generate very little revenue. In fact, AI is frequently loss making for many of the large organisations operating in this space. Could their qualifying worldwide revenue, at least as defined, be negative in such cases? If so, how would that be treated under the regime?

Of course, we welcome the exemption for services with under £10 million in UK referable revenue—we feel that that is a sensible threshold—but are the Government willing to review it if evidence shows that it is deterring legitimate or public interest platforms from entering or remaining in the UK market?

These regulations are a necessary step. They must be implemented fairly, not just for the global giants but for those trying to do the right thing. In closing, I thank the Minister for stepping in at short notice to guide us through this—it was no doubt a not wholly welcome surprise. I hope that the Government will have plans in place to monitor the regime’s impact actively and closely to ensure that Ofcom’s guidance is transparent and consistent and that they will remain open to adjusting thresholds or definitions if unintended consequences should arise.

[Lord Leong (Lab)]

I thank all noble Lords, especially my noble friend Lord Stevenson, the noble Baroness, Lady Humphreys, and the noble Viscount, Lord Camrose, for their valuable contributions to this debate. The noble Viscount, Lord Camrose, should be really proud of his legacy in taking the Online Safety Act through Parliament. It is due to him that we are now implementing these regulations.

I shall now respond to the various questions raised by noble Lords and to the Secondary Legislation Scrutiny Committee in its report on this instrument. The total amount of fees collected must not exceed the annual cost of Ofcom’s exercise of its online safety regulation functions. The cost may vary from year to year. Ofcom’s expected annual costs for online safety services for 2025-26 are close to £92 million, which includes regulatory activities and what Ofcom calls common costs, which are its running costs, allocated to all sectors that it regulates. Ofcom’s annual costs will vary depending on the level of regulatory activity undertaken in any given year, and those for online safety for 2026-27 will be published in the 2027 tables. Ofcom’s duties under the Act are extensive, and this will allow it to deliver effectively.

Service providers whose qualifying worldwide revenue is at or above a revenue threshold that we are discussing, and which these regulations will allow Ofcom to consult on and set, will need to pay approximately 0.02% to 0.03% of their qualifying worldwide revenue in fees. The Secretary of State will determine the threshold figure, having taken advice from Ofcom, which recommends a threshold of £250 million. If implemented, that means that only the largest companies will be in scope of fee paying. For example, a company with a qualifying worldwide revenue of £250 million can expect fees to constitute something like £50,000 to £75,000, using the formula of 0.02% to 0.03%.

Ofcom has robust enforcement powers available to use against companies that fail to fulfil their duties and will be able to issue enforcement decisions. That is in response to a question posed by my noble friend Lord Stevenson. This includes non-payment of fees, which is explicitly covered under Section 141 of the Online Safety Act.

Ofcom’s authority to collect fees is set up, as I said earlier, under Section 84 of the Act. Its authority to collect penalties is also set up under Schedule 13. If a provider of a regulated service does not pay its fee to Ofcom in full, Ofcom may give the provider a penalty notice specifying the outstanding sum and a date on which it must be paid. It may also bring legal proceedings for the recovery of the whole or part of the amount due.

I will write to my noble friend Lord Stevenson on the issue of Ofcom’s future receipts being lower than its costs.