Domestic Gas and Electricity (Tariff Cap) Bill (First sitting)
Tuesday 13th March 2018
(6 years, 1 month ago)
Public Bill CommitteesRead Full debate Domestic Gas and Electricity (Tariff Cap) Act 2018 View all Domestic Gas and Electricity (Tariff Cap) Act 2018 Debates Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Public Bill Committee Amendments as at 13 March 2018 - (13 Mar 2018)
The Chair
Before we begin, I am afraid I have a list of dos and don’ts; I hope that we are not going to continue in this vein. Please switch electronic devices to silent. Tea and coffee are not allowed during sittings. Today we will first consider the programme motion on the amendment paper. We will then consider a motion to enable the reporting of written evidence for publication, and then a motion to allow us to deliberate in private about our questions before the oral evidence sessions. In view of the limited time available, I hope we can take these matters without too much debate. Date Time Witness Tuesday 13 March Until no later than 10.15 am Octopus Energy Bulb Energy Good Energy Tuesday 13 March Until no later than 10.45 am Ofgem Tuesday 13 March Until no later than 11.25 am Citizens Advice Bureau Which? National Energy Action
I call the Minister to move the programme motion, which was agreed by the Programming Sub-Committee yesterday.
Ordered,
That—
(1) the Committee shall (in addition to its first meeting at 9.25 am on Tuesday 13 March) meet—
(a) at 2.00 pm on Tuesday 13 March;
(b) at 11.30 am and 2.00 pm on Thursday 15 March;
(2) the Committee shall hear oral evidence in accordance with the following Table:
TABLE
(3) the proceedings shall (so far as not previously concluded) be brought to a conclusion at 5.00 pm on Thursday 15 March. —(Claire Perry.)
Resolved,
That, subject to the discretion of the Chair, any written evidence received by the Committee shall be reported to the House for publication.—(Claire Perry.)
Resolved,
That, at this and any subsequent meeting at which oral evidence is to be heard, the Committee shall sit in private until the witnesses are admitted.—(Claire Perry.)
The Chair
Good morning. We will now hear evidence from Greg Jackson, CEO of Octopus Energy; Hayden Wood, co-founder of Bulb energy; and Juliet Davenport, the CEO of Good Energy. Thank you all for being here this morning. Members of the Committee will now ask a series of questions. Unfortunately, this session has to finish by 10.15, so brief questions and brief answers will be gratefully heard.
Vicky Ford (Chelmsford) (Con)
Q
Octopus, do you think there is a risk that once the cap comes in, prices will all bunch around that cap level? Some people have said that switching activity might then reduce. Do you think that is a risk? Bulb, do you think that the cap will disincentivise investment in infrastructure at this stage, or do you think we can manage the infrastructure need separately?
Greg Jackson: To answer those three questions, on the bunching question we do not agree. There are 70-odd energy suppliers in the retail market currently. The majority of them price below any realistic level at which an absolute cap would be introduced. If there is any bunching, it will be the welcome bunching of the suppliers that currently charge their loyal customers more than an absolute cap by bringing their prices down to that level. Underneath any realistic cap, there is still plenty of room for competition, and competition among the challengers that have to fight for and win every single customer from scratch will be unabated.
In terms of switching rates, the first thing is that the idea that very high levels of switching is a good thing is outdated. For 20 years, consumers have been told that they have to switch; in any given year, no more than 15% to 20% will do so. All the rest are getting ripped off. What we need is a market in which you get good value without switching, and an absolute cap is a step in the right direction. It is an excellent measure that will help reduce the rip-off for those who switch and those who do not.
Finally, in terms of investment in infrastructure, Octopus Energy is backed by the Octopus Group, which is one of the largest investors in renewable generation in the UK. Frankly, something that makes the retail market behave more like a proper market—one in which consumers get good value by staying loyal to good suppliers—will generate more investment in the sector, rather than the current strangulation that occurs because of things such as predatory pricing, whereby back-book customers of large companies cross-subsidise loss-making deals.
Vicky Ford
Q
Juliet Davenport: It is going to be interesting—that is the answer. If you look at the current data in the marketplace, with no intervention whatever four out of the big six have a 25% gap between their most expensive tariff and their cheapest tariff. There are two that do not—two have closer to a 6% to 8% differential between the two. Interestingly, the one with the smallest differential also has the lowest standard variable tariff.
If you have an absolute price cap, you will obviously see that the affordability of the lower tariffs for the big six will be less: you will see some shrinkage between the highest price and the lowest price. That is what we are trying to do—to get rid of cross-subsidisation between the most expensive and the cheapest.
Will we see some bunching? We will see a narrowing of that. The question is: how do you want to achieve that? I am assuming that is what you are trying to achieve: the stopping of cross-subsidisation, keeping those people who are very faithful to their suppliers and making the suppliers pay for the discounts that they are using to get other people. I think there will be some slendering through that and the data is kind of showing that already, if you look at it.
Hayden Wood: I would say two things. The first, on the bunching question, is that a price cap would have absolutely no effect on how Bulb sets its prices. We have one tariff, so whether the cap is there or not we would continue to charge the rates that we charge now, and they are among the cheapest rates in the market. There will probably be some bunching, but it is going to occur because suppliers currently adopting these “tease and squeeze” tactics, where they have a great rate in the first year and then they charge more in later years, will be less able to do that: they will not be able to subsidise those teaser rates with expensive rates later. However, we do not expect the long-term cost of energy to change.
On your question about whether this will disincentivise investment in infrastructure, there are two parts of infrastructure that spring to mind: the first is network infrastructure and the second is generation infrastructure. On the network infrastructure question, those investment decisions are made by the regional power networks. Those are regulated local monopolies. They make a metronomic profit margin of between 7% and 9%. The price cap should not affect the profit margin that they will make here, so I do not see any reason why they should be disincentivised from investing.
On the question of generation, from where I am sitting the introduction of a price cap would be a big stimulus to investment in renewable generation, because it would mean that more and more homes could choose to buy their energy from a low-cost, efficient renewable supplier. We see no reason why renewable suppliers should be exempt from this cap, because my view is that Bulb can provide 100% renewable electricity, at a rate that is at least £200 lower than the cap.
Bim Afolami (Hitchin and Harpenden) (Con)
Q
Hayden Wood: I struggle to explain it. We do not understand why two people in the same street using the same amount of energy from the same supplier should pay different rates. That just does not seem fair to us. There are some suppliers who will provide a fixed tariff and then they claim that there are substantial costs to providing that fixed tariff, and that those costs then need to be reflected in a—
Bim Afolami
Q
Hayden Wood: Like a hedging cost—exactly. But the irony with the cost of hedging, which you need to put on to a fixed tariff, is that very often those fixed tariffs are cheaper than the variable tariffs. That does not make any sense to us, which is why we have chosen to have a simple offer that consumers can understand, and we think that if you provide something that consumers understand, they are more likely to engage with it.
Juliet Davenport: Most fixed-price tariffs are slightly cheaper because it is cheaper to do that. If you minimise your risk, you can guarantee that that customer will be there, and you can buy forward. If you do not know whether that customer will be there, you have a bigger risk, because you might buy the power and then they do not turn up. That is why, when you buy forward on fixed-rate tariffs, you tend to get those.
I do not agree with the myriad. There are too many tariffs—agreed—but there are some differentials. People want choice, and we must not forget what customers want. Some customers want to fix their tariffs for the next two years. Some customers—they are fairly rare—want to have a daily price, maybe even a half-hourly price, where they can see what is going on and change their behaviours as things go on. Whatever we do, we must make sure that we take into account a wide range of customers in this marketplace and actually deal with their needs.
From talking to our customers we know that there are different needs. Some want smart meters. Some love the idea of smart meters, and some hate the idea, so we have to work our way through that one. Some love the idea of fixing their power for the next five years, because then they do not need to think about it and can get on with the rest of their life, but some want to be much more active. For me the key thing is to look after the people who cannot make those decisions—who do not necessarily have the time, the capability or the access to go and find tariffs that are good for them.
Bambos Charalambous (Enfield, Southgate) (Lab)
Q
Juliet Davenport: In our view, green gas is an area that is developing in the UK. At the moment, we have a limited amount of green gas. I think the heat targets under the Climate Change Act 2008 are quite significant, and we as a country are behind those targets. We are doing relatively well on electricity, but not so well on gas. My personal view is that we need to try to seed that market. People want to choose.
It reminds me of the early stages of the mobile phone market. If we had said that everybody had to have access to mobile phones right at the beginning, we would not have ended up with a product that was cheap enough. So if you think about technological innovation, that is the way we should go. I think it is the same in this area. We should allow the early adopters to come into this marketplace, which is why there is the idea of giving an exemption on that. We should allow the infrastructure investment.
I am afraid I disagree with Bulb. A lot of work goes into making sure that there are contracts in place to allow for infrastructure investment. We are currently running a pilot with the Eden Project in Cornwall to look at how to buy storage in this marketplace. Our customers back that—they love that—but we would not be able to do that unless we had a whole team managing it and looking at that. It is the same with green gas. You can go and buy certificates, which is really easy. You can buy them on the wholesale market. But if you want to provide investable contracts that allow people to put money behind the projects, then that looks very different.
Hayden Wood: To add to that, today Bulb supplies green gas to more homes in the UK than any other energy supplier. We are growing so quickly that there are new green gas plants being built at pace in order to meet the demand from our future customers. We see absolutely no reason why a green gas tariff should be exempt from the Bill. The cost of providing green gas to homes is between £25 to £50, which is much smaller than the £200 gap between the best tariffs in the market and the most expensive tariffs under a capped regime.
Greg Jackson: In our view, what we cannot allow is a loophole that allows exploitative suppliers to create fake green products in order to evade the cap. It needs to be formulated in such a way that, for example, a company like Good Energy, which has highly informed customers that have chosen to be with an innovative supplier and chosen the price they are on, can carry on doing the good work that it does. But at the same time it should not allow what we are seeing already, which is two of the big six launching green products since the Bill has been under discussion. I do not want to sound cynical, but I cannot help feeling there is a connection.
Bambos Charalambous
Q
Greg Jackson: That is exactly right. For example, if you are going to have an exemption, maybe a company would have to do 100% green products for all of its customers on all of its products. Something simple like that means you cannot get away with greenwashing a company that is really a cap evader.
Vicky Ford
Q
Juliet Davenport: What is the alternative? Is there an alternative? To make a definition in the Bill?
Vicky Ford
Q
Juliet Davenport: I would agree on that.
Hayden Wood: This Committee has an opportunity to help 12 million homes that are currently languishing on standard variable tariffs and massively overpaying for their energy, and help them to reduce their bills. If we allow a loophole such as this into the legislation—let us say that it is Ofgem’s responsibility to manage that loophole and to keep it closed—we open it up to being manipulated or lobbied on or people working around it. We saw how the retail market review regulation years ago led to some unintended consequences in how the energy market is structured, and we now suffer from this “tease and squeeze” problem, which others on the panel have described. We would propose completely removing clause 3(2) of the Bill to eliminate any issues with unscrupulous suppliers introducing non-green tariffs and removing the effect of the cap.
James Heappey (Wells) (Con)
Q
Hayden Wood: I completely agree with that. It perpetuates the myth.
Juliet Davenport: My view is that you can have cheap greenwash tariffs alongside genuine innovative tariffs and you can have a differentiation. You have to focus on the big six and make sure that there are not any loopholes, but most of these companies have had people come to them as a choice. What is great about this market is that we do have choice. We have the cheap greens, and we also have the more innovative products such as us. Why would you close that down? You can see that we have been leading this market and making changes in it. We support about 140,000 homes who generate power in their own house. Those are the kind of innovations that we want to continue to do. To be honest, if you price-cap us, we are going to have no investment left for that kind of innovation.
I completely agree that we should have a differentiation and we should have products that are cheaper green. I met one of Bulb’s customers at the rugby the other day who was very enthusiastic. She was so excited by the fact that she is going on a green journey. I think that is brilliant, and that is what we should embrace in this. We should not try to close it down to be one thing or another. We should allow innovation within the marketplace.
Alan Brown (Kilmarnock and Loudoun) (SNP)
Q
Greg Jackson: That is the most important issue to address during these conversations. An absolute cap, as per the Bill, will provide a decency level beyond which no default customer will be charged. That is a good thing. However, at the moment, a loyal customer of, for example, one of the big six is paying £250 a year more than the price that the same company advertises openly to new customers. When I say “openly”, of course, you still have to type in 25 sets of details to see that price, because energy is too complicated. Under an absolute cap, we think that might fall to £200. It is still not going to create an effective market in energy, where competition thrives, if we do not do something about those tremendous differentials. That loyalty penalty is by far the biggest barrier to true competition in the energy industry, so we would propose that, with the protection of an absolute cap, it is the perfect time to bring in a simple limit on the difference between the cheapest and most expensive tariff offered by a supplier, to prevent it hoodwinking its customers into overpaying for loyalty.
The only reasons given during the Select Committee hearings not to have a relative cap were a concern that large suppliers—existing former nationalised suppliers—would raise their prices to fit a relative cap. The absolute cap prevents that being a concern. Bringing in the absolute cap provides the perfect opportunity to generate real competition underneath it by a simple limit on the loyalty penalty. If you do that, I think we will find a price war among energy companies, equivalent to that in supermarkets, where everybody sees the same price. In supermarkets, you do not need to switch, because the threat of some people switching forces supermarkets to bring prices down for everybody. That will be the effect of a relative cap underneath an absolute cap. It is one line of additional rule in the statement of a price cap that would enable this. I think that what you would find, when you take away the absolute cap, which is defined to be a temporary measure, is that you would have a truly competitive market in energy for consumers.
It is worth noting that we are all challenger brands. We have to fight for every single customer from scratch. Eleven challenger brands favoured a price cap, and split roughly equally between absolute and relative, with a lot favouring the combination. We are one of those companies, and that is because we know that will generate the most competitive market for the benefit of consumers.
Juliet Davenport: This is not a position, so much as I just want to add in the risks that we need to be aware of with the absolute price cap, just to see whether there is anything else we can think about in terms of softening those risks.
One risk with an absolute price cap that I am concerned about is that Ofgem will be setting the prices. There is no downside to Ofgem with getting that wrong; if Ofgem sets that price incorrectly—I know you are seeing Dermot after this, so you can ask him the question—what are the sanctions against Ofgem for getting that price wrong?
And it is really difficult to set prices at the moment. I could ask my colleagues about the unidentified gas charges that we have just seen go from 0.6% to 2% of gas bills. This is a post-charge that we were not aware was coming. We knew there was some discussion of it, but it has been charged in arrears. How does Ofgem factor some of those things into its price? Does it put a risk in the price? That would be one question.
The other question is, because we set the price cap at a particular time of year, we will get everybody forward-contracting with their hedging position at the same time of year. The concern I have is that we might see some distortion within the wholesale market. Can we keep an eye on the wholesale market? I do not know whether that means that we have to ensure that there are extra powers to ensure that the wholesale market does not try to spike at exactly the time that everybody will be forward buying their power.
Those are the two risks that I am concerned about with the absolute cap. That is not to argue against it, but those risks are there and they need addressing whether in the Bill or in guidance from Ofgem.
Alan Brown
Q
Hayden Wood: We think that the top priority is the absolute cap. As I have mentioned before, there is a risk that homes will not get relief from the cap if that is not in. The idea of a relative cap underneath the absolute cap sounds fine to us, too. I think more price competition in the energy market is a great thing.
The third point I would mention on these extraordinary powers that Ofgem would have under this new set-up to set prices is that those powers need to come with more transparency. The formula and methodology for calculating what the absolute cap would be should be published so that there are no surprises for suppliers and we can plan. We also think there should be more transparency around the contributions that Ofgem receives from suppliers and the meetings that they hold with them, in order to ensure that there is more transparency.
Dr Alan Whitehead (Southampton, Test) (Lab)
Q
Greg Jackson: You are quite right that the phrase “relative price cap” is not necessarily the most helpful name. It is a simple restriction—a simple limit—on the difference between the highest and lowest price from a single supplier. There is no reason at all why that would not operate underneath an absolute cap. In fact, there is no reason at all why it would not be defined at the same time as the pricing rules of an absolute cap.
If we did that, it would simultaneously attack the loyalty penalty, which is one of the biggest topics currently being looked at in pricing in consumer markets where you pay by direct debit. The real issue is that in consumer markets where you pay by direct debit—running an account—you do not know what you are being charged. If you do not know what you are being charged, companies essentially can have these enormous false differentials, and the opportunity, alongside this absolute cap, to bring the differential down is sitting there today. That would turbocharge competition because it would mean that, if a company wants to win new customers, it would have to bring prices down for its existing ones. But not only that: if it wanted to hang on to its existing customers, it would have to bring prices down.
We saw that British Gas provided a useful case study during the period when they were having to sit in front of Select Committees. They reduced their differential to basically zero for that period, and they lost 823,000 accounts in four months, I think, leading to a 12.5% drop in share price and a 20-year share price low. That demonstrates that companies that try not to offer good value in a world of a relative price cap will lose customers, market share and share price.
Therefore, we think that bringing that alongside the absolute cap, sitting underneath it, is the best way to use the force of competition to drive prices down for everyone. When you remove the protection of the absolute price cap, you will actually have a competitive market.
The Chair
I want to bring in Stephen Kerr here. I should say that we have only another seven minutes.
Stephen Kerr (Stirling) (Con)
Q
Greg Jackson: Appeal rights—for example, Competition and Markets Authority appeal rights—would probably mean that every time the cap is being reviewed every six months or quarter, it gets tied up in process. It means it never actually happens. Of course, that is what the big six want.
Hayden Wood: I completely agree. If consumers are going to benefit from this, we want them in by the next winter, and also Ofgem needs to be able to set the price, and not have to go through a long appeals process because, as Juliet said, things move in the energy market, so it needs to be nimble—
Stephen Kerr
Q
Juliet Davenport: The only thing I would comment on is this. In a business you have got a first line, a second line and a third line of defence. Normally, Ofgem would be your second line of defence. The issue you have got is that you are blurring their rules: they are acting as first line and second line. That is where the appeal is a concern because they are setting the prices, and then they have got to judge themselves, almost, on setting the prices.
Stephen Kerr
Q
Juliet Davenport: I wonder whether you have to look at the role within this: how you get that to be independent rule setting—whether it almost has to sit aside from Ofgem so that Ofgem can oversee it. If you put it within the regulator, I agree it is going to get—
Stephen Kerr
Q
Juliet Davenport: They will have to consult but, even so, I think you can see this being contested time after time. On the prepayment meter cap that has gone in so far, our calculation is that it has been incorrectly calculated probably about twice already. The question is that, if that then goes across 11 million customers, what is going to happen at that point, when it really starts to hit people’s balance sheets?
Stephen Kerr
Q
Juliet Davenport: It is not.
Stephen Kerr
It is not?
Juliet Davenport: It is not transparent till afterwards. You are immediately in breach if you do not comply. There is a process where you cannot actually challenge it.
Stephen Kerr
Neither of you had any concerns relating to that. You agreed with the Select Committee.
Hayden Wood: I would say that this goes back to the transparency point that I made earlier. I have an issue with a non-transparent process where the methodology, formula, and data input into that process are not published. That is an issue. I do not have information on the appeal issue.
Greg Jackson: The idea that you end up going to appeal in order to get the right to over-charge customers is going to be pretty grotesque. The reality is that they may try to do that, and you have to stop them. We have to prevent it becoming tied up in process. The prices are all still grotesquely high, whether they are set at £1,050, £1,075 or £1,030.
Bill Grant (Ayr, Carrick and Cumnock) (Con)
Q
Greg Jackson: I think smart meters make this all the more important right now. If we do not clean up the energy market before we end up with everybody having a different price every half hour, it is going to be a wild west. We have the opportunity to clean up pricing now, and that is why it is particularly important that we deal with this topic of the difference between the highest and lowest tariffs. If it is hard for someone to know where they stand at the moment, then it will be even harder for them to know where they stand in the world of rampant time-of-use tariffs. Let us tidy up pricing now, and then smart meters really can be a path to success.
Hayden Wood: To add to that, we find the conflation of the price cap and the smart metering quite troubling. We do not see a relation between them. A person’s understanding of how much energy they use does not influence how often they might go into the market and look at price comparison sites and understand how much they are paying versus other suppliers. We are also not aware of any evidence suggesting that installing a smart meter would offset the £100 a year that a consumer would save under this price cap. The Government’s own data would suggest that the installation of a smart meter saves the consumer only £11 a year on their energy bill. They are actually separate things.
Juliet Davenport: My personal view is that they do come together when we get proper smart meters: SMETS2 in as opposed to SMETS1. The SMETS2 meters are going to make a significant difference to switchability. At the moment, if you take on a SMETS1 and you are not SMETS1-qualified you cannot switch them to smart metering. You would have a proper smart process in terms of switching. We are going to see some disruption in the market there with accessibility of data and third parties providing information in the house that can switch you instantly to another supplier if you are over-paying. That is the intelligence we are going to see with an increased amount of data. I am quite excited about smart meters and what they can do. They will facilitate households in saving much more than at the moment because we are going to see the smart house plug into that.
Bill Grant
I welcome the embracing of the new technology and I know it is not perfect right now. You seem rather negative, Hayden.
Hayden Wood: On smart meters? Oh no, we are extremely positive about smart meters, but not—
Bill Grant
Thank you, we will leave it at that. It was my misinterpretation.
James Heappey
Q
Greg Jackson: You now have a market of 70-odd companies, mainly vying it out in a 20% churning area. If we get this right, you will be able to let loose the competitive efforts of companies like ours and 68 or however many others to bring prices down for everyone. Getting it right involves the decency cap or the absolute cap and finding a way to tidy up the entirely unjustifiable hundreds of pounds of difference between the cheapest and most expensive tariffs from each supplier. At that point you can let loose our competitive efforts to bring prices down for everyone.
The Chair
Order. I am ever so sorry about what I am about to do, but I am required to do it. I am afraid that has brought us to the end of the allocated time to ask questions. I thank all the witnesses. It has been a very good session. Thank you very much. I now call the next panel.
Examination of Witnesses
Dermot Nolan and Rob Salter-Church gave evidence.
The Chair
We will now hear from Dermot Nolan, chief executive of Ofgem, and Rob Salter-Church, acting senior partner for consumers and competition at Ofgem. For this session, we have until 10.45 am. Will the witnesses please introduce themselves, although I may have already done that?
Dermot Nolan: Thank you, Chair. I am Dermot Nolan, the CEO of Ofgem.
Rob Salter-Church: I am Rob Salter-Church, the interim senior partner for consumers and competition at Ofgem.
Bim Afolami
Q
Dermot Nolan: We have already commenced the process in the sense that last Thursday, after Second Reading, we put out an open letter specifying our processes over the next few months. Yesterday we released one of a series of discussion papers that looks at certain elements of the cap and how it might work. We will do that over the next month or so. We will gather information, consult as widely as possible and issue a more formal consultation while the Bill is still passing through Parliament. That will try to tie together the various proposals that we will put in place and look at a potential framework for the cap. After Royal Assent we will issue a statutory consultation, which we are required to do, so we can put the cap in place as quickly as possible.
Bim Afolami
Q
Dermot Nolan: It certainly informs us, as indeed do the designs of price caps around the world. We have caps in place for pre-payment meters and particular tranches of vulnerable consumers, and they will inform us. Given the statutory duties as we interpret them, though, we will I think have to design the cap ourselves while being informed about others. One point about the Northern Ireland cap is that it was designed specifically for one firm, for the previously dominant firm, so it may not be exactly wise to take it off the shelf for the cap in GB.
Bim Afolami
Q
Dermot Nolan: I am confident. I am confident that it is a difficult task. There are statutory objectives, and we have to be mindful of them all. It will require a lot of analysis, which we are already commencing on, a lot of evidence and, ultimately, a degree of regulatory judgment to get it right, but I am confident that we can do it. It is an absolute priority for the organisation, and for my board and me.
Bim Afolami
Q
Dermot Nolan: Yes, I certainly would have. I will be responsible if I do not get it right, so I would have communicated that.
Vicky Ford
Q
Dermot Nolan: We will consult as openly as possible. We will issue consultation documents, because that is the nature of what we are required to do, but we will also hold workshops which are open to all and we will try to get views from every possible supplier. Not only that, however—I want to be very clear on this—we will want views from stakeholders far beyond suppliers. I think your next session is consumer groups, and we will try to consult as extensively as possible with them. In fact, being blunt, we are both required to and want to listen to as many as we can hear over the next few months, to inform any decision.
Regarding next winter, as you say, it was cold recently, but I have said before and I repeat again very clearly here that we will have the cap in within five months of Royal Assent. We will have it in place and affecting consumers by that point.
Vicky Ford
Q
Dermot Nolan: Yes, it would be on our website and we would make a specific—[Interruption.] Sorry, Chair.
The Chair
No, no, I am sorry. I am just keen to get as many people in as possible. Alan Whitehead.
Dr Whitehead
Q
Dermot Nolan: I might ask Rob to answer that, but I may come back at the end.
Rob Salter-Church: That five-month period will start with us issuing a statutory consultation, which will run for eight weeks, or two months. That is something that we are required to do by law as part of the due process that we go through. Thereafter, we would have a period to analyse fully the responses to the consultation. As we said, that will be a transparent process; there will be lots of information that we will need to review. Thereafter, when we publish our decision and the final drafting of the cap, it is subject to a 56-day notice period, which again is a legal requirement that we have to go through before the changes can take effect. When you add those various stages together, it gets to five months. Can I guarantee you that there will not be any drift? What I can guarantee is that we will have this as our absolute No.1 priority for Ofgem to deliver.
One of the things that is important for us to consider in ensuring that this cap is in place as quickly as possible is making sure that the due process is gone through. It would be unfortunate if, in trying to do something more quickly, we created a legal risk around process, and that could be exploited by somebody challenging it and seeking to delay the introduction of the cap. So, we are confident that we have a good, robust process and we will get through it as quickly as we can.
The Minister for Energy and Clean Growth (Claire Perry)
Q
Dermot Nolan: Retrospectively, Minister, in the sense of—?
Claire Perry
In other words, reimburse customers who would otherwise be overcharged if for some reason the energy companies delayed the introduction of the cap through any form of legal challenge.
Dermot Nolan: First, before coming back to that, I want to reiterate again that we want the cap in as quickly as you do. There will be no drift; we will make sure that we meet that timeline. I absolutely say that as clearly as I possibly can. So we will bring in the cap.
At that point, the cap would apply to all energy suppliers. If they were in breach of it, they would be in breach of their licence obligations and potentially they would be subject to fines, and ultimately to losing their licence. So, it is almost inconceivable to me that, if the cap was in place, a supplier was not in compliance with it. We would obviously use every single power we had at that point in time.
James Heappey
Q
Dermot Nolan: Absolutely. Two points on that. First, regarding, the events of last week, it is difficult to be precise. I would say they are more the type of once-in-five-years spikes. I will note that, if I may sound very gnomic, there are spikes and spikes. This was quite an acute spike in the gas price, and then there was a spike in the electricity price, but it was not that long-lived. Forward prices for four or five days did not change dramatically, so it was an abrupt spike but a short one.
The whole point of how to set the cap, and over what time period, is a fundamentally important one. The Bill suggests that the price cap must be updated every six months or less. There is an inherent trade-off. One of the things I particularly want to hear about from consumer bodies is over what period people want their prices to change. All the evidence we have in many ways suggests that people like smooth energy prices. They do not like spikes in their own bill. If the cap is set every six months, and a one-week spike is smoothed out over that six months, there is an appeal to that—you get relatively sure prices over a six-month period.
At the same time, you find that if there have been spikes of whatever form during a six-month period—if there has been, say, a fall in energy prices after two or three months—people say, “Why is this fall in wholesale prices not being reflected in my bill? Why do I have to wait six months for it? Why can I not have it after three months?” If we did a three-month price cap, that would ameliorate that issue, but we might be a little bit more vulnerable to spikes and changes in prices. How we balance that is not straightforward and is one of the things that we would particularly want to hear from consumer groups on during a consultation.
Michelle Donelan (Chippenham) (Con)
Q
Dermot Nolan: I think six months is the maximum. If the Bill goes through as is, we will consult on it. I honestly cannot say what we would ultimately pick, because it would be an open consultation. Certainly, I cannot imagine, at this point in the way the energy market is, having prices change every week or month. I think it would be a consultation along the lines that I have already mentioned. There is no perfect number though. We would want to try to hear from consumers what they thought was best and what reflected their preferences.
Vicky Ford
Q
Dermot Nolan: We will listen to everybody when taking views on setting the cap. However, the infrastructure should not formally be part of the price cap. It should not affect the way in which the price cap will broadly be set in terms of interactions with suppliers and the prices of the inputs they purchase. So although we will listen to everyone, I do not think infrastructure investors per se will be crucially involved.
I came in at the end of the last session and heard about smart metering. We will have to consider the smart metering costs, but only in the efficient cost. One of the difficult tasks in setting any level of cap is deciding a precise, efficient cost for the firms and ensuring that those efficient costs are passed on in the cap.
Stephen Kerr
Q
Dermot Nolan: The CMA view was split. We said we would go with the majority view, but one of the points about the process is that Parliament has now taken a decision. It is absolutely something that we will implement, because we are servants of Parliament, and we will implement it as quickly and as effectively as possible.
On the theme of competition, in my reading of the draft legislation, it seems to me that there is a desire to bring in a cap but also a desire to develop a more competitive market. There are a number of things that we are putting in place that we believe will help develop a competitive market further.
On smart metering, I know there were different views among the earlier panel, but smart metering is helpful. It is in some sense a necessary condition for, if you like, a digitised retail energy sector. There will be faster and more reliable switching processes. There are a number of remedies we have tested for prompts—ways in which people who have not yet been prompted to engage in the market will be prompted further. We have tested a lot of those already, trialled many of them and are going to roll them out in the next couple of years. There is the work on what we call midata, where we are going to push forward with a secure piece of your data that you can use in any price comparison website or any particular thing that will facilitate competition.
There are two more points—I know I am listing them off, but I want to be clear. One is that we think vulnerable protections will still be necessary if a full price cap is removed. We will look at whether any vulnerability price caps should be kept and, in particular, whether other forms and ways of protecting vulnerable customers, including things such as collective switches, could be used.
Stephen Kerr
Q
Dermot Nolan: Those are things that will be done over the next year to two years.
Stephen Kerr
Q
Dermot Nolan: Last year we published a response to the Competition and Markets Authority—which, going forward, will form the core of our report to the Secretary of State, as envisaged under the Bill—that we called a state of the market. It was a detailed look at the state of competition in the retail sector. It will look at a number of indicators; it will be on the basis of this suite of indicators—there will not be one perfect one. It will include the numbers switching, but also survey evidence, levels of satisfaction in the market, whether people feel more trust in the market, and whether the vulnerable, in particular, feel empowered to switch or still feel disengaged. We will focus on and continue to develop a suite of indicators that will form the basis of a report to the Secretary of State, which, as envisaged in the Bill, we will make on a yearly basis.
James Heappey
Q
I wonder how we do something in this price-capping process that, when energy companies go to war with one another over price, ensures that all of their consumers, including those who are loyal and seeing the benefits of good customer service, get rewarded, rather than simply perpetuating this view that a good energy market is one in which everybody is moving constantly and there is no incentive for companies to deliver good service.
Dermot Nolan: Absolutely. When I talked about a suite of indicators earlier, I think one should not over-concentrate on switching. It is perfectly possible, as James Heappey has said, to have a market that is functioning relatively well, but, actually, observed levels of switching are slow. What is important is that the customer must have the ability to switch if treated poorly.
In that sense, what we have seen, particularly in the energy market over the past two years, as we have seen in other markets, is a divergence of outcomes—£200 or £300 between people’s bills. Some—not all, because more than 20% of our domestic residential customers now come from small suppliers—have the disengaged feeling of, “I don’t feel comfortable switching and don’t feel protected.” The reforms that I mentioned in the last question are about trying to create a situation where we go back to the engaged customer—in some sense protecting the disengaged—with less variation between the engaged and the disengaged as a result and with people feeling, “I don’t need to switch, because I am not going to get charged £300 or £400 more by my own supplier if I don’t switch.” That is the kind of market that we would revert to. I think the reforms that we have set out will get us in that direction.
James Heappey
Q
Dermot Nolan: That must be the market we are seeking to design. I would say more generally that new technology, through which we are buying goods and services in many areas, is such that that old area is, to some extent, breaking down. I do not want to go beyond the topic, but you will see people paying different prices buying online, and that is good in many ways, but it also has public concerns more generally. One thing about the energy market is that it will clearly not be successful if we are still seeing observed differentials of £300 in two or three years’ time.
Alan Brown
Q
Dermot Nolan: I think there are already 5 million people who are vulnerable under price cap protection. If the Bill was not going forward, we would have extended that, anyway, to another tranche of vulnerable customers. Regardless of whether there is a price cap or not market-wide, the regulator is likely to have price caps for vulnerable customers going forward. I might be wrong on that, but it will be an absolute priority for the regulator to do that, which we believe we can and already are doing under our own powers. Obviously, I want as much protection as possible for vulnerable customers. Any regulatory body, given the statutory duties that it has, will take on that itself. If it does not, it will be messing up. So I feel there will be protections there from the regulator in any case.
Alan Brown
Q
Rob Salter-Church: At this stage it would be difficult to say exactly how much money a customer would be able to save through the price cap that will be put in place. We can say that—indeed, the Bill requires this—our first and primary objective is to think about protecting consumers, but we need to make sure that in setting the cap we also take account of the other factors that we need to consider, which is ensuring there are incentives for customers to switch and ensuring that suppliers are able to continue to finance their activities and fund things such as the smart metering roll-out. Although we are keen to ensure that we can save consumers as much money as possible, ultimately it would potentially create some unintended consequences to fix that amount at this stage in the Bill.
Michelle Donelan
Q
Dermot Nolan: Is this a relative price cap and an absolute price cap co-existing at the same time?
Michelle Donelan
Yes.
Dermot Nolan: I have only heard that recently. I am sceptical for a number of reasons. First, I think it is always difficult, and it is undesirable, to tell a company it cannot charge a price below a certain level, which is what a relative price cap might do. I would always be reluctant, personally, to endorse something like that. More generally, the absolute price cap will, to be candid, have an effect on the larger companies. It will drive down the prices at which they charge standard variable tariffs. They will react to that, hopefully, by becoming more efficient and so on, but it seems likely that, for the larger companies, it would reduce the differential between their standard variable tariffs and their fixed tariffs. The idea that they would then be able to cross-subsidise seems unlikely, so I do not see the need for a relative price cap on top of an absolute price cap.
As I said earlier, I think that anything that involves telling a company it cannot charge a low price is not a great thing. Further, if I may say, it complicates the cap. We can figure out an absolute price cap. It will not be easy to set, but we will muster every fibre we have to set the right cap. To complexify it further with a relative price cap strikes me as undesirable.
Michelle Donelan
Q
Dermot Nolan: I think it will have an effect. We have a prepayment meter cap already. I said that switching is only one aspect of competition; I want to be clear on that. After the prepayment cap, we saw that some of the cheaper deals left the market, but not all of them did. Some stayed, including from existing suppliers, and there were still cheaper deals from some of the smaller suppliers. I think that is likely to occur. There might be a measured drop in switching for a period of time, but as long as the mechanisms are put in place, this can facilitate competition over the medium and long term.
James Heappey
Q
Dermot Nolan: I think it is an opportunity for transformation. I have talked about some of the short to medium-term things we will do. Over the period of the price cap—this would probably be a legislative thing, working with the Department and ultimately with Parliament—it represents a chance to perhaps radically recast the supply market.
The supply market has become quite complex. I am not saying that the system of suppliers acting as vehicles for delivering the various obligations has not worked—in many ways, it has—but we see a situation in which a host of new suppliers will be entering the market in three to five years. These might be quite large ones that do not currently provide energy, and they could come in selling energy in a bundled product with other goods.
We will see electric vehicles being rolled out, and a price cap will have to deal with issues such as electric vehicle charging and how people are charged for them. I see a situation in four to five years’ time in which the energy market could have changed radically. The key point of the price cap is that it has to be flexible to any changes and fulfil its basic role of protecting consumers. With great respect to the suppliers in this room and suppliers already out there, I would hope that we could see radically different sets of people providing energy in five years’ time.
Alex Norris
Ofgem said to the Department for Business, Energy and Industrial Strategy Committee when this was being considered that the cap ought to be temporary. How do you feel about 2023 as the sunset clause? What should Members in 2023 have seen to be assured that the cap would be unnecessary?
Rob Salter-Church: It is right that everyone is focused on what happens at the end of the price cap. It is important to us that if the price cap is removed, then all consumers get to benefit from the new competitive market that we are seeking to create.
We are comfortable with how the Bill is currently drafted. It requires us to have a comprehensive report from 2020 on the state of competition, and whether we believe that the conditions for effective competition that benefit all consumers are in place. Every year, we will be providing recommendations to the Secretary of State.
We are confident that, as the Bill is drafted, there is sufficient opportunity for the Secretary of State to determine whether there is a future role for an overall price cap, or whether there are things within our powers that we should be doing. Earlier on, Dermot mentioned the likely ongoing need for vulnerable consumer price protection. More broadly, we will be able to report on the progress made by us in creating what is ultimately a more effective form of competition where everyone benefits, whether you choose to switch or whether you choose to stay with your current supplier.
Vicky Ford
Q
Dermot Nolan: I hope we do not, frankly. We will do our very best to bring competition as quickly as possible.
Dr Whitehead
Q
Are you happy with what appears to be an almost complete lack of pillars on which your report might be based? Is that something that you can live with easily, or would you prefer or welcome further pillars in the report to ensure that your understanding of the report was in line with what was required to bring competition back into the market?
Dermot Nolan: It is a fair question. I am personally content with the drafting, but I respect the fact that it is a matter for Parliament. I think we have a reasonably clear idea, and I hope we have given some of it today, but I assure you that we will spend a lot of time preparing an analysis of whether we think competition is working effectively in the market.
If further areas are to be put in, that is a matter for Parliament. I am slightly worried that putting specific targets and measures directly into legislative language now, in a market that will change radically over the next five years, might be somewhat distortionary. All I can say is that on the current language we will do as comprehensive a job as we can and look at all possible indicators to give an overall assessment to the Secretary of State of whether we think the market is working for consumers.
The Chair
Order. I am very sorry, but that brings our session to an end. I thank the witnesses for giving their evidence and I ask the next panel to come forward.
Examination of Witnesses
Rich Hall, Pete Moorey and Peter Smith gave evidence.
The Chair
We will now hear evidence from Rich Hall, Chief Economist for Energy at Citizens Advice, Pete Moorey, Director of Advocacy and Public Affairs at Which? and Peter Smith, Director of Policy and Research at National Energy Action. We have until 11.25 am.
Claire Perry
Q
One question that I think is exercising us all is support for vulnerable customers, who we strongly believe the Bill will help. We are interested in your views as to what else, as well as the Bill, would be necessary to deliver what we all want: maximum protection for the most vulnerable.
Rich Hall: I will kick off. I think we would strongly support the view that we would like to see protections in place for vulnerable consumers as a priority—for them to be the first to be protected and the last to lose protection if there were to be a circumstance in which it would be lost. We know from the CMA’s investigation and from other studies that consumers with vulnerability characteristics are less likely to switch than the norm: disabled people, the elderly, those on low incomes, renters, people in rural areas and those who left education early. Some of the most vulnerable consumers in society are likely to be on the worst rates.
The Bill should provide significant protection to those consumers for the lifespan of the legislation, but that lifespan is clearly finite in its current form. There would be annual reviews from 2020 to 2022, which we would expect to pay particular regard to the impact of the price cap on vulnerable customers and to the extent to which they are engaged in the market and benefiting from it or need further protection.
However, in its current form the Bill would fall away no later than 2023, which creates an issue around how you would ensure that those consumers continued to be protected beyond that date. Clearly, if it were possible to encourage them to engage more in the market and to switch, that would be our first line of protection in which they could help to protect themselves. However, we have to look back at the historic records here and note that over 20 years or so there has been significant disengagement in the marketplace. It might be difficult to tease vulnerable customers into the market. From our perspective, we would be looking to see price protection for vulnerable consumers extended beyond the lifespan of the legislation.
We note and welcome the comments from the Minister and the Government in their response to the Business, Energy and Industrial Strategy Committee’s pre-legislative scrutiny, that enduring protections might be needed, and also Dermot Nolan’s comments, from Ofgem, to a similar effect. I think the challenge is: if it is not going to be in the form of protection through this cap, what is it? We currently think that there might be a need for an enduring cap, and the Bill in its current form does not necessarily provide for that protection after 2023.
Claire Perry
Q
Pete Moorey: I support everything that Rich said on the potential need for ongoing support for vulnerable consumers beyond the end of the cap as set out in the Bill. It is important, though, that we do not assume that vulnerable consumers across the board do not engage in the energy market. We know that the most vulnerable are often the savviest consumers. They have to be: they are on tight budgets and, therefore, they can be the most adept at engaging with markets. I know Peter’s organisation, National Energy Action, has done an awful lot of work with very vulnerable people to get them engaged and on to some of the best deals in the market.
Our—and, I hope, your—vision is ultimately of a market that is competitive and delivering good outcomes for consumers. That should include vulnerable consumers and the ability for those consumers to be as actively engaged in the energy market, as they are in many other markets—notwithstanding the fact that, as Rich said, there will potentially be some people who will need ongoing additional support. We would support that.
Peter Smith: There are two clear priorities that sit outside the Bill. The first would be to extend the warm home discount scheme to smaller suppliers; currently, smaller suppliers, with fewer than 250,000 customers, are not required to provide the warm home discount scheme. That means a real challenge on the doorstep in terms of encouraging households, particularly vulnerable households, to switch to the smaller suppliers. Those smaller suppliers are often able, at least on a price comparison website, to provide the cheapest deal but households do not know that they might be missing out on the warm home discount scheme.
The second element is to get on and use the data-sharing powers on which there was a recent consultation, which would enable Government to better share information about households eligible for the warm home discount scheme and could, therefore, benefit from the safeguard tariff.
Those two actions can take place regardless of this Bill. As we warned in the Business, Energy and Industrial Strategy Committee’s pre-legislative scrutiny, if we do not do those things, the cost might be that 500,000 low income and vulnerable households—many working-age—will miss out on approximately £260-worth of support this winter and next. It is an urgent priority.
Two things that can be done inside the Bill, reflecting on the previous evidence and remarks from the rest of the panel, would be to clarify in clause 2 that Ofgem should have due regard to households on the safeguard tariff. We are particularly worried that there is an assumption being baked in at this stage that the SVT-wide cap will protect exactly the same households as are protected by the safeguard tariff. That is not the case. We are also making an assumption that the relative values of those two different caps are going to be broadly the same. Again, that is not the case. We would like Ofgem to consider those two issues specifically. It is right that that is reflected in clause 2, and we support the hon. Member for Southampton, Test’s amendments that seek to achieve that outcome.
The final thing from my perspective is in relation to clause 8, where the conditions by which we remove this SVT-wide price protection need to be met. The opportunities that Dermot Nolan talked about to reflect on vulnerability within that context, particularly engagement for vulnerable consumers, are the clear priority and should be listed in the Bill to make sure that that assessment on competition is also reflecting on engagement of consumers, particularly the most vulnerable households. There would be a set of things that could be done to make that clear.
Michelle Donelan
I just want to follow up and build on the topic of consumers. How do you each feel this Bill will impact on the interest groups you represent? This is particularly pertinent to Which?
Pete Moorey: We represent all consumers, and the Bill may have a number of different impacts for all consumers. Clearly, for the large number of people on standard variable tariffs, it is going to mean a cut in their energy bills, which will be very welcome for them.
However, as you are probably aware, we have some concerns about the risks presented by a price cap and the impact that could have for consumers as a whole, which may well be mitigated by the measures in the Bill regarding Ofgem, ensuring that it maintains attempts to promote competition.
Nevertheless, the things that we are concerned about with the introduction of a price cap are that we do not see any softening of competition and that we do not see prices for consumers overall going up. It is likely that for some consumers we will see some price rises, as some tariffs get removed. We do not want to see a reduction in the standard of customer service, which is often deemed as being poor among the larger suppliers; the annual satisfaction survey that we do at Which? every year shows that the larger suppliers do very poorly on a whole range of metrics.
Also, we do not want to see less innovation in the market. So we do not want to see the introduction of a cap having an impact on the smart meter roll-out, or indeed on the transformation that Dermot Nolan spoke about, which we really support, around the introduction of new suppliers in the market, who may well be able to bring a transformation to energy, which is what we want to see.
I absolutely understand why the price cap is being introduced. I think the energy industry had opportunities, time and again, to stop this from happening, and they failed to react to that and to the problems that their customers were facing in the market. However, as we now introduce the cap, we have to be very mindful of those risks: the last thing we want is a price cap to come in, be removed at the end, and for us then to be left with exactly the same kind of broken market that we have now.
Vicky Ford
Q
Pete Moorey: Absolutely. Smart meters themselves are only the facilitator of a new kind of market. Gas and electricity is a homogenous product. Of course it is dull for consumers to engage with, and our expectations around them switching have been—by and large—fairly ridiculous really, given that there is generally little value in switching beyond the price that you can be saving, which can be significant. But beyond that, why people should really engage with this market has been bewildering to consumers, really.
However, we are now just starting to see potentially a very different energy market, because of smart metering and then smart appliances, as well as the introduction of electric vehicles, storage and a whole range of other changes. They should make energy an attractive industry for new kinds of players to enter, which may well mean that consumers start to be offered very different kinds of things. It may well be, as Dermot said, that there will be much more bundled products, whereby suppliers effectively offer to look after your whole house—your whole life—and that may well be attractive.
Of course, with that comes the risk that that will potentially only benefit people like me, who perhaps have the ability and the money to engage with that market. We obviously want to see all consumers benefiting and we will need to be very mindful, as that change comes, about vulnerable consumers and their ability to benefit from the price cap, too. They should do, because the positive benefit could well be that you can target much more specific products at the most vulnerable, and ensure that they really are getting value out of their relationship with their energy supplier, or indeed with a whole range of other suppliers that could start to form a hub around smart meters and other smart appliances.
Vicky Ford
Q
Pete Moorey: Yes. I think it is the right date, but the critical thing is that Ofgem has the ability on a very regular basis to review how the price cap is working, to set out transparently the changes being made in the market, and to be able to recommend to the Government whether the cap should be removed earlier. I think that having that balance is right.
Bill Grant
Q
Finally, picking up on Pete’s reference the less well-off groups, or those who are less price-savvy—I think that was the term—do you think the meters will assist those people in understanding their expenditure? Do you really think it will have an impact?
Pete Moorey: I hope so, but I think there are significant challenges for the roll-out. The fact is that the roll-out does not appear to be going as well as it should. Our own research in the last few months revealed that energy suppliers would be having to install 24 meters per minute for us to hit the target by 2020. So we have to keep a close eye on the smart meter roll-out. I do hope that it leads to changes, and changes that benefit all consumers, but that will require not only groups like us but also yourselves to keep an incredibly close eye on the roll-out.
Peter Smith: National Energy Action runs something called the communities programme, alongside Smart Energy GB, which is the organisation that exists to engage smart meter roll-out. We are doing some valuable work on that, but we are concerned that the roll-out is significantly back-loaded now. That challenges the cost-benefit analysis that the Government originally estimated, which assumes cumulative benefits running all the way through successive years, up to 2020. Now we are in 2018—and 2020 is there; so there is a concern.
Bill Grant
Q
Peter Smith: It would be slightly less than that, but it depends whether you think you need to put in SMETS2 meters, once they are ready, and replace the SMETS1 meters. We recognise the value of smart meters, particularly for low-income and vulnerable households, given the fear of an unknown bill. Estimated bills are the biggest concern that these guys get, so we recognise that they can have sufficient benefits. The trouble is we are so back-loaded now, the care and attention and extra help that we thought was going to be possible with smart meter roll-out is now going to be compromised, as everybody, as you say, is just going for volume.
Kerry McCarthy (Bristol East) (Lab)
Q
Peter Smith: First things first: it was reflected in my comments to the Business, Energy and Industrial Strategy Committee as well that NEA believes we must also tackle the vicious overlap between the households with the lowest incomes living in the least efficient homes. That needs to continue to be a priority, and, sadly, we have seen a dramatic drop-off recently in home energy efficiency delivery rates. You could build that into one condition by which Ofgem could make an assessment about whether we are now pulling on that lever as hard as can, maybe as part of an ambitious energy efficiency infrastructure programme.
The second thing relates particularly to the Bill. As I have described, there is a risk that we are assuming that the same people are covered through the SVT-wide cap as benefit currently—or would do in a few months’ time, with the extension of data-sharing powers—in the safeguard tariff. There is a difference between the people that it covers, so not everybody that will be protected by the SVT-wide cap will be protected by the safeguard tariff currently; and the values are very different—or could potentially be very different—in terms of the value of the safeguard tariff currently in place. That is about £100.
Given the drivers on Ofgem to create headroom to encourage competition and so on, that headroom might be significantly reduced. Therefore the general value that the two relative caps present might be very different. So in simple terms we cannot assure ourselves that the provisions in the Bill are consistent with the value that the safeguard tariff is currently providing. Ofgem need to consider that issue in relation to clause 2. It should be written into the Bill.
Kerry McCarthy
Q
Peter Smith: Clause 2 needs to say that there should be specific regard to customers that currently benefit from the safeguard tariff, and that the value of those relative price protections should be considered, to make sure that vulnerable customers benefit from the most attractive option.
Kerry McCarthy
Q
Peter Smith: Currently, the safeguarding tariff only targets those households that receive the warm home discount scheme. Those are typically poorer pensioners who automatically receive the warm home discount scheme, and some households in what is called the “border group”, which have to apply for support. Some households apply and are eligible, but miss out on the assistance because the programme is a first come, first served programme. Therefore we have been urging—and there were encouraging signs recently that this was going to be acted upon—that that should be extended to all households that were eligible for the warm home discount scheme, so it would cover those people who apply but maybe miss out on support.
Kerry McCarthy
Q
Peter Smith: You are either doubly benefited or doubly negatively impacted, because you do not receive the warm home discount scheme and therefore miss out on the safeguard cap, or you get the warm home discount scheme and the safeguard cap. We can reconcile all of that without these provisions. It was encouraging to hear Dermot Nolan say that he is minded to have due consideration of those issues when he sets the cap—because we could get into a situation where we look to preserve the extended safeguard cap at the same time as continuing with this endeavour. That would make sure that some of the issues I have spoken to are addressed. We would welcome that approach.
Dr Whitehead
Q
Pete Moorey: We supported many of the remedies of the CMA, so while we did not believe that they would take us far enough to deliver effective competition, it was absolutely right that the CMA recommended that we would be testing and trialling new ways of engaging people in the energy market. We were disappointed that the energy industry did not respond effectively enough to that. We said to the industry immediately after the CMA inquiry, “Start getting on with it. Test and trial new ways of engaging particularly the most disengaged people with the energy market.” I think that a lot of that work should continue. The good news from Dermot Nolan this morning, and from other statements Ofgem have made over time, is that they are going to continue to do work on that, which is welcome.
We are not necessarily suggesting that there are other remedies such as that that could be trialled. It is more that we should be spending time considering what transformational changes can be made to the market along the lines that Dermot Nolan was talking about, particularly in his responses to James Heappey, to ensure that we have much more innovation in the market through new suppliers who can be tapping into the benefits that smart and other changes in the energy market will make. That is likely to be the transformation that will lead to a new kind of energy market where consumers are more engaged. That is the critical element, alongside all the key factors around switching levels—particularly engagement of more vulnerable consumers, energy satisfaction, trust in the market and so on—that we should be looking at.
As I say, simply removing the cap in 2023, and the market looking effectively as it is now, will not, I think, be the kind of change that we all want to see in the energy industry, and certainly will not deliver the kind of change that consumers need.
Alan Brown
Q
Peter Smith: I will try to be a bit more concise than I was earlier. Clause 2 needs to be amended specifically to ensure that the safeguard tariff is considered when setting the SVT-wide cap, and Ofgem needs to have a duty to consider that. In clauses 7 and 8, we need to include customer engagement, particularly vulnerable customer engagement, as part of that overall assessment of competition and of whether it is working effectively.
I could give you a couple of examples, but perhaps they are best fleshed out in some further written evidence. They would include online access. For instance, we know that households that are offline do not benefit from the considerable discounts for online deals and from paperless billing discounts, and they do not get to apply to the warm home discount scheme. Cumulatively that could be up to £300. Things like that need to be considered when we make that overall assessment.
Rich Hall: From our perspective, we are broadly comfortable with the Bill in its current form. In the area of providing enhanced assurance that vulnerable customers’ circumstances are being improved, we think that is something that should be captured within the annual assessment by Ofgem and by the Secretary of State. We are reasonably comfortable that that is implicitly delivered through the Bill, but I can understand that there are arguments that there might be benefits in it being explicitly delivered on the face of the Bill.
In terms of there potentially being a relative cap underneath the absolute cap, I have some similar views to Dermot on that, in that it is an idea that has been floated only really in the last few days and weeks, possibly by people who would prefer a relative cap and who are now trying to use absolute plus relative as an alternative vehicle to reintroduce that approach.
We have some concerns about the relative cap approach. Because the large incumbents have so many sticky customers, in comparison with the relatively small number of customers they could pick up through any promotional campaign, if they were to seek to hold their line on their acquisition prices, that would make the cost of acquiring new customers punitively expensive. Because of that, we think it is more likely that the large incumbents would simply exit the acquisition market, which would neither help their SVT customers, who would continue to pay the same prices, nor improve pressure in that market. There is a risk that a relative price cap could backfire and be worse than the status quo, so we see the decision on absolute versus relative as not simply a choice between a good model and an excellent model, but as a choice between a good model and an unworkable model.
Pete Moorey: I would not add anything to what Rich said, but in terms of other changes to the Bill, there could be some changes to ensure there is more transparency and accountability of Ofgem, in terms of setting the cap. We would like to see changes so that Ofgem are required to set out clear criteria for monitoring and evaluating the success of the cap. We wanted to see a requirement to review the price cap every six months. It may well be that the evidence you have just heard from Dermot Nolan suggests that they will be reviewing it anyway every six months and that the bar could be set lower. It may well be that that is unnecessary in the Bill itself, given that it seems likely from what he said this morning that we will have a consultation on that as well. I think Ofgem should be required to publish reports on the impact of the cap on a regular basis and on how they would take any action if the cap was having any negative impacts.
James Heappey
Q
Rich Hall: We do not have any analysis on that to hand, but it is a crucial issue, in that the problem with SVTs is not their name, but their characteristics; it is the fact that they are extremely poor value products that exploit consumer inertia. If the replacement products simply have the same characteristics, and they are benchmarked to a similar level of pricing, that is simply an attempt to get around the intent of the Bill rather than to reduce the detriment that those customers see. That is an area where we, Ofgem and others will need to improve our monitoring in the coming months, as we see more of those tariffs in the market. At the moment, it is still fairly soon after the launch of these approaches by three suppliers, so it is a bit too early to say, but it is a genuine issue.
Vicky Ford
Q
Pete Moorey: That is good news.
Stephen Kerr
Q
Pete Moorey: I don’t know. It might do. That probably returns to the point I made to Alan Whitehead around testing and trialling different ways of engaging people in the market. It is really important that Ofgem tests how it communicates the safeguard and whether it should be called the safeguard. There is a real danger that most consumers, once they hear they are on a safeguard tariff, think that there is absolutely no reason for them to switch. Once the cap is in place, one of our key messages at Which? would be to go out there and say to people, “The safeguard tariff is not the cheapest tariff on the market. You could well still be saving hundreds of pounds by switching, particularly to some of the smaller suppliers in the market.”
Stephen Kerr
Q
Pete Moorey: Absolutely.
Stephen Kerr
Q
Pete Moorey: I think it should be tested.
Peter Smith: There is also a risk that if people are on the safeguard tariff, they think that they are safeguarded, but they are not taking up the wider support schemes that the Government have made suppliers deliver—things such as the energy company obligation, the warm home discount scheme, free gas safety checks and the priority services register. There are a number of other things that need to be considered to assess whether or not consumer engagement is happening, particularly for vulnerable households.
The Chair
If there are no further questions from Members, I thank the witnesses for their evidence.
Ordered, That further consideration be now adjourned. —(Rebecca Harris.)
Domestic Gas and Electricity (Tariff Cap) Bill (Second sitting)
Tuesday 13th March 2018
(6 years, 1 month ago)
Public Bill CommitteesRead Full debate Domestic Gas and Electricity (Tariff Cap) Act 2018 View all Domestic Gas and Electricity (Tariff Cap) Act 2018 Debates Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Public Bill Committee Amendments as at 13 March 2018 - (13 Mar 2018)
The Committee divided: - Ayes: 8 / Noes: 9 - Question accordingly negatived.
The Chair
We now begin line-by-line consideration of the Bill. Today’s selection list, which is available in the Committee Room, shows how the amendments selected have been grouped for debate—generally because they relate to the same or similar issues. Please note that decisions on amendments will take place not in the order in which they are debated, as shown on the selection list, but in the order in which they appear on the amendment paper. Decisions on each amendment will be taken when we reach the relevant clause. I will use my discretion to decide whether to allow a separate stand part debate on individual clauses and schedules after debate on the relevant amendments.
Clause 1
Cap on standard variable and default rates
Dr Alan Whitehead (Southampton, Test) (Lab)
I beg to move amendment 3, in clause 1, page 1, line 3, leave out
“after this Act is passed”
and insert
“and no later than 30 November 2018”.
It is a pleasure to serve under your chairmanship, Ms McDonagh. Let me start us off this afternoon with what I hope will be the first of many amendments that the Minister and other Conservative Members think so reasonable and constructive that they feel impelled to accept them.
Amendment 3 relates to our consensus that an energy price cap needs to be agreed across the board and brought in as soon as possible. Without presuming to speak on behalf of all Committee members, I believe that we are all united in our support for a temporary cap to allow the market to be set right. We hope that by the time the cap comes to an end, we will be reasonably assured that the market is working much better and that the circumstances that led to the cap’s introduction will not be repeated further down the road.
The Committee is united on our endeavour this afternoon. We want to finish our deliberations, get the Bill passed as speedily as possible, and have it on the statute book by the summer—hopefully the early summer—so that Ofgem can execute it. We heard this morning from Ofgem’s chief executive, Dermot Nolan, about the processes that Ofgem will be required to undertake to ensure that the price cap is properly implemented. The Bill requires it to have regard to a number of concerns, which I am sure we will discuss in our deliberations.
Essentially, Ofgem has the task of ensuring that the provisions in the legislation for the implementation of the price cap are legally waterproof, that the measures in the Bill around Ofgem’s responsibility for having regard to those various pillars are properly carried out, and that Ofgem has the arrangements in place that it will need to look periodically at what is happening to wholesale prices and to produce reports and proposals for how those wholesale price changes can be taken into account under the umbrella of the cap. Ofgem has to get a whole range of things right before the cap is properly in place. It is proper and right that Ofgem takes a reasonable amount of time to ensure that happens.
We heard this morning that Ofgem already has some consultations and discussions under way in anticipation of the Bill shortly being on the statute books, but there are a number of statutory things that it has to do and a number of further consultations that it has to undertake. We were told this morning that all this is about five months’ work as far as Ofgem is concerned. In principle, if we assume that the Bill will be on the statute books by the end of June, the five-month timescale that Ofgem has set itself would mean that the cap could be effective by the end of November this year.
Pretty much everybody associated with this Committee and the passage of the Bill has said that they fervently want to see this legislation enacted and a proper price cap in place before winter this year. By that, I am sure they do not mean when a cold snap takes place next February and looks a bit like winter, but the onset of winter—about the time people get their winter fuel allowances. That will ensure that the price cap is in place and benefiting customers in advance of the bills they face over winter.
To get this price cap in place not just over winter but as winter comes in—absolutely on the nail, given the time that Ofgem says it will need to get this Bill into shape and to get an operational cap—we will clearly want to ensure that that timetable is adhered to as closely as possible. That is why I asked Dermot Nolan this morning whether he thought the five-month period was an exact period, a maximum period or an approximate period. What was his view? He said that they would do their best to ensure it was within that five-month period. However, I did not get the impression from that evidence this morning that Ofgem was saying to us, “We can absolutely stand by the idea that there is a maximum possible period of that amount of time for us to do our work.”
James Heappey (Wells) (Con)
My reading of Mr Nolan’s evidence this morning was somewhat different. I thought that he very much felt this could be delivered within five months. The only note of caution he sounded was over a legal challenge. I am not sure that any timeline that we prescribe in legislation would prohibit such a legal challenge from one of the current large suppliers.
Dr Whitehead
The hon. Gentleman is absolutely right. If there do turn out to be legal challenges, despite our best efforts in this Committee to ensure that the Bill is as watertight as it can be, it is conceivable that the whole timetable of a price cap could be seriously derailed—I think we have all understood that, as far as the process is concerned. Indeed, one reason there is legislation, rather than Ofgem going down the road of a price cap under its own steam, which it has been claimed at various times could have been the case, is to ensure that, as far as possible, the proposals and what Ofgem puts in place around them, are legally watertight. That comes in two parts. First, there is the question of ensuring that the legislation is as watertight as possible, but there is also a duty on Ofgem to ensure that, in translating the instruments in the legislation into a workable price cap, it takes measures that are also legally watertight, so that it does not slip up after we have done the good work in Committee of making the legislation as watertight as possible.
Vicky Ford (Chelmsford) (Con)
In the evidence session this morning, I clearly asked whether Ofgem would be ready for next winter, and Ofgem was not only clear that it would be ready for next winter, but outlined the very robust, transparent and deep process being undertaken to ensure that.
Dr Whitehead
Yes, indeed. The hon. Lady will recall that, in answer to my question, Ofgem went through the processes it is statutorily required to undertake, together with an estimate of the time that that would take. Between us, we were able to get on record a pretty clear note of intention from Ofgem that, subject to the possibility that the whole thing could come off the rails because of an unexpected legal intervention, it would bend its efforts to ensure that the process of five months was adhered to.
The amendment seeks to go a small step further and to place on the face of the Bill an indicative time by which Ofgem should have done its business, to ensure that the working price cap becomes reality under the Act. The amendment does not seek to interfere with, foreshorten or undermine what Ofgem is trying to do, quite properly, to make the Bill a reality.
Vicky Ford
I am sorry, but I read the amendment completely differently. If we have all agreed that Ofgem has made it clear that it will go through the process to come up with the right level of cap—taking the right level of evidence—by next winter, and that the only thing that could delay it would be a legal judgment, why would we even suggest, through the amendment, that it may not be ready? That throws unnecessary doubt on the process, which would still be subject to a legal challenge were the amendment there. I think it would just add confusion and doubt.
Dr Whitehead
I fully accept the hon. Lady’s reading of the amendment, but I assure her that that is not its purpose.
Caroline Flint (Don Valley) (Lab)
Does my hon. Friend agree that it is quite useful to discuss this at the start of our Bill consideration, because our constituents will want to know that, in truth and earnest, we are going to push, in whatever way we can, to ensure—let us hope we do not have as bad a winter as we have had in recent weeks—that we get this cap into place? It is worth while to have this discussion. I hope the Minister can give reassurance in her response that it is up to all our endeavours to ensure that the cap is in time for when those winter bills drop on our mats.
Dr Whitehead
I thank my right hon. Friend for that intervention underlining the thrust of what I have to say. Although we may take serious account of Ofgem’s earnest intentions, which we heard about this morning, we are not legislating for the good side of earnest intentions, but for what we want to happen in the end with the Bill. To put in the Bill what we actually want to happen clarifies matters for the future, rather than spreading confusion. We will have declared—I use that word because we cannot entirely proof ourselves against the possibility of an unexpected legal challenge, although, if I can be congratulatory to the Bill’s constructors for a moment, they have done a good job of ensuring that it is as legally unchallengeable as it can be—
Stephen Kerr (Stirling) (Con)
I perfectly understand where the hon. Gentleman is coming from, because Ofgem’s performance over the last few years has been less than inspiring. Having said that, both sides of the House have said, and we heard it again from Ofgem today, that we know what our destination is with the Bill. I cannot understand what we gain by putting a date in it, beyond what we have already amassed in terms of collective evidence and collective will that we have to see this enacted before next winter.
Dr Whitehead
I fully accept that there are different interpretations of the best way forward within the overall agreed framework of where we want to go. Perhaps hon. Members take the perfectly reasonable, honourable and thought-out view that we have got what we want to say in the Bill, we have heard what Ofgem thinks it can do and we are happy to leave it there. My view is that it would be helpful to properly encapsulate our position on the Bill by saying in it what we want to happen—by setting an out-date for the considerations that Ofgem has to undertake before the cap becomes real.
Although I do not doubt for a moment the bona fides of Ofgem, or the sincerity of what Dermot Nolan said this morning, nevertheless, if we are not as clear as we can be about what we want to put forward in the Bill, it is conceivable—no more than conceivable—that someone could say, “Actually, we said five months, but some unexpected circumstances have cropped up—not a legal challenge, but other things—so we can push that further down the line. We’ll have to say that we are a bit sorry about that, but that’s how it is.” I do not want that circumstance to be even remotely in the minds of anyone at Ofgem over the next few months.
Kerry McCarthy (Bristol East) (Lab)
Is it not also a fact that in 2012, under the last Government, the then Prime Minister promised that he would force companies to switch customers to the lowest tariff? When he was talking about the “green crap” on energy bills, he also promised to use regulatory measures to reduce energy bills for consumers. As we have already heard, if we had introduced measures after last year’s election, when there was a manifesto commitment to do it, customers would have been protected in the cold weather we have just had. So I think it is only fair that people have some concerns about whether this is actually going to happen, when there have been so many false promises in the past.
Dr Whitehead
My hon. Friend makes a powerful point. Today, thinking about the cap, we are not in such a position that we can look back with complete equanimity and say, “Actually, everything that could have been done to hasten the cap, once it was decided that there should be a cap, has been done over that period.” There has been quite a bit of equivocation since, for example, the suggestion at the time of the Conservative manifesto for the last election that there should be a cap. It made an appearance but then went through a period when there seemed to be some resiling from that particular commitment.
As hon. Members will recall, there were indeed suggestions and discussions that Ofgem, in its own right, could and should undertake a cap: a cap would need no legislation from Government, so Ofgem could go ahead and put one in place. Indeed, as I recall it, a letter to Ofgem from the Secretary of State during the summer in effect said that. At the time, as hon. Members will also recall, Ofgem came back fairly publicly to say, “We are not convinced that we have the powers to do this,” or rather, “We may technically have the power to do this, but we wouldn’t be proof against legal challenge were we to go ahead and introduce a price cap administratively without the back-up of legislation from Parliament.”
As hon. Members will again recall, it was at that point—I think it was at the Conservative party conference—that the Prime Minister reasserted the fact that she wanted a price cap. Perhaps we will come on to what she said about the consequences of that price cap in a moment, but she certainly said at Conservative party conference that she wanted a price cap and that, in effect, legislation was to be introduced to produce one. So, arguably, we could say that, had we got on with legislation from the moment that the idea that there should be a price cap was put forward, we would not be sitting here today. Instead, we would be contemplating a price cap having been introduced, probably this autumn.
James Heappey
The hon. Gentleman makes his case well, but I remain to be convinced that putting in a deadline makes a difference. The biggest pressure that Ofgem will be operating under once we clear the Bill through Parliament—surely the biggest variable in the whole process—is an enormous amount of political pressure. Given that the hon. Gentleman does not propose a sanction against Ofgem should it miss the deadline, one would imagine that the political pressure Ofgem will be under from both sides of the House to deliver the cap is more than enough to deliver it very quickly. He will remember that the last time that there was a notice of insufficient margin, with the price spike that it brought, was in the middle of November 2015, so a date of the end of November seems somewhat arbitrary. We want it done as quickly as possible.
Dr Whitehead
The hon. Gentleman’s point about the amendment not suggesting any sanctions on Ofgem is an interesting one. Were that suggestion put into operation, it would require about six more pages of amendments to secure a sanctions regime against Ofgem, but that is not how Ofgem works. In effect, Ofgem has a requirement to do things—in its charter of existence, in legislation—and it is instructed by legislation and not, by the way, in final and legal terms by what a Minister may or may not write to it on a daily basis. It is supposed to go along with what is in legislation. That was the problem that arose with the letter from the Secretary of State to Ofgem when the idea of a legislatively based price cap appeared to be up in the air.
Ofgem made the point that it would prefer, or that it thought it necessary, to have some kind of legislation on the statute book to guide and advise it—or, more than that, to be a framework for its carrying out of its responsibilities. The Bill requires Ofgem to do all sorts of things but contains no sanction. It does not set out what would happen to Ofgem—whether Dermot Nolan would be taken out, and something would be done to him—if it did not do all that is specified. The point is that there are requirements on Ofgem under its charter from Government.
The Chair
Order. May I suggest to the shadow Minister that we have an awful lot of amendments to deal with this afternoon, and sanctions are slightly off track.
Dr Whitehead
Yes, I am happy to accept your guidance, Ms McDonagh. I am being enticed down the road I have taken by hon. Friends and colleagues, and of course as far as I am able I will not give way to temptation.
The central point, on which I want to end, is that we do not need a lot of sanctions to get Ofgem to do what it is supposed to do under legislation; but if something is in legislation it is pretty sure that it will get done, because that is how it works. An out date in the Bill would be a little further help in making sure that Ofgem would do what it has said it will do to put the measure into practice. Hon. Members will have a view on how important or necessary that approach is, but I do not think it can be gainsaid that putting the date into the Bill would provide a little further assurance.
That is the basis for the amendment. I hope that Members will support it, if they decide they want that further assurance, but I am sure that the Minister will come up with persuasive reasons why another view could be taken. We will listen with interest.
The Minister for Energy and Clean Growth (Claire Perry)
It is a pleasure to serve under your chairmanship, Ms McDonagh. I thank all members of the Committee. We have a highly qualified Committee here to deliver, over the next few days, what we all want: a legally watertight price cap Bill that enables some of the more egregious pricing structures in the energy market to be addressed.
The amendment moved by the hon. Member for Southampton, Test is intended, as he said, to put a hard-stop deadline on the implementation of the Bill. I understand his reasons exactly. We have discussed the Bill and are broadly in agreement about what we are trying to achieve. I agree that it is imperative for the measure to be in place before the end of the year. People say “before next winter”, and that somehow rolls into 2019. I want it on the statute book and implemented by the end of the year—ideally well before 31 December—because we owe it to the customers whom we are trying to protect. We have all been clear about that, and it is the message delivered in multiple debates and in multiple communications with Ofgem and suppliers. I shall speak in a moment about the possible risks of accepting the amendment.
Something else that is refreshing is that all parties have committed to getting the Bill through. I do not suggest that there will not be strenuous attempts to amend it, but I intend that it should be sent up to the other place in good order, so that it can go through the Lords effectively and we can get what we want, which is for the Bill to be in place and in good shape by the summer recess.
It was helpful to have the witness sitting this morning. We heard Ofgem say that, once we have given the go-ahead on Royal Assent, it will have to take a whole series of statutory measures, including developing the cap. Of course, some of that work has already started, quite rightly. We do not need to do this sequentially; we can do it in parallel. We are then going through a fairly transparent consultation process to make sure that any possible objections or concerns about the tests we have set out in the Bill on competition, switching and maintaining investment are met. There is a statutory duty to have a consultation period. We heard this morning that that will take five months, albeit with some things starting already and processes going on in parallel.
Alan Brown
It is a pleasure to serve under your chairmanship, Ms McDonagh. I was not originally going to talk, but 25 minutes into the Bill Committee my frustrations kicked in. It felt like 25 minutes of almost agreeing with the amendment. We have got an amendment with a date and everybody agrees that it is a reasonable deadline and timeframe. We are seeming to agree that Ofgem has committed to doing this in five months. I thought that Dermot was absolutely resolute in the evidence session in saying “We will do it in five months”, but his colleague had slightly more caveats and was slightly more restrained.
I cannot see any problem in getting a deadline that puts a marker down: humans work better to a deadline. It sends a message to our constituents and the people out there that we have this clear deadline. I listened to the comments from the Minister and I understand that she is saying that she wants to minimise any risks going forward in getting the Bill implemented. What if there is a legal challenge and then the deadline becomes a possible issue? But given that we have already agreed that we think this is a robust Bill that has been well written and well crafted, I think we have got to have confidence that it is robust. Having a date on the face of the Bill will make it that bit more robust and watertight.
Claire Perry
I appreciate the hon. Gentleman’s support, and I am delighted that we have cross-party support. I think we are all agreed that this is a robust Bill. I thank the hon. Gentleman for sharing his tribute to the parliamentary team, who have done a good job drafting it.
Stephen Kerr
I would like to pick up on the comments made by the hon. Member for Kilmarnock and Loudoun about the robust performance that we saw from Ofgem this morning. Frankly, that could be, in part, because when Ofgem appeared before the Select Committee scrutinising the legislation, it was less than robust—the witness was less than robust. I think he has got the message: he cannot be neutral on this; he has to be robust. We saw that today and that gives me great confidence that we will see this Bill enacted in the way we envisage.
Claire Perry
I defer to my hon. Friend’s experience. He sat through this process, doing an excellent job on the Business, Energy and Industrial Strategy Committee, and has seen the evolution of this robustness.
In response to the hon. Member for Kilmarnock and Loudoun, I think the Bill is absolutely robust. We are agreed: we have a tight, well-drafted Bill that does not allow for random amendments. The challenge is that the actual job of setting the price cap has, quite rightly, been given to the independent regulator. We have to go through a process of transparency and confidence building, if you like, with participants in the market, so that the number is set at the level we want to deliver maximum benefits to consumers without the dis-benefits of driving investment out of the industry, or indeed providing a less competitive environment. That is why I have been persuaded that Ofgem gets the deadline, believes it has the right to do it, but has asked for a period in which, quite rightly, it can go through a very transparent process. The more transparency the better, because that will head off any possible legal challenge. I wish we did not have to be in the world of worrying about future legal challenges, but I think we are all convinced that we need to make the whole process as robust as possible.
In responding to the hon. Gentleman from north of the border, Kilmarnock and Loudoun, I hope I have persuaded the hon. Gentleman from a long way south of there to withdraw his amendment.
Dr Whitehead
I would not say that I am wholly convinced but, as I mentioned in my opening remarks, to some extent it is a matter of how one views what has been said so far and the degree to which one thinks that this really is going to work as well as it could. Having been in this place for some while, I must admit that I am of a mind that one ought to legislate for things being as terrible as they possibly can be, and make sure that one moves upwards from there. Obviously, that view is not entirely shared but, on the other hand, it is also not a particularly big deal. We have heard from Ofgem that it is pretty committed to that five-month period. As I said, if all goes well with this Bill getting on the statute books when we think it will, that just about gets us to the right time. I am happy to withdraw this amendment on that basis, but I hope that I will not have to say I told you so come 31 December if it is all not in place as well as it should be. I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Dr Whitehead
I beg to move amendment 4, in clause 1, page 2, line 15, at end insert—
“(e) the need to ensure that customers on standard variable and default rates have their annual expenditure on gas and electricity reduced by no less than £100 as a result of the tariff cap conditions, and
(f) the need to ensure that adequate protection exists for vulnerable and domestic customers, including those customers protected by the safeguard tariff.”
The Chair
With this it will be convenient to discuss the following:
Amendment 8, in clause 8, page 5, line 21, leave out from beginning of line to end of line 24 and insert “—
(a) the statement published by the Secretary of State in that year under section 7 is to the effect that the conditions are not yet in place for effective competition for domestic supply contracts, or
(b) effective competition does not exist for vulnerable or disabled domestic customers,
‘(none) in which case the tariff cap conditions have effect for the year 2021.”
Amendment 9, in clause 8, page 5, line 26, leave out from “unless” to end of line 29 and insert “—
(a) the statement published by the Secretary of State in that year under section 7 is to the effect that the conditions are not yet in place for effective competition for domestic supply contracts, or
(b) effective competition does not exist for vulnerable or disabled domestic customers,
‘(none) in which case the tariff cap conditions have effect for the year 2022.”
Amendment 10, in clause 8, page 5, line 31, leave out from “unless” to second “in” in line 33 and insert “—
(a) the statement published by the Secretary of State in that year under section 7 is to the effect that the conditions are not yet in place for effective competition for domestic supply contracts, or
(b) effective competition does not exist for vulnerable or disabled domestic customers,”
New clause 1—Duty to consider the needs of vulnerable and disabled domestic customers—
‘(1) When exercising its duties under section 1, the Authority must have regard to—
(a) the need to protect vulnerable and disabled domestic customers, and
(b) the needs of domestic customers protected by the Authority’s safeguard tariff at the date the cap outlined in section 1 comes into force.
(2) When exercising their duties under sections 7 and 8, the Authority and the Secretary of State must have regard to—
(a) whether effective competition exists for vulnerable and disabled customers, and
(b) additional protection in place for vulnerable and disabled customers.”
This new clause requires the Secretary of State and the Authority to have regard for vulnerable and disabled customers when exercising their powers in setting, reviewing and terminating the cap.
Dr Whitehead
The amendments and new clause 1 are grouped together because they refer to the pillars of consideration that Ofgem—the authority—must have regard to when drawing up the process of turning our legislation into a practical price cap. That is essentially the subject matter of clause 1(6), which sets out the four pillars instructing the authority about its considerations. They include incentives for holders of supply licences to improve their efficiency; setting the cap at a level that enables holders of supply licences to compete effectively; the need to maintain incentives for domestic customers; and the need to ensure that holders of supply licences who operate efficiently are able to finance activity, as authorised by the licence.
The amendments essentially agree that those pillars should be in place, and it is right that Ofgem should have clear guidance in the legislation about how to go about their business. We suggest that further pillars be added to the considerations that Ofgem should have in mind when it is doing its work after we have done ours. Amendment 4 has two further pillars: one relates to further amendments to enforce that. As stated in the amendment, it refers to
“the need to ensure that adequate protection exists for vulnerable and domestic customers, including those customers protected by the safeguard tariff.”
We know that a number of customers are protected by a safeguard tariff. Effective price caps relating to those ranges of customers are already under way and, as far as this Bill is concerned, the price cap that will be introduced will add to those protections, placing a much wider tariff cap on to SVT customers in particular, whether or not they are vulnerable. It also substantially widens the scope.
We suggest that it would be a good idea to put in the pillars relating to Ofgem’s work; the fact that they should have consideration, particularly for those vulnerable domestic customers and those protected by the safeguard tariff, should relate to this wider tariff. That seems a reasonable addition, as a reminder to Ofgem that it ought to be considering that issue during its discussions about making the price cap a reality.
The other pillar suggested in amendment 4 is that Ofgem should bear in mind what sort of saving—it cannot be exact, obviously—should be considered as being possible as a result of those tariff cap conditions. I have a view on what that figure ought to be—not because I put the figure forward, but because the Prime Minister did. I will not ask hon. Members about their reading habits, but some of them may have seen a piece in The Sun newspaper on 25 February.
Dr Whitehead
The hon. Gentleman shakes his head. I cannot possibly comment on that. I got this on the internet, by the way. The headline was “Millions of Brits in line for £100 as Theresa May delivers on energy price cap promise”. Underneath, it said:
“The price cap on 11 million gas and electricity bills is to come in by end of the year as The Sun’s Power to the People campaign pays off”.
“It was The Sun wot done it”—not us, by the way.
Claire Perry
It is worth saying that that fine newspaper The Sun has campaigned for an end to various aspects of rip-off energy tariffs, and it is great that it was celebrating the fact that we had finally launched this Bill and got the provisions in. In this case we should all say, “Power to the people!”
Dr Whitehead
Since I do not read The Sun, I am not entirely up to date with all its campaigns, but obviously the Minister does and is. We will leave it there.
Bim Afolami (Hitchin and Harpenden) (Con)
I understand the thinking behind amendment 4. At first glance, one might almost be persuaded by it—until one looks at the clause in its entirety. The first sentence of clause 1(6), which governs all its paragraphs, states that functions must be exercised
“with a view to protecting existing and future domestic customers”.
That consideration is already in the legal framework.
With respect to the hon. Gentleman’s second pillar, the reference to £100 in his proposed new paragraph (e) is very prescriptive. It would make Ofgem’s already pretty difficult job—setting the cap at a level that satisfies all the conditions—even harder.
Dr Whitehead
I appreciate the hon. Gentleman’s point. Paragraph (e) would, conceivably, make life more difficult for Ofgem with respect to what it has to consider. As he correctly points out, it is required first to take a very general view
“to protecting existing and future domestic customers who pay standard variable and default rates”,
and then
“in so doing it must have regard to the following matters”—
those listed in the following paragraphs. In other words, if my reading is correct, after Ofgem has undertaken its initial consideration, it has a number of specific further considerations to take into account. All our amendment says is, “Here are two more to add to the list.”
Vicky Ford
The way I read amendment 4, it suggests that all customers on standard variable and default rates will get a £100 reduction, whereas the Prime Minister’s statement was that the millions of consumers who are on unacceptably high default rates would get a reduction. In the statement this morning, there was a suggestion that at least two of the big six do not have unacceptably high rates. I am rather concerned about the one-size-fits-all nature of the amendment.
Dr Whitehead
The hon. Lady has a point, but if hon. Members read amendment 4 and clause 1(6) reasonably carefully, they will see that
“the need to ensure that customers on standard variable and default rates have their annual expenditure on gas and electricity reduced by no less than £100 as a result of the tariff cap conditions”
would be a consideration—I emphasise the word “consideration”—that Ofgem needed to take into account.
James Heappey
I am afraid that I agree with my hon. Friend the Member for Chelmsford. A number of the larger supply companies have already sought to get ahead of the Bill by transferring their most loyal, or “sticky”, customers from what used to be called SVTs—standard variable tariffs—to other tariffs that are called something else but may be just as expensive. My concern is that the hon. Gentleman’s amendment is overly prescriptive and might allow the energy companies to get round what we seek to achieve.
Dr Whitehead
I do not think the amendment would allow energy companies to get round what we seek to achieve, although I accept the analysis that it may produce more work for Ofgem. I based amendment 4 on what the Prime Minister said. One could argue that she was being overly prescriptive—I do not know.
Alan Brown
I am glad the hon. Gentleman has explained that the £100 is not arbitrary, but a figure from the Prime Minister. Equally, I assume the Prime Minister’s £100 was arbitrary as well, so I must admit that I have concerns about stipulating a figure in the Bill. When I asked about it earlier, Ofgem said that there would be unintended consequences.
Presumably, concerns have been expressed about the big energy companies gaming in terms of exemptions and green tariffs. I am concerned that they will use this as a way to do gaming, so that they provide savings on paper by dodging and changing rates before the legislation kicks in. Could he address that?
Dr Whitehead
The hon. Gentleman makes an important point about what could happen prior to the cap coming in. Energy companies could be gaming ahead of the game with their prices, so what would savings look like after that? I am not sure that we can do anything about that right now. As Ofgem mentioned, if energy companies are too blatant in their price rises over the next period, they will be in breach of their obligations to Ofgem anyway.
We have seen several instances of small price rises recently. We heard about one—a comparative gas price—this morning. Bulb, one of the witnesses this morning, put up its rate by £24 just a few weeks ago. That was for particular purposes, but one could argue that it was a gaming price rise ahead of the legislation. Bulb was very clear that it was not, and that it was for other purposes, but we clearly have to be alert to that possibility.
If that does happen, what anyone has said about what savings would result from this price cap would have to be taken relative to whatever that price was at the point when the price cap was introduced. It would be possible for consumers to say at that point, “Actually, we were promised a £100 price saving. It does not look like a £100 saving to me, because it is a saving against a price rise that will end up increasing my bills.” In wishing to place this in the legislation, I am indicating that we in this Committee do not wish to let the public down regarding what might happen with this price cap.
The Prime Minister has already said that there will be a £100 saving. Indeed, I do not know whether this applies to anyone present, but interestingly The Sun article states:
“Government insiders say the cap should save at least £100, potentially rising to £300 a year with increased competition and faster switching.”
Government insiders, whoever they are, are suggesting that the £100 is a minimum and it could be considerably more.
Stephen Kerr
More important than any quotation from The Sun, the number that really counts is the £1.4 billion of detriment that was identified in the CMA report. That is the number we should be going on. Confusing the issue by coming up with arbitrary numbers in the Bill means taking our eye off the ball of the £1.4 billion.
Dr Whitehead
The hon. Gentleman is right to draw attention to the CMA figure. Customers were, in effect, being overcharged by that over a considerable period. Indeed, that was a substantial precursor to the idea that there should be a price cap in legislation in the first place. A regime was in place that allowed overcharging by a variety of devices, a number of which were identified by CMA in its report. We want not only to cap the price for a certain period of time, but to ensure that the behaviour that allowed more than £1 billion to be overcharged is not repeated. We do not want to be back here in a few years’ time, saying “That is terrible—now we have to implement another price cap.”
The issue is not just about the price cap, but about what happens afterwards. We need to do what we can, both during the passage of the Bill and during the price cap, to ensure that circumstances in the market prevent such overcharging from happening again. One of the underlying aims of the Prime Minister’s statement about the savings that would arise was that the price cap should be more than just a temporary punishment for certain energy companies; it should be an attempt to reset the market so that things work differently. The proposal for the £100 saving derives from that.
In May 2017, the BBC site—I do watch the BBC—reported that the
“Prime Minister…said 17 million households would benefit by up to £100 from the cap on poor value standard variable tariffs.”
What has been in the papers recently is slightly different, but it is clear that the original plan was a £100 saving for customers paying standard variable tariffs. That is the public’s expectation, as franked by the Prime Minister, of the consequences of the price cap; committing to it in the Bill would show that our intention is in line with the results they expect. Including the £100 saving as a consideration for Ofgem would complete the circle. As I say, it was a suggestion not from any Opposition Member, but from the Prime Minister, about how the Bill should work. We merely seek to enshrine her words in the Bill.
Our other amendments serve essentially the same purpose but relate to later clauses, especially clause 8, which sets out a clear mechanism for the circumstances in which the cap can be terminated, describing subsection by subsection what will happen at the end of each year from 2020 until 2023, when the sunset clause has effect. In each year, the trigger for rolling over the tariff cap conditions for another year is that
“the statement published by the Secretary of State in that year under section 7 is to the effect that the conditions are not yet in place for effective competition for domestic supply contracts”.
Our amendments would insert an additional condition for effective competition in each year, based on whether the Secretary of State thinks that
“effective competition does not exist for vulnerable or disabled domestic customers”.
Alan Brown (Kilmarnock and Loudoun) (SNP)
I rise to speak to new clause 1, which is tabled in my name. It replicates or mirrors amendments 8, 9 and 10 in trying to provide explicit support for vulnerable and disabled consumers.
In the Minister’s opening remarks this morning—in private and in the evidence session—she expressed her concern to ensure that vulnerable customers are protected in future. Clearly, part of the Bill’s aim is to protect the vulnerable and those who have been getting ripped off. When I asked one of the panels about improving the Bill, and I specifically mentioned vulnerable and disabled people, the representative from Citizens Advice said that the protections are implicit in the Bill, but not explicit. Ofgem agreed that the protection of vulnerable people needs to be considered, although it believes that some measures are already in place. New clause 1 would explicitly ensure that vulnerable and disabled consumers have that protection and consideration in terms of effective market competition for the grouping they sit within.
New clause 1 effectively mirrors a clause proposed by Scope—a charity whose strapline claims that it exists
“to make this country a place where disabled people have the same opportunities as everyone else.”
Given that Scope are expert advocates and campaigners, I was happy to move this new clause.
As Scope rightly observes, people with disabilities are often high consumers of energy due to their impairment or condition. The hon. Member for Southampton, Test highlighted that a quarter of the households in which a disabled person resides—4.1 million households—spend more than £1,500 per year on energy, and nearly 800,000 households spend over £2,500 a year. That is a huge, significant sum and clearly has a huge impact on their expenditure. In terms of market regulation, it therefore makes absolute sense to make specific provision for vulnerable and disabled consumers.
We heard that some disabled people are protected under current schemes, but not all disabled people are automatically eligible for the warm home discount, and nor do they automatically get registered on the priority services register. That, again, reinforces why the Bill needs to make explicit provision for vulnerable and disabled people when setting, implementing and reviewing the cap, particularly in terms of whether conditions for effective competition are in place and whether the cap should be lifted.
We have already heard that, as predicted, additional protections will need to remain in place post cap. I want to conclude with an example from Scope. This is from someone called Lynley:
“Before I became disabled, I never gave heating a second thought. But now, as I’m home every day, things are very different. I find it hard to stay warm as I can’t move around to generate any heat. I need the heating on pretty much constantly. I also use an electric heat pad to help manage my pain and an electric powerchair to go outside. This equipment requires charging frequently. My energy bills are much higher than before, and—coupled with the loss of my income as a teacher—have made getting by very difficult.”
There is cross-party support for the Bill as a whole, and we all agree that it is about doing the right thing to protect consumers from getting ripped off in what has been a market failure to date. But let us do this absolutely properly and make sure that the rights of the vulnerable and the disabled are explicitly protected in the Bill as well.
Claire Perry
I would like to speak to amendments 4, 8, 9 and 10 and new clause 1. I will start with the first part of amendment 4, which requires a hard estimate on the face of the Bill as to what the saving might be. I was delighted to hear the hon. Member for Southampton, Test quoting our Prime Minister so extensively. I could quote some of the things she has said about the Labour party, but I would not like to challenge the spirit of cross-party consensus. [Interruption.] The hon. Gentleman really does not want to tempt me on that.
We can all sit and make estimates of what the savings ought to be, but all of that will depend on the level at which Ofgem chooses to set the cap.
Alex Norris (Nottingham North) (Lab/Co-op)
Does the Minister think that it is regrettable that, in the newspaper with the biggest circulation in the nation, a legitimate expectation may now be created that the saving will be at £100 or greater?
Claire Perry
I am sure the hon. Gentleman listened to the Prime Minister talking about the Labour party as being divided, divisive, tolerating anti-Semitism and supporting voices of hate. He probably does not want to trade quotes the Prime Minister has given.
However, let me move back to what we discussed in relation to the previous amendment. We talked extensively about how Ofgem needed to set the level of the cap to avoid crowding out investment, to encourage switching and, importantly, to set the cap at a level that does not facilitate strong legal challenges. That is why it is so important that we let Ofgem—which I think we all now believe does have the capability, and does share our commitment, to get this done by year end—get on and set the cap.
My hon. Friend the Member for Chelmsford made the point about setting an arbitrary figure. The problem with that is that this is not an average figure. We all know that we tend to work in averages, so just having that as the target would lead to all sorts of gaming.
The three things we all want are for the cap to come in, for it to be set at the right level and for it to be proportionate—once again, I wish we were not worrying about legal challenges, but we have to make sure. This is absolutely vital.
The hon. Member for Southampton, Test and I have discussed at length the difference between a cap and a freeze. We do want this cap to move over time. We know that prices go up as well as down. We know that the wholesale cost changes. We want to have the most efficient energy system we can, but the cost may increase. Having this number in the Bill would, in effect, bind Ofgem into setting a number that had no relation to the underlying costs.
I absolutely support the hon. Gentleman’s intentions. He and I both want to see these sorts of savings. In fact, the average spread between the cheapest tariffs in the market and the average of the standard variable tariffs is more like £300, so we would both confidently expect the savings to be greater than this. I will turn to the prepayment meter cap—the safeguarding cap—in a second in relation to the specific regard for vulnerable customers, but it is notable that the average saving after the April increase will be north of £100. Customers who are on that tariff are more than £100 better off than they would have been if that tariff had not come into place, so there is evidence that more than that amount could be achieved.
I will turn now to the second part of amendment 4, plus amendments 8 to 10 and new clause 1, which was tabled by the hon. Member for Kilmarnock and Loudoun.
Kerry McCarthy
If I heard correctly, the Minister was saying that people on the safeguarding tariff would be better off. However, in evidence this morning we heard that people will be eligible for it only if they have successfully applied for the warm home discount. Is that right? There is a waiting list and money runs out before time, so would she give consideration to the notion that it should be people who are eligible for the warm home discount and not just the people who have actually managed to get it?
Claire Perry
That is a very important point, and the hon. Lady is extremely knowledgeable in this area. She brings me to the second part, when I will hopefully address her point.
The safeguarding tariff came into force in April 2017. That perhaps gives the lie to the idea that the previous Government did nothing; this was all part of the pressure that we put in place. The tariff initially affects people who are on prepayment meters, who are often exactly as the hon. Member for Kilmarnock and Loudoun described—perhaps living in fuel poverty. That tariff is put in place by the CMA—it is nothing to do with Ofgem—and it will run until 31 December 2020. We have seen Ofgem extend that to this additional group—those who have claimed warm home discount—as the hon. Lady quite rightly said. She raises an interesting point, and we should take a look at it to ensure the maximum number of people are capable of achieving that safeguarding discount.
I asked the team to look at the impact on the bills of customers on these tariffs. Before the safeguarding tariff came in, the PPM average standard variable tariff was about 5% more expensive than the average standard variable tariff. Now, those who are on the PPM and vulnerable tariff pay on average 8% less than those on standard variable tariffs. That is absolutely working, independently of the Bill, to deliver the savings that we want to see for vulnerable and disabled customers. Those caps will continue to be in place, and it is very important that both are in place and that the Bill does nothing to remove eligibility for them.
I want to talk about some of the other duties on Ofgem, which are already covered in clauses 1(6), 7 and 8. They require Ofgem to protect all existing and future domestic customers, including vulnerable and disabled customers, and to consider whether effective competition is in place for the domestic energy supply as a whole. When effective competition is considered, it has to apply for all customer groups, including vulnerable and disabled customers.
James Heappey
Before the Minister gets too far from the issue of vulnerable customers and the cap, I thought National Energy Action’s evidence this morning was interesting. It is probably premature to react to that evidence by enacting the Opposition’s amendments. Could the Minister confirm that she will go back and look at whether the evidence provided this morning warrants some action, perhaps before the Bill comes back on Report?
Claire Perry
Again, it was a very effective evidence session this morning. I was just going to come on to some of the other support we are looking to provide, in particular through the Energy Company Obligation, where we may be looking to help a broader group of people than is currently eligible.
I want to touch on some of the other duties that Ofgem already has in relation to protection of this customer group. The original gas and electricity Acts place a duty on Ofgem to protect the interests of existing and future customers. In carrying out this duty, Ofgem should have regard to the interests of individuals who are disabled or chronically sick, individuals of pensionable age, individuals with low income and individuals residing in rural areas. So I would argue that Ofgem already has these duties in place as part of its conditions. Indeed, the Bill, in which we make it explicit that we need Ofgem to consider all customers and all competition in setting the cap, makes the amendment surplus to requirements.
Stephen Kerr
I just have a brief question. I know the Minister has acknowledged the Select Committee’s work on pre-legislative scrutiny. One of the recommendations in its report was about amending the Digital Economy Act 2017 to allow data to be shared with energy companies. That is a huge impediment right now to getting help to the most vulnerable—particularly those who are on SVTs.
Claire Perry
Yes. Again, I want to thank my hon. Friend and the Select Committee for bringing forward a series of recommendations, which we have accepted. He refers to a statutory instrument that is being started in the Cabinet Office, which I am assured will receive assent—or whatever the right word is—during the passage of this Bill, subject, of course, to cross-party support. That opens up the opportunity for much better data sharing to support vulnerable and disabled consumers.
It is extremely important that we continue to look at this group. We heard today that some of those we might consider most vulnerable are also the most assiduous switchers, because they simply do not have a penny to spare. I guess the issue I have, which is why we are here, is that we do not want people to have to invest the time in shopping around to feel that they are always getting the best deal.
Households that are receiving the warm home discount, in addition to qualifying for the safeguarding tariff, get £140 a year. Of course, we protect our pensioners, with up to £300 a year for winter fuel payments. Sadly, the cold weather payment was also triggered in the last couple of weeks, and that was another £25 during the cold snap. There is also the priority services register, which is a free service provided by suppliers for people of pensionable age who are disabled or chronically sick, have a long-term medical condition or are in a vulnerable situation. Those people go to the front of the queue should an emergency—a supply interruption—interrupt their heating or cooking facilities.
Finally, I want to mention the ECO consultation, which we will bring forward shortly. It is my intention, as far as possible, to pivot the whole of ECO to focussing on the challenge of fuel poverty and trying to make sure that those in the greatest poverty receive the greatest benefit, but also to use the programme to support more innovation and more targeting. I live in an off-grid area, and I am fed up of getting ECO leaflets through my door. It does not feel like the best targeted scheme to me, and I would like it to be targeted at those who are perhaps time-poor and need the help the most.
Kerry McCarthy
In the NEA’s evidence this morning, it said that one of the additional things needed for a package for the most vulnerable customers was energy efficiency measures. I know the Government are consulting on energy efficiency programmes, and particularly on amending the energy efficiency standards for rented homes. May I urge the Minister to make sure that that is brought forward quickly as well, because it will take a while to implement these measures in people’s homes? This is not just about lowering the bills; it is about making sure that people are not using huge amounts of electricity and gas in the first place.
Claire Perry
The hon. Lady is quite right: the great thing about energy efficiency in the home is that it cuts both carbon emissions and bills, so it is a win-win situation, and that is why we have set an ambitious target. She is right that we have started with homes in the rented sector and the social rented sector, and our intention is to make sure that progress is delivered as soon as possible.
Dr Whitehead
I am grateful to the Minister for not exactly spilling the beans but giving us a little preview of what the Government will come up with in response to the consultation on ECO. If there is to be much more concentration on those in fuel poverty, regardless of one’s view on whether the total sum on ECO is sufficient to do what we want on energy efficiency, that is a positive step.
Will the Minister also say a word or two about the regulations that I think are still not yet with us on the responsibilities of landlords to raise the energy efficiency of their properties? I am sure the Minister will know that overwhelmingly those who are vulnerable and in fuel poverty are concentrated in that private rented sector—
Dr Whitehead
Substantially, I think we can agree. Does the Minister have any idea whether the regulations will turn up shortly? Secondly, if they do turn up, will they have within them the requisite amount of money that landlords should spend on bringing their properties up to band E, so that we can have reasonable assurance that will help vulnerable and fuel-poor customers?
Claire Perry
At the risk of being ruled out of order, I will write to the hon. Gentleman. He is quite right that we want to make sure that people are not living in private rented accommodation with poor quality safety or energy efficiency. We intend to introduce those regulations—indeed, they are already on the statute book. We intend to make sure of the maximum amount of cash that is required.
The other question on this is that the vast majority of landlords are small: they are people owning one or two properties that they rent out. As the hon. Gentleman will know, the whole scheme was based on the green deal. It was a Bill Committee that I was proud to sit on; we thought that was going to provide a financing mechanism, but it has not. That is why the work of the Green Finance Taskforce, which we will be bringing forward to assist in financing mechanisms, will be helpful. I will write to him with those details.
Turning to amendments 4, 8, 9 and 10 and new clause 1, I hope I have persuaded the Committee, first, that to put an arbitrary number for savings in the Bill would not be appropriate. It would not be an average number and is not necessary, because we can see from the safeguarding tariff that bills have fallen. Also, we would all expect that number to be greater. Secondly, I think we are all seized of the need to protect and improve services for vulnerable customers. That is part of Ofgem’s duty and is part of the tariff cap conditions and the conditions for competition. There is a lot of support already. I take the point made by my hon. Friend the Member for Wells that more needs to be done. That is why we would like to bring in ECO, to make sure that that customer group is paying the least possible for their energy and getting the best possible service.
On that basis I invite the hon. Member for Southampton, Test, to withdraw his amendments.
Dr Whitehead
As I have mentioned, our amendments are requirements on Ofgem to take these matters into account. It may be that, as a result of what we have discussed in Committee—after all, it will be on the record—that Ofgem might consider itself to be rather better instructed.
Claire Perry
I want to emphasise that this is exactly why this process is so incredibly helpful. The signalling that collectively we can give about the need to consider the conditions that might be there—albeit perhaps buried in a statute book somewhere—is vital. That is why it is a pleasure to have these conversations.
Dr Whitehead
I think the Minister for giving that additional weight to the points we made this afternoon, which will amplify our intentions for those reading our deliberations. It is clear that the intention behind the amendment—what Ofgem should have regard to in setting the tariff cap—is shared across the Committee.
I also take the point in practice that the first part of amendment 4 would give Ofgem additional work and could be a little problematic as far as getting the amount right before the price cap comes in is concerned. It might have been prudent for the Prime Minister to put those caveats in what she said a little while ago about how the Bill was to proceed, but on the basis of our discussion this afternoon, I do not wish to proceed further and I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 1 ordered to stand part of the Bill.
Clause 2 ordered to stand part of the Bill.
Clause 3
Exemptions from the cap
Dr Whitehead
I beg to move amendment 5, in clause 3, page 3, line 17, after “Authority” insert “wholly”.
Hon. Members will find the amendment rather hard to spot. It is to insert one word, “wholly”, and I want to explain why that is important and give some of the background to how the clause came about in the first place. There is no universal agreement on the need for the clause. After all, it exempts certain providers of certain tariffs from conditions that elsewhere will apply as far as the price cap is concerned. The providers exempted under subsection (2)(b) are those that appear to the authority to support the production of gas or the generation of electricity from renewal sources. There are a number of arguments about whether an exemption should be in place; my view is that there should be.
We heard in the evidence session this morning about suppliers of renewable tariffs ensuring that what they source is genuinely from renewables. They might undertake power purchase agreements from independent producers so that they can guarantee that their tariffs are sourced directly from those producers or, under certain circumstances, they might have their own supply of renewable energy because they have themselves invested in wind farms or other forms of such energy and therefore know that their renewable energy is wholly such. Under those circumstances, those companies—there are a number of them—inevitably incur rather more complicated arrangements in the delivery of their tariffs and in guaranteeing that these really are what they say they are, wholly renewable tariffs delivered to customers on that basis.
Bambos Charalambous (Enfield, Southgate) (Lab)
When I asked Octopus and Bulb this morning whether there was a need to tighten the definition of renewable energy, they both agreed that there was. They saw it as a way of the big six getting round the cap. So does my hon. Friend agree that there needs to be a tightening of the definition?
Dr Whitehead
Yes, I certainly do. If one first agrees that this particular provision should be made, the question of tightening it is quite an important aspect of the Bill.
I am sure that hon. Members will be aware that the draft Bill, when it first appeared, had a much wider and I think much less satisfactory definition of the circumstances under which an exemption could be made. The Select Committee that considered the draft Bill and produced its excellent report singled out this particular clause as one that should be strengthened, as my hon. Friend the Member for Enfield, Southgate has pointed out. It thought it should be strengthened on the basis that a number of stakeholders viewed the Bill as then drafted as allowing for
“unscrupulous suppliers to game the system and avoid the cap by moving customers on poor-value tariffs onto loosely-defined green tariffs.”
It recommended:
“The Government should work with Ofgem to strengthen the definition, standards and checks for electricity tariffs with environmental claims so the system cannot be gamed in this fashion and undermine the success of the cap.”
That concern was absolutely right. Regrettably, it is the case that throughout the present tariff offer a number of tariffs are in place that purport to be green tariffs, but when we drill down to what they consist of, they are pretty much not green tariffs. They may have a part of renewable energy in their make-up. It may be claimed that the company is advantageously purchasing renewable energy as part of its overall purchase arrangements, but of course we know in terms of today’s energy mix that it is fairly difficult to rigidly remove oneself from purchasing any renewable energy in the portfolio of purchases for tariff purposes.
James Heappey
I have huge sympathy with the point that the hon. Gentleman is making. My concern is that we risk letting the perfect be the enemy of the good. There may well be tariffs that are 95% or 99% green that really should be supported, but would not be under his amendment. The wider issue of greenwashing is a matter for the regulator more generally, rather than specifically a matter for this Bill.
Dr Whitehead
I take the hon. Gentleman’s point. I have tried to think about this point precisely on those sort of lines. It is difficult, in looking at such tariffs, to see the circumstances under which a company offering not a wholly renewable tariff is protected from a slippery slope—from going right down that slope and saying, “Well, as long as there is something in there that is renewable, we can call it a renewable tariff.”
I was about to make a point about the circumstances under which companies trade. Normally, because of the extent of renewable penetration into the energy system, most companies will come across a renewable supply as part of their trading arrangements. As I said, it is pretty difficult to avoid that, so we can imagine how relatively easy it is in principle for someone sitting in a company boardroom to say “How can we produce a tariff that looks like a green tariff but does not give us any sort of problem in producing it? Why don’t we just set aside what we have come across by chance, as far as our energy supply is concerned, say that it is our green purchase and put it in a tariff? Then we will have a green tariff and will be fine.” No work would have been done to distinguish that tariff from anything else, and the company would have no intention of doing anything within their tariff offer but trade in the ordinary way. That is a worry.
Caroline Flint
This is an important area of the Bill. Does my hon. Friend agree that there is a requirement on energy companies to source renewable energy—quite rightly—and those costs are already spread across all bill payers? Why should there be a premium on top?
Dr Whitehead
The point that my right hon. Friend makes is, I think, taken into account by the circumstances that now apply across the board for energy sourcing. As she and I know, having talked about this for years, the process of the renewables obligation did impose a particular obligation for a proportion of energy purchased to be green. Then there was a system of trading those obligation certificates. Those people not directly purchasing green energy would have to purchase certificates, which could be traded from those who had actually traded in green energy in the first place, so that those involved had, in one way or another, carried out their obligation. The overall design of the renewables obligation system was to encourage the production of green energy, because the beneficiaries of the certificates when they were traded in cash would be the producers. That was a system that very much incorporated in it an incentive to trade in green energy in the first place.
Now, of course, the renewables obligation is no more. It continues as a ghost trade system and will continue on a declining basis, I think, until 2027, but as of March 2017 no more renewables obligation certificates are being issued. They are being replaced by the contracts for difference system, which does not impose an obligation to purchase green energy in the same way as the renewables obligation system did. The prospective system does not, as my right hon. Friend suggested, provide a universal underwriting of green energy production. She is right, of course, that the system overall encourages renewable energy production, but not in the same way as the renewables obligation.
I do not think that that particularly detracts from my right hon. Friend’s fundamental point, but it puts us in a position where we can properly consider the idea that a number of energy companies might accidentally, as it were, purchase green energy that does not, otherwise, have an obligation attached to it, and introduce it as part of a green tariff that is not really a green tariff. I suggest that companies wholly in the business of producing renewable energy, or those that produce it from their own sources or sources guaranteed through a power purchase agreement, or something similar, with the operator, are in a different category. I want to emphasise that difference with respect to the purpose of the amendment.
James Heappey
I think the point made by the right hon. Member for Don Valley was really about the existence of clause 3(2)(b) in the first place. I have a lot of sympathy with that. I think it is unhelpful to mark out green tariffs as a premium product—that is counter-intuitive to the wider effort we are making. However, if clause 3(2)(b) must remain, I am not convinced that the amendment tabled by the hon. Member for Southampton, Test is necessary. I encourage him to consider again whether where we all agree is that Ofgem might take a much more robust view on the practice of greenwashing and that that is the actual challenge that we want the regulator to close with, not necessarily an amendment to the legislation this afternoon.
Dr Whitehead
I would say that the essential point is how far up the beach and close to the walls the greenwashing actually goes. Can we conversely say that we can put greenwashing into a particular box and say “That looks like greenwashing”, but as we move up the scale of more and more renewables in the system, the greenwashing ceases and therefore can we say that this really is a renewable product and is something we can apply special exemption arrangements to? That is the nub of the debate.
Stephen Kerr
I would like to share with the hon. Gentleman the very words of Dermot Nolan in relation to this issue. In evidence to the Select Committee, he said in answer to a question about how it is decided whether energy is green or not:
“There are ways to determine the source of energy as to whether the generation of energy by that company has occurred in a sufficiently green fashion, which we have a definition for already, although not a perfect one. We would make specific requirements of companies on that. We would audit them and we would police it. If they were not compliant, we would tell them they must immediately withdraw the tariff or face enforcement action.”
That answer and the agenda that Ofgem is following make the amendment redundant.
Dr Whitehead
That is a reasonable and honestly held opinion about the extent to which it is possible easily to distinguish when greenwash is not greenwash and the point at which an energy company, even with a partially green tariff, puts in something that is honestly green and not something that they have just cooked up because they happen to have purchased something that has an element of traceable green energy in it.
Even under the circumstances that the hon. Gentleman mentions, it would be fairly difficult for Ofgem to make easy distinctions when it came to what it was doing about tariffs that could be jumbled up with a lot of brown energy but nevertheless be claimed to be at least partially green.
I have tried to think this through and consider how we might be able to make honest citizens of those companies under such circumstances. It is possible to argue that even if a company accidentally buys green energy, if it is genuine green energy, then yes, it has sourced green energy. However, the bar needs to be set rather higher.
Vicky Ford
The hon. Gentleman’s amendment uses the word “wholly”. In my view, “wholly” means that 100% of the energy would be renewable. To me, that is wholly unworkable. I want more consumers to get more choice. If they really wish to buy more renewable energy packages, they can do that. I would also like to see green tariffs that encourage smart consumption—smart appliances that switch on and off at peak times, for example. Those could also be bundled into a green tariff.
Furthermore, as more and more people want to buy renewable packages, what happens at a peak time on a very, very cold day when our renewables cannot cover the amount of consumption those consumers need? Would they have to be switched off and have no energy at all? Would they not be allowed any back-up supply? “Wholly” is not the right word.
Dr Whitehead
I hope the hon. Lady will forgive me for saying this, but she makes a rather good case for my amendment. Let us consider circumstances, such as those she mentions, in which insufficient renewable energy is generated on a particular day to “go round”. What we mean by “go round” is that renewable energy, in most instances, is variable. If we look at our little National Grid—
Dr Whitehead
The app, to see what is being generated on any particular day, we will see that it varies from 4% or 5% to 20% or more, depending on the circumstances, so it certainly is true that there will be a variable amount of renewable energy to go round.
However, that is not the point as far as renewable energy suppliers who contract to supply wholly from renewable sources are concerned because they will provide themselves with power purchase agreements or will own their own generating capacity and guarantee that, come what may, what the consumer gets as a result of their tariff is renewable. In a sense, they will have pre-empted the “not enough to go round” point by guaranteeing with their arrangements that there is. I suggest, precisely for the reasons the hon. Lady set out, that that can be problematic for those companies. Nevertheless, that is what they guarantee as part of their tariff.
As far as brown energy companies that want to do a bit of greenwashing are concerned, the hon. Lady is absolutely right that if there is not enough green energy to go round they remove the portion of renewable energy from their supply and the tariff becomes browner, even though they say it is partially green. That is precisely what the amendment seeks to avoid, by making the starting point that the exemption applies to tariffs that are clearly wholly renewable and about which it can be said without a doubt that that is what they are—no messing about. That is why they should be exempted.
Michelle Donelan (Chippenham) (Con)
Further to the point made by my hon. Friend the Member for Chelmsford, I am a little confused as to why the hon. Gentleman would add “wholly” when he admits that that is a virtually impossible state for companies to be in at present. Would the amendment not make the Bill have a null and void section, if the word “wholly” was used when that was unachievable?
Dr Whitehead
Forgive me, but I was trying to distinguish between other companies and those that guarantee to provide a green tariff come what may because they have either their own supplies or a power purchase agreement with a supplier that guarantees to supply them come what may with renewable energy.
Let us remember that not all renewable energy is variable. Not all renewable energy is reliant on a variable supply being continuously variable. I have recently been to see a number of plants, one of which was a large solar farm close to the Minister’s constituency, which had a large battery installation next to it. The power produced from that source is continuous even though the solar is variable because of the existence of the battery. If a company offering a wholly renewable tariff has a power purchase agreement with that producer, it will have a reliable source of renewable energy come what may, because that is the contract it has made. That is essentially the contract that those companies are undertaking on their renewable tariffs.
Michelle Donelan
Is that not disincentivising the green company from growing? It knows that if it takes on more consumers, it cannot 100% guarantee to fulfil their needs on a cold day or in a cold snap. That would cap the green market, which is contrary to what we want to do—we want to encourage it to grow.
The Chair
Order. Before the shadow Minister responds, we will have a short comfort break.
Dr Whitehead
I was about to reply to the hon. Member for Chippenham, who suggested that the amendment might be superfluous because, as she put it, if companies cannot supply from renewable energy in any event, putting forward an amendment to require an exemption only where a supplier wholly supplies renewable energy might be a step too far for the energy market.
The amendment sets the bar fairly high, but not impossibly high. Companies that genuinely supply renewable tariffs have effectively pre-empted the variability of the market by securing reliable renewable supplies one way or another in advance, because of their power purchase agreements or their individual ownership, so that they can reliably offer a renewable tariff.
On a wider basis, it is true that what we want is to have as much renewable energy on offer as possible, as a general policy good thing, but that amount on offer will necessarily vary, although as I think hon. Members can see—the Minister has mentioned the nice app that we both watch regularly—those numbers have come up enormously in recent years.
Caroline Flint
It is a pleasure to serve under your careful stewardship, Ms McDonagh.
I find myself in an interesting position. I completely understand what my hon. Friend the Member for Southampton, Test is trying to do with his amendment. The sense I get from the interventions so far is of common agreement, and that is also the response of the Select Committee. I am glad to see on page 24 of the Select Committee’s report that I have a footnote—I have never been a footnote before, and I am so proud. Good Energy and I, and others, made a submission to the Select Committee about why we have to be very careful about gaming in moving forward in relation to the price cap.
My hon. Friend has clearly outlined the concerns that we have—and share with others across the House and those outside who have made representations—about the danger of people trying to use green as a way to avoid providing fair prices. Let us be clear: we are talking about the sticky customer base—those people who, year in year out, find that their energy bills go up. The CMA review and others have found how people have been overcharged for a number of years now, and there has been much discussion in this place about that. I totally understand my hon. Friend’s intent in trying to introduce “wholly” as another way to separate those who might game the system from those who are in all good faith seeking to invest in and buy 100% renewable energy.
My only problem is that I feel that we want to make this legislation as simple and straightforward as possible, given that there is also agreement that this is a temporary measure for a period, which will hopefully allow people to get a fairer Bill for their energy and not be overcharged, and in which we and the Government can look at what further reform might follow from this in the future. My hon. Friend and I have spent many hours discussing that and we think there is much that could be done—but that is not for today’s debate, Ms McDonagh.
As someone who very much supports renewable energy, not only for our electricity and power supply but for our heat supply as well, I am not sure of the evidence. I may be convinced during the passage of this Bill that a premium price for green energy stacks up. I might be wrong, but I am not sure it does stack up. I apologise to colleagues on the Committee that I was not able to be here this morning, but I have read the written submissions—in particular, those from Bulb and OVO, who outline their concerns about exempting green tariffs from the legislation. A lot has been done to contribute to today’s situation, where the sort of energy that we want, for climate change and in terms of being innovative in the sector, has seen a huge reduction in overall costs and is therefore able to compete very effectively in the market.
Claire Perry
In my mind, the right hon. Lady is not a footnote—she is a major chapter heading. I am enjoying listening to her speech, because it was largely as a result of the great cross-party consensus that we brought in the Act—and some pretty tough decisions, which she supported in her shadow Secretary of State role. That is why we are able to buy renewable energy at prices that do not require a substantial subsidy. That is why we all look forward to a situation where customers should not be charged a premium for that renewable energy source.
Caroline Flint
I thank the Minister for that intervention—I aspire to be a book. [Interruption.] A library, no less. Goodness. People will not be able to work out what the hell we are talking about in this Committee!
A lot has been done to drive investment in the renewable sector, and some of that is ongoing. My hon. Friend is quite right that the renewable obligation is coming to, if not its end, then close to it. We also have contracts for difference. We also have the renewable heat incentive for heat. A business in my constituency that produces green gas is a beneficiary of that. In lots of different ways, there continues to be support for renewable energy of one form or another. No doubt, should it get the green light, the tidal lagoon will also be receiving a contract for difference that will guarantee a price for what it produces over a number of years.
I would question my hon. Friend, and also the Minister—she has tried to tighten up the wording and, in this clause, has enabled Ofgem to step in, assess, consult and what-have-you—because I am still not convinced that there is any need for exemptions in the way they suggest. The more complicated things become, the more clarification that is required and the more points at which Ofgem is tied up finding a formula for what the price should be—we will have more discussions down the road about how often that should happen and the methodology for that—the more tasks we are giving it, which could lead to more confusion. The last thing I want, after all this, is a legal challenge that could stop the price cap being in place in time for the people we care about as they start paying their winter bills in 2018 and early 2019.
I hope we can think more about those issues. We may not resolve them today, but we should give them some more thought—I certainly will. I might be wrong about this, and I am happy to receive submissions and thoughts from others outside this place. For reasons of simplicity, and for the development of the renewable energy market and how it has been helped to get to a place where it provides cheaper energy today than our fossil fuels, it is still worth considering whether any kind of exemption is warranted in the Bill.
Alex Norris
It is a pleasure to serve under your chairship, Ms McDonagh. I will briefly follow the contributions of my hon. Friend the Member for Southampton, Test and my right hon. Friend the Member for Don Valley with one simple point.
I should say, for context, that we have obviously broken out into violent agreement—that is always good—not just on the need for the legislation, but on what it is for. It is not the end state that we seek, but a key part of getting us on the journey there. We all want the market and the providers to use this time, whether the full five years or not, to change practices so that, at the other end, the consumer gets what they need. There is a lot of enthusiasm for that.
With that in mind, as we look at each and every line in the Bill, we should think about how the individual words fall and the unintended consequences that might arise from a superfluous word or a missing word, because we know—and we would expect nothing less—that there will be conversations in the big companies about the different ways to approach the next five years. The choice will be whether to genuinely change or to game the system. We have to be mindful of that and look to close down every possible opportunity to game the system, so as to be clear that this is legislation to drive proper change. It is a short-term cap, but will lead to a long-term benefit.
The amendment does that. It takes up the cudgels from what the Select Committee said. It is proportionate, simple and easy to understand. I understand that delivering what sits behind it may be complicated, but it sends a clear signal about what this Parliament values and I support it.
Claire Perry
One little word has provoked a substantial and excellent debate. There is a genuine sense in the Committee that we all want to achieve the same thing: companies not being able to game the system, and tariffs that deliver for consumers and do what they say on the tin, so that if they say they are renewable, they are actually renewable, not just a package of greenwash. That is why I genuinely feel that the crowdsourced approach to legislation can be very good. I pay tribute to the Select Committee process, once again ably represented by my hon. Friend the Member for Stirling, who helped us to focus on the issue. I was pleased to hear several hon. Members comment that we have tightened up the wording accordingly.
We are wrestling with questions around gaming and what a green tariff looks like, and this question of “wholly” or “in part”. All those will be addressed by two processes, which I will talk briefly about. First, as the right hon. Member for Don Valley said, we have quite properly tasked Ofgem with looking at the whole issue. I think I am right in saying that it has never been asked to review the whole suite of green tariffs in the market and opine on whether they are any such thing.
A co-benefit of the whole process will be understanding what is out there, whether it is wholly, partially or not at all green, and what the price premium for some of those products is. I was a very early Good Energy customer, over 10 years ago, and—
Claire Perry
I am afraid that, unlike the hon. Lady, I came off it, because it was so expensive—I apologise if she thought we were going to have a nice bonding moment over our green tariff. By the way, having heard the evidence, particularly from some of the more nimble companies coming in, I have every intention of looking very closely at changing my tariff again. However, the point is that the world has moved on. As the right hon. Member for Don Valley pointed out, prices have dropped and there is a question as to why we should be paying a premium tariff.
I would like the amendment to be withdrawn today—albeit on the basis that we do not yet have a brilliant fact base—but the offer I would make to every member of the Committee is for my team to put together a list of all the green tariffs in the market already and perhaps to ask for some evidence for to what the price premium is, so that when we look at this issue again on Report we will perhaps all feel a little bit better informed about this part of the market structure.
James Heappey
It is useful that the Minister will go away and make an analysis of the green products that are already on the market. I wonder whether she might also, with the evidence from Octopus and Bulb ringing in her ears, go away and ask the Department to go for just one more lap on whether or not this exemption is necessary all together, or whether it might do more harm than good when it comes to promoting green energy and the way that consumers regard green tariffs.
Claire Perry
I am sympathetic to my hon. Friend’s point; he is extremely knowledgeable in this area. However, as we have been through, particularly in the draft scrutiny process, we genuinely do not want tariffs that customers actively choose to be on, and which support the welcome development of creating demand for the renewable market, to be captured, as it were. The hon. Member for Nottingham North made the point about unintended consequences, and that is why word-by-word scrutiny is so important. The BEIS Committee supported that view, and I think the legislation has been substantially improved by that process. I am therefore less inclined for the proposal to be withdrawn completely, but I want to talk a little more about the point that the hon. Member for Southampton, Test made. I have talked about publication transparency. To me, transparency—having Ofgem look at these tariffs, probably for the first time—is an important part of establishing that this is a credible part of the market.
Kerry McCarthy
I should say that although I have been a Good Energy customer for some time, we now have Bristol Energy—there is that conflict between being green and giving support locally; I think it has now introduced a green tariff. Another west country electricity company, Ecotricity—which has made a submission to this Committee very late in the day—is concerned that if the cap is introduced across the board before the green exemptions are looked at, its customers might find their bills having to go down when the cap comes in, only for Ecotricity to have to turn round and say, “Actually, we’ve got this exemption now. We want to put your bills up.” At the risk of delaying the introduction of the cap, I urge the Minister to make sure that the green exemption issue is sorted out at the same time that the cap comes in.
Claire Perry
In standing up for her local enterprise, the hon. Lady pre-empts the second point I was about to make, which is that we will use transparency, but we will also use the Ofgem consultation process to do exactly that. Ofgem has to consult—it has to review the existence of these tariffs and understand what they mean—and it will have to do that as part of creating the cap, because it is a condition of introducing the cap that those exemptions are also carefully defined.
There is an interesting question. There is the transparency issue, there is the consultation issue, but the third thing is this: is it zero, 100 or somewhere in between? It will be explicit, I think, in conducting that analysis that Ofgem has chosen a level of what it thinks this level will be. I totally understand the point that the hon. Member for Southampton, Test made about us all wanting a world in which renewable energy is not intermittent. Indeed, I opened Clayhill solar farm, the country’s first subsidy-free solar farm, partly because it has managed to achieve on-site storage, providing both a better economic return and overcoming the problem of intermittency. That is all absolutely correct.
However, we are not there yet, and I was very struck by what my hon. Friends the Members for Wells and for Chelmsford and the right hon. Member for Don Valley said. They said that we want to be in a world where we are not stifling that evolution, but instead creating a demand for those tariffs in the future. It may be that, in setting out its view on what constitutes the tariff, Ofgem will say that it is 75%, or 95%, or 50%, and we will all have a chance to respond at that point. I absolutely accept the spirit in which the hon. Member for Southampton, Test tabled the amendment, but I fear, as we talked about, that it would have the unintended consequences of driving some tariffs out of the market and creating other perverse incentives.
I would like to put on record that the issue of gaming exercises us all. I have said this to the energy companies and I will say it face to face: if they think they should be spending their energies working out ways to game the tariff, as opposed to delivering better consumer value and service, we will put them on notice that that is exactly what none of us wants to see. That is a strong message that we have all delivered.
I am happy to provide more information to inform the debate. I have listened carefully to the excellent contributions, but I hope that the hon. Gentleman sees that this one tiny word creates a series of unintended consequences that perhaps weaken the cap and that he is therefore content to withdraw the amendment.
Dr Whitehead
I take the Minister’s offer to give further and better particulars about green tariffs, including what they consist of, what the relationship between part-green tariffs and wholly green tariffs is, and what the cost is, as essentially a suggestion that the matter should at least partly be placed on the Table and might be revisited on Report, depending on what we see. It is an excellent suggestion and I very much welcome it.
Claire Perry
To be clear, I am not inviting further amendments to the Bill—far from it. My hope is that during the passage of the Bill, with the joint messages we are sending out with cross-party support, the requirements for more information and transparency that will accompany the Bill’s passage—because they have to inform the tariff calculation—can only be helpful in this consumer market, even if they are not on the face of the Bill.
Dr Whitehead
I understand that the Minister is not inviting further amendments—it is her job not to—but I can envisage a circumstance in which we have gathered all the information together and some things scream out from it that we might consider on Report. In which case, we should properly do that. On the basis of that offer, and presuming that the information would effectively be in the form of a sort of late evidence submission to the Committee and would go to all its members—
Claire Perry
My intention is that we will write to all Committee members with the information.
Dr Whitehead
That is great. It is a very welcome suggestion and wholly constructive regarding what we are trying to achieve with the amendment. On that basis, I wholly agree that it should be withdrawn. I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 3 ordered to stand part of the Bill.
Clause 4
Notice of proposed modifications
Question proposed, That the clause stand part of the Bill.
Claire Perry
I realise that, in moving swiftly through clause 2, I did not give anyone the opportunity to comment, so I feel that I should say briefly what this clause does and why it should stand part of the Bill.
The clause sets out the first part of the bespoke licence modification that must be followed by Ofgem to implement the price cap. They are the statutory steps that Ofgem will take and they will cover the final design and level of the cap. Concerns have been expressed that if organisations wanted to try to derail the implementation of the Bill, it would be by objecting to some part of that process. The process very much mirrors powers that Ofgem already has to modify the standard supply licence. The clause sets out the technical arrangements of the timing, the timings of notice of publication, and provides the steps to be taken before the Bill is passed, which I alluded to in earlier comments, so that as much of the work as possible can be done in tandem with the Bill’s passage through Parliament.
Question put and agreed to.
Clause 4 accordingly ordered to stand part of the Bill.
Clause 5
Publication and effect of modifications
Question proposed, That the clause stand part of the Bill.
Claire Perry
Again, the clause outlines the final part of the licence modification process that Ofgem must undertake to impose the tariff cap—this is the actual modification of the licence conditions and implementation. It, too, sets out the statutory steps that Ofgem must go through. Ofgem must set out how it has taken account of representations made during the consultation specified under clause 4. As we heard in the evidence session this morning, it must set a date that the modifications will take effect from, which must be after a period of 56 days beginning on the day when the notifications are published.
The clause also sets out that the appeal mechanism is via judicial review, rather than through an appeal to the Competition and Markets Authority. We have had a conversation about that—certainly during the very good Second Reading debate—which is primarily because we want nothing to get in the way of implementing the temporary price cap. The CMA’s powers are used exclusively where there is a permanent control mechanism, but we and the Select Committee have taken substantial evidence to suggest that judicial review gives all interested parties an adequate means of address. A court has sufficient expertise to hear an appeal. A court is likely to be able to hear a matter more quickly than the CMA, which reduces the possibility of the implementation route being delayed.
James Heappey
I am keen to ensure that I understand the measure correctly. There is a 56-day period ahead of any modification being published, but presumably there is also a 56-day period for the initial implementation of the cap. Are we clear that Ofgem is content about being able to publish its cap within the five months—actually, eight weeks ahead of that five months?
Claire Perry
My hon. Friend makes a good point. I believe a very good letter was written to the Select Committee in which the timetable was set out specifically. Perhaps we can arrange for the letter to be distributed to the Committee—although I am not sure whether I have such powers over a letter to the Select Committee. Ofgem set out the timetable clearly, including all the statutory periods, with the assurance that it felt very capable of bringing the cap in before year end.
To return to the clause, in Committee we are very much of the mindset that the judicial review route, should someone wish to appeal against Ofgem’s methodology, is appropriate and would not delay implementation. That was agreed in the excellent work of the Business, Energy and Industrial Strategy Committee.
Question put and agreed to.
Clause 5 accordingly ordered to stand part of the Bill.
Clause 6
Review of level at which cap is set
Dr Whitehead
I beg to move amendment 6, in clause 6, page 4, line 31, leave out “6” and insert “3”.
I must confess that I have been following the past several clauses assiduously by reference to the draft Bill instead of to the actual Bill, although the Government had not made any changes, so I do not feel too out of sorts. However, with this clause, the draft Bill and the final Bill part ways considerably. Fortunately, I managed to realise where I was in time, so we can talk about this relatively short clause, which is on a review of the level at which the cap is set.
The clause is important because it is the clause that decides this is a cap and not a freeze. The requirement on the authority is that it regularly review the level at which the cap is set, on the basis of all the circumstances to which the market has been subject, and whether the cap should be modified or changed as a result of its review. Indeed, the clause requires the authority to publish a statement when it has done that review, as to whether it proposes to change the level at which the cap is set.
Claire Perry
The hon. Gentleman again puts forward a sensible probing amendment that it is a pleasure to think about and speak to, but I will chance my luck and try to persuade him to withdraw it.
The hon. Gentleman is right that the review is a crucial part of the Bill’s effectiveness. Is the cap set at the right level? Is the ability to change the cap clear? Have we set out the conditions under which the cap must apply? We will get on to the conditions as to what success looks like. Is the cap dynamic enough to make a difference in the market?
If I read clause 6 carefully, two words precede the hon. Gentleman’s one-number intervention. In terms of reviewing the cap, the clause uses the phrase:
“The Authority must, at least once every 6 months”.
When we had this conversation on Second Reading, I said, correctly, that the opportunity is there for Ofgem to review this cap more frequently than that, should it choose to do so. It can review it on a weekly basis or a three-monthly basis, but it must review the cap every six months. That is consistent with the reviews of the prepayment meter cap, which is already delivering savings of up to £120 a year, as we talked about, and which is what the excellent Business, Energy and Industrial Strategy Committee report recommended. I think that the flexibility the hon. Gentleman is seeking is covered by the words “at least”.
Yet the hon. Gentleman raises an important point: what happens if there are suddenly wild fluctuations in the energy market, which we want consumers to benefit from, and particularly if there is a sustained price fall? I have looked at this a bit. It is a bit like the mortgage market: unless someone is on a tracker rate, changes in the wholesale prices do not always feed into the retail prices. Indeed, these companies make an art, or a science, of hedging their supplies so that they bake in what their margins look like on a future basis. Any sustained price fall would take its time to feed through to those companies’ overall cost of energy provision.
Indeed, companies change their SVTs only once or twice a year, even though those are standard variable tariffs. We had a very interesting conversation this morning in Committee about whether that was a rather benign description—maybe we should be looking to tighten up the language a bit. These variable tariffs vary only once or twice a year. There is an argument that giving Ofgem a statutory duty to review this at least every six months provides an opportunity for the market movement to be greater than it is under the SVTs. I feel that with the words “at least” we have provided in the Bill for Ofgem to react to market movements or any other structural changes that would affect consumers. That flexibility is there.
As always, the hon. Gentleman has thought about these things carefully. As he alluded to, there is a risk that by specifying every three months, given that this is a short-term cap—it will apply for a minimum of just over two years and a maximum of just over five years—we would perhaps create an unnecessary process burden. We want Ofgem to continue to regulate this market well; we want it to continue to bring forward initiatives such as the cancellation of billing backwards for more than 12 months and the work it has announced it wants to do in the wholesale energy markets to ensure that returns are proportionate. I am persuaded that by changing the period to three months, we would create a potentially unnecessary burden that does not deliver anything more than we have already allowed for with the wording of clause 6(1).
James Heappey
I got there in the nick of time. While the Minister has been speaking, I have been looking at Ofgem’s tracker for wholesale energy prices. It is clear to me that in the first quarter of each calendar year, prices are particularly volatile and disproportionately higher than in the remainder of the year. In his evidence, Dermot Nolan said that, over six months, those midwinter peaks are ridden out. That means we should defer to his judgment that six months is the right unit, not quarterly.
Claire Perry
My hon. Friend again brings assiduous online research, which is marvellous, and his knowledge of this market, to support the point that Ofgem believes that six months is a proportionate time. The Bill does allow Ofgem—should it be required to do so by market movements, and that volatility persists over a period of time—to make the necessary adjustments. I know that I am on a winning trend, which may not last, but on that basis, I hope the hon. Gentleman is persuaded once again to withdraw the amendment.
Dr Whitehead
The intervention of the hon. Member for Wells demonstrates why I should not only have been looking at the right Bill in the last 10 minutes, but have brought my iPad with me.
Dr Whitehead
There you are—I am on my own now.
At the heart of this proposal is the rocket and feathers issue that my right hon. Friend the Member for Don Valley is famed for in her past interventions in this area, which is about the extent to which, when wholesale prices go up, energy companies put prices up pretty assiduously to compensate for the additional costs, but when wholesale prices come down, the same picture is not quite so much in evidence. For various reasons—buying along the curve, hedging in the medium term and various other things—the energy companies all say, “Oh no, we can’t possibly put our prices down, because of the positions we have taken.” It seems to work one way rather than the other.
Claire Perry
That is an excellent point, and I was thinking of exactly the same things when the hon. Gentleman was speaking. The rocket and feathers, by the way, sounds like a marvellous pub in the Don Valley that I would love to come and visit one day. That is an excellent description for what happens and, thinking it through, the existence of the cap protects against the feathers, because there will be a hard stop in the market that might accelerate the fall of the feathers or create something a little more weighty, on the same duration, or a more accelerated duration, than the current SVTs. It would be a prod to the market, to make sure that those downward prices are reflected in the price cap. On that basis, it could be very helpful to overcoming the problem.
Dr Whitehead
Indeed. As the hon. Member for Wells points out, over the recent period, there has been a pattern of volatility in the wholesale market, but not necessarily a pattern of predictability. The market tends to be rather more volatile at the beginning of the year; the level of volatility differs, but we know it is more volatile. There is the question of looking at that effect over the entire period of intervention of the cap, and how that volatility is factored into Ofgem’s duties.
I take the point that the phrase in the Bill is
“at least once every 6 months”.
After what has been said this afternoon, I hope that Ofgem will consider fairly carefully how its interventions take place. It may well be that—after close consultation with the hon. Member for Wells—Ofgem comes along and says it will review the cap more frequently at certain parts of the year and rather less frequently at other parts of the year.
Claire Perry
I hope that the hon. Gentleman will agree that the wording of the Bill allows Ofgem to effect exactly those decisions, should it think it necessary.
Dr Whitehead
I take that point. Although I prefer to legislate with absolute certainty rather than hope, in this instance we can reasonably expect that Ofgem would look at that properly, as far as the market is concerned. On that basis, I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Question proposed, That the clause stand part of the Bill.
Claire Perry
We have had an excellent debate, where we have been genuinely probing and testing the Bill, and we have come to a good outcome. I commend the clause to the Committee.
Question put and agreed to.
Question 6 accordingly ordered to stand part of the Bill.
Clause 7
Review of competition for domestic supply contracts
Alan Brown
I beg to move amendment 1, in clause 7, page 4, line 38, at end insert—
“(1A) The Secretary of State shall within six months of the passing of this Act publish a statement outlining the criteria that is to be used by the Authority in the review to assess whether conditions are in place for effective competition for domestic supply contracts.”
This amendment would require the Secretary of State to outline the criteria that shall be used by Ofgem when assessing whether conditions are in place for effective competition for domestic supply contracts.
I do not know if it is my upbringing in the west of Scotland, but compared to the hon. Member for Southampton, Test, I am a man of few words, so I will be really brief.
Amendment 1 and its explanatory notes lay out the case. I have prepared a timeframe for the Secretary of State to set out the criteria by which Ofgem will assess the operation of the energy market for effective competition in the marketplace, and such effective competition clearly will allow the cap to be lifted.
The amendment is important for a couple of reasons. Clearly, if we want the suppliers to change their behaviour, it is important that they know what they will be measured on. Hopefully, that will give them further incentives to change their behaviour and to make the market much more competitive and effective for consumers.
The Government’s aim is that the cap will be only temporary—perhaps lasting only two years. Therefore, it is a limited timeframe. That makes it even more important that, as soon as we can, we understand what the companies will be measured against. If a report is laid that sets out the criteria within six months, that takes away the risk of moving targets, in terms of the suppliers changing how they are operating, but perhaps not in the way we want. Obviously, we want to manage how they operate and make that most effective for consumers. The amendment is quite simple and speaks for itself.
Claire Perry
The hon. Gentleman is a man of few words, but what a very pleasant accent, if I might say so, and what a joy it is to welcome so many colleagues from north of the border with similar burrs on our side of the House. I will now try to speak exclusively about the amendment and take his example of brevity in doing so.
The hon. Gentleman is absolutely right to raise the question of the conditions for effective competition so that we can all understand when the recommendation to remove the cap is the right one, as he said, considering how the market evolves over the next few years. We all have a hope and expectation that the market will evolve rapidly; indeed, the whole principle behind the Bill is about an intelligent intervention that will help the market to reset to a more competitive environment.
We have set out these general conditions, but I feel very strongly that with an independent regulator that we all believe has the powers and knowledge to both set the cap and confirm whether competition has been restored, it is right that we do not hold it to a specific set of weightings for what competition looks like. Again, I refer to the BEIS Committee, which said:
“We believe that Ofgem have the required expertise to set and measure indicators of effective competition and make the appropriate recommendation to the Secretary of State.”
The hon. Member for Nottingham North made the point about unintended consequences; we had conversations in pre-Bill meetings about whether we would want there to be a formula that said, “It is 20% switching times and 50% price cap reduction”. All that constrains Ofgem’s ability to review and set an opinion on competition, particularly as the market evolves. We are all expecting the energy market to evolve quickly. The amendment would constrain Ofgem’s job unnecessarily. There is nothing to be gained from seeking to pre-empt Ofgem in its work. In raising this issue, the hon. Member for Kilmarnock and Loudoun is absolutely right to say that that scrutiny of what effective competition looks like will form an extremely active test of whether we can all sit around in a couple of years’ time and say that this Bill on which we have all worked so hard has been effective.
On the basis that the amendment would constrain what Ofgem want to do, I hope that the hon. Gentleman feels content with my explanation and will consider withdrawing it.
Alan Brown
Listening to the Minister, on one level I think that constraining Ofgem might not be such a bad thing if it constrains it in a way that we are happy with, because then we can have criteria that we as politicians, and consumers and suppliers, understand. On the other hand, I understand what the Minister says, in that the regulator has its own job to do. I am conscious that some of the submissions we received as part of this process express concern about the fact that nobody knows what these effective competition criteria will look like. I still have some slight concerns, but I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Dr Whitehead
I beg to move amendment 7, in clause 7, page 4, line 39, leave out from “must” to end of line 40 and insert
“have regard to the extent to which—
(a) progress has been made in installing smart meters for use by domestic customers,
(b) incentives for holders of energy supply licences to improve their efficiency have been created,
(c) holders of energy supply licences are able to compete effectively for domestic supply contracts,
(d) incentives for domestic customers to switch to different supply contracts are in place,
(e) the barriers which prevent the customers from switching from different supply contracts quickly and easily are addressed,
(f) holders of supply licences who operate efficiently are able to finance activities authorised by the licence,
(g) holders of supply licences have eliminated practices that are to the detriment of customers in their tariff structures,
(h) District Network Operator costs and dividends are proportionate to expectations and the impact of that on domestic supply contracts, and
(i) vulnerable and disabled customers are adequately protected.”
I am afraid this may be the end of the Mr Nice Guy bit. Hon. Members must find that incredible, but it is true. This amendment is potentially very important for the integrity of the whole process of how the price cap is set up, how it works and the circumstances under which it can be brought to a close. There is no real difference between the amendment of the hon. Member for Kilmarnock and Loudoun and mine, except that his requires the Secretary of State to produce a statement to outline the criteria that shall be used by the authority in a review to assess whether conditions are in place for effective competition.
Our amendment seeks to identify what the conditions might look like. That is particularly important, because for this price cap to work clearly both ends of the cap have to be reasonably synchronised. As hon. Members will have observed when we debated an earlier clause, a number of conditions are put forward for the authority to digest when we move from the point of legislation to the point of actually putting the cap in place. There are a number of conditions in clause 1(6) to which the authority needs to have regard when it is putting the cap in place.
That is not so when the authority is considering whether to lift the cap. It is worthwhile considering for a moment what the mechanism for lifting the cap in the Bill actually is. The authority has to carry out a review—in the first instance, in 2020—to look at whether it considers that conditions are in place for effective competition for domestic supply contracts. Therefore, in principle, it can consider whether to bring the cap to an end. Once that review is carried out, roughly before halfway through 2020, the authority must produce a report on the outcome, which must include a recommendation about whether the authority considers that the tariff cap conditions should be extended and should have effect for the following year. When the report is produced, before 31 August 2020, we would expect to see a view from the authority about whether the cap should be continued. Obviously, subject to the sunset clause in the next clause, what the authority says effectively has a one-way view on what the Secretary of State should subsequently say about the cap. As laid out in clause 7(5), the Secretary of State, having received a report,
“must publish a statement setting out whether the Secretary of State considers that conditions are in place for effective competition for domestic supply contracts.”
James Heappey
I rise to speak briefly. I know exactly what the shadow Minister is trying to achieve with the amendment, and I agree with him that the cap must be a temporary measure. On Second Reading, I answered an intervention by saying that this should be a raid into the market, not an occupation. It is very necessary indeed to set out clearly the terms on which the cap will come to an end.
Having said that, my concern with the amendment is that whereas the Bill as drafted refers explicitly simply to progress with smart meter deployment—it quite reasonably leaves the regulator and the Minister to work out what progress is being made on the remainder—the hon. Gentleman’s list is so lengthy as to be overly prescriptive. Some measures in his list, such as improving efficiency in suppliers’ business models, are not the business of the regulator at all. I rather think that suppliers will be driven to find efficiency by the creation of competition, rather than needing to have it required of them. That is what the market does.
The hon. Gentleman is an enthusiastic fellow traveller on the route to a decentralised, digitised, dynamic energy system, so I wonder why his list does not include half-hourly settlement or the universal application of demand-side response, why he does not require the market to be electric vehicle-ready, why he is not concerned about transmission costs as well as distribution costs, why he does not seek signals from the regulator about the readiness of the market to manage a decentralised energy system given all the price advantages that might bring, and why he is not enthusiastic about a code review or embedded benefits, or about looking at what energy-efficiency measures have been made or at whether we are ready for a data-heavy digitised market.
As well as all those things, there is the unknown scale of the renewable deployment that might come our way, alongside the flexibility that storage and demand-side response will bring with them, and what impact that might have on price variability over the course of a year. There are so many unknowns, and the pace of change in the energy system is such that being as prescriptive as the hon. Gentleman desires at this stage would risk hindering progress in the system. It would shape the way the market worked towards achieving the end of the price cap, rather than allowing it to be disrupted in the way that I know he and I genuinely hope it will be.
Alan Brown
I understand the hon. Gentleman’s point about other factors that may ultimately influence the retail energy market, but why should progress with smart meter installation be the one thing we tell Ofgem it must measure in its review? It seems to me a bit strange to specify that criterion but say that we do not want all the other important criteria that the hon. Member for Southampton, Test laid out.
James Heappey
I suspect that the Minister is much better placed to answer that than I am, but I guess—I would support this wholly if it were the case—that we have done a lot of work with carrots when it comes to smart meters and we are starting to get into stick territory. If we want the new digitised market to really work—I know that almost everyone here is passionate about achieving that—smart meters are no longer optional: they are a necessity. To use that as a metric of success seems very reasonable to me.
Claire Perry
I want to try to address two of the main points that came up: what “good” looks like, the conditions for success and how far we should specify them in the Bill, and why progress with installing smart meters is the only explicit condition. Ultimately, this is the nub of the whole Bill. We are all here because we believe that the conditions for effective competition are not in place and that the Bill will assist the market towards that evolution. I suspect that we all believe in well regulated, competitive markets delivering the best value and service for consumers, and if we see a regulatory gap—a place where the regulator needs new powers to deliver that—it is only right that we fill it. That is what we are doing.
Once again, I have great sympathy with what the hon. Member for Southampton, Test set out. I feel sometimes that we are a bit like Eeyore and Tigger: he is always looking for the very worst outcome and I am always very optimistic about the future. Perhaps it is good that we often meet in the middle. The challenge, as my hon. Friend the Member for Wells set out, is that the list that the hon. Gentleman has put forward is very sensible. I am sure that we could all come up with further factors that we thought would indicate that the market was acting more competitively.
Alan Brown
Why would it be a box-ticking exercise if we as parliamentarians set out criteria that we think can be used, but not if Ofgem sets out the criteria?
Claire Perry
That is a valid point. I guess that by setting the criteria in the Bill we would effectively constrain the opportunities that Ofgem has. Ofgem, as a regulator, should be able to sit closer to the market and observe its evolution, and amend its processes accordingly. All of us know how even the most tortuous, tiny change to a Bill, even if it is done through a statutory instrument, can chew up an awful lot of time and reopen a debate that did not actually need to be reopened.
The hon. Member for Southampton, Test is right that we absolutely have legal powers to protect our constituents, and that is what we are doing, but what we are also doing is empowering the regulator to be perhaps more nimble and agile than politicians and even my fine civil servants might be.
I turn to the Smart Meters Bill, because it is right to say, “Why is that the only thing in the Bill?” Frankly, the reason is that we are rolling out this massive Government programme. We are talking about £11 billion of investment and £17 billion of benefit to consumers. It is now a licence condition for Ofgem. We have had the first roll-out and we are working hard on the data integration, so that the upgrades to a SMETS2 meter happen seamlessly and remotely. I fully intend to work with industry very closely this summer to start to turbocharge that process. There is huge benefit there; the conditions are in place and we want to accelerate.
We want to make sure that the obligations to be part of the evolution of a competitive market and to roll out smart meters are inextricably linked in the minds of industry. On that basis, although we have an important role to play in talking about the terms of effective competition, we expect the market to continue to evolve. It would not be helpful to constrain Ofgem’s definition now by setting out what could be perfectly sensible ideas.
Of course, there will be an opportunity to review Ofgem’s report and say what the conditions are. We have not yet talked about what the transparency of publication is for that report, but that is certainly something we can address when we discuss that part of the Bill. There is a question as to how transparent that report is made and how widely it should be circulated. As the Committee knows, I am open to ideas of transparency, because it is the way to drive the best forms of competitive behaviour. I fear I may be chancing my luck this late in the day, but I invite the hon. Member for Southampton, Test to withdraw his amendment.
Dr Whitehead
May I say something first about Tigger and Eeyore? I can see the analogy, but we have to remember that Tigger got Pooh and Piglet completely lost in their quest for the North Pole, and also consumed all Roo’s medicine in a very unhealthy way.
Claire Perry
But surely the hon. Gentleman would accept that that was a fine and wonderful adventure, and Tigger did it with great gusto?
Dr Whitehead
I was just going to say briefly that Eeyore stopped people standing on each other and falling over while trying to get Piglet out of a tree. He was very wise in certain circumstances. What I am trying to say, I hope without any further reference at all to Pooh and Piglet, is that under these circumstances we need to be a little more—I will refer to it again—Eeyoreish than Tiggerish. It is essential that we are careful about the going out of the cap, just as we are careful about its going in.
I heard what the hon. Member for Wells had to say—indeed, it would have been possible to put out a list as long as your arm of possible concerns. He is quite right. I heartily endorse a number of the concerns he raised. I am grateful to him for describing me as a fellow traveller; as he will know, in our party, being described as a fellow traveller is not always meant in the most complimentary of ways. He has set the record straight as far as that is concerned.
What I have tried to do with this particular amendment—by the way, I am not particularly precious about every last line of it—is to craft a number of considerations that should reasonably pass by the eyes of Ofgem when it is thinking about whether conditions have returned to the market or not, so that it is shaped. Indeed, if the Minister were to say, “Yes, jolly good idea, but we’re not quite sure that all the conditions are absolutely right. We’ll take it away and come back with something on Report that will set that out in a rather better way,” I would be overjoyed. It is an attempt to try to make things work, rather than to get everything right first time.
What I do know, however, is that among the flakier conditions is ensuring that Ofgem has due consideration for the roll-out of smart meters. I could see circumstances where the smart meter roll-out has gone completely down the Swanee, yet market conditions are effectively there for the removal of the cap. Indeed, from what I know about the circumstances around the smart meter roll-out, partly as a result of my involvement in the Smart Meters Bill recently, it is quite possible that the smart meter roll-out will go seriously down the Swanee.
Claire Perry
I now feel a T-shirt coming on saying, “What would Eeyore do?” I wanted to try to give the hon. Gentleman some comfort on this matter. Clause 7(1) refers back to something set out in clause 1(6)(b):
“whether conditions are in place for effective competition for domestic supply contracts.”
That means that in consulting on the cap structure, what Ofgem believes to be important will have to be explicit upfront. Also on smart meters, it says that the review “must, among other things”, so it is not the exclusive thing. In fact, I have just reassured myself, because clause 7(5) states that the Secretary of State will have to publish the statement about whether they consider the conditions to be in place. It will be very explicit about which conditions have been taken into account in establishing whether the market competitive conditions have been restored.
Dr Whitehead
I thank the Minister for her concordance-like examination of the Bill to look at those conditions, but I stand by the point that there is, with the anomalous imposition of smart meter roll-out, nothing there effectively. I would have hoped that the Minister would be able to say, “Yes, you are quite right. There is nothing there effectively and we can put something there—perhaps not exactly this—on Report”. That would have caused my worries about the out as well as the in of the price cap to recede, but apparently that is not going to happen.
I, of course, wish the Minister the best of luck with her Tiggerish wish to get smart meters absolutely right. I am sure she will give that her full attention and ensure that it works as well as it possibly can, but I am afraid that under the circumstances I will have to press the amendment to a vote on the principle of what it is about.
Question put, That the amendment be made.
Claire Perry
I rise simply to say that I think that was a useful conversation about what competition looks like. We have made excellent progress today, and I propose that clause 7 stand part of the Bill.
Question put and agreed to.
Clause 7 accordingly ordered to stand part of the Bill.
Ordered, That further consideration be now adjourned. —(Rebecca Harris.)
Data Protection Bill [ Lords ] (Second sitting)
(6 years, 1 month ago)
Public Bill CommitteesRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Committee divided: - Ayes: 9 / Noes: 10 - Question accordingly negatived.
The Committee divided: - Ayes: 9 / Noes: 10 - Question accordingly negatived.
The Committee having divided: - Ayes: 10 / Noes: 9 - Question accordingly agreed to.
The Chair
I remind the Committee that with this we are discussing Government amendments 77 to 83 and 87 to 91.
Amendment 76 agreed to.
Amendments made: 77, in schedule 1, page 124, line 24, leave out from “subject” to end of line 25.
In paragraph 8 of Schedule 1, sub-paragraph (3) contains an exception from the condition in sub-paragraph (1). This amendment would remove from the exception the requirement that the processing is carried out without the data subject’s consent.
Amendment 78, in schedule 1, page 124, line 36, at end insert—
“Racial and ethnic diversity at senior levels of organisations
8A (1) This condition is met if the processing—
(a) is of personal data revealing racial or ethnic origin,
(b) is carried out as part of a process of identifying suitable individuals to hold senior positions in a particular organisation, a type of organisation or organisations generally,
(c) is necessary for the purposes of promoting or maintaining diversity in the racial and ethnic origins of individuals who hold senior positions in the organisation or organisations, and
(d) can reasonably be carried out without the consent of the data subject,
subject to the exception in sub-paragraph (3).
(2) For the purposes of sub-paragraph (1)(d), processing can reasonably be carried out without the consent of the data subject only where—
(a) the controller cannot reasonably be expected to obtain the consent of the data subject, and
(b) the controller is not aware of the data subject withholding consent.
(3) Processing does not meet the condition in sub-paragraph (1) if it is likely to cause substantial damage or substantial distress to an individual.
(4) For the purposes of this paragraph, an individual holds a senior position in an organisation if the individual—
(a) holds a position listed in sub-paragraph (5), or
(b) does not hold such a position but is a senior manager of the organisation.
(5) Those positions are—
(a) a director, secretary or other similar officer of a body corporate;
(b) a member of a limited liability partnership;
(c) a partner in a partnership within the Partnership Act 1890, a limited partnership registered under the Limited Partnerships Act 1907 or an entity of a similar character formed under the law of a country or territory outside the United Kingdom.
(6) In this paragraph, “senior manager”, in relation to an organisation, means a person who plays a significant role in—
(a) the making of decisions about how the whole or a substantial part of the organisation’s activities are to be managed or organised, or
(b) the actual managing or organising of the whole or a substantial part of those activities.
(7) The reference in sub-paragraph (2)(b) to a data subject withholding consent does not include a data subject merely failing to respond to a request for consent.”.
Part 2 of Schedule 1 describes types of processing of special categories of personal data which meet the requirement in Article 9(2)(g) of the GDPR (processing necessary for reasons of substantial public interest) for a basis in UK law (see Clause 10(3)). This amendment adds to Part 2 of Schedule 1 certain processing of personal data for the purposes of promoting or maintaining diversity in the racial and ethnic origins of individuals who hold senior positions in organisations.
Amendment 79, in schedule 1, page 125, line 3, at end insert—
“( ) If the processing consists of the disclosure of personal data to a competent authority, or is carried out in preparation for such disclosure, the condition in sub-paragraph (1) is met even if, when the processing is carried out, the controller does not have an appropriate policy document in place (see paragraph 5 of this Schedule).”.
This amendment, and Amendment 80, provide that where processing falling within paragraph 9 of Part 2 of Schedule 1 (preventing or detecting unlawful acts) consists of, or is carried out in preparation for, the disclosure of personal data to a competent authority, the condition in that paragraph is met even if the controller does not have an appropriate policy document in place when the processing is carried out.
Amendment 80, in schedule 1, page 125, line 4, at end insert—
““competent authority” has the same meaning as in Part 3 of this Act (see section30).”.
See the explanatory statement for Amendment 79.
Amendment 81, in schedule 1, page 125, line 16, at end insert—
“Regulatory requirements relating to unlawful acts and dishonesty etc
10A (1) This condition is met if—
(a) the processing is necessary for the purposes of complying with, or assisting other persons to comply with, a regulatory requirement which involves a person taking steps to establish whether another person has—
(i) committed an unlawful act, or
(ii) been involved in dishonesty, malpractice or other seriously improper conduct,
(b) in the circumstances, the controller cannot reasonably be expected to obtain the consent of the data subject to the processing, and
(c) the processing is necessary for reasons of substantial public interest.
(2) In this paragraph—
“act” includes a failure to act;
“regulatory requirement” means—
(a) a requirement imposed by legislation or by a person in exercise of a function conferred by legislation, or
(b) a requirement forming part of generally accepted principles of good practice relating to a type of body or an activity.”.
Part 2 of Schedule 1 describes types of processing of special categories of personal data which meet the requirement in Article 9(2)(g) of the GDPR (processing necessary for reasons of substantial public interest) for a basis in UK law (see Clause 10(3)). This amendment adds to Part 2 of Schedule 1 certain processing of personal data for the purposes of complying with, or assisting others to comply with, a regulatory requirement.
Amendment 82, in schedule 1, page 125, line 35, at end insert—
“( ) The condition in sub-paragraph (1) is met even if, when the processing is carried out, the controller does not have an appropriate policy document in place (see paragraph 5 of this Schedule).”.
This amendment provides that the condition in paragraph 11 of Part 2 of Schedule 1 (journalism etc in connection with unlawful acts and dishonesty etc) is met even if the controller does not have an appropriate policy document in place when the processing is carried out.
Amendment 83, in schedule 1, page 126, line 22, at end insert—
“Support for individuals with a particular disability or medical condition
13A (1) This condition is met if the processing—
(a) is carried out by a not-for-profit body which provides support to individuals with a particular disability or medical condition,
(b) is of a type of personal data falling within sub-paragraph (2) which relates to an individual falling within sub-paragraph (3),
(c) is necessary for the purposes of—
(i) raising awareness of the disability or medical condition, or
(ii) providing support to individuals falling within sub-paragraph (3) or enabling such individuals to provide support to each other,
(d) can reasonably be carried out without the consent of the data subject, and
(e) is necessary for reasons of substantial public interest.
(2) The following types of personal data fall within this sub-paragraph—
(a) personal data revealing racial or ethnic origin;
(b) genetic data or biometric data;
(c) data concerning health;
(d) personal data concerning an individual’s sex life or sexual orientation.
(3) An individual falls within this sub-paragraph if the individual is or has been a member of the body mentioned in sub-paragraph (1)(a) and—
(a) has the disability or condition mentioned there, has had that disability or condition or has a significant risk of developing that disability or condition, or
(b) is a relative or carer of an individual who satisfies paragraph (a) of this sub-paragraph.
(4) For the purposes of sub-paragraph (1)(d), processing can reasonably be carried out without the consent of the data subject only where—
(a) the controller cannot reasonably be expected to obtain the consent of the data subject, and
(b) the controller is not aware of the data subject withholding consent.
(5) In this paragraph—
“carer” means an individual who provides or intends to provide care for another individual other than—
(a) under or by virtue of a contract, or
(b) as voluntary work;
“disability” has the same meaning as in the Equality Act 2010 (see section 6 of, and Schedule 1 to, that Act).
(6) The reference in sub-paragraph (4)(b) to a data subject withholding consent does not include a data subject merely failing to respond to a request for consent.”.—(Margot James.)
Part 2 of Schedule 1 describes types of processing of special categories of personal data which meet the requirement in Article 9(2)(g) of the GDPR (processing necessary for reasons of substantial public interest) for a basis in UK law (see Clause 10(3)). This amendment adds to Part 2 of Schedule 1 certain processing of personal data by not-for-profit bodies involved in supporting individuals with a particular disability or medical condition.
The Parliamentary Under-Secretary of State for the Home Department (Victoria Atkins)
I beg to move amendment 84, in schedule 1, page 126, line 27, leave out “a reason” and insert “one of the reasons”.
This amendment amends paragraph 14(1)(b) of Schedule 1 for consistency with paragraphs 18(2) and 19(2) of that Schedule.
The Chair
With this it will be convenient to discuss Government amendments 85, 86, 116 and 117.
Victoria Atkins
It is a pleasure to serve under your chairmanship, Mr Hanson. I am pleased to introduce this group of amendments, which relate to data processing for safeguarding purposes. The amendments respond to an issue raised in an amendment tabled by Lord Stevenson on Report in the Lords in December. In response to that amendment, Lord Ashton made it clear that the Government are sympathetic to the points Lord Stevenson raised and undertook to consider the matter further. Amendments 85, 116 and 117 are the result of that consideration.
I am grateful to Lord Stevenson for raising this issue, and for his contribution to what is probably the most important new measure that we intend to introduce to the Data Protection Bill. The amendments will ensure that sensitive data can be processed without consent in certain circumstances for legitimate safeguarding activities that are in the substantial public interest. We have been working across government and with stakeholders in the voluntary and private sectors to ensure that the amendments are fit for purpose and cover the safeguarding activities expected of organisations responsible for children and vulnerable adults.
The Government recognise that statutory guidance and regulator expectations place moral, if not legal, obligations on certain organisations to ensure that measures are in place to safeguard children and vulnerable adults. Amendment 85 covers processing that is necessary for protecting children and vulnerable adults from neglect or physical or mental harm. This addresses the gap in relation to expectations on, for example, sports governing bodies.
The Government have produced cross-agency and cross-governmental guidance called “Working Together to Safeguard Children”, which rightly places the responsibility of safeguarding children on all relevant professionals who come into contact with children and families. For example, it creates an expectation that those volunteering at a local sports club will assess the needs of children and, importantly, will take action to protect them from abuse.
Amendment 85 permits the processing of sensitive personal data, which is necessary to safeguard children from physical, emotional, sexual and neglect-based abuse. Amendment 84 makes a consequential drafting change, while amendments 116 and 117 make an analogous change to the regimes in parts 3 and 4 of the Bill. This is aimed at putting beyond doubt a controller’s ability to safeguard children and people at risk.
I thought an example might help the Committee to understand why we place such an emphasis on the amendments. An example provided by a sports governing body is that a person may make an allegation or complaint about a volunteer that prompts an investigation. Such investigations can include witness statements, which reference sensitive personal data, including ethnicity, religious or philosophical beliefs, sexual orientation and health data.
In some instances, the incident may not reach a criminal standard. In those cases, the sports body may have no legal basis for keeping the data. Keeping a record allows sports bodies to monitor any escalation in conduct and to respond appropriately. Forcing an organisation to delete this data from its records could allow individuals that we would expect to be kept away from children to remain under the radar and potentially leave children at risk.
Amendment 86 deals with a related issue where processing health data is necessary to protect an individual’s economic wellbeing, where that individual has been identified as an individual at economic risk. UK banks have a number of regulatory obligations and expectations which are set out in the Financial Conduct Authority’s rules and guidance. In order to meet best practice standards in relation to safeguarding vulnerable customers, banks occasionally need to record health data without the consent of the data subject.
An example was given of a bank which was contacted by a family member who was alerting the bank to an elderly customer suffering from mental health problems who was drawing large sums of money each day from their bank account and giving it away to a young drug addict whom they had befriended. The bank blocked the account while the family sought power of attorney. Again, the amendment seeks to clarify the position and give legal certainty to banks and other organisations where that sort of scenario arises or where, for example, someone suffers from dementia and family members ask banks to take steps to protect that person’s financial wellbeing.
The unfortunate reality is that there still exists a great deal of uncertainty under current law about what personal data can be processed for safeguarding purposes. My brief of crime, vulnerability and safeguarding means that all too often—perhaps in the context of domestic abuse—agencies will gather, sadly, to conduct a domestic homicide review and discover that had certain pieces of information been shared more freely, perhaps more action could have been taken by the various agencies and adults and children could have been safeguarded.
These amendments are aimed at tackling these issues. We want to stop the practice whereby some organisations have withheld information from the police and other law enforcement agencies for fear of breaching data protection law and other organisations have been unclear as to whether consent to processing personal data is required in circumstances where consent would not be reasonable or appropriate. The amendments intend to address the uncertainty by providing relevant organisations with a specific processing condition for processing sensitive personal data for safeguarding purposes. I beg to move.
Liam Byrne (Birmingham, Hodge Hill) (Lab)
I rise to put on record my thanks to the Minister for listening carefully to my noble Friend Lord Stevenson. There was strong cross-party consensus on these common-sense reforms.
We all know that in our own constituencies there are extraordinary people doing extraordinary things in local groups. They are the life-blood of our communities. Many of them will be worried about the new obligations that come with the general data protection regulation and many of them will take a least-risk approach to meeting the new regulations. Putting in place some common safeguards to ensure that it is possible to keep data that allow us to spot important patterns of behaviour that can lead to appropriate investigations is very sensible and wise. These amendments will therefore be made with cross-party support.
Amendment 84 agreed to.
Amendments made: 85, in schedule 1, page 126, line 38, at end insert—
“Safeguarding of children and of individuals at risk
14A (1) This condition is met if—
(a) the processing is necessary for the purposes of—
(i) protecting an individual from neglect or physical, mental or emotional harm, or
(ii) protecting the physical, mental or emotional well-being of an individual,
(b) the individual is—
(i) aged under 18, or
(ii) aged 18 or over and at risk,
(c) the processing is carried out without the consent of the data subject for one of the reasons listed in sub-paragraph (2), and
(d) the processing is necessary for reasons of substantial public interest.
(2) The reasons mentioned in sub-paragraph (1)(c) are—
(a) in the circumstances, consent to the processing cannot be given by the data subject;
(b) in the circumstances, the controller cannot reasonably be expected to obtain the consent of the data subject to the processing;
(c) the processing must be carried out without the consent of the data subject because obtaining the consent of the data subject would prejudice the provision of the protection mentioned in sub-paragraph (1)(a).
(3) For the purposes of this paragraph, an individual aged 18 or over is “at risk” if the controller has reasonable cause to suspect that the individual—
(a) has needs for care and support,
(b) is experiencing, or at risk of, neglect or physical, mental or emotional harm, and
(c) as a result of those needs is unable to protect himself or herself against the neglect or harm or the risk of it.
(4) In sub-paragraph (1)(a), the reference to the protection of an individual or of the well-being of an individual includes both protection relating to a particular individual and protection relating to a type of individual.”
Part 2 of Schedule 1 describes types of processing of special categories of personal data which meet the requirement in Article 9(2)(g) of the GDPR (processing necessary for reasons of substantial public interest) for a basis in UK law (see Clause 10(3)). This amendment adds to Part 2 of Schedule 1 certain processing of personal data which is necessary for the protection of children or of adults at risk. See also Amendments 116 and 117.
Amendment 86, in schedule 1, page 126, line 38, at end insert—
“Safeguarding of economic well-being of certain individuals
14B (1) This condition is met if the processing—
(a) is necessary for the purposes of protecting the economic well-being of an individual at economic risk who is aged 18 or over,
(b) is of data concerning health,
(c) is carried out without the consent of the data subject for one of the reasons listed in sub-paragraph (2), and
(d) is necessary for reasons of substantial public interest.
(2) The reasons mentioned in sub-paragraph (1)(c) are—
(a) in the circumstances, consent to the processing cannot be given by the data subject;
(b) in the circumstances, the controller cannot reasonably be expected to obtain the consent of the data subject to the processing;
(c) the processing must be carried out without the consent of the data subject because obtaining the consent of the data subject would prejudice the provision of the protection mentioned in sub-paragraph (1)(a).
(3) In this paragraph, “individual at economic risk” means an individual who is less able to protect his or her economic well-being by reason of physical or mental injury, illness or disability.”—(Victoria Atkins.)
Part 2 of Schedule 1 describes types of processing of special categories of personal data which meet the requirement in Article 9(2)(g) of the GDPR (processing necessary for reasons of substantial public interest) for a basis in UK law (see Clause 10(3)). This amendment adds to Part 2 of Schedule 1 certain processing of personal data which is necessary to protect the economic well-being of adults who are less able to protect their economic well-being by reason of a physical or mental injury, illness or disability.
Louise Haigh (Sheffield, Heeley) (Lab)
I beg to move amendment 150, page 126, line 38, at end insert—
“Register of missing persons
14A This condition is met if the processing—
(a) is necessary for the establishment or maintenance of any register of missing persons, and
(b) is carried out in a manner which is consistent with any guidance which may be issued by the Secretary of State or by the Commissioner on the processing of data for the purposes of this paragraph.”
It is a pleasure to serve under your chairmanship, Mr Hanson. Amendment 150 seeks to provide a similar exemption to the one that the Minister has just laid out. As my right hon. Friend the Member for Birmingham, Hodge Hill said, we completely support the principles behind this exemption to schedule 1. As the Minister made clear, too often serious case reviews or reviews after an incident of this nature, particularly in child protection cases, show clearly that if the data had been shared more effectively—often in health cases—the child could have been protected and their life might have been saved.
We tabled this amendment because of the increase in the number of missing persons and missing children over the past few years. As the shadow Police Minister, I approach this issue from a policing perspective. It is important that all data handlers fully understand their obligations and the powers that are bestowed on them. Too often, under the existing legislation, they hide behind data protection to avoid sharing data, and we fear that that tendency will become even stronger under the Bill.
Sharing data relating to missing persons is important for a number of reasons. The demand on police services from such cases has rocketed over the past few years. Police officers spend only 17% of their time responding to crime, so 83% of police time is spent responding to non-crime demand. That includes mental health call-outs, but largely it relates to missing persons. Some police forces tell me that missing persons place the greatest demand on their time.
In the west midlands, since 2015 the number of missing person incidents has doubled to nearly 13,000 cases a year. In Northumbria—one of the smallest police forces in the country—as of this minute there are 43 men and 20 women missing. For such a small police force, that is a significant number of people to be out looking for. Last year alone, such investigations cost the police service more than £600 million. One fifth of those missing persons are children in care, more than 50% are children, and a significant proportion are elderly people missing from care. Crucially, about one third are reported missing on more than one occasion. It is those individuals we seek to address with the register.
There are various reasons for the increase, one of which is certainly better police reporting. Our ageing population means that more people are in care and are going missing from care. The police have responded to that issue in various ways, including by tagging elderly individuals who go missing from care repeatedly —we have tabled amendments to explore the issues arising from that. Cuts to other public services mean that the increasing demand, which previously would have fallen elsewhere—in particular, on local authorities—is now landing on the police. We are seeing a higher tolerance of risk across the care sector, and possibly the health sector too, and a tendency to pass the buck for these issues and other vulnerabilities on to the police, who have a very low risk threshold and nowhere to pass them on.
I believe we need a review of all agencies that are involved with safeguarding to ensure that they are taking seriously their responsibilities in this regard. When the issue relates to resources, they must make the case for those resources, rather than merely pass the problem on to the police. I have heard stories about private children’s care homes where staff may see that the child is outside their window or down the street, but because they are five minutes over curfew they ring the police and say that the child is missing. That passes on the responsibility, but has very serious implications for the police. It diverts resources from tackling crime and from responding to genuine cases of missing children and high-risk missing persons.
Estimates of the time associated with this activity suggest that approximately 18 hours of police time is needed for a medium-risk missing persons investigation. In 2015-16, that equated to more than 6 million investigation hours, or more than 150,000 officers occupied full time with that activity. Not being dealt with by the appropriate agency and not being responded to correctly has real implications for the individual. Going missing can be a precursor to various aspects of significant harm, such as abuse, exposure to criminal activity and mental ill-health. There are enough issues relating to police forces sharing data among themselves, let alone with other agencies. As a result, various criminal activities exploiting those weaknesses have developed. In the past, the Minister and I have discussed county lines at length, which is a criminal activity whereby organised criminal gangs exploit children. They take them, internally traffick them across the country, set them up in another vulnerable adult’s home and leave them to deal drugs on their behalf. That is a very profitable criminal activity, but the perpetrators have been able to evade real enforcement because of the weaknesses in data sharing and cross-agency working between police forces and agencies. The amendment will ensure that the police and all appropriate safeguarding agencies have access to the relevant data to ensure that at-risk missing people are found as quickly and safely as possible, and have their needs dealt with in the most appropriate way.
Victoria Atkins
I am grateful to the hon. Member for Sheffield, Heeley for affording me the opportunity to update the Committee on our progress in establishing a national register of missing persons, and to touch on the missing children and adults strategy that the Government are currently working on, which I hope will be published shortly. It will address many of the themes that the hon. Lady drew on in her speech, particularly the deliberate targeting of vulnerable children by county lines gangs, children who go missing—usually, sadly, from care homes—and the exploitation that occurs.
As the hon. Lady said, this is an important subject because each year more than 337,000 calls are made to police stations in England and Wales about missing and absent people. Happily, the vast majority are found within 24 hours, but 2% or thereabouts remain missing for more than a week. Anyone who has ever met the parents of children who go missing knows the heartache that those parents face, not just on an annual basis, but on a daily, minute-by-minute basis. They feel that pain constantly.
People who go missing are often the most vulnerable in society, and it is vital that those tasked with investigating their disappearance have the most accurate and up-to-date information available. We accept that the current technology available to frontline staff to deal with missing persons is insufficient. For example, the police national computer identifies only those currently reported as missing, while the National Crime Agency database includes only those missing for more than 72 hours. We know that the search must start the moment that a child or vulnerable person is identified as missing; we cannot wait for 72 hours. There is no national record of the history of missing persons in England and Wales.
The Government’s “Tackling child sexual exploitation: progress report” published in February last year set out our commitment to deliver a national missing persons register. This will enable police officers to access up-to-date data about missing people across force boundaries and take appropriate action when they investigate missing person incidents or encounter a missing person who is away from his or her home force area. The register is being established as part of the national law enforcement data programme, which will replace the police national computer and the police national database with a new national data service. The current timetable, agreed with the police, is to launch the capability for forces to record manually missing and associated found incidents from mid-2019 with releases thereafter, including automation and establishing the ability to share controlled information beyond policing to other agencies.
In terms of the way in which the register and the scheme interplay in the Bill, the processing of the personal data held on the database will take place under either the GDPR or part 3 of the Bill. Processing of the data by the police will often be for a law enforcement purpose, including the prevention, investigation or detection of a criminal offence and any sensitive processing would fall within paragraph 3 of schedule 8, which enables processing where necessary to protect the vital interests of the data subject or another individual, or under the new safeguarding condition, which we have just debated. Where the processing is undertaken under the GDPR, the conditions in respect of protecting the vital interests of the data subject, or preventing or detecting unlawful acts, may apply. Again, the new safeguarding condition may also be applicable.
Given those provisions and the very clear timetable that the Government and police have for their programme, we are of the view that the amendment is unnecessary, but I am, of course, very appreciative that the hon. Lady has raised this in the Committee. Obviously, I will keep her informed of progress on the new register.
Louise Haigh
That is fantastic news. It is a very ambitious deadline for a police IT transformation programme. I know that South Yorkshire is going through the transformation on the CONNECT programme at the moment; it is woefully behind the timescale envisaged and over budget, as every IT transformation in the history of any Government, of any colour, has always been. I wonder, therefore, given the urgency of this issue, whether it is possible for this information to be recorded on the PNC for the time being.
Victoria Atkins
I am looking at my officials and they will stop me if I am wrong, I hope. If she prefers, may I write to her? I do not think that the PNC has the capability at the moment. That is why we are having to develop this new programme, but we will write to the hon. Lady in any event. As I say, I will keep her up to date with progress. But I invite her to withdraw the amendment, please.
Louise Haigh
Given that the Minister asked so nicely, I will. I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Amendments made: 87, in schedule 1, page 127, line 30, at end insert—
“( ) The reference in sub-paragraph (4)(b) to a data subject withholding consent does not include a data subject merely failing to respond to a request for consent.”
This amendment clarifies the intended effect of the safeguard in paragraph 15(4) of Schedule 1 (processing necessary for an insurance purpose).
Amendment 88, in schedule 1, page 127, line 39, at end insert—
“( ) is of data concerning health which relates to a data subject who is the parent, grandparent, great-grandparent or sibling of a member of the scheme,”.
This amendment provides that the condition in paragraph 16 of Schedule 1 (occupational pension schemes) can only be relied on in connection with the processing of data concerning health relating to certain relatives of a member of the scheme.
Amendment 89, in schedule 1, page 128, line 6, at end insert—
“( ) The reference in sub-paragraph (2)(b) to a data subject withholding consent does not include a data subject merely failing to respond to a request for consent.”
This amendment clarifies the intended effect of the safeguard in paragraph 16(2) of Schedule 1 (processing necessary for determinations in connection with occupational pension schemes).
Amendment 90, in schedule 1, page 131, line 14, at end insert—
“( ) If the processing consists of the disclosure of personal data to a body or association described in sub-paragraph (1)(a), or is carried out in preparation for such disclosure, the condition in sub-paragraph (1) is met even if, when the processing is carried out, the controller does not have an appropriate policy document in place (see paragraph 5 of this Schedule).”
This amendment provides that when processing consists of the disclosure of personal data to a body or association that is responsible for eliminating doping in sport, or is carried out in preparation for such disclosure, the condition in paragraph 22 of Part 2 of Schedule 1 (anti-doping in sport) is met even if the controller does not have an appropriate policy document in place when the processing is carried out.
Amendment 91, in schedule 1, page 133, line 17, leave out from “interest” to end of line 21.—(Margot James.)
This amendment removes provisions from paragraph 31 of Schedule 1 (extension of conditions in Part 2 of Schedule 1 referring to substantial public interest) which are unnecessary because they impose requirements which are already imposed by paragraph 5 of Schedule 1.
The Minister of State, Department for Digital, Culture, Media and Sport (Margot James)
I beg to move amendment 92, page 134, line 18 [Schedule 1], leave out “on the day” and insert “when”.
This amendment is consequential on Amendment 71.
The Chair
With this it will be convenient to discuss the following:
Government amendments 107, 108, 111, 113, 114, 21, 29 to 40, 43 to 46, 118 to 121, 48, 49, 53, 55, 56, 123 to 125, 59 and 71.
Margot James
Following engagement with local government stakeholders, we have recognised that the maximum time period permitted for responses to the subject access request set out in parts 3 and 4 of the Data Protection Bill subtly differs from that permitted under the GDPR and part 2 of the Bill. That is because the GDPR and, by extension, part 2 rely on European rules for calculating time periods, whereas parts 3 and 4 implicitly rely on a more usual domestic approach. European law, which applies to requests under part 2, says that when one is considering a time period in days, the day on which the request is received is discounted from the calculation of that time period. In contrast, the usual position under UK law, which applies to requests under parts 3 and 4 of the Bill, is that that same seven-day period to respond would begin on the day on which the request was received. In a data protection context, that has the effect of providing those controllers responding to requests under parts 3 and 4 with a time period that is one day shorter in which to respond.
To provide consistency across the Bill, we have decided to include a Bill-wide provision that applies the European approach to all time periods throughout the Bill, thus ensuring consistency with the directly applicable GDPR. Having a uniform approach to time periods is particularly helpful for bodies with law enforcement functions, which will process personal data under different regimes under the Bill. Without these amendments, different time periods would apply, depending on which regime they were processing under. Ensuring consistency for calculating time periods will also assist the information commissioner with her investigatory activities and enforcement powers, for example by avoiding the confusion and potential disputes that could arise relating to her notices or requests for information.
Amendment 71 provides for a number of exemptions to the European approach where deviating from our standard approach to time periods would be inappropriate. For example, where the time period refers to the process of parliamentary approval of secondary legislation, it would clearly not be appropriate to deviate from usual parliamentary time periods. The unfortunate number of amendments in this group comes from the need to modify existing language on time periods, currently worded for compliance with the usual UK approach, so that it applies the approach of the EU rules instead. I hope that this has provided the Committee with sufficient detail on the reasons for tabling this group of amendments.
Amendment 92 agreed to.
Question proposed, That the schedule, as amended, be the First schedule to the Bill.
Liam Byrne
We had a useful debate this morning about the whys and wherefores of whether the article 8 right to privacy should be incorporated into the Bill. Although we were disappointed by the Minister’s reply, what I thought was useful in the remarks she made was a general appreciation of the importance of strong data rights if the UK is to become a country with a strong environment of trust within which a world of digital trade can flourish.
I will briefly alert the Minister to a debate we want to have on Report. The reality is that we feel schedule 1 is narrowly drawn. It is an opportunity that has been missed, and it is an opportunity for the Minister to come back on Report with a much more ambitious set of data rights for what will be a digital century. When we look around the world at the most advanced digital societies, we can see that a strong regime of data rights is common to them all.
I was recently in Estonia, which I hope the Minister will have a chance to visit if she has not done so already. Estonia likes to boast of its record as the world’s most advanced digital society; it is a place where 99% of prescriptions are issued online, 95% of taxes are paid online and indeed a third of votes are cast online. It is a country where the free and open right to internet access is seen as an important social good, and a good example of a country that has really embraced the digital revolution and translated that ambition into a set of strong rights.
The Government are not averse to signing declaratory statements of rights that they then interpret into law. They are a signatory to the UN universal declaration of human rights and the UN convention on the rights of the child; the Human Rights Act 1998 is still in force—I have not yet heard of plans to repeal it—and of course the Equality Act 2010 was passed with cross-party support. However, those old statements of rights, which date back to 1215, were basically to correct and guard against dangerous imbalances of power. Things have moved on since 1215 and the worries that the barons had about King John. We are no longer as concerned as people were in 1215 about taking all the fish weirs out of the Thames, for example.
The Chair
To make matters clear to hon. Members and in particular those who are new to the Committee, the right hon. Member for Birmingham, Hodge Hill tabled a number of amendments—171 to 175 and 177 to 178—that were not selected because they were tabled only yesterday. We need to have several days’ notice before selection can be considered. Had they been tabled earlier, we could have debated and voted on those amendments now. I have given the right hon. Gentleman leeway to widen his arguments about schedule 1, and it is up to him whether he wishes to table those amendments on Report. He is perfectly in order to do so. The debate today is on schedule 1, and the points that the right hon. Gentleman has made in relation to potential amendments are a heads-up for the future or for the Minister to respond to at this point.
Margot James
The right hon. Member for Birmingham, Hodge Hill covered a lot of important ground. He mentioned the digital charter. We are bringing forward the digital charter and we do not intend for it to be set in stone. We recognise that this is a fast-changing environment and so it is deliberately something that will evolve over time. We both share the concerns that he expressed with regard to fake news and the rights and protections needed for children and young people who, as he says, make up a third of internet users. We will address many of the things he highlighted as part of our internet safety strategy, and I look forward to debating them further with him on Report.
To add to what we have already discussed under schedule 1, article 9 of the GDPR limits the processing of special categories of data. Those special categories are listed in article 9(1) and include personal data revealing racial or ethnic origin, health, political opinions and religious beliefs. Some of the circumstances in which article 9 says that special category data can be processed have direct effect, but others require the UK to make related provision.
Clause 10 introduces schedule 1 to the Bill, which sets out in detail how the Bill intends to use the derogations in article 9 and the derogation in article 10 relating to criminal convictions data to permit particular processing activities. To ensure that the Bill is future-proof, clause 10 includes a delegated power to update schedule 1 using secondary legislation. Many of the conditions substantively replicate existing processing conditions in the 1998 Act and hon. Members may wish to refer to annexe B to the explanatory notes for a more detailed analysis on that point.
Darren Jones
I want to make one point about schedule 1. Amendment 9, which was made this morning, allows democratic engagement to be a purpose under article 6(1)(e) of the GDPR—namely, that consent is not required for the processing of data for public interest or the exercising of official authority and the purposes of democratic engagement. I wonder whether the definitions of political parties and politicians under schedule 1 could be used to restrict that amendment, so that organisations other than political parties and politicians are not able to process data in the public interest for democratic engagement without consent. For example, if Leave.EU or Open Britain wanted to process our personal data, they ought to do so with consent, not using the same public interest for democratic engagement purposes as politicians or parties.
Margot James
I understand the hon. Gentleman’s concerns. The GDPR requires data controls to have a legal basis laid down in law, which can take the form, for example, of a statutory power or duty, or a common-law power. Any organisation that does not have such legal basis would have to rely on one of the other processing conditions in article 6. With regard to the amendment that was agreed to this morning, we think that further restricting clause 8 might risk excluding bodies with a lawful basis for processing. However, the hon. Gentleman is free to raise the issue again on Report.
Question put and agreed to.
Schedule 1, as amended, accordingly agreed to.
Clauses 11 to 13 ordered to stand part of the Bill.
Clause 14
Automated decision-making authorised by law: safeguards
Liam Byrne
I beg to move amendment 153, in clause 14, page 7, line 30, at end insert—
“(1A) A decision that engages an individual’s rights under the Human Rights Act 1998 does not fall within Article 22(2)(b) of the GDPR (exception from prohibition on taking significant decisions based solely on automated processing for decisions that are authorised by law and subject to safeguards for the data subject’s rights, freedoms and legitimate interests).”
This amendment would clarify that the exemption from prohibition on taking significant decisions based solely on automated processing must apply to purely automated decisions that engage an individual’s human rights.
The Chair
With this it will be convenient to discuss the following:
Amendment 130, in clause 14, page 7, line 34, at end insert—
“(2A) A decision that engages an individual’s rights under the Human Rights Act 1998 does not fall within Article 22(2)(b) of the GDPR (exception from prohibition on taking significant decisions based solely on automated processing for decisions that are authorised by law and subject to safeguards for the data subject’s rights, freedoms and legitimate interests).
(2B) A decision is “based solely on automated processing” for the purposes of this section if, in relation to a data subject, there is no meaningful input by a natural person in the decision-making process.”
This amendment would ensure that where human rights are engaged by automated decisions these are human decisions and provides clarification that purely administrative human approval of an automated decision does make an automated decision a ‘human’ one.
Amendment 133, in clause 50, page 30, line 5, at end insert “, and
(c) it does not engage the rights of the data subject under the Human Rights Act 1998.”
This amendment would ensure that automated decisions should not be authorised by law if they engage an individual’s human rights.
Amendment 135, in clause 96, page 56, line 8, after “law” insert
“unless the decision engages an individual’s rights under the Human Rights Act 1998”.
Liam Byrne
The amendments touch on what I am afraid will become an increasing part of our lives in the years to come: the questions of what decisions can be taken by algorithms; where such decisions are taken, what rights we have to some kind of safeguards, such as a good old-fashioned human being looking over the decision that is taken and the outcomes that arise; and whether we are content to acquiesce in the rule of the robots.
In a number of areas of our lives—particularly our economic and social lives—such algorithms will become more and more important. Algorithms are already used to screen job applications, for example, and to create shortlists of candidates for interview. Insurance companies use them to adjudge what premiums someone should enjoy, or whether they should be offered insurance at all. The challenge of algorithms was put best by my hon. Friend the Member for Cambridge on Second Reading: the great risk of such developments is that old injustice is hard-coded into new injustice.
That is particularly troubling when we think about the provisions and exemptions the Government have brought forward that allow the automatic processing of data in public services. Many public servants around the world are beginning to look at predictive public services and how algorithms can scan great swathes of, for example, health data and crime data, and make decisions about where police should attend, who should or should not get bail, who should be added to police databases such as the gangs matrix, and how healthcare should be targeted in parts of the country or to what kinds of families. There are great risks in algorithms taking decisions in ways ungoverned by us. As parliamentarians, we have a particular duty to ensure that the appropriate safeguards are in place.
Clauses 14 and 15 allow automated processes where they are authorised by law. That creates the obligation of giving notice and what is, in effect, an ex post facto right of appeal. The Opposition’s argument is somewhat different: it is better not to take decisions on the basis of automatic processing of data where those decisions affect our human rights.
They say that to err is human, but to really mess things up you need a computer. We all know from our casework, whether about the benefits or the social care system or any other kind of system that constituents might name, that sometimes the most terrible, egregious errors are made. We also know that sometimes it is very difficult for citizens to seek remedies for those problems. Very often, the reason they have come to see us in our surgeries is because, as they so often say to us, we are the last port of call and the last hope that is kicking around; if we cannot fix it, frankly, our constituent is about to give up. That is an unfortunate situation that we do not want to see multiply.
Brendan O'Hara (Argyll and Bute) (SNP)
I will speak to amendments 130, 133 and 135, which appear in my name and that of my hon. Friend the Member for Cumbernauld, Kilsyth and Kirkintilloch East. Our amendments seek to provide protection for individuals who are subject to purely automated decision making, specifically where we believe that it could have an adverse impact on their fundamental rights. The amendments would require that where human rights are or possibly could be impacted by automated decisions, ultimately there are always human decision makers. The amendments would instil that vital protection of human rights with regard to the general processing of personal data.
The amendments seek to clarify the meaning of a decision that is based solely on automated processing, which is a decision that lacks meaningful human input. That reflects the intent of the GDPR, and provides clarification that purely administrative human approval of an automated decision does not make that decision a human one. It is simply not enough for human beings to process the information in a purely administrative fashion, but to have absolutely no oversight or accountability for the decision that they process. We strongly believe that automated decision making without human intervention should be subject to strict limitations to ensure fairness, transparency and accountability, and to safeguard against discrimination. As it stands, there are insufficient safeguards in the Bill.
As the right hon. Member for Birmingham, Hodge Hill said, we are not talking about every automated decision. We are not talking about a tech company or an online retailer that suggests alternatives that someone may like based on the last book they bought or the last song they downloaded. It is about decisions that can be made without human oversight that will or may well have long-term, serious consequences on an individual’s health, financial status, employment or legal status. All too often, I fear that automated decisions involve an opaque, unaccountable process that uses algorithms that are neither as benign nor as objective as we had hoped they would be, or indeed, as we thought they were when we first encountered them.
We are particularly concerned about elements of the Bill that allow law enforcement agencies to make purely automated decisions. That is fraught with danger and at odds with the Data Protection Act 1998, as well as article 22 of the GDPR, which states:
“The data subject shall have the right not to be subject to a decision based solely on automated processing”.
Although there are provisions in the GDPR for EU member states to opt out of that, the opt-out does not apply if the data subject’s rights, freedoms or legitimate interests are undermined.
I urge the Government to look again at the parts of the Bill about automated decision making, to ensure that when it is carried out, a human being will have to decide whether it is reasonable and appropriate to continue on that course. That human intervention will provide transparency and capability, and it will ensure that the state does not infringe on an individual’s freedoms—those fundamental rights of liberty and privacy—which are often subjective. Because they are subjective, they are beyond the scope of an algorithm.
There are serious human rights, accountability and transparency issues around fully automated decision making as the Bill stands. Amendment 130 says that any human involvement has to be “meaningful”. We define meaningful human oversight as being significant, of consequence and purposeful. As I have said, that is far beyond the scope of an algorithm. If an individual’s rights are to be scrutinised and possibly fundamentally affected, it is an issue of basic fairness that the decision is made, or at least overseen, by a sentient being. I hope the Government accept the amendments in the faith in which they were tabled.
Margot James
The amendments relate to automated decision making under the GDPR and the Bill. It is a broad category, which includes everything from trivial things such as music playlists, as mentioned by the hon. Member for Argyll and Bute, and quotes for home insurance, to the potentially more serious issues outlined by the right hon. Member for Birmingham, Hodge Hill of recruitment, healthcare and policing cases where existing prejudices could be reinforced. We are establishing a centre, the office for artificial intelligence and data ethics, and are mindful of these important issues. We certainly do not dismiss them whatsoever.
Article 22 of the GDPR provides a right not to be subject to a decision based solely on automatic processing of data that results in legal or similarly significant effects on the data subject. As is set out in article 22(2)(b), that right does not apply if the decision is authorised by law, so long as the data subject’s rights, freedoms and legitimate interests are safeguarded.
The right hon. Member for Birmingham, Hodge Hill, mentioned those safeguards, but I attribute far greater meaning to them than he implied in his speech. The safeguards embed transparency, accountability and a right to request that the decision be retaken, and for the data subject to be notified should a decision be made solely through artificial intelligence.
Liam Byrne
The Minister must realise that she is risking an explosion in the number of decisions that have to be taken to Government agencies or private sector companies for review. The justice system is already under tremendous pressure. The tribunal system is already at breaking point. The idea that we overload it is pretty optimistic. On facial recognition at public events, for example, it would be possible under the provisions that she is proposing for the police to use facial recognition technology automatically to process those decisions and, through a computer, to have spot interventions ordered to police on the ground. The only way to stop that would be to have an ex post facto review, but that would be an enormous task.
Margot James
The right hon. Gentleman should be aware that just because something is possible, it does not mean that it is automatically translated into use. His example of facial recognition and what the police could do with that technology would be subject to controls within the police and to scrutiny from outside.
Louise Haigh
The case that my right hon. Friend raises is certainly not hypothetical. The Metropolitan police have been trialling facial recognition scanning at the Notting Hill carnival for the last three years with apparently no legal base and very little oversight. We will move on to those issues in the Bill. That is exactly why the amendments are crucial in holding law enforcement agencies to account.
Margot James
As the hon. Lady says, the police are trialling those things. I rest my case—they have not put them into widespread practice as yet.
Returning to the GDPR, we have translated the GDPR protections into law through the Bill. As I said, the data subject has the right to request that the decision be retaken with the involvement of a sentient individual. That will dovetail with other requirements. By contrast, the amendments are designed to prevent any automated decision-making from being undertaken under article 22(2)(b) if it engages the rights of the data subject under the Human Rights Act 1998.
Liam Byrne
Will the Minister explain to the Committee how a decision to stop and search based on an automated decision can be retaken? Once the person has been stopped and searched, how can that activity be undone?
Margot James
I am not going to get into too much detail. The hon. Member for Sheffield, Heeley mentioned an area and I said that it was just a trial. She said that facial recognition was being piloted. I do not dispute that certain things cannot be undone. Similar amendments were tabled in the other place. As my noble Friend Lord Ashton said there, they would have meant that practically all automated decisions under the relevant sections were prohibited, since it would be possible to argue that any decision based on automatic decision making at the very least engaged the data subject’s right to have their private life respected under article 8 of the European convention on human rights, even if it was entirely lawful under the Act.
Liam Byrne
I fear that the Minister is taking some pretty serious gambles on the application of this technology in the future. We think it is the business of this place to ensure that our citizens have strong safeguards, so we will put the amendment to a vote.
Question put, That the amendment be made.
The Chair
Does the hon. Member for Argyll and Bute wish to press amendment 130 to a Division?
Brendan O'Hara
I would like to press the amendment to a vote, or should I do that on Report?
The Chair
The hon. Gentleman can press the amendment to a vote now. If it is carried, it will be part of the Bill. If it is defeated, it will not be, and it may then be moved on Report, subject to the Speaker’s discretion. If the hon. Gentleman does not press the amendment now, it may be that there is more of a likelihood of its being picked on Report, but that is a matter for the Speaker.
Margot James
I beg to move Government amendment 10, in clause 14, page 8, line 4, leave out “21 days” and insert “1 month”.
Clause 14(4)(b) provides that where a controller notifies a data subject under Clause 14(4)(a) that the controller has taken a “qualifying significant decision” in relation to the data subject based solely on automated processing, the data subject has 21 days to request the controller to reconsider or take a new decision not based solely on automated processing. This amendment extends that period to one month.
The Chair
With this it will be convenient to discuss Government amendments 11, 12, 23, 24, 27, 28, 41 and 42.
Margot James
Amendments 10, 11 and 12 relate to clause 14, which requires a data controller to notify a data subject of a decision based solely on automatic processing as soon as is reasonably practicable. The data subject may then request that the data controller reconsider such a decision and take a new decision not based solely on automated processing.
The purpose of the amendments is to bring clause 14 into alignment with the directly applicable time limits in article 12 of the GDPR, thereby ensuring that both data subjects and data controllers have easily understandable rights and obligations. Those include giving the data subject longer to request that a decision be reconsidered, requiring that the controller action the request without undue delay and permitting an extension of up to two months where necessary.
Furthermore, to ensure that there is consistency across the different regimes in the Bill—not just between the Bill and the GDPR—amendments 23, 24, 41 and 42 extend the time limit provisions for making and responding to requests in the other regimes in the Bill. That is for the simple reason that it would not be right to have a data protection framework that applies one set of time limits to one request and a different set of time limits to another.
In a similar vein, amendments 27 and 28 amend part 3 of the Bill, concerning law enforcement processing, to ensure that controllers can charge for manifestly unfounded or excessive requests for retaking a decision, as is permitted under article 12 of the law enforcement directive. To prevent abuse, amendment 28 provides that it is for the controller to be able to show that the request was manifestly unfounded or excessive.
Liam Byrne
It would be useful if the Minister could say a little more about the safeguards around the controllers charging reasonable fees for dealing with requests.
It is quite easy to envisage situations where algorithms take decisions. We have some ex post facto review; a citizen seeks to overturn the decision; the citizen thinks they are acting reasonably but the commercial interest of the company that has taken and automated the decision means that it wants to create disincentives for that rigmarole to unfold. That creates the risk of unequal access to justice in these decisions.
If the Minister is not prepared to countenance the sensible safeguards that we have proposed, she must say how she will guard against another threat to access to justice.
Margot James
The right hon. Gentleman asks a reasonable question. I did not mention that data subjects have the right of complaint to the Information Commissioner if the provisions are being abused. I also did not mention another important safeguard, which is that it is for the data controller to show that the request is manifestly unfounded or excessive. So the burden of proof is on the data controller and the data subject has the right of involving the Information Commissioner, if he or she contests the judgment taken in this context, concerning unfounded or excessive requests in the opinion of the data controller. I hope that satisfies the right hon. Gentleman.
Amendment 10 agreed to.
Amendments made: 11, in clause 14, page 8, leave out line 10 and insert “within the period described in Article 12(3) of the GDPR—”
This amendment removes provision from Clause 14(5) dealing with the time by which a controller has to respond to a data subject’s request under Clause 14(4)(b) and replaces it with a requirement for the controller to respond within the time periods set out in Article 12(3) of the GDPR, which is directly applicable.
Amendment 12, in clause 14, page 8, line 16, at end insert—
‘(5A) In connection with this section, a controller has the powers and obligations under Article 12 of the GDPR (transparency, procedure for extending time for acting on request, fees, manifestly unfounded or excessive requests etc) that apply in connection with Article 22 of the GDPR.” —(Margot James.)
This amendment inserts a signpost to Article 12 of the GDPR which is directly applicable and which confers powers and places obligations on controllers to whom Clause 14 applies.
Clause 14, as amended, ordered to stand part of the Bill.
Clause 15
Exemptions etc.
Margot James
I beg to move amendment 13, in clause 15, page 8, line 31, after “21” insert “and 34”
This amendment is consequential on Amendment 94.
The Chair
With this it will be convenient to discuss Government amendments 14, 93 to 106, 109, 110 and 112.
Margot James
Schedule 2 allows for particular rights or obligations contained in the GDPR to be disapplied in particular circumstances, where giving effect to that right or obligation would lead to a perverse outcome. To do that, it makes use of a number of derogations in the GDPR, including articles 6(3) and 23(1).
Amendments 93, 95 and 109 permit article 19 of the GDPR to be disapplied for the purposes in parts 1, 2 and 5 of schedule 2.
When a data controller corrects or deletes personal data following a request from a data subject, article 19 of the GDPR requires them to inform all persons to whom the personal data has been disclosed. Additionally, if requested, the data controller must inform the data subject about those persons to whom the data has been disclosed. Following the introduction of the Bill, we have had further representations from a range of stakeholders, including the banking industry, regulators and the media sector, about the problems that article 19 might create in very particular circumstances.
The amendments will ensure that, for example, where a bank may have shared personal data about one of its customers with the National Crime Agency because of a suspected fraud, it will not have to tell the data subject about that disclosure when the customer changes their address with the bank. That will ensure that the data subject is not tipped off about the suspected fraud investigation.
Several amendments in the group are designed to ensure that a valuable provision of the GDPR—article 34—does not have unintended consequences for controllers who do the right thing by seeking to prevent or detect crime, assist with the assessment or collection of tax or uncover abuses in our society. Article 34 requires data controllers to inform a data subject if there has been a data breach that is likely to result in a high risk to the rights and freedoms of an individual. In normal operation, this is an important article, which we hope will prompt a step change in the way organisations think about cyber-security.
However, article 23(1) enables member states to create laws to restrict the scope of the obligations and rights for which article 34 provides in the minority of cases where it conflicts with other important objectives of general public interest. The amendments seek to do that in the Bill. Amendment 94 responds to the concerns of the finance sector that compliance with article 34 may result in persons under investigation for financial crime being tipped off. Amendment 110 serves a similar purpose for media organisations.
Article 85(2) creates scope for member states to provide exemptions from chapter 4 of the GDPR, which includes article 34, if they are necessary to reconcile the right to the protection of personal data with the freedom of expression. The amendment intends to ensure that processing data for a special purpose that is in the public interest is not prejudiced—for example, by a controller having to notify the data subject of a breach in relation to pre-publication undercover footage. Importantly, data controllers will still be required, for the first time, to report a breach to the Information Commissioner under article 33 of the GDPR. That will ensure that she is well placed to take all the necessary steps to ensure data subjects’ rights are respected, including by monitoring compliance with these new exemptions.
On the more general question of who can make use of the exemptions in schedule 2 and when, amendment 96 broadens the exemption in paragraph 7 of the schedule, which relates to the protection of members of the public. As drafted, the exemption applies to personal data processed for the purposes of discharging a function that is designed to protect members of the public against dishonesty, malpractice or incompetence by persons who carry out activities that bring them into contact with members of the public. We have identified an issue with that wording: a number of public office holders, including police staff, do not carry out activities that necessarily bring them into contact with members of the public. Amendment 96 broadens the scope of the exemption to include processing in relation to individuals who work for those organisations in a behind-the-scenes capacity.
We have also had representations from several regulators on the need to make additional provisions to protect the integrity of their activities. Amendment 97 provides the UK’s Comptroller and Auditor General, and their counterpart in each of the devolved Administrations, with an exemption from certain GDPR provisions where these are likely to prejudice their statutory functions. That will prevent certain individuals who suspect they may be under scrutiny from trying to use their rights under the GDPR, such as article 15 (confirmation of processing) as a way of confirming that their data is being processed, or from using article 17 (right to erasure) and article 18 (restriction of processing) to undermine the effectiveness of an audit.
Liam Byrne
I beg to move amendment 156, in schedule 2, page 136, line 30, leave out paragraph 4.
This amendment would remove immigration from the exemptions from the GDPR.
We are trying to provide some careful and considered constraints on the exemptions that the Government are asking for, in particular the exemptions that Ministers seek for the purposes of immigration control.
The Bill has been drafted essentially to enable the Home Office to do two things: win cases and create a hostile environment for those who are here illegally, where it has no capacity to trace and deport individuals. In conducting its work, the Home Office draws on a wide range of private providers, from G4S to Cifas. They have a mixed record, including on data protection. The carve-out that the Government seek for immigration purposes has caused widespread concern. It has drawn concern from the other place, the Information Commissioner and the Joint Committee on Human Rights.
The Minister will try to assure us by saying there are safeguards wrapped around the exemption and that there are limits on the way it can be used, but those limits are drawn so vaguely and broadly that they are not safeguards at all. They have been drafted to apply where matters are likely to prejudice immigration control. Who gets to judge the likelihood of prejudicing immigration control is not terrifically clear. In my Home Office days, we used to call that carte blanche.
Through the powers and exemptions in the Bill, the Home Office seeks to collect data for one purpose and then use it without informed consent. Where the rubber hits the road is that, crucially, the effect will be to ensure that subject access requests are basically put beyond the scope of someone seeking information that they might be able to use either in representations that we all might make to Ministers or, more importantly, in an immigration tribunal.
I want to sound a warning note to the Minister, as I hinted on Second Reading. I was brought into the Home Office as a Minister in 2006 and, after a glorious fortnight as Minister for Police and Counter-terrorism, I was moved by my boss John Reid to become Immigration Minister, where I was asked to conduct the biggest shake-up of our immigration system for 40 years.
I created the UK Border Agency; I took UK visas out of the Foreign Office; I took Customs out of the Treasury. We created a Border Agency that could run a biometric visa programme abroad, checking fingerprints against police national computers before anyone got on a train, plane or boat to our country. We introduced much stronger controls at the border, increasing those nice new blue signs, creating smart uniforms for immigration officials, and we increased immigration policing by around £100 million a year
I said earlier that to err is human but it takes a computer really to foul things up. That is a lesson that I learned with some force during my time at the Home Office. The dedicated, fantastic officials in the Home Office and the extraordinary officers who work in what was the UK Border Agency—it has since been revised a couple of times—do an amazing job. They are dramatically underfunded by the Treasury. They have been underfunded by the Treasury under this Government and, in my view, we did not get enough out of the Treasury in my day.
However, they are human and make mistakes. That is why we have such a complicated immigration tribunal system, where people can take their complaints to a first tier tribunal but very often need to seek a judicial review down the line. The challenge is that, if the Home Office wants to create a process and an administration for making the right decision, which can be defended in a tribunal and in a judicial review case, that process must be robust. When we streamlined the immigration tribunal system, we realised that we had to change, improve and strengthen the way that we took decisions in the Home Office because too many were made in a way that was not JR-proof. We were losing JRs and therefore denying justice to those who brought a legitimate claim against the Crown.
There were occasions when I lost cases because of information that was disclosed to the applicant through a subject access review. SARs are one of the most powerful instruments by which anybody in this country, whether a citizen or someone applying to become a citizen, or applying for a legal right to remain, can acquire information that is crucial to the delivery of justice. Many of us are incredibly sympathetic to the job that the Home Office does. Many of us will want a tougher regime in policing immigration, in particular illegal immigration, but I suspect every member of the Committee is also interested in the good conduct of justice and administrative justice. As someone who served in the Home Office for two years, I had to take some very difficult decisions, including to release subject access request information that I absolutely did not want to go into the public domain. Sometimes it was right to release that information because it helped ensure that justice was done in the courts of this land.
The Minister has some very strong safeguards in the Bill. There are strong safeguards that create exemptions for her where the interest is in crime prevention, such as, for example, illegal immigration. However, the power that the provision seeks, at which we take aim in our amendments, is a step too far and risks the most terrible injustices. It risks the courts being fouled up and our being challenged in all sorts of places, including the European Court of Human Rights in the years to come. It is an unwise provision. If I were a Home Office official, I would have tried it on—I would have tried to get it through my Minister and through the Houses of Parliament, but it is unwise and a step too far. I hope the Minister will accept the amendment and delete the provisions.
Brendan O'Hara
I will speak in favour of amendment 156. On Second Reading, I said that I would raise this matter again in Committee and I make no apologies for doing so. We regard this new exemption as extremely concerning. It permits the Government to collect and hold data for the purposes of what they describe as “effective immigration”.
It also concerns me that nowhere in the Bill does there seem to be a legal definition of effective immigration control. I am worried that “effective immigration control” is highly subjective and highly politicised. It exposes individuals, weakens their rights and makes them vulnerable to whatever change in the political tide happens to come along next. This broad-ranging exemption is fundamentally unfair. It is open to abuse and runs contrary to safeguarding basic human rights. I believe that the UK’s proposed immigration exemption goes much further than the scope of restrictions afforded to member states under GDPR, with all the consequences of that, which we discussed in such great detail this morning around adequacy decisions.
Ian Murray (Edinburgh South) (Lab)
The hon. Gentleman makes a powerful case against this particular exemption. He will know as well as me as a constituency Member of Parliament that one of the first things checked when someone comes to seek our advice is whether the Home Office has the correct information on an individual. Nine times out of 10, because of sheer workload, the Home Office just has it wrong. Then the visas and so on can be processed. Am I right in saying that, under this exemption, we would be unable to do that?
Brendan O'Hara
The hon. Gentleman is absolutely correct; I was just getting on to the point about the information held by the Home Office. If it cannot be checked and if it is wrong at source, it is wrong at the end of the process. As far as I can see, there are no safeguards against that. He is absolutely correct that one early error in data collection and processing becomes an irrefutable and indisputable fact by the time it reaches the Home Office. The Home Office could then base its case against an individual on that wrong information.
The hon. Gentleman is right—as constituency MPs, there is not one of us, I am sure, who is not painfully aware of wrong information being held not just by the Home Office, but by a whole range of Departments. That makes the exemption fundamentally unfair. This is an issue of basic fairness and there is little wonder it has been so loudly and roundly condemned by civil liberties groups and many in the legal profession. If we go ahead with the schedule as it stands, it fundamentally changes how we can operate and how we can help people who require our assistance.
At the moment, we have subject access requests. As matters stand, the Home Office and the subject or their legal representative have a right to access the same information, on which legal claims and challenges are based. Surely, if both sides do not have access to the same information, the fairness of any legal proceedings is inevitably compromised. Subject access requests are often the only route through which a legal professional can make representations on very complicated issues on behalf of their client. Indeed, for clients who have been victims of domestic abuse and are fleeing an abusive partner, sometimes a subject access request is all that stands between them and a successful application to remain.
This exemption will reduce legal representatives’ ability to best represent their clients and it removes a fundamental tool for holding the Home Office to account when it either gets things wrong or chooses to ignore or misrepresent the facts. The exemption is fundamentally unfair and as unnecessary as it is disproportionate. I urge the Government to reconsider.
Darren Jones
I support the amendment tabled by my right hon. and hon. Friends, because there are some harsh realities about this exemption for effective immigration control, including the harsh reality that such an exemption right does not exist under the GDPR. Indeed, it is a new exemption compared with the law that exists today under the Data Protection Act 1998.
This broad, undefined exemption really must be restricted. I declare an interest. My wife is Australian and is here on a spousal visa. I therefore assume that, as a British citizen, I too could be subject to my rights being exempted for the effective control of immigration in order to understand what my wife is up to. I should declare for the record that her staying here in the UK is perfectly legitimate. This is a wide-ranging exemption that could apply to EU citizens, non-EU citizens and, as I say, British citizens who are connected with those who are subject to immigration controls.
This is not just an issue for the Home Office; there is data across various Departments that could be of use to the Home Office for the effective control of immigration. Indeed, we have been waiting for quite some time for the Government to publish the biometric strategy, setting out how they intend to use lots of biometric data across Government Departments. We have been waiting for a couple of years to see how the Government intend to do that.
My understanding is that if all the photographs held on our passports and driving licences were collated, in essence the Government would have the power to have a virtual ID card for the bulk of the adult population in this country. How on earth would that information be used for the effective control of immigration, which would potentially be applied to so many people here in the UK?
This exemption creates a derogation for many rights: the right to information, the right to access, the right to explanation, the right to erasure, the right to restriction of processing, the right to data portability, the right to object, and all the principles set out in article 5 of the GDPR. This is an enormous derogation from rights that our colleagues in Europe think are important. Again, this relates to the risk of failing to seek adequacy in our negotiations with the EU.
I seek not only to support the amendment but to ask the Minister to clarify something. If the Government do not support the amendment, how does the exemption fit within the language of article 23 of the GDPR, which states that it can only exist
“when such a restriction respects the essence of the fundamental rights”—
which we have already noticed today are being repealed by this Government—
“and freedoms and is a necessary and proportionate measure in a democratic society”?
My assertion is that this exemption goes too far and, therefore, that the amendment tabled by my right hon. and hon. Friends is perfectly sensible. I look forward to it receiving Government support.
Stuart C. McDonald (Cumbernauld, Kilsyth and Kirkintilloch East) (SNP)
We have already heard three very good speeches in support of the amendment. I will not take too long to support pretty much everything that has been said so far. As a former troublesome immigration lawyer from back in the day—in fact, when the right hon. Member for Birmingham, Hodge Hill was busy making his reforms in the Department—I do not think that I could have lived it down if I had not said a few words in support of the amendment.
We must remember that the context for all this is that we have a Department—the Home Office—where, as the most recent statistics show, half of all immigration decisions that are challenged in a tribunal are overturned, which is a record high. The Home Affairs Committee has recently expressed grave concerns about the poor quality of decision making in far too many areas and the functioning of a hostile environment, for example in the area of bank checks, where there is something like a 10% error rate. We also live in a world where the creeping reach of the Home Office’s information tentacles is almost being seen to put off migrants from accessing necessary public services such as health, creating a public health danger.
To provide a massive and almost unlimited exemption from many of the key protections, as has been described, is not only unjustified but counterproductive, because rather than fixing the fundamental problems with Home Office decision making, it will make them worse by hiding them from view and from scrutiny. The Home Office, not for the first time, is being pretty greedy with the powers that it seeks, because even if we take out the exemption, as this amendment proposes, the Home Office will still have plenty of scope—perhaps too much scope—to do what it wants to do. Recent immigration Acts have created myriad criminal offences in the sphere of immigration law, so the Home Office can already rely on other exemptions within the Bill where necessary. What is absolutely lacking is any explanation of why the exemption is needed. Will the Minister explain what it is about current data protection laws that has unacceptably hindered Home Office operations? I have seen no evidence of that at all.
Another concern is that it is not just the Home Office that will benefit from this exemption but other organisations that are involved in immigration control, such as G4S in its operation of detention centres. There is no justification for that, but there are serious risks, harms and injustices that might be created by the proposed exemption.
As we have heard, subject access requests are regularly a crucial part of representing a migrant caught up in the immigration system. They can be used to establish statuses that have not been communicated or have been lost. They can be used to establish other crucial facts that have not been known to that individual or their representatives. They can, of course, be absolutely crucial in establishing that the Home Office has made errors, as all too many hon. Members will have experienced.
Members of the Committee have been provided with a host of examples by the Law Society, the Bar Council, the Immigration Law Practitioners’ Association and others. Those are real-life examples occurring day in, day out. Quite simply, the failure to allow those individuals access to data protection rights is not only a denial of those rights but a denial of access to justice altogether. This part of the Bill desperately needs reconsideration by the Government.
Victoria Atkins
I feel I should defend all the hardworking people both in the Home Office and Border Force who do their best to do their jobs, day in, day out, to ensure that we have an effective, fair and proportionate immigration system. They have come under a bit of an attack in this debate.
Ian Murray
I do not think anybody on the Committee would disagree with the statement that the staff work incredibly hard. Would it not be a show of solidarity with those staff to give them the resources they require to do the job properly?
Victoria Atkins
The hon. Gentleman is starting the debate in very sparky form.
Victoria Atkins
I didn’t start it. The point is that, when people talk obliquely about the Home Office, it is people working in the Home Office who have to make these decisions day in, day out and who have to apply the law and do their best. I think we need to bear that in mind when we are talking about the Home Office system and how bad it is.
The provision relating to data processing for the purposes of immigration control in paragraph 4 of schedule 2 has been the subject of much debate. I would like to address some of the misunderstandings that have clearly arisen during the course of the Bill around both the purpose and scope of the provision. I hope I can persuade the Committee that this is a necessary and proportionate measure to protect the integrity of our immigration system.
Mr Alister Jack (Dumfries and Galloway) (Con)
Opposition Members have expressed concern, which I would like to emphasise, that this exemption is too wide. Can the Minister provide an assurance that that is not the case?
Victoria Atkins
Very much so. I will take it slowly because it is complicated and I want to ensure that the points raised today have been addressed. First, I was asked who decides the definition of effective immigration control in the schedule. That is an established term of art. It is used, for example, in the Immigration Act 2014. The Freedom of Information Act 2000 uses a similar term, namely
“the operation of the immigration controls”.
In the context of the schedule, we have adopted a wraparound term such as that, rather than set out a detailed list of specific immigration-related functions to which the exemption might be applied. Given the undoubted complexity of immigration legislation, there is a danger that any such list would be incomplete and would need to be regularly reviewed and updated. The term is either the precise term or similar to those already in law, such as in the Freedom of Information Act, which has been law for 18 years.
The hon. Member for Argyll and Bute seems concerned that once the Home Office system has accessed some of this information, it is lost forever and will not be revealed to the person whom it concerns. I will give case examples later, but I reassure him that the way in which we describe this exemption in the Home Office is that it is a pause on two of the data protection principles. Once the pause is lifted, because the end has been achieved—the person has been found or whatever—all those rights kick back in again, and they are able to make requests for the information that the hon. Gentleman set out. We see it as a pause, not as a long-standing and permanent exemption. It is just for the precise circumstances of enabling the immigration system and its protections.
Liam Byrne
The Under-Secretary of State will know better than anybody that there are very tight time limits over the windows within which people can ask for entry clearance officer reviews or reconsideration, either by an immigration official or, in extremis, by the Minister. How long will the pause last, and can she guarantee the Committee today that the pause will never jeopardise the kick-in of time limits on an appeal or a reconsideration decision?
Victoria Atkins
The reason for the pause is—I will give case studies of this—to enable the immigration system to operate. If someone has gone missing, requests for data will be required to find that person. Once that person is found, and there is no longer a need to apply the exemption, it will be lifted.
Liam Byrne
That is not an answer to my question. I am asking for a guarantee to the Committee this afternoon that the pause will never jeopardise somebody’s ability to submit a valid request for a reconsideration or an appeal with the information that they need within the time windows set out by Home Office regulations—yes or no.
Victoria Atkins
I am asked whether this will have an impact on someone’s application, either at appeal or reconsideration. Of course, information is obtained so that a person can be brought in. As I say, I will make it clear with case studies, so perhaps I can answer the right hon. Gentleman in more detail when I give such an example, but the purpose of this is generally to find a person. When the need, as set out under the exemption, no longer exists, the rights kick back in again. This relates only to the first two data protection principles under the GDPR. Again, I will go into more detail in a moment, but this is not the permanent exemption from rights as perhaps has been feared by some; it is simply to enable the process to work. Once a person has been brought into the immigration system, all the protections of the immigration system remain.
Stuart C. McDonald
The circumstances that the Minister describes for using the exemption are much narrower than the way the exemption is actually drawn. It seems to me that if that is the only way in which the Home Office wants to use the exemption, it could frame it in a much narrower way and possibly gain cross-party support.
Victoria Atkins
I will move on to the case studies in a moment, as I have given way several times. First, I will lay out the titles, then I will come on to article 23. Again, our analysis is that the provision fits within one of the exemptions in article 23. That is precisely the reason that we have drawn it in this way.
We very much welcome the enhanced rights and protections for data subjects afforded by the GDPR. The authors of the GDPR accepted that at times those rights need to be qualified in the general public interest, whether to protect national security, the prevention and detection of crime, the economic interests of the country or, in this case, the maintenance of an effective system of immigration control. Accordingly, a number of articles of the GDPR make express provision for such exemptions, including article 23(1)(e), which enables restrictions to be placed on certain rights of data subjects. Given the extension of data subjects’ rights under the GDPR, it is necessary to include in the Bill an explicit targeted but proportionate exemption in the immigration context.
The exemption would apply to the processing of personal data by the Home Office for the purposes of
“the maintenance of effective immigration control, or…the investigation or detection of activities that would undermine the maintenance of effective immigration control”.
It would also apply to other public authorities required or authorised to share information with the Department for either of those specific purposes.
Let me be clear on what paragraph 4 of schedule 2 does not do. It categorically does not set aside the whole of the GDPR for all processing of personal data for all immigration purposes. It makes it clear that the exemption applies only to certain GDPR articles. The articles that the exemption applies to are set out in paragraph 4(2) of schedule 2. They relate to various rights of data subjects provided for in chapter 3 of the GDPR, such as the rights to information and access to personal data, and to two of the data protection principles—namely the first one, which relates to fair and transparent processes, and the purpose limitation, which is the second one.
Liam Byrne
As I understand it, the derogations that are sought effectively remove the right to information in article 13; the right to information where data is obtained from a third party in article 14; the right of subjects’ access in article 15; the right to erasure in article 17; the right to restriction of processing in article 18; the right to object in article 21(1); the principle of lawful, fair and transparent processing in article 5; the principle of purpose limitation in article 5(1)(b); and the data protection principles in article 5 of lawfulness, fairness, transparency, purpose limitation, data minimisation, accuracy, storage limitation, integrity, confidentiality and accountability to the extent that they correspond to the rights above. That is a pretty broad set of rights to be cast out.
Victoria Atkins
Those are not the data protection principles. If one continues to read on to paragraph 4(2)(b) of schedule 2, it sets out the two data protection principles that I have just highlighted. The provisions set out in sub-paragraph (2)(a) relate to the data protection principles of fair and transparent processing and the purpose limitation. As I say, this is not a permanent removal. This is, as we describe it, a pause. There is not a free hand to invoke the permitted exception as a matter of routine.
All of the data protection principles, including those relating to data minimisation, accuracy, storage limitation and integrity and confidentiality, will continue to apply to everyone. So, too, will all the obligations on data controllers and processors, all the safeguards around cross-border transfers, and all the oversight and enforcement powers of the Information Commissioner. The latter is particularly relevant here, as it is open to any data subject affected by the provisions in paragraph 4 of schedule 2 to make a complaint to the Information Commissioner that the commissioner is then under a duty to investigate. Again, I hope that that addresses some of the concerns that the hon. Member for Argyll and Bute raised.
Contrary to the impression that has perhaps been given or understood, paragraph 4 does not give the Home Office a free hand to invoke the permitted exceptions as a matter of routine. The Bill is clear that the exceptions may be applied only to the extent that the application of the rights of data subjects, or the two relevant data protection principles, would be likely to prejudice
“the maintenance of effective immigration control, or…the investigation or detection of activities that would undermine the maintenance of effective immigration control”.
That is an important caveat.
Liam Byrne
The Minister will know that in paragraph 2(1)(a) we already have a set of exemptions that relate to the prevention or detection of a crime, including, presumably, all of the crimes that fall into the bucket of organising or perpetrating illegal immigration. Despite constant pressing during the debate in the other place and here, we have not yet had a clear answer as to why additional powers and exemptions are needed, over and above the powers expressly granted and agreed in paragraph 2(1)(a).
Victoria Atkins
I am grateful to the right hon. Gentleman for raising that issue, because it allows me to get to the nub of how we approach the immigration system. We do not see the immigration system as some form of criminality or as only being open to the principles of criminal law. He will know that we deal with immigration in both the civil law and criminal law contexts. The exemption he has raised in terms of paragraph 2 of the schedule deals with the criminal law context, but we must also address those instances where the matter is perhaps for civil law.
We know that in the vast majority of immigration cases, people are dealt with through immigration tribunals or through civil law. They are not dealt with through criminal law. That is the point; we must please keep open the ability to deal with people through the civil law system, rather than rushing immediately to criminalise them. If, for example, they have overstayed, sometimes it is appropriate for the criminal law to become involved, but a great number of times it is for the civil law to be applied to deal with that person’s case either by way of civil penalty or by finding an arrangement whereby they can be given discretion to leave or the right to remain. We have the exemption in paragraph 4 so that we do not just focus on the criminal aspects that there may be in some immigration cases. We must ensure that we also focus on the much wider and much more widely used civil law context.
It is important to recognise that the exemptions will not and cannot be targeted at whole classes of vulnerable individuals, be they victims of domestic abuse or human trafficking, undocumented children or asylum seekers. The enhanced data rights afforded by the GDPR will benefit all those who are here lawfully in the United Kingdom, including EU citizens. The relevant rights will be restricted only on a case-by-case basis where there is evidence that the prejudice I have mentioned is likely to occur.
Peter Heaton-Jones (North Devon) (Con)
The Minister specifically mentioned EU citizens. There have been concerns that the exemption will impact those EU nationals who are already here and who, as we have already heard, are contributing hugely to the UK. Can she assure us that the exemption is not targeted at them?
Victoria Atkins
Absolutely. The exemption will not be enacted on the basis of nationality. It is enacted on a case-by-case basis to uphold the integrity of the immigration system. There will be no question of EU nationals being in any way targeted by it. Indeed, we know the great effect that EU nationals and other people from other countries have had in this country, and we certainly would not be looking to target them on the basis of nationality.
Darren Jones
Is it not right to say that EU citizens will be part of the immigration system? They will be immigrants with immigration rights as part of the Brexit process. These rules could therefore apply to them, could they not? Secondly—
Victoria Atkins
I will answer the first one—yes. The hon. Gentleman asked whether EU citizens would be targeted. Once we leave the European Union, we will have our own immigration policy. There will clearly be no distinction between EU and non-EU, because everyone will be outside of the UK, if I may put it that way, very inelegantly.
Darren Jones
But they would still be subject to the right to exempt them from their data protection rights. I welcome the Minister’s comments on the time-limited nature of the intention of using the rules, but can she point me to the section of the Bill that defines that time limit, because I am struggling to find it?
Victoria Atkins
If I may, I will come back to that point in a moment. In the case of subject access requests, each request would need to be considered on its own merits. For example, we could not limit the information given to visa applicants on how their personal data would be processed as part of that application. Rather, the restrictions would be applied only where there was a real likelihood of prejudice to immigration controls as a result of disclosing the information concerned.
Liam Byrne
If someone has overstayed, they have committed a crime. Therefore, paragraph 2(1)(a) absolutely bites. We are seeking to prevent that crime. Someone who has overstayed their visa has committed a crime. It is kind of as simple as that.
Victoria Atkins
In that scenario, we may well effect their removal administratively. It does not mean that it is going through the criminal courts.
By way of a second example, take a case where the Home Office is considering an application for an extension of leave to remain in the UK. It may be that we have evidence that the applicant has provided false information to support his or her claim. In such cases, we may need to contact third parties to substantiate the veracity of the information provided in support of the application. If we are then obliged to inform the claimant that we are taking such steps, they may abscond and evade detection.
Liam Byrne
If someone has submitted false information in support of an application to the Government, and signed it, as they must, that is called fraud. That is also a crime, and is covered by paragraph 2(1)(a).
Victoria Atkins
I take the right hon. Gentleman’s point, particularly in relation to the overstayer, but as the purpose of processing personal data in many immigration areas is not generally the pursuit of criminal enforcement action, it is not clear that it would be appropriate in all cases to rely on crime-related exemptions, where the real prejudice lies in our ability to take administrative enforcement action. It may well be that in some cases a crime has been committed, but that will not always be the case.
Criminal sanctions are not always the correct and proportionate response to people who are in the UK without lawful authority. It is often better to use administrative means to remove such a person and prevent re-entry, rather than to deploy the fully panoply of the criminal justice system, which is designed to rehabilitate members of our communities. As the purpose of processing personal data in such cases is not generally the pursuit of a prosecution, it is not clear that we could, in all cases, rely on that exemption relating to crime.
Stuart C. McDonald
So far we have had some hypothetical examples about what might happen in the future, but given that we have a data protection regime in place already, it would be useful to know whether the Minister can give us examples of situations that have arisen in which the Home Office has been hindered by the current data protection regime. We have not heard anything like that so far.
Victoria Atkins
If I may, I will continue with my speech, because I have more information to give. Perhaps at the end I can deal with the hon. Gentleman’s point.
Liam Byrne
I just want to dissolve one confusion in the Minister’s remarks. The nature of the Home Office response, whether it is a prosecution through a civil court, a civil sanction or a civil whatever else, does not affect the nature of the offence that is committed. The Home Office has a range of sanctions and choices in responding to an offence, but that does not stop the offence being an offence. The offence is still a crime, and is therefore covered by paragraph 2(1)(a).
Victoria Atkins
The right hon. Gentleman is assuming that each and every immigration case that will be covered by these provisions necessitates the commission of a crime.
Victoria Atkins
I would not make that assumption. The vast majority of immigration cases are dealt with in a civil context.
Victoria Atkins
No, forgive me. I have been very generous with interventions. I am going to make some progress, and then no doubt others will intervene on me in due course.
I turn to the charge that the exemption has no basis in EU law. Article 23 of the GDPR allows member states to restrict the application of certain provisions of the regulation to safeguard important objectives of general public interest. Immigration control constitutes one such objective. We see immigration as an important matter of public interest, and the GDPR allows member states to exempt rights where that is the case. We are not alone in our belief that immigration is an important matter of general public interest. The Irish Government clearly stated that in their own Data Protection Bill. Clause 54 of the Irish Bill gives powers to make regulations restricting certain rights and obligations under the GDPR to safeguard important objectives of general public interest. The list of such objectives in the Bill includes matter relating to immigration.
Opposition Members have talked about their concerns about the fact that these provisions may be covered by paragraph 2 of the schedule. I want to reflect on the outcome of the debate on this provision in the House of Lords, which contains many noble Lords who are extremely learned in the law, have much experience of campaigning on immigration rights and so on. We listened very carefully to the concerns raised at Lords Committee stage, and as a result the Government tabled amendments at Lords Report stage to narrow the scope of the exemption so that it no longer covers the right to rectification and data portability. In response to those amendments, Lord Kennedy of Southwark said:
“The amendments tabled by the Government provide important clarification on what is exempt, limit the power in Bill and seek to address the concerns highlighted during the previous debate and today…I am happy to support their amendments.”—[Official Report, House of Lords, 13 December 2017; Vol. 787, c. 1590.]
Furthermore, in a Division on a Liberal Democrat amendment to strike out the immigration exemption, the official Opposition abstained. I wonder what has changed between their abstaining on that amendment and accepting that the Government’s amendments were sufficient, and today. Nothing has changed since the Bill left the Lords, so perhaps the right hon. Member for Birmingham, Hodge Hill can help us with why their position has changed.
I hope I have been able to satisfy the Committee that this provision is necessary and important.
Gareth Snell (Stoke-on-Trent Central) (Lab/Co-op)
It is a pleasure to serve under your chairmanship, Mr Hanson. Will the Minister give a tangible example, as she has done in other cases, of where an immigration case may require exemption under paragraph 4—in other words, a case in which a crime has not been committed and therefore would not be covered under paragraph 2(2)? The cases she has mentioned so far would, on the face of it, be covered by paragraph 2(2), because a criminal act had taken place or was about to take place.
Victoria Atkins
There may be occasions when there is a person we have lost track of whose status is irregular. If we know they have a child, we will seek from the Department for Education assistance to find the whereabouts of the child. That child has not committed a criminal offence, so I would be very concerned to ensure that the Home Office, Border Force or whoever else acted lawfully when seeking that data in order to enable them to find the parent or whoever is the responsible adult, as part of the immigration system.
Louise Haigh
In that example, would the exemption not be covered under the safeguarding exemption, as brought by the Government amendment to schedule 1?
Victoria Atkins
No—the child is not missing, but the parent is; so we seek advice from the Department for Education about where the child is. It may be that cleverer lawyers than me in the Home Office will find an exemption for that, but the point of this exemption of paragraph 4 is to cover the lawfulness of the Home Office in seeking such information in order to find parents or responsible adults who may have responsibility, and either to regularise their stay or to remove them.
I encourage the right hon. Member for Birmingham, Hodge Hill to withdraw his amendment, as we believe that it is not the wholesale disapplication of data subjects’ rights, and it is a targeted provision wholly in accordance with the discretion afforded to member states by the GDPR and is vital to maintaining the integrity and effectiveness of our immigration system.
Liam Byrne
Anyone who was not alarmed by this provision certainly will leave this Committee Room thoroughly alarmed by the Minister’s explanations.
First, we were invited to believe that we could safeguard due process and the rights of newcomers to this country by suspending those rights and pursuing people through civil court. We were then asked to believe that the Home Office’s ambition to deal with these cases with civil response rendered inoperable the powers set out in paragraph 2(1)(a), confusing the response from the Home Office and the nature of the offence committed up front. Then, we were invited to believe that this was not a permanent provision—even though that safeguard is not written into the Bill—but a temporary provision. What is not clear is when those temporary provisions would be activated and, crucially, when they would be suspended.
Liam Byrne
I am happy to give way in a moment. Most of us here who have done our fair share of immigration cases—I have done several thousand over the last 14 years—know that on some occasions, the Home Office interpretation of time is somewhat different from a broadly understood interpretation of time. I have cases in which a judge has ordered the issue of a visa, and six months later we are still chasing the Home Office for the issue of the visa. I will not be alone in offering these examples.
Perhaps when the Minister intervenes, she could set out what “temporary” means, where it is defined and where are the limits, and she still has not answered my question whether she will guarantee that the implementation of this pause will not jeopardise someone’s ability to submit either a request for an entry clearance officer review or an appeal within the legally binding time windows set out in Home Office regulations.
Victoria Atkins
The key to this is the purpose for which we are processing the data. Even if there are criminal sanctions, that does not mean that we are processing for that purpose, particularly where we are not likely to pursue a prosecution. The primary purpose is often immigration control—that does not fit under paragraph 2 as he has described it—rather than enforcing the criminal justice system. That is the point. It is for the purpose of processing the data. The crime-related provisions in the Bill refer to the importance of identifying the purposes of the processing. Where the primary purpose is immigration related, it is not clear that we could rely on the crime-related exemptions. That is why paragraph 4 is in the schedule.
Liam Byrne
I am really sorry to have to say this, but that is utter nonsense. The idea that the Home Office will seek to regularise someone’s immigration status by denying them access to information that might support their case is, frankly, fanciful.
This is not a new debate; we last had it in 1983. The Home Office tried to sketch this exemption into legislation then, it failed, and we should not allow the exemption to go into the Bill, especially given that all the explanations we have heard this afternoon are about cases where paragraph 2(1)(a), or the safeguarding provisions drafted by the Government, would provide the necessary exemptions and safeguards in the contingencies that the Minister is concerned about.
Darren Jones
I feel for the Under-Secretary, because she is on a bit of a sticky wicket given the Government’s drafting, but does my right hon. Friend agree that it is concerning that I asked twice to be pointed to specifics—I asked first how the pause is drafted in the Bill, and secondly where the word “immigration” appears under article 23 of the GDPR—but on neither occasion was I was pointed to them? We ought also to draw the Committee’s attention to the report on the Bill by the Joint Committee on Human Rights, which states:
“The GDPR does not expressly provide for immigration control as a legitimate ground for exemption.”
Liam Byrne
My hon. Friend is bang on the money, but perhaps the Under-Secretary can enlighten us.
Victoria Atkins
All rights are reinstated once the risk to prejudice is removed. The wording is in line 35 of paragraph 4:
“to the extent that the application of those provisions would be likely to prejudice any of the matters mentioned in paragraphs (a) and (b).”
To reassure the hon. Member for Bristol North West, that is the end point.
Liam Byrne
I am grateful to the Under-Secretary for clarifying a point that was not at issue. No one is concerned about what rights kick back in at the end of a process. We are worried about how long the process will last, who will govern it, what rights newcomers to this country or courts will have to enforce some kind of constraint on the process and how we will stop the Home Office embarking on unending processes in a Jarndyce v. Jarndyce-like way, which we know is the way these cases are sometimes prosecuted. The Home Office is full of some of the most amazing civil servants on earth, but perhaps, a little like the Under-Secretary, they are sometimes good people trapped in bad systems and, dare I say it, bad arguments.
Question put, That the amendment be made.
“2. The function is designed to protect members of the public against— (a) dishonesty, malpractice or other seriously improper conduct, or (b) unfitness or incompetence. | The function is— (a) conferred on a person by an enactment, (b) a function of the Crown, a Minister of the Crown or a government department, or (c) of a public nature, and is exercised in the public interest.” |
“() section 244 of the Investigatory Powers Act 2016;” |
“1A. The Scottish Information Commissioner. | By or under— (a) the Freedom of Information (Scotland) Act 2002 (asp 13); (b) the Environmental Information (Scotland) Regulations 2004 (S.S.I. 2004/520); (c) the INSPIRE (Scotland) Regulations 2009 (S.S.I. 2009/440).” |
“5A. The Financial Conduct Authority. | By or under the Financial Services and Markets Act 2000 or by another enactment.” |
“12. The Charity Commission. | By or under— (a) the Charities Act 1992; (b) the Charities Act 2006; (c) the Charities Act 2011.” |
Liam Byrne
I beg to move amendment 170, in schedule 2, page 151, line 8, at end insert—
“(f) in Chapter IX of the GDPR (provisions relating to specific processing situations), Article 89(1) (safeguards and derogations relating to processing for archiving purposes in the public interest, scientific or historical research purposes or statistical purposes).”
This amendment adds the restrictions imposed on archiving by the GDPR and the Bill to the list of matters in the Bill that benefit from the Journalism, Art and Literature exemption.
The purpose of this amendment is to protect some of our important national archives. We in this country are some of the greatest collectors on earth; the tradition established by Sir Hans Sloane all those centuries ago inspired many generations that followed him. Our ability and our tradition of collecting mean that this country is now home to some of the greatest collections on the planet.
It is fantastic to see many of these institutions now rapidly digitalising those archives. I was privileged to be able to visit the Natural History Museum recently, which I think is home to something like 83 million different specimens. It is now beginning to digitalise those archives in a way that opens them up not only to our schoolchildren, but to citizens of this country and those around the world who are keen on science.
The point of this amendment is that we cannot simply preserve those archives in aspic. They must be dynamic resources; they must be added to, and our success or failure in that task has a crucial bearing on the health of our democracy and our ability to, dare I say it, reflect on past mistakes and do better. I think it was the legendary Karl Popper who once said, “To err is human, to correct divine.”
We make mistakes. It is important that we reflect on the mistakes we have made in the past, in order to do better next time around. Many of the more contemporary archives, particularly news archives, have had a crucial bearing on inquiries into historical child abuse, the injustices perpetrated at Hillsborough and at Orgreave, and HIV-contaminated blood. All those inquiries relied on records that were not necessarily historical; many were contemporary.
A range of crucial organisations entrusted with the delicate task of keeping our archives up to date are seriously worried about the provisions in the GDPR. In fact, they believe the inadequacy of the derogations and exemptions in the GDPR, as it is proposed that we draft it into law, means that they will be quickly put out of business. In particular, that will bite on thousands of smaller archives.
The point they have consistently made to us is that, although we have such great collections and archives in this country and a public interest culture around protecting some of those archives, we do not have any of the kind of legal protections that they enjoy in countries such as France. We do not have the defendable protections around archives that those abroad benefit from.
The challenge in this Bill is a lack of precision. I do not want to pretend that this is a black-and-white case. Sometimes news archives in particular will be required to draw something of a grey line, and I am afraid the Minister has to earn her pay and be the one to decide where to draw that grey line. Sometimes there will be information stored in those archives that absolutely should be subject to the GDPR provisions. But if we are in effect granting a carte blanche for people to make requests of archives that require those archives to dip deep into the historical record, correct things and go through challenging processes to ensure they are right, I am afraid it will put a number of our archives out of business, and that will damage the health of our democracy.
We have drafted this amendment with a number of aims. We want to try to create a statutory definition for organisations that archive in the public interest. We have had a first attempt at drawing that in a narrow way, so it does not infringe on material that is stored that absolutely should be subject to general GDPR provisions. We have done our best to ensure that the archiving exemptions are proportionate to the public interest nature of the material being archived. We wanted to offer an amendment worded hopefully in such a way that, frankly, it excludes Google, Facebook and others from enjoying the exemptions sought here.
This is the first place in the Bill where the debate rears its head. I am grateful to the range of museums, archives and the BBC that have helped us to craft this amendment. It should not be particularly controversial. There should be agreement across the Committee on the need to protect our great collections, yet keep some companies, such as Google and Facebook, subject to the provisions in the Bill.
We offer the amendment as a starter for 10. Obviously, we would be delighted if the Government accepted it; we would be even more pleased if they could perfect it.
The Chair
I have just had a request to remove jackets, because of the warm temperature in the room. I give my permission to do so. I call the Minister.
Margot James
Thank you, Mr Hanson. I agree with the tribute paid by the right hon. Member for Birmingham, Hodge Hill to the custodians of some of the most wonderful archives in the world. I will comment on his proposals with regard to such archives shortly, but I hope that recent debates have left no doubt in hon. Members’ minds that the Government are absolutely committed to preserving the freedom of the press, and maintaining the balance between privacy and freedom of expression in our existing law, which has served us well for so many years.
As set out in the Bill, media organisations can already process data for journalistic purposes, which includes media archiving. As such, we believe that amendment 170 is unnecessary and could be unhelpful. I agree with the right hon. Gentleman that it is crucial that the media can process data and maintain media archives. In the House of Lords, my noble Friend Lord Black of Brentwood explained very well the value of media archives. He said:
“Those records are not just the ‘first draft of history’; they often now comprise the only record of significant events, which will be essential to historians and others in future, and they must be protected.”—[Official Report, House of Lords, 10 October 2017; Vol. 785, c. 175.]
However, recital 153 indicates that processing for special purposes includes news archiving and press libraries. Paragraph 24 of schedule 2 sets out the range of derogations that apply to processing for journalistic purposes. That includes, for example, exemption from complying with requests for the right to be forgotten. That means that where the exemption applies, data subjects would not have grounds to request that data about them be deleted. It is irrelevant whether the data causes substantial damage or distress.
However, if media organisations are archiving data for other purposes—for example, in connection with subscriber data—it is only right that they are subjected to the safeguards set out in article 89(1), and the Bill provides for that accordingly. For that reason, I hope that the right hon. Gentleman agrees to reconsider his approach and withdraw his amendment.
Liam Byrne
I am happy to withdraw the amendment, although I would say to the Minister that the helpful words we have heard this afternoon will not go far enough to satisfy the objections that we heard from organisations. We reserve the right to come back to this matter on Report. We will obviously consult the organisations that helped us to draft the amendment, and I urge her to do the same. I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Schedule 2, as amended, agreed to.
Schedule 3
Exemptions etc from the GDPR: health, social work, education and child abuse data
Amendments made: 111, in schedule 3, page 160, line 21, leave out
“with the day on which”
and insert “when”.
This amendment is consequential on Amendment 71.
Amendment 112, in schedule 3, page 162, line 3, leave out paragraph 16 and insert—
“16 (1) This paragraph applies to a record of information which—
(a) is processed by or on behalf of the Board of Governors, proprietor or trustees of, or a teacher at, a school in Northern Ireland specified in sub-paragraph (3),
(b) relates to an individual who is or has been a pupil at the school, and
(c) originated from, or was supplied by or on behalf of, any of the persons specified in sub-paragraph (4).
(2) But this paragraph does not apply to information which is processed by a teacher solely for the teacher’s own use.
(3) The schools referred to in sub-paragraph (1)(a) are—
(a) a grant-aided school;
(b) an independent school.
(4) The persons referred to in sub-paragraph (1)(c) are—
(a) a teacher at the school;
(b) an employee of the Education Authority, other than a teacher at the school;
(c) an employee of the Council for Catholic Maintained Schools, other than a teacher at the school;
(d) the pupil to whom the record relates;
(e) a parent, as defined by Article 2(2) of the Education and Libraries (Northern Ireland) Order 1986 (S.I. 1986/594 (N.I. 3)).
(5) In this paragraph, “grant-aided school”, “independent school”, “proprietor” and “trustees” have the same meaning as in the Education and Libraries (Northern Ireland) Order 1986 (S.I. 1986/594 (N.I. 3)).”
This amendment expands the types of records that are “educational records” for the purposes of Part 4 of Schedule 3.
Amendment 113, in schedule 3, page 164, line 7, leave out
“with the day on which”
and insert “when”.—(Margot James.)
This amendment is consequential on Amendment 71.
Schedule 3, as amended, agreed to.
Schedule 4 agreed to.
Clause 16
Power to make further exemptions etc by regulations
Question proposed, That the clause stand part of the Bill.
Stuart C. McDonald
This morning we had a discussion about some of the Henry VIII clauses contained in the Bill. In essence, I said that when we are talking about personal information—particularly, in such circumstances, sensitive personal information—there should be a strong presumption against Henry VIII clauses, with the onus being on the Government to justify why delegated legislation is the appropriate way to make changes to our data protection rules.
Throughout the passage of the Bill we will continue to challenge the Government to justify delegated powers proposed under the Bill. This clause is the next example of that arising, so in our view it falls on the Minister to explain why she seeks delegated authority to exercise certain functions under the GDPR. I look forward to hearing what she has to say.
Liam Byrne
We agree that the clause offers Ministers a rather sweeping power to introduce new regulations. Over the course of what has been quite a short day in Committee we have heard many reasons to be alarmed about equipping Ministers with such sweeping powers. We proposed an amendment to remove the clause, which I think was not selected because we have this stand part debate. What we need to hear from the Minister are some pretty good arguments as to why Ministers should be given unfettered power to introduce such regulations without the effective scrutiny and oversight of right hon. and hon. Members in this House.
Margot James
I am glad that the right hon. Gentleman feels we have had a short day in Committee. In answer to his questions and those of the hon. Gentleman, the order making powers in clauses 16 and 113 allow the Secretary of State to keep the list of exemptions in schedules 2 to 4 and 11 up to date. As I mentioned when we discussed order making powers in relation to clause 10 and schedule 1, we carefully reviewed the use of such powers in the Bill following recommendations from the Delegated Powers and Regulatory Reform Committee. We think an appropriate balance has now been struck. It might be helpful if I explain the reasons for our thinking.
Clause 16 includes order making powers to ensure that the Secretary of State can update from time to time the particular circumstances in which data subjects’ rights can be disapplied. That might be necessary if, for example, the functions of a regulator are expanded and exemptions are required to ensure that those new functions cannot be prejudiced by a data subject exercising his or her right to object to the processing.
We believe it is very important that the power to update the schedules is retained. Several of the provisions in schedules 2 to 4 did not appear in the Data Protection Act 1998 and have been added to the Bill to address specific requirements that have arisen over the last 20 years.
For example, the regulatory landscape has changed dramatically since the 1998 Act. Organisations such as the Bank of England, the Financial Conduct Authority and the National Audit Office have taken on a far broader range of regulatory functions, and that is reflected in the various amendments we have tabled to paragraphs 7 to 9 of schedule 2, to provide for a broader range of exemptions. No doubt, there will be further changes to the regulatory landscape in the years to come. Of course, other exemptions in schedule 2 have been carried over from the 1998 Act, or indeed from secondary legislation made under that Act, with little change. That does not mean, however, that they will never need to be amended in the future. Provisions made under the 1998 Act could be amended via secondary legislation, so it would seem remiss not to afford ourselves that same degree of flexibility now. If we have to wait for primary legislation to make any changes, it could result in a delay of months or possibly years to narrow or widen an extension, even where a clear deficiency had been identified. We cannot predict the future, and it is important that we retain the power to update the schedules quickly when the need arises.
Importantly, any regulations made under either clause would be subject to the affirmative resolution procedure. There would be considerable parliamentary oversight before any changes could be made using these powers. Clause 179 requires the Secretary of State to consult with the Information Commissioner and other interested parties that he considers appropriate before any changes are made.
I hope that that reassures Members that we have considered the issue carefully. I commend clause 16 to the Committee.
Question put, That the clause stand part of the Bill.
The Committee proceeded to a Division.
The Chair
The ayes were 10, the noes were nine. No—[Interruption.] I have been here a long time.
Margot James
I beg to move amendment 15, in clause 17, page 10, line 16, leave out “authority” and insert “body”.
This amendment corrects the reference in Clause 17(7) to the “national accreditation authority” by amending it to refer to the “national accreditation body”, which is defined in Clause 17(8).
Clause 17 relates to the certification of data controllers. This is a relatively new concept and will take time to bed in, but it could also be a significant step forward in ensuring that data subjects can have confidence in controllers and processors and, perhaps even more important, that controllers and processors can have confidence in each other. It is likely to be particularly relevant in the context of cloud computing and other business-to-business platforms where individual audits are often not feasible in practice.
Before they can audit controllers, certification bodies must be accredited, either by the Information Commissioner or by the national accreditation body, UKAS. Clause 17 and schedule 5 set out how the process will be managed. Unfortunately, there is a typographical error in clause 17. It refers erroneously to the “national accreditation authority” in subsection (7), when it should refer to the “national accreditation body”. Amendment 15 corrects that error.
Amendment 15 agreed to.
Clause 17, as amended, ordered to stand part of the Bill.
Schedule 5
Accreditation of certification providers: reviews and appeals
Amendment made: 114, in schedule 5, page 170, line 21, leave out “In this paragraph” and insert—
“Meaning of “working day”
7 In this Schedule”
This amendment applies the definition of “working day” for the purposes of the whole of Schedule 5. There are references to “working days” in paragraphs 5(2) and 6(3) of that Schedule.—(Margot James.)
Schedule 5, as amended, agreed to.
Clause 18 ordered to stand part of the Bill.
Clause 19
Processing for archiving, research and statistical purposes: safeguards
Amendment made: 16, in clause 19, page 12, line 2, leave out “(d)” and insert “(e)” —(Margot James.)
This amendment amends the definition of “relevant NHS body” in this Clause by adding special health and social care agencies established under Article 3 of the Health and Personal Social Services (Special Agencies) (Northern Ireland) Order 1990 (which fall within paragraph (e) of section 1(5) of the Health and Social Care (Reform) Act (Northern Ireland) 2009).
Clause 19, as amended, ordered to stand part of the Bill.
Clauses 20 to 22 ordered to stand part of the Bill.
Ordered, That further consideration be now adjourned.—(Nigel Adams.)
Data Protection Bill [ Lords ] (First sitting)
(6 years, 1 month ago)
Public Bill CommitteesRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Committee divided: - Ayes: 8 / Noes: 10 - Question accordingly negatived.
The Committee divided: - Ayes: 9 / Noes: 10 - Question accordingly negatived.
The Chair
Welcome. The annunciators in the Committee Room are not working, so we will go by the Hansard clock on my left until they are repaired. I remind colleagues to switch off their mobile phones, and that tea and coffee are not permitted in Committee sittings.
Ordered,
That—
(1) the Committee shall (in addition to its first meeting at 9.25 am on Tuesday 13 March) meet—
(a) at 2.00 pm on Tuesday 13 March;
(b) at 11.30 am and 2.00 pm on Thursday 15 March;
(c) at 9.25 am and 2.00 pm on Tuesday 20 March;
(d) at 11.30 am and 2.00 pm on Thursday 22 March;
(e) at 9.25 am and 2.00 pm on Tuesday 27 March.
(2) the proceedings shall be taken in the following order: Clauses 1 to 10; Schedule 1; Clauses 11 to 15; Schedules 2 to 4; Clauses 16 and 17; Schedule 5; Clauses 18 to 22; Schedule 6; Clauses 23 to 30; Schedule 7; Clauses 31 to 35; Schedule 8; Clauses 36 to 86; Schedules 9 and 10; Clauses 87 to 112; Schedule 11; Clauses 113 and 114; Schedule 12; Clauses 115 and 116; Schedule 13; Clauses 117 and 118; Schedule 14; Clauses 119 to 153; Schedule 15; Clause 154; Schedule 16; Clauses 155 to 181; Schedule 17; Clauses 182 to 204; Schedule 18; Clauses 205 to 208; new Clauses; new Schedules; remaining proceedings on the Bill;
(3) the proceedings shall (so far as not previously concluded) be brought to a conclusion at 5.00 pm on Tuesday 27 March. —(Margot James.)
Resolved,
That, subject to the discretion of the Chair, any written evidence received by the Committee shall be reported to the House for publication.—(Margot James.)
The Chair
Copies of written evidence will be made available in the Committee Room shortly.
We now begin line-by-line consideration of the Bill. Mr Streeter—my fellow Chair—and I have selected the amendments for consideration today; the selection list is available in the Committee Room. Amendments that have been grouped for debate are generally on the same or a similar issue.
For the benefit of new Members on the Committee, I should say that decisions on amendments are made not necessarily in the order in which they are debated, as shown on the selection list, but rather in the order in which they appear on the amendment paper. Some of the provisions that we debate today will therefore not be voted on until a later day. I will use my discretion to determine whether to have separate stand part debates on clauses to which a number of amendments have been tabled. I am sure it will all become clear in due course.
Clause 1
Overview
Question proposed, That the clause stand part of the Bill.
The Minister of State, Department for Digital, Culture, Media and Sport (Margot James)
It is a pleasure to serve under your chairmanship, Mr Hanson. Clause 1 is a signposting overview of the Bill. It is not intended to have any effect other than to help us to navigate such a large Bill; I trust that hon. Members agree that it achieves its purpose.
Liam Byrne (Birmingham, Hodge Hill) (Lab)
It is a pleasure to serve under your chairmanship, Mr Hanson. Looking around the Committee Room, I see that you have an extremely unruly bunch of hon. Members to police in the next couple of weeks, but I know that you will do so with skill and care.
The Opposition do not wish to object to clause 1, which is basically the foundation stone of the Bill. We wish only to underline the Bill’s peculiarity in that it seeks to incorporate a piece of European legislation into British law without actually reproducing the legislation in question. Throughout the debate, we will hear references to the general data protection regulation—GDPR—a text that appears nowhere in the Bill. I hope that over the coming weeks the Committee will therefore focus on a series of principles for data protection. The Opposition will move amendments to enshrine those principles more firmly into our law. Beyond that, I have no objections to this foundation stone of the Bill.
Question put and agreed to.
Clause 1 accordingly agreed to.
Clause 2
Protection of personal data
Question proposed, That the clause stand part of the Bill.
The Chair
With this it will be convenient to discuss new clause 12— Right to protection of personal data—
“(1) A person (“P”) has the right to protection of personal data concerning him or her.
(2) Personal data must be processed fairly for specified purposes as set out in the GDPR, and in accordance with the provisions, exceptions and derogations of this Act; and on the basis of the consent of P or some other legitimate basis.
(3) The Information Commissioner shall be responsible for ensuring compliance with the rights contained within this section.”
This new clause would incorporate Article 8 of the Charter of Fundamental Rights of the European Union (Protection of personal data) into the Bill.
Liam Byrne
New clause 12, which I tabled with other Opposition members of the Committee, seeks to achieve something very simple: to incorporate article 8 of the EU charter of fundamental rights into British law. It is beyond dispute that both sides of the House share the objective of ensuring friction-free trade with our neighbour, the European Union, over the years to come. The role of this Bill in enabling that trade is of fundamental significance. Something like 70% of our exports of goods and services rely on the smooth transfer of data, and we know that the European data economy will be worth something like £643 billion by 2020. Despite all the efforts of the Secretary of State for International Trade, the reality is that the EU data economy, sitting next door to us, remains one of the most important, if not the most important, global markets from which we should aspire to profit over the years to come.
One of the great risks of Brexit is that technology firms will relocate, which is already beginning to take place. Many such firms will choose to headquarter in the Republic of Ireland. It is therefore in everybody’s interest that our trade and data protection regimes allow the smooth export of digitally enabled services. I hope that is not a contentious point.
In new clause 12, we propose to incorporate into British law what is, in effect, at the cutting edge of global data protection measures. It is not a trivial or frivolous new clause. Her Majesty’s Opposition did not make it up; it was crafted with techUK—an organisation that represents 950 companies, which employ something like 800,000 people and make up about half of the UK tech industry. When techUK proposes a fundamental measure of reform, it is important that we listen.
When we leave the European Union, we will need to agree with it an adequacy agreement by which it recognises the data protection regime in this country as adequate and therefore indicates that it is permissible for us to share data across the continental borders. The question, therefore, is how do we put that adequacy agreement beyond any doubt, not just for the immediate years after Brexit but for the decades to come? We know that trade will be fundamental to the health and wellbeing of our economy over many, many years. Let us put the data sharing regime between us and the European Union beyond doubt, not just for the short term but for the long term. Failure to get an adequacy agreement could arguably be fatal to the British economy. We simply cannot consider a shred of risk to that adequacy agreement. I hope that, having looked at this amendment and appreciated some of the refinements we made in the other place, the Government will decide that they will not put dogma in the way of agreeing to it. It is too important to leave to doubt.
In the debate on clause 1, I said that this principle was all the more important, because right hon. and hon. Members are being asked to agree to a Bill that does not feature the GDPR, which it seeks to incorporate into British law. Hon. Members can look it up if they like, but the Government have not set it out in a schedule or anywhere else. The fact that the Bill does not include the GDPR makes it all the more important that the House agrees a series of principles that are good now and for the future. Principles are paramount, and in this Bill the principle of privacy is first among equals.
The question of privacy is not disputed. It is a principle that has been agreed by our own Supreme Court in a recent case that was brought by the right hon. Member for Haltemprice and Howden (Mr Davis), who is now the Secretary of State for Brexit. Together with my hon. Friend the Member for West Bromwich East (Tom Watson), he brought the case of David Davis and others v. Secretary of State for the Home Department to the High Court, which confirmed the right of privacy in this country. This is not something that is necessarily party political; this is something on which there is strong cross-party consensus. These principles will become all the more important as the EU (Withdrawal) Bill is given effect because the Bill has thousands of ideas and proposals but kills off only one piece of legislation: the EU charter of fundamental rights.
A British tradition helped shape the EU charter of fundamental rights. We are the country of the Magna Carta and we are the country that helped craft the European convention on human rights after world war two to ensure there was never a return to the horrors of the 1930s and 1940s. Our lawyers played a fundamental role in shaping the EU charter of fundamental rights, but now, in the EU (Withdrawal) Bill, the Government decide to kill off the whole thing.
In killing off the whole thing, and in particular article 8—the fundamental foundational right to privacy—we create a new risk to keeping in lockstep the data protection regime in this country and the data protection regime in the European Union. If we bring that into doubt, we jeopardise an adequacy agreement for the future. I fear that, by setting their face against this new clause 12, the Government are, in some way and for some reason, trying to preserve the illusion of harmony between our regime and the regime of the European Union in order to camouflage the flexibility that might allow it to depart from regulatory harmonisation in the years to come. To coin a phrase, they are trying to have their cake and eat it.
That is not a reasonable position. The Minister will reassure us that that is not the intention of Her Majesty’s Government today. No doubt, she will tell us there is no will to try and win a race to the bottom in the data protection regime and many of us may be sympathetic to her position, as she is quite famously a reasonable Minister. However, the Tory party is not a stable place and the worry on all parts is not only how long the Minister will enjoy her office but what will come after her and what Government will come after this Government. There will be Governments of many colours over the course of the next 70 or 80 years and in this Committee we do not want to risk leaving unfettered a future Government who may take a less reasonable position than the famously reasonable Minister. That is why we want to move the incorporation of article 8 into British law.
We currently have a Bill without a data protection instrument and without clear data protection principles. That is a high-risk situation when, today, we have a low-risk regime. Nobody is particularly troubled by the current privacy regimes; we have been operating under article 8 of the EU charter of fundamental rights for some time and, certainly, no arguments I have heard suggest that it is troublesome in any way. What is wrong with continuing with it?
When we first crafted this new clause, there were some issues to which we were alert. A number of noble peers expressed a concern that we were creating too absolutist a right, a right without balancing test and provisions. That has been corrected in the new clause presented to this Committee today. We would therefore like to press it to a vote, as we want to ensure this fundamental right is part and parcel of British law for the years to come. It de-risks an adequacy agreement for data protection for the future. We have enjoyed the provisions of article 8 for some years, and there is no reason to suggest that they may be more troublesome in the years ahead. We do not think the Government want to depart from a harmonisation of regulations in this area over the years to come so the flexibility that this Bill currently offers will not be taken up. Let us put the matter beyond dispute and beyond doubt and let us incorporate article 8 into the Bill.
The Chair
I remind Members—particularly new Members—that new clause 12 is being debated now, but will not be voted on, if Members wish to have a vote, until we have completed consideration of the Bill. Today’s debate is on clause 2 and new clause 12, but the vote on the new clause will come later.
Brendan O'Hara (Argyll and Bute) (SNP)
I rise in support of new clause 12, for two reasons. With the Bill as it stands, we see an erosion of the rights of UK citizens in a range of areas. This is particularly important because, as drafted, the EU (Withdrawal) Bill, eliminates important rights that are protected by article 8 which would otherwise constrain Ministers’ ability to erode the fundamental data protection rights that we currently enjoy.
On top of that, it is essential that, post-Brexit, the United Kingdom has an adequacy agreement with the rest of the European Union. As we have heard from the right hon. Member for Birmingham, Hodge Hill, if the United Kingdom fails to secure an adequacy agreement, I fear there will be a flight of high-tech, high-skilled jobs from the United Kingdom to other parts of the European Union.
For the UK to be able to take full advantage of this vital continued free flow of data with the rest of the European Union post Brexit, the most straightforward route is an adequacy agreement. As I have heard argued before, that decision is not as straightforward as one would hope. An adequacy agreement is not simply in the Commission’s gift to give; it is a legal judgment.
If I could point again to the data protection lawyer, Rosemary Jay, who said that the EU had to go through a legislative process, and it was simply not in the EU’s gift to do this in any informal way. The Commission has to go through a legislative process in order to give the UK an adequacy agreement. There are further complications because, with an adequacy agreement, the European Commission has to consider a variety of issues, such as the rule of law, respect for human rights, and legislation on national public security and criminal law. That being so, as it currently stands, the Investigatory Powers Act may well prove a block to achieving adequacy. The Act has already been accused of violating the European Union’s charter of fundamental rights. Eduardo Ustaran, the internationally recognised expert, has said:
“What the UK needs to do is convince the Commission—and perhaps one day the European Court of Justice—that the Investigatory Powers Act is compatible with fundamental rights. That’s a tall order”.
While I can understand that the Government are absolutely desperate to secure an adequacy agreement, the harsh reality is that, in these challenging circumstances and with this challenging legal process, it is not going to be as simple as perhaps we had hoped.
No one wants this situation to arise; it is absolutely essential that we have this deal, but, as GDPR evolves over time—as it surely will—in order to maintain that adequacy status, should we attain it, the UK will have to keep its data protection law in line with GDPR. The EU charter of fundamental rights and freedoms is absolutely central to EU data protection law. If we exclude ourselves now from article 8, the chances of achieving adequacy are seriously jeopardised, and the chances of maintaining adequacy are further jeopardised. I urge the Government please to consider the long and short-term consequences of not accepting this new clause. Without article 8, I cannot see how we will achieve or maintain adequacy, and if we cannot achieve and maintain adequacy, the consequences for UK high-tech businesses are unfathomable.
Darren Jones (Bristol North West) (Lab)
Thank you, Mr Hanson. It is a pleasure to serve under your chairmanship on my first Bill Committee.
I rise to support the comments made by my right hon. Friend the Member for Birmingham, Hodge Hill about the importance of adequacy and its link to article 8 of the charter of fundamental rights, and therefore in support of new clause 12. The Bill is pragmatic in seeking to bring GDPR principles into areas of non-EU competence and to provide a legislative parking space for GDPR if the UK leaves the European Union. However, we cannot get away from the fact that GDPR in itself has a legal basis that is anchored to the European charter of fundamental rights. In trying to copy and paste that level of protection into UK law, we must therefore also bring with it the fundamental rights to which it is attached.
Mike Wood (Dudley South) (Con)
The hon. Gentleman is selectively quoting from that analysis. As he will see, it also says that the European Court of Human Rights —I think that the case concerned Finland—held that article 8 of the European convention on human rights encompassed data protection rights that were protected in article 8 of the charter.
Darren Jones
Of course the hon. Gentleman is right that the article includes principles of data protection, but we are trying to make the Government’s job in seeking the decision on adequacy with the European Union as easy as possible. This seems an easy way to facilitate that. Clearly, there is a dereliction of fundamental rights through not copying and pasting this across into UK law. Although there are data protection principles under the European convention on human rights, article 8 states:
“Everyone has the right to respect for his private and family life, his home and his correspondence.”
That does not sound very modern or digital to me. Although rights flow from that, the charter rights on communications—specifically electronic communications— seem much more fit for the future. I welcome the Secretary of State’s comments that the Bill seeks to make our country fit for the future. Let us rely not on a world of manual correspondence, but on one of electronic communications.
The new clause is not ideological; it does not seek to rebalance power between business controllers and individual citizens. It merely seeks to replicate what is in law today: a basic and fundamental human right that seems to me and to others to be perfectly sensible. Only yesterday, I was in Brussels with the European Scrutiny Committee, meeting Mr Barnier. He talked positively about wanting to get agreement on data adequacy, given its importance—not least because 11% of global data flows come to the UK, 70% of which are with the EU. It would be a disaster for this country if we did not have adequacy, so let us make our job easier to effect that shared aim across the Floor of the Committee and with our counterparts in Europe of seeking a decision on adequacy. Let us put this new clause into the Bill, so that we maintain the position that our data subjects have today: a fundamental right, which is in the European charter of fundamental rights, and in the future will be in this Bill.
Margot James
I thank speakers for their thoughtful contributions. I share many of their concerns, as do the Government, particularly with regard to adequacy, which I will talk about in more detail. I think we are all agreed that after Britain leaves the European Union we must be able to negotiate an adequacy agreement for the free flow of data between us and the EU. That is absolutely essential.
First, the GDPR implements the right to data protection and more. It is limited in scope, but the Bill also implements data protection rights on four areas beyond GDPR. It applies GDPR standards to personal data beyond EU competence, such as personal data processed for consular purposes or national security. Secondly, the Bill applies the standards to non-computerised and unstructured records held by public authorities that the GDPR ignores. Thirdly, the Bill regulates data processed for law enforcement purposes. Fourthly, it covers data processed by the intelligence services.
There is no doubt in our minds that we have fully implemented the right to data protection in our law and gone further. Clause 2 is designed to provide additional reassurance. Not only will that be clear in the substance of the legislation, but it is on the face of the Bill. The Bill exists to protect individuals with regard to the processing of all personal data. I think this is common ground. We share Opposition Members’ concern for the protection of personal data. It must be processed lawfully, individuals have rights, and the Information Commissioner will enforce them.
New clause 12 creates a new and free-standing right, which is the source of our concern. Subsection (1) is not framed in the context of the Bill. It is a wider right, not constrained by the context of EU law. However, the main problem is that it is not necessary. It is not that we disagree with the thinking behind it, but it is not necessary and might have unforeseen consequences, which I will come to.
Article 6 of the treaty on European Union makes it clear that due regard must be had to the explanations of the charter when interpreting and applying the European charter of fundamental rights. The explanations to article 8 of the charter confirm that the right to data protection is based on the right to respect for private life in article 8 of the ECHR. The European Court of Human Rights has confirmed that article 8 of the ECHR encompasses personal data protection. The Government have absolutely no plans to withdraw from the European Court of Human Rights.
The new right in new clause 12 would create confusion if it had to be interpreted by a court. For rights set out in the Human Rights Act, there is a framework within which to operate. The Human Rights Act sets out the effect of a finding incompatible with rights. However, new clause 12 says nothing about the consequences of potential incompatibility with this new right to the protection of personal data.
Liam Byrne
The Minister is rehearsing the argument that was made in the other place before the requirements that we put into our amendments. She can see as well as me that the new clause was rewritten so that, under subsection (2), it is to be interpreted only
“in accordance with the provisions, exceptions and derogations of this Act;”.
So the idea that we are creating some kind of new and unfettered right is nonsense. We had this debate in the other place. We made refinements and they have been presented in the new clause.
If there is no dispute about the importance of adequacy and of putting it beyond risk, what is the problem with putting the question beyond doubt and dispute and incorporating the same foundation that is enjoyed in the European Union into British law?
Margot James
New clause 12 takes article 8 of the charter outside that context and creates a free-standing right. That is the potential for confusion. New clause 12 says nothing about the consequences of incompatibility with the new right to the protection of personal data. That would create, legal, regulatory and economic uncertainty. We are endeavouring not just to ensure adequacy after we leave the European Union, but to go beyond the mere requirement for adequacy, as the Prime Minister set out in her speech almost two weeks ago.
Further, how would the courts approach other legislation in the light of this new right? One has to ask how they would approach other rights. Could this new right be balanced against other rights?
Liam Byrne
It is not a new right; it is a roll-over of an existing right. I have not heard of a case prosecuted in British courts where there was a problem with balancing the right that we currently enjoy with anything else. We simply seek to roll this right over into the future.
Margot James
That brings me on to my other point: not only does this roll-over, as the right hon. Gentleman puts it, threaten to create confusion and undermine other rights, but it is unnecessary. The charter of fundamental rights merely catalogues rights that already exist in EU law; it is not the source of those rights. The rights, including to data protection, which is, importantly, what we are here to debate, arise from treaties, EU legislation and case law. They do not arise from the European charter of fundamental rights, so we argue that the new clause is completely unnecessary.
Darren Jones
The right exists in its own right in the European charter of fundamental rights. That is why European Courts refer to it when making decisions. If the Courts did not think that it was an established right in itself, they would refer to the other sources of legislation that the Minister mentioned. It therefore must, as a matter of logic, be a legal right that is fundamental; otherwise, the Courts would not refer to it.
On the Minister’s original comments about the consequences of the new clause, I think they are clear in the drafting. Subsection (2), as my right hon. Friend the Member for Birmingham, Hodge Hill said, states that processing personal data must comply with GDPR and the derogations in the Bill, and the consequences of subsection (3) are that the Information Commissioner should ensure compliance. In ensuring compliance, the commissioner will look to GDPR and the Bill to understand the consequences of a breach of a fundamental right that already exists.
Margot James
The source of the rights that we are discussing are EU legislation and case law. Those rights will be protected in UK domestic law after we leave the European Union by the European Union (Withdrawal) Bill. We have fully protected the right to data protection in our law. We have considered new clause 12 carefully, and it creates a new right. As I said, the arguments are well rehearsed, which is why we created clause 2 with the agreement of the Opposition spokespeople in the House of Lords.
The Government are determined to ensure the future free flow of data when we leave the European Union. We have heard much about the importance of, and the need for, an adequacy agreement, and I agree with everybody who has spoken on that. The general consensus is that, to achieve that, we need to faithfully implement the GDPR, and avoid the courts finding parts of the GDPR potentially incompatible with a new right. If that happened, rather than enabling the free flow of data, we would risk undermining it.
Twelve countries have negotiated adequacy arrangements with the European Union, including Canada, Israel, Uruguay, New Zealand and the United States. None of those countries was obliged by the EU Commission to put the charter of fundamental rights into their law, so I think Members can rest assured that the new clause is entirely unnecessary to achieve adequacy on our departure.
Brendan O'Hara
Does the Minister not accept that the countries she just listed were in an entirely different situation from the one that the United Kingdom finds itself in at the moment, where it is withdrawing from, rather than joining? One cannot compare like with like, because they are two entirely different situations. I believe that we are putting ourselves outside the scope of the GDPR and of achieving adequacy. The countries that she talked about took many years to achieve an adequacy agreement. The United Kingdom does not have that time. If the United Kingdom does not achieve adequacy on day one post-Brexit, does she not agree that the economy of the United Kingdom will suffer greatly as a result?
Margot James
I do not agree with the hon. Gentleman. I share his concern that we need to negotiate an adequacy agreement effectively; I am at one with him on that matter. For the reasons I have outlined, I do not believe that, if our clause is passed unamended, it will undermine that right when we come to negotiate an agreement. He made the point that those other countries are in a different position. They are already third countries in relation to us, and will be so when we leave. We will become a third country when we leave the European Union. I accept that the situation is different, but it puts us at an advantage. We are incorporating the GDPR in its entirety into UK legislation, and I assure the hon. Gentleman that we have that safeguard.
Future free flow of data is absolutely at the top of our agenda for the forthcoming EU negotiations. As I said earlier, my right hon. Friend the Prime Minister made that clear in her Mansion House speech two weeks ago. We want to secure an agreement with the EU that provides stability and confidence for EU and UK businesses and individuals, and ensures we achieve our aims of maintaining and developing the UK’s strong trading and economic links with the European Union.
Ultimately, as some Opposition Members said, importing text from the EU charter of fundamental rights is unnecessary. The general principles of EU law will be retained when we leave the EU via the European Union (Withdrawal) Bill for the purposes of the interpretation of the retained EU law. The GDPR will be retained. Indeed, the Bill will firmly entrench it in our law. The right to the protection of personal information is a general principle of EU law, and has been recognised as such since the 1960s. The withdrawal Bill requires our courts to interpret the GDPR consistently with the general principle reflected in article 8 and retained CJEU case law, so far as it is possible to do so.
Darren Jones
Does the Minister recognise that, under the European Union (Withdrawal) Bill, the application of the EU acquis—EU law—is based on legislation that existed before the point of exit? It will not continue to apply to new legislation and developments after the point of exit. The new clause needs to be in the Bill to maintain that position for the future; we must not just look back into the past.
Margot James
The European Union (Withdrawal) Bill fully protects the rights to data protection in our law. As I said earlier, we are seeking not only adequacy after Brexit, but a continuing role in conjunction with the bodies in Europe that govern the GDPR, with the idea that we continue to contribute our expertise and benefit from theirs.
Liam Byrne
I am afraid we have heard a very weak argument against new clause 12. The Minister sought to prosecute two lines of argument: first, that new clause 12 risks confusion in the courts; and, secondly, that it is not needed. Let me take each in turn.
First, there can be no risk of confusion because this is not a new right. It is a right we already enjoy today, and our courts are well practised in balancing it with the other rights we enjoy. We are simply seeking to roll over the status quo into the future to put beyond doubt an adequacy agreement not just in the immediate years after we leave the European Union but in the decades that will follow.
Secondly, the Minister sought to persuade us that the new clause was not needed, and she had a couple of different lines of attack. First, she said that the source of our new protections would be the incorporation of EU case law and legislation as enshrined by the European Union (Withdrawal) Bill. Of course, that is simply not applicable to this case, because the one significant part of European legislation that the withdrawal Bill explicitly does not incorporate is the European charter of fundamental rights. The Minister slightly gave the game away when she read out the line in her briefing note that said that the rights we currently have in EU law would be enshrined and protected “so far as it is possible to do so.” That is exactly the kind of risk we are seeking to guard against.
As noble peers argued in the other place, the challenge with incorporating the GDPR into British law is that this is a piece of regulation and legislation that reflects the world of technology as it is today. It is not the first bit of data protection legislation and it will not be the last. At some point in the years to come, there will be a successor piece of legislation to this Bill and the courts’ challenge will be to make judgments that interpret an increasingly outmoded and outdated piece of legislation. We have to ensure that judgments made in the British courts and in the European courts remain in lockstep. If we lose that lockstep, we will jeopardise the future of an adequacy agreement. That will be bad for Britain, bad for British businesses and bad for technology jobs in all our constituencies.
The challenge we have with regulating in this particular field is that sometimes we have to be anticipatory in the way we structure regulations. Anyone who has spent any time with the British FinTech industry, which Ministers are keen to try and enhance, grow and develop for the years to come, will know that FinTech providers need to be able to test and reform bits of regulation in conjunction not only with the Information Commissioner but with other regulators such as the Financial Conduct Authority. For those regulators to be able to guarantee a degree of regulatory certainty, sometimes they will need to look beyond the letter of a particular piece of legislation, such as the Data Protection Bill when it becomes an Act, and reflect on the spirit of that legislation. The spirit is captured best by fundamental rights. The challenge we have is in the thousands of decisions that our regulators must take in the future. How do we put beyond doubt or dispute the preservation of regulatory lockstep with our single most important market next door?
The Uruguayan defence offered by the Minister will reassure few people. We should not be aspiring to the Uruguayan regime; we should be aspiring to something much deeper, more substantive and more harmonious. The Minister’s proposal will create a field day for lawyers. We all like lawyers; some of our Committee members are former lawyers—recovering lawyers in some cases. Lawyers should enjoy a profitable and successful future, but we in this House do not necessarily need to maximise their profit-making possibilities in the future. However, that is exactly what the Minister is doing by creating a pot pourri of legislation, which lawyers and judges will have to pick their way through. It is much simpler, much lower-risk, much safer and better for economic growth if we put beyond doubt, dispute and question the harmonisation of our data protection regime with our single most important market. That is why we need to incorporate article 8.
Darren Jones
I have a copy of the general data protection regulation here. Recital 1 on the first page states:
“The protection of natural persons in relation to the processing of personal data is a fundamental right. Article 8(1) of the Charter of Fundamental Rights of the European Union—”.
Is it not the case, to use some imagery here, that at the moment the GDPR is built on a foundation as on page one of this fundamental right in the same way as a house is built on strong foundations? Are we now not seeking to build the same house but without the foundations? Does this risk us sinking our decision on adequacy?
Liam Byrne
My hon. Friend is right. He speaks with tremendous knowledge on this particular subject. There is a real risk that one of our most important industries will have its foundations wrecked by the inadequacies of this piece of legislation. There is no risk of confusion, there is no creation of a new and unchecked, unfettered right. We can draw no comfort from the EU (Withdrawal) Bill. There is a great risk of regulatory confusion and divergence over the years to come. I simply cannot understand why the Government would seek to put dogma and not the future protection of the British technology industry first.
This is not a trivial or frivolous issue; it has been put forward by the industry association representing half of technology jobs in this country. I hope that the Committee is persuaded by these arguments. We will seek to prosecute these arguments in a vote, at your discretion, Mr Hanson, but I hope that before we get to that point, the Government will see sense and accept the amendment.
The Chair
As I said, the vote on new clause 12, should there be one, will take place at a later date.
Question put and agreed to.
Clause 2 accordingly ordered to stand part of the Bill.
Clause 3
Terms relating to the processing of personal data
Margot James
I beg to move amendment 1, in clause 3, page 2, line 25, leave out “personal data” and insert “information”.
This amendment and Amendment 2 enable the definition of “processing” to be used in relation to any information, not just personal data.
The Chair
With this it will be convenient to discuss Government amendments 2 to 6 and 69.
Margot James
These amendments make a series of minor and technical changes to clause 3, which covers terminology relating to use of personal data. I do not propose to go through each one in detail, because they are designed to improve clarity and consistency of language, and no more. Amendments 1 and 2 amend the definition of “processing” in subsection (4), by replacing the term “personal data” with “information”. This has no material impact on the use of the term “processing” in parts 2 to 7 of the Bill, where the meaning of “processing” is to be understood within the context of the applicable regime, but the amendments ensure consistency with terminology in other legislation.
Amendments 3 and 6 are linked; amendment 6 adds a new paragraph (c) to subsection (14), confirming that the terms “controller” and “processor” have the same meaning in parts 5 to 7 of the Bill as they do in parts 2 to 4 respectively, unless otherwise stated. Amendment 3 adds a cross-reference to this new paragraph in subsection (6). Again, these are both technical in nature. Amendment 4 ensures that references in parts 5 to 7 of the Bill to chapter 2 of part 2 will be read as including the applied GDPR under chapter 3 of part 2, unless stated otherwise.
Amendment 69 removes similar wording from clause 184, because amendment 4 means that it is no longer required. Finally, amendment 5 improves the phraseology relating to the processing of personal data in subsection (14)(b).
Amendment 1 agreed to.
Amendments made: 2, in clause 3, page 2, line 26, leave out “personal data, or on sets of personal data” and insert “information, or on sets of information”.
See the explanatory statement for Amendment 1.
Amendment 3, in clause 3, page 2, line 41, after “83” insert “and see also subsection (14)(c)”.
This amendment is consequential on Amendment 6.
Amendment 4, in clause 3, page 3, line 27, at end insert —
“(aa) references to Chapter 2 of Part 2, or to a provision of that Chapter, include that Chapter or that provision as applied by Chapter 3 of Part 2;”.
This amendment makes clear that references to Chapter 2 of Part 2 in Parts 5 to 7 of the bill include that Chapter as applied by Chapter 3 of Part 2.
Amendment 5, in clause 3, page 3, line 28, leave out “processing and personal data are to processing and personal data” and insert “personal data, and the processing of personal data, are to personal data and processing”.
This amendment is consequential on Amendment 1.
Amendment 6, in clause 3, page 3, line 29, at end insert —
“(c) references to a controller or processor are to a controller or processor in relation to the processing of personal data to which Chapter 2 or 3 of Part 2, Part 3 or Part 4 applies.”—(Margot James.)
This amendment and amendment 3 make clear that references to controllers and processors in Parts 5 to 7 of the bill are to controllers and processors in relation to processing to which the GDPR, the applied GDPR or Part 3 or 4 of the bill applies.
Clause 3, as amended, ordered to stand part of the Bill.
Clauses 4 to 6 ordered to stand part of the Bill.
Clause 7
Meaning of “public authority” and “public body”
Margot James
I beg to move amendment 7, in clause 7, page 5, line 8, leave out “a body specified” and insert “body specified or described”.
This amendment and Amendment 8 make clear that regulations under Clause 7 may identify an authority or body by describing a type of authority or body, as well as by specifying an authority or body.
The Chair
With this it will be convenient to discuss Government amendments 8, 18, 19 and 62.
Margot James
Clause 7 defines the meaning of “public authority” for the purposes of the GDPR. Generally speaking, “public authority” will have the same meaning as the definition used in the Freedom of Information Act 2000 or the Freedom of Information (Scotland) Act 2002. Those Acts list a wide range of public authorities, including Departments, local authorities and NHS bodies. As the new legislation beds in, the list of authorities imported from those Acts may need to be adapted to function properly in a data protection setting rather than a freedom of information setting. Clause 7(1) therefore allows the Secretary of State to specify in regulations that additional bodies are public authorities for the purposes of data protection legislation. Conversely, subsection (3) allows the Secretary of State to specify that certain bodies are not to be treated as public authorities, even if they are defined as such for the purposes of freedom of information legislation.
Amendments 7 and 8 clarify that the Secretary of State may describe bodies that are or are not public authorities in addition to specifying them. They are technical amendments designed to improve the terminology used in relation to the Secretary of State’s regulation-making powers. Amendments 18 and 19 make corresponding provisions in relation to part 3 of the Bill.
Amendment 62 is designed to ensure that regulations made under clause 7 will not be considered as hybrid instruments. Regulations made under the clause are already subject to the affirmative resolution procedure, and the general duty to consult before making regulations, which is set out in clause 179, also applies. In this setting, the hybrid procedure would add nothing but bureaucracy.
Liam Byrne
The amendments look like tidying-up amendments, but it would help if the Minister put on the record the extent to which they will allow the Bill to bite effectively on the nation’s schools. Obviously, schools collect a great deal of data. They often hold not only exam data but data relating to eligibility for free school meals, and most schools operate systems such as ParentPay, which means that they capture children’s biometrics. Anything to do with the protection of children’s data has to be treated incredibly seriously. The school system in this country has been balkanised—often, academies are set up as private sector entities in complex chains and have problematic governance arrangements—so I think we would all benefit from the Minister saying a few words about the Bill’s bite on schools, academies and colleges. Will she also say a little more about her plans to ensure that there are statutory codes of practice to which everyone who provides education services must adhere?
Margot James
I thank the right hon. Gentleman for his comments. Obviously, we share his concern about the protection of children. He cites important and highly sensitive personal data such as biometrics. Schools, like all bodies, must have a legal basis—the public interest or the normal course of their business—for processing personal data.
The right hon. Gentleman raises safeguarding. Later in our deliberations, my hon. Friend the Under-Secretary of State for the Home Department will introduce Government amendments to strengthen the safeguarding aspects of the processing of personal data. Schools are public authorities, and GDPR protections intended for authorities will apply, as I said. Schedule 3 provides further and specific protection on the points that he raises.
Liam Byrne
Will the Minister set on the record explicitly the fact that academies are covered in the same way as schools? An academy may be set up by a private sector organisation, set up as a charitable body, or set up in a way that is outwith the formal education system. Ofsted has raised concerns about unregulated schools, for example. Can she confirm whether organisations that provide education services—whether they are academies, charities or local education authority schools—are governed by the codes? Crucially, can she confirm that she will publish the code of practice?
Margot James
I certainly can confirm that the schools that the right hon. Gentleman has cited—academies run by private sector organisations and/or charities—are public authorities for the purposes of the Bill, and will be subject to the same protections.
Question put and agreed to.
Amendment made: 8, in clause 7, page 5, line 13, after “specified” insert “or described”.—(Margot James.)
See the explanatory statement for Amendment 7.
Clause 7, as amended, ordered to stand part of the Bill.
Clause 8
Lawfulness of processing: public interest etc
Daniel Zeichner (Cambridge) (Lab)
I beg to move amendment 140, in clause 8, page 5, line 23, after “includes” insert
“but is not limited to,”.
The Chair
With this it will be convenient to discuss amendment 141, in clause 8, page 5, line 29, at end insert
“or
(e) the exercise of research functions by public bodies.”
This amendment would ensure that university researchers and public bodies with a research function are able to use the ‘task in the public interest’ lawful basis for processing personal data, where consent is not a viable lawful basis.
Daniel Zeichner
It is a pleasure to serve under your chairmanship, Mr Hanson. I shall begin by declaring an interest: I chair the all-party parliamentary group on data analytics, the secretariat to which is provided by Policy Connect. In that capacity, I have had the pleasure of having many discussions about GDPR with experts over the past couple of years. I reflect on what a very good process it is that British parliamentarians in the European Parliament are able to intervene on such matters at early stages, to make sure that when the legislation finally comes to us it already has our slant on it. That may not be possible in future when we come to discuss such legislation.
I represent a university city, so research is a key part of what we do. It is on that basis that I tabled the amendments, and I am grateful to the Wellcome Trust and the Sanger Institute, which have given me advice on how the amendments would help them by providing certainty for the work that they do. The purpose of amendment 141 is to ensure that university researchers and public bodies with a research function are able to use what is called the “task in the public interest” lawful basis for processing personal data, where consent is not a viable lawful basis. I apologise for going into some detail, but it is important for universities and researchers that there is clarity.
As the Bill is drafted, clause 8 provides a definition of lawfulness of processing personal data under GDPR article 6(1)(e). Subsections (a) to (d) of clause 8 set out a narrow list of activities that could be included in the scope of public interest. I am told that that list is imported from schedule 2(5) of the Data Protection Act 1998, but I am also told that the drafters have omitted a version of the final and most general sub-paragraph from that list, which reads:
“for the exercise of any other functions of a public nature exercised in the public interest by any person.”
It is speculated that that may have been taken out of the list to tighten up, and to avoid a tautology in defining, “public interest”, but the worry is that taking it out has made the clause too restrictive. The explanatory notes indicate that the list in clause 8—that is, subsections (a) to (d)—is not intended to be exhaustive, but the Wellcome Trust and the Sanger Institute worry that it has narrowed the public interest terminology to a very narrow concept, which will be confined to public and judicial administration.
There was a very lengthy and very good debate in the other place on this matter. One of our universities’ main functions is to undertake research that will often involve processing personal data. In some cases, GDPR compliant consent, which may seem the obvious way of doing it, will not be the most appropriate lawful basis on which to process that data. It is therefore really important that an article 6 lawful basis for processing is available to university researchers with certainty and clarity.
The Government have included reference to medical research purposes in the explanatory notes, but the worry is that that does not necessarily have weight in law and the reference excludes many other types of research that are rightly conducted by universities. This is not a satisfactory resolution to the problems that are faced.
The amendment tries to enable research functions to be conducted by public bodies such as universities without doing what the Government fear, which is to broaden the definition of “public interest” too far. The wording retains the structure of the DPA list, from which the current clauses were imported, but it narrows it down in two ways. It specifies the purpose of processing, that is, research functions, which must be the reason for the processing and specifies who is doing the processing—the basis of it only being available to public bodies, as defined in the previous clause.
We are aware that the Government are worried about adding further subsections to the list. I think they said that it could open the floodgates in some way. However, I am told that there is not really any evidence to suggest that the current wording of paragraph 5 of schedule 2 of the Data Protection Act, which has a very broad notion of public interest, has in any way “opened the floodgates”. To give some sense of the concerns that have arisen, the processes by which university researchers seek permission to do things are quite complicated. Some of the bodies have already issued guidance. I am told that the Health Research Authority issued guidance on GDPR before Christmas. It advised that a clause on using legitimate interests should be included in the Bill.
There is confusion in the research sector, and there is a wider worry that if this is not clear, it is open to legal challenge. While some institutions will be able to take that risk, the worry is that smaller research bodies would conclude that, given the lack of clarity, it would not be worth taking that risk. I hope that the Government will think hard about the suggestion. It comes from the research institutions themselves and would give clarity and reassurance. I hope that the Minister will accept the amendment.
Liam Byrne
I want to say a few words in support of my hon. Friend and these important amendments. I think there is an acknowledgement on both sides of the Committee that if we are to prosper in the world that is coming, we are going to need to increase the amount of money that we spend on research and development and make sure that a research-driven economy reaches every corner of the country.
The world of innovation and research is changing very quickly. I think it is next year that China becomes the world’s largest science spender for the first time in several centuries. If we are to compete in this new world, we need to invest more in our R&D base. The Government have made some helpful commitments in this area. Their proposals are not quite as ambitious as the Labour amendments, but none the less all progress is welcome.
I hope that the Minister will reflect on the reality—the way in which research is conducted in our country is changing. In the past, I have called that a shift from the cathedral to the campus. Once upon a time, big firms put a lot of people in a large building and prayed for the best. Now, they are building business parks and creating ecosystems of innovation where they may have a shared research and development facility, otherwise known as a university. There may be big international companies with global reach organised around them, but there are also scores of much smaller firms. They may be as small as a couple of post-docs in a shared lab. If we look at facilities such as BT at Dashwood Park, the Crick Institute or GSK in Stevenage, we see big global companies with hundreds of smaller companies around them which are undertaking research with much greater speed and much lower risk, but with an impact that could change the world.
We cannot jeopardise the conduct of that research. My hon. Friend the Member for Cambridge is right to point out that where there is doubt about the law, or the powers and freedoms of research firms, there is a risk that such firms simply will not undertake such work in the UK, and instead will seek relationships either with global companies or, increasingly, with universities that have R&D facilities elsewhere. We want to create the world’s best place to undertake new science, and that means having a research regime that is the best in the world. We therefore need a data protection regime that helps and does not hinder, which is why the Government should accept these carefully crafted amendments.
Margot James
I recognise the expertise of the hon. Member for Cambridge in this area, and I am glad of the opportunity to debate the matter fully with him, as I am conscious that I did not address the points he made in his good contribution on Second Reading. We all agree on the importance of scientific research, and one of the things I am most proud of in the industrial strategy is the huge increase in public funding for research and development. We welcome the interest in the Bill shown by the Wellcome Trust and other organisations. They are concerned that universities processing personal data in the context of ground-breaking medical research will not have a clear legal basis for doing so. The Government recognise how important that is, but we believe that the amendment is not necessary and that there is no need specifically to mention the research functions of public bodies in clause 8.
It might be helpful if I explain what clause 8 is designed to do. If an organisation is to process personal data, it must have a legal basis for doing so under article 6 of the GDPR. The clearest basis is where the data subject has given his or her consent to the processing, but article 6 also permits processing without someone’s consent in certain circumstances, including where
“processing is necessary for the performance of a task carried out in the public interest or in the exercise of official authority vested in the controller”
Clause 8 helps to explain the meaning of “public interest tasks” by providing a list of processing activities that fall into that category. The list was always intended to be non-exhaustive, which is why we have used the word “includes”. In law, that word is always assumed to introduce a non-exhaustive list, and we have tried to make that point as clear as possible in the explanatory notes.
Additional phrasing in the Bill, such as that proposed in amendment 140, would add nothing to what is already in the clause’s interpretation under English law, and it would risk confusing the interpretation of the many other uses of that word elsewhere in the Bill. Given the non-exhaustive nature of the list, the fact that publicly funded research is not mentioned specifically does not mean that the research functions of public bodies will not be considered as “public interest tasks”, thereby providing a legal basis for universities to process personal data.
The Information Commissioner’s Office said:
“Universities are likely to be classified as public authorities, so the public task basis is likely to apply to much of their processing”.
Its guidance goes on to give “teaching and research purposes” as one such example. Hon. Members will appreciate that the list could become very long and still not be conclusive if we included everything that the Government and the Information Commissioner’s Office consider amounts to a “public interest task”. Given those reassurances, I hope that the hon. Gentleman will not feel it necessary to press his amendment to a vote.
Daniel Zeichner
I thank the Minister for her kind words—particularly about Second Reading. I think that we were all puzzled about what was going on at about five minutes to 10; I am none the wiser. I am slightly disappointed by her response, because this is not a party political discussion. We all want to get to the same place. In many ways, the discussion we have just had is not that dissimilar from the previous one about educational institutions, schools and academies. There are many grey areas relating to what universities are, and what their status and that of the research bodies associated with them is. My worry is that if we just take the Minister’s reassurances rather than amend the Bill, the uncertainty to which I alluded—it is not my uncertainty; it is what staff at esteemed research institutions say they feel—will be a problem. We should try to improve the Bill to get the clarity we need.
The Chair
The hon. Gentleman needs to indicate to the Chair whether he wishes to withdraw the amendment or press it to a Division.
Daniel Zeichner
I think we will go to a vote, Mr Hanson.
Question put, That the amendment be made.
Margot James
I beg to move amendment 9, in clause 8, page 5, line 29, at end insert—
“( ) an activity that supports or promotes democratic engagement.”
This amendment adds a reference to processing of personal data that is necessary for activities that support or promote democratic engagement to Clause 8 (lawfulness of processing: public interest etc).
Since the Bill’s introduction, it has been brought to our attention by a range of stakeholders from all sides of the political divide that there is concern about how processing for the purpose of democratic engagement should be treated for the purposes of the GDPR. As my noble Friend Lord Ashton set out in the other place, the Government believe that there is a strong public interest in political parties and elected representatives and officials being able to engage with the public both inside and outside elections, which may sometimes include the processing of personal data.
Having considered the matter further since the debates in the other place, the Government have concluded that it would be prudent to include a provision in the Bill to provide greater clarity to those operating in the area of democratic engagement. Helpfully, clause 8 already provides high-level examples of processing activities that the Government consider could be undertaken on grounds of public interest if the data controller can demonstrate that the processing is necessary for the purposes of the processing activity. As a consequence of the importance that the Government attach to the matter, amendment 9 adds to that list
“an activity that supports or promotes democratic engagement.”
That term has been deliberately chosen with the intention of covering a range of activities carried out with a view to encouraging the general public to get involved in the exercise of their democratic rights. We think that that could include communicating with electors, campaigning activities, supporting candidates and elected representatives, casework, surveys and opinion gathering and fundraising to support any of those activities. Any processing of personal data in connection with those activities would have to be necessary for their purpose and have a legal basis. We will ensure that the explanatory notes to the Bill include such examples, to assist the interpretation of what this provision might mean in practice.
The amendment does not seek to create a partisan advantage for any one side or to create new exemptions from the data protection legislation. It is intended to provide greater clarity. It is also independent of any particular technology, given that in a short time we have moved from physical post to email, Twitter, text messages, WhatsApp, Facebook and so forth.
The Government are always open to suggestions of what else could be done to ensure legal and operational clarity for political parties and elected representatives. Further work might be needed to ensure that their current activities have the legal basis required to rely on the public interest condition. The Government will shortly engage with political parties via the parliamentary parties panel to discuss the matter further and in more detail.
Liam Byrne
I was surprised and not a little troubled that the Minister did not include the opportunity of creating Member-specific apps in her list—especially those which suck out the pictures from someone’s phone without their permission. Presumably that was not included in her list because that is already illegal.
I am grateful to the Minister for tabling the amendment and for her earlier correspondence with my noble Friend Lord Kennedy. She undertook to reflect on that correspondence and bring forward amendments. She helpfully set out a list of some of the activities that may be undertaken by a political party that fall within the ambit of the amendment. She gave a pretty comprehensive list, but will she put beyond doubt whether canvassing and collecting canvass returns were in her mind when she tabled the amendment and are therefore covered by the amendment? That would be extremely helpful.
The amendment is well intentioned. The health of our democracy is important to all parties. We look forward to the conversations that she will broker through the parliamentary parties panel.
Stuart C. McDonald (Cumbernauld, Kilsyth and Kirkintilloch East) (SNP)
We, too, are grateful to the Minister for tabling the amendment and for her letter to you on 12 March, Mr Hanson, which has been shared with the Committee.
From our point of view, the description of democratic engagement as a new lawful basis for processing in the public interest, under article 6(1)(e) of the GDPR, is useful. In fact, there might even be an argument for including the non-exhaustive list, which I think is due to appear in the explanatory notes, in the Bill. Will the Minister think about that? I appreciate that it has been kept in very general terms.
In her letter, the Minister asked for views on whether the basis for processing data from electoral registers is currently appropriate as defined. Those registers are supplied to parties with the main condition that they are used for electoral purposes. The Law Commission, which recently reported on the review of electoral law, expressed the view that the legislation should be more precise about what that means. Again, the list in the letter that the Minister sent to you, Mr Hanson, looks like a good starting point for that.
Margot James
I thank the right hon. Member for Birmingham, Hodge Hill and his noble Friends for their constructive participation in the development of the amendment. He mentioned the app of the Secretary of State for Digital, Culture, Media and Sport; I assure him that it is compliant in every way with current data protection law and will be compliant with the provisions of the Bill. I commend my right hon. Friend for setting a new standard in the way that he communicates with his constituents.
I reassure the right hon. Member for Birmingham, Hodge Hill that canvassing and collecting canvassing returns are covered by the amendment. That is absolutely vital. I reassure the hon. Member for Cumbernauld, Kilsyth and Kirkintilloch East that it covers campaigning activity and communications between elections, concerning issues as well as elections. As I said in my short preamble, the detail of the matter can be further discussed at a meeting of the parliamentary parties panel and it is within everybody’s rights to contribute their thoughts to panel members for those important forthcoming discussions.
Amendment 9 agreed to.
Clause 8, as amended, ordered to stand part of the Bill.
Clause 9
Child’s consent in relation to information society services
Question proposed, That the clause stand part of the Bill.
Liam Byrne
The clause is an important topic of debate because it enshrines the Government’s derogation from European frameworks in law and sets the minimum age of consent for data processing at 13 rather than 16.
That derogation was invented before social media companies arrived at their current strength and delivered the very wide and sophisticated range of tools that help ensure that children become almost addicted to social media devices. In the debate on this topic over the last two or three months there have been fresh revelations from leaders of social media firms that they forbid their children to engage in the apps that their companies deliver. We have had revelations from engineers who have worked at companies such as Facebook, Twitter and Instagram that a great deal of thought goes into how they create devices and forms of interaction that encourage that basic addiction to their apps.
We are at the beginning of what I hope is a period of re-regulation and better regulation of these firms, so that we can do away with many of the risks that affect our children. In a way, I was encouraged to see the Secretary of State’s interview with The Times on Saturday, in which he said very clearly that he would like to see better regulation of social media firms in this country before his own children are tempted to engage in this exciting online world. Many of us have children who are already engaged in this and, as a parent, I have real concerns about the freedom with which social media companies can develop and deliver these techniques, as well as their freedom to take a rather relaxed view of taking down often unfortunate and extremist content. I know that we will have this debate later, and we have tabled amendments to encourage the Government to set a deadline for reforming the electronic commerce directive.
It is important to draw a little more out of the Government about how they see the safeguards coming into place around clause 9. We have not sought to challenge the derogation the Government seek to enshrine in the Bill, but we ensured widespread support for Baroness Kidron’s amendment on the creation of an age-appropriate code. However, rather than simply wave clause 9 through, it is incumbent on the Minister to say a little about how she will ensure that there are adequate safeguards in place to protect our children from the very threats the Secretary of State lit up in lights on Saturday.
Margot James
I support the general tone of the right hon. Gentleman’s comments. I too was pleased to see the interview with the Secretary of State, his focus on the addictive nature of some of these apps and the idea that there could be within the technology a means of limiting the time children spend on them, which parents could click on. The Information Commissioner’s Office will publish guidance shortly on how clause 9 will work and what those safeguards will be. She will take into consideration an age-appropriate design, as suggested by Baroness Kidron.
Overall, where online services referred to in the Bill as “information society services” choose to rely on consent as the basis for their processing, article 8 of the GDPR sets the age below which a website must obtain the parents’ and not the child’s consent. Most websites will be captured by this additional safeguard, ranging from online banking to search engines to social media, with social media probably being the most relevant to the age group in question.
The GDPR gives member states the flexibility to set this age within a prescribed range of between 13 and 16. The Bill sets it at 13, with an exception for preventive and counselling services, for which the test is based purely on the child’s capacity to understand what they are being asked to consent to. The Government are satisfied that the Information Commissioner’s Office has adequate enforcement powers, including large fines for any offences committed in this area.
Darren Jones
The Minister said that Europe provides that the age range is between 13 and 16. In fact, the GDPR says the age for consent is 16, but that member states can derogate down to 13. I do not wish to be an annoying lawyer, but it is an important distinction. Our colleagues in Europe are saying that the age they deem to be appropriate is 16, but they are giving member states flexibility to go lower. Interestingly, article 8(2) talks about how reasonable efforts need to be taken to verify age and consent
“taking into consideration available technology.”
My view is that, on these types of issues, there should be better technology for age verification as part of using online services and, where children’s data is being used to commercialise and monetise for the purposes of advertising, there should be additional safeguards for children.
I ask the Minister only to keep an open mind in the future, so that when we get to a position where technology providers can verify the age of children—I appreciate that is perhaps currently a little difficult—if industry does not move voluntarily to this position, the Government consider regulating in that regard.
Margot James
The hon. Gentleman is right that the GDPR stipulates 16 as the minimum age for consenting to data processing without parental consent, but that it provides for member states to derogate from that. At least seven, including Spain, Ireland and Denmark, have done just that. Like us, they have proposed a much younger age of 13, so we are not an outlier on the issue.
Currently, the minimum age in this country for allowing personal data to be used without parental consent is 12, so in a sense we are derogating from that policy by setting the minimum age at 13 in the Bill. The hon. Gentleman is right to point out that it is very difficult for technology companies to implement meaningful verification mechanisms for those younger than 18, who may not have anything like a credit card or driving licence. I have no doubt that the Government will keep an open mind on the matter, in line with other developments that will take place long after the Bill is passed.
Question put and agreed to.
Clause 9 accordingly ordered to stand part of the Bill.
Clause 10
Special categories of personal data and criminal convictions etc data
Stuart C. McDonald
I beg to move amendment 129, in clause 10, page 6, line 19, leave out subsections (6) and (7).
This amendment would remove delegated powers that would allow the Secretary of State to vary the conditions and safeguards governing the general processing of sensitive personal data.
The Chair
With this it will be convenient to discuss the following:
Amendment 132, in clause 35, page 21, line 29, leave out subsections (6) and (7).
This amendment would remove delegated powers that would allow the Secretary of State to vary the conditions and safeguards governing the general processing of sensitive personal data.
Amendment 134, in clause 86, page 50, line 33, leave out subsections (3) and (4).
This amendment would remove delegated powers that would allow the Secretary of State to vary the conditions and safeguards governing the general processing of sensitive personal data.
Stuart C. McDonald
The amendments stand not only in my name and that of my hon. Friend the Member for Argyll and Bute, but in the names of Labour Members, for whose support we are very grateful.
There cannot be anyone in this Committee Room who does not know what a Henry VIII power is. If my email inbox is anything to go by, half the country knows what a Henry VIII clause is now, even if they did not know before the European Union (Withdrawal) Bill commenced its progress through the House. Amendments 129, 132 and 134 would remove Henry VIII powers from clauses 10, 35 and 86 respectively. To explain why those powers are not appropriate and need to be removed, I need to explain briefly what those clauses concern and why the powers are therefore too significant and wide.
Clause 10 needs to be read alongside article 9 of the GDPR, which states unambiguously:
“Processing of personal data revealing racial or ethnic origin, political opinions, religious or philosophical beliefs, or trade union membership, and the processing of genetic data, biometric data for the purpose of uniquely identifying a natural person, data concerning health or data concerning a natural person’s sex life or sexual orientation shall be prohibited.”
Such data includes some of the most sensitive information that we can imagine. Article 9 then sets out situations in which the prohibition does not apply. Some of the exceptions that it lists, such as those in which
“processing relates to personal data which are manifestly made public by the data subject”,
apply directly, so the Bill need not address them. Others need to be interpreted in accordance with EU or member state law before they can be relied on; for instance, paragraph 2(g) of article 9 states that the prohibition shall not apply if
“processing is necessary for reasons of substantial public interest, on the basis of Union or Member State law”.
Clause 10, which applies schedule 1, establishes the basis in member state law for lifting the prohibition on processing such sensitive information. For example, part 2 of schedule 1 includes 18 conditions—ranging from parliamentary and ministerial functions to preventing money laundering and detecting unlawful acts—that provide the basis in UK law for the substantial public interest exception to apply to the processing of special categories of personal data.
Clause 35 is in part 3, which is headed “Law enforcement processing”. It states that the first of the data protection principles by which law enforcement bodies must abide
“is that the processing of personal data for any of the law enforcement purposes must be lawful and fair”.
The specific conditions that must be met with respect to sensitive data are set out in schedule 8, which is similar to schedule 1. They include cases in which the processing is necessary
“for the administration of justice”
or
“to protect the vital interests of the data subject or of another individual.”
Clause 86 is in part 4, “Intelligence services processing”. It essentially does for that activity what clause 35 does for law enforcement, and it applies schedule 10. In short, we have a carefully framed set of exceptions to the prohibition on processing of this extremely sensitive information, and those exceptions provide a lawful basis for the processing of information that we normally would not dream of processing because of its highly intrusive and sensitive nature.
Liam Byrne
We support these amendments very strongly, and if possible we would like to test the Committee’s will on this. The Bill has a succession of Henry VIII powers at a number of different clauses, which in effect give the Secretary of State the power to vary and amend regulations that are incredibly important. We cannot detach this debate from the earlier debate on the incorporation of article 8. We now have a Bill that is pretty weak on the fundamental principles of law that it seeks to enshrine; the Government want to set their face against incorporating some protections that we have in the European charter of fundamental rights. Therefore, the idea that we leave out some fundamental protections of rights, but then hand over to the Minister unfettered power to make regulations as he or she sees fit, does not seem to be in Parliament’s best interest. We think that the Government need to think again.
The powers in this particular clause create the possibility that exemptions to data protection rights, which have not been considered or debated in Parliament, go through effectively at the whim of the Minister. Those powers are enshrined in clause 10, and in clauses 35 and 86; we will come on to those debates, but the powers that clause 10 proposes to grant the Minister are in effect unilaterally to vary the conditions and safeguards governing the general processing of sensitive personal data—the general data set out in schedule 1—and then to add new conditions to schedules 1, 8 and 10.
That means that we would basically give the Secretary of State the power to expand the permissible reasons to allow processing of sensitive personal data, both generally and particularly for law enforcement and intelligence agencies. That is something that has been considered extensively in the other place. The House of Lords Constitution Committee said:
“The Government’s desire to future-proof legislation…must be balanced against the need for Parliament to scrutinise and, where necessary, constrain executive power.”
The Delegated Powers and Regulatory Reform Committee said that
“it is not good enough for Government to say that they need ‘flexibility’ to pass laws by secondary instead of primary legislation without explaining in detail why”.
The Ministers slightly let the cat out of the bag when Baroness Chisholm spoke up for the Government and said that if they were to accept the Committee’s recommendations in full that would
“leave the Government unable to accommodate developments in data processing and the changing requirements of certain sectors”—[Official Report, House of Lords, 11 December 2017; Vol. 787, c. 1464.]
That includes, for example, the insurance sector. That is patently nonsense. It would not constrain the Government’s ability to introduce wise regulations in this place; it would simply constrain the Government’s ability to do that unilaterally without effective recourse to Parliament. We are seeking a very clear Government explanation as to why the Secretary of State, not Parliament, should be empowered to alter the data protection regime to keep it up to date, and that explanation needs to be all the more robust following the remarks that the Minister has made about her attitude towards incorporating the fundamental right of privacy in British law.
We think that the amendments would be sensible constraints on Henry VIII powers. There is wide consensus across both Houses that they are necessary. They will not damage or diminish the Secretary of State’s ability to keep regulation up to date. Many of us have been in this place long enough to know that it is perfectly within the Executive’s power to keep regulatory reform on track if the political will is there. We are asking for a defence of Parliament’s right to oversee, scrutinise and, where necessary, constrain the powers of the Secretary of State to regulate in this field.
Margot James
Following recommendations by the Delegated Powers and Regulatory Reform Committee, we have considered carefully the use of the Bill’s order-making powers and amended the Bill in the House of Lords to provide additional safeguards for the exercise of those powers, but Members of the Lords on all sides of the House agreed that it was essential to retain the order-making powers in the Bill as amended.
I will explain how the powers will be used in practice. Article 9 of the GDPR prohibits the processing of special categories of personal data unless one of the exemptions in paragraph 2 of article 9 applies. The exemptions include, for example, the situation where processing is necessary for reasons of substantial public interest. Schedule 1 to the Bill provides a series of processing conditions for special categories of data under article 9 and criminal convictions data under article 10. Most of those processing conditions have been imported from the Data Protection Act 1998 and statutory instruments made under that Act, but some of them are new—for example, the conditions on anti-doping in sport or processing for insurance purposes. They have been added to reflect the way in which the use of data has changed over the past 20 years.
Amendment 129 would remove the ability to amend schedule 1 via secondary legislation. That would be particularly damaging because it would mean that primary legislation might be needed every time the need for a new processing activity involving special categories of data arose. The 1998 Act was itself amended several times through secondary legislation, and it is important that we retain the flexibility to respond to emerging technologies and the different ways in which data might be used in the future.
It is interesting to note that the hon. Member for Sheffield, Heeley has tabled an amendment to schedule 1 that would add a completely new processing condition in relation to maintaining the missing persons register. My hon. Friend the Under-Secretary of State for the Home Department will touch on the merits of that proposal later, but the fact that others in the Committee are considering further changes to schedule 1 illustrates the point that schedule 1 cannot simply freeze the regimes in parts 3 and 4 of the Bill. I urge colleagues to resist the amendment.
Stuart C. McDonald
It is vital that we get the balance right: we are talking about very sensitive information and processing of that information. It is absolutely right for hon. Members to table amendments to the Bill and for them to be considered, including proposals on the missing persons register. The fact that hon. Members are suggesting changes at this stage does not mean that we are saying that we want to fix things for all time now and never suggest changes again. We are saying that we are not happy with the process whereby changes are brought about. The Minister has not explained why she believes that changes could not be brought about satisfactorily by changes to legislation from time to time. She has not explained why there would be urgent situations in which the only possibility would be a “Take it or leave it” statutory instrument. In the light of the seriousness of the data that we are speaking about and the inadequacy of the Minister’s explanation, we would like to press the amendment to a vote.
Question put, That the amendment be made.
Margot James
I beg to move amendment 76, in schedule 1, page 123, line 21, at beginning insert “Except as otherwise provided,”.
This amendment is consequential on Amendments 79, 82 and 90.
The Chair
With this it will be convenient to discuss Government amendments 77 to 83 and 87 to 91.
Margot James
Part 2 of schedule 1 sets out a series of processing activities that are considered to be or have the potential to be in the substantial public interest. That is important in ensuring that such activities can continue even in the absence of explicit consent and even where they require special categories of personal data to be processed.
I am pleased to introduce amendment 78 today. It will help businesses and other organisations ensure that boardrooms and senior management levels are truly representative of the workforce they manage and the communities they serve. In my former role at the Department for Business, Energy and Industrial Strategy, I worked closely with Sir John Parker, to whom I pay great tribute for the work that he has done in this area. I worked with him to examine how we could ensure that more FTSE 100 companies and others did more to attract talent from a wide range of racial and ethnic backgrounds.
In November 2016, Sir John published a report that showed that although 14% of the population identified as black, Asian or other minority ethnic status, only 1.5% of directors in FTSE 100 boardrooms were UK citizens from such a minority. Although significant progress has been made in recent years to improve the gender balance in the boardrooms of such companies, the severe under-representation of people from minority ethnic backgrounds cannot be tolerated in modern society. Sir John’s report included a series of recommendations to improve ethnic diversity in the boardroom. He encouraged companies to make better use of executive search firms to identify potential candidates and invite them to be interviewed for managerial vacancies.
Amendment 78 will add a new processing condition to schedule 1 to allow organisations to process personal data about potential candidates’ racial or ethnic origin and identify suitable candidates for potential board or managerial positions. The processing condition will apply only until such point as it is reasonable to expect the organisation to get the potential candidate’s consent to the continued processing of their racial and ethnic origin data. If the data subject gave a positive indication that she or he did not consent to the processing of such data, the controller would have to cease processing the data.
I hope that hon. Members welcome the steps we are taking to implement the recommendations of the Parker review. We believe that it is in the interest of society as a whole to ensure that businesses and other organisations recruit the best person for the job if they are going to compete in today’s economy. People from all backgrounds should be given equal opportunities to contribute.
Margot James
It does happen. That is not a new provision, but one that was imported from the current law. Unfortunately, some crucial words were accidentally lost in the process of importing it. The amendment reinstates them.
Schedule 1 sets out UK domestic legislation to allow the processing of particularly sensitive data in certain circumstances. The Government’s view is that the processing of such data must be undertaken with adequate and appropriate safeguards to ensure that individuals’ most sensitive data is appropriately protected. One of those safeguards is the new requirement for an appropriate policy document to be maintained in most circumstances when special categories of data and criminal convictions data are processed. That is set out in paragraph 5 and part 4 of the schedule.
Since the Bill’s introduction, we have reflected on whether there are cases where the requirement to hold an appropriate policy document is so disproportionate that, rather than improving protections, it effectively prevents the necessary processing from taking place. Amendments 79, 82 and 90 remove the requirement for a controller to have an appropriate policy document where processing involves the disclosure of special category data to a competent authority for the detection or prevention of an unlawful act, the disclosure of special category data for specific purposes in connection with journalism, or the disclosure of special category data to an anti-doping authority. Amendment 80 defines what is meant by “competent authority”. The aim of those amendments is to avoid a scenario in which an individual who never normally processes data under schedule 1 wishes to report a crime, report something of public interest to the media or report doping activities in sport and, in so doing, processes special categories of data and would have to have in place an appropriate policy document.
Amendment 76 reflects that change to the requirement to have an appropriate policy document by inserting the words, “Except as otherwise provided” in paragraph 5 of the schedule. Amendments 87 and 89 make it clear that, in the context of schedule 1, “withholding consent” means doing something purposeful, not just neglecting to reply to a letter from the data controller. That avoids a world in which data controllers have an incentive not to bother requesting consent in the first place.
Paragraph 31 of the schedule requires the controller to have an appropriate policy document in place when relying on a processing condition in part 2 of the schedule to process criminal convictions data. However, all the provisions in part 2 are subject to the policy document requirement except where noted, so there is no reason to state it again in paragraph 31. Amendment 91 removes that duplicate requirement. It is simply a tidying-up amendment to improve the coherence of the Bill.
Darren Jones
On a point of order, Mr Hanson. I think I was remiss in not declaring my interest at the start of my contributions to today’s proceedings. With your permission, I seek to rectify that.
The Chair
That is indeed a point of order. The record will show that the hon. Gentleman has now declared his interest in relation to his contributions to the debate.
Ordered, That the debate be now adjourned.—(Nigel Adams.)