Lords Grand Committee
Tuesday 1st September 2026
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15:46
15:46
15:46
15:46
Speaker 4
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Speaker 4
Thank you, my Lords. I beg to move amendment one, after which I will also speak to the other amendments in my name in this group. First, let me thank noble Lords for their constructive engagement on this topic over the summer recess, with particular thanks to the noble Viscount Camrose and his colleagues for sending their questions in advance. I will seek to address those in my opening remarks. This package of amendments introduces new powers that will enable the UK to address vendor related cyber risks in our critical infrastructure.
The principal new clause introduces a new direction power. It enables the Secretary of State to direct entities in scope of the power where they are using, or may potentially use vendor supplied goods, services or facilities in connection with their network and information systems that could create national security risks. It is becoming increasingly clear that there are axes of cyber risk that the government needs to address. These risks arise from goods or services supplied by another company, being harnessed as tools for sabotage, surveillance or espionage.
But they also exist where goods or services constitute critical points of failure due to their defective design or vulnerabilities. Noble lords will have had some sense of these risks from debates during the Bill itself. In particular, discussions about remote access in embedded products like cellular cellular modules and the scope for hostile interference and control. Gchq has also raised escalating concerns about supply chain vulnerabilities in the wider geopolitical context. The director of Gchq explicitly called out those risks in her annual lecture in May this year, when discussing the challenges posed by a relationship with China and the threats posed by Russian cyber operations.
That is why we have tabled amendment 102 to decisively tackle these risks and protect our national security. Our intention is to limit the use of this power to operators of essential services. In the first instance, though, we will review the case for bringing other entities into scope in the future. Supplementary amendments contain the mechanisms needed to operationalise the power they enable the Secretary of State to set statutory timeframes for decision making, to specify and update which entities are in scope of the vendor related direction, power, and to introduce mandatory procurement screening should this ever be considered necessary to protect national security.
They also introduce a power to bring more entities into scope of the existing direction. Power. In clause 43, the powers to bring entities into scope of this framework are rightfully restricted to be brought into scope. The Secretary of State or Chancellor of the Duchy of Lancaster must be satisfied that the entity is essential to the economy or the day to day functioning of society in all or part of the UK. This is consistent with the bill's definition of essential activity.
In clause 24 I, the Minister can exercise the power. It has been drafted like this to accommodate machinery of government changes. The decision to introduce the amendments has not been taken lightly. The Bill already includes important national security powers to direct , regulated entities whose systems have been compromised or at risk of being compromised by hostile actors. This new power complements this and. This new power allows the government to act before vendors become embedded in supply chains.
Before . Before taking action becomes costly and disruptive, it gives operators greater confidence in their procurement planning and avoids the need for costly interventions down the line. Crucially, we are not proposing to introduce these powers in isolation. There will be part of a broader framework, which will also include procurement guidance for operators and a voluntary referral route into government, where operators have identified potential potentially risky procurements. The voluntary Self-referral route will enable the government to assist operators with vendor related concerns, provide them with guidance on how to proceed and, where necessary, inform decisions about the issuing of a direction.
We intend to consult on the implementation of the framework in due course. This will include the criteria for referral and how the mechanism will work in practice. In the event that this government ever determined a mandatory referral scheme was necessary, we would intend to consult on the definition of a qualifying transaction before laying the necessary secondary legislation. However, I should emphasise that it is not our current intention to set up a mandatory scheme. Ultimately, we expect this wider framework will minimise the need for formal interventions using new powers.
However, it is crucial that the power is in place as a backstop to guarantee the government's ability to protect the UK's national security. I beg to move.
The principal new clause introduces a new direction power. It enables the Secretary of State to direct entities in scope of the power where they are using, or may potentially use vendor supplied goods, services or facilities in connection with their network and information systems that could create national security risks. It is becoming increasingly clear that there are axes of cyber risk that the government needs to address. These risks arise from goods or services supplied by another company, being harnessed as tools for sabotage, surveillance or espionage.
But they also exist where goods or services constitute critical points of failure due to their defective design or vulnerabilities. Noble lords will have had some sense of these risks from debates during the Bill itself. In particular, discussions about remote access in embedded products like cellular cellular modules and the scope for hostile interference and control. Gchq has also raised escalating concerns about supply chain vulnerabilities in the wider geopolitical context. The director of Gchq explicitly called out those risks in her annual lecture in May this year, when discussing the challenges posed by a relationship with China and the threats posed by Russian cyber operations.
That is why we have tabled amendment 102 to decisively tackle these risks and protect our national security. Our intention is to limit the use of this power to operators of essential services. In the first instance, though, we will review the case for bringing other entities into scope in the future. Supplementary amendments contain the mechanisms needed to operationalise the power they enable the Secretary of State to set statutory timeframes for decision making, to specify and update which entities are in scope of the vendor related direction, power, and to introduce mandatory procurement screening should this ever be considered necessary to protect national security.
They also introduce a power to bring more entities into scope of the existing direction. Power. In clause 43, the powers to bring entities into scope of this framework are rightfully restricted to be brought into scope. The Secretary of State or Chancellor of the Duchy of Lancaster must be satisfied that the entity is essential to the economy or the day to day functioning of society in all or part of the UK. This is consistent with the bill's definition of essential activity.
In clause 24 I, the Minister can exercise the power. It has been drafted like this to accommodate machinery of government changes. The decision to introduce the amendments has not been taken lightly. The Bill already includes important national security powers to direct , regulated entities whose systems have been compromised or at risk of being compromised by hostile actors. This new power complements this and. This new power allows the government to act before vendors become embedded in supply chains.
Before . Before taking action becomes costly and disruptive, it gives operators greater confidence in their procurement planning and avoids the need for costly interventions down the line. Crucially, we are not proposing to introduce these powers in isolation. There will be part of a broader framework, which will also include procurement guidance for operators and a voluntary referral route into government, where operators have identified potential potentially risky procurements. The voluntary Self-referral route will enable the government to assist operators with vendor related concerns, provide them with guidance on how to proceed and, where necessary, inform decisions about the issuing of a direction.
We intend to consult on the implementation of the framework in due course. This will include the criteria for referral and how the mechanism will work in practice. In the event that this government ever determined a mandatory referral scheme was necessary, we would intend to consult on the definition of a qualifying transaction before laying the necessary secondary legislation. However, I should emphasise that it is not our current intention to set up a mandatory scheme. Ultimately, we expect this wider framework will minimise the need for formal interventions using new powers.
However, it is crucial that the power is in place as a backstop to guarantee the government's ability to protect the UK's national security. I beg to move.
15:51
15:51
Speaker 3
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Speaker 3
My Lord, clearly there are no backbench contributions, I'm assuming, at this point. So I rise to speak on behalf of the Liberal Democrats to this very significant group of amendments tabled by the noble Minister recently as the 24th of August, and I thank her for her introduction today and for her brief meeting shortly after tabling. My Lords, at the outset on these benches, we want to express our strong concern regarding both the timing and the sheer scale of the government's package of new amendments to drop 65 amendments of this nature on the eve of committee stage amendments that completely reshape the architecture of this bill after its passage through the Commons is a major challenge to effective parliamentary scrutiny.
The minister's letter was dated also the 24th of August and came alongside the amendment. So, my Lords, we've had very little time indeed to consider these 65 new amendments. And as far as I can see, there wasn't a full ministerial statement accompanying the amendments. My Lords, we had to rely on the coverage of Computer Weekly to understand the government's motives and what the government has quietly done, my Lords, is establish a major parallel, high risk vendor regime under amendment 102 and amendment 103, the Secretary of State and now, crucially, under amendment 101, the Chancellor of the Duchy of Lancaster granted unilateral powers to issue vendor related directions.
They can legally order an organisation to prohibit, restrict, remove, disable or modify any software, hardware or digital facility supplied by designated high risk vendor. Furthermore, under amendment 105, they establish they give.
The minister's letter was dated also the 24th of August and came alongside the amendment. So, my Lords, we've had very little time indeed to consider these 65 new amendments. And as far as I can see, there wasn't a full ministerial statement accompanying the amendments. My Lords, we had to rely on the coverage of Computer Weekly to understand the government's motives and what the government has quietly done, my Lords, is establish a major parallel, high risk vendor regime under amendment 102 and amendment 103, the Secretary of State and now, crucially, under amendment 101, the Chancellor of the Duchy of Lancaster granted unilateral powers to issue vendor related directions.
They can legally order an organisation to prohibit, restrict, remove, disable or modify any software, hardware or digital facility supplied by designated high risk vendor. Furthermore, under amendment 105, they establish they give.
16:08
Speaker 5
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Speaker 5
The transactions would not be proper. Instead, amendment 153 was an attempt to provide. Those regulations will necessarily be ad hoc and as such, defining qualifying clarity to decision making without inhibiting government's ability to act. However, given that the noble Baroness, the Minister, in her opening remarks that the government has no intention of setting up a mandatory referral scheme, we must question why the government feels the need to give themselves the powers to do so.
Powers should not be granted and should not come into existence if they are never to be used. At the very least, given that the minister has the noble lady, the Minister has now said that they would consult on the definition of a qualifying transaction before any scheme is established. The amendment should ensure as much. The government will now have the opportunity to bring these amendments back at report stage. The mandatory referral scheme should be redrafted to reflect the Minister's statement and be conditional on the defining of qualifying transactions, and I hope the noble lady, the Baroness, will agree to this.
Finally, my Lords, let me make a general point about the definitions these amendments use, but also those that are used throughout the Bill. The proposed criterion of being, quote, essential to the economy, unquote, is, in my opinion, unworkably vague. It is not an adequate representation. Both of the different types and the scale of risks. May I suggest that, for example, the cyber Monitoring Centres five levels severity scale as a model more reflective of the grades of threats facing the United Kingdom? I'm not arguing this is necessarily the right model, but it is at least tested and quantifiable.
I look forward to the noble lady. The minister's response.
Powers should not be granted and should not come into existence if they are never to be used. At the very least, given that the minister has the noble lady, the Minister has now said that they would consult on the definition of a qualifying transaction before any scheme is established. The amendment should ensure as much. The government will now have the opportunity to bring these amendments back at report stage. The mandatory referral scheme should be redrafted to reflect the Minister's statement and be conditional on the defining of qualifying transactions, and I hope the noble lady, the Baroness, will agree to this.
Finally, my Lords, let me make a general point about the definitions these amendments use, but also those that are used throughout the Bill. The proposed criterion of being, quote, essential to the economy, unquote, is, in my opinion, unworkably vague. It is not an adequate representation. Both of the different types and the scale of risks. May I suggest that, for example, the cyber Monitoring Centres five levels severity scale as a model more reflective of the grades of threats facing the United Kingdom? I'm not arguing this is necessarily the right model, but it is at least tested and quantifiable.
I look forward to the noble lady. The minister's response.
16:09
Speaker 4
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Speaker 4
I thank the noble Lords for their comments, their views and their questions, and I will endeavour to respond to them in respect of the question of why the power is being granted to the Secretary of State or the Chancellor of the Duchy of Lancaster, that is, to. Anticipate any unforeseen machinery of government changes, and it is. It is nothing more than that to avoid a future changes that are needed when government departments change.
In respect of the question on the skilled persons list that is available, I believe I'm advised on the D, the NTSC website currently. So that is something that is accessible to all. But let me come back to really the sort of the heart of the questions, which is why is this power needed? It is needed because even though we are taking powers on critical suppliers, it can be the case that vendors have the capability and intent to cause harm, particularly where they have a link to to a third country.
And that is the element that I would highlight today. It is through such vendors that a third country can gain access to or control of critical systems, enabling disruption to UK national infrastructure surveillance through access to data at scale or espionage, through access to sensitive information. And the risk landscape is evolving quickly. And that is why we are taking action. Now to the questions posed by the the Noble Viscount Law cameras.
It is very much in the context of all the other things that we are doing, all the other powers in the Bill, the questions of the scope of the bill, the government action plan. This is an additional power, particularly to focus on being able to act before, before, earlier on in the stage, in a preventative manner, in terms of the questions around the the qualifying transactions and the definition, the amendment contains a power to create a statutory referral system, and this would.
This referral system would need a state which. Procurements or transactions were in scope of the referral system, but we are, as the noble Viscount, mentioning, not anticipating needing to do that. Now the process of the Bill is such that we will enact the. Both the powers in the bill or the mechanisms in the bill and the voluntary referral mechanism. We will then be able. Art in the period of assessing the effectiveness of the Bill, be able to look at the effectiveness of the voluntary referral route and should we need to introduce a mandatory route, which obviously we have in different areas of national security, we will be able to do so.
In respect of the , the, the, the, the scrutiny by Parliament and the fact that we tabled this over the summer. I do appreciate that that has meant that not everybody has been able to familiarize themselves, and we have not been able to have as many in-depth discussions as we would normally when Parliament is sitting. And I'm extremely happy to facilitate to meet with noble Lords myself and with officials so that we, after committee, can go through all the questions and the points of detail that have been raised in this session on, on, on the details of how these powers would be enacted, the parliamentary scrutiny, the consultation process and all the elements which we have set out in our amendments in respect of the focus on AI, that.
In respect of the question on the skilled persons list that is available, I believe I'm advised on the D, the NTSC website currently. So that is something that is accessible to all. But let me come back to really the sort of the heart of the questions, which is why is this power needed? It is needed because even though we are taking powers on critical suppliers, it can be the case that vendors have the capability and intent to cause harm, particularly where they have a link to to a third country.
And that is the element that I would highlight today. It is through such vendors that a third country can gain access to or control of critical systems, enabling disruption to UK national infrastructure surveillance through access to data at scale or espionage, through access to sensitive information. And the risk landscape is evolving quickly. And that is why we are taking action. Now to the questions posed by the the Noble Viscount Law cameras.
It is very much in the context of all the other things that we are doing, all the other powers in the Bill, the questions of the scope of the bill, the government action plan. This is an additional power, particularly to focus on being able to act before, before, earlier on in the stage, in a preventative manner, in terms of the questions around the the qualifying transactions and the definition, the amendment contains a power to create a statutory referral system, and this would.
This referral system would need a state which. Procurements or transactions were in scope of the referral system, but we are, as the noble Viscount, mentioning, not anticipating needing to do that. Now the process of the Bill is such that we will enact the. Both the powers in the bill or the mechanisms in the bill and the voluntary referral mechanism. We will then be able. Art in the period of assessing the effectiveness of the Bill, be able to look at the effectiveness of the voluntary referral route and should we need to introduce a mandatory route, which obviously we have in different areas of national security, we will be able to do so.
In respect of the , the, the, the, the scrutiny by Parliament and the fact that we tabled this over the summer. I do appreciate that that has meant that not everybody has been able to familiarize themselves, and we have not been able to have as many in-depth discussions as we would normally when Parliament is sitting. And I'm extremely happy to facilitate to meet with noble Lords myself and with officials so that we, after committee, can go through all the questions and the points of detail that have been raised in this session on, on, on the details of how these powers would be enacted, the parliamentary scrutiny, the consultation process and all the elements which we have set out in our amendments in respect of the focus on AI, that.
16:46
16:46
Speaker 7
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Speaker 7
My Lords, I'll speak to amendment six and 75 in my name, and thank the noble Lords who have added their names in support. I was also glad to add my name to amendments 1285 and 86 in the name of Lord Tarasenko and amendment 84, in the name of the noble Lord Clement Jones. At the heart of these amendments is the place of artificial intelligence in this bill, a concern powerfully raised by noble Lords during second reading and repeatedly raised by colleagues from all sides in the other place.
And I rather suspect earlier in this session. Amendment six is a probing amendment. It seeks to understand if AI products and services are categorised as relevant digital services, and therefore that providers of AI products and services will be subject to the same duties in the act as other providers of relevant digital services such as online marketplaces, search engines, etc.. And the reason, my Lords, that I raise this and wish to have clarification is that in the regulations, the definition of an online search engine is a digital service that allows users to perform searches of.
In principle, all websites, websites in particular language on the basis of a query on any subjects in the form of a keyword phrase or other input, and returns links in which information related to the requested content can be found. Now, this sounds a lot like a definition that could cover many of the LLMs and AI agents. So I'd like to ask the noble lady, the Minister, to clarify if AI services are already covered under the categorisation of online search engines, or.
Absolutely not. I'd also like the noble lady to confirm if an AI service did not offer Service did not offer links or was restricted to a particular subject matter, but had all these other features and would it fall automatically out of the regime, i.e. some are covered and some are not. Now at second reading, and I believe this is the answer that the noble lady just gave. But she said the bill enables the Secretary of State to require an organisation using AI to cease using and isolate an AI model, but suggested that those powers were a backstop and do not focus on the safety of AI products systematically.
So, my Lords, I find myself confused because. Because on the one hand it seems that the definition could include. On the other hand, it seems that there may be reasons where some might be out of scope, but when the noble lady the minister speaks, it appears the AI is not properly considered proactively. But if there's a disaster, the Secretary of State can do something. And so I will be really grateful if she would just answer those two questions very directly, because I think it would.
As I say, it was a probing amendment, and I think it would be really helpful in the course of the bill to understand that categorically, amendment 75 is would establish a series of red lines for AI products and services classified as relevant digital services. These red lines have excellent parentage, my Lord. They reflect the work of Professor Stuart Russell, and are signed up to by some of the most eminent AI founders and professionals around the globe, and they reflect the global call for AI red lines.
Launched during the United Nations General Assembly. In short, they provide. The AI services must not be capable of evading human oversight, shut down or control, nor be able to autonomously self-replicate, self-improve or acquire compute they provide. The AI providers will be prohibited from creating systems that were capable of autonomously conducting sophisticated attacks on critical infrastructure, or that support terrorists and hostile states from attacks on such critical infrastructure, or which can deceive or manipulate populations at scale.
And they prevent capabilities which relate to the availability, authenticity, integrity or confidentiality confidentiality of stored or processed data. Following the exact language of the bill and clause three of the amendment would require the AI, AC, AC to ensure these red lines are adhered to. My Lords, this is an essential amendment and I do believe the UK is singularly well placed to introduce it. There is increasing evidence and understanding of the risks, and both the public and experts are calling for action.
My Lords, I had many people to quote, but I think I'm just going to really say that I spoke to Jonathan Casey, the independent reviewer of terrorism legislation and state threats legislation, a couple of weeks ago, and he is among many people who have warned publicly about the risk of AI used to support terrorist action and subvert information in the public domain.
And I rather suspect earlier in this session. Amendment six is a probing amendment. It seeks to understand if AI products and services are categorised as relevant digital services, and therefore that providers of AI products and services will be subject to the same duties in the act as other providers of relevant digital services such as online marketplaces, search engines, etc.. And the reason, my Lords, that I raise this and wish to have clarification is that in the regulations, the definition of an online search engine is a digital service that allows users to perform searches of.
In principle, all websites, websites in particular language on the basis of a query on any subjects in the form of a keyword phrase or other input, and returns links in which information related to the requested content can be found. Now, this sounds a lot like a definition that could cover many of the LLMs and AI agents. So I'd like to ask the noble lady, the Minister, to clarify if AI services are already covered under the categorisation of online search engines, or.
Absolutely not. I'd also like the noble lady to confirm if an AI service did not offer Service did not offer links or was restricted to a particular subject matter, but had all these other features and would it fall automatically out of the regime, i.e. some are covered and some are not. Now at second reading, and I believe this is the answer that the noble lady just gave. But she said the bill enables the Secretary of State to require an organisation using AI to cease using and isolate an AI model, but suggested that those powers were a backstop and do not focus on the safety of AI products systematically.
So, my Lords, I find myself confused because. Because on the one hand it seems that the definition could include. On the other hand, it seems that there may be reasons where some might be out of scope, but when the noble lady the minister speaks, it appears the AI is not properly considered proactively. But if there's a disaster, the Secretary of State can do something. And so I will be really grateful if she would just answer those two questions very directly, because I think it would.
As I say, it was a probing amendment, and I think it would be really helpful in the course of the bill to understand that categorically, amendment 75 is would establish a series of red lines for AI products and services classified as relevant digital services. These red lines have excellent parentage, my Lord. They reflect the work of Professor Stuart Russell, and are signed up to by some of the most eminent AI founders and professionals around the globe, and they reflect the global call for AI red lines.
Launched during the United Nations General Assembly. In short, they provide. The AI services must not be capable of evading human oversight, shut down or control, nor be able to autonomously self-replicate, self-improve or acquire compute they provide. The AI providers will be prohibited from creating systems that were capable of autonomously conducting sophisticated attacks on critical infrastructure, or that support terrorists and hostile states from attacks on such critical infrastructure, or which can deceive or manipulate populations at scale.
And they prevent capabilities which relate to the availability, authenticity, integrity or confidentiality confidentiality of stored or processed data. Following the exact language of the bill and clause three of the amendment would require the AI, AC, AC to ensure these red lines are adhered to. My Lords, this is an essential amendment and I do believe the UK is singularly well placed to introduce it. There is increasing evidence and understanding of the risks, and both the public and experts are calling for action.
My Lords, I had many people to quote, but I think I'm just going to really say that I spoke to Jonathan Casey, the independent reviewer of terrorism legislation and state threats legislation, a couple of weeks ago, and he is among many people who have warned publicly about the risk of AI used to support terrorist action and subvert information in the public domain.
17:06
Speaker 8
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Speaker 8
In this group, in one set of amendments at committee stage, we have more on AI. My Lord, it's a pleasure to rise to support all of the amendments, not just the cyber bill, but across most of government legislation past, present and tragically, probably largely future, as has already been mentioned, and was covered widely and rightly at second reading. There's a huge gaping hole at the center of this bill, a silence that booms around the entire bill. And that is all things AI.
It seems unfortunate that we are told at second reading and probably today, that this bill isn't the place for AI. Well, maybe it isn't, but it certainly is in that no previous opportunities have been taken. There was mention one liner in the 2024 King's speech of something around frontier models with AI. There have been various other nods and winks. There was a bill potentially ready to go at the end of autumn 2024.
Nothing came and still we have nothing. So now we have a cyber bill. It would be extraordinary not only to consider, but to have the threat of AI running right through this bill, because what is behind so much of the difficulties, the clear, present and real dangers that the minister has set out? Well, it may be cyber said at the front end, but it is AI as the grunt, brute force driving so much of this.
And that is what all of the amendments in this group see, it's right, or Tarasenko has done to highlight the excellent work of EC. But again, as we've seen with previous regulators for want of proper action when it comes to AI and indeed other technologies, numerous governments have just piled on more and more requirements and obligations on various regulators, as if somehow they're going to be able to manage this. This is what we're already seeing with AC, AC, world renowned and rightly respected, but they're already being asked to do an increasing number of tasks without the statutory footing or the resourcing to enable them to continue to do that world class and at the leading edge.
So when the minister comes to respond, I'd be very interested for her to update the committee on how she sees the role of AC going forward there in the right position. They're perfectly formed for the task, but needing statutory underpinning and resourcing would make such a significant difference. If the government fail to accept these amendments or indeed, if they so prefer, bring forward amendments of their own. Well, we'll have a very narrow, very specific piece of cyber legislation.
Good, in that it's the first piece of legislation to have cyber in its title good in so far as it goes, but really unfortunate in the sense that not only does it see cyber, but it sees technology. Unfortunately, through this view, which has dripped across washed across largely from the United States, that it's only and all about big players. The AI is really only about these LLMs, these frontier models, which nomenclature one chooses.
And the journey of AI has been to this point. And this is a zenith. So this is where the focus should be largely around these large so-called AI models. Not a bit of it there, but one element of a far more complex constellation, and to take a broader view, would not only enable the government to have the right thread of AI running through it, but it would be far more UK focused, context rich and be put into the bill in a way which would enable adaptability, agility going forward rather than potentially trapping ourselves with one specific view of AI, or indeed leaving ourselves at the will of all of these organisations, individuals and entities that are using various AI to attack us through having no or little or only sort of euphemistic nods and winks around AI throughout the bill.
I believe we need to have a rewrite throughout the entire bill, and this group of amendments is a very good start in that direction.
It seems unfortunate that we are told at second reading and probably today, that this bill isn't the place for AI. Well, maybe it isn't, but it certainly is in that no previous opportunities have been taken. There was mention one liner in the 2024 King's speech of something around frontier models with AI. There have been various other nods and winks. There was a bill potentially ready to go at the end of autumn 2024.
Nothing came and still we have nothing. So now we have a cyber bill. It would be extraordinary not only to consider, but to have the threat of AI running right through this bill, because what is behind so much of the difficulties, the clear, present and real dangers that the minister has set out? Well, it may be cyber said at the front end, but it is AI as the grunt, brute force driving so much of this.
And that is what all of the amendments in this group see, it's right, or Tarasenko has done to highlight the excellent work of EC. But again, as we've seen with previous regulators for want of proper action when it comes to AI and indeed other technologies, numerous governments have just piled on more and more requirements and obligations on various regulators, as if somehow they're going to be able to manage this. This is what we're already seeing with AC, AC, world renowned and rightly respected, but they're already being asked to do an increasing number of tasks without the statutory footing or the resourcing to enable them to continue to do that world class and at the leading edge.
So when the minister comes to respond, I'd be very interested for her to update the committee on how she sees the role of AC going forward there in the right position. They're perfectly formed for the task, but needing statutory underpinning and resourcing would make such a significant difference. If the government fail to accept these amendments or indeed, if they so prefer, bring forward amendments of their own. Well, we'll have a very narrow, very specific piece of cyber legislation.
Good, in that it's the first piece of legislation to have cyber in its title good in so far as it goes, but really unfortunate in the sense that not only does it see cyber, but it sees technology. Unfortunately, through this view, which has dripped across washed across largely from the United States, that it's only and all about big players. The AI is really only about these LLMs, these frontier models, which nomenclature one chooses.
And the journey of AI has been to this point. And this is a zenith. So this is where the focus should be largely around these large so-called AI models. Not a bit of it there, but one element of a far more complex constellation, and to take a broader view, would not only enable the government to have the right thread of AI running through it, but it would be far more UK focused, context rich and be put into the bill in a way which would enable adaptability, agility going forward rather than potentially trapping ourselves with one specific view of AI, or indeed leaving ourselves at the will of all of these organisations, individuals and entities that are using various AI to attack us through having no or little or only sort of euphemistic nods and winks around AI throughout the bill.
I believe we need to have a rewrite throughout the entire bill, and this group of amendments is a very good start in that direction.
17:11
Speaker 9
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Speaker 9
I just very briefly want to speak to these amendments from an anti-terrorism point of view, from a the point of view of national security. I do so with trepidation, listening to the wonderful speeches that have been made thus far, and to say that I find it difficult to understand why there is a willingness to give the clarity that has been requested in these group of amendments, particularly around AI models. And I note that the noble lady, the minister, in response to the first group of amendments, said that AI could be in scope, or would it not be much clearer for all concerned if AI was very specifically in scope and ethically.
And this follows on from the noble lady, Lady Harding? I mean, ethically, I would have much preferred if we'd had a royal commission look at AI and say, here are the guardrails for the development. As you've often said, around the development of AI. But for some unknown reason, we either seem unwilling or unable to do that as a nation. And in the absence of that, that's why I think the amendment 75 is so very, very important.
Because from a national security point of view, we should adopt the precautionary principle. We live in very dangerous times. We've listened to experts such as Jonathan Hall KC saying very clearly that we need to take it into account. And so in, in in brief, I would say to the noble lady, the minister, it would be really helpful to hear from the government as to how they intend to deal with AI as it moves forward, as it gets bigger and bigger, because surely we should have that ethical, moral conversation about where the guardrails are.
And this follows on from the noble lady, Lady Harding? I mean, ethically, I would have much preferred if we'd had a royal commission look at AI and say, here are the guardrails for the development. As you've often said, around the development of AI. But for some unknown reason, we either seem unwilling or unable to do that as a nation. And in the absence of that, that's why I think the amendment 75 is so very, very important.
Because from a national security point of view, we should adopt the precautionary principle. We live in very dangerous times. We've listened to experts such as Jonathan Hall KC saying very clearly that we need to take it into account. And so in, in in brief, I would say to the noble lady, the minister, it would be really helpful to hear from the government as to how they intend to deal with AI as it moves forward, as it gets bigger and bigger, because surely we should have that ethical, moral conversation about where the guardrails are.
17:13
Speaker 10
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Speaker 10
I just want to very briefly add my support to the amendments in this group, particularly the Red lines amendment and the last resort amendment. I mean, nobody has read the report on the Hugging Face incident. Can cannot think that we really need legislation now to deal with these kind of events. And this was, you know, showing unintended cooperation between agents that even discussed amongst themselves whether individual actions were ethical. They were referring to their own ethical guidelines.
And none of the agents then flagged to their human supervisors what was going on. So you can see what the training and the programming is behind these agents, that they have some ethical guidelines in there, but those guidelines are in the gift of the companies that are training them. We have to have more control and oversight over that sort of behaviour, because you can see the consequences of it. And this was an unintended consequence. And obviously there could be intended consequences as well.
So I just think that this is an opportunity for the sorts of this legislation is our only opportunity now, and we need to take it because this is not the future. This is the present.
And none of the agents then flagged to their human supervisors what was going on. So you can see what the training and the programming is behind these agents, that they have some ethical guidelines in there, but those guidelines are in the gift of the companies that are training them. We have to have more control and oversight over that sort of behaviour, because you can see the consequences of it. And this was an unintended consequence. And obviously there could be intended consequences as well.
So I just think that this is an opportunity for the sorts of this legislation is our only opportunity now, and we need to take it because this is not the future. This is the present.
17:14
Speaker 3
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Speaker 3
My Lords, we've had some really excellent speeches in this group, and I really hope that the has taken on board some of the points that have been made today. My Lords, from people who really know what they're talking about in the AI field, my Lords, I rise to speak to amendment 84, which stands in my name and to speak in strong support of the amendments tabled by the noble Lord Tarasenko and the noble Baroness Kidron. The omission of robust statutory AI governance from this bill is not just an oversight, it's completely unsustainable.
My Lords and the noble Baroness Harding made a very good point that what we really need is an AI bill.
My Lords and the noble Baroness Harding made a very good point that what we really need is an AI bill.
17:15
17:15
Speaker 3
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Speaker 3
Depressing though it may have been, the noble Lord Holmes gave us a history of the lack of action. To date. My Lords, we live and breathe in the desire to see some action in this area, my Lords. But inevitably we're disappointed and frontier AI models are expanding at exponential speed, doubling in capability every four months. We've crossed from passive chatbots into autonomous AI systems capable of executing multi-step cyber operations.
And my Lords, a warning has been issued by nobody less. We've had a few quotes today, my Lords, but I. I think Bill Gates's testimony in The New York Times was worth listening to. He understands software engineering better than almost anyone, and he confessed that he was deeply shocked by the coding and offensive capabilities of tools like Claude Code. He warned that industry leaders privately know how dangerous these models are getting, but remain silent because there's too much money on the line.
As he noted, tech companies are failing to observe their own stated safety milestones on bioweapons and loss of control, racing full speed ahead while relying on voluntary codes. His verdict on self-regulation was pretty blunt self-regulation on the most dangerous tool ever invented. No thanks Lords, I do hope that the government is reluctant, as they are, to listen to some of the advocates of regulation. Do listen to someone with that level of authority, and real world evidence bears out these fears.
In February 26th, and we've heard from noble Lords with various examples. But in February 2026, researchers at Gambit Security documented a campaign where a single operator used Claude code and GPT 4.1 to attack nine Mexican government organizations. Approximately 75% of remote command executions were conducted completely autonomously by the AI agent. We also witnessed the AWS China incident, where an internal coding agent suffered compound errors and autonomously purged a live database, causing a 13 hour regional outage.
And the noble Lord Tarasenko, the noble Baroness Kidron. Very convincingly, in my view, described not only the nature of the risk but also the sheer scale of that risk. Under amendment six, tabled by noble Baroness Kidron, which I have signed, she is rightly seeking to ensure that AI products and services underpinning digital systems are recognised within clause seven scope. Under amendment 75, we would establish clear statutory red lines prohibiting AI systems capable of evading human shutdown, self-replicating, self-replicating uncontrollably or executing automated attacks on critical infrastructure.
And as she described, the Red lines campaign is backed by a great many of the leading names in AI developments. And clearly it's backed by the public in terms of public opinion. As she mentioned under Lord Tarasenko amendments 12 and 85 and my amendment 92 AC would be integrated into the regulatory architecture as the noble Lord Tarasenko has argued, the Information Commissioner's Office and sectoral regulators simply do not possess the specialist machine learning engineering capability that exists within AC.
When regulators assess AI enabled infrastructure, they must have statutory access to AC technical threat modelling. Furthermore, under Lord Tarasenko amendment 86, any emergency intervention must be subject to an independent post-incident technical review laid before Parliament within 28 days, ensuring lessons are learned and transparency shared. Finally, my Lords, amendment 84 in my name provides the state with a necessary emergency kill switch. If an autonomous model malfunctions within critical national infrastructure, the government currently lacks clear statutory power to direct an emergency shutdown.
This amendment provides that last resort power while embedding gold standard constitutional checks. A mandatory 24 hour review, a seven day parliamentary reporting lot and an immediate right of appeal to the High Court with compensation provisions for disproportionate directions. The core argument advanced by control AI and leading safety researchers is simple yet profound. You cannot govern what you cannot legally stop. At present, the UK finds itself in a state of dangerous legal exposure if a highly capable autonomous frontier model.
And I do agree, by the way, that this is not all about frontier with the noble Lord Holmes. It's not all about frontier models, but in this case, frontier model, whether hosted in a UK data centre or integrated across our critical infrastructure, begins exhibiting rogue behaviour, compound algorithmic failure or active alignment collapse. Our security services and regulators possess no specific agile statutory mechanism to compel a physical or digital shutdown, relying on slow moving administrative notices or voluntary developer goodwill in a minutes critical national emergency is not a sufficient strategy.
Now, the government may point to their broad national security direction powers under clause 43, but clause 43 was designed for slow moving preventative supply chain restrictions, not real time emergency operational crises. Clause 43 lacks the explicit technical definitions of large scale AI systems that the essential 24 hour continuous necessity review and, crucially, lacks the immediate judicial compensation mechanisms required to make emergency state intervention legally sound commercially fair and compliant with the European Convention on Human Rights.
Crucially, unlike the government amendments in Group one, amendment 84 is not a blank check for executive overreach. On the contrary, this power operates as a strictly bounded three layer lock. Furthermore, catastrophic risk does not require a hostile nation state. It requires only the sudden, unpredictable failure mode of an autonomous agentic AI operating at machine speed. As we've seen both with mythos and GPT five, when commercial giants are racing full speed ahead and ignoring their own safety milestones, the state must possess the sovereign backstop backstop of a legal kill switch.
By establishing this transparent court emergency power on the face of primary legislation, amendment 84 provides a strong statutory safety net for the AI age. My Lords, I urge your lordship to support all these future proofed AI protections and reject the idea that we will be adequately protected under this bill. With a technology neutral approach, we need to accept the fact that there is, as the noble Baroness and noble Lord Tarasenko and many other noble lords, Baroness Harding and the noble Lord Holmes, have shown us we have a huge AI shaped hole in this bill.
And my Lords, a warning has been issued by nobody less. We've had a few quotes today, my Lords, but I. I think Bill Gates's testimony in The New York Times was worth listening to. He understands software engineering better than almost anyone, and he confessed that he was deeply shocked by the coding and offensive capabilities of tools like Claude Code. He warned that industry leaders privately know how dangerous these models are getting, but remain silent because there's too much money on the line.
As he noted, tech companies are failing to observe their own stated safety milestones on bioweapons and loss of control, racing full speed ahead while relying on voluntary codes. His verdict on self-regulation was pretty blunt self-regulation on the most dangerous tool ever invented. No thanks Lords, I do hope that the government is reluctant, as they are, to listen to some of the advocates of regulation. Do listen to someone with that level of authority, and real world evidence bears out these fears.
In February 26th, and we've heard from noble Lords with various examples. But in February 2026, researchers at Gambit Security documented a campaign where a single operator used Claude code and GPT 4.1 to attack nine Mexican government organizations. Approximately 75% of remote command executions were conducted completely autonomously by the AI agent. We also witnessed the AWS China incident, where an internal coding agent suffered compound errors and autonomously purged a live database, causing a 13 hour regional outage.
And the noble Lord Tarasenko, the noble Baroness Kidron. Very convincingly, in my view, described not only the nature of the risk but also the sheer scale of that risk. Under amendment six, tabled by noble Baroness Kidron, which I have signed, she is rightly seeking to ensure that AI products and services underpinning digital systems are recognised within clause seven scope. Under amendment 75, we would establish clear statutory red lines prohibiting AI systems capable of evading human shutdown, self-replicating, self-replicating uncontrollably or executing automated attacks on critical infrastructure.
And as she described, the Red lines campaign is backed by a great many of the leading names in AI developments. And clearly it's backed by the public in terms of public opinion. As she mentioned under Lord Tarasenko amendments 12 and 85 and my amendment 92 AC would be integrated into the regulatory architecture as the noble Lord Tarasenko has argued, the Information Commissioner's Office and sectoral regulators simply do not possess the specialist machine learning engineering capability that exists within AC.
When regulators assess AI enabled infrastructure, they must have statutory access to AC technical threat modelling. Furthermore, under Lord Tarasenko amendment 86, any emergency intervention must be subject to an independent post-incident technical review laid before Parliament within 28 days, ensuring lessons are learned and transparency shared. Finally, my Lords, amendment 84 in my name provides the state with a necessary emergency kill switch. If an autonomous model malfunctions within critical national infrastructure, the government currently lacks clear statutory power to direct an emergency shutdown.
This amendment provides that last resort power while embedding gold standard constitutional checks. A mandatory 24 hour review, a seven day parliamentary reporting lot and an immediate right of appeal to the High Court with compensation provisions for disproportionate directions. The core argument advanced by control AI and leading safety researchers is simple yet profound. You cannot govern what you cannot legally stop. At present, the UK finds itself in a state of dangerous legal exposure if a highly capable autonomous frontier model.
And I do agree, by the way, that this is not all about frontier with the noble Lord Holmes. It's not all about frontier models, but in this case, frontier model, whether hosted in a UK data centre or integrated across our critical infrastructure, begins exhibiting rogue behaviour, compound algorithmic failure or active alignment collapse. Our security services and regulators possess no specific agile statutory mechanism to compel a physical or digital shutdown, relying on slow moving administrative notices or voluntary developer goodwill in a minutes critical national emergency is not a sufficient strategy.
Now, the government may point to their broad national security direction powers under clause 43, but clause 43 was designed for slow moving preventative supply chain restrictions, not real time emergency operational crises. Clause 43 lacks the explicit technical definitions of large scale AI systems that the essential 24 hour continuous necessity review and, crucially, lacks the immediate judicial compensation mechanisms required to make emergency state intervention legally sound commercially fair and compliant with the European Convention on Human Rights.
Crucially, unlike the government amendments in Group one, amendment 84 is not a blank check for executive overreach. On the contrary, this power operates as a strictly bounded three layer lock. Furthermore, catastrophic risk does not require a hostile nation state. It requires only the sudden, unpredictable failure mode of an autonomous agentic AI operating at machine speed. As we've seen both with mythos and GPT five, when commercial giants are racing full speed ahead and ignoring their own safety milestones, the state must possess the sovereign backstop backstop of a legal kill switch.
By establishing this transparent court emergency power on the face of primary legislation, amendment 84 provides a strong statutory safety net for the AI age. My Lords, I urge your lordship to support all these future proofed AI protections and reject the idea that we will be adequately protected under this bill. With a technology neutral approach, we need to accept the fact that there is, as the noble Baroness and noble Lord Tarasenko and many other noble lords, Baroness Harding and the noble Lord Holmes, have shown us we have a huge AI shaped hole in this bill.
17:23
17:23
Speaker 5
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Speaker 5
My Lords, I'll begin with amendment 12 in the names of the noble Lord, Lord Tarasenko and the noble Baroness, Lady Kidron. Let me say, first of all, I completely understand the necessity and the urgency of taking action on these things. And I thought in particular, the noble Lord, Lord Tarasenko, set out the. The absolute urgency and growing weight of the problem that we need to solve here, where I do have my doubts and I'm delighted to carry on talking about this as we go through.
I do have my doubts about the quite significant expansion and change of the role of Acei in order to take on these additional responsibilities, and those are practical doubts, and I'm certainly not disputing the desirability of of, of the outcome of fixing this problem. Equally, we have to think practically about how this works alongside the Information Commissioner's Office. What is the relative role of each one? And I thought my noble friend Lord Holmes set it up very well.
You know, yes, we are going to need to look carefully at who regulates what, and we're going to come to this in the next group, but we need to do so with quite a bit more information about their resources and about their goals, and about how we see each individual regulator taking this forward. And I think it is a very much larger discussion. I'm afraid that we're going to have to be taking forward on this matter.
My Lords, while I understand the desire to maximize the use of Acei in giving it these statutory functions in a moment. 85 we in these benches are hesitant when consolidating powers in a separate non-governmental body. No matter how effective that body continues to prove to be in its original and existing role, taking power outside of Parliament may not be the most effective way to ensure rigour and accountability. The Secretary of State should, of course, have regard to what the Acei says and closely monitor its output.
But I'm concerned, willing to be convinced, but concerned that placing it on a statutory footing risks diverting responsibility away from the Secretary of State. We hold, therefore, the same position for amendment 92, giving the Acei standard setting, inspection and enforcement powers risks creating an unaccountable body with a greatly increased remit out of what is currently a vital and successful research body. I feel currently that that risk is too great for both sides.
Instead, we would rather see powers vested in the hands of accountable public figures. It's for that reason, my Lords. We support the principle behind amendment 84. In the name of the noble Lord, Lord Clement-jones. It provides the Secretary of State with the power to shut down AI systems during large scale emergencies. It provides a necessary stopgap in the hands of an accountable Secretary of State, while also requiring Parliament to be informed of the decision taken.
Additionally, and I think this is important, it does not inhibit the growth of safe and responsible AI or across the AI sector, which can be an additional worry with the pre-deployment checks of amendment 85. My Lords amendment 75, tabled by the noble Lady Baroness Kidron, would introduce red lines for relevant AI digital services. I slightly confess I was very impressed when I read the red lines, because I thought the noble lady had written them herself, but she.
She perhaps foolishly gave away that it came from from the brilliant Stuart Russell. I think the list is, needless to say, entirely sound, at least for today. We of course , agree that AI services should not partake in actions that threaten the safety of individuals, businesses or nations. But our hesitation arises from the fact that, well, the the logic in the red lines is clear. The red lines themselves are necessarily speculative.
At a moment in time, however eminent and wise, their creator. Further, AI models must demonstrate that they cannot perform the capabilities listed. So they would essentially be asked to prove a negative. Aside from the fact that this place has an administrative burden on the providers, AI models develop in a way, of course, as we all know, that are near impossible to predict and quantify. I'm I'm unclear in my mind how Frontier Labs would be able to engineer their models in a way that allows them to, to show they demonstrably would not, for example, self-improve so as to pose a risk to the authenticity, authenticity, and integrity of processed data.
Similarly, I'm unsure in my mind how the regulators will be expected to quantify these capabilities, since to a large extent, they're a function not just of ability, but degree. In theory, the requirement not to support the development of chemical weapons might be violated by a model that simply gives basic chemistry lessons. Would that model be banned, or would it be forced not to answer questions about chemistry? And I, I don't want to trivialize by by giving too simple an example, but I am trying just to convey how difficult it is going to be to design the, the precise scope and and extent of the necessary regulation.
I do worry they currently seem arbitrary. They would be onerous on both firms and regulators and will slow, slow down, safe and responsible growth where it does exist in our domestic AI industry. My Lords, may I briefly suggest a a different or additional approach, which is to say to go principles based rather than capabilities based, ensuring, for example, that labs and associated businesses are focused on integrity prevention, human control, threat minimization, and transparency.
Rather than attempting to regulate specific examples of AI malpractice could prove more effective at serving the dual goal of AI growth and AI safety. As I've argued many times, I'm afraid in other bills and debates, the only way legislation can keep ahead of technology is to pursue principles over rules about specific features. My Lords, let me finish by returning to the broader point, which is that the reason for this group, the debate around AI in the context of cyber security is because, I'm afraid we are still unclear of the government's wider approach to cyber security or to AI, and we really need to see the bigger picture in the form of a national action plan, or indeed of a white paper.
That's going to explain to us overall, how does the government see the evolving world enabled by these extremely powerful technologies? We can go sector by sector and debate the best way to regulate and protect them against cyber attacks. But what actually matters is the government's applied philosophy. Until we see that, I'm afraid we are debating ideas in the dark. Area.
I do have my doubts about the quite significant expansion and change of the role of Acei in order to take on these additional responsibilities, and those are practical doubts, and I'm certainly not disputing the desirability of of, of the outcome of fixing this problem. Equally, we have to think practically about how this works alongside the Information Commissioner's Office. What is the relative role of each one? And I thought my noble friend Lord Holmes set it up very well.
You know, yes, we are going to need to look carefully at who regulates what, and we're going to come to this in the next group, but we need to do so with quite a bit more information about their resources and about their goals, and about how we see each individual regulator taking this forward. And I think it is a very much larger discussion. I'm afraid that we're going to have to be taking forward on this matter.
My Lords, while I understand the desire to maximize the use of Acei in giving it these statutory functions in a moment. 85 we in these benches are hesitant when consolidating powers in a separate non-governmental body. No matter how effective that body continues to prove to be in its original and existing role, taking power outside of Parliament may not be the most effective way to ensure rigour and accountability. The Secretary of State should, of course, have regard to what the Acei says and closely monitor its output.
But I'm concerned, willing to be convinced, but concerned that placing it on a statutory footing risks diverting responsibility away from the Secretary of State. We hold, therefore, the same position for amendment 92, giving the Acei standard setting, inspection and enforcement powers risks creating an unaccountable body with a greatly increased remit out of what is currently a vital and successful research body. I feel currently that that risk is too great for both sides.
Instead, we would rather see powers vested in the hands of accountable public figures. It's for that reason, my Lords. We support the principle behind amendment 84. In the name of the noble Lord, Lord Clement-jones. It provides the Secretary of State with the power to shut down AI systems during large scale emergencies. It provides a necessary stopgap in the hands of an accountable Secretary of State, while also requiring Parliament to be informed of the decision taken.
Additionally, and I think this is important, it does not inhibit the growth of safe and responsible AI or across the AI sector, which can be an additional worry with the pre-deployment checks of amendment 85. My Lords amendment 75, tabled by the noble Lady Baroness Kidron, would introduce red lines for relevant AI digital services. I slightly confess I was very impressed when I read the red lines, because I thought the noble lady had written them herself, but she.
She perhaps foolishly gave away that it came from from the brilliant Stuart Russell. I think the list is, needless to say, entirely sound, at least for today. We of course , agree that AI services should not partake in actions that threaten the safety of individuals, businesses or nations. But our hesitation arises from the fact that, well, the the logic in the red lines is clear. The red lines themselves are necessarily speculative.
At a moment in time, however eminent and wise, their creator. Further, AI models must demonstrate that they cannot perform the capabilities listed. So they would essentially be asked to prove a negative. Aside from the fact that this place has an administrative burden on the providers, AI models develop in a way, of course, as we all know, that are near impossible to predict and quantify. I'm I'm unclear in my mind how Frontier Labs would be able to engineer their models in a way that allows them to, to show they demonstrably would not, for example, self-improve so as to pose a risk to the authenticity, authenticity, and integrity of processed data.
Similarly, I'm unsure in my mind how the regulators will be expected to quantify these capabilities, since to a large extent, they're a function not just of ability, but degree. In theory, the requirement not to support the development of chemical weapons might be violated by a model that simply gives basic chemistry lessons. Would that model be banned, or would it be forced not to answer questions about chemistry? And I, I don't want to trivialize by by giving too simple an example, but I am trying just to convey how difficult it is going to be to design the, the precise scope and and extent of the necessary regulation.
I do worry they currently seem arbitrary. They would be onerous on both firms and regulators and will slow, slow down, safe and responsible growth where it does exist in our domestic AI industry. My Lords, may I briefly suggest a a different or additional approach, which is to say to go principles based rather than capabilities based, ensuring, for example, that labs and associated businesses are focused on integrity prevention, human control, threat minimization, and transparency.
Rather than attempting to regulate specific examples of AI malpractice could prove more effective at serving the dual goal of AI growth and AI safety. As I've argued many times, I'm afraid in other bills and debates, the only way legislation can keep ahead of technology is to pursue principles over rules about specific features. My Lords, let me finish by returning to the broader point, which is that the reason for this group, the debate around AI in the context of cyber security is because, I'm afraid we are still unclear of the government's wider approach to cyber security or to AI, and we really need to see the bigger picture in the form of a national action plan, or indeed of a white paper.
That's going to explain to us overall, how does the government see the evolving world enabled by these extremely powerful technologies? We can go sector by sector and debate the best way to regulate and protect them against cyber attacks. But what actually matters is the government's applied philosophy. Until we see that, I'm afraid we are debating ideas in the dark. Area.
17:31
17:31
Speaker 4
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Speaker 4
I thank noble Lords for their amendments and I recognise the concerns that have been expressed this afternoon. Technology is evolving at a rapid pace and it's important we both harness the benefits and equally protect against the risks that they may pose. Lord Holmes of Richmond asked about the approach that we take, we understand how quickly technology is evolving and it's important that we have a flexible and future approach. If we limit ourselves to specific technologies, we will not capture new developments.
For instance, when the regulations were introduced in 2018, we could not have predicted the role that AI and quantum would play in cyber. That is why the bill takes an all hazards, all threats, all technologies approach. This requires regulated entities to manage all the risks relevant to their network and information systems. For example, if an AI forms a part of the system that the essential service relies on, for example, in the provision of drinking water, then that entity must assess and mitigate the risks it poses.
But more generally, the government takes the concerns very seriously. The UK is taking a leading role in our approach to AI security. I will set out my response to each amendment in turn. But while we do not consider the amendments proposed to be the right approach, I would like to reassure noble Lords that the government is exploring whether additional targeted interventions may be needed in future to address the most significant AI related national security risks.
As the government's thinking is at an early stage, I will be open to future engagement with noble Lords on potential options. Any future approach would need to be carefully designed. Measures would be evidence based, proportionate and targeted at the risks in question, while minimising unintended impacts on growth, innovation and the operation of critical services. Turning now to the amendments. The intention of the new regime is to require organisations to protect themselves from risks that could compromise their network and information systems, which could include cyber attack, a national disaster or even human error.
That protection would be appropriate and proportionate to the risks faced by those organisations, including state of the art technology such as AI. I would like to reassure noble Lords that this would include relevant risks from AI embedded within the systems of regulated organisations. To take one example, healthcare providers in scope of the regime would be required to manage risks associated with the AI products they use to provide their services. This is because essential services in scope must look at and work to mitigate risks posed to their information, network and information systems.
As AI is increasingly becoming embedded across the economy, we will keep its impact on the regulatory landscape under review. This bill is focused on the cyber security and resilience of network and information systems. While broader questions about the regulation of AI systems are more appropriately addressed through separate, for example, online safety discussions. In that respect, bringing providers of AI services. Those companies which are at the cutting edge of frontier AI development and their products into the scope of the regime, which amendment six would seek to do, did not address the harms that can be posed by some AI products or services, or specifically, it would not prevent their misuse by hostile actors.
Instead, the government is already taking firm action through more appropriate ways in this space, which also speaks to the concerns that amendment 75 would aim to address and which the noble Baroness, Baroness Foster, asked about. First, the UK AI Security Institute, as noble lords are well aware, is world leading in its research on advanced AI capabilities, AC was set up to build a rigorous scientific understanding of the capabilities of the most advanced AI systems and the risks they pose.
It works with developers to strengthen security before models are released, and ground policy decisions and evidence rather than speculation, especially as they relate to national security matters. Second, the UK government is taking a leading role in addressing these risks in both the domestic and international setting. As the noble Lord Tarasenko and others have set out, including Viscount Camrose, it is critical that this approach has global impact. Our AI Cyber Security Code of Practice has formed the basis of the world first global standard in 304223, which sets baseline security requirements for developers and deployers across the AI life cycle.
This demonstrates our global leadership and commitment to shaping international technical standards, which go wider than some of the issues raised in this bill. Underpinning all this is a simple but powerful message set out in a joint Five Eyes statement in June. It recommended that as AI capabilities evolve, all industry, including vendors, should seek to step up their cyber defenses. This is a clear call to all to action for all organisations, including government, and a reminder that the key tenets of cyber hygiene still stand strong.
And that is also why we are committed to building a national scale, AI enabled cyber defence for the UK Cyber Shield. It will scan UK systems to continuously discover vulnerabilities and apply national level mitigations. The noble Baroness Kidron has tabled amendment 75, which sets out seven red lines AI capabilities that would enable an AI system to facilitate significant risks to the UK. The noble Baroness will recognise that AI is one of the many technologies that can be used for both beneficial and harmful purposes.
As she herself has mentioned on previous occasions, alongside the example of a sort of chemistry questions. Banking services can be used to connect families, but might also be used to finance illegal terrorist activities. Equally, while powerful AI capabilities can be used by malicious actors to cause harm to the UK, they might also be used by the national security community to defend the UK and by UK organisations and companies to protect themselves from harm. It's therefore not in the UK's national interest to restrict UK organisations in the public sector from accessing powerful AI capabilities, especially given the global nature of AI risks.
It's also unlikely that AC would be able to give conclusive assurances regarding AI models in the way envisaged in this amendment. Testing shows what a model can do, not what it could conclusively cannot. As the noble lord Viscount Camrose pointed out, the noble Lord, Lord Tarasenko, has also tabled amendment 12, which would require Dhssps to follow guidance issued by the AI Security Institute. For the reasons I have set out on amendment six and because it is not AC provide guidance of this nature, I do not think it would be appropriate.
I will set out in more detail on Ace's role later in my response. Moving on to amendment 84, tabled by the noble Lord, Lord Clement Jones, we have chosen to go further than our EU counterparts and the Miss two regime to respond to these risks by bringing forward powers in the Bill to direct regulated entities. If there is a national security risk in relation to their network and information system, this may be used, for instance, to require a regulated entity to cease and cease using and isolate an AI model.
We believe this is a more proportionate and effective response, as data centres operate in highly complex ecosystems and AI systems, often distributed across different data centres and jurisdictions, it's much less desirable to direct multiple data centres to shut down, and the impacts this could have on services that rely on them than to direct them to cease using an AI model. This is important as our economic security will grow as UK companies grow, as they increase AI adoption, as we develop our domestic capabilities and attract global talent, underpinned by our data centre and digital infrastructure.
I will also refer back to my introductory remarks on exploring further targeted interventions. This includes examining whether proportionate containment powers could provide a more effective and targeted response, including powers to restrict access to specific AI systems where necessary to prevent or mitigate serious harm. The amendment, tabled by the noble Lord, Lord Clement Jones, also seeks a regular report on AI security. In December 2025, the AI Security Institute published the frontier AI trends report, which sets out high level trends on AI progress based on two years of government led testing of leading models coming to amendments 85, 86, 92, 98, tabled by the Noble Lords Lord Tarasenko and Lord Clement Jones, which are indeed a testament to Ace's leading role and expertise.
They seek to provide AC with powers to address potential risks arising from frontier AI models. As I have already set out the important role the AC plays, building a rigorous scientific understanding of the capabilities of the most advanced AI systems and the risks they pose. Working with developers to strengthen security models, security before models are released, and grounding policy decisions on evidence rather than speculation. These amendments would give AC a role that it was not designed to fulfil.
Ace's focus on frontier technology and trusted relationships with the world's leading AI labs allow it to keep pace with the fast moving technology, thereby providing critical awareness of the most novel and serious risks. This amendment would undermine the voluntary collaboration on which AC operates. A regulatory role for AC is therefore the wrong answer. That the government is does remain committed to AC equipped to fulfil its vital role, and will continue to keep the House updated on its work as appropriate as I've just set out, such amendments run the real risk of placing barriers on AI adoption and deployment in the UK.
Due to the scope of the bill, the amendments cannot address wider AI harms or cyber security in the wider economy. I share concerns about the potential of hostile actors using frontier AI models against our essential services . By placing these restrictions on their deployment in the UK, as amended, would not be affected. Let me also respond to the direct question asked by the noble Baroness, Baroness Kidron, on large language models, large language models are not typically considered online search engines in respect of the CSB, while some LLMs can be seen to share similar characteristics and may utilize online search engines, their functions tend to be much broader.
I hope I have addressed the points raised well. I hope I have at least touched on all of the points raised today to the points made before on changes to the government. I recall very well the numerous discussions we've had on AI over the past few months, and continue to leave their point of continuity on those. I hope I have been able to address the points made today, and as I have said, the government would be happy to engage with noble Lords as options are being considered.
We always stand ready to protect our national and economic security.
For instance, when the regulations were introduced in 2018, we could not have predicted the role that AI and quantum would play in cyber. That is why the bill takes an all hazards, all threats, all technologies approach. This requires regulated entities to manage all the risks relevant to their network and information systems. For example, if an AI forms a part of the system that the essential service relies on, for example, in the provision of drinking water, then that entity must assess and mitigate the risks it poses.
But more generally, the government takes the concerns very seriously. The UK is taking a leading role in our approach to AI security. I will set out my response to each amendment in turn. But while we do not consider the amendments proposed to be the right approach, I would like to reassure noble Lords that the government is exploring whether additional targeted interventions may be needed in future to address the most significant AI related national security risks.
As the government's thinking is at an early stage, I will be open to future engagement with noble Lords on potential options. Any future approach would need to be carefully designed. Measures would be evidence based, proportionate and targeted at the risks in question, while minimising unintended impacts on growth, innovation and the operation of critical services. Turning now to the amendments. The intention of the new regime is to require organisations to protect themselves from risks that could compromise their network and information systems, which could include cyber attack, a national disaster or even human error.
That protection would be appropriate and proportionate to the risks faced by those organisations, including state of the art technology such as AI. I would like to reassure noble Lords that this would include relevant risks from AI embedded within the systems of regulated organisations. To take one example, healthcare providers in scope of the regime would be required to manage risks associated with the AI products they use to provide their services. This is because essential services in scope must look at and work to mitigate risks posed to their information, network and information systems.
As AI is increasingly becoming embedded across the economy, we will keep its impact on the regulatory landscape under review. This bill is focused on the cyber security and resilience of network and information systems. While broader questions about the regulation of AI systems are more appropriately addressed through separate, for example, online safety discussions. In that respect, bringing providers of AI services. Those companies which are at the cutting edge of frontier AI development and their products into the scope of the regime, which amendment six would seek to do, did not address the harms that can be posed by some AI products or services, or specifically, it would not prevent their misuse by hostile actors.
Instead, the government is already taking firm action through more appropriate ways in this space, which also speaks to the concerns that amendment 75 would aim to address and which the noble Baroness, Baroness Foster, asked about. First, the UK AI Security Institute, as noble lords are well aware, is world leading in its research on advanced AI capabilities, AC was set up to build a rigorous scientific understanding of the capabilities of the most advanced AI systems and the risks they pose.
It works with developers to strengthen security before models are released, and ground policy decisions and evidence rather than speculation, especially as they relate to national security matters. Second, the UK government is taking a leading role in addressing these risks in both the domestic and international setting. As the noble Lord Tarasenko and others have set out, including Viscount Camrose, it is critical that this approach has global impact. Our AI Cyber Security Code of Practice has formed the basis of the world first global standard in 304223, which sets baseline security requirements for developers and deployers across the AI life cycle.
This demonstrates our global leadership and commitment to shaping international technical standards, which go wider than some of the issues raised in this bill. Underpinning all this is a simple but powerful message set out in a joint Five Eyes statement in June. It recommended that as AI capabilities evolve, all industry, including vendors, should seek to step up their cyber defenses. This is a clear call to all to action for all organisations, including government, and a reminder that the key tenets of cyber hygiene still stand strong.
And that is also why we are committed to building a national scale, AI enabled cyber defence for the UK Cyber Shield. It will scan UK systems to continuously discover vulnerabilities and apply national level mitigations. The noble Baroness Kidron has tabled amendment 75, which sets out seven red lines AI capabilities that would enable an AI system to facilitate significant risks to the UK. The noble Baroness will recognise that AI is one of the many technologies that can be used for both beneficial and harmful purposes.
As she herself has mentioned on previous occasions, alongside the example of a sort of chemistry questions. Banking services can be used to connect families, but might also be used to finance illegal terrorist activities. Equally, while powerful AI capabilities can be used by malicious actors to cause harm to the UK, they might also be used by the national security community to defend the UK and by UK organisations and companies to protect themselves from harm. It's therefore not in the UK's national interest to restrict UK organisations in the public sector from accessing powerful AI capabilities, especially given the global nature of AI risks.
It's also unlikely that AC would be able to give conclusive assurances regarding AI models in the way envisaged in this amendment. Testing shows what a model can do, not what it could conclusively cannot. As the noble lord Viscount Camrose pointed out, the noble Lord, Lord Tarasenko, has also tabled amendment 12, which would require Dhssps to follow guidance issued by the AI Security Institute. For the reasons I have set out on amendment six and because it is not AC provide guidance of this nature, I do not think it would be appropriate.
I will set out in more detail on Ace's role later in my response. Moving on to amendment 84, tabled by the noble Lord, Lord Clement Jones, we have chosen to go further than our EU counterparts and the Miss two regime to respond to these risks by bringing forward powers in the Bill to direct regulated entities. If there is a national security risk in relation to their network and information system, this may be used, for instance, to require a regulated entity to cease and cease using and isolate an AI model.
We believe this is a more proportionate and effective response, as data centres operate in highly complex ecosystems and AI systems, often distributed across different data centres and jurisdictions, it's much less desirable to direct multiple data centres to shut down, and the impacts this could have on services that rely on them than to direct them to cease using an AI model. This is important as our economic security will grow as UK companies grow, as they increase AI adoption, as we develop our domestic capabilities and attract global talent, underpinned by our data centre and digital infrastructure.
I will also refer back to my introductory remarks on exploring further targeted interventions. This includes examining whether proportionate containment powers could provide a more effective and targeted response, including powers to restrict access to specific AI systems where necessary to prevent or mitigate serious harm. The amendment, tabled by the noble Lord, Lord Clement Jones, also seeks a regular report on AI security. In December 2025, the AI Security Institute published the frontier AI trends report, which sets out high level trends on AI progress based on two years of government led testing of leading models coming to amendments 85, 86, 92, 98, tabled by the Noble Lords Lord Tarasenko and Lord Clement Jones, which are indeed a testament to Ace's leading role and expertise.
They seek to provide AC with powers to address potential risks arising from frontier AI models. As I have already set out the important role the AC plays, building a rigorous scientific understanding of the capabilities of the most advanced AI systems and the risks they pose. Working with developers to strengthen security models, security before models are released, and grounding policy decisions on evidence rather than speculation. These amendments would give AC a role that it was not designed to fulfil.
Ace's focus on frontier technology and trusted relationships with the world's leading AI labs allow it to keep pace with the fast moving technology, thereby providing critical awareness of the most novel and serious risks. This amendment would undermine the voluntary collaboration on which AC operates. A regulatory role for AC is therefore the wrong answer. That the government is does remain committed to AC equipped to fulfil its vital role, and will continue to keep the House updated on its work as appropriate as I've just set out, such amendments run the real risk of placing barriers on AI adoption and deployment in the UK.
Due to the scope of the bill, the amendments cannot address wider AI harms or cyber security in the wider economy. I share concerns about the potential of hostile actors using frontier AI models against our essential services . By placing these restrictions on their deployment in the UK, as amended, would not be affected. Let me also respond to the direct question asked by the noble Baroness, Baroness Kidron, on large language models, large language models are not typically considered online search engines in respect of the CSB, while some LLMs can be seen to share similar characteristics and may utilize online search engines, their functions tend to be much broader.
I hope I have addressed the points raised well. I hope I have at least touched on all of the points raised today to the points made before on changes to the government. I recall very well the numerous discussions we've had on AI over the past few months, and continue to leave their point of continuity on those. I hope I have been able to address the points made today, and as I have said, the government would be happy to engage with noble Lords as options are being considered.
We always stand ready to protect our national and economic security.
17:43
Speaker 7
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Speaker 7
If I might ask the noble lady, the Minister, if I've understood what what she said, the NHS must protect itself, but the AI that is attacking it has no requirement under the Bill no. No duties, no obligations under the bill to check itself before it's used in these ways. That's what I think the government's position is, and I would be grateful when she does respond if she could answer that. But I do also want to say two things.
One is that I do think that these issues are going to come back at report, so I really would be grateful for some proper discussion before so that we can see whether we come to a certain place I haven't got at my fingertips. I may be helped by one of my colleagues, but the amount of search that now happens through AI, it is almost ludicrous to suggest that that the LMS aren't research. I mean, it's it's deliberate that I got the answer and it was and that was, sorry.
5 trillion a year, 5 trillion a year. And I think that that was and I'm grateful, actually very grateful to the minister for actually answering my question very often. That doesn't happen. But I do think that that really points at a problem. And then finally, I just want to say on the AC point, and we'll probably come back to it a little bit in the next group is, is that a few months ago, the government AC was dropped its societal harms piece of its remit.
And that was largely due to pressures, you know, within within government. And I think that, you know, as much as I recognise that they were set up to do one thing, they are very much at the behest of whoever is immediately pulling the strings. And I think that there was a very big sort of. There was a very deep understanding amongst those who were concerned about this issue, that the frontier companies were much more comfortable talking about future societal risks than they were about a security risk.
Beg your pardon? Future security risks than they that are a little way in the forward. And we can say we don't know what's going to happen. Then the societal risks which are happening now, right now. So I think that on both of these things, we will be back. But I, you know, I'm grateful for the offer of a discussion.
One is that I do think that these issues are going to come back at report, so I really would be grateful for some proper discussion before so that we can see whether we come to a certain place I haven't got at my fingertips. I may be helped by one of my colleagues, but the amount of search that now happens through AI, it is almost ludicrous to suggest that that the LMS aren't research. I mean, it's it's deliberate that I got the answer and it was and that was, sorry.
5 trillion a year, 5 trillion a year. And I think that that was and I'm grateful, actually very grateful to the minister for actually answering my question very often. That doesn't happen. But I do think that that really points at a problem. And then finally, I just want to say on the AC point, and we'll probably come back to it a little bit in the next group is, is that a few months ago, the government AC was dropped its societal harms piece of its remit.
And that was largely due to pressures, you know, within within government. And I think that, you know, as much as I recognise that they were set up to do one thing, they are very much at the behest of whoever is immediately pulling the strings. And I think that there was a very big sort of. There was a very deep understanding amongst those who were concerned about this issue, that the frontier companies were much more comfortable talking about future societal risks than they were about a security risk.
Beg your pardon? Future security risks than they that are a little way in the forward. And we can say we don't know what's going to happen. Then the societal risks which are happening now, right now. So I think that on both of these things, we will be back. But I, you know, I'm grateful for the offer of a discussion.
17:46
Speaker 4
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Speaker 4
To respond to the question about how the bill approaches AI services, as I mentioned, in respect of amendment six, were AI services to be brought into the ambit of the bill as proposed in amendment six. That would not address some of the harms that the noble Baroness, Baroness Kidron, has set out, and other noble lords of those posed by certain AI products and services. It would. In that. In that way the.
The way the bill works is that it is about risks that are relevant to the systems of automated organisations. So as I gave the example of the healthcare example, its risks associated with products they might use to provide their services. So that is the way the bill is set up. Obviously, as I also said, we are very well aware about of the increasing embedded nature of AI in the economy, and we will keep its impact on the regulatory landscape under review.
The way the bill works is that it is about risks that are relevant to the systems of automated organisations. So as I gave the example of the healthcare example, its risks associated with products they might use to provide their services. So that is the way the bill is set up. Obviously, as I also said, we are very well aware about of the increasing embedded nature of AI in the economy, and we will keep its impact on the regulatory landscape under review.
17:47
17:47
17:47
17:47
17:47
Speaker 3
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Speaker 3
Rise to speak to amendment seven and all the other amendments in my name, all supported by the noble Lord, Lord Londesborough, and and some by other of your lordships, my Lords. The Bill in its present form. As others have already said, is extraordinarily limited in scope and ambition. Well short, for example, of the scope of the EU s own NIS2 and its Cyber Resilience Act one likely and highly unwelcome consequence of this shortfall is that the UK, if this Bill passes in its present form, will be even less well defended than our equivalents in Europe and even more of an attractive target for the bad actors than we are now.
Taken together, my amendments one create a single regulator, the Office of Cyber Resilience. The OCR two extend the scope of the bill to all services that have a material impact on the economy, society or on the UK's defence and security. Three place obligations on technology suppliers barely discussed so far to provide safe services for. Require relevant bodies to adjust to threats from new and emerging technologies. Five ensure that we have sufficient and appropriately qualified cyber professionals.
And finally. Six enable new organisations to be brought under the auspices of the bill as circumstances change. So, my Lords, why a single regulator? Because the threat and we've heard it all afternoon, the face we. The threat we face is enormous from state actors, from organised criminal gangs and even from obsessive teenagers. Since second reading, I've been made personally aware of multiple attempted hacks, and some on the public record have succeeded and have some mentioned already.
In July, after second reading, Louis the self proclaimed teenage founder of cyber criminal group Exfil Squad, stole 607,000 records from the Department for education, declaring it and I quote, stupid, easy. Such an attack by Lords is not at present within the scope of this bill. In late July, the Police National Legal Database was breached, exposing data on 100,000 police officers and criminal justice professionals . Also not in scope.
In August, customers as the noble Viscount Lord Colville mentioned, customers of Manchester Stansted and East Midlands Airport had their email addresses, phone numbers, vehicle registrations and postcodes stolen in an attack also not in scope. There will have been , since we all last met, many more successful breaches that we simply do not know about my Lords, many with a highly adverse impact on the organisations concern. We need a single regulator, my Lords, because we need a singular focus, not a fragmented one.
We need to amass all relevant knowledge in one place about the perpetrators and the vulnerabilities. We need a singular focus on how to respond to minimize attacker success, and we should extend the scope of the bill, my Lords, because it focuses only narrowly on a very small fraction of the economy. The 12 national infrastructure sectors, each with its own regulator. And because the overwhelming bulk of high performing private sector, the high performing private sector is excluded from the bill, including M&S and JLR, the damage to our economy, my Lords, can only grow.
Moreover, I can see no good reason why the government itself or any part of the public sector the NHS has just been mentioned, should enjoy a carve out and should not be brought into scope two. And I note that the EU SNIS2 with limited exceptions, my Lords , does exactly that. My amendment on scope proposes that services that have a material impact on society, the economy or on our defence and security should be deemed essential and should have an annual, independently conducted cyber resilience audit alongside.
And they all have it now an annual independent financial audit for those concerned, rightly about a possible burden on SMEs. I point out that there are around 6 million private sector businesses in the UK, but 8000 with more than 250 employees, less than one fifth, one fifth of 1% of the total produce around half of all private sector turnover. So only a tiny fraction of businesses would be included within the regulatory orbit of the OCR.
As I've defined it. My Lords, why place obligations on suppliers? Because whilst some breaches occur because of poor practice within recipient organisations, falling for scans, failing for scams, failing to introduce multi-factor authentication, for example, at least an equivalent number of breaches result from providers selling insufficiently robust services or not closing down vulnerabilities speedily once they become apparent. In July, the supplier of a service to over 1000 UK charities and non-profit organisations was breached, and personal details and donations paid by a multiplicity of donors was stolen.
A supplier not in scope. My Lords cars were once sold. Absent all safety functionality, seat belts, airbags and the like, but Ralph Nader put an end to all of that. Thank goodness the EU has the Cyber Resilience Act. We need an OCR to ensure that the UK's modern technology suppliers provide safe to use and secure services. My Lords, why arm the OCR with the power to require relevant bodies to adjust to threats from new and emerging technologies? Well, I think we've just had in spades the answer to that question from quite a few devastating contributions most affecting for me.
Lord Tarasenko. New technologies like a genetic AI, pose an existential threat. Now we all appear to be to be agreed about that, already escaping their minders and practicing trickery. They are effectively unregulated and they simply must be. I can only hear agreement on that question. The only slight note of caution that I would strike is we. Technology is changing all of the time, so we can't have a bill which has such amount of detail in it and I think it was.
Viscount Cromer suggested it should be more principle based. We can't have something with lots of fine detail in it because things will change and only one person so far has mentioned, I think, quantum technology, which potentially is even going to have an even bigger impact down the line than AI and the UK, by the way, has the second highest number of quantum startups, startups of any country in the world, second only to the United States.
So why, my Lords, give the OCR a role in the oversight of training and qualifying cyber professionals? Plainly, there are other ways of skinning this particular cat, but I note how very poor all governments have been over time in strategic skill planning vis dentists. For instance, I think the last government's founding of the Cyber Security Council was a really valuable innovation. It is, of course, early days, but since its inception it has qualified 761 professionals, 570 in the highest chartered category.
Purely informal estimates. My Lords, however, indicate that across the UK economy as a whole, we will need something like 50 to 60,000 qualified cyber professionals and the sooner we have them, my Lords, the better. So we have a long road ahead and with an OCR defined as the powerhouse of cyber security, the rest of the scale and nature of offending and of vulnerabilities, the OCR would seem to be best placed to vouchsafe that the Cyber Security Council's qualification standards are bang up to date, and I would suggest to you that it should report annually on whether the numbers are sufficient that we are on track to produce scale of cyber professionalism, that both the public and private sectors will require.
Finally, my Lords, why enable the OCR to recommend to the Secretary of State the expansion of the definition of an essential service to be brought under OCR regulation? Because government, my Lords, can be a slow moving bureaucratic tangle and an independent, informed and focused regulator with just one job to do is much more likely to act with due urgency and to identify vulnerable but critical and essential services that need to be brought under scope.
My Lords, the noble Lord, Lord Arbuthnot, a gentle and much respected man in this House, careful with his words, described this bill at second reading as a muddle. I fear, my Lords, that that was an understatement. This Bill has been too long in the genesis. It completely fails to deal with the world as it has developed. As the most experienced and acute cyber professionals describe it as the worst of its victims have experienced it.
So I really implore the noble Baroness, the Minister, to recognise that this is not a party partisan matter. This has been very clear from our proceedings this afternoon, but there are profound reservations about the bill across the House as presently constructed. And I urge, as Baroness Kidron just did, I urge the Minister to use the period between now and the bill's next stage to engage widely, open mindedly and meaningfully with those who wish to improve it.
My Lords, I beg to move.
Taken together, my amendments one create a single regulator, the Office of Cyber Resilience. The OCR two extend the scope of the bill to all services that have a material impact on the economy, society or on the UK's defence and security. Three place obligations on technology suppliers barely discussed so far to provide safe services for. Require relevant bodies to adjust to threats from new and emerging technologies. Five ensure that we have sufficient and appropriately qualified cyber professionals.
And finally. Six enable new organisations to be brought under the auspices of the bill as circumstances change. So, my Lords, why a single regulator? Because the threat and we've heard it all afternoon, the face we. The threat we face is enormous from state actors, from organised criminal gangs and even from obsessive teenagers. Since second reading, I've been made personally aware of multiple attempted hacks, and some on the public record have succeeded and have some mentioned already.
In July, after second reading, Louis the self proclaimed teenage founder of cyber criminal group Exfil Squad, stole 607,000 records from the Department for education, declaring it and I quote, stupid, easy. Such an attack by Lords is not at present within the scope of this bill. In late July, the Police National Legal Database was breached, exposing data on 100,000 police officers and criminal justice professionals . Also not in scope.
In August, customers as the noble Viscount Lord Colville mentioned, customers of Manchester Stansted and East Midlands Airport had their email addresses, phone numbers, vehicle registrations and postcodes stolen in an attack also not in scope. There will have been , since we all last met, many more successful breaches that we simply do not know about my Lords, many with a highly adverse impact on the organisations concern. We need a single regulator, my Lords, because we need a singular focus, not a fragmented one.
We need to amass all relevant knowledge in one place about the perpetrators and the vulnerabilities. We need a singular focus on how to respond to minimize attacker success, and we should extend the scope of the bill, my Lords, because it focuses only narrowly on a very small fraction of the economy. The 12 national infrastructure sectors, each with its own regulator. And because the overwhelming bulk of high performing private sector, the high performing private sector is excluded from the bill, including M&S and JLR, the damage to our economy, my Lords, can only grow.
Moreover, I can see no good reason why the government itself or any part of the public sector the NHS has just been mentioned, should enjoy a carve out and should not be brought into scope two. And I note that the EU SNIS2 with limited exceptions, my Lords , does exactly that. My amendment on scope proposes that services that have a material impact on society, the economy or on our defence and security should be deemed essential and should have an annual, independently conducted cyber resilience audit alongside.
And they all have it now an annual independent financial audit for those concerned, rightly about a possible burden on SMEs. I point out that there are around 6 million private sector businesses in the UK, but 8000 with more than 250 employees, less than one fifth, one fifth of 1% of the total produce around half of all private sector turnover. So only a tiny fraction of businesses would be included within the regulatory orbit of the OCR.
As I've defined it. My Lords, why place obligations on suppliers? Because whilst some breaches occur because of poor practice within recipient organisations, falling for scans, failing for scams, failing to introduce multi-factor authentication, for example, at least an equivalent number of breaches result from providers selling insufficiently robust services or not closing down vulnerabilities speedily once they become apparent. In July, the supplier of a service to over 1000 UK charities and non-profit organisations was breached, and personal details and donations paid by a multiplicity of donors was stolen.
A supplier not in scope. My Lords cars were once sold. Absent all safety functionality, seat belts, airbags and the like, but Ralph Nader put an end to all of that. Thank goodness the EU has the Cyber Resilience Act. We need an OCR to ensure that the UK's modern technology suppliers provide safe to use and secure services. My Lords, why arm the OCR with the power to require relevant bodies to adjust to threats from new and emerging technologies? Well, I think we've just had in spades the answer to that question from quite a few devastating contributions most affecting for me.
Lord Tarasenko. New technologies like a genetic AI, pose an existential threat. Now we all appear to be to be agreed about that, already escaping their minders and practicing trickery. They are effectively unregulated and they simply must be. I can only hear agreement on that question. The only slight note of caution that I would strike is we. Technology is changing all of the time, so we can't have a bill which has such amount of detail in it and I think it was.
Viscount Cromer suggested it should be more principle based. We can't have something with lots of fine detail in it because things will change and only one person so far has mentioned, I think, quantum technology, which potentially is even going to have an even bigger impact down the line than AI and the UK, by the way, has the second highest number of quantum startups, startups of any country in the world, second only to the United States.
So why, my Lords, give the OCR a role in the oversight of training and qualifying cyber professionals? Plainly, there are other ways of skinning this particular cat, but I note how very poor all governments have been over time in strategic skill planning vis dentists. For instance, I think the last government's founding of the Cyber Security Council was a really valuable innovation. It is, of course, early days, but since its inception it has qualified 761 professionals, 570 in the highest chartered category.
Purely informal estimates. My Lords, however, indicate that across the UK economy as a whole, we will need something like 50 to 60,000 qualified cyber professionals and the sooner we have them, my Lords, the better. So we have a long road ahead and with an OCR defined as the powerhouse of cyber security, the rest of the scale and nature of offending and of vulnerabilities, the OCR would seem to be best placed to vouchsafe that the Cyber Security Council's qualification standards are bang up to date, and I would suggest to you that it should report annually on whether the numbers are sufficient that we are on track to produce scale of cyber professionalism, that both the public and private sectors will require.
Finally, my Lords, why enable the OCR to recommend to the Secretary of State the expansion of the definition of an essential service to be brought under OCR regulation? Because government, my Lords, can be a slow moving bureaucratic tangle and an independent, informed and focused regulator with just one job to do is much more likely to act with due urgency and to identify vulnerable but critical and essential services that need to be brought under scope.
My Lords, the noble Lord, Lord Arbuthnot, a gentle and much respected man in this House, careful with his words, described this bill at second reading as a muddle. I fear, my Lords, that that was an understatement. This Bill has been too long in the genesis. It completely fails to deal with the world as it has developed. As the most experienced and acute cyber professionals describe it as the worst of its victims have experienced it.
So I really implore the noble Baroness, the Minister, to recognise that this is not a party partisan matter. This has been very clear from our proceedings this afternoon, but there are profound reservations about the bill across the House as presently constructed. And I urge, as Baroness Kidron just did, I urge the Minister to use the period between now and the bill's next stage to engage widely, open mindedly and meaningfully with those who wish to improve it.
My Lords, I beg to move.
17:59
17:59
17:59
17:59
Speaker 12
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Speaker 12
To speak to amendment seven, nine, 11, 76, 77 and 88 to 91. In the name of my noble friend Lord Burt, each of which I have added my name to, and also to speak to amendment 87 in the name of the noble Lord, Lord Clement-jones. Since the second reading, some of you will have noticed that I've gained a pair of crutches, and this is not so much the result of a cyber kneecapping exercise, but a planned intervention by my surgeon.
But the good news is that the longest I can stand up and speak for is currently ten minutes, which is nature's way of stopping me banging on for too long about cyber security. That said, my main focus is on this crucial amendment proposing the creation of the office for Cyber Resilience. The OCR, a much needed single competent authority adopting a centralised rather than a fragmented approach. But before I get into that, let me provide some perspective from the world of business and indeed the consumer, on why the centralised approach is, in my view, absolutely needed.
First, a word about the threats and the financial cost during the second reading of the bill, you may remember that many people mentioned the £15 billion estimated annual cost in the UK of lost revenues as a result of cyber attacks in this country. This, my Lord, is almost certainly a very serious underestimate, given how many outfits fail to report cyber attacks or indeed near misses. The financial impact comes not just in the form of reparation and reputational costs and lost revenues, but in the major distraction on core businesses and the drain on resources and loss of productivity.
These real costs are not factored in, so no one knows the actual number. It could well be as high as £30 billion a year. But what we do know is that this figure, reflecting the multiplicity of threats, is growing at an alarming rate and could breach the £100 billion mark within the next five years. Unless unless, my Lords, we massively upgrade our cyber defenses, our detection, our knowledge, and our standards and certification practices.
As these amendments propose. My Lords, we have mission critical cost benefit questions. How much will we invest to protect our economy, our infrastructure and our defences, both public and private? And put another way, how much are we prepared to lose by patching together a fragmented approach to cyber security, which I am afraid to say this bill, this bill is absolutely guilty of. That is the question we need to ask ourselves.
And it's not just a level of funding, but how the resources should be structured. Is this the time for a fragmented, multi-sector, multi regulator approach, or do we grasp the nettle and set up a single centralised body that has the teeth, the power, the funding, the expertise and know how to face up to these existential threats? This group of amendments raises a fundamental question, which has echoes of the current debate on devolution and economic growth.
Do we devolve responsibilities for cyber security to our 12 regulators, the majority of whom are currently struggling to keep on top of their current remit, such as off what and Ofgem, albeit with the support of the NCS, which is a respected but nonetheless advisory body sitting within Gchq? Or do we adopt what is internationally considered best practice the centralised model, by setting up an OCR that has fit for purpose regulatory powers? And do this not just in the interests of the 12 sectors, but to mind the many gaps that this bill fails to address across both public and private sectors, especially small and medium.
Enterprises were now almost all tech enabled exposed to cyber attacks, most of which go unreported and never touch the national statistics. We should be concerned about the impact of cyber attacks on SMEs across all sectors, who are generally under-resourced and ill prepared to face up to, or even detect the growing array of threats. Witness the fact that 96% of all successful cyber attacks in the UK in 2024 are the ones we know about, were perpetrated on SMEs, not because they are prime targets, but because they are soft targets.
So here's another reason to establish an OCR to set up a single competent authority for the benefits of SMEs, whatever their sector, and not simply as an advisory body. We have that already. But to address the points three and four in amendment 88, setting specific standards, audits and certification for software and digital service providers and MSPs. The SME infrastructure depends on. I should declare at this stage that I chair and sit on the board and advise a number of start ups and scale ups, all of them ranging from 20 to 100 staff.
Let me very briefly describe the cocktail of cyber risks that they are exposed to. They all have their customer and prospect databases, CRM that sit on third party software platforms, often requiring bespoke programming to fit the needs of each company. These platforms are typically interfaced with other applications and databases one for marketing, one for sales, one for finance and accounts, one for HR and payroll, and often complicated ones for content production or product.
The point I'm making is that even for companies with less than 50 staff, there can be a complex web interdependencies, which may involve as many as 5 to 10 different software or digital service providers. Their networks are therefore very vulnerable to hackers who have a number of entry points to exploit. Amendment 89 to which I've signed my name is highly relevant here. Establishing a register of software and platform providers of essential services, and to certify their products as safe for use that is vital.
This is not about advice, it is about regulation, certification and of course, proper real time reporting of incidents and indeed near misses. So I ask the noble lady, the Minister and indeed her Department to give these amendments in this group the attention that they absolutely deserve.
But the good news is that the longest I can stand up and speak for is currently ten minutes, which is nature's way of stopping me banging on for too long about cyber security. That said, my main focus is on this crucial amendment proposing the creation of the office for Cyber Resilience. The OCR, a much needed single competent authority adopting a centralised rather than a fragmented approach. But before I get into that, let me provide some perspective from the world of business and indeed the consumer, on why the centralised approach is, in my view, absolutely needed.
First, a word about the threats and the financial cost during the second reading of the bill, you may remember that many people mentioned the £15 billion estimated annual cost in the UK of lost revenues as a result of cyber attacks in this country. This, my Lord, is almost certainly a very serious underestimate, given how many outfits fail to report cyber attacks or indeed near misses. The financial impact comes not just in the form of reparation and reputational costs and lost revenues, but in the major distraction on core businesses and the drain on resources and loss of productivity.
These real costs are not factored in, so no one knows the actual number. It could well be as high as £30 billion a year. But what we do know is that this figure, reflecting the multiplicity of threats, is growing at an alarming rate and could breach the £100 billion mark within the next five years. Unless unless, my Lords, we massively upgrade our cyber defenses, our detection, our knowledge, and our standards and certification practices.
As these amendments propose. My Lords, we have mission critical cost benefit questions. How much will we invest to protect our economy, our infrastructure and our defences, both public and private? And put another way, how much are we prepared to lose by patching together a fragmented approach to cyber security, which I am afraid to say this bill, this bill is absolutely guilty of. That is the question we need to ask ourselves.
And it's not just a level of funding, but how the resources should be structured. Is this the time for a fragmented, multi-sector, multi regulator approach, or do we grasp the nettle and set up a single centralised body that has the teeth, the power, the funding, the expertise and know how to face up to these existential threats? This group of amendments raises a fundamental question, which has echoes of the current debate on devolution and economic growth.
Do we devolve responsibilities for cyber security to our 12 regulators, the majority of whom are currently struggling to keep on top of their current remit, such as off what and Ofgem, albeit with the support of the NCS, which is a respected but nonetheless advisory body sitting within Gchq? Or do we adopt what is internationally considered best practice the centralised model, by setting up an OCR that has fit for purpose regulatory powers? And do this not just in the interests of the 12 sectors, but to mind the many gaps that this bill fails to address across both public and private sectors, especially small and medium.
Enterprises were now almost all tech enabled exposed to cyber attacks, most of which go unreported and never touch the national statistics. We should be concerned about the impact of cyber attacks on SMEs across all sectors, who are generally under-resourced and ill prepared to face up to, or even detect the growing array of threats. Witness the fact that 96% of all successful cyber attacks in the UK in 2024 are the ones we know about, were perpetrated on SMEs, not because they are prime targets, but because they are soft targets.
So here's another reason to establish an OCR to set up a single competent authority for the benefits of SMEs, whatever their sector, and not simply as an advisory body. We have that already. But to address the points three and four in amendment 88, setting specific standards, audits and certification for software and digital service providers and MSPs. The SME infrastructure depends on. I should declare at this stage that I chair and sit on the board and advise a number of start ups and scale ups, all of them ranging from 20 to 100 staff.
Let me very briefly describe the cocktail of cyber risks that they are exposed to. They all have their customer and prospect databases, CRM that sit on third party software platforms, often requiring bespoke programming to fit the needs of each company. These platforms are typically interfaced with other applications and databases one for marketing, one for sales, one for finance and accounts, one for HR and payroll, and often complicated ones for content production or product.
The point I'm making is that even for companies with less than 50 staff, there can be a complex web interdependencies, which may involve as many as 5 to 10 different software or digital service providers. Their networks are therefore very vulnerable to hackers who have a number of entry points to exploit. Amendment 89 to which I've signed my name is highly relevant here. Establishing a register of software and platform providers of essential services, and to certify their products as safe for use that is vital.
This is not about advice, it is about regulation, certification and of course, proper real time reporting of incidents and indeed near misses. So I ask the noble lady, the Minister and indeed her Department to give these amendments in this group the attention that they absolutely deserve.
18:07
Speaker 10
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Speaker 10
My Lord, it's a pleasure to speak to this group of amendments, and I was certainly delighted to sign those in the name of the noble Lord. But before turning to the specific subject matter, I thought the point the noble Lord raised around JLR is germane to our broader discussions this afternoon, and goes to the heart of this sense of coherence, or the lack of. In certain key elements within the bill, JLR suffered a serious cyber attack, and yet currently they would not fall within one of the sectors which is covered by this bill.
So was that attack significant at a level that should be of concern to this bill? Economic impact. The definition which my noble friend, Viscount Camrose, identified as being somewhat broad, paraphrasing what he said. Well, the JLR attack impacted that quarter's GDP numbers, thus raising the eyes of the markets, the ratings agencies and all international economic observers. So I would suggest more than material, certainly significant and yet would fall without with would fall outside.
Currently the sectors within this bill as drafted. And that goes to the point at the heart of the need for an OCR or an entity which would perform that function and that role. And so much of the discussion so far in this group is understandably echoing of the discussion we were having around the need for a role for AI to be taken on by some regulator. As as we were discussing the need for AI regulation and legislation, it seems only fair for me to give a nod to the AI authority in my AI regulation private member's bill.
It comes with music when I announce it every time. Multimedia. The reality is, if the choice of the government, be it for AI or be it for cyber, is to not have a single centralised regulator, then the consequences are clear and the consequences are profound. It in no sense has any chance of there being clarity, consistency and coherence for businesses, for sectors right across our economy and society. When you come across cyber, you shouldn't have to consider is it in a sector which is within the bill or not? Is that specific regulator in that sector tooled up or having any experience, knowledge or abilities to lead when it comes to all of the challenges of cyber? And take one obvious example, just for the case of efficiency, effectiveness and economic good management, say there's a search out, a recruitment for a particular cyber professional.
And it turns out that Ofgem and the FCA are both in the final throes of getting that person, and the FCA end up getting that cyber professional, good for the FCA, good for financial services, less good for Ofgem. But how is that in any sense, good for the broader economy, the broader society and the UK as a whole when it comes to protection and effective, coherent approach to cyber risks and how we protect and guard against them.
The case for a unifying regulator when it comes to cyber is equal to that. When it comes to AI, it would enable clarity, consistency and coherence of approach. It would be that centre of expertise. You would have that horizontal impact across all sectors at a way which would be delivered effectively and efficiently, which just simply cannot be the case if individual regulators, no matter how well intended they may be and how up for it they may be, they simply couldn't deliver that.
And even if one sector did, another sector wouldn't. And that would mean that just by dint of where your business or where you as an individual happen to come up across a cyber challenge, it would just be the luck of whichever regulator, whichever professionals were in that field. So I think the case for an individual central, clear, coherent cyber regulator is clear. I hope the minister agrees. I look forward to her response.
So was that attack significant at a level that should be of concern to this bill? Economic impact. The definition which my noble friend, Viscount Camrose, identified as being somewhat broad, paraphrasing what he said. Well, the JLR attack impacted that quarter's GDP numbers, thus raising the eyes of the markets, the ratings agencies and all international economic observers. So I would suggest more than material, certainly significant and yet would fall without with would fall outside.
Currently the sectors within this bill as drafted. And that goes to the point at the heart of the need for an OCR or an entity which would perform that function and that role. And so much of the discussion so far in this group is understandably echoing of the discussion we were having around the need for a role for AI to be taken on by some regulator. As as we were discussing the need for AI regulation and legislation, it seems only fair for me to give a nod to the AI authority in my AI regulation private member's bill.
It comes with music when I announce it every time. Multimedia. The reality is, if the choice of the government, be it for AI or be it for cyber, is to not have a single centralised regulator, then the consequences are clear and the consequences are profound. It in no sense has any chance of there being clarity, consistency and coherence for businesses, for sectors right across our economy and society. When you come across cyber, you shouldn't have to consider is it in a sector which is within the bill or not? Is that specific regulator in that sector tooled up or having any experience, knowledge or abilities to lead when it comes to all of the challenges of cyber? And take one obvious example, just for the case of efficiency, effectiveness and economic good management, say there's a search out, a recruitment for a particular cyber professional.
And it turns out that Ofgem and the FCA are both in the final throes of getting that person, and the FCA end up getting that cyber professional, good for the FCA, good for financial services, less good for Ofgem. But how is that in any sense, good for the broader economy, the broader society and the UK as a whole when it comes to protection and effective, coherent approach to cyber risks and how we protect and guard against them.
The case for a unifying regulator when it comes to cyber is equal to that. When it comes to AI, it would enable clarity, consistency and coherence of approach. It would be that centre of expertise. You would have that horizontal impact across all sectors at a way which would be delivered effectively and efficiently, which just simply cannot be the case if individual regulators, no matter how well intended they may be and how up for it they may be, they simply couldn't deliver that.
And even if one sector did, another sector wouldn't. And that would mean that just by dint of where your business or where you as an individual happen to come up across a cyber challenge, it would just be the luck of whichever regulator, whichever professionals were in that field. So I think the case for an individual central, clear, coherent cyber regulator is clear. I hope the minister agrees. I look forward to her response.
18:12
Speaker 2
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Speaker 2
My Lords, the the last two interventions seem to me to be to raise two issues, really not just one. One is the question of how many regulators and secondly, what their coverage is. Who are they going to regulate? Are they going to regulate us, say public sector, or are they going to regulate, in effect, the whole of the economy, including retail business and the high street business and so on? You can argue your case.
It seems to me, for any of the approaches, any of these approaches, and you can do try to do too much, and certainly you can fail and do too little. It seems to me that while I can see the case for a single regulator, my worry is that large organisations like that with monopoly powers tend either in the end to fail because they just in the end don't cope or else. They become overweening.
And I don't think we want either of those two things. So I think I'm in favour of something which is more decentralised than that, and which has more single, more specialised regulators involved, partly because actually I think the nature of the regulation probably deserves that. But there does have to be, it seems to me at the same time, some degree of coordination, in fact, high degree of coordination between the regulators. They must operate according to the same principles applied appropriately.
They must as far as the same philosophy, and they must be seen to be fair. Therefore, they, you know, great divergence and different approaches seems to me something that equally won't work. So you do need to have I seems to me a mechanism for coordination, for discussion, for agreement of principles. And you also need to have a thinker there somewhere. So I am in favour of some bit of the system being bigger than the rest, so that it actually inspires a degree of, of, of good and, and recognised coordination coordination in the system.
And the second issue is what's the what's the coverage? Is it essentially the suppliers in the, in the world of, of cyber and digital activity, or does it have to go to go wider? I have actually argued publicly for the regulation to go wider, because it's not satisfactory that when you get something as damaging as JLR, you know, you have to have a public bailout. So there is real danger to the economy.
And I don't don't dispute that. Should it be the same as the kind of regulation applied to the the direct suppliers, to the to the industry that supports the security of the country there? I don't have a firm answer, but it seems to me that's an area where there ought to be discussion how far you actually take these regulatory powers. The. I'm not. I think the one who says it's enough to go to the board and tell them to do a proper job.
Most boards at the moment have a half hearted and rather uninformed approach to cyber regulation. Not enough real expertise. And it does seem to me that, you know, directors these days in directors do actually need not just to be able to understand the PNL and be able to answer questions of accountability, financial accountability. They actually need to understand a much wider set of risks. And it includes the technological ones.
So I am in favour also of great, much greater education and a good, good deal more pressure inside the city for competence to be generated more widely. And that, I think, would be good. But I think the language that needs to be used by the government needs to be a lot more, lot tougher and a lot more directed than it is at the moment. It's sort of half hearted, if I might say so. The question of how far you take the powers of the state and the powers of the regulator, it seems to me, is an area for discussion.
And it will be good to see, actually some agreement between the private sector and actually the, the, the regulators about what actually does need to be regulated and what should be left to left to business. And I think that's an area for further discussion. But my Lords, I think that we need something which is not quite either of these of these two extremes as being proposed, a complete regulation of everything and only done by one regulator.
It seems to me, for any of the approaches, any of these approaches, and you can do try to do too much, and certainly you can fail and do too little. It seems to me that while I can see the case for a single regulator, my worry is that large organisations like that with monopoly powers tend either in the end to fail because they just in the end don't cope or else. They become overweening.
And I don't think we want either of those two things. So I think I'm in favour of something which is more decentralised than that, and which has more single, more specialised regulators involved, partly because actually I think the nature of the regulation probably deserves that. But there does have to be, it seems to me at the same time, some degree of coordination, in fact, high degree of coordination between the regulators. They must operate according to the same principles applied appropriately.
They must as far as the same philosophy, and they must be seen to be fair. Therefore, they, you know, great divergence and different approaches seems to me something that equally won't work. So you do need to have I seems to me a mechanism for coordination, for discussion, for agreement of principles. And you also need to have a thinker there somewhere. So I am in favour of some bit of the system being bigger than the rest, so that it actually inspires a degree of, of, of good and, and recognised coordination coordination in the system.
And the second issue is what's the what's the coverage? Is it essentially the suppliers in the, in the world of, of cyber and digital activity, or does it have to go to go wider? I have actually argued publicly for the regulation to go wider, because it's not satisfactory that when you get something as damaging as JLR, you know, you have to have a public bailout. So there is real danger to the economy.
And I don't don't dispute that. Should it be the same as the kind of regulation applied to the the direct suppliers, to the to the industry that supports the security of the country there? I don't have a firm answer, but it seems to me that's an area where there ought to be discussion how far you actually take these regulatory powers. The. I'm not. I think the one who says it's enough to go to the board and tell them to do a proper job.
Most boards at the moment have a half hearted and rather uninformed approach to cyber regulation. Not enough real expertise. And it does seem to me that, you know, directors these days in directors do actually need not just to be able to understand the PNL and be able to answer questions of accountability, financial accountability. They actually need to understand a much wider set of risks. And it includes the technological ones.
So I am in favour also of great, much greater education and a good, good deal more pressure inside the city for competence to be generated more widely. And that, I think, would be good. But I think the language that needs to be used by the government needs to be a lot more, lot tougher and a lot more directed than it is at the moment. It's sort of half hearted, if I might say so. The question of how far you take the powers of the state and the powers of the regulator, it seems to me, is an area for discussion.
And it will be good to see, actually some agreement between the private sector and actually the, the, the regulators about what actually does need to be regulated and what should be left to left to business. And I think that's an area for further discussion. But my Lords, I think that we need something which is not quite either of these of these two extremes as being proposed, a complete regulation of everything and only done by one regulator.
18:17
Speaker 5
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Speaker 5
My Lord, can I first of all congratulate the noble Lord Birt on what I think is a really comprehensive vision expressed in this group of amendments. My Lords and I want to speak in strong support of those amendments on which both he and noble Lord Londesborough have spoken so cogently. My Lords, and together they address really one of the most glaring defects of this, of the architecture of this bill the fragmented, inefficient model of 12 separate sectoral regulators.
And, my Lords, I think the noble Baroness Neville-jones asked the right questions, how to coordinate and how to be fair. But I'm afraid I come to a very different answers, and I come to the same conclusion as the noble Lord Birt. Cyber threats are sector agnostic. Malicious code and supply chain exploits don't respect the boundary between off what? Ofgem or the CAA expecting 12 separate bodies to recruit scarce elite cyber forensic talent is a fantasy that results in weak, uneven enforcement.
Furthermore, multi-sector businesses face duplicative compliance obligations across separate competent authorities in the current scheme. Under amendment seven, nine and 11, the noble Lord, Lord Birt, correctly widens the definition of digital service providers to include the creators, distributors and managers of software and digital platforms. As the synovial pathology attack proved so catastrophically to London, hospitals are critical. Infrastructure is entirely dependent on third party software code. If we do not bring software and platform providers into scope under clauses seven and eight, we leave the front door wide open to cyber crime.
My Lords, amendment 88 in the name of the Lord of Lord Birt, which I actually prefer to my own. Amendment 87 replaces this maze of regulators with a unified, specialized body, the office for Cyber Resilience. The OCR centralizes enforcement, establishes common auditing baselines and maintains sector specific expertise under a single roof. Amendment 76 and 77 would ensure that when the Secretary of State specifies new essential activities under part three, they must act on the expert recommendations of the OCR targeting any activity whose disruption carries severe economic, societal or national security impacts.
And I entirely agree with what the noble Lord Holmes had to say. Except, sadly, I think we'd all benefit from a bit of musical accompaniment. My thoughts. This structural foundation would enable a vital reform suggested by the noble Lord Birt. Amendment 89 establishes a register requiring software and platform providers to certify products as safe by design. Amendment 91 introducing annual independent cyber resilient audits modelled on statutory financial audits and under amendment 90, the OCR would work hand in glove with the UK Cyber Security Council to validate and enforce workforce competence standards across all regulated entities.
And my Lords, I remind your lordships that amendment 99 in the name of my noble friend Baroness Northover, has been d grouped. But it is relevant to the relationship between the potential OCR and the UK Cyber Security Council. My Lords, I do think this is a very comprehensive but significant group of amendments which hang together extremely well, and I do urge the government to look very closely at what I think could be a really effective scheme of regulation.
And, my Lords, I think the noble Baroness Neville-jones asked the right questions, how to coordinate and how to be fair. But I'm afraid I come to a very different answers, and I come to the same conclusion as the noble Lord Birt. Cyber threats are sector agnostic. Malicious code and supply chain exploits don't respect the boundary between off what? Ofgem or the CAA expecting 12 separate bodies to recruit scarce elite cyber forensic talent is a fantasy that results in weak, uneven enforcement.
Furthermore, multi-sector businesses face duplicative compliance obligations across separate competent authorities in the current scheme. Under amendment seven, nine and 11, the noble Lord, Lord Birt, correctly widens the definition of digital service providers to include the creators, distributors and managers of software and digital platforms. As the synovial pathology attack proved so catastrophically to London, hospitals are critical. Infrastructure is entirely dependent on third party software code. If we do not bring software and platform providers into scope under clauses seven and eight, we leave the front door wide open to cyber crime.
My Lords, amendment 88 in the name of the Lord of Lord Birt, which I actually prefer to my own. Amendment 87 replaces this maze of regulators with a unified, specialized body, the office for Cyber Resilience. The OCR centralizes enforcement, establishes common auditing baselines and maintains sector specific expertise under a single roof. Amendment 76 and 77 would ensure that when the Secretary of State specifies new essential activities under part three, they must act on the expert recommendations of the OCR targeting any activity whose disruption carries severe economic, societal or national security impacts.
And I entirely agree with what the noble Lord Holmes had to say. Except, sadly, I think we'd all benefit from a bit of musical accompaniment. My thoughts. This structural foundation would enable a vital reform suggested by the noble Lord Birt. Amendment 89 establishes a register requiring software and platform providers to certify products as safe by design. Amendment 91 introducing annual independent cyber resilient audits modelled on statutory financial audits and under amendment 90, the OCR would work hand in glove with the UK Cyber Security Council to validate and enforce workforce competence standards across all regulated entities.
And my Lords, I remind your lordships that amendment 99 in the name of my noble friend Baroness Northover, has been d grouped. But it is relevant to the relationship between the potential OCR and the UK Cyber Security Council. My Lords, I do think this is a very comprehensive but significant group of amendments which hang together extremely well, and I do urge the government to look very closely at what I think could be a really effective scheme of regulation.
18:21
Speaker 7
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Speaker 7
My Lord, let me start by thanking the noble Lord, Lord Birt, for introducing this debate and all. And to all noble lords who have spoken, I do appreciate the rigorous strategic thinking that the noble Lord has brought to this. And indeed the noble Lord, Lord, Lord Londesborough, that he has put into the proposal for an office for cyber resilience. But I want to try and keep my remarks around the principle of a single regulator.
My Lords, I do see the appeal of having a single regulator, as others have set out very powerfully. It's easy to issue directives to store data and information centrally, take a systemic approach overall, and indeed better manage the the hiring of scarce skilled resources. That said, I think it is also worth, as my noble friend, the noble lady, Lady Neville-jones, has pointed out, I think it is important to to see the value of sectoral regulators supported by a Centre of Excellence model.
More sector specific expertise, more direct communication with the industry and more flexible approaches are all easier to achieve with these smaller, more specific regulators and actually at a sufficient level of abstraction, it almost doesn't matter which of those models you go for, it's about having the resourced, skilled and empowered people performing, monitoring and enforcement activities, regardless of the body they sit under. But I think more broadly, my Lords, the point is that while differences between the centralised or more centralised or a more central approach are worthy of debate, I don't think you'd ever hit the extremes in either of those.
What actually matters is ensuring that whichever route the government chooses to take us down, they make certain the regulators are adequately resourced and exist within a wider strategy. Now, I'm not sure, and I look forward to finding out more whether the first of those is the case. The government has chosen the more sectoral approach, but we don't yet know how the regulators are going to be resourced, what their additional resourcing needs are going to be in order to cope with the increased responsibilities that are going to be laid at their door.
And I look forward to hearing from the noble lady, the minister, how the regulators are going to be funded, how the funding needs are going to be calculated and how they're going to be supported in this very significant expansion of their role. The second point the regulators should exist as part of a wider strategy is currently not the case. And I do apologise to noble Lords for banging on about this, but I it's very difficult in this bill to get past the the hole in the shape of a wider national cyber strategy.
Whether the regulators are many or one, it matters little without the bigger picture into which they fit. In an ideal world, we would review the overall cyber strategy and then debate what regulatory structures might be appropriate to deliver it. But for now, sadly, that is not the world we're in. The Secretary of State, or indeed the Chancellor of the Duchy of Lancaster, and it is not reassuring that we still don't know which must commit to publishing the national plan, after which we can assess the efficacy of its many parts.
My Lords, I do see the appeal of having a single regulator, as others have set out very powerfully. It's easy to issue directives to store data and information centrally, take a systemic approach overall, and indeed better manage the the hiring of scarce skilled resources. That said, I think it is also worth, as my noble friend, the noble lady, Lady Neville-jones, has pointed out, I think it is important to to see the value of sectoral regulators supported by a Centre of Excellence model.
More sector specific expertise, more direct communication with the industry and more flexible approaches are all easier to achieve with these smaller, more specific regulators and actually at a sufficient level of abstraction, it almost doesn't matter which of those models you go for, it's about having the resourced, skilled and empowered people performing, monitoring and enforcement activities, regardless of the body they sit under. But I think more broadly, my Lords, the point is that while differences between the centralised or more centralised or a more central approach are worthy of debate, I don't think you'd ever hit the extremes in either of those.
What actually matters is ensuring that whichever route the government chooses to take us down, they make certain the regulators are adequately resourced and exist within a wider strategy. Now, I'm not sure, and I look forward to finding out more whether the first of those is the case. The government has chosen the more sectoral approach, but we don't yet know how the regulators are going to be resourced, what their additional resourcing needs are going to be in order to cope with the increased responsibilities that are going to be laid at their door.
And I look forward to hearing from the noble lady, the minister, how the regulators are going to be funded, how the funding needs are going to be calculated and how they're going to be supported in this very significant expansion of their role. The second point the regulators should exist as part of a wider strategy is currently not the case. And I do apologise to noble Lords for banging on about this, but I it's very difficult in this bill to get past the the hole in the shape of a wider national cyber strategy.
Whether the regulators are many or one, it matters little without the bigger picture into which they fit. In an ideal world, we would review the overall cyber strategy and then debate what regulatory structures might be appropriate to deliver it. But for now, sadly, that is not the world we're in. The Secretary of State, or indeed the Chancellor of the Duchy of Lancaster, and it is not reassuring that we still don't know which must commit to publishing the national plan, after which we can assess the efficacy of its many parts.
18:25
Speaker 6
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Speaker 6
I would like to thank Lord Bute and Lord Jones for their introduction to this section, and for setting out the motivation behind a single cyber regulator. As others have pointed out, this is a question of sectoral expertise and cyber expertise. It is my view that, given the complex cyber landscape, a establishing a single regulator would not be as effective as the approach we are pursuing. Different sectors have different risks technologies, operational environments, market structures and resilience challenges within their industry.
To take an example, the energy sector has a greater reliance on operational technology turbine substations, gas pipes compared to the digital service sector, which is predominantly information technology based. And you'll see the guidance, for example, on quantum differs in that. In that respect, that is why expert regulators are needed to ensure compliance in a matter which reflects the realities of their sectors. I also don't recognise the assertion that there is a single internationally recognised model of best practice.
There are very near neighbors who have the model that we are pursuing that keeps the sectoral expertise. Additionally, I do not believe it would be an effective use of resource to establish a new regulator, and the proposed 12 month establishment period would delay the implementation of this regime. And finally, cyber would also continue to exist within a multi regulator landscape as there are separate regulatory approaches for telecommunications and the financial services. But I do agree to the points made by many noble Lords and particularly highlighted by Lord Holmes, both at second reading and now that a consistent approach to implementing and enforcing the regime is crucial, the Bill will drive this through by establishing common security and resilience requirements and secondary legislation for all regulated entities, clear guidance for regulators and a statement of strategic priorities setting common objectives which regulators must seek to achieve.
These will cover issues such as governance , skills, risk management, business continuity, supply chains, incident response response and appropriate testing and exercising. They will be consulted on and relevant secondary legislation subject to the affirmative procedure, so regulators will supervise and enforce the common requirements, whilst providing guidance tailored to the risks and operational realities of their sectors and, crucially, information sharing gateways and cost recovery mechanisms will bolster the well resourced and experienced regulators who will stand ready to collaborate whilst best supporting their respective sectors.
So I believe the approach of the bill gets the right balance between sectoral expertise and a common approach. Turning specifically to the amendment 91, which requires specific organisations to conduct an annual independent audit. I agree independent assessments play an important role in providing assurance and leveraging external expertise. That's why the current framework already enables regulators to require independent audits or inspections. But it's for the sectoral regulators to set the frequency and nature of audits, bearing in mind proportionality and their expertise on the risks and operational realities of their sector.
We will continue to drive the uptake of assured independent audits across sectors, using a range of levers that the Bill provides, and that is why that is what the current framework provides for, and the implementation of this bill will ensure. I now turn to amendment 90, which requires the proposed OCR to work with the UK Cyber Security Council to ensure sufficiently qualified cybersecurity professionals amongst regulated entities, and was also noted. The amendment made by Baroness Northover will also be debated on this topic later.
The government strongly supports the need for professionalisation of the cyber sector. We already work with the UK Cyber Security Council and regulators to encourage cyber professional professionalisation across the sectors. We also intend to set further expectations for regulators to encourage cyber professionalism through the bill's security and resilience requirements, which, as I just mentioned, will be set out in secondary legislation. They will address relevant training skills and professional standards, and the bill's regulators must publish guidance on these requirements.
Turning to the question of scope, as well as the the question of what kind of model of regulator we are looking at amendments 76 and 77 on the definition and designation of essential services. I agree that a clear framework is needed for bringing additional organisations in scope of the regulations. However, these criteria should ensure that the UK's. That only the UK's most critical services are brought into. Scope of the regulations.
In keeping with the objectives of these regulations. By shifting the definition of. Essential to focus on assessments only of material impact rather than systemic importance of the activity, the new criteria risk significantly expanding the scope of the regulations to capture many more businesses, large and small. We will again talk further about the scope of the bill in later groups, but I would just note in respect of JLR, that the Ukef guarantee was not a bailout.
Ukef will receive payment for providing its guarantee and in respect of the process set out under the the. The amendment and introducing a duty for the Secretary of State to consider recommendations from a central regulator that creates a further unnecessary layer of complexity. The Secretary of State already has a duty to consult appropriate persons when considering designation A new activities will only be brought into scope where the Secretary of State has undertaken a thorough assessment of the evidence.
Let me turn to the questions that the noble Lord, Lord James, and the noble Lord, Lord Burt, turned to on talks about bringing the providers of software and digital platforms within the definition of a relevant digital service provider, and to provide relevant security duties to those who create, distribute, manage or support software. Software and digital platforms are captured by the existing DSP framework where they meet the definition of cloud computing. This would include common models such as platform as a service, infrastructure as a service, and where the service is scalable and elastic software as a service.
Organisations providing ongoing management or supportive software on behalf of others can also be captured under the relevant Managed Service Provider measure where they meet that definition. But the effect of these amendments was extend regulation to software developers, distributors and support providers who are not otherwise intended to be in scope. The approach we are taking for software products, the Software Security Code of Practice sets baseline expectations for organisations that develop and sell software, and the government is promoting the adoption of the Software Security Code of Practice by working closely with industry through the Software Security Ambassador Scheme.
The scheme brings together industry leaders who are committed to championing the code and driving improvements to software security practices within their supply chains. And while the government agrees that software security is important, creating a statutory register of approved software providers could distort the market, restrict supplier choice and interest, and introduce untested regulatory consequences that go significantly beyond those risk based approach. It could create unnecessary barriers for innovative UK firms, start ups and SMEs, and potentially limit access to some of the best talent and, of course, the position of larger established providers.
Coming to the question of regulator funding raised by the noble Lord Lord cameras, the bill, of course, provides a different funding model to allow cost recovery such that regulators would be appropriately funded for their additional activities in respect of cyber, I hope these responses reassure noble lords of the benefit of a multi regulatory regime made up of expert and coherent regulators who have a strong understanding of the needs and risks of their respective sectors, combined with the means for consistent, clear and coherent commonality across the piece.
To take an example, the energy sector has a greater reliance on operational technology turbine substations, gas pipes compared to the digital service sector, which is predominantly information technology based. And you'll see the guidance, for example, on quantum differs in that. In that respect, that is why expert regulators are needed to ensure compliance in a matter which reflects the realities of their sectors. I also don't recognise the assertion that there is a single internationally recognised model of best practice.
There are very near neighbors who have the model that we are pursuing that keeps the sectoral expertise. Additionally, I do not believe it would be an effective use of resource to establish a new regulator, and the proposed 12 month establishment period would delay the implementation of this regime. And finally, cyber would also continue to exist within a multi regulator landscape as there are separate regulatory approaches for telecommunications and the financial services. But I do agree to the points made by many noble Lords and particularly highlighted by Lord Holmes, both at second reading and now that a consistent approach to implementing and enforcing the regime is crucial, the Bill will drive this through by establishing common security and resilience requirements and secondary legislation for all regulated entities, clear guidance for regulators and a statement of strategic priorities setting common objectives which regulators must seek to achieve.
These will cover issues such as governance , skills, risk management, business continuity, supply chains, incident response response and appropriate testing and exercising. They will be consulted on and relevant secondary legislation subject to the affirmative procedure, so regulators will supervise and enforce the common requirements, whilst providing guidance tailored to the risks and operational realities of their sectors and, crucially, information sharing gateways and cost recovery mechanisms will bolster the well resourced and experienced regulators who will stand ready to collaborate whilst best supporting their respective sectors.
So I believe the approach of the bill gets the right balance between sectoral expertise and a common approach. Turning specifically to the amendment 91, which requires specific organisations to conduct an annual independent audit. I agree independent assessments play an important role in providing assurance and leveraging external expertise. That's why the current framework already enables regulators to require independent audits or inspections. But it's for the sectoral regulators to set the frequency and nature of audits, bearing in mind proportionality and their expertise on the risks and operational realities of their sector.
We will continue to drive the uptake of assured independent audits across sectors, using a range of levers that the Bill provides, and that is why that is what the current framework provides for, and the implementation of this bill will ensure. I now turn to amendment 90, which requires the proposed OCR to work with the UK Cyber Security Council to ensure sufficiently qualified cybersecurity professionals amongst regulated entities, and was also noted. The amendment made by Baroness Northover will also be debated on this topic later.
The government strongly supports the need for professionalisation of the cyber sector. We already work with the UK Cyber Security Council and regulators to encourage cyber professional professionalisation across the sectors. We also intend to set further expectations for regulators to encourage cyber professionalism through the bill's security and resilience requirements, which, as I just mentioned, will be set out in secondary legislation. They will address relevant training skills and professional standards, and the bill's regulators must publish guidance on these requirements.
Turning to the question of scope, as well as the the question of what kind of model of regulator we are looking at amendments 76 and 77 on the definition and designation of essential services. I agree that a clear framework is needed for bringing additional organisations in scope of the regulations. However, these criteria should ensure that the UK's. That only the UK's most critical services are brought into. Scope of the regulations.
In keeping with the objectives of these regulations. By shifting the definition of. Essential to focus on assessments only of material impact rather than systemic importance of the activity, the new criteria risk significantly expanding the scope of the regulations to capture many more businesses, large and small. We will again talk further about the scope of the bill in later groups, but I would just note in respect of JLR, that the Ukef guarantee was not a bailout.
Ukef will receive payment for providing its guarantee and in respect of the process set out under the the. The amendment and introducing a duty for the Secretary of State to consider recommendations from a central regulator that creates a further unnecessary layer of complexity. The Secretary of State already has a duty to consult appropriate persons when considering designation A new activities will only be brought into scope where the Secretary of State has undertaken a thorough assessment of the evidence.
Let me turn to the questions that the noble Lord, Lord James, and the noble Lord, Lord Burt, turned to on talks about bringing the providers of software and digital platforms within the definition of a relevant digital service provider, and to provide relevant security duties to those who create, distribute, manage or support software. Software and digital platforms are captured by the existing DSP framework where they meet the definition of cloud computing. This would include common models such as platform as a service, infrastructure as a service, and where the service is scalable and elastic software as a service.
Organisations providing ongoing management or supportive software on behalf of others can also be captured under the relevant Managed Service Provider measure where they meet that definition. But the effect of these amendments was extend regulation to software developers, distributors and support providers who are not otherwise intended to be in scope. The approach we are taking for software products, the Software Security Code of Practice sets baseline expectations for organisations that develop and sell software, and the government is promoting the adoption of the Software Security Code of Practice by working closely with industry through the Software Security Ambassador Scheme.
The scheme brings together industry leaders who are committed to championing the code and driving improvements to software security practices within their supply chains. And while the government agrees that software security is important, creating a statutory register of approved software providers could distort the market, restrict supplier choice and interest, and introduce untested regulatory consequences that go significantly beyond those risk based approach. It could create unnecessary barriers for innovative UK firms, start ups and SMEs, and potentially limit access to some of the best talent and, of course, the position of larger established providers.
Coming to the question of regulator funding raised by the noble Lord Lord cameras, the bill, of course, provides a different funding model to allow cost recovery such that regulators would be appropriately funded for their additional activities in respect of cyber, I hope these responses reassure noble lords of the benefit of a multi regulatory regime made up of expert and coherent regulators who have a strong understanding of the needs and risks of their respective sectors, combined with the means for consistent, clear and coherent commonality across the piece.
18:34
Speaker 2
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Speaker 2
Could I ask are they in this recovery regime of a company is going to be or whatever organisations are regulated? Are they going to be levied for the service of regulation that's going to be provided, or are is the revenue going to come as a result of fines? In which case, I hope they're not going to raise their revenue by finding fault. But what is the what is the the basis of cost recovery? Because it needs to seems to me to be perceived to be fair and not onerous and not directed at encouraging regulators to regulate for the sake of actually increasing their income.
18:35
Speaker 6
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Speaker 6
No, indeed, the the, the intent behind the cost recovery model is to provide a fair approach so that regulators, when regulating on cyber can can recover the costs associated with that. There will be further guidance put out on this. I cannot recall exactly the the the bill's provisions in respect of fines. Let me come back to the noble Baroness on that point.
18:35
Speaker 3
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Speaker 3
My Lords, I confess to real disappointment . Listening to the Minister's response. We sat here all afternoon and had very, very many strong contributions on many matters. But so far the government doesn't appear to have moved an inch on any of them. Just a few quick points from me, the regulators to which the minister just referred. There are 12 regulators of 12 sectors and which is a tiny fraction of the economy.
And you've we've had this very profound discussion about AI today. Are you really asking us to believe that what is capable of mastering the complexity and the continuing nature of the challenge that AI proposes? I. To me, it is a complete. The answer is all too obvious. Secondly, I would just make the point to Baroness Neville-jones in particular, but you can't. I've sat on many, many boards over recent decades at different levels in the UK, in Europe and more globally.
And the. The awful lot of expertise comes to the table. But it is absolutely out of the question that every board in the land is going to have a real cyber expert on it, hence the notion. A financial audit is a really powerful thing these days. It gets into the bowels of a company and and it's going to anything is going wrong anywhere. It's going to find out, find out about it.
And that's why I proposed that we have a cyber resilience audit, not for every company in the land, but for those that fall within the heading of. Essential services. And finally, we are at war, my Lords, and I completely agree with what Lord Londesborough said, that the the scale of the damage to our economy is almost certainly vastly under underestimated, and the framework imposed in this bill for fighting a war. And as we see in wars around the world at the moment, guess what? Wars change.
Different weapons are used, different tactics come up, and it's as if we split the Mod and said, the Army is going to be with DCMs, and the Navy is going to be with another department, and the Air Force is going to be with another department. The idea that you cannot have called effective coordination within government and outside government is honestly just doesn't carry any weight. My Lords, I beg to withdraw my amendments.
Is it your lordships pleasure that amendment seven. be withdrawn? Amendment is by leave withdrawn. Amendment eight Baroness Kidron not moved . Members nine. Lord Birt not moved. Question is at clause seven stem part of the Bill. As many as are of that opinion will say content. Content.
And you've we've had this very profound discussion about AI today. Are you really asking us to believe that what is capable of mastering the complexity and the continuing nature of the challenge that AI proposes? I. To me, it is a complete. The answer is all too obvious. Secondly, I would just make the point to Baroness Neville-jones in particular, but you can't. I've sat on many, many boards over recent decades at different levels in the UK, in Europe and more globally.
And the. The awful lot of expertise comes to the table. But it is absolutely out of the question that every board in the land is going to have a real cyber expert on it, hence the notion. A financial audit is a really powerful thing these days. It gets into the bowels of a company and and it's going to anything is going wrong anywhere. It's going to find out, find out about it.
And that's why I proposed that we have a cyber resilience audit, not for every company in the land, but for those that fall within the heading of. Essential services. And finally, we are at war, my Lords, and I completely agree with what Lord Londesborough said, that the the scale of the damage to our economy is almost certainly vastly under underestimated, and the framework imposed in this bill for fighting a war. And as we see in wars around the world at the moment, guess what? Wars change.
Different weapons are used, different tactics come up, and it's as if we split the Mod and said, the Army is going to be with DCMs, and the Navy is going to be with another department, and the Air Force is going to be with another department. The idea that you cannot have called effective coordination within government and outside government is honestly just doesn't carry any weight. My Lords, I beg to withdraw my amendments.
Is it your lordships pleasure that amendment seven. be withdrawn? Amendment is by leave withdrawn. Amendment eight Baroness Kidron not moved . Members nine. Lord Birt not moved. Question is at clause seven stem part of the Bill. As many as are of that opinion will say content. Content.
18:38
18:38
18:39
Speaker 14
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Speaker 14
My Lords, I apologise for not having been much around earlier, but I'm also involved on the Hillsborough Bill in the in the chamber I wish to move amendment ten, which stands in my name, and that of my noble friend Lord Clement-jones, and it inserts just five words into regulation 12 of the 2018 regulations so that the risks which are relevant digital service provider must identify and manage explicitly include risks arising from fraud, and the amendment might create no new duty if the duty is already encompassed in clause eight.
But it settles the question that the bill does currently leave open when an online marketplace, search engine or cloud provider, or indeed a software or digital platform under the noble Lord. Lord Birt's Amendment seven sits down with its regulator and asks which risks it is expected to manage. Is fraud definitely on the list? At present, nobody can say with confidence, and the answer matters a great deal because of who clause eight applies to . Relevant digital service providers are online marketplaces, search engines, cloud computing services, and possibly digital and software platforms.
These are not incidental to fraud in this country. They're increasingly where it begins. We can see the impact of a lack of action to secure online and cyberspace. Fraud makes up 44% of all UK crime and online technologies, especially artificial intelligence, are supercharging that, with big increase in online generated fraud and scams. Research by Lords Lloyds Bank found that Meta's social media sites are a starting point for 76%.
That's three quarters of purchase scams in the UK, with the value of losses to UK customers estimated at £66 million in the last year alone. The government's fraud strategy does not really focus on the role of social media giants and big tech in the proliferation of online scams, and now the bill fails to address explicitly the risks that fraud and scams pose to critical infrastructure and organisations. And that is very striking when we consider that the government's official statistics on cyber security breaches show that phishing attacks scams remain the most prevalent type of breach or attack by far in the UK.
The evidence of the impact of fraudulent online activity is not contested and is a huge concern for consumers. UK Finance's annual fraud report, published in June, records that criminals stole nearly £1.3 billion through payment fraud in 2025, a rise of 4% over the previous year and the second consecutive year of growth growth. There are more than 4 million confirmed cases there were in 2025 4 million confirmed cases, eight people defrauded every minute.
Authorised push payment losses rose 19% to 576 million, and around two thirds of that fraud originated online. Investment fraud was up 40%. UK finance describes fraud as a national security threat and I think they are right. The government's Cyber Security Breaches survey, published in April, found phishing to be by far the most prevalent form of breach or attack experienced by almost 4 in 10 businesses and rated the most disruptive by 7 in 10 of
But it settles the question that the bill does currently leave open when an online marketplace, search engine or cloud provider, or indeed a software or digital platform under the noble Lord. Lord Birt's Amendment seven sits down with its regulator and asks which risks it is expected to manage. Is fraud definitely on the list? At present, nobody can say with confidence, and the answer matters a great deal because of who clause eight applies to . Relevant digital service providers are online marketplaces, search engines, cloud computing services, and possibly digital and software platforms.
These are not incidental to fraud in this country. They're increasingly where it begins. We can see the impact of a lack of action to secure online and cyberspace. Fraud makes up 44% of all UK crime and online technologies, especially artificial intelligence, are supercharging that, with big increase in online generated fraud and scams. Research by Lords Lloyds Bank found that Meta's social media sites are a starting point for 76%.
That's three quarters of purchase scams in the UK, with the value of losses to UK customers estimated at £66 million in the last year alone. The government's fraud strategy does not really focus on the role of social media giants and big tech in the proliferation of online scams, and now the bill fails to address explicitly the risks that fraud and scams pose to critical infrastructure and organisations. And that is very striking when we consider that the government's official statistics on cyber security breaches show that phishing attacks scams remain the most prevalent type of breach or attack by far in the UK.
The evidence of the impact of fraudulent online activity is not contested and is a huge concern for consumers. UK Finance's annual fraud report, published in June, records that criminals stole nearly £1.3 billion through payment fraud in 2025, a rise of 4% over the previous year and the second consecutive year of growth growth. There are more than 4 million confirmed cases there were in 2025 4 million confirmed cases, eight people defrauded every minute.
Authorised push payment losses rose 19% to 576 million, and around two thirds of that fraud originated online. Investment fraud was up 40%. UK finance describes fraud as a national security threat and I think they are right. The government's Cyber Security Breaches survey, published in April, found phishing to be by far the most prevalent form of breach or attack experienced by almost 4 in 10 businesses and rated the most disruptive by 7 in 10 of
18:43
Speaker 6
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Speaker 6
By 7 in 10 of those affected among businesses breached, more than half experienced . Only phishing fraud is not parallel to the cybersecurity threat. For most organizations, fraud is the cyber threat . I anticipate the minister is going to tell me that fraud is handled elsewhere in the Online Safety Act, in the reimbursement rules, in the fraud strategy. But I would make two points. First, none of those regimes places the security and resilience duty on cloud providers or marketplaces in respect of the systems on which essential activities depend.
Second, a regulatory architecture in which every regulator assumes that fraud is everybody else's business is precisely how a gap of this size opens up in the first place. This amendment was raised in the other place by my honourable friend Victoria Collins MP. The ministerial answer then was, in essence, that the words were unnecessary, but I would rather have them explicitly on the face of the bill rather than rely on inference. If the minister cannot accept the amendment, I ask for two assurances that the guidance the Information Commissioner must issue under paragraph four A of regulation three will address fraud risk, fraud risk explicitly, and that the statement of strategic priorities under clause 25 will name fraud.
Among the risks to which regulators must have regard. Just turning to just one other theme in this group, because otherwise, I think my noble friend Lord Clement Jones is going to sweep at the end in his mind, I would just like to speak to amendment 15 on workforce competence and skills, which also issues raised in amendments one, seven, four, three and 174 D, which I think also refer to cybersecurity capability. Now, we're all concerned about the shortage of cyber skills and competencies in the workforce.
But that's got to start. One place that has to start is with young people in schools and colleges. I sought to table an amendment calling for the government to publish a strategy for improving the cyber security, awareness and resilience of children and young people through education. Sadly, the PBO ruled that out of scope, but I hope that we might have that issue in mind. If we are going to have an increase that we need, that we vitally need in workplace workforce skills and competence on on cyber security, then we also need to have an eye to developing those skills in our young people who spend so much of their lives online.
I beg to move.
Second, a regulatory architecture in which every regulator assumes that fraud is everybody else's business is precisely how a gap of this size opens up in the first place. This amendment was raised in the other place by my honourable friend Victoria Collins MP. The ministerial answer then was, in essence, that the words were unnecessary, but I would rather have them explicitly on the face of the bill rather than rely on inference. If the minister cannot accept the amendment, I ask for two assurances that the guidance the Information Commissioner must issue under paragraph four A of regulation three will address fraud risk, fraud risk explicitly, and that the statement of strategic priorities under clause 25 will name fraud.
Among the risks to which regulators must have regard. Just turning to just one other theme in this group, because otherwise, I think my noble friend Lord Clement Jones is going to sweep at the end in his mind, I would just like to speak to amendment 15 on workforce competence and skills, which also issues raised in amendments one, seven, four, three and 174 D, which I think also refer to cybersecurity capability. Now, we're all concerned about the shortage of cyber skills and competencies in the workforce.
But that's got to start. One place that has to start is with young people in schools and colleges. I sought to table an amendment calling for the government to publish a strategy for improving the cyber security, awareness and resilience of children and young people through education. Sadly, the PBO ruled that out of scope, but I hope that we might have that issue in mind. If we are going to have an increase that we need, that we vitally need in workplace workforce skills and competence on on cyber security, then we also need to have an eye to developing those skills in our young people who spend so much of their lives online.
I beg to move.
18:46
18:46
18:46
Speaker 2
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Speaker 2
Working for Atkins Wireless and rise to speak to amendment 82. Now, my Lords, in Group three, we had a lot of good points made about one specific technology related to cyber AI. But as the noble Lord, Lord Berts said in the previous group, quantum is the other area that needs attention as a specific technology. Now, my Lords, when I started here around seven years ago, I never thought I'd be talking about quantum mechanics one day in your lordships house, I recently heard the story of Heisenberg and his discovery of the uncertainty principle almost 100 years ago in 1927, and he was out in a park late one night after a long argument with Niels Bohr, and he saw a row of street lights, and he saw a person walking in between the street lights late at night, so he would see them go past one light, and you'd be able to observe them, and then they would disappear into the darkness.
They would then reappear at the next. And he realised he could use that analogy for the behaviour of the electron, that as it was being measured, it was there as a particle . When it was not being measured. It has to be considered probabilistically. You don't know where it is. And in the same way a quantum computer, the the value of the qubits, as it's called, is only locked in when it's interacts with a measurement device.
And this is an extraordinary, powerful technology that is now emerging. As an example, the Willow chip, which has recently been developed by Google, completed a benchmark calculation in five minutes, would have taken the fastest classical computer in the world ten septillion years to complete. That's ten with 24 zeros, I believe, my Lords. So, according to the Parliamentary Office of Science and Technology and the NCS, in less than ten years, perhaps even sooner than that, we could have a cryptographically relevant quantum computer that uses Shor's algorithm to decrypt all communications that rely on the RSA algorithm that we relied on for decades, all of our bank transactions, states, local communications, and so on.
So an area of technology that's moving extremely quickly. And it's not just one that we have to worry about. My Lords, at some point in the future, the so-called harvest now decrypts later attacks that could be used to decrypt sensitive information in the future. So that brings me really to the amendment, which is quite a simple, straightforward amendment and really goes forward from the discussions on given the changing nature of these technologies, it's perhaps not appropriate to have specific technologies, timelines on the face of the bill.
But as a noble lady, the minister has already brought out the statement of strategic priorities, I think is a powerful tool to ensure national join up and join up across those regulators within the remit of the bill. So we have 12, 12 regulators. My Lords, each one could be approaching the approach to quantum crypto differently. So-Called post-quantum cryptography. And there would be huge benefits in really ensuring that regulators work from the same national signal, rather than inventing their own pqc post-quantum crypto expectations individually.
And that would also allow them, if it can be brought out in the in the statement of strategic priorities to plan their inspections, guidance, skills and capacity around the NCS timelines, which is a really a plan ranging from 2028 discovery, an initial plan through to 2035 when post-quantum crypto implementation is is completed, and also to help with all of those newly in-scope firms that will be coming in within the remit of this legislation, giving the regulators really a legitimate basis to raise quantum post-quantum crypto early on with those new those new organisations.
So, my Lords, I, I read back the the Minister's remarks at second reading, where she said that quantum crypto would be considered as part of that requirement by regulated entities, but would not necessarily be singled out as a specific technology in the regulation so that we keep these regulations up to date and match to the cyber risks that individual entities face. And I believe, my Lords, that this amendment would help strengthen and deliver exactly that.
So without my Lords, I look forward to hearing from the Minister on her thoughts on this approach.
They would then reappear at the next. And he realised he could use that analogy for the behaviour of the electron, that as it was being measured, it was there as a particle . When it was not being measured. It has to be considered probabilistically. You don't know where it is. And in the same way a quantum computer, the the value of the qubits, as it's called, is only locked in when it's interacts with a measurement device.
And this is an extraordinary, powerful technology that is now emerging. As an example, the Willow chip, which has recently been developed by Google, completed a benchmark calculation in five minutes, would have taken the fastest classical computer in the world ten septillion years to complete. That's ten with 24 zeros, I believe, my Lords. So, according to the Parliamentary Office of Science and Technology and the NCS, in less than ten years, perhaps even sooner than that, we could have a cryptographically relevant quantum computer that uses Shor's algorithm to decrypt all communications that rely on the RSA algorithm that we relied on for decades, all of our bank transactions, states, local communications, and so on.
So an area of technology that's moving extremely quickly. And it's not just one that we have to worry about. My Lords, at some point in the future, the so-called harvest now decrypts later attacks that could be used to decrypt sensitive information in the future. So that brings me really to the amendment, which is quite a simple, straightforward amendment and really goes forward from the discussions on given the changing nature of these technologies, it's perhaps not appropriate to have specific technologies, timelines on the face of the bill.
But as a noble lady, the minister has already brought out the statement of strategic priorities, I think is a powerful tool to ensure national join up and join up across those regulators within the remit of the bill. So we have 12, 12 regulators. My Lords, each one could be approaching the approach to quantum crypto differently. So-Called post-quantum cryptography. And there would be huge benefits in really ensuring that regulators work from the same national signal, rather than inventing their own pqc post-quantum crypto expectations individually.
And that would also allow them, if it can be brought out in the in the statement of strategic priorities to plan their inspections, guidance, skills and capacity around the NCS timelines, which is a really a plan ranging from 2028 discovery, an initial plan through to 2035 when post-quantum crypto implementation is is completed, and also to help with all of those newly in-scope firms that will be coming in within the remit of this legislation, giving the regulators really a legitimate basis to raise quantum post-quantum crypto early on with those new those new organisations.
So, my Lords, I, I read back the the Minister's remarks at second reading, where she said that quantum crypto would be considered as part of that requirement by regulated entities, but would not necessarily be singled out as a specific technology in the regulation so that we keep these regulations up to date and match to the cyber risks that individual entities face. And I believe, my Lords, that this amendment would help strengthen and deliver exactly that.
So without my Lords, I look forward to hearing from the Minister on her thoughts on this approach.
18:51
Speaker 10
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Speaker 10
My Lords, I rise to speak to this substantial and rather disparate group of amendments, including 93, 94 and 95 in my name and Amendment ten, tabled by my noble friend Baroness Ludford, and a number of other amendments in the name of other noble Lords, including that of the noble Lord Arbuthnot, who sadly, I think, is in the chamber as well. My Lords, under amendment ten, comprehensively introduced by my noble friend Baroness Ludford, we would ensure that digital service providers manage risk arising from AI driven fraud, which, she explains represents over 40% of reported crime in England and Wales.
And I thought she made an extremely convincing case. My Lords and I very much hope that the Minister takes what she has said to heart and adds the very few words that are required to make this bill much more secure. As far as the kind of fishing activity that she described, my Lords, as regards the various amendments relating to skills just beginning with the workforce and competence deficit in their latest 2020 526 workforce study, Isc2 reveals that 52% of UK cyber professionals identify skills shortages as their single greatest obstacle to regulatory compliance, with 58% of organisations facing critical skills shortages.
Regulation without competence is what might be described as pure compliance theatre, and that's why we strongly on these benches support amendment 15. In the name of the noble Lord, Lord Arbuthnot, placing a direct statutory duty on regulated organisations to ensure that their security leads possess verified competence. Alongside Lord Holmes's Amendment 114, which requires the Secretary of State to define the objective, qualifications and independent criteria for appointing skilled persons. My Lords, we also see critical implementation blind spots in distributed infrastructure in July 2026, as documented in the analogue 72 Green Paper, which I've mentioned before, a small UK electricity generator was taken offline for four days following a suspected state sponsored cyber attack because it fell below the statutory reporting size threshold, local responders had zero visibility of the disruption.
Its small distributed energy assets are paralysed. The compound threat to local grids is severe. My Lords Amendment 82, tabled by the noble Lord Lord Ravensdale, rightly addresses quantum decryption. And I'm afraid, my Lords, if we're not careful, we're back in the territory of of territory, of technology , agnosticism, which I we I think we have a fundamental disagreement with the government across the Committee about that. Hostile states are actively executing harvest now, decrypt later operations by requiring the Secretary of State to incorporate NCS post-quantum cryptography timelines into strategic priorities.
It would mandate preparation for quantum resistant encryption across all critical sectors. And we very much support Lord Ravensdale amendment. Amendment 93 in my name introduces mandatory eight week public consultations before secondary regulations or codes of practice are issued. Protecting industry and SMEs from closed door administrative creep. And my Lords, I think that's the kind of area where the Minister could give further assurance. Amendment 94, in my name, establishes a statutory presumption of conformity for organisations achieving ISO, IEC 27,001 or Cyber Essentials Plus certification.
This safe harbour would eliminate legal ambiguity, would award gold standard cyber hygiene hygiene and would free regulatory resources to focus on high risk , non-compliant entities while preserving the regulator's right of rebuttal. And as the minister can imagine, this has considerable industry support. Under clause 40, my amendment 95 shortens the legislative cycle from five years to three years. We also. Support the alternative of the noble Lord, Lord Arbuthnot's amendment 95 A, which probes an even tighter two year window, and his amendment 95 B, which I have signed, which ensures that future statutory reviews must explicitly assess third party and supply chain dependencies originating outside the regulatory perimeter.
Furthermore, my Lords, we support the noble Lord, Lord Arbuthnot's new clauses 174 C and 174 D mandating competency standards and annual workforce strategies are. Just sorry that he's not here and able to speak to those amendments. And alongside Viscount the noble Lord, Viscount Camrose , is amendment 92 B, requiring large businesses to report transparently on their cyber resilient plans. My Lords, we haven't heard from the noble Viscount regarding the other conservative front bench proposals, but we are sympathetic with the need to review information sharing and analysis centers isacs under amendment 169 and to expect clear regulatory funding plans under amendment 174.
Furthermore, holding the government to its commitment under the National Audit Offices 2025 and the Cyber Action Plan under amendment 170 is important. However, my Lords, we are less supportive of amendments 173 and 175 which attempt to make commencement of the entire act conditional on publishing the National Cyber Action Plan. My Lords, in our view, that would potentially create a dangerous delay holding our national resilience hostage to Whitehall paperwork when our hospitals and utilities need protection today.
And I thought she made an extremely convincing case. My Lords and I very much hope that the Minister takes what she has said to heart and adds the very few words that are required to make this bill much more secure. As far as the kind of fishing activity that she described, my Lords, as regards the various amendments relating to skills just beginning with the workforce and competence deficit in their latest 2020 526 workforce study, Isc2 reveals that 52% of UK cyber professionals identify skills shortages as their single greatest obstacle to regulatory compliance, with 58% of organisations facing critical skills shortages.
Regulation without competence is what might be described as pure compliance theatre, and that's why we strongly on these benches support amendment 15. In the name of the noble Lord, Lord Arbuthnot, placing a direct statutory duty on regulated organisations to ensure that their security leads possess verified competence. Alongside Lord Holmes's Amendment 114, which requires the Secretary of State to define the objective, qualifications and independent criteria for appointing skilled persons. My Lords, we also see critical implementation blind spots in distributed infrastructure in July 2026, as documented in the analogue 72 Green Paper, which I've mentioned before, a small UK electricity generator was taken offline for four days following a suspected state sponsored cyber attack because it fell below the statutory reporting size threshold, local responders had zero visibility of the disruption.
Its small distributed energy assets are paralysed. The compound threat to local grids is severe. My Lords Amendment 82, tabled by the noble Lord Lord Ravensdale, rightly addresses quantum decryption. And I'm afraid, my Lords, if we're not careful, we're back in the territory of of territory, of technology , agnosticism, which I we I think we have a fundamental disagreement with the government across the Committee about that. Hostile states are actively executing harvest now, decrypt later operations by requiring the Secretary of State to incorporate NCS post-quantum cryptography timelines into strategic priorities.
It would mandate preparation for quantum resistant encryption across all critical sectors. And we very much support Lord Ravensdale amendment. Amendment 93 in my name introduces mandatory eight week public consultations before secondary regulations or codes of practice are issued. Protecting industry and SMEs from closed door administrative creep. And my Lords, I think that's the kind of area where the Minister could give further assurance. Amendment 94, in my name, establishes a statutory presumption of conformity for organisations achieving ISO, IEC 27,001 or Cyber Essentials Plus certification.
This safe harbour would eliminate legal ambiguity, would award gold standard cyber hygiene hygiene and would free regulatory resources to focus on high risk , non-compliant entities while preserving the regulator's right of rebuttal. And as the minister can imagine, this has considerable industry support. Under clause 40, my amendment 95 shortens the legislative cycle from five years to three years. We also. Support the alternative of the noble Lord, Lord Arbuthnot's amendment 95 A, which probes an even tighter two year window, and his amendment 95 B, which I have signed, which ensures that future statutory reviews must explicitly assess third party and supply chain dependencies originating outside the regulatory perimeter.
Furthermore, my Lords, we support the noble Lord, Lord Arbuthnot's new clauses 174 C and 174 D mandating competency standards and annual workforce strategies are. Just sorry that he's not here and able to speak to those amendments. And alongside Viscount the noble Lord, Viscount Camrose , is amendment 92 B, requiring large businesses to report transparently on their cyber resilient plans. My Lords, we haven't heard from the noble Viscount regarding the other conservative front bench proposals, but we are sympathetic with the need to review information sharing and analysis centers isacs under amendment 169 and to expect clear regulatory funding plans under amendment 174.
Furthermore, holding the government to its commitment under the National Audit Offices 2025 and the Cyber Action Plan under amendment 170 is important. However, my Lords, we are less supportive of amendments 173 and 175 which attempt to make commencement of the entire act conditional on publishing the National Cyber Action Plan. My Lords, in our view, that would potentially create a dangerous delay holding our national resilience hostage to Whitehall paperwork when our hospitals and utilities need protection today.
18:58
18:58
Speaker 15
-
Speaker 15
My Lords, I thank the noble Baroness Ludford for introducing this group and I generally supportive of the principles she's introducing in that. And thank all noble Lords who have spoken in this debate. I particularly enjoyed trying to get my head round 10 quintillion or however many zeros that was on those on on on the computing. In terms of moving first to our amendments, hopefully this is constructive in this debate, really trying to build on a lot of the themes that Lord Burke was saying in the previous grouping around giving people the tools around self-help, really, in a lot of this, because we know the government can't be expected to cover every aspect.
So starting with our amendment in my name, 92 B, and my noble friend Viscount Camrose, it really builds on a similar principle underpinning our support for voluntary referral scheme, that being that both businesses and individuals, where practical practical should be self sufficient and self accountable with regards to the security. The more that businesses are responsible for their own security, the less the state has to look over its shoulders. I think that's a benefit to both parties.
So, you know, requiring a large business to report their own cyber security and resilience resilience plan provides an impetus, really, what the idea is that you want the board to be saying to the chief executive and the executive team, what are you doing in this space? And holding them to account and through the board, their shareholders themselves? Because, of course, if the if the answer in all of that is a big fat zero, then that's clearly something which, you know, is going to be concerned.
So we think that that kind of informal nudging pressure call, whatever you want, will actually be quite a call to action that any self-respecting chief executive and board are going to take heed of our our amendment 169 attempts to maximize the effectiveness of our information sharing and analysis centers, whether private or public. In the case of the NCS, organizations that exist to support the entities covered by the Niss regulations will inevitably have sector specific expertise.
And if there's a chance to utilize that expertise, the government should do so. Our amendment 170 would require the Secretary of State to annually report on the government's progress towards meeting existing requirements and implementation deadlines that have been set. Of course, naturally, it's a function of both Houses of Parliament to hold the government to its own targets into account. And so hopefully something that all, all noble Lords would would get behind and something that the government would be very supportive as well.
Our amendments 71, 73 and 75, would make the commencement of the bill conditional on the publication of the National Cyber Action Plan. Now, clearly , to the point that Lord Clement-jones said, we're not trying to delay this in any way, shape or form. Of course, we want this to be quickly enacted, but at the same time, I think we would all say it's vital that there is a cyber action plan that we can look and see, and we're trying to use this as a tool.
So please, please, please can we have some action in this in this space? Finally, my Lords, our amendment 174 would require the Secretary of State to lay before the House a funding plan for the key provisions before commencement. The remit of the regulatory authority is being expanded and their responsibilities increase. That must come with a proportionate increase in their resources and support. If this is going to be meaningful, my Lords, I will briefly touch on the several other amendments in this group.
I am grateful to my noble friend Lord Arbuthnot with with impeccable timing. That. That you know what he's trying to do in amendment hundred and 74 is that cyber security is best achieved when the strategy is system driven rather than entity based. I support the principle behind my noble friend, Lord and noble friend, Lord Bittner's amendments around making sure that the skilled people in place and that that is something that the Secretary of State should be helping to mandate and define the standards on which someone should be considered an expert.
Lastly, my Lords, I'm particularly grateful to the noble Lord, Lord Clement-jones, for his amendments. In particular, amendment 95, which will reduce the maximum interval between legislation and operational reports from 5 to 3 years, is a welcome point. My Lords, the world of cyber security is ever changing and will do so with increased speed as our AI continues to develop. A five year maximum time frame is simply too long for any government to reflect the effectiveness of existing legislation.
I hope that the noble Baroness, the Minister, takes the point along with the others I have made.
So starting with our amendment in my name, 92 B, and my noble friend Viscount Camrose, it really builds on a similar principle underpinning our support for voluntary referral scheme, that being that both businesses and individuals, where practical practical should be self sufficient and self accountable with regards to the security. The more that businesses are responsible for their own security, the less the state has to look over its shoulders. I think that's a benefit to both parties.
So, you know, requiring a large business to report their own cyber security and resilience resilience plan provides an impetus, really, what the idea is that you want the board to be saying to the chief executive and the executive team, what are you doing in this space? And holding them to account and through the board, their shareholders themselves? Because, of course, if the if the answer in all of that is a big fat zero, then that's clearly something which, you know, is going to be concerned.
So we think that that kind of informal nudging pressure call, whatever you want, will actually be quite a call to action that any self-respecting chief executive and board are going to take heed of our our amendment 169 attempts to maximize the effectiveness of our information sharing and analysis centers, whether private or public. In the case of the NCS, organizations that exist to support the entities covered by the Niss regulations will inevitably have sector specific expertise.
And if there's a chance to utilize that expertise, the government should do so. Our amendment 170 would require the Secretary of State to annually report on the government's progress towards meeting existing requirements and implementation deadlines that have been set. Of course, naturally, it's a function of both Houses of Parliament to hold the government to its own targets into account. And so hopefully something that all, all noble Lords would would get behind and something that the government would be very supportive as well.
Our amendments 71, 73 and 75, would make the commencement of the bill conditional on the publication of the National Cyber Action Plan. Now, clearly , to the point that Lord Clement-jones said, we're not trying to delay this in any way, shape or form. Of course, we want this to be quickly enacted, but at the same time, I think we would all say it's vital that there is a cyber action plan that we can look and see, and we're trying to use this as a tool.
So please, please, please can we have some action in this in this space? Finally, my Lords, our amendment 174 would require the Secretary of State to lay before the House a funding plan for the key provisions before commencement. The remit of the regulatory authority is being expanded and their responsibilities increase. That must come with a proportionate increase in their resources and support. If this is going to be meaningful, my Lords, I will briefly touch on the several other amendments in this group.
I am grateful to my noble friend Lord Arbuthnot with with impeccable timing. That. That you know what he's trying to do in amendment hundred and 74 is that cyber security is best achieved when the strategy is system driven rather than entity based. I support the principle behind my noble friend, Lord and noble friend, Lord Bittner's amendments around making sure that the skilled people in place and that that is something that the Secretary of State should be helping to mandate and define the standards on which someone should be considered an expert.
Lastly, my Lords, I'm particularly grateful to the noble Lord, Lord Clement-jones, for his amendments. In particular, amendment 95, which will reduce the maximum interval between legislation and operational reports from 5 to 3 years, is a welcome point. My Lords, the world of cyber security is ever changing and will do so with increased speed as our AI continues to develop. A five year maximum time frame is simply too long for any government to reflect the effectiveness of existing legislation.
I hope that the noble Baroness, the Minister, takes the point along with the others I have made.
19:03
Speaker 11
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Speaker 11
I the noble Lords for all their amendments in this group, which I will endeavour to cover in my response, starting with the lead amendment for this group from the noble Baroness Ludford. Fraud and fraud are indeed important to address. The bill requires relevant digital service providers to prevent or mitigate risks through an all hazards approach. We already expect Dhssps to address risks posed by fraud as part of their security duties.
The reason we do not single out risk posed by fraud is because this may not reflect the full range of risks faced, and it is important that regulators in their guidance, for example in respect of the ICO, respond to the risks that their sectors are are experiencing, which of course could include fraud and the. I heard very clearly the fact she set out, but that will be something that would come in due course in respect of the the the important points made by the noble Lord, Lord Ravensdale, in respect of the risks posed by quantum computing.
The. All hazards, all threats, all technologies approach does enable a flexible and future proofed regime. It is important that each version of the statement of Strategic priorities is not bound by the risks posed by specific technologies. Because they could become outdated, they can't necessarily prefigure what will be a particular risk in ten years time.
The reason we do not single out risk posed by fraud is because this may not reflect the full range of risks faced, and it is important that regulators in their guidance, for example in respect of the ICO, respond to the risks that their sectors are are experiencing, which of course could include fraud and the. I heard very clearly the fact she set out, but that will be something that would come in due course in respect of the the the important points made by the noble Lord, Lord Ravensdale, in respect of the risks posed by quantum computing.
The. All hazards, all threats, all technologies approach does enable a flexible and future proofed regime. It is important that each version of the statement of Strategic priorities is not bound by the risks posed by specific technologies. Because they could become outdated, they can't necessarily prefigure what will be a particular risk in ten years time.
19:05
19:05
Speaker 11
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Speaker 11
Post-quantum cryptography is incredibly important. The department is working with on guidance documents that will support organisations to manage their transition, in line with the NCS guidance and deadlines. In respect of the question specifically on the statement of, as well the next statement of strategic priorities, we encourage regular. We will encourage regulators through the statement, to understand the evolving threat landscape and adapt their regulatory response accordingly, which could include risks from quantum or fraud.
If those are the ones that are most pressing at that point in time. Turning to the approach advocated by in amendment 94 from Lord the noble Lord, Lord Clement Jones, we absolutely appreciate good practice standards, and we continue to promote their adoption across the wider economy. However, a more advanced cybersecurity framework is required to ensure adequate protection and assurance for the services in scope of this bill, and I am confident that the bill's outcomes based approach is the right one.
It allows existing good practice to contribute to demonstrations of compliance with existing and future requirements. We will introduce security and resilience requirements in secondary legislation. These requirements will be linked to security duties and will provide clearer outcomes that organisations in scope must meet. We are engaging with regulators and industry throughout this development, and we intend to consult on these proposals later this year. Turning to the question of how regulated entities demonstrate their compliance with their duties, the amendment 92 B seeks to require large businesses in scope to report on their cyber security and resilience plans.
Our proposed security and resilience requirements under the bill will require regulated entities to maintain overarching security policies, implement a continuous risk management framework, maintain incident response and recovery plans, and ensure appropriate board level oversight of these. This will be supported by guidance from regulators, which must be regarded, and entities would be expected to maintain evidence demonstrating compliance with these requirements. The information provided to regulators and the NCC will enable effective regulatory supervision, which holds organisations to account and will enhance wider threat and resilience analysis and support.
This will feed into government monitoring and evaluation, where post public post implementation reports will provide insights and assess the effectiveness of the regime. I will come later on to the question of the time timing of those in respect of the UK's corporate reporting framework. We are currently undergoing wider modernization efforts, and future consultation will seek views on whether the existing risk reporting framework produces sufficient reporting on cyber risk management. So as best dealt with as part of that work.
Coming back, coming on to the questions of funding and information sharing in respect of amendment 169 on Isacs, these can play an important role, and there are many initiatives underway, many of them supported by NCC. They they have a voluntary approach which builds trust and brings about positive cultural changes. We do believe there's a risk that the government could undermine these benefits by intervening and recasting these initiatives as mechanisms of regulatory oversight and enforcement, and complicate the regulatory landscape.
However, I do agree that more can be done to understand their impact and how the government can support them. That's why the bill's formal review mechanism was included, which will include the entirety of the regimes and impact, including for information sharing. Coming back to the question of regulator funding, and to expand a little bit on the new cost recovery powers to ensure that regulators are able to recover the full costs relating to their duties. This will enable regulators to be autonomously funded and sufficiently resourced to carry out their responsibilities.
We will also enable regulators to better focus their resources through establishing a unified set of objectives through the statement of strategic Priorities. So the current framework already ensures sufficiently independently funded regulators without a delayed commencement of the regime. And to respond to the question posed earlier by Baroness Neville-rolfe, the. It is anticipated that fines levied under the regime would go to the Treasury, coming on to the absolute criticality of skills in the sector and.
Amendments 15 174 C and 174 D from the noble Lord, Lord Arbuthnot. All those who spoke on skills and cyber capability that is absolutely agreed with by the government. That workforce is crucial for effective implementation of the regime. I have previously set out how we intend to introduce security and resilience requirements, which will be consistent with the CAF. We propose that the Srss will address organisational capability and personnel skills and training driven from board level.
These requirements will be delivered, will be developed in collaboration with industry experts, regulated and formally consulted upon before they are mandated. The S s will be supported by regulated guidance tailored by sector as well as government implementation guidance for regulators. So we do not believe additional guidance and a separate strategy would be proportionate and it could be duplicative, given the existing guidance published under the Bill. Cyber skills obviously go much broader than the bill.
That is why we are working closely with the UK Cyber Security Council and regulators to encourage cyber training and professional standards. And additionally, we have Tech First, the government's flagship tech skills programme, which goes, I think, to Baroness Ludford Point everywhere from school children through to professionals and the university sector. Very briefly we talked earlier about skills, persons and amendment 114, and I mentioned earlier that a skilled person is a person with expertise, but we do not think that we should tie the government's hands to specific skills requirements, which would reduce the Secretary of State's flexibility in this space and could impede the regulated entities ability to take the necessary action required by the direction.
Let me come on to the question of of reporting. We do recognise the pace of cyber developments, alongside the importance of regular assessments of the regime. We must be as effective as possible and agile in the face of new developments. On the question of amendments 95 and 95 A, tabled by the noble Lord, Lord Arbuthnot, and noble Lord, Lord Clement-jones, to reduce the period of the report and operation of the legislation to three or even two years as raised in the other place.
The five year period set out in the Bill is a minimum baseline, and the government will consider more frequent reports if deemed necessary. This is. The framing follows the precedent set by the Telecommunications Security Act and the existing regulations. They. This will provide the government with the time it needs to meaningfully review cross-sectoral. The cross-sectoral regime, analyse information received from regulators and understand how it has evolved and identify what improvements can be made.
But I should also stress that the Bill will also require the Secretary of State to provide Parliament with an annual report setting out how regulators have sought to achieve their objectives, set out in a statement of strategic priorities. This annual report will allow more frequent monitoring of the regime and how it is working in practice by reporting on the regulators who implement it. The first report will be published one year after the publication of the SSP, which is targeting 2027.
As a result, we anticipate the first report would be published under two years after royal Assent. Let me turn now to amendment 95 B, which. Would require the report to explicitly assess the impact of supply chain and third party dependencies on the on the resilience of regulated persons. The regime does indeed place duties on regulated entities to identify, assess and manage risks, including those posed by their supply chains, which will be strengthened by supply chain duties, which we propose to include in the S, s, r, s s and through the designated critical supply measure, we will safeguard the cyber resilience of our essential services.
Most critical suppliers, as the Bill already requires the report on the operation of the regime to assess whether the overall objectives of the regime have been met. This would include consideration of the frameworks, supply chain measures. The bill's delegated powers will enable us to specify additional topics which must be covered in each report if needed. But as supply chain resilience is a core component of the framework, specifying this factor, consider in the statutory report would not be necessary.
Turning to the question of amendment, the Government Cyber Action Plan and amendment 170 introduced tabled by the cameras, which touches on how Parliament holds government to attack to account for its own cyber resilience. We strongly welcome the reports from the Public Accounts Committee and the National Audit Office on the government's cyber resilience, and in response, we have already we have already adopted a duty to provide bi annual reporting on progress against the recommendations of these two reports.
The Government's Cyber Action Plan sets out clear accountability structures to ensure that cyber risks at all levels of government are actively owned and managed, with those responsible held to account in respect of the end cap . National Cyber Action Plan and Amendments 173 and 175. I would like to reassure noble Lords that we remain committed to publishing the National Action Plan, and we will update Parliament upon its publication. Finally, my Lords, I turn to amendment 93 from the noble Lord, Lord Clement Jones.
It is essential that the proposed measures I have spoken to are appropriate, appropriately consulted on. That is why the Bill already contains a consultation provision in relation to issuing and revising of a Code of practice, the use of the Bill's regulation, making powers and the powers of direction, and at times a public consultation may be appropriate. And that is why we have already indicated our intention to publish a consultation on key elements of the bill's implementation.
However, a full public consultation will not always be proportionate to the proposal. This could be the case where a very specific set of individuals or organisations are likely to be affected, whose views can be sought by targeted engagement, or whether consultation deals with highly technical issues or minor amendments. And when it comes to matters of national security in particular, decisions are likely to be highly time sensitive, requiring extensive public consultation ahead of issuing a direction will delay urgent action and increase risks to national security.
The bill already requires the Secretary of State to consult the intended recipient of a direction, and any other persons deemed appropriate before issuing direction. This requirement may only be waived where it would not be practicable, or holding a consultation would be contrary to national security interests. This exception also exists for issuing designated vendor directions in the Telecoms Security Act 2021. I thank Noble Lords for your amendments, touching on many aspects of implementation of the regime.
If those are the ones that are most pressing at that point in time. Turning to the approach advocated by in amendment 94 from Lord the noble Lord, Lord Clement Jones, we absolutely appreciate good practice standards, and we continue to promote their adoption across the wider economy. However, a more advanced cybersecurity framework is required to ensure adequate protection and assurance for the services in scope of this bill, and I am confident that the bill's outcomes based approach is the right one.
It allows existing good practice to contribute to demonstrations of compliance with existing and future requirements. We will introduce security and resilience requirements in secondary legislation. These requirements will be linked to security duties and will provide clearer outcomes that organisations in scope must meet. We are engaging with regulators and industry throughout this development, and we intend to consult on these proposals later this year. Turning to the question of how regulated entities demonstrate their compliance with their duties, the amendment 92 B seeks to require large businesses in scope to report on their cyber security and resilience plans.
Our proposed security and resilience requirements under the bill will require regulated entities to maintain overarching security policies, implement a continuous risk management framework, maintain incident response and recovery plans, and ensure appropriate board level oversight of these. This will be supported by guidance from regulators, which must be regarded, and entities would be expected to maintain evidence demonstrating compliance with these requirements. The information provided to regulators and the NCC will enable effective regulatory supervision, which holds organisations to account and will enhance wider threat and resilience analysis and support.
This will feed into government monitoring and evaluation, where post public post implementation reports will provide insights and assess the effectiveness of the regime. I will come later on to the question of the time timing of those in respect of the UK's corporate reporting framework. We are currently undergoing wider modernization efforts, and future consultation will seek views on whether the existing risk reporting framework produces sufficient reporting on cyber risk management. So as best dealt with as part of that work.
Coming back, coming on to the questions of funding and information sharing in respect of amendment 169 on Isacs, these can play an important role, and there are many initiatives underway, many of them supported by NCC. They they have a voluntary approach which builds trust and brings about positive cultural changes. We do believe there's a risk that the government could undermine these benefits by intervening and recasting these initiatives as mechanisms of regulatory oversight and enforcement, and complicate the regulatory landscape.
However, I do agree that more can be done to understand their impact and how the government can support them. That's why the bill's formal review mechanism was included, which will include the entirety of the regimes and impact, including for information sharing. Coming back to the question of regulator funding, and to expand a little bit on the new cost recovery powers to ensure that regulators are able to recover the full costs relating to their duties. This will enable regulators to be autonomously funded and sufficiently resourced to carry out their responsibilities.
We will also enable regulators to better focus their resources through establishing a unified set of objectives through the statement of strategic Priorities. So the current framework already ensures sufficiently independently funded regulators without a delayed commencement of the regime. And to respond to the question posed earlier by Baroness Neville-rolfe, the. It is anticipated that fines levied under the regime would go to the Treasury, coming on to the absolute criticality of skills in the sector and.
Amendments 15 174 C and 174 D from the noble Lord, Lord Arbuthnot. All those who spoke on skills and cyber capability that is absolutely agreed with by the government. That workforce is crucial for effective implementation of the regime. I have previously set out how we intend to introduce security and resilience requirements, which will be consistent with the CAF. We propose that the Srss will address organisational capability and personnel skills and training driven from board level.
These requirements will be delivered, will be developed in collaboration with industry experts, regulated and formally consulted upon before they are mandated. The S s will be supported by regulated guidance tailored by sector as well as government implementation guidance for regulators. So we do not believe additional guidance and a separate strategy would be proportionate and it could be duplicative, given the existing guidance published under the Bill. Cyber skills obviously go much broader than the bill.
That is why we are working closely with the UK Cyber Security Council and regulators to encourage cyber training and professional standards. And additionally, we have Tech First, the government's flagship tech skills programme, which goes, I think, to Baroness Ludford Point everywhere from school children through to professionals and the university sector. Very briefly we talked earlier about skills, persons and amendment 114, and I mentioned earlier that a skilled person is a person with expertise, but we do not think that we should tie the government's hands to specific skills requirements, which would reduce the Secretary of State's flexibility in this space and could impede the regulated entities ability to take the necessary action required by the direction.
Let me come on to the question of of reporting. We do recognise the pace of cyber developments, alongside the importance of regular assessments of the regime. We must be as effective as possible and agile in the face of new developments. On the question of amendments 95 and 95 A, tabled by the noble Lord, Lord Arbuthnot, and noble Lord, Lord Clement-jones, to reduce the period of the report and operation of the legislation to three or even two years as raised in the other place.
The five year period set out in the Bill is a minimum baseline, and the government will consider more frequent reports if deemed necessary. This is. The framing follows the precedent set by the Telecommunications Security Act and the existing regulations. They. This will provide the government with the time it needs to meaningfully review cross-sectoral. The cross-sectoral regime, analyse information received from regulators and understand how it has evolved and identify what improvements can be made.
But I should also stress that the Bill will also require the Secretary of State to provide Parliament with an annual report setting out how regulators have sought to achieve their objectives, set out in a statement of strategic priorities. This annual report will allow more frequent monitoring of the regime and how it is working in practice by reporting on the regulators who implement it. The first report will be published one year after the publication of the SSP, which is targeting 2027.
As a result, we anticipate the first report would be published under two years after royal Assent. Let me turn now to amendment 95 B, which. Would require the report to explicitly assess the impact of supply chain and third party dependencies on the on the resilience of regulated persons. The regime does indeed place duties on regulated entities to identify, assess and manage risks, including those posed by their supply chains, which will be strengthened by supply chain duties, which we propose to include in the S, s, r, s s and through the designated critical supply measure, we will safeguard the cyber resilience of our essential services.
Most critical suppliers, as the Bill already requires the report on the operation of the regime to assess whether the overall objectives of the regime have been met. This would include consideration of the frameworks, supply chain measures. The bill's delegated powers will enable us to specify additional topics which must be covered in each report if needed. But as supply chain resilience is a core component of the framework, specifying this factor, consider in the statutory report would not be necessary.
Turning to the question of amendment, the Government Cyber Action Plan and amendment 170 introduced tabled by the cameras, which touches on how Parliament holds government to attack to account for its own cyber resilience. We strongly welcome the reports from the Public Accounts Committee and the National Audit Office on the government's cyber resilience, and in response, we have already we have already adopted a duty to provide bi annual reporting on progress against the recommendations of these two reports.
The Government's Cyber Action Plan sets out clear accountability structures to ensure that cyber risks at all levels of government are actively owned and managed, with those responsible held to account in respect of the end cap . National Cyber Action Plan and Amendments 173 and 175. I would like to reassure noble Lords that we remain committed to publishing the National Action Plan, and we will update Parliament upon its publication. Finally, my Lords, I turn to amendment 93 from the noble Lord, Lord Clement Jones.
It is essential that the proposed measures I have spoken to are appropriate, appropriately consulted on. That is why the Bill already contains a consultation provision in relation to issuing and revising of a Code of practice, the use of the Bill's regulation, making powers and the powers of direction, and at times a public consultation may be appropriate. And that is why we have already indicated our intention to publish a consultation on key elements of the bill's implementation.
However, a full public consultation will not always be proportionate to the proposal. This could be the case where a very specific set of individuals or organisations are likely to be affected, whose views can be sought by targeted engagement, or whether consultation deals with highly technical issues or minor amendments. And when it comes to matters of national security in particular, decisions are likely to be highly time sensitive, requiring extensive public consultation ahead of issuing a direction will delay urgent action and increase risks to national security.
The bill already requires the Secretary of State to consult the intended recipient of a direction, and any other persons deemed appropriate before issuing direction. This requirement may only be waived where it would not be practicable, or holding a consultation would be contrary to national security interests. This exception also exists for issuing designated vendor directions in the Telecoms Security Act 2021. I thank Noble Lords for your amendments, touching on many aspects of implementation of the regime.
19:18
Speaker 2
-
Speaker 2
My Lords, before the noble lady, the Minister sits down, could I just clarify in her response to my amendment? She stated that the statement of strategic priorities should not refer to specific technologies, implying that it's difficult to change now, the reasoning behind my amendment was precisely because the statement of strategic priorities is a more flexible instrument. Having these targets on the face face of the bill, and I think there's no question about the threats posed by quantum cryptography and the need for better join ups.
I wonder if she could just perhaps clarify her statements on the strategic priorities.
I wonder if she could just perhaps clarify her statements on the strategic priorities.
19:19
Speaker 11
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Speaker 11
Yeah. The the content of the statement of strategic priorities will be subject to consultation, and we will be working with regulators on that. And it could include risks, specific risks, whether that is from quantum or from fraud. What I didn't want to do right now was commit that it will include that because we are going through a process.
19:19
Speaker 6
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Speaker 6
My Lord, I thank the minister for her reply, and her last words were a little bit more. Give me a little bit more hope than the rest of her response. To be honest, when he when she said that the statement of strategic priorities could include specific risks because it seemed to me that that otherwise she was being a little bit sort of generic and unspecific and almost above the fray. And I think when I came in on the previous group, other noble Lords are much more knowledgeable and expert in this field.
That certainly than I am. But I picked up some frustration that the the feedback from from government and from the minister today was, you know, a little bit vague and not very responsive. You know, all this is happening out there, huge cyber threats. And, and there's a feeling that the government isn't really getting to grips with the , with the actuality quite as much as it as it might. But, you know, I understand that she, she maybe can't say now what will be in the statement of strategic priorities, but I think what we're searching for is that it will grapple with real problems out there in the economy in society, of which the.
I mean, I must admit that the noble Lord, Lord Ravensdale amendment 82 is post-quantum cryptography. Cryptography somewhat above my pay grade. I wish I was more knowledgeable, but I'm. But I ain't, but but you know that I understand what he's saying, how real it is. I mean, the threats are there. You just have to read newspapers to sort of get get the, the the drift of what's happening and fraud.
I mentioned that fraud is, you know, going on for half of all crime. So these big issues, I think we want from government a feeling that it gets it , that there's going to be small. In, in, in, in the way that it's going to implement this bill and really going to be on the case of these big threats. And maybe her last words were a little bit more encouraging than I think some of the rest of what she's she's been been saying.
So that said, I'm sure we'll come back to some of these issues report, but with that, I beg leave to withdraw my amendment.
That certainly than I am. But I picked up some frustration that the the feedback from from government and from the minister today was, you know, a little bit vague and not very responsive. You know, all this is happening out there, huge cyber threats. And, and there's a feeling that the government isn't really getting to grips with the , with the actuality quite as much as it as it might. But, you know, I understand that she, she maybe can't say now what will be in the statement of strategic priorities, but I think what we're searching for is that it will grapple with real problems out there in the economy in society, of which the.
I mean, I must admit that the noble Lord, Lord Ravensdale amendment 82 is post-quantum cryptography. Cryptography somewhat above my pay grade. I wish I was more knowledgeable, but I'm. But I ain't, but but you know that I understand what he's saying, how real it is. I mean, the threats are there. You just have to read newspapers to sort of get get the, the the drift of what's happening and fraud.
I mentioned that fraud is, you know, going on for half of all crime. So these big issues, I think we want from government a feeling that it gets it , that there's going to be small. In, in, in, in the way that it's going to implement this bill and really going to be on the case of these big threats. And maybe her last words were a little bit more encouraging than I think some of the rest of what she's she's been been saying.
So that said, I'm sure we'll come back to some of these issues report, but with that, I beg leave to withdraw my amendment.
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Speaker 8
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Speaker 8
The amendment 15 in the next group, Lord Arbuthnot, have not moved moved . And we move now to the amendments in the supplementary list. And we have amendment 50 in clause 12. Then we have first, I think. We should first stand clause 11 stand part question is clause 11 stand part of the bill? Many that opinion should say content. Content not content the contents of it.
Now we have clause amendment 15 A in clause 12. Lord Arbuthnot of Edrom my Lords, I do apologise. For
Now we have clause amendment 15 A in clause 12. Lord Arbuthnot of Edrom my Lords, I do apologise. For
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Speaker 16
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Speaker 16
having spent less time in the committee than I would have liked, but I've been speaking on the Public Office Accountability Bill, and so I'm grateful to those those of your lordships who've been moving amendments on my behalf, I suspect . Moving. But this this these two amendments, 15 A and 15 B , are about the designation of critical suppliers. Subclause 14 H says a designated competent authority may designate a person under this regulation.
If P supplies goods or services directly to an OS for which the authority is the designated competent authority. Now, the bill expands the regime to cover additional organisations, creates a new framework for designating critical suppliers. That's good, and it recognises that essential services depend on organisations that go far beyond the direct infrastructure of the critical organisation itself. Everything is dependent on everything else, but the critical supplier test is focused on suppliers providing goods or services directly to a regulated organisation.
That ignores, in my suggestion, the concept of a supply chain with several tiers of suppliers , and these amendments are intended to address that and therefore I beg to move these amendments. No, I don't beg to move them. I beg to move.
If P supplies goods or services directly to an OS for which the authority is the designated competent authority. Now, the bill expands the regime to cover additional organisations, creates a new framework for designating critical suppliers. That's good, and it recognises that essential services depend on organisations that go far beyond the direct infrastructure of the critical organisation itself. Everything is dependent on everything else, but the critical supplier test is focused on suppliers providing goods or services directly to a regulated organisation.
That ignores, in my suggestion, the concept of a supply chain with several tiers of suppliers , and these amendments are intended to address that and therefore I beg to move these amendments. No, I don't beg to move them. I beg to move.
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Speaker 2
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Speaker 2
My Lords, I rise to speak to my amendment 16 My Lords, I'll be. I'll be brief. The central. The central problem here, in my view, is that if I'm a small or mid-sized firm . Can't currently tell with any confidence whether I'm within the scope of the bill as a critical supplier, and particularly looking at small and medium sized enterprises, they are the lifeblood of our economy, and we need to approach with caution.
There. Any ambiguity around their inclusion in the bill, and I did take note of what the minister said at second reading, where she said they can be they can be regulated as if they were designated as critical suppliers, for which there will be a high bar for designation, which was which was helpful. But what exactly is that high bar? And and just to give noble Lords an example of regulation legislation that isn't defined, I would come back to an example.
Noble Lords will likely be familiar with er IL 35, the infamous R 35. Now , what what happened with that regulation was that the uncertainty and costs of getting it wrong were high in the regulations. So what the what happened was firms applied. A blanket where everyone they engage with had to be inside IL 35 had to be treated as an employee now. Now Ir35 addressed a real problem, but the test was judgment heavy.
Getting it wrong was expensive , and that was why many organisations stopped making case by case decisions and applied a blanket policy, which meant that far more were caught by the regulation than was intended. And I remember many years ago, as an engineer, spending a lot of time trying to fill in IL 35 determinations and not not doing engineering, which is a frustration at the time, but it did lead to many issues with with finding the right niche skilled resource and that we required to, to undertake the work.
Now, I'm sure that the minister will say that, well, this this will be set out in this criteria. We'll be set out in secondary legislation. But, my Lords, there will be a long period of uncertainty and the risks that the I 35 example helps illustrate. And I did take a look, my Lords, at the impact assessments and some of the costs were laid out. For example, if a firm is within the scope of this legislation, you're looking at physical security costs, perhaps 114 K cyber security spending, 190 K per year of of potential costs.
And actually the impact assessment could not say how many SMEs may be designated within this this legislation, so that all of that uncertainty is a cost. Because what it means is if firms are uncertain about whether they're going to be included, they may delay investments. In fact, they may overprepare they may take on additional costs, which has wider implications to the UK economy. Or in fact, they may walk away from public service contracts.
They don't want to go for these contracts because of the risk they may fall under this legislation, and that could potentially cause the same grit in the wheel of the economy that was that was seen in IL 35. So actually, my Lords, I think there is a case here to at least provide some additional definition on the face of the bill about what is a a critical supplier, which is what what my amendments intends to do.
There. Any ambiguity around their inclusion in the bill, and I did take note of what the minister said at second reading, where she said they can be they can be regulated as if they were designated as critical suppliers, for which there will be a high bar for designation, which was which was helpful. But what exactly is that high bar? And and just to give noble Lords an example of regulation legislation that isn't defined, I would come back to an example.
Noble Lords will likely be familiar with er IL 35, the infamous R 35. Now , what what happened with that regulation was that the uncertainty and costs of getting it wrong were high in the regulations. So what the what happened was firms applied. A blanket where everyone they engage with had to be inside IL 35 had to be treated as an employee now. Now Ir35 addressed a real problem, but the test was judgment heavy.
Getting it wrong was expensive , and that was why many organisations stopped making case by case decisions and applied a blanket policy, which meant that far more were caught by the regulation than was intended. And I remember many years ago, as an engineer, spending a lot of time trying to fill in IL 35 determinations and not not doing engineering, which is a frustration at the time, but it did lead to many issues with with finding the right niche skilled resource and that we required to, to undertake the work.
Now, I'm sure that the minister will say that, well, this this will be set out in this criteria. We'll be set out in secondary legislation. But, my Lords, there will be a long period of uncertainty and the risks that the I 35 example helps illustrate. And I did take a look, my Lords, at the impact assessments and some of the costs were laid out. For example, if a firm is within the scope of this legislation, you're looking at physical security costs, perhaps 114 K cyber security spending, 190 K per year of of potential costs.
And actually the impact assessment could not say how many SMEs may be designated within this this legislation, so that all of that uncertainty is a cost. Because what it means is if firms are uncertain about whether they're going to be included, they may delay investments. In fact, they may overprepare they may take on additional costs, which has wider implications to the UK economy. Or in fact, they may walk away from public service contracts.
They don't want to go for these contracts because of the risk they may fall under this legislation, and that could potentially cause the same grit in the wheel of the economy that was that was seen in IL 35. So actually, my Lords, I think there is a case here to at least provide some additional definition on the face of the bill about what is a a critical supplier, which is what what my amendments intends to do.
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Speaker 10
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Speaker 10
My Lords, I want to speak in support of this group on designated critical suppliers and support amendments 15 A and 15 B in particular, tabled by the noble Lord, Lord Arbuthnot of Edrom and I have signed both those amendments, my Lords, and also we are sympathetic in principle to amendment 16. In the name of the noble Lord Ravensdale. My Lords, on these benches we fully support the principle of regulating managed service providers and designated critical suppliers.
Because MSPs and key vendors act as trusted bridges into multiple enterprise networks, a single compromised supplier can trigger a systemic, cross-sector shutdown. We saw this in the Collins Aerospace attack, which halted airport check in systems across Europe. However, we must ensure our regulatory net is both deep enough to capture hidden systemic risks, but precise enough to avoid catching non-critical small businesses. Amendments 15 A and 15 B in the name of the Lord, noble Lord Arbuthnot, achieve the necessary depth.
In our view, they empower regulators under clause 12 to designate critical suppliers who supply essential services or manage service providers through one or more intermediaries in modern digital architecture. Systemic single points of failure often sit at tier two or tier three in the supply chain. If an essential service materially depends on a sub tier vendor, regulators must not be blinded by the absence of a direct contract. My Lords, by pairing amendments 15 A and 15 B with amendment 16 in the name of the name of Lord Ravensdale, we could ensure that deep supply chain risks are policed while protecting small innovators from bureaucratic overreach.
Because MSPs and key vendors act as trusted bridges into multiple enterprise networks, a single compromised supplier can trigger a systemic, cross-sector shutdown. We saw this in the Collins Aerospace attack, which halted airport check in systems across Europe. However, we must ensure our regulatory net is both deep enough to capture hidden systemic risks, but precise enough to avoid catching non-critical small businesses. Amendments 15 A and 15 B in the name of the Lord, noble Lord Arbuthnot, achieve the necessary depth.
In our view, they empower regulators under clause 12 to designate critical suppliers who supply essential services or manage service providers through one or more intermediaries in modern digital architecture. Systemic single points of failure often sit at tier two or tier three in the supply chain. If an essential service materially depends on a sub tier vendor, regulators must not be blinded by the absence of a direct contract. My Lords, by pairing amendments 15 A and 15 B with amendment 16 in the name of the name of Lord Ravensdale, we could ensure that deep supply chain risks are policed while protecting small innovators from bureaucratic overreach.
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Speaker 15
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Speaker 15
My Lords, I thank my noble friend for introducing this group. And as it's the final group of the day, I will keep my remarks brief. My Lords amendments 15 A and 15 B in the name of my noble friend Lord Arbuthnot, and noble Lord. Lord Clement-jones seek to allow regulatory oversight of critical suppliers upon whom operators of essential services and relevant service providers depend, directly or indirectly. We believe this has got to be a reasonable approach.
The aim of clause 12 is to ensure the continuing functioning of essential suppliers and providers by providing support for their critical suppliers. Surely it is of little importance whether they are supplied directly or indirectly by Lords. Amendment 16 of the noble Lord. Lord Ravensworth, would restrict the designation of critical suppliers to those who present systemic risk, rather than simple entity risk a single entity risk. My Lords, we should seek to minimise government oversight wherever possible, and suppliers should not be designated unless they pose a genuine risk.
I'm also supportive of the noble Lords focus on cross sectoral consistency and general macro macroeconomic risk, which is something the government often neglect. However, I am hesitant to endorse an amendment in its entirety. Having to assess every supplier of every OS, DSP or MSP and decide whether it meets the systemic threshold has the potential to place an unrealistic administrative burden on designated competent authorities. We're already concerned about the resources that will need to undertake the changes that this bill introduces, and I'm unsure whether we need to ask more of them.
To wrap up, my Lords, I will return to a more general point. The fact that the risk of the economy or national security is a scale, and the legislation we pass should reflect that. Perhaps the noble Lord, Lord Ravenscroft Dale, is correct in the designation of critical suppliers based solely on on who they serve is too permissive, but it's equally as likely that restricting designation of systemic, systemic, systemic risks will be too restrictive. What this highlights, and goes back to the very early groups is that it what we the binary distinction we're talking about now doesn't really cover for the kind of gradation of different types of risks.
And that's why I come back to the original point that my noble friend, Viscount Camrose, myself, made in terms of maybe adopting the Cyber Monitoring Centres severity scale, which does offer that template for a more nuanced approach to definitions. I hope that the noble Baroness, the Minister, can commit to review the bill's definitions ahead of the report stage.
The aim of clause 12 is to ensure the continuing functioning of essential suppliers and providers by providing support for their critical suppliers. Surely it is of little importance whether they are supplied directly or indirectly by Lords. Amendment 16 of the noble Lord. Lord Ravensworth, would restrict the designation of critical suppliers to those who present systemic risk, rather than simple entity risk a single entity risk. My Lords, we should seek to minimise government oversight wherever possible, and suppliers should not be designated unless they pose a genuine risk.
I'm also supportive of the noble Lords focus on cross sectoral consistency and general macro macroeconomic risk, which is something the government often neglect. However, I am hesitant to endorse an amendment in its entirety. Having to assess every supplier of every OS, DSP or MSP and decide whether it meets the systemic threshold has the potential to place an unrealistic administrative burden on designated competent authorities. We're already concerned about the resources that will need to undertake the changes that this bill introduces, and I'm unsure whether we need to ask more of them.
To wrap up, my Lords, I will return to a more general point. The fact that the risk of the economy or national security is a scale, and the legislation we pass should reflect that. Perhaps the noble Lord, Lord Ravenscroft Dale, is correct in the designation of critical suppliers based solely on on who they serve is too permissive, but it's equally as likely that restricting designation of systemic, systemic, systemic risks will be too restrictive. What this highlights, and goes back to the very early groups is that it what we the binary distinction we're talking about now doesn't really cover for the kind of gradation of different types of risks.
And that's why I come back to the original point that my noble friend, Viscount Camrose, myself, made in terms of maybe adopting the Cyber Monitoring Centres severity scale, which does offer that template for a more nuanced approach to definitions. I hope that the noble Baroness, the Minister, can commit to review the bill's definitions ahead of the report stage.
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Speaker 11
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Speaker 11
I thank noble Lords, particularly noble Lord Arbuthnot and Lord Ravensdale for engaging with this incredibly important question of drawing the right scope for the designation of those in the supply chain in the bill. It is incredibly important that we get this right and take into account the economic impact and the security impact. Let me explain our reading of the amendments and the practical impact that will have. To begin with.
So, in respect of the amendments 15 A and 15 B, which would enable regulators to designate suppliers as critical beyond those who directly supply regulated entities, if they materially, they are materially dependent on that supplier to provide the regulated service. This would indeed extend the scope of the measure to suppliers further down the chain, even when they have no direct relationship with the regulated entity. In addition, the amendments introduce an additional assessment of whether a regulated entity is materially dependent on a supplier, which would form part of the designation process.
This could potentially create a higher bar for designation of a direct supplier than currently exists in the bill, and it could limit designation by excluding suppliers for whom it would be reasonable and prudent to include. The Bill recognises the importance of supply chain security and has considered the risks they pose and develop targeted and proportionate measures to to address those risks, as regulated entities are subject to an overarching duty to identify and manage the risks posed to the systems they rely on to provide their services.
And a core part of this is to consider risks arising from their supply chains. And secondly, as will be set out in the forthcoming security and resilience requirements, we will require regulated entities to take specific steps to manage their supply chains through an analysis of the risks they propose, and to include a requirement to put in place contractual obligations on those suppliers to manage the immediate risks and the risks posed further down the supply chain.
Who may not be the immediate, who may not be in the immediate view of the primary regulated entity. And thirdly, it is recognised that some suppliers in the market are critical to certain sectors and therefore the most proportionate step is to regulate them in their own right and to subject their security posture to the scrutiny of regulators. So this clause is already designated to be a proportionate and targeted measure, and is aimed to bring into scope only those suppliers who are genuinely critical to the regulated entities they supply directly.
And finally, as we have discussed briefly, also somewhat at the beginning of this Grand committee, we some suppliers may present additional risk and are potentially the vector of attack from hostile actors, which is why we believe we need to take measured but decisive steps to manage that risk before it crystallises and before those vendors are embedded in critical systems. This amendment would significantly increase the number of potential suppliers that regulators may need to consider for designation, and could risk imposing additional burdens on smaller suppliers that may be several layers removed from regulated service.
Turning now to the noble Lord, Lord Ravensdale amendment 16. I agree that a supply should only be designated when they are genuinely critical to the provision of the regulator's service. That is why the bill includes strict designation criteria that must be met before a supplier can be designated. Importantly, that an incident affecting the systems relied on by the supplier could disrupt regulated services in a way that significantly impacts the economy or functioning of society. That maximizes the proportionality of the measure so that only the most critical suppliers to regulated entities are designated.
This will also limit the number of small and micro enterprises who are likely to be designated. The Noble Lords amendment intends to limit this further. Its intention is to focus on suppliers whose activities being disrupted would cause systemic risk to the UK's digital ecosystem, economy or essential services, and to prohibit designation if a supplier only provides goods or services to a single operator of essential services, critical national infrastructure or a public authority.
We discussed a little earlier in the committee the risk of small, small but risky suppliers. So amending the designation criteria to focus on systemic risk to a wider number of entities can potentially leave many of the UK's most essential services vulnerable to disruption. In fact, compromise of just one of these providers could still have a significant impact on the economy or functioning of society in the UK, or any part of it under the Noble Lords amendment, a supplier that is, that is essential to a single energy provider responsible for a country's power or an NHS hospital.
Looking after a whole city or a single cloud service provider used nationwide may not be judged as posing a systemic risk. If it was just, if it was, if it was disrupted, this would leave these essential services vulnerable to severe disruption if that supplier was compromised, the significant impacts for the huge number of citizens relying on them. The amendment also requires the government to issue statutory guidance for regulators on designating critical suppliers, and I agree that consistency in the decisions taken by regulators will be crucial to the success of this regime, and that is why my department will work with regulators to develop guidance to drive this consistency, and regulators will be required to consult with other regulators before designating suppliers where there is a relevant connection to multiple sectors.
And as we've discussed before, the statement of strategic priorities will also provide common objectives for regulators, which will further increase alignment between their approaches. I have heard very clearly what the noble Lords have said in introducing their amendments and the importance of other contributors during this discussion, which highlight how important it is to strike the right balance with precision. I believe the Bill establishes that proportionate and targeted framework that captures genuinely critical suppliers without extending regulation or excluding risks within the supply chain.
So, in respect of the amendments 15 A and 15 B, which would enable regulators to designate suppliers as critical beyond those who directly supply regulated entities, if they materially, they are materially dependent on that supplier to provide the regulated service. This would indeed extend the scope of the measure to suppliers further down the chain, even when they have no direct relationship with the regulated entity. In addition, the amendments introduce an additional assessment of whether a regulated entity is materially dependent on a supplier, which would form part of the designation process.
This could potentially create a higher bar for designation of a direct supplier than currently exists in the bill, and it could limit designation by excluding suppliers for whom it would be reasonable and prudent to include. The Bill recognises the importance of supply chain security and has considered the risks they pose and develop targeted and proportionate measures to to address those risks, as regulated entities are subject to an overarching duty to identify and manage the risks posed to the systems they rely on to provide their services.
And a core part of this is to consider risks arising from their supply chains. And secondly, as will be set out in the forthcoming security and resilience requirements, we will require regulated entities to take specific steps to manage their supply chains through an analysis of the risks they propose, and to include a requirement to put in place contractual obligations on those suppliers to manage the immediate risks and the risks posed further down the supply chain.
Who may not be the immediate, who may not be in the immediate view of the primary regulated entity. And thirdly, it is recognised that some suppliers in the market are critical to certain sectors and therefore the most proportionate step is to regulate them in their own right and to subject their security posture to the scrutiny of regulators. So this clause is already designated to be a proportionate and targeted measure, and is aimed to bring into scope only those suppliers who are genuinely critical to the regulated entities they supply directly.
And finally, as we have discussed briefly, also somewhat at the beginning of this Grand committee, we some suppliers may present additional risk and are potentially the vector of attack from hostile actors, which is why we believe we need to take measured but decisive steps to manage that risk before it crystallises and before those vendors are embedded in critical systems. This amendment would significantly increase the number of potential suppliers that regulators may need to consider for designation, and could risk imposing additional burdens on smaller suppliers that may be several layers removed from regulated service.
Turning now to the noble Lord, Lord Ravensdale amendment 16. I agree that a supply should only be designated when they are genuinely critical to the provision of the regulator's service. That is why the bill includes strict designation criteria that must be met before a supplier can be designated. Importantly, that an incident affecting the systems relied on by the supplier could disrupt regulated services in a way that significantly impacts the economy or functioning of society. That maximizes the proportionality of the measure so that only the most critical suppliers to regulated entities are designated.
This will also limit the number of small and micro enterprises who are likely to be designated. The Noble Lords amendment intends to limit this further. Its intention is to focus on suppliers whose activities being disrupted would cause systemic risk to the UK's digital ecosystem, economy or essential services, and to prohibit designation if a supplier only provides goods or services to a single operator of essential services, critical national infrastructure or a public authority.
We discussed a little earlier in the committee the risk of small, small but risky suppliers. So amending the designation criteria to focus on systemic risk to a wider number of entities can potentially leave many of the UK's most essential services vulnerable to disruption. In fact, compromise of just one of these providers could still have a significant impact on the economy or functioning of society in the UK, or any part of it under the Noble Lords amendment, a supplier that is, that is essential to a single energy provider responsible for a country's power or an NHS hospital.
Looking after a whole city or a single cloud service provider used nationwide may not be judged as posing a systemic risk. If it was just, if it was, if it was disrupted, this would leave these essential services vulnerable to severe disruption if that supplier was compromised, the significant impacts for the huge number of citizens relying on them. The amendment also requires the government to issue statutory guidance for regulators on designating critical suppliers, and I agree that consistency in the decisions taken by regulators will be crucial to the success of this regime, and that is why my department will work with regulators to develop guidance to drive this consistency, and regulators will be required to consult with other regulators before designating suppliers where there is a relevant connection to multiple sectors.
And as we've discussed before, the statement of strategic priorities will also provide common objectives for regulators, which will further increase alignment between their approaches. I have heard very clearly what the noble Lords have said in introducing their amendments and the importance of other contributors during this discussion, which highlight how important it is to strike the right balance with precision. I believe the Bill establishes that proportionate and targeted framework that captures genuinely critical suppliers without extending regulation or excluding risks within the supply chain.
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Speaker 8
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Speaker 8
Amendment 16. Lord Ravensdale not moved. Questioners at clause 12 stand part of the bill. As many as are of that opinion will say content. Content not content for contents have it. The question is that clauses 13 and 14 stand part of the Bill. As Minister. That opinion will say content and not content. The contents have it. Does the Minister wish to move the adjournment?
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