Electronic Communications (Networks and Services) (Designated Vendor Directions) (Penalties) Order 2025
Baroness Jones of Whitchurch Excerpts(1 month, 3 weeks ago)
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Baroness Jones of Whitchurch
That the Grand Committee do consider the Electronic Communications (Networks and Services) (Designated Vendor Directions) (Penalties) Order 2025.
The Parliamentary Under-Secretary of State, Department for Business and Trade and Department for Science, Information and Technology (Baroness Jones of Whitchurch) (Lab)
My Lords, the Government take the security of public telecoms seriously. As noble Lords know, the Telecommunications (Security) Act 2021 received Royal Assent on 17 November 2021. The Act established powers to introduce a new telecommunications security framework and introduced new vendor security powers. It is these vendor security powers that are relevant to this statutory instrument.
The Act allows the Secretary of State to issue a designation notice to a vendor whose presence in the UK networks poses national security risks, and designated vendor directions to public communications providers placing controls on their use of equipment or services by a designated vendor. The Act also gives the Secretary of State powers to impose a penalty on a public communications provider that does not comply with a designated vendor direction issued to it. That penalty can be up to 10% of a provider’s turnover. The Act states that the Secretary of State must set out rules for how they intend to calculate a provider’s turnover. That includes what relevant business the Secretary of State will take into account when calculating that turnover.
The Electronic Communications (Networks and Services) (Penalties) (Rules for Calculation of Turnover) Order 2003 sets out rules for Ofcom to calculate a provider’s turnover when it contravenes conditions set under the Communications Act 2003. The statutory instrument makes changes to the 2003 order so that rules in that legislation apply when calculating turnover for the purposes of determining a penalty for enforcement of designated vendor directions. It also defines what is to be treated as a network service facility or business by reference to which the calculation of turnover is to be made.
The Secretary of State could have relied on the 2003 order for the purposes of enforcement of a designated vendor direction. However, this SI removes any ambiguity and provides legal certainty and absolute clarity on the rules that apply. Turnover will be calculated in line with accounting practices and principles generally accepted in the United Kingdom and will be limited to the amount derived by that provider after the deduction of relevant taxes.
In conclusion, this is a narrowly focused but important statutory instrument through which we are ensuring legal certainty and clarity. It makes clear the Secretary of State’s approach to calculating turnover, which will underpin any decision to penalise a provider in relation to the designated vendor directions. I beg to move.
Lord Clement-Jones (LD)
My Lords, I thank the Minister for her introduction to this draft statutory instrument; it was brief and to the point. These penalties will be able to reach 10% of turnover or £100,000 per day for continuing breaches, so getting the calculations right is crucial. However, I have some concerns about the SI, the first of which is about timing.
I do not understand why we are looking at a three-year gap between the enabling powers and the calculation rules. The Telecommunications (Security) Act 2021, which I worked on, was presented to this House as urgent legislation to protect critical national infrastructure, yet here we are, in 2025, only now establishing how to calculate penalties for breaches in the way set out in this SI. During this period, we have had enforcement powers without the ability to properly determine penalties. As I understand it, tier 1 providers had to comply by March 2024, yet the penalty calculation mechanism will not be in place until this year—no doubt in a few weeks’ time.
Secondly, there is the absence of consultation. The Explanatory Memorandum cites the reason as the SI’s “technical nature”, but these penalties—I mentioned their size—could have major financial implications for providers. The telecoms industry has complex business structures and revenue streams. Technical expertise from the industry could have helped to ensure that these calculations are practical and comprehensive. The technical justification seems remarkably weak, given the impact these rules could have. For example, the current definition of “relevant business” for these calculations focuses on traditional network and service provision, but modern telecoms companies often have diverse revenue streams. There is no clear provision for new business models or technologies. How will we handle integrated service providers? What about international revenues? The treatment of associated services needs clarification.
Thirdly, the implementation sequence is an issue. We are being asked to approve penalty calculations before seeing the enforcement guidelines. There is no impact assessment, so we cannot evaluate potential consequences. I understand that the post-implementation review is not scheduled until 2026, and there is no clear mechanism for adjusting the framework if problems emerge. The interaction with the existing penalty regime needs clarification.
There are also technical concerns that need some attention. The switch from “notified provider” to “person” in the 2003 order, as a result of this SI, needs rather more explanation. The calculation method for continuing breaches is not fully detailed, there is no specific provision for group companies or complex corporate structures and the treatment of joint ventures and partnerships remains unclear.
Finally, I hope that, in broad terms, the Minister can give us an update on progress on the removal of equipment covered by the Telecommunications (Security) Act 2021. That was mandated by the Act; I know it is under way but it is not yet complete.
This is about not merely technical calculations but creating an effective deterrent to the telecoms industry, while ensuring fair and practical enforcement of important security measures. Getting these rules right is essential for both national security and our telecoms sector. I look forward to the Minister’s response on these points.
Baroness Jones of Whitchurch (Lab)
My Lords, I thank noble Lords for their valuable contributions to this debate. We believe that legislative certainty is important, which is why we are seeking to resolve potential ambiguity by making this instrument at the earliest opportunity. This SI will ensure that important decisions on national security, specifically the enforcement of national security powers introduced by the Telecommunications (Security) Act, have clear rules underpinning them.
I will now have a go at answering the questions raised in the debate. The noble Lord, Lord Clement-Jones, asked about the three-year gap and why the SI was not taken forward earlier. I should thank Secondary Legislation Scrutiny Committee clerks for asking for clarification on the operability of the regime. The system has not been inoperable for four years. The Secretary of State can and has used their powers to monitor compliance with a direction under the current rules. The Secretary of State could have taken enforcement action without this SI being in place. The 2003 order could have applied for the purpose of enforcement of a designated vendor direction. However, there is some ambiguity concerning whether the rules set out in the 2003 order can apply to the enforcement of a designated vendor direction. This could have left enforcement action imposing a penalty on a provider vulnerable to legal challenge. We are therefore making an SI to ensure that there is legal certainty and clarity when penalties are imposed, and that position was set out in a letter to the Secondary Legislation Scrutiny Committee clarifying that.
The noble Lord, Lord Clement-Jones, also asked about the lack of consultation, but this is a technical clarification for rules that were already in operation. He asked about how turnover would be calculated. It will be done in conformity with the accounting practices and principles that are generally accepted in the United Kingdom. The turnover will be limited to the amount derived by that provider from the relevant business after deduction of sales rebates, value added tax and other taxes directly related to turnover. If the provider’s relevant business consists of two or more undertakings that each prepare accounts, then the turnover should be calculated by adding together the turnover of each undertaking. Any aid granted by a public body to a provider should be included in the calculation of turnover if the provider is a recipient of the aid and if that is directly linked to the carrying out by that provider of the relevant business. The business activities to be included in the turnover calculation for a provider are as follows: the provision of public electronic communications network; the provision of the public electronic communication of services; and the making available of facilities that are associated with facilities by reference to such a network or service.
The noble Lord, Lord Clement-Jones, asked about the removal of equipment and the progress report on that. Using the powers provided by the Telecommunications (Security) Act, the former Secretary of State for Digital, Culture, Media and Sport issued a designation notice to Huawei and a designated vendor direction to 35 providers in October 2022. The direction gives 12 specific requirements for telecom providers’ use of Huawei equipment. The previous Secretary of State decided that these legal controls on the use of Huawei equipment or services were necessary and proportionate to the national security risks they were designated to mitigate. The UK is now on a path towards the complete removal of Huawei from its 5G networks by the end of 2027.
The noble Viscount, Lord Camrose, asked whether the application was being applied in a fair and consistent way. I would say that this was an evidence-based decision, reflecting the national security risk. The designation notice issued to Huawei set out the reasons why the use of its equipment is viewed as a national security risk; it includes concerns about, among other things, corporate control, cybersecurity and engineering quality. This action builds on long-standing advice from the National Cyber Security Centre and the Government on the use of Huawei equipment in UK public tele- communications networks.
The noble Viscount asked about the cost to business of removing this equipment. The Government have estimated that the removal of Huawei equipment due to the designated vendor directions will cost providers up to £2 billion in total.
The noble Viscount also asked how the Secretary of State monitors compliance with a direction. The Communications Act 2003, as amended by the Telecommunications (Security) Act 2021, provides the Secretary of State with powers enabling the monitoring and enforcement of requirements imposed in designated vendor directions. The Secretary of State is responsible for determining compliance with a direction, based on evidence provided by the industry and Ofcom. The Secretary of State may give Ofcom a direction requiring Ofcom to monitor providers’ progress in complying with the direction and to report to the Secretary of State to inform their assessment of compliance. The former Secretary of State received Ofcom’s report in spring 2024 on the removal of Huawei from relevant providers’ core network functions, and that ongoing appraisal continues.
I hope that I have answered all the questions that were asked. If I have not answered on something that is very technical, I can write to noble Lords, of course. In the meantime, I hope noble Lords agree on the importance of introducing this instrument to ensure legislative certainty and therefore agree that enforcement through these powers should be introduced as swiftly as possible.
Lord Clement-Jones (LD)
Is the Minister confident that the 2027 deadline will be met; that no vendor, purchaser or telecoms company will be caught by the Act; that no fines will be levied; and that what we are talking about today is, therefore, entirely theoretical?
Baroness Jones of Whitchurch (Lab)
I am sure that it says in my brief that we are on target to meet the 2027 deadline. If I am mistaken about that, I will write to noble Lords, obviously.
In response to the noble Viscount, Lord Camrose, of course Ofcom reports to Parliament in the normal way, through its annual report, and I am sure that this activity will be included.
Israel: Arms Exports
Baroness Jones of Whitchurch Excerpts(1 month, 3 weeks ago)
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Lord Howard of Lympne
To ask His Majesty’s Government, further to the remarks by Baroness Chapman of Darlington on 3 September 2024 (HL Deb cols 1065-69), whether they had discretion not to suspend the arms exports to Israel which they suspended.
The Parliamentary Under-Secretary of State, Department for Business and Trade and Department for Science, Information and Technology (Baroness Jones of Whitchurch) (Lab)
My Lords, the assessment that there was a clear risk that certain UK exports might be used to commit or facilitate serious violations of international humanitarian law meant that such exports were no longer permitted under our strategic export licensing criteria, and were thus suspended. The SELC are statutory guidance, from which the Government may depart only when there is a good reason. Moreover, the UK’s international obligations, such as under the Arms Trade Treaty, remain binding on the UK under international law, irrespective of whether the SELC are being applied. My noble friend Lady Chapman was therefore quite correct to say that, under the criteria, the Government were required to suspend certain licences.
Lord Howard of Lympne (Con)
I thank the Minister for that answer but, when the Foreign Secretary announced the suspension, he was careful not to use the word “required”, and specifically referred to the fact that international humanitarian law was not the only factor to be taken into account. Whether one thinks that all arms exports to Israel should be suspended or no arms exports to Israel should be granted, surely we can all agree that Parliament must be given an accurate reason for the Government’s decision. Is not the very fact that the suspension is only partial proof that, contrary to what the noble Baroness, Lady Chapman of Darlington, told your Lordships on 3 September and subsequently, the Government had a discretion in this matter that they chose to exercise in a particular way?
Baroness Jones of Whitchurch (Lab)
I must reiterate that my noble friend Lady Chapman was absolutely correct to say that, under the criteria, the Government were required to suspend certain licences. The decision not to suspend the F35 licences was a departure from the criteria, and Ministers anticipated such a course when the criteria were introduced.
However, our international obligations remain binding on the UK under international law, regardless of whether the SELC are being applied. So, for example, our actions to depart from the SELC and continue the export of items for the F35 programme still have to comply with the Arms Trade Treaty. Article 7 of that treaty requires a balancing exercise, considering factors including the risk of serious violation of international humanitarian law and whether exports
“would contribute to or undermine peace and security”.
Exports are prohibited under this article unless the risk of negative consequences is overriding.
Finally, the Government have been clear about the international humanitarian risks in this case, but also that F35 licences cannot be suspended without serious prejudice to the entire programme and, therefore, to international peace and security. Thus, the exemption of F35 licences was a case-specific decision based on specific factors, while the suspension of other licences was mandated by the criteria.
Lord Singh of Wimbledon (CB)
My Lords, the United Nations, Amnesty International, Human Rights Watch and others have all condemned Israeli brutality and genocide against Palestinians in Gaza and the West Bank. The International Criminal Court has declared Israel’s Prime Minister, Benjamin Netanyahu, guilty of war crimes and issued a warrant for his arrest. Will the Minister agree that, in continuing to supply arms to Israel, however diplomatically we put it, we are complicit in the genocide of Palestinian men, women and innocent children?
Baroness Jones of Whitchurch (Lab)
Ultimately, these are matters for the courts to determine, not the Government. However, the clear risk of serious breaches of international humanitarian law has led us to suspend those licences. I will say one further thing: Prime Minister Netanyahu has not been found guilty of any breaches up until this date.
Baroness Deech (CB)
My Lords, are the Government taking a bit of a pick-and-mix attitude to international law? In the case of Prime Minister Netanyahu, what about the law of sovereign immunity? He has immunity as a head of state, and it is a state that never signed up to the International Criminal Court. The Government need to be clear on what they consider to be international law and what is not, and not just pick and choose.
Baroness Jones of Whitchurch (Lab)
I can only reiterate what I have just said, which is that this is a matter for the courts, not the Government, to determine. However, we have made our own decisions about the clear risk of serious breaches of international humanitarian law, which have led us to suspend the licences being debated.
Lord Wolfson of Tredegar (Con)
My Lords, on 15 October my noble friend Lord Howard of Lympne asked a Written Question of the Attorney-General, who I am pleased to see in his place. He asked whether the Attorney-General’s advice was that licences to export arms to Israel had to be suspended. The Attorney’s reply cited the usual convention that his advice was confidential. But, on 5 September, the noble Baroness, Lady Chapman of Darlington, referred expressly to the substance of that advice when explaining to this House why arms exports had to be suspended. Her answer therefore both breached the convention on Attorney-Generals’ advice and contradicted the Foreign Secretary’s explanation, because he said in the other place that the Government had a “discretion” on whether to suspend the licences. Can we now finally have a clear answer to a clear question? Were the Government legally required to suspend those arms export licences or did they have a discretion that they chose to exercise in a particular way?
Baroness Jones of Whitchurch (Lab)
As I have made clear, our assessment was that there was a clear risk that there would be serious violations of international humanitarian law, so my noble friend was correct in her decision. The strategic export licensing criteria are cumulative, in that before a licence can be issued it must comply with all the criteria. Criterion 5 of the SELC is a separate criterion that allows the Government to weigh national security concerns when considering whether to license an export, and as such provides a discretionary basis on which to refuse exports. There is no scope to balance criterion 2(c) on international humanitarian issues against criterion 5.
Lord Grocott (Lab)
My Lords, is it not a fact that we all know and can agree on that, during the course of the war in Gaza, schools, hospitals and aid convoys have been attacked, and families have been attacked in areas that the Israel Defense Forces has declared as being safe to go to? Rather than looking at the intricacies of legal arguments, is it not an absolutely clear fact, bearing in mind the proportionality principle of international humanitarian law, that it would be an astonishing argument to say that there have been no violations of international humanitarian law?
Baroness Jones of Whitchurch (Lab)
I thank my noble friend for raising those issues. We strongly oppose Israel’s resumption of hostilities and urgently want to see a return to a ceasefire. More bloodshed is in no one’s interest. The reported civilian casualties resulting from the recent strikes are appalling and we urge all parties to return urgently to talks, implement the ceasefire agreement in full and work towards a permanent peace. For the sake of the remaining hostages and their loved ones, for the people of Gaza and for the future of two peoples who have suffered so much for so long, we will continue to strive for a return to the path of peace.
Lord Purvis of Tweed (LD)
My Lords, these Benches agreed with the assessment carried out last summer. But, given that there have been considerable and grave breaches since then, why have the Government not reviewed their assessment, to take into consideration the more recent developments and the concerns over breaches? Given that the assessment concerned the risk of grave breaches in Gaza, we have also seen—with almost impunity—the deteriorating situation in the West Bank. Surely the Government should be using the precautionary principle and we should not be trading with the Occupied Territories and should be restricting further activities, because these export licence restrictions represent less than 10% of all licences. Surely the Government must now use the precautionary principle and widen restrictions even further, especially with regard to the West Bank?
Baroness Jones of Whitchurch (Lab)
My Lords, we keep all these decisions under review. The noble Lord is right to say that not all the licences have been suspended. Some of the items are not being used actively in combat; they are being used for humanitarian aid and other issues, to help, for example, the NGOs in those territories, so we did not feel that a full suspension was necessary.
US Tariffs on EU Goods
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Baroness Ritchie of Downpatrick
To ask His Majesty’s Government what assessment they have made of the implications of tariffs imposed by the United States of America on EU goods for trade in Northern Ireland, having regard to the Windsor Framework.
The Parliamentary Under-Secretary of State, Department for Business and Trade and Department for Science, Information and Technology (Baroness Jones of Whitchurch) (Lab)
My Lords, I am grateful to my noble friend for raising this issue. Northern Ireland is part of the United Kingdom customs territory and internal market. Northern Ireland exporters will not be impacted by these new US tariffs any more than exporters from elsewhere in the UK. We are looking closely at the retaliatory tariffs announced by the EU and any impact that they might have on Northern Ireland businesses. Under the Windsor agreement, where US imports into Northern Ireland do not subsequently enter the EU, traders can reclaim any additional duties through the duty reimbursement scheme.
Baroness Ritchie of Downpatrick (Lab)
My Lords, I thank my noble friend the Minister for her response. Bearing in mind that the Windsor Framework is a device to protect delicate trading relationships in Northern Ireland in the post-Brexit era, can she outline what work is being done with regard to potential tariffs imposed on EU goods by the USA, which could impact on Northern Ireland? What will be the impact on the most vulnerable products and markets? What discussions have taken place with the EU and the American Administration regarding mitigations to protect businesses?
Baroness Jones of Whitchurch (Lab)
I would like to reassure my noble friend that we will always act in the best interests of all UK businesses, which of course includes those in Northern Ireland. We continue to look closely at the details of the retaliatory tariffs announced by the EU and any impact they might have on businesses. We are in regular contact with our partners in the US and the EU, as well as businesses in the UK. An important mitigation is already in place under the Windsor agreement. Where goods do not subsequently enter the EU, the duty reimbursement scheme enables traders to reclaim EU applicable duties in full without any limit on total claims. The customs duty waiver scheme also allows duties to be waived entirely, subject to an overall limit.
Lord Carlile of Berriew (CB)
My Lords, bearing in mind that the issues raised by the noble Baroness are seen by Northern Ireland business as raising huge complexities, will the Minister consider the practical step of issuing a weekly bulletin in Northern Ireland so that tariffs and other regulations appear to business- people to be less like an anarchic board game?
Baroness Jones of Whitchurch (Lab)
Comprehensive guidance is available on GOV.UK and businesses can contact HMRC for more information about the reimbursement schemes. I will take back the noble Lord’s general comment about how we can improve those communications.
Lord Dodds of Duncairn (DUP)
My Lords, the fundamental problem is that part of the United Kingdom, Northern Ireland, is forced to impose tariffs on US imports in a situation where the rest of the UK may not. That is without any reference to the UK Government, this Parliament, the Northern Ireland Government or the Northern Ireland legislature, so that colonial set-up has to be rectified. In the absence of a rectification of the fundamental problem, the Minister referred to the tariff reimbursement scheme, but the head of Manufacturing NI said in the Financial Times that the scheme is “nonsense” and full of red tape, and that
“few companies have been able to successfully navigate it”.
He knows about business. Is he right, or do the Government know better?
Baroness Jones of Whitchurch (Lab)
The duty reimbursement scheme is an established scheme that businesses have been using to make successful claims since 30 June 2023. As I have said, comprehensive guidance is available on GOV.UK and businesses can contact HMRC if they need more information to support their claims.
Baroness Foster of Aghadrumsee (Non-Afl)
My Lords, I refer to my interest as chair of InterTrade UK. Paragraph 47 of Safeguarding the Union says that the United Kingdom is not just a political union but an economic union. Given that, and bearing in mind what other noble Lords have said, how can we deal with the economic problems of tariffs coming from either the European Union or the United States of America? How do we make it simpler? The Minister said that it is an established scheme, but it has been in place for less than two years and has not had to be activated until these tariffs have come to fruition. We need to find a way to make it easier for companies and to deal with it proactively.
Baroness Jones of Whitchurch (Lab)
This is all predicated on the Windsor Framework, which removes unnecessary checks, paperwork and duties and fixes a lot of the problems for parcels and medicines applying across the whole of the UK. It also enables important democratic scrutiny through the Stormont brake. There are those protections in place, and we are continuing to look at the operation of the Windsor Framework as we go forward.
Lord Caine (Con)
My Lords, last week, at the St Patrick’s celebrations in Washington, the Northern Ireland Secretary restated the Government’s commitment to reaching a trade agreement with the United States, which we strongly welcome. At the weekend, however, former House Speaker Nancy Pelosi threatened that Congress would veto any trade deal that does not respect the 1998 Belfast agreement. Given that the 1998 agreement upholds Northern Ireland’s position as an integral part of the United Kingdom and the fact that the United States is the largest market for Northern Ireland goods outside Great Britain and Ireland, can the Minister confirm that it is the Government’s intention that any US trade agreement will benefit Northern Ireland in exactly the same ways and on the same terms as all other parts of our country?
Baroness Jones of Whitchurch (Lab)
My Lords, as noble Lords will know, we are working to find a new relationship with the US and to build on the strong economic relationship we have, which is fair, balanced and reciprocal. Of course, that will have to take into account the interests of Northern Ireland as well.
Lord Purvis of Tweed (LD)
My Lords, given that all parts of the UK economy are so integrated with that of the European single market already, and that the tariffs from the Trump Administration are economic coercion and not based on any trade policy, I have two questions for the Minister. First, have we triggered the enhanced co-ordination mechanism within the Windsor Framework process, to ensure that any retaliatory action is co-ordinated across the European Union and the United Kingdom? Secondly, considering that this is economic coercion and illegal under WTO rules, what instructions have our Ministers given to our representative at the WTO to complain against the Trump Administration’s practice?
Baroness Jones of Whitchurch (Lab)
My Lords, it is of course disappointing that the US has imposed global trade tariffs. We are determined to support UK businesses across the sector. The Government are working with the affected businesses but, as noble Lords will know, standing up for industry means finding solutions to the global challenges we face. That means working closely and pragmatically with the US to press the case for UK business interests.
Lord Empey (UUP)
My Lords, the review of the trade and co-operation agreement between the European Union and the United Kingdom will take place next year, 2026. If the Minister thinks that things are working smoothly, or that it is easy for businesses to operate, she is under a misapprehension. Have the Government started work on what the review should deal with? Do we have a policy? What consultation will the Government undertake as they prepare their negotiating position?
Baroness Jones of Whitchurch (Lab)
My Lords, the Government are seeking to strengthen and reset the relationship between the EU and the UK. Taking forward our manifesto commitments on that relationship will carry tangible benefits for businesses in Northern Ireland and the UK. The Government are committed to abiding by commitments in international agreements, including working to the Windsor Framework in good faith. That will include new negotiations going forward.
Lord Elliott of Ballinamallard (UUP)
My Lords, I hear the Minister say that there will be a reset of relationships between the UK and the EU but, if that happens, it may mean that those extra tariffs from the US will impact more on the United Kingdom as a whole. At some stage, the UK Government might have to choose between being closer to the USA and closer to the EU. Which is it?
Baroness Jones of Whitchurch (Lab)
My Lords, we will always ensure that we protect the interests of all UK businesses, including those in Northern Ireland.
Lord Watts (Lab)
Does the present position not demonstrate that Britain is being left behind in the negotiations between all the different partners in America and Europe? This is a reflection of our decision to leave Europe, and leave ourselves exposed to these measures.
Baroness Jones of Whitchurch (Lab)
My noble friend is right that we need to strengthen and reset our relationship with the EU, and that is exactly what we are attempting to do now.
Statutory Neonatal Care Pay (General) Regulations 2025
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Baroness Jones of Whitchurch
That the draft Regulations laid before the House on 20 January be approved.
Relevant document: 16th Report from the Secondary Legislation Scrutiny Committee. Considered in Grand Committee on 10 March.
US Steel and Aluminium Tariffs
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Lord Sharpe of Epsom
To ask His Majesty’s Government what steps they plan to take to mitigate the impact of US steel and aluminium tariffs on the UK manufacturing sector.
The Parliamentary Under-Secretary of State, Department for Business and Trade and Department for Science, Information and Technology (Baroness Jones of Whitchurch) (Lab)
My Lords, it is disappointing that the US has today imposed global tariffs on steel and aluminium. The UK will always be a champion of free and open trade, which is essential in delivering our Plan for Change. We are resolute in our support for the UK steel industry. This Government are working with affected companies today, and we back the industry’s application to the Trade Remedies Authority to investigate what further steps might be necessary to protect UK producers.
Lord Sharpe of Epsom (Con)
I thank the Minister for her Answer, and I am pleased to hear about the steps she is taking. To move on slightly, I was pleased to hear that the Prime Minister acknowledged, during Prime Minister’s Questions today, the Brexit benefit of seeking a trade agreement with the United States to avoid tariffs. However, while the UK looks to negotiate with Washington, the EU has already retaliated against US tariffs, so the Government must now recognise that resetting relations with the EU at this moment risks dragging the UK into an escalating transatlantic trade war. Last month, a close ally of Donald Trump, Stephen Moore, made it clear that Britain will have to choose between its special relationship with the US and closer ties to the EU. The time for vague statements and talk of all options being open is surely over; we need clarity. Now that the US and the EU are openly in a trade war, do the Government not see the urgency of making their position clear? What will the UK prioritise—the special relationship or Brussels?
Baroness Jones of Whitchurch (Lab)
My Lords, as the Prime Minister has made clear, when it comes to the national interest, he rejects having to make any false choice between allies. We are committed to continuing our work with both the US and the EU to remove barriers to trade and help UK businesses grow. Our number one priority will be the growth of the UK economy and free and open trade with our most economically important partners. We will only ever sign trade agreements which align with the UK’s national interests.
Lord Fox (LD)
My Lords, the noble Lord, Lord Callanan, speaking to the last Question, noted that the Trump Administration had been completely outrageous to Canada. By extension, it must therefore have been completely outrageous to the European Union, so it is interesting to hear the opposite being argued by the noble Lord, Lord Sharpe. Does the Minister agree that now is the time to work with our allies? The noble Baroness, Lady Chapman, said that Canada is our closest ally. The Prime Minister has said that we need to reset our relationship with the European Union. Why, then, have we taken a different approach to those two closest trading allies?
Baroness Jones of Whitchurch (Lab)
My Lords, as the Prime Minister has said, this is a time for a cool-headed approach on the issue of trade tariffs. The UK and the US have a strong economic relationship that is fair, balanced and reciprocal. The tariffs on steel, aluminium and derivatives being proposed by the Trump Administration are global; they are not targeted at the UK. In the meantime, we have been having regular, detailed conversations with the US Administration and have repeatedly and emphatically made the case for the UK to be exempt from proposed tariffs—most recently with the Secretary of State speaking to US Commerce Secretary Howard Lutnick on Sunday and US Trade Representative Jamieson Greer on Tuesday. We have made that point over and over again. This is a time for a cool-headed approach to any possible tariffs, and we will take every action we need to in order to defend the UK’s national interest.
Baroness Rafferty (Lab)
My Lords, I welcome the Opposition’s sudden interest in the fortunes of the British steel industry—a sector which was neglected over the past 15 years and has suffered enormously as a result. This Government launched a consultation on a steel strategy earlier this year. Could my noble friend update the House on the status of that consultation? How soon does she envisage the strategy being brought forward?
Baroness Jones of Whitchurch (Lab)
I thank my noble friend for raising this issue. The steel strategy consultation remains open until 30 March, at which point we will analyse responses received. The consultation is a key step forward in developing the steel strategy, ensuring it best promotes long-term, sustainable growth that will provide benefits to communities across the UK. It will provide us with a clear evidence base on the needs of the steel sector and its customers by leveraging a wide range of views and expertise and will bring those views to the heart of steel-making. We are committed to bringing forward the steel strategy in the spring, and we will learn from the lessons of that strategy.
Lord Lamont of Lerwick (Con)
My Lords, is it not the case that the reckless and ill-thought-out measures being taken by President Trump will only damage the US economy itself—they will not prevent imports but will harm immensely the steel-using industries that are the main market for the US steel industry? It is an extremely short-sighted measure by President Trump. His having taken that measure is no reason for us to follow in such a short-sighted policy. We have the much more important objective of trying to negotiate better trade terms with the United States. These are general tariffs, not ones against the UK in particular, and the Government are quite right not to react by imposing tariffs ourselves.
Baroness Jones of Whitchurch (Lab)
I very much thank the noble Lord for that intervention. Let us be clear that industry here does not want to see a trade war with both sides escalating the situation. Standing up for industry means finding a solution, and we are working on that solution. The UK and the US have a strong economic relationship which is fair, balanced and reciprocal. We have £1.2 trillion invested in each other’s economies, supporting more than 2.5 million jobs across both countries. It is important that we maintain and build on those relationships. As I said before, cool heads are aware of and monitoring very carefully what is going on, but we do not want to do anything reciprocal at this stage.
Baroness Armstrong of Hill Top (Lab)
My Lords, will my noble friend comment on how she sees the development of steel in this country? I am pleased that the Opposition are now interested in that. I represented a community that lost what I think was at the time the most cost-effective steel-making plant in the country; I then had to represent the community that was devastated following that, under Mrs Thatcher’s Government, so I am really pleased that they are now interested in putting manufacturing at the heart of this country. In the north-east, we have been developing some very good greening of the industry. Can the Minister reassure us that the plans that the Government have for growth will involve re-energising that industry so that we get the new houses and new infrastructure that we need in this country and rebuild a steel-making industry here?
Baroness Jones of Whitchurch (Lab)
I assure my noble friend that we are determined to support and invest in the steel sector. We already have plans and are taking steps to do that. We see a bright future for steel in the UK, and our plan for steel, which will be published in the spring, will establish a long-term vision for the industry, promoting long-term growth and securing jobs for the future in all parts of the country. The point that my noble friend makes is absolutely right about that. This is about ensuring jobs, protecting the industry for the future and making sure that we can go forward on a competitive basis in the global trade on this issue.
Baroness Hoey (Non-Afl)
My Lords, I think that His Majesty’s Government are quite right not to rush into retaliatory measures, but will the Minister say whether they are giving any thought to what will happen when the EU retaliates? What happens to Northern Ireland, which has been left within the EU for these kinds of matters? That is something that they need to be looking at urgently.
Baroness Jones of Whitchurch (Lab)
My Lords, Northern Ireland is a part of the United Kingdom’s customs territory and internal market. We will continue to monitor closely the impact on Northern Ireland of any tariffs. While the framework means that tariffs would apply on US goods moved into Northern Ireland for the limited subset of US goods in line with its protection of the UK and EU markets, there is a duty reimbursement scheme in place where those goods do not enter the EU. The duty reimbursement scheme enables traders to reclaim or remit applicable duties in full without any limit on total claims. Businesses moving goods into Northern Ireland should contact HMRC for more information about these schemes.
Lord Macpherson of Earl’s Court (CB)
My Lords, does the Minister agree that tariffs harm consumers and encourage industrial inefficiency? Does she agree that the British economy was at its most successful when it was pursuing a policy of unilateral free trade in the 19th century?
Baroness Jones of Whitchurch (Lab)
The noble Lord makes an important point about our commitment to free trade. The Prime Minister has made our position absolutely clear on this matter. I am sure there are lessons from history that we can learn on all of this. We will continue to promote our policy of free trade and encourage new agreements wherever it is in our interest.
Lord Liddle (Lab)
Does my noble friend agree that there is very little prospect of a comprehensive free trade agreement with the United States because of its stance on agricultural products, which we could not possibly accept? However, there is a real possibility of an agreement on high technology, and that is what we should aim for.
Baroness Jones of Whitchurch (Lab)
My noble friend is absolutely right that we are continuing to discuss with the US the possibility of a trade deal. In the economic and tech sectors, there is the possibility of agreements on the basis of mutual interest. Those discussions are ongoing, and I hope to update the House on them in due course.
Lord Swire (Con)
My Lords, while I very much welcome the action and words that the Prime Minister is using to defend the United Kingdom in this respect, does the Minister share my concern that, if the United Kingdom is to be exempt from any tariff war with the United States but the EU is not, the EU will seek some kind of revenge on the United Kingdom? What will the Government’s reaction be if that is the case?
Baroness Jones of Whitchurch (Lab)
My Lords, that is very much a hypothetical question. As I said earlier, we have very good relations with both our key partners, the US and the EU, and we will continue to aim to maintain those relationships. We have seen no sign that the EU will take any action against us, and we will continue to pursue good, friendly and trade-based relationships with the EU.
Lord West of Spithead (Lab)
My Lords, the steel that the US imports from us is specialist steel. It is interesting that, for the new ballistic missile submarines—both our own and the American ones—a common missile compartment is being designed and built by the UK. It will contain specialist steel, for which the US will pay more money. The Government are absolutely right not to take any action at this stage, because people will look again at this and there will be sensible negotiations.
Baroness Jones of Whitchurch (Lab)
My noble friend makes a very good point. As I said, we very much support the strengthening of our steel industry in this country. It is very important to us, and we are taking a number of measures to invest in and build that sector, including the specialist sectors he referred to.
Baroness Kramer (LD)
My Lords, will the Government give us an assurance that they will be extremely wary as they enter into, or continue with, trade talks with the United States? It has always sought very exploitative trade agreements to take advantage of both our National Health Service and our agriculture. The Conservatives negotiated a very weak trade treaty with Australia, which has done only damage. In these negotiations, will this Government be careful that they do not follow in the previous Conservative Government’s footsteps?
Baroness Jones of Whitchurch (Lab)
My Lords, I assure the noble Baroness that we will act only in the UK’s interest in any discussions we have with the US. The National Health Service is not on the agenda for those discussions.
Viscount Hailsham (Con)
My Lords, in our negotiations with the United States, the Minister should be very cautious on relying on expressions of good will from President Trump—it seems that they are not to be relied upon.
Baroness Jones of Whitchurch (Lab)
The US is a very strong friend and partner of this country, and we will continue to aim to maintain very good relations. We will of course take a hard-headed approach; we will not simply do deals on the expression of good will. These negotiations will be hard-headed, and they will take some time.
Statutory Neonatal Care Pay (General) Regulations 2025
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Baroness Jones of Whitchurch
That the Grand Committee do consider the Statutory Neonatal Care Pay (General) Regulations 2025.
Relevant document: 16th Report from the Secondary Legislation Scrutiny Committee
Neonatal Care Leave and Miscellaneous Amendments Regulations 2025
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Baroness Jones of Whitchurch
That the Grand Committee do consider the Neonatal Care Leave and Miscellaneous Amendments Regulations 2025.
Relevant document: 16th Report from the Secondary Legislation Scrutiny Committee
The Parliamentary Under-Secretary of State, Department for Business and Trade and Department for Science, Information and Technology (Baroness Jones of Whitchurch) (Lab)
My Lords, I am delighted to bring these regulations, which were laid before the House on 2 January, forward under the Neonatal Care (Leave and Pay) Act 2023, which originated as a Private Member’s Bill during the previous Parliament. I pay tribute to Stuart McDonald—the former Member for Cumbernauld, Kilsyth and Kirkintilloch East—and the noble Baroness, Lady Wyld, for successfully steering that Private Member’s Bill through the various stages in both Houses to secure Royal Assent in 2023. The Act establishes new statutory entitlements to neonatal care leave and neonatal care pay for employed parents if their child starts to receive neonatal care within 28 days after birth and goes on to spend seven or more continuous days in care. These regulations are another step towards the implementation of neonatal care leave and pay in April this year, and they are the first to be brought before the Committee under the powers of the Act.
Currently, there is no statutory entitlement for parents of children who require neonatal care. Until now, parents in this difficult situation have had to rely on using other existing rights, such as maternity leave or annual leave, in order to be there to care for their baby and to support their partner. This approach has caused additional stress for parents. Some mothers have reported that they had to leave work because they were not ready to return at the end of their maternity leave. Because paternity leave is limited to two weeks, some fathers and partners have to rely on statutory unpaid parental leave or the compassion of their employers in order to take time off work.
Around 40,000 babies spend over one week in neonatal care each year. Once neonatal care leave and pay comes into force in April 2025, we estimate that around 60,000 parents will be eligible and that around 34,000 parents will take up paid neonatal care leave each year.
What do the SIs do? Neonatal care leave will enable eligible parents to take a minimum of one week and a maximum of 12 weeks of leave, in line with the number of weeks for which their baby receives neonatal care, on top of their other parental leave entitlements. Neonatal care leave will be a day 1 right for employees.
Statutory neonatal care pay, like other family-related pay rights, will be available to employees who also meet continuity of service and minimum earnings tests. Eligible employees must have worked for their employer for at least 26 weeks ending with the relevant week and must earn, on average, at least £125 per week before tax. If eligible, the parent will be able to claim a flat rate of £187.18 per week in the 2025-26 financial year, or 90% of their average earnings, whichever amount is lower.
Employers will administer the statutory payment on behalf of the Government. Small employers will be able to recover 103% of their statutory payment from the Exchequer, while larger employers can recover 92% of payments, and will therefore incur wage-like costs equivalent to 8% of the statutory payments they make. A similar arrangement applies for all other existing statutory parental payments.
Together, these regulations will provide protection and support for parents at an incredibly challenging time. These entitlements provide a floor, and employers can and should go further if they are able to.
We have consulted extensively with stakeholders, including charities and business representative organisations, to ensure that these regulations balance the needs of parents and businesses. These groups agreed that the proposed reforms would provide substantial benefits to businesses, including retaining the skills and knowledge of their current employees.
I will now explain a few points of detail in the regulations. These have been developed through consultation, including with the Department of Health and Social Care and NHS professionals.
We have designed a definition for neonatal care that encapsulates the different ways in which babies receive it, going beyond the walls of hospitals and including outreach care. This could include care that takes place within the family home, provided it meets the relevant criteria.
We have included outreach care in the eligibility criteria to capture the many ways in which babies receive care, and also to prevent a postcode lottery, where parents of children who receive the same clinical treatment may qualify in one area, as they receive treatment in hospital, but not in another, as they receive treatment at home through an outreach care programme.
To ensure that as many parents as possible are eligible, the definition of “parent” in the regulations encompasses adoptive parents, foster-to-adopt parents and intended parents in surrogacy arrangements. Those who meet this definition would also be required to have responsibility for the upbringing of the child and be caring for the child at the time of taking their leave and pay.
Having a baby in neonatal care is a difficult experience for any parent, whether the baby is admitted for one day or for many months. However, this entitlement will focus on parents of babies who experience prolonged stays in neonatal care, as they will be in most need of additional support. The qualifying period of neonatal care, as set out in the Act, will be a minimum of seven continuous days beginning on the day after the one on which the care starts. Starting the clock at 00.01 am—one minute past midnight—of the day after the child is admitted creates a consistent approach that does not vary from baby to baby.
Baroness Jones of Whitchurch (Lab)
My Lords, I am grateful for the support across the Committee for these regulations. Again, I thank the noble Baroness, Lady Wyld, who rightly paid tribute to the parents and campaigners; I absolutely echo that point. Without that pressure, which all Governments have received, these measures simply would not have come forward. We are very grateful for the campaigners and the parents behind all of this. The noble Baroness also mentioned cross-party working. Private Members’ Bills are often a good illustration of that; I know this from the ones I have been involved in.
The noble Baroness, Lady Wyld, asked about the people who might be excluded. That is a good question and goes some way to answering the point made by the noble Lord, Lord Sharpe. We are just setting a minimum standard here, of course. This is a minimum standard, but we encourage employers to go above and beyond it. Many do so already and recognise the benefits that this brings to their businesses. We will keep this whole issue under review; the charities and campaigners will require that of us, I think, going back to the point made by the noble Lord, Lord Sharpe. We will want to see how the rollout goes but this is a good start. As with many regulations, we want to embed this measure before we do any further evaluation of it.
The noble Lord, Lord Sharpe, asked about making sure that we have a smooth implementation so that everybody knows what is going on. My officials are working with HMRC to develop and publish guidance on GOV.UK, which will explain the requirements of the legislation. In developing this guidance, we are undertaking user testing to ensure that it is fit for purpose. Ahead of implementation, my officials have been engaging with stakeholders—including employer groups, payroll providers, IT software developers and ACAS charities—and ensuring that we have posters in neonatal wards to advertise the benefits; I hope that that will make sure that the word spreads as widely as it possibly can.
I am grateful to the noble Lord for talking about some of the other measures and family-friendly policies that the previous Government introduced. I was pleased to hear about those; I hope that it bodes well for the debates that we are going to have on the Employment Rights Bill when we come to it in due course.
In the meantime, the provisions outlined in these SIs will provide for new parents with babies in neonatal care the ability to benefit from additional time off as a day 1 right. We should not lose sight of how important that is. Currently, many working families across the UK are having to return to work while their babies are sick and receiving care. As I said before, some mothers are also having to leave work because they are simply not ready to return to work. These measures aim to address some of the difficulties that thousands of parents face when their babies are in neonatal care or afterwards. They are a huge step forward.
We hope that the change in the law will also send a signal of encouragement to employers about the significance of recognising the struggles that parents go through when their very young child is unwell and of the need to provide them with appropriate support in all ways—not just with leave and pay but in other forms of support as well. Of course, I acknowledge that many employers are already providing that support to parents, but there is more that they can do; we all have an education role to play in all of that, I think.
In the meantime, I again thank noble Lords for all their comments.
Tariffs: Canada and Mexico
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Lord Lamont of Lerwick
To ask His Majesty’s Government what communications they have had with the governments of Canada, Mexico and other countries about the decision of the President of the United States to impose tariffs on certain of their exports.
The Parliamentary Under-Secretary of State, Department for Business and Trade and Department for Science, Information and Technology (Baroness Jones of Whitchurch) (Lab)
My Lords, we have noted President Trump’s announcement of tariffs on Canada and Mexico and the subsequent 30-day suspension agreement. That is a matter for the US Administration, and it is not for me to comment on another country’s bilateral trade relationships. We respect other countries’ dialogue with the US and we will not intervene. However, the UK Government are prepared to take action to mitigate the potential economic impact on our businesses and consumers. We will continue to monitor developments across the Atlantic.
Lord Lamont of Lerwick (Con)
My Lords, I thank the Minister for that reply and welcome the fact that, in his talks with the President of the United States, the Prime Minister managed to obtain at least a grudging hint that the UK might be exempt from proposed tariffs. Will she not agree, if there is a fully fledged trade war that affects our trading partners, that it will have an impact on the world economy and on our economy and growth rate, and make it more difficult to do what we want to do on defence spending? Secondly, if, as our newly appointed ambassador to the United States has said, there is a prospect of a UK-US technology deal, is it not extremely important that we take advantage of the extra flexibility that we have outside the EU to have a regulatory regime that is not hostile to the industries of the future but actually sees them as an opportunity for innovation?
Baroness Jones of Whitchurch (Lab)
The noble Lord raised several questions there. On the question of the UK and US, we have a strong economic relationship that is fair, balanced and reciprocal. As noble Lords know, the Prime Minister and President Trump discussed that on 27 February, when they agreed that we would deepen our relationship and have tasked teams to work together on a trade deal focused on tech. This is absolutely fundamental to us; the Prime Minister has been clear that he will not make any false choices between our allies—it is about our national interests. As the noble Lord rightly says, the Prime Minister has said that we are going further and we will work on an economic deal with advanced technology at its core—but these are early days to comment any further on this. Obviously, we will set out more details as discussions evolve.
Lord Reid of Cardowan (Lab)
My Lords, I commend the Minister’s first reply, which, as I understood it, was that while of course we will confer with colleagues and allies across the world, we will not intervene—it is a matter for them to deal with the United States. I also very much commend the noble Lord’s second comment when he recommended that we use, to off-set some of the damaging effects of Brexit, the opportunities of Brexit to manifest an acceptance of our point of view on the high-tech industries, because those are the industries of the future.
Baroness Jones of Whitchurch (Lab)
My noble friend makes an important point. Advanced technology is one of the key industries in our industrial strategy, and certainly one of the important areas for our future prosperity. We are committed to continuing our work with both the US and the EU to remove barriers to trade and to help UK businesses grow. Our number one priority is the growth of the UK economy, and free and open trade with our most economically important partners will be key to its delivery.
Lord Purvis of Tweed (LD)
But, my Lords, our trade is so integrated with that of the European Union, and our trade policy is based on WTO rules. The Trump Administration imposing tariffs based not on trade policy but on other policy areas means that we will have to be a party to any WTO disputes if we are to protect our interests. One consequence of Brexit is that we have not followed suit with having an anti-coercion instrument, which would allow us to respond quickly if tariffs are put in place on non-trade policy areas. Does the Minister not agree that, for the resilience of the British economy and our trade, it would be better to co-ordinate with our European trading allies to have a common anti-coercion trade policy?
Baroness Jones of Whitchurch (Lab)
My Lords, as I said, we are committed to working with both the US and EU to remove barriers to trade and to help UK businesses grow. It is obviously very early days, and we will continue to take a cool-headed approach to any possible tariffs. We remain prepared to defend the UK’s national interest where it is right to do so.
Lord Sharpe of Epsom (Con)
My Lords, it is very welcome to hear the Minister talk about the national interest, because the importance of a trade deal with the US obviously cannot be overstated. Indeed, the British Chambers of Commerce estimates that if a deal could be reached it would provide business with a stable basis for up to £1.5 trillion of bilateral investment between the two countries. The Prime Minister has said, very wisely, that he is neither with the EU nor the USA, but the EU would seem to be taking a different view. A spokesman said that we need to make up our mind who we are with. Given the regulatory differences between the two entities, what steps are His Majesty’s Government taking to ensure that closer alignment with the EU does not hinder progress towards a comprehensive trade agreement with the US?
Baroness Jones of Whitchurch (Lab)
My Lords, as I said, we are committed to working with both the US and the EU to remove barriers to trade and to help UK businesses grow. The noble Lord is quite right to draw attention to the fact that the US is one of our largest trading partners, with trade worth around £300 billion in September 2024, representing 18% of total UK trade. We have a long and deep relationship with the US, and we will obviously want to enhance that as the trade discussions continue.
Baroness Hoey (Non-Afl)
If President Trump imposes tariffs on the European Union and not, we hope, on the United Kingdom, what plans do His Majesty’s Government have to protect the part of the United Kingdom—Northern Ireland—that has been left in the EU for some hundreds of trading areas? How will we be affected and what will His Majesty’s Government do to protect the citizens of Northern Ireland?
Baroness Jones of Whitchurch (Lab)
My Lords, we will always consider businesses across the country and their particular interests. However, it is difficult to comment on specific tariffs when there are few facts and speculation is taking place. Northern Ireland is part of the UK customs territory and internal market, and goods moving into Northern Ireland do not subsequently enter the EU. We are considering what action would be in the best interests of all UK businesses and will make sure that the implications for Northern Ireland are considered in those discussions.
Lord Mendoza (Con)
My Lords, the imposition of tariffs can have effects beyond trade. For example, this morning the New York Times reported that the Chinese foreign ministry is considering relaxing its co-operation with America on the import of the products necessary to make fentanyl. Fentanyl, along with other synthetic opioids, has been responsible for the deaths of hundreds of thousands in America. Are the Government ready for the reduction in China’s co-operation in this area and what might happen as a result, even in this country?
Baroness Jones of Whitchurch (Lab)
My Lords, we are aware that the US has imposed a tariff on all Chinese goods. I reiterate that it is not for me to comment on another country’s bilateral trade relationships—that is a matter for the US—but we are of course aware of China’s retaliatory response. We respect China’s dialogue with the US and will not intervene. However, the Government are prepared to take any necessary action to mitigate the potential economic impact on our businesses and will continue to monitor the situation.
Lord Hannan of Kingsclere (Con)
My Lords, to return to the Minister’s first Answer, of course I am sensible that there are things that you do not say in public, but I hope that in private His Majesty’s Government are making it clear that we have an interest in free trade within North America. We are the largest investor in the US and we will be affected by US tariffs on every component part that will be hit by them. We also have an enduring interest in the prosperity of Canada. How can anyone in this country think of Canada without thinking of Vimy Ridge, Juno beach and a hundred other battlefields where it has stood alongside us? I hope we will make it very clear that free trade between the United States and Canada is a British national interest.
Baroness Jones of Whitchurch (Lab)
My Lords, Canada is a valued partner for the UK, including as a Commonwealth member state, and our shared ties are deep and historic, as noted by our respective Prime Ministers when they spoke on 5 February. Our trade relationship, which was worth more than £26 billion in the four quarters to the end of quarter 3 in 2024, supports jobs and businesses on both sides of the Atlantic. This is underpinned by our trade continuity agreement. These relationships are important and ongoing. We will continue these discussions and hope to further and deepen our ties with Canada in due course.
Post Office Horizon Compensation Scheme
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The Parliamentary Under-Secretary of State, Department for Business and Trade and Department for Science, Information and Technology (Baroness Jones of Whitchurch) (Lab)
My Lords, first, I welcome my noble friends Lord Barber of Ainsdale and Lady Elliott of Whitburn Bay and congratulate them on their maiden speeches. I am sure this House would agree with me that they both bring a wealth of experience, particularly in speaking up for working people, and I look forward to working closely with them as they navigate their way through our shared UK growth missions. My noble friend Lady Elliott—I am sure the House agrees—will be an important northern voice in this Chamber. I am sure that the House will also agree that we will all benefit from my noble friend Lord Barber’s experience in arbitration and conciliation. We have a lot to learn from him in that regard.
I am pleased to respond for the Government and . I thank the noble Lord for bringing forward this Motion and allowing us to debate this very important issue. I pay tribute to the work of my noble friend Lord Beamish, alongside that of the noble Lord, Lord Arbuthnot, as members of the Horizon Compensation Advisory Board. They have helped guide and shape the Government’s work in this area.
Like my noble friend Lord Beamish, I pay tribute to Alan Bates and the 550 who took the case to court and finally shone a light on the role of the Post Office in deliberately hiding the truth. I also agree with the noble Baroness, Lady Ludford, that certain members of the press—ITV has obviously been mentioned—and in particular Nick Wallis, played an important role in shining a light on this in a very dogged and determined way, and brought it certainly to my attention for the first time.
I welcome this opportunity to provide an update on the progress of the Horizon redress schemes and to discuss the contribution of Fujitsu to the costs of the scandal. This scandal was one of the worst miscarriages of justice in this country’s history. Redress for the postmasters whose lives were scarred by it is of great importance for the new Government. A number of noble Lords, including the noble Lord, Lord Polak, and my noble friends Lord Beamish and Lady Elliott, gave very moving examples of the individuals impacted by the scandal and their lives being torn apart as a result. We recognise the devasting impact that the Post Office’s actions had on many postmasters’ lives, their families and their communities.
The Government remain focussed in our efforts to ensure that all postmasters receive full, fair and swift redress for the terrible ordeals to which they have been unjustly subject. That is why the Government have set aside around £1.8 billion for redress for the 2024-25 financial year onwards for those postmasters affected by this grievous miscarriage of justice. This is in addition to the around £200 million already paid to victims in previous years; this is not a ceiling but an estimate.
I turn now to the progress of the redress schemes. My department and Post Office Ltd publish monthly updates on progress. Since the end of June last year, the total amount of redress paid to victims of the Horizon scandal has more than doubled. Across this period, 1,409 more victims have settled their claims. Approximately £663 million has now been paid to over 4,300 claimants.
As we have identified, there are four separate redress schemes. This is by no means ideal, but, as noble Lords know, the reasons for it are historical. I will describe separately the progress of each scheme. I will start with the Horizon shortfall scheme, which covers postmasters who were not part of the group litigation and do not have a criminal conviction. It is run by Post Office Ltd, with funding, oversight and governance provided by the Department for Business and Trade. Approximately £315 million has been paid under this scheme. However, it has delivered redress too slowly, for two reasons. First, the scheme received many more applications than were originally anticipated: 7,000 and counting rather than a few hundred. Secondly, amounts are decided by a panel independent of the Post Office. This is intended to ensure fairness, but it makes the process slower. Combined with the huge volume of cases, this has caused real problems.
In March 2024, the Minister for Postal Affairs announced an optional fixed sum offer of £75,000 to those applicants who did not wish to complete a full claim. This has greatly accelerated progress. As well as providing speedy redress for those who accepted the offer, it has substantially shortened the queue for everyone else.
The Government have also acted to give postmasters assurance of fair redress. Many postmasters have had understandable concerns about any scheme run by the Post Office, even though redress offers are recommended by an independent panel, which the Post Office has never undercut. The noble Baroness, Lady Ludford, asked whether there was secret guidance to the Post Office lawyers on this issue. In response, I say that the principles of the Horizon shortfall scheme are public; offers are set by an independent panel, with a KC, an accountant and a retail expert. There is also a process to dispute the offer.
Baroness Ludford (LD)
I apologise for interrupting the Minister when we are time-pressed. Can she undertake to explore whether the Post Office really is operating to those published principles? The material that I have seen seems to give credible backing to the suggestion that it is not. Indeed, there is an exchange featuring Post Office lawyers saying that they are working on a contractual basis and not a consequences-of-loss basis, which is entirely different.
Baroness Jones of Whitchurch (Lab)
I hear what the noble Baroness is saying. Perhaps if she has some of that evidence, she could share it with us. I am not dismissing what the noble Baroness said. If she has that evidence, we will of course look into it. It is important that justice is done in this case, and is seen to be done.
In light of these concerns, in September the Minister announced that the Government are setting up an appeal process for postmasters who are unhappy with the full assessments of their claims, as recommended by the Horizon Compensation Advisory Board. We expect to receive the first appeals in the spring. The Government have committed to covering the reasonable costs of postmasters obtaining legal advice at each stage of the appeals process. The Government are also actively looking at other ways in which the pace of redress can be sped up and have been supported by the recommendations from the advisory board and claimants’ lawyers in this area.
Post Office prosecutions of innocent postmasters were perhaps the most reprehensible part of this scandal. Some 111 of these unfortunate individuals had their convictions overturned by the courts. The Post Office set up the overturned convictions scheme to ensure that such people get fair redress for malicious prosecution and other losses. Approximately £65 million has been paid under this scheme. So far, 82 of the 111 exonerated people have submitted full and final claims for redress. In response, 73 redress offers have been made and 66 accepted and paid. This scheme provides the option of an upfront offer of £600,000 to claimants, ensuring swift redress is provided to those victims who do not wish to submit a full claim. This is larger than the fixed offer in the HSS, reflecting the greater harm done to those who were convicted. As of 3 January, 58 people have chosen to accept that offer.
The House will recall the widespread concern that people convicted as a result of the scandal were not being exonerated by the courts, often because the evidence had gone or because they could not face a further legal fight. These people were therefore exonerated en masse by Parliament in May of last year. As of 7 February, 557 individuals in England and Wales have been sent a letter, informing them that they have at least one conviction quashed by the Act. The devolved Administrations in Scotland and Northern Ireland are running parallel exercises.
In July last year, the Government launched the Horizon convictions redress scheme to address the suffering of these people, wherever they are in the UK. I am pleased to report that it has made excellent progress. Under this scheme, eligible applicants are entitled to an interim payment of £200,000. They can then opt to have their claims individually assessed or take the fixed offer of £600,000. The noble Baroness, Lady Ludford, said that 72% of people in this redress scheme have not yet been paid. Most of the costs of redress relates to convictions which were rightly overturned by Parliament. No full claims have yet been received from those individuals and the Government are not going to slow down the redress. When people claim and we get the full claims, we aim to make to make an offer within 40 working days in 90% of the cases.
As of 31 January, 383 initial interim claims had been received, of which 364 have been paid; 232 full claims have been received, with 208 of those paid and 24 offers accepted and awaiting payment. The department’s target is for the first offers to be provided in response to 90% of full claims within 40 working days of receipt. A total of £156 million, including interim payments, has been paid to eligible claimants under this scheme. BBC News recently ran a story of two more claimants having received their £600,000 claims. It is very good to hear those individual cases of justice being done, even if it has taken far too long.
This brings us to the GLO scheme—the group litigation scheme. The group litigation court order case celebrated in last year’s ITV drama provided redress which proved to be unequal and unfair when compared with that provided by the HSS. The GLO scheme is intended to put that right.
The scheme is delivered by the Department for Business and Trade rather than the Post Office. Last year, Sir Alan Bates expressed concern that the scheme was not delivering fast enough. The Government agreed, but the problem was that we were not receiving the full claims. However, those concerns have now been eased. Out of the 492 postmasters eligible for the scheme, the department has received 408 completed claims. When it receives claims, the department acts quickly. It aims to make offers in 90% of cases within 40 working days of receiving a completed claim. As of 31 January, 89% of offers were made within that target period.
If any postmaster cannot resolve their redress through such bilateral discussions, they can go to the scheme’s independent panel. So far, only five cases have required help from the panel. By contrast, 257 cases have been by agreement between the department and the postmaster, either in response to the first offer or a subsequent challenge. This demonstrates that the department is making fair offers.
A total of £128 million, including interim payments, has been paid to postmasters under the GLO scheme. The Government expect to have paid redress to the great majority of the GLO claimants by 31 March 2025.
My noble friend Lord Sikka raised a question about the DWP convictions. I can assure him that the Minister for Transformation is looking into this, a review is being established, and I hope to provide more information about that. My noble friend also raised questions about the Lost Chances charity. A meeting has been arranged between it and my colleague, Minister Thomas.
We have been talking about the Horizon redress schemes but, as noble Lords have pointed out, a predecessor system known as Capture also involved errors and bugs which affected some postmasters. I pay tribute to the tireless advocacy of my noble friend Lord Beamish on behalf of this group.
In response, the Minister announced on 17 December last year that the Government will be providing full and fair redress to postmasters who were victims of errors and bugs in the Capture programme. The Government will continue to discuss this work with my noble friend Lord Beamish, and we will return to the House in the spring with an update.
Fujitsu supplied the Horizon software at the heart of this scandal. The sorry tale of its introduction has been fully explored by Sir Wyn Williams’ public inquiry. The Government of course welcome Fujitsu’s acknowledgement of a moral obligation to contribute to the cost of the scandal and continue to talk regularly to Fujitsu about this. The Post Office Minister will be meeting Fujitsu’s Europe CEO shortly.
The noble Lord, Lord Arbuthnot, asked: if Fujitsu were in jail, would we be giving it the millions that we are currently giving it? It is of course true that Fujitsu has admitted wrongdoing, but at the moment we do not know whether it is criminal. Deciding on that before reviewing the evidence is part of what has caused the scandal, and we should not repeat it. In its apology, Fujitsu recognised that it has a civil liability, and this will be dealt with through the financial contributions which it has promised.
The noble Lord, Lord Arbuthnot, my noble friend Lord Monks, the noble Earl, Lord Erroll, the noble Baroness, Lady Brinton, and others raised the issue of errors made by the Post Office auditors. The noble Lords have referred the performance of Post Office auditors to the Financial Reporting Council, and my department officials have also spoken to it. It is the right body to consider this, and the Government should not second-guess it. But, going back to the issue of Fujitsu’s contribution, the full amount cannot be determined until we have Sir Wyn Williams’ report, which will set out the full facts of what happened.
The noble Lord, Lord Arbuthnot, and my noble friends Lord Beamish and Lord Sikka raised the potential for an interim contribution from Fujitsu. I would say that it is too soon to decide on Fujitsu’s final contribution to the costs of the scandal, but I agree with noble Lords that an interim contribution would be very welcome and appropriate in these circumstances. Given the nature of the discussions that will need to take place on Fujitsu’s contribution, the Government will not be giving a running commentary on them. But I can promise that we will keep the House informed of progress at appropriate moments.
The Horizon system is still in place, unfortunately. A new version was introduced in the late 2010s, which the High Court accepted was “relatively robust”, but it is none the less very much in need of replacement. There can be no overnight fix for this lack of investment.
We are working with the Post Office to secure a new system which is fit for purpose, and which will not involve Fujitsu. In the meantime, the Post Office is, unfortunately, still dependent on the Horizon system to run its branches. I understand the widespread desire to see Fujitsu out of the Post Office picture immediately, but the only way to achieve this would be to shut down all local post offices and deny citizens the vital services which they provide. We do not think that we can do that, and so Fujitsu must remain for the time being. The Post Office has extended its contract until March 2026 but is looking to reduce its input as soon as possible.
Recognising its responsibility for the scandal, Fujitsu has voluntarily paused bidding for new government contracts. However, the Post Office is not the only area where government needs help which is only practicable to get from Fujitsu. So, while we agree with Fujitsu’s decision not to bid for government contracts in general, there will be situations where existing contracts need to be extended, or new ones begun, although generally in connection with existing services. Of course, we understand why that is undesirable, but it is being done only because currently there are no viable alternatives.
There have been allegations in the media that Fujitsu is seeking and receiving contracts beyond those limits. I assure the House that this is not the case. The Crown Representative and his team in the Cabinet Office, who oversee all the Government’s dealings with Fujitsu, are keeping a close watch on the situation.
I agree with noble Lords that individuals and companies responsible for the Horizon scandal must be held to account. The Metropolitan Police is keeping a close eye on the Williams inquiry and has a number of staff working on this. The noble Lord, Lord Hastings, asked about the involvement of law processes. The Solicitors Regulation Authority has said that it has more than 20 live investigations into solicitors and law firms relating to the scandal. There are other channels of accountability, too, and all of these need to be investigated in due course. My noble friend Lord Monks rightly raised the question of the wholesale culture change needed at the Post Office, and my noble friend Lord Sikka raised specific questions about the culpability of the directors. This will all be covered in Sir Wyn Williams’ report, which will establish what happened, what went wrong and why.
The noble Lord, Lord Beamish, raised the question of an independent body—
Lord Sikka (Lab)
I apologise to the Minister for interrupting. I know she has had a lot of questions to answer; I very much hope she will send detailed replies to a lot of the questions I asked. One matter was the case of 92 year-old Mrs Betty Brown, who, despite promises from the Minister six weeks ago, is still waiting for her compensation. Secondly, I asked whether the Minister could meet me and Mrs Gowri Jayakanthan, who had been refused any compensation and whose husband committed suicide, unfortunately, under pressure from Post Office allegations. Would the Minister be good enough to meet us, please?
Baroness Jones of Whitchurch (Lab)
My Lords, I was going to go on to say that a number of noble Lords have asked very specific questions, and I will of course write. I will just deal quickly with the idea that there should be an independent body for redress in the future. That is certainly something that we are looking into, and it is a very helpful suggestion coming forward from the Horizon Compensation Advisory Board, among others.
Horizon was a terrible scandal, and it is right that we should continue to keep it in our minds through debates such as this. The Government are determined to learn the lessons from it, which is why Sir Williams’s report will be so important, to deliver full and fair compensation, as quickly as possible, to those postmasters who were so unjustly used. I thank noble Lords for this very helpful debate.
Copyright and Artificial Intelligence
Baroness Jones of Whitchurch Excerpts(2 months, 3 weeks ago)
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Baroness Chakrabarti
To ask His Majesty’s Government what is their initial assessment of the scale and balance of responses to their consultation on copyright and artificial intelligence.
The Parliamentary Under-Secretary of State, Department for Business and Trade and Department for Science, Information and Technology (Baroness Jones of Whitchurch) (Lab)
My Lords, the Government consulted on several issues regarding copyright and AI. That consultation closed on 25 February and over 11,500 responses were received. We welcome this significant engagement from across the creative and AI sectors. Our priority must be now to analyse the evidence that has been submitted. Proposals will be set out in due course, including a fuller breakdown of the types of respondent to the consultation.
Baroness Chakrabarti (Lab)
I am very grateful to my noble friend the Minister for that Answer. I declare my interests as an author, like many Members of your Lordships’ House. Does she agree that the intellectual property of creatives in this country is no less precious or important than the intellectual property of tech companies that have, frankly, already been scraping the internet for creative work and ripping these people off? Wherever the policy lands in the future as a result of the consultation, will the Government consider offering assistance to creatives, many of whom are really not very well off, to ensure that they have restitution for the grand theft that has already been perpetrated?
Baroness Jones of Whitchurch (Lab)
My Lords, of course the Government recognise the concerns that many in the creative industries have about the potential impact of AI on that sector. This is why we want to act now to give UK creators greater control over their works and more transparency about how their work is being used, as well as creating the ability for them to be paid for it. That is exactly what the proposals in our consultation aim to achieve. But I should say that this is a complicated area, because AI adoption also has the potential to drive growth across the economy, including in the creative industries. For example, 38% of creative industry businesses are already using AI technologies. So this is a complicated area, but we know we have to find a solution and protect the interests of creatives in the future in the way that the noble Baroness has alerted us to.
Viscount Colville of Culross (CB)
My Lords, the Government intend to take out the transparency amendments tabled by my noble friend Lady Kidron in the Data (Use and Access) Bill. What provision are they going to make to ensure that creatives know that their copyrighted work has been pirated by AI models, so that they can then take action?
Baroness Jones of Whitchurch (Lab)
My Lords, the Government agree with many of the points made during the debate on the data Bill, and in other discussions in this House, that further transparency is needed from AI developers about their use of web crawlers and the materials that they use to train their models. However, we have a consultation out and it would be premature to commit to specific legislation until we have analysed the responses to that consultation and heard all the voices in this sector. Nevertheless, I assure the noble Viscount that we intend to resolve this issue. It is one that the previous Government failed to resolve and we need to resolve it now, so we will take action as soon as the consultation has been analysed and resolved.
Lord Parkinson of Whitley Bay (Con)
My Lords, there has been widespread concern that the Secretary of State in the Minister’s department has been very happy to meet representatives of big tech and AI firms but less willing to meet representatives of our thriving but threatened creative industries. Of course, in due course his meetings will be published through the Government’s quarterly transparency returns but, given how germane this is to a contentious area of policy currently under discussion, will she give consideration to publishing that list of meetings sooner?
Baroness Jones of Whitchurch (Lab)
My Lords, as the noble Lord knows, that information will be published in the normal way. What I will say is that the Minister for AI and Digital Government and the Minister for Creative Industries, Arts and Tourism have been extremely active in engaging on this subject. They have held round tables with the creative industries and the AI sector during the consultation, which is a joint consultation involving DCMS and DSIT. This morning, the Secretary of State for DSIT explained that, and also said that he is of course open to meetings with the creative sector. All that is on the table and there is no problem about dialogue or engagement. That will go on in the next few months as well, while we seek to find a solution to this issue.
Lord Foster of Bath (LD)
My Lords, regardless of whatever future plans are brought forward, will the Minister confirm that, if the outcome of current challenges shows that our current IP regime is legal, the Government will provide assistance to those creators whose IP has been stolen on an industrial scale by AI companies?
Baroness Jones of Whitchurch (Lab)
The noble Lord is right that this is a complicated copyright area and there are some legal cases in the offing. It is a complicated area that needs a holistic approach. Our view is that addressing the issue in isolation will not provide sufficient legal clarity or resolve the issue in a way that I think that most noble Lords would expect. The consultation will help guide us on this issue and I urge noble Lords to await its outcome, which I hope will provide some solutions.
The Earl of Clancarty (CB)
My Lords, despite what the Minister says, there is a basic concern about the framing of this issue by the Government, their perceived need for a balance between the tech companies and the creative industries, and the logic of that in terms of the need for someone to give something up. Should any side have to give up something that is already theirs, morally and in law: namely, work made by artists, who therefore hold the copyright? This is not about balance; it is about rights.
Baroness Jones of Whitchurch (Lab)
The noble Earl is right, and we are trying to find a way to ensure that those rights are upheld. However, all these sectors need to grow in our economy. As I was just explaining, the creative sector uses AI, so it is not as simple “us and them” situation. AI is increasingly being used by all sectors across our economy. We need to find a way through this that rewards creators in the way that the noble Earl has outlined, which I think we all understand.
Viscount Camrose (Con)
My Lords, I recognise of course that the task of analysing the results of the consultation still needs to go ahead. That said, does the Minister agree with us that digital watermarking is going to be a key component of the solution to the AI and copyright issue? If so, what does she make of the number of digital watermarking solutions that are now coming to market? In her view, is this to be welcomed or should we be pursuing a single standard for digital watermarks?
Baroness Jones of Whitchurch (Lab)
The noble Viscount has made an important point about watermarks, and that is certainly one solution that we are considering. The issue of transparency is crucial to the outcome of this issue, and watermarks would certainly help with that. I do not have a view as yet on whether we should have one or many, but I am hoping that the consultation will give us some guidance on that.
Lord Brennan of Canton (Lab)
My Lords, the Minister is right when she says that AI is extensively used in the creative industries and the music industry, and has been for a long time—as a servant, not a master of creatives. Is this not an opportunity to look at those companies such as DAACI that try to use AI in an ethical way which ensures that creators are rewarded for their input?
Baroness Jones of Whitchurch (Lab)
I thank my noble friend for that proposal. Again, I hope that all these companies will contribute, or have contributed, to the consultation, because those are exactly the sorts of standards we want to achieve. We want to make sure that creators get the right awards; that is certainly our intention through this consultation. We need to find a way through this. We are working hard and we will not give up until we have found a way to resolve the issue.
Baroness Bennett of Manor Castle (GP)
My Lords, the noble Earl, Lord Clancarty, the noble Lord, Lord Foster, and the noble Baroness, Lady Chakrabarti, all pointed out the way in which big tech has already stolen large amounts of property. Had that property been cash or gold, we surely would be getting a different reaction from the Government—yet it is actually the same thing. I have a constructive suggestion to help the Minister. How about a universal basic income for the creative sector as compensation?
Baroness Jones of Whitchurch (Lab)
I thank the noble Baroness for her helpful suggestion. Hopefully, she has fed that into the consultation. I am sure it will be considered as one of the many proposals to resolve this issue.
Lord Pannick (CB)
My Lords, have His Majesty’s Government received representations, formal or informal, on this subject from the Government of the United States and, if so, will they publish the substance of those representations?
Baroness Jones of Whitchurch (Lab)
To my knowledge, we have not received any representations from the US Government. I am sure any such discussions that take place will become public very quickly.