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Mr. Heald: I beg to move, That the clause be read a Second time.

Mr. Deputy Speaker (Mr. Michael Lord): With this it will be convenient to discuss the following: New clause 4--Report of payments made--

'.--The Secretary of State shall report annually to Parliament setting out the payments made under section 13 in respect of each person to whom such payment is made, and where payments are not made, the reasons therefor.'.

New clause 6--Appeal against payment decisions--

'.--(1) A person to whom a payment is made under section 13, or a person who is refused payment thereunder, may within seven days of notice of the decision appeal to the Court as to the amount of such payment or the said refusal.
(2) The Court to which an appeal may be made under this section shall be--
(a) in England and Wales or Northern Ireland, the High Court and
(b) in Scotland, the Court of Session.'.

Amendment No. 7, in clause 12, page 14, line 7, after "order" insert--

', a draft of which has been laid before Parliament and approved by a resolution of each House,'.

Amendment No. 8, in page 14, line 41, at end insert--

'(6A) Before giving a notice for the purposes of subsection (2) the Secretary of State shall obtain a certificate of technical approval from the Technical Approval Board.'.

Amendment No. 19, in page 14, line 41, at end insert--

'( ) A person on whom a notice under subsection (2) is served may apply to the Technical Approval Board for a review.
( ) A review may be sought on any of the following grounds--
(a) that such steps as may be specified or described in the notice are not technically competent for the purpose set out in subsection (1);
(b) that such steps are not proportionate to the purpose set out in subsection (1); or
(c) that such steps exceed what is necessary to achieve the purpose set out in subsection (1).
( ) On a review application under this section, the Technical Approval Board may either cancel or affirm the notice, and, if it affirms it, may do so either in its original form or with such modifications as the Board may in the circumstances think fit.'.

Government amendment No. 24.

Amendment No. 9, in page 15, line 11, at end add--

'(9) In this section "a certificate of technical approval" means a certificate in writing given by the Technical Approval Board to the effect that the steps specified or described in the notice would be--
(a) technically competent for the purpose set out in subsection (1); and
(b) proportionate thereto.'.

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Amendment No. 13, in clause 13, page 15, line 12, leave out--

'may, if he thinks fit,'

and insert "shall".

Government amendment No. 25.

Amendment No. 10, in clause 21, page 24, line 16, at end insert--

'(4A) Where is appears to the designated person that a postal or telecommunications operator is not or may not be in possession of, but is or may be capable of obtaining any communications data, the designated person shall not give a notice under subsection (4) unless he has obtained a certificate of technical capability from the Technical Approval Board.'.

Amendment No. 11, in page 24, line 16, at end insert--

'(4B) In this section "a certificate of technical capability" means a certificate in writing given by the Technical Approval Board to the effect that the postal or telecommunications operator--
(a) is technically capable of obtaining the communications data, or
(b) could be technically capable of obtaining the communications data if certain steps were taken, and the certificate--
(i) specifies or describes such steps; and
(ii) certifies that the taking of such steps would be proportionate to what is sought to be achieved by so obtaining the data.'.

Government amendment No. 28.

Amendment No. 17, in clause 71, page 77, line 21, at end insert--

'"technical obligations under this Act" means steps to be specified or described in a notice pursuant to section 12(2) and steps needed to be taken pursuant to section 21(4) in order to be capable of obtaining any communications data.'.

Mr. Heald: New clause 2 would set up a technical approval board made up of six representatives of industry and the regulator to vet technical requirements to be imposed by the Secretary of State on public telecommunications and postal services providers under clauses 12 and 21.

We all accept the principle that there should be an intercept capability for the internet. As we made clear on Second Reading and in Committee, however, there is widespread concern at the unknown extent and cost of providing that capability as well as concern about communications data. When the Government consulted on these issues last summer, it became clear that there is uncertainty about whether it is technical practicable to provide such an intercept capability. The costs also remained uncertain.

It is surprising that it was not until January that the Government troubled to employ expert consultants to report on the technical issues. However, the Smith Group of Guildford has done its work and its report has been published recently, for which I thank the Minister, even if I have to say that it is better late than never. The industry is considering the detail at the moment, and it is difficult to know exactly what the full response will be. Early indications are worrying. The Federation of the Electronics Industry tells me that, even at this early stage, some people believe that the measure will lead to bulk interception. The operators' group has not previously commented on the clauses; however, it now states:

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In effect, the group is saying that the broad scope of powers exercised purely at Ministers' discretion, coupled with a highly optimistic compliance cost assessment, is unsatisfactory.

As we have pointed out, British Telecom noted that the mechanism for deciding what is a reasonable intercept capability will be a key factor in ensuring the successful implementation of the Bill and in avoiding putting the UK at a commercial disadvantage with the rest of the world. My hon. Friend the Member for Esher and Walton (Mr. Taylor) mentioned Mr. Philip Virgo. Mr. Virgo is involved with EURIM--the European Informatics Market--but is commenting on his own behalf. He said:

He noted that many institutions are already "tiptoeing offshore". That point was also made by my hon. Friend.

The Smith Group's report raises as many questions as it answers--as does previous information supplied by the Government. The group has decided that one solution cannot be applied to all internet service providers and it has come up with a menu. There is the low-cost option of active interception, whereby e-mails for a selected subscriber would be provided. The next option is semi-active interception, whereby control data would be passed to interception equipment each time an address was assigned to a selected subscriber. The subscriber traffic would be routed past an intercept point in order to obtain that. The most expensive option is passive interception, whereby all selected subscriber traffic would be forced to flow past interception points and there would be a selection of traffic.

The report makes several points that are of concern. It states that the semi-active approach might be over-burdensome for small internet service providers and that the passive approach is more expensive to implement for the ISP and the Government in medium-sized ISPs and is therefore not recommended in such cases.

The spectre is that a bespoke notice will have to be served on each ISP, with the technical requirements to be imposed on the particular ISP. That raises huge issues. One of the industry's concerns throughout the process has been that the provision should not discriminate between ISPs. Under the Government proposal that seems to be emerging--we have never actually heard it, but I hope that we shall do so tonight--a medium-sized ISP could be told that it had to provide only an active approach. That would be the cheap method. At the same time, another slightly larger ISP, which, although described as

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"big", was in competition with the medium-sized one, could be required to implement the expensive, passive approach with huge start-up costs.

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