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Lord Bassam of Brighton: I am grateful to all those who have contributed to the debate because--I pick up the point made by the noble Viscount, Lord Goschen--it is right that the Government should come under pressure on this to make sure that their arguments and figures stack up and that they should come under some scrutiny.

Perhaps I may try to pick up the points which have arisen as a by-product of the discussion. We are conscious of the fact that there are very real questions relating to costs which may be incurred in providing interception capabilities. We are extremely conscious also of how those costs may be apportioned between government and industry.

As I understand it, Amendment No. 55 suggests that the Secretary of State "shall" make payments to communication service providers rather than that he "may" do that. The intention behind the amendment is to require the Secretary of State to meet costs incurred both in effecting individual warrants and in maintaining a reasonable intercept capability under Clause 12. I would argue that, as drafted, it does not quite achieve that because it leaves a considerable amount of discretion for the Secretary of State. But the intention is clear and we must respect the intention.

Members of the Committee will wish to note that the Government introduced an amendment in another place, which was accepted, setting out their continuing commitment to the payment of marshalled costs. Those marshalled costs are incurred by the communications service providers in respect of processing each individual interception warrant--the ongoing costs. Those include the costs of staff and overheads and cover the cost of transporting the intercept product from an agreed hand-over point, normally within the CSP's own network to the intercepting agency. All those costs are currently, and will continue to be, met by the Government.

I do not accept that it is necessary at this stage to go any further than the commitment which we have already given. On that basis, I hope that the amendment will be withdrawn. But our commitment is clear. We introduced that amendment in the other place. We understand the issues involved. The costs will cover other matters, such as staff and overheads and the costs of transporting the intercept product. So we have gone quite a long way already in that regard.

I turn to the amendment in the name of the noble Lord, Lord Lucas. It was described by the noble Lord, Lord Phillips, as "absolutist", and I believe that that is a fair description. The amendment refers to how the costs of maintaining a reasonable intercept capability shall be apportioned between government and industry. The noble Lord, Lord Lucas, wants to see a categorical statement on the face of the Bill stating how those costs will be apportioned between government and industry. That is an unusual and novel approach which the Government cannot accept.

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Clause 13 bears close reading. As it currently stands, it permits payments to be made by the Secretary of State and it imposes a duty to contribute to marshalled costs in some cases. Exactly what those payments should be will be decided after we have gone through the consultation process with industry, to which I have referred on many occasions. To assist that consultation process, we commissioned a report known as the Smith report. No doubt many Members of the Committee will have heard of it and read it. That report has been produced by independent consultants to look at the whole business of cost allocation in some detail. In a sense, it is part of the debate about how high those costs may be--whether £600 million, according to one tranche of argument, or £20 million in another. As I stated earlier, that consultation exercise will lead to secondary legislation by means of an order to be laid before Parliament.

I can offer some assurance to Members of the Committee that the allocation of costs will be addressed very clearly in that order. We shall make sure that there is more than adequate time, proper time, to take a detailed look at the issue. But I am happy also to tell the Committee that we shall take that opportunity to confirm again that the Government will contribute to costs and that we shall not impose any unreasonable burden on industry. Exactly how much we will contribute will have to be debated in detail--the devil is in the detail in this instance--when, after lengthy consultation, we introduce secondary legislation. We shall have the opportunity to talk to industry in the build-up of time to that secondary legislation. We shall consult in detail on the way in which it will work and will bring forward secondary legislation. We shall have the opportunity to give it further scrutiny in this Chamber and Members of the Committee will be able to go over it again. There will be ample opportunity for people to get to the root of the costs. Legislation does not necessarily make it easier and facilitate detailed consideration.

It is worth stressing that we are not setting out on a grand scheme that has not before been undertaken. For many years now, telecommunication companies have been required to maintain an intercept capability and have had to share the costs of so doing with the Government. I believe that it is also the case that many ISPs have begun to share the costs with Government in the current situation. This is not something new that we are demanding of business or the industry. It has not suddenly been dreamt up; it is already in existence.

At this stage of the development of the legislation I understand that there is some nervousness. I understand the concerns of industry in that regard. However, we believe that they are not well founded. Many Members of the Committee referred to the fact that there has been considerable debate about the degree of cost. We think that it is about right in the regulatory impact assessment undertaken by the Cabinet Office. Even the CBI described the figures in the BCC report as alarmist. I have no doubt that the CBI is well informed in its approach. If one looks at the history of the PTOs, they have been meeting

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capability costs for the past 15 years or more, providing interceptor capability at their own cost. No PTO has gone out of business as a result. We take the view that we have struck a reasonable balance and that businesses have always managed to meet a reasonable solution.

The noble Lord, Lord Blackwell, asked a question, the answer to which is along the lines that we will be looking to future costs but will start from designing in from the outset cost minimisation. That is the whole approach that will inform our strategy in this regard.

In summary, we think we have the balance about right. We believe that the consultation and secondary legislation process will flush out cost. We think that we can meet the reasonable costs on the face of the Bill. Clause 13(3) provides flexibility for the Secretary of State to address the costs issue and make a contribution. We need to get that balance right. We have no intention of pushing unreasonable costs on to the industry. We do not want to frighten it abroad. At this stage, we have no evidence that people will be frightened off from setting up and maintaining their businesses in the United Kingdom; far from it. We think that it will add extra confidence to the industry.

For those who have been critical of us, saying that we are forging ahead without other jurisdictions taking an interest, that simply is not true. My attention has been drawn to the fact that the standards we wish to adopt have been adopted by a number of member states of the European Union in the council resolution of January 1995. Those standards have been subsequently adopted by the governments of Canada, Australia and New Zealand. As the noble Viscount, Lord Goschen, aptly and ably expressed, we are working in an international field. However, we are not working on our own. We are all moving in the same general direction. It is against that background that the legislation we are setting up has to be seen.

I trust that in view of the comments I have made this evening, those Members of the Committee who have moved the amendments will feel able to withdraw them.

Lord Phillips of Sudbury: Before the Minister sits down, can he tell us whether the Government are accepting the recommendation of the Smith report that they should pay for the design and software development of the black boxes which will be crucial to this information gathering?

Lord Bassam of Brighton: In general terms we have accepted the findings of the Smith report. That level of detail is a matter which we shall consider throughout the process of bringing together the consultations and framing the secondary legislation. That is how we see things working out. In general, we accept the Smith report. It has provided us with useful background and will inform the way in which we proceed.

I need to correct a remark I made earlier to Members of the Committee. I might have suggested--I do not think I said it directly--that we might already be meeting some of the ISP intercept costs. That is not

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currently the case because it is not covered by the Interception of Communications Act. We do not currently cover those interception capability costs. However, that is an area which we are keeping carefully under review.

Viscount Goschen: Perhaps I may briefly pick up one point. The Minister said that he felt they had the balance about right. However, he gave the Committee precious little information about where that balance lies, and spoke in generalities. There are vast discrepancies between the figures talked about by the Minister on the one hand--I accept his caveat about the regulatory impact statement; as I understood it, he then went on to support that as being a good and sensible base case--and, on the other, the sort of figures talked about by the industry. For the Minister to suggest that the balance is about right and then give the Committee almost no information about where the Government thought that balance lies is asking it to make a large leap of faith.

On another point, I specifically asked the Minister whether he believed it would be possible for much of this business to be transferred overseas. I did not ask whether he had had any indication that that was happening, because the Bill has yet to be enacted. I asked whether it would be feasible for consumers here to use ISPs based overseas and therefore evade the impact. That, surely, is an important point to inform today's debate.

Finally, perhaps I may pick up a point made by the noble Baroness, Lady Thornton. I apologise for intervening in her remarks. As far as I am aware, no one in this Chamber is speaking on behalf of the Internet industry. I certainly am not. Noble Lords speak from their own personal perspective. They might well have listened to arguments put forward by industry or parties such as the Minister. It is our duty to weigh those up. However, it is not the case that noble Lords, certainly myself and, I believe, my noble friends, are speaking in any way on behalf of the industry.

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