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Lord McNally: My Lords, before the Minister sits down, perhaps I may make a brief comment. Although the Minister was obviously not in a position to see for himself, when he reached the point he made about a possible chairman for the board, the noble Lord, Lord Desai, clearly indicated that he was a candidate.

Lord Bassam of Brighton: My Lords, I am grateful to the noble Lord for his advice.

Lord Hylton: My Lords, perhaps I may intervene to make a brief remark. I have been a Member of your Lordships' House since 1971. In that time I have seen many all-party amendments being passed on legislation. However, I do not ever recall seeing one to which a Government Minister had added his name. I hope that this is a good omen for the future. The mechanism may be suitable for dealing with technical and complex matters such as this.

On Question, amendment agreed to.

19 Jul 2000 : Column 1022

Lord Cope of Berkeley moved Amendments Nos. 4 to 6:

    Page 15, line 23, leave out ("to") and insert-

("(5A) Where a notice given to any person under subsection (2) is referred to the Technical Advisory Board under subsection (5)-
(a) there shall be no requirement for that person to comply, except in pursuance of a notice under paragraph (c)(ii), with any obligations imposed by the notice;
(b) the Board shall").

    Page 15, line 24, leave out ("and the Board") and insert (", for the person making the reference, of the notice referred to them and").

    Page 15, line 25 at end insert ("; and

(c) the Secretary of State, after considering any report of the Board relating to the notice, may either-
(i) withdraw the notice; or
(ii) give a further notice under subsection (2) confirming its effect, with or without modifications").

On Question, amendments agreed to.

Clause 13 [Technical Advisory Board]:

Lord Cope of Berkeley moved Amendment No. 7:

    Page 16, leave out lines 23 to 26 and insert ("such number of persons appointed by the Secretary of State as he may by order provide.

(2) The order providing for the membership of the Technical Advisory Board must also make provision which is calculated to ensure-
(a) that the membership of the Technical Advisory Board includes persons likely effectively to represent the interests of the persons on whom obligations may be imposed under section 12;
(b) that the membership of the Board includes persons likely effectively to represent the interests of the persons by or on whose behalf applications for interception warrants may be made;
(c) that such other persons (if any) as the Secretary of State thinks fit may be appointed to be members of the Board; and
(d) that the Board is so constituted as to produce a balance between the representation of the interests mentioned in paragraph (a) and the representation of those mentioned in paragraph (b).
(3) The Secretary of State shall not make an order under this section unless a draft of the order has been laid before Parliament and approved by a resolution of each House.").

On Question, amendment agreed to.

Clause 14 [Grants for interception costs]:

3.30 p.m.

Lord Bassam of Brighton moved Amendment No. 8:

    Page 16, line 27, leave out subsection (1) and insert-

("(1) It shall be the duty of the Secretary of State to ensure that such arrangements are in force as are necessary for securing that a person who provides-
(a) a postal service, or
(b) a telecommunications service,
receives such contribution as is, in the circumstances of that person's case, a fair contribution towards the costs incurred, or likely to be incurred, by that person in consequence of the matters mentioned in subsection (2).").

The noble Lord said: My Lords, my name is, I suppose by the luck of the draw, at the top of the list of names to the amendment. It could have been moved by the noble Lord, Lord Cope, or the noble Lord, Lord McNally.

19 Jul 2000 : Column 1023

I wish to speak also to Amendments Nos. 9 and 10. These amendments clarify the effect of the amendments to this clause made by noble Lords last week. This clarification is necessary as the effect of the amendments last week was to create two separate but overlapping duties in Clause 14. The first duty, at Clause 14(1), was in respect of marginal costs for postal companies, marginal costs for telecommunications companies and capital costs for both. The second duty, at subsection 14(3), was in respect of the marginal costs of companies which also happen to be the subject of obligations under Clause 12.

Prior to last week's amendments, the obligation on the Secretary of State under subsection (3) was stronger than the discretion under subsection (1). Hence they were treated separately although there was a degree of overlap between them.

The effect of last week's amendments was to introduce an obligation under subsection (1). As both subsections now impose an obligation to pay contributions, or to see that contributions are paid, it is right that they should now be wrapped up into a single duty. The amendment is recast in terms of "arrangements" for securing that contributions are paid, as this allows other means of payment than direct payment from the Home Office. For example, contributions to the marginal costs for telephone interception may well come from the National Criminal Intelligence Service. That is what is now proposed in subsection (1) of this amendment. The issues for which payments can be made--listed in subsection (2)--remain unchanged.

This amendment incorporates a slight elaboration on the requirement to ensure a fair contribution in subsection (1). It specifies that considerations of fairness should look to the particular circumstances of the case in question; in other words, on a case by case basis. Particular notice should be taken of the circumstances of the service provider on whom the obligation is being imposed. We argue that that is the fairest way to deal with the matter. A wide variety of issues may be relevant here but I am pleased that the noble Lords opposite and I have been able to reach agreement that the duty of the Government to ensure fairness in the regime to be operated under Clause 12 carries with it an explicit commitment to consider the circumstances of each individual service provider approached when assessing what is a fair contribution. I would expect this to include a consideration of a wide variety of factors such as comparisons with international practice; the nature of any additional burden to be imposed; the size of the company in as far as that may be related to the ability of the company to absorb the burden, and other factors besides.

Amendment No. 9 includes a new subsection to replace existing subsection (3). This is merely the familiar provision that the Secretary of State may make arrangements for payments to be made out of money provided by Parliament in order to fulfil the duty identified at subsection (1). I beg to move.

Lord Cope of Berkeley: My Lords, as the noble Lord, Lord Bassam, pointed out, my name is also

19 Jul 2000 : Column 1024

added to the amendment, which seeks to implement the decision that noble Lords took on Report with regard to cost.

With regard to the previous group of amendments, the Minister said, most helpfully, that the Government do not expect to make any requirement under Clause 12 to service providers who deal only with the financial services industry. I believe that that measure will be widely welcomed, as the Minister suggested. I hope that there will be great awareness of it.

Neither the amendment nor the Bill defines "fair". The proposed subsection (1) in the amendment states,

    "such contribution as is, in the circumstances of that person's case, a fair contribution".

That permits the Government to allocate different proportionate contributions in different circumstances. It is right and fair in some circumstances--particularly in the case of a small company--for the Government to pay the whole cost of what is required; that is, the black boxes. As the black box will carry out the work that is required by the agencies of the Government, the police and so on, the presumption should be that it is fair that the agency concerned should pay the major cost of it.

I appreciate that it is argued that in some cases the equipment will also benefit service providers by providing them with extra information and facilities. Nevertheless, the main purpose of the black boxes is to serve the interests of the Government. Therefore, it is right that the taxpayer should pay the major part of the cost. Anyone who feels aggrieved at the settlement could no doubt seek judicial review in regard to the proportion of the cost that is considered fair.

I turn to the total cost. I admit to having become a little confused with regard to the sum of £20 million. I may have inadvertently contributed to my confusion and perhaps to other people's on this matter. However, my original understanding was that the sum of £20 million was the estimated cost of the black boxes, part of which was to be borne by the Government and part of which was to be borne by the ISPs.

However, my subsequent understanding was that the sum of £20 million was the total cost of the Government's contribution to the scheme. That implies that the total cost of the black boxes will be higher than that. For example, it might be £30 million, of which the Government would pay £20 million and the ISPs £10 million. It is, of course, difficult to estimate the cost because we are not sure how many service providers will be asked to install such equipment, or what the nature of the equipment is. The Smith report began a discussion on that matter but it by no means concluded it. The recommendations of the Smith report no longer appear to be a sound basis on which to proceed.

A large proportion of the costs will comprise the extent to which the facility is used. That is difficult for those inside government, let alone those outside, to determine. The facility may develop over time, but so may the cost of an individual black box. The one thing of which we can be certain is that the technology which

19 Jul 2000 : Column 1025

is appropriate today for this purpose will probably have developed out of all recognition in a year or two, or three years, and probably in an even shorter period. That fact also makes any estimate of costs liable to change. However, this is an important matter. Whatever sum of money is paid by service providers--however large or small--will damage the competitiveness of British service providers compared with those overseas who do not have this overhead.

I appreciate that other countries may, in time, follow the lead given by the Government; so the competitive position may even out slightly if they do the exactly the same and adopt the same charging arrangements. But in the mean time--possibly for ever in regard to some smaller countries, especially tax havens--whatever the figure is, it will prove a competitive disadvantage to British service providers and others subject to the charge. I am sorry to expand at some length on this matter, but it is important. We should do our best to be clear about this before finally sending this piece of legislation on its way.

We have gone along with the Government a great deal in all these matters and they have moved in our direction a great deal. But the question of cost, and of how much of the cost will finally come out of the pockets of British service providers, is important to whether or not British electronics companies remain competitive in the world.

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