I turn to my third concern, which is about the terms of reference of the proposed, so-called independent privacy and civil liberties board. The first thing I say to my noble friend is: let us be honest about what this board is. It is the counterterrorism oversight board, and we would do well to adopt the title used in the United States so that it is what it says on the tin, as it were. I ask my noble friend to answer these questions. Was Mr Anderson consulted about the terms of reference for that board, which have been published today? If he was, were any of his comments rejected as part of the terms of reference, and if so, which ones? I am sure that the Minister will have information at his fingertips within minutes. In particular, there is the crucial question raised by the noble Baroness, Lady Kennedy. Will members of the board enjoy developed vetted access to be able fully to scrutinise counterterrorism activity by the services? It is crucial that, if his post is abolished,
someone should have that access. It is important to have a positive assurance of that, otherwise what has been announced is a seriously retrograde step in terms of scrutiny.
Mr Anderson, and, indeed, I before him, spent more than 100 days a year up to now as independent reviewer. At the worst time, after 2005, in one year I spent 144 days, I think, as independent reviewer. It was certainly more than 140 days. Will the members of this board be expected to give, and will they be paid for, the 100-plus days per year that independent reviewers of terrorism legislation have given in every single year since 2001? Can we be assured—I speak here of David Anderson, not of myself—that the people on this board will be of such a quality that they are able to scrutinise such matters using their past analytical experience? It is not something you can just walk into out of some other discipline.
I notice that one of the aims is expressed in the terms of reference, rather oddly, as being to:
“Provide public assurance that the current arrangements ensure”,
satisfactory regard to, “privacy and civil liberties”. May we at least have an assurance that the words “or otherwise” will be added so that the mission is not just to ensure that the Government are doing the right thing, but to be able to state clearly when they may be doing the wrong thing?
Also, can the Minister assure us that the current requirement for an annual review of all sensitive counterterrorism legislation will be part of the terms of reference of this board if the independent reviewer is abolished? That is something that happens now and it has proved peculiarly useful. My suggestion to your Lordships would be that if the Government wish to create this board—and, as I said at the beginning of these comments, I am very much in favour of increased safeguards—alongside that they should continue to have the independent reviewer of terrorism legislation, and he can usefully chair the board as well. It might involve more than 140 days, but I am sure somebody could be found to do it because it is an extremely interesting and intellectually rewarding task.
I apologise for taking up more than the average time in this debate, but the points I have sought to make are all, in my view, important ones that we could and should include in legislative scrutiny, were we to have a more normal timeframe. In the absence of that, I invite the Minister to respond to the questions I have just raised.
6.09 pm
Lord Hope of Craighead (CB): My Lords, it was on a Wednesday in July, like today, just over nine years ago, on 7 July 2005, that the London bombings took place. I am sure that all noble Lords have their own memories of that dreadful day. My memories are closely associated with this Chamber. That morning the Lords of Appeal, who were still working in this building, gathered to give judgment. We were due to give judgment at 9.45, and before we could sit, as the House, to give judgment, prayers had to be said—but we found that the Bishop was missing. Prayers were said by the senior Law Lord, Lord Bingham, on our behalf.
The rumour was that the Bishop had been unable to come here because there had been an electrical surge on the Underground, and his line had been out of operation. It was only when we got upstairs to our rooms on the west corridor that we realised the real horror of that day. Those who remember it will recall how London became completely seized up with traffic jams, no public transport was able to move, mobile phones would not work, and the general feeling was one of extreme distress—horror at what had happened to the victims, and immense inconvenience and disruption to the way of life in London.
I mention that because whenever I am confronted, in court or indeed in here, by this kind of issue, about the balance between security and the right to privacy, I seek to find where the balance should be struck, realising how immensely important it is, from whichever side one is looking at the problem.
Against that background, one must commend the security services for the painstaking work that they do on our behalf, which is, no doubt, greatly assisted by the data that we are thinking about. One should also appreciate the immense burden that rests on Ministers, who have to take some of these acute decisions on our behalf, balancing, as they have to, privacy against security.
This is an extremely difficult issue, but on the principle of the measure I am in no doubt—as I think almost all of us agree—that the Bill should have a Second Reading. Its purpose, and the principle that lies behind it, seem to me entirely beyond question. The problem, as always when one considers matters in this House, is one of detail—and it is the opportunity of detailed scrutiny that is, in effect, being denied to us by the speed with which the measure has come forward.
Speaking entirely for myself, I think it is a great shame that the Government have excited criticism of the kind that they have, which undermines public confidence in an area where, as others have said, public confidence is so important. It is a great pity, it is a great disadvantage, and it is difficult for us, who are coping with detail in an unfamiliar area, to meet the requirements we have to meet in order to contribute effectively to the debate.
For my own part, I started my study of the issue by looking at the judgment of the European Court of Justice that gave rise to all the problems, in the case called Digital Rights Ireland, reported in April this year. It is an interesting, and quite easily read, judgment, and quite a lot of it entirely supports what the Government seek to do. The basis of the criticism is Article 7 of the European Charter of Fundamental Rights, to which this country is not a party. However, one has to bear in mind the fact that Article 52(3) of the charter says that in so far as it,
“contains rights which correspond to rights guaranteed by the Convention for the Protection of Human Rights and Fundamental Freedoms”—
the ECHR, to which we are, of course, a party—
“the meaning and scope of those rights shall be the same as those laid down by the said Convention”.
So there is a read-across between Article 7 of the charter, which the European Court of Justice was talking about, and Article 8 of the convention, to which the
noble Lord, Lord West, referred, which contains the guarantee of the right to privacy. However, it is extremely important to appreciate that, as he also said, it contains the balancing provision that:
“There shall be no interference … except such as is in accordance with the law and is necessary in a democratic society”.
One is entitled to take that into account in considering what the court was talking about.
When the court analysed the case—this is in paragraphs 41, 43 and 44 of the judgment—it was satisfied that there was a genuine national interest in what the measure sought to do, and indeed in the objective of the measure that it was considering, which was the directive. In its judgment the court clearly makes the point that in connection with such issues,
“the retention of … data may be considered to be appropriate for attaining the objective pursued by that directive”.
So far, so good. But what was the basis of the criticism? One has to examine the judgment a little bit to understand what caused concern, and ultimately led to the decision that the court gave. We find that in paragraphs 37, 45 and 46, as well as paragraphs 59, 64 and 65. It was the detail of the wording of the directive, and in particular the wide-ranging and potentially serious interference with fundamental rights that it gave rise to, that caused the problem. This is the crucial sentence, in paragraph 65:
“without such an interference being precisely circumscribed by provisions to ensure that it is actually limited to what is strictly necessary”.
“limited to what is strictly necessary”—
in paragraph 64. The noble Lord, Lord Paddick, picked up that aspect when he used the phrase “absolutely necessary” in his speech. This is a high test, and the court found that it was not satisfied by the directive.
That leads me to my first point for the Minister. In Clause 1(1) of the Bill, everything depends on the view taken by the Secretary of State about the requirement being imposed. The phrase used is “necessary and proportionate”. I would be grateful if the Minister could explain where that phrase comes from. It is not the phrase used by the European Court of Justice, and one might be forgiven for thinking that it does not constitute quite as high a test as the strict test that the court laid down in the phrase, “strictly necessary”.
The wording is important, because any court that is testing the ability of the scheme that the Bill contains to satisfy the requirements of the convention will look at the precise wording and see whether the guidance given to the Secretary of State, who has to take the decision, is sufficiently accurate and precise to enable him or her to fulfil the requirements of the directive. I am disappointed, I must say, that the carefully chosen wording of the court was not adopted here, and I would be grateful for an explanation of why that was not the case.
This is not an opportunity to go into detail, but one of the unfortunate aspects of the procedure being adopted is that we are being asked to rest on the basis of amendments to a code of practice and no doubt further regulations, which we have not seen. So a great deal of this has to be taken on trust. I am prepared, in this area, to repose a great deal of trust in Ministers.
But the wording of the test that they are being asked to apply is absolutely crucial. If one is seeking a sound foundation—a legal basis that puts the matter beyond doubt—one needs to choose the words extremely carefully.
Finally, I come to the question of extraterritoriality. Like others, I have been given suggestions—including a considerably detailed one—that there is an extension of the investigatory powers. I think I owe it to Jack Straw, as the noble Lord, Lord Howard, mentioned earlier, to make this point: in Section 2 of the Regulation of Investigatory Powers Act there is a definition of one of the expressions in the Act—“telecommunications system”. That definition says that a “telecommunications system” means a system,
“whether wholly or partly in the United Kingdom or elsewhere”.
Jack Straw stressed the words “or elsewhere”, and said that built into the definitions in RIPA from the very beginning was a recognition that such systems operate widely well beyond our own shores, so it was wrong to think that extraterritoriality was something new. I accept that, and here is the foundation for that proposition, right in Section 2 of RIPA. I also accept that since then there has been some informal method of imposing extraterritoriality—no doubt very properly, with the co-operation of overseas bodies—but that, the way things are nowadays, there is a need for that to be regularised. That is what Clause 4 is all about. However, I have a word of warning. Warrants are all very well; you can write a warrant and get it issued. The problem is in its enforcement.
I will give two examples, one of which takes us back to 1987 and the Zircon affair, which may not mean very much to us nowadays. The journalist Duncan Campbell was working with the BBC to present a series of programmes called “Secret Society”. One of his programmes was about the funding by government of a spy satellite, which in those days seemed a horrifying thing to do—perhaps we are now so used to them that we do not mind them. Nevertheless, Duncan Campbell thought that something extremely sinister was going on, and the BBC, in Glasgow, as it happened, had in its possession a great deal of material on that. Special Branch knew about that, got a warrant in London, went over the border to Glasgow and delivered the warrant to the BBC, which caved in and gave a lot of material to Special Branch. The BBC then consulted its solicitor, who looked at the warrant and said, “This is no good, because it hasn’t been passed through the system for the enforcement of warrants in Scotland—no sheriff has been asked to look at it”. So all the stuff had to be handed back. Special Branch went back over the system, tried a second time—got it wrong again—and the third time got it right. All sorts of things could have happened, although I do not suppose that much happened, because they were dealing with paper copies. However, nowadays it is so important to get the system right. Has thought been given—as has obviously been given to the mechanism for the creation of the warrant in the first place—to its enforcement?
The other example is a reported decision of this House in a case called Granada Television, in 1999, which was the reverse problem. The Scots were trying to enforce a warrant or to obtain material in Manchester under a warrant for use in Scotland. They ran into all sorts
of difficulties, which are described in that case, because of the problems of cross-border warrants. Therefore, while a great deal of thought has been given to the design of Clause 4—which I admire, as it deals with many of the problems—has thought been given to how you can enforce these warrants on people overseas? What about their enforceability in the United States or in China and the mechanisms which are necessary to make them effective? There is enough here that goes so far within our own shores, but the enforceability of warrants overseas may matter at the end of the day if we are to move beyond the informal process into an area that stands up to scrutiny in a court of law.
6.22 pm
Lord Wasserman (Con): My Lords, I am very grateful to the noble and learned Lord, Lord Hope of Craighead, for that brilliant explanation of the judgments of the European Court of Justice and related matters. I find it intimidating to continue now with some rather tedious political points after his brilliant exposition.
I will not detain your Lordships very long this evening. I simply want to record my strong support for this essential Bill and to urge your Lordships to give it a speedy passage on to the statute book. However, before I say anything more, I declare an interest as a strategic adviser to the head of public sector business of Telefónica UK. As an international company, it provides communications services to customers in the UK and therefore will be directly affected by the Bill when it becomes the law of the land. I have never discussed any aspect of the proposed legislation with anyone at Telefónica, and my connection with the company is declared in the register of members’ interests. Nevertheless, I thought it wise to mention that to avoid any possible misunderstandings at a later date.
On 16 June, at Second Reading of the Serious Crime Bill, which your Lordships have been considering in Committee, I said that although I welcomed that Bill, I was disappointed that it did not deal with the situation caused by the 8 April decision of the European Court of Justice, which struck down the European Union’s data retention directive, thus raising serious legal concerns about our own national mandatory communications data retention framework. I am pleased that those concerns have been confirmed by the report of the Constitution Committee published today. I went on to say that the court’s decision had very damaging consequences—perhaps I should have said potentially catastrophic consequences—for our fight against terrorism and serious and organised crime.
As was pointed out by the Minister and many other noble Lords who have spoken, communications data of the kind affected by the court’s decision are critical to the success of almost all investigations of serious and organised crime, including rape, child sexual exploitation and murder. Of course, they are also critical to the prevention of terrorist activity at home and abroad. That material is also vital to securing convictions and, as one or two noble Lords have mentioned, to protecting the vulnerable who are at risk of serious harm. That is why we cannot afford for there to be doubts surrounding the legality of our communications retention and
investigatory arrangements. In the speech of a month ago which I referred to, I also urged the Government, in putting things right by removing those doubts, to “act boldly and courageously” so that our law enforcement, security and intelligence agencies were able to use the full range of available technological systems and equipment to assist them in their mission of keeping us safe.
In saying that, I had in mind the communications data Bill, which, sadly, we will not consider in this Parliament. I very much hope that we as a nation will not have cause to regret the decision of the coalition Government not to proceed with that Bill at this time. I say that not only because I believe that a Bill of that kind is essential if our policing, security and intelligence services are to have even half a chance of keeping up with the ever-expanding capabilities of the information processing and communications industries. I say it also because that draft Bill was described in this House last Thursday by the noble Lord, Lord Armstrong of Ilminster, and again today, as,
“a good Bill which balanced the essential needs of civil liberty and privacy against the Government’s first duty to protect the security and safety of the citizen”.—[
Official Report
, 10/7/14; col. 288.]
That Bill has been ready for introduction for some time now, and has been sidelined for purely party-political reasons, despite a large amount of work having already been done on it by both the Government and the Joint Select Committee under the chairmanship of my noble friend Lord Blencathra. How sad that we should play politics with an issue that is so central to our national security and to the safety of our communities.
Be that as it may, I must admit that it would be difficult to characterise the provisions of this Bill as either bold or courageous. We have heard on a number of occasions from my right honourable friend the Home Secretary and from the Minister that this is a narrow and limited Bill, which does nothing more than maintain the status quo and ensure that police investigations do not suddenly go dark and criminals escape justice. I am sorry about that—it all sounds a bit too cautious for me. However, perhaps it is just as well that the Bill is not more courageous and bold. As we all know, courageous and bold Bills have a tendency to excite a good deal of political controversy, and therefore take up a good deal of parliamentary time. In the present instance, time is something we do not have very much of.
It is essential that we get these provisions on the statute book as quickly as possible. I see no justification for wasting precious parliamentary hours and days arguing about whether the Government should have brought the Bill forward more quickly, made it shorter or more comprehensive, or anything else. There will be plenty of time to argue about the Government’s management of the Bill and about their general approach to public safety and fighting crime in the run-up to the general election, which is about to begin, if indeed it has not already done so. The fact is that the Bill does the job that needs doing now. It does it efficiently and effectively. Those who want to have these issues discussed at much greater length can take heart from the fact that the Bill contains a sunset clause, which ensures that it will be repealed on 31 December 2016 unless
Parliament acts to continue it, with or without amendment. That is why I endorse the Bill without reservation and urge other noble Lords to do the same.
6.30 pm
Lord Davies of Stamford (Lab): My Lords, we have heard a number of speeches this evening which, unfortunately, have been dismissive of public concerns about this Bill, but I am glad to say that the general tenor of the debate has been very thoughtful. We have heard some very sophisticated speeches which have engaged with this subject in considerable detail. I pay particular tribute to the speeches from the noble Lord, Lord Hodgson, the noble Baroness, Lady Kennedy, the noble Lord, Lord Carlile, and the noble and learned Lord, Lord Hope. There were a large number of questions in those speeches, and I hope the Minister will take time to address those when he sums up and to provide the House with suitable considered answers because I do not think that the public concern in this matter is misplaced.
The concern is probably growing because of the volume of communications and data available. It is certainly growing because of the phenomenon of metadata which has already been dealt with in a number of colleagues’ speeches. The concern has also grown because of a major scandal which, curiously, has not been mentioned. The Snowden revelations revealed that the NSA—it has a symbiotic relationship with GCHQ, as the House will know—was severely in breach of American law. The chief executive of the NSA gave answers which were certainly less than full and frank, to a committee of the US Congress. That sort of incident can only greatly exacerbate public concern. Emergency legislation on such a sensitive matter is a perfect formula for maximising public anxiety. So it is not surprising that there are some very serious questions in people’s minds. It is important that Parliament makes sure that it does its job today, and indeed tomorrow, and makes sure that all the various angles of concern are pursued and addressed and that we get suitable answers from the Government.
I agree with the remarks of my noble friend Lord West. Having mentioned the NSA, I want to make that clear. I also have had a lot of professional dealings over the years with officials of the three major agencies. I have always found them—and genuinely believe them to be, in their vast majority—people of great professionalism, who are patriotic, extremely well motivated, entirely honest and concerned to obey the law. So I agree with what my noble friend said and I endorse those remarks. However, at the same time, we need to make sure that the legitimate concerns are properly addressed.
We all have to strike a balance this evening in how we decide to deal with this matter. My strong inclination is to support the Government. We have heard the Government say that major criminal prosecutions depend on the continued availability of these powers. We are talking about powers that, in the main, are already in place and with which we are familiar, although there were interesting questions today about surreptitious and covert extension of the powers in the Bill. The Minister, who takes his duties very seriously and for whom the House has the greatest regard, said in his
introductory remarks that lives may depend on the continuation of these powers, by virtue of our passing this Bill as rapidly as the Government are asking us to do. For those reasons, it would be difficult to do anything to hold this Bill up. I do not intend to do that. Nevertheless, I look forward with great interest to the answers from the noble Lord.
I want to make three brief points. The first is a repetition of what I said last week when the Statement was made, but the audience is slightly different tonight so I will repeat it. It is clear that we would not have got into this particular mess, and the Government would not have required this emergency legislation, if we had used primary legislation to provide ourselves the original powers. This is not a party political point because it is a point for both Governments. I know very well, and I said last Thursday, that all bureaucracies—it must be true around the world—and all Ministers like to have a quiet life if they can. Their first, instinctive, default reaction is always to try to put any legislation through the secondary process so that the scrutiny will be pretty soft, maybe even perfunctory, and unlikely to be very profound. That sort of behaviour only changes when it is seen to have a cost. On this occasion it does have a cost for the Government so I hope that a lesson will be learnt. When we have legislation that raises important principles, or as in this case, an important conflict of principles between privacy and security, that sort of legislation should always go through the primary legislative process.
My second point deals with timing. I repeat what has already been said by many others. I do not believe for a moment that it was necessary to wait three months after the ECJ judgment to tell Parliament—or anybody at all—that there was a need for new legislation on this matter. The Government, if they had been half-competent, would have known before 8 April that there was a possibility of the ECJ deciding in the sense in which it did, and therefore could have prepared some reaction on a contingency basis. Even without that, by 9 or 10 April, they knew what the position was and they could have taken action accordingly. Silence for three months followed by the demand that Parliament passes something in a week or two, is frankly taking Parliament for granted. I do not think Parliament can or should ever allow itself to be taken for granted. This is a very serious point. The Minister himself is not responsible for this. He has to come to this House to defend the actions, or failure to act, of colleagues. We understand that, but it is important that a message goes back that the Government’s behaviour on this occasion is simply not acceptable.
My third point is this: I have had no collusion with the noble Lord, Lord Butler—I had not the faintest idea what he was going to say. I personally was absolutely horrified that there was no report by the Intelligence and Security Committee available, when we have to take a decision so rapidly on this Bill. I may be wrong, but I thought the whole purpose of the Intelligence and Security Committee was that we had their ears and eyes on our behalf behind the security wall, able to ask questions of the agencies, able with their great experience and knowledge—which the noble Lord, Lord Butler, certainly represents—to weigh the answers, to decide what exactly the threat is, to decide whether
the powers that the agencies have are adequate and if not, in what way they need to be supplemented, or whether they are excessive and gold-plated. All these questions are those which the committee is able to reach a judgment on, on our behalf. We could ask the questions but we would not get the answers, whereas the committee can not only ask the questions but can insist on getting the answers.
I was absolutely stunned that there was no report at all. I could not quite believe it. I went to the Printed Paper Office and asked for the committee report—I was told that there was not one. As the noble Lord, Lord Butler, has told us, the committee did not hear about this until a few hours before the rest of us, and so it is not surprising that it could not produce a report. If it had had two or three months’ warning, which it could easily have had, we could have had a very intelligent and helpful report. It might have helped the Government—I am assuming that the Government are not actually up to some terrible trick and are not deliberately trying to disguise the facts from the public and from Parliament. What an extraordinary. idiotic thing it was, to pre-empt the possibility of such a report being produced in the first place.
As I said, I will be supporting this Bill but I am very concerned about these matters. I think that the whole House is waiting with great interest to hear the Minister’s response.
6.38 pm
Lord Strasburger (LD): My Lords, I start my contribution to this debate with the words of Benjamin Franklin, in a letter to the colonial Government more than 250 years ago:
“Those who would give up essential Liberty, to purchase a little temporary Safety, deserve neither Liberty nor Safety”.
Having said that, nobody in this House more than I wants the people of this country to be safe—to be safe from terrorists, safe from paedophiles, safe from drug barons, safe from anyone who would do us harm. I am sure that every noble Lord feels the same way.
I am also confident that we all agree that there are some limits on the price we are prepared to pay to nudge the threats to our citizens closer to zero. For example, not many of us would be happy to see the Government installing equipment in everyone’s home to continuously record video and sound. We would not like it if all our letters were being steamed open by the authorities, and then scanned and recorded for no better reason than that we might one day go off the rails and commit a serious crime. Although these measures would probably reduce crime of all types, most people would consider the level of intrusion too big a price to pay. We all have a privacy red line we would not cross in return for some sort of reduction in the threat to our safety. It is a matter of where that red line is that we are debating.
By the way, some noble Lords may not realise that so far as our use of the internet is concerned, the red line has already been crossed. GCHQ’s Project Tempora is doing the digital equivalent of steaming open our e-mails and web browsing, and recording it all, with no differentiation between metadata and content. I
have tried on many occasions in this Chamber to raise this huge invasion of our privacy, which is without the people’s consent, but have just been stonewalled by the Home Office, which would rather that we talk about something else and leave it to get on with trampling on our liberty and our privacy.
To return to this Bill, some will be surprised to hear that I support it, for two reasons. The first is that I accept that the ECJ judgment could leave our police and intelligence agencies with no communications data about those who have committed, or are about to commit, serious crime. We do not have time to discuss and agree a Bill to replace RIPA that would deliver the data on the bad guys and leave the innocent alone, and would provide the extra security and control that is needed. So we have no option but to pass this Bill to temporarily fill the gap. Although that means that vast numbers of suspicionless citizens will have their metadata collected and stored, I am reassured that this Bill, when it is enacted, will start life under a sentence of death in 29 months. I will come to my second reason for not opposing this Bill in a moment.
Although other noble Lords—in fact, every noble Lord—has referred to it in this debate, I cannot stand here without drawing the House’s attention to the scandalous affront to democracy that is the timetable for this Bill. The Home Office and everyone else knew about the ECJ judgment on 8 April. Despite being told by many specialists in the field that there was a consequential effect on the validity of the UK’s 2009 data retention regulations, the Home Office repeatedly asserted that there was no problem. Then suddenly, 13 weeks after the ECJ judgment and two weeks before the Summer Recess, the Home Office now tells us that there is a problem and an emergency Bill has to be passed within a week.
There are only two possible explanations for this chain of events. The first is pure incompetence and a failure to understand the judgment; the second one, to my mind, is that it is a ploy by the Home Office to suppress scrutiny of important and complex legislation. Last Tuesday I watched the Home Secretary struggle to explain the sudden panic to the Home Affairs Select Committee. Perhaps my noble friend the Minister could have a go when he responds to this debate. Why was this Bill not mentioned in the Queen’s speech, which took place eight weeks after the ECJ judgment? Was it a mistake or was it a conspiracy? No wonder there is such cynicism about and distrust of politicians out in the country.
RIPA was deeply flawed for many reasons when it was passed. Today it is also out of date, having been passed seven years before the first smartphone was introduced to the market—Apple’s iPhone—and internet on the move became ubiquitous. It allows too many public authorities to delve into too much of our data for too many reasons. While the equivalent in America is used less than 60,000 times a year, there are more than half a million access requests a year in the UK. But the biggest problem with RIPA is that it contains a deliberate and well concealed loophole that is used to claim legal cover for Project Tempora’s hoovering up of everything that everyone does on the internet and storing it. The British people were never asked,
via their representatives in Parliament, “How do you feel about the Government helping themselves to all your private data?”. I presume that they were not asked because the Home Office knew what the answer would be—and it would not have been, “Yes please”, especially if it had been explained that it is as if there is a man or woman from the Ministry looking over your shoulder and making notes whenever you use the internet, at home or at work or on a train, or wherever you are. So instead of getting the permission of the British people, the Home Office used legislative sleight of hand to slip it in under the radar. That must ring alarm bells about related legislation such as this Bill being rushed through without proper scrutiny.
Parliament, too, must take its share of the blame for this state of affairs. For too long, parliamentarians have been asleep at wheel when it comes to watching our spies or resisting Home Office land grabs. Is it not to Parliament’s shame that it took an ECJ judgment to point out that the European directive on data retention, which the UK was heavily involved in promoting, fails to comply with human rights law in many ways? Many specialist lawyers are saying that existing UK law and regulations, after amendment by this Bill and its accompanying regulations, fail to answer at least two of the ECJ’s concerns, which leaves them vulnerable to challenges. As a former Conservative chairman and shadow Home Secretary said in the other place yesterday:
“While the Bill may be law by the end of the week, it may be junk by the end of the year”.—[Official Report, Commons, 15/7/14; col. 731.]
What then—another emergency Bill?
I said earlier that there was another reason why I am supporting this Bill. It is that the Deputy Prime Minister has been very astute in extracting a high price for his co-operation. I am particularly pleased that the long overdue review of RIPA will now happen and that Mr Anderson’s report will go to a Joint Committee for consideration. The new Government will have to take notice because RIPA will be heading for the buffers when this Bill expires in 2016. As other noble Lords have said, it is high time that there was a full debate in this country on how much privacy we are prepared to sacrifice for a bit more security. The setting up of a privacy and civil liberties council has the potential to redress the balance in favour of the citizen versus the state. Time will tell. The small but meaningful decision that the chair of the ISC must be from an opposition party will make a difference.
Finally, I am not a politician, but I hope that noble Lords will forgive me for making a political point. None of these important steps forward, and others that I have not mentioned, would have happened without Nick Clegg’s steadfast insistence. None of them would have happened without the Liberal Democrats being in government.
6.49 pm
Baroness Lane-Fox of Soho (CB): My Lords, when Tim Berners-Lee famously typed his message “this is for everyone” at the start of the 2012 Olympic ceremony, I do not think he could have imagined just how prescient that statement would be and why. Tim has always striven for an open, transparent and universal
web, one where people are able to have private conversations and assume complex identities. Nowadays his Olympic optimism could be read instead as a statement of the irrevocable powers of Governments and commercial organisations to know everything that people are doing in their digital lives.
I do not think that many of us who were around at the beginning of the web’s development imagined that the landscape would so quickly look as it does today. I certainly thought that, as the web became more mainstream, it would open up enterprise, policy-making and the monopolies that had characterised our society. The power for individuals to disrupt the status quo and to create better services—both public and private—seemed significant. Instead, it is remarkable how quickly the freedoms that I found so energising are in danger of being eroded.
In this context, I want to talk about three aspects of the Bill: first, the digital skills needed within Parliament to achieve proper scrutiny; secondly, the timing of the sunset clause; and, finally, the nuances of Clause 4. I spend a great deal of my working life encouraging large organisations to embrace the digital world, particularly the pace of digital change. Generally, I am on the side of speed, and I am often mocked for setting an unfeasible and unreasonable timeframe to complete a project. As noble Lords have said, the timeframes for this Bill are alarming.
I agree with all noble Lords who have raised the point, as well as with the World Wide Web Foundation, which said that,
“we fundamentally disagree with the lack of consultation and the speed with which the Bill will be rushed through. Full and frank public debate that informs the legislative process should have occurred by now—after all, these issues have been making headlines for over a year and the relevant ECJ judgment was delivered in April”.
Putting aside whether it is proper parliamentary process, this rush seems to highlight an issue of growing importance which we, as parliamentarians, face. I consider myself fairly digitally literate and yet I have struggled to understand the nuances that are informing this legislation. Whatever our political persuasion and whatever we feel about the subjects, we can all agree that these are complex areas which are understandably unfamiliar to many parliamentarians who are being asked to consider them. I felt as if I had a head start, yet I struggled to assimilate the different areas addressed in the Bill. As the noble Lords, Lord Knight and Lord Hodgson, demonstrated so effectively, even the meaning of metadata is complicated. Contrary to popular belief, it can very easily and quickly lead to individual identification.
Through no fault of their own, parliamentarians may well be making judgments on areas which are rapidly evolving and where technology is changing the art of the possible. For example, ways of intercepting and recording data that do not exist today will undoubtedly be invented. There are many products launching right now which will change the boundaries again. How do wearable technologies, such as Google Glass, which collect data fit into this new picture? It therefore makes me extremely nervous that Bills which require such deep technical expertise are given so little time.
The digital capability of the other place and of your Lordships’ House is something that will become more and more profoundly significant. All pieces of legislation will soon have aspects of technology at their core and our ability to scrutinise effectively will rely on a deeper understanding than currently exists. As someone from the digital sector, it is also disappointing to watch as legislation that directly affects that sector is so cursorily debated. It only goes to further people’s belief that neither House understands the modern world nor cares about their digital lives. It is a tough problem to crack, but may I suggest to the Minister that it would be interesting to consider a review of our own skills which might lead to some actions to improve them?
The lack of time to scrutinise the Bill is what makes the sunset clause so vital. If debate about these issues is as important as the Government reassuringly claim that it is, why would a sunset clause not come into force much more quickly than after two and a half years? The pace of technological change is so great that to be certain of anything two years out is brave. The questions under discussion are becoming more, not less important to citizens. Many in the technology community, including Jimmy Wales, the founder of Wikipedia, are calling for a six-month sunset clause. Despite the six-month reviews included as part of the amendments made yesterday, that would seem extremely sensible and desirable.
My final point is on Clause 4 of the Bill. If this clause is seeking to preserve the status quo, it is a status quo that has never been clear or legal. It is a status quo which, as has been intimated by other noble Lords, read in conjunction with Section 8(2) of RIPA would allow for the blanket interception of all data from international technology companies. Like the noble Baroness, Lady Kennedy, I would appreciate clarification as to whether this complies with the ECJ judgment.
I am not clear why, in an age where all data can be collected, all data should be collected. We require reasonable suspicion and an individual search warrant in order to enter someone’s home. Why cannot the same be true in respect of someone’s online property? No one would suggest that, where appropriate, Governments should not be able to target individuals about whom they have suspicions. The security of citizens is paramount. I have felt reassured that, where necessary, the security services have the ability to track an individual who may pose a threat, using all the available new platforms. However, I believe that this Bill is building on a modus operandi that has been going on for too long without clarity or transparency, and because it has been happening it does not mean that it should go on happening. In some ways it could be argued that at least Clause 4 puts a legal framework around something that, as the Home Secretary herself has said, was just previously assumed by Government, but at least let us be honest about the extent and genesis of these powers.
When the Snowden revelations broke, President Obama immediately set up an expert panel to examine oversight of the security services. That showed how far the political discourse in the UK lagged behind that of the US. No such steps were taken here. This panel looked into claims by the NSA about the necessity
of data gathering. It found only one case where the bulk collection of phone records was helpful—itself a money laundering incident. Allegations that GCHQ and the NSA undermined encryption alarm everyone who trusts the web with their medical, financial or personal records. Public trust is at an all-time low and I fully understand why. We ignore people’s anxiety at our peril.
As many noble Lords are aware, this year is the 25th anniversary of the world wide web. It is essential that we do not charge headlong into decisions about the relationship between citizen and state in the new world that will influence us for the next 25 years. I am an optimist, but I must confess that I am uncharacteristically depressed. The web I want seems to be disappearing. Addressing the ECJ ruling and planning this Bill far earlier could have been an extraordinary opportunity to instigate a wide-ranging and sophisticated review about the future, a review which carefully considered the implications of data collection, the role of surveillance and the trade-off between privacy and security. Instead, we are being catapulted into legislation that builds on the badly understood and arguably dysfunctional RIPA legislation.
This Bill sets a precedent from which, even with reviews and a sunset clause, I believe it will be hard to row back. I sincerely hope that we do not regret it. I look forward to the Minister’s response.
6.58 pm
Lord Judd (Lab): My Lords, I am glad to follow two such courageous, perceptive and challenging speeches, with which I found myself in great agreement.
It would be foolish to deny that we live in a very dangerous world. One of the most important considerations is that we do not—deliberately or, at worst, inadvertently—give victories to the extremists. We must become resolute in defending the things that make our society worth protecting. At times I share the noble Baroness’s despair, which she was very honest about. I have an awful feeling that if we looked at ourselves from another planet and saw what had happened to the quality of our life in the past 20 years, we would be appalled at how far the extremists have won victories by getting us to restrict and undermine the whole quality of our society, of which law, as we understand it, and the operation of law is so essential.
A long time ago I dealt with security in the Ministry of Defence. I was not dealing with it in this particular context, but as a Service Minister. It struck me then that if you believe that in the reality of the world in which we live there must be security services, by definition it is crucial that they are headed and staffed by people who are second to none in their commitment to the defence of liberal democracy, and who in that context really believe that what they are about is maintaining the quality of British life. Therefore, it seems to me there has to be trust in all this. That is why it is so important to be able to be confident that the right culture operates in the security services and the Home Office.
That is why I cheered the very stern rebuke at the beginning of the debate from the noble Lord, Lord Butler, with all his distinguished experience. It is totally
unacceptable and a very sad day for the quality of British democracy that we should rush the Bill through at the end of the summer Session, with all this duress. I share the view of the noble Lord, Lord Carlile. I cannot see any evidence as to why we could not have considered this earlier. One is forced to the sad conclusion that a political game is going on here: that the Government want to reduce the amount of public discussion. Let us take one statistic: 88% of the British public want their telephone communications to be private. If we move into this kind of area, it is crucial that we have the maximum public debate and discussion, starting with Parliament, about what is involved and what is at stake. We have not had that. Whatever the improvements to the legislation—I take my hat off to those who have worked very hard to get it improved—we still know we are not going to be able to begin to scrutinise it in the required detail.
I want to make another general observation. I often reflect that, in an age of advanced IT and incredibly advanced surveillance techniques, it is just possible that we in institutions such as Parliament are all trying to shut the stable door once the horse has bolted. That brings me back to trust. Unless the security services and others operate with a relentless commitment to values that matter, I am very dubious as to how far effective scrutiny can ever be ensured in the future. We can take certain steps, but there will always be potential for abuse. In recent years, there have been too many disturbing examples of the security services going off course. In saying that, I do not want to join an ill informed body of people yelling at the security services, which are doing immensely challenging work in very difficult circumstances. I have great admiration for them. However, we have to face up to the targeting, which has been seen in recent years, of benign activist organisations, of trade unions and, indeed, of my noble friend Lady Lawrence. Those are profoundly disturbing issues that raise all sorts of questions about how much trust there can be and how we can ensure we have as much accountability as possible, with all the reservations I have expressed.
In the mean time, I would like to raise certain specific issues, on which it would be helpful if the Minister was able to comment or indeed write—although I do not think there is much time to write to us before tomorrow. The Minister and the Government have repeatedly said that DRIP just maintains existing interception capability, but is that really the case? Is it not, in effect, primary legislation that is supporting and extending controversial mass interventions—let us face up to it—such as those revealed by Snowden, the use of which has been doubted by the US Privacy and Civil Liberties Oversight Board and criticised by the Interception Commissioner? I would like to hear more from the Minister on that point.
How can I know if we come to this urgent situation because we currently have some sort of acute emergency? How can any of us know the realities of the nature of that acute situation? If we really have such a situation, why will it take two and a half years before the emergency measures have to be reasserted and positively endorsed by Parliament? That is a hell of a long time. Surely we should have a much shorter period.
If there is to be an independent review of RIPA it obviously has to be robust. I believe it must include terms of reference, proper funding, specified timescales and scope. What is really needed is a convincing board of people with relevant and impressive experience, with a credible chair.
There is one other matter. If we are trying to establish minimum requirements for a review of UK-USA data sharing, we need to clarify our goals. We need to update existing arrangements for data interception and processing by the US in the UK. We need to review the whole process of UK-US data sharing, and we have to look at the US’s use of data retention in view of new technologies and innovative practices since the original 1946 UKUSA agreement, as amended. We need a specific assurance that UK data will not be available to support activities that would be unlawful in the UK, including extrajudicial targeted killing—noting confirmation from senior US officials that “metadata kills”. That is an extremely serious issue, which we cannot skate over. We need very specific reassurances from the Government.
I conclude as I was arguing a moment ago, and some of those who serve on the same Select Committee as I do will get a bit weary of how often I find myself repeating this. Because of the nature of the IT advances and the huge scope of surveillance that we now have, we are playing around unless we are second to none in the fight to establish a culture to defend what freedom, justice, the rule of law and open government are really all about. I am afraid that we have slipped a very long way.
7.10 pm
Baroness Kidron (CB): My Lords, it is an honour to follow such a speech from the noble Lord, Lord Judd. I feel that I had better declare my involvement in iRights, a civil society initiative that seeks to establish five principles that would frame all interactions with children and young people under 18 when they use the internet and digital technologies.
There seem to be four aspects of the Bill that cause concern: the process by which it came to your Lordships’ House; whether it does or does not represent the status quo; whether the status quo is what we want to reproduce; and, given the uncertainty of the first three, whether the sunset clause is too far away.
Given how much has been said on the first point, I just want to share the dismay of others at the lack of both foresight and oversight. I understand that heading off opposition and consulting stakeholders are legitimate parts of the legislative process but, somewhat unusually, in considering this Bill it is worth us noting that nearly all the UK population uses the technologies that the Bill addresses. They, too, are stakeholders, and to deny them a proper understanding through the reporting of public debate that the parliamentary process provides is at the very best disrespectful and most probably a further blow to public confidence in the political establishment.
The question of security versus freedom and privacy will be central in a world in which web and digital technologies become the organisational technologies of our society. Rushing through emergency legislation
that has been privately consulted upon by an elite group of parliamentarians and international companies does not send a reassuring message of transparency and accountability that such an important issue deserves.
We are repeatedly told that this Bill is not intended as an extension of powers but that it simply upholds the status quo, that Clause 1 restores the previous position on communications data retention, and that what had previously been assumed about the extraterritorial application of communications data acquisition and interception powers was now being properly put on the face of the Bill in Clause 4. This reassurance has been repeated in briefings, in the Explanatory Notes attached to the draft Bill, in the impact assessment, in the other place and today in this debate, but it is in this Chamber on multiple occasions, listening to the likes of my noble friend Lord Pannick, the noble Lord, Lord Lester, my noble and learned friend Lord Woolf and many others that I have experienced the powerful art of clarification.
The companies at which the extraterritorial reach of RIPA is established and aimed want clarification, by Ministers’ own admission. If they need clarification, it must mean that there is some doubt. If there is no longer doubt then there has, de facto, been an extension, the purposes and meaning of which have not adequately been tested by the British public nor by their Parliament.
My noble friend Lady Lane-Fox, in her debate that celebrated the 25th anniversary of the world wide web and again today, suggested that we as a nation and we as a Parliament had not properly responded to the revelations contained in the leaks orchestrated by Edward Snowden. In spite of what we now know and the Pulitzer prize-winning efforts of the Guardian and the Washington Post to make us care, we are rushing through a Bill without the opportunity to determine whether the status quo should be underlined and underscored or whether, in a world where communications are central to every aspect of our lives, we now need to think again.
I should like to make it clear that I have little appetite for a lawless and untended communications highway with no responsibilities to real-world outcomes. Like most others who reject this emergency legislation, I would actively support a more carefully considered Bill that sought to address some of the broader issues that have been raised today and some of the newer technologies on the horizon. However, imposing suspicionless blanket communications data retention on the entire population challenges the basic premise of a free society. For that reason, this policy has been struck down in constitutional courts across Europe and, for that reason too, we must have a regime that takes account of all possible consequences of data retention, as well as the absolutely legitimate needs of the police and security forces.
The European Court of Justice found that on 10 counts the 2009 regulations failed to deliver proportionate retention of data. It laid out specific criteria that needed to be met. We have been told by Ministers in briefings that the Bill in front of us answers some of those findings and that others are answered by existing UK legislation. In spite of reading many late briefings,
I cannot fully comprehend in sufficient detail whether all 10 counts have been fully answered. I ask the Minister whether there is any danger that the Bill simply re-enacts the disproportionate retention that has already been found unlawful by the European Court of Justice—a point put much more eloquently and precisely by my noble and learned friend Lord Hope of Craighead.
It is disappointing that the Bill has come to your Lordships’ House in such unhappy haste and that its progress to becoming law does not serve to educate Members of both Houses about the issues at stake. Nor does it ignite a desperately needed public debate about who is gathering the data, what those data are, and when and how they are being gathered. It is desperately worrying that its development has taken place entirely in private. I find myself wondering whether the explanations given by Ministers for conceiving this Bill in private suggest that Her Majesty’s Government’s need for privacy is a little more equal than the need for privacy of the population as a whole.
Given the inevitable passing of the Bill without it being subject to the parliamentary journey that it deserves, your Lordships may wish to send a message to the citizens of the UK by inserting an earlier date for the sunset clause. It would be a date not designed to serve the needs of the election cycle but one that reflects the urgent need of the British people—indeed, it is an emergency—for their Parliament to understand, investigate and decide how we are going to balance their need for security against their need for privacy and liberty.
7.18 pm
Lord Blencathra (Con): My Lords, I support the Bill, which is an essential stop-gap measure.
We must continue with our current powers and the 12-month retention period until we pass new legislation which tackles the so-called capability gap, deals with the vexed question of IP addresses and strikes a proper balance between the needs of the security services and the police on the one hand and the privacy of the individual on the other. For the moment, that means the Bill that we are considering today, and it means more Elastoplasts on the broken and bleeding RIPA 2000. Also, we must attempt to persuade our United States service providers to co-operate with us—the extraterritoriality clause.
I do not want to sound like a second-hand car salesman as I return yet again to extol the virtues of the report of the Joint Committee on the Draft Communications Data Bill, which I had the privilege of chairing 18 months ago. We were fortunate to have the noble Lords, Lord Armstrong of Ilminster, Lord Strasburger and Lord Jones, my noble friend Lord Faulks and the noble Baroness, Lady Cohen of Pimlico, as well as six excellent colleagues from the Commons. Our task was to scrutinise the draft Bill, which was then commonly known as the snoopers’ charter. We all started with some fairly strongly held beliefs, some of which we discovered were quite wrong, and we held widely different views on key issues. Nevertheless, we agreed on a unanimous report, which I commend to the House and the Home Office as a blueprint for new legislation to replace RIPA. It is only £15.50 and I have lots of remaindered copies.
To be fair, just after we reported, the Home Office showed me and the noble Lord, Lord Armstrong, the framework for a new Bill, which incorporated about 95% of the recommendations we made in the report. Unfortunately, that new draft did not find favour with all members of the coalition, but I will not be critical. However, it is essential that after the next election measures along the lines we suggested should proceed expeditiously. Why, you may ask? It is simply because RIPA is no longer fit for purpose and should not be the framework on to which we patch amendments to catch up with technological changes. The Home Office says that there is a capability gap of 25% in the information it collects now as compared to 2000. My committee was highly sceptical about that.
In 2000, I had a top-of-the-range Nokia phone which held about 100 phone numbers and 120 short text messages. I wish I had that phone back. In 2000, only 50% of UK adults had a mobile phone. In 2012, that figure was 92% with 81.6 million mobile subscriptions. What does your iPhone or Galaxy hold now? A thousand times more information, as it can also handle all web and e-mail traffic. Facebook was invented on 4 February 2004 and Twitter on 1 March 2006 and both have added billions of bits of new information to the airwaves. After Twitter was launched, we were told that it took three years before the billionth tweet happened. Now there are a billion tweets every two days, God help us. That is why my committee said that,
“the volume of communications data now available is vastly greater than what was available when RIPA was passed. The much quoted figure of a 25% communications data gap purports to relate to data which might in theory be available, but currently is not. The 25% figure is, no doubt unintentionally, both misleading and unhelpful”.
Clause 2 of the Bill defines “communications data” and gives them the same meaning as Section 21 of RIPA, but what exactly are communications data? There are three parts to this. First there are traffic data, identifying the location of the device to or from which the communication is sent. Secondly, there are use data, which are anything other than content about the use made of a service. Finally, there are subscriber data which are data, other than traffic or use, held by a service provider about the persons to whom it provides the service. Traffic and subscriber data are absolutely vital for law enforcement authorities, as we have all heard, since they give the location, name and address of the subscriber, their bank account details and stuff such as that. At least that was all they did in 2000, when half of communications were by land line. However, RIPA was drafted in such a way that every bit of information one supplies to a service provider is automatically classed as subscriber data unless it is in the narrow category of traffic or use data. Subscriber data have, therefore, accidentally become a catch-all for everything not called traffic or use. That is one major reason why there was widespread criticism of the draft Bill and why many people called it the snoopers’ charter.
However, there were other reasons. The original Bill was exceptionally widely drafted, for the best of intentions. That was a tactical mistake by the Home Office. It wanted to make the legislation technologically future-proof. Facebook and Twitter came out a few years after
RIPA was passed and the Home Office, Ministers and many of us who served there know that although one can get a crime and justice Bill in nearly every Queen’s Speech, there was little likelihood of a new RIPA being passed every year. So the Home Office tried to make the legislation in the draft Bill as wide as possible, taking into account any new gizmo, widget, app or service that some brilliant geek might invent in his bedroom many years hence. Inevitably, that very wide scope concerned many people and rightly so. My committee said that no area of technology was moving faster than communications technology and that if Parliament wanted more control of legislation in this field, we had to have a very efficient means of annually, if necessary, amending the legislation to keep up with technological advances. That was the quid pro quo; if this House or the other place wanted narrowly focused measures requiring parliamentary approval, we had to give the Government a rapid mechanism to approve changes.
The other major tactical mistake that the Home Office made originally and later corrected—but by that time the damage was done—was not to spell out exactly what were the crucial bits of information it really wanted in the new measures. Opponents were rightly pointing out that the draft Bill wanted to capture and store every communication, including the content of all e-mails and records of every website visited. We were told that the reasons could not be revealed because of secrecy, hence the very wide drafting of Clause 1. Initially, the Home Office would not tell us what data types it was looking for. However, when we talked to the police and others, it soon became clear that 98% of the time they needed only location, name, address, bank details and numbers. This is basic traffic, use and subscriber data—the who, what and when stuff.
When applied to computers and the technology we have now, that meant three slightly different things. Subscriber data would include IP addresses, but that is no different, in principle, from telephone numbers. The second, highly contentious items we wanted were data identifying which services or websites are used on the internet up to the first forward slash. Thirdly, there were data from CSPs based overseas, which are addressed in Clause 4 of the Bill. The Home Office confirmed to my committee on 24 October 2012 that those three items were the capability gap it wanted to plug.
The extraterritoriality provision in Clause 4 attempts to deal with the difficulty of obtaining information and co-operation from giant service providers based mainly in California. I am with very distinguished and learned noble Lords but that clause is a little bit of wishful thinking. We are legally powerless to compel Google or Apple, or any of the rest of them in California, to give us information held on their servers outside the UK. However, in 2012, we heard fairly powerful evidence that they co-operated all the time with the British Government—nudge, nudge, wink, wink: we do all that co-operation stuff—but they wanted a comfort blanket of something judicial or semi-judicial that they could rely on. That is what they get in the States. The FBI gets a judge to approve a warrant and then the CSPs will hand over everything straightaway. So they wanted this fig leaf of some British warrant so that they could say to their customers,
“We do not want to give anything away, we will keep everything secret, but we have this judicial warrant so we have to hand it over under the law”. It is great if they do that, but do not expect United States service providers to feel legally bound by the power we are putting in here. It is a good little fig leaf; it is ours and we should give it a go.
The one mega item that my committee wrestled with was internet protocol or IP addresses and web logs. There is deep division in the country and in Parliament about the state collecting and storing all these and how far that impinges on personal liberty. This is not the time to go into it but it is the core of the concerns raised about the earlier Bill. This Bill, rightly, does not touch on it, but we will have to return to this issue early in the next Parliament. My committee concluded that a new Bill should be drafted in such a way that this one item could be voted on in both Houses of Parliament and a definitive decision reached on it. We did not want it hidden away in some obscure legal or technical jargon that would cause suspicion of the Government’s motives, as well as confusing every single one of us who were supposed to vote on it.
I am proud to say that my committee was thorough and meticulous, not because of me but because of the others who served on it. We savaged the Home Office draft Bill and I make no apology for that. However, we drew up a framework for a better Bill. I pay tribute to Home Office Ministers and officials who rapidly took on board 95% of what we suggested. The noble Lord, Lord Armstrong, and I were fortunate enough to see some of the revised draft. That draft did not get full coalition support but, in my opinion, it dealt with all the problems. If that Bill were to be presented again, it could never be properly called a snoopers’ charter. It targeted the gap, narrowed the scope and built in protections.
Turning to Clause 7 and the independent reviewer, I shall send Mr Anderson our report since we have done most of the work for him—at least, on items concerning Clause 7(2)(b) to (f). We were not allowed, and we did not want to have, the power to comment on current and future threats to the United Kingdom. There is a clear case for new legislation to replace RIPA to give our security services, the police and others the powers that they need, but that has to be based on parliamentary approval of all aspects of all the powers. The public will consent to quite large levels of intrusion so long as the powers to do it are clear, open and proportionate, and have had proper democratic scrutiny. I hope that when Mr Anderson reports we will not be faced with a heavily redacted report on which the Government may wish to base the reasons for new legislation. That simply would not get through this House.
Noble Lords will be pleased to hear that that leads me to my final point. I think I heard the Home Secretary say that there will be a scaling back of the organisations that could get access of some sort to the data. On our committee, I think we were all surprised and appalled to discover that more than 600 organisations, including 400 councils, could use RIPA to access data. None of them is in RIPA except the police, SOCA, which is now the National Crime Agency, HMRC and the security services. That was another fundamental
presentational mistake that the Home Office made and is still making. We have the repeated mantra from Ministers and the Government that access to communications data is essential to deal with terrorists, paedophiles and serious crime, and that these organisations need the exceptional powers granted in RIPA to deal with them. We all agree on that and there is no argument there. But when one finds that local councils are included as relevant authorities, and that one used RIPA to catch out a parent outside a school catchment area, and that others use it to catch fly tippers, no wonder people simply do not believe that the Government were thinking only of taking exceptional powers to deal with terrorists, paedophiles and serious crime.
Among the 200 other organisations is my favourite bête noire: the Defra egg inspectorate is on the list because its job, through its Veterinary Medicines Directorate, is to investigate the serious crime of stamping the little lion on the wrong eggs. I kid you not. I checked on the website this morning and—I do not know how this can be put in Hansard—I can give the Minister the pages from the website, including the picture of the little lion on the eggs. That is still being done. I make that slightly silly point because these organisations are on the list and they undermine the argument that we need RIPA powers to deal with the serious crimes. I ask the Minister to get rid of all these other organisations, which account for less than 2% of the access requests to RIPA but do enormous discredit to the main argument. I know that they cannot get access to intercepted communications data and that they are more limited in what they can get access to, but they get some form of access. Let us restrict the new RIPA powers to the police, the security services, the FSA, the NCA, HMRC and the United Kingdom Border Agency—the big players. If we do that, we will go a long way to removing the snoopers’ charter label. The British people and this Parliament will be happy to grant exceptional powers to these important organisations to access all data if it is to catch terrorists, paedophiles and serious criminals. But the quid pro quo is that they, and only they, should have access to these powers. I appreciate that some of these matters are not for this Bill but they are part of the broken and bleeding sore that is RIPA just now and which this Bill is trying to patch up. We need the Bill but we need a new RIPA even more. I apologise for taking so long.
7.34 pm
Lord Soley (Lab): My Lords, it is a pleasure to follow the noble Lord, Lord Blencathra, who knows a lot about this area. I do not need to repeat many of the very good arguments that have been made, including the obvious case about the delay between the European Court passing its judgment in April and this Bill being rushed through now, which is right. The Government have to answer for it. I do not wish to pursue it. I agree that the legislation needs to go through and that it is very good that the Government have accepted some of the amendments dealing with reviews, the sunset clause, and so on.
I heard the Minister say in his opening speech that he accepted the second recommendation in the Delegated Powers Committee’s report. I did not hear him say that he accepted the first recommendation, which deals
with the affirmative procedure being used after the regulations have been brought into effect. Will the Government accept that recommendation in paragraph 7 of the report? The noble and learned Lord, Lord Hope of Craighead, made a number of interesting points. If I understood him correctly, as regards Clause 3 on grounds for issuing warrants and obtaining data, his question deserves an answer. Why are the Government using the words “necessary and proportionate”, which is a weaker phrase, when the European Court of Justice refers to “strictly necessary”? I am relieved to see the noble and learned Lord nodding because I did not quite follow some of the legal points that he made. That seems to be an important point.
I now turn to the issue in its wider sense, which has been very important to me for some time. I have had a long involvement in legislation, as the noble Lord, Lord Howard, will know, including in the Prevention of Terrorism Act in the House of Commons. The noble Lord, Lord King, made the point that about 30 to 40 years ago there was a department in, I think, the Home Office, which steamed open letters to see what was written in them. My memory is of making a speech in about 1979 pointing out that MI5 and MI6 did not have an existence in statute. No statute recognises the existence of those two organisations despite the fact that MI6 probably was the most famous secret service in the world, thanks in no small part to James Bond and, rather less romantically, to the Cambridge spy ring. What interested me was that they had no legal existence in the normal sense. As a result of the questions that I and others asked at that time, legislation was passed in the early 1980s which gave them a statutory basis.
It is also right to say that Bletchley Park, which was unacknowledged, emigrated after the war to Cheltenham and became GCHQ. I am not quite sure of the history. I asked the noble Baroness, Lady Trumpington, but I am not sure that she knew either at what point it became part of statute. To put this in a historical perspective, the interesting reason is that it is difficult for democratic states to deal with legislation of this type. Although everyone has been rightly saying that our security services are very good and deserve praise, it is also right to point out that the various civil liberty groups and individuals who rattle the bars at times of legislation of this type going through at high speed are absolutely right to do so. Although some people might get frustrated with them, a healthy democracy, if it did not have such groups and individuals, ought to invent them. It is worth pointing out that they are as necessary as the security services.
I strongly agree with the noble Lord, Lord Blencathra; we have discussed before how the Regulatory and Investigatory Powers Act was unfit for purpose before it hit the statute book. It was already out of date. In a sense, my main point, which also relates to the speech made by the noble Baroness, Lady Lane-Fox, is that we should be extremely proud in this country that Tim Berners-Lee invented the world wide web. We underestimate how much he is appreciated around the world. In the context of this debate, we also underestimate massively the complexity of the path before us with modern technology.
There is a balance here. We all know that the balance is between the powers of the state and the rights of individual—freedom, citizenship, privacy and so on. It is a recognition that, because of the nature of modern weapons, the threat particularly from terrorism—although the Bill goes wider than just terrorism—is profoundly dangerous, far more dangerous than the 19th-century anarchist going around with a smoking bomb, ready to throw it. We are now talking about the death of thousands, or perhaps tens of thousands, of people.
On the other hand, there is the complexity of the technology; it brings us great freedoms and we ought to be grateful for that. I am sorry that the noble Baroness, Lady Lane-Fox, was a bit depressed by it. I find that, with the invention of modern technology, the freedoms and the ability to deal with problems accelerate. I will give a very brief example. I was out walking in the Oxfordshire countryside at the weekend and came across a cow stuck in a pool of mud and water. It was drowning. Thanks to modern technology, I was able to give the precise latitude and longitude of the position to a police officer—using the 101 number, not the 999 number. Within 35 minutes—we were 30 minutes away from the nearest track—two firemen appeared and pulled the cow out. It might seem a minor example, but you have only to think of all the examples in your life in which modern technology had been profoundly useful and had opened up all sorts of possibilities. If that had been the old days, I would have had to walk for miles to find a phone or a farm, and I probably would not have got back in time for this debate. The difference is massive and, of course, it opens up all sorts of possibilities in real life.
I come to my main point in this debate. I was very glad that the Government had accepted the recommendations about reviews, sunset clauses and so on because I believe that the challenge to us is to use this time that we have, in this House and in the House of Commons, to devise better ways of looking at legislation, particularly in relation to issues of this type. We do not have a structure for examining legislation in a way that keeps us up with technological change. I agree with all the comments that have been made about some of the committees and so on. I feel that this view applies not just to this Bill but to many Bills, which are often slightly dated by the time they come into effect because they have been overtaken by technology.
Legislation such as this is particularly important because the control of the security services evokes the Nineteen Eighty-Four argument about how much power should be given to the state and how much you risk if you take those powers away and leave yourself at risk from the activities of other groups. I wish that I had a nice, simple model to offer to the Minister and could say, “This is the sort of structure that we need to develop in this House in order to have the processes that could keep us up to date with technological change on the legislation that we are passing”. I do not have such a model, and the challenge to this House and to the House of Commons is to devise such structures. Both Houses are famous—and rightly so—for their ability to defend and speak up for freedom over the centuries, but we are in such a strange situation.
I return to what the noble Baroness, Lady Lane-Fox, said about technology. Her speech was important because it was the only one so far in this debate that put it in the context of the digital revolution. As we try to legislate now, I do not think of myself as at the cutting edge of the digital revolution; I manage, but it is more of a struggle than a great success. Yet it is so important. It affects so many walks of life and so many people, and there is a danger that the public see us as not being relevant, in part because we cannot keep up our legislative processes with the speed of technological change.
There is an opportunity here to use this Bill and the period working up to the sunset clause to start looking at more effective ways of keeping legislation up to speed with technology. The importance of this Bill is massive because of the balance between the security of citizens in the face of threats from crime and the protection of their rights, of which we are so proud both in this House and in the House of Commons. I urge the Government to acknowledge that we all need to focus on how we can improve our legislative processes so that we do not have situations like this and, if we have to rush something through, that we examine and process them in a way which does not mean that we end up losing some of the freedoms that we value so dearly.
7.45 pm
Baroness Jones of Moulsecoomb (GP): My Lords, I thank noble Lords for allowing me to speak. I will be brief, not least in view of the erudite speeches that have gone before. I thank the Government for adding to my general knowledge because until a week ago I did not know what metadata were, and I cared even less; now I know, and I care very much.
We have debated various parts of the Bill extensively today. On the emergency aspect of this Bill, I find it hard to believe that all those big brains at the Home Office did not see this coming. I simply find it impossible to believe. Along with hundreds of thousands of people outside this House, I do not understand why this is an emergency.
Do these regulations come in before the Summer Recess or will they be delayed until after? That, of course, has an impact on whether this truly was an emergency.
On the issue of extraterritoriality, the powers seem to have been implied, but they were implicit rather than explicit. For me, this is an expansion of powers and therefore should have had a proper consultation. Ducking public consultation is really not part of the democratic process. We hear again and again that this is being done to protect us, but the security services and the police will always ask for greater powers and more weapons so that they can do their job properly. However, it is for politicians to decide whether that is appropriate and whether it is for the common good and for the public good; I would argue that it is not.
Some of the clauses from the other place were accepted, and I am very pleased about that. However, the one on bringing the sunset clause forward to 2014 was an opportunity missed because, quite honestly, if we are not having a proper debate now, having it as soon as possible and ignoring the political timetable would have been a good way forward.
As other noble Lords have said, it is very easy to encroach on civil liberties and it is for us to decide where the line is between national security and civil liberties. I feel again and again that it is easy to be pushed into things through fear rather than for sensible reasons of national security. I do not support the Second Reading of this Bill.
7.47 pm
Lord Rosser (Lab): This Bill was the subject of just nine hours of discussion and debate in the House of Commons yesterday. We will have to wait and see whether the time spent on discussion and debate in this House exceeds or falls short of that over the two days—today and tomorrow—that have been set aside.
Serious concerns have been raised in this debate over the way in which this Bill is being rushed through in the light of the fact that the European Court of Justice judgment, which the Government say has been the driving force behind the need for this Bill, was handed down more than three months ago. The reality is that the date of the Summer Recess was known in April, when the judgment was given. Thus the need for minds to be focused on reaching conclusions without delay was also known. We could have avoided the situation that we now have of rushed legislation, rushed committee reports, committees being sidelined and a general feeling that the Government could have ensured that there was more time to consider the proposals in the Bill before it needs to be passed prior to the Recess.
The rush means that the reports of the Delegated Powers and Regulatory Reform Committee and the Constitution Committee have only today been published. The Constitution Committee has commented on its report that between the date of the ECJ judgment in early April and 10 July the Government did not indicate that fast-track legislation might be necessary to address the court judgment, and that the contrast between the time taken by the Government to consider their response and the time given to Parliament to scrutinise the Bill is a matter of concern. The DPRRC has stated that there is no actual duty on the Secretary of State to make regulations under Clause 1(3), simply a power. The committee also said that since the powers conferred by Clause 1(1) and (2) on retention notices, which allow a significant intrusion into the privacy of members of the public, will come into force on the passing of the Bill, with the regulations under Clause 1(3) subject to the affirmative procedure, it is possible with the Recess imminent that there will be a period of three months without any regulations under Clause 1(3) in place to govern the exercise of powers under Clause 1(1) and (2). The Minister has said that that will not be the case, but like my noble friend Lady Smith of Basildon, I would like him to spell out again the timetable that the Government will be following to avoid the potential situation highlighted by the DPRRC from actually arising.
The Delegated Powers and Regulatory Reform Committee also pointed out that Clause 1(3) confers a power on the Secretary of State to make further provision by regulations about the retention of relevant communication data, and does not restrict the scope of the powers conferred by Clause 1(3). Perhaps the
Minister will also respond to the view of the Constitution Committee in the light of the scope of the powers conferred by Clause 1(3) that, since it is the Government’s intention that the Bill does not enhance data retention powers, perhaps the Bill should expressly so provide.
The delay in bringing forward the Bill and then having to rush it through is all the more surprising since the judgment of the Court of Justice of the European Union to declare the new EU data retention directive invalid cannot have been entirely unexpected to the Government, since it supported the earlier opinion of the Advocate-General in December 2013. He found the directive incompatible with the EU’s Charter of Fundamental Rights in respect of the right to respect for private life and the right to the protection of personal data. The case was brought by the High Court in Ireland and the Constitutional Court in Austria. In essence, the Court of Justice of the European Union concluded that the data retention directive adopted by the EU legislature exceeded the limits imposed by compliance with the principle of proportionality as it did not limit the interference in respect of the fundamental rights in question to what is strictly necessary, since the directive covered in a generalised manner all individuals, all means of electronic indication and all traffic data without any differentiation, limitation or exception being made in the light of the objectives of fighting against serious crime.
The effect of the European Court of Justice decision was to strike down regulations to enable internet providers to retain communications data for law enforcement purposes of up to 12 months, thus creating uncertainty among communications service providers about the legal basis for the retention of communications data in the UK. The ECJ ruling did not take account of any controls or safeguards in the domestic laws of member states and in particular our communications data access regime, which is governed largely by the Regulation of Investigatory Powers Act 2000. RIPA seeks to ensure that access to communications data can take place only where it is necessary and proportionate for a specific investigation. Our data protection laws mean that in the absence of a legal duty to retain specific data, companies must delete data that are not required under their strict business uses.
Communications data, as has already been said, have been crucial to every counterterrorism operation by the security services in recent years and are used as evidence in nearly all serious and organised crime cases dealt with by the Crown Prosecution Service. The view of the House of Commons Home Affairs Committee yesterday was that the retention of communications data, subject to appropriate safeguards, was an important tool in the fight against terrorism, organised crime and child sexual exploitation, and that the Government were right to bring forward urgent legislation.
Following the ECJ ruling, the concern has been that without new legislation data could be destroyed within a short period by communications service providers fearing legal challenges, with the result that the police and security services would be unable to access them. With the EC directive in question having been transposed into UK law, national legislation needs to be amended only with regard to aspects that become contrary to
EU law after a judgment by the European Court of Justice, and a finding of invalidity of the directive does not cancel the ability for member states to oblige retention of data. Indeed, the European Court of Justice accepted that an ability to retain data was necessary and recognised purposes for which data could be retained. Its objection to the directive was to its generalised nature and scope.
The EU data retention directive was implemented through secondary legislation through the Data Retention (EC Directive) Regulations 2009, and the Bill that we debate today is intended to remove any doubt there may be about the legal basis of our 2009 regulations and to give effect to the ECJ ruling. Clauses 1 and 2 confer on the Secretary of State the powers currently in the 2009 regulations to require service providers to retain communications data. The Bill of course also addresses the application of our laws on interception to remove any doubt that the requirement that companies co-operate with UK law enforcement and intelligence agencies also extends to companies that are based overseas but provide services to people in the United Kingdom.
The Constitution Committee said in its report published today that it is not clear why this last part of the Bill on interception needs to be fast tracked as there is evidence that the Government have known about the problem for some time, since the Joint Committee on the Draft Communications Data Bill noted in its report published at the end of 2012 that,
“many overseas CSPs refuse to acknowledge the extra-territorial application of RIPA”.
Will the Minister give the Government’s response to that point?
A number of the contributions in this debate have referred to the need to strike a balance in making a judgment on the Bill between the two main concerns of privacy of information and the need for agencies such as the police and security agencies to know about information and have access to it. The need in a democracy is to sustain liberty and security, and privacy and safety. The Government have made it clear that the purpose of the Bill, which we support, is to maintain existing capabilities and indeed to restrict them in line with the ECJ judgment. Clause 3, for example, will change the basis for obtaining a warrant for intercept on grounds of economic well-being. At the moment, under the Regulation of Investigatory Powers Act 2000, economic well-being is the sole criterion without condition. In future it will be subject to the interests of national security.
In the House of Commons, the Government agreed to our amendments designed to ensure that the Bill does not go beyond existing capabilities by requiring six-monthly reports on the operation of the Bill when it becomes an Act, to ensure that its implementation does not go beyond what the Government have stated is its purpose. There is also a sunset clause in the Bill, on which we insisted, which means that the legislation will cease to have effect from the end of 2016. That provides an opportunity for full public consideration and debate about what powers and capabilities will actually be required and how they will be regulated after then in the field of communications data access
and interception. It will also provide an opportunity to ensure that whatever is deemed to be required will have rather greater public understanding and acceptance than is the case at present. People want to feel secure, but they also value their privacy and they do not like to find out the sheer extent to which that privacy can be and is being invaded from whistleblowers. They rightly feel that there should be more transparency from government on this issue both on the extent and necessity, and with that greater transparency might well come rather more trust and acceptance of the need for what should be done, provided it is proportionate.
The Government said last week that they would review the interception and communications data powers that we need and how they are regulated in the context of the threats we face. It was helpful that in the Commons the Government accepted the need to go down the road of our amendments and place this work, which will be conducted in the first phase by the Independent Reviewer of Terrorism Legislation, David Anderson QC, on a proper statutory footing. I hope the Minister, having mentioned Mr Anderson, will respond to the numerous points raised by my noble friend Lady Kennedy of The Shaws and by the noble Lord, Lord Carlile, about the future of Mr Anderson’s post, and the role and powers of the proposed new board.
The review which Mr Anderson will be conducting in the first phase will also take account of the impact of changing technology on the work of the different agencies involved. We have been calling for an independent expert review of the legal and operational framework, and in particular of the Regulation of Investigatory Powers Act 2000, because the speed of the communications data revolution since that Act has probably already led to the law and our oversight framework becoming out of date. The police and the security and other relevant agencies need to be able to keep up with new technology, but the safeguards need to keep up too—though, as has already been said in this debate, it is the knowledge that some private companies and organisations have about our daily lives and what we do that is equally breathtaking.
We will play our part in seeing that this Bill is passed, because the existing powers that it seeks to retain are too important for public safety and security to be put at risk of being lost. However, we also need that full debate about achieving the right balance, in a democracy, in an increasingly technological age, between privacy and liberty on the one hand and safety and security on the other, and ensuring that that balance commands public consent and confidence.
8.01 pm
Lord Taylor of Holbeach: My Lords, this debate has been an exceptional debate, not only because we are dealing with something of great importance but also because we have heard some extremely able and interesting speeches. Some have been more supportive than others of the Bill I have presented to the House, but I found them all interesting. The debate reflects the ability of this House to recognise the importance and significance of legislation and the scrutiny it can offer. We know that these are extraordinary circumstances: we are
being asked to consider fast-track legislation. However, I think that everyone understands why the Government need a sense of urgency about this legislation.
I hope that where noble Lords have expressed reservations about that, I will be able to reassure them. I appreciate the concerns of some noble Lords about the constrained timetable, given the time that has elapsed between the ECJ judgment and this Bill being introduced. I hope that the House will understand and accept that we have had to make sure that our response both addressed the needs of law enforcement and intelligence agencies and provided the appropriate safeguards and public reassurance. This inevitably required careful consideration, in order to create a package to which all parties could agree.
We feel that it is important that the Bill has been widely supported across the parties, and indeed passed through the House of Commons with a very large majority. Building that consensus was important in a matter that was clearly as important as this.
In the absence of a clear legal basis for retaining communications data, the police stand to lose access to vital information, which—as has been pointed out—contributes to 95% of serious crime prosecutions. Unless we make clear the obligations that RIPA imposes on companies based overseas but providing services here in the UK, the security and intelligence agencies stand to lose their ability to monitor terrorists and organised crime groups in this country. Indeed, as a number of noble Lords have said, and have agreed with the Government, the Bill does not provide new powers. It does not alter or extend existing powers. It simply provides a clear legal basis for powers that the police and intelligence agencies have always relied on to keep people safe, which for different reasons—and there are different reasons within the two parts of the Bill—are now in question.
We have been clear that the Bill is not a permanent solution to the challenges we face in the future. We had a brilliant speech from my noble friend Lord Blencathra, who talked about the scrutiny he had given to previous attempts to find a solution to these problems. It is quite clear that in this Bill we are not attempting to address the future proofing of which he talked. It does not address the growing gap in relation to communications data that the draft communications data Bill sought to resolve. Nor does it address the wider question of the powers that law enforcement, and the security and intelligence agencies, will require in the future.
Those issues will have to be addressed. That is why the provisions in the Bill fall away at the end of 2016. A number of noble Lords have said that we need an earlier sunset. However, if we are to have a proper successor to RIPA, if we are to have a proper evaluation of this matter and if we are to have the public debate about these issues that noble Lords have called for, we need time to do so. Although there have been suggestions that we are being governed by the political timetable—the electoral timetable—I think it is important that we recognise that legislation is dependent on Governments, and Governments have to be elected. Governments have to develop programmes that they are able to communicate.
It is to the credit of this Parliament that we have been able to agree on this issue. I do not know who will form the Government after the election. I do, however, know that it is important that, whichever Government are elected, they have the responsibility of finding a successor to this law and future proofing this sort of issue in the ways outlined so ably by my noble friend. That is why the provisions will fall away. There will be a public debate. I want a public debate. It will have to take account of not only the threats we face but the safeguards required to strike the necessary balance between privacy and security.
Lord Soley: This is a very important point. I am sympathetic to the longer sunset, but I do not understand what sort of structures the Government want to put into place to enable that public debate to inform the changes.
Lord Taylor of Holbeach:For a start, not only will there be a review of this piece of legislation on a six-monthly basis, something that has been agreed and now forms part of the Bill, but David Anderson, the independent reviewer—that is the very paragraph I was turning to, the noble Lord, Lord Soley, will be delighted to know—will lead a review into these issues. The Bill now provides a clear basis in law for that review. The noble Lord, Lord Blencathra, suggested that Mr Anderson look at his report as a starting point for addressing this sort of issue. That will be available before the election, and will help inform public debate during the election. The wider safeguards and assurances that sit around the Bill are also important. I am glad that noble Lords have taken account of those safeguards, which build on the extensive safeguards that already exist.
However, there are wider issues, and I will do my best to go through some of them at this stage. I am going to demand a lot of my officials, in the sense that I will ask them, to the extent that they are able, before Committee tomorrow morning, to draft a letter which can be circulated to all noble Lords who have participated —if I do not get time, because I am conscious of time.
In a very interesting speech, the noble Lord, Lord Knight, asked whether there was compliance with the European Convention on Human Rights. The Home Secretary and I have signed on the Bill a declaration that it is so. We have also made available the memorandum to the Joint Committee on Human Rights, which explains how our Bill satisfies the ECHR. I hope that that reassures the noble Lord.
The noble Lord, Lord Rosser, asked: what are our plans for the timing of regulations? I understand the interest in that. The draft regulations have been published and we have informed the House that the Government’s intention is to lay the regulations following Royal Assent, so that they can be approved by both Houses of Parliament prior to recess. They have, of course, already been published, as I said, and we are liaising with both the Joint Committee on Statutory Instruments and the Secondary Legislation Scrutiny Committee, ably chaired by my noble friend Lord Goodlad, to ensure that they can consider these matters as soon as possible. The JCSI will meet on Monday to consider the regulations, so that the Commons can debate them prior to recess.
The noble Lord, Lord Strasburger, asked why the measures were not part of the Queen’s Speech. When the gracious Speech was written, our response had not been finalised. The noble Baroness, Lady Smith, asked why it did not form part of the Serious Crime Bill, which she and I are seeing through this House and has finished in Committee. As she knows, we will not return to Report until October. The difficulty of the timetable for that Bill means that it will not be through all its stages before the new year, if we are lucky.
Baroness Smith of Basildon: My Lords, the Minister has given answers to a lot of the questions that have been raised, but I said, when I talked about introducing the provisions at the same time as the Serious Crime Bill, that although these provisions may have had to be taken more quickly than the rest of the Bill, it is still the view of most Members of your Lordships’ House that these provisions could have been brought in sooner.
Lord Taylor of Holbeach: My Lords, I do not think that the Government consider that that was a satisfactory way to deal with the problem.
The noble Lord, Lord Davies of Stamford, asked why the Intelligence and Security Committee did not have time to report on the Bill. I note the noble Lord’s concern on that, but I draw his attention to remarks in the Commons yesterday by the chairman of the committee, Sir Malcolm Rifkind. He said:
“The Intelligence and Security Committee has considered the Bill, and we have taken evidence from the intelligence agencies on its content. If we were concerned in any way that the Bill simply added to the powers available to the Government and that they were using a fast-track procedure to implement it, we would not be able to recommend its endorsement, but we are satisfied that that is not the case”.—[Official Report, Commons, 15/7/14; col. 725.]
Noble Lords should bear that in mind.
Lord Davies of Stamford: My Lords—
Lord Taylor of Holbeach: Perhaps the noble Lord will allow me to answer other people’s questions.
The noble Lord, Lord Soley, asked about Royal Assent; I think that I have dealt with that. The noble Baroness, Lady Kennedy, was particularly concerned about the nature of the matters that we are trying to deal with. There are already a number of reviews in the system, including that to be headed by the independent reviewer of terrorism legislation, David Anderson. He needs to be given time to conduct that work. I see no point in requiring Parliament to return to those issues almost as soon as we return from the Summer Recess without the benefit of the work that we have set in train. Any such legislation would require an accelerated timetable, and we do not want to be doing that again if we can avoid it. I think all noble Lords will agree on that.
The noble Lord, Lord Armstrong of Ilminster, asked whether David Anderson’s review would cover all use of communications data. Clause 7 makes clear that the review covers the operation and regulation of investigatory powers. That extends to communications data for all purposes under RIPA for which it can be obtained. I hope that that reassures the noble Lord.
The noble Lord, Lord Knight, also asked: would the review consider all legislation relating to communications and lawful interception? It does indeed; I have just explained that to the noble Lord, Lord Armstrong.
In answer to the noble Lord, Lord Macdonald of River Glaven, the noble Lord, Lord Hodgson of Astley Abbotts, and the noble Baroness, Lady Kennedy, who is about to resume her place, as I said in my Second Reading speech, we intend to create a privacy and civil liberties board. The terms of reference can be found on the Home Office website and in the Printed Paper Office. Legislation would be required to establish the board, and we will have plenty of opportunity to discuss the detail of the board’s functions then.
I am grateful to my noble friend Lord Carlile for the work that he has done in this area; he has been a very important figure in these matters. David Anderson, his successor, has been consulted on the proposals before the announcement was made to Parliament and as they have developed. Parliament will have the opportunity to debate these matters fully when the legislation to create the board is presented.
The noble Lord, Lord Judd, asked about US data sharing. He will be aware that the Government have announced the appointment of a senior diplomat to look at the issue of data sharing. That is another feature of the non-legislative part of the announcements made by the Home Secretary in the Statement which I repeated here.
My noble friend Lord Paddick asked: what is the annual transparency report and how does it relate to the internet section of the commissioner’s report? There will be an annual transparency report relating to the exercise of powers under RIPA. It will take advantage of as much detail as possible. There will, of course, be a six-monthly report on the operation of the Bill.
My noble friend Lord King of Bridgwater asked: will we reform the ISC so that the chairman is drawn from the Opposition? In view of the reforms that we have made in the Justice and Security Act 2013, the Government have no immediate plans to make further changes, but it is a matter that is live and to which Parliament may well wish to return.
I turn to some of the detailed items under data retention types. The regulations made under the Bill will directly replace the data retention regulations of 2009; they will not extend the list of data types being regulated.
The noble Baroness, Lady Kennedy, asked about the ECJ judgment on the EU data retention directive. It did not take account of any of the domestic safeguards that we had in place. Many of the ECJ’s concerns were addressed in the UK’s domestic legislation. The difficulty in responding to the judgment was that we had to consider how we implemented some of the safeguards so that it was clear that they were in primary legislation, not the secondary legislation in which we had translated the European directive in the first place.
I have always enjoyed listening to the legal mind of the noble and learned Lord, Lord Hope of Craighead, working in its Rolls-Royce fashion. The noble Baroness,
Lady Kidron, also asked: how do the regulations respond to the issue of the ECJ judgment? They will replace the 2009 data retention regulations. In particular, regulations will set out what must be specified in a data retention notice; place requirements on the Secretary of State to keep such notices under review; set out the security requirements that apply; provide that service providers can be reimbursed for any expenses incurred in complying with the requirements; and revoke the 2009 regulations, as they will be redundant.
The noble and learned Lord, Lord Hope of Craighead, asked why Clause 1(1) does not use the wording of the ECJ judgment. The test in the Bill requires the Secretary of State to consider whether it is necessary to require a provider to retain data, but also whether it is proportionate for that legitimate aim. This is in accordance with the judgment, which also makes it clear that it is necessary to verify the proportionality of any interference with a person’s rights when requiring the retention of data. That is why that particular wording referring to proportionality is used.
My noble friend Lord Blencathra raised a plethora of issues, if I may refer to them as such. It is vital that future consideration bears in mind the parliamentary inquiry and accordingly, as I have said, it is explicitly referred to in the terms of reference. Local councils will no longer be able to access communications data under these proposals. From the lists that I have seen, the Egg Marketing Inspectorate does not, nor has it ever had, access to communications data under RIPA. Indeed, Defra will also be losing its entitlement to such access in future. We recognise that the list has grown and that it needs to be cut down. The 13 bodies which will have their powers removed are the Civil Nuclear Constabulary, the Port of Liverpool Police, the Port of Dover Police, the Royal Mail, BIS, Defra, the Department of Agriculture and Rural Development in Northern Ireland, the Environment Agency, the Scottish Environment Protection Agency, the Department of the Environment in Northern Ireland, the Food Standards Agency, the Pensions Regulator and the Charity Commissioners. I should think that noble Lords are amazed that those bodies had access in the first place. This just shows the necessity for reviewing this sort of legislation and working it out on the basis of who actually needs it.
There was some concern over territoriality—a difficult word to say, particularly if one has been sitting here for a few hours. The noble Lord, Lord Knight of Weymouth, raised this, as did my noble friends Lord Paddick and Lord Hodgson and the noble Lord, Lord Judd. The Bill clarifies the territorial extent of the Regulation of Investigatory Powers Act: in the absence of explicit extraterritorial jurisdiction, some companies have started to question whether the legislation applies to them. This is nothing new. Jack Straw—who as Home Secretary was responsible for RIPA in the first place—made this clear yesterday in the House of Commons. He stated that the “clear intention” of that Act was to extend extraterritoriality. My noble friend Lord Howard of Lympne quoted Jack Straw to great effect; his was a very effective speech. I am pleased that many noble and noble and learned Lords, including the noble and learned Lord, Lord Lloyd of Berwick, recognise that this is not an extension of powers.
I have done my best, within the relatively short time that I have had to wind up what has been an extremely useful debate, to reassure noble Lords about this issue. The wider safeguards that sit around the Bill are important and we will have a chance to discuss them at length. However, I am glad that noble Lords have taken account of them in discussing the Bill before us today. We will no doubt be back tomorrow to consider it in Committee. There are wider issues and it is good that they have been raised by my noble friend Lord Blencathra.
I welcome this debate, and I would like briefly to reflect on the importance of the issues that we will return to tomorrow. Communications data and interception powers are intrusive. They are rightly subject to very strict safeguards, but they are also of vital importance to the work of law enforcement and the security and intelligence agencies. Without the legislation that we are considering today, those powers would be undermined. Those who mean us harm would be able to evade detection. Put simply, lives would be at risk. These are important issues. That is why this debate has been an important one. On that basis, I commend the Bill to the House and ask that it receive its Second Reading.
Bill read a second time and committed to a Committee of the Whole House.
Finance Bill
Second Reading
8.25 pm
That the Bill be read a second time.
The Commercial Secretary to the Treasury (Lord Deighton) (Con): My Lords, this Government have a clear and highly effective plan to secure our country’s economic future. It is a plan that is cutting the deficit, attracting investment and helping British households to work and to save. This Finance Bill builds on the strong foundations put in place over the past four years.
I begin with those measures aimed at increasing investment and growth. At the start of this Parliament, we set out our ambition to have the most competitive corporation tax system in the G20 and by the end, we will have delivered. We have cut our main rate at every Budget since coming to power. From 2015, it will be 8% less than the rate that we inherited. By 2016, that will mean £9.5 billion-worth of savings for businesses across the UK every year. That is why more and more businesses are starting up here and moving here. For the first time since 2007, business investment has grown for four consecutive quarters. We are helping businesses of all sizes to invest and create jobs. We have doubled the annual investment allowance to £500,000, introduced the first tax relief of its kind for investment in social enterprises and increased the research and development tax relief to provide support for early-stage companies that will become the industries of the future for us. These tax reforms are a central plank of our economic strategy. Employment is at record levels, business confidence is high and investment is forecast
to grow rapidly. The Finance Bill 2014 continues to send the message that Britain is open for business.
The quid pro quo for our highly competitive tax regime is that all companies and individuals pay their dues. This Government have taken a firm line in tackling tax avoidance and aggressive tax planning. They have made more than 40 changes to tax law to tackle avoidance and introduced the UK’s first general anti-abuse rule—the GAAR. This approach is working but tough measures are still needed. Over the next five years, almost £5 billion of revenue will be brought forward from users of avoidance schemes which have been defeated in another party’s litigation, or which fall within the scope of the DOTAS rules or the GAAR. The evidence is that these cases are decided against the taxpayer, so this is a fair measure. It is fair to the millions of taxpayers who pay their fair share and expect others to do the same. This measure and others in the Bill which prevent the use of dual contracts or employment intermediaries artificially to reduce or avoid UK tax liability will help to ensure that setting up a contrived structure will not result in a tax advantage and that our tax system will help to provide a level playing field across the labour market.
Taking a firm stance against tax avoidance is an important part of delivering a tax system that is fair, but fairness goes further than just tackling avoidance. It is about making sure that those with the broadest shoulders bear the greatest burden. At our first Budget, we raised the income level at which people began paying tax and we have not stopped since. We are going beyond our original commitment to raise the personal allowance to £10,000, which we accomplished a year ahead of schedule, by introducing a personal allowance of £10,500 from 2015. To put this into perspective, when this Government came into office, the personal allowance was only £6,500. This Government have cut the number of income tax payers by a greater number in five years than any other Government in recorded history. That is not all that we are doing to help. The Bill introduces a transferable tax allowance for married couples, targeting the benefit on married couples and civil partner lower-income households.
Saving, especially saving for retirement, was a fundamental part of this Budget. Thanks to the changes in the Bill before us, from next April those individuals who have been sensible enough to put aside for their future will have far greater control over how they access and ultimately spend their savings.
I turn to this Government’s radical pension reforms, which from next April will allow individuals with defined contribution pension savings more choice and control over their pension wealth. The measures in the Bill help individuals who are approaching retirement now to benefit from that choice this year.
The Finance Bill before us reflects the Government’s commitment to greater consultation on tax policy changes. I thank my noble friend Lord MacGregor and the members of the Economic Affairs Committee for their detailed consideration of the draft Finance Bill legislation at the start of this year and for their report that followed on 11 March. I look forward to some of the contributions that follow, which I am sure will take us through their thinking.
I shall take this opportunity to respond to some of the main points raised in that very thorough report. The focus of the report was on the salaried member element of the partnerships measure, and a recommendation to defer this legislation for a year. The partnerships measure is about fairer taxation and removing distortions across different types of partnerships. It has two key elements. First, the new salaried member rules will reduce differences in the tax treatment between limited liability partnerships—the so-called LLPs—and partnerships generally by providing that individuals who are in essence employees are taxed as employees. Secondly, the mixed membership partnership element will prevent individuals from reducing their personal tax liabilities by allocating profits to a corporate member of the partnership. This measure brings in total tax and NICs revenue of about £3.3 billion over the current forecast period.
The salaried member legislation corrects an anomaly under current law that treats all members of limited liability partnerships as self-employed, regardless of the terms on which they are engaged. This legislation is based on specific statutory tests, as proposed in HMRC’s original consultation document. I would highlight that the draft legislation published last December did not go further than the original consultation proposals but merely updated them to reflect consultation responses received.
As set out in the original consultation document, the legislation has three conditions. Collectively, these capture what it means to be a partner in a traditional partnership by looking at the income entitlements of the members, the amount of capital they have at risk and whether they can significantly influence the LLP’s affairs. The legislation, which came into effect on 6 April 2014, will ensure that members of LLPs will be treated as employees for tax purposes if they are engaged on terms closer to employment.
The Government made clear from the start that the change would take effect from April 2014 and reaffirmed at Budget 2014 that there would be no deferral of this legislation. The argument, of course, is that any deferral would be unfair to the many LLPs that had already taken practical steps to implement these changes. Deferring implementation would also have a significant impact on the Government’s objectives of fairness and deficit reduction.
Noble Lords will of course be aware that the Bill before us today includes this revised legislation as part of the partnership clause and schedule. It was not amended during its passage through the Commons. This legislation will remove structural inconsistencies in the partnership rules and prevent the disguising of employment in LLPs and tax-motivated partnership allocations.
I turn to the points raised by the committee in relation to the development of tax policies in general. The Government set out a new approach to tax policy-making in 2010 following consultation. I am pleased that the committee itself said in its report:
“We commend the Government, HMRC and HMT on the quality of the consultations conducted and the tax legislation produced since 2011”.
Officials consult interested parties and groups from across the tax spectrum throughout the development of measures both to test policy and inform the Government’s understanding of the impacts. The findings are reflected in formal responses to consultations and tax information and impact notes, the majority of which are published with draft Finance Bill legislation in the autumn.
The Finance Bill contains a number of improvements from the technical consultation launched in December. We received more than 300 comments to the draft legislation that we published and have had continuing interaction with individuals and organisations since. The consultation has ensured better legislation and more effective policy.
The committee also considered the policy partnership between the Treasury and HMRC. I assure your Lordships that this is a strong, positive relationship where both departments work closely together, maintain constant contact and look at ways to improve things on a continuous basis. I can assure noble Lords that the policy partnership is kept under constant review to look for improvements. There is a big focus on improving skills and ongoing education. Part of that is being done through the introduction of the new programme, the Policy Skills Learning Programme.
To conclude, this Finance Bill legislates measures that improve our competitiveness, target tax avoidance and leave more money in people’s pockets. It carries out the Government’s economic plan, which has successfully consolidated our recovery and is now driving forward our growth and competitiveness. I commend the Bill to the House. I beg to move.
8.37 pm
Lord MacGregor of Pulham Market (Con): My Lords, I rise to speak to the Motion standing in my name on the Order Paper. However, before I do so, I shall make two brief points on the Budget as a whole. The Minister outlined many of the measures. I entirely endorse them, and I wholly support the Chancellor’s overall economic strategy and, in particular, his and the Chief Secretary to the Treasury’s heroic efforts to reduce public sector net borrowing and to reach the target of moving the public finances into surplus, which the OBR forecasts will be achieved for the first time in 18 years by 2018-19. That is, of course, clearly dependent on the return of a Conservative Government at the next election or, very much second best, but recognising the role that the Liberal Democrats have played in the past few years, perhaps a coalition Government.
In the context of the Budget itself, I warmly welcome the various measures in the Finance Bill which the Minister outlined, in particular on ISAs and defined contribution pensions further to encourage savings. Pensioners particularly hard hit by the current very low interest rates on savings will be helped by the new pensioner bond to be introduced by National Savings & Investments in January next year. There are various measures for businesses, including those designed to encourage and assist investment and exports and those specifically for small businesses. When I first became a Member of the other place, one of my passions was for small businesses. I give them my total support.
I cannot resist saying that for all of us who support tax simplification and all that goes with it, the Finance Bill is not the best example. I understand the temptation of a whole lot of fiscal lollypops, but it has resulted in a monumental Bill, one of the largest I can remember. Similarly, the Explanatory Notes are among the largest I have seen in all my time as a Minister or a Back-Bencher in the Committee on the Finance Bill in the other place. I shudder at the thought of having been on that one.
I now turn to the report of the Economic Affairs Committee on the draft Finance Bill. First, as the retiring chairman, I shall give some reflections on the role and process. The committee’s task is limited as the elected House, quite rightly, has sole prerogative over supply and all the revenue raising that goes with it. That means that in nearly all my time in the other place this House had no role in the Finance Bill. But it was recognised that there was considerable professional, actuarial, legal and accounting expertise here which was not being tapped. In addition, because of all the pressures in the other place as Members of Parliament have to deal with so many other things, detailed technical and less partisan examination of various tax issues with expert witnesses from outside was recognised as being a useful addition to parliamentary scrutiny, and so it has proved. I pay tribute to my noble friend Lord Wakeham for the crucial part he played in initiating that.
We cannot amend the Finance Bill so the committee concentrates on selected aspects of tax simplification, clarification, administration and so on which may not be the first priority in the other place. If the committee has to be useful, not least in drawing the attention of the Commons and, indeed, the Government, to certain issues or concerns, it has to work fast and be selective. The timetable aspect has been greatly aided by the present Government’s welcome decision to publish draft Finance Bills, which made our task easier and enabled us to make our report well in advance of the Committee stage in the other place.
Does the process add value? I believe it has three merits. It uses the often considerable experience, knowledge and skills of appropriate Members of this House; it is considerably valued by the expert bodies and associations outside concerned with tax, accountancy, legal issues and business generally in giving them a forum to bring to parliamentary attention in a non-partisan ways their concerns, which are quite technical but important; and it provides the Committee in another place with an independent assessment in its scrutiny of the Bill. There were references to our report in the debates in the other place on Clause 68.
I now turn to our current report. The Minister has already given answers to some of our points, but I still want to persist with them because I want a more detailed explanation. The draft Finance Bill was published on 10 December 2013, and we began our inquiry in January 2014 and published our report on 10 March. I thank my fellow members of the sub-committee for their substantial contribution, their intense scrutiny and the speed at which they were willing to work. I am also most grateful to our specialist advisers Dr Trevor Evans and Mr Tony Orhnial and our committee clerk Bill Sinton and his team for their immaculate and
professional support. We made 34 conclusions and recommendations. This is a very complex area and I will touch on some of the most important.
We decided to look at the measures which deal with the taxation of partnerships, now Clause 68 of and Schedule 13 to the Finance Bill, because preliminary evidence suggested that they would be some of the most controversial proposals—technically and professionally as distinct from politically—in this vast Bill, and so it turned out. We had a lot of evidence from expert witnesses. As my noble friend said, the draft Bill contained various measures to counter the abuse—I stress the word “abuse” —of the current rules governing the taxation of traditional partnerships and limited liability partnerships, commonly known as LLPs. Our committee wholly supported the objective of that legislation.
A feature of the original Limited Liability Partnerships Act 2000 is that for tax purposes, all members of an LLP are treated as self-employed partners, even if they would have been treated as employees in a traditional partnership. Most of our witnesses accepted that this provision was being abused in order to minimise the income tax and national insurance contributions paid by LLP members. So the need for action was accepted.
The draft Bill introduced three legislative tests to distinguish between LLP members who were genuine partners and those who were in effect employees. As my noble friend said, the aim of those tests was to put members of LLPs in broadly the same tax position as members of general partnerships. LLP members failing the tests would pay income tax and national insurance contributions on the same basis as employees, and the LLPs concerned would pay employers’ national insurance contributions. There were also other provisions, including special arrangements to accommodate alternative investment fund management partnerships that were obliged to defer bonuses to meet the requirements of an EU directive. I do not have time to go into detail on those today.
Our report recognised the need for the current rules to be reformed in order to stem tax losses. The large majority of our witnesses, however, were concerned that the legislative tests proposed for determining whether, for tax purposes, a member of an LLP was an employee or truly a partner were quite different from those consulted on before the draft Bill was published. I heard what my noble friend said, but that was very much the tenor of the evidence that we were given—and we agreed with it. So: consultation good, but subsequent follow-up not so good.
Moreover, nearly all the evidence we received argued that the tests were unlikely to achieve the aim of aligning the tax treatment of LLPs with that of general partnerships. The differences from the original consultation document were key points for us, so we recommended that the proposals be delayed until April 2015, to allow both the legislative approach and the drafting to be got right, and to give LLPs time to adapt to the revised rules.
There was an issue of yield forgone here. The Government estimate was for a total yield at that stage of £3.26 billion—certainly not a sum to be sneezed at. However, we thought that only a very small part of that yield would be lost by delaying the measures for a
year. Our main concern was that, given the substantial difference between the original consultation proposals and the draft Bill, and the concern of the professional bodies that in some respects the legislation could be unworkable—coupled with the fact that we felt that in order to minimise compliance costs, the Government should consider applying the new rules from the start of an LLP’s accounting year rather than the start of the fiscal year—a one-year delay to get all this right would be justified.
Another concern was that in the process of our inquiry the anticipated yield from these measures was increased by nearly £2 billion—pretty well all, I think, emerging from more detailed analysis by HMRC of the alternative investment fund managers sector. This difference was never really explained to us.
Our report was well received by the main professional bodies concerned. They supported our main conclusions, and pointed to the practical problems, which we had identified, in sticking to the Government’s timetable. The Chartered Institute of Taxation stated that,
“it is disappointing that the House of Lords recommendations have been ignored and this has been pushed through so quickly”.
The Law Society of England and Wales commented in similar vein.
In fairness, I must add that the Bill as published improved the drafting of some of the provisions, and introduced some new flexibility around meeting one of the tests. The guidance, too, has been redrafted and improved substantially following the consultation. We welcome these changes, which are in line with our recommendations. But the Government stuck to the proposed tests for determining the employment status of LLP members and to making the start date April this year. As a result, I understand that there is a general feeling throughout the industry—if I may refer to it as such—that although it has learnt to live with this legislation, it has caused a lot of unnecessary work and cost, and taken up a lot of unnecessary time, for not much revenue to the Government. It would have been so much better to have got it right through further consultation on the revised proposals in the first place. Having said that, this is an unfortunate case, because as we said elsewhere in our report, in our analysis of the new approach to tax policy-making:
“We commend the Government, HMRC and HMT on the quality of the consultations conducted and the tax legislation produced since 2011 in these areas (the large majority) where the new approach to tax policy-making has been applied comprehensively”.
There is much else I could say, but at this hour it is necessary to conclude. I will finish by saying that the Financial Secretary to the Treasury responded to the debate on all these issues in the other place on 13 May. In considering the Financial Secretary’s response to the debate, we maintain that the points made in our report have not been dealt with. First, while it is reassuring that the figures for yield have the OBR’s approval, the detail of how the figures were arrived at needs to be understood. That is why our report made a number of detailed recommendations for greater openness from HMRC. Secondly, the process of arriving at the legislative tests flies in the face of nearly all the evidence submitted to the sub-committee by witnesses. Thirdly, the proposed deferral of the salaried members provisions
would have allowed more time for the tests to achieve the intended result and an orderly transition to the new system could have been managed. In contrast to the Financial Secretary’s assurances, the
Financial Times
reported on 14 April that:
“Thousands of UK lawyers, accountants and property consultants are scrambling to inject equity into their firms”,
in order to avoid falling foul of the new rules. Finally, the rejection of our proposals for formal, published post-implementation reviews is fundamentally inconsistent with the Government’s “new approach to tax policy-making”, which advocates openness and consultation at all stages of the process of developing and implementing a policy change and should include post-implementation reviews. Overall, however, I warmly commend the new approach to consultation that the Government are taking. Our committee makes a considerable contribution in assessing the key measures that we undertake to look at in the Finance Bill. I commend our report to the House.
8.51 pm
Lord Joffe (Lab): My Lords, it was a privilege to be a member of the Finance Bill sub-committee, which was so impeccably chaired by the noble Lord, Lord MacGregor, and which, as he has already said, was so superbly organised by the clerk to the committee and his staff and advisers. I will limit my comments to that report and the committee’s proceedings.
On the basis of the evidence received, I agreed and supported all the sub-committee’s recommendations. However, I was concerned about the very narrow base from which that evidence was drawn. There are some 420,000 partnerships of one form or another in the UK, 90% of which have three or fewer partners. Despite that, the evidence that the sub-committee heard was overwhelmingly from associations, organisations and professional advisers who represent large partnerships, which probably make up less than 1% of all partnerships. Professional advisers inevitably had potential conflicts of interest in that some of their members would benefit from a rejection of the proposed changes in the law.
The sub-committee recognised that narrow base in its recommendations in clause 291 of the report, in which HMRC and HMT were urged to urgently develop and publish comprehensive strategies for consulting smaller businesses, non-business stakeholders and other groups. It also drew attention to the same recommendation made by its predecessor committee in 2011, which does not appear to have been acted upon.
Clearly, it will take some time for HMRC and HMT to devise these innovative ways of reaching out to small businesses, or to non-business stakeholders and individual taxpayers. In the mean time, some balanced and objective evidence could be achieved by the sub-committee in future hearings by inviting a significant number of informed witnesses, from organisations to individuals, who are seriously concerned about tax avoidance from a society perspective and who would have no conflict of interest.
Additionally, it would probably be more effective if the committees of this House and those of the other place had budgets made available to them so that they could commission evidence from a wider variety of
opinion on important issues such as tax policy. That would make a major contribution to accurately reflecting the views of society on controversial issues, unlike the present position, where we largely only hear from those with command of considerable financial resources, not from the rest of society.
Clearly, the problem for the Chancellor of the Exchequer—who has had considerable success in closing some of the loopholes in the law—is how to close all the gaps. This would require a complete revision of the law on taxation which currently provides endless loopholes that enable talented accountants and lawyers to devise lawful systems for companies and individuals to avoid paying the tax which these laws intend to levy. Unfortunately, the underresourced Inland Revenue is unable to confront on equal terms the talented and highly paid lawyers and accountants who devise these systems.
Pending a complete revision of the law, I draw attention to the budget suggestion made this year by the Association of Revenue and Customs, part of the First Division Association trade union representing senior staff at HMRC. Its suggestion was that if just £312 million a year were spent on additional senior staff in the department, then an extra £8 billion of tax revenue might be raised. If this is even half right, the question has to be why these funds are not being made available at this time, when tax revenue is insufficient to meet the needs of society as a whole.
The Government has rejected a key recommendation of the committee in relation to salaried members. I suspect that this will not make much difference to the amount of tax revenue that will be raised as a result of the changes in the law, as the professional advisers who so passionately oppose the changes in the law will now turn their talents to lawfully devising means to circumvent the provisions, and, with some knowledge of tax avoidance, I think they will probably succeed.
A final suggestion, which I fear may not be within the remit of the committee, is whether the army of highly paid tax lawyers and accountants—some of whom told the committee that the law was the problem—could not devote at least part of their time to developing proposals for policies for changes in the law to prevent avoidance of tax. They would thereby be using their talents and experience to benefit society as a whole, rather than mainly big business and the wealthy.
8.58 pm
Lord Lawson of Blaby (Con): My Lords, this is a relatively brief but remarkably wide-ranging debate. The most important thing, however, in my judgment, is to pay tribute to my noble friend Lord MacGregor, because this is something of a valedictory occasion. He described himself as the retiring chairman of the Economic Affairs Committee of your Lordships’ House. While his manner is always attractively modest, I have never considered him to be particularly retiring, but he is certainly retired, and his loss will be greatly felt. I have worked with him one way or another for quite a long time. We began working together when we were both what I believe is now known as special advisers to the then Prime Minister, Sir Alec Douglas-Home, 50 years ago. Off and on we have worked together ever
since. He was a brilliant assistant and help to me—and more than that—when he was Chief Secretary to the Treasury during my time as Chancellor of the Exchequer. I hope that I served him equally well as a member of the committee under his chairmanship. I certainly enjoyed it; he will be a very hard act to follow. Nobody could possibly better combine a grasp of practical economics with the art of chairmanship of a committee of a very diverse kind, none of whose members was particularly retiring.
My noble friend the Minister began by saying a little about the state of the economy and how it was in pretty good shape. I absolutely agree with him, and I have no wish to add much to that. Of course, not everything is perfect. I am sure that the noble Lord who will respond from the opposition Bench will point that out, but I shall pre-empt that by saying that I have a secret to tell him. In this world, nothing is ever perfect. But the fact is that the state of the economy in this country is not merely pretty good in the way that my noble friend described; it is good relatively. It is the best performing economy in the G7, comparing particularly well with the economies of the eurozone.
One other thing that my noble friend the Minister could have said but did not is that in sticking to his guns, my successor George Osborne—goodness knows how many there have been in between—has proved to be right when pretty well everybody else was wrong outside those who supported the Government in the first instance. The Opposition predicted that these policies would prove to be completely wrong and would doom the country to an ever deeper recession, but they have been proved completely wrong. So has the IMF, which reminds me of the 364 economists who wrote that letter to the Times in 1981, saying that if we pursued the policies that we were pursuing—very similar to the policies that the present Government have pursued—we would commit this country to a self-perpetuating downward spiral. From the moment they said it, the economy recovered and went on recovering. It was exactly the same with the IMF; when it eventually said, “We no longer have confidence in you and you must change your policies”, from that moment the recovery became unequivocal. Of course, some academic economists supported the Government, but the majority did not—particularly the clever-clever ones, like Professor Paul Krugman of the United States, who is always wrong about everything. It makes him a rather useful man to follow, because you know what to believe. He, too, said that if the policy was pursued any further the recession would never end.
So what do we need to do now that the Chancellor has been vindicated? What threats face the economy? I refer to the threats within our own control. There are always threats that are not in our control, because we are exposed to the world economy. If things go wrong in the eurozone, which they usually do, or in China or the United States, it is bound to have a considerable effect on us.
There are three things in our own control, which I should like to mention. The first is the danger of allowing interest rates to remain at this crisis level of 0.5%—that is the official rate—for too long. Linked with that is the equally artificial crisis measure of
quantitative easing, or “underfunding”, as it was known in my day. As many in your Lordships’ House are aware, I have always favoured an independent central bank. I think it is vital that monetary policy should be its province. That does not mean that noble Lords cannot comment on it. I believe it is of the first importance that we move away from the artificially low level of interest rates, and the sooner the better. We should also begin to unwind quantitative easing and change underfunding to overfunding, to use the old-fashioned expression.
I wish the present Governor of the Bank of England well, as we all must. He is relatively new. He got himself into a jam in the first place with the fiasco of his forward guidance which he has had to abandon. He has still been talking about what is going to happen next—perhaps more than he should.
The extremely able Labour Member of Parliament, Pat McFadden, who sits on the House of Commons Treasury Committee, told the governor that he was behaving rather like an unreliable boyfriend, blowing hot and cold. This was rather too close to the mark for comfort. He has given the impression of floundering, which is very dangerous. He does not need to talk about the future level of interest rates. When there is a change, then he needs to explain why it has happened, but he did not need to talk in the way that he did. The Governor of the Bank of England should not appear to be floundering; he should convey authority. It is particularly important in the context of the financial markets, which are very sensitive to this sort of thing.
The second problem, which is to some extent within our control, is the level of bank lending. We still have a situation in which thoroughly sound SMEs have difficulty getting adequate borrowing from the banks on which they rely. Big companies do not rely on the banks; they have no problem in accessing the capital markets directly. Small and medium-sized enterprises are reliant on the banks and it is very difficult for even the soundest of small businesses to get adequate finance at a reasonable rate of interest.
More attention needs to be paid to the recommendations of the Parliamentary Commission on Banking Standards. A number are relevant to this, though it is too late for me to go into them. I had the honour of serving on that commission. We need to see all those recommendations in force, including particularly ones that the Government have accepted in principle. Some of them are implemented in the banking Act which my noble friend dealt with so well in this House. Others are not in that Act because the Government said that it was not necessary to legislate since the regulatory authorities already had the power. We want to see these things being done. We want the separation between high street, as it used to be called, and investment banking rigorously enforced. Almost every month some new scandal emerges in the banking sector. It is always on the investment banking side and it is detracting from the need for the high street banks to finance SMEs. That is their job and their function.
In this area of bad behaviour we need also to stress the importance of individual responsibility. This is very strongly pointed up in the various reports from
the Parliamentary Commission on Banking Standards. It is no good just fining banks. In my experience, that does not have a big effect on banking behaviour. There is no such thing as a bank being responsible for bad behaviour; it is always individuals who are responsible. Individual responsibility needs to be nailed down. Okay, penalise the banks as well, but it is important that the individuals responsible are punished. If they say, as they have in the past, “We didn’t know about it”, that is no excuse. It is their job to know what is going on in their institutions.
The structure of remuneration needs to be addressed. It is fundamental and again has not yet been done by the banks. It is the job of the PRA to ensure it is. It is also the job of the PRA and the Bank of England to introduce the requirement for banks to have a second set of accounts, which I hope they will accept. IFRS is of dubious correctness for companies generally, but it is clearly inadequate for banks. What we recommend, the Government have accepted and it is now for the PRA and the Bank of England to implement is that there should be a second set of accounts that meets regulatory needs and purposes.
The third threat that faces us is a misguided energy policy. Business and industry in this country, and indeed households, are forced to pay quite excessive energy costs as a result of the energy policy we have in place. It is accepted that that is done in the name of combating climate change. However, even Dieter Helm, the leading energy economist in this country and who accepts fully the alarmist interpretation of climate change, which I believe to be mistaken, is a bitter critic of the energy policies we have in place. His latest writing on this, which I commend to the House, is called The Return of the CEGB, which states that we are going back to a complete étatist energy policy—in fact, a rather worse one than we had under the Labour Governments of the 1970s. He also points out that it will be touch and go this coming winter whether the capacity margin will be adequate, but by the following winter it is almost certain the lights will go out because the capacity margin will come to zero or below.
It is very important that there is a change in our energy policy in the short term, but also in the medium term. Government talks the right talk about developing our indigenous supplies of shale gas, which will be a great help to the British economy in the medium term—although obviously not in the short term—but it is just talk. The most recent report of the Economic Affairs Committee, which as I say is so brilliantly chaired by my noble friend Lord MacGregor, was on this very subject. We pointed out that the regulatory regime is in a mess in this country and inhibits the development of shale. That is not because it is too strict—we need a strict regulatory regime—but because it is too cumbersome, involves too many departments that do not co-ordinate and too many agencies. It takes far too long. We produced a unanimous report.
We have now had a reply from DECC, which is the most complacent reply I have ever seen from any government department, and that is saying something. It says that everything is all right and that none of our recommendations is necessary. The department seems not to be aware of the evidence, including the fact that
even now not a single exploratory well has been drilled. We had evidence from Cuadrilla, the most prominent of the companies operating, that, even if there is no judicial review of planning, it takes three years from first preparing the environmental impact assessment to being able to drill. That is ludicrous compared with what has happened so successfully in the United States. The response completely ignores the evidence that we had from Chris Wright, the father of shale gas in the United States and a great Anglophile. He said that he would love to invest in this country but, on the present basis, there is no way that it would make sense for him to do that.
I say to the Minister that there is one easy thing that he could do straightaway. The present Government have Cabinet committees on a whole range of trivial matters—one would find it hard to believe—but there is no Cabinet committee on something as important as the extraction of our shale resources. Because of all the departments and agencies involved—the Environment Agency and lots of others—it is absolutely essential to have a Cabinet committee to bring everything together, and we recommended that such a committee should be chaired by the Chancellor of the Exchequer.
I have one final point to make on the report of the Economic Affairs Committee. In 2012—again, under the excellent chairmanship of my noble friend—we produced a report on the economics of development aid. Again, there was unanimous, all-party agreement that the antiquated 1970 aid target of 0.7% of GNP made no sense. Above all, this should never be made statutorily binding. It is palpably absurd to make any public expenditure statutorily binding, and there are no such pretensions with things such as national health spending. I do not think that the public would see any sense in that at all, and we made that absolutely clear.
We are now told that there is going to be a Private Member’s Bill—from the Liberal Democrats, I understand —starting in the other House but reaching us during this Parliament, to make the 0.7% target statutorily binding. If it ever reaches this House—it may not—I hope that we will examine it with exemplary thoroughness and not take too little time over a Bill which is clearly a major nonsense and for which, if it were to be passed, future generations would curse us.
9.18 pm
Lord Razzall (LD): My Lords, I am glad that the noble Lord, Lord Lawson, has just contradicted his statement in The House magazine that the Liberal Democrats have only two policies; apparently, he has just added a third.
Many people outside your Lordships’ House regard this House as being rather pickled in aspic and stuck in procedures that have applied for the past God knows how many centuries. However, since I came to this House in 1997, there have been two significant procedural alterations. First, as demonstrated by this debate, although we cannot amend it, we now debate the Finance Bill. I remember the pressure to do that. The noble Lord, Lord MacGregor, was very much part of that and I think that the noble Lord, Lord Saatchi, also used to press for that to happen. Secondly, since 2003, we have had a Finance Bill Sub-Committee, which examines
selected topics of the Finance Bill. This year, as we are debating today, it examined the detailed measures affecting changes in tax law for partnerships.
As a practising lawyer for over 30 years, I am well aware of the significant role that professional partnerships have played, especially the lawyers and accountants, in the development of the financial services industry. In my professional lifetime, there have been two very significant events in this area. First, a lot of people forget that, until 1967, no partnership could contain more than 20 partners. Our Victorian forefathers took the view that if you wanted to have a business with more than that, the appropriate thing to do was to have a limited liability company. Those of us who have attempted to manage professional partnerships in later years will realise their wisdom because of the significant problems of managing a large professional organisation where the owners of the business are also the means of production. The problem for the law and accountancy firms was that they could not incorporate because their professional organisations did not allow them to have limited liability. It was not until the Companies Act 1967 that, under pressure from the big firms of lawyers and accounts, the limit of 20 partners was removed. That has resulted in the huge organisations that have subsequently been created in both those industries.
The second major change was the Limited Liability Partnerships Act 2000. The major driver for that was the desire for individual firms of accountants and lawyers to obtain a limited liability to protect themselves against large negligence claims. Nowadays, almost all major professional firms have become limited liability partnerships and the structures of those organisations are well established. It would be common ground that, where a limited liability partner is in reality a salaried employee, he or she should be treated as such for tax purposes. However, as the noble Lord’s committee has indicated, there has been significant pressure from the professions that a case law test should apply to the definition of the nature of partnership rather than a legislative one. As the noble Lord, and his report, indicated, there has been significant concern that the consultation set up by the department was inadequate because the proposals on which it was based were not the same as those set out in the Finance Bill. I strongly support the recommendation by the sub-committee to delay implementation of these proposals until 15 April, not only to make sure that the rules are correct but to give a longer opportunity for firms to make any structural changes needed to comply with them. For example, this would enable them to put in place adequate resources so that the capital requirement needed by partners could be met.
As this House now has the opportunity to discuss the Finance Bill, I, like the previous speaker, cannot miss the opportunity to make an overall comment on the last effective Finance Bill before the general election. The tax provisions in the Bill must be looked at in the context of the overall economic position and the policy to reduce the deficit and the public sector borrowing requirement. As the Institute for Fiscal Studies has pointed out, no Government raise taxes in the year before an election but, surprise, surprise, taxes
tend to go up straight after one. As noble Lords will be aware, both coalition parties are committed to eliminate the budget deficit in 2017-18, although there is some political difference about to how to do it. The Tories seem to propose that it should be done primarily through cuts in expenditure. I think that the Lib Dem members of the coalition think that there should be a mix between expenditure cuts and tax increases. The problem, as the Institute for Fiscal Studies has certainly demonstrated, is that if all the savings were to come from departmental cuts in order to get back to a budget equilibrium in that year, the cuts would have to accelerate from 2.3% per annum to 3.7% per annum.
Whoever is in government after 2015, if the decision is maintained to protect the National Health Service, the schools budget and overseas aid, and if they are immune to cuts in real terms, it is estimated that other departments will have to deliver annual cuts of more than 20% per annum for the three years after the election. The Home Office, the Ministry of Justice, Defra and DBIS, let alone other departments, could not deliver the current level of services if they were compelled to make cuts on that scale. Whatever political party, or combination of political parties, forms the Government after the general election, it would be impossible to achieve that in practice.