Eighteenth Report Contents

Appendix 1: Digital Economy Bill: Government Response

Letter from Lord Ashton of Hyde, Parliamentary Under Secretary of State at the Department for Culture, Media and Sport, to Baroness Fookes, Chairman to the Delegated Powers and Regulatory Reform Committee

I am grateful for the detailed reports we have received from the committee on the Digital Economy Bill. The government has given careful consideration to your recommendations and our response is enclosed.

The first day of the Bill’s report stage will be on 22 February and will cover parts 1, 2 and 4 of the Bill. All but one of your committee’s recommendations relate to parts 3, 5 and 6 of the Bill which will be covered at report stage on a further date yet to be announced. Our enclosed response sets out our intentions to table amendments, but today we are only tabling amendments required for the first day of report. We will table all further amendments as soon as possible and the Bill team will keep your committee’s clerk informed so that there is time to adequately consider them.

Finally, I would like to draw your attention to the government’s amendment tabled today on e-book lending which fulfills a commitment in the government’s manifesto and has cross party support. It will extend the Public Lending Right so that it includes remote loans of e-books and audio-books. This will ensure that authors continue to be supported in the future as the way we borrow books in the digital world changes. The Public Lending Right Act 1979 provides that the Public Lending Right is determined in accordance with a scheme prepared by the Secretary of State, the amendment therefore affects the scope of this existing delegated power. I have supplied your committee with a supplementary memorandum.

Digital Economy Bill – response to the reports of the Delegated Powers and Regulatory Reform Committee

This document is the government’s response to the recommendations of the Delegated Powers and Regulatory Reform Committee on the Digital Economy Bill as given in their 11th report of session 2016-17 published on 22 December 2016, their 13th report of session 2016-17 published on 19 January 2017, and their 16th report of session 2016-17 published on 2 February 2017.

Clause numbers in this document refer to the Digital Economy Bill as amended in Committee [HL Bill 102].

Clause 6 - power to make consequential provision in connection with the electronic communications code

This clause contains a power for the Secretary of State to make consequential amendments in connection with the electronic communications code by regulations. The Committee recommended that the Secretary of State should be required to consult with Devolved Administrations when amending legislation they have passed.

There is already an established commitment to consultation with the Devolved Administrations as set out in the Memorandum of Understanding and relevant concordats between the administrations, and so putting a consultation requirement on the face of the Bill is unnecessary and undermines the settled arrangements that have worked well to date. In practice the vast majority of consequential provision of this sort is relatively minor.

It should also be noted that the devolved legislatures in Scotland and Wales can make minor or consequential modifications to Acts of the UK Parliament so far is necessary to give effect to the purpose of the provisions in their Acts (see sections 42 and 43 of the Abusive Behaviour and Sexual Harm (Scotland) Act 2016, sections 108 and 109 of the Burial and Cremation (Scotland) Act 2016, section 186 of the Regulation and Inspection of Social Care (Wales) Act 2016 and section 255 of the Renting Homes (Wales) Act 2016). These do not include any statutory consultation requirement or any specific role for the UK Parliament in the passing of such provision.

The devolution settlement in Northern Ireland is different to that in Wales and Scotland in that there are three levels of devolution rather than two (transferred, reserved and excepted). However, the general commitment to consultation described above applies equally to all three settlements, including the Northern Ireland settlement.

Clause 17(1) - power to designate age-verification regulator

The Committee recommended that the regulator be identified on the face of the Bill. The government has identified the regulator for some purposes but has still not done so for others. It is intended that the British Board of Film Classification (“BBFC”) will make decisions as to whether a website is compliant with the age verification requirement, will be able to notify payment service providers and ancillary service providers under clause 22 and direct internet service providers under clause 23, as appropriate. However, it is not intended that the BBFC will be the designated regulator to issue financial penalties. The government accepts, however, that the identity of the regulator may merit additional scrutiny and will table amendments to adopt the affirmative procedure for the first exercise of the power in relation to any regulatory function. Thereafter the procedure would revert to negative.

Clause 17(4) - appeal arrangements

This clause states that the Secretary of State must be satisfied that the regulator will have arrangements for appeals in place before designation of the regulator. The Committee recommended instead that a statutory right of appeal should be on the face of the Bill.

The BBFC already has an appeals process for distributors of video works who are dissatisfied with the classification of their work. This involves reconsideration by the BBFC and/or an appeal to an independent authority, which in relation to video works is to the BBFC’s Video Appeals Committee. This is a non statutory scheme which is effective and the government expects a similar scheme to be operated in respect of the regulatory scheme in the Bill. The government does not believe that a statutory right of appeal is necessary.

The government accepts, however, that the appeal must be considered by someone independent from the original decision maker and will table appropriate amendments to require the Secretary of State to be satisfied that the appeal will be independent before designating the regulator. The government will also table amendments such that on laying the proposed designation under clause 18(1) the Secretary of State should accompany that designation with information about the proposed regulator’s arrangements for appeals. Additionally, the Secretary of State may issue guidance to the regulator on this matter as detailed below.

Clauses 15(3), 21(9) and 22(7) - the regulator’s guidance

The Committee raised a number of concerns over the scope for the regulator to produce guidance which could define terms, and whether certain elements of the guidance would better be placed on the face of the Bill or whether the guidance should be subject to Parliamentary oversight.

In relation to the power of the regulator to issue guidance on the interpretation of clause 15(1) the Committee recommended that the term “commercial basis” and the circumstances in which material is to be treated as “not normally accessible” to under 18s should be spelt out on the face of the Bill. The government’s concern is that to further define the term “commercial basis” risks allowing pornographers to find ways of creating websites that avoided the definition. However, the government has carefully considered the Committee’s recommendation, and is proposing to amend the Bill to make provision in regulations as to the meaning of “commercial basis”. These will be made by the Secretary of State and will be subject to the affirmative procedure in the first instance followed by the negative procedure for any subsequent regulations.

The Committee had more general concerns about the regulator’s ability to specify important matters in guidance, and where a website failed to follow this guidance, enforcement action could follow. The manner in which age verification technology operates will be fluid given the pace of technological change. The government’s view is that the regulator should remain responsible for the production of guidance about the types of arrangements for making pornographic material available that it treats as complying with being “not normally accessible” to persons under the age of 18, but agrees that parliamentary oversight is necessary. The government will table amendments so that that the guidance must be laid before Parliament subject to the affirmative procedure for first exercise of the power and the negative procedure thereafter.

The Committee recommended that the regulator’s guidelines on financial penalties should be laid before Parliament subject to the affirmative, then the negative procedure. The Bill currently requires the regulator to publish guidelines, mirroring equivalent Ofcom guidelines on which it is based. The government considers the Committee’s proposal to be unnecessary, but will table amendments to require the guidance to be laid before Parliament, without any procedural requirement.

The Committee recommended that the definition of the term “ancillary service provider” should be on the face of the Bill or be set by regulations subject to Parliamentary oversight rather than left to the regulator’s guidance. Ancillary service providers are not required by the legislation to act, they will only be notified of non-compliant sites. We therefore consider clause 22 in relation to ancillary service providers to be fundamentally different from other areas of the legislation such as clause 23 which relates only to internet service providers (who are required to act under clause 23). Further, the enabling and facilitation of making pornographic material available can be by a wide range of constantly evolving technologies. Defining these terms on the face of the Bill is not appropriate. The government, however, will table amendments such that guidance must be made on these points, that the guidance must be approved by the Secretary of State and must be laid before Parliament subject to the procedural requirements proposed by the Committee (affirmative procedure in the first instance followed by the negative procedure for subsequent guidance).

We are planning to underpin these changes with the introduction of a clause which will give the Secretary of State Power to publish guidance, which the regulator must have regard to, as to how the its exercises its functions, including the guidance it produces. We intend to publish draft guidance before Report Stage to assist Parliament and in understanding how the regulation of online pornography is intended to operate. The final guidance from the Secretary of State will be laid before Parliament.

Clauses 31(2), 44(4) and 52(5) - power to define “specified person” for purpose of public service delivery, debt owed to the public sector and fraud against the public sector

The Bill provides powers for the Secretary of State to specify the persons who may disclose and receive information under chapters 1, 3 and 4 of Part 5 of the Bill. The Committee recommended that the list of persons should appear on the face of the Bill and the power to add persons to the list by regulations should be limited to only add persons engaged in the provision of the types of public service specified in the Bill (public service delivery), those which have difficulty in recovering debt, by reference to particular criteria in the Bill (debt owed to the public sector) and those taking action in connection with fraud against a public authority, again by reference to particular criteria in the Bill (fraud against the public sector).

The government will table amendments to specify the list of persons on the face of the Bill for these powers. In chapter 1, the list of persons will be narrowed from the list in the draft regulations. Specified persons will only be permitted to share information for the purposes of an objective which has been expressly specified as applicable to that person, rather than any specified objective. In chapter 3, additional criteria will be specified in the Bill relating to improving the recovery and management of debt by an authority. In chapter 4, additional criteria will be added to the Bill relating to sharing information which could improve the ability of a public authority which is assessed as being at risk of fraud to identify or reduce that risk.

Clauses 31(3); 44(5) and 52(6) - persons providing services to a public authority

The Committee recommended that the power to prescribe as a “specified person” should not extend to a person “providing services to a public authority” because this would include charities and commercial organisations. The government apologises for not explaining this in the memorandum to the Committee.

Bodies that will be defined as “public authorities” do not always directly deliver public services. The ability to use external partners and sub-contractors is essential to improving efficiency and obtaining value for money for taxpayers. In these situations, public authorities are likely to need to access data from external delivery partners and sub-contractors or to provide them with information so that they can fulfil their duties. These organisations will be required to handle information to the same standards as public authorities, including compliance with the codes of practice and the Data Protection Act.

The government understands that there are concerns that personal data, when accessed by private sector organisations, could be used for commercial advantage. That is why we sought views on whether to include private sector/third sector organisations in our Better Use of Data consultation. There were eighty-two responses to this question of which the majority of respondents were supportive of the proposals as long as appropriate strict controls are in place to safeguard citizens’ data against misuse. The Bill allows information to only be shared for the specific objectives listed and any specified persons found to be in breach of this, including external delivery partners and sub-contractors, will be subject to the same criminal sanctions.

Clause 31(6)- power to specify objectives of data sharing for public service delivery

The Committee recommended that the power in clause 31(6) be tightened so that it only becomes possible to specify closely delineated objectives. The government wishes to ensure the power in the Bill would allow for the specification of objectives such as that set out in regulation 3(2) of the draft regulations (identifying those who face multiple disadvantages) but will seek to ensure that all objectives are drafted as narrowly as is consistent with achieving the purpose of the objective. To further ensure that suitable objectives are set, the government intends to table amendments to insert a third condition on the use of the power to specify an objective. The additional condition will require the specified objective to support the delivery of a specified public authority’s functions, which will include administration, monitoring or enforcement of the delivery of the function. This will require a national authority to apply its mind to the issue of whether any proposed objective supports the delivery of an identifiable function.

Clause 32(4) - disclosure of information to gas and electricity suppliers

The Committee recommended that the power to amend the list of fuel poverty schemes and persons with whom data can be shared should be narrowed to reflect the policy objectives set out in the memorandum submitted to the Committee. The government accepts this recommendation and will be tabling appropriate amendments.

Since the Committee reported on this part of the Bill, the government has amended the Bill to insert similar data sharing provision to address the take-up of water poverty schemes. The government inserted these additions without powers to keep the legislation up to date as consideration was still being given to the Committee’s recommendations. The government will now table amendments so that equivalent powers to those in clause 32, narrowed as described above for the fuel poverty provisions, will be applied to the provisions to share information with water and sewerage companies.

Clauses 39, 42 (in new section 19AC), 48, 56, 66, 73 - codes of practice and statement of principles

Key protections to ensure safe and secure data sharing are set out in the codes of practice. The Committee recommended that the first codes of practice and the UK Statistics Authority’s statement of principles should be laid before Parliament in draft, and not brought into force until they have been approved under the affirmative procedure. While normally the government does not believe codes of practice require parliamentary oversight, the government agrees that because these codes comprise such important safeguards and because public authorities would be acting unlawfully by failing to have regard to them, the government will table appropriate amendments to meet the recommendations. Subsequent revisions to the codes will be laid before Parliament under the draft negative procedure.

Clauses 40(3), 50(3), 58(3) - power to make consequential provision

The Committee views the Henry VIII power taken in the above clauses to have been taken “just in case” and recommended that they should be removed. During the passage of the Bill the government has considered the Bill further in the light of the Committee’s recommendation and concluded that these powers are no longer required. The government will table appropriate amendments to remove them from the Bill.

Clauses 49(5), 57(5) - power to amend or repeal Chapters 3 and 4 of Part 5 following review

The Committee recommended that the powers to amend or repeal the debt or fraud clauses ought to be narrowed. These provisions are new ways to manage debt and prevent fraud and will be initially subject to carefully controlled pilots. After 3 years there will be a review of how the powers have operated and the Minister may amend or repeal the powers to reflect the outcome of that review. The government believes that the use of these powers is an open and transparent process with adequate parliamentary oversight. The government will, however, table amendments to the Bill to narrow the powers to ensure the power to amend after a review can only be used to improve or make more effective the operation of the debt and fraud powers, and to ensure that the Minister cannot broaden the powers conferred by Chapter 3 and 4 respectively or remove any safeguards from the face of the primary legislation.

Clause 85 - on-demand programme services: accessibility for people with disabilities

The Committee made three further recommendations on the new measure inserted into the Bill through the government supported amendment tabled by Lord Borwick on the accessibility of on-demand programme services.

First, the Committee recommended that the affirmative procedure should be used instead of the negative procedure for at least the first regulations made under the clause. The government agrees that the regulations will impose new statutory duties and that the regulator will have the power to impose substantial financial penalties for a contravention. The government will table appropriate amendments to implement the Committee’s recommendation.

Second, the Committee recommended that the identity of the “appropriate regulatory authority” be placed on the face of the Bill. It is important to understand the legislative context and the government apologises to the Committee for not making this clearer . The Bill inserts provisions into Part 4A of the Communications Act 2003 which already makes clear, at s.368B, that Ofcom is the regulator unless it has appointed a separate body for that purpose. The drafting therefore follows the approach in Part 4A of the 2003 Act, which uses the phrase “appropriate regulatory authority” throughout, so as to provide for a situation where Ofcom has appointed a separate body as regulator. The government is happy to clarify that Ofcom has not currently appointed any other such body and accordingly is the regulator of on-demand programme services.

Third, the Committee recommended that the Bill provide a statutory duty to consult with on-demand programme service providers and organisations representing persons with sight and hearing disabilities. The government intends to table amendments to place a duty on the appropriate regulatory authority (currently Ofcom) to consult with these groups of stakeholders on the new requirements. The appropriate regulatory authority would then be under a duty to report to the Secretary of State on the outcome of its consultation along with any other matters of importance, who would develop the regulations in light of the outcome. In situations where Ofcom has appointed another body as the appropriate regulatory authority, the Secretary of State would also be under a duty to consult Ofcom as well.

16 February 2017

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