Standing Committee B
Tuesday 14 December 1999
[Mr. John Maxton in the Chair]
Delegation of approval functions
Question proposed, That the clause stand part of the Bill
The Minister for Small Business and E-Commerce (Ms Patricia Hewitt): Good morning, Mr. Maxton. First, let me thank the hon. Member for Rutland and Melton (Mr. Duncan) for giving me notice of his intention to oppose clause stand part. He is revisiting an issue that he raised when moving the Opposition's amendment on Second Reading, an amendment that was rejected comprehensively by the House. However, I agree with one remark that he made at the time, which was:
``The last thing that the internet needs is an interfering regulator.''—[Official Report, 29 November 1999; Vol. 340, c.54.]
The Bill is not about regulating the internet. That is neither possible nor desirable. The internet is regulated in the same way as other aspects of our lives, because the same law applies in the familiar off-line environment as in the on-line environment. Our aim is to introduce specific regulation relating to electronic matters only if that is absolutely necessary and justified.
There is widespread agreement in the industry that a kitemark for cryptography services is needed to boost confidence and build trust, and there is broad support for the Government's approach of favouring self-regulation. We are debating the reserve option—the statutory default, the powers that the Government will use if self-regulation fails. If we have to use those powers, part I of the Bill will not allow us to regulate the internet as a whole. It will allow us to act in the narrow matter of providing a voluntary approval scheme for cryptography service providers.
If we decided to implement the statutory reserve powers, who would exercise them? The Government previously suggested that Oftel would be the most appropriate body and, at present, we think that it will be. It has expertise in regulating the telecommunications sector, which has many similarities to the sector under discussion. Many telecommunication companies propose to offer cryptography services directly or in collaboration with other companies. Oftel also has experience of representing the interests of consumers and balancing them against the interests of industry. It has broad technical expertise and would be able to subcontract particular aspects of technical assessment. Bringing in Oftel's existing expertise would be a cost-effective use of resources and, if we were setting up a statutory scheme, it would be the most likely choice of approvals authority.
However, we propose to hold the possibility of a statutory scheme in reserve. If it is ever implemented, it could be some years hence and other bodies such as the Financial Services Authority or even the Data Protection Registrar might be equally or more suitable regulators. We would have to weigh up the pros and cons of choosing a particular body in the light of the circumstances. That is why the provision allows the flexibility to delegate to other bodies, rather than specifying a body that is most suitable now, but may not be in the future. Delegating the functions to a statutory body might require changes in the statutory provisions for that body and the clause provides that any such changes would be subject to the affirmative resolution procedure. The House would be given the opportunity to debate the matter and to scrutinise explicitly the Government's choice of approvals authority. I hope that I have adequately summarised the purpose of clause 3 and persuaded the Committee to allow it to stand part.
Mr. Alan Duncan (Rutland and Melton): The clause is one of the dodgiest in the Bill. It is open-ended; it gives the Secretary of State the freedom to appoint virtually anyone to be the regulatory person or body under part I, which is utterly unnecessary. I shall not revisit the arguments for not wanting part I, but should its provisions ever be invoked, clause 3 will be the most unsatisfactory provision in it.
We are not debating simply a reserve option. As the Minister pointed out, we are debating the nature of that reserve option. Clause 3 allows the Secretary of State to appoint pretty well anybody as regulator, although we believe that ``regulator'' is the wrong word and we hope that it will remain an inaccurate description of what that body or person will do.
The provision is very unclear. If the Secretary of State was so inclined, a new structure could be created, perhaps called the Office of Cryptography—Ofcrypt or Ofweb. It is, as yet, undefined, unexplained and unspecified. It would be open to the whim of the Secretary of State. A body such as Ofweb or Ofcrypt would be excessive even it was separate from the Department of Trade and Industry, but what fills me with most foreboding is that the job might be given to Oftel.
Oftel regulates prices with an inflation-minus formula and it issues telecommunications licences. It is now reviewing that process. Its ethos is one of pretty heavy regulation, which came about in the wake of the privatisation of the British telecommunications industry. Such an approach, with the necessary duplication of personnel, would be a grave mismatch. Oftel would be the wrong body to give the light touch promised by the Minister for the regulation of trust service providers, cryptography and the workings of the internet.
I seek an assurance that Oftel will not be used. It is not the right body. Indeed, we are not sure that such regulation needs a specially structured organisation, with its own offices and staff. Such an organisation would be one step removed from the scrutiny of the House. The light touch that the Minister promised could equally well be provided by an official in the Department, a few doors down the corridor in the DTI building from the Minister's office. The Minister would thus be directly responsible to Parliament only for the few simple decisions that might need to be taken under the Bill. That would not necessitate a separate office. If it was suggested that it did, I should be gravely concerned that the proposed regulation would become unduly heavy-handed and complicated—and, what is more, one step removed from parliamentary scrutiny.
I accept that the setting up of Ofweb or Ofcrypt, or whatever else it might be called, will be subject to the affirmative resolution procedure. We welcome the fact that both Houses of Parliament would be able to scrutinise such a change, but such a change could be slipped through in the dead of night. I fear that it would involve much more regulation than the Minister is prepared to admit. I take in good faith her statement that she does not want heavy-handed regulation, but the Bill is structured in such a way that it could creep in.
If internet access charges are thought to be too high, or if other matters are thought to be wrong, we shall start receiving campaign postcards legitimately demanding that changes are made. Politics will then take over, and Ministers will flex their muscles and say, ``Do not worry, we shall regulate it.'' As soon as that happens, a statutory instrument will be made to set up Ofcrypt—or to change the powers of Oftel.
The explanatory notes on clause 3 state:
``Subsection (4) provides that where the functions are delegated to a statutory body or office holder''—
as the Minister pointed out, that means one that already exists, such as Oftel—
``the statutes relating to their original functions shall be modified to include the new functions so delegated.''
Therefore, clear and open provision has been made, as the Economic Secretary said, for Oftel to assume the powers and responsibilities of regulating the sector in a way that we do not advocate. Oftel would be the worst possible organisation to assume that responsibility.
Dr. Nick Palmer (Broxtowe): I have been listening to the hon. Gentleman's argument with all the attention that it requires. Is it his view that such supervision should be the responsibility of someone in the Department, consistent with what I understood to be his view that political involvement in the decision was undesirable?
Mr. Duncan: I understand the hon. Gentleman's point, but an impartial official in the Department of Trade and Industry is entirely reliable and should not be as political as the hon. Gentleman suggests. An entirely new apparatus for regulation is unnecessary; a professional civil servant in the DTI would suffice. If the hon. Gentleman is suggesting that, by being so proximate to Ministers, officials would be infected by Ministers' political purpose such that they could not be relied on, he is wrong. A separate office could be created—Ofcrypt or Ofweb, perhaps—that was not immediately accountable to the House of Commons, so that when Ministers were asked questions they could say that the office was independent and they could not answer for its day-to-day actions. Alternatively, the role could be given to DTI officials, for whose day-to-day actions Ministers are responsible and on which they would have to answer questions on the Floor of the House. I accept the distinction that the hon. Gentleman is making, and there is a trade-off between the two, but the structure that I propose is more satisfactory.
Dr. Palmer: On the basis of that argument, would it not be logical to abolish Oftel, Ofwat and the other regulatory bodies?
Mr. Duncan: No, because they have different purposes from those that the Economic Secretary envisages in this case. They relate to the climate of competition in particular industries following the privatisation of state monopolies. The internet is not being similarly privatised, because, thank goodness, it is private already. If it were not, it would never have got off the ground. The last thing that it needs now is for the Government to knock it for six. That is why I am calling for the lightest regulatory touch and the simplest mechanism possible. [Interruption.] I believe that a fan of Al Gore is about to speak.