TECHNICAL APPROVAL BOARD

HC Deb 08 May 2000 vol 349 cc560-78

'.—The Secretary of State shall appoint to a Technical Approval Board—

1. (a) six representatives of persons appearing to him to be likely to be subject to technical obligations under this Act; and
2. (b) such persons with statutory functions in relation to persons falling within paragraph (a).'.—[Mr. Heald.]

Brought up, and read the First time.

Mr. Heald

I beg to move, That the clause be read a Second time.

Mr. Deputy Speaker (Mr. Michael Lord)

With this it will be convenient to discuss the following: New clause 4—Report of payments made— '.—The Secretary of State shall report annually to Parliament setting out the payments made under section 13 in respect of each person to whom such payment is made, and where payments are not made, the reasons therefor.'. New clause 6—Appeal against payment decisions— '.—(1) A person to whom a payment is made under section 13, or a person who is refused payment thereunder, may within seven days of notice of the decision appeal to the Court as to the amount of such payment or the said refusal. (2) The Court to which an appeal may be made under this section shall be—

1. (a) in England and Wales or Northern Ireland, the High Court and
2. (b) in Scotland, the Court of Session.'.

Amendment No. 7, in clause 12, page 14, line 7, after "order" insert— ', a draft of which has been laid before Parliament and approved by a resolution of each House,'. Amendment No. 8, in page 14, line 41, at end insert— '(6A) Before giving a notice for the purposes of subsection (2) the Secretary of State shall obtain a certificate of technical approval from the Technical Approval Board.'. Amendment No. 19, in page 14, line 41, at end insert— '( ) A person on whom a notice under subsection (2) is served may apply to the Technical Approval Board for a review. ( ) A review may be sought on any of the following grounds—

1. (a) that such steps as may be specified or described in the notice are not technically competent for the purpose set out in subsection (1);
2. (b) that such steps are not proportionate to the purpose set out in subsection (1); or
3. (c) that such steps exceed what is necessary to achieve the purpose set out in subsection (1).

( ) On a review application under this section, the Technical Approval Board may either cancel or affirm the notice, and, if it affirms it, may do so either in its original form or with such modifications as the Board may in the circumstances think fit.'. Government amendment No. 24.

Amendment No. 9, in page 15, line 11, at end add— '(9) In this section "a certificate of technical approval" means a certificate in writing given by the Technical Approval Board to the effect that the steps specified or described in the notice would be—

1. (a) technically competent for the purpose set out in subsection (1); and
2. (b) proportionate thereto.'.

Amendment No. 13, in clause 13, page 15, line 12, leave out—

• 'may, if he thinks fit,'
• and insert "shall".

Government amendment No. 25.

Amendment No. 10, in clause 21, page 24, line 16, at end insert— (4A) Where is appears to the designated person that a postal or telecommunications operator is not or may not be in possession of, but is or may be capable of obtaining any communications data, the designated person shall not give a notice under subsection (4) unless he has obtained a certificate of technical capability from the Technical Approval Board.'. Amendment No. 11, in page 24, line 16, at end insert— (4B) In this section "a certificate of technical capability" means a certificate in writing given by the Technical Approval Board to the effect that the postal or telecommunications operator—

1. (a) is technically capable of obtaining the communications data, or
2. (b) could be technically capable of obtaining the communications data if certain steps were taken, and the certificate—
1. (i) specifies or describes such steps; and
2. (ii) certifies that the taking of such steps would be proportionate to what is sought to be achieved by so obtaining the data.'.

Government amendment No. 28.

Amendment No. 17, in clause 71, page 77, line 21, at end insert— 'technical obligations under this Act" means steps to be specified or described in a notice pursuant to section 12(2) and steps needed to be taken pursuant to section 21(4) in order to be capable of obtaining any communications data.'.

Mr. Heald

New clause 2 would set up a technical approval board made up of six representatives of industry and the regulator to vet technical requirements to be imposed by the Secretary of State on public telecommunications and postal services providers under clauses 12 and 21.

We all accept the principle that there should be an intercept capability for the internet. As we made clear on Second Reading and in Committee, however, there is widespread concern at the unknown extent and cost of providing that capability as well as concern about communications data. When the Government consulted on these issues last summer, it became clear that there is uncertainty about whether it is technical practicable to provide such an intercept capability. The costs also remained uncertain.

It is surprising that it was not until January that the Government troubled to employ expert consultants to report on the technical issues. However, the Smith Group of Guildford has done its work and its report has been published recently, for which I thank the Minister, even if I have to say that it is better late than never. The industry is considering the detail at the moment, and it is difficult to know exactly what the full response will be. Early indications are worrying. The Federation of the Electronics Industry tells me that, even at this early stage, some people believe that the measure will lead to bulk interception. The operators' group has not previously commented on the clauses; however, it now states: Despite assurances given to the Standing Committee, the remarks of Jane Kennedy MP, the Parliamentary Secretary in the Lord Chancellor's Department, the Bill as at present worded gives the Government powers to require interception of data and other communications which will mean the commitment by communications service providers of a high level of expenditure on hardware, software and personnel. These costs will fall proportionately more heavily on smaller communications operators than on larger ones, and are therefore likely to be anti-competitive, and inimical to new entry. The assurances given so far are not comforting…Thus, the costs remain unspecific, and Government appears to arrogate to itself the right to decide to what extent the cost of these new regulatory burdens carried out for Government's benefit, would fall upon our industry. There is no negotiating machinery by which the industry could agree the definition of a reasonable intercept capacity, and there is not even a commitment to negotiate over costs. In effect, the group is saying that the broad scope of powers exercised purely at Ministers' discretion, coupled with a highly optimistic compliance cost assessment, is unsatisfactory.

As we have pointed out, British Telecom noted that the mechanism for deciding what is a reasonable intercept capability will be a key factor in ensuring the successful implementation of the Bill and in avoiding putting the UK at a commercial disadvantage with the rest of the world. My hon. Friend the Member for Esher and Walton (Mr. Taylor) mentioned Mr. Philip Virgo. Mr. Virgo is involved with EURIM—the European Informatics Market—but is commenting on his own behalf. He said: The main concern (of City institutions) is over the uncertainty as to who will have what rights of access to their data and communications and the risk of criminal access under guise of a warrant. He noted that many institutions are already "tiptoeing offshore". That point was also made by my hon. Friend.

The Smith Group's report raises as many questions as it answers—as does previous information supplied by the Government. The group has decided that one solution cannot be applied to all internet service providers and it has come up with a menu. There is the low-cost option of active interception, whereby e-mails for a selected subscriber would be provided. The next option is semi-active interception, whereby control data would be passed to interception equipment each time an address was assigned to a selected subscriber. The subscriber traffic would be routed past an intercept point in order to obtain that. The most expensive option is passive interception, whereby all selected subscriber traffic would be forced to flow past interception points and there would be a selection of traffic.

The report makes several points that are of concern. It states that the semi-active approach might be over-burdensome for small internet service providers and that the passive approach is more expensive to implement for the ISP and the Government in medium-sized ISPs and is therefore not recommended in such cases.

The spectre is that a bespoke notice will have to be served on each ISP, with the technical requirements to be imposed on the particular ISP. That raises huge issues. One of the industry's concerns throughout the process has been that the provision should not discriminate between ISPs. Under the Government proposal that seems to be emerging—we have never actually heard it, but I hope that we shall do so tonight—a medium-sized ISP could be told that it had to provide only an active approach. That would be the cheap method. At the same time, another slightly larger ISP, which, although described as "big", was in competition with the medium-sized one, could be required to implement the expensive, passive approach with huge start-up costs.

7.15 pm

Will the Minister confirm that IPSs—almost above all else—do not want the provision to be discriminatory? It should not create competitive advantages for one ISP over another. Will he confirm that active interception—as identified by the Smith Group—is a limited and cheap option? Would he be prepared to limit his ambitions to that? Will he confirm that the Smith Group has recommended that the Government should meet initial investment costs? Does he agree with that? Does the Minister agree with the cost estimate of the Foundation for Information Policy Research that ISPs will be required to pay more than £30 million?

In Committee, the Minister said that ISPs would not support the idea of a technical approval board. I replied that I would consult on that point. The advantage of such a board is that it would be an independent body that understood the issues. I do not know whether the Minister claims to understand that fully. He nods—he does understand. I admit that there comes a point when the technical difficulty is beyond me. Does the Minister agree that the advantage of a technical approval board is that it would be independent? It would consider the Minister's proposal for companies and would be able to decide whether the proposal was technically sensible; whether it was proportionate to the purpose and—in the case of a small ISP—whether it would put the ISP out of business. The board would provide an element of independent scrutiny. After all, the Government are not expert in technical matters, as every computer project over the past 10 years has shown—there has not been a successful Government computer project for a long time.

Governments are not technically proficient in such matters. An independent body could at least offer companies a review from technical experts. I said that I would consult on that matter. The Minister said that the Government would not welcome a scheme that allowed a quango to give technically sensitive information to competitors and that it would not be right to share such information. However, in a letter, he had previously told me that the only way that the Government could reduce costs would be by sharing expertise across the community.

The Minister might be interested to learn that the Federation of the Electronics Industry stated that we believe that it is important that industry have the powers envisaged under your proposal for a technical approval board…I cannot agree with the Minister's statements…I thought you easily won the argument on technical approval board.

The London Internet Exchange stated: We have always expected some kind of approval board…There is no feeling that confidentiality would be a problem. Numerous other bodies have told us that no one is against the measure. Will the Minister reconsider the matter? He has thought again about many of the issues. What is wrong with appointing an independent body to consider the matter? He will have to appoint technical experts. If his statements in Committee are correct, he will have to consult on the measure. Why not do so in the way that the industry wants? Why dig in?

New clause 4 would also build confidence. It would require the Secretary of State to report annually to Parliament setting out the payments made under section 13 in respect of each person to whom such payment is made, and where payments are not made, the reasons therefor. New clause 6 would give a right of appeal. That would ensure a level playing field between ISPs, so that if one seemed to be favoured over another for compensation, there would be some redress.

It is welcome that the Government are responding to amendment No. 7, which provides that the generic requirements—the general terms to be applied to ISPs—would be subject to the affirmative resolution procedure. We are pleased that they have conceded that point in Government amendments Nos. 24 and 28.

The issue is not only about whether the Government's proposal is technically feasible—the Smith report expressed concern about whether it would be feasible to apply it to all ISPs and suggested that it would not be—but about the question of money. We are pleased that the Government have listened to the suggestions that were made in Committee. They are now prepared to respond to our amendment No. 13—Government amendment No. 25 acknowledges our point—which requires that they "shall" make a fair contribution to the industry. Amendments Nos. 17 and 19 are consequential on the acceptance of the idea of a technical approval board.

The industry is obviously worried that the Government's proposal might be burdensome, especially as circumstances change with new technologies coming on stream. The Government's requirements today might not be their requirements in the future. There is evidence that companies are already responding to the proposal by moving, or by considering moving, offshore. We have built a marvellous new industry in information technology that does this country proud and it provides a future for young people in a new economy, as the Prime Minister would describe it. Therefore, it would be a tragedy to turn our back on that by being stubborn about something as sensible and well supported as a technical approval board.

I hope that the Minister will take our suggestion more seriously than he did in Committee, where he described it as an expensive quango. He will have to do the work anyway. No extra cost will be involved—a point that the London Internet Exchange makes in its correspondence with me. A board would be nothing new; everyone expected one. Therefore, the industry says, "Come on Minister. Let us see a little more reasonableness and the colour of your money."

Mr. Simon Hughes

Again, there is broad consensus among Opposition Members. It only remains for the Minister to sign up and we will be all aboard together. The industry and the people who made representations to us will be happy. The House will be happy, we will be able to move on to the next group of amendments and the Minister will be able to chalk up another success.

As the hon. Member for North-East Hertfordshire (Mr. Heald) said, the Government have already made two welcome concessions in this group of amendments. Government amendment No. 24 clearly accepts the principle of amendment No. 7, which was tabled by Conservative Members but which Liberal Democrats support. Government amendment No. 25 responds to points made in Committee, particularly by my hon. Friend the Member for Sheffield, Hallam (Mr. Allan), and it sensibly uses the wording in clauses 23 and 48 on the reimbursement of costs and seeks to apply it to clause 13.

All the new clauses and amendments in the group that were tabled by Conservative Members are eminently sensible given the provisions in clauses 12 and 13. Clause 12 is the substantive clause, under which the Secretary of State can order those who provide postal services or public telecommunications services, or who propose to do so, to comply with interception warrants, and we anticipate that clause 13 will provide grants to meet the costs of that. It is sensible that the additional costs should be paid for as part of the system of getting our commercial sector into a position in which it can comply with the law. It wants to do that, and there has been a positive response to the suggestions made.

We support the practical proposals in new clauses 2, 4 and 6 and in amendments Nos. 7, 8, 19, 9, 13, 10 and 11. There was considerable debate in Committee on how we would meet the concerns of industry. It is sensible to create a body such as a technical approval board, so that discussions can take place and agreement can be reached with industry. In Committee, the Minister suggested that the Government would try to reach agreement with the private sector and that they intended to proceed by consensus. That approach would be better secured by making it clear in the Bill.

There needs to be an appeals system and we are grateful for the fact that the Government appear to have conceded the point that orders must be laid before both Houses and approved after a debate on them. That will give us the opportunity to ensure that the Government get it right, which is always an additional incentive. The proposals for a certificate of technical approval and for a review are sensible, as is the definition proposed.

I welcome Government amendment No. 25 because it will ensure that the Secretary of State has the power to consider what payment is appropriate. The defect is that clause 13 contains a "may" and not a "shall" provision, and amendment No. 13 would cover that point.

Two issues relate to compliance. The first is how those in the telecommunications world comply with the provisions and the second is the need to ensure that they have the technical ability to do so. It is no good to produce a scheme that is not technically feasible, so I hope that the Government will be positive about the principles in the amendments and new clauses, which have our broad support, even if they quibble with their wording.

Liberal Democrats did not lead on this issue in Committee and we are happy that Conservative Members continue to lead on it. However, we broadly accept their arguments and people outside the House have been very positive about them.

Mr. David Ruffley (Bury St. Edmunds)

Clause 12 is inadequate without the benefit of the amendments tabled by my right hon. and hon. Friends. It will provide no proper means for service providers to affect or to challenge notices served on them under the Bill. If the clause is accepted unamended, the United Kingdom industry will be subject to a regime unlike that imposed in any other developed industrialised economy.

I shall address my remarks to new clauses 2 and 4. As my hon. Friend the Member for North-East Hertfordshire (Mr. Heald) pointed out, the industry believes that investors in this country will be deterred by the obligations set out in clause 12. In particular, potential investors will face technical implementation costs that are unquantified and unquantifiable. The industry's view is that those costs will constrain technical solutions and the development of technology, and that uncertainties will directly discourage investment in this country.

The Government have a way out. They can agree to the amendments and to new clause 2, which is key because it would set up a technical approval board. One does not have to look far to see the reasons for the new clause. We should all accept—as the Minister did in Committee, I believe—that technology, especially internet technology, is moving rapidly. There is no analogy between intercept regimes for fixed-line and circuit-switched operating technology, like telephony, and the new world of the internet in which service providers must operate.

It is vital that the technical requirements that authorities impose on service providers under the clause are reasonable. We contend that technical requirements will be reasonable and proportionate only if the industry provides genuine technical input to determine what the reasonable requirements of service providers are in relation to the capabilities defined in clause 12.

7.30 pm

With the greatest respect, the Government have not been awfully good on the quantification of costs, which is the subject of new clause 4. They have not shed much light on the real cost to small, medium-sized and large companies in this sector. The technical advisory board that would be set up if new clause 2 were accepted would give the industry and the Government much-needed information and a proper quantification of the costs to UK industry. That would enable Ministers to decide what is a reasonable technical requirement under the clause.

My hon. Friend the Member for North-East Hertfordshire has rehearsed the arguments on that, so I will not develop them. I had the privilege of serving on the Committee considering the Bill, and I merely wish to register concern on behalf of the many operators who have contacted me and who have reiterated such anxieties since the Committee proceedings. I urge the Minister, who was diligent in Committee, and is also reasonable and exceedingly courteous, to give us further explanation, if possible, as to why the Government find a technical advisory board so objectionable—or, indeed, to say why it is otiose, irrelevant, unnecessary or redundant. Whatever words he chooses, will he explain why the board is, if not objectionable, unnecessary? if it is, why do so many operators take the contrary view and support our amendment?

I shall quickly rehearse an explanation of the regime that a technical approval board would put in place. There would be six representatives from the industry, who would be likely to be subject to the technical obligations under this clause; there would also be; as new clause 2 states, such persons with statutory functions, which, typically, means the regulator.

New clause 2 should be accepted because it would result in the Secretary of State having his or her feet held to the fire in relation to determining what is reasonable under clause 12(1). The Minister intended to satisfy us with an assurance that he would consult. However, the consultation requirement of which he spoke in Committee is not in the Bill; it does not appear in clause 12 or anywhere else in relation to the obligations under that clause. That is not good enough.

The new technologies coming on line will result in Ministers imposing obligations, but, as has been said, without the benefit of our amendment, there is no proper guarantee that those obligations will be technically competent or proportionate. Let me pre-empt the Minister by suggesting that he will say that the technical approval board would be another quango, and will then ask how much it would cost. We have already heard the answer to that: it should cost nothing, and indeed, might save the Government money.

In the fast-moving world of the future, the Secretary of State or his successor will have to ask his civil servants for detailed technical advice before deciding what a reasonable obligation is and whether to impose it. With the greatest respect to civil servants in Whitehall, the technical advice that they are able to give the Secretary of State will not be as good as the advice that players in the industry can give him. People who are running businesses that require them to be on top of the subject, day in, day out, have technical ability and expertise that must be far in advance of what civil servants have at their command. No matter how technically brilliant such civil servants may be, they will never be as good as the players in the industry running businesses, who know the subject inside out.

Such individuals would be on our board, and would give advice to the Secretary of State at a minimal cost—lower than the costs that he would incur by having civil servants trained up to give technical advice of comparable quality. We made that point in Committee, but the Minister did not, I fear, give an adequate response to it. I trust that he will give a slightly better answer in this debate, and that it will involve his acceding to new clause 2.

I turn now to costs—the subject of new clause 4, which would oblige the Government to produce an annual report for Parliament, detailing grants made to compensate operators who have had to comply with the technical capability requirements in clause 12. That involves a big problem, to which the Government are alive, as they talk at great length about the need to cut regulatory and cost burdens on small and medium-sized enterprises in this country. There are units in the Cabinet Office that seem to do little else but talk about that important subject. In this debate, the Minister has an opportunity to put his money where his mouth is and deliver a Bill that reduces—or at least does not increase—the costs and regulatory burden on small businesses in the sector that it covers.

As has been hinted, and as was discussed at great length in Committee, the costs imposed by clause 12—which are the subject of a compensatory grants system in clause 13, to which new clause 4 relates—are not one-off costs. Continuing costs will be imposed on the providers who are under such obligations, relating to the cost of software, hardware, extra staff and their training, the time that must be spent talking to law enforcement agencies, month after month, year after year, not to mention the legal advice that such companies must seek to ensure that they are complying with the legislation.

Clause 13 is a permissive measure, allowing the Secretary of State to make contributions in the form of grants for costs incurred by providers, but not requiring him to make such grants. Other amendments in this group deal with that concern.

I shall finish by raising a serious concern about the basis on which the Minister has argued that we should not bother too much about those costs, contending that clause 13 is adequate to cover them. I believe that the Government think that those costs are marginal. Their consultation document certainly seemed to state that the costs were marginal. In Committee, the Minister provided an estimate of £20 million for the additional costs imposed on the industry as a result of clause 12, but I fear that that was only a wild stab in the dark. The changes that providers will have to implement will not be a one-off; changes may be required five or six times during the next decade, as technology moves on. More than one set of intercept capabilities might have to be introduced—for all we know, one a year, or even one a month, could be required. The costs could be massive, and £20 million is not a realistic estimate, given the fast-changing nature and rapid pace of technological innovation in the industry.

The London Internet Exchange has underlined that point, arguing that Due to the inherently short lifecycle of internet— specifically, internet— infrastructure equipment, and the need to replace and enhance networks due to traffic growth, it is misleading to think that any changes and upgrades will be one-off actions, given that networks are constantly evolving and expanding and the need for additional engineering work to support the capability for interception will be ever present. Therefore, £20 million cannot be an adequate quantification of the costs in years to come.

I hope that the Minister will reflect on that. Even if he does not resile from the £20 million figure, I hope that he will at least acknowledge that it cannot be a proper final estimate of the costs to which the industry will be subject. We require some assurance that the compensation system will be not subject to the Secretary of State's discretion, but that he will be under a duty to make payments to those who suffer huge hits, especially small and medium-sized enterprises. Given that the costs will not be one-off and that there could be myriad changes over the next decade, the Government should accede to our request that Parliament should, in years to come, be told what the costs are and what grants are being made to cover those costs.

An annual mechanism for accountability to Parliament is the best way in which the House can protect the interests of this country's small and medium-sized enterprises. In that spirit of honest inquiry, we are willing the Government to listen to the operators that have lobbied the Opposition Members who have spoken about these matters. Ministers must do the right thing by an important world-class industry: they must make sure that it remains a world-class industry and is not driven offshore by uncertainty and ridiculous cost impositions.

Mr. Charles Clarke

I am delighted to respond to the debate. I should first like to emphasise an important point that ran through the debate in Committee and that has been raised again this evening: that is, the Government's strong desire in everything we do in this sector to co-operate with industry. I repeat that we acknowledge that the arrangements and the apparatus established by the Bill will not succeed if that co-operation does not take place.

These amendments deal with four main issues, the first of which is whether an order made under clause 12 should be subject to the negative or affirmative resolution procedure. Secondly, the amendments propose that a technical approval board should be set up to oversee the duties placed on communication service providers. Thirdly, they propose that users of communication services should be consulted about the technical requirements that will be imposed on service providers. Fourthly, the amendments are designed to provide greater clarity regarding the cost of interception and who will pay.

All those issues were debated at length in Committee, at which time I indicated that I was sympathetic to the first of the amendments—the one dealing with the negative or the affirmative resolution procedure. I am pleased to report that, as the hon. Member for North-East Hertfordshire (Mr. Heald) and other speakers graciously acknowledged, the Government have introduced amendments Nos. 24 and 28, which will have the effect of making a clause 12 order subject to the affirmative, rather than the negative, resolution procedure.

In Committee, I made it equally clear that, although I fully agreed that any requirements placed on industry by part I should be properly considered and reasonable, I was not sympathetic to the concept of a technical approval board, which remains the most substantive issue dividing the House. I explained at length in Committee why I believe that the existing provisions of the Bill achieve the desired aim, but I shall attempt to do so again now, albeit without subjecting the House to the extensive debate that the Committee enjoyed, both on that subject and on matters closely related to it. I am happy to summarise the Government's position.

7.45 pm

The Bill already provides the framework for a three-stage process to arrive at a reasonable intercept capability in respect of individual communication service providers. Given the comments of the hon. Member for Bury St. Edmunds (Mr. Ruffley), it is important to say which of those three stages would be removed if the technical approval board were to be established, in order to avoid an additional stage that carried implications of cost and bureaucracy.

The first stage is the Bill itself, which sets out the principle that responsibility for maintenance of an intercept capability should fall to the provider of the communication services. That is an established principle long adhered to by public telecommunications operators. It leads to the need for the second stage, which is a thorough consultation exercise on the draft clause 12 order—the generic reasonable intercept requirements document.

There is already a good deal of informal consultation going on, the debate on which has recently been informed by an independent report on the feasibility of intercepting internet service providers. That report was commissioned by the Government and is now available on the Home Office website. Later this year, we shall publish a draft order for formal consultation with providers of communication services and regulatory bodies. Following the consultation, the Secretary of State will lay the order before Parliament. If Government amendment No. 24 is accepted, the order will be passed under the affirmative resolution procedure.

That is the second stage, consisting of substantial debate. The hon. Member for Bury St. Edmunds spoke about seeking genuine input from the industry, but we believe that that process has already commenced and will continue. The hon. Gentleman also talked about my feet being held to the fire; I am glad to learn that the mid-19th century traditions of the public schools—whether Rugby or another—are alive in the modern Conservative party.

Mr. Ruffley

I did not go to Rugby.

Mr. Clarke

I was not suggesting that the hon. Gentleman did; I was saying that the ethos still infects his party today. However, I wish to place on record the fact that I do not enjoy having my feet held to the fire—no part of me takes pleasure in that.

Mr. Heald

I am sorry to interrupt the Minister, especially with an intervention that is not even amusing. He says that the technical approval board is not a suitable body; however, paragraph 5.6 of the Government's original consultation document states: The Government also proposes to appoint an independent body to provide impartial advice on how to balance the requirements of the agencies and CSPs. This should help to ensure that any requirements are reasonable, proportionate and do not place CSPs at a disadvantage. What did they mean by that?

Mr. Clarke

I am grateful to the hon. Gentleman for bringing me back to earth after my far-ranging diversion following the hon. Member for Bury St. Edmunds. I shall come to the point raised by the hon. Member for North-East Hertfordshire shortly.

The third phase of the procedure consists of the serving of individual notices on communication service providers. The notices will say what providers are expected to provide and give the time scale within which they should provide it. Individual notices will result from dialogue between the Government and the service providers themselves. Each notice will take account of the precise circumstances, much of which information will be commercially sensitive, and it will be consistent with the order passed by Parliament. The purpose of the notices will ensure consistency across the industry. I emphasise that individual notices will not be imposed by any external body—for example, a technical approval board—but will result from dialogue between the Government and service providers.

The Opposition amendments would require a further step to take place—the approval of any requirements by a technical approval board. However, that presupposes that a notice has been served that is unreasonable, or that the service provider has been unable to comply with it. Either circumstance would be counterproductive and would not be brought about by the Government. The effect would be that the service provider would be unable to comply, or would refuse to do so, which would place on the Secretary of State, if he wished to take enforcement action, the onus of convincing a court of the reasonableness and proportionality of the notice. It is difficult to see what a technical approval board could add to the process.

What would enhance the process is the proposal in the second stage of the generic reasonable intercept requirements document, under which we have established, as the hon. Gentleman knows, the consultative body with which we are discussing these matters in a consistent and inclusive way. That was referred to in his document.

If the proposal made by the hon. Member for North-East Hertfordshire were agreed by the House, I would be concerned about how the six members of the putative technical approval board would be selected, and how they would consider applications in commercial confidence. As I made it clear in Committee, I believe that those are difficult issues. We believe that the proper way is to consult the industry.

The hon. Gentleman suggested that there was significant industry support for a technical approval board. However, in the responses to the consultation document, the industry did not generally support the idea of an independent industry body. We responded by setting up the general consultation, which has been described.

In the light of what we have just heard, I want to place it on record that the Home Office has received no representations supporting the idea, despite our regular contact with the Federation of the Electronics Industry and the operators' group. The Home Office has day-to-day contact with the telecommunications operators that have a current intercept capability. They are understandably reluctant to share commercial secrets, although they willingly share interception methods where that does not compromise their commercial position.

I am happy to examine the detailed correspondence and the survey that the hon. Gentleman has conducted on the matter. It is perfectly reasonable for him to do that, and I shall consider his conclusions. I emphasise that the Home Office has not had representations from the industry supporting the idea of a technical approval body. The responses to our original consultation document were not positive in that regard, either.

Mr. Heald

The original proposal was that approval would be given by Oftel, which is quite different from what I am proposing.

Mr. Clarke

I understand that. It is a fair point. I do not seek to second-guess the hon. Gentleman, but we have not had representations from the industry supporting the idea of a technical approval board.

Mr. Heald

I am grateful to the Minister for giving way again. If he thinks that the proposal is worth considering, is it possible for the Home Office to consult on it to satisfy itself?

Mr. Clarke

The debate is public, and our discussions with the industry continue, both with individual ISPs and with the associations. I do not believe that a more beneficial situation would result from the imposition of the proposed body, on top of the three-stage process that I described, given that—I place this on record again—we are seeking agreement before introducing any order. That is why I must resist the hon. Gentleman's amendment.

Amendment No. 12 proposes that users of communication services should be formally consulted about the order made under clause 12. As I explained in Committee, it is right that the wider public should have the opportunity to offer their opinion on the general use of interception and the circumstances in which it may be deployed. They took that up during the public consultation exercise, and they will have the opportunity to comment on the codes of practice when we consult on those later this year. Although we will publish the draft on the Home Office website for all to see, we have not extended the requirement on the Secretary of State to consult more widely than the Bill provides.

On the Government amendments, I mentioned at the beginning of my speech that, following consideration of the representations, we tabled amendments Nos. 24 and 28 to make the clause 12 order subject to the affirmative, rather than the negative, resolution procedure. I hope that that will provide reassurance.

As we acknowledged throughout the debate, and as the hon. Gentleman said in his intervention, cost is an extremely important consideration. I am conscious of the fact that there are serious questions relating to the costs and their apportionment between Government and industry.

The Opposition amendment requiring that the Secretary of State "shall", rather than "may", make payments to communication service providers was discussed at length in Committee. The Parliamentary Secretary, Lord Chancellor's Department, my hon. Friend the Member for Liverpool, Wavertree (Jane Kennedy), offered in Committee to include in the Bill a provision making clear the Government's intention to continue to meet marginal costs. In the light of that commitment, Opposition Members withdrew their previous identical amendment on the matter. The Government have now tabled, as promised, amendment No. 25, setting out our commitment to continue the payment of marginal costs. I am grateful to the hon. Gentleman for his support and acknowledgement of that.

Amendment No. 13 demands that the Secretary of State report annually to Parliament providing information on what payments have been made to whom, and if payments have not been made, the reasons why that is so. We cannot support the amendment and hope that, on serious reflection, the Opposition will withdraw it.

We believe that the amendment would fatally undermine the interception regime if it became publicly known which communication service providers were maintaining an intercept capability. On publication of the annual report, criminals would automatically move their custom to communication service providers that were not listed as having received contribution payments from the Government to provide interception assistance. Moreover, we do not think that CSPs would wish their individual assistance to be publicly acknowledged in such a manner.

Similarly, the specific reasons why payments have been made and the particular level at which they have been set in a particular case may touch on operational practices which could adversely impact on law enforcement practices and capabilities.

I understand the hon. Gentleman's arguments with regard to the technical board, although I do not accept them, but I hope that on this issue, he will concede that his amendment would be damaging to law enforcement in this country, which I know is not his intention.

New clauses 4 and 6 introduce a right of appeal within seven days of a notice being served that payment by the Government will not be made, or if the recipient of the notice considers the payment to be insufficient. Although I understand the intentions behind these new clauses, I do not consider them to be necessary.

My final point refers to the Smith report. Hon. Members will be aware of the report, which has been produced by independent consultants and has been published on the Home Office website. The report discusses the various interception capabilities that may be required and the different costs involved in supplying those requirements. The document will be used to inform our consultations with industry on how costs should be allocated.

Once consultations have been completed, we will set out in secondary legislation how costs will be allocated between industry and Government. Following on from that, decisions on specific cost allocation will be reached with each individual CSP by mutual agreement, after comprehensive consultations. That is exactly how decisions are currently reached—through mutual agreement on an individual basis. We have not encountered any calls from industry to change the current arrangements that I have just described.

In the light of comments made in the House and outside, I shall comment on some of the proposed costings. There has been a suggestion that £34 million is the appropriate cost, as the hon. Member for Bury St. Edmunds mentioned. That assumes that all 400 ISPs will be obliged to possess an e-mail active intercept capability, amounting to £17 million, and furthermore that the 20 largest ISPs will be obliged to possess a semi-active or passive capability, amounting to another £17 million.

I make it clear that that is not the intention at all. We do not currently require all public telecommunications operators to possess an intercept capability, and we do not expect to ask all ISPs to carry an intercept capability. We therefore consider the £30 million price tag as overestimating considerably the overall costs of providing a reasonable intercept capability.

8 pm

We have not rushed to put a price tag on the overall costs. However, figures in the report do not contradict the views in the regulatory impact assessment which was published with the Bill. It estimated that the costs would be less than £20 million for the whole industry. We debated that in Committee.

We have been in continuing discussions with industry for a considerable time. The Smith report will be used as the basis for informed discussions with individual service providers and others. We welcome constructive discussion with them. After we have consulted industry about those points and the specific point that the hon. Member for North-East Hertfordshire made, we have shall have a clear view of the potential costs. The hon. Gentleman will have noted that the Smith report concluded that the burden on industry to fulfil the Bill's obligations is "not onerous". I believe that that is so.

I have tried to tackle as fully as possible the points that the amendments raised. I hope that hon. Members will support our amendments and reject those of the Opposition.

Mr. Peter Luff (Mid-Worcestershire)

It is appropriate that my hon. Friend the Member for North-East Hertfordshire (Mr. Heald) opened the debate because, on this occasion, the Opposition is like Oliver: we are asking for more. Sadly, the Minister has not acceded to that request, and we regret that.

Let us deal first with the amendments that tackle the reimbursement of costs. While we welcome Government amendment No. 25, it does not go far enough. We cannot understand why the Government continue to resist amendment No. 13. Government amendment No. 25 appears to impose a duty on the Secretary of State. To change "may he thinks fit" to "shall" is eminently sensible. However, the absence of a right of appeal on reimbursement is worrying. The Minister spoke in reassuring terms about the total cost of the process, but I do not share his optimism.

I draw the Minister's attention to the Smith report's clear finding that there is no single solution to the problem and that different costs will be imposed on different internet service providers. Although the Minister said that he would discuss with them the way in which the costs would be apportioned and the burdens that would be placed on them, the private sector does not always trust Governments.

The Minister made a useful point about new clause 4 and the duty to report to the House. However, it is important to have some idea of the costs that the Bill will impose on the Government and the providers. Although we shall not press new clause 4 to a Division this evening, I strongly suspect that we shall revert to it in another place.

The Minister spoke of a three-stage process for the technical approval board. The third stage was consulting with those who will be subject to the orders. That is all very splendid, but what if the dialogue, about which the Minister spoke so movingly, fails? What if the Government get it wrong? After all, Governments have been known to get it wrong. The Minister may have reservations about our proposed technical approval board, although Conservative Members and Liberal Democrat Members did not criticise it.

The technical approval board is the right way forward and the Minister needs to reconsider the matter. He will have to undertake the functions that would be delegated to a technical approval board; he said that in the original consultation document. I am glad that he is prepared to reconsider information from my hon. Friend the Member for North-East Hertfordshire and I hope that he will return to the subject.

We welcome the Government's change of heart on the order-making powers, which have worried the Opposition throughout the Bill's passage. However, the burdens that the Bill imposes on individual providers remain a matter for discussion between the Government and those providers. The order, which is now subject to the affirmative resolution procedure, is general and permissive. The devil will indeed be in the detail.

The Minister has underplayed the risk of undermining confidence in the e-commerce revolution in this country. He has failed to grasp the risk of discrimination—unintentional, I am sure—by the Government against individual service providers through the different burdens that technical requirements or costs place upon them.

I am unable to give the Minister the assurance that he sought. We shall press new clause 2 to a vote. If time permitted, we would have like to press other amendments in the group. New clause 2 is a surrogate for our remaining deep anxieties about the sad inadequacy of the Government's response.

Question put, That the clause be read a Second time:—

The House divided: Ayes 156, Noes 296.

Division No. 181]	[8.4 pm
AYES
Ainsworth, Peter (E Surrey)	Ewing, Mrs Margaret
Amess, David	Faber, David
Arbuthnot, Rt Hon James	Fabricant, Michael
Atkinson, David (Bour'mth E)	Fallon, Michael
Atkinson, Peter (Hexham)	Fearn, Ronnie
Baldry, Tony	Flight, Howard
Bell, Martin (Tatton)	Forth, Rt Hon Eric
Bercow, John	Foster, Don (Bath)
Beresford, Sir Paul	Fox, Dr Liam
Blunt, Crispin	Fraser, Christopher
Boswell, Tim	Garnier, Edward
Bottomley, Peter (Worthing W)	George, Andrew (St Ives)
Brady, Graham	Gibb, Nick
Brand, Dr Peter	Gill, Christopher
Brazier, Julian	Gorrie, Donald
Breed, Colin	Gray, James
Brooke, Rt Hon Peter	Green, Damian
Browning, Mrs Angela	Greenway, John
Bruce, Ian (S Dorset)	Gummer, Rt Hon John
Bruce, Malcolm (Gordon)	Hague, Rt Hon William
Burns, Simon	Hamilton, Rt Hon Sir Archie
Burstow, Paul	Hammond, Philip
Butterfill, John	Hancock, Mike
Cable, Dr Vincent	Hawkins, Nick
Campbell, Rt Hon Menzies(NE Fife)	Heald, Oliver
	Heath, David (Somerton & Frome)
Cash, William	Hogg, Rt Hon Douglas
Chapman, Sir Sydney(Chipping Barnet)	Howarth, Gerald (Aldershot)
	Hughes, Simon (Southwark N)
Chidgey, David	Hunter, Andrew
Chope, Christopher	Jack, Rt Hon Michael
Clappison, James	Jackson, Robert (Wantage)
Clark, Dr Michael (Rayleigh)	Jenkin, Bernard
Clarke, Rt Hon Kenneth(Rushcliffe)	Johnson Smith,
	Rt Hon Sir Geoffrey
Collins, Tim	Key, Robert
Cormack, Sir Patrick	Kirkbride, Miss Julie
Cotter, Brian	Kirkwood, Archy
Cran, James	Laing, Mrs Eleanor
Cunningham, Ms Roseanna (Perth)	Lait, Mrs Jacqui
	Lansley, Andrew
Davey, Edward (Kingston)	Leigh, Edward
Davies, Quentin (Grantham)	Letwin, Oliver
Davis, Rt Hon David (Haltemprice)	Lewis, Dr Julian (New Forest E)
Day, Stephen	Lidington, David
Duncan Smith, Iain	Lilley, Rt Hon Peter
Evans, Nigel	Lloyd, Rt Hon Sir Peter (Fareham)

Luff, Peter	Shepherd, Richard
Lyell, Rt Hon Sir Nicholas	Smith, Sir Robert (W Ab'd'ns)
MacGregor, Rt Hon John	Smyth, Rev Martin (Belfast S)
McIntosh, Miss Anne	Spicer, Sir Michael
MacKay, Rt Hon Andrew	Spring, Richard
Maclean, Rt Hon David	Stanley, Rt Hon Sir John
McLoughlin, Patrick	Steen, Anthony
Madel, Sir David	Streeter, Gary
Major, Rt Hon John	Stunell, Andrew
Malins, Humfrey	Swayne, Desmond
Maples, John	Syms, Robert
Mawhinney, Rt Hon Sir Brian	Tapsell, Sir Peter
May, Mrs Theresa	Taylor, Ian (Esher & Walton)
Moss, Malcolm	Taylor, John M (Solihull)
Nicholls, Patrick	Taylor, Sir Teddy
Norman, Archie	Tonge, Dr Jenny
O'Brien, Stephen (Eddisbury)	Townend, John
Öpik, Lembit	Trend, Michael
Ottaway, Richard	Tyrie, Andrew
Page, Richard	Viggers, Peter
	Waterson, Nigel
Paice, James	Webb, Steve
Paterson, Owen	Wells, Bowen
Pickles, Eric	Whitney, Sir Raymond
Prior, David	Whittingdale, John
Redwood, Rt Hon John	Widdecombe, Rt Hon Miss Ann
Robathan, Andrew	Wilkinson, John
Robertson, Laurence	Willetts, David
Roe, Mrs Marion (Broxbourne)	Wilshire, David
Rowe, Andrew (Faversham)	Winterton, Mrs Ann (Congleton)
Ruffley, David	Winterton, Nicholas (Macclesfield)
Russell, Bob (Colchester)	Young, Rt Hon Sir George
St Aubyn, Nick
Sanders, Adrian	Tellers for the Ayes:
Sayeed, Jonathan	Mr. John Randall and
Shephard, Rt Hon Mrs Gillian	Mr. Geoffrey Clifton-Brown.

NOES
Abbott, Ms Diane	Chapman, Ben (Wirral S)
Ainger, Nick	Chaytor, David
Ainsworth, Robert (Cov'try NE)	Clapham, Michael
Allen, Graham	Clark, Rt Hon Dr David (S Shields)
Anderson, Donald (Swansea E)	Clark, Paul (Gillingham)
Anderson, Janet (Rossendale)	Clarke, Charles (Norwich S)
Armstrong, Rt Hon Ms Hilary	Clarke, Eric (Midlothian)
Atherton, Ms Candy	Clarke, Rt Hon Tom (Coatbridge)
Atkins, Charlotte	Clelland, David
Austin, John	Clwyd, Ann
Barnes, Harry	Coaker, Vernon
Battle, John	Coffey, Ms Ann
Bayley, Hugh	Cohen, Harry
Beard, Nigel	Coleman, Iain
Beckett, Rt Hon Mrs Margaret	Colman, Tony
Bell, Stuart (Middlesbrough)	Connarty, Michael
Benn, Hilary (Leeds C)	Cook, Frank (Stockton N)
Benn, Rt Hon Tony (Chesterfield)	Cooper, Yvette
Bennett, Andrew F	Corbett, Robin
Benton, Joe	Corston, Jean
Bermingham, Gerald	Cousins, Jim
Berry, Roger	Crausby, David
Best, Harold	Cryer, Mrs Ann (Keighley)
Blears, Ms Hazel	Cryer, John (Hornchurch)
Blizzard, Bob	Cummings, John
Blunkett, Rt Hon David	Cunningham, Jim (Cov'try S)
Bradley, Keith (Withington)	Curtis-Thomas, Mrs Claire
Bradley, Peter (The Wrekin)	Dalyell, Tam
Bradshaw, Ben	Davey, Valerie (Bristol W)
Brown, Rt Hon Nick (Newcastle E)	Davidson, Ian
Browne, Desmond	Davies, Rt Hon Denzil (Llanelli)
Burden, Richard	Davies, Geraint (Croydon C)
Burgon, Colin	Davis, Rt Hon Terry (B'ham Hodge H)
Butler, Mrs Christine
Caborn, Rt Hon Richard	Dawson, Hilton
Campbell, Mrs Anne (C'bridge)	Denham, John
Campbell, Ronnie (Blyth V)	Dismore, Andrew
Cawsey, Ian	Dobbin, Jim

Donohoe, Brian H	King, Andy (Rugby & Kenilworth)
Doran, Frank	Kumar, Dr Ashok
Dowd, Jim	Ladyman, Dr Stephen
Drew, David	Lawrence, Mrs Jackie
Dunwoody, Mrs Gwyneth	Laxton, Bob
Eagle, Angela (Wallasey)	Lepper, David
Eagle, Maria (L'pool Garston)	Levitt, Tom
Edwards, Huw	Lewis, Ivan (Bury S)
Efford, Clive	Lewis, Terry (Worsley)
Ellman, Mrs Louise	Liddell, Rt Hon Mrs Helen
Ennis, Jeff	Linton, Martin
Etherington, Bill	Lloyd, Tony (Manchester C)
Field, Rt Hon Frank	Lock, David
Fisher, Mark	McAvoy, Thomas
Fitzsimons, Lorna	McCafferty, Ms Chris
Flynn, Paul	McDonagh, Siobhain
Foster, Rt Hon Derek	McDonnell, John
Foster, Michael Jabez (Hastings)	McGuire, Mrs Anne
Foster, Michael J (Worcester)	McIsaac, Shona
Foulkes, George	McNamara, Kevin
Fyfe, Maria	Mactaggart, Fiona
Gapes, Mike	McWalter, Tony
Gibson, Dr Ian	McWilliam, John
Gilroy, Mrs Linda	Mahon, Mrs Alice
Godman, Dr Norman A	Mallaber, Judy
Godsiff, Roger	Marsden, Gordon (Blackpool S)
Goggins, Paul	Marsden, Paul (Shrewsbury)
Golding, Mrs Llin	Marshall, David (Shettleston)
Gordon, Mrs Eileen	Marshall, Jim (Leicester S)
Griffiths, Jane (Reading E)	Marshall-Andrews, Robert
Griffiths, Nigel (Edinburgh S)	Martlew, Eric
Griffiths, Win (Bridgend)	Maxton, John
Grocott, Bruce	Meacher, Rt Hon Michael
Hall, Mike (Weaver Vale)	Meale, Alan
Hall, Patrick (Bedford)	Michael, Rt Hon Alun
Hamilton, Fabian (Leeds NE)	Michie, Bill (Shef'ld Heeley)
Hanson, David	Miller, Andrew
Heal, Mrs Sylvia	Mitchell, Austin
Healey, John	Moffatt, Laura
Henderson, Doug (Newcastle N)	Moonie, Dr Lewis
Henderson, Ivan (Harwich)	Moran, Ms Margaret
Heppell, John	Morgan, Ms Julie (Cardiff N)
Hesford, Stephen	Morley, Elliot
Hill, Keith	Morris, Rt Hon Ms Estelle(B'ham Yardley)
Hinchliffe, David
Hoey, Kate	Mountford, Kali
Hood, Jimmy	Mowlam, Rt Hon Marjorie
Hoon, Rt Hon Geoffrey	Mudie, George
Hope, Phil	Mullin, Chris
Hopkins, Kelvin	Murphy, Denis (Wansbeck)
Howarth, Alan (Newport E)	Naysmith, Dr Doug
Howells, Dr Kim	Norris, Dan
Hoyle, Lindsay	O'Brien, Bill (Normanton)
Hughes, Ms Beverley (Stretford)	O'Brien, Mike (N Warks)
Hughes, Kevin (Doncaster N)	Olner, Bill
Humble, Mrs Joan	O'Neill, Martin
Hurst, Alan	Organ, Mrs Diana
Hutton, John	Osborne, Ms Sandra
Iddon, Dr Brian	Palmer, Dr Nick
Illsley, Eric	Pearson, Ian
Jackson, Ms Glenda (Hampstead)	Perham, Ms Linda
Jackson, Helen (Hillsborough)	Pickthall, Colin
Jenkins, Brian	Pike, Peter L
Johnson, Alan (Hull W & Hessle)	Plaskitt, James
Jones, Mrs Fiona (Newark)	Pollard, Kerry
Jones, Helen (Warrington N)	Pond, Chris
Jones, Ms Jenny(Wolverh'ton SW)	Pope, Greg
	Prentice, Ms Bridget (Lewisham E)
Jones, Dr Lynne (Selly Oak)	Prentice, Gordon (Pendle)
Keeble, Ms Sally	Prescott, Rt Hon John
Keen, Ann (Brentford & Isleworth)	Primarolo, Dawn
Kemp, Fraser	Prosser, Gwyn
Kennedy, Jane (Wavertree)	Purchase, Ken
Khabra, Piara S	Quin, Rt Hon Ms Joyce
Kidney, David	Quinn, Lawrie
Kilfoyle, Peter	Radice, Rt Hon Giles

Rammell, Bill	Taylor, Rt Hon Mrs Ann (Dewsbury)
Raynsford, Nick
Reid, Rt Hon Dr John (Hamilton N)	Taylor, Ms Dari (Stockton S)
Roche, Mrs Barbara	Temple-Morris, Peter
Rooker, Rt Hon Jeff	Thomas, Gareth (Clwyd W)
Rooney, Terry	Thomas, Gareth R (Harrow W)
Ross, Ernie (Dundee W)	Timms, Stephen
Rowlands, Ted	Tipping, Paddy
Roy, Frank	Todd, Mark
Ruane, Chris	Touhig, Don
Ruddock, Joan	Trickett, Jon
Ryan, Ms Joan	Truswell, Paul
Salter, Martin	Turner, Dennis (Wolverh'ton SE)
Sarwar, Mohammad	Turner, Dr Desmond (Kemptown)
Sawford, Phil	Turner, Dr George (NW Norfolk)
Sedgemore, Brian	Turner, Neil (Wigan)
Sheerman, Barry	Twigg, Derek (Halton)
Sheldon, Rt Hon Robert	Twigg, Stephen (Enfield)
Singh, Marsha	Tynan, Bill
Skinner, Dennis	Vis, Dr Rudi
Smith, Rt Hon Andrew (Oxford E)	Ward, Ms Claire
Smith, Angela (Basildon)	Wareing, Robert N
Smith, Jacqui (Redditch)	Watts, David
Smith, John (Glamorgan)	Whitehead, Dr Alan
Smith, Llew (Blaenau Gwent)	Wicks, Malcolm
Snape, Peter	Williams, Rt Hon Alan(Swansea W)
Soley, Clive	Williams, Alan W (E Carmarthen)
Squire, Ms Rachel	Williams, Mrs Betty (Conwy)
Starkey, Dr Phyllis	Winnick, David
Steinberg, Gerry	Wood, Mike
Stevenson, George	Woolas, Phil
Stewart, David (Inverness E)	Worthington, Tony
Stewart, Ian (Eccles)	Wray, James
Stinchcombe, Paul	Wright, Anthony D (Gt Yarmouth)
Stoate, Dr Howard
Strang, Rt Hon Dr Gavin	Tellers for the Noes:
Straw, Rt Hon Jack	Mr. David Jamieson and
Stuart, Ms Gisela	Mr. Tony McNulty.

Question accordingly negatived.