Lords debate on Digital Regulation: Communications and Digital Committee Report - July 21

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Baroness Stowell of Beeston

That the Grand Committee takes note of the Report from the Communications and Digital Committee Digital regulation: joined-up and accountable.

Baroness Stowell of Beeston (Con)

My Lords, I am very pleased to introduce this debate on our report, Digital Regulation: Joined-up and Accountable. I will emphasise the principle behind that title quite a bit in the remarks I make today.

Before I get into the substance of my contribution, I note that this is my first debate as chairman of the Communications and Digital Select Committee. I pay tribute to my predecessor, my noble friend Lord Gilbert of Panteg. He is very well respected across the industries and sectors that the committee focuses its work on. He has become a respected figure because he has ensured that we as a committee have focused on matters of importance and that we have done so in a fair and balanced way. The work we have done has had some impact as a result. He is a tough act to follow.

I add to this tribute by paying thanks to Theo Demolder, who supported the committee for three years, initially as our policy analyst and then as our clerk. He finished that role at the beginning of this year. I also thank the policy analyst who then worked with us and remains part of our team, Emily Bailey Page. I would like to welcome our new clerk, Daniel Schlappa. They and the whole committee are greatly assisted, as always, by the wonderful Rita Cohen. I am very grateful to the team.

I am grateful to all noble Lords who sit on the committee and I am particularly grateful to my noble friend Lord Vaizey for being here to speak today. We had to decide whether to accept what I might describe as this “graveyard slot” in the Moses Room on the last day of term during a hot and sunny week, or perhaps wait months for another opportunity to have this debate. The trade-off was few people being available, but I know my colleagues are with me in spirit. I am grateful to the Labour and Lib Dem Front Benches for fielding their A-teams and to my noble friend the Minister for his never-ending zeal and commitment to his brief, whatever the weather or political events outside. I look forward to everybody’s contributions today.

This inquiry and the resulting report were the final pieces of work undertaken by the committee under my noble friend’s chairmanship, as a follow-up to a major inquiry into digital regulation carried out by the committee in 2019. Three years ago, the committee’s central finding was that the digital world requires not merely more regulation but a different approach to regulation. Digital technologies are playing an ever-greater role in our lives and the regulation of those technologies deserves increasing scrutiny.

As I say, that does not necessarily mean more regulation, but we believe that regulators would need new and different powers. Indeed, they would need to adopt a different kind of regulation. It would need to be principles-based, with regulators having to exercise greater flexibility and judgment, which in turn would require greater collaboration between regulators and much greater and co-ordinated parliamentary oversight than ever before.

We published our report Digital Regulation: Joined-up and Accountable in December 2021 as a follow-up to the earlier inquiry. So fundamental was the need for a change of approach in regulation, we thought it was important to find out what progress had been made in the two and a half years since. In December last year, regulators appeared to be on the verge of being granted broad new powers, urgently necessary to keep pace with the fast-changing digital world.

Unfortunately, since then, what was expected has not yet come to pass. The parliamentary progress of the Online Safety Bill has recently been delayed, and the proposals to place the Digital Markets Unit within the CMA on a statutory footing have not been brought forward, despite multiple reviews and consultations over nearly five years pointing to this as the way forward.

In the meantime, other jurisdictions are pulling ahead. The Digital Markets Act and Digital Services Act have been adopted this month by the European Parliament. As a result, the UK risks becoming a rule taker, rather than a rule maker, in this area of digital regulation. To state the obvious, this means that we could lose our influence in setting the agenda. It is hard to understand why the Government have been prepared to let this happen, because designing our own framework was a benefit of us leaving the European Union, and the UK’s proposed approach has been held up as much better—I will come back to this later.

Our report, published seven months ago, at a time when we were on the verge of change, focused on the need for better co-ordination and co-operation between regulators—and that requirement remains a priority. But, as a committee, we were also clear that more co-operation between regulators needed to be accompanied by updates to the legislative framework, because, however well co-ordinated they are, they will be ineffective if they do not have the powers required.

I of course understand that the call for more regulatory power can often trigger alarm. Mission creep and unnecessary red tape would not be supported by any sensible person, which is why our report recognised the legitimate concerns that many will have about regulators being given broad new powers and increased discretion to make judgments in complex areas. Furthermore, this is precisely why our report recommends that increased parliamentary accountability for regulators is an equal necessity. What we cannot escape, and what we are clear about, is that, given the pace of technological change, regulation needs to become more principles-based. But we are equally clear, as I say, that this must be coupled with greater parliamentary oversight.

I turn now to what we reported in December 2021, having reviewed progress against that earlier March 2019 report. In our first report, we asked for regulation to be strengthened and better co-ordinated, to make it capable of responding to the fast pace of change and the impact of that across the economy and society. The Digital Regulation Cooperation Forum or DRCF—even the acronym is a mouthful—was then established in July 2020. This was an early step in the right direction and includes representatives of the CMA, Ofcom, the ICO and, latterly, the FCA.

But there are persistent challenges that are not being dealt with adequately, which we raised in our December 2021 report. For instance, we found that more needed to be done to improve co-ordination and co-operation, particularly to identify new and emerging risks. The DRCF told us that it is difficult to recruit people with the right skills to scan the horizon for new regulatory challenges and that it cannot compete with the salaries that big tech companies can offer to skilled individuals. Yet, although it was struggling to do that, there is a proliferation of horizon-scanning activity in industry, academia, think tanks and advisory bodies. One of our witnesses—Andrew Murray from the LSE—told us that new reports identifying a lot of these challenges were coming out “almost daily”. In fact, as an expert working on this full time, even he could not keep up with it, although it was supposed to be his day job.

So there was no need for the DRCF to attempt to replicate this work, but it needed to do better to take advantage of the work already being done by others. As a result of that, we are pleased to see that it is doing so and joining up more now with SMEs, start-ups and academia via external engagements and symposia. However, we still feel that there is more to be done. In our report, we recommended that full membership of the DRCF be extended to all statutory regulators with an interest in the digital world, and partial membership extended to relevant non-statutory and advisory bodies.

The second challenge we identified in our report is something I have already talked about: a lack of parliamentary accountability for regulators as their work expands. Just as we believe that the work of regulation in the digital world needs to be “cross-sectoral”, if noble Lords will forgive the jargon, so too must be the process of holding regulators to account in Parliament. As I have already said, as the work of regulators expands and involves more discretion and judgment, some parts of the industry are understandably concerned that this will lead to overreach and unaccountability.

The committee believes that if the DRCF were placed on a statutory footing under a non-executive board of directors and led by an independent chair, this would enable Parliament to hold the DRCF directly accountable. We made that recommendation in our report. Unfortunately, it was not supported by the Government, but this accountability is becoming increasingly important as individual regulators increasingly take joint decisions.

As noble Lords will know, no single Select Committee has a remit to focus on digital regulation across government departments and industry sectors. Many Select Committees have remits relating to digital regulation but must balance them alongside other work. Indeed, the Communications and Digital Committee must balance scrutiny of digital regulation alongside work on the media and creative industries. Stakeholders told us that they would welcome formal public scrutiny of the work of the DRCF via a parliamentary committee, both as a counterweight to regulatory reach and to ensure that regulation is effective.

Again, one of our specific recommendations was that a Joint Committee of Parliament be established to provide sustained scrutiny of digital regulation. In fact, it is worth noting that the Joint Committee on the Online Safety Bill—the committee that did the pre-legislative scrutiny—agreed and made a similar recommendation. Unfortunately, the Government did not support that recommendation, either. Maybe my noble friend the Minister can offer us some further thoughts on that, as we are identifying it as still a key issue.

The third key concern was that the DRCF lacks robust mechanisms for resolving conflicts that may arise between regulatory agendas, increasing the risk that powerful tech companies will be able to play regulators off against each other. For example, encryption might be favoured from a privacy standpoint, but child protection advocates may seek to limit it. One of our witnesses, Dr Elena Abrusci, warned that

“the DRCF may suffer from a power imbalance between regulators. Without an independent chair or a procedure to manage trade-offs between contrasting interests, the DRCF could be limited in its actions.”

So without statutory underpinning of the DRCF, which is something we have called for and which the Government do not support, there is a limit to what the DRCF can achieve here.

We also made a recommendation to formalise DRCF co-ordination by introducing statutory measures, including duties for regulators to consult one another and the creation of statutory information-sharing mechanisms. We welcome the Government’s commitment in response to that that there will be statutory duties for the CMA and the ICO to consult other regulators, but what legislation will that appear in and when will it come forward?

Since our report, albeit that there were specific recommendations that the Government did not support, as I identified, they none the less gave overall support to the report, and we welcome that. They agreed with us about the scale of opportunities and challenges posed by digital innovation, as well as the importance of ensuring that our regulatory system keeps pace with developments in digital technologies and markets.

The DRCF itself published its workplan for 2022-23 a few months ago, including plans to build further on the joint statement between the ICO and the CMA from the year before about data protection and competition, and sharing knowledge on algorithmic auditing. We welcome the joint statement from Ofcom and the CMA earlier this month on online safety and competition in digital markets. We also welcome action from individual regulators, such as the CMA’s decision to launch market investigation references into Google and Apple’s dominance in mobile app ecosystems, while it awaits the necessary powers to place the Digital Markets Unit on a statutory footing.

So all of this is welcome, but without the DMU being put on a statutory footing and the new pro-competition regime we will not have a UK equivalent of the news media bargaining code, which has provided enormous benefit to the news industry in Australia. I know that the Government care about the future of journalism. They committed to a news media bargaining code in their response to the consultation on the pro-competition regime for the digital market, but the policy solutions that the media industry is crying out for are sat on the table.

We welcome the initial progress, but there remains a long way to go. We as a committee are concerned that the UK is falling behind in this vital area of digital regulation, particularly in the area of competition. We urge the Government to bring forward legislation to put the DMU on a statutory footing and give it the ex-ante powers it needs to address fundamental imbalances in the market.

As I have commented before in debates, my noble friend has had busy slate of legislation to steward through your Lordships’ House, but, as much as I am concerned for his well-being in undertaking all that work, I am now also concerned about the potential delay to some of this. Will my noble friend give us an update on what is happening to the Online Safety Bill, the latest on the media Bill and, in response to something in the newspaper today, the Government’s latest position on the independent review of the BBC’s future funding? I look forward to all noble Lords’ contributions to this debate, particularly the Minister’s, and I beg to move.

1.16pm
Lord Vaizey of Didcot (Con)

My Lords, it is a great pleasure to take part in this debate and to welcome this report. As my noble friend Lady Stowell knows, I am always here for her, which is why I am here today. I notice lurking in the shadows another former member of our committee who took part in this report, the noble Lord, Lord Stevenson of Balmacara. We wait to see whether he will make a contribution. We note that he has shaved and had a haircut, and that bodes well for some important contribution later in this debate—that did not go down so well, but it was meant in affection.

It has been a pleasure to serve on this committee for the past couple of years. I can say this because I am not responsible for the direction of travel of the committee’s reports, but it seems the committee has a history of leaning into policy and helping to move things along, not least, for example, in calling for the Digital Markets Unit to be set up—which is still a work in progress, but one that is much needed.

It goes without saying—it is a trite thing to say—that everything is now digital, so trying to bring some coherence into how one regulates a world of digital is extremely important. The advent of the Digital Regulatory Cooperation Forum—my noble friend Lady Stowell is quite right that it is a mouthful whether one uses its full title or its acronym—is a welcome development. Anyone who has ever worked with government knows the extraordinary frustration at the way that Whitehall is currently configured, with departments working in silos and with the only co-ordinating mechanism appearing to be the Cabinet or the Cabinet Office. It is extremely difficult to get joined-up government, and it is equally difficult to get joined-up regulation, so anything that moves the dial in that respect has to be welcomed. I often think that perhaps one day we could use technology to abolish all government departments and at last have government by task, where we can mix and match the right people to achieve the right outcomes for our country—but I digress.

The point about the Digital Regulatory Cooperation Forum is that it is here, and this report is a welcome intervention in the beginning of this process to ask how it can be improved and made better. That is the spirit with which this report should be read. It is in no way a criticism of anything, but simply looking at the existing situation and thinking how it could be improved and built upon. In that respect, I hope the Government and indeed the regulators will regard it as something they can keep referring to when they think about the next steps.

The first and most obvious point, given that there are four regulators involved in the DRCF, is how many more regulators should be involved. Given what I said earlier about digital being everything, the list is almost endless, but the report details six or seven other regulators that could have a role in the DRCF. That made me think a bit about the progress of the European Economic Community and later the European Union. At what point does one reach optimal membership? I started to speculate that perhaps in 25 years’ time we might have the head of the Information Commissioner’s Office demanding a referendum so that it could leave the Digital Regulatory Cooperation Forum—but, again, I digress. It is certainly something that the forum has to keep in mind: which additional regulators could and should be members?

The other important point the report makes is that there are additional stakeholders who are not necessarily formal non-departmental public bodies or quangos but which still have huge degree of expertise that they can bring to the debate about digital regulation. One of those cited, for example, is the Internet Watch Foundation, which I used to work with closely and which I think is technically a charity. That is a classic example of something that is not a government body but which nevertheless contains an enormous amount of expertise and takes action in the important area of child sexual abuse.

Given that the DRCF has been established, it again goes without saying that accountability and transparency, which the report touches on, are extremely important. It is important that we know what is the DRCF’s remit, the issues that it is looking at, and its plans for this year and years to come. Again, it is important, given what I said earlier about stakeholders, that even if they do not have a formal role, people can input into the work plan, if you like, of the DRCF and the regulators that sit on it.

It is also important, as the report says, that we have a rigorous process in the DRCF. Its greatest opportunity is to look at conflicts of regulation to try to work out where one regulator’s remit begins and another’s ends—I was going to say “turf wars” but that would be an inappropriate term. For example, I remember bringing together Ofcom and the ICO to discuss the important issue of nuisance calls, which affects the day-to-day lives of many people. Bringing those two regulators into a room to work together provided a much more impactful response to that. However, it is important that one regulator does not go off on a particular campaign without having at least had some engagement with other regulators, who may have locus and expertise to bring to bear, and it is important that those conflicts are resolved.

One of the other interesting aspects of the report is how one constitutes the DRCF formally. It now has a well-respected chief executive who comes from industry but it does not have a board, and the report recommends an independent non-executive chair and a number of other non-executives. I note that your Lordships’ House has provided Ofcom with a fantastic chair, and no doubt it will be able to provide the DRCF with a superb, independent, non-executive chair in the months and years to come—a process, of course, like the previous one, that will be completely free from political interference and which will simply seek out the best candidate.

It is also important that the DRCF provides an opportunity for regulators to share information. When I had a briefing from the DRCF before we even started our report, one of the things that I was struck by, which is a lesson that I have taken elsewhere with other organisations I worked with, was the idea of joint hiring, which struck me as a brilliant albeit obvious opportunity—although obvious only once it has been explained—in the world of technology. Hiring people who know about and can work with technology, who can therefore command pretty high salaries from technology companies, is very difficult for regulators, who are quite rightly constrained by public sector pay restraint. However, the opportunity to hire highly talented people who can work across those regulators is obvious. With that naturally flow other ways of co-operating, such as joint regulation and joint powers explicitly set out. However, as the report makes clear, that needs to be set out potentially in legislation.

Finally, the report is quite right to focus in its opening paragraphs on the opportunity for this forum to be an organisation that does horizon scanning—that looks at what is coming down the line. I noticed that the Government, for example, published yesterday their plans to support artificial intelligence in the years to come—I think I only noticed it on a tweet; I must sign up for the DCMS emails. Those kinds of reports coming out of DCMS are extremely valuable and important. However, it struck me that, with the DRCF in place, here is a perfect opportunity to involve the regulators on the ground floor, as it were, when DCMS is doing this kind of work, looking at particular sectors of technology. Getting regulation right is just as important as getting right government financial support, fiscal support, skills or whatever. A great regulatory climate is just as important when we are leaning into technology.

As my noble friend Lady Stowell outlined in her excellent speech, it is quite right as well that there be a parliamentary Joint Committee to scrutinise the work. It could bring together the heads of the various Select Committees that have a place in talking about digital regulation, so that they can meet regularly, scrutinise what is going on and compare their knowledge and information.

This is an incredibly useful report on a pretty niche and narrow issue that fascinates a few of us but not necessarily a general audience. Nevertheless, it is the kind of thing that can really make an extraordinary difference to UK plc—to use that terrible phrase—in creating a forward-looking, dynamic regulatory climate for technology and digital in this country.

My noble friend the Minister will no doubt cover this brief for many years to come. I know that he has been asked to tell us about the progress of the Online Safety Bill, about which I will be extremely interested to hear. I will leave him with one final thought: the DRCF also could be a prompt to the Government to shine a light on the plethora of digital bodies and committees that now exist to supervise technology policy in government. Many of them are excellent individual bodies in themselves, but there appears to be no particular coherence in how they work together. Just as with the regulators, there appears to be no clear road map of where one research or grant-giving body’s remit ends and another one begins. I know that my noble friend never puts his feet up, so I urge him to turn his mind to that work over the Summer Recess, which might save the Government some money and give them much more bang for their buck.

1.27pm
The Earl of Erroll (CB)

I shall speak in the gap; I am sorry that I did not get my name down early enough to speak properly. I have one or two quick comments. First, I welcome this useful and excellent report, which will be a useful step forward if something happens about it. I notice that DCMS has responded to it but, actually, regulation involving digital issues runs across all departments, so it almost ought to be a joint response from every single department. That is something that we miss; “divide and rule” in the Executive is very dangerous.

From the summary, I picked out references to

“unnecessary regulatory burdens which could limit the benefits of digital innovation”—

that remains very true—and

“a lack of overarching coordination and oversight of regulatory objectives.”

That is also extremely true, and I have hit it several times. Paragraph 9 states:

“The solution was not to be found in more regulation, but in a different approach to regulation, with a coordinated response across policy areas.”

Therefore, the Government’s response—they are not down as saying that they actually want this to happen—really worries me. I thoroughly agree with the noble Baroness, Lady Stowell, when she said that we should set out the principles in what we do sometimes. We cannot control complex systems using rules, as they start conflicting and alter in unpredictable ways; there is a lot of theory around this. We have to realise that we must set out the objectives and principles behind them.

Paragraph 62 is about “power to resolve conflicts”. Someone needs to have that power. I will illustrate that with a real example. Among other interests, I have been involved in the whole thing about age verification for many years, going back to Bills on ID cards and things like that—although that was not so much about age verification. One of the challenges is that the civil servants who know all about it tend to move within a year and a half to two years, so you lose your expertise the whole time. All those who worked on Part 3 of the Digital Economy Act—we had to get them up to speed—have gone. I do not know where; they are probably desperately hiding somewhere else.

Lord Vaizey of Didcot (Con)

They have gone to the metaverse.

The Earl of Erroll (CB)

Exactly—we will never see them again. This is the big problem. I chaired the British Standards Institute’s publicly available specification—PAS—1296 on anonymous age verification; we solved the problem, and it is out there. The sad thing is that this is now being elevated to international standards used by Europe, but I do not know whether we still recognise that it exists. In 2020-21, the French started implementing the protection of children in legislation—I am not up to speed on exactly where they are—so it is actually happening there. But what have we done? We have said that we will stop it in the Online Safety Bill, repealing the part that was going to work in the Digital Economy Act. This is complete lunacy and, in fact, goes against the principle of the supremacy of Parliament—but I will not go into constitutional issues.

Looking forwards, the benefits and potential risks of AI will not be a single-department thing; this will run across all departments, because it involves everyone and everything. A lot of people mean different things when they say “AI”, so this is huge.

Finally, yes, we need some horizon scanning, but we do not want to get bogged down in trying to anticipate futures that may not exist. As someone said, a lot of other people are doing this. If you have knowledgeable people in the committee and in the Lords, they can help to spot where things are coming from and go from there. I welcome this report.

1.31pm
Lord Clement-Jones (LD)

My Lords, I am pleased to be speaking in this short but perfectly formed debate. I congratulate the noble Baroness, Lady Stowell, on her accession to the chair of the Communications and Digital Committee and on her comprehensive introduction. I also congratulate the committee on a niche but highly significant piece of work.

In their digital regulation plan, first published last July and updated last month, the Government acknowledged that

“Digital technologies … demand a distinct regulatory approach … because they have distinctive features which make digital businesses and applications unique and innovative, but may also challenge how we address risks to consumers and wider society.”

I entirely agree, but I also agree with the noble Baroness, Lady Stowell, the noble Lord, Lord Vaizey, and the noble Earl, Lord Erroll, that we need to do this without the kind of delays in introducing regulation that we are already experiencing.

The plan for digital regulation committed to ensuring a forward-looking and coherent regulatory approach for digital technologies. The stress throughout the plan and the digital strategy is on a light-touch and pro-innovation regulatory regime, in the belief that this will stimulate innovation. The key principles stated are “Actively promote innovation”, achieve “forward-looking and coherent outcomes” and

“Exploit opportunities and address challenges in the international arena”.

This is all very laudable and reinforced by much of what the Select Committee said in its previous report, as mentioned by the noble Baroness. But one of the key reasons why the design of digital governance and regulation is important is to ensure that public trust is developed and retained in an area where there is often confusion and misunderstanding.

With the Online Safety Bill arriving in this House soon, we know only too well that the power of social media algorithms needs taming. Retention of public trust has not been helped by confusion over the use of algorithms to take over exam assessment during the pandemic and poor communication about the use of data on things like the Covid tracing app, the GP data opt-out and initiatives such as the Government’s single-ID identifier “One Login” project, which, together with the growth of automated decision-making, live facial recognition and use of biometric data, is a real cause for concern for many of us.

The fragility of trust in government use and sharing of personal data was demonstrated when Professor Ben Goldacre recently gave evidence to the Science and Technology Committee, explaining that, despite being the Government’s lead adviser on the use of health data, he had opted out of giving permission for his GP health data to be shared.

As an optimist, I believe that new technology can potentially lead to greater productivity and more efficient use of resources. But, as the title of Stephanie Hare’s new book puts it, Technology Is Not Neutral. We should be clear about the purpose and implications of new technology when we adopt it, which means regulation which has the public’s trust. For example, freedom from bias is essential in AI systems and in large part depends on the databases we use to train AI. The UK’s national AI strategy of last September does talk about public trust and the need for trustworthy AI, but this needs to be reflected in our regulatory landscape and how we regulate. In the face of the need to retain public trust, we need to be clear, above all, that regulation is not necessarily the enemy of innovation; in fact, it can be the stimulus and key to gaining and retaining public trust around digital technology and its adoption.

We may not need to go full fig as with the EU artificial intelligence Act, but the fact is that AI is a very different animal from previous technology. For instance, not everything is covered by existing equalities or data protection legislation, particularly in terms of accountability, transparency and explainability. A considerable degree of horizontality across government, business and society is needed to embed the OECD principles.

As the UK digital strategy published this month makes clear, there is a great deal of future regulation in the legislative pipeline, although, as the noble Baroness mentioned, we are lagging behind the EU. As a number of noble Lords mentioned, we are expecting a draft digital competition Bill in the autumn which will usher in the DMU in statutory form and a new pro-competition regime for digital markets. Just this week, we saw the publication of the new Data Protection and Digital Information Bill, with new powers for the ICO. We have also seen the publication of the national AI strategy, AI action plan and AI policy statement.

In the context of increased digital regulation and the need for co-ordination across regulators, the Select Committee welcomed the formation of the Digital Regulation Cooperation Forum by the ICO, CMA, Ofcom and FCA, and so do I, alongside the work plan which the noble Baroness, Lady Stowell, mentioned. I believe that this will make a considerable contribution to public trust in regulation. It has already made great strides in building a centre of excellence in AI and algorithm audit.

UK Digital Strategy elaborates on the creation of the DRCF:

“We are also taking steps to make sure the regulatory landscape is fully coherent, well-coordinated and that our regulators have the capabilities they need … Through the DRCF’s joint programme of work, it has a unique role to play in developing our pro-innovation approach to regulation.”

Like the Select Committee in one of its key recommendations, I believe we can go further in ensuring a co-ordinated approach to digital regulation, horizon scanning—which has been mentioned by all noble Lords—and adapting to future regulatory needs and oversight of fitness for purpose, particularly the desirability of a statutory duty to co-operate and consult with one another. It is a proposal which the Joint Committee on the Draft Online Safety Bill, of which I was a member, took up with enthusiasm. We also agreed with the Select Committee that it should be put on a statutory footing, with the power to resolve conflicts by directing its members. I was extremely interested to hear from noble Lords, particularly the noble Lord, Lord Vaizey, and the noble Earl, Lord Erroll, about the circumstances in which those conflicts need to be resolved. It is notable that the Government think that that is a bridge too far.

This very week, the Alan Turing Institute published a very interesting report entitled Common Regulatory Capacity for AI. As it says, the use of artificial intelligence is increasing across all sectors of the economy, which raises important and pressing questions for regulators. Its very timely report presents the results of research into how regulators can meet the challenge of regulating activities transformed by AI and maximise the potential of AI for regulatory innovation.

It takes the arguments of the Select Committee a bit further and goes into some detail on the capabilities required for the regulation of AI. Regulators need to be able to ensure that regulatory regimes are fit for AI and that they are able to address AI-related risks and maintain an environment that encourages innovation. It stresses the need for certainty about regulatory expectations, public trust in AI technologies and the avoidance of undue regulatory obstacles.

Regulators also need to understand how to use AI for regulation. The institute also believes that there is an urgent need for an increased and sustainable form of co-ordination on AI-related questions across the regulatory landscape. It highlights the need for access to new sources of shared AI expertise, such as the proposed AI and regulation common capacity hub, which

“would have its home at a politically independent institution, established as a centre of excellence in AI, drawing on multidisciplinary knowledge and expertise from across the national and international research community.”

It sets out a number of different roles for the newly created hub.

To my mind, these recommendations emphasise the need for the DRCF to take statutory form in the way suggested by the Select Committee. But, like the Select Committee, I believe that it is important that other regulators can come on board the DRCF. Some of them are statutory, such as the Gambling Commission, the Electoral Commission and the IPO, and I think it would be extremely valuable to have them on board. However, some of them are non-statutory, such the BBFC and the ASA. They could have a place at the table and join in benefiting from the digital centre of excellence being created.

Our Joint Committee also thoroughly agreed with the Communications and Digital Committee that a new Joint Committee on digital regulation is needed in the context of the Online Safety Bill. Indeed the Secretary of State herself has expressed support. As the Select Committee recommended, this could cover the broader digital landscape to partly oversee the work of the DRCF and also importantly address other objectives such as scrutiny of the Secretary of State, looking across the digital regulation landscape and horizon scanning—looking at evolving challenges, which was considered very important by our Joint Committee and the Select Committee.

The Government are engaged in a great deal of activity. The question, as ever, is whether the objectives, such as achieving trustworthy AI, digital upskilling and powers for regulators, are going to be achieved through the actions being taken so far. I believe that the recommendations of the Select Committee set out in this report would make a major contribution to ensuring effective and trustworthy regulation and should be supported.

1.43pm
Lord Bassam of Brighton (Lab)

My Lords, like other colleagues this afternoon I congratulate the noble Baroness, Lady Stowell, on her excellent presentation of the report, its findings and its recommendations. I am very flattered that she might consider me part of the “A team” responding today to that report—I am certainly not in that league. The noble Baroness was elevated to her role; I think we should look at in that light rather than as “accession”. This report was timely when it was published, and I regret that we have had to wait seven months for the opportunity to debate it because, as we are all aware, the digital world moves on very fast and we are, as the noble Lord, Lord Clement-Jones, said, urgently awaiting the arrival in this House of the Online Safety Bill.

I am ever grateful to the Communications and Digital Committee for its work. Its 2019 report Regulating in a Digital World and now this report with suggestions for addressing the insufficiencies—and the sufficiencies—of the current regulatory system are very welcome. As all sides have acknowledged, digital innovation comes at us rapidly: some developments are anticipated, while others are more surprising. Regulation of some clearly sits with a particular regulator, whereas some other activities may cut across several remits. This report makes a case for better co-ordination and the updating of powers.

Whether we see developments coming or not, and regardless of the regulator involved, it is rare that we have proven models to replicate or to take influence from. That inevitably means that our initial attempts might not be wholly successful.

While we must leave room for innovation and the possible substantial economic and social benefits it can bring, any responsible Government must also deliver a regulatory framework that recognises and mitigates risk, and which has the tools to react if and when things go wrong. We await some of that.

In their response, the Government are right to note that policy responses must be “proportionate and evidence-based”—which leads me to be rather surprised by some of their conclusions on the simple and effective recommendations that the report has brought forward. Although it is important to implement the right system, and although we might not be able to be ahead of the curve, we must try to keep pace with developments rather than allow ourselves to lag behind. That is clearly what has happened with the digital world. For example, we need confidence that the evidence base for potential policy responses is being built right now, rather than having Ministers wait for problems to arise before research is commissioned or consultations take place. I hope that the Minister can provide some assurance on this front.

I also wonder whether the Minister, before he puts his summer flip-flops on, could comment further on the Government’s decision not to put the Digital Regulation Cooperation Forum on a statutory footing. I think most Members here in the Committee today are wondering why that is. It seems a very strange decision indeed. The Government’s response talks of the importance of

“sufficient clarity and transparency around the DRCF’s ways of working”,

but surely the best way of delivering such clarity and transparency would be to enable scrutiny of the body’s remit and working practices through consideration of legislation. Similarly, the committee’s report talks of the need for the DRCF to engage with regulators and other relevant bodies, whether those organisations are based domestically or overseas.

The Government used their response to outline several meetings held between the forum and interested parties, but future engagement depends very much on ongoing good will and co-operation rather than having any firmer underpinning. Does the Minister think that that is right?

I also wonder why the Government failed to support the proposal of a Joint Committee across both Houses. It worked very well for the consideration of the Online Safety Bill. I wonder what the harm is. I do not buy the argument that there is duplication. There is value in this, because Parliament needs to have a say in these matters.

There are any number of related issues, including how we regulate artificial intelligence—the favourite subject of the noble Lord, Lord Clement-Jones—but, given everyone’s wish to wrap up for the Summer Recess, I look forward very much to the Minister’s response. However, I add my voice to the list of questions from the noble Baroness, Lady Stowell, as to what has happened to the Online Safety Bill, what is happening to the review of the BBC’s future funding and where we are at with the media Bill. I know that at this time in the political cycle, when you change political leaders, there is a temptation to park things, but it would be good to have an update on some of those things from the Minister.

1.48pm
The Parliamentary Under-Secretary of State, Department for Digital, Culture, Media and Sport (Lord Parkinson of Whitley Bay) (Con)

My Lords, I am very grateful to my noble friend Lady Stowell of Beeston for moving and so expertly teeing up this debate on your Lordships’ committee’s report. It is yet another example of the committee’s foresight in placing digital regulation at the centre of public debate—something it also did very effectively through its 2019 report Regulating in a Digital World. I am very grateful to all the members of the committee for their work and to the noble Lords who have spoken today.

I certainly add my voice to the commendation of my noble friend on the constructive way she goes about her engagement and the scrutiny she gives the Government on behalf of your Lordships’ committee, and I also join her in paying particular tribute to our noble friend Lord Gilbert of Panteg, who chaired the committee so ably during the course of this and previous inquiries.

Before I turn to the specific recommendations made in the report, it may be helpful to set out briefly the fundamental issue which lies at the heart of this inquiry: how we approach the regulation of digital technologies. Your Lordships’ committee has done great work to highlight the importance of ensuring that our regulatory approaches can keep pace with the opportunities and the challenges posed by digital technologies, enabling us to maximise the benefits they bring while minimising the risks they pose. Crucially, that is not just about ensuring that our regulators are able to work effectively together, or that we have effective horizon scanning in place, important as these considerations are. It is also, more fundamentally, about how we design and implement our overarching regulatory approach.

The Government take this issue extremely seriously. In July last year we published the plan for digital regulation, setting out our overarching approach to digital regulation for the first time. The plan outlined our commitment to develop regulatory policy which is capable of delivering our core objectives: to promote competition and innovation, to keep the UK safe and secure online, and to promote a flourishing democratic society.

Momentum since the publication of the plan has been steady. Indeed, we have continued to make rapid progress even in the relatively short time since the committee concluded its inquiry. In March, the Online Safety Bill was introduced to Parliament, which will equip the UK with powerful regulatory and legal tools to keep internet users, especially children and vulnerable people, safe. As your Lordships know, it is still on Report in another place, which means that, regrettably, we will not have our Second Reading in the first week back after the Summer Recess. However, I hope that it will reach your Lordships’ House expeditiously so that we can do that swiftly.

Also in March, the Secretary of State wrote to the Digital Regulation Cooperation Forum outlining the Government’s priorities for digital regulation, including more effective horizon scanning and greater regulatory join-up, key elements of which are being addressed through the current work programme of the forum.

In May, we confirmed our approach to delivering the new pro-competition regime for digital markets, which will help to deliver lower prices for UK families, enable entrepreneurs to compete and grow, and give consumers more choice and control over the services that they use online.

In June, we confirmed our data reform proposals, setting out how we intend to update our data protection laws, implement a more flexible approach to compliance and ensure that the Information Commissioner’s Office is better able to account for the increasing importance of its remit for competition, innovation and economic growth.

In July, we published our approach to regulation in the UK Digital Strategy, including new research on regulatory innovation, as well as an “initial outcomes monitoring framework”, which will enable us better to understand and assess the evidence base for regulatory policy.

In addition, only this week, as my noble friend Lord Vaizey of Didcot spotted through his assiduous monitoring of the DCMS Twitter feed, we published a policy paper on the governance of artificial intelligence, setting out our proposals for a new approach to AI regulation, which will unleash growth and innovation while safeguarding our fundamental values and keeping people safe and secure, and we introduced the Data Protection and Digital Information Bill to Parliament.

I list all this to emphasise how seriously the Government take this issue, and I hope to provide some reassurance to noble Lords. Like your Lordships’ committee, we are committed to making sure we have a coherent approach to regulation which will deliver the full benefits of digital technologies, and we are taking the steps we needed to do this.

I turn now to the specific recommendations made by the committee in its report, beginning with its proposals on regulatory co-ordination and co-operation. As we have been discussing, the report made two connected recommendations: to expand the Digital Regulation Cooperation Forum and place it on a statutory footing as the “digital regulation board”, and to implement new statutory duties to strengthen and facilitate regulatory co-operation.

On the proposal for a digital regulation board, I emphasise the points that we made in our response to the committee’s report. Although the Government agree that the forum has a fundamental role to play in the regulatory landscape, we do not currently support the idea of converting it into a statutory body with the power to direct and oversee other regulators. That is partly due to the complexity that such a body would create in the regulatory landscape at a time when regulatory regimes and remits are quickly evolving, as noble Lords noted. In particular, we are concerned that such a move would confuse issues of accountability and ownership, at a point when consumers and industry are looking for more—not less—clarity on where regulatory responsibilities sit.

Our reticence to create more formal architecture at this stage also reflects the value that we attach to the agility of the forum. The former Minister for the Digital Economy, Chris Philp, made this point in evidence to your Lordships’ committee when he noted that the forum has to work much more quickly than would have been possible with a statutory body. Statutory bodies can be cumbersome to create and operate, whereas less formal approaches can enable us to move more quickly and make more rapid progress, which is critical given the fast-moving nature of digital technologies.

Indeed, I point noble Lords to the impressive work which the forum is doing, to some of which my noble friend Lady Stowell alluded in her opening speech. This year alone it has published a landmark statement on online safety and competition regulation, major publications on algorithmic processing and auditing and an ambitious work plan for 2022-23, as well as launching its digital market research portal. I also venture to suggest that it is the flexibility afforded by the forum’s model of co-ordination that has made it such a strong focus of international interest, with comparable bodies already established in the Netherlands and Australia, and other countries such as Singapore following its work with close interest.

I recognise that it was not only the legislative basis of the forum but the extent and scope of its membership that was a central concern in the committee’s proposal for a digital regulation board. As the Government have made clear in our plan for digital regulation, the digital strategy and the Secretary of State’s letter of priorities to the chief executives of the forum, effective co-ordination will need to involve a wider set of regulators than those currently included in the forum, although clearly they will play a central role in digital regulation. We therefore welcomed the commitment that the forum made in its current work plan and letter to the Secretary of State to engage comprehensively with other regulators via quarterly round tables and to identify opportunities for collaborative work on that basis. Those round tables have already seen the forum engage with the Gambling Commission, the Bank of England, the Payment Systems Regulator, the Advertising Standards Authority, the British Board of Film Classification, the Intellectual Property Office and the Electoral Commission. There is clearly scope for further engagement, although it is important to note that there is inevitably a trade-off between the breadth of the forum’s activities and its ability to progress specific projects quickly.

I turn to the second element of the committee’s recommendations on co-ordination. I am pleased to confirm that we are in the process of implementing a range of statutory measures to enable regulators to collaborate and share information in the delivery of new regulatory regimes. As recently discussed in another place in relation to the Online Safety Bill, we are updating Section 393 of the Communications Act 2003 to ensure that Ofcom can disclose information with other regulators including the Competition and Markets Authority, the Information Commissioner’s Office, the Financial Conduct Authority and the Payment Systems Regulator for the purposes of its functions under that Bill. We will likewise introduce a duty for the Digital Markets Unit to consult the Financial Conduct Authority, Ofcom, the Information Commissioner’s Office, the Bank of England and the Prudential Regulation Authority as part of the planned measures for the new pro-competition regime. Finally, in reforms to the data protection regime and ICO, the Data Protection and Digital Information Bill introduces a new duty for the ICO to consult regulators and other relevant bodies when exercising its duties to have regard to growth, innovation and competition.

We are confident from intensive discussions with regulators that these measures will provide them with the powers they need to address key points of intersection between the new regulatory regimes while being proportionate and tight in scope. Of course we recognise that further measures may be needed to address other challenges that may be raised in the future. For example, issues of co-ordination are likely to become a major area of focus as we develop our proposals for AI regulation and governance which will be outlined in our forthcoming White Paper. I assure noble Lords that we will continue to keep such issues under review.

I turn to the next key area of the committee’s recommendations: the need to ensure greater consolidation in regulatory horizon scanning. I agree that this is vital, given the speed and suddenness with which disruptive digital technologies can transform society. The Government have made science and technology policy, driven by evidence, a major priority. There are strong networks across government for sharing insights from the horizon-scanning teams in different departments. This is led by the national science and technology council, chaired by the Prime Minister, and the Government Office for Science, led by the Chief Scientific Adviser. These organisations bring together expertise from inside and outside government to identify the mechanisms required to deliver our ambitions for innovation.

It is also an area where the regulators, the DRCF in particular, are making rapid progress. Last year, for example, the forum launched its technology horizon-scanning programme, which is explicitly designed to enable join-up with small and medium-sized enterprises, start-ups and academia—partnerships which bring great benefit, as my noble friend Lady Stowell rightly said. In March, it followed this with the launch of a research portal to help regulators and others access existing knowledge about topical issues, and has undertaken the first of a projected series of symposia on issues such as fintech, the metaverse and Web3. Alongside this, it has continued to strengthen its engagement with international counterparts.

Government and regulators are also supported by a network of advisory bodies. These include the Alan Turing Institute, which specialises in data science and artificial intelligence, the Regulatory Horizons Council, an independent expert committee which identifies the implications of technological innovation and provides government with impartial expert advice on regulatory reform, and the AI Council, another independent expert committee that provides advice to government and high-level leadership of the artificial intelligence ecosystem.

As the noble Lord, Lord Clement-Jones, noted—

Lord Clement-Jones (LD)

Can the Minister say a bit more about the Regulatory Horizons Council? It seems to be one of these shadowy bodies that very rarely publish anything or make updates. The Minister mentioned many other bodies that clearly do useful work, but I have my doubts about the Regulatory Horizons Council.

Lord Parkinson of Whitley Bay (Con)

I would be very happy to provide an introduction for the noble Lord so that he can speak to it directly.

I was going to follow the point the noble Lord made about the report this week from the Alan Turing Institute on how regulators can address the challenges and opportunities of regulating AI. That report echoes the Government’s national AI strategy and plan for digital regulation in concluding that there is a greater need for regulatory co-ordination; it proposes enabling co-ordination, including resource pooling, as my noble friend Lord Vaizey mentioned in his points about joint hiring, to increase readiness for AI across the UK’s regulatory landscape. All these bodies provide us with useful insights. I am very happy to provide an introduction for the noble Lord, Lord Clement-Jones, to the Regulatory Horizons Council.

As ever, there is much more work to be done and the Government will continue to analyse how we can best support work across the different institutions involved in the complex science of horizon scanning. Again, this is likely to become a particularly salient issue as we develop our thinking on AI governance and regulation, and one where we expect to offer further suggestions in due course.

I turn to the committee’s recommendation for a new parliamentary Joint Committee to scrutinise digital regulation. Again, I refer noble Lords to the position we outlined in our response: we believe it would be unnecessary to establish a permanent Joint Committee of this kind when we already have rigorous scrutiny provided by established committees such as your Lordships’ committee and the DCMS Select Committee in another place. We will therefore not take forward the recommendation for a new Joint Committee, although, as the former Minister for the Digital Economy made clear in Committee on the Online Safety Bill, we continue to assess whether some form of additional scrutiny is needed in the context of that piece of legislation. We remain open-minded on that and I look forward to discussing it with noble Lords when the Bill comes to your Lordships’ House.

My noble friend Lady Stowell asked about the timing of the digital markets Bill. As she knows, the Queen’s Speech outlined that we will publish a draft digital markets, competition and consumer Bill. Publishing in draft allows us to engage with Parliament and interested parties on the details of the regime to ensure that the legislation is effective, balanced and proportionate. Pre-legislative scrutiny certainly improved the Online Safety Bill, and I hope the engagement that the publication of a draft Bill will allow us will help sharpen its proposals.

In the meantime, the Government will continue to work with the Digital Markets Unit to ensure the operational readiness of the regime, ahead of the legislation being passed. We have engaged with interested parties extensively, through a public consultation, and published our responses earlier this month. As I say, we committed in the Queen’s Speech to publish a draft Bill in this parliamentary Session, and that remains our commitment.

My noble friend also took the opportunity to ask a slightly off-topic question about BBC funding. As this is her last chance to do so before the Summer Recess, I am happy to say that DCMS will begin preparatory work over the summer, including considering the findings of your Lordships’ committee. We will look at what lessons we can learn from other countries on how they have reformed public service broadcasters in their jurisdictions in recent years. Although it has not been possible to launch a review of the licence fee funding model before the Summer Recess, the next Prime Minister will obviously have a role in deciding how we approach it.

To conclude, I reiterate the point about the speed with which new opportunities and challenges are being generated in the regulatory space. By necessity, the decisions that we make today about our regulatory approach and institutions will not be the final word on any of these questions, and the Government are fully committed to reviewing our regulatory approaches and structures.

I thank noble Lords for their willingness to engage so constructively with us as we chart our course through these new challenges. I encourage them to continue doing so as digital innovation continues to transform our lives still further—but perhaps not until after they have all enjoyed a well-earned summer break.

2.07pm
Baroness Stowell of Beeston (Con)

My Lords, I am very grateful to everyone for their powerful contributions. This may have been a small Committee, but it has been perfectly formed.

To repeat something that I said at the beginning, I welcome the important work of the statutory regulators, which are responsible for a lot of important aspects of our national life. It is incumbent on me in particular—as chair of the Communications and Digital Committee, which engages with all of them—to put on record just how much we acknowledge and recognise the important work they do.

I also again welcome the creation of the DRCF. As I said, this is an important step in the right direction and, as noble Lords touched on, its work is already making a difference, which is to be acknowledged. I was taken by my noble friend the Minister’s remarks on the benefits, sometimes, of something not being statutory but agile and flexible. I take that point, but I emphasise that the nature of what we are talking about requires us to keep this under constant review. I remain of the view that there needs to be some statutory underpinning for a body that is able to pull together the work of these various regulatory bodies and deal with the occasional conflicts and issues that might require trade-offs. If it were to be on a statutory footing, that would make its accountability and the parliamentary oversight of it that much more effective.

I also endorse noble Lords’ references to the non-statutory bodies that do important work in this area. I will name a few: the Internet Watch Foundation, the Advertising Standards Authority and the British Board of Film Classification—that is not an exhaustive list. It is important that we recognise their work, the importance of the statutory regulators working hand in hand with them and the requirement for that to continue.

I was encouraged that my noble friend said that the Government remain committed to bringing forward the draft Bill on digital competition. What he said about the potential for a new Joint Committee to scrutinise the implementation of the Online Safety Bill once it is passed by Parliament was interesting. As he alluded to, when that Bill comes to your Lordships’ House, we might want to return to some of the issues we have talked about. If a Joint Committee is to be set up specifically for that, it may make sense to look at its remit.

In closing, I want to repeat something that the noble Lord, Lord Clement-Jones, said: regulation is not the enemy of innovation; it can encourage public trust and therefore the take-up of new technologies. It is important for us to understand that properly. As I said in my opening speech, I acknowledge and appreciate that there is fear about regulation being stifling. What we are calling for and recommending in our report—I am very pleased with my noble friend’s constructive response—is the need for a new approach to regulation in the digital sphere and making sure that our regulators are equipped to serve the public interest as a whole. Just believing that what exists currently will be adequate for a very different kind of world is not right. Things are changing, and we need to make sure that regulation changes too.

To illustrate that point, I turn to of putting the Digital Markets Unit on a statutory footing. One of the real-life impacts of it not having ex-ante powers—at least, not yet—and therefore not having the ability to assign strategic status to the likes of Google or Facebook is that it is very limited in how it can intervene in these markets at the moment. As I say, and wish to stress, intervention by regulators is a very sensitive area for anything to be done. In 2018, the CMA did a study of online advertising which showed that both Google and Facebook were consistently earning profits well above what is required to reward investors with a fair return to the tune of £2 billion. That was in 2018. The real risk of not being able to revisit this sort of thing—which would need to be very sensitively done; it is not something you would want to do without proper oversight—means that customers are potentially being overcharged for products and services that make heavy use of digital advertising, such as consumer electronics, hotels and insurance. In a world where we are talking about a cost of living crisis, that brings into focus that there is sometimes a need for regulators to intervene in the public interest which, at the moment, they would be not well equipped to do. Should it be decided that that is the right thing for them to do, the oversight of that does not exist in the way we might want it to in the future.

This has been a very helpful and rewarding debate. I say again that I am very grateful to all noble Lords for their contributions. I am grateful to the Minister for his update on the legislation and where we are with the Government considering the committee’s recommendations on the future funding of the BBC and their decision to launch an independent inquiry. I look forward to reconvening with him after the summer break when we are all refreshed to crack on with the important work we are responsible for.

Motion agreed.