Report received.

Clause 2 [Meaning and location of "interception" etc.]:

4:55 pm
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Lord Bassam of Brighton (Parliamentary Under-Secretary, Home Office; Labour)

moved Amendment No. 1:

Page 4, line 32, leave out ("address or other") and insert ("traffic").

Photo of Lord Bassam of Brighton

Lord Bassam of Brighton (Parliamentary Under-Secretary, Home Office; Labour)

My Lords, I wish to start today's proceedings by recording my gratitude to all noble Lords opposite for the constructive way in which they have approached debates on this Bill to date. I know that some noble Lords have had considerable difficulties with the Bill as regards its drafting and introduction. I know also that the importance of this Bill and of early Royal Assent are well known to noble Lords opposite. In the light of these potentially conflicting concerns, I have greatly appreciated the spirit in which noble Lords have approached the difficulties. That was particularly the case as regards a number of amendments to Part III of the Bill tabled at short notice by the Government at Committee stage. I know that these amendments were moving in the direction favoured by noble Lords opposite, but none the less the amendments were tabled very much at short notice and I was grateful for the general tolerance of that fact.

Things have been no less easy in respect of the short time period between Committee and Report stages. Again, I have particularly appreciated attempts by noble Lords opposite to explain their position to us and indeed to give us prior warning of amendments, where possible. I hope that noble Lords believe that we on the Government side have been able to return the favour although I still feel some need to express apologies for the late tabling of some of our amendments.

I must also mention the codes of practice supporting the Bill which were published on Monday of this week. I had undertaken to publish them in advance of Report stage. I regret that it was not possible to publish them sooner. I also regret the imperfect state of the preliminary drafts: there is still some considerable amount of work to be undertaken. None the less, I hope that the publication of the drafts is appreciated as giving considerable information as to the Government's intentions in this area.

There are still issues to be resolved and the drafts were published before consultation with key constituents was possible. In particular, these drafts have not been shared with colleagues in industry before publication. Experience tells us that we would normally expect to amend the drafts, possibly in some significant areas, once we have had the benefit of input from experts in industry. We have greatly appreciated that input all the way through the Bill. None the less, I hope that the effort in publishing them at this time is helpful and appreciated and that the general input of the codes informs the deliberations of this House rather than confuses it.

There are some particular areas in the codes which we know require further informal consultation before we can release them for formal consultation under Clause 69 of this Bill, once enacted. These are in addition to the issues that may well be of most interest to industry. I am aware that we also require further work in consultation on the provision affecting legal, medical and spiritual confidentiality. That is one issue which is relevant to all four codes. Separately, we do appreciate the need to develop further appropriate wording to reflect the well developed arrangements which already exist between agencies and telecoms operators regarding the supply of communications data. In this respect, the extant ACPO codes are rather more developed than the codes we were able to publish on Monday. But I can give a commitment that we shall be seeking to develop the codes published on Monday more in line with the ACPO codes on communications data, perhaps explicitly reflecting higher levels of authorisation for particular types of access to communications data.

That concludes my opening remarks in respect of the debate on this Bill. I look forward to further debates today and tomorrow. I record once more my gratitude to noble Lords opposite for helping us with the background to some of the amendments that have been tabled in order that we can have a positive and constructive debate on the main issues.

In moving government Amendment No. 1, I speak also to Amendments No. 2 to 4, 6 and 99. These cover the definition of "communications data" which has been the subject of much debate and press interest, particularly since the Government introduced the amendment to tackle dial-through fraud. The noble Lord, Lord Lucas, was the first to voice his concerns, and his views were supported by industry representatives as well as other noble Lords.

During the debate on Chapter II on 19th June, I undertook to return to the House with a new definition of "communications data" which reflected the distinction more clearly. Since then a great deal of work has gone into producing a refined definition which could address the needs of all interested parties. At the time of that debate I explained that the new definition would have to satisfy three elements. It would have to include in what manner and by what method a person communicates with another person or machine, but exclude what they say or what data they pass once the connection has been established (that is, content of communications) and still allow dial-through fraud to be investigated properly.

We believe that the amendments more closely defining "traffic data" as a sub-category of "communications data" which stand today in my name do just that. They ensure that the definition cannot be interpreted to include any content of communication or interaction with websites.

Because the new definition is necessarily fairly complicated, it may assist noble Lords if I explain what each part is designed to achieve. For all of the data in paragraphs (a) to (d) to count as communications data, they have to meet the test in Clause 2(5)(a)--that is, they have to be comprised in or attached to a communication for the purpose of a telecommunications system by which the communication is being transmitted. The first two parts are relatively self-explanatory: new paragraph (a) covers subscriber information; and new paragraph (b) covers routing information. New paragraph (c) is the provision covering data which actuate apparatus--this is the part designed to address dial-through fraud. New paragraph (d) catches the data which are found at the beginning of each packet in a packet switched network which indicates which communications data attach to which communication. Finally, the tailpiece to the new definition puts beyond any doubt that in relation to Internet communications, traffic data stop at the apparatus within which files or programs are stored, so the traffic data may identify a server but not a website or page.

I hope that that careful explanation helps to expedite the debate. I trust that it is clear and uncomplicated. I beg to move.

5:00 pm
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Lord Cope of Berkeley (Conservative)

My Lords, we are grateful for the Minister's remarks. Perhaps I may refer to them as the noble Lord's "apologies" for some of the difficulties with the Bill. I am grateful also for his understanding of our severe difficulties in dealing with the Bill. For those us who are neither lawyers nor electronics experts, trying to translate the arguments of one group of persons to another and to draft amendments capable of being discussed in your Lordships' House has been a great test.

The Minister referred to the codes of practice. We are also grateful to him for publishing them although in a highly draft state. Nevertheless, it is still valuable to have sight of them at this stage.

The Bill is also in a fairly highly draft state although we are moving towards the end of our consideration of it. It is still being severely criticised by a wide range of bodies and companies, not only those operating in the field of the Internet, and so on, but also charities, organisations and trade unions of every kind. For that reason, we and others outside the House appreciate the willingness of the Minister and his colleagues radically to amend the Bill. The attitude of the past few days has been in sharp contrast with that of Mr Charles Clarke at the end of consideration of the Bill in another place when he expressed the view that your Lordships' House would be offered only minor and technical amendments. We are a long way from that.

We are all agreed--I mentioned it at Second Reading--that dial-through fraud needs to be tackled. That is part of the basis of what is being done. But we also recognise that the Government have moved very considerably in terms of the definitions by introducing the new definition of "traffic data", leaving other types of communications data subject to the full rigours of the remainder of the Bill. Although it does not divide data into quite as many different categories as many, including myself, would have wished, that is a move in the right direction.

We have some detailed comments. It might be helpful if we discuss those in separate groupings. I do not think that that will take more time; it may make our debates more logical.

On the main amendment describing traffic data, while we can criticise it in detail we welcome the move in principle. We are all agreed on what should be achieved by these definitions. As the Minister said, we wish to exclude content from traffic data or other data which can be got at readily. We understand the need to get hold of what are properly called "traffic data".

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Lord McNally (Liberal Democrat)

My Lords, I share the understanding the noble Lord expresses for the Minister's dilemma. I think that we all take the attitude that we would not have started from here--but here we are. There has been an element of the politics of the souk as the Bill has passed through your Lordships' House, with offers and counter offers. In the end I believe that what we are doing is to the credit of this House.

The Bill emerged from the Commons with concerns expressed by civil liberties groups and the industry. We hope that we are edging towards a better Bill. The purists may find fault with the Minister's attempts to define "communications data", but it is a definition that we can live with. It is moving in the right direction and in the right spirit. Perhaps by the end of our proceedings we shall have a Bill with which we are all satisfied. But that will be the case only if we continue in the spirit of listening not because the Opposition parties want to score points but because even at this stage, and after considerable movement by the Government, there are concerns which we want to explore.

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Lord Bassam of Brighton (Parliamentary Under-Secretary, Home Office; Labour)

My Lords, I was expecting there to be more interest but in a sense I am grateful that there is not. I am grateful for the kind comments made by noble Lords and for their tolerance and forbearance in respect of our changes to the Bill at this late stage.

We are perhaps victims of our own strategy because we promised to be a listening government in this exercise as in many others. We have kept to that promise and have tried to capture the sense of concern expressed by the industry and reflected on all Benches in your Lordships' House. As was said by the noble Lord, Lord McNally, this is the House at its best looking in detail at a piece of legislation, finding it wanting in some respects and the Government able and willing to try to accommodate those real and genuine concerns.

I trust that the amendments meet with your Lordships' satisfaction and I commend them to the House.

On Question, amendment agreed to.

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Lord Bassam of Brighton (Parliamentary Under-Secretary, Home Office; Labour)

moved Amendments Nos. 2 and 3:

Page 4, line 40, leave out ("addresses and other") and insert ("traffic").

Page 4, line 42, leave out subsection (6).

On Question, amendments agreed to.

Photo of Lord Bassam of Brighton

Lord Bassam of Brighton (Parliamentary Under-Secretary, Home Office; Labour)

moved Amendment No. 4:

Page 5, line 16, at end insert--

("(9A) In this section "traffic data", in relation to any communication, means--

(a) any data identifying, or purporting to identify, any person, apparatus or location to or from which the communication is or may be transmitted,

(b) any data identifying or selecting, or purporting to identify or select, apparatus through which, or by means of which, the communication is or may be transmitted,

(c) any data comprising signals for the actuation of apparatus used for the purposes of a telecommunication system for effecting (in whole or in part) the transmission of any communication, and

(d) any data identifying the data or other data as data comprised in or attached to a particular communication,

but that expression includes data identifying a computer file or computer program access to which is obtained, or which is run, by means of the communication to the extent only that the file or program is identified by reference to the apparatus in which it is stored.").

Photo of Lord Cope of Berkeley

Lord Cope of Berkeley (Conservative)

moved, as an amendment to Amendment No. 4, Amendment No. 5:

Line 5, leave out ("apparatus or location") and insert ("or apparatus").

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Lord Cope of Berkeley (Conservative)

My Lords, although we have accepted the generality of Amendment No. 4, a detailed point was raised with me that I believe is worth putting before your Lordships' House. It concerns the use of the word "location".

Your Lordships will appreciate that mobile telephones are becoming increasingly more sophisticated. The location of some of the newest ones can be tracked through global positioning systems or other electronic means. That means that if the location is regarded as traffic data, which can readily be obtained by the police and other authorities, the police will be able to follow someone carrying one of the new mobile telephones without troubling further.

I can see that that would be a great facility for the police but it could also be highly intrusive in following someone from shop to shop or from home to another location. It is not in the nature of ordinary traffic data--for instance, a telephone number--but it is a highly intrusive power.

I am not saying that the police should never be allowed to use it; the whole Bill provides a framework for giving different levels of authority to different types of information. The question posed by the amendment is where the location of a particular mobile telephone, and hence of a particular person, should fall in the categories of information to be revealed.

Amendment No. 4 suggests that it should be placed in the lowest category of traffic data, and therefore readily obtainable to the authorities, and that any invasion of privacy involved should not be considered. I beg to move.

5:15 pm
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Lord McNally (Liberal Democrat)

My Lords, I believe that the Minister can use his favourite word, "proportionality", in respect of the amendment. It has been pointed out to me that in some cases the ability to track the movement of a mobile telephone could be most important; for example, in the movement of drugs. One can there see the point of the power. However, another scenario put to me was of the noble Lord, Lord Cope, meeting Mr Portillo privately. The ability to track that would be an outrageous intrusion into his private activities.

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Lord Cope of Berkeley (Conservative)

My Lords, I am happy to meet Mr Portillo and I frequently do--and I do not mind who knows!

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Lord McNally (Liberal Democrat)

My Lords, the scenario put to me was even more lurid, but I shall go no further. In any event, as we all know, Mr Portillo prefers landlines to mobile telephones when he is plotting something.

Returning to proportionality, one can well understand that the authorities may need such powers in relation to a serious investigation into drugs. If that were the case, surely, as the noble Lord, Lord Cope, argued, a higher rather than a lower category of authorisation should be required. It would be interesting to know why the Government have opted for the lower category.

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Viscount Goschen (Conservative)

My Lords, I fully recognise the concerns put forward by my noble friend Lord Cope. It would be helpful to hear from the Minister the Government's intention behind the use of the word "location". It is conceivable that there could be an oversight by the Minister or there could be a deliberate attempt to include data on the location of someone carrying a mobile telephone.

Accessing information about the position of a mobile telephone transmission bears comparison with the planting of location devices on vehicles. It would be helpful if the Minister could remind the House about the regime for attaching location-giving devices to vehicles.

The proposal raises other issues. I can understand the Minister's intention in Amendment No. 4 that the word "location" should convey "address". But with modern e-mail communications and other types of data transmission, location and address rapidly diverge. One could use the same e-mail address to transmit from a fixed point or from mobile points at will.

I believe that my noble friend Lord Cope has put his finger on an important issue and it would be interesting to hear whether the Minister intended to mean that the location data from mobile telephones should be able to be accessed through the lower category of permission. If not, I am sure that we can come up with a compromise that might clarify the issue. However, I believe that the Bill, as it is proposed to be drafted within the amendment, leaves open a very wide door.

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Lord Howell of Guildford (Conservative)

My Lords, I wonder whether the amendment, which my noble friend rightly has put forward, takes account of the ever-onward movement of the technologies which are moving far faster than can legislators. I think in particular of the wireless access protocol which is now progressing here in its third generation. That will give people with mobile phones access to both e-mail and the Internet, wherever they may be, and of course to the i-mode system in Japan, which many Japanese argue is superior to the WAP and, indeed, may eventually replace it. I know that it is controversial and those who invest their money in the WAP would not like to hear that. However, it is a possibility and things are moving very quickly.

In Japan--it will happen here, too--something in the region of 60 million people have mobile telephones, of whom approximately 15 million are already on the i-mode Internet e-mailing system. All those people move about all the time. There is no question of their location existing for more than a second. By definition, they are using mobile telephones for mobile business and mobile activity. I wonder whether the drafters of the Bill have understood that the vast majority of e-mail traffic will not take place in fixed locations but will be among people who are on the move in a totally inter-connected world.

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Lord Bassam of Brighton (Parliamentary Under-Secretary, Home Office; Labour)

My Lords, I am grateful to the noble Lord for moving the amendment. I believe that it will enable us to understand each other better on this issue, and I am grateful to noble Lords who have contributed to the debate.

I turn to the amendments which relate to the new definition. Amendments Nos. 5 and 29 would exclude the word "location", as the noble Lord, Lord Cope, explained. However, there are--I believe that the noble Lord, Lord McNally, put his finger on it--many circumstances, not only in criminal investigations, where the giving of the location of a person is critical. Let us take, for example, a person who makes a 999 call, perhaps from a telephone box, or even a child who makes a call to the emergency services from his home. Callers are not always in a position to describe their location accurately, yet the communication service provider possesses the information and passes it on to the appropriate emergency service.

There is, of course, another side to the argument in relation to calls to the emergency services. The fact that the location of telephone boxes can be passed quickly to the police acts as a very effective deterrent against hoax callers. The information is no less useful when it comes to mobile telephones. I am sure that we have all read about injured mountaineers who are rescued on the strength of the information which the telephone company is able to give regarding the location of their mobile phones.

I realise that the concern expressed by noble Lords focuses more upon the way in which location data may be used as a surveillance tool rather than as an aid to emergency services. I also recognise that the use of location data should be properly regulated. The noble Viscount, Lord Goschen, made the point very well and it is a topic to which we shall return when we discuss amendments tabled by the noble Lord, Lord Lucas. I believe that I shall be able to offer some reassurance on that score.

As I indicated in my opening remarks, we are considering the appropriate level of authorisation for types of communications data. The noble Lord, Lord McNally, is right to refer to the issue of proportionality and of getting the balance right, particularly in terms of investigations. That issue is already addressed in the non-statutory agreements between ACPO, Customs and the telecoms industry, and authorisation must be sought at the level of Assistant Chief Constable. That is what we intend to put in the code of practice and I believe that that is the appropriate level to which the matter should be referred.

I hope that what I have said about the amendment is sufficient to show that location needs to be included in the definition. Perhaps I should remind your Lordships that this view was shared by those who drafted the European convention on cyber crime, on which the definition is in part based. Therefore, I trust that those reassurances and comments will help the noble Lord, Lord Cope, to withdraw his amendment. I believe that they should.

Amendment No. 5, as an amendment to Amendment No. 4, by leave, withdrawn.

On Question, Amendment No. 4 agreed to.

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Lord Bassam of Brighton (Parliamentary Under-Secretary, Home Office; Labour)

moved Amendment No. 6:

Page 5, line 17, leave out ("References in this section to") and insert ("In this section--

(a) references, in relation to traffic data comprising signals for the actuation of apparatus, to a telecommunication system by means of which a communication is being or may be transmitted include references to any telecommunication system in which that apparatus is comprised; and

(b) references to traffic").

On Question, amendment agreed to.

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Lord Bassam of Brighton (Parliamentary Under-Secretary, Home Office; Labour)

moved Amendment No. 7:

Page 5, line 19, at end insert--

("and in this section "data", in relation to a postal item, means anything written on the outside of the item.

(10A) The Secretary of State may by order modify the provisions of subsections (5), (9A) and (10).

(10B) The Secretary of State shall not make an order under subsection (10A) unless a draft of the order has been laid before Parliament and approved by a resolution of each House.").

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Lord Bassam of Brighton (Parliamentary Under-Secretary, Home Office; Labour)

My Lords, in moving Amendment No. 7, I wish to speak also to Amendment No. 32. Together, these amendments make the new definition capable of amendment by the Secretary of State, subject to the affirmative resolution procedure.

Our difficulty here is that in order to define communications data with sufficient specificity to avoid including content of communications data, the definition has become rather more complicated than I suspect many of us would prefer. However, the more complicated a definition, the greater the chance of it being overtaken by technical developments. For that reason, we have sought to leave the Government some flexibility in order to ensure that if the definition becomes badly out of date it can be amended through a relatively simple procedure but still with the oversight provided by the affirmative resolution procedure.

I wish to make two further points. First, I want to state for the record that the definition is intended to cover communications data and not the content of communications. Any amendment to the definition would be carried out only in that spirit. I believe that that needs to be understood. Secondly, none of us can predict how advances in technology might affect the definition--a point acknowledged, I believe, by the noble Lord, Lord Howell. It may move in such a way as to allow intrusion into privacy to occur in a manner that we cannot possibly envisage at present. In those circumstances, a power to amend the definition may be seen more favourably. I beg to move.

Photo of Lord Cope of Berkeley

Lord Cope of Berkeley (Conservative)

moved, as an amendment to Amendment No. 7, Amendment No. 8:

Line 4, leave out subsections (10A) and (10B).

Photo of Lord Cope of Berkeley

Lord Cope of Berkeley (Conservative)

My Lords, it may be convenient to discuss Amendments Nos. 8 and 33 with Amendments Nos. 7 and 32. Although I had previously suggested that they might be degrouped, I believe that it would be helpful to discuss them together.

There are two parts to Amendment No. 7 and its friend. The first part is, if I may say so, an extremely neat definition of "traffic data" in respect of mail and distinguishes it from "contents". It states quite simply,

"'data', in relation to a postal item, means anything written on the outside of the item".

So far as I can see, that is a perfect distinction to draw between "contents" and "traffic data". However, that part of Amendment No. 7 and its friend are entirely uncontroversial.

More controversial is the power to which the Minister referred to modify those provisions. He explained that it was intended that the power should be used only in order to preserve intact, as it were, the exclusion of contents. I am paraphrasing, but not inaccurately, I hope.

We would support subsequent modifications that became necessary to ensure the continued exclusion of content, but that is not how the power is written. Sometimes, powers are written to give a one-way ticket for the statutory instruments, not a two-way ticket. For example, in tax law it may be possible by order to alter a particular allowance or tax either upwards or downwards, but not necessarily in both ways. The amendment does not say that the Secretary of State may, by order, modify the provisions of the subsections to preserve content from inspection. It says only that he may modify the provisions--in any way. The order-making power could be used very widely to make it easier for the police and the other services to obtain much more data.

That is an important potential distinction. At one end of the scale is material that can be obtained readily by the police. In the middle, higher permission is required, from the chief constable or the assistant chief constable. At the top of the scale, the Secretary of State's warrant is required. Only a statutory instrument stands between those very different powers. That is what led us to table the amendment. The question is whether the Minister's word that the power will be used in only one way and not the other is sufficient for your Lordships' House. I beg to move.

5:30 pm
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Lord McNally (Liberal Democrat)

My Lords, the amendments have to be seen against the background of two facts. First, as the noble Lord, Lord Cope of Berkeley, has just said, the government amendment could swing both ways. It would not be so bad if we had overall confidence in the Government's instincts in these matters, but given the genuine public concern about the implications of the Bill, the House is right to pause and think whether the Secretary of State should have such powers in secondary legislation.

Secondly, as the noble Lord, Lord Howell of Guildford, said, the problem with the Bill is that it is being enacted against a background of rapidly developing technology. We often see the phenomenon in broadcasting legislation, but it is perhaps even more evident in this case that the Government want as much flexibility as possible in secondary legislation, because they know darned well that the technological background against which they are legislating will have changed dramatically within years, or maybe even months.

There is a balance to be struck. How much do we trust the Minister's assurances--which I am sure are made in absolute good faith--about why the amendment is necessary? As the noble Lord, Lord Cope, has rightly pointed out, it does not just give flexibility to underpin the meaning of the present legislation; it leaves a loophole for the Secretary of State to broaden the remit. That is a matter of real concern and the Minister will need to be eloquent to convince the House.

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Lord Lucas (Conservative)

My Lords, as an aside, when I send an item by recorded delivery, the post office counter clerk peels off a sticker with a barcode on it and sticks it on the outside of the envelope. Is that barcode

"written on the outside of the item"

and do all the other records that the post office keeps that use that barcode to track the item and its final delivery count as communications data, which will be available under this section?

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Lord Bassam of Brighton (Parliamentary Under-Secretary, Home Office; Labour)

My Lords, as ever, the noble Lord, Lord Lucas, asks a puzzling riddle. I am not sure that I have the answer. I suppose that the answer must be yes, but I shall ponder on it.

I am grateful to the noble Lords, Lord Cope and Lord McNally, for the way in which they have approached the amendments. The noble Lord, Lord Cope, has clearly understood our intent. I have made it clear that we do not intend the definition to cover the content of communications. That is the spirit in which we seek this extra flexibility. We are not conspiring to find a way of gaining access to further information about the detailed content of communications at some later date. I hope that I have expressed that sufficiently forcefully to offer some reassurance.

I entirely understand the spirit in which the amendment to our amendment has been proposed. I am prepared to look again at our wording to try to add some further clarity about what we are after. I cannot give an absolute commitment to come back with something, but I appreciate the point that is being made. It should be crystal clear that we are not after the content of communications. However, we need the flexibility, because, as has been said many times, the rapid pace of technological change could create new difficulties in the future.

I would prefer to persist with our amendment at this stage and I ask the noble Lord, Lord Cope, to withdraw the alternative version on the basis of my undertaking to have a closer look at the wording to see whether there is anything else that we can do to add an extra level of clarification. However, I cannot make an absolute promise.

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Lord Cope of Berkeley (Conservative)

My Lords, in the light of that generous offer from the Minister and the assurances that he has given, I beg leave to withdraw the amendment, leaving open the possibility of returning to it at a later stage should that prove necessary.

Amendment No. 8, as an amendment to Amendment No. 7, by leave, withdrawn.

On Question, Amendment No. 7 agreed to.

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The Earl of Northesk (Conservative)

moved Amendment No. 9:

Page 5, line 22, at end insert--

("( ) For the purposes of this section "general reception" shall have the same meaning as in section 1(7) of the Broadcasting Act 1996.").

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The Earl of Northesk (Conservative)

My Lords, the Minister will recall that we debated the issue at some length in Committee. Indeed, it gave rise to a host of questions about what is deemed to be included in the phrase "general reception". For example, as the Bill is currently drafted there is uncertainty about whether subscription broadcasting or encrypted broadcasting fall within the term. As my noble friend Lord Goschen asked in relation to a later amendment, should we infer that it includes an e-mail system based in interactive television and using television signals? My noble friend Lord Lucas put his finger on the issue by explaining how, on a strict analysis of how the technology operates, pager messages and mobile telephone traffic could well be deemed to fall within the definition.

My major complaint is that the drafting is sloppy and unclear. I freely concede that the Minister offered the comfort that:

"We do not agree that communications for reception by a closed network come within the provisions for general reception. We are clear that the term 'general' means available to all. However, it specifically excludes those on a closed network".--[Official Report, 12/6/00; col. 1422.]

That is fair enough. I do not doubt for one moment that assertion but, to my mind, that is not what the Bill currently provides. In the absence of a generic definition on the face of the Bill, it remains open to interpretation.

I acknowledge too that the Bill has been drafted with the aim of providing some element of future-proofing. I do not decry that. Because of the Bill's focus on the new technology, it is a worthy aspiration. But that should not be delivered via the expedient of legislative uncertainty; hence my amendment.

I acknowledge that it has its imperfections. My researches to date have not yet unearthed a truly generic definition of the phrase in existing statute. However, the Minister helpfully advised the Committee that,

"In Section 1(7)",

of the Broadcasting Act 1996,

"we are told that 'for general reception' means for general reception in, or in any area in, the United Kingdom ... the phrase here has the same meaning".--[Official Report, 12/6/00; cols. 1421-2.]

In other words, the amendment delivers no more and no more less than the Government's position on the issue, as espoused by the Minister. That being so, I could reasonably anticipate that the noble Lord might be well disposed towards it. I beg to move.

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Viscount Goschen (Conservative)

My Lords, in Committee, we had an interesting, if somewhat confused, discussion about this issue. During the course of that, we were unable to reach a definitive view on the meaning of "general reception" or "general broadcast".

I welcome the initiative taken by my noble friend Lord Northesk. If the Minister does not like the definition which my noble friend proposes--I have no idea whether or not he does--it is incumbent on him to find something equally good, if not better.

The fact is, as we have said, the world of electronic communications is changing so quickly that the question of whether something is for general broadcast or general reception can easily be argued both ways. We need more clarity on this issue.

5:45 pm
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Lord Bassam of Brighton (Parliamentary Under-Secretary, Home Office; Labour)

My Lords, Amendment No. 9 seeks to clarify the phrase "general reception". In Committee, I relied on the Broadcasting Act 1996 definition which would mean,

"general reception in, or in any area in, the United Kingdom".

I also said in Committee that we believed this phrase to be used and well understood in legislation, and that no amendment was necessary. We have given the matter very careful consideration but our view remains the same.

In response to the noble Earl's amendment, I should say first that it does not provide a definition of "broadcast for general reception". That is because the Broadcasting Act does not do so--and we do not believe that we should try to do so either.

In our view, broadcasting for general reception implies that the transmission is intended to be received by anyone who wants to receive it. Whether to receive it is an individual's own choice. A person may, for example, choose not to buy a TV receiver or not to buy a digital decoder; but the transmission is there for him if he wants it.

The question arises of whether pager messages and mobile telephone base station transmissions fall within this category. We believe that the answer is no. A paging message has to be addressed to a particular number or group of numbers and is received only by a person or group of persons whose pager is programmed with that address number. Other people, even though on the same pager system, will not receive the message unless it is addressed to their pager number also. The same is true for mobile phones: many people call on the same system, but a call will be received only by a phone with a number to which the message is addressed.

Finally, I should confess that I referred in error to Section 1(7) of the Broadcasting Act 1996 when I responded to the noble Earl's amendment in Committee. Although the definition of "general reception" was indeed originally contained in that subsection, the same definition is now to be found in Section 1(1A). I hope that I have made the position plain and, on that basis, I hope that the noble Earl will feel able to withdraw his amendment.

Photo of The Earl of Northesk

The Earl of Northesk (Conservative)

My Lords, I thank the Minister for that reply. I remain uncomfortable about the issue but, at this time, I fear that I may have to resign myself to living with the uncertainty for a little longer. I may try to return at Third Reading with a definition of "general reception" which would satisfy both of us.

Photo of Lord Bassam of Brighton

Lord Bassam of Brighton (Parliamentary Under-Secretary, Home Office; Labour)

My Lords, if, before Third Reading, the noble Earl wants to share his thinking on that, we shall be more than happy to explore any further views he has on the subject.

Photo of The Earl of Northesk

The Earl of Northesk (Conservative)

My Lords, I thank the Minister for that suggestion and I hope that I shall be able to take it up. In the mean time, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 4 [Power to provide for lawful interception]:

Photo of Lord Bassam of Brighton

Lord Bassam of Brighton (Parliamentary Under-Secretary, Home Office; Labour)

moved Amendment No. 10:

Page 7, line 6, at end insert--

("( ) Conduct taking place in a state hospital is authorised by this section if it is conduct in pursuance of, and in accordance with, any direction given to the State Hospitals Board for Scotland under section 2(5) of the National Health Service (Scotland) Act 1978 (regulations and directions as to the exercise of their functions by health boards) as applied by Article 5(1) of and the Schedule to The State Hospitals Board for Scotland Order 1995 (which applies certain provisions of that Act of 1978 to the State Hospitals Board).").

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Lord Bassam of Brighton (Parliamentary Under-Secretary, Home Office; Labour)

My Lords, in moving this amendment, I shall speak also to Amendments Nos. 11 and 12. These amendments are minor amendments to take account of different terminology used in Scotland and Northern Ireland. We are not adding or making policy changes. We are merely ensuring that the same regime of lawful interception can be practised in both those countries, as, indeed, will be allowed in England and Wales.

Amendments Nos. 10 and 11 relate to hospitals in Scotland. The current Clause 4 referring to high security hospitals would not have authorised similar conduct within the state hospital at Carstairs in Scotland. The state hospital is the Scottish equivalent to our high security hospitals. We have discussed this matter with the Scottish Executive and the amendments that we have tabled will ensure that an equivalent regime can operate.

Similarly, Amendment No. 12 adds the term "young offenders centre" in subsection (8)(a) to ensure that the equivalent institution in Northern Ireland is able to operate in exactly the same way as prisons, young offender institutions or remand centres in the rest of the United Kingdom. I beg to move.

Photo of Lord Cope of Berkeley

Lord Cope of Berkeley (Conservative)

My Lords, I am sure that all Members of your Lordships' House with Scottish links will be very glad that the Government have at last recognised the differences and have included them in this.

On Question, amendment agreed to.

Photo of Lord Bassam of Brighton

Lord Bassam of Brighton (Parliamentary Under-Secretary, Home Office; Labour)

moved Amendments Nos. 11 and 12:

Page 7, line 17, at end insert ("; and

"state hospital" has the same meaning as in the National Health Service (Scotland) Act 1978.").

Page 7, line 19, after ("institution") insert (", young offenders centre").

On Question, amendments agreed to.

Clause 12 [Maintenance of interception capability]:

Photo of Lord Bassam of Brighton

Lord Bassam of Brighton (Parliamentary Under-Secretary, Home Office; Labour)

moved Amendment No. 13:

Page 14, line 23, at end insert--

("( ) A person shall not be liable to have an obligation imposed on him in accordance with an order under this section by reason only that he provides, or is proposing to provide, to members of the public a telecommunications service the provision of which is or, as the case may be, will be no more than--

(a) the means by which he provides a service which is not a telecommunications service; or

(b) necessarily incidental to the provision by him of a service which is not a telecommunications service.").

Photo of Lord Bassam of Brighton

Lord Bassam of Brighton (Parliamentary Under-Secretary, Home Office; Labour)

My Lords, the Government have sought at every opportunity to emphasise that interception is a method of last resort, and is used sparingly. The purpose of Amendment No. 13 is to clarify that commercial and other organisations which provide a telecommunications service as a means of accessing a further service of theirs will not be subject to any order under Clause 12.

I give an example to explain what that means in practice. A bank may decide that it will offer a telecommunications service to its customers, as a means of providing access to its banking service. As a result, customers are able to communicate with that bank, perhaps by e-mail, and make transactions or check the balance of their account. Where such a service is provided, the effect of the amendment is to exclude its provider from any obligations imposed under Clause 12 to develop or maintain an interception capability.

The amendment also puts outside the scope of Clause 12 a telecommunications service that is necessarily incidental to a different service. There may be businesses now, or in the future, which offer a telecommunications service only as part of a wider, non-telecommunications operation. The telecommunications aspect might be an integral part of the business; but only as a necessary off-shoot of the non-communications business. Clause 12 will not cover such a service.

With regard to the specifics of what the order made under Clause 12 will contain, my honourable friend Mr Clarke explained in another place that there was a three-stage process towards reasonable intercept capability. The Bill is the first stage. It sets out the principle that some service providers should maintain an intercept capability. This is an established principle that has been long adhered to by public telecommunications operators.

The second phase will be an order laid before Parliament for the establishment of a reasonable capability. That order can be made only after consultation with those likely to be affected and must be approved by each House. It will set out what kind of businesses are proposed to be covered. The order cannot go beyond the meaning of "public telecommunications services" in the Bill. In particular, it can apply only to telecommunications services that are

"offered or provided to a substantial section of the public".

And it will oblige the Secretary of State to come to Parliament and to justify the interpretation that he places on those words. Within the class of businesses that could be covered in theory, the order will reveal exactly which parts of the communications sector are to be covered.

The third phase will be the serving of individual notices on communication service providers. Those will state the capability that they are expected to provide and the time-scale for provision. The individual notices will result from a dialogue between the Government and the service providers themselves. The notice will take account of the circumstances of each provider and will be consistent with the order passed by Parliament.

I hope that this amendment will be welcomed by all sides of the House. I beg to move.

Photo of Lord Lucas

Lord Lucas (Conservative)

My Lords, I am happy to see this amendment. It removes the question as to whether ATM networks and other such matters would be liable under the Bill. Perhaps the Minister, now or later, can satisfy my curiosity as to which side of the line JANET falls.

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Lord Bassam of Brighton (Parliamentary Under-Secretary, Home Office; Labour)

My Lords, I shall have to satisfy the curiosity expressed by the noble Lord later!

On Question, amendment agreed to.

Photo of Lord Cope of Berkeley

Lord Cope of Berkeley (Conservative)

moved Amendment No. 14:

Page 14, line 23, at end insert--

("( ) The person to whom a notice is given may refer the notice to the Technical Advisory Board to consider the technical requirements and the financial consequences and the Board shall report their conclusions on those matters to that person and to the Secretary of State.").

Photo of Lord Cope of Berkeley

Lord Cope of Berkeley (Conservative)

My Lords, in speaking to Amendment No. 14, in my name and that of the noble Lord, Lord McNally, I shall also speak to Amendments Nos. 15 and 17. To some extent we discussed this matter in Committee, but I have no hesitation in returning to it.

We propose that there should be a technical advisory board and that the board should consist of six representatives, chosen by the Secretary of State, of the kind of companies affected by this legislation such as Internet service providers and others, and importantly some of their customers, banks and so on. There should also be six representatives of what one may describe as the users of interception: the police, Customs and Excise, the security service and others. It is intended that the board should be balanced.

In Committee we suggested that the interception commissioner should be a member and should chair the board. We have not retabled that proposal, but equally we have not necessarily abandoned it. Speaking for myself, I am not desperately concerned about the details of the board. The figure of six may be varied--certainly upwards--although I do not believe that it should be too large. Who should chair the board is also a matter for consideration. What is important is the principle.

We have in mind two jobs for the technical advisory board. The first is to consider the technical aspects and feasibility of orders put by the Secretary of State, under Clause 12, on the basis of which black boxes will be inserted in Internet service providers and others. That is a highly technical matter. The Government commissioned the Smith report from external consultants in order to look into the matter and to open it up. Within the industry that report has been quite widely criticised, but the great value of it to all of us who have taken an interest in such matters, is that it has exposed this difficult and continuing problem. One thing that we can be certain about is that technology will develop at a rapid rate in the future.

It is not just a matter of the Secretary of State laying down an order and a whole series of black boxes springing up in the appropriate parts of the economy; on the contrary, I believe that successive Secretaries of State will find themselves having to propose to Parliament further orders as time goes on. I believe that it would be in the interests of all if a small group, such as the technical advisory board that we propose, should have the statutory duty, as suggested in our amendment, to consider this matter on a continuing basis. As a result I believe that a much greater understanding would grow up between those in the electronic communications industry and the users that I have described--the police and other authorities. Each would have a much greater understanding of what should be achieved and the best ways in which to do that.

The second job of the board would be to consider what may be called appeals from individual Internet service providers or others who are required by a notice following a statutory instrument to install a black box within their set-up. The amendment that we tabled in Committee suggested that all such notices should be vetted by a technical advisory board--or as we then called it, a technical approvals board--and that all such notices should be approved. It was said to us, particularly by BT, that people would not want such a notice to be seen by others in the industry. That is understandable and, in due course, that view may be shared by others. As a result we have made it an appeals procedure so that the ISP can, if it wants, ask the technical advisory board to look at its notice to see whether it is technically feasible and sensible to do it in a particular way.

Internet service providers and others who will be affected by this point differ greatly in their size, their technical capacity, and so on, and in future they will differ even more. As a result, every notice will be quite different.

In Committee, the Minister's view seemed to be that no one in the industry was supportive of this idea. If that was his view, I hope he has been thoroughly disabused of it now. The Internet Service Providers Association and Linx, the London Internet Exchange, have confirmed to me that they are in favour of a technical advisory board, along the lines suggested in the amendment, as have the CBI, the Federation of the Electronics Industries and others who have considered the matter. They all favour it because of the potential complexity and obtrusiveness of the black boxes as a method of looking at e-mails and other traffic. It is sad to say, but the Government have succeeded with this Bill, and particularly with this black box proposal, in frightening a large section, not only of the electronics industry, but also of the whole of the economy, including banks and others involved in international business.

From the start we have all accepted, as do those who comment from outside, that it is valuable and important for the police and others to be able to tap telephones and now to tap e-mails to capture criminals, terrorists, paedophiles and others. But it is a question of balance and a question of how far we go with the regulatory framework. I am sure the Minister will recognise the phrase,

"If our regulatory framework is excessive or poorly conceived, we all suffer from the resultant red tape".

That comes from the Prime Minister's foreword to the White Paper on regulation and regulatory impact. The Prime Minister went on,

"I have therefore decided that no regulatory proposal which has an impact on business, charities and voluntary bodies should be considered by the Government without a thorough assessment of the risks, costs and benefits, a clear analysis of who will be affected",

and so forth. He made clear that that applied to both primary and secondary legislation.

I realise that a sort of impact assessment was done in the case of this Bill. But it has been hugely criticised and was certainly not discussed in the way intended as far as I can gather from the White Paper. So this remains an extremely important matter for the whole future of e-commerce in this country. If we do not succeed in reassuring electronic business in this country--and that is every business these days--e-commerce will not have a future in this country, certainly not the future the Prime Minister and others in the Government envisage for it.

We all want our country to be in the forefront of e-commerce. This proposal is perceived as threatening that. The Minister may say it is only a perception. But it is the way in which the Bill is drawn and the lack of reassurance in it that gave rise to that perception. And that perception continues to grow the more we discuss the Bill. In the end, it is perception that matters. It is the perception of these things that decides whether or not companies invest here and whether or not companies here expand their e-commerce business.

We have all read--I am sure the Minister has--of companies even in the past day or two saying that, if this Bill is not amended, they will move the centre of gravity of their operations overseas. Those are serious companies and I believe that there are others who hold the same view who have not gone public. It is those perceptions we must change. One of the important amendments which would help to change that perception is the introduction of the technical advisory board on the lines set out in Amendment No. 14. I beg to move.

6:00 pm
Photo of Lord McNally

Lord McNally (Liberal Democrat)

My Lords, the noble Lord, Lord Cope, eloquently and pertinently explained the reasons for this amendment. I can think of no better way of changing the external perception of the Government's attitude to this Bill than if the Minister were to stand up and accept this amendment. It is over 50 years since the late Douglas Jay suggested that the man in Whitehall knows best. If ever there was a Bill that proved that the men and women in Whitehall may not know best, it is this one. There is no doubt that if the Government had got closer to industry and used the great expertise that is out there earlier, this Bill would have been in a better shape earlier.

What strikes me about Amendment No. 14--I confirm the assertion of the noble Lord, Lord Cope, that industry wants such a statutory body--is that it gives the Government the opportunity of repairing earlier omissions. Instead of wasting money on external consultants, they have the opportunity of obtaining the advice of industry experts.

Like so many, I started out with a vague idea of what was being proposed. But when it became clear that the Government had almost a blank cheque for the technical impositions that they could place on service providers, that seemed to me to be extremely unfair and reckless. It was a question of one side thinking up requirements and the other side having to pay for it and work out how to implement it. That is not the way to obtain technical co-operation. However, the proposal for a technical advisory board offers the Government two great prizes. First, it offers industry expertise in ensuring that effective measures are introduced. Secondly, it wins industry confidence. I should have thought they were two worthwhile prizes for the Government to seize now.

Photo of Viscount Goschen

Viscount Goschen (Conservative)

My Lords, I endorse the comments of the noble Lord, Lord McNally, and my noble friend Lord Cope. The stakes are extraordinarily high at this point in the development of the e-commerce industry, an industry in which the United Kingdom takes a strong leading role.

The Minister has asserted on a number of occasions that he feels that the United Kingdom is taking a view towards e-commerce security which will be followed by other countries. I am not entirely sure that that is true. Indeed, I would be surprised to see wide international agreement surrounding the approach that the United Kingdom has taken. But we on these Benches have always said that the more international agreement we have, the better. However, if the Government are determined to push ahead with this Bill on their own, there is a danger, as the Minister will be tired of hearing, that this business could evaporate. It is extremely mobile internationally. The Minister simply does not have the power to control. If he puts excessive regulation on the business in this country, it will move overseas. We have already seen those indications.

Amendment No. 14--it is difficult to argue that it is unreasonable--adds a layer of comfort to the Bill. At least with the technical advisory board there will be an avenue of appeal; there will be an area to which ISPs can go and discuss the technical obligations being imposed on them by government. As the noble Lord, Lord McNally, said, it is clear that industry knows a huge amount about its business, unlike the Government. The Government, by definition, cannot move as fast as the e-commerce industry. I believe it will be of great assistance to the departments and agencies for which the Minister is responsible to have that level of input.

If companies do not wish to use the board; if they prefer to have private discussions with the agency looking to impose this burden, then so be it. But at least they have an alternative avenue.

Clearly the fact that my noble friend includes "financial consequences" in the amendment is extremely important. When we come on to later amendments to Clause 13 we will discuss the financial burdens--they may be very high--which may be imposed by the Bill. We look forward to the Minister giving us more clarity about the Government's approach towards co-operating with industry. There is little for the Government to lose. They may say it is another layer of bureaucracy. That is true. But if the Government are determined to drive ahead on their own, they need this safeguard. If they do not accept this safeguard, there could be substantial losses to our economic well-being.

Photo of Lord Desai

Lord Desai (Labour)

My Lords, I wish to speak briefly on Amendment No. 17. But before I do so perhaps I can say something on Amendment No. 14.

In moving the amendment the noble Lord, Lord Cope, said that BT was worried about these notices being public rather than being used individually. I understand that there are issues of commercial confidentiality, but that will have a bearing on how the proposed technical advisory board operates. If the users are to fall under paragraph (a) of Amendment No. 17, some of them may be competing ISPs. Such matters will have to be taken into consideration when the composition of the board is decided.

As I said in Committee, among those defined as persons affected by Clause 12 I hope to see mention of ordinary citizens, not just ISPs. It is bad enough to have all the users of interception as regards paragraph (b) of Amendment No. 17, but if they got into cahoots with all the ISPs I would be even more frightened. That would just be a ganging up on ordinary consumers and citizens. Whatever happens to the amendment and whatever shape the technical advisory board takes, I hope that it will look after the interests of ordinary citizens because they should be protected.

Photo of Lord Howell of Guildford

Lord Howell of Guildford (Conservative)

My Lords, the noble Lord, Lord Desai, has made a very pertinent point upon which I hope that the Minister will be able to reassure us. I strongly support the comments made by my noble friends Lord Cope and Lord Goschen about the need for a board of this kind. It would give some reassurance as regards meeting the problems raised by the legislation.

I apologise for not taking part in the Committee stage; indeed, I regret it. However, the Report stage will allow me to express fears that I suspect are increasingly widely shared, as the general public become aware of what is proposed and how the whole slant of the Bill, which I recognise has been accepted by parties on both sides of the House and in the other place, is really in favour of a bureaucratic hierarchical order of the kind that is actually being swept away by technology. We are moving into a network world in which this kind of attempt by such central authorities will, in five years' time, look as absurd as did the attempts of the old authoritarian governments of the 1960s and 1970s who tried to keep a grip on their societies in eastern and central Europe. In the end, they were swept away not only by politics but also by technology. I believe that technology will carry this whole process along far faster than government officials or bureaucrats recognise.

It is perfectly obvious that this is a global phenomenon. The e-mails that everyone is involved in sending and in dealing with, the operations of the ISPs and of the Internet portal and vortal providers, and so on, are done on a global basis. Every day millions and millions of e-mails travel across the Atlantic and into other parts of continental Europe, as well as into Asia. Who will advise on the interface, the link-up and the logic of a link-up between what this Bill attempts to do and what is going on elsewhere in the world? It is not merely a question of finding that if we do not have the proper interface we shall fall behind as an island. In fact, this technology does not take any notice of borders, nations, islands or national boundaries.

If we attempt to provide the kind of control and authoritarian intervention which is hinted at by the Bill and we are not in line with what is going on in the United States, in the rest of Asia or, indeed with what our continental partners are doing, we shall look a crowd of fools. Indeed, we shall look absurd. We shall find our efforts both ineffective and damaging. Therefore, it seems to me essential that such a board should at all times examine very closely what is going on in the rest of the global system of which we are just a part. We are just an individual element--a cluster, if you like--in the network system, which is the global Internet web. Unless we have a body of this kind keeping its eye on such matters, we shall be in grave danger of passing legislation that is not only damaging locally but also highly ineffective. Indeed, it may interfere with the general advance of the global information system, which, if properly understood and harnessed--although it has its dangers--could be of great benefit to all mankind.

6:15 pm
Photo of Lord Stevenson of Coddenham

Lord Stevenson of Coddenham (Crossbench)

My Lords, I had not intended to speak during the Report stage and must apologise to the House for doing so because I did not speak in Committee. That can be put down partly to inexperience as I am very new in this place and partly, quite frankly, because I had not understood some of the implications of this Bill as regards some of my activities. I must declare an interest at this point in that I chair two of our top 20 companies, both of which are huge investors in Internet-driven companies, spending about 2 billion this year. I personally invest in a number of rather smaller companies.

However, those companies all have in common--this is most important--the fact that they will ultimately be paying for this regulation. I suspect that the Minister has been lobbied by the people immediately affected. I have to admit that large companies like the ones I run have not really understood the implications involved. Despite all the publicity, I believe that that is an important point that Her Majesty's Government should take on board.

I should make it plain that I am hugely supportive of the purpose of the Bill. I believe that the UK is an extremely good place in which to do e-commerce. With the odd exception, I think that this Government have been pretty darned good at maximising and optimising that development. However, I have a real worry that a miscalculation on costs could lead to accidents that we would really regret. Since I became all worked up about this, I have read very widely. I have read the debates that took place on the subject both here and in another place. I have also read as many of the lobbying documents as I could find. It seems to me that there is complete disagreement about the cost implications of the legislation. It is my judgment that no one knows what the cost to the economy will be. I strongly support the view expressed by the noble Lord, Lord Cope, that, in any event, it will be different this time next year: the technology will have changed and goodness knows what it will be like!

Having declared my interest, I should like to share with noble Lords how this legislation will affect my businesses. It is possible that it will be all right and that the Home Office, with the help of the Government--I am not being at all sarcastic--has got the costs in perspective; in other words, there will be a marginal addition to the cost of doing business, and that is fine. However, some people may not feel confident about that. It is not a case of either of the businesses that I run suddenly saying, "Hey, unless this changes, we will be leaving the country and going to America". It will not be like that.

One of my businesses is a very large international business and the market leader in its field world-wide. A majority of its profits and activities lie outside the UK, but the UK gets a huge benefit from its British domicile. But if we have a relative cost disadvantage in this country, the business will melt away into other countries. Indeed, not even the chairman will know about it. It will happen in the process of doing business and the Government will not have the luxury of any warning.

My other business is a largely UK business in the financial services industry. It is a business that is poised to internationalise. The situation there would be rather more abrupt and spectacular if the people working for me suddenly realised in six months' time that there would be huge cost implications as a result of this legislation. There would be more formal moves outside the UK because we are already discussing with partners in different countries how we operate. At present, the UK will get the benefit of that; but if we are loaded with cost, the chances are that we shall relocate certain activities abroad.

I have to be honest and say that I do not know whether the proposed technical advisory board is the right way to deal with this issue. Although it would add another level of bureaucracy, I must say that it sounds rather sensible. However, unless the Minister and the Government are really confident, on advice, that they have the costs in perspective, I urge them, please, to find a way to ensure that, when they are gone and other people are gone, there is flexibility to control the situation. Indeed, they should do that if they have a scintilla of doubt that there could be huge costs involved. The suggested technical advisory board could be one way of achieving that aim.

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Lord Phillips of Sudbury (Liberal Democrat)

My Lords, I should like briefly to refer to a point already mentioned by the noble Lord, Lord Desai, in relation to the amendment so tellingly moved by the noble Lord, Lord Cope of Berkeley. Indeed, the noble Lord, Lord Cope, was open and "liberal" enough--dare I say it?--to say that the precise composition of the technical advisory board is not written in stone in his mind.

Although there is talk in the amendment of there being six members on the board appointed from the providers of technical services and six from the agencies which will use the powers under the Bill, there should be representation from the consumers of these services, not just the voluntary sector consumers but consumers generally. I congratulate the noble Lord, Lord Stevenson, on one of his earliest interjections. Amendments Nos. 18, 19 and 20 will deal more directly with the important points that he raised.

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Lord St John of Bletso (Crossbench)

My Lords, like my noble friend Lord Stevenson I did not get involved in the Committee stage. I declare an interest as managing director of one of the larger ISPs in the UK and a NASDAQ quoted company. In Committee the Minister mentioned that industry had been fully consulted on the implications of the Bill. I beg to differ. I have spoken to a number of colleagues who run similar large ISPs who are horrified at the potential consequences of the Bill. I totally agree with the noble Lord, Lord McNally, that it is essential that the Government gain the confidence of industry with regard to the Bill.

Amendment No. 14 is concerned with technical requirements. My noble friend Lord Stevenson mentioned financial consequences. I mention also legal consequences. Every ISP has to provide clients with service level agreements. The installation of a "black box" has severe implications from a security angle which would affect the guarantees in service level agreements. I do not resist the Bill, but I totally support and endorse the amendment which would help to win the confidence of industry.

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Lord Blackwell (Conservative)

My Lords, I too urge the Government to accept the amendments that we are discussing. Rather than repeat the arguments that have already been made this evening and in Committee, I ask the Government to explain how they would envisage the measure working if the committee of experts is not in place. Given the pace of change of technology that a number of speakers mentioned in Committee, it seems to me inevitable that disputes will occur if the Minister simply imposes obligations on persons,

"as it appears to him reasonable".

On occasion companies will dispute that those obligations are reasonable. They will say that the obligations are technically impossible and that they cannot be delivered in the way that is envisaged. I believe that some mechanism will have to be put in place to resolve such disputes. Therefore, is it not far better for the Government to accept such a mechanism and a committee of experts in the first place?

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The Earl of Erroll (Crossbench)

My Lords, I have entered the discussion rather late and I am starting to realise the horrors that might be involved. As access to the Internet speeds up at an extremely rapid pace, if the black boxes do not keep up with that and cannot monitor the traffic fast enough, presumably the Government will either have to give up the idea, persuade people to spend a fortune on developing them, or not monitor the traffic.

I may be able to develop a way round the black boxes. My main e-mail currently resides on a server probably based in Seattle as an American service provider provides my mail box. I assume that my communication goes straight across the Atlantic and is downloaded over there. That provider will not have a black box. If I get a cheap link from one of the telecoms providers to take me across the Atlantic for 3p a minute, presumably I can get round the black box by linking into an American ISP over the telephone line. I would love to know whether that is possible as it would solve a lot of problems.

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Lord Bassam of Brighton (Parliamentary Under-Secretary, Home Office; Labour)

My Lords, some matters are beyond me and that is probably one of them.

Photo of Viscount Goschen

Viscount Goschen (Conservative)

My Lords, with the leave of the House, I make the following point. I am well aware that we are on Report. The noble Lord cannot just dismiss the point made by the noble Earl. That matter is absolutely key; namely, that Internet traffic can be routed via overseas ISPs to evade cost, as well as regulatory and technical burdens. The noble Lord must address that issue.

Photo of Lord Bassam of Brighton

Lord Bassam of Brighton (Parliamentary Under-Secretary, Home Office; Labour)

My Lords, I shall endeavour to do that. However, at this stage I wish to focus on the issues that have been raised in the debate and on some of the underlying issues. I believe that the noble Viscount, Lord Goschen, invited me to set out the Government's broader thinking, not least on issues of cost. I wish to discuss that before I turn to the amendments relating to the possible creation of a technical advisory board.

In Committee, I was pressed to make a more general statement about the Government's intentions with regard to the implementation of Clauses 12 and 13. It is right that I should respond to that matter now. Our response is not to alter the legislation significantly. We do not believe that that would be appropriate in this case. However, we can and do intend to give a greater indication of our strategy in approaching the allocation of costs and the implementation of an intercept capability. I wish to tell the House what we have in mind.

I start with Clauses 12 and 13 as currently drafted. The matter of the allocation of costs is dealt with in a Clause 12 order. I need to correct something for the record. The order itself will not deal with costs. However, the Secretary of State, in presenting the order to Parliament, will in practice have to explain the position on costs. This is partly because Parliament will expect that and partly because the Secretary of State will have to show that he has discharged his duty under Clause 13(3).

As many have pointed out, Clauses 12 and 13 necessarily contain a great deal of flexibility. That is important in order to ensure that the provisions can apply to a range of technologies and over a number of years. For both those reasons--that technology is changing and that we wish this legislation to have a certain longevity--we need to retain flexible arrangements. Noble Lords will note that Clause 13 requires the Secretary of State to pay marginal costs. We have defined what we mean by this at various stages. On the question of other costs, Clause 13 allows a Secretary of State to pay all or none of the costs involved. We regard that flexibility as essential but it has none the less drawn some criticism. It is the uncertainty that that creates which I now seek to address.

I start with a resume of the current position in terms of an intercept requirement. We have set this out elsewhere. The communication service providers meet the cost of developing and maintaining the reasonable capability, identifying the relevant communication and delivering it to an agreed handover point within their network. The Government are responsible for meeting the cost of invoking an interception, transmission of the product from the handover point and any additional assistance beyond the reasonable capability.

That is the current situation. However, the Government appreciate that the emergence of new technologies--significantly Internet protocol--brings new considerations to bear. In addressing these new considerations, the Government must also bear in mind the need to ensure equity across the entire industry in the new arrangements.

The Government have estimated that costs to communication service providers not presently covered, but who will be covered under the Bill, will not exceed 20 million over three years. As is well known, that estimate was published in the regulatory impact assessment when the Bill was introduced in the other place in February.

None of the research since that time has caused us to alter this view. We stand by that estimate. We are aware that alternative estimates exist--the noble Lord, Lord Stevenson, made the point very capably that estimates have varied greatly--but we have not yet seen a reason to move from the 20 million estimate. Having said that, we do not claim a monopoly of wisdom on these complicated and difficult issues--we cannot--and we intend to ratchet up the level of our discussions with industry contacts to reflect that point. But we must go with the best estimate that we can make at this stage.

We have given careful thought to the way to approach the requirement under Clause 12. It should be noted that Clause 12 requires the Government to return to Parliament with an order before Clause 12 can be implemented. This order would contain more details of the capability to be required and it would be accompanied by more indications on the allocation of costs. The time at which that order is brought before Parliament will depend upon the progress that the Government can make with industry on technical considerations. In advance of the appearance of that order, and to aid today's debate, I shall now outline our strategy.

We start from the current position, which I outlined earlier, and I can move on to say that the Government will set aside an amount of money over three years, from April 2001 to 2004, to ease the introduction of the additional burden. We will set aside 20 million for that purpose.

I should outline the approach that the Government will take on allocating the money. First, the Government expect to fund most of the development of the capability for the interception of traffic transmitted as Internet protocol and for the building of any necessary equipment. Some people have estimated developmental costs at around million; others have estimated that the costs will be higher. We shall work with industry colleagues on this development and, depending upon the extent to which the technology is genuinely different for interception or to which the technology is similar to that which the industry might itself need--for example, for record keeping or for audit purposes--the Government will pay either for the development of the capability or make a contribution. Part of the money we have set aside will be for this purpose and it will be the first draw on that money.

The rest of the money would, exceptionally, be available to service providers who require help with the installation of a new intercept capability due to new technology. Primarily, we are thinking here of the integration of the Internet protocol interception capability. My first point is that most service providers will not be approached with a requirement to install a capability. There may be some planning and consideration costs for smaller companies, but we genuinely do not think that these will be significant for larger companies. Where installation requirements are significant in terms of the size of the company, the Government will make a contribution. We have said many times that we expect these companies to be small in number. That view continues to be the case. Once installed, the CSPs will be responsible for ensuring that the Internet protocol interception capability is updated to intercept new services they offer and changes within their network.

I should at this stage divert to answer a couple of frequently asked questions. Some people assert that, as the coverage will not be universal, all that criminals will need to do is use a service provider that does not contain this capability. Others say that as the requirement will not be universal it will necessarily create inequities in the communications market. We reject both of those assertions.

As to the first assertion--that criminals will simply use service providers that do not maintain a capability--we do not expect that criminals will know which service providers maintain a capability. A more significant point is that criminals have, one presumes, known for some time that it is possible to intercept telephones--but this does not stop them using telephones. It is also the case that, while all public telecommunications operators may be required to maintain a capability, only a small number are called upon to do so in practice--yet we have shared with this House many times the significant results from interception at present--185 million-worth of drugs was seized in this way in 1998. Current successes are ones that the UK as a whole simply cannot afford to lose.

As to the second point, that this will create inequities in the market, we reject this too. This will not be the case. The same criteria will be applied to all service providers regardless of the situation. The criteria will be: is this a new requirement on the service provider; how significant is the cost in terms of the overall size and turnover of the company?

In practice, we do not expect to approach the smallest companies in this way. However, the smaller the company, the greater proportion of its costs the Government will meet, up to and including the entire cost of installation. None the less, if considerations are appropriate, we believe that it may be possible to reimburse some of the larger companies for some of the costs of installing a capability to intercept traffic carried over Internet protocols.

I should highlight one point: this money is all intended to be focused on the costs of developing, building and, in some cases, integrating the equipment for Internet protocol interception rather than on maintaining the capability. It would all be for the costs over the three years starting from next April. Once installed, and if the capability continued to be required, we would expect service providers to maintain and upgrade equipment; and, indeed, we would expect service providers to continue to maintain and upgrade equipment which already exists. I hope that that is an indication of how the Government expect to spend the money. We would approach the task by working with industry, with the intention of allocating the money only in respect of new requirements due to new technologies and loaded towards the smaller companies, although not exclusively for their benefit.

Parliament can expect more detail on these issues to be set out in the order which must precede any requirement under Clause 12 of the Bill. The money will cover the period 2001 to 2004. We do not think that it is possible at this stage to give an indication of our intentions beyond 2004. Further technological considerations may well by then have affected the equation, a point made very ably by a number of noble Lords. But we undertake to monitor the experience of the system we will put in place and to review and consider the cost issues--and to return to Parliament if necessary--at the end of that three-year period.

We believe that our practice continues to be consistent with international practice, and this is something that particularly we will keep an eye on over the next three- year period. For example, under the Telecommunications Act 1998 in Holland, Internet service providers are required, we understand, to pay the costs of providing the IP stream. This may prove more onerous than our regime in some circumstances.

Secondly, we also believe that there are benefits for industry from the use of interception. This is partly because of the potential and social costs of the drugs menace. It has been estimated, for example, that 50 to 70 per cent of the estimated 1.5 billion a year spent on drugs is raised through acquisitive crime. Perhaps more directly, industry may well appreciate the savings in national security terms gleaned from interception. Significant terrorist bombings have caused huge and extensive damage to business, not least in the City. Interception is one of the key weapons in the armoury available to prevent such bombings happening again. Evidently there is a business interest as well as a wider society interest in ensuring sufficient interception capability.

Finally, our third argument is that to expect industry to pay at least a contribution towards these costs is a decision based on pure economics. Both government and industry should have an interest in minimising the costs involved. We do not believe this efficiency will best be achieved if industry has no financial stake in the matter.

We accept that considerations of the new technologies, the diversification of communication service providers and the emergence of small companies bring new considerations with them. We do not expect that we will approach the smallest and newest companies with a requirement to install a capability. But we shall approach some companies and focus on the nature of the technology that they are operating and on the overall impact on their business plan that the expenditure will have before allocating an appropriate contribution--more details of which we expect to be available to accompany the draft order to be brought before Parliament.

I hope that I have outlined our strategy with sufficient clarity. We shall make some money available; we expect it to cover the vast majority, if not all, of the costs incurred in the three-year period from 2001 when focusing on those companies which are installing an interception capability over IP and for which this expenditure would be significant. With the reassurance that these matters must return to Parliament in secondary legislation before they take effect, I ask that noble Lords will accept this indication of our strategy as sufficient reassurance as to our intentions in respect of the use of Clauses 12 and 13.

I turn to the amendments on the technical advisory board. I am conscious that I have taken some time in making my earlier statement. I trust that noble Lords will continue to bear with me as I respond to the important points that have been made. It is fair to say that there is probably not a great deal of difference between the position of the mover of the amendment and that of the Government. The difference is probably more the means of achieving what is sought.

The issue of a technical advisory or approvals board has been discussed at great length at all stages of the passage of the Bill through both Houses of Parliament. What has come through clearly, and I think very clearly in this debate, is how all sides agree on the importance of there being close dialogue between government and the industry on reaching agreement on what will constitute a reasonable intercept capability. Certainly, we have always stressed our commitment to that dialogue and we have all along maintained that it would make no sense to forge ahead without having industry alongside in tandem. I can see no virtue in that. We know that from our long experience of close co-operation with the public telecommunications operators which, most would agree, has worked very well over many years.

I should like to assure noble Lords that the Government's expressed scepticism about the necessity of setting up such an advisory board on a statutory basis is not due to inertia or any form of "bloody-mindedness" on our part. Indeed, we have given the matter very serious consideration since it was first proposed. Our most important consideration has always been that the industry itself expressed initial scepticism. Much of the advice we received from industry was that, if there was to be a body at all, it would favour a non-statutory advisory group, much along the lines of the arrangements which we already have in place with telecommunications operators. I can confidently say that industry has not been of one mind--this point has been acknowledged in the debate--on the proposal to set up a statutory body. Indeed, it still does not speak with one voice on the matter. I think that is a fact.

British Telecom has informed us that it sees no good reason to change the existing arrangements, which have always worked perfectly well. That was its comment. The communications company, NTL, has also expressed to us its hostility to any changes to the current practice such as the noble Lord proposes in his amendment. Cable & Wireless has informed my officials of its view that the current structure works well and that it can see no benefit to be gained from making the changes suggested here. Only this morning, my--

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Lord Phillips of Sudbury (Liberal Democrat)

My Lords, might it not be the case that these huge players have all the access they currently require for bending the ear of government?

6:45 pm
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Lord Bassam of Brighton (Parliamentary Under-Secretary, Home Office; Labour)

No, my Lords, that is not the point. The point they are making is that the arrangements which they currently operate work perfectly well. The arrangements are perfectly acceptable to them. If noble Lords will bear with me, I shall continue and perhaps offer some further understanding of our position. My officials learned from Vodafone today that it is generally happy, as were the others, with the current arrangements and can see little advantage in instituting a statutory body. That is not to say that a voluntary set of arrangements would not be acceptable to all four of those major players.

It is because of this lack of agreement within the communications service provider industry that, as a sensible compromise, we expressed our willingness to consider involving some kind of existing non-statutory group as an appropriate substitute for what is being proposed. That is in addition to all the procedures we have set out in the Bill to consult with industry and Parliament at each and every step.

I trust that the House will permit me a few moments to remind noble Lords what these steps are. First, we stated on the face of the Bill that any requirements placed upon industry should be properly considered and reasonable. Secondly, we set out in the Bill clear consultative steps that needed to be taken before any notice was served on a communication service provider. The Bill itself is the first step in that consultation exercise. An order-making power to be approved in both Houses by the affirmative resolution procedure is to be the second step. We have always maintained that we would consult industry before proceeding with this further legislation.

The third step is to be the final notice, where we would discuss with each individual service provider what would be the most appropriate form of intercept capability to maintain. That is a detailed discussion with each service provider. It is a more than adequate consultation process between government and industry on what amounts to a reasonable intercept capability. A statutory board could become, as noble Lords recognise, a further bureaucratic layer and an unnecessary addition to what has already been provided for.

As I have previously suggested, we have always worked with the view that consultations with industry, and resulting subsequent requirements to be placed on Internet service providers, would follow a similar process to that which already exists with the telecommunications industry. We are not asking anything here of Internet service providers that has not previously been asked, and continues to be asked to this day, of telecommunications service providers.

There are genuine reasons for our opposition to the setting up of a statutory body. We think that those reasons still hold considerable weight, particularly when some very important parts of that industry expressed directly to us their opposition to a statutory body. I am not suggesting that there are fundamental disagreements on the way in which the Government should consult with industry. I am happy to say that all sides agree that there should be a standing body made up of industry and government representatives to advise the Secretary of State on these matters. There is little disagreement on what the body should do or on the need to set it up quickly so that it can have a meaningful input to any order made under Clause 12.

The only major remaining question is the one which has been raised by virtue of the amendment: whether the body should be statutory or non-statutory. It is not a matter about which we need to become too exercised, but it is clearly one about which the noble Lord, Lord Cope, feels strongly. Indeed, other noble Lords have expressed their strength of view. It would be remiss of us in government not to recognise that very genuine concern. I can say that the Government will consider further whether an advisory body should be set up along the lines suggested by these amendments. I can give that firm commitment.

However, I hope that noble Lords will appreciate that we shall need to consult further with industry because of the sharp divergence of view that I have explained to the House, and particularly in the light of the fact that there is no universal support for a statutory body. I ask noble Lords to allow the Government to reflect further and to return at Third Reading with our considered position. In the event that the Government were to accept that, on balance, the best option was to have a statutory board, I suspect that lack of time would not allow us to do any more than provide an order-making power. However, as I hope that I have made clear, we have not yet reached that position.

Perhaps I may set out what I am saying to the House at the conclusion of the debate. We recognise the strength of view; we recognise that there is a clear divergence as to whether a non-statutory or a statutory body is the best way of moving forward. There is a shared view about what should be covered in such a board's considerations. That is where the common ground lies. That is the Government's position as we see it.

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The Earl of Caithness (Conservative)

My Lords, the noble Lord said that he will take the matter away and give it consideration. Will he also speak to those noble Lords who have taken part in the debate? We have heard some immensely powerful speeches from noble Lords who think that they will be affected. Will the noble Lord come back to the House before Third Reading so that those of us who are interested will know what the position is?

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Lord Bassam of Brighton (Parliamentary Under-Secretary, Home Office; Labour)

My Lords, I am more than happy to continue that process of consultation with all noble Lords who have contributed to the debate. It is important that I do so in order that we can better formulate our thinking. We shall need to have further discussions, particularly with those companies that have offered us their view that they do not favour the statutory route. They may well require some persuasion. We shall reflect on their comments as well. But we shall consult in detail with the industry in its entirety because we believe that to be the right way forward. We have always made that plain.

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Lord Cope of Berkeley (Conservative)

My Lords, in response to the noble Earl, Lord Erroll, the Minister said that he does not always understand these matters. From time to time we have all experienced that reaction. The noble Lord went on to discuss costs. We shall return to that subject later in our proceedings when we reach Amendment No. 18. Therefore, I shall not at this stage say much in detail on that matter. I simply reflect on the fact that the Government have not revised their estimate from 20 million even though others have estimated the cost involved in the first few years to be as high as 650 million. The figure of 20 million was the only hard thing about costs that the Minister had to say. He said a good many soothing words but each was covered by saving phrases such as "We will consider without commitment" and so on. Those kinds of saving phrases are insisted on at intervals by Her Majesty's Treasury, as some of us know only too well when we have been in the same position as the Minister trying to explain such matters away.

I turn to the amendment itself, which deals with the question of the advisory board. The Minister rightly said that the matter had been discussed a great deal, not only in our previous debates at Second Reading and in Committee but also at various stages of the Bill's passage through another place. Yet, at the Report stage in this House, the Minister is saying, "Give us time to reflect further on this matter. We need to think about it. We will consider whether there should be a statutory board or a non-statutory board". We do not know whether there will be a board of this character, although, from the general flavour of the noble Lord's remarks, we seem to have dragged the Government a good deal further towards that idea over the course of these debates.

The Minister mentioned some large telephone operators which were not in favour of a statutory board. With respect, I mentioned large numbers of ISPs and those directly involved. They are very much in favour and have confirmed that to me in the past few days. The Government's attitude seems to be, "Just hang on. We will fob you off one more time". I do not feel that that is sufficient. I feel that we should ensure that the Minister and the Government consider this issue carefully by pressing the amendment.

On Question, Whether the said amendment (No. 14) shall be agreed to?

Their Lordships divided: Contents, 155; Not-Contents, 130.

Division number 3

See full list of votes (From The Public Whip)

Resolved in the affirmative, and amendment agreed to accordingly.

7:03 pm
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Lord Cope of Berkeley (Conservative)

moved Amendment No. 15:

Page 14, line 35, at end insert--

("( ) the Technical Advisory Board,").

On Question, amendment agreed to.

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Lord Bach (Government Whip (technically a Lord in Waiting, HM Household); Labour)

moved Amendment No. 16:

Page 15, line 3, at end insert ("; and

(c) for the purpose of facilitating the carrying out of any functions in relation to this Chapter of the Interception of Communications Commissioner;

but before determining for the purposes of the making of any order, or the imposition of any obligation, under this section what arrangements he considers necessary for the purpose mentioned in paragraph (c) the Secretary of State shall consult that Commissioner").

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Lord Bach (Government Whip (technically a Lord in Waiting, HM Household); Labour)

My Lords, on behalf of my noble friend I should like to move Amendment No. 16. During the Committee's deliberations on the Bill, we gave a commitment to consider how best to ensure that the interception commissioner and his staff are able effectively to scrutinise any interception equipment designed and maintained in obedience to a notice served under Clause 12. Amendment No. 16 is designed to deliver on that commitment.

The noble Lord, Lord Phillips of Sudbury, spoke to Amendment No. 50A during the debate in Committee, an amendment which would have enabled notices to specify what should be done to provide the commissioner with reliable and verifiable technical means of fulfilling his duties. I am sure that the noble Lord will be pleased to hear that this amendment goes wider than that.

First, it may apply to both orders and notices made under Clause 12. Secondly, it does not restrict the additional material they may contain only to ensuring reliability and verifiability: it enables them to deal with any matter which may facilitate the carrying out of the commissioner's duties. I hope that the amendment will be welcomed by the noble Lord and by all sides of the House. I beg to move.

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Lord Phillips of Sudbury (Liberal Democrat)

My Lords, speaking on my own part, I am entirely content with the way in which the Government have dealt with this issue. I am grateful to the noble Lord.

On Question, amendment agreed to.

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Lord Cope of Berkeley (Conservative)

moved Amendment No. 17:

After Clause 12, insert the following new clause--

:TITLE3:TECHNICAL ADVISORY BOARD

(" . There shall be a Technical Advisory Board consisting of--

(a) up to six members appointed by the Secretary of State from among persons affected by section 12 of this Act, and

(b) up to six members appointed by the Secretary of State representative of persons specified in section 6(2).").

On Question, amendment agreed to.

Clause 13 [Grants for interception costs]:

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Viscount Astor (Conservative)

moved Amendment No. 18:

Page 15, line 12, leave out ("may, if he thinks fit,") and insert ("shall").

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Viscount Astor (Conservative)

My Lords, I beg to move Amendment No. 18 and speak at the same time to Amendments Nos. 19 and 20. These are simple amendments to Clause 13, in which the Secretary of State is empowered to make payments. In two places we wish to replace the word "may" with "shall" and the word "appropriate" with "fair".

In Committee we had what was for some noble Lords a somewhat misleading debate on this matter. The Minister was trying to be as helpful as possible, but, when referring to Clauses 12 and 13, he said that he,

"could offer some assurance to Members of the Committee that the allocation of costs would be addressed very clearly in that order".--[Official Report, 19/6/00; col. 59.]

He was referring specifically to the order to be made under Clause 12. He went on to say, most helpfully, that he would consult in detail on how it would work and that he would bring forward the relevant legislation.

However, when one looks at the provision covering the order in Clause 12, it does not in fact refer to costs at all. Subsection (1) refers only to obligations and says nothing about costs. When discussing the order, the Minister confirmed that the Secretary of State would have to have regard to subsection (3) of Clause 13. That is perfectly correct, but the order will refer only to obligations. It will not refer to costs incurred by the industry. The Minister said only that when the Secretary of State brings forward the order he will have to refer to costs. However, that is all that he will have to do: he will need to talk about costs, but they will not form a part of the order. We feel it is important that Clause 13 is strengthened to take account of that.

The Minister has already put the Government's view on costs in our previous debate, which was helpful. I shall comment on it only briefly. The Minister said that not all ISPs will have black boxes. Although that may be true, one of the difficulties we face is that the Government seem not yet to know which ISPs will have black boxes and which will not. It is certainly the case that the industry does not have a clue. Indeed, the industry does not even understand how this is going to work unless a universal system is put in place. If that is not done, businesses will simply bypass the system.

We know, after holding discussions with ISPs, that they employ different systems; some are linked, some are compatible and some are not compatible. This area is different from that of telephone systems and exchanges which for a long time have contained equipment for interception. However, it has always been possible to fit such equipment at source; namely, at the exchange. The same does not apply to the Internet industry.

Internet service providers are diverse. Some companies are large while others are quite small. The Minister stated that, in the case of small ISPs, the Government would try to be more generous. However, while we acknowledge those kind words, we must return to the point that we have only the Government's own estimate of costs at 20 million spread over three years. That estimate has not been in any way agreed by the industry. The noble Lord, Lord Stevenson of Coddenham, who is the chairman of a large company involved in this technology, remarked that, "Nobody knows what it will cost". I think he is right. It is all well and good for the Government to declare that 20 million will be made available over three years, but one knows exactly how government systems work. The money will run out after the first year. A company will come along after that and be told by the Government, "We are very sorry. This is what we promised and we cannot go back to the Treasury".

We know that costs will be incurred by the industry to maintain and upgrade the equipment. Clause 13 contains no "right of appeal" against those costs unless one opts for judicial review. Noble Lords know how expensive and time-consuming is that process. The powers contained in Clause 13 have been described by some as a form of "Internet tax". The Government might consider that a little unfair, but that is how the provisions are perceived.

If we are to satisfy some of the concerns expressed by the industry, we must look again at Clause 13 where it states:

"The Secretary of State may, if he thinks fit, make such payments".

That is too wide. The industry must know that the Secretary of State will do it. Noble Lords will be aware that, with the best of intentions, Ministers express an intention. However, it is only an intention--not something that is to be found in primary legislation. Therefore, the amendments to which I have spoken are necessary for the purposes of the Bill. I beg to move.

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Lord Phillips of Sudbury (Liberal Democrat)

My Lords, I support entirely the words of the noble Viscount. These amendments are absolutely minimalist. To contend with the immense underlying unease about the sharing of cost, if it be shared, these amendments could not be more modest. If the Government are not prepared to accept these amendments, we shall be on a collision course, not least because there is no requirement under the clause to lay any kind of order. In any event, the amendments do not impose on the Secretary of State any specific requirement but merely tighten up to a significant, but not excessive, degree the objectivity of the judgment that he or she must bring to bear in deciding what grants to make under the clause.

I shall be grateful if in his response the Minister can confirm my impression that the words of the noble Lord, Lord Bassam, a few minutes ago were intended to reassure the House that the recommendations of the Smith report with regard to these wonderful black boxes--namely, that the Government would pay for the design and software development--have been taken on board by the Government. The noble Lord did not make specific reference to that, and I should be grateful if he would deal with the matter in his response. Plainly, that is germane to the burden which business may be called on to shoulder.

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Lord Cope of Berkeley (Conservative)

My Lords, before the noble Lord sits down, does he agree that paying for the initial development of the software and so on is one thing? The Minister was not even specific about that because his comments were hedged about with all kinds of subsections. The Minister said specifically that the Government would not pay for the upgrades at all. In times of rapidly changing technology, upgrades can in some cases be the expensive bit.

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Lord Phillips of Sudbury (Liberal Democrat)

My Lords, I am delighted to confirm entirely what the noble Lord says. That is another reason why these minimalist amendments should be accepted without demur.

7:15 pm
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Viscount Goschen (Conservative)

My Lords, I agree with the noble Lord, Lord Phillips of Sudbury, that if the Government are not prepared to accept these amendments we shall have real difficulties. These amendments still provide considerable scope for interpretation. The word "fair" cannot be pinned down and defined very well. If the Minister uses that as his only defence, I suggest that it is a self-defeating argument which will encourage my noble friends on the Opposition Front Bench to return with much stronger amendments than the ones we are considering tonight.

I welcome the initiative of the Government in trying to inject additional clarity into their approach to funding the equipment, the running costs and the whole process of interception. It was helpful that the noble Lord came before the House and said what he did. It was very strange that at previous stages of the Bill the Minister was unable to make any comment on the Government's approach to funding. However, by putting forward the figure of 20 million he has set more hares running than he has managed to corral. As we have heard around the Chamber at this and previous stages of the Bill, there are greatly differing estimates of the cost of installing the interception equipment. The figure of 20 million may be a very small percentage of the overall cost and put the burden fairly and squarely on the operators. Like the noble Lord, Lord Phillips, and my noble friend Lord Cope, I find it difficult to square that with the Government's more generic statements about their approach.

I am at a loss to understand the noble Lord's argument about the number of ISPs to which these provisions will apply. The noble Lord approaches the matter in a vague manner and makes the generic statement that we should not worry because it will involve only a few, without saying which ones it is likely to be. He says that perhaps it is just a sample. I do not see how the Minister can make such vague statements and yet come up with a specific funding proposal of 20 million. If the provision is to apply to only a small percentage of ISPs, 20 million may or may not represent a significant percentage of the cost. The provision may apply to many more ISPs than the noble Lord indicates. The Minister puts forward no evidence at all to justify his stab (if I may so describe it) at the number of ISPs which will be required to install the equipment. We are groping in the dark. The noble Lord simply lights a very small candle and tells us not to worry because it will show us the way. My noble friend's amendments are modest. The amendments inject a greater degree of clarity about the burden on the Secretary of State and I wholeheartedly support them.

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Lord Lucas (Conservative)

My Lords, the noble Lord, Lord Bassam, made a very good point in his speech on the previous group of amendments. He said that it was important that both the ISPs and the Government shared the financial responsibility for the decisions that would be taken. I believe that that is what we should try to achieve. Clearly, the ISPs must bear part of the cost. They have considerable ability to keep down the costs and need an incentive to do so. Anyway, if they did not have to contribute, they would merely trot off to any good defence contractor and find out how to turn costs into high profits. It is entirely right that the ISPs should make a fair contribution.

Similarly, the Government must be bound by financial responsibility and should not be able to cast unquantifiable costs on to the ISPs and bear none of it themselves. If the cost turns out to be 300 million, the Government must go for budgetary approval for a sum that bears a proper relationship to that cost. A sensible proportion that comes to mind is half. Therefore, if it is worth 150 million to the Government, perhaps they are right to ask for a similar contribution from ISPs. The present wording of the Bill does not do that. Under Clause 13, the Secretary of State has get-out after get-out after get-out. The first amendment merely removes one of those get-outs and leaves him with a pretty full set of flexibilities. The word "appropriate" is incapable of judgment, except that it is quite clear that it can be biased far more in the Secretary of State's favour than is appropriate. We should, therefore, insert a word such as "equitable" or "fair" which implies something closer to 50:50. The Bill would then be exactly in line with the way that the noble Lord, Lord Bassam, expressed himself in his previous speech, which surely can be no bad thing.

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Lord Howell of Guildford (Conservative)

My Lords, I simply ask: how can the Government quantify these costs when they cannot define the scope of the Bill, as we have already heard in debate this evening and, I am sure, also in Committee? It is not clear to what extent the provisions are to be applied and how they will work, given the fact that a great many service providers and operations are located, at least partially, overseas. One thinks of the simple operation of transferring information and messages from local files to remote sites through the appropriate transfer protocol. In many cases that is done through remote sites which are deliberately not sited in the UK either because the technology has originated in America or because of low cost high quality provision elsewhere. India, for example, already provides remote site storage for a vast range of information and collects e-mails and website transfers through the necessary protocols on a colossal scale. Where will it come into the equation? What part of its operation will be addressed by this Bill? What costs will it have to pay?

Unless we can begin to answer these questions the debate about costs is in the area of fantasy. I do not see how this House, let alone the general public or industry, can be asked to plunge ahead with legislative provisions which are so stratospherically vague and unrelated to any definition of scope which could seriously give us a basis on which to compute the cost of this operation.

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Lord McNally (Liberal Democrat)

My Lords, I make one further appeal to the Minister. I thought my appeal made during the previous debate had almost succeeded. The Minister teetered on the edge of making a sensible decision, but then he was dragged back, presumably by the Treasury. Looking from the outside, the words "shall" instead of

"may, if he thinks fit"

and "a fair" rather than "an appropriate" to the reasonable person appear to be addressing the word "confidence" as regards industry. The noble Lord, Lord Howell, said that the Government stick grimly to the figure of 20 million. They hysterically rubbish any larger figure and in the process cause deep consternation in industry. I want to see this Bill finish up in good shape. These are not destructive amendments in any way, but make the Bill much better and they will raise much greater confidence in industry.

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Lord Bassam of Brighton (Parliamentary Under-Secretary, Home Office; Labour)

My Lords, this debate is a reflection on the previous one and the comments that I made about costs. I accept that that is right. I made a statement on government policy and the way in which we believe we should develop our thinking in this area. The issue of costs revolves in part around a sense of trust. Perhaps it is because there has been a hyping of the debate that a view is emerging in some quarters that 20 million will be far too small a sum of money to cover the set up costs which we have made plain we shall cover. We do not see the exercise as being as extensive as some have imagined. It is that imagining that troubles me most in this debate.

I shall go over some of the points that have been made during the course of this discussion as briefly as I can. The noble Viscount, Lord Astor, asked me to correct something that was said during Committee stage. I gave that correction during an earlier debate, but I am not sure whether the noble Viscount picked it up. If it helps the House I shall repeat it for the record. It concerns the allocation of costs and how they will be dealt with in Clause 12.

I said that the order itself will not deal with costs, but the Secretary of State, in presenting the order to Parliament, will in practice have to explain the position on costs. That is partly because Parliament will expect it and partly because the Secretary of State will have to show that he has this duty under Clause 13(3). That is the correction. I wanted to put the matter right. I believe that the noble Viscount raised the matter with officials. He was right and I was wrong in what I said in Committee. I apologise to the House for that. It was not a deliberate error on my part and neither was I seeking to mislead. It was simply an error. It is only right that we put it on the record and get the matter corrected.

I turn to the amendments. There is good and bad news here. I am sure that the noble Viscount will be pleased to hear that we are happy to accept the suggested substitution of the word "fair" for the word "appropriate", as drafted. We have always said that we would be willing to look at this in a positive light, as we do at all times, in order to try to improve the Bill. Our initial view was that fairness could have been a factor to take into account in any event if one has the appropriate test to comply with. Nevertheless, if the Secretary of State is to make a payment we are happy to agree that he cannot make one that is less or more than a reasonable Secretary of State would consider to be fair.

Furthermore, Amendments Nos. 19 and 20 will ensure that the payments made to one operator are fair in relation to the payments he is making, or proposing to make, to other operators for an equivalent service. We are happy to accept Amendments Nos. 19 and 20.

I am sorry to disappoint the noble Viscount as regards Amendment No. 18, which requires that the Secretary of State "shall" make payments to communication service providers rather than "may". As regards Clause 12, we discussed at some length the issue of costs which may be incurred by industry and how the Government intend to alleviate them. I do not wish to detain the House by repeating that debate except to say that we have given our commitment to provide the sum of 20 million over the next three years to help Internet service providers who are required to maintain such a capability.

Noble Lords will be aware that the Government have previously amended the Bill to set out explicitly our commitment to pay the marginal costs incurred by communications service providers as regards processing each interception warrant. These marginal costs include the cost of providing staff, the overheads incurred and also the cost of transporting the intercept product to the intercepting agency. All these costs are currently, and will continue to be, met by the Government in addition to the extra 20 million to which I have just referred. I do not accept that it is now necessary to go any further than the commitments which have been given. I trust that the noble Viscount will feel able to withdraw Amendment No. 18.

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Viscount Astor (Conservative)

My Lords, I am grateful to the Minister for his agreement to Amendments Nos. 19 and 20. I am also grateful for what he said about the order-making power in Clause 12, which, as I believe we now both agree, will not refer to costs, but that at the time the Secretary of State will explain it. That is helpful, but it makes it more important that we get Clause 13 right.

The Minister gave his commitment to 20 million and I accept that. But it is his commitment, and not one which is in the Bill. It is something separate. If the noble Lord accepts Amendments Nos. 19 and 20 the effect will be that the Secretary of State may, if he sees fit, make a payment and if he does so it has to be fair. It is not said that the Minister has to accept it because unless we include the word "shall" he does not have to make the payment at all.

The Minister said that the Bill revolves around trust. I accept that and that the Minister is an honourable person. But tonight we are not debating trust; we are debating legislation. What matters is passing good legislation in this House. I accept the Government's assurances, but we need to make sure that the legislation we pass in this House is correct. On that basis I accept the noble Lord's generous offer on Amendments Nos. 19 and 20, but I shall have to test the opinion of the House on Amendment No. 18.

On Question, Whether the said amendment (No. 18) shall be agreed to?

Their Lordships divided: Contents, 131; Not-Contents, 119.

Division number 4

See full list of votes (From The Public Whip)

Resolved in the affirmative, and amendment agreed to accordingly.

7:38 pm
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Lord Bach (Government Whip (technically a Lord in Waiting, HM Household); Labour)

My Lords, I beg to move that consideration on Report be now adjourned. In moving the Motion I suggest that the Report stage begin again not before 8.40 p.m.

Moved accordingly, and, on Question, Motion agreed.