New Clause 3 - Duty of Ofcom to report on its resources

Telecommunications (Security) Bill – in a Public Bill Committee at 2:15 pm on 26th January 2021.

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‘(1) Ofcom must publish an annual report on the effect on its resources of fulfilling its duties under this Act.

(2) The report required by subsection (1) must include an assessment of—

(a) the adequacy of Ofcom’s budget and funding;

(b) the adequacy of staffing levels in Ofcom; and

(c) any skills shortages faced by Ofcom.’.—

This new clause introduces an obligation on Ofcom to report on the adequacy of their existing budget following the implementation of new responsibilities.

Brought up, and read the First time.

Photo of Steve McCabe Steve McCabe Labour, Birmingham, Selly Oak

With this it will be convenient to discuss new clause 7— Review of Ofcom’s capacity and capability to undertake duties (No.2)—

‘(1) The Communications Act 2003 is amended as follows.

(2) After section 105Z29 insert—

“105Z30 Review of Ofcom’s capacity and capability to undertake duties

The Secretary of State must, not later than 12 months after the day on which the Telecommunications (Security) Act 2021 is passed, lay before Parliament a report on Ofcom’s capacity and capability to undertake its duties under this Act in relation to the security of public electronic communications networks and services.”.’

This new clause would require the Secretary of State to report on Ofcom’s capacity and capability to undertake the duties provided for in the Telecommunications (Security) Bill which would be inserted into the Communications Act 2003 under the cross-heading “Security of public electronic communications networks and services” (which would encompass all the clause numbers which start with 105).

Photo of Chris Matheson Chris Matheson Shadow Minister (Digital, Culture, Media and Sport)

I do not want to detain the Committee all that long. The basis of the new clause is to ensure that Ofcom has the staffing and financial resources, as well as the capacity and technical capability, to undertake its new responsibilities under the Bill.

I remind the Committee that we heard in the evidence sessions that this is only one of several new areas of responsibility that Ofcom has received in recent years. For example, it now has responsibilities for regulating aspects of the work of the BBC. Parliament will be presenting Ofcom with responsibilities in relation to online harms, all of which is to be welcomed, but we have to recognise that there will be an overstretch for Ofcom.

In the area that the Committee is considering, there are technical complications that require specific sets of talents and capabilities which, we have heard previously, are not always in ready supply in the sector. We heard evidence that Ofcom, in common with other public sector bodies, does not pay as highly as some high-end consultancies, suppliers, developers or software houses, and therefore there will be churn. I do not want to stand in the way of anyone’s career development, but understandably there will be churn, in terms of Ofcom’s ability to maintain its responsibilities in what we know will be a continually evolving sector that throws up new technical challenges.

New clause 3 provides a duty on Ofcom to report on its resources, including the

“the adequacy of Ofcom’s budget and funding…the adequacy of staffing levels….and any skills shortages faced”.

In doing so, it will concentrate the minds of senior management at Ofcom, although I have no doubt that those minds will be focused on these matters already. Perhaps they will give this priority, particularly in terms of forward planning, and they will think, “We’re okay at the moment, but are we going to require extra and additional capability in area x, y or z in the next couple of years.” It will also focus and concentrate the minds of Ministers and Parliament, ensuring that Ofcom has the resources and capability to achieve the tasks that we have given it.

We heard many lines of evidence from the expert witnesses. My hon. Friend the Member for Newcastle upon Tyne Central may refer to some of them in her contribution, and I do not want to undermine that. Professor Webb said:

“I doubt Ofcom has that capability at the moment. In principle, it could acquire it and hire people who have that expertise, but the need for secrecy in many of these areas is always going to mean that we are better off with one centre of excellence”.

Emily Taylor of Oxford Information Labs said:

“Ofcom is going to need to upskill. In reality, as Professor Webb has said, they are going to be reliant on expert advice from NCSC, at least in the medium term,”––[Official Report, Telecommunications (Security) Public Bill Committee, 19 January 2021; c. 79, Q95.]

The new clause is about assisting Ofcom to make an audit of what is available and ensuring that it is up to standard in terms of technological changes. It will also ensure that it is looking forward, in the midst of all the other responsibilities that Parliament is asking it to undertake, in order to maintain a level of skills and expertise that will enable it to undertake the snapshot reviews of current networks, as well as reviews of future provision and threats to the network. I hope that the new clause is self-explanatory and I am pleased to present it to the Committee.

Photo of Kevan Jones Kevan Jones Labour, North Durham

I would like to speak to new clause 7, which stands in my name. It is related to new clause 3, in the name of my hon. Friend the Member for City of Chester. As he has just said, Ofcom has had an expansion of its duties in the last few years and become a little bit like a Christmas tree with added responsibilities, but none of them will be as important for the nation’s future as this. That is not to decry any of the expertise or other duties that Ofcom has, but national security and the security of our national telecoms infrastructure, is a vital new task. I have said before that my concern about Ofcom centres on national security. That is why I have tabled amendments to the Bill. My fear is that Ofcom will not have the necessary expertise, although I am not suggesting that it cannot develop into a good regulatory body looking at security and our national telecoms infrastructure.

I tabled parliamentary questions on Ofcom’s budgets and headcounts, and I am glad to see that its budget and personnel have increased as its tasks have grown. That was not the case in 2010, when its budgets were subject to some quite savage cuts. My concern—I will call this my Robin Day approach—is that we have to future-proof Ofcom to ensure that the organisation not only has the budget but also has the personnel it needs. I do not want to suggest that the Minister would want to cut Ofcom’s budget at present, as it does important work. However, it is a regulator and perhaps does not have the clout of a Government Department, so any future Chancellor or Treasury looking for cuts disguised as efficiencies could see it as easy, low-hanging fruit.

Ensuring that the Secretary of State undertakes duties highlighting Ofcom’s efficiency puts a spotlight on the basis of considerations by future Administrations of any political persuasion. That will be important, not just in the early stages but as we continue. It may take a while for Ofcom to get up to speed, but I want to ensure that that continues. The obligation for the Secretary of State to report on Ofcom would at least give me comfort that first, it is being looked at and, secondly, that civil servants cannot in future just assume that an easy cut can be made but which might then impact on our national security.

I raised another subject with the head of Ofcom when she appeared before the Committee. I do not really want to rehearse the discussions again, but as the Bill progresses the Minister will have to give assurances on security, and try to demonstrate the close working relationship between Ofcom and the security services. That will be important, as it will give credibility to the expectation that Ofcom can actually do the job that we have set out. If the Minister does that, it will reassure people who may not be convinced that Ofcom has the necessary expertise, and ensure that that close working relationship continues, not just now but in future, so that national security is at the centre of this.

There will always be a balance—as I said, we saw it in the National Security and Investment Bill—between wanting, quite rightly, to promote telecoms as a sector, and national security. I fall very much on the side of national security being the important consideration, and we need to ensure that that is always the case. It is important that national security and intelligence agencies are able to influence these decisions, not just in respect of Ofcom but also in respect of Ministers in future.

Photo of Chi Onwurah Chi Onwurah Shadow Minister (Business, Energy and Industrial Strategy), Shadow Minister (Digital, Culture, Media and Sport)

I support and second the comments and contributions of my hon. Friend Christian Matheson and of my right hon. Friend Mr Kevan Jones, who tabled new clauses 3 and 7. I would also like to congratulate the Committee on having made it through, as it were, the thickets of the Bill as it stands to the sunlit uplands of our new clauses, which are designed to improve it in a constructive and supportive way.

New clauses 3 and 7 both address the challenge of Ofcom’s resources. As Members of the Committee know, I joined Ofcom in 2004. I know that we are not allowed to use props in debates in the Chamber, but the Communications Act 2003, which I am holding in my hand, is the Act with which the Bill is concerned. The changes that the Bill makes are mainly adding to that Act.

When I joined Ofcom in 2004, the Act was about half the size it is now. I am grateful to the Vote Office for printing and binding the enlarged Act which, as I said, is about double the size it was when I joined Ofcom. That is because—my hon. Friend the Member for City of Chester alluded to this—Ofcom has acquired responsibility for critical national infrastructure, the BBC, the Post Office. What is not yet reflected in the Act is Ofcom’s soon-to-be-acquired responsibility for the entirety of our online existence, as reflected in an online safety Bill, which has yet to make its appearance but has the absolute commitment of the Minister’s Department.

This latest expansion of Ofcom’s duties will necessarily add a strain not only to its budget—I shall come on to address that briefly—but, most importantly, to its resources, as was referred to by my right hon. and hon. Friends. In January this year, a colleague of the Minister stated that Ofcom will have the resources that it needs to do its job. If that is the case, may I ask what objection the Minister has to Ofcom reporting to Parliament on the state of its resources, particularly as those resources will be very hard to come by. My right hon. and hon. Friends emphasised the fact that Ofcom lacks experience in national security measures, and that expansion of duties will require the recruitment of people with the required level of security clearance and experience.

We heard in the evidence sessions that that might be a challenge. Dr Alexi Drew said:

“I think what needs to be considered in that question is the type of resources that will be the hardest for Ofcom to acquire. I frankly believe it is not necessarily technology; I believe it is actually personnel. The edge that is given to companies that have already been mentioned in your hearings today—Google, Microsoft, Facebook et al—is not necessarily in the technology, but in those who design the technology. Those people are hard to come by at the level that we require them at. They are also very hard to keep, because once they reach that level of acumen and they have Google, Facebook or Amazon on their CV, they can pretty much choose where they go and, often, how much they ask for in the process.”––[Official Report, Telecommunications (Security) Public Bill Committee, 19 January 2021; c. 84, Q82.]

I just want to reiterate that the Bill must be forward-looking on security challenges. While we the existing architecture of our telecoms networks requires skills in certain aspects of technology—radio frequencies and so on—as the architecture moves more and more into the cloud and the software domain, those skills and CVs are going to be all the more scarce and difficult to obtain.

We also heard from Dr Drew that he was not sure whether Ofcom had the capacity to take on the sheer volume of work that was likely to be created. Finally, we heard evidence from Lindsey Fussell, Ofcom’s group director for network and communications:

“In relation to Ofcom’s costs, Ofcom is funded in two ways: first, by a levy on the sectors and companies that it regulates and, secondly, through the collection of fees, primarily from our spectrum duties. Our overall funding is obviously agreed by our board but also subject to a cap agreed with Government…We are currently in discussion with the Treasury about the exact technicalities and which of those routes will be used to fund this, but it will be in line with Ofcom’s normal funding arrangements.”––[Official Report, Telecommunications (Security) Public Bill Committee, 19 January 2021; c. 97, Q131.]

Photo of Kevan Jones Kevan Jones Labour, North Durham 2:30 pm, 26th January 2021

This is about resources for Ofcom as a whole, but there will also be debate within Ofcom about how its resources are spent. Without any ring-fenced moneys for security, is my hon. Friend concerned, like me, that not only the external control of the budget but that debate internally might compromise security?

Photo of Chi Onwurah Chi Onwurah Shadow Minister (Business, Energy and Industrial Strategy), Shadow Minister (Digital, Culture, Media and Sport)

My right hon. Friend makes an excellent point. This debate is important for the Bill and important for our new clauses. It is also important that the Minister clarifies what the duties and priorities of Ofcom should be. Having worked for Ofcom at a different point in its history, I can tell hon. Members that when there is, say, a complaint about the behaviour of somebody in the “Big Brother” household that is hitting all the headlines in all the newspapers, that attracts the sudden concentration of resource—unnecessarily, one might argue. There needs to be a counterweight, if you like, to those headline-driven resourcing bottlenecks, which would be either ring-fencing or reporting on how resource is being used to support national security.

All Opposition Members are clear that national security must be the first priority of Government, and therefore the first priority of Ofcom. This is all the more relevant as I pick up the Communications Act 2003, in all its weightiness, where we find the general duties of Ofcom in section 3:

“It shall be the principal duty of OFCOM, in carrying out their functions—(a) to further the interests of citizens in relation to communications matters; and (b) to further the interests of consumers in relevant markets, where appropriate by promoting competition.”

Security is not mentioned—national security or telecommunications security. During the evidence sessions, the argument was made, although I forget by whom, that security was a necessary part of furthering the interests of citizens in relation to communication matters. That is possibly true, but I still think this important issue would be improved by clarity.

As we know, there is a significant pressure on Ofcom’s resources, which changes week by week and month by month depending on what the issues are in the many and increasing domains in which it operates. If these principal duties of Ofcom do not reflect our national security, the concern is that having no direct reporting mechanism to Parliament could mean these resources being used opaquely, with no direct requirement to prioritise national security. I hope the Minister will agree that new clauses 3 and 7 solve a problem the Bill will have in practice. I hope that if he will not agree to the clauses as they stand, he will agree to consider how Ofcom’s prioritisation of national security interests can be made clearer.

Photo of Kevan Jones Kevan Jones Labour, North Durham

As I have said before, I am not a great fan of arm’s length regulators, because it is a way of Government Departments and Ministers off-loading their responsibilities. Given how my hon. Friend has described the Bill, the way this is going means that Ofcom will be larger than DCMS in the future. Does she share my concern about accountability if things go wrong? It is a good get-out for the Government to be able to hide behind Ofcom, rather than Ministers taking direct responsibility.

Photo of Chi Onwurah Chi Onwurah Shadow Minister (Business, Energy and Industrial Strategy), Shadow Minister (Digital, Culture, Media and Sport)

As always, my right hon. Friend raises a good point. Having worked for a quango, I had clear insight into the line between independence and dependence, and into the importance of the political will of the Government, regardless of supposed independence. Equally, I saw how any regulator or supposedly independent organisation can be used as a shield for Ministers who do not want to take responsibility.

My right hon. Friend also raises a good point about the hollowing out of capacity in Government Departments. A consequence of 10 years of austerity and cuts is that DCMS and other Departments do not have the capability, capacity or resources that they previously might have enjoyed. I will point out to the Minister the example of the Government’s misinformation unit. It has no full-time employees and is supposed to exist using resources already in the Department—for something as critical now, with the vaccine roll-out, as disinformation.

My right hon. Friend is right to emphasise that given the relationship between the Government and Ofcom, which is an independent regulator, and given the increase in responsibilities that the Bill represents at a time when other responsibilities are also being added to Ofcom, the Minister cannot have it both ways. He cannot have no visibility when it comes to Ofcom’s resources and capacity while giving it yet more responsibility. In fact, this seems to be responsibility without accountability. I hope the Minister will take on board the suggestions in new clauses 3 and 7.

Photo of Matt Warman Matt Warman The Parliamentary Under-Secretary of State for Digital, Culture, Media and Sport

I thank the hon. Lady for her contributions. To address her central point, it would not be possible for Ofcom to meet the duties Government have tasked it with without addressing the foundational issue of security. It is important that we bear in mind that that is not an exhaustive list, but security will always be a foundational point.

The new clauses would require the Secretary of State to lay a report before Parliament within 12 months of Royal Assent. New clause 3 would require Ofcom to publish an annual report on the adequacy of its budget, resourcing and staffing levels in particular.

As the Committee is aware, the Bill gives Ofcom significant new responsibilities. Ofcom’s budget is approved by its independent board and must be within a limit set by the Government. Clearly, given the enhanced security role that Ofcom will undertake, it will need to increase its resources and skills to meet these new demands. As such, the budget limit set by the Government will be adjusted to allow Ofcom to carry out its new functions effectively. This is of a piece with the direction of travel we are going in. In 2012, Ofcom had 735 employees. Last year, it had 937 employees, so as its remit has expanded, so has its headcount. That will continue to be reflected in the level of resourcing that it will be given.

Photo of Chris Matheson Chris Matheson Shadow Minister (Digital, Culture, Media and Sport) 2:45 pm, 26th January 2021

Budget allocations can go down as well as up and there might be a future Government who are not quite as generous as past Governments have been. What guarantee can the Minister offer us that without some kind of reporting, such as that we propose, Ofcom’s budget will not be frozen or, indeed, reduced?

Photo of Matt Warman Matt Warman The Parliamentary Under-Secretary of State for Digital, Culture, Media and Sport

Ultimately, a mechanism already exists by which Parliament is able to scrutinise Ofcom’s resourcing. Ofcom is required under the Office of Communications Act 2002 to publish an annual report on its financial position and other relevant matters. That report, which is published every March—I am sure the hon. Gentleman is waiting with bated breath for the next one—includes detail on Ofcom’s strategic priorities as well as its finances, and details about issues such as its hiring policies.

Photo of Kevan Jones Kevan Jones Labour, North Durham

I am intrigued. The Minister says Ofcom already has over 900 people, and it is obviously going to have to grow. How big is DCMS? We basically have a mini-Department here.

Photo of Matt Warman Matt Warman The Parliamentary Under-Secretary of State for Digital, Culture, Media and Sport

The right hon. Gentleman asks me a question that I may be able to answer in a moment, depending on a number of factors. As for the thrust of his question, Ofcom is ultimately a serious regulator that has the resourcing to do a serious job. The right hon. Gentleman would be criticising us if it had fewer people, so he cannot have his cake and eat it by criticising the fact it has enough to do the job—but I think he is going to have a go.

Photo of Kevan Jones Kevan Jones Labour, North Durham

Quite the opposite. This just reinforces my point about quangos. If we reach a situation where quangos are bigger than the sponsoring Department it is perhaps best to keep things in-house rather than having arm’s length quangos and the nonsense behind which we hide in this country about so-called independence.

Photo of Matt Warman Matt Warman The Parliamentary Under-Secretary of State for Digital, Culture, Media and Sport

The reality is that the relationship between Government Departments and regulators is very often incredibly close, but independence is an important part of regulation. Although the right hon. Gentleman makes a reasonable point about the optimal size for in-house expertise versus external expertise, it is getting the balance right between Ofcom, the National Cyber Security Centre and DCMS that this Government and the reporting measures we already have are fundamentally committed to providing.

The right hon. Gentleman talked about Ofcom’s resourcing. Ofcom will not be making decisions on national security matters, as we have said repeatedly, but it will to be responsible for the regulation around these issues. As the right hon. Gentleman said, the Intelligence and Security Committee has shown great interest in how Ofcom is preparing for its new role.

As for the point about disclosure and resources, I would be happy to write to the ISC to provide further details in the appropriate forum about Ofcom resourcing and security arrangements. This could include information that cannot be provided publicly, including information about staffing, IT arrangements and security clearances of the sort that we have discussed. I hope that Opposition Members understand that that is the appropriate forum to provide reassurance and to satisfy the legitimate requirements of public scrutiny on this issue.

Photo of Chi Onwurah Chi Onwurah Shadow Minister (Business, Energy and Industrial Strategy), Shadow Minister (Digital, Culture, Media and Sport)

I thank the Minister for giving way and for the tone of his response to the different points we made. I will leave the reassurance about writing to the ISC to my right hon. Friend the Member for North Durham. Does the Minister recognise that that does not address the issue of Ofcom’s resources and reporting more generally, particularly lower down the pipeline, when it comes to national security? We have emphasised again and again the breadth of powers. The Minister has said that Ofcom will have the discretion, for example, to require an audit of all operators’ equipment—an asset register audit. It will take significant resource to understand the audit when it comes back. There are significant resource requirements involved that do not necessarily require security clearance but are nevertheless essential to effective security, and the Minister does not really seem to be offering reassurance on those.

Photo of Matt Warman Matt Warman The Parliamentary Under-Secretary of State for Digital, Culture, Media and Sport

I would say that there is a sensible place to put some of that information, which is the communication to the ISC that I have offered, and there is a sensible place to put other information, which is the annual reporting that already exists. Hopefully the hon. Lady can find some comfort in the fact that both the information that cannot be shared publicly and the information that can will be subject to an appropriate level of parliamentary and public scrutiny.

Photo of Chris Matheson Chris Matheson Shadow Minister (Digital, Culture, Media and Sport)

I simply want to welcome the Minister’s comments, and the fact that he has recognised that the Intelligence and Security Committee is the appropriate place to discuss these matters, which, of course, cuts across other clauses that the Committee has already considered. He might bear that in mind on Report.

Photo of Matt Warman Matt Warman The Parliamentary Under-Secretary of State for Digital, Culture, Media and Sport

I thank the hon. Gentleman for that intervention. I hope that now that I have given those various reassurances, hon. Members are appropriately comforted.

Everyone is waiting for the headcount of DCMS; I am assured that it is 1,304 people, some 300 more than that of Ofcom. I do not know whether that makes the right hon. Member for North Durham happier or more sad.

Photo of Kevan Jones Kevan Jones Labour, North Durham

According to the website that I have looked at, the figure is 1,170, so it has obviously increased slightly. Still, it makes Ofcom with its new responsibilities nearly as big as, if not bigger than, the sponsoring Department.

Photo of Matt Warman Matt Warman The Parliamentary Under-Secretary of State for Digital, Culture, Media and Sport

We can discuss the optimal sizes of quangos and Departments outside this room. However, the right hon. Gentleman is obviously right that Government Departments and regulators need the resources they require to do their job properly. I hope that by describing the various mechanisms I have provided hon. Members with the reassurances they need to withdraw the new clause.

Photo of Chris Matheson Chris Matheson Shadow Minister (Digital, Culture, Media and Sport)

First, I owe you an apology, Mr McCabe; so keen was I to crack on with the consideration of the Bill that I did not say how great a pleasure it was to serve yet again under your chairmanship. I should have done so at the outset and I apologise.

I am grateful to the Minister for his response. I am looking to the shadow Minister, my hon. Friend the Member for Newcastle upon Tyne Central, for a little guidance. It could well be that we might want to serve a little bit longer under your chairmanship, Mr McCabe, by testing the views of the Committee on new clause 3, if we may.

Question put, That the clause be read a Second time.

Division number 2 Telecommunications (Security) Bill — New Clause 3 - Duty of Ofcom to report on its resources

Aye: 3 MPs

No: 10 MPs

Ayes: A-Z by last name

Nos: A-Z by last name

The Committee divided: Ayes 3, Noes 10.

Question accordingly negatived.