Thursday 3 October 2019
[Philip Davies in the Chair]
Sanctions Policy and Implementation
[Relevant Documents: Eighth Report of the Foreign Affairs Committee, Moscow’s Gold: Russian Corruption in the UK, HC932, and Seventeenth Report of the Foreign Affairs Committee, Fragmented and incoherent: the UK’s sanctions policy, HC1703.]
I beg to move,
That this House has considered sanctions policy and implementation.
It is a pleasure to see you in the Chair, Mr Davies. Sadly, I will not be following your example with a 12-hour peroration; I will limit myself to merely five.
I am very pleased to move this motion on a subject about which the Select Committee on Foreign Affairs, which I am privileged to chair, has felt strongly for several years, because sanctions are one of the tools that defend the commercial frontline of the United Kingdom. This debate is an opportunity for me, and I hope others, to speak about the country’s sanctions policy. In June, the Committee published our first report on sanctions, and last month we received the Government’s response. On behalf of my colleagues, I thank everyone who submitted evidence, particularly those who appeared in person.
We focused on sanctions policy because it increasingly matters. Two thirds of the UK’s sanctions are currently agreed and implemented at European Union level, so we need a coherent and robust sanctions policy ready for when we leave the organisation. However, Brexit is far from being the only reason for urgency. An effective sanctions policy is an important part of something much more fundamental to communities across our country. It is not just a crucial part of UK foreign policy and national security and the rules-based international system, although of course it is part of all of those; it is a rampart that defends public confidence in open and honest markets. It is, in many ways, a defence of the capitalist system on which we have built our prosperity and economy for so many years. That matters because confidence in that system is key to our future prosperity, but that confidence is in short supply.
Two years ago, Matthew Elliott and James Kanagasooriam wrote an excellent report, “Public opinion in the post-Brexit era”, based on polling by Populus. They found a growing tendency among people of all ages—not just the young—to label capitalism as greedy or corrupt. We all know about the problems in some markets that explain why people think of the word “greedy”, but I am interested in why they think capitalism is corrupt. The answer, I think, lies in people’s growing awareness of how a tiny number of people have made staggeringly large sums of money, and of how those oligarchs use bankers, lawyers, accountants and company formation agents in this country to protect their ill-gotten wealth. Last year, the compelling BBC series “McMafia”, based on a book that Misha Glenny wrote a decade ago, did a superb job of dramatising how they have done so.
If there was any residual complacency about this country’s role in international corruption, Oliver Bullough’s book “Moneyland”, which was published only a few months later, dispelled it. His extraordinary tome is an essential read for anyone who wishes to understand how international finance can corrupt even us—even here, in one of the most law-abiding societies in the world. Oliver Bullough set out the three-step cycle that oligarchs follow—steal, hide, spend—and described the role that middlemen in this country play in parts two and three of that process. It is nothing to be proud of, but it means that our sanctions policy can have real bite.
Our sanctions policy can be a real tool of foreign influence. The reliance of many oligarchs on London as a place to launder and spend the money that they have stolen creates an opportunity for us to carve out a role as the champion of a more moral capitalism. From arts, to education, to property, we all know that this country has sometimes been too tolerant of those who would do us harm using our schools, our galleries and our buildings that house them. Well-aimed sanctions will help us to tackle the dangerous, corrosive perception that all capitalism is corrupt by making less easy the lives of those whose wealth derives from theft and violence.
Evidence that we took during our “Moscow’s Gold” inquiry last year reinforced that point. We heard how the En+ Group was listed on the London stock exchange at a time when the sanctions regime in the UK was not equipped to prevent that, even though the company was linked to sanctioned organisations in Russia. As part of that inquiry, we invited Linklaters to give evidence. It is a highly reputable law firm that conducts half of the deals in Russia—or so it says—and acted for En+ during the listing. We invited it to give evidence not on any specific client, which of course it could not do, but on the nature of doing business in the legal wild west that is modern Moscow. It declined to do so. I will leave others to judge what that says about its willingness to offer evidence to the British people. I welcome the Government’s confirmation that they will explore ways to block listings on the London stock exchange on national security grounds.
In “Moscow’s Gold”, we advocated a Magnitsky Act, which many in the House will have heard of. It is named after Sergei Magnitsky, a tax adviser who was tortured to death in Russia. The law would enable the Government to impose sanctions on human rights abusers around the world. The measures were all included in the Sanctions and Anti-Money Laundering Bill, which has now become law, but there was uncertainty as to whether sanctions could be implemented before Brexit and the end of any transition period. I am pleased to see that the Government have established that there is no obstacle to doing so, and I very much welcome the Minister’s acknowledgement of that.
Many of our allies have already implemented the measure. It is not just targeted at Russia, despite the name; it is targeted at human rights abusers around the world. A Magnitsky Act would enable us to join our allies and send a powerful signal that we support the victims of human rights abuse around the world and will not profit from their abusers’ theft and murder.
As our latest report on sanctions shows, there is much else still to be done. Witnesses repeatedly told us that the Government’s approach to sanctions is fragmented and incoherent. The Foreign and Commonwealth Office makes the policy, which a variety of other Departments then implement. Departments interpret sanctions policy inconsistently and, sadly, too often with very little guidance. It does not help that sanctions and anti-money laundering policies are separate. As the then Minister of State, my right hon. Friend the Member for Rutland and Melton (Sir Alan Duncan), put it when giving evidence to our Committee, financial crime
“is not quite our patch.”
To bring more coherence to the sanctions policy of the United Kingdom, we recommended that the Government establish a senior responsible officer for policy and its delivery. While multiple senior responsible officers overseeing sanctions policy exist within the Foreign Office, Brexit offers a perfect opportunity, as the Government note, to create one who can span the whole of Whitehall. We also recommended that this person should be accountable to the National Security Council, which should in turn designate sanctions strategy as an urgent priority. We have therefore called for a review this year by the National Security Council to ensure that the resources that it needs to make sanctions a priority are in place. To be effective, the review should explore how the UK can explore its heft in financial services and address exactly how we should engage with our international partners and influence their decision making in the years ahead.
This report was the second one we have published in this Parliament on the connection between finance and foreign policy. In “Moscow’s Gold”, we showed how Russia is using our financial markets to subvert the international rules-based system. What is more, the cynicism that that generates undermines our own faith in the order that has kept us safe.
We are looking at more work, however. One area that we are beginning to investigate is the nature of autocratic engagement with democracies such as ours. Although the focus, so far, has been on Russia, we could list many other countries. We could certainly look at some of the ways in which China uses its state assets to influence markets around the world. The United States is also considering that, so we will be working on it together.
Our new report shows that the Government have much to do if they are to make sanctions an effective weapon and not cede the initiative to others in the field. In a world where financiers have become foot soldiers in foreign policy, we need to wake up and recognise that our international financial markets are the frontline. They can be used against us, but they also give us a home advantage. In a world where the rule of law is threatened, the pursuit of dirty money is now a vital part of foreign policy.
That fight starts on our doorstep. There is no room for complacency; we need to hurry. The UK is on the frontline of financial crime. Our people deserve a better defence and they deserve to have the weapons to achieve it. We need to make sure that our commercial fortifications are as strong as our physical ones. We need a Royal Navy for the financial markets.
I did not expect to be called to sum up so soon. I will try to stick to the seven-hour limit that the Chair of the Select Committee, the hon. Member for Tonbridge and Malling (Tom Tugendhat), indicated. I congratulate him and his colleagues on the Committee on a couple of very thorough reports. I know that they are only two of a large number of detailed inquiries that they have undertaken, which have involved a lot of work from him, his colleagues and the Clerks and others who support the Committee—we should never forget how important their work is.
I will make a few general comments. When we are talking about sanctions, we should ask ourselves what they are for and why they are there. There are two kinds of sanctions: first, those that are imposed usually on countries or Governments because they are behaving in a way that we find unacceptable and secondly, those that we impose on individuals usually because they have been identified as a significant threat to the financial and economic stability of the United Kingdom or to the safety and security of our citizens.
It will come as no surprise to hear that I am not always happy about the decisions that the UK Government take about which countries are subject to sanctions and which are not, but that is a topic for a different debate. The principle should be that, if we know that a country is acting in breach of international law, we must use all the levers that we have. That certainly includes diplomatic influence, but we also have to be prepared to use financial and economic levers, if necessary, to bring even supposedly friendly countries into line. Sometimes we are too slow to exert financial pressure on countries that are designated as our friends, as opposed to those that are designated as neutral or potentially unfriendly.
When it comes to sanctions against individuals, the principle should always be that those who are involved in systematic human rights abuses or international crime, or those who are actively seeking to undermine democracy in their own country or anywhere else, will simply not be welcome, no matter how much money they are prepared to invest in our financial institutions or to pay the Government to buy their way in.
It is a sad irony, but a salutary lesson, that the first person to be stripped of substantial amounts of money about a year ago—a Russian lady or a partner of a known Russian individual—was here only because she had enough money to fast-track the UK immigration system. The rules allow people to come in with a substantial amount of money, because that is deemed to be of economic benefit, so she was able to come in more quickly than if she had not had billions of pounds with her. When it turned out that the source of those billions of pounds was extremely dodgy, enforcement action had to be taken.
That is a salutary lesson that when we look to make people welcome because of assets they bring with them, we have to be very careful—before we make them welcome—about where those assets have come from. And if there is a question about that, it is much better for to say, “I’m sorry. You wait outside until we are sure that it’s acceptable to let you come in.”
I will raise another issue that I know is not strictly covered within these reports and that is not strictly within the remit of the Foreign Affairs Committee. As the hon. Gentleman pointed out, sometimes the demarcations between Government Departments do not work particularly well, because criminals and those who wish us harm do not stick to attacking the functions of one Government Department, and sometimes a cross-Government approach is needed.
I do not think that there is enough recognition yet that one of the features of global capitalism is that the financial markets can be very deliberately manipulated by people who have at their control assets bigger than those of most countries in the world. Those financial markets can sometimes be deliberately manipulated for no other purpose than to wreck the economy of one or more countries because people have hedged financial bets on those countries being damaged.
We have certainly seen that happen in the past; it is the reason why a number of countries in Latin America had severe economic crashes in the past. I think that we would be naive to think that somebody is not looking at the United Kingdom right now and preparing to hedge the financial markets, effectively betting on the UK economy crashing. And if those people are also in a position to wield influence that makes it more likely that the economy will go down, then we have a very serious problem. So, although it is not within the strict remit of the hon. Gentleman’s Committee, I think it is an indication that when we start to look at the malign influence of Russian money in the City of London, eventually we have to start looking at the malign influence of other people’s money in the City of London, too.
My final comment is about when we leave the European Union. I thought it was very interesting that the sanctions report pointed out that effectively the Foreign Office—along with, I think, the rest of the Government—catastrophically underestimated how much very detailed technical work had to be done. It was not simply a case of, “We leave tomorrow, and we have a customs deal the next day, and everything’s fine.” Work that the Foreign and Commonwealth Office should have been doing to protect us from malign influences was not able to be done as quickly as it should have been, because the FCO had so many other things going on. Okay, that is a case of being wise after the event, but this issue should still concern us.
When we leave the European Union, there will be a question as to whether it will ever be credible or effective to have an entirely independent sanctions policy, because although the United Kingdom is—what?—the sixth or seventh biggest economy in the world, depending on how it is measured, if it imposes sanctions and nobody else does, those sanctions will not work. And if the other big players—the USA and the European Union—impose sanctions and we do not, we would then be in serious danger of falling victim to secondary sanctions, because if we do not stop our trade with sanctioned countries, the European Union or the United States of America will sooner or later start considering whether they should continue to trade with us.
So, although we have been part of a framework and any sanctions were imposed on an EU-wide basis, in practice we will have to keep talking to our European colleagues, even if and when we leave the European Union. That is because sanctions, and probably international sanctions, can effectively protect the unique institutions of the City of London, only if they are applied not only by the United Kingdom but by other major players as well.
I welcome the publication of these two reports. The timing of this debate is unfortunate, and in other circumstances we would have had a much greater attendance. I do not think there is a lack of interest in this subject; I think there is a great deal of interest. It is just that there are so many other demands on Members’ time just now. I hope that the Chair of the Committee will take back—on behalf of myself and indeed the whole House—our thanks, not only to his colleagues on the Committee but to all the Clerks and other staff who have helped to get these reports published.
It is always a pleasure, Mr Davies, to serve under your stewardship.
I thank my friend the Chair of the Foreign Affairs Committee, the hon. Member for Tonbridge and Malling (Tom Tugendhat), for raising this important issue. Since he has been the Chair of that Select Committee, he has been studious and worked very hard. Even through the so-called Prorogation, I know that he was here most of the time—I have come in and he has been here. When the Prorogation was deemed illegal, he was one of the first people in the Chamber. I congratulate him on the effort and the energy that he has brought to his work; being a Select Committee Chair is really hard work, particularly in the Foreign Affairs Committee, which has a hugely important function. I am pleased that he heads that Committee, and he does so excellently.
The UK adopts sanctions primarily through the UN and the EU, and two thirds of its sanctions regime has been driven through the European Union. Leaving the European Union will thus bring about a seismic shift in how the UK adopts, imposes and implements economic and financial sanctions. For this reason, Parliament passed the Sanctions and Anti-Money Laundering Act 2018, which provides the legal foundation for an autonomous UK sanctions policy. Since the Act became law in May 2018, the Government’s activity on sanctions has been focused on ensuring that the UK will be legally able to maintain existing EU sanctions under UK law, even in a no-deal Brexit scenario.
As the Chair of the Foreign Affairs Committee said, the Committee conducted an inquiry. It is important that we understand the issue of sanctions and how and where we deem them fit to apply to specific countries. Part of the sanctions framework is the use of a Magnitsky Act, which I will come to later. Both types of legislation should be applied together, as individuals are coming through international loopholes as well as using national mechanisms. We need to be able to address the individuals who have been placed under sanctions by the United Nations or the European Union, or will be placed under sanctions by us. As he quite rightly says, such people interfere with the normal wellbeing of our financial economy; they distort it. It is important for us to understand and deal with the effects on financial institutions. The hon. Gentleman has clearly explained Magnitsky powers and it is important to recognise these issues. Sergei Magnitsky was a Russian lawyer; for his efforts, he was tortured by the Russians.
As we place financial sanctions and travel sanctions on certain individuals, we must understand how such powers work and how they should operate. The hon. Gentleman also pointed out the problem of people being able to circumvent the sanctions policies that we might apply, and how they might be able to do that. The report recommends the appointment of an officer to monitor the situation, which I think is much needed, because, at the moment, we do not really think about the process of how to apply sanctions and we need to do so in a joined-up way. We need a senior responsible officer bringing the laws together and addressing the issues—considering how people use their immigration status or their financial wealth, from which country they are operating and what secondary operations are related. There must also be a clear trail examining the input into our finances; such individuals distort our finances and make it difficult for the people of the United Kingdom who are trying to behave properly to have a proper regime around what they are doing. We must look at and deal with that situation. We need to take a serious cross-Whitehall approach, as the hon. Gentleman recommends. If we do not, how we deal with sanctions and money laundering will remain fragmented.
It is also important to look at what the Labour party want to do. Sanctions can certainly be an effective and useful tool for achieving policy objectives. For example, they can apply pressure on states and individuals that are carrying out human rights violations to alter policies and behaviour. I mention that in reference to Myanmar; the hon. Gentleman mentioned Russia. I would also add India’s current situation—I declare an interest, as I am a Kashmiri. There are issues going on there and it is important for us to be able to look at that and see how those policies affect a nation that is bringing people into subjugation. As the hon. Gentleman will understand, we have to look at where human rights and civil liberties are being abused day in, day out. We cannot allow abusers to engage in international markets via financial circumvention.
I will cut down my speech because we all need to keep to a similar length of speaking time, but I will question the Minister. Three years after the referendum, little thought appears to have gone into the consideration of the UK’s strategy and policy approach to co-operation with EU sanctions. What progress has been made in the development of a plan for post-Brexit co-operation with the EU in terms of sanctions? If the Government claim to take seriously the actions of human rights abusers, why have no individuals accused of human rights abuses been sanctioned? Sixty-six individuals have been sanctioned by Lithuania and 49 by Estonia—both countries are EU members. Will the Government set out a clear position on whether the UK can independently sanction human rights abusers while it is still an EU member state? Does the Minister agree with the Foreign Affairs Committee report that the Government would benefit from having a senior civil servant who is accountable for sanctions policy implementation?
It is a pleasure to serve under your chairmanship, Mr Davies. I shall do what I can to expand my speech to fit the time available. I congratulate my hon. Friend the Member for Tonbridge and Malling (Tom Tugendhat) on introducing this subject for debate today. I am sorry there are not more people here to debate the matter. It is, as the hon. Member for Glenrothes (Peter Grant), who speaks for the Scottish National party, says, an important matter and such a debate would ordinarily be attended by a significant number of colleagues wishing to contribute—but these are not normal times, are they?
The speech made by my hon. Friend the Member for Tonbridge and Malling was magisterial; he hit the nail on the head, and I will do my best to cover the issues he has raised. I also congratulate him and his Committee on their report of 5 June. As the ex-Chairman of a Select Committee myself, I know a little about drafting Select Committee reports. I understand full well that the main thing is to get the title right, and his report’s title certainly shoots from the hip: “Fragmented and incoherent: the UK’s sanctions policy”. I do not think we need to read much further, although I did, last night. I read it in great depth and detail to know where the Foreign Affairs Committee is coming from. Since the report, a lot has happened and I hope in my remarks to be able to persuade my hon. Friend of that.
I apologise that the Minister for Europe and the Americas, my right hon. Friend the Member for Tamworth (Christopher Pincher), is not in the Chamber today; he is the Minister with responsibility for sanctions, but he is abroad on duty. I have dealt with sanctions a fair amount because of my geographic portfolio, so I hope I am reasonably well placed to comment on some of the issues contained within the report and the more general questions. I enjoyed the remarks made by my hon. Friend the Member for Tonbridge and Malling about capitalism in general. We could have such a debate for many hours, but this is not the place—you would probably call me to order, Mr Davies, if I attempted to do that. However, I sympathise with the general thrust of what my hon. Friend said. I am reminded the remarks made about a decade ago by Peter Mandelson, now Lord Mandelson, about being intensely relaxed about people getting “filthy rich”. I did not particularly like that at the time, not because I object to people becoming wealthy if they have the talents and the attributes to do so, but because I objected to the word “filthy”, which probably touches on the thought processes that will have gone through the minds of members of my hon. Friend’s Committee when they drafted their report on dirty money from Russia.
It is clearly not the case that this country does not want people to invest here. London and, indeed, Edinburgh rely heavily on inward investment and financial transactions. However, this country has a reputation for standards—that is part of the UK’s attractiveness as a source for foreign investment—and that depends on sufficient, adequate and proper regulation and the rule of law. In anticipation of Brexit, we will need to think about that when transposing into our domestic law the European Union’s rules and regulations, and when we consider what we will do next. Clearly—I will come on to this—we need to be alongside others. Today’s contributors made the point well that this is so much more effective if we work with others. We also need to consider what the UK will need to do unilaterally. There are advantages, I would say, in our soon to be autonomous status and in being able to do things more rapidly. That has to be counted as one of the advantages of Brexit after 31 October. I would certainly anticipate that being the case in relation to sanctions, but I absolutely accept the added value in acting multilaterally in that particular space. There is very good evidence to suggest that that is the best way to approach sanctions in the main.
Sanctions are a key tool for the pursuit of our foreign policy and national security objectives. They play a central role in supporting our efforts on priority issues, including tackling human rights abuses, which formed the substance of a great deal of what the Chair of the Foreign Affairs Committee touched on. They are central to countering terrorism, to the non-proliferation of chemical weapons and to upholding the rules-based international system.
This country has consistently played a leading role in the use of sanctions at the United Nations and the EU, to support our foreign policy objectives on Russia for its actions in Ukraine, and on Iran and the Democratic People’s Republic of Korea to slow or halt nuclear proliferation. In the last year alone, we have led the way in the adoption of sanctions against challenging individuals, from hate preachers to Syrian businessmen intent on funding the murderous Assad regime. We also led efforts to establish the first EU chemical weapons sanctions regime, and secured travel bans and asset freezes against individuals and leadership in the Russian intelligence service responsible for the use of chemical weapons on the streets of Salisbury last year. That is an issue about which I feel particularly strongly, since my constituency abuts that of Salisbury. I am very pleased that Messrs Chepiga and Mishkin have fallen foul of that particular sanctions operation. You will remember, Mr Davies, that they were the gentlemen who professed to show a particular interest in English ecclesiastical architecture but who were clearly part of the GRU. Fortunately, we have been able to apply sanctions to them. It is those sorts of individuals, and the entities they work for, that any future sanctions regime would seek to act against.
In total we implement 37 UN and EU sanctions regimes, and almost 2,000 individuals and entities are prevented from travelling to, or investing in, the United Kingdom as a result. The Government’s focus over the past two years has rightly been on preparing for Brexit. The Sanctions and Anti-Money Laundering Act received Royal Assent in May 2018, and since then we have laid 24 statutory instruments, mostly in order to transfer EU and UN sanctions regimes into domestic law from the point that the United Kingdom will no longer be bound by the EU.
We have reviewed about 1,000 individual EU sanctions designations to consider whether they satisfy United Kingdom legal thresholds. We have also set up the necessary processes to allow us to publish on gov.uk the names of those sanctioned under United Kingdom sanctions. The scope of that task was unprecedented, and as such we prioritised the work accordingly to ensure the continued application of existing sanctions after Brexit. I am sure that right hon. and hon. Members will understand that, first and foremost, our focus with this and every other Brexit-related piece of work across Government is on having to transpose into UK domestic arrangements 40 years’ worth of EU norms, values, rules and regulations. That has been the principal focus across Government, and I think that most people will understand how important that is.
After we leave the EU, however, we will have our own independent sanctions powers and will be able to consider exactly how we use sanctions as part of our broader foreign policy. Once we are outside the EU, we will have the opportunity to deploy sanctions more swiftly and decisively in support of our national interest. In the event of an international crisis, we will no longer have to wait for consensus among 28 members of the EU, but will be able to act in our national capacity. The sanctions Act and the supporting secondary legislation give us the freedom to decide national sanctions as we see fit, aligning with our key priorities, notwithstanding my remarks about acting together.
Sanctions are most effective when jointly enforced by many nations. That is why we fully intend to continue to drive co-ordination on sanctions with our key partners, EU members and other close allies such as the US or Canada, and through the G7. Indeed, in the 5 June report, the importance of working together is underscored several times, notably by authorities such as Professor Paul Cardwell and RUSI, who were quite clear that sanctions are most effective when they are applied multilaterally—a point that was well made by the SNP spokesperson, the hon. Member for Glenrothes.
We will continue to use our permanent seat on the UN Security Council to ensure co-ordinated and effective action on UN sanctions; indeed, that was one of the issues that was discussed around the bazaars last week at the UN General Assembly, from which—by force of circumstance, sadly—Ministers were untimely ripp’d. Nevertheless, it is clearly an important part of the toolbox that multinational forums such as the United Nations are exercised about. They are right to be, and it is very often at those forums that such measures are most effectively exercised. We will continue to make sure that that is the case with the European Union and with others.
The United Kingdom wants a supportive and constructive relationship with the EU as constitutional equals going forward, and as friends and partners we want to face the challenges that lie ahead together. Although we will exercise the power to impose sanctions independently, that will not prevent the United Kingdom from co-ordinating with the European Union. The outcome will be that we enjoy both freedom of manoeuvre and the option of working alongside the EU on sanctions where our objectives align.
In answer to a point raised by the Opposition spokesperson, the hon. Member for Birmingham, Perry Barr (Mr Mahmood), however, we cannot set out in detail how the UK and the EU will co-operate on sanctions in future until the terms of the United Kingdom’s departure from the EU are clear. I am sorry that I cannot be any more specific, but he will understand that these things are all evolving all the time. With respect to the future relationship, it would be very difficult to be more prescriptive about what the future will look like, not least because the United Kingdom is only one party to the arrangements going forward. That is a matter that will have to be determined, but it seems to me that of all the things to determine in the future relationship, such issues are perhaps among the lower-hanging fruit.
The United Kingdom’s impact in multilateral settings has ensured that sanctions play a part in confronting and combating a range of hostile state activities. It has also ensured that those sanctions have wide applicability beyond the United Kingdom’s jurisdiction. We led the debate on maintaining and strengthening multilateral sanctions against Russia for its illegal annexation of Crimea and for its destabilising actions in eastern Ukraine. The United Kingdom also fully supports new sanctions in response to Russian elections in Crimea and Sevastopol, the construction of the Kerch bridge, the illegitimate elections in the Donbass, and Russia’s attack on Ukrainian vessels in the Black sea. National sanctions will also allow us to continue to constrain the ability of those who wish to do us harm, to encourage changes in behaviour from malign actors, and to send a clear signal about the role of global Britain as a moral anchor in the world today.
Let me turn to the Magnitsky powers, which were the principal focus of the remarks of the Chairman of the Select Committee. As he knows, preparatory work is under way to implement a new independent human rights sanctions regime as soon as practicable after we leave the European Union. That work has proceeded apace since March—from around the time that he delivered his report. It was probably reasonable for the Select Committee to comment at that time about its concern that not enough planning had been done for the subsequent sanctions regime, but I assure him that a great deal has happened since then.
Our report had the desired effect.
Indeed. One has to take credit where one can in this business, and I am pleased to say that my hon. Friend is right to take some of the credit for moving the narrative along. More particularly, I am pleased to see that the work in the Foreign and Commonwealth Office, which also involves others, as I will come on to, has been proceeding apace. I am comfortable that we are in a good position to deal with some of those things in a timely manner at the point of our departure on 31 October.
As a non-lawyer, it is sometimes challenging and tricky to get my head around some of the complexities of the issue. The worst thing that we could do would be to create bad law that would be challengeable, because it would cost the British taxpayer many millions of pounds to defend the UK Government against people with very deep pockets. The last thing that my constituents want is for large sums of their cash to be disbursed to some of those individuals in damages. It is absolutely right that, across Government, we work hard to make sure that the legislation is in place and the statutory instruments are prepared in such a way as to minimise the chance of the UK Government being challenged by lawyers.
The sanctions regime that we are discussing derives from the so-called Magnitsky powers provided for in the Sanctions and Anti-Money Laundering Act. Clearly, all those here gathered are intensely interested in that legislation and its secondary legislation. Establishing a national human rights sanctions regime will show the United Kingdom’s commitment to human rights worldwide and will be an important plank in our post-Brexit foreign policy. It will allow the United Kingdom to impose travel bans and asset freezes, and it will ensure that people who abuse human rights anywhere in the world will not be able to travel here or invest in our economy. The Government will publish the names of those subject to those sanctions.
To impose a sanctions regime for human rights, we have drafted a statutory instrument to ensure the associated processes and structures are in place to implement and manage it. It is important that we set it up correctly, and I am absolutely focused on ensuring that those processes and structures are as legally robust and watertight as they can be. That has perhaps accounted for some of the delay that was remarked on in the report, in which the frustration of Select Committee members was palpable. I hope that my hon. Friend the Chair of the Select Committee understands the reasons for that. There is a need to replicate EU sanctions following Brexit and work has been going on in the past few months with legal draftsmen to ensure that the subsequent regime, particularly in relation to the Magnitsky clause that was introduced by the 2018 Act, is robust and will hold water against what is likely to be a hostile response from some of those designated under the legislation.
Hon. Members will be pleased to know that we are working closely with key partners, such as the US and Canada, which already have specific human rights sanctions regimes, to co-ordinate our efforts and to ensure that the sanctions that we impose have maximum effect. The Government are absolutely committed to tackling illicit finance, corruption and money laundering. We do not want dirty money here; money launderers are not welcome in the UK. We are actively implementing our anti-corruption strategy, led by the Prime Minister’s anti-corruption champion, my hon. Friend the Member for Weston-super-Mare (John Penrose). The National Security Council has met twice to discuss the issue, and the Government are consulting on reforms to Companies House and on introducing legislation to require foreign companies that own or purchase property in the UK to provide beneficial ownership information.
We have new and exciting tools to tackle illicit finance, such as unexplained wealth orders and account freezing orders, which were introduced under the Criminal Finances Act 2017. Those have been used to isolate millions of pounds across hundreds of bank accounts. Consequently, and as a direct result of all that work, the Financial Action Task Force found in 2018 that the United Kingdom had the strongest anti-money laundering regime of more than 60 countries assessed to date. I think we should all be proud of that, but there is no complacency. In July 2019, we published an economic crime plan in conjunction with the private sector. The plan outlines the public and private sectors’ collective ambition to combat economic crime and sets out a series of actions that both sectors will undertake to enhance the United Kingdom’s economic crime response. The plan was the first output from the economic crime strategic board, which the Chancellor and the Home Secretary co-chair. We are also actively looking at the possibility of introducing a power to block a listing on the London stock exchange on national security grounds. The work is well under way.
Although the issues are primarily the responsibility of the Home Office and the Treasury, the FCO plays a part as well. It leads the international delivery of the Home Office serious and organised crime strategy, supporting the overseas territories and Crown dependencies in tackling illicit finance and co-ordinating with the Department for International Development, Her Majesty’s Treasury and other Departments to deliver a global anti-corruption programme. It is important to understand the central role of the Foreign and Commonwealth Office. Ministers within the FCO are signed up to jointery and the idea that if we are to deal with all the issues that we have been discussing this afternoon, we need a cross-Government response.
I note the concerns about senior responsible officers for sanctions, and I read the remarks in the report very carefully. If we had a senior official responsible for this piece of work, which runs like a vein through the whole of Government business, I would be concerned about their being isolated. Although the proposal is that such an individual should report to the NSC, my worry—it is a concern that I have more generally with the machinery of government—is that we would be taking important bits of Government policy outside implementing Departments and making Departments respond in a sort of silo format to the NSC. Before too long, we would find that the NSC was responsible for a raft of bits of Government policy, and Departments were in some way isolated and frozen out. The Departments are expected to implement all of this and they have the experts and the expertise to deal with it, and I am vaguely uncomfortable with such a proposal.
In defence of the current position—all issues around the machinery of Government are of course kept under review and are always subject to change and modification—the national security strategy and implementation groups, with which my hon. Friend the Member for Tonbridge and Malling will be familiar, are headed up at director general level and report directly into the NSC. I know that Russia is a particular concern of the Foreign Affairs Committee, for example, and the one on Russia is influential in securing that cross-Government response to the challenges posed by that particular malign actor. My sense is that such a mechanism serves Government well and is the best fit right now, but as with anything in this space, it is always subject to constant review and reappraisal.
The remarks made in the report are important in informing the general debate on how we do this. I hope that the Chairman of the Select Committee, and others, will understand the rationale for perhaps resisting, at this juncture, the solution proposed in the report. Perhaps it is something we may come back to at a future date.
The Foreign Office is intent on supporting the United Kingdom’s effort to strengthen international standards in general. You will be interested to reflect, Mr Davies, on the fact that in spring at the Open Government Partnership summit in Ottawa the Prime Minister’s anti-corruption champion, my hon. Friend the Member for Weston-super-Mare, launched a global leadership group to drive international efforts to strengthen international beneficial ownership transparency. The United Kingdom is an active member of the G20 anti-corruption working group and will be strongly represented at the conference of states parties to the UN convention against corruption in Abu Dhabi in December. As the Foreign Affairs Committee has identified, sanctions are a powerful foreign policy tool and form part of the overall approach to protecting the United Kingdom from threats from overseas and to delivering our foreign policy. Dirty money should not be in the United Kingdom, and we should be using domestic law enforcement tools and international co-operation to send a clear signal that we do not tolerate illicit finance in any form, not simply for moral or legalistic reasons.
Part of the power of the United Kingdom in terms of financial services is the reputation that we have for upholding the rule of law—and in particular for dealing with anything to do with illegality, corruption or things that transgress our rules and norms. That is much of the power of the City of London and, indeed, other financial centres such as Edinburgh, and it must continue. Unless we take these matters seriously we shall find that the reputation of the United Kingdom falls away in that respect, and we will all suffer as a consequence. There is therefore a strong financial imperative to ensure that our sanctions regime is as robust as it can be.
The United Kingdom is a global leader on sanctions, as I hope my remarks have explained. It is a major contributor to the development of international sanctions policy. I am very proud that when Ministers go to institutions such as the UN General Assembly we can be seen to be in a leadership position in respect of much of the debate. We can already draw on more sanctions expertise and resources within Government than any other European partner, and maintaining that capacity will be a priority after we leave the EU. We have increased the number of officials working on sanctions across Whitehall and intend to maintain those numbers beyond Brexit. The United Kingdom has one of the world’s largest and most open economies, and London is one of the world’s most attractive destinations for foreign investors. That means that the sanctions we impose will really bite.
The Foreign Office’s primary objective is to ensure that we can continue to use sanctions as an effective foreign policy tool to tackle some of the most serious threats to our national security and moral values and to drive forward our foreign policy. That is why our focus over the last two years has been to safeguard existing sanctions in the United Kingdom post-Brexit and why we will have a new global human rights sanctions regime.
To conclude—I have filled the time available as best I could—sanctions will remain a key part of the United Kingdom’s approach to a wide range of foreign policy priorities after we leave the EU. The importance that we attach to sanctions is reflected in the huge effort put into our preparations for Brexit and the additional resourcing that we have put in place across the FCO network. As I am sure hon. Members can understand, it was right for the Government to prioritise the work to ensure that existing sanctions would continue to apply in the event that we leave the EU without a deal. However, I hope that they will equally understand that in the past few months we have put an enormous amount of work into determining the future relationship, and that they are content with the general approach. I am grateful for all the recommendations outlined in the Foreign Affairs Committee’s report of 5 June and our response to it, since when a great deal has been done. I am by no means complacent about the task ahead, but I hope that the Committee will accept that we are on track.
Once we are outside the EU, we will continue to work in concert with others and will have the opportunity to implement our own autonomous sanctions, including on human rights, to combat threats, protect our norms and protect our values. We will continue to demonstrate through our actions that the UK is and will remain a global sanctions leader.
I am grateful for the Minister’s speech, which recognised not just many of the ideas that I raised but many of the ideas that the Foreign Affairs Committee has debated. That demonstrates that, despite having been Chair of another Committee, he was assiduous in following the work of ours, even before he became a Foreign Office Minister.
I am also grateful to my friend the hon. Member for Birmingham, Perry Barr (Mr Mahmood), who has been of invaluable support in many projects that I have done outside this place. His kind words supporting the Committee’s work and recognising the challenge that we all face, on whichever side of the House we sit, are extremely well received; I thank him for them.
The hon. Member for Glenrothes (Peter Grant) spoke extremely well on behalf not just of his party but of the House. He recognised many areas in which we all face similar challenges; one area that he did not mention, but could have, was the UK Government’s responsibility with respect to Scottish limited partnerships, on which he and his party have assiduously led the campaign. His speech reminded me that one reason why we are in this position in the UK is that we have the legacy of a very unusual political and economic system of absentee landlords that lends itself to foreign oligarchs in a way that many other economic systems do not.
I am particularly grateful to the Minister for speaking about the rule of law, because it is the economic underpinning of the United Kingdom. It is fundamental, and highlighting it is extremely important. That leads me on to an area that none of us mentioned, but that perhaps we should have—the challenges in places such as Hong Kong, where the human rights abuse of individual citizens could easily raise questions about Magnitsky implementations. It may also raise questions about the position of British judges on the Court of Final Appeal. After all, at what point is the defence of commercial justice reliant on civil justice? At what point does the undermining of civil rights in a territory undermine the ability of any judge affiliated to the UK—certainly a former UK High Court or Supreme Court judge—to deliver justice? At what point is that no longer possible? Maybe that is a question for another day.
The fundamental point is that the UK’s reliance on its economic markets is essential, as we know. We therefore need to look at whether the markets are not just open and fair but properly regulated with rules that are properly enforced. In the same way that the Minister’s ancestors on Her Majesty’s men of war—like their counterparts on Her Majesty’s frigates and destroyers today—implemented the rules of the sea and fought the evils of the slave trade and so many other forms of tyranny in the pirate wars from 1600 to about 1900, there is a place for a new red ensign to fly over our financial markets. Everyone should know that the people who put their money here and invest through London, Edinburgh or the UK’s markets, and the businesses that use those institutions, cannot be the human rights abusers, thieves and oligarchs who enrich themselves in places such as Moscow by raping and pillaging the people. They should know that because our markets have the best sanctions regimes to prevent any such crimes.
I congratulate the Chairman of the Foreign Affairs Committee on mentioning the Navy’s fight against slave traders. It is very important to point that out, particularly now that we are in Black History Month.
I am grateful that the hon. Gentleman raises that issue. It is also worth mentioning that today is the anniversary of the death of Alan Henning; I do not know how many hon. Members remember him, but he was a taxi driver with a huge heart and enormous courage who took aid to Syria. His abusers probably enriched themselves in ways that we can only imagine. One very encouraging thing that the Foreign Office is doing—forgive me if it is not quite in the sanctions line—relates to the work of the British Museum in fighting the vile trade in historic artefacts. It is clearly connected to the sanctions issue, so I hope that the Foreign Office will pick it up, although the Committee did not cover it in our report.
I thank you for your chairmanship, Mr Davies, and all hon. Members present. I particularly thank the Clerks of the Foreign Affairs Committee, whose work has been exceptional, on this and many other subjects.
Question put and agreed to.
That this House has considered sanctions policy and implementation.
Internet of Things: Regulation
[Mike Gapes in the Chair]
I beg to move,
That this House has considered regulating the internet of things.
It is a pleasure to serve under your chairmanship, Mr Gapes, in a debate on such an important subject. I am a tech evangelist. I believe that technology is an engine of progress. Growing up in the north-east, in Newcastle, the home of the first industrial revolution—although I know that some from the north-west may debate that—gave me a love of science, technology and innovation. The achievements of local greats such as Armstrong, Stephenson and Parsons—that is Rachel Parsons, the world’s first female naval engineer—inspired me to study electrical engineering and embark on a two-decade career as a chartered engineer working in telecoms all over the world.
Newcastle’s experience of the industrial revolution was captured in the excellent BBC series “A House Through Time” with David Olusoga, which showed a mixture of life-changing technological progress and huge social problems, as in many other cities. We are now in the midst of what some consider to be the fourth industrial revolution—although how to count them is not agreed—powered by data and renewable energy, instead of labour, discipline and steam.
Last week the Prime Minister made what I can only call an interesting speech to the United Nations on technology, with this historical analysis:
“When I think of the great scientific”—
I cannot pretend to do his way of speaking, so I will just quote—
“revolutions of the past—print, the steam engine, aviation, the atomic age—I think of new tools that we acquired but over which we—the human race—had the advantage”.
The industrial revolution radically changed society, but it is a mistake—one, if I may say, of privilege—to say that the human race had the advantage. The steam engine rapidly increased productivity but also powered factories and mills with brutal working conditions that produced textiles from slave-milled cotton. Those new tools brought benefits, but the benefits were not equally shared. Of course, that happened before the United Kingdom had universal suffrage or a labour movement and a Labour party, and when many in the world were colonial subjects. Our opportunity, and our duty, in the fourth industrial revolution is to make those technologies work for the many, not the few. In that context, I will today set out what the internet of things is, the benefits it brings, the concerns and the current state of regulation.
What is the internet of things? I was surprised to see that in the Prime Minister’s speech on the gov.uk website, the internet of things was in inverted commas. I am sure that the Minister is aware that IOT is not sci-fi, but a reality of our daily lives. I was the first Member of Parliament to mention the internet of things, in my Westminster Hall debate on machine-to-machine communication in June 2011, just a year after I entered Parliament. One of the Minister’s predecessors, the right hon. Member for Wantage (Mr Vaizey), responded, so I think he was the second MP to mention it.
I called that debate because my experience as a chartered electrical engineer and as Ofcom’s head of telecoms technology had brought home to me, even then, the opportunities and threats that the internet of things represented. At the time, Ericsson estimated that 50 billion things would be connected to the internet of things by 2020. In fact, that was a bit of an exaggeration, because we have about 7 billion. However, global spending on IOT is forecast to reach $745 billion by the end of this year, Ericsson now estimates that by 2023 we will have 31 billion things connected to the internet, and the Government’s own estimate is that there will be 420 million internet-connected devices in the UK within the next two years.
The internet of things is basically things connected to the internet—it does what it says on the tin, for once. That allows everyday objects to talk to each other and to people. In fact, the first internet-connected toaster was revealed in 1989. While there has been speculation for years about how the internet of things will change our lives, it is now that we are really beginning to see its full implications for how we live, work, play and do everything in between.
Smart homes and connected appliances are perhaps the most commonly understood applications. Smart meters mean that we can turn our heating on when we leave work, whatever time that is. A fridge can tell someone when they are out of milk. More poignantly, a child’s teddy bear could record their first words and share them with the whole family.
However, IOT is about much more than household gadgets and cuddly toys. Scaling up IOT will bring us smart cities, where bins can signal when they are full, parking spaces can tell us when they are empty, and traffic lights can tell an autonomous car how fast to drive, so that it never has to hit a red light. Every time I wait at a bus stop—despite the ridiculously high cost of bus travel in Newcastle, that is still quite often—I look forward to an IOT-enabled and truly integrated public transport system, which will mean buses stopping when and where people want them to, and not stopping if there is no one at a bus stop. That means a saving in fuel efficiency, and a saving in all our time.
IOT is also transforming industry. The fourth industrial revolution has at its heart smart factories, and intelligent and flexible automation, making manufacturing cheaper, quicker, more efficient, more personalised and more reliable. Indeed, the smart factory might be in someone’s home—3D printing plus IOT could equal home manufacturing.
I am an internet of things believer. I have studied it, lived it and effectively built bits of it all over the world. It has huge economic and social benefits, as well as environmental benefits, ranging from energy management to tracking endangered species. We cannot address climate change without the internet of things. It allows the monitoring of energy usage but also enables a smart grid. IOT can literally save the planet, which is just as well now that it accounts for 8% to 10% of European electricity consumption.
However, I hope that the Minister will agree that people, and not technology or things, must be at the heart of the internet of things revolution. An IOT that works for everyone requires action—action that this Government seem unwilling to take. IOT will be as pervasive as electricity, and found in every home and handbag. And, like electricity, IOT is an enabling technology, only the enabler is not electric current but data—people’s data—and right now we have no idea who owns that data.
Take personal health tech. A company called OrCam has developed discreet camera glasses for the visually impaired, which can read text and recognise people, while the L'Oréal UV sensor, which detects ultraviolet exposure, is small enough to be worn comfortably on someone’s fingernail. However, who owns and controls the data gleaned by these devices? I hope that the Minister can tell us that, and say why it is not the people who generate that data.
As companies bring more IOT devices to market, this is a pressing issue. Although the GDPR represented progress, it is already years out of date: it addresses privacy, not control; it barely takes account of artificial intelligence and algorithmic management; and it ignores completely the internet of things. The Information Commissioner’s responsibilities over IOT are unclear.
The more interconnected things are—which in itself is a good thing—the bigger the potential for cyber-attack, which is already a huge area of concern. In 2018 there was a 500% increase in the average size of a botnet attack. There are more than 7 billion IOT devices in circulation, and that number is only going to grow. Given that each IOT device is always on, it is possible to build and deploy large-scale attacks within minutes.
In 2017 the US Food and Drug Administration recalled almost half a million pacemakers due to fears that they were vulnerable to hacking, while a Chinese IOT firm recalled 4 million cameras for the same reason. November 2018 saw the first scaled botnet attack using smart TVs. Other household appliances can also be used not only to bring down internet platforms such as Spotify, Amazon and Twitter, as happened in 2016, but to take control of our homes or any networked utility. Back in 2010 an Iranian nuclear facility was targeted by a malicious computer worm, which led to the shutdown of multiple gas centrifuges, and in 2015 blackouts in Ukraine were caused by cyber-attacks. Although we call them “cyber-attacks”, they have very physical consequences. In 2017 the Federal Network Agency, the German communications regulator, told parents to destroy a talking doll called Cayla, because its smart technology can reveal personal data. A couple of years ago I wrote about the implications of internet of things security for sex toys, but today I will spare Members’ blushes.
The lack of security on IOT devices is not only a risk to the individual user; it threatens huge economic and social damage. Importantly, security for IOT devices does not just need to be built in at the start, even though that in itself takes time and money; it needs to be upgradeable over time as threats evolve. However, producers of IOT devices are simply not incentivised to consider security concerns, with global supply chains competing mainly on costs for devices that can be sold for only a few cents or even less. Of course, the lowest-cost device is, inevitably, the lowest-security device. This is one problem that the market cannot and will not solve on its own, which means that it is up to Governments to correct.
In his speech, the Prime Minister used quite lurid language on the issue of internet of things surveillance:
“But this technology could also be used to keep every citizen under round-the-clock surveillance. A future Alexa will pretend to take orders. But this Alexa will be watching you, clucking her tongue and stamping her foot”.
The Prime Minister shows both his lack of respect for women and his lack of understanding of technology in caricaturing it as a nagging housewife arguing with an unfaithful husband. That sort of gendered view is, sadly, far from uncommon. Technology is far too often the creation of well-off men and, unsurprisingly, it reproduces their biases and prejudices.
There is an important issue of surveillance to address, both in the private and public domain. The recent book by Shoshana Zuboff, “The Age of Surveillance Capitalism”, addresses the ways in which data is used not just to monitor us but to direct and control what we do. We see it already in the practices of Amazon, Sports Direct, Uber and Deliveroo, to name just a few, where the companies’ control of data can control work life.
Research by Defend Digital Me shows that the internet of things has an increased presence within our classrooms, from direct monitoring through biometrics to facial recognition and tracking technologies as part of a smart campus project, in some cases run by the Office for Students. Many of the applications that are marketed claim noble aims around improved health or scholastic performance, but they are rather less clear when it comes to consent. When we consider how the internet of things can be used to monitor children in compulsory education, how can the child or parent be said to consent if it is a generalised practice?
The Government have repeatedly ignored warnings on cyber, much less done anything to ensure that small businesses and citizens, as opposed to big businesses and national security agencies, are protected. There are no current regulations that require a security standard for internet of things devices. About 30 groups are developing security standards for the internet of things, but if we have 30 standards, we do not have a standard. Our public response needs to be as joined up as our networks, but it is not. Responsibility for cyber-security lies across several disconnected Government silos. The Home Office publishes cyber-security stats; the cyber-security strategy comes from the Cabinet Office, although it was launched with a speech by the then Chancellor; the Department for Digital, Culture, Media and Sport takes care of cyber-skills for young people; and the cyber-essentials scheme sits in the Department for Business, Energy and Industrial Strategy. Responsibility for cyber-security is defused across Government. There is a lack of leadership and, even worse, a lack of concern. The policies seem largely to ignore mobile devices and the internet of things.
At the same time, and for some years now, the Government have been encouraging us to take up smart meters, for example, without a regulatory framework to protect us from attack. Personally, if a device is called smart, I do not buy it, at least not without a one-hour technical interrogation, which few customer service agents can pass.
My hon. Friend is making a very important speech. I, too, have spent time reading the Zuboff book, and the more I read it, the more alarmed I became. Does she agree with me that the real issue is the one she started with: whose data is it? Without that being resolved, there is an inevitable drift towards big tech companies using it for profit. Why wouldn’t they? But it is our data, and on every one of these issues, if we could pin that down, it would completely disrupt their business model. That is why it is a tough thing to do, but it would ultimately resolve the issue.
My hon. Friend, who is a great champion of innovation and technology—coming from the constituency that he represents, it is appropriate—makes a critical point. I could not have put it better. Although this debate is about regulation of the internet of things, it is impossible to talk about protection and security in the internet of things without talking about the data that is its lifeblood: the flows of data that both drive and enable the internet of things. We are in a confused state about who owns and controls the data and how it can be shared. The Government, for example, had at the last count at least 80 different ways of sharing data with themselves. As long as that is the case, we cannot have real security or integrity within the internet of things.
Last year the Government finally took some action with their Secured by Design voluntary code of practice on the security of the internet of things, as well as guidance for consumers, which was later codified as ETSI TS 103 645. In May this year, the Government announced a consultation on the introduction of some mandatory legislation on labelling. For example, retailers would have to label internet-of-things products as complying with varying levels of the Secured by Design code. Labelling is necessary because the Government will not decide what is secure and make it mandatory—if everything were secure, it would not need to be labelled. We await the outcome of the consultation. However, there are at least five major issues, and many others besides.
First, the tone of the consultation is, “Regulation is very, very bad and stops innovation, so let’s just have as little as possible.” Secondly, there is no enforcement or sanction. Thirdly, while some mandatory requirements are proposed, they would simply be a declaration of adhering to standards. That approach puts a major emphasis on the consumer to understand these increasingly complex problems and does not account for the use of the devices in public spaces.
The fourth major concern is that the regulations deal only with consumer things. The clue is in the name: it is an internet of things. We need an architecture of standards and a regulatory framework that enables security and interoperability across the internet and also considers the lifeblood of the internet of things—data. Fifthly and finally, there are billions of insecure old-generation IOT devices already enmeshed in our digital infrastructure. The regulations do nothing to address them.
The Government need to recognise that technology is not something that happens to us; it is something that we actively participate in, or should do. That does not mean stifling innovation. Instead, it means using Government influence to look forward to the impact of technologies and to shape them for the public good. The Government must understand technologies in terms of social purpose, rather than just profit margins. That must be done with the tech sector, but the Government must recognise that it is their job to protect the interests of the people. During the first and second industrial revolutions, it was the trade unions, organised workers, the nascent Labour movement, feminists, abolitionists and former slaves who pushed law makers into putting legislation in place that would direct the use of technology to more egalitarian ends. I fear that it will be for a Labour Government to ensure that that is what happens here.
Technology can be used for good or ill. My hope is that intervening now to set up a framework for data and the IOT will mean that we do not face problems and resistance further down the line.
Last year, I was at CES, which is the largest computer electronics show in the world, in Las Vegas. An American start-up literally begged me to put in place security regulations for IOT devices, so that it could compete on a level playing field with the cheap but totally insecure exports from less reputable manufacturers. It is cheap and, frankly, lazy to set up a sort of binary choice between regulation and innovation. A clear regulatory framework and strong governance allows good companies that are making socially useful products to succeed without markets being flooded with poor quality and potentially dangerous products that threaten security.
I want to say a little on Labour’s plans as I understand them—I know that the shadow Minister, my right hon. Friend the Member for Birmingham, Hodge Hill (Liam Byrne), will set them out in more detail—and I want to put that in context. I am a technology evangelist. Before becoming an MP, I worked all over the world building out the networks that now form the internet. One of my proudest moments was when I rolled out the first global system for mobile communications network in Nigeria and saw how mobile communications could really make a positive difference to people’s lives. Fisherman in the delta could now know the market price in Lagos and could not be cheated out of the right price for their fish; pregnant women could phone for a doctor instead of having to send vital requests on foot, which took hours. The internet of things will bring more and better benefits.
I have also seen the flip side of new technology. When I worked for Ofcom, I was asked to report to the board on internet security in 2005. When I came back with stories of bot attacks, honey traps, distributed denial of service, white hat wizards, Trojans, worms, phishing and pharming, it was as if I was describing a war in a galaxy far, far away. More than 10 years on, however, those threats are very real. They are part of everyone’s daily lived experience. Online fraud is the most common crime in the country, with almost one in 10 people falling victim to computer misuse or one sort of fraud or another. The same may happen with the internet of things—in fact, to an even greater extent—and we must not allow that.
I talk about the internet of things for everyone, because I believe that technology can be democratising and enabling, but just as cyber-crime seemed so foreign only a decade ago, we do not yet fully understand the new risks posed by the internet of things. To fully realise its benefits, we need to be able to deal with the increasingly pervasive security threats it presents. To address them, we need regulation as well as action in other areas. For example, we need to invest properly in skills and adult learning to help people to become digitally literate citizens. Labour’s pledge to create a free truly universal national education service, the NHS for the innovation age, will help everyone to become part of an innovation nation in which everyone is a creator, not simply a user, of technology.
We also need the power of Government to address our creaking infrastructure, and close the productivity gap at the same time, by enabling businesses across the country to invest in the internet of things. Our national transformation fund will do what it says on the tin—transform our infrastructure to bring it up to OECD levels.
We need to address a critical part of the tech sector that I referred to earlier, which is a lack of diversity. Diversity is not an optional add-on; it is an economic imperative. It needs to be at the heart of economic and technological policy, because we cannot build a more prosperous economy without making use of everyone’s talents. We need a more comprehensive sector-wide approach to diversity, particularly in the tech sector. It is key that the creators of new applications for the internet of things come from diverse backgrounds, so we have technologies that work for all and make use of the full array of talent in our society.
Finally, an internet of things requires the right digital rights and responsibilities to exist across our nation. That is why Labour plans to introduce a bill of digital rights that will provide strong and easily understood protections for citizens and will give us all rights and control over our own data.
As I draw to the end of my comments, I want to make sure that the Minister understands the questions that I am asking, so I will list the ones to which I would like him to respond. First, as I have mentioned, who owns and controls the data flowing to and from internet of things devices? Why is it not the people who are generating the data? The Prime Minister said that data is the new oil, but we have seen what the corruption around the oil industry did to many developing economies. Our citizens deserve to be in control of their own data.
Secondly, what steps is the Minister taking to ensure that insecure internet of things devices cannot be sold? Thirdly, will the provisions of the online harms legislation, specifically the duty of care, apply to the internet of things? I asked his predecessor that question, but the answer was not clear. Fourthly, when the internet of things is combined with facial recognition to monitor people, whether in education or on our streets, what requirements are there on consent? Fifthly—this was raised by TechNorthWest—internet of things devices take data for one stated purpose. What prevents its being used for various others? How does consent work in that case? Is GDPR sufficient?
Sixthly, I believe that all our critical national infrastructure is connected to the internet of things. I have mentioned the blackouts in Ukraine and attacks on an Iranian power station. What regulation is there of the internet of things in critical national infrastructure?
Seventhly, what analysis has been made of how the Government should respond to the misuse of internet of things devices? What scenarios are being considered and what plans are in place?
Eighthly, for the purposes of internet of things regulation, what is the nature of the relationship between the Department for Digital, Culture, Media and Sport, the National Cyber Security Centre, the Cabinet Office and the Information Commissioner’s Office?
I expect the Minister to respond to the five criticisms of the current consultation.
How long do you think we’ve got?
We have an hour and a half, which will be more than adequate. I should perhaps have said that the Minister has a background in technology, as a tech correspondent, so I am sure that he has the answers to all the questions.
Loth as I am to interrupt the exam paper, which I am sure will come to an end soon, a practical application of the questions came up not long ago with the facial recognition monitoring of my constituents at King’s Cross station. I hope that the Minister will be able to explain how they can be protected in future.
That is another excellent intervention from my hon. Friend. I look forward to the Minister’s response about facial recognition technology and consent.
I have asked the Minister nine questions and here is the 10th and final one: can we have a comprehensive forward-looking review of digital rights and responsibilities to deliver a regulatory framework fit for the future, which encompasses data rights and delivers an internet of things security architecture in which citizens can have confidence?
I hope that the Minister noted that when US presidential candidate Elizabeth Warren talks of regulating the tech giants for the benefit of consumers Facebook trembles—so much that Mark Zuckerberg has promised to “go to the mat” and fight her over it. However, when the Prime Minister talks about “pink-eyed terminators” the world laughs. That matters, particularly as the Minister advocates a hard Brexit, after which we would not have the support of our European friends and colleagues in establishing internet of things regulation.
The internet of things could represent a more profound technological change than anything since electricity, as I have said. To make it work we need to understand the problems that it raises, and lay out a clear framework for technology companies to work in. However, to take advantage of the changes, we need a Government who understand the opportunities of the internet of things, and who work with industry to mitigate the threats. That is a question not primarily of technology but of standards, interoperability, protocols, control, industry co-operation, self-regulation, legislation and enforcement. If we get that right we can look forward not just to a future of the internet of things but to a prosperous future of innovation that works for all, and things that have yet to be thought of, the benefits of which will be shared by everyone.
I, too, look forward to hearing the Minister’s response to all those questions in a few minutes’ time. I congratulate my hon. Friend the Member for Newcastle upon Tyne Central (Chi Onwurah) on securing the debate, which covers some of the most challenging issues that society— indeed, humanity—will face over the coming years, many of which are rarely discussed in Parliament. Her speech was quite brilliant.
The internet of things is such a vast subject that it is difficult to know where to start, but I will restrict myself to the ethical questions that underlie the regulation issues that my hon. Friend spoke about, given the epochal technological challenges. In a general sense, many challenges that the country faces appear inversely related to our capacity as politicians to properly discuss them, let alone resolve them. Increasingly, liberal democracies appear unable to navigate the complexities of the modern world. One obvious example is the escalating authoritarianism across Europe and the globe—where is the political diagnosis and response to it, and where is the defence of liberal democracy? To give another example, do we really talk, post referendum, about the issues and feelings that ushered in the referendum, or are we preoccupied instead with the technical aspects of Brexit?
Maybe politics has lost its ethical grip and become too technocratic, and maybe today’s populism is a backlash against that managerialism. Maybe we require a different conversation that addresses moral and ethical questions about the lives that people wish to live. I realise that that point appears unrelated to questions of robotics, the internet of things and artificial intelligence, but I would argue that it is imperative to embed our discussion of those technological changes in a deeper conversation. I welcome this debate because maybe we can start that conversation—arguably the most profound conversation that confronts us as politicians and public policy makers in this country and across the planet.
Whether the forecasts are apocalyptic or utopian, no one doubts the significance of artificial intelligence and the internet of things. They have the potential to affect all aspects of policy, from education to the labour market, and from policing to health and social care. However, much of the current political thinking about artificial intelligence is reactive and geared simply towards ensuring that Britain is at the forefront of technological change—we might describe that as the utilitarian approach. Maybe we should begin instead by discussing what role technology should and should not play in our societies, our workplaces and our personal lives. That departure point would be different from the one that tends to dominate the utilitarian approach: instead of focusing simply on utility or economic benefit to Britain plc, it would focus on justice and how society should be organised.
Shrinking the political debate down to technical rather than ethical terms is especially dangerous in this area of technological change, owing to our lack of expertise in it—notwithstanding some notable exceptions, some of whom have just spoken. For example, being unable to evaluate the claims of developers or independently discern the likely outcomes and risks of their products means that politicians and the public are prone to being swayed by either apocalyptic or utopian technological narratives. Many technologists have bought into what has been termed technosolutionism: the idea that all problems that humanity faces can be solved using technology—even those that technology has caused.
I thank my hon. Friend for his excellent remarks, which cover the ethical debate about technology that we too rarely have about the internet of things. One example of the approach he describes—the idea that technology can solve all our problems—is the proposals for alternative arrangements on the island of Ireland, which I understand are being driven by blockchain and other technologies that the Government are not fully familiar with. That libertarian idea that technology is the answer to everything has driven our regulatory approach for too long, so he is right to say that we need experts on technology who can stand up for and consider its future applications from the point of view of society and citizens.
That is bang on. For many in silicon valley, that confidence in the potential of technology goes hand in hand with a widespread libertarianism. As the role of technology and profit margin expands, so the role of the state should contract.
My hon. Friend did not mention those who come at the issues from a transhumanist approach. Modern transhumanism asserts that technological change creates the opportunity to transcend the human condition and become transhuman, and that that is to be celebrated, while resistance is deemed nostalgic or parochial. Politicians now and in the future will have to defend a discernible human condition in these debates, which will be a huge challenge.
For example, what happens when transhumanist thinking informs the technologists? Nick Bostrom is the director both of Humanity+, an international transhumanist organisation, and the Future of Humanity Institute at Oxford University, which regularly produces policy recommendations for Government. The point is that politicians and policy makers need to avoid being captivated by the promise of technological progress without an appreciation of the philosophical assumptions that inform the thinking behind the policies being advocated by those with agendas. Consequently, philosophers such as Jürgen Habermas have argued that politicians and policy makers should maintain a “species ethic” when navigating this terrain. These are deep waters, yet such questions are not really addressed in modern political debate.
On a slightly more practical level, the potential risks of mismanaging artificial intelligence are phenomenal. The most obvious example is mass unemployment. It is not possible to pick up a newspaper without reading about the march of the robots and the end of work. Estimates of the proportion of jobs in the UK that could, over the next two decades, be replaced by artificial intelligence and related technologies range from some 22% to between 40% and 45%. There are a wide range of estimates—some of them quite dodgy—of future structural unemployment, and they point to a range of conflicting policy options, such as universal basic income versus full employment. That suggests a wider range of policy remedies, but we are not spending enough time scrutinising the assumptions and empirical data that underscore those policy debates. Maybe we should.
To give a further example, we have already seen data analytics being used malignly in targeted political campaigns, and that practice will become ever more sophisticated, at the expense of our democratic process. As has been mentioned, in the corporate world facial recognition software is now being trialled for the purpose of marketing, to detect the efficacy of an advert on the viewer by judging their facial expressions. Businesses now have the potential to reach into people’s lives in the way Orwell’s “1984” imagined for totalitarian regimes.
Similarly, we have seen the social media filter bubble effect on civic and social life. It feeds us information that aligns with our preconceived notions of the world, closing us off from any contradictory information. Perhaps in the future our children will ask why we as parents allowed them to be so unprotected against such technological power. Left unchallenged, future public debate will suffer from the ease with which fake news could be produced on an industrial scale, given that AI makes the processing and manipulating of all forms of digital data substantially easier and cheaper.
Our very knowledge of the world around us and notions of truth are at stake. That may seem melodramatic, but I do not think it is. The greatest threat to the established political parties, however, could come from the powerlessness and exclusion felt by many as they feel that decisions about them—from hiring, to policing, to insurance—are made by machines. In its evidence to the Lords inquiry into AI, Future Intelligence said that
“the most challenging point relating to AI and democracy is the lack of choice that is offered to the population at large about the adoption of technology. It is, to say the least, undemocratic”.
As wealth becomes increasingly concentrated in the hands of businesses that employ fewer and fewer humans, our society will be riven by inequality on a scale perhaps never before seen. Brexit pales by comparison.
My hon. Friend is making excellent points. Although my remarks on Brexit and technology were limited, I want to emphasise his point. If we agree that part of the Brexit vote was based on people’s sense of disconnect from Brussels and the corridors of power, how much greater will that sense of disconnect be when all decisions are made through technology that monitors but is not under the control of the people?
Exactly. These are essential issues for the democratic character of western market democracies. That takes us back to the question my hon. Friend asked the Minister about the Government’s proposed remedies and policies. As it stands, policy proposals to meet these challenges are phenomenally weak. For instance, they include developers undergoing training in ethics as part of their computer science degrees, companies ensuring that their workplaces are diverse, and individuals who are made redundant by AI, perhaps repeatedly, being able to train for a new career. As I mentioned earlier, universal basic income is one proposal floated to ensure that those who lose their jobs are not made destitute, but that would mean the state taking on a phenomenal welfare burden just at the time when fewer people were able to pay income tax. To make up the deficit, people such as Bill Gates have suggested a robot tax, but would we tax algorithms as well as robots? Trying to define a robot is a legal and regulatory nightmare.
Returning to the question of regulation, before we make good policy, perhaps we need to return to first principles, asking questions about the values we place on work, freedom, privacy, community and justice—in short, what we want our society to look like. From there, we can then discern the role that we wish to allocate to technology, rather than being seduced by the hype of novelty and processing power. We decide the ethical environment and responsibilities of technologists and their platforms, not vice versa. If we do not build policy on a well-defined vision of human flourishing, policy makers run the risk of slipping into techno- solutionism, thereby putting technological and economic progress above people, leaving them to become citizens of those corporations.
Alternatively, we could endorse a somewhat softer technological determinism and use policy only to manage what we euphemistically call “risk”, when what is really at stake is huge social issues: rising inequality, the accumulation of power in the hands of private companies and human dignity itself. Deeper political conversations are required about what constitutes a good life and a good society. That should inform our approach to regulation. We literally need to rethink human rights in a different way, in terms of the preservation of the species. Thanks to my hon. Friend the Member for Newcastle upon Tyne Central, we can start that conversation.
It is a pleasure to serve under your chairmanship, Mr Gapes. I congratulate my friend the hon. Member for Newcastle upon Tyne Central (Chi Onwurah), with whom I serve on the all-party parliamentary group for Africa, on securing this debate and being very fleet of foot in doing so. Of course, we were not supposed to be meeting this week, so goodness knows when she might have had time to secure the debate otherwise. It has been a pretty profound and comprehensive debate, and there is plenty for the Minister to respond to, so I do not want to take desperately long in reflecting as the Scottish National party spokesperson. However, given that we started with some debate about the industrial revolution, I remind Members that if they care to take a stroll through Glasgow Green, they will find the boulder that commemorates the spot where James Watt conceived of the condensing steam engine, and much has flown from there.
I thank the hon. Gentleman for giving way. I recognise that while I did acknowledge a debate between the north-east and the north-west of England as to whether they were the home of the industrial revolution, I failed to acknowledge Scotland’s claim, which is equal. I will only add that obviously Watt’s initial invention was perfected and made commercial as a steam engine in my constituency in Newcastle.
I think there is enough credit for it to be happily shared. It is a timely debate, not least in the context of the Prime Minister’s speech at the UN General Assembly. Both the hon. Lady and the hon. Member for Dagenham and Rainham (Jon Cruddas) have made comprehensive contributions in which there was much to agree with that does not necessarily need repeating.
I am not certain whether the SNP has an established view on transhumanism. We have a vision for the future of Scotland and our population, but whether that extends into the far future of the human race, I am not entirely sure. It is important that we have these opportunities to reflect on this kind of thing, and the idea of starting from first principles is important. A range of significant and exciting opportunities come with the internet of things, but it clearly raises challenges, too. It is already part of some people’s daily lives, perhaps without them even realising or with them already taking it for granted. I know several people who take for granted being able to control central heating from a remote location and switch it on when they are on their way home.
On the roll-out of automated and electric vehicles, I saw a report today on the first tests that will take place in London. The hon. Member for Newcastle upon Tyne Central (Chi Onwurah) spoke about her experience of the roll-out of such technology in Africa. I am aware of parts of Africa—Rwanda, for example—where drones are used to deliver medicine and medical devices. That all relies on the technology of the internet of things.
There are undoubted challenges, to which I will return, but I want to reflect briefly on the position in Scotland. Notwithstanding the challenges and the importance of getting regulation right—the United Kingdom Government and devolved Administrations need to co-operate in doing so—the Scottish Government welcome many of the opportunities presented by these technologies. Last year they announced a £6 million project to develop the internet of things across the country. To support businesses to develop new and innovative applications, IoT Scotland provides a wireless sensor network for applications and services to collect and send data from devices without the need for 3G, 4G or wi-fi. Examples include installing smart bins in local high streets that can indicate to local authorities when they require emptying; making the best use of bin lorries through the correct collection cycle, which in turns helps to reduce carbon emissions; and monitoring office environments to lower costs by saving energy. That three-year project includes investment from both the public and private sector, with the Scottish Government investing almost £2.7 million.
Some of that is already coming to fruition in Glasgow, which will become one of the first cities to offer that technology across the board, working in partnership with some private companies to provide the city with over 99% coverage via 22 different gateways installed across the city. Up in the far north in the highlands and islands, progress is being made in using internet of things technology to gather data from the council’s water systems, providing effective ways to monitor and control the risk of waterborne diseases.
Many positive examples of the technology are already being rolled out and working in people’s day-to-day lives. However, it is important that we consider the serious impacts that have been raised. The fact that the Government have consulted is welcome, but whenever the Government publish consultations we want to see the response and we want to know exactly what the next steps will be. I echo the calls for clarity around that.
We already see the challenges arising from data handling in the social media networks and the traditional internet, and these questions will only get bigger. Who controls access to data is a question not only because people can hack and misuse devices or control access and be physically disruptive, but because mass monitoring of data has led to attempts to influence human behaviour as we have seen in the growth of fake news online and fake consumer goods? That kind of manipulation is undoubtedly a real concern and it is important that this is all properly thought through and that we do not rush ahead. This is a global challenge that relies on international co-operation. Every debate in this place seems to touch on Brexit consequences. How will the Government make up for the withdrawal from international co-operation that Brexit represents? How will they re-establish such co-operation on these important issues?
We must also consider our own personal responsibilities. We are for ever being reminded in Parliament about the importance of cyber security and best practice in sharing passwords, devices and so on. That applies equally to any such systems that we and the wider population install for domestic use, whether in households, vehicles or elsewhere. Getting that message out to the public is hugely important. It is right that we have had an opportunity to consider these issues. How does the Minister intend to work with the devolved Administrations on these matters as they become a more and more fundamental part of our daily lives?
What a fantastic debate we have had this afternoon. I congratulate my hon. Friend the Member for Newcastle upon Tyne Central (Chi Onwurah) very warmly on securing it. I am extremely glad that she started with a brief account of the industrial revolution, which started in 1712 when the Newcomen steam engine was demonstrated at Dudley castle, a day that we commemorate every year on Black country day.
The debate that unfolded subsequently illustrated an important point. The steam engine was not perfected until James Watt joined Matthew Boulton at the Soho manufactory. It was 1789 before the first rotary steam engine was sold to a man called Peter Drinkwater, who created the first steam-powered textile factory and lit the spark on a textile revolution in Manchester, which was the beginning of Manchester’s claim. Peter Drinkwater’s factory manager was a man called Robert Owen, who went on to found New Lanark mill in Glasgow. It was 1825 before steam technology was incorporated into Locomotion No.1, which was set to work on the Stockton to Darlington railway. The point is that it was 113 years over which the steam revolution unfolded and began to transform every aspect of this country, including our economy.
The speech made by my hon. Friend the Member for Dagenham and Rainham (Jon Cruddas) was important in setting the wider stage and the bigger story, because the new technology required a revolution in law and regulation. Over the course of the 19th century there was not one factory Act but 22 different factory Acts and Bills, and over this century there will no doubt be just as many different attempts to reform, revise, regulate, legalise and make lawful or unlawful different aspects of the technology that we are debating here today. So my hon. Friend the Member for Dagenham and Rainham was right to say that what is needed from the Government is a plan for a just transition. We now understand what “just transition” means when it comes to climate change, but we need a plan for technology just as much, just as we need a plan for just transition given the new trade conflicts that are now ensuing. The rise of temperature, robots and conflicts will define our economy over the next 20 or 30 years, so we need not only just transition but just transitions, and at the moment we have nothing from the Government to tell us how that journey will be steered over the years to come.
As the Minister knows, because he was at the sharp end of these debates during the proceedings on the Data Protection Bill, which became the Data Protection Act 2018, our approach is rooted in a particular philosophy. Our inspiration is the work of Amartya Sen and the work that he set out first in “Development as Freedom”. Over the course of the revolution in this century, we must ask ourselves what capabilities we want every citizen in this country to have.
Adam Smith talked about how a man might need a linen shirt to go out in public. That was something that people needed in order to participate in civilised society at the time when Adam Smith was writing. These days the capabilities that people need will be different. We therefore have to ask ourselves what those capabilities are and how we turn them into rights. That is why, given the complexity and the regulation and re-regulation that is to come in this century, it would be wise now to set out a document of first principles. We believe that a Bill of digital rights will make the business of regulating far simpler over the next 50, 60, perhaps 113 years. Who knows what the life cycle of this debate might be?
We set out in the debate some of the rights that we think should feature in a charter. We set them out because we wanted to have a debate, and I am pleased to be able to have a bit of that debate this afternoon. I think that some of the issues are uncontested; I think we agree on equality of treatment and on the right to security. I also think we agree on the right of free expression, although we believe that we should incorporate lessons from Germany, which has pioneered the NetzDG legislation to take out hate speech online. I think we agree on equality of access, although, as my hon. Friend the Member for Newcastle upon Tyne Central said, ideas such as the national education service are important here, because of course they will transform rights to digital literacy. We believe in universal digital literacy; we believe that it is a fundamental right for the 21st century. We also believe in a right to privacy; I believe that is uncontested.
However, what is perhaps not agreed on is the kind of rights to algorithmic justice that my hon. Friend the Member for Cambridge (Daniel Zeichner) insisted on during the Committee stage of the Bill that became the Data Protection Act 2018. Crucially, we also believe that there should be some kind of right of ownership and control of data that is created through our use of technology. That was absolutely at the heart of the speech by my hon. Friend the Member for Newcastle upon Tyne Central. At some point, the Government will have to step up and provide some answers as to what they think about this issue. I hope that the Minister will begin that business of stepping up in about five minutes’ time.
These charters—these bills of rights—are meaningless without two further pieces of the puzzle. The first is an effective system of powerful regulation. We are now facing off against some of the biggest, wealthiest and most powerful companies on earth, yet the regulatory infrastructure that we have today would be described by Sidney Webb as a mish-mash: Ofcom; the Information Commissioner’s Office; the Competition and Markets Authority; the Payment Systems Regulator; the Financial Conduct Authority; the Advertising Standards Authority; and the Independent Press Standards Organisation. There is a slew of non-regulatory advisory bodies.
Something like 13 different advisers and regulators have some kind of bite in relation to what happens online. They all do an important job and they are all staffed by excellent people. My hon. Friend used to work for one of them—indeed, she helped to set it up—so she knows very well how long it takes to set up a regulator or to merge regulators. Consequently, we are not calling for some kind of bonfire of the quangos here. What we are asking for is for some proper thought about how those 13 different regulators and advisory bodies might number something closer to one—not one, but not 13, either. We believe that we will have to start bringing these regulators together, if we are to concentrate the firepower that is needed to take on the biggest and most complicated regulatory challenge in human history.
I thank my right hon. Friend for giving way and for the excellent comments that he is making, which have raised some of the key issues we face. In 2002-03, the then Labour Government held a wide-ranging review of the communications sector and the many regulators that existed for television, for radio and for spectrum, etc. Then, in concert with the industry sector, civil society and so on, they developed a plan to bring them all together in Ofcom. That process took time, but it also built consensus and agreement about what the key challenges were. In addition, it enabled the right technical talent to come together. Could that not be a model for developing the right regulatory approach to these challenges?
It absolutely could and it absolutely should, because the truth is that that work will have to happen at some point, so all we are arguing about is when and how. It is inconceivable that we will have 13— now 14—different regulators and advisers; the Data Protection Act 2018 brought in a new organisation, or institution, which is the Centre for Data Ethics and Innovation. We cannot keep multiplying these regulators and allowing them to proliferate.
Equally, however, we cannot take the approach that was taken back in 2010-11, when the Government sought to wipe out many different quangos. They had their bonfire of the quangos and it sounded excellent in the pages of The Daily Mail. Of course, in practical terms, it was a bureaucratic disaster and many of the efforts to abolish organisations that were doing an important job had to be reversed. It was a complete waste of time, energy and money, at a time when civil service bandwidth was under tremendous pressure. So what we are asking for is a road map—a proper one—with a timetable to be debated, in order to bring together the regulatory firepower that is needed to hold to account the biggest companies on Earth.
There is a final piece of the puzzle. We have discussed rights and regulators; the third piece of the puzzle is redress. If we do not have accessible forms of redress, this debate is a waste of time. Yesterday, in the Court of Appeal, the three senior judges handed down a challenge to the Minister by saying that the process that we suggested during the passage of the Data Protection Act 2018 for class action should be implemented. My key question to the Minister is whether he will introduce what is required under that 2018 Act, which is the review that was promised of opt-out class actions, given the advice that was handed down to him in the judgment on Lloyd v. Google in the Court of Appeal yesterday.
For those who have not seen the case, it began in November 2017 and was brought by Mr Richard Lloyd on behalf of millions of iPhone users who, he alleges, had their personal data taken between 2011 and 2012. The Court of Appeal basically ruled that that representative action could now proceed. It found that personal data has economic value—the principle at the heart of the contribution of my hon. Friend the Member for Newcastle upon Tyne Central; that a violation of that right to privacy was a damage; that individuals do not need to demonstrate pecuniary loss and distress; that a loss of control of personal data is the same loss and the same interest, as if there had been economic loss or economic damage; and finally, and perhaps most importantly for the Minister, that representative actions, in which people opt out rather than opt in, are effectively the only way in which such claims could be pursued.
The judges have underlined the argument that we underlined a number of months ago in the Committee that considered the Data Protection Bill and which is at the core of this debate: if we do not have redress, those rights, even the rights that we have enshrined in the Act, are meaningless. We are talking about humble individuals taking on some of the biggest firms on earth. The only way those rights can be made a reality is if we allow effective remedies in court. We have now heard from the judges that those effective remedies are most likely to be class actions. I look forward to the Minister confirming that he will introduce that review forthwith, so that we can at least begin to make some progress on the critical issues that my hon. Friend the Member for Newcastle upon Tyne Central has highlighted to the Chamber.
I begin by saying that I will not intrude on the private grief of where the industrial revolution began; I am certain that it did not begin in Skegness, so I have no dog in the fight. I congratulate the hon. Member for Newcastle upon Tyne Central (Chi Onwurah) on securing the debate. I well remember the work that we did together in the parliamentary internet, communications and technology forum—PICTFOR—and in other forums.
The hon. Lady says that she is a tech evangelist, and so am I. Although I regret the tone of some of her comments about some aspects of the Government’s policy, I think we agree that there is not a huge amount of partisan disagreement on many of the issues. We want to get it right. The right hon. Member for Birmingham, Hodge Hill (Liam Byrne) and I also agree on a huge number of issues, as he said, particularly around discrimination and what we should do to ensure that the well-known principles that exist in the offline world persist online. I hesitate to use the slogan, but we too want technology to work for the many, not the few.
I will begin by seeking to answer some of the questions of the hon. Member for Newcastle upon Tyne Central, which might be a novel approach, although I am sure she will not be satisfied with all the answers. In many ways, as she identified, this is a debate about data, not the internet of things. On the principle of who owns the data, the general data protection regulation applies to data controllers in exactly the same way whether they are processing data that derives from the internet of things or anywhere else, so the principles that we all subscribe to, of the consumer owning their data, should persist. That is a hugely important starting point, and we should acknowledge that there is agreement on it. The hon. Lady frowns as if she disagrees, so I invite her to intervene.
I thank the Minister for the tone of his opening comments. It is certainly true that there are many areas on which we agree. The reason for my frowning is the idea that the GDPR recognises the right of ownership of consumers or citizens. The fact that there is a data controller who is not the citizen or consumer suggests that it does not. As I have said, the GDPR is progress, but issues of ownership and control are still far from clear. My right hon. Friend the Member for Birmingham, Hodge Hill (Liam Byrne) made some excellent points in this area.
The hon. Lady pre-empts my next point: all of this is predicated on consent. The consumer has to understand that they are giving up their data for a particular purpose and a particular benefit. As the hon. Member for Dagenham and Rainham (Jon Cruddas) said in what was a fascinating speech—albeit one where I wondered if I had at times transcended, if not humanity, at least this debate—these are fundamental issues that have effects far beyond what we might think of in an arcane debate about the ownership of data. I commend the approach that says we are dealing with issues that go far beyond a debate about technology, which will have an impact on huge aspects of humanity itself, whether we get them right or wrong. That is why it is important to consider them in that wider way.
The hon. Lady was right to point out that, in some ways, the internet of things represents a whole new chapter of how technology is becoming more common in our homes and making our lives easier and more enjoyable, but potentially also more fraught with decisions that we need to be aware we are making. I will trump the hon. Lady’s numbers: Statista says that by 2025, there will be 75 billion internet-connected devices worldwide—I am sure other analysts are available to provide even higher numbers. In our estimates, that translate to some 15 devices per household by next year. The internet of things is very real; it is already with us.
Before the Minister moves on, I just want to clarify one point. Is it his position to accept that data that is generated as user data does have an economic value, but that it is basically fine for the individual to surrender that economic value through the way in which they consent to use a service?
I feel like the right hon. Gentleman is going to accuse me of wilfully misunderstanding his question, but it is obviously fine for an individual to choose what they do with their own data. If that involves, as he puts it, surrendering the data for a particular purpose, that is their decision to make. I am not sure that that is quite the question he was asking. The point about consent being absolutely in the hands of the user is the most important one to make. That is why the cyber-security of the products that the hon. Lady referred to is so hugely important, in many ways; it is why we have put so much effort into delivering the code of practice for consumer IOT security.
The hon. Lady mentioned the sale of potentially insecure devices, which is one of the key planks that we are seeking to address. People want to have implicit trust in their devices and they need to have confidence in how their data is being used, not just when they first purchase that device but into the future as well.
The Minister is helpfully helping me join some dots. Why does he think that it is right for the Government to intervene to ensure that the consumer has particular cyber-security protections but not to ensure that the consumer enjoys any particular economic protections, for example around the value that is created through third-party use of their data?
It is obviously about a balance between different situations. The Government, in a host of ways, provide a degree of opportunity for the kind of protection that the right hon. Gentleman seeks. In other fields there are already opportunities for redress in extreme circumstances. In some ways he and the hon. Member for Newcastle upon Tyne Central are asking for greater coherence in this space, and others. It is precisely for that reason that my Department is developing the strategies that they both referred to. On the one hand he seems to attack the bonfire of the quangos, but on the other he seemed to want fewer regulators, so I am almost reduced to asking what his favourite number is.
My point is simply that according to the Chancellor of the Exchequer I will soon not be allowed to sell my labour for less than £10.50 an hour. The Government have put a floor on the economic freedom that I enjoy, and that is giving me a degree of economic protection. Why does not the same principle apply to the way in which my data as opposed to my labour is exploited?
That is a philosophically interesting question but it is also obvious that at the moment data is readily given up in exchange for a service. I am not sure whether the right hon. Gentleman would therefore seek to put a value on the service and say, “That service, whether offered by Facebook or whoever, should not be worth less than a certain amount.” That seems to be the logical conclusion of his argument, which is why I say it is perhaps more an interesting philosophical question than a practical one.
Will the Minister give way?
I am conscious of the time, but this is all very interesting, so I am happy to give way.
It is more than interesting. It is critical. Is the Minister assured that people are involved in a free exchange, and that there is transparency—that they understand the terms and conditions of all the things that capture data on their devices? I am certainly not. I think most people who look at it are convinced that people do not know, so they are not getting the economic benefit of that behavioural data.
Essentially I agree with the hon. Gentleman that it is obvious that not everyone reads the terms and conditions of every single thing they have signed up to for any website; but it seems to me that Government’s role in this space is not to stop people making those decisions. It is to make sure that people have a better understanding of the decisions they make, and that they trust the companies that are doing whatever it may be with their data. That obviously requires us to put certain constraints on the behaviour of companies, as we do in every other circumstance. However—and I do not think the hon. Gentleman is suggesting this—it should surely not be for us to say that people should not be allowed to make certain decisions. I think that on the Government side of the House we would be keen to free people up to make whatever decisions they reasonably want to make.
The Minister is being incredibly generous and this is the last time I shall intervene. To round out the picture that my hon. Friend the Member for Cambridge (Daniel Zeichner) is presenting, network effects mean, obviously, that in social media land we have monopolies—or, if not monopolies, certainly oligopolies. It has long been an established principle of consumer welfare protection that there should therefore be some kind of price protection. In a debate about how we protect and enhance the economic welfare of the citizen if we do not recognise a defined value for their data—which they are not freely surrendering into a free market, but giving over to a monopoly—surely the quid pro quo is some kind of price regulation on the other side. The Minister cannot have it both ways.
The right hon. Gentleman raises a lot of points in one short paragraph. I understand what he accuses me of seeking, when he speaks of having it both ways. Actually the services that are offered digitally, ostensibly free, are different from services in a physical world where we might talk about the kind of monopoly that he has mentioned. In that sense, all he is doing is underlining why we need to get things right, in a way where the digital challenges are understood, without reinventing the wheel and pretending that all online challenges are necessarily different from those in the physical world. It is an emerging picture, which is why I refer back to the technology innovation strategy that we published in June 2019 and that includes new measures, such as the Spark procurement programme, to enable Government and the wider public sector to benefit from new digital technologies and the service that can be provided by stimulating the UK’s world-leading tech sector. It is also why we set up the Centre for Data Ethics and Innovation, which will allow us to consider how we might best benefit from those opportunities and ensure that we seek not to design in the kind of prejudices that the hon. Member for Newcastle upon Tyne Central mentioned. One of its first papers is on smart speakers and voice assistants and on how industry and Government can work together to ensure that the products do what they are supposed to and that users consent to them.
We should also be mindful that the 75 billion devices, or however many there turn out to be, will have a physical environmental impact. I am therefore pleased that as part of its resources and waste strategy, the Department for Environment, Food and Rural Affairs has committed to updating the existing guidance for local authorities on managing the collection of smart items and similar electricals. That might sound like a minor point, but it is probably less minor than others.
The hon. Lady mentioned the Prime Minister’s speech at the United Nations General Assembly. I am not delivering the rhetorical flourishes that he delivered late at night at the UN, but it is important to say that he made that speech in that location because this country is already a world leader in this area in so many ways. It is right that our Prime Minister is addressing these issues and the legitimate public concern.
It is also right that, as several hon. Members have mentioned, when we seek to regulate in this area and on online harms, we in this country and across the parties should be proud that the UK is a liberal democracy that seeks to lead the way. We have an opportunity to shape a global debate, as my Opposition counterpart, the right hon. Member for Birmingham, Hodge Hill, observed.
In some ways, the greatest thing we can do is use Britain’s status in this area and on the world stage to try to develop global standards. The hon. Member for Newcastle upon Tyne Central mentioned those of the ETSI, which in its way is world-leading: it seeks to produce standards that can be replicated or mirrored globally, addressing some of the coherence that risks arising in the area. She says that we are not providing leadership and quotes the Prime Minister’s speech, but I say that his speech demonstrates the existing status of Britain’s leadership in the area already. If I am being kind to her, although we disagree on several minor issues, I should say that she too would agree that Britain has a huge opportunity to capitalise on its place in the world on this issue.
In June, we published a White Paper, “Regulation for the Fourth Industrial Revolution”—we are sticking to that number, although I understand that there is a dispute over whether it is correct. It confirms that the Government will establish the regulatory horizons council to identify the implications of precisely the sort of technological innovation that the hon. Lady spoke about, and to advise the Government on regulatory reform so that we can take exactly the kind of steps that she highlights.
In that process, security should not be an afterthought; it has to be embedded. Thus far, we have taken the approach of working with industry, and industry is now saying to Government—the hon. Lady will have heard these calls as well—that greater clarity, particularly in regulation, will help consumers and the industry itself. Many of the internet-connected devices that are currently on the market still lack even the most basic cyber-security provisions. Some 90% of 331 manufacturers that supply the UK market and that were reviewed in 2018 did not use a comprehensive vulnerability disclosure programme up to the level that we would expect; I think that hon. Members on all sides would agree that that is unacceptable. Organisations have a duty of care to their customers, to help make sure that they can access and use their internet-connected products safely.
Although Government have previously encouraged industry to adopt a voluntary approach, it is now clear that decisive action is needed to ensure that stronger cyber-security is built into these products by design. That is why we launched our consultation on secure consumer IOT in May. That consultation built on the extensive work to which I have referred. It allows us to talk about minimum security principles for connected devices, which my Department elaborated on in the document published last year. Our focus will be on ensuring that there is a baseline of cyber-security built into all consumer IOT products by design, to eliminate the most harmful practices.
These are, I freely admit, low-hanging fruit. We wish we did not have to tackle issues such as forbidding the use of universal default passwords, ensuring that manufacturers provide a contact point for security researchers, and making sure that consumers are informed at the point of sale of the minimum length of time for which security updates are provided for their device. Those measures address some of the issues raised by the hon. Member for Newcastle upon Tyne Central, and we would like to go further in due course. We will respond on what that will look like as soon as possible after the consultation.
We are advocating a staged approach to enforcing those principles through regulation. Obviously, there is always a balance to be struck between regulation and legislation, and in this case I think it will be a bit of both. We will publish the formal response to our consultation on the regulatory approach later this year, but we are mindful of the urgency of this work. Our approach must keep pace with the technological change identified by the hon. Lady. We have said that we will review the code of practice every two years. The development of the code of practice may not sound exciting, but as the hon. Lady acknowledged, and as the hon. Member for Dagenham and Rainham said, these things are hugely far reaching, even if they do not sound as exciting as some people might wish, because then they would attract the attention they perhaps deserve.
There is major business support for our approach, including from the signatories to the cyber-security tech accord. I always hesitate to say “major business support”, because businesses will not always necessarily greet with enthusiasm the actions of a sensible regulator. Some would say that this is a sign of success. We will develop the strategy, but ultimately the security of the internet of things is a global challenge and it requires a global effort to get it right and to shape those norms.
In February 2019 we worked closely with international standards bodies and the National Cyber Security Centre to make sure that we publish the ETSI standard to which the hon. Lady referred, though without the complementary tone it deserves. None the less, I understand her point.
We do not think it is right to expect all users of all internet-connected devices to become cyber-security experts, and we recognise the need to take from them the burden of differentiating between good and bad. That is why we have been clear with industry what good practices will look like, and we wish to support manufacturers of all sizes to embed them and to support retailers to make sure that they are obvious.
I will give way to the hon. Lady, but she does not have long.
I thank the Minister for giving way. In the absence of any time to sum up, I want to thank him for his comments and to confirm that I will write to him with my list of questions so that he can answer them in full. Will the regulatory horizons council cover all regulation with regard to technology or only that relating to manufacturing, and does he agree that this is about not only consumer data but citizen data, because it relates to Government as well?
I absolutely agree with the hon. Lady’s second point. The council will, of course, be wide ranging. I look forward to answering her comprehensive list of questions, and I will be grateful to Hansard for providing clarity on them.
Finally, in response to the intervention from the hon. Member for Cambridge, this Government do not think there is a choice between innovation and security. We have to make those two complement each other. That is at the core of our strategy and will continue to be so, and I would hope that we can move forward together with the cross-party consensus to which the hon. Member for Newcastle upon Tyne Central alluded.
Question put and agreed to.
That this House has considered regulating the internet of things.