Dame Chi Onwurah
MP for Newcastle upon Tyne Central and West · Labour · United Kingdom
“An extraordinary debate is going on right now inside and outside AI companies about whether the possibility of AI destroying humanity is more or less than 10%. The European Union is moving ahead with a comprehensive AI regulatory framework, but the UK continues to rely on existing regulation.”
“The Pope also highlighted how the billions of online digital twins constitute an unprecedented concentration of power in the hands of a small number of men. Among the many consequences of the 40 years of neoliberalism repeatedly called out by the Prime Minister is a libertarian attitude to technology.”
“But this stealth digital twinning violates the integrity, uniqueness and very personhood of our constituents and of all of us. Digital twins can take many forms, from content creation algorithms and deepfakes to chatbots that reflect aspects of our personalities back at us. It is particularly worrying when children are the target.”
“The automated version of our kids will grow with them, using the power of AI to target advertising and products at them, and worse. The Science, Innovation and Technology Committee has heard about some of the tragic consequences of online grooming by algorithms and chatbots—a vulnerable boy persuaded to kill himself; a vulnerable girl fed…”
“In the arts, entertainment and tech industries, many performers are agreeing to the creation and use of digital replicas as part of their work—think of ABBA Voyage. But performers increasingly encounter unauthorised digital replicas of themselves, which pose a threat to their career, livelihood and reputation.”
“Since then, deepfakes have proliferated. The hon. Member for Mid Norfolk (George Freeman) was shown crossing the Floor in Parliament to join Reform, to his constituents’ consternation and his own—it was a fake. Then there were the horrendous photos of naked women and girls that Elon Musk’s AI created on demand.”
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“Two weeks ago, I held a business roundtable in Newcastle and I was struck by how hard so many businesses are working to do the right thing, investing thousands in covid security, keeping their customers safe, keeping their employees safe and protecting jobs. I really want to urge the Government to work with local authorities, to work with Newcastle City Council, to communicate effectively with businesses that feel betrayed and to ensure that the support is there for businesses as well as a plan that they can follow, but also to make sure that no one is excluded. We have seen mass unemployment in Newcastle under a previous Conservative Government. If our viable sectors—and our sectors are viable—and our viable jobs are destroyed during this pandemic, it will be another failure of a Conservative Government.”
“Instead, we find today that only 60% of Test and Trace contacts are reached by the £10 billion Serco test and trace. We should be in a position where we know where the disease is, so that while coronavirus remains a deadly threat, we feel confident that we know where it is and how to avoid it. In Newcastle, we are battling to stay in tier 2, and I urge everyone to follow the coronavirus measures—the security measures—but I also say that without a proper track and trace, we are working blind, and the failure to control the disease is a failure of the Government and not my constituents. Finally, I want to talk about jobs and the re-emergence of mass unemployment on Tyneside, which would be another failure of this Government.”
“As Allyson Pollock, professor of public health at Newcastle University, said in April, “You need people on old-fashioned things like telephones or going door to door and they need to be local teams because they need to understand the local communities.” The fact is that without the Government’s Health and Social Care Act 2012, which led to the decimation of public health disease control and both its centralisation and fragmentation; without 10 years of austerity, which slashed the capacity of the state and our public services and drove up inequality, on which the virus feeds; without a Secretary of State who put his faith in technology, when, as an engineer, I know that it is only ever people who are the solution; without a Prime Minister who is scared of difficult decisions and unable to grasp detail; and without a Government steeped in the ideology of the free market knows best, we could be in that world.”
“I imagine another parallel universe—one where the Government got a grip on the virus back in March and did not let go, and where the Secretary of State did not decide to stop tracking community infections in March but instead took up the offer of local environmental health officers and gave local authority public health teams, such as the one in Newcastle led by the excellent Eugene Milne, the responsibility and resources to set up local community tracking and tracing.”
“Sometimes it feels like we are living in a parallel dimension. When we think of our lives a year ago, it feels like another galaxy far, far away. For many of my constituents —particularly those isolating on their own—it is the impression of being stuck in a parallel life, subject to confusing and inconsistent communications, battling alone through a long tunnel with no light at the end that is so dispiriting, undermining mental wellbeing and the success of public health measures. That is why we need a circuit breaker now and a road map to control the virus.”
“Finally, I was unable to find an impact assessment. Although I welcome the Minister’s words, have the Government carried out an impact assessment on the effects of these changes on UK firms, job and charities? If not, will they do so? To conclude, we support bringing enforcement powers against EEA companies into line with those for UK businesses. This will ensure that UK companies do not suffer disproportionately from EU rule of origin laws. However, the Government should more effectively set out how they intend to maintain an open but properly regulated market in information services, both within the UK and between the UK and the European Union. I am very concerned that the Government seem to be working without an impact assessment in this area. I thank the Minister in advance for his answers to my questions.”
“In addition, it is estimated that a quarter of all donations to TV charity events, such as Red Nose Day or Children In Need, came from premium rate services. Also, the PSA has stated that there is considerable potential for further growth for the charity sector. Charity sector fundraising has been adversely hit by covid-19, so I would like the Minister to provide, if he can, assurances that there will be no potentially negative impact on UK charities and jobs from firms seeking to relocate within the EEA to benefit from country of origin regulations. Also, will he say how many UK-based firms currently provide these services to the EEA and how many EEA-based firms provide services that are accessible in the UK, so that we can get an idea of the size of the market that this measure will have an impact on?”
“If the European economic area rules change for UK companies providing premium services in member states, does he anticipate that UK law changes will reflect those changes? If not, how will the Government avoid divergence, creating increasing regulatory burdens in the future? UK businesses must be protected—I am sure the Minister agrees—and they need to see some long-term thinking on this really important issue. Premium rate services play an important role in the UK economy, and I specifically emphasise their role in supporting UK charities. In 2018, the Phone-paid Services Authority found that the amount donated by typically generous UK citizens to UK charities by text messages grew by 30%; we might not have anticipated that, given that the text message is not the latest technology.”
“My concern is that firms will now feel that they have to research every regulatory requirement in every member state in which their services are accessible. Will the Minister cite the evidence on which he based his assessment? How are companies are being communicated with, so that they understand that the change, under which they are now subject to regulations in each of the EU countries in which they operate, will not put a burden on them? That burden could simply be researching lawyers’ fees in order that they feel confident to continue to operate, for example. Will all UK firms now have to work to 26 changing legislative agendas in practice? The Minister said that the regulatory regimes were similar, but for how long will that continue?”
“I remind the Minister that the powers that he referred to give Ofcom the power to take enforcement action against those who persistently misuse the electronic communications network. Persistent misuse is defined as “using a network or service in ways which cause or are likely to cause someone else, especially consumers, to suffer harm.” We can all agree that there are many, many users of networks—Facebook in particular—that allow harm to be caused to consumers, yet we still do not have effective regulatory oversight. Returning to the specifics, the SI raises some questions for UK firms. Could the Minister elaborate a little on his reasons for believing that there will be “little or no”—I believe those were his words—implications for UK companies that provide services in the EEA? Specifically, what is his view based on?”
“It is worthwhile remembering that the regulatory arrangements for premium rate services followed a self- and co-regulatory approach, until the celebrated “Richard and Judy” quiz “You Say We Pay” scandal of 2007, when I was working as head of telecoms technology at Ofcom. I remember well the public concern over the way in which premium rate services exploited consumers with unclear numbering systems and charges. At the time, the demand for regulation was criticised by some at the time as stifling innovation, but regulation was eventually put on a statutory footing to protect consumers. It is unfortunate that mobile users still experience many harms that have no regulatory oversight. I do hope the Minister might say a word about when we can expect the long-awaited online harms White Paper to come before the House.”
“This would give EEA-based information society services preferential market access, with no reciprocity from the EEA for UK businesses. The SI addresses this issue by removing that competitive disadvantage for UK-based companies. I was pleased to hear the Minister set out that there would be little or no change for UK businesses. With so many businesses currently awaiting some kind of clarity on our trading arrangements with the EU, I know that they will appreciate that. I am also pleased that this SI effectively recognises the importance of regulatory purchase in protecting our citizens from communications technology harm. As I said, Mr Gray, I previously worked for Ofcom.”
“Article 3 of the directive—the internal market clause—provides that firms supplying online services are subject to the law of the member state in which they are established, not the law of the member state where the service is accessible. This is the country of origin principle. As things stand, on 1 January 2021 at the end of the transition period, under the withdrawal agreement signed by this Government, UK businesses will no longer benefit from the country of origin principle when operating in the EEA and will therefore be subject to local regulations. The direct effect of retaining the country of origin benefits for EEA members in UK law would be that EEA businesses would continue to be exempt from UK rules, while the same benefits are not afforded to businesses operating in the EEA.”
“I myself have been on the end of a text messaging scam and had to complain to Ofcom in order to get it resolved. I put on record my thanks to Ofcom and the Phone-paid Services Authority for their continuing hard work. I am pleased that the this SI will give power to UK regulatory authority bodies to tackle key issues. As you may have concluded from that, Mr Gray, we do not oppose the SI, but we do have some concerns and some questions. As the Minister has set out, the SI allows us to regulate services in the UK, bringing enforcement powers against EEA companies into line with UK companies. Currently, as we have heard, the country of origin principle is in force in the EEA.”
“Research commissioned by mobile insight specialists Mobilesquared found that in 2017, premium rate services contributed more than £700 million to the UK economy, with more than 22 million people using UK services. However, as with every sector, there is risk; nearly 200,000 people a year suffer from text message scams, ITV faced a £70 million fine after phone-in competition winners were cheated out of millions, and we have all seen the regular news reports of children running up thousands in costs to their parents’ credit cards on mobile games. That is why it is so important that we get regulation, oversight and governance in this area right, providing consumers with the protections and confidence they need and good businesses with the regulatory environment to thrive.”
“It is a pleasure to serve under your chairmanship, Mr Gray. Like the Minister, I congratulate colleagues on being here and our team in particular, which is strong in knowledge, as we shall see. I must declare an interest inasmuch as I was tangentially involved in the regulation of the premium rate industry when I worked as head of telecoms technology for Ofcom before entering Parliament, so I may be going into a little bit more detail than members of the Committee would expect with regard to this statutory instrument. As the Minister told us, the premium rate industry in the UK incorporates a range of services, from simple directory inquiries and 087 business information lines to innovative mobile games, competitions, charity giving and chat services. It is a diverse and complicated sector.”
“I do not mean to dwell on “Richard and Judy” for too long in this Committee. To clarify, because of the way in which the regulatory regime was set up, I did not actually adjudicate on it, but we did develop the recommendations that led to stronger regulation of premium rates.”
“Their sign was “I am a man” because they were always called “boy”. We may not be called “boy” now, but racism in the workplace remains a barrier to the success of so many. Explicit racial discrimination may be illegal, but implicit stereotyping, exclusion and the burden of being the only black person in the room forms the ceiling of achievement for so many. The impact of workplace discrimination has been highlighted by the pandemic. Covid feeds on inequality, but I am angry that six months into this pandemic, all we seem to know is that black and minority ethnic people are two to three times more likely to die, not why, where or when. Does the Government Equalities Office have no data analysts?”
“Let me give just one example. My constituent Miriam Mafemba came to England 21 years ago from Zimbabwe, where she faced harassment because of her trade union activism. Here, she studied nursing and now works on the frontline against covid. As an active Unison member, she fights for better conditions for all, seeking to address the snowy white peaks that unfortunately remain in our beloved NHS. Miriam, and all those fighting to improve working lives, represents the future of Newcastle. I praise the work of trade unions such as Unison and all who seek to improve the working conditions of their black members. When Martin Luther King was assassinated, he was in Memphis supporting American Federation of State, County and Municipal Employees union sanitation workers in their struggle to be recognised as key workers.”
“I want in particular to thank historian and fellow Geordie David Olusoga for celebrating the long history of black Britain, often in the face of virulent racism. That is why Black History Month matters. Yes, there is justice in telling the stories of those whom history has overlooked; there is also power in sharing the diversity of achievement that is our history. My own achievement of being Newcastle’s first black MP is put into context; I am not an outlier, but I stand on the shoulders of the many who go before me in our shared past. So yes, I want black history taught in our schools. I want young girls and boys of each and every ethnicity to learn British history, and I want them to know that Geordie Africanus has a long and exciting history and future in our region. The stories of black lives now need to be celebrated.”
“I remember as a child being inspired by the words of Martin Luther King, but I did not know that he had come to Newcastle University, that it was the only non-American university to honour him in his lifetime and that he made an amazing speech accepting that honour—a call to arms and international solidarity in the fight against racism. That speech is online and remains relevant today. I did not know that Frederick Douglass, the American campaigner and abolitionist and the most famous black person of his time, lived and lectured in Newcastle in the 1840s. Indeed, it is sad to think that, given the lack of diversity in academia now, Newcastle may have had a higher proportion of BAME lecturers then than it does today. I never learned that African soldiers were garrisoned on Hadrian’s wall.”
“George Floyd is murdered agonisingly over nine long minutes in Minneapolis, and in Newcastle 5,000 people of all ages, races and backgrounds join an online protest seeking real change. Racism is global, and our response must be. Let me start by saying why Black History Month matters so much to me personally. I grew up in Newcastle in the ’70s. I went to fantastic local schools, where I learned the history of our great region, and I was inspired by local heroes such as Stephenson and Parsons to become an engineer, but I learned nothing of black history. I would have been hard put to name a dozen famous black people outside music or sports. My knowledge of black achievement was limited to those two sectors and a few walk-on parts in the great histories of nations, generally as hapless victims or stereotypical villains.”
“I look forward to a day when parents will explain racism to their children in the same way that they now explain hanging, drawing and quartering: as a barbaric practice of our past. Black voices will be celebrated in the story of the ending of racism. For too long, history has been written by the victors. We want a world in which success is open to all, and Black History Month can help to achieve that by remembering all our history in colour and making racism history.”
“As someone who was on the national executive of the anti-apartheid movement for many years, I often think about why that international movement was so successful. Certainly, we protested in huge numbers all over the world—and certainly we had the best music—but we also made organisations, companies, politicians and countries change. We boycotted, we voted, we made apartheid South Africa a pariah state. We have to do the same thing for racism. We have to make it unacceptable. Do not buy its products, do not vote for its advocates, do not fund its perpetrators and do not click on its content—and, yes, I mean Facebook, YouTube, Twitter and all the social media platforms whose business model is predicated on promoting the extremes.”
“I look forward greatly to that statement. Perhaps then the Minister will tell me whether it is true, as I have been told, that the number of BAME women with covid in Newcastle hospitals is eight times that of white women with covid. I praise the impact of Black History Month and what it does in telling our shared history, but it needs to do more. How do we eradicate racism? I was set that challenge by young people during a Black History Month event recently, and I was flummoxed. I realised that I do not spend enough time imagining the end of racism, but we should. Yes, it will take a race equality strategy, and real action and legislation, but there is more that we can all do as individuals.”
“Small businesses in a tier 2 area such as Newcastle may not be asked to close, but they will face severe reductions in revenue due to local restrictions affecting football, for example, in the centre of our great city. The Secretary of State talks about unprecedented support, but these are unprecedented challenges for viable jobs in our city centre. In addition to what he has already mentioned, what local economic support will he offer to businesses in Newcastle?”
“Test, track and isolate must be made to work; without it, nothing can work. Can the Prime Minister tell me where transmission is occurring in Newcastle now, rather than guessing based on US data? If he cannot, after six months and hundreds of millions of pounds spent on private contractors to track transmission, will he accept that fundamentally what is not working in this pandemic is the Prime Minister, and the businesses and people of Newcastle are paying the price?”
“It cannot be limited to the platforms simply policing their terms and conditions. Enforcement and redress are required, and I repeat the questions posed by my hon. Friends the Members for Halifax and for Bristol North West (Darren Jones), although I despair of answers. The Government must get a grip if our lives are to flourish online without fear or favour.”
“However, we have also launched the Our Digital Future consultation to build consensus on the underlying principles by which our online lives should be guided—it is still taking submissions, if hon. Members would like to contribute. We are also committed to eradicating the digital divide—indeed, the many new digital divides—as a result of which marginalised people have become increasingly excluded from the online world. Many bodies have contacted me and asked me to raise their concerns about issues from dangerous goods online to data adequacy, small business competition to fake reviews, age verification to facial recognition, and antisemitism to intellectual property. I cannot do them all justice. The Government must outline a clear plan to address the multitude of online harms.”
“The Government have been too slow to act, and tech giants have thought themselves unaccountable for too long. However, they can be made accountable. Self-regulation has failed, but robust, reasonable, rational, forward-looking and principles-based regulation can succeed. It is shocking that, in all this time, the Government have not established what those principles should be. Is anonymity a right, or is it a privilege? Is identity a right? How do we decide when legal online content becomes harmful? Labour has made it clear that we need a digital bill of rights and a legal duty of care to give more powers and protections. We need a statutory regulator for online platforms to crack down on the harm, the hate and the fake.”
“Friend the Member for Ogmore (Chris Elmore), however, misinformation on vaccines—as well as on 5G, the holocaust and just about everything—is freely available and promoted on social media. The Government’s counter-disinformation officer has a full-time dedicated staff of zero. When will they take disinformation seriously, and what will they do about it? We are a constructive Opposition. It might appear that I have been liberal in my criticism of the Government, but that is born from my experience, the experience of hon. Members present and, most importantly, the experience of constituents up and down the country. Far too many people’s lives are detrimentally affected by what they experience online. As a constructive Opposition, we have proposals as well as criticisms.”
“It is despicable that, nearly three years after her death, the family of Molly Russell have had only limited access to her data and have been denied access to the algorithms and all the content that helped facilitate her suicide. Will the Minister ensure that that changes? The tech giants’ model also means that Google and Facebook have control of the online high street, directing the traffic on it, even as Amazon unfairly outcompetes the high street in our real-world towns. How will the Government address economic online harms and enable competition? Our ability to build back from covid will depend on the successful deployment of a vaccine. As we have heard from the hon. Member for Brigg and Goole (Andrew Percy) and my hon.”
“Will the Government replace the UK Safer Internet Centre’s EU funding, so that it can continue to do its good work as we leave the European Union? On financing, the platform giants’ business model is driven by algorithms that serve up more and more extreme content, which drives extreme behaviours such as radicalisation and self-harm. The model depends on eyeballs and is financed through advertising. Google and Facebook control the online advertising market, which facilitates so much online harm. What plan do the Government have to address the failings of that model or to give the Competition and Markets Authority and the advertising regulators the powers to do so?”
“Member for Upper Bann (Carla Lockhart) and my hon. Friend the Member for Putney (Fleur Anderson), the Government are failing in their duty to safeguard children. Worsened by increasing social isolation due to the pandemic, online abuse is being normalised for a whole generation. The previous Chancellor of the Exchequer, the right hon. Member for Bromsgrove (Sajid Javid), called the pandemic the “perfect storm” for child abuse. The UK Safer Internet Centre found 8.8 million attempts to access child sexual abuse in one month alone. How will the Government address that, and what will they do to support schools? The centre found that schools desperately need help and support in levelling up online safety.”
“As we have heard, the Government cannot even respond to their own belated and limited online harms consultation in a timely manner, leaving it to big tech to continue to control our online lines. I consider myself a tech evangelist. I believe that tech is an engine of progress like no other. I believe it can improve the lives of my constituents and enable a more equal, more productive and more sustainable skills- based economy through a fourth industrial green revolution. However, people need to be protected online and empowered to take control of their online lives. The Government need to be on the side of the people, not tech lobbyists. Hon. Members have set out many of the critical issues, so I will focus my remaining remarks on four areas: children, finance, disinformation and regulation. As emphasised particularly by the hon.”
“Regulation has not kept pace with technology, crime or consumers, leaving growing numbers of people increasingly exposed to significant online harms. It did not have to be this way. In 2002, the then Labour Government saw the growth of new communications technologies and undertook a comprehensive, forward-looking review of the issues they raised. The result was the Communications Act 2003 and a new regulator, Ofcom, with the power to ensure that these issues were resolved in the public interest. That regulatory framework was given a 10-year lifespan—I know that because I was head of technology at Ofcom at the time. In 2012, the Conservative-led Government saw the growth of our online lives, social media and big data, and did—nothing. The 2012 review of online harms may be the most important review we never had.”
“Members for East Kilbride, Strathaven and Lesmahagow (Dr Cameron) and for Congleton (Fiona Bruce), the internet is at times an increasingly dark, challenging and inhospitable place. No matter how vulnerable or how well informed people are, they have little control over content, which is curated by tech platforms, allowing the spread of disinformation, sexual exploitation, fake news, extremism, hatred and other harmful content. The importance and timeliness of today’s debate can be seen in the number of hon. Members in the Chamber, in yesterday’s United States Congress tech antitrust report and in today’s report from UBS, which reveals the eye-watering levels of wealth in the tech sector. Yet, as we have heard, the UK Government have done nothing.”
“Together with a vast array of online apps for everything from video conferencing to healthy eating, they are a critical enabler of an active life as citizen, consumer and economic contributor. The covid-19 pandemic has accelerated the shift online. At the height of the lockdown, UK adults were spending on average over four hours a day online. For those not digitally excluded, it brought huge benefits, keeping us in touch virtually as physical touch became antisocial. However, as we have heard, particularly for my hon. Friends the Members for Swansea East (Carolyn Harris) and for Cardiff South and Penarth (Stephen Doughty), the right hon. Member for Basingstoke (Mrs Miller) and the hon.”
“It is a great pleasure to serve under your chairship, Sir Edward. I congratulate my hon. Friend the Member for Halifax (Holly Lynch) on securing the debate and other Members on their contributions, which have been thoughtful, well-informed and passionate on this critical subject. I also declare an interest: as a chartered engineer, I spent 20 years building out the networks that have become the internet. Over that time, but most particularly in the 10 years since I entered Parliament, our lives have been increasingly lived online, with 80% of UK adults using the internet daily or almost every day. Social platforms such as Facebook, Google, YouTube, Instagram and Twitter are woven into the fabric of our lives.”
“A miscarriage of justice on this scale undermines confidence in the justice system. Is it right that the Post Office has the power of independent prosecution, and is the Minister reviewing it? The victims need justice, not more unanswered questions. The taxpayer needs to know just how much this failure of oversight has, and will, cost. Finally, the Government need to take responsibility for this debacle and ensure nothing like it can ever happen again.”
“Far from it being merely an operational matter, as the Minister has said, will he admit that this represents a gross failure of oversight, and will he tell us how much this has cost the Post Office and, ultimately, the taxpayer? What is the estimated cost of the compensation that will now need to be paid to those prosecuted, and what of those who were pursued, harassed and bankrupted, but not ultimately prosecuted? It is right that the Government have finally announced a judge-led inquiry into this scandal, which Labour called for months ago, but despite this House having expressed its concerns forcefully, the terms of reference deliberately exclude compensation. Will the Minister amend the terms of reference to include compensation and deliver true justice for the victims?”
“The Post Office Horizon scandal may well be the largest miscarriage of justice in our history, with 900 prosecutions, innocent people bankrupted and imprisoned, careers ruined, families destroyed, reputations smashed and lives lost. I pay tribute to the Justice For Subpostmasters Alliance and all who campaigned with them, including Members on all sides of the House, and particularly my right hon. Friend the Member for North Durham (Mr Jones), who secured this urgent question. For decades, the Post Office denied all wrongdoing, imposing huge stress and legal fees on the victims and spending tens of millions of pounds in the process. Friday’s announcement is a welcome relief for so many, but can the Minister tell us why, as its only shareholder, the Government allowed the Post Office to continue to oppose the appeals for so long?”
“Newcastle’s night-time economy is globally renowned but, yesterday, in a typically cowardly attack, the Prime Minister basically said that we should not complain about the impact of these measures on that sector because local leaders had asked for them. Will the Secretary of State confirm that in their letter of 29 September local leaders specifically said that the measures must be accompanied by targeted support, and will he say what targeted support pubs and restaurants, and the 10,000 jobs in my constituency that depend on them, can expect?”
“It is important to have a view on those questions, because it is important for Ofgem to manage these eventualities and ensure continuity of supply, particularly at this time. Labour has always supported a competitive energy market that provides cheap and reliable services to consumers, and the rights of consumers always to have access to the essential energy provisions that they need. With winter approaching and the virus again spreading, we must do all we can to ensure our constituents do not have to worry about their energy provision. For that reason we will not oppose the regulations, but I would be grateful if the Minister answered some of my questions.”
“A combination of the energy price cap, the effects of covid-19 and the imminent emergence of this year’s levy payment point may cause a further number of energy companies to go under this year, something that the Government are effectively acknowledging through the SI. Can the Minister tell me how many companies he anticipates may become insolvent this October because of covid-19 price cap problems? How many does he fear may go under because of continued problems associated with the management of finances and payment obligations? Will his Department seek to distinguish between those companies that are in difficulty because of immediate problems and those that are in difficulty because of their own business models and poor management of liabilities? I recognise that that may be difficult to achieve.”
“A substantial cause of collapse appears to be the borrowing of levy payment liabilities by troubled energy companies, using the sums required to pay those levies to keep themselves afloat. The levy payment is due each October and, historically, troubled companies have defaulted on payments of levies at that point, leading to notices issued against them from Ofgem, and either arrangements to pay the levy in instalments or effective foreclosure on the company. In 2019 we lost eight domestic energy suppliers, meaning half a million customers were moved to suppliers they did not pick, with 87% ending up back at one of the big six companies. Is the Minister considering either short or long-term changes to the conditions for the payment of the levies by energy companies in the light of the this year’s circumstances?”
“In effect, the process is equivalent to a competitive bid from other energy companies for the customers of the failed company, with provisions about continuity of tariffs, prices and so on being part of the bid process. The company taking over the customers may be compensated for the work involved in doing so through payments socialised across the sector. Because of the risk of a high number of sizeable companies going bust, those payments have become a real source of concern for stable energy companies that find themselves having to underwrite payments for failed companies that may have previously tried to undercut them with cheap but unsustainable customer tariffs.”
“That could lead to companies defaulting on levy payments due in October. If that occurs, Ofgem will manage the insolvency by a series of stages to prevent a company from taking on new customers if it is seen to be failing in its licence obligations and then will enter supplier of last resort arrangements when the company is no longer able to trade. With companies inevitably falling into those arrangements following insolvency, can the Minister tell us to what extent socialisation of compensation for companies taking over customers of failed concerns will have a detrimental effect on bill payers generally and the finances of other more stable companies? Is he considering any changes to the supplier of last resort compensation regime to make that less of a customer and company burden in the future?”
“Currently, companies in distress can enter a moratorium period to enable possible restructuring and rescue activities to take place while in administration. The modifications that the SI introduces will require struggling companies to notify the Department for Business, Energy and Industrial Strategy that they are in a moratorium, so that the Secretary of State can consider whether to apply for a special administration order that will enable Ofgem to protect continuity of supply and, if appropriate, commence proceedings for the transfer of supply to another company through the supplier of last resort proceedings. There is some fear about the solvency of a number of energy supply companies as a result of the financial losses that have occurred as a result of measures relating to bill payments and increasing bad debts.”
“Insolvencies of energy companies have occurred in increasing numbers in recent years because of undercapitalisation of new entrants in the supply market, over-optimistic plans for growth and new customers, and inadequate provision for levies and other requirements on energy companies that are part of the funding landscape. Five relatively small energy providers—with fewer than 200,000 customers—went bankrupt last year, and since 2016 a total of 13 such companies, some of which were considerably larger, have gone under. As the Minister said, the SI modifies the working of the moratorium regime in part A1 of the Insolvency Act 1986 in respect of particular energy companies involved in provision or distribution of gas, electricity and smart meter services.”