19
Examination of witnesses
Paul Scully and Holly Creek.
Q110 The Chair: This is the Communications and Digital Committee and we are continuing our inquiry on digital exclusion or digital inclusion, depending on the angle from which you are looking at this issue. In fact, this will be our final public hearing of this inquiry. We are pleased to be joined by Minister Paul Scully, who is the PUS or Minister for Tech and the Digital Economy at the new Department for Science, Innovation and Technology. You are joined by one of your senior officials. Ms Creek, can I just ask you to say what your role is at the department?
Holly Creek: I am deputy director for wireless infrastructure, spectrum and telecoms consumer policy. I am here with my telecoms hat on.
The Chair: Thank you very much indeed. As I am sure you will understand, we will direct most of our questions to the Minister, but we are happy for you to support him on that specific area of policy. I will open with some general questions, then we want to cover the economic impact of digital exclusion, move on to skills, and finish with the telecoms market at the end.
Minister, you are now in a new department and digital inclusion or exclusion is part of your new department’s remit. We are keen to understand how much of a priority digital exclusion is for the Government.
Paul Scully: It is a pleasure to be back in front of you again talking about this really important issue. It is a high priority. We talk a lot about making the UK a science and technology superpower by 2030. We talk a lot about being only the third country in the world to have a $1 trillion tech ecosystem. That is all very well, but it means nothing if you do not have the customers or the skills base to use the products, never mind produce them in the first place.
We know we are moving to a more online world. We know we are going through this revolution driven by computer power. There is a lot of news at the moment about artificial intelligence and where that is going to go in the next few months. It is important that we get that base level of inclusion up, bringing people in to make sure that there is no one left behind and that people can access apps, banking, energy services, government services and indeed social connections as well. That is really important.
We have a cross-government approach. It is ingrained within each department, whether it is the Department of Health and Social Care, the Department for Education, or, as you would expect, the Department for Science, Innovation and Technology. That is underpinned by the principles established in the digital strategy in 2014, which have not changed. They are about making sure that people have access to the kit, that they have the skills to use it, and that they have the motivation to include themselves in the major cultural shifts over these last few years about using technology, feeling free to use it and trusting it. That means trusting the processes, the apps and the approaches that companies are taking in this day and age.
The Chair: Most of the evidence that we have taken from the witnesses we have had before us has expressed a sense of frustration that digital inclusion, or dealing with the issue of digital exclusion, has not been sufficiently high up the order of priorities of the Government. The fact that there has not been a new strategy since 2014 is often raised as an example of this not having been given the attention it deserves. Are you looking at that strategy? Are you considering updating or redoing it?
Paul Scully: We are not looking at the strategy per se. I talked about the principles, and those underpin the technological advances that have been made since 2014. In technology terms, 2014 is a long, long time ago, but those four principles have not changed. When we come up with a strategy, it always needs to be technology agnostic so that it can flex with the times. Frankly, if we came up with a less agnostic approach now, in a new strategy, it would be out of date within six months anyway.
I have talked about AI. We can see the concerns in the way that we are having to reflect on our moves towards AI now. We do not need a new strategy. We can always do more on tackling those principles around access to equipment, skills, trust and, indeed, motivation. We cannot do everything, because you will always have individuals who resist the advancement of the equipment and the approach that we have, but we just want to make sure that no one gets left behind.
I was considering when we were preparing for today what more we can do to sense check what the departments are doing. That does not necessarily mean setting up a digital exclusion tsar. It does not necessarily mean having a standing committee, because we obviously get our data from a number of sources. We have you, as well as the Select Committee in the other place, which can tackle some of this. It is incumbent on me, sitting in the middle of this in DSIT, to reflect on what you are going to produce, I am sure, when you have had your evidence, and see what I can do to sense check the work being done in those other departments so that we remain aligned.
The Chair: From what you have just said, do I take it that you are not intending to re-establish the digital inclusion working group, which was, I believe, disbanded during the pandemic?
Paul Scully: No, we are not intending to do that at this time. I talked about sense checking. That is probably a more appropriate way forward, because I want to make sure that the various departments can get on and do their jobs rather than continuing to re-diagnose the problem. We can do that by sense checking what is happening now rather than having a standing committee and returning to this time and again, rehearsing the same issues.
The Chair: One of the things we were clear about at the start of this inquiry was that we were not just looking to come up with a new description of an old problem. We wanted not just to be clear about what the scale of the problem is, but to understand the complexities of it and where there are real risks of policy not being relevant or departments not doing what needs to be done, and to come up with specific actions that could be taken to address this problem.
I am sure that, when we come to publish our report, we will have recommendations to make to the Government. One of the strongest things to come through the evidence we have taken is that there is a lack of co-ordination across government. It starts from a question mark as to whether it is sufficiently recognised as an important aspect of economic growth and us being a modern economy that can fulfil and exceed our potential. Whether it is DfE or other parts of Whitehall, are they all delivering on their various commitments and so on? That seems to me to require somebody to really drive that forward.
Paul Scully: I hope, by the end of this session, you will have seen that we are doing a lot of work, which sometimes does not get the focus or coverage that it needs. As I say, we do not have a digital tsar or someone like that who is looking to publish a report, but that does not mean the work is not being done.
What you will find is that the speed of the work we are doing on skills, and the work Holly will tell you about on telecom and broadband rollout, is accelerating, albeit until we get to those very hard-to-reach areas where we hit a wall, which is not insurmountable but is challenging. A lot of that work is being done and checked through. As I say, I would want to sense check it, but I will happily take on board what you report and see what more we can do.
The Chair: Let us move on to economic issues.
Q111 Baroness Wheatcroft: A lot of the evidence we have had has been critical of the Government not doing enough to deal with digital exclusion. I wonder whether that is because there is not any evidence as to the cost. Could you tell me whether you have any means of measuring what it costs the country in terms of loss of activity, for instance?
Paul Scully: We take our evidence and statistics from a number of sources, whether it is the ONS or the Lloyds Consumer Digital Index, which we use to better understand our digital capacity in the first place. There are a number of things.
The Good Things Foundation has come up with significant benefits. If we get this right, we can have total NHS savings of £899 million over the period that it has appraised. Through reducing in-person GP appointments and usage of online services, the Government, or the taxpayers, could make efficiency savings of £1355 million, so £1.3 billion, over the 10-year period. That would have a cost-benefit ratio of 1:9.48, indicating that, for every £1 invested in digital skills training, £9.48 is gained throughout the economy. The associated net present value is £12.2 billion. There is a lot that can be done there, and lots still to be done, so it is worth while for us to make sure that we can lean into this.
Funnily enough, I was in Japan over the weekend at the G7 Tech Ministers’ meeting. This is an area that we talked about significantly, because we had a representative from Ukraine there. Ukraine is hugely advanced in the work it is doing on having government services via an app called Diia. They reckon they have half their population on this single app now. They have described it as a government super-app. If you tried to describe a government super-app here, I think people would run a mile, so I would be slightly worried. There is clearly a cultural difference but, as I say, we bring in our sources from a wide-ranging area and there is so much to benefit from.
Baroness Wheatcroft: Do you think those estimates are accurate?
Paul Scully: I think they are.
Baroness Wheatcroft: Have you done any internal work?
Paul Scully: We have not. We believe those assessments are accurate about what we can achieve because we cross-checked them with ONS and other sources. We do not have a single version of the truth within the Government. We rely on those wider viewpoints.
Baroness Wheatcroft: They are certainly huge numbers. When successive Governments are all about generating growth, clearly this is stuff to go for. To what extent are you measuring the effectiveness of the measures that you have brought in now to see how quickly we are going to achieve those savings?
Paul Scully: It is difficult. I used to be Retail Minister. We were looking at greater take-up for the online economy, and digital exclusion is really important in this. I was answering correspondence from one of my colleagues in the other place just this morning about someone who is digitally excluded. Medically, they cannot use computers, et cetera, and so they felt excluded from a number of services. How do you balance that with the future of the high street, retail and these kinds of things? How do you balance it with online banking, which we were first movers in? We legislated for mandating the banks to open their data for reducing bank branches, for example, which then has an on-cost on older people and cash businesses.
There is a lot that we have to weigh up there. As I say, that is why I am keen to sense check the work we do, but we have enough statistics there to know the size of the prize, which is why we are addressing access, skills and rollout in particular.
Baroness Wheatcroft: You are also Minister for London. Do you think there is a digital divide geographically?
Paul Scully: Yes. That really goes to the heart of the levelling-up programme. When you talk about levelling up, I always like to talk about levelling up people. What do you mean by that? It is all about readiness for access to infrastructure, whether that is digital infrastructure, transport or opportunities. Inevitably, you quickly get into a north versus south or a rural versus urban debate on that, but it is not one or the other. It should not be a competition.
I talked about harder-to-access rollouts of broadband and mobile. When you have 11 million people in a confined area, it is relatively easy to access all those people. If you have a hill farmer, a coastal worker or someone trying to set up a business in the countryside, they are difficult to get connected and so it costs more, but it is very much worth the prize in doing so.
I saw a business in Lancaster, which is not exactly a rural area but a town outside the biggest cities. One of the businesses there said, “I can set up my small business in a digital hub in an old council building. I’ve got the access to the skills I need from the university up the road. I don’t need to go to Liverpool or Manchester”. He did not mention London, which is great because his pull factors in Lancaster were those big cities near him, which should be the case. If we get levelling up right, including digital inclusion, people can choose to come to London; they should not feel they have to come to London.
Q112 The Chair: Before I move us on to skills, I am struggling to get a sense, from what you have said so far, of whether you think that the UK is doing quite well on digital inclusion.
Paul Scully: Culturally, we are in a different place from some of the other areas that I talked about, which is partly through education. We have to do more on education and giving people that sense of trust. We are particularly good at cybersecurity, for example, so we have very trustworthy apps and systems compared to some other countries, but we have to keep getting that across, because that does not always come across in wider media coverage.
On gigabit broadband, we have started well, but there is plenty more that we can do. The first million gigabit connections took a few years to roll out; the last million took something like four or five months, from memory. It took us a while to start off but, when we started and injected some pace into it, it gained a pace of its own. Holly, do you have anything to add on rollout when compared internationally?
Holly Creek: It is different across different countries, but our gigabit rollout at the moment is at 75%. That is up from 10% just a few years ago, so there is a real acceleration there. There is lots happening on commercial investment. The Government are stepping in with their £5 billion gigabit programme to make sure that we can give people access to gigabit broadband even in the most rural, remote parts of the country. Similarly, on mobile coverage, we have a basic type of 5G outside of 77% of premises now, but we will still rely on 4G, which still has a lot to give. We have our shared rural network programme providing 95% 4G coverage on a geographic basis no matter where you are, not just at premises.
The Chair: We will come on to the telecoms market a bit later on. In the Budget earlier this year, the Chancellor set out his priorities as enterprise, employment, education and everywhere. All these things require all aspects of the digital issues that we have been looking at in this inquiry to be operating at a high level. It is somewhat surprising that that has not triggered a renewed energy for addressing these gaps. I am not talking so much about rollout of gigabit broadband.
Paul Scully: One of the things that did trigger the energy was the pandemic, which you mentioned. For the first time, people had to turn towards technology and digital take-up. That is the cultural bit that I was talking about. The principle of motivation was particularly accelerated. People who had an aversion to these sorts of things, for whatever reason, were pushed to take a technological approach to this during lockdown, in order to connect with others to do personal business.
We do work in public libraries, for example, to help people access services, but just doing that does not tackle the underlying issue of day-to-day accessibility. It might get their tax return done or give them access to their pension or to banking that day. How do you then move them to the next stage and properly include them in a digital society?
Q113 Baroness Harding of Winscombe: I just wanted to follow up on what the Chair was asking and look at the digital inclusion strategies of the four nations. We have taken evidence from the Scottish Government and the Welsh Government in particular. Both of them have updated their digital strategies since 2014. As you yourself said, the digital world is very different nine years on. It is a real priority for both of them, and they have different approaches. Scotland has put some more money on the table; Wales is using much more of a convening approach. I am struggling to understand what the UK Government’s version is, given that we do not have a strategy and we do not seem to have a convening approach either.
Paul Scully: As I say, we are doing work within our departments and making sure we have a cross-government approach that is ingrained within each department. I am not sure about having one cross-cutting committee at this stage. I will be interested to see your recommendations and what you find elsewhere, but that cross-cutting committee will not necessarily add to the work they are already doing.
For example, DHSC is looking at what GPs can do in using technology to get people to take up GP appointments and to speed up that process. We will talk about skills in a second, I am sure, but DfE is looking at ingraining skills. As I always talk about, just because children these days are seemingly born with a smartphone at the end of their wrist, that does not give them the skills they need to participate in wider areas, especially in employment. DfE is looking at other areas, which I am sure we will explore in a moment, but I do not necessarily see that the principles of the digital skills strategy that we published in 2014 have changed, although the technology has.
Baroness Wheatcroft: Do you think digital skills should be taught in schools?
The Chair: We are going to come on to skills.
Baroness Wheatcroft: Sorry, I am sounding much more critical than I want to be. I am just genuinely trying to understand how much of a priority you view this as, or whether you think it will automatically solve itself within each of the government departments.
Paul Scully: It is not all about government. Government cannot solve the problem by itself. We have to do this alongside companies, organisations, the NHS and DHSC, as I was talking about, and there is a lot of work going on there.
When we get to skills, you will see that a lot of the work that I do on the Digital Skills Council is about access into employment of those companies, but it is not all about that, for the reasons that I said at the beginning. If there is no one to buy the products, they do not have a business model in the first place, so they need to be educating up the wider populace as well. That is the kind of work we are doing where we do use our convening power. I can speak to that with greater strength because I co-chair the Digital Skills Council, for example. That is the kind of work that is going on.
The Chair: At the end, when we have covered some of the other areas, we may come back to the principles of the strategy and how you are measuring performance in terms of delivery against that strategy.
Q114 Baroness Fraser of Craigmaddie: I would like to give you an opportunity, Minister, to talk about the work you are doing on addressing basic skills gaps. We have heard evidence, for example, in which people have referred to the Government’s essential digital skills framework, but this does not seem to be implemented cross-departmentally in government. The framework does not go below 18, so Lady Wheatcroft’s question about what is happening in schools is something that we would like to explore. Is DSIT the department that is going to be sense checking this work? How is it sense checking? How are you leading on this work?
Paul Scully: I mentioned at the beginning that the sense checking is really a reflection of my preparation for coming here today. It is something that I would like to take out. Whatever your recommendations are, that is something that I am definitely going to do to bring this together. It is not going to be a new strategy, but we need to refresh our thinking to make sure that we are in the right place with this. We can then reflect on the report that you come up with.
I will lean heavily on the essential digital skills qualification that you rightly mentioned. How do we do this for under‑18s? It is important that, when schools are looking at how to teach digital skills, they are not just doing it all through the prism of computer science. You have to ingrain it into each of the subjects and have that broad approach.
To answer Baroness Harding’s earlier question, yes, I absolutely believe that we should be teaching those skills in a broader way. I have talked about the fact that, at the Digital Skills Council, the companies themselves, which know what skills they will be looking for in employment, are the end users of the work we are doing, and so they should and do have an increasing role in working out our policy and what we might do with their support in schools.
Baroness Fraser of Craigmaddie: Is there a danger, then, that the concentration by companies or people on advanced skills means that basic skills are potentially being forgotten?
Paul Scully: There may have been that possibility in the past. I have taken over as co-chair of the Digital Skills Council. I do not know what came before because it was a relatively new skills council, but I come from an area where, for example, I did the Help to Grow schemes. When we look at why we have low productivity in this country, it is about digital take-up and structured management techniques.
I can use the example of my builder. When my partner, who is a head teacher and is used to doing school builds, asked him for a Gantt chart of how he was going to build the extension, he said, “I’ve got my little bar chart”. He came up with a lined bit of paper and just wrote, “Week one, demolish, week two, et cetera”. Now imagine that, as a builder or a plumber, you had the confidence to take up Sage or something like that. Other accounting packages are available. You could press a button and send out an invoice. Someone else could press a button and pay you. Then you can build or you can plumb. You then do not have to worry about computer skills and sitting in front of a computer or typing out invoices. You can get back to your core business.
The skills are not just for someone who wants to go and work for Cisco or Google. They are for people who are going into every aspect of working life. They need that basic level of digital skills just to make their lives easier so that they can focus on what they are doing on a day-to-day basis.
Baroness Fraser of Craigmaddie: I am unclear as to how we are supporting people such as your builder to get those basic digital skills. We have had lots of evidence saying, “You have to go to where the person is and what they want to do”. The example of your builder is great, but in another committee I sat on, the Covid-19 Committee, it was very clear that people did not just want to hear, “Here’s a qualification. You’re now digitally skilled. Off you go”. That was not the right way to go. I am unclear as to the way in which the Government are going to help your builder.
Paul Scully: You have the essential digital skills qualification. I talked about that. We have introduced computing as a national curriculum subject, but it needs to be wider than that, as I have described. We are estimating that 20% of adults lack the very basic digital skills, so how are we going to tackle that? We have introduced a digital entitlement for adults with no or low digital skills to undertake specific digital qualifications up to level 1, free of charge.
On the Digital Skills Council, with the feedback we have been getting, we have talked about a more modular approach to learning. It works for people with no or low digital skills just as it does for people who are looking for digital or more tech-focused employment. It reflects your question about what more we can do to shrink some of these qualifications down so that people can dip in and out of this rather than sitting something and feeling that they have a certificate so it is job done. That is clearly not job done.
I talked about the four principles, but the fifth principle is about what happens when technology moves on. You sit there; you feel comfortable with things now. We know that, in six months, a year or two years, it will have changed enormously. How do we keep people refreshed with the skills? That is why a modular approach to learning is probably a far more sensible way.
Baroness Fraser of Craigmaddie: Do you think we are right to focus on skills rather than, for example, affordability, access, geography or something like that?
Paul Scully: No, we should not be focusing on any one of those. They are all pertinent. It is all very well having telecom skills, but if you cannot afford a £1,000 handset, or the tariff to get on to use apps, you are going to struggle, which is why social tariffs are so important.
Q115 Lord Young of Norwood Green: I tend to agree with you about not focusing on digital skills but ensuring it goes through all the subjects. You referred to the pandemic. That was a game-changing moment for all sorts of reasons. I want to focus on primary schools, because there we had children who had a handset at home and that was about it—that was their broadband connection. It was only when they got to school that they experienced something significantly better. Do you recognise the challenge of that?
You have a challenge in that, of course, when they get to school you want them to have the best experience they can get, but it is also doing something about that underprivileged home environment. Do you recognise that challenge? If you recognise it, as I am pretty convinced you do, how are you ensuring that the DfE and whatever other departments are involved can rise to that challenge? It starts at primary level.
Paul Scully: There are so many things. You are absolutely right to focus on primary level because, whether you are looking at social mobility, digital inclusion or the prospects of anybody, primary school is the time to be able to form those approaches.
In terms of digital take-up, you are right that, when we got to the pandemic, there was a significant shift to online learning, so people needed devices at home. It was quickly clear that there was inequity between people who had devices and people who did not. We had to move quickly as a Government to work through that. It is not easy to produce a whole load of laptops and tablets within short order because, at that particular time, you could cause a shortage in the market just by buying so many laptops or tablets or putting in an order for that.
I have spoken to people from Unlock Digital, for example, who are repurposing and handing out devices around London. Some of the bigger, well-known companies are doing likewise. We need to make sure that government is doing its part, but understanding that it cannot tackle everything. It needs to tackle it with business organisations.
Lord Young of Norwood Green: That is good and I am not disputing that it is important, but it is only part of the problem. The other bit is the broadband connection when people are at home. Can you tell me what you, or other departments, have done in relation to that?
Paul Scully: That does come into the social tariffs and the rollout that I was talking about.
Q116 The Chair: We will come on to that. Can I ask a supplementary while we are still on learning and skills, before we move on to the topic that we have been touching on and not properly exploring? Do the Government do any assessment of the impact of informal learning, whether that is in community groups or libraries? We went to visit a community group in Newham as part of our fieldwork. Where does that sit in the Government’s overall evaluation?
Paul Scully: I will write to you, if I may, about whether we have made any assessment of that. I am not aware either way, to be honest. In terms of community work, this is another aspect of the levelling up that we have been talking about, because so much of levelling up is not just about infrastructure. It is also about local governance and leadership, which leads into how you build up vibrant communities. Part of that is exactly the kind of initiative that you are talking about.
I also spoke about the work we are doing through our public libraries, but on the understanding that if you are just spoon feeding it to people on a day-to-day basis it is not giving them the long-term skills that you need.
The Chair: Interestingly, some of our witnesses have highlighted the false economy of digital first with some public services, particularly through DWP. It has led to claimants having to go to the library or to Citizens Advice to get them to print things out, and then the local people in the libraries have had to certify that, in printing them out and letting them do something, it is valid, or they have not done this, that and the other.
All sorts of consequences have come from not properly understanding what it means or not ensuring, at the same time as moving to digital first, that people are equipped to use these services in a way that does not involve cost in other places. These charities are trying to pitch for funding from the Government so they can help people and fill out the forms.
Paul Scully: You will know about unintended consequences better than most, especially from your previous roles. When you set targets, they themselves have consequences. When looking back at the strategy, I am not necessarily keen to refresh it for the sake of refreshing it. We can grab the principles, but the operationalisation of it, how you actually make it work, will change because of the technology.
You are absolutely right. I would be really interested to see what you have found and what you recommend. When I am sense checking, as I described, I will be happy to speak to DWP, DfE and the like to see that, because that is always a frustration to any Minister—otherwise it is going round in circles and taxpayers’ money is not focused enough.
Q117 Lord Griffiths of Burry Port: Thanks for raking over the embers. I am just back from Wales, where the big educational debate is about the point at which you take the learning of Welsh as a subject to the next level, which is teaching the curriculum through the medium of Welsh. I introduce that in order to suggest that the trick at primary level is not teaching digital as a subject, but teaching the entire curriculum with the development of skills that are applicable across it. If you are to do that, it seems to me that you must have more than just a business relationship with the Department for Education. It must be involved in shaping curriculums, in getting these ideas to be fundamental to teaching methods and so on. Then, of course, you have the problem of changing age-old habits in classrooms, so that things are done another way.
Is all of this where the eventual consequences that we all want to see will spring from? People will think digitally and will see the digital dimension of all the subjects they are learning. When I was at school, people would do mental arithmetic: “422 times 1,078—put your hand up when you can answer that question”. It has to be instinctual; that is how it happens. Are you working with the Department for Education in this constructive and philosophical way, as well as just in terms of business outcomes and measurable, quantitative things?
Paul Scully: Yes, that is a really interesting point. I did worry that you were going to ask me my views on teaching in Welsh. I do not want to step on the Department for Education.
Lord Griffiths of Burry Port: I am not going to ask you to multiply by 842.
Paul Scully: I will show my working in Welsh. The cross‑cutting curriculum is really important. Yes, we obviously talk to the Department for Education and have these kinds of conversations. Where you face a problem with actually making that work is in how you find the teachers who have the wherewithal, capacity and approach to be able to think digitally, as you say, when teaching history, geography or things like that, as important as that is. That is something we can work on, but you cannot just force it through. You are talking about the ethos of thousands and thousands of teachers who are doing amazing work around the country in other areas. It is absolutely the way forward.
You talked about business. This is not specifically about digital inclusion, but about the end result, one of those unintended consequences you are talking about, and the circularity of it. I am now delivering an AI skills conversion course where we are trying to attract people into working on AI from a non-STEM subject or a non-computer science background.
Lots of people talk about diversity. This is about diversity of thinking. It brings people into producing products and services which are, I hope, better, because they have come from a philosophy background, an ethics background or a history background, rather than just a comparatively narrow computer science background. You can have the broad‑brush curriculum that you talked about, which will then break down digital exclusion in the first place, but it will also have a wider result for the economy, online safety and our approach to online products.
Q118 Baroness Wheatcroft: My question is about the generations who do not have the benefit of a digital education. I was much taken with your example of the plumber and how, with the right advice, his business could be much more efficient and much more productive. Where would you advise that plumber to go now to get the skills? Would it be worth while for the Government to have a network of hubs where small business people—and you know about small businesses—could just go along and say, “Look, I need help”?
Paul Scully: Yes, absolutely. We launched Help to Grow: Digital for that very reason, to try to get businesses—maybe slightly bigger businesses than an individual plumber—to take up our digital offer. It was not a great success, to be frank, because we were duplicating a lot of the work that banks and other businesses were doing.
I always have three buckets when I look at my role and government’s role. What can I do to help people? Those were Ronald Reagan’s nine most feared words in the English language: “I’m from the Government and I’m here to help”. What can I do to back out of people’s lives? That might be cutting regulation and making it easier for people to do things. The third thing is convening power. All businesses tend to have a bank account and an accountant. Those kinds of organisations are really powerful for pushing the benefits of an accounting package to make those business people’s lives easier so they can focus on their day-to-day, rather than government feeling the need to step in and do that.
There are lots of other things. The Federation of Small Businesses, the chambers of commerce and those kinds of organisations also have roles to play. What we can do is not just convene but sometimes signpost as well.
Baroness Wheatcroft: Is there enough signposting at the moment?
Paul Scully: It is something we can always improve on. We have the 38 growth hubs around the country, which do slightly different things. Having more of a coherent approach around the country would be better. That is something we are looking at.
Q119 Lord Hall of Birkenhead: Can we go back to affordability, which you briefly mentioned earlier? How effectively is the telecoms market working, in your view, to provide a fair and affordable range of tariffs for consumers?
Paul Scully: Can I bring Holly in here? Telecoms is not my particular portfolio. I have some views but Holly is better qualified.
Holly Creek: The market is generally working well. We have a number of providers offering services that are affordable for the majority. We paid close attention to Ofcom’s affordability report, which it published last week. I know you had evidence from Ofcom colleagues here last week. It showed that services are affordable for the vast majority of households, accepting that there are many that are still suffering. Ofcom’s report showed that 6% of broadband customers had an affordability problem, which is clearly problematic, but the remaining 94% are not currently reporting an issue. We are monitoring this closely alongside Ofcom. The figure for mobile is 8%.
We do accept that there is an affordability issue in the market. Particularly through the pandemic and in the last couple of years, we have worked with a range of providers—the large, fixed operators, the smaller altnets, as we call them, and the mobile network operators—to ensure that there is a range of social tariffs that are available for people who are struggling to pay.
Paul has said that it is not his particular remit, but I have worked with the various Ministers in this area. We have had a series of roundtables with the industry where we try to push them to go further and see if they can do more. Last summer we had a roundtable with the major operators and the leaders of those companies to secure a series of commitments, not just for people who want social tariffs, but for anyone who is struggling to pay, that their provider will support them. We are helping them to move to a cheaper tariff, for example. We are helping them with payment plans across fixed and mobile.
We can get into the detail, but in general terms we would say it is working well. There are affordability issues, but for now we are content that there are a sufficient range of offers on the market.
Lord Hall of Birkenhead: Can I come on to social tariffs in a moment? Something that Enders said to us struck me as interesting—they said that our prices are low, and in Europe likewise, but pointed towards a frontloading of deals, making them look very cheap to start off with, but then, to use my verb, not theirs, people can get clobbered by add-ons or mid-contract price increases. Is that a problem that you recognise and have some sympathy with?
Holly Creek: Yes, we definitely agree in terms of our affordability. Our mobile is the cheapest across the EU. There are good deals to be had on the mobile market. For broadband we are mid-table. We are doing okay in terms of affordability.
Frontloading quite often happens when you buy a mobile contract. What lots of people do is buy their handset at the same time, so their contract will often reflect the cost of the handset. It is up to you whether you want to have a smartphone, the latest iPhone or something cheaper, but you will be paying for that over the year or, most commonly, two years. It is a competitive market and the operators will want to attract customers to their deal.
The issue is about the transparency of what people are going to be paying. That is absolutely what the operator should be ensuring. Ofcom is currently looking at the issue of mid-contract price rises, not whether you should have them, but whether the terms are clear and understandable enough for the people on the street to go in with their eyes open and know what they are signing up to.
Lord Hall of Birkenhead: Do you think they are clear? I am not asking you to prejudge what Ofcom is going to say. Well, I am, actually.
Holly Creek: I am not sure how much value my own opinion has on that, but it is important that people can understand it. Maybe there is an issue with CPI and whether that is understandable to people everywhere. We have a regulator that is looking at affordability and at the transparency of this issue. I will leave it to them to decide whether there is something that needs to be fixed here.
Paul Scully: We have something like 80 companies offering broadband, which has helped drive the cost of broadband down. Ms Creek talked about the fact that we have among the cheapest tariffs in the EU, but there are new entrants into telecoms as well, whether it is Smarty, Tesco Mobile or Giffgaff. They have started to give those cheaper options. The key is the handset, because the marketing goes towards the latest iPhone, the latest Android phone and the £1,000-plus handsets. Clearly if someone is going to be giving you a handset and rolling it over two years, they are going to be doing it for a reason. That will be frontloaded.
As well as talking about social tariffs, we are working with organisations to make sure that people know that they do not need all‑singing, all‑dancing phones. You can still do the things that we are talking about here—about being digitally included—on a cheaper handset.
Lord Hall of Birkenhead: You mentioned social tariffs. We have heard a lot of evidence on social tariffs. One bit of evidence that stuck out for me was Ofcom suggesting that an affordable tariff for households on universal credit would be in the range of £4 to £7, rather than the actual £10 to £20 range. There is quite a difference there.
Holly Creek: A range of tariffs are available on the market. It is likely that the providers offering those in the market are doing it at a loss.
Lord Hall of Birkenhead: I suppose it is a question for the Minister, in a way. There is quite a difference between a social tariff of £10 to £20 and a range, for a household on universal credit, of £4 to £7.
Paul Scully: We have set the social tariffs through working with the telecoms company. For some households, it is always going to be a struggle, whatever that amount is. It is incredibly difficult to encapsulate absolutely every circumstance within that, not least when you are trying to take the telecoms company with you and use its good will in this situation. They were one of the first companies that we started to look at post Covid, as the cost of living situation was kicking in, and they were actually the first to engage. There is plenty more we can do, to look at not just the amounts but the take-up as well.
Lord Hall of Birkenhead: Have you considered the removal of VAT on social tariffs? Again, that is something we have heard coming out strongly.
Paul Scully: Yes, we have, but we need some guarantee that, if you are going to start removing VAT, it will be passed on and the customer will see the benefit.
Lord Hall of Birkenhead: We have had two companies saying they would absolutely pass on the VAT.
Holly Creek: We have been having conversations with the Treasury about this. There is a high bar of evidence to say that it would be passed on. You have two companies; that is great. Would they all necessarily do it and would they do it for ever?
The Chair: Could you not mandate them to?
Holly Creek: Yes, potentially.
The Chair: If the Treasury decides that it wants to forgo a tax for the benefit of consumers, you do not just have to leave it to the businesses, willy-nilly, to grab it.
Paul Scully: In the way that VAT works, if you are going to mandate it, you would have to legislate. It is quite a technical approach to how you would legislate to do that.
The Chair: You could shame them into doing it.
Paul Scully: Yes, possibly, but the Treasury would always base it on evidence, so the operators would provide the evidence. They continue to work with operators, charities and other organisations to look at that, but at the moment there are no plans.
Lord Hall of Birkenhead: Would you support it if it was an idea?
Paul Scully: If we knew it was going to be passed on, it would be an interesting idea to look at.
Baroness Harding of Winscombe: Given my background, I just wanted to dig a bit more on the pricing. Before I get into the detailed question, I want to set the context. Holly, you have described that the vast majority of households can afford broadband, but I just want to remind you that this is not an inquiry about the vast majority. It is about the people who cannot afford it, do not have the skills or do not understand the benefits that digital might bring to them. Forgive me, but I am not focusing on people who are thinking about £1,000 for a handset. I am focusing on people who cannot afford £10 to £20 a month on a social tariff, as Lord Hall said. Within that context, one thing you could do is to look to reduce the price of that social tariff. We have talked about VAT—and, by the way, there is a huge amount of precedent in other utilities, so I would like to understand why we think telecoms companies would work differently from other utilities where VAT is not charged on a social tariff.
The other area where you could bring the price down is if you put a social tariff on the wholesale price. As you said, the telecom retailers are probably losing money on their social tariffs at the moment. Openreach is not; it is making the same amount of money. Have you considered a wholesale social tariff? That would drive the retail social tariff down more quickly than almost anything else you could do.
Holly Creek: The wholesale market is where regulation takes place in the UK market. The regulation takes place where a provider has significant market power. You probably know this, given your previous role, but the context for us delivering broadband is that we are asking the industry to invest billions in coverage and to ensure that the whole country has the coverage it needs. That is the context. Openreach has made a proposal on its Equinox product, which you will be familiar with as well. Ofcom is looking at that too. It is an Ofcom regulation question rather than one for the Government, but we are absolutely paying attention to Ofcom’s findings on that.
Baroness Harding of Winscombe: Equinox is a fibre product. It is not a social tariff product for copper. That is not going to get you to £4 to £7 for a broadband connection. Equinox is a wholesale deal for fibre connections, which is why all the fibre altnets are so exercised about it. That is a bit of smoke and mirrors, really, as a wholesale social tariff. Equinox does not get you anywhere close. When you say, “The other piece of context is that we are asking the industry to invest billions”, are you trading off digital inclusion for investment in the network?
Holly Creek: That is probably a policy question for Ministers, rather than me as a policy official.
Paul Scully: Some of these social tariffs are below cost anyway, so these are difficult. You asked about regulation. As far as I understand, if you were regulating anything like that, Ofcom would need to start consulting on it. You will not be able to regulate the day after, so you are probably talking about a year to 18 months to get through that process anyway. We need to have solutions now to address the cost of living. It is a difficult balance and nothing is off the table, but we are trying to act in the here and now.
Baroness Harding of Winscombe: How are the Government managing this trade-off? I recognise it is a difficult trade-off. We want to build out the network, but equally we should care about take-up.
Paul Scully: Yes, for sure.
Baroness Harding of Winscombe: How are you thinking about that trade-off for telecoms regulation? The direction over the last five years has been very single-mindedly focused on the rollout. As the network is built, how are you thinking about take-up? Our take-up stats are a lot less good than the rollout ones you have quoted.
Paul Scully: It is a difficult balance and we will have to continue to address it over the coming months. I may write to you in a bit more detail. That is probably better than me trying to reach for an answer now.
Q120 Lord Young of Norwood Green: On the investment in delivering fibre to the home, what I see all around cities is loads of companies duplicating the same thing. I am pretty convinced they are not all going to make it in the end. You may not want to express such an opinion, but we need to be focusing more of them on difficult areas, if we are serious about reaching that 95%. That is one question.
Secondly, are you sure that delivering fibre to the home is going to be the only solution—I am glad you are shaking your head—given that we have 5G and 6G is coming along behind it? There are many households now, especially the younger generation, who are saying, “I’m not bothering with a landline”. Could you address both of those questions?
Paul Scully: I did not look to the side, but I am glad Holly was shaking her head, because that cannot be the only solution. If you are in the middle of a town or a city it is probably the best solution, but if you are in a rural area you could be taking hundreds of thousands of pounds, maybe £1 million, to connect up some rural hamlets and things like that.
Lord Young of Norwood Green: It depends on the technology.
Paul Scully: That is what I mean. That is why you cannot just go fibre to fibre and think that is the solution for every household in the country. It cannot be. You have to look at 5G and then 6G down the line. You have to look at satellite connections and other things. That is absolutely appropriate.
You may remember about three months ago—from memory—we issued some changes to planning regulations, going back to more towns, cities and other areas where we started to look more at the hard to reach in the built environment. This is why it is important to have that competition of people rolling out fibre. They would go in and write to landlords of blocks of flats, apartments and the like. Some 40% of the inquiries came back unanswered, because a landowner was not interested or was abroad or the property was vacant or whatever it was. We changed that regulation so that operator can approach the courts and then get into the common ways to be able to roll out broadband to the individual apartments.
Similarly, if you are building new-build houses in the United States, you have to demonstrate not just that you have a box somewhere but that you have proper rollout to the houses to be able to proceed with the building of those homes. It is then incumbent on the housebuilders to make sure that they are helping us roll out broadband. That is the speed that we want to inject and continue to inject in the process, but that speed is also helped by the fact that we do have 80 providers.
Yes, you are probably right that in an openly competitive process not all of those 80 companies will thrive, but it is better than the alternative of a monopoly company that can rest on its laurels and does not feel the need to innovate in that way.
Q121 The Chair: I am going to wrap this up, but I have a couple of final questions I wanted to ask, picking up on things that you said earlier. The first is just to go back to the 2014 strategy. You have mentioned a few times about the principles of that strategy remaining valid now. The principles, as I understand them, are access, skills, motivation and trust, which I certainly would not dispute as principles of a digital exclusion strategy. Can you tell us how the Government are evaluating the delivery of that strategy? If that is, in your view, still valid and current, and is being pursued, who is doing the evaluation, what is it saying, and what actions are being taken as result of the evaluation that you are receiving?
Paul Scully: It is essentially about working with civil society and local authorities, and making sure that we can ascertain the numbers of people who remain digitally excluded. We are repeatedly getting feedback on that. We will be working with AbilityNet, the Good Things Foundation and those sorts of organisations, as well as through our work with DWP and other charities.
The Chair: You have said a couple of times today that you want to sense check that things are progressing, and that you see it as a responsibility for DSIT in its new role to oversee this activity across government. Would you find it helpful if the Prime Minister and No. 10 made digital inclusion a priority?
Paul Scully: I have talked about the fact that it is a priority because we are doing all this work on digital. It is for naught if we have a significant amount of our population left behind, but I can do the work within the department anyway without an explicit moment on digital exclusion. I am not sure how to answer your question exactly, inasmuch as the Prime Minister does have this at his heart. I do not think he needs to be taking his time to do the sense checking himself. Our department can do that.
The Chair: No, I would not expect him to be sense checking it at all.
Paul Scully: The reason I say that is that No. 10 does a lot of convening itself. That is exactly what he has done. By setting up this department, it is giving us the sharp focus that we need to be able to look at science and technology, not just in a high‑growth way, but in this way as well, to benefit everybody.
The Chair: From this inquiry, that is what has come through loud and clear. Whether it is that bold ambition around AI, technological advancements that we want to see the UK be at the front and centre of, or even just basic levelling up, these things cannot be achieved without really effective digital inclusion. That involves an awful lot of complex component parts across Whitehall. Since the 2014 strategy, we have not seen anything from the Government that gives serious weight and urgency to digital inclusion being a means to some of those ends. That is what I am saying. If it came from No. 10, would that give you the real authority that DSIT needs if it is going to be the place where this kind of activity is convened and pulled together, and an assessment of it happens?
Paul Scully: We already have authority from the Prime Minister to do that, in the sense of digital inclusion and making sure that nobody is left behind. You will always find that AI and all the exciting whizzbang stuff gets the attention in the media and other announcements, but it does not mean that we are not looking at this.
I would be really interested to see your report and your recommendations. That will help me in the process I have been talking to you about of sense checking the work we are doing to make sure that we are still on the right lines. We do not need a long‑standing committee to do so, but I would be interested to use your report and recommendations to help me on that basis.
The Chair: Minister, Ms Creek, thank you very much for being here today and for answering our questions. As I said at the beginning of the session, this is our final hearing, so we will be moving into writing our report. For those who may be tuning in and watching us, we will be publishing that as soon as we are able. Thank you very much.
