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UK government warned to act fast on Brexit risks

ICE Graveyard 18/07/2016 Natasha Lomas

A UK parliamentary committee looking at issues pertaining to the digital economy has warned of multiple risks in the wake of last month’s referendum vote to leave the European Union.

The committee is also urging the government to set out key objectives for regulating what it dubs “disruptive change” — urging a focus on promoting productivity, innovation, and customer choice and protection, and suggesting that users of online platforms should be more involved in solutions to improve compliance with existing regulations.

Brexit risks

In a report published today, the Business Innovation and Skills committee urges the government to act quickly in the wake of the referendum vote — citing multiple risks to the domestic tech industry including ongoing access to skills and the risk of a post-Brexit brain drain; the UK’s fintech sector dominance being eroded if it loses access to the single market of financial regulation; investor confidence ebbing and businesses relocating to other European countries if the UK is outside the European digital single market.

“The digital sector relies on skilled workforce from the European Union, and those individuals’ rights to remain in the country must be addressed, and at the earliest opportunity,” the committee notes in its report.

“The Government needs to provide clarity surrounding skills, post referendum, otherwise skills and talent will be lost to other countries,” it warns.

“We could have led on the Digital Single Market, but instead we will be having to follow,” the committee writes, recommending that the government address the issue of whether businesses will be able to access the European Single Digital Market, “if they want to do so”.

“The Government must address this situation as soon as possible, to stop investor confidence further draining away, with firms relocating into other countries in Europe, to take advantage of the Digital Single Market,” it adds.

The committee also urges the government to explain how its forthcoming Digital Strategy will be affected by the referendum result, and suggests the document sets out a list of “specific, current EU negotiations relating to the digital economy”.

The Digital Strategy has been delayed for more than six months, with the government also putting out a call for public and industry contributions in December — a move the committee queries, asking the government to explain why it did this.

Following that call the minister for digital issues, Ed Vaizey, said the government would delay the publication of the strategy until after the EU referendum vote. In the event, Vaizey himself is now a casualty of Brexit, with the new Prime Minister, Theresa May, reshuffling her top team and replacing him with Matt Hancock.

The committee is also asking for clarity on how the strategy has changed since it was originally drafted. (It previously took evidence from Vaizey on this but appears to have been given only a rather sparse explanation of the strategy’s contents at that point.)

“While the Government is supporting the digital economy, including support of Innovate UK, Tech City and Tech North, there is no overall strategy for this support,” the committee writes. “We hope that the digital strategy will provide an overview of present and future Government policy on the digital economy, which will be published as soon as possible, and in its reply the Government must provide us with an update of any changes made to the strategy since it was originally written.”

“The Digital Strategy must address head on the status of digitally-skilled workers from the European Union who currently work in the UK. The digital sector relies on skilled workforce from the European Union, and those individuals’ rights to remain in the country must be addressed, and at the earliest opportunity,” it adds.

However, given the ongoing fallout from Brexit, it seems safe to expect further delays to the publication of the government’s Digital Strategy. After all, the new minister for digital issues has only been in post since Friday.

Regulating disruption

On the challenge of regulating disruptive businesses, the committee writes that public policy needs to be future proofed “as far as possible, to ensure that the need for constant regulatory reform is minimised”.

Specifically it recommends regulation based on “agreed principles”, with a focus on consumer interests of quality, choice, cost and safety.

The committee notes the UK government has generally, up to now, taken a hands-off approach to regulating tech platforms — an approach it says it supports, noting this is also in line with an earlier House of Lords report on online platforms (which judged no new regulation is needed to govern the operation of online platforms).

It further suggests that regulation to ensure “reasonable protection” for workers supplying labour to online platforms should be “either given or offered” (emphasis theirs) — suggesting tacit support for some form of opt-out options for employment rights where there is operational pressure stemming from online platform business models.

The committee’s preferred phrase here is “reasonable employment conditions”.

“We agree that regulation should ensure that reasonable protection is either given or offered to individuals working in or using business models based on digital or disruptive technologies,” it write, adding: “It is right, for example, that customers have clear evidence and reassurance that Uber drivers and their cars have been checked fully, and that accommodation booked through Airbnb has adequate insurance.”

On regulatory compliance, the committee suggests online platform feedback mechanisms could be explored as a route for ensuring businesses and their users comply with existing regulations — noting for example that some Airbnb hosts are flouting planning rules in London that restrict the renting of homes for more than 90 days per year, and also pointing to the problem with professional landlords operating multiple properties on Airbnb.

It also believes this route could help regulate conditions for workers supplying labour to online platforms.

“A more collaborative approach to regulation, involving users, should be explored by the Government. Digital platforms (the software or hardware of a site) could themselves become key players in the regulatory framework, required to ensure that users are complying with current regulations, and that workers using the platforms have reasonable employment conditions and are not vulnerable to exploitation,” says the committee.

“We believe that platforms should have greater responsibility in ensuring that regulatory requirements are adhered to. Given that they have the technology at their disposal, this should not be an onerous responsibility,” it adds.

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