Online safety laws ‘pose substantial risks to our economy’
As published in the Sunday Telegraph
Looming online safety laws pose “substantial risks” to the economy, ministers have been warned, amid fears the new red tape will smother small tech businesses.
Sir David Davis, a former Cabinet minister, has called for a new review of forthcoming tech regulation, which is designed to protect children from harmful online content.
The laws, which require technology companies to start taking action to protect children from online harms such as suicide, self-harm and pornographic content, are expected to come into force before the end of the year. Those who fall foul risk heavy fines.
In a letter to Peter Kyle, the secretary of state for science, technology and innovation, seen by the Telegraph, Sir David said the complexity of the laws created “significant regulatory uncertainty for companies”, particularly smaller businesses that lack the resources of Californian tech giants.
He wrote: “While the Online Safety Act’s intended purpose, to make the UK the safest place to be online is welcomed, its current design and scope pose substantial risks to our economy and society.”
He said smaller companies would face particular difficulty in identifying what constitutes harmful content and what they needed to do to address it.
This is particularly worrying given British tech companies are generally far smaller than US rivals, suggesting the impact will be disproportionately felt at home.
Sir David added: “These businesses, which often lack the resources of larger platforms like Facebook and X (formerly Twitter) are disproportionately burdened by this uncertainty.”
In the letter, Sir David pointed to research from Ofcom that suggested smaller websites could face costs of up to £45 per user to comply with the new laws, whereas larger websites would only be spending 25p to 50p per user.
Sir David said: “Such disparities could drastically stifle innovation and productivity and constrain our digital economy.”
It comes amid growing concerns over the health of Britain’s small business sector, which is bracing for tax hikes in the upcoming Budget.
The Chancellor is thought to be planning to increase National Insurance contributions for employers later this month, as part of a package designed to raise £40bn.
Rachel Reeves has said “difficult decisions” need to be made to fill a £22bn black hole in the public finances she claims to have inherited.
Daisy Cooper, the deputy leader of the Liberal Democrats, last week said Ms Reeves should rethink a potential increase in employers’ National Insurance.
She said: “Small businesses have already suffered from eye-watering tax rises under the last Conservative government.”
Entrepreneurs have also lashed out at the Chancellor’s rumoured plans to increase capital gains tax. In a letter sent earlier this month, 500 top business creators said proposed changes would “jeopardise the success of our country’s startup ecosystem”.
Sir David’s comments come days after Ofcom vowed to “come down hard” with multi-million pound fines on companies that fail to protect children.
In the most serious cases, the regulator has suggested it will use its powers to block access to services in the UK. Companies will have three months to conduct risk assessments.
There is uncertainty over what the regulations could entail and which companies will fall under them.
The British Retail Consortium (BRC) is understood to be concerned that some of its members may be drawn under the rules, which could apply to sales listings on websites including Amazon and eBay.
The BRC has written to the Government to argue that Ofcom has failed to consult with the retail sector, which it said “has resulted in a weak evidence base” around the regulation.
A spokesman for Ofcom said: “We’ve engaged with online retailers and marketplaces on a one to one basis and through our industry roundtables, and heard a wide range of evidence to inform our policy proposals.
“Many organisations have also responded to our consultations and calls for evidence, and every response has been given careful consideration.”
A spokesman for the Department for Science, Innovation and Technology said: “Creating a safer online world is a priority and ensuring the Online Safety Act is implemented is an important part of this work.
“To ensure firms can fulfil their duties, the Act requires Ofcom to take the needs of businesses of all sizes and types into account and sets out different steps they can take to keep everyone, especially children, safe online.”