HC Deb 22 March 1904 vol 132 cc417-32

Considered in Committee.

(In the Committee.)

[Mr. J. W. LOWTHER (Cumberland. Penrith) in the Chair.]

THE POSTMASTER-GENERAL (Lord STANLEY,), Lancashire, Westhoughton

in moving the Resolution, asked the House to allow him to postpone what he had to say in regard to the telephone service until the Second Reading of the Bill with respect to this issue of £3,000,000. This was a formal Resolution asking the House to allow an arrangement to be made for this sum of money for the purpose of extending and amplifying the present telephone service. This was not a new principle. It had been advocated in this House in the past, and he was glad to think that the proposals which his predecessors had put forward had been successively successful. The money the House was now asked to vote would be of a remunerative character. The increase in the receipts for the telephone service was growing very rapidly as he hoped, on the Second Reading of the Bill, to be able to show. On the Second Reading of the Bill he would give full details of the working of the Acts.

Moved to resolve. That it is expedient to authorise the issue, out of the Consolidated Fund, of any sums not exceeding in the whole £3,000,000 for the purpose of the Telegraph Acts, 1863 to 1899, and to apply the provisions of The Telegraph Act, 1892, to the raising of such sums.

MR. McCRAE (Edinburgh, E.)

asked whether the noble Lord would be able to say anything on the Second Reading of the Bill regarding the intention of the Post Office in respect to the acquisition of the National Telephone Company's undertaking. He understood that they had an opportunity prior to 31st December, 1904, of giving six months notice of their intention to acquire the National Telephone Company's undertaking.


said he would not be prepared to state more on that subject on the Second Reading than he could state now. The money now asked for was in no way mixed up with the question of purchasing the National Telephone Company's undertaking. There were negotiations going on at the present moment with regard to what should be done in the future for the amalgamation, or rather the absorption, of the National Telephone Company in the Postal Telephone Service. He was afraid that he should not be able on the Second Reading to make any declaration. He was in hopes that he might before very long be able to come before the House with some proposition. The money now asked was for the extension of the Post Office Telephone Service in districts where it was urgently required and demanded, and where they were unable to provide the service owing to lack of funds.


asked whether the Resolution was to authorise the issue of the money out of the Consolidated Fund.


said the money was to be provided out of the Consolidated Fund. The Treasury was to have authority to raise the money by short terminable annuities.


said he did not think the noble Lord had taken the most convenient course in deferring the explanation. The noble Lord said this Resolution was formal, but when the Bill was brought forward they would be told that the House had practically agreed to this. He thought the House should be very careful before it agreed to impose on the Consolidated Fund, which was already overcharged, this further sum without any explanation. The Committee would not fail to remember that the bargain made between the National Telephone Company and the Post Office was disastrous. They were made to vote several millions—a million more or less was so small in this connection that one did not remember the exact sum—for the purpose of competing with the National Telephone Company, and, although he understood the noble Lord to deny it, the money now asked was really for the acquisition of the National Telephone Company.




Well, absorption was the word used. It might be that, having got three millions to develop the Post Office system, the noble Lord would require three, four, five, or ten millions for the absorption of the Telephone Company, with which the Post Office was now supposed to be competing. The present system was a system of competition with the National Telephone Company. He thought the time had arrived when the noble Lord should make a clean breast of his telephone policy. He was not going to attack the Post Office telephone system. He thought it was extremely well worked, and he could bear personal testimony to the excellence of the arrangements. There was scarcely ever a hitch or a breakdown. The basis of the bargain between the Post Office and the National Telephone Company had, he thought, been throughout disastrous. What he was afraid of was that a still further disastrous course might be entered upon with regard to the National Telephone Com- pany, and the taxpayers might be saddled with an enormously increased cost. His opinion always was, and he endeavoured to impress it on the late Mr. Hanbury, that the Government should buy out the National Telephone Company, and he would rather the £3,000,000 now asked was avowed to be part of the sum for which the National Telephone Company was to be purchased. It would be for the convenience of the Committee if the noble Lord would give a little more information on the subject now. It would prepare their minds for the course he was going to take. If the noble Lord made the statement now he would find that when the Bill came on for Second Reading the conduct of it would be less difficult.


said if the noble Lord made a statement now they would be able to ask Questions in an informal way, but that could not be done if the statement was postponed until the Second Reading of the Bill.


said he was perfectly ready to make a statement now. He hoped the House would take the statement once and for all, and that it would not be necessary to repeat it on the Second Reading of the Bill. In previous years £4,300,000 had been voted for the telephones by the Acts of 1892, 1896, 1898, and 1899. That money had not been expended, except as regarded the purchase of the trunk lines and in buying other plant. It had been used for the further development of the postal telephone service. The extra amount he was now asking was not to purchase any plant of any other company, but was to extend the trunk lines where required, and to create exchanges in places where there was now a great demand for the telephone. He had a long list of these places, but it would probably weary the House to read it. They were all over the Kingdom, and he was glad to think that, the telephone was extending into districts where the telegraph had not reached, and that it was of infinite service in small towns where the telegraph was not of the same use. In round figures the expenditure had been as follows: On trunk lines £2,180,000; on exchanges in London £1,495,000; on exchanges in the provinces £262,000; and on stores and stock of telephone requirements £233,000. The total expenditure was £4,174,000, leaving a balance of £126.000, which would just carry them over the present financial year. The amount he was now asking was £3,000,000, which would be distributed roughly as follows—though he would not like to bind himself absolutely to the accuracy of the distribution, owing to the fact that demands must be met as they arose:—£1,300,000 for trunk lines; £1,500,000 for London exchanges; and £200,000 for provincial exchanges. Speaking roughly, this would carry them on for five years, but lie should explain that if the demand for telephones increased in an even greater pro-portion than in the past the Rouse would probably be asked to grant a further sum. It might interest the House to know something of the work done by the telephone. The number of conversations during one year of their operation was 12,895,883. The number of single conversations over the telephone compared very favourably with those over the corresponding plant in other countries.

The London exchanges had been the most expensive; but they were also most complete and of the largest capacity. There was only one thing which, lie believed, people disliked more than the paying of taxes, and that was having the streets pulled up in front of their doors; and, therefore, it was necessary in taking up the streets and laying down pipes for telephone wires to have regard to the amount of expansion of business in the future. Accordingly a certain amount of unremunerative capital had been expended initially, but in after years that would be remunerative. At the present moment the capacity of the plant in London was for 40,000 subscribers, but they had just yet only 15,292 subscribers, so that only a third of the plant was in profitable use. But they were going to have an exchange for 6,000 subscribers at Hampstead and one for 2,000 subscribers at Ealing. It might interest the Committee to know that there were in London 1,094 miles of underground pipes, in which there were, at present, 110,128 miles of wires. These had all been provided for by the money voted by the Committee. Of course there were miles and miles of spare pipes only waiting for the development of subscribers to be tilled with wires. He could not give corresponding figures as to provincial exchanges; but the increase of subscribers in the provinces to the Post Office telephones was from 1,259 in 1899 to 5,000 this year. It was in the smaller towns, with a limited number of subscribers, that the greatest increase had taken place; and the telephones there had undoubtedly been excessively useful.

While the expenditure had increased, he was glad to say that the receipts had equally increased. In the central exchanges in thirteen months the receipts amounted to £61,000. In regard to payment, as the Committee knew, there were two rates—a fixed rate which covered all charges; and there was also a fixed rate and a payment for so much per call. Ninety per cent, of the London subscribers accepted the second rate—a minimum rent of £5, plus 30s. as a minimum for messages, and a penny for every message after that. Now, the cheapest telephone which had been asked for was by the London County Council, viz., £10 per annum. He was glad to think that this latter rate, taking an average, worked out considerably less than £10 for the use of the Post Office telephones in the London area. It was slightly under £8, which was a great deal cheaper than had ever been contemplated as possible some time ago. As to actual profits, as he had said, a great deal of the capital was, so to speak, lying idle at present waiting to be developed; but the increase of receipts had been so great last year that he was sanguine enough to believe that next year the system would be a paying concern; and that in subsequent years it would be an enormously paying business. In the Report of the Postmaster-General last year the balance towards meeting depreciation and interest on capital expended was stated to be £6,155. He had had drawn up a statement on exactly the same lines, and that showed that they should be able to earn £48,000 next year—a jump which he thought justified him in saving that before long the Post Office telephone system in London would be more profitable than at present. It was for the extension of that policy that he was asking this money; and he hoped he had been able to show the Committee hat he was not asking the Committee to rote money which would be for an unremunerative service. It had nothing to do with the National Telephone Company. They were going to extend the lines with which the National Telephone Company had nothing to do, and by extending the trunk lines they would be extending exchanges for which there was a great demand. The Post Office was therefore not competing with the National Telephone Company in areas where the National Telephone Company already existed, but they were getting telephones into towns and villages which under ordinary circumstances would never be able to get such a service. Moreover, they were building up a general system which would prove beneficial to the whole business community. His hon. friend spoke about the purchase of the National Telephone Company's undertaking. That was quite outside the present question. It was true that the Post Office was able before the end of the year to give notice to the National Telephone Company to purchase by arbitration unless they could previously come to some agreement.

MR. LOUGH (Islington, W.)

Must not the notice be given in June?


said he was not quite certain as to the date, and he would find out; but they could do it by agreement before. He believed that purchase by arbitration would be a very expensive thing to undertake; and he was much more inclined to accept the other alternative of making some amicable agreement. But that was not in any way bound up with this particular Resolution which he was now asking the Committee to agree to. If it came about that there would be an agreement, it would come up for approval by the House of Commons. He, therefore, asked the Committee to accept the Resolution which was to grant power to the Post Office to obtain £3,000,000 more money for a system to which the Committee had already devoted a large sum, which had been profitably invested and which in the future would show as large a profit as in the past.

MR. CALDWELL (Lanarkshire, Mid)

said that before granting this £3,000,000, this was obviously an occasion for reviewing the Post Office telephone system—more especially from two points of view. The first was the expediency of handing over the telephone system to the London County Council instead of spending more money on the Post Office system: and the second was, what was to be done with the National Telephone Company? It was all very well for the Postmaster-General to say that after negotiations had taken place, the Post Office would come to the House and ask the House to give sanction to an agreement. That was a practice which the House of Commons had always condemned, because the agreements carried by private arrangement were invariably carried by the Government majority after twelve o'clock at night. The House of Commons had therefore no say in the arrangement. The same thing took place in connection with the purchase by the Government of the trunk lines from the National Telephone Company. The Government would tell the House of Commons, after they had made an agreement, that it was not judicious to go into an explanation of negotiations until these were finished. The House of Commons therefore found they were always stultified in their criticism. The Post Office had formerly made their own arrangements with the National Telegraph Company, which proved to be disastrous to the public interest. He suggested that the proper way, if the House of Commons was to have effective control over the expenditure of this £3,000,000, was for the noble Lord to say, on behalf of the Government, to what extent that money would be spent by the Post Office, or whether it would be handed over to the London County Conned, as had been done in Glasgow, where the municipal telephone system had worked remarkably well. He did not suppose the Government were particularly anxious to extend the telephone business, or anything else, if they could get a local body to undertake the work, and do it more efficiently, since they had control of the streets. The House had no confidence in any arrangement between the National Telephone, Company and the Government. The officials of the company were far too clever for the Government officials, as had been shown on previous occasions. Under the Telegraphs Acts notice might be given six months before 31st December, 1904, if the Post Office desired to purchase the undertaking of the National Telephone Company, otherwise the company would continue until 1911. The company were anxious to realise now, while the present Government were in power, instead of waiting until the end of their lease, when they would be practically at the mercy of the Post Office. Obviously, the question of purchase was one which ought to be considered by a strong Committee of this House; and he thought the House should have an assurance to that effect. The expenditure of this £3,000,000 was inseparably bound up with the policy of the Post Office. He was astonished that the Postmaster-General should have imagined that this was merely a formal stage. The Telegraphs Hill was a money Bill and might be brought on after midnight, in which case there would be no opportunity for a discussion. He would, therefore, suggest the appointment of a strong Committee to consider the entire question before the money was voted. Such a Committee would relieve the Post Office of a great deal of responsibility, and would thoroughly investigate the entire matter.


said it appeared that the £3,000,000 required would be raised by terminable annuities. Was that amount to be spread over five years and would the sum to be raised in the first year be comparatively small? According to the Postmaster-General the income from the Post Office telephones was increasing; and, therefore, it was more or less a good investment. He agreed, however, that the present was a most inopportune time to buy out the Telephone Company as the Post Office telephone system would be able to gradually elbow out the company's system. He certainly would deprecate any large sum being paid for the purchase of the. Telephone Company at present.


said that the only accounts the House had in reference to the Post Office telephones also included the telegraphs; and, therefore, there was difficulty in ascertaining what the results of the telephones really were. The telegraph account showed a continually increasing loss. In 1903 the balance of expenditure over receipts was £601,000, the previous year it was £651,000, and the year before that £337,000. Even these amounts did not include all the loss that was incurred. He wished to put it to the House that this was a losing concern. It was said that the great house of Rothschild made its reputation and its fortune by following the dictum of cutting its losses and leaving its profits to run on. The Post Office was a losing concern, and to propose to put £3,000,000 into it was a very serious matter, and one not to be viewed with satisfaction. The Postmaster-General made a serious proposal to lump all the Post Office Votes together. He, on the contrary, would suggest that the accounts should be cut up, in order to show the exact working of the different departments. At present, the telegraph and telephone accounts were joined. That, in his opinion, was wrong. The two services were essentially different; and the accounts for each ought to be given separately. It was rather deplorable to find that, while the National Telephone Company was making very handsome profits, the Post Office was making a greater and greater loss. He asked his noble friend to contrive to give the accounts of the telegraphs and telephones separately.


asked whether a portion of this money would be spent on an extension of the telephone system in Ireland. If so, he would gladly support it.




said the loss on the telegraph service was nearly £1,000,000, and one reason given by the Post Office was the great use that was being made of the telephone. The life of the National Telephone Company would cease in seven years, and he would like to know from the Postmaster-General whether any arrangement was being made for buying the undertaking. The words of Mr. Arnold Morley were still fresh in the memory of the House. Mr. Arnold Morley said he would not give the Telephone Company more than the price of old iron for their undertaking. If that were so, and they could have some assurance that the country would not be called upon to pay an enormous sum for the company, he thought they would vote the money now before them much more cheerfully.


thought it would be a great convenience, in view of the possible acquisition of the National Telephone Company's system, if they could have the accounts presented separately, as suggested by the hon. Member opposite. Bo far as he understood, there was an option of purchase in 1904. But, if the Government were going to exercise that option, he gathered they would have to give six months' notice prior to 31st December. So there was really not very much time for the Government to make up their mind with regard to what they were going to do with the Telephone Company. He hoped that, until the Government had settled its policy on this question, no part of these £3,000,000 would be spent on competitive undertakings with the Telephone Company. They wanted effective competition between the Post Office and the company, but if the Government were going to acquire the company's undertaking, there should be no expenditure on any works which would be of an overlapping character. He should like to know from the Postmaster-General what period was to he taken for these annuities.


Twenty years.


thought that was a very reasonable period for work of this kind. In view of the fact that they were piling up the National Debt to an extent which had not been equalled for many years, he desired to impress on the noble Lord the necessity for proceeding cautiously in this matter.

MR. FIELD (Dublin, St. Patrick)

expressed himself as being favourable to the extension of the telephone service in Ireland, but, at the same time, stated that a great deal might be said on the question of cost. As compared with the services of Norway, Sweden, and other Continental nations, the cost of the Irish service was prohibitive. In those countries the business was almost entirely done by means of the telephone, but in Ireland it was very seldom done in that way—the cost was too prohibitive. The telephone service was practically a branch of the Post Office telegraph service, and it ought to be at the service of the public in the same way. It should not belong to a private company, and he was at a loss to understand why the Government could not make a profit out of it.


said the statement of the Postmaster-General as to the increased receipts from the London service had been favourably received; but he hoped the right hon. Gentleman would give fuller particulars. Four-and-a-quarter millions of capital had been sunk in the undertaking; and £48,000 was not nearly sufficient to meet the interest and depreciation charges on so large a sum. He asked the right hon. Gentleman to state the amount of receipts for the telephone service for the whole country, whether the service was paying, and, if not, whether it held out a prospect of paying shortly. The Committee were obliged to ask for this information because the accounts as published included the telegraph accounts. It was essential that the accounts for the two services should be separated, and he hoped the right hon. Gentleman would give fuller information regarding these accounts and state the amount of the net estimated receipts to the end of the year. The Postmaster-General evidently believed the business to be a good and paying one into which the State ought to plunge to a far greater extent. He agreed with the right hon. Gentleman, believing that, properly managed, the telephone service would be of the greatest benefit to the community, and that it ought to belong to the State. He was in favour of a progressive policy, but before a vote was taken the right hon. Gentleman ought to give definite pledges in regard to certain points. What was to be the policy of the Post Office with regard to the encouragement of local authorities to develop local telephone services? Did the Department intend to follow the course adopted by the National Telephone Company in buying up the Tunbridge Wells system, or would local authorities be encouraged to develop their local systems? Reference had been made to the splendid facilities afforded in foreign countries, but on the basis of the number of services to the population the Island of Guernsey had a system which could hardly be beaten. With a population of 40,000, there was a telephone for every thirty-three inhabitants; and although the service was exceedingly cheap, there was a balance of profit after all expenses had been paid. That was a good instance of the result of working the telephone system simply and economically.

The right hon. Gentleman had promised that the House should have an opportunity of discussing the agreement with the Telephone Company. If that promise meant that the agreement would be entered into and then the House would be asked to say "Aye" or "No" to it, it would be a most unsatisfactory proceeding. He was glad to hear that negotiations were going on; everybody would be wiling to deal fairly with the Company, and it would be to the advantage of the State to take over the undertaking as soon as possible on fair terms; but ho was anxious that the House should have fair play in this matter, as it had never been properly treated in telephone negotiations in the past. He suggested that the terms of the agreement, when drafted, should be submitted to a Select Committee with a simple reference, so that the House would know whether it was safe to go on with the matter or whether amendments were necessary. He was extremely interested in an experiment which at his suggestion the right hon. Gentleman's predecessor had carried out in an outlandish area in Ireland. In county Cavan the county town was connected with several sub-districts by telephone for the purpose of sending telegrams, and at his suggestion, the public in the district were allowed to use the telephone. The concession was a great advantage to the district, and had been availed of to a considerable extent. He believed that a similar arrangement might with advantage be made in many country districts, and he suggested that the right hon. Gentleman should take the matter into his consideration. In London considerable difficulty arose from the scarcity of call-offices and their inconvenient situations. Why should not every post office be made a call-office? Such an arrangement would be a great convenience to the public, and would tend greatly to increase the use of the telephone.

MR. BRIGG (Yorkshire, W.R., Keighley)

complained of the unbusiness like condition of the present arrangements between the Government and the Telephone Company. The company s licence expired in 1911, and consequently, whenever anybody asked for improvements to be made, the invariable reply of the Company was that they could do nothing as they were in the hands of the Government, and would be obliged in 1911 to give up all their rights and claims. Between the Government not buying and the company not selling the public were being badly served. The company were naturally averse to spending money on works which would last longer than the period of their licence, and he urged the right hon. Gentleman to endeavour to come to an arrangement which should come into operation immediately.


said the form the raising of this money would, take would be a sort of domestic loan and there would be no question of disturbing the money market. He thought it was advisable that the telephone and telegraph accounts should be kept separate. With reference to the purchase of the National Telephone Company by the State it should not be forgotten that that would involve a great increase in the number of persons employed in the public service. Already there were about 170,000 persons employed by the Post Office, and they represented a very serious danger to the independence of Members of this House. Consequently it was a rather serious matter for the Government to adopt any suggestion which might add a few more thousands to those already employed.


said the principal question was that of the future arrangement to be made with the National Telephone Company. His personal opinion was, notwithstanding certain dangers which he clearly foresaw, that the right thing was probably purchase, and purchase by agreement would probably be cheaper than purchase by arbitration. That, of course, was a matter for consideration; and he thought that in such a matter, where the amount paid would, for all time, have an effect upon the receipts from what would be a national institution, the whole subject must be thoroughly discussed. He would not like to decide off-hand, but he rather inclined to the proposition that a small Select Committee of the House should be appointed. Of course, however, negotiations must go on between the Postmaster-General and his representatives and the company, and not between the Committee and the company; and all he could pledge himself to was that the House should have every possible opportunity, so far as he could give it, for considering this agreement, and that no agreement should be in any way binding on the Government until it had received the assent and ratification of the House. He should endeavour to give opportunities for full consideration before coming to a decision, and very likely a Select Committee would consider any agreement he might propose. He might propose an agreement, and then ask for a small Select Committee, but he asked hon. Members not to bind him clown in regard to a matter which he had not considered before he came down to the House.


thought there was other machinery apart from a discussion in the House for the consideration of such an agreement.


said he would not pledge himself, but the agreement would be considered by those best qualified to deal with it. At the present time he would not bind himself by any definite pledge. The hon. Member for Edinburgh asked whether the Post Office and the company were overlapping. They were not in any way; the former was only dealing with trunk lines or with areas into which the company would not or could not go. He would be only too ready to help in every way any municipality that wished to start its own telephones.


pointed out that municipalities could not get an extension beyond 1911 unless a similar extension was granted to the National Telephone Company.


said he hoped that the present difficulty—that a municipality could not get an extension beyond 1911 without the company's receiving the same extension—might be overcome when they came to a general agreement. As to the suggestion of the hon. Member for Islington that every post office should be made a call-office, he was willing to consider the possibility of such a thing. With regard to the suggestion of the hon. Member for King's Lynn that the accounts should be kept separate, he believed that they were kept separate for London, but he was not certain how far that was possible for the telephone area of the three kingdoms. He thought separate accounts should be kept, and he would look into the matter to see if it was possible to meet the hon. Member's suggestion.

Resolved, That it is expedient to authorise the issue, out of the Consolidated Fund, of any sums not exceeding in the whole £3,000,000 for the purpose of the Telegraph Acts, 1863 to 1899, and to apply the provisions of The Telegraph Act, 1892, to the raising of such sums.

Resolution to be reported To-morrow.