HC Deb 18 February 1921 vol 138 cc479-514
Mr. REMER

I beg to move, at the end of the Question, to add the words, But regret the absence from the Gracious Speech of any announcement that the telephone service will be placed under private enterprise, in view of the necessity for a cheaper and more efficient service. 2.0 P.M.

In moving this Amendment, I would first like to call attention to the very strong opinions which have been expressed on the telephone service within the last month or six weeks, almost unanimously, by the business community. This feeling has been aroused more fiercely in all kinds of Associations and Chambers of Commerce connected with trade than probably on any other subject which has been discussed by them for a very long time. The opinions have not been merely an echo of a Press agitation. I do not think a Press agitation could ever arouse public opinion unless there was some solid sound foundation for it, and more particularly is that the case if the public opinion which is aroused is the calm and cool opinion of the business community. We have just concluded a Debate in this House during the last two days on the unemployment question. If there was one thing which came out more prominently in that Debate than anything else it was that the business community as a whole is now faced with unparalleled difficulties and anxieties, and I am sure, when we come to realise the amount of irritation which the business man has almost daily to face through the telephone service, we shall agree we ought to take every step possible to remove that cause of irritation. I may be asked why has this agitation on the part of the business community been aroused against the telephone service? Let me at once say, quite frankly and bluntly, that the telephone service of this country is thoroughly bad and inefficient. I am quite sure that the difficulties about raising the charges would not have arisen, and that the volume of strong public opinion on that point would not have been created if the telephone service had been an efficient service. If it had been efficient there might have been a few grumbles and some small complaints, but the complaints would not have reached that loud volume which they have attained during the past six weeks.

I propose to give three examples from personal experience of the inefficiency and incompetence of the telephone service. I suppose, like myself, every Member of the House has received letters on this subject. One of my constituents wrote to me complaining that he could not get put on the telephone service. He conceived a novel and original way of getting the telephone connection. He went to the Manchester Exchange and gave a number of his friends 1s., telling them to send telegrams on any subject they liked to be delivered at his private house, which was four miles from the post office: After this had been going on for about ten days the postmaster came to him and said, "Is there no way by which I can get out of the terrible trouble you are putting me to? "The reply was, "If you put me on the telephone I shall not need to have any more telegrams." Prior to this my constituent had been told, as an excuse for not putting the telephone on, that there was a shortage of labour and material, but 48 hours after this conversation the requisite labour and materials appeared, and he was put on the telephone system and is on it at the present moment. That is my first example of the inefficiency of the telephone service.

The second example deals with a matter on which I have had correspondence with the right hon. Gentleman himself. Another of my constituents wrote complaining of his inability to get put on the telephone. This was the case of a very important business concern. The right hon. Gentleman, in answer to my letter, said the reason why my constituent could not be put on the telephone was because of the shortage of material, and especially of silk. This firm happened to be one of the largest silk manufacturers in the United Kingdom and their works working two days per week, and naturally they did not regard this excuse as adequate. After it had been pointed out by them that it was not a good reason, the excuse was altered, and instead of it being alleged that there was a shortage of silk, they were told that the reason was that the price of the silk required happened to be higher than the price of foreign silk.

These are two examples of the most incompetent and inefficient telephone service which has existed in any part of the world. I now come to the third example. This is from my own personal experience. I have a telephone in my private office. I am persistently being cut off, and have been so cut off frequently during the last three years in the middle of important conversations. After complaining to the telephone managers, I was told that if I would only give a specific instance my complaint would be immediately remedied. I gave a specific instance. A gentleman came to the telephone and asked for me personally. I spoke to him. He said, in most courteous language, that the facts were not as I had stated in my letter, but while he was in the middle of telling me so the old trouble recurred, and we were cut off in the middle of the conversation, thereby proving conclusively that my complaint was well founded; that there was some inattention on the part of the operator, and that the telephone service was not as efficient as it ought to be.

These three cases are typical of many complaints which every Member of this House have received from business men. They show what the business man is suffering from day by day, and they constitute one of the reasons, I might say the chief reason, why the business community are so fiercely condemning the Postmaster-General at the present moment. I have read very carefully, as most of us have done, the report of the Select Committee dealing with the question of increased charges, I think the House owes a debt of gratitude to the Committee for the careful way in which they have examined this problem. But what does that report mean? If it means anything it means that the nationalisation of the telephone system has failed, and failed badly. It has proved quite conclusively that the nationalisation of this or any other service is bound to fail. We have, fortunately, in this country a telephone service with which we can compare the Post Office service. I refer to the telephone service in the City of Hull. In 1912, when the telephone service was nationalised, this municipality decided to continue it as a municipal service, and the National Telephone Company's plant was bought by the Hull Corporation from the Post Office. I am not going to enter into the details of the service except to say that the Hull Corporation supply a telephone service at a very much lower rate than the Post Office service. My object in referring to this particularly at the moment is this. The Postmaster-General has been speaking recently, and on the 8th February, addressing the National Association of Traders, he gave various reasons why the Hull Corporation were able to supply the telephone cheaper than the Post Office were. One of the reasons that he gave was that the rents of the premises—offices and exchanges—of the Hull Corporation's service were 5d. instead of 7s.1d.per station. I do not know whether he is aware of it or not, but that statement is a complete mare's nest. It is not correct. The inference which the right hon. Gentleman drew was that the Corporation were providing these premises free of rent and rates, and the figures do work out in the accounts at 5d. per station. He has entirely overlooked, however, the fact that in the capital account of the Hull Corporation there appears a sum of £14,000 which the Corporation borrowed for the purpose of building these premises, and that they are paying interest on this sum, so that, instead of the amount appearing in the form of rent, it appears in the form of interest on capital which they have borrowed. A further point which shows the inefficiency and mismanagement of the Post Office in their telephone service is that they have not adopted the ordinary business policy with reference to interest and depreciation. It is almost impossible to understand the method which the Post Office adopt in writing down for depreciation each year, but, adding these two figures together, the amount per annum per station in the case of the Hull Corporation service is £l 6s. 5d., while in the case of the Post Office it is £3 7s. 5d. In other words, the amount is over £2 higher per station in the case of the Post Office than in the case of Hull.

I do not propose to go any further without making a definite and constructive proposal. My Amendment deals with the proposal that this service shall be put under private enterprise, and I believe that the only remedy is to let the business men of this country show that they can, by business methods, manage the telephone service much more efficiently and cheaply than the Post Office can. I have taken some trouble to draw up a scheme by which this can be done, and I put it before the House as a constructive proposal to which I hope the right hon. Gentleman will give his very careful consideration. The scheme that I propose is that the telephone service shall be leased to a private company, and I have taken the trouble to find that there is a body of responsible public men who are prepared to guarantee the proposal which I am making. They are prepared to pay the Government a considerable sum of money annually for the privilege of providing the public with a service of telephones at the present rates, without any increase in charges. The effect of this, so far as the Government and the right hon. Gentlemen are concerned, would be that, instead of the loss with which they are now faced, they would have a profit; they would have something coming into the revenue instead of having to provide money, and instead of having, as happens with all Government-controlled establishments, the blight of Government control turning what were profits in the case of the National Telephone Company into a most serious and disastrous loss. Under this scheme we should have a sound profit coming into the revenues of the country. It is obvious to everyone who has examined the history of nationalisation whether of the telephone service or anything else, that it is always disastrous. When people are working for themselves they work harder and more efficiently than they ever will do if they are working under Government control Under Government control they are faced with the blight of red tape and of inefficiency on the part of those who do not understand the job that they are trying to do; and they find also that there are political influences which cannot but be bad for employés under State enterprise. Political graft creeps into all nationalised industry, and I am certain that it has crept into this telephone service. I know that I shall be told that the inefficiency and dearness of the telephone service is the result of the War; but we must remember that this telephone service, which produced a profit under the National Telephone Company, produced, immediately it was put under the State, a loss. That is the elementary fact which I will ask the right hon. Gentleman to explain, and which is the most damaging thing that he has to explain.

The POSTMASTER-GENERAL (Mr. Illingworth)

It is the easiest.

Mr. REMER

I am very glad to hear that it is the easiest, because it is the point upon which business men feel most deeply, and the one they feel to be the most difficult for the right hon. Gentleman to explain. If the whole country were to serve as civil servants, logically there would be an end of all responsible Government. We find that, similarly, nationalisation means, as the hon. Member for Plaistow (Mr. W. Thorne) mentioned in an interruption in the Debate on Unemployment, the end of our freedom, the end of everything which British people love, and which they desire to see in their national institutions. If we could only get back to the elementary principle which used to obtain in the public service, when business men managed the telephones on sound businesslike lines, instead of having them under the blight of Government control as a nationalised industry, I believe that we should be able to give the country not only an efficient service, but a cheaper service than we have at the present time.

Captain THORPE

I beg to second the Amendment.

A recent publication, with all the appearances of considered judgment, suggested that this was a proper time to raise a statue at the public expense to a lady telephone operator. The reason given why she should be held up to honour at the present time and handed down to posterity, was that she presented a subscriber with the particular number for which he had asked, and did so without delay. That is an emphatic, but, I think, not exaggerated indication of the public feeling at the present moment about the telephone service. It is true that the right hon. Gentleman who at present occupies the position of Post-master-General is not entirely to blame. He finds himself in an unfortunate position. He is the legal successor of other people who started an inefficient and uneconomical system. He has what in the law is called a damnosa hereditas. He finds himself burdened with something of which he has to make the best that he can, something that is bad from top to bottom. The complaint is not a new one, but it has been brought before the public in a striking manner by the suggestion that the expenses should be increased. The increase of expenditure and the decrease of efficiency is one of the inevitable concomitants of all Government enterprise. When the Government took over the telephones some 13 years ago, I understand the wages of the telephone operators were raised 20 per cent, in order that they should be made equal to the wages of the telegraph people in the Post Office. Their efficiency immediately descended 20 per cent., and the history of every subsequent rise, as I understand it, is a decrease in the efficiency of the service. The recent charges are such as give one very seriously to consider whether they are justified by the subsequent services which are rendered to the community. The proposition is roughly that in a large number of cases there shall be an increase of 160 per cent, over the pre-war rate, and in some cases of 250 per cent. Business men immediately ask themselves, "Where is this going to stop? If we pay more, are we going to get a better article?" I believe the business community would be prepared to pay any sum for an efficient system. Is this going to make it efficient? That is the first question, and from our experience in the past, if we are not over-persuaded by my Friends on the Labour benches, who would persuade us that the nationalisation of everything is the ultimate good, I feel convinced that this is only another demand indicating a later demand without any subsequent increase in efficiency. The country does not want to pay more unless it is going to get better returns. The country anticipates nothing from a Government-managed enterprise and wants to take this opportunity of saying it will not pay more until it is satisfied that something is going to be done to consider and alleviate its complaints.

Of course, one could give isolated complaints, and one could spend the whole day doing it, but I heard one this morning which is perhaps somewhat novel. It was from a gentleman in my constituency who, as the result of some successful commercial enterprise, decided to have a telephone installed in his private house. It was installed with the usual paraphernalia of instalment. They require nearly as many workpeople to instal a telephone as they require prelates to consecrate a bishop. A large army descended on his house and in due course a telephone was installed. He received with some pride a telephone book. He turned his name up. He found his name was right; his number was wrong, and his address was wrong. He made a complaint. I have no reason to doubt that the complaint was immediately considered, but I should have no surprise myself if it had been returned with the request that it should have been submitted in triplicate. That is a not uncommon form of dealing between the Government and a private individual. Another case is that of a village in Scotland. It is full of health seekers in the summer and empty in the winter. There was a generally expressed desire to have a telephone system installed. The usual formalities were gone through, and the Post Office required that a certain number of people should add their names to the demand for a telephone system. The census was taken in the winter, and it so happened that the number of people who resided in the winter and required telephones caused the census to be two below the requisite number. The Post Office, properly, of course, under the system in which they live, wrote back and said: "As the number falls below the requisite number you cannot have a telephone system." They were quite right if they go by the rules which govern Government offices, but they were quite wrong if they are running the telephone on a commercial system. A private company would have gone into the facts and said: "Here is an opportunity of development. Here is perhaps a little risk. We will take it, and if it succeeds it will benefit our shareholders." The Government cannot do that, and they would be wrong to try.

These are only indicative of the thousands of complaints which could be made against the system of nationalisation. My hon. Friends on the Labour Benches, whom I see present in large numbers to support this continued nationalisation of telephones, must find it a difficult task to support the present Government ownership. One wonders how often Members on these Benches find their dogmas shaken. We can conceive of one or other of the more extreme Members of that Party retiring on some evening to bed, and just before he goes into bed the telephone bell rings, and I have no doubt he says to himself, as many of us might have said, "That is a trunk call; I must go to it. It may be from Lenin at Moscow or from the Member for Central Hull." He goes to it and he hears a young lady say, "What is your number?" He gives his number and he hears the reply, "Oh, I am sorry, wrong number." There is no reason why that should continue. Presumably the lady will continue to draw her salary as long as she sits at the desk. Presumably she may make mistakes, but she only has to continue to live and be respectful to her chief in order to retain her job. In my submission the whole system is wrong. It is proved abundantly that private enterprise can run telephones, as it can run other things. It is proved in Hull. Glasgow has made a success of it. Has anyone any fault to find with the American system? Every shop and every house in America has the telephone. We are told that the increase of telephone wires increases expenditure. That principle, if true, does not appear to have hindered development in America. The hon. Member (Mr. Remer) suggested that a private company should be asked to take it over. If I may elaborate that in one respect I would suggest that the public might be protected by these provisoes, namely, that the company should give an undertaking that the charges under their management should not exceed the present charges and that the percentage of profit paid to the shareholders should not go above a certain figure, and that any sum above that figure should be spent in reducing the charges to the subscriber. That is a proposition which I understand has been used with effect in the case of gas enterprises, and when you have a body of business men who are prepared to take the risk, it appears to me to be a mistaken policy for the Government, whose duty after all is to govern and not to run business enterprises, to hand it over.

The Postmaster-General has received a large number of deputations. One can only wish he had received as many letters of complaint—and perhaps he has—as individual Members. He informed one deputation that there were no skeletons in the cupboard at the Post Office. He meant by that that all the cards were on the table and he had nothing to conceal. He has a chapter of loss. He has no prospect of greater success. He has a tale of inefficiency and irritation. If anyone had expected a skeleton in the cupboard I think perhaps he was only anticipating by a very short time the decomposition of the telephone service. One hopes that in the very near future there will be a skeleton in the cupboard, and that it will be the skeleton of the present system, and that a more efficient, more useful service will take its place, and that we shall look back to the present day as days of the past in which we learned that the Government never could and never will successfully run a big business enterprise. The right hon. Gentleman (Mr. Illingworth), who has many friends, is known to some of his admirers as the Napoleon of the Post Office. I hope he will forgive me expressing the hope that this afternoon the Napoleon of the Post Office will meet with his Waterloo.

Mr. ILLINGWORTH

The hon. Member for Macclesfield (Mr. Remer) has truly said that this question has excited a certain amount of public interest. There are certain subjects which always do excite public interest: one is the telephone service, and the other is the question of temperance. With respect to the telephone service, the Press has taken up the subject very vigorously and have shown interest in my past, my present, and my future. They are among the large flat rate users who will have to pay in future a fair share of the expenses of the administration of the telephone service. Like the other large telephone users, they have been getting at a very low rate a service which has been paid for by the smaller people. The hon. Member for Macclesfield comparing the telephone service with that of the National Telephone Company said that it was now a very bad service. I am afraid the hon. Member has a short memory. I have always taken an interest in the telephone question, and in the days of the National Telephone Company I was one of those who made themselves rather troublesome to the company in criticism of their service. I do not wish merely to give my own personal experience, but I can point out from the Debates in this House and from extracts from newspapers the general feeling of the public with respect to the service rendered by the National Telephone Company. A Select Committee of this House was appointed in May, 1898, and one of their references was: Is the telephone service now, or is it calculated to become, of general interest? Their reply was: The telephone service is not at present of general benefit either in the United Kingdom at large or even in those limited portions of it where exchanges exist. Under the monopoly which was given to the telephone company they could go where they liked and not go where they did not like. Unless there was a fair chance of getting profit in a certain district they could refuse to extend their service there. Not only that, but they only had a flat rate", which was extremely expensive, and did not allow the smaller users any benefit. In accordance with the report of the Committee the Government offered to give licences to towns of 50,000 inhabitants and more. On this point as to the efficiency of the service an inquiry was held at Glasgow, and the service there was regarded as very inefficient. One of the Members for Glasgow said the service there was the worst in the world. Sir James Fergusson, who was the Post master-General at one time, and afterwards became a director of tin National Telephone Company, said that the National Telephone Company were treated like criminals and the enemies of the public. That does not show that the nation at large was satisfied with private management. After mny years the system was still unsatisfactory. I will read an extract from the "Times" of the 10th September, 1906: The Postmaster-General had no power to compel the company to give either a good or a cheap service, and, except in so far as municipalities could exact terms for the Use of the streets, the public were at the mercy of the company. The official inquiry which took place at Glasgow showed that the service actually given by the company was very far from ideal, both being dear and bad. The Manchester "Dispatch" also made the following statement in 1907: The patience of the long-suffering telephone users in London has come to an end, and they have formed an association for their own protection. The "Daily Express," which has taken a great interest in telephone matters for a considerable time, stated on 3rd August, 1907: It would be, perhaps, an exaggeration to say that the telephone service in London cannot be more inefficient that it is; but, certainly, the telephones in comparison with the service in foreign cities, which are inferior to London in size and importance, are both very dear and very bad. It is comforting to know that the services rendered to the community by the Post Office are, on the whole, admirably carried out, despite the absence of competition, and this circumstance, taken together with the fact that 'hope springs eternal in the human breast,' makes one have some small encouragement. To-day, numbers of people are not quite as satisfied as they might be with the telephone system, or, at any rate, as they hope to be. There are various reasons for it. For one thing, the National Telephone Company left its system in a very bad state. At a certain date their licence was to terminate, and they had to hand over their plant to the Post Office at a price which had to be settled by arbitration, and their outlay was very small towards the end. There was a great lot of work which had to be done by the Post Office when they took over the telephones, and they were expending considerable sums of money. Then the War came along, and the expenditure went down considerably. In the last year of the National Telephone Company, then expenditure was £395,000. The Post Office expenditure in 1913 was £1,800,000; in 1914 it was £3,400,000, and in 1915 £3,300,000. Then the War came, and the services made demands on the efforts of the Government, and in 1917 the expenditure dropped to £288,000; in 1918 it was £189,000, and in 1919 £251,000. Hon. Members will quite understand that through not laying out sufficient money in these years, arrears of work accumulated, and the plant of the Post Office got into a very unsatisfactory state. In 1920 we began laying out money which has not yet shown results as it will do before long. The expenditure was £2,600,000. The programme for 1920–21 is £5,803,000. Most of the engineers went into the Army, and there were very few men left to give assistance.

An hon. Member has referred to another company who say that they will be prepared to take over the service, and continue it at pre-War prices with post-War expenses. I hope that they are a very rich corporation. It would be a very expensive undertaking to try to carry out. I would like to know if there is any service or business in this country that can be earning dividends and charging only what we propose to charge—on the average 80 per cent, over pre-War prices. If there are any I would like to hear of them. I have asked on several occasions, but have never had any reply as to where it can be done. The hon. Member for Macclesfield (Mr. Remer) referred to the profits earned by the National Telephone Company, which he said had all disappeared since the Government had taken over the telephone It is purely the question of the difference of accounts. The National Telephone Company put their financial interest and other items, as well as their dividends, as profit. They also had no depreciation fund. Instead of that, they put aside so much a year, which they called the reserve fund, and then the sum which they paid to the Post Office in the way of royalties.

Mr. LYNN

How much was that?

Mr. ILLINGWORTH

Ten per cent. on the gross receipts. The profits in 1911 were £1,592,000. The dividends, including debenture interest, etc., £739,000, amount transferred to reserve against depreciation, £500,000, and royalty paid to Post Office, £353,000. The Post Office accounts are on commercial lines. Interest on capital is regarded as expense and not as profit, and also depreciation is charged as expense. Made up for 1913–14 on the same basis as the National Telephone Company, the figures are: interest on capital, £507,000; depreciation, £1,211,000; and surplus, £396,000. So that taking the accounts on the same basis the National Telephone Company in 1911 made profits of £1,592,000. While the Post Office figure in 1913–14 was £2,114,000. That is not an isolated instance. I can give for several years the National Telephone Company and the Post Office figures. In 1906 the profits of the National Telephone Company were £1,035,000; in 1907, £1,172 000; in 1908, £1,264,000; in 1909, £1,334,000; in 1910, £1,435,000; in 1911, £1,594,000. For the Post Office: In 1912–13 the figures were £2,014,000; in 1913–14, £2,114,000; m 1914–15, £2,030,000; in 1915–16, £2,006,000; in 1916–17, £2,202,000; in 1917–18, £2,129,000; and in 1918–19, £1,869,000. Taken on the whole, the final result of the figures taken on the same basis is very favourable to Post Office management as compared with that of the National Telephone Company.

Mr. R. YOUNG

Have there been large increases of salaries in these years?

3.0 P.M.

Mr. ILLINGWORTH

In 1915 there was an increase in these items, and at the time of the transfer there was an increase of wages of about £150,000 odd. With reference to Hull, the accounts have been very carefully gone into. The average charge per station there is £7 5s., or £3 10s. less than the charge for the Post Office. The depreciation is 16s. l0d. as against £2 6s. 9d. at the Post Office, or a difference of £l 9s. 11d., and there are other charges which are much higher at the Post Office than at Hull. Items of expenditure which the Post Office incurs and Hull does not, include headquarters' expenses. Hull has no research department, and a large portion of the plant is fortunately underground, and in consequence suffers very little storm damage. In a large system like that of London with many exchanges, many calls have to be put through more than one exchange, which means that operat- ing expenses are doubled at once. The General Manager of the Hull telephones was asked at the Select Committee of Inquiry, "Suppose you were to take over the national service, would you be able to bring the national service into line with the Hull service?" He replied, "No. It is simply because it is local that it is cheaper. Ours is a local service. Over 95 per cent. of our calls are local, and the Post Office is handicapped in having a national service." He added that a national service must be much more elaborate than that at Hull, and so he could not run it more cheaply. The increase in telephone rates by the Post Office is only 67 per cent. over the present charges, or 80 per cent. over pre-War charges, and it is hoped that with this increase it will be possible to make both ends meet. It has been suggested that we should look forward to an increased use of the telephone instead of increasing charges. On the face of it, it seems that that ought to be so, but practical experience is against the proposal. It has not been an effective remedy in this or in any other country. When you have to increase the service you have to increase your capital charges; if you double the service you have to double your plant; there is double the space occupied and there is need for doubling the staff. Although in some cases there might be a slight decline on overhead charges, yet in effect it does not amount to anything. In 1903, the National Telephone Company, had 278,000 stations and their working cost per station was £3 14s. 8d. In 1911 the company had 561,000 stations and the working cost per station was £3 14s. 11d.

The flat rate has been inquired into in many countries at various times. It has been condemned wherever it has been adopted. The annual meeting of the National Telephone Company in 1908 condemned it. The experience has been the same in the United States and in Canada. It was abolished in the provinces in this country in 1907, except for those firms who already had it, and I do not think it fair to new firms to make them pay on the message rate when their old competitors are paying on the flat rate system. Several people have said: "Keep the flat rates on, but double the charge." There are 120,000 flat rate subscribers in the, country—30,000 in London and 90,000 in the provinces. If you doubled the charge you would make it £40 in London and £25 in the country. At that figure it would pay only 55,000 out of the 120,000 to keep the flat rate and then they would be subsidised to the extent of £800,000 a year by the other subscribers. At present they are subsidised to the extent of £1,200,000. It has also been suggested that the charges should be £50 in London and £30 in the provinces. Then it would only pay 25,000 subscribers to continue on the flat rate, and in that case they would be subsidised to the extent of £525,000 a year. But apart altogether from the injustice of the thing it is financially unsound, because the more they use the telephone the greater is the cost to the Post Office, and the Post Office receives no increase of revenue whatever. I do not think there is any more justification for continuing the flat rate for subscribers to the telephone than for introducing a flat rate for people who use the telegraph or the postal service and allowing anyone to have unlimited use of those services for a certain figure. Not only that, but the flat rate system increases the use of a line and increases the inefficiency of the service, because users cram as many messages on the line as they can and the number of engaged calls is greater. Further, I think it is generally admitted that people do not wish to be subsidised by the Government, and that the charges must be increased in order to make the system pay its way.

Mr. RENWICK

Will the right hon. Gentleman tell us what they are going to do in regard to increasing efficiency?

Mr. ILLINGWORTH

I have already explained that we are laying out immense sums of money. I will give the hon. Member figures as to what is being done to increase the number of exchanges. In regard to trunks, we are laying 450 miles of ducts, which will contain 696 miles of cables, and in the following year we shall lay 300 miles of ducts containing 742 miles of cable. When these cables are laid there will be an immense relief to the wires. Then, automatic exchanges are going to be arranged for in Dundee, Sheffield, Southampton, and Swansea, and there are various other automatics. Six new exchanges have been opened in the country since the Armistice, there are 24 more exchanges in course of erection, 17 more new exchanges have been arranged for, and probably 70 or 80 are being enlarged, and so on.

I think I have dealt with most of the points raised, but I should just like to give a few instances of decreases in charges, because all we have heard about is the increase in charges. From London to Elstree is now 4d. and will be l½d., though I think the local charge will have to be added on to that; from Glasgow to Paisley is at present 4d., it will probably be l½ and from Glasgow to Renfrew is 5d. and it will be only l½d. There are many others that I could quote. Some 25 per cent. of the charges have been decreased. The London area has been mapped out into areas of five miles radius.

Lieut.-Colonel Sir F. HALL

With regard to call offices. If you go to a call office, and wish to call up a London exchange and it happens to be outside the five miles radius, how are arrangements going to be made?

Mr. ILLINGWORTH

That is a small detail. It is very interesting, but I am not at the moment prepared to answer it.

Mr. LYNN

May I, at the very outset, as a newspaper editor, resent the base insinuation made by the Postmaster-General that this agitation is being carried on by the newspapers, because we object to the flat rate for the use of the telephone. I think no more unfair insinuation could be made.

Mr. ILLINGWORTH

I did not make it

Mr. LYNN

You did! I can assure the House, as one who has had thirty years experience of newspaper offices, that the last thing in the world we want to do is to have any relations whatever with the Post Office, and for the simple reason that the affairs of the Post Office are so badly managed that newspapers are more and more relying on their own resources, and getting outside the telephone and telegraph systems. Personally, the last thing in the world I want to do is to lift a telephone receiver. The Postmaster-General said, talking with regard to the National Telephone system, that it could not have been more inefficient, but I think we have now reached the lowest stage possible, though probably I am making a mistake in thinking that there are not even deeper depths that the Post Office can reach. From what the Postmaster-General said, it appeared that the only real way in which we can increase the revenue of the Post Office is to reduce the number of subscribers. Why not wipe them out altogether and have done with it? Then probably you will have an enormous surplus. The right hon. Gentleman reminded me of the draper who lost on each article he sold, but made his profit on the turnover. When we come to look at his facts we find that for fifteen calls a day we have got to pay £40 a year, and even for three calls a day it is going to cost us £15 a year. I wonder if the Postmaster - General would take the trouble, or find someone in his office to take the trouble, to compare the cost under the National Telephone Company with his own. I quite agree with him that no one in this House, and very few in the country, want to see the telephone service subsidised. What we really want is to pay for an efficient service, but we are paying, and we are not getting an efficient service, and I see no signs of getting an efficient service. The Postmaster-General made a little joke of his own when he pointed out to a deputation of newspaper owners that they had increased their prices by 100 per cent., but the newspapers have got to compete and to pay, and if they do not give an efficient service they lose their revenue. They are different from the Post Office, which can always fall back on the public, and the public have got to pay for whatever mistakes are made. If the newspapers were run on the same lines as the Post Office there is not a newspaper which would not have been bankrupt years ago.

The Select Committee says it is unfair to be too hard on the Post Office because it only got hold of the telephone service two and a half years before the War. The Post Office officials, however, did not really take over the telephone service as novices. They acquired the trunk lines in 1892, and as far back as 1907 the Postmaster-General asked for £6,000,000 for developing the then telephone system worked by the Government. I think this is a point that most Members, and certainly I myself, feel strongly on, that shortly after the Post Office took over the telephone service the service became more and more inefficient. The hon. Member for Macclesfield (Mr. Remer) referred to one or two cases. I can easily get from Northumberland Avenue to the head of Fleet Street in a taxi quicker than a telephone connection. I have tested that several times, and it is a fact, and that sort of thing is going on all over the country. People who want to get into communication with anybody at a short distance never think of trying to get through on the telephone, and yet the Paymaster-General comes here and talks of this service as an efficient service, whereas it is the most amazingly inefficient service that I think any Government Department has ever put up. He referred to the Telephone Company. In the last year of its existence it paid £353,000 in royalty, which was 10 per cent. on the gross receipts. It paid £739,600 in dividends and carried over to reserve the sum of £501,536. In the first year of the Post Office management I find the profits were £303,000, and the following year they had dropped to £239,000, while I believe at the present time there is a loss of something like £4,000,000 a year. I do not know whether the Postmaster-General calls that good business or not, but I think most of us will think it very bad business.

I agree with the hon. Member for Macclesfield that the Post Office is quite incompetent to carry on this service with efficiency. This is not the only thing that the Post Office has been carrying on badly. In the year 1870 it took over two prosperous and flourishing telegraph companies, and for the first two years of Post Office management there was, I believe, a profit; but the Post Office has been making a loss ever since. The same thing must happen with the telephone service. After having listened to the Postmaster-General's very inconclusive speech, I doubt very much if the increased charges will have any effect in getting rid of his deficit. After all, in business we find that we have got to cut our coat according to our cloth, and that is exactly what the Post Office never do. They will spend enormous sums of money in developing the telephone system. I see that inside the next four years they mean to spend £35,500,000 on the telephone service at a time when the burdens on the country are heavy enough in all conscience, and I hope this House will have the courage to resist and to resent these new commitments. The Postmaster-General says it is easy to criticise a Department, and that is the one point on which I agree with him, because no Department I know of lays itself more open to criticism than that of the right hon. Gentleman. If any business concern was run in the same way as the Post Office, it would be bankrupt in a few years, yet the right hon. Gentleman comes down here and asks us to agree to increased charges and increased expenditure of money. I agree with my two hon. Friends who have spoken that we made a blunder when we agreed to the telephone service going into the hands of the Post Office. There is only one effective remedy, and that is to take our telegraph and telephone services and put them in charge of a business trust that will manage them in a businesslike way. I have no doubt that this proposal will meet with the hostility of the Socialists and the bureaucrats who have no desire to compete for a living in the open market, but I appeal to the business men of this House to refuse to have anything more to do with these State systems which are run so inefficiently as this telephone service has been. It has been muddled from beginning to end, and it will be muddled as long as the Post Office is allowed to run it.

Lieut.-Colonel W. GUINNESS

I beg to move, as an Amendment to the proposed Amendment, to leave out the words the telephone service will be placed under private enterprise, in view of the necessity for a cheaper and more efficient service, and to insert instead thereof the words an inquiry will be instituted into the possibility of effecting economies in the telephone service and of obtaining additional revenue by judicious development and an increase in the number of subscribers, rather than by heavy increases in charges which may tend to hinder that development. The persuasive speeches of the Mover and Seconder of the Amendment have not persuaded me that their proposal to retransfer to private enterprise is, in fact, practical. I agree that, in the abstract, private enterprise is undoubtedly more efficient, and that nationalisation and elimination of competition was a mistake, but you cannot consider a matter of this kind in vacuo without reference to the facts of the present position. It is, or it seems, obvious that the re-transfer to private control of the telephone system, as it has now been inflated in cost to the State, could not be done without an enormous capital loss. It was bought for an excessive price, and that excessive price will have to be written off before you can re-transfer it on a commercial basis to private control. Then, how are you, after all these years, to avoid heavy capital expenditure by re-dividing your exchanges? It is common knowledge to any of us who know anything of the telephones of the country, that a vast number of telephone exchanges are located in the post offices. It would mean a very great and unremunerative expense again to divide up and change all that in order to re-establish private control.

Then we have heard nothing from the Proposer or the Seconder as to the intention of this private company in regard to a staff, and I gather that they would not take over the staff, because the hon. and gallant Member for Rusholme (Captain Thorpe) particularly criticised the wages that are being paid to the staff. It is quite clear that, in that case, before you went back to private control, the State would have to meet a colossal bill for compensating these established civil servants. I think, therefore, it would only be possible to re-transfer to private control if you were to saddle the taxpayer with an enormous burden, and I do not believe that would be justified, as it would be only in the interests of one section of the community who use telephones. I do not believe there is in the country to-day any great backing for this idea that has been brought forward for re-transferring to private enterprise, but I do think there is an enormous amount of dissatisfaction with the present state of efficiency of the telephone service. The Postmaster-General in these Departmental matters is very easily satisfied. I remember last Session showing him that it was quicker to telegraph to Parisvia New York than direct, and he seemed to think that was entirely rational and reasonable. To-day he defends himself against any alleged inefficiency against the Post Office by producing ancient Press cuttings about the National Telephone Company, going back in some cases more than 20 years. I do not think that deals with the case now at all.

The point which is in all our minds is that, as a result of criticism when under private control, the service was greatly improved, and the more criticism there is now, the less the service is improved from the point of view of the man who uses it, because the sole result of criticism is that more money is poured out. My hon. Friend the Member for Newcastle interrupted and said, "What are you doing for more efficiency?" and the Postmaster-General's answer was, "We are spending large sums of money." That is not efficiency from the point of view of the user of the telephone service, because he has got to pay that money, and, so far, we have had very little sign of wise expenditure in pouring out these public funds. In addition to the irritation felt by the public at the complacent indifference of the Post Office to the public convenience of this country, there is a strong objection to a universal message rate. It is felt that this message rate has been found to be very arbitrary in its imposition. Many people check their message rates, and find in many cases they are overcharged. I do not say it is intentional on the part of the Post Office. It is very easy to understand that operators in the hurry of the moment may often charge up wrong numbers, but, undoubtedly, the present message system is unsatisfactory, and people do not like getting, as they do, demands for further payments without any information as to how many calls they have had, or how these payments are incurred. It is absurd to think you can argue with the Post Office. You can no more argue with them than you can with a man who has his finger on your windpipe, because they will cut off your service as soon as you even suggest delay in payment.

The objection to this proposal for a universal message rate is not in any way prompted by the desire to avoid payment for service, and I am sure telephone users recognise that it is not fair that the State should subsidise them, but that, in view of the general increase of the price of every other service and commodity, it is reasonable that they should pay more. But until an automatic register is available, the message rate is considered, by anyone who uses telephones on a large scale, as most objectionable. It does not distinguish at the present time between effective and ineffective calls. This is not the view only of a few people in this House, but of the whole business community. It is the view, as I think most of us will have heard from the constituencies, of the great majority of local authorities in the country. I have had given me the resolution passed by the greatest municipal authority in the country, the London County Council, who resolved yesterday: It is regrettable, in view of the present dissatisfaction with the London telephone service as it is at present administered, that the Report of the Department Committee does not encourage the belief that adequate steps are being taken to bring the service to the highest possible state of efficiency. That is on the first point. On the second point they say: While recognising the importance of placing the telephone service on a sound financial basis, it is highly desirable in the public interests that the 'unlimited user rate' system should be retained on such conditions as are necessary to place it on a sound economic basis; that users should still have the option of adopting this system. And so forth. I do not think the Government are wise in ignoring this demand for consideration, and, in view of the extravagance, as I believe, of the proposal for reverting to private control, I should like to bring the Debate on to more practical grounds by moving the Amendment in my name. I may say that the wording of my Amendment is directly inspired by the very fair and able report of the Committee which was presided over by the hon. Baronet the Member for Lewisham (Sir E. Coates). That Committee, which sat last Session, had a very narrow reference. They were asked to inquire into what revision of charges was necessary to place the service on a remunerative basis. They had no alternative. They were not allowed to see whether the service could be carried out with greater efficiency. They said in the second paragraph: The limitations imposed on your Committee by the restricted Terms of Reference precluded inquiry into the efficiency of the Telephone Service. Further on, they show in the very words that I have taken, that much might be done by development. They say that— Additional revenue should be looked for from judicious development rather than from such heavy increase in charges as may tend to hinder that development. Development admittedly depends to a large extent on small users among whom the service might, by canvassing and advertisement, be made more popular than it is at present. There is overwhelming evidence coming to Members of this House day by day of extravagant administration, and this has never been looked into in recent years by any public inquiry. So far as I can make out from this Report, although it does not include Sir Evelyn Murray's statement, the wages paid in the telephone service have gone up by three and a half times during the period of the War, and we are always hearing of the great disregard of local conditions in payments made by the Post Office. I heard of a case the other day in which twenty miles of cable had to be laid, and the Post Office deliberately paid double the agricultural rate, that is, twice as much for hire as the farmers had to pay under the Agricultural Wages Board.

Naturally if that sort of thing is going on telephone administration is going to cost us a lot of money. One cannot help fearing that the Post Office do not want effective competition with their twopenny post; they want to increase the cost of the telephone so that people will be induced to buy stamps and keep up the revenue of the Post Office. Anyhow the answers which we have had in this House show little signs that they think of the convenience of the public or the general improvement of the service. The revenue from the public has decreased, according to the report of the Committee, during the War. We ought to have evidence that the Post Office is at least trying to push forward development and to get back to the normal state which they would have reached had it not been for the interruption of the five years of war. I am not satisfied at the compulsory measures rate. It is impossible to follow the figures given by the Post Office on the subject, and when I heard the right hon. Gentleman this afternoon he only convinced me more that we ought to have an inquiry into the details. I recognise the telephone service must be self-supporting, but in view of the objection to the measured rate and the narrow reference under which last year's inquiry was carried out I do urge that another effort should be made to find a way out of the present difficulty by less objectionable lines than the proposals put forward.

Rear-Admiral Sir REGINALD HALL

I beg to second the Amendment to the proposed Amendment.

The Postmaster-General, replying to a question as to what he was doing for efficiency, said he was spending a good deal of money. He gave the House a good many figures to prove it. May I give the House a few figures of the inconveniences felt by the commercial community in spite of the spending of these vast sums of money. On the Baltic Exchange the following were the delays in getting connections on the telephone: Scotland, 90 minutes; Liverpool, 40; Hull, 40; Bristol, 60; Newcastle-on-Tyne, 60; Cardiff, 60, Birmingham, 30; and Manchester, 60. I need hardly point out to men of business what that means. I do not know whether the Postmaster-General realises that delays like those militate against the effective use of the telephone. But I should like to take up the challenge he put forward to the right hon. Baronet beside me (Sir F. Banbury) when he asked: "Do you propose to reduce expenditure on the railways?" I should reply to that: "Certainly." Railways are only too anxious to reduce their expenditure when they are allowed to do so. I would point out to the Government that they would like to have a Committee of Inquiry into the expenditure of railways, and I would suggest that the Government should apply to the railways what they have to the telephones and set up an inquiry.

Sir F. BANBURY

An independent Committee!

Sir R. HALL

Yes, an independent Committee to inquire into Government administration of the railways which we say has been extravagant and uneconomical.

Major Sir E. COATES

As Chairman of the Select Committee to which the original reference was passed, I would like to say a few words upon the Debate and in regard to the original Amendment. I certainly consider it is a somewhat wide scheme for anyone to suggest taking over a huge portion of capital of something like £40,000,000 and running the institution concerned as a private institution. I cannot but think that if those who put that matter forward had really looked into the matter, or had studied even the evidence given before us as a Select Committee, they would have realised, I think, in regard to the management of the telephone system, that when it was taken over by the Government in 1911, it was, as the House has been reminded, doing well for its shareholders. What happened when the Government took it over? We are told that the Government does not know how to manage anything. At the same time we are bound to look the facts in the face. These are that after the Government took over the system they not only made it pay, but two years before the War they had a considerable surplus after providing for interest on capital, depreciation, and pension fund, and a very much higher depreciation than the National Telephone Company ever thought of when they had it under their control.

In so far as the Pension Fund is concerned, the National Telephone Company themselves only provided £13,000 in 1911 towards the Pensions Fund. When the Government took the business over, they had themselves to find some big pensions and increases of wages to the telephone staff to make them equal to the servants in the telephone department of the Civil Service. They had to pay a charge of £400,000. They not only paid that £400,000 during the next few years, but they made a profit. Then the War supervened. Most of us are business men. We know the difficulties that were confronting the country. We know the difficulties we had in our own businesses and our own domestic affairs. Does anyone imagine that the Government are to be free from these difficulties? Certainly not. The Government themselves have had difficulties, and greater because they have a huge Civil Service, and naturally had to carry on, so far as the telephone system was concerned, and give bonuses and increased wages. Criticism has been passed upon the amount of £4,000,000 required to put things straight. But we must bear in mind that 74 per cent, of that £4,000,000 is simply war bonuses. Do Members of this House wish the Government to cut the wages down?

Sir F. BANBURY

I do. [HON. MEMBKRS: "Hear, hear!"]

Sir E. COATES

Apparently there are other Members, too, who wish to cut wages down, but I question if they are in the majority. It cannot be done. We come to the question: What action should the Government take in order to meet these difficulties of the £4,000,000 caused by a rise in price? I maintain the Government are taking the right course in putting up the price to the user of of the telephone. If there is to be a £4,000,000 loss and you have to pay your wages, where is it to come from? There are only two sources, either the user or the taxpayer. Are you going to ask the taxpayer to pay it? [HON. MEMBERS: "Certainly not!"] Then the user must pay it. When you consider your various charges, you should once and for all endeavour to make the charge a fair one for rich and poor alike. The Committee realised that that was the best advice they could give to the House. When we started to look into this matter some six months ago, most of us had had experience of the flat-rate system ourselves. I have been a flat-rate subscriber for the last 30 years. As the evidence came before us day after day we realised that the flat rate had to go, because it was apparent that flat-rate users were having something they ought not to have, and the poorer users were being charged in order that we might have a low rate.

Throughout our investigations we kept that fact clearly in mind. We had very competent witnesses before us, and as far as we were able we had the best advice we could get from representatives of the various associations all over the country connected with the various Chambers of Commerce. Really, I only regret that amongst the many witnesses who came before us, we did not have any representatives from the bankers, the chartered accountants or the Law Society. We invited them to send witnesses, but they did not see their way to do so. Those who have read the evidence will have noticed that the witnesses who came before us all thoroughly understood their work, and they were very helpful to the Committee. I will consider for a moment what the witnesses said about the flat rate. I believe there were only about two witnesses who said that we must have the flat rate kept on. One witness said that if the flat rate was kept on, then you must limit it, but you cannot have an unlimited limited rate.

There was a very able witness representing the London Chamber of Commerce and he told us their views with regard to the flat rate system and the charges generally. The London Chamber of Commerce were in favour of the flat rate system, although their own representative who gave evidence, when pressed for his own private opinion, said he was against the flat rate system. There was another witness whose articles have appeared in the "Times," and he was very helpful to us. He said that the flat rate must be abolished, because it was not fair or right. If the flat rate has to be abolished, what is the next step? We felt that we should scrap the measured rate and have the message rate with this proviso, that the larger users of the message rate should have a rebate or discount after 2,000 calls, our view being that as the calls went up to 2,000, 3,000, 4,000, 10,000 or 15,000 the rebate should gradually increase and in that way we felt that we had left a loophole for those who desired the flat rate, and also one for those who had been accustomed to the measured rate. One witness told us that under the flat rate system you might call up as many of your friends as you like, day or night, and no note is taken of the number of calls, but directly we get to the message rate it has to be counted, because you pay for the number of messages which pass over the telephone line from your own extension.

One of the difficulties which we foresaw, and which we are told by experts cannot be overcome, is the fact that no invention has yet been found which will check the efficient and inefficient calls in the subscriber's house. That is the great difficulty, and that is where I hope some improvement will be made, because a certain amount of dissatisfaction will always exist when users are overcharged. On this question of overcharging, may I draw attention to something I learned on the Committee which I did not know before it was given in evidence. It is that all over the country a system was started some years ago of having telephone advisory committees formed in various areas which were in touch with the telephone authorities in that area. There are only some 50 of these advisory committees, but when we get the message rate I think we shall find these committees will number hundreds in the larger areas of the British Isles. Anyone who has any objection to make against the telephone service may go to the advisory committee, lodge his objection, and the telephone committee will look into it, and approach the Post Office authorities if necessary. I did not hear the Postmaster-General mention that although there are 120,000 flat rate users in the country, they are only about 20 per cent, of the general users of the telephone, and yet that 20 per cent. used 40 per cent. of the lineage of the telephone, and in that way they are to a great extent blocking the system and hoping to make it more inefficient. I am not an expert, but I think when we have this system of the message rate, we shall not have the line so congested, because everyone will think before they spend their fee, and they will see that their servants do not use the telephone unnecessarily.

My hon. and gallant Friend has proposed an Amendment asking for the appointment of a further committee of experts to look into the question of the efficiency and development of the telephone system. I would like to add my voice to the appeal which has been made to the Postmaster-General and ask him to give us this committee. I feel that the public would like it, because for some reason or other they are not satisfied. We have all of us at one time or another cursed the telephone, and I have done so when it was under the National Telephone Company, and even during the time it has been under the Post Office. I do not think the Postmaster-General has anything to fear by granting this committee. If he does set it up, I would ask him to put a very stiff back to the question of the rates, and the appointment of this committee must not stop the putting of this new system into force. Get the new system going, and let the committee report as to what line of action they would take. I hope my right hon. Friend will see his way to grant the concession which has been asked for.

The ATTORNEY-GENERAL (Sir Gordon Hewart)

It is obvious to anyone who has followed the course of this Debate throughout the afternoon that the mood of the House has to some extent at any rate undergone a change. The first Amendment which was proposed, and which as I understand is still in a sense before the House, was one regretting the absence from the Gracious Speech of any announcement that the telephone service would be placed under private enterprise in view of the necessity for a cheaper and more efficient service. The point, and the whole point of that Amendment, was that for some reason suggested in the epithets in the later part of the phrase the control of the telephones should now or at the first possible moment be taken out of the hands of the Post Office and placed once more in private hands. I listened with attention to the arguments which were used or suggested in support of that proposition. Although there were many complaints of alleged inefficiency in the existing system, there was not a word said to suggest that the remedy proposed would go any dis- tance whatsoever towards removing them. I was reminded of the kind of speech which one hears or reads in defence or rather in praise of Socialism. The orator begins by depicting the evils of the existing social order, and when in that way he has created a suitable atmosphere he proceeds to say that under a socialistic system all these evils will disappear, and there will be a new heaven and a new earth. There is a gap in the argument. I could not help thinking that there was a gap in the argument this afternoon. No doubt everyone who has spoken has had complaints to make of the telephone system as it is now. I might quote a familiar example. I believe it is no small grievance from which most of us have suffered: 'Number engaged.' This is often now the answer received from the Central Call Office for from 10 to 20 minutes and more at times. When you speak to a superviser, you are put on at once, and on inquiry you find that the number said to be engaged has not been called. It is very annoying to business men who have trains to catch and appointments to keep to be treated like this. I hate making complaints, especially about employés, but there is a limit to one's endurance. 4.0 P.M.

That, it will be agreed, is a typical complaint. [HON. MEMBERS: "Hear, hear!"] Yes, but it was made on 9th January, 1907, when the telephone service was still in the benign hands of the National Telephone Company. We may have our complaints and our grievances, but I have not heard one word to suggest, nor can I imagine one word to suggest, that the solution of the difficulty is to place the telephone service under private enterprise. Indeed, when once it is conceded, as I imagine it is conceded on all hands, that you cannot have an efficient telephone service unless it be a monopoly—the notion of competitive telephone systems with different registers of telephone subscribers is one from which the mind recoils—it follows that the monopoly must be in the hands of the Government.

I pass from that Amendment with which the Debate began to the proposal which, as it appealed to me, attracted far more attention, that while the telephone service should remain in the hands of the Government there should be, and there should be forthwith an inquiry of the kind which is indicated in the second Amendment. My hon. and gallant Friend based his attack, if attack be the proper word, upon what he conceived to be the objections to a universal message rate. I should have thought that anyone who has studied what I may perhaps be permitted to call the masterly memorandum put out by the Post Office on this matter, upon whatever else he may have been left in doubt, must have been convinced by the case for the universal message rate. What was said upon that matter? I will quote only two opinions, one expressed in the memorandum and one which I have otherwise obtained. As America has been referred to, I will quote an American authority. It was said by the Merchants' Association of New York City in the year 1915 that a system which exacts an average uniform charge for varying degrees of service is obviously inequitable. Again, the Vice-President of the New York Telephone Company, in 1913, said: Flat rates simply make it impossible properly to develop the telephone service. The real conflict of interest in this case, therefore, is not between the Telephone Company and business firms, but between the relatively small number of subscribers who have an unlimited business service and the larger number of subscribers whose service is limited. That is the testimony of American authority. May I just add a testimony nearer home. Mr. Gane, at the time he was manager of the National Telephone Company, speaking in the year 1899, said: There is no doubt whatever, as far as my judgment goes, that not only this country, but nearly all other countries, commenced the telephone service on wrong principles. The essential principle in my opinion is payment per message, namely, according to user, but how to get back again to that is the difficulty. I say most frankly to the Committee, that in my humble judgment the whole principle on which these charges have been founded is a wrong principle. I submit to the House that it is apparent, when one looks at the matter without prejudice, that the flat rate must be unfair. One can quite understand in some kinds of businesses the wisdom and the principle of what is called a reduction upon quantity. If a man has some commodity to dispose of, it may be useful to him to take a reduction upon quantity. He might save delivery charges and warehouse charges, and might avoid loss on seasonal trade. But why in the world should there be a reduction on the quantity of telephone messages? One might say on the other side, that where you have ex hypothesi a limited total capacity of service for a very large business community, the man who uses an enormously large number of telephone calls should pay more in proportion, after a certain point, whatever the reasonable number might be, and I should have thought a case might be made out for compelling that man to pay more than is paid by the man who only has a reasonable number of calls.

It does not depend on hypothesis. We have here on the fourth page of the Memorandum on the New Telephone Rates a little table, and when one looks at it it will be found that the figures are very striking. There are various rates of charges for users of limited numbers of calls. If a man uses from 3,000 to 4,000 calls the charge, should the revised rates come into operation, would be £19 11s. 8d. Up to that point therefore it does not pay the subscriber to have a flat rate of £20. How many subscribers are there who come into this category? Apparently no fewer than 90 per cent, of the users of the telephone fall into it. Those who have between 4,000 and 5,000 calls are 2 per cent. of the total number of subscribers, those between 5,000 and 6,000 calls are also 2 per cent., and those over 6,000 calls constitute 6 per cent., so that those who wish to pay £20 for the unlimited service are only 10 per cent. of the whole and they might have 100,000 calls. I can imagine that those who have had for many years the unlimited use of the telephone system would be content with the payment of £20, and that they would be alarmed to discover that henceforward if they have from 4,000 to 5,000 calls they will have to pay £35, and if from 5,000 to 6,000 calls £41, and in the case of their having 12,000 calls they may have to pay up to something in the neighbourhood of £70 or £80. I can well imagine their feeling of distaste at that. But what strikes me more is the credulity and alacrity with which the 90 per cent. come forward, if they do, and say, "Please let us go on paying for the large user." That I do not understand, and I cannot help thinking that in the minds of those men there is a lacuna in the argument. They say, "We have many grievances against the telephone system. Somebody is crying out against that system. We had better join in." They do it without stopping to examine the facts and without perceiving that one result of their action will be that they are to pay more to enable the large user of the telephone system to pay less. I do not know who the distinguished American was who said that in the telephone business the flat-rate system was a system in which the benefit was enjoyed by the sharps and the money paid by the flats. Of course, one never uses words like that in England, but that is the principle, and if I thought that, by going any way towards meeting this second Amendment, I was supposed to be conceding on behalf of the Post Office anything in favour of the flat rate, or admitting any alleged objection to the universal message rate, I should be very reluctant to take the course which I am now about to take. Subject to this observation, that of course the new tariff must be put in force on the date named, that is to say, on the 1st April next, the Government recognise that it is quite desirable, and may even be useful, to have an inquiry, and I would suggest to my hon. and gallant Friend that the words indicating the scope of that inquiry might be even more comprehensive than those of his Amendment. If it is in accord with his view and with the view of the House, I would suggest that there should be appointed a Select Committee to inquire into the organisation and administration of the telephone service. Within the generous ambit of that phrase, everything which is relevant to the improvement of the telephone system can, I think, be explored.

Lieut.-Colonel GUINNESS

Not the charges?

Sir G. HEWART

That is an ingredient in administration, and is included in the instruction.

Lieut.-Colonel GUINNESS

Could it not be specified that they are to inquire into the charges?

Sir G. HEWART

I do not want to put in that word, but I cannot appreciate how a Select Committee inquiring into the organisation and administration of the telephone service could for one moment close its mind to the question of charges. I throw out that suggestion, and would ask my hon. and gallant Friend, in these circumstances, to withdraw his Amendment; but of course it is impossible, as I think the House recognises for us to have anything to do with the first Amendment, which relates to the abolition of State control.

Lieut.-Colonel GUINNESS

I am quite prepared to withdraw my Amendment if it is made clear that the flat rate is to remain an open question. I feel that it is most necessary that this should be specified, in view of the very strong line which the Attorney-General has taken against it in his speech. I think we are all prepared to agree that the rates should come into force pending the result of the inquiry, but we do wish it to be put upon the Committee as an obligation that they should again look into this matter of the system upon which the charges are made.

Sir F. BANBURY

May I suggest to the Attorney-General that if he added, after the words he has just read, the words "and the method of making charges," that would meet the contention of my hon. and gallant Friend and would, I think, meet the desire of a vast number of people outside the House.

Sir G. HEWART

Yes, I think it will be quite convenient to add those words. They are implicit in what is there already. With regard to the observation of my hon. and gallant Friend, I am sure he will agree that these rates cannot be deferred beyond the named date, namely the first day of April, but that does not prejudice the inquiry with regard to the future, though I should sincerely hope, so far as the flat rate is concerned, that the labours of the Committee which has recently reported will not be merely repeated by the Select Committee which is now to be set up. The question, however, is not prejudiced by the fact that the new rates come into force on the 1st April.

Sir F. BANBURY

May I ask my right hon. Friend one question? Assuming that this Committee does not report for several months, and supposing that it reports against the charges which have been in force during that time, will a rebate on those charges be allowed?

Sir G. HEWART

I will answer that question at once. That would be administratively impossible.

Mr. REMER

In the circumstances, I beg leave to withdraw my Amendment.

Amendment to the proposed Amendment, by leave, withdrawn.

Amendment, by leave, withdrawn.

Main Question again proposed.

Motion made, and Question, "That the Debate be now adjourned," put, and agreed to.—[Lord Edmund Talbot.]

Debate to be resumed upon Monday next (21st February).

Whereupon Mr. SPEAKER adjourned the House, without Question put, pursuant to Standing Order No. 3, till Monday next (21st February), pursuant to the Resolution of the House of this day.

Adjourned at Sixteen minutes after Four o'clock.