TELEGRAPH (MONEY) BILL. (Hansard, 28 July 1925)

§ The POSTMASTER-GENERAL (Sir William Mitchell-Thomson)
I beg to move, "That the Bill be now read a Second time."
I do not think it desirable to detain the House long with this Bill, but perhaps I ought to say a few words with regard to its provisions. As regards its particular form, there is nothing to say. It is practically in common form. That is to say, it follows the general lines which are customary in Bills of this character. I ought to explain that 388 although it is called the Telegraph (Money) Bill it has nothing to do with telegraphs, but is confined to the single purpose of providing credits for fresh capital expenditure on the telephone system of the country. I pointed out on the Committee stage of the Financial Resolution that the financial position with regard to telephone development in this country was, shortly speaking, as follows: that we had on the 1st April last available for capital purposes, from previous Bills, £9,400,000; and that the amount included under this Bill was £30,000,000, making a total of £39,400,000. I went on to say that it was our intention within the next three years to proceed with capital expenditure on telephone development to the extent of £35,000,000, which figure, deducted from £39,400,000, makes the total balance available at the end of three years, that is to say, on the 1st April, 1928, £4,400,000.
What we are proposing to do by this Bill is to authorise the State to raise credits for expenditure on telephone development in this country at the rate, during the next three years, roughly speaking, of £1,000,000 a month. I tell the House frankly that that represents a considerable acceleration in the rate of telephone development. For the year 1923–24, the capital expenditure on the telephone service was £7,800,000. In 1924–25 that was considerably accelerated, and it was £9,700,000. In 1925–26 we propose to spend, as I have already stated, £12,000,000; about the same in the succeeding year, and £11,000,000 in the year thereafter.
Now let me say one other word by way of explanation on this question of telephone development. Let me point out to the House that this is expenditure, not on revenue account but on capital account, and accordingly it is found not from Vote money but from loan money. That is important for more than one reason. It is important in the first place as regards the particular form which this Bill is taking this year. My hon. Friend behind me rightly pointed out the other day when this matter was last before the House, that we were in one sense departing from precedent in that we were laying down to the House a programme over a series of years rather than a programme to cover a much shorter period. I told him then, and I tell the House now, 389 that that has been deliberately done. We are deliberately laying down a programme for a series of years because we believe that that will be to the advantage of the Treasury, to the advantage of the industry, and to the advantage of the Post Office telephone service in general. It will be to the advantage of the Treasury because it is of considerable assistance to the Chancellor of the Exchequer in the present state of national finances to know exactly in advance over a period of years what his large commitments on capital account of this nature are going to be. It is of advantage, and of very great advantage, to the industry—and the industry knows quite well that as far as we can we try to share out these orders over the whole field of industry affected—because the industry affected knows beforehand the programme of development and the expenditure which the Post Office proposes to make and that enables them in arranging to lay out their works programme and their output generally over the period of the next three years, to look ahead and forecast their development in comparison with the rate of orders which they know are going to come. It is of great advantage to them, and that advantage reacts to the benefit of the Post Office, because it not only means that the industry is in a better position to carry out its orders successfully, so far as its own financial results are concerned, but also in the long run it means that the Post Office gets the benefit of cheaper prices.
Let me point out further, and I will not detain the House more than a few minutes, that this expenditure involves no charge (although for purpose of precaution it is provided in the last resort that recourse may be had to the Consolidated Fund) by way of direct provision by the taxpayer, nor indeed does it involve, if T am right, any charge on the user of the postal services. It falls solely on the telephone service, and that service, as I said in Committee of Supply the other day, we try to carry on on the basis that it is to be self-supporting and pay for itself as a separate service.
The charge for investment and for amortisation on capital and for depreciation arising from the borrowings which it is proposed to make under this Bill, will be borne solely by the telephone service. The actual method of raising the 390 money is, of course, one which appertains more strictly to the Treasury than it does to myself. But, so far as the practical working is concerned, I may explain that the way in which it is worked is, that the Post Office applies to the National Debt Commissioners periodically for an advance on capital account, and towards the end of the financial year the advances made during that financial year are converted into an annuity, repayable over a period of 20 years. The cost of that annuity is then charged against the Post Office telephones, and to that is added a charge for interest and a charge for depreciation.
If the telephone service were functioning as a private enterprise, I make bold to say that the telephone service would have no difficulty in raising the capital which it requires. It is quite true we have no national capital account, but I can give one set of figures with regard to the capital account of the telephone service which may be illuminating, and which may help to show that there is good ground for what I have just said. Taking the figures at the 31st March last, the end of the last financial year, the total capital expenditure on telephones was, roughly, £77,000,000. The total amount of indebtedness outstanding was £46,000,000, and the depreciated value, the value of the assets after writing off depreciation, was £68,500,000. It may be said, "What profit are you making after service? "The answer is that, viewed strictly from a profit-earning standpoint, of course, the telephone ser-vice would not commend itself directly to an investor. But the House must remember that, being a national service, it deliberately sets out, not to earn large profits, but rather to put back those profits into the business, partly in the form of renewals and fresh expenditure, and partly in the form of reduction of rates. That has been the deliberate policy followed for years by the telephone service, and I believe it is the right policy. From the commercial point of view, I have not the slightest hesitation in commending this proposition to the House. If the telephone service of this country is to prosper, if it is to grow, and if it is to thrive, it must be in the position to pull new business, and be able to deal with new business.
I said on another occasion we were sadly behindhand as regards telephones 391 in this country. Perhaps I may tell the House in a few figures how we actually do stand. These are the figures of population in the different countries per telephone. In the United States it is 7, Canada 8, Denmark 11.4, Sweden 14.9, Australia 18.8, Switzerland 22, Germany 26, the Netherlands 36, and then—and not till then—you come to Great Britain with 38.5. In the last few days I have seen exhortations to start an advertising campaign to try to popularise the telephones. There is no good advertising, unless you are in the position when you get replies to your advertisements to deliver the goods, and, frankly speaking, owing to the arrears which accumulated during War time, we are not in the position to deliver the goods the demand for which ought to come from a largely extended advertising campaign. We have in many districts a good service, and we do hope, and we do expect, that we shall have, as the result of efforts which we are making now in those districts, fresh business, which will give us fresh revenue, and will, we hope, in its turn create fresh demands. But there are districts in the country where, owing to sheer shortage of plant, we are not in a position to give any largely extended service. In some districts, as I know too well, people have to wait far too long when they apply for telephones.
For these reasons, from the commercial point of view, it is good business to spend money on the development of this service. The money which you spend, directly and immediately becomes revenue-earning, and I have no hesitation in saying, from what I know of the feelings of the commercial community generally, that there is no dissent from the proposition I have just laid down. On the contrary, I think everyone believes this is an expenditure which will well repay itself. May I refer to the matter from another angle from the point of view of employment. This expenditure, if on no other ground, would be very largely justified from that point of view. I cannot look further ahead than the present 12 months, because I cannot say at this period of time exactly in what proportions the expenditure will be divided during the ensuing 12 months. But I can say roughly that during this 12 months the expenditure of £12,000,000 will be divided up in this way: Trunk 392 works, £3,600,000; new exchanges, local lines and junction circuits, £7,650,000. The House will see that out of £12,000,000 that only leaves a balance of about £750,000 which represents actual expenditure likely to be made during the present 12 months on land, bricks and mortar.

§ Sir FREDRIC WISE
Will it all be spent on British goods?

§ Sir W MITCHELL-THOMSON
The largest possible proportion will certainly be spent on British goods. As I was saying, only a relatively small fraction goes to bricks and mortar and land. Therefore, this expenditure is valuable in more than one direction. In the first place, it provides a certain amount of unskilled labour, for those who sometimes to the annoyance of people open up roads and close them again. That is, relatively speaking, unskilled labour. [HON. MEMBERS: "Hear, hear!"] Well, it is very important to have that labour. On the other hand, it provides—and this is even more important in the industries affected —employment for the highest forms of craftsmanship. Not only does it do that, but this expenditure, unlike some other forms of unemployment expenditure, almost immediately becomes revenue-earning. It is quite true that the expenditure which is undertaken in the development of the more rural parts of the country does not immediately become revenue-earning, hut, apart from that, all expenditure made under this proposal becomes directly revenue-earning. It not only becomes directly revenue-earning but it at once proceeds to react on the service by improving the service given to the consumer. Not only that, but it ends by leaving the country with a capital asset, and that is something which cannot be said of every form of unemployment expenditure. For all these reasons I commend the proposition to the House, and I ask them to give the Bill a Second Reading.

§ Mr. HARTSHORN
I cannot but ex press my regret that so important a Bill as this should be brought on at this time of night. After all, we are authorising the expenditure of a huge sum of money. In 1922 we authorised the expenditure of £15,000,000, last year of £17,000,000, and now we are asked to authorise the expenditure of £30,000,000, or £62,000,000 in 393 all. This House ought to have the opportunity of having explained fully the whole scheme of development which is being brought about in the Post Office, and the whole country ought to know exactly what is being done. I think it would be a very good thing if the country and the House did know. I think it would be very much more appreciated than merely having these figures placed before the House. It was the same last year and in 1922, and it is the same to-night. I think it is much too important a matter to be disposed of in this way.
My hon. Friend beside me the Member for North Camberwell (Mr. Ammon), who has been associated with the Post Office all his life, suggests that we should ask certain questions about development in certain directions, but I think it would be largely a waste of time to go into details unless we can have the whole scheme expounded to the House. I do not think that can be done at this hour of the night, and I think the Postmaster-General has occupied as much time in putting the Bill forward as the House would desire that he should do at this time. I am sure that the House would not desire that I should occupy much time, and I have only to say that my experience convinces me that there is so much congestion on the existing lines of our telephone service, largely as a consequence of not having gone on during the War, that it is necessary that these developments should be proceeded with and that the money should be voted, and as far as I know there is no opposition from our party.

§ Colonel GRETTON
I wish to say a few words in regard to the form in which this Bill is presented to the House. It would be preferable if the expenditure proposed in each financial year were put before the House and examined and criticised according to the results ascertained from the expenditure. We are asked to vote £30,000,000 on the explanation which has been given by the Postmaster-General, sanguine and, no doubt, on the facts as they present themselves to-day, justifiable, but when this Bill is passed the Post Office will have absolute power to raise this money and to make expenditure without any further criticism or any further requirements from year to year as to what is being done.

§ Sir W. MITCHELL-THOMSON
Always subject to Treasury control.

§ Colonel GRETTON
But I prefer the House of Commons control. Treasury control is always brought forward by Ministers when they wish to escape the criticism and the difficulties of House of Commons control. I think it is a great pity that this programme for three years should be combined in one Bill. It is a course which is being taken by no other Department. We shall be asked tomorrow to discuss and agree to a certain programme of construction in regard to the Navy, but this year we shall be asked to agree only to the expenditure for this year, and the House in each succeeding year will have the opportunity of discussing, criticising, and examining that expenditure. Schemes of this magnitude should not be taken at this time of night, when we have little or no real opportunity for their examination. The only other criticism I desire to put forward is to express my regret that the Postmaster-General, when challenged as to whether this vast expenditure was going to be on British products and material, qualified his reply by saying "as far as possible." What does that qualification mean? Is there anything he cannot get in this country from the electrical trades, for instance, which were established, and necessarily, during the War? It would have been much more satisfactory to the House if the right hon. Gentleman had been able to say that the expenditure would have been on British materials made by British labour?

§ Sir W. MITCHELL-THOMSON
The conditions under which foreign goods will be obtained are: First, if the work cannot be done in this country; secondly, if no British goods of the same quality are available; or, thirdly, if the British price is such that I cannot justify the difference between it and the foreign price in the House Commons.

§ Colonel GRETTON
I do not know that that answer is quite as satisfactory as it might have been. Ministries come and go. What we really desire is an assurance that no part of this money will be expended on foreign goods, or used for the employment of foreign labour in preference to British. We have no opportunity of discussing this matter except 395 by questions or by a vote of censure on the Postmaster-General, because when this Bill has passed the whole subject will be dismissed.

§ Lieut.-Colonel Sir JOSEPH NALL
Very large schemes of development are projected by the Post Office. I have come across several instances where schemes of telephone extensions have been started, and before they could be completed the extension has become inadequate. In Manchester the overhead lines were replaced by underground cables, but almost before the overhead wires were taken away the underground cables were found to be insufficient for the needs of the district, and many applications for new telephones were held up, people being told: "Unfortunately you cannot be connected up until we have taken up the streets again in your neighbourhood to lay more cables. The same thing is happening in other parts of the country, and I think there ought to be a more generous anticipation of developments. There would be a saving of expense in connection with these extensions, if that were done.

§ Mr. BASIL PETO
The speech of he hon. and gallant Member for Hulme (Sir J. Nail) is the first of the three which has provided a real argument for the proposal for a three years' programme in connection with the extension of the telephone system. The Post Office desire to know in advance what their programme should be, and contractors ought to know precisely what is required of them. I may incur the censure of my hon. Friend the Member for Burton, but I think his criticism overlooked this great business consideration on which the Postmaster - General is basing his scheme for an expenditure of £30,000,000 spread over three years. It may be undesirable from some points of view that the House will not have a debate year by year on every detail of expenditure, but if there be one matter on which a programme extending over several years is justified it is this case of telephone extensions. The House will be well advised to give the power to the present Postmaster-General, at any rate. He deserves the confidence of the House. As far as rural, areas are concerned he has pursued a progressive policy in telephone extensions, 396 and if it does not bring in the direct revenue to which he referred it is of great benefit to farmers all over the country in increasing their facilities for doing business, securing veterinary assistance, and the like. This programme ought to remove to some extent the stigma under which the country rests of being one of the most retrograde in Europe and in the world in the matter of telephone service.