Commons Sitting of 2 December 1980

Preamble
The House met at half-past Two o'clock
The Clerk at the Table informed the House of the unavoidable absence, through illness, of Mr. SPEAKER from this days sitting.
Whereupon Mr. BERNARD WEATHERILL, The CHAIRMAN OF WAYS AND MEANS, proceeded to the Table and, after Prayers, took the Chair, as DEPUTY SPEAKER, pursuant to the Standing Order.

PRIVATE BUSINESS
  FELIXSTOWE DOCK AND RAILWAY (NO. 2) BILL
  As amended, considered; to be read the Third time.

  BRITISH RAILWAYS BILL
  Orders for consideration, as amended, read.
  To be considered upon Thursday.

  GREATER MANCHESTER BILL [Lords]
  Order for Second Reading read.
  To be read a Second time upon Thursday.

TRADE
Return ordered
"of Statistics relating to Overseas Trade of the United Kingdom for the year 1981 and for each month during 1981."—[Mr. Le Marchant.]

Oral Answers to Questions
  Defence

    Cruise and Trident Missiles
    Mr. Rentonasked the Secretary of State for Defence when next he plans to attend a North Atlantic Treaty Organisation meeting in order to discuss the deployment of cruise and Trident missiles.
    The Secretary of State for Defence (Mr. Francis Pym): I attended a meeting of the NATO nuclear planning group in Brussels on 13 and 14 November. A copy of the full communiqué has been placed in the Library. We discussed both the Trident system and the NATO long-range theatre nuclear force modernisation programme.
    The two NATO meeting is that of the Defence Planning Committee, which is to be held next week.
    Mr. Renton: I thank my right hon. Friend for that answer. In view of the increasingly vocal concern in Britain about the cost and additional vulnerability of our deploying cruise and Trident missiles, what steps will my right hon. Friend and his NATO colleagues take to put
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    over the message that the possession of an effective modern nuclear deterrent is essential if we in Western Europe are to protect ourselves against invasion and attack—if, in a word, we are to prevent ourselves from being in the position of Afghanistan or Poland?
    Mr. Pym: For my part, I do my best to make the basic cause and need for defence very clear and to explain in detail how our forces are disposed. My colleagues in other countries represent to their publics precisely the same need. We are agreed in the Alliance about the essential requirement of having a complete and comprehensive defensive shield, which includes its nuclear element. For our part, we do the best that we can to make this very clear to the public.
    Mr. Frank Allaun: Contrary to the view expressed by the hon. Member for Mid-Sussex (Mr. Renton), does the Secretary of State intend to ignore the recent public opinion poll which showed 56 percent, against cruise, 59 per cent. against Trident and 60 per cent. thinking that cruise would make Britain more likely to be attacked in the event of war?
    Mr. Pym: I shall do my best to fulfil my responsibility, with our allies, to ensure that war does not begin and that peace is preserved.
    Mr. Michael McNair-Wilson: Is my right hon. Friend aware that, although cruise missiles are to be stationed in my constituency, so far I have received only 20 letters on the subject? However, can my right hon. Friend say whether, in any discussions that he has had with his NATO counterparts, the sum total of cruise missiles to be deployed in Western Europe has in any sense been a negotiable figure, in view of possible negotiations which may be opened with the Soviet Union?
    Mr. Pym: The answer to the second part of my hon. Friend's question is "No, Sir; that has not arisen". The Alliance is unanimous in adhering to the decision that it took originally. We must all hope, of course, that the negotiations now going on at Geneva will yield some fruit. If they are successful it might be possible to reopen that question, but it has not arisen yet. What we must remember is that those negotiations might not succeed, however much we hope that they will.
    As to the first part of my hon. Friend's question, everybody dislikes nuclear weapons intensely. We all look forward to the day when we no longer have to rely on them in any sense for security.
    Mr. Wellbeloved: Does the agreement with the United States contain a penalty clause for cancellation of the Trident missile? If there is such a clause, what would be the cost of cancellation?
    Mr. Pym: I hope that the hon. Gentleman will have no part in any such decision. I feel sure that in the unlikely event of his party ever returning to office it would, upon a fresh analysis of the realities, come to exactly the same conclusion as we have. The arrangements are exactly the same as they were for Polaris. As the hon. Gentleman remembers, there was much talk on the Opposition Benches then about renegotiation, but it never happened when Labour came to power. I do not envisage that it will happen now.
    Mr. Rodgers: As the right hon. Gentleman says, everybody dislikes the missiles about which we are

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    talking. I think that it is the concern of both sides of the House that the breathing space between 1980 and 1983 should be used with the objective of negotiating agreement with the Soviet Union affecting the SS20. What new initiatives are now being taken towards arms control and disarmament in that area?
    Mr. Pym: We are in the process of carrying out the initiative on arms control that the Nato Alliance took last December at the same time as the cruise missile decision was taken. The Soviet Union was reluctant to begin any negotiations. Despite that, the United States still said that it would withdraw 1,000 warheads, and that decision is in the process of being carried out. Only recently have the two sides sat down in Geneva to talk about the possibilities for the future. We must hope that they will succeed, but we must never forget that it is just possible that there will not be a change of heart on the other side, and we may face the fact that we shall have to go ahead with this programme, as has now been decided. We must all hope that better counsels will prevail, but we must also prepare for the possibility that they will not.

    North Atlantic Treaty Organisation
    Mr. Wallasked the Secretary of State for Defence if he is satisfied that British undertakings to the North Atlantic Treaty Organisation are being fully implemented.
    Mr. Pym: Yes, Sir.
    Mr. Wall: Is my right hon. Friend aware that the failure to reach a 3 per cent. increase in defence expenditure will come as a shock to our NATO allies? Will he give an undertaking that in the calculation of future expenditure the base will be the promised 3 per cent., not the 2½ per cent. of this year?
    Mr. Pym: I share my hon. Friend's view about the importance of the increase in our expenditure and the importance of our defence programme. We plan to achieve 5 per cent. over two years, rather than 6 per cent. I agree that in view of the 3 per cent. aim that is a disappointment, but it is an aim. Amongst our European allies we shall probably still achieve the largest increase and spend a higher proportion of our gross domestic product than they do, even though on a per capita basis we are not so high up the league table. I share my hon. Friend's sorrow about the matter, but, in the face of extreme economic difficulty, it seemed helpful that we should marginally reduce the rate of increase for a year or two. Therefore, we have come to the conclusion that it is reasonable to make this reduction, but I think that our NATO allies will still be pleased with the United Kingdom.
    Mr. Allan Roberts: Will the Minister now answer the question that was asked by my hon. Friend the Member for Salford, East (Mr. Allaun)? Is he not aware that there is growing support in the country as well as in the Parliamentary Labour Party—
    Mr. Deputy Speaker: Order. It is not in order to go back to a previous question.
    Mr. Roberts: I am relating the question to our commitment to NATO, Mr. Deputy Speaker. It is the same question, because the vast majority of the British people are opposed to the commitments that the Minister and his Government are giving to NATO.
    Mr. Pym: The hon. Gentleman has got it wrong. I have not the slightest doubt that the British people realise that, even though, of course, they dislike nuclear weapons, it is essential to remain strong enough while we are negotiating in an endeavour to secure a multilateral balanced reduction of arms. I am certain that that is the view of the broad mass of the British people.
    Mr. Cormack: Is my right hon. Friend aware that most of us, on the Conservative Benches at least, thoroughly admire what he has done and struggled for? We regret that he was not quite as successful as we would have hoped, but we express the hope that should Russia invade Poland the whole position will be reviewed.
    Mr. Pym: That would be an entirely separate collection of circumstances. Certainly, it is vital that we play our part in NATO, as we are. We put at the disposal of the Alliance the most highly professional and motivated Service men to be found in any country. We are doing the best that we can to help the Alliance.
    Mr. Dalyell: What hard information is available to NATO about Western observers being asked to move from sensitive areas of Eastern Germany and Czechoslovakia and about unusual troop movements on the Polish borders?
    Mr. Pym: There is hard evidence of requests with regard to movements of our defence attaches and military staff in Europe. The movements of those staff are, of course, subject to the customary diplomatic restrictions, including exclusion from certain areas. At this time, we naturally hope very much that they will be enabled to stay exactly where they are.
    Mr. Churchill: A major factor in fulfilling Britain's undertakings to the NATO Alliance is the maintenance of a high level of morale and strength of the Forces. Bearing that in mind, will my right hon. Friend confirm that it remains the Government's firm commitment to honour their pledge to the Armed Forces of full comparability of pay and that there will be no question of any nobbling of the Review Body on Armed Forces Pay behind the scenes, as happened in the case of Lord Boyle's report on hon. Members' pay?
    Mr. Pym: There will be no nobbling of the review body. It will take evidence, come to its conclusions, and report some time next May to my right hon. Friend the Prime Minister. Our commitment to the Service men on the basis of comparability is clear, and I have every reason to suppose that we shall adhere to it.

    Reserve Forces
    Mr. Trippierasked the Secretary of State for Defence how many men currently are serving in each of the reserve forces of the Crown compared with the number serving in May 1979.
    The Under-Secretary of State for Defence for the Army (Mr. Barney Hayhoe): The strength of the Territorial Army has risen by some 4,800 to over 64,000 since May 1979. In the volunteer reserves of the Royal Navy and Royal Marines there has been an increase of about 100 to just over 6,000 and in the Royal Air Force, including the three new regiment squadrons which began recruiting in autumn 1979, an increase of about 250 to 550. In the same period, the strength of the Regular reserves has risen by some 6,300 to 186,100.
    Mr. Trippier: Will my hon Friend confirm that those encouraging figures are largely due to the co-operation of the reservists' civilian employers? Will he take steps to encourage more civilian employers to give more time off for reservist training?
    Mr. Hayhoe: I am happy to pay tribute and express gratitude to civilian employers who have given time off to their employees who are in the volunteer reserves. We rely on the good will of employers, and I urge that they continue to support our volunteer forces.

    Air-to-Air Refuelling Capacity
    Mr. Michael McNair-Wilsonasked the Secretary of State for Defence if he has any proposals for expanding the air-to-air refuelling capacity of the Royal Air Force.
    The Under-Secretary of State for Defence for the Royal Air Force (Mr. Geoffrey Pattie): Work is in hand on the conversion of nine VC10 aircraft into air-to-air refuelling tankers, to supplement the RAF's Victor K2 tanker force.
    Mr. McNair-Wilson: Does my hon. Friend agree that in-flight refuelling could play an important role in strengthening the capacity of our air defence squadrons in the event of conflict? In those circumstances, what proposal, if any, does he have for modifying the new British Airways Boeing 737 aircraft to become tankers in an emergency?
    Mr. Pattie: As my hon. Friend says, the idea of a force multiplier by air-to-air refuelling is very important. It is one of the options that we are considering, as is its further refinement—the creation of a formal RAF reserve to carry out this role.
    Mr. Wellbeloved: Although air-to-air refuelling is an essential factor in the RAF's capability, when does the Minister expect to be able to implement the decision by the Royal Air Force Board to increase by 50 the air defence fighters that cover the United Kingdom so that, in conjunction with the air-to-air refuelling tankers, they might give effective cover to Britain?
    Mr. Pattie: If the hon. Gentleman refreshes his memory he will recall that the board decided that there was a need for that but did not take that decision.
    Mr. Nelson: Is my hon. Friend satisfied with the range and loiter capability of the Tornado F2, in particular in defending out northern approaches? Could not both capabilities be considerably enhanced, at minimal cost, if the Boeing 737s, in their civil capacity, had the basic equipment so that fuel pods could be added later, again at minimal cost?
    Mr. Pattie: Yes. I am satisfied with the forecast operating capability of the Tornado F2, although the operating range would be much enhanced, as would the time on station, if there wore an air-to-air refuelling capability of the type described by my hon. Friend.

    North Atlantic Treaty Organisation
    Mr. Leightonasked the Secretary of State for Defence what proposals he will make to the North Atlantic Treaty Organisation meeting of defence and foreign ministers on 11 and 12 December.
    Mr. Pym: I shall be attending NATO's defence planning committee meeting on 9 and 10 December. Details of the issues to be discussed are not normally made public in advance of the meeting but Alliance Defence Ministers will be considering a wide range of issues affecting Western security. My right hon. and noble Friend the Foreign and Commonwealth Secretary will be attending the North Atlantic Council on 11 and 12 December.
    Mr. Leighton: Does the Secretary of State acknowledge the genuine and sincere misgivings of increasing millions of our people, especially younger people, at the spiralling nuclear arms race and its cost? Is he aware that many people believe that the arms race is more likely to destroy than to protect them? In view of that, will the right hon. Gentleman use his influence with the new American Administration to take up as soon as possible the strategic arms limitation talks?
    Mr. Pym: As I have said already, everybody dislikes these weapons intensely. However, the way in which they have been managed has contributed to the peace that we have known in Europe for 30 years. I assure the hon. Gentleman that neither I nor any other Minister will leave any stone unturned in our attempt to achieve some progress in the talks on disarmament and detente.
    Mr. Cartwright: Does the Secretary of State believe that Britain can continue to afford to make four major contributions to NATO, when our European partners make only one? Does he accept that our defence spending must reflect the harsh economic realities? In such a situation, is it not better to sacrifice the status symbol of an independent deterrent rather than our conventional contribution to NATO?
    Mr. Pym: There is no status symbol element. An independent deterrent is either needed for defence, or it is not. The view of Governments of both parties has been that it is a necessary element in our defence. Yes, of course the defence effort has to take account of the economic effort. I could make a strong case for doing rather more, rather than marginally less. We must also take into account the defence needs, the burgeoning threat that is emerging and the instability in various regions of the world. It is only prudent—and history reinforces the view—to ensure that we are strong enough to cope with the situation and to bring our influence to bear in the regions of the world so that stability can be restored as soon as possible.
    Mr. Geoffrey Johnson Smith: What attitude will my right hon. Friend take when he discusses the American deployment of forces in the Persian Gulf, even though this may, as some people argue, weaken support for the NATO area? Does he agree with many hon. Members and others, that the Persian Gulf is probably where the biggest threat lies?
    Mr. Pym: It certainly is a big threat to the Western world. We are much indebted to the United States for the burden that it is bearing in doing its best to keep the peace in that part of the world. I should like the United Kingdom and other allies who are able to help the United States to exercise that help as far as they can. There are implications for Europe. There is no recall of United States manpower or equipment from Europe, but there are implications in terms of reinforcement. I have no doubt that that is one of the matters that we shall discuss next week.
    Mr. Duffy: In view of the reply that the Secretary of State gave to the hon. Member for Haltemprice (Mr. Wall), may I ask, what type of progress report the right hon. Gentleman will make to his NATO colleagues on Britain's contribution to the long-term development programme, namely items 3 to 7, which relate to conventional strength?
    Mr. Pym: We shall give a good account of ourselves. It will be at least as good as that of any other European country, and we should be satisfied with that progress.
    Mr. Stephen Ross: Will the rapid deployment of our forces be on the agenda at the NATO meeting? Did the Secretary of State observe the large hovercraft being used by Warsaw Pact countries, to great effect when exercises were taking place last September? Is it not time that we followed suit?
    Mr. Pym: I do not think that we shall discuss rapid deployment. The exercise in September was a good expression of the speed at which it is possible for us to reinforce our Army of the Rhine. Recently, we introduced a new system for calling up the reserves which will more than halve the time that it takes for our reservists to be in uniform and available. In a practical way we are speeding up our redeployment, but, so far as I know, that subject will not be on the agenda next week.

    Cruise Missiles
    Mr. Cryerasked the Secretary of State for Defence if there has been any deferment of the proposal to instal cruise missiles.
    Mr. Pym: No, Sir. It is still planned that the first of these missiles will be deployed to Greenham Common in late 1983.
    Mr. Cryer: Why cannot the United Kingdom defer the installation of these menacing missiles, as Holland and Belgium have done? Will the Secretary of State confirm that the installation of cruise missiles represents the implementation of the Pentagon's limited nuclear war strategy and Presidential Directive 59? Would not a limited nuclear war as envisaged by the Pentagon be a radioactive cinder heap for the United Kingdom?
    Mr. Pym: It would be as well for the House to remember that if the Alliance had not remained resolute in its decision to modernise its theatre nuclear forces there would be no negotiations at Geneva. The Russians began by making conditions. When they saw that the Alliance was determined to go ahead with the programme they decided that it was worth their while to negotiate. As things stand, there is no question but that the decisions taken unanimously by the Alliance still stand.
    Mr. Maxwell-Hyslop: Can my right hon. Friend confirm that it is incorrect to regard the cruise missile as being for first-strike only? Will he confirm that standing patrols carrying cruise missiles can survive a first-strike so that they can be used for second-strike action?
    Mr. Pym: At no point has NATO nuclear strategy envisaged a first-strike weapon of any kind.
    Mr. Jay: Are the British Government giving full support to the United States in the negotiations with the Soviet Union to secure reciprocal restraints on the deployment of such weapons?
    Mr. Pym: Yes, Sir. The resolute line that we took in the decision contributed to the negotiations that are taking place. The right hon. Gentleman may be reassured on that matter.
    Mr. Latham: Can my right hon. Friend confirm that no additional danger to the United Kingdom is involved in having cruise missiles here, since we already have both American and British nuclear weapons on our soil? Does he agree that the argument that additional danger exists makes sense only in the terms of unilateralism—a policy that was opposed by the last three Labour Prime Ministers?
    Mr. Pym: I give my hon. Friend that assurance. There is an escalation in scale, but the capiability of our nuclear forces—our own and the American forces stationed here when deployed—will be about equivalent, in relation to the Soviet Union capability, to Polaris in the 1960s. In one sense there is an updating, but the proportion remains the same. In principle, we are in exactly the same position.
    Mr. Newens: Will the Secretary of State, in any circumstances, be prepared to support proposals for a nuclear-free zone in Europe which would make it unnecessary to deploy cruise missiles, and ensure that similar steps would be taken by the other side? Would not that meet the desire of the British people not to have nuclear weapons on their soil, because such weapons make life more dangerous, not less?
    Mr. Pym: As presently promoted, the idea of the European nuclear free zone is a Continental unilateralism. No part of that suggestion requires any withdrawal of nuclear weapons on the other side. From that point of view it is unsatisfactory. No one should turn down out of hand any suggestion where there is a possibility of making progress. Our objective is to secure a reduced level of defence. The Opposition must make up their mind quickly whether, if, despite every effort, negotiations fail, they will be in favour of continuing with the programme. In our view, it is vital that we do so.
    Mr. Cryer: On a point of order, Mr. Deputy Speaker. Because of the unsatisfactory nature of that reply, I give notice that I intend to raise the matter on the Adjournment, as is my right.
    Mr. Farrasked the Secretary of State for Defence if he will make available the outline of discussions with the United States Government concerning the joint consultation procedure, to be followed before United Kingdom based cruise missiles are activated.
    Mr. Pym: As I have made clear to the House on several occasions, the use of the bases concerned by the United States in an emergency would be a matter for joint decision between the two Governments in the light of the circumstances at the time. These arrangements were originally agreed between Mr. Attlee and President Truman in 1951 and made public in a communiqu6 following talks between Mr. Churchill and President Truman in 1952, and have been in operation under successive Governments ever since.
    Mr. Farr: I thank my right hon. Friend for that reply. Does he not think that the details should be updated because there is a considerable belief in Britain that joint consultation is only a charade and that, if necessary, any objections that the British Government may have could be brushed aside?
    Mr. Pym: No, Sir. It is not joint consultation, but joint decision. We have not felt, and my right hon. Friend the Prime Minister has not felt, the need for any updating of the arrangement. It has endured for a long time. The previous Government supported it. We do not think that it is necessary to make an adjustment at present.
    Mr. Flannery: When the Secretary of State raises the question of joint consultation about the joint decision, and voices—as I am sure that he will—the disquiet felt by the majority of people in Britain about cruise missiles, will he point out that from rather less than 600 missiles we are due to have 200 in Britain? Does he agree that, because of the grave disquiet, that is a disproportionate number of missiles that will be kicking about in East Anglia and other places?
    Mr. Pym: It is a mistake for the hon. Gentleman to be alarmist about the matter. Until not so long ago all the long-range theatre nuclear capability belonging to the Alliance in Europe was stationed in the United Kingdom. Under this arrangement it will be spread more widely, which is to the advantage of Britain.
    Mr. Kilfedder: The Secretary of State said that the people approve of cruise missiles and Trident. How can they form a judgment without having all the facts before them? Will he arrange for regular television programmes to tell the people about the horrific consequences of nuclear warfare that will last for a quarter of century?
    Mr. Pym: If it were within my power I should be delighted to facilitate a television programme to show the way in which the deployment, strategy and thinking behind the nuclear weapon part of our defences actually preserve the peace. It is difficult to obtain a balanced view an a television programme. It is important that it should be shown wherever possible.
    Mr. Cook: Did the Secretary of State notice that one of the planning assumptions of Operation Square Leg was that Greenham Common and Molesworth would be destroyed in the first nine minutes of hostilities? Because of that dismal view by the Home Office, will the right hon. Gentleman withdraw his misleading brochure that has been distributed to residents in those areas assuring them that they would not be a special target in the event of war? Is not the reality that cruise missiles make it even more certain that mainland Britain would be hit by strategic nuclear weapons in the event of war in Europe?
    Mr. Pym: These is no justification for that view, and I disagree with it.
    Mr. Rodgers: Will the Secretary of State look again at the question of control? He is right to say that the joint decision arrangement has existed since 1951. I do not suggest that successive Governments have not been satisified with it However, does he not agree that we are facing a new position and there is a great deal of anxiety about it? Does he further agree that we must recognise that, although we hope that negotiations will succeed, they may fail? In that event, why cannot we consider the prospect of a dual key? It cannot be ruled out simply because it has not been the case in the past, except when there has been ownership.
    Mr. Pym: There could be a dual key if we pay the price by buying a large proportion of the missile, or some of them, and man them ourselves. I do not think that that is
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    the best use of our resources for defence. It is more important to use our resources on conventional defences. We have gained a good bargain out of the modernisation programme for the European members of the Alliance. The United States is paying for most of it. The cost to us and to our allies is really quite small. The added strength to our deterrent is out of all proportion to the cost to us. We recognise clearly that, although we must never exclude the possibility of reviewing the control arrangements at some time in the future, no Government, including the previous Labour Government, have felt the need to seek such a review.

    Defence Expenditure
    Mr. Ioan Evansasked the Secretary of State for Defence what is the proposed total annual expenditure on defence and particularly on nuclear weapons.
    Mr. Pym: The defence budget this year is £11,151 million at outturn prices. For expenditure on nuclear weapons, I refer the hon. Gentleman to the figures I gave him on 28 October.
    Mr. Evans: Does the Secretary of State realise that, at a time when the Government are cutting back on social benefits and social services it is wrong to have a massive increase in defence expenditure on nuclear arms? Does he not realise that we are contributing a higher proportion of our gross national product to arms expenditure than our European industrial competitors and Japan, and that that may be one of the reasons for the present collapse of British industry?
    Mr. Pym: Currently, we are not increasing our expenditure on nuclear weapons. When we build the boats for Trident the capital cost, in the late 1980s and early 1990s will be a substantial expense, in the way that Tornado is now. Currently the nuclear part of our defences costs our budget 1½ per cent., which is a modest price in view of the strength that it gives us. The hon. Gentleman will appreciate that defence industries provide a subtantial number of jobs and exports, while at the same time strengthening the defences of the West. Therefore, there is something to be said for keeping our expenditure as high as it is.
    Mr. Nicholas Winterton: Does my right hon. Friend agree that while there may be room for debate about whether we are allocating too much money to nuclear rather than conventional weapons, there is no argument at all, in the light of what could be another example of blatant Soviet aggression against Poland, about the need to increase defence expenditure? Will he accept that on this side of the House some of us view with concern the reduction in expenditure that he was recently forced to accept?
    Mr. Pym: I am grateful to my hon. Friend for his remarks. However, the reduction to which he referred is a reduction in the rate of increase. There will still be a considerable increase in expenditure next year. We must bear that in mind. There is virtually unanimous support for that on this side of the House, and I am bound to say that I think that there is more support on the Opposition side of the House than sometimes appears.
    Mr. Robert C. Brown: While the essential services in Britain are grinding to a halt and being cut to ribbons, how can the Secretary of State seriously contend that we can afford the Trident programme?
    Mr. Pym: The continuation of the Polaris capability is an absolutely essential part of our defence. I should be the first to say that it is a large sum of money, but in relation to the deterrent, peace-keeping capability that it brings to us, it is good value for money.
    Mr. Buck: Is my right hon. Friend aware that the majority of right-thinking people in Britain will think that this is money well spent, not only for the defence of the realm but also as the basis for future arms reduction talks and mutual and balanced force reductions.
    Mr. Pym: I agree with my hon. and learned Friend—until such time as we can protect ourselves and secure our safety on both sides of the Iron Curtain at a lesser cost. In the meantime, I am sure that this is a necessary part of our defence capability.

    Arms Expenditure
    Mr. Frank Allaunasked the Secretary of State for Defence if he will give his revised estimate of arms expenditure for 1980–81 and 1981–82.
    Mr. Pym: I refer the hon. Gentleman to the statement by my right hon. and learned Friend the Chancellor of the Exchequer on 24 November.
    Mr. Allaun: Does the Secretary of State wish his Government to go down as the Government who slashed everything except arms spending? Following the supplementary question of the hon. Member for Macclesfield (Mr. Winterton), is not arms spending being increased at 2½ per cent. per annum in real terms, at the very time when housing is being cut by 48 per cent.?
    Mr. Pym: If we are able to achieve the maintenance of peace throughout the 1980s, that, I think, will be an achievement for which we shall like to be remembered.
    Mr. Bruce-Gardyne: Will my right hon. Friend tell the House something about the observance of cash limits within the defence budget in the current year? We all realise that there have been particular problems owing to the accelerated delivery of equipment because of the recession, but cash limits were substantially over-spent by his Department last year.
    Mr. Cormack: So what?
    Mr. Bruce-Gardyne: Can we be sure that rather more stringent criteria will be applied in the current year?
    Mr. Pym: As my hon. Friend knows, I think that in the context of defence the strict annual cash limit system is not a sensible way of doing our business. As some of my right hon. and hon. Friends know, I have tried to get it altered. I do not suppose that I shall succeed, so I have to live with it. My hon. Friend has identified the problem that faces us this year. There has been the quicker delivery of defence equipment because of the shortage of orders on the civil side. As a result, we are paying bills much more quickly than either we or industry expected. We are taking every step that we can to keep within the cash limit, including restrictions on training in all three Services. Bearing in mind the way that things are going in the
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    recession, it is difficult to think that this year we shall avoid overspending. I am doing everything possible to avoid that.
    Mr. Douglas: Will the Secretary of State indicate clearly that his commitment to the Trident programme is irrevocable? In view of his assertions about job creation, will he comment on the statement made last week by one of his officials that the programme would secure thousands of new jobs on the Clyde?
    Mr. Pym: As far as I am concerned, the programme is irrevocable. The fact that it produces additional jobs is of secondary consideration to the importance that it plays in our defence capability. Over 70 per cent. of the programme will be spent and made in Britain by British industry. That is an important consideration.
    Mr. Amery: Will my right hon. Friend confirm that the French Government are to increase their defence spending next year by 6·7 per cent.? If the French Government, who have been notoriously favourable to detente policies, believe that to be right, are we not in danger of underspending on this vital aspect of national policy?
    Mr. Pym: In comparison with practically every other country in the Alliance and in Europe, we shall do rather better. When we compare figures between one country and another, it is vital that we know the basis upon which the figures are made. This is a complicated area. There is no doubt that the French are going to spend more, but so is the United Kingdom. It remains to be seen whether we or they will spend the most or increase the most. However, we are of one mind, namely, that in the present circumstances the need for a greater defence effort is there, unfortunately, and we intend to play our part in it.
    Mr. Joel Barnett: I revert to the right hon. Gentleman's reply to the supplementary question of the hon. Member for Knutsford (Mr. Bruce-Gardyne) on cash limits. Will the right hon. Gentleman confirm that any overspending this year on his cash limits will be set of against next year's cash limits?
    Mr. Pym: Yes. That is the system under which we operate, and that will apply.
    Mr. Alan Clark: Did not the point made by my hon. Friend the Member for Knutsford (Mr. Bruce-Gardyne) about accelerated deliveries, and so forth, exemplify the extremely important role of defence spending in our industrial prosperity? Does my right hon. Friend agree that if spending were cut in accordance with the recommendations of the Labour Party, that would have a grave effect on our industrial capacity?
    Mr. Pym: My hon. Friend is right. If many of the advances made by Labour Members for the Government to spend less on defence were heeded, the consequences in terms of employment in many of their constituencies would be rather severe.
    Mr. John Evans: Is the Secretary of State saying that he does not believe in cash limits as an economic exercise, or is he merely telling us that he does not believe in cash limits for the Ministry of Defence?
    Mr. Pym: I was saying that in relation to the Ministry of Defence, which is obviously unlike any other Department, I did not think that cash limits were the most delicate or suitable instruments with which to control our

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    cash, or that they were the best way of doing so. That is known by my right hon. and learned Friend the Chancellor of the Exchequer and by all my colleagues in the Government. They know also that I am afraid that I shall probably lose my struggle to get the system altered. However, I shall go on trying.

  Prime Minister (Engagements)
  Mr. Peter Bottomleyasked the Prime Minister if she will list her official engagements for 2 December.
  The Secretary of State for the Home Department (Mr. William Whitelaw): I have been asked to reply.
  My right hon. Friend is taking part in the meeting of the European Council in Luxembourg.
  Mr. Bottomley: Does my right hon. Friend agree that those of us who dislike nuclear weapons would be better advised to support multilateral disarmament negotiations, rather than unilateral disarmament, and that perhaps Britain should support the United Nations Association rather than the CND? Is it not better to be like the sheep that says that he will not support vegetarianism because the wolf will not agree to do so as well?
  Mr. Whitelaw: As my right hon. Friends the Prime Minister and the Secretary of State for Defence have consistently made clear, we believe that our part in multilateral disarmament is correct and that unilateral disarmament would do grave damage to the peace of the world.
  Mr. Foot: May I take the earliest possible opportunity to congratulate the right hon. Gentleman on the settlement of the firemen's dispute? At least we can say that this is one election pledge that the Government have carried out. May we have some indication from the Government whether they are prepared to put their money where their election pledge was?
  Mr. Whitelaw: I am always grateful to the right hon. Gentleman, or anyone else, for small mercies. As I understand it the local authority employers, who were negotiating in this case, appreciated the Government's 6 per cent. overall cash limit on the rate support grant. Notwithstanding that position, they have decided to put forward proposals to the Fire Brigades Union, which I understand that union is now considering.
  Mr. Foot: In view of the clear-cut promises that the right hon. Gentleman, among others, made during the election campaign—he made no restrictions then about cash limits or anything else—does he agree that the Government should provide at last some of the money to secure this settlement?
  Mr. Whitelaw: The Government have made it clear that the cash limit of 6 per cent. overall on the rate support grant will staid. Within that proposal, I understand that the local authority employers have decided to seek to honour the agreement, and that is now being considered by the Fire Brigades Union.
  Mr. Tilleyasked the Prime Minister whether she will list her official engagements for 2 December.
  Mr. Whitelaw: I have been asked to reply.
  I refer the hon. Gentleman to the reply which I have just given.
  Mr. Tilley: Why does not the Home Secretary not congratulate the fire brigade authorities on keeping the promise that they gave? Will he now confirm that the Government's rather underhanded pay policy of trying to pick off groups of public sector workers one by one went up in flames last night? Will he explain to the House and the country how any group of workers can in future accept the word of honour of a Tory Minister?
  Mr. Whitelaw: I think that I should make it clear that the position of the fire brigade employers, with the specific agreement that they had, is somewhat different from other negotiations that will be conducted on the basis of the Government's 6 per cent. overall cash limit.
  Mr. Stokes: In view of the settlement of the firemen's dispute and the award of an 18 per cent. pay increase, do we understand that that will be paid for by a reduction in the number of firemen?
  Mr. Whitelaw: That is a matter for the individual fire authorities. It is important for the House to appreciate the correct position. Any individual fire authority that seeks to make a reduction in fire cover has to make an application to me as Home Secretary. Then, with the Chief Inspector of Fire Services, I have to consider whether such a reduction is appropriate. In the past 18 months, 19 authorities have made applications, of which 18 have been granted in full.
  Mr. Marks: Is the right hon. Gentleman aware that there will be particular problems for metropolitan counties in the fire brigades decision, since, apart from administrative staff, their only other employees are police and waste disposal workers? Which of those workers will have to take a reduction in their pay increase to allow for the 18 per cent.?
  Mr. Whitelaw: That is for the authorities concerned.
  Mr. Lawrence: Is my right hon. Friend aware that on no fewer than three occasions this term members of the students' union at Sussex university have physically attacked visiting Conservative speakers? Is it surprising that the new generation of Left-wingers behave in that deplorable way to stifle free speech, when they have the example of Labour Members?
  Mr. Whitelaw: I do not believe that any hon. Member in any part of the House would countenance those who try to deny free speech to anyone, no matter how much he may dislike their views.
  Mr. Robert Hughes: In the absence of his right hon. Friend the Prime Minister, did the right hon. Gentleman videotape "World in Action" last night, which showed how the Rossminster Group set up bogus companies and bogus transactions to set up tax avoidance schemes? Does he accept that such schemes cost the country hundreds of millions of pounds, which could help, for instance, to meet the firemen's claim? Did the right hon. Gentleman take particular note of the part played by the hon. and learned Member for Dover and Deal (Mr. Rees)? Does his continued retention in the Government have something to do with the old saying about setting a thief to catch a thief?
  Mr. Whitelaw: I did not see the programme. I am not in the habit of videotaping programmes for myself. I am therefore not prepared to comment on unfounded allegations of a most serious order.
  Later—
  Mr. Latham: On a point of order, Mr. Deputy Speaker. I raise this matter with some diffidence, but I think that there was a word used during the Question Time on which you ought to rule. The word used by an hon. Member was "thief, when he talked about setting a thief to catch a thief. He was referring clearly to an hon. and learned Member. I believe that you should rule on that, Mr. Deputy Speaker.
  Mr. Deputy Speaker: I also heard the word, but I did not think that the hon. Member was referring to an individual Member. Had he done so, I would have ruled it out of order.
  Mr. Winnick: Further to the point of order, Mr. Deputy Speaker. Since very serious allegations were made in a television programme about the activities of two Members who are now Ministers in a company that specialised in tax evasion, should not the Ministers concerned come to this House and make a statement? The matter will not simply go away.
  Mr. Deputy Speaker: That is not a point of order.
  Sir Frederick Burden: Further to the point of order, Mr. Deputy Speaker. Is it not clear, from the intervention that has just been made, that the word "thief was in fact a reference to the—
  Mr. Deputy Speaker: Order. At Prime Minister's Questions necessarily there is a good deal of noise. I heard the word, but I did not consider that it was directed at any particular right hon. or hon. Gentleman. I think that we had better leave it at that.
  Miss Joan Lestorasked the Prime Minister if she will list her official engagements for 2 December.
  Mr. Whitelaw: I have been asked to reply.
  I refer the hon. Member to the reply which I gave earlier.
  Miss Lestor: Bearing in mind the right hon. Gentleman's responsibility and concern for law and order in the country, can he find it in his heart to congratulate the Labour Party on the magnificent peaceful demonstration in Liverpool on Saturday, when 100,000 people marched in protest against the Government's policies? Will he note that his hon. Friends behind him could also do with a few lessons in free speech? Is he aware that thousands of young people took part in the demonstration and that the social unrest and other consequences of large-scale unemployment—
  Mr. Deputy Speaker: Order. It is an abuse of Question Time to put very long questions.
  Mr. Whitelaw: I find it in my heart to congratulate anyone who manages to avoid violence. I abhor violence in all circumstances and on every occasion. The demonstration involved the Leader of a responsible Opposition, and it would have been bad for our democracy had the demonstration been otherwise. If the Leader of the Opposition wanted to make sure that there were more jobs in Merseyside, perhaps he should have stopped off at Halewood and other places and given lectures in industrial relations, at which he is so good.
  Mr. Farr: Will my right hon. Friend have a chance to discuss with the Prime Minister on her return from Luxembourg the desirability of promoting EEC food exports to Poland, where the Communist Government
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  seem to have organised the country into permanent hunger and despair, and where surplus Community foodstuffs could well be chanelled?
  Mr. Whitelaw: I understand that the matter was discussed by the Heads of the Community Governments in Luxembourg. My right hon. Friend will make a statement on the results of the meeting tomorrow.
  Mr. James Hamilton: Bearing in mind the part played by the right hon. Gentleman with regard to firemen's wages, both before and after the election, and the 6 per cent. limit dictated to local authorities, does he believe that the Government are still preaching a philosphy of free collective bargaining?
  Mr. Whitelaw: The Government have made the position clear. We have put in the rate support grant an overall 6 per cent. cash limit for pay. That stands.
  Mr. Gummer: Would my right hon. Friend care to contrast the post-election reticence of the Leader of the Opposition on unilateral nuclear disarmament with the strong and proper moral speech of the Archbishop of Canterbury, supporting our retention of a nuclear deterrent?
  Mr. Whitelaw: It is not for me to comment on the Leader of the Opposition or the Archbishop of Canterbury. However, during the war I served in the same battalion as the Archbishop of Canterbury. He was a very brave officer indeed.
  Mr. Freud: Is the Deputy Prime Minister aware that the 71-year-old chief executive of the disaster-prone nationalised Totalisator Board has just received a redundancy payment of £70,000? In view of the economic situation, is that a good idea?
  Mr. Whitelaw: I do not know whether it is a good idea. It is entirely a matter for the chairman of the Tote Board.

  European Community (Heads of Government Meeting)
  Mr. Spearingasked the Prime Minister when and where she expects the next Heads of Government meeting of the European Economic Community to take place.
  Mr. Whitelaw: I have been asked to reply.
  On 23 and 24 March at Maastricht in the Netherlands.
  Mr. Spearing: Does the Home Secretary agree that at that time there will be great pressure on the EEC budget? As the Minister of Agriculture, Fisheries and Food has made it clear that he favours retention of the CAP, will the Government refuse to sanction further means of revenue, direct or indirect, to the EEC between now and then?
  Mr. Whitelaw: Those are matters that the Prime Minister and the Minister of Agriculture, Fisheries and Food will no doubt report to the House in due course.
  Mr. Gordon Wilson: Will the right hon. Gentleman consult the Prime Minister, when she returns from her present visit, about the consequences of selling out on the fishing industry if no reasonable agreement over exclusive limits is achieved? [HON. MEMBERS: "Rubbish."] Will the right hon. Gentleman accept that there is great fear in the industry about what the Government may do to it?
  Mr. Whitelaw: There is a certain disagreemant about what is happening. I hear flora behind me calls of "Rubbish". The hon. Gentleman's views; seem to be somewhat premature. I do not believe that there is any question of a sell-out.

  Southall
  Mr. Bidwellasked the Prime Minister if she will pay an official visit to Southall
  Mr. Whitelaw: I have been asked to reply.
  My right hon. Friend has at present no plans to do so.
  Mr. Bidwell: Will the right hon. Gentleman consider coming instead of his right hon. Friend to discuss with my constitutents the Yellowlees report on immigration control activities? Does he accept that in the virginity testing case, which has not yet been settled, a much more generous offer is required? Will he also discuss the deportation of people who have been living and working in Britain for as long as 6, 7, 8 and 9 years? Will he use his exceptional powers to mitigate the situation now that primary immigration has been stopped for such a long time?
  Mr. Whitelaw: As I made clear in an answer in the House last week, the Yellowlees report will be published and in the hands of hon. Members as soon as possible. I
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  hope that they will then carefully study it. I do not wish hon. Members to jump to conclusions before they have had a chance to look at it.
  I know the hon. Gentleman's concern and the difficulties that he faces in Southall. If a suitable moment should arise at which I could come and discuss these problems, I should be very pleased to do so, or, if not, my Minister of State would equally be very pleased to do so.
  Mr. Greenway: Has my right hon. Friend had the time to read the recent disturbing report of the Religious Education Council for England and Wales, which pointed out that in the majority of primary schools the status and content of religious education is muddled, and that two-thirds of those teaching it are unqualified to improve this situation? The report also says that in nearly 25 per cent. of comprehensive schools there is no education in religion or morality at all.
  Mr. Deputy Speaker: Order. The question must be related to Southall or to immigration procedures.
  Mr. Greenway: It affects the general attitude of the nation and Southall to morality. [Interruption.] Southall is part of the nation. What is the attitude of the Government to this report?
  Mr. Whitelaw: Perhaps it would be appropriate for me to intervene at this stage to say that I shall, of course, call these matters to the attention of my right hon. and learned Friend the Secretary of State for Education and Science.

Service Women (Carriage of Arms)
The following Question stood upon the Order Paper:
Mr. Anthony Buck: To ask the Secretary of State for Defence what representations he has received about the proposal that Service women should be allowed to bear arms; and if he will make a statement.
The Secretary of State for Defence (Mr. Francis Pym): In the "Statement on the Defence Estimates" (Cmnd. 7826) I announced that we were reconsidering our traditional attitude to the carriage of arms by Service women for defensive purposes. Since then, despite press coverage and the invitation in the Service debates for views to be expressed, very few representations have been received. I have concluded that there is a readiness to accept limited change and I have, therefore, decided that members of the women's Services can be trained in the use of arms.
At first, training will be given only to a limited number. This will be voluntary in the WRAF and compulsory in the WRAC, though exemptions will be made for those currently serving who have genuine objections to carrying arms. The number of WRAC involved will depend upon studies into future manpower requirements. WRAC personnel will carry arms for self-defence purposes only. The majority of the WRAF will eventually receive training; in addition to being armed for self-defence purposes, they will also be armed for station defence duties.
There is no requirement at present for the WRNS to carry arms; and there is no question of members of any of the women's Services serving in a combat role.
Mr. Buck: I thank my right hon. Friend for that answer. Is he aware that most of us take the view that with equal rights should go similar obligations and that most of us would think it right that the bearing of arms by Service women should be oriented towards self-defence and self-preservation? What is the attitude of the Armed Forces? Will my right hon. Friend also say a word about the position of Service women serving in Northern Ireland?
Mr. Pym: I am grateful to my hon. and learned Friend for what he has said. The Services themselves—both Service men and Service women—are in favour of this change. The purpose of it is entirely for self-defence, with a slight extension for the defence of certain bases in the case of the WRAF.
With regard to Northern Ireland, there is no question of Service women carrying arms. They will continue to be protected by armed Service men.
Mr. J. Enoch Powell: Is it clear that self-defence is purely individual and personal self-defence and has no wider connotation?
Mr. Pym: The only wider connotation is in the case of members of the WRAF, who will be armed in some cases for station defence duties as well. With that sole exception, it is entirely for personal self-defence.
Mr. Churchill: Is my right hon. Friend aware that his statement this afternoon will be warmly welcomed in all parts of the House and, above all, within the women's Services? Once the experiment has proved itself, will he consider carrying it a step or two further, bearing in mind the very great shortage of armed manpower available in a crisis?
Mr. Pym: I am grateful for what my hon. Friend has said. The women's Services are eager to play as full a part as possible in the defence of our country, but I should not like to go any further than I have today with regard to the future.
Mr. James Wellbeloved: Will the Secretary of State ensure that the X factor component of Service pay will be adjusted so that Service women undertaking the same sorts of armed duties as Service men will receive the same X factor contribution to their salary?
Mr. Pym: That will be a matter for the Review Body on Armed Forces Pay to consider.
Mr. A. J. Beith: Will the Minister confirm that if he did not take the step that he has taken in allowing women to carry arms for station duties in the WRAF the deployment of women at RAF stations could be affected and that it is, therefore, a sensible decision?
Mr. Pym: I am grateful for what the hon. Gentleman has said.
Mr. John Farr: Will my right hon. Friend recognise that the decision will be widely accepted on each side of the House?
What is the position concerning women police officers? As a matter of interest to the House, the most accurate member of the Houses of Parliament rifle club happens to be a woman police officer.
Mr. Pym: I thank my hon. Friend for what he has said. There is no change envisaged at present in regard to policewomen.
Mr. Tam Dalyell: What exactly is the criterion for self-defence in this context? Is it simply up to a commanding officer to say "Yes" or "No"? Is it a matter of request from the Service man or Service woman concerned? Who is to be the judge of what constitutes a matter of self-defence for which the carriage of arms can legitimately be asked?
Mr. Pym: I cannot recall the Oxford dictionary definition, but most hon. Ministers will appreciate what is meant by self-defence. The military certainly appreciate it.

Falkland Islands
The Minister of State, Foreign and Commonwealth Office (Mr. Nicholas Ridley): With permission, Mr. Speaker, I wish to make a statement on the Falkland Islands.
We have no doubt about our sovereignty over the islands. The Argentines, however, continue to press their claim. The dispute is causing continuing uncertainty, emigration and economic stagnation in the islands. Following my exploratory talks with the Argentines in April, the Government have been considering possible ways of achieving a solution which would be acceptable to all parties. In this, the essential is that we should be guided by the wishes of the islanders themselves.
I therefore visited the islands between 22 and 29 November in order to consult island councillors and subsequently, at their express request, all islanders on how we should proceed. Various possible bases for seeking a negotiated settlement were discussed. These included both

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a way of freezing the dispute for a period or exchanging the title of sovereignty against a long lease of the islands back to Her Majesty's Government.
The essential elements of any solution would be that it should preserve British administration, law and way of life for the islanders while releasing the potential of the islands' economy and of their maritime resources, at present blighted by the dispute.
It is for the islanders to advise on which, if any, option should be explored in negotiations with the Argentines. I have asked them to let me have their views in due course. Any eventual settlement would have to be endorsed by the islanders and by this House
Mr. Peter Shore: This is a worrying statement.
Will the Minister confirm that involved here are the rights and future of 1,800 people of British descent in a territory which was originally uninhabited—people who, above all, wish to preserve their present relationship with the United Kingdom? Will he reaffirm that there is no question of proceeding with any proposal contrary to the wishes of the Falkland islanders? Their wishes are surely not just "guidance" to the British Government. Surely, they must be of paramount importance. Has the hon. Gentleman made that absolutely clear to the Argentine Government?
Is not the Minister aware that proposals for a leasing arrangement represent a major weakening of our long-held position on sovereignty in the Falkland Islands, and chat to make them in so specific and public a manner is likely only to harden Argentine policy and to undermine the confidence of the Falkland islanders? Will he, therefore, make it dear that we shall uphold the rights of the islanders to continue to make a genuinely free choice about their future, that we shall not abandon them and that, in spite of all the logistical difficulties, we shall continue to support and sustain them?
Mr. Ridley: The answer to all the right hon. Gentleman's questions is "Yes". There are about 1,800 islanders. I make it clear, as I did in my statement, that we shall do nothing which is not "endorsed" by the islanders. I used that word as well as the word "wishes". I agree that that is the predominant consideration in this matter. I am sure that equally the right hon. Gentleman will agree that nothing that he might feel, think or do should be allowed to interfere with what the islanders themselves decide. I confirm that our long-standing commitment to their security and economic well-being remains, and I said that in the islands.
Sir Bernard Braine: Does not my hon. Friend agree that the option of yielding on sovereignty and leasing back undermines a perfectly valid title in international law? Secondly, does he not realise that the precedent of Hong Kong, which was taken from China by force, is an insult to Falkland islanders whose ancestors went there more than a century ago and settled peaceably in an uninhabited land?
Thirdly, did my hon. Friend discuss with representatives of the Falkland Islands alternative means of communications, which are perfectly feasible, in order to reduce the islands' total dependence upon the Argentine? Lastly, in view of the fresh anxieties that these talks have caused about the future of the islanders, and bearing in mind that the islanders are wholly British in blood and
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sentiment, will he give an assurance that the Government will include the Falkland islanders as an exception in the forthcoming British nationality law?
Mr. Ridley: I agree with my hon. Friend that we have a perfectly valid title. There is no question about that in our mind. The question is whether the islanders would prefer to have the dead hand of the dispute removed so that they can not only continue their British way of life but have reasonable prospects of economic expansion. I suggest that that is something upon which they have every right to give their views before we all give ours.
I consulted the islanders on the question of communications, but, of course, in the event of a dispute between ourselves and Argentina becoming more tense, my hon. Friend should realise that it is unlikely that communications could be established with neighbouring countries in South America. The question of British nationality is a matter for my right hon. Friend the Home Secretary.
Mr. Russell Johnston: Is the Minister aware that his reception in the Falkland Islands left the islanders' views in no doubt, although it left a considerable doubt about his good intentions? Is he further aware that there is no support at all in the Falkland Islands or in this House for the shameful schemes for getting rid of these islands which have been festering in the Foreign Office for years? Will he take this opportunity to end speculation once and for all by declaring quite clearly that he disowns those schemes and that he will work to improve the economic and political links between the United Kingdom and the Falkland Islands? Surely, that is the way to end the emigration about which he talked earlier.
Mr. Ridley: Perhaps I am more aware of the reception that I received in the islands than the hon. Gentleman is. I hope that even those who did not like what I had to say were at least agreed upon my good intentions. I can assure the hon. Gentleman that a large number of people felt that it was right that something should be done to settle the dispute. Some of them liked some of the ideas and some did not. The islanders must be allowed to make up their own minds. The hon. Gentleman is rushing it a bit in trying to anticipate what they may eventually decide.
Mr. Peter Tapsell: Will my hon. Friend bear in mind that some of us who have interested ourselves in the future of the Falkland Islands over the years have considerable doubts about the tactical wisdom of placing the leasing point on the negotiation table? We therefore particularly welcome that part of his statement which said that no settlement would be pursued which did not have the support of the Falkland islanders.
Mr. Ridley: No offer has been made to the Argentine Government to negotiate on anything. This was a visit to consult the islanders about what they would like to see in any future negotiation or, in the case of a negative answer, if there were to be no future negotiation. There is no question about this being a negotiating offer on the table. This is something which the islanders will discuss among themselves in order to decide whether they wish it to be pursued.
Mr. Frank Hooley: Is not the Government's argument that the interests of 1,800 Falkland islanders take precedence over the interests of 55 million people in the United Kingdom?
Mr. Ridley: There need be no conflict between the two, especially if a peaceful resolution of the dispute can be achieved.
Mr. Julian Amery: Is my hon. Friend aware that his statement is profoundly disturbing? Is he also aware, as certainly the Falkland islanders are, that for years—and here I speak from some experience—his Department has wanted to get rid of this commitment? Is he further aware that it is almost always a great mistake to get rid of real estate for nothing, that the Falkland Islands may have an important part to play in the future of the South Atlantic and that, admitting that the interests of the inhabitants and their wishes must be paramount, there is also a considerable British interest in maintaining this commitment, which is probably much cheaper to maintain than it is to lose? Will my hon. Friend look back at the cost to us in terms of oil prices of the surrender of Aden and the Persian Gulf?
Mr. Ridley: I think that my right hon. Friend knows me well enough to realise that I do not embrace schemes which are thrust upon me by my Department. The Government as a whole have taken the decision to take this initiative. It is of a political nature, and it is not the job of the Foreign Office to devise such an initiative. There is a great deal in what my right hon. Friend said about the need to watch the strategic and other interests in the South Atlantic. It is in order to ensure that these may be peacefully pursued, including the possibilities of oil around the Falklands, that there is a premium on trying to solve the dispute.
Mr. Donald Stewart: In order to allay the fears and doubts which his statement will have aroused among islanders, and in order to preserve the honour of the Government in the affair, will the Minister now advise the Argentine Government that the matter is closed unless and until the islanders wish to reopen it?
Mr. Ridley: I stress that I was in the islands more recently than the right hon. Gentleman. It is not for him to say what the islanders do or do not want. I have asked them directly, and I do not need his services to anticipate what they may say.
Mr. Kenneth Warren: I recognise that the Falkland Islands have severe current economic problems, but does my hon. Friend agree that the potential in terms of fisheries and offshore oil in the Falkland Islands is sufficient to sustain them economically in the not-too-distant future and that we should give the islanders every support that we can in their economic bargaining?
Mr. Ridley: My hon. Friend is right, but he will also know that it has not proved possible under Governments of either party to exploit those resources, either of fish or oil, because of the dead hand of the dispute with Argentina. We are seeking to find a solution in order to make that possible.
Mr. Tom McNally: Is the Minister aware that his Department's policy over many years has been the major cause of the uncertainty affecting the islands? Instead of making these humiliating excursions to the Argentine, would it not be better for the hon. Gentleman simply to say that, whatever the Government and whatever the majority, there will never be a majority in this House to give this historically separate people and these separate islands to the Argentine?
Mr. Ridley: The hon. Gentleman speaks as if he knows more about the position than the Foreign Office and the islanders; he seems to speak for the whole House. He may find that he is sometimes wrong.
Viscount Cranborne: Is my hon. Friend aware that his statement today has caused grave disquiet throughout his own supporters, and that merely by entertaining the possibility of the surrender of sovereignty he is encouraging the islanders to think that they do not enjoy the support that they deserve from their home country? Is he also aware that his attitude reminds me of the attitude of the Church of England over the old Prayer Book—
Mr. Deputy Speaker: Order.
Mr. Ridley: I was happy to be able to assure the islanders that they had our support, whatever course they chose to take. Of course, whether the position remains as it is at present or whether there is a lease back, the Government are obligated to defend their territories all round the world.
Mr. Douglas Jay: It is clear that the islanders, whatever else they may think, have no wish for a change of sovereignty. Why cannot the Foreign Office leave the matter alone?
Mr. Ridley: The right hon. Gentleman should have accompanied me on my visit; it would have been very pleasant. He might then have heard the views of the islanders, a large number of whom believe that it would be to their advantage to settle the dispute. He must listen to the views in the islands instead of preaching what he has always believed to be the case
Several hon. Members Several hon. Members rose—
Mr. Deputy Speaker: Order. I must protect the business on the Order Paper. I propose to take three more questions from either side of the House.
Mr. Robin Maxwell-Hyslop: Did my hon. Friend discuss with the islanders the question of their right of access to the United Kingdom in any proposed change of the nationality laws, or did he tell them that a Home Office Minister would be visiting the Falkland Islands to do so? In other words, is it only to the House of Commons that my hon. Friend will not answer questions about that, or will a Home Office Minister do so?
What is the position concerning Falkland Islands trade with Southern Chile? There was some experimental trade in lamb. What opportunities are there for further economic links between Southern Chile and the Falkland Islands rather than that the Falkland Islands should be totally reliant on Argentina?
Mr. Ridley: The islanders certainly discussed the question of nationality with me, and I said that I would discuss the matter with my right hon. Friend the Home Secretary when I returned home. I am sure that my right hon. Friend will discuss the matter with me at some stage.
The question of trade with Chile is open. There is no reason why the islanders should not trade with Chile or with any other country. There has been one delivery of sheep to Chile, and we hope that there will further trade between the two countries.
Mr. James Johnson: The House will welcome, and has welcomed, the Minister's

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unequivocal statement that the islanders will be the arbiters and sole judges of their destiny, but what is he doing to ameliorate their conditions? The islands are 10,000 miles away with a diminishing population, and young people are leaving them. Argentina will not go away, so the Government's duty is to ameliorate conditions between the islands and the mainland. What are the Government doing about fishing ventures or any other commercial exploitations?
Mr. Ridley: I am taking an initiative to see, with the islanders, whether there is a way of solving the dispute. That is the way to unlock the economic potential that the islanders so badly need.
Mr. Matthew Parris: Will my hon. Friend explain why the continuing dispute with Argentina precludes help from the United Kingdom Government to the islanders in developing their territory?
Mr. Ridley: The possibility of declaring a 200-mile zone round the islands is remote without the agreement of the Argentine because of the difficulty of enforcing the licensing of fishing or oil exploration. Successive Governments found that that was not possible in the absence of an agreement. There is also considerable difficulty relating to investment and the extension of credit to the islands because of the fear of investors that the dispute may frustrate their investment.
Mr. John Home Robertson: Will the Minister tell the House more about the leasing proposals? Is it his idea to sell the freehold to Argentina and 10 lease it back as part of the Government's attempts to reduce the public sector borrowing requirement?
Mr. Ridley: The details of any lease-back arrangement would first have to be considered by the islanders, and then it would be the subject of negotiation with the Argentine and then the subject of endorsement by the islanders and this House- It is impossible to go into detail with any accuracy, but it is not envisaged that any money would change hands, either in the transfer or in the lease.
Mr. William Shelton: I congratulate my hon. Friend on taking the views of the islanders, which is right and proper. Will he confirm that should those views be for maintenance of the status quo he will accept that? Will he also say whether he has contingency plans to help the islanders, despite the lack of resolution of the problem?
Mr. Ridley: We shall have to wait for the answer. That is a hypothetical question, and we must consider the matter when we hear from the islanders.
Mr. David Lambie: As one of the few Members to have visited the Falkland Islands, may I
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ask the Minister whether he is aware of the deeply felt suspicion of the islanders of previous British Governments and British politicians, especially those representing the Foreign Office? Is he further aware that there was no need for today's statement, which will further heighten those suspicions? Is this a further example of the Government reneging on previous promises that were given to those people?
Mr. Ridley: As one of the few hon. Members to have visited the Falkland Islands—I have visited them twice—I beg to differ with the hon. Gentleman. My welcome was friendly, and the islanders were kind and listened to me with great attention. They were grateful for the frank discussions that we had.
Mr. Shore: The Minister was asked a few moments ago whether, if the islanders were to opt for the status quo, that would then be the Government's view on the matter and they would sustain it. He did not give a clear reply to that. If the Government are to honour their commitment that the views and wishes of the Falkland Islands are to be paramount, which is the word which has been used hitherto, he must assure the House and the Falkland islanders that that principle of paramountcy of their wishes about their future will be sustained by the British Government.
Mr. Ridley: I have said that anything that was proposed would have to be endorsed by the islanders. There is no need to repeat that. However, I cannot answer a hypothetical question about what might happen in certain circumstances, just as I am sure that the right hon. Gentleman would not be prepared to say that if the islanders endorsed a solution he could make his whole party vote for it.
Mr. John Farr: On a point of order, Mr. Deputy Speaker. Is it possible to give notice after a ministerial statement that one would wish to raise a matter on the Adjournment? If it is possible, I should like so to do because of the intense dissatisfaction I feel about what the Minister said.

STATUTORY INSTRUMENTS, &C.
Ordered,
That the Elections (Welsh Forms) (No. 2) Regulations 1980 be referred to a Standing Committee on Statutory Instruments, &c.—[Mr. St. John-Stevas.]

NORTHERN IRELAND AFFAIRS
Ordered,
That the matter of the proposal to establish an Enterprise Zone in Belfast, being a matter relating exclusively to Northern Ireland, be referred to the Northern Ireland Committee for their consideration.—[Mr. St. John-Stevas.]

Orders of the Day

  British Telecommunications Bill
  Order for Second Reading read.
  4.2 pm
  The Secretary of State for Industry (Sir Keith Joseph): I beg to move, That the Bill be now read a Second time.
  I suppose that most Ministers who bring a Bill before the House claim that it is important and substantial. In this case, however, I commend the Bill to the House without hesitation as a substantial measure likely to bring noticeable and worthwhile benefit to those who work in the public and private sectors connected with telecommunications and to the public generally as consumers and users of telecommunications.
  The purpose of the Bill is to allow a more flexible approach to the postal and telecommunications services by the private and public sectors. Technological advances in telecommunications have made or are making the concept of an absolute monopoly out of date. Monopoly stifles the growth of services and the development of new equipment. The existing structure in telecommunications is far too rigid.
  The Bill will help break down the artificial barriers between the public and private sectors. Overseas experience—a number of other countries are far ahead of us in collaboration and competition between the private and public sectors—demonstrates that the public at large and the national carriers gain enormously from open telecommunications markets where competition encourages new equipment and services.
  There is a huge demand now even for existing services and an even greater potential demand for services that are already available in some form, let alone the services that will become increasingly available. There is every reason to expect that over the years ahead a large increase in jobs will emerge from telecommunications and the new industries and sub-industries and services flowing from them. The way in which they will be distributed between the public and private sectors will depend upon performance in meeting the demand of customers. The Bill will facilitate growth to meet the demand.
  I do not want to give the impression that the Bill is connected only with British Telecommunications. Part of it is also concerned with the postal services, where more flexibility is similarly needed. I must emphasise the Government's view that monopolies are not rights but privileges, which must be earned and re-earned every day.
  The Bill points the way to much more flexible organisation both for British Telecommunications and the Post Office. It does not just split the present Post Office into a continuing Post Office for postal services and a new British Telecommunications corporation for telecommunications. It will also lead to the creation of new profit and self-accounting units which should be more responsive to the needs of customers.
  The Bill also extends the Post Office Act 1969 so that the Government will have power to dispose of their shares in Cable and Wireless Ltd. We are seeking that power in pursuance of our general policy of disposals in the public sector. However, no final decision on the exercise of this
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  power or on the timing or form of the disposal of shares will be taken until overseas Governments directly affected by the operations of Cable and Wireless have been fully consulted.
  Mr. John Silkin: This is an important point because Cable and Wireless was formed in 1949 by agreement with the Commonwealth. That was its whole basis. Clause 76 is already included in the Bill, but I gather that so far not only has there been no agreement with the members of the Commonwealth but apparently they have not yet even been consulted.
  Sir Keith Joseph: No policy decision will be taken until the overseas Governments directly affected have been fully consulted. We are seeking only the power to dispose of some or all of the shares should the Government so decide.
  Mr. John Silkin: But surely the Secretary of State is taking unprecedented action in the Bill. This is a vital matter, on which the Commonwealth has to be consulted. That was the basis of the 1949 set-up. For the Government to put the provision into a Bill without ever having consulted those countries seems an outrage to those countries and to the House.
  Sir Keith Joseph: We have talked of this possibility a number of times. The Governments immediately concerned know that we shall be consulting them. We are doing no more than putting ourselves in a position, subject to consultations, to take a decision. We shall be able to pursue this matter at a later stage in the Bill. No policy decision has been made.
  I come to the split of the Post Office into separate corporations for the postal services and telecommunications. The split has been under consideration for many years. The Carter committee, set up by the last Government, recommended in favour of the split in 1977. Its argument was that the two businesses were markedly different, one being capital-intensive and the other labour-intensive. Each needs its own board to concentrate on running its business. I announced the Government's acceptance of those arguments last year. The Post Office has been carrying out the necessary preliminary arrangements. The separation is now, subject to the passage of the Bill through Parliament, largely prepared. The Bill, if approved, will complete the process.
  Dr. Oonagh McDonald: Do those considerations include splitting the pension funds, and, if so, what consultations have taken place with the trade unions involved?
  Sir Keith Joseph: If the hon. Lady will permit me, I shall come to that in due course.
  Both corporations will be large in their own right. Much of the Bill is devoted to the creation of British Telecommunications and the transfer to it of the rights and liabilities of the Post Office with respect to telecommunications. To this extent the Bill merely repeats the existing law, but for British Telecommunications rather than for the Post Office. All this is contained in Part I.
  Part II deals with the Post Office and contains changes to the postal monopoly. These changes are necessary to bring the ministerial controls over the Post Office into line with those for British Telecommunications.

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  It would be right, perhaps, to concentrate at the start of the description of the proposed British Telecommunications regime on a factor that I know interests the House—investment. After the passage of the Bill, the borrowing of British Telecommunications and of the Post Office will, like the borrowing of other nationalised industries, continue to count against the public sector borrowing requirement. Therefore, the Government must continue to set limits on the amount of external finance that the businesses can take.
  As my right hon. and learned Friend the Chancellor of the Exchequer announced last week, British Telecommunications is being set an external financing limit for 1981–82 of £180 million, which is substantially more than in the current year or in recent years, of some of which a net repayment was required. This limit should allow for an investment programme in excess of £2 billion — bigger in real terms than the current year's programme and an increase on the previous year.
  There is no dispute about the need to increase British Telecommunications' investment to expand: the network further, to modernise it and to speed up the introduction of new attachments and services. However, I believe that there is scope for British Telecommunications, to finance part of what could by this means be a still larger investment programme by partnerships with the private sector, particularly as regards new o attachments and services.
  We need a strong and successful British Telecommunications, not only competing with the private sector but co-operating with it in joint ventures. That is the way forward for management and staff to secure expansion and jobs. We hope to see BT co-operating with the private sector in, for example, providing auxiliary services which depend on the telecommunications network and attracting private capital into subsidiaries set up to market subscribers' apparatus. Provided that BT is not in control of any partnership, it will be a genuine private sector activity whose financing can be conducted outside the PSBR and, therefore, in addition to the £2 billion investment programme of which I have spoken.
  In drafting the Bill, we have sought to remove any obstacles that there might have been to BT proceeding down these paths. For instance, the drafting of clause 3 makes it clear that BT can discharge its duty through a subsidiary or a licensee. It does not necessarily have to provide all the services if it is satisfied that others can provide them adequately or if it can arrange to do so through a subsidiary or associate. At the same time, it will not be free to dispose of its interest in a subsidiary except with the consent of the Secretary of State.
  I think that it will be common ground on both sides of the House that there has been widespread, and often justifiable, public dissatisfaction with the operation of telecommunications and postal monopolies. Whether this stems from the shortcomings of management, from trade union restrictions or working methods or from equipment deficiencies is not the immediate point. The fact is that the quality of service is inadequate. The Government believe that the introduction of competition, or the possibility of its introduction, will bring increased benefits for the consumer and the economy generally.
  In 1977, the Carter committee recommended that the boundary of the telecommunications monopoly should be redrawn. We believe the case for that to be unanswerable.
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  In the United States, the past 15 years have seen marked progress towards open competition in place of closely regulated local and national monopolies. Entrepreneurs in the United States have gained freedom to develop new services and a wide range of equipment associated with telecommunications. Few would doubt that this has enormously stimulated enterprise and benefited users.
  Meanwhile, in this country, where we have been almost entirely relying on a single public sector organisation, there is great dissatisfaction with the range and availability of equipment and services, many of which are subject to unacceptable delay.
  Telecommunications is in a stage of rapid development and growth. It is essential that we allow these developments to evolve as rapidly as possible for the benefit of the public. A new revolution is upon us, spurred by the dramatic reduction in the unit cost of computing power and electronic memory. The combination of technical advances in microelectronics, computing, telecommunications and automation makes the application of these interlocking technologies fundamental to the progress of industrial economies. We have the economic means to put within the reach of everybody the power to store, retrieve and process information on a scale impossible only a few years ago. Telecommunications lies at the heart of this transformation and can play a vital part in the future efficiency of businesses of all kinds everywhere. We cannot afford to lag behind in its development and use.
  Throughout industry and commerce, management and work forces which do not keep pace with the application of the new technologies will become more and more uncompetitive. Individual firms must judge for themselves in their own areas of work, but as a nation we cannot afford to let the application of this technology be held back by inadequate telecommunications services. There are immense opportunities for the telecommunications industry, private and public alike. More jobs will result from the rapid expansion of telecommunications which this measure will help to stimulate. We look forward to the creation of many new businesses as new ryes of products and services are developed in response the the wider opportunities which will evolve.
  The new corporation has a crucial role in providing a modern and efficient network and in applying the new technologies. It will benefit substantially from the increased volume of traffic generated by the growth of new services which it helps to make possible. Our policy is that British Telecommunications should be free to compete in all areas but that it should do so fairly and, as; far as possible, on an equal basis with the private sector. To this end, BT will have powers to supply telecommunication equipment which serves other purposes as well — for example, in data processing—and to extend its activities into new technologies such as opto-electronics.
  I must emphasise that we regard a financially healthy and thriving BT as essential to the full development of telecommunications in this country. There is plenty of scope for both BT and the private sector to play a full part, in some areas in competition and in others working together in joint enterprises.
  The new arrangements under the Bill are designed to achieve a far greater degree of flexibility to make that possible. We shall be looking to BT to carry out many of its developing activities through Companies Act subsidiaries and in partnership with the private sector.

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  Clause 4 gives the power to require the corporation to set up a self-accounting subsidiary or subsidiaries to carry out its competitive activities — for example, in the supply of terminal equipment. This will ensure that there is no hidden cross-subsidisation of the corporation's competitive activities.
  The Director General of Fair Trading will monitor the development of the competitive market and will be on the look-out for evidence of unfair trading practices. If the full potential for development is to be achieved, both public and private investment will be necessary. The Bill will help to make that possible. It is for industry to make the most of the opportunity.
  Mr. Frank Dobson: Will the Director General of Fair Trading be looking to see whether private sector competitors as well as British Telecommunications are competing fairly?
  Sir Keith Joseph: That is his function. That is what he is there for.
  The Government's role in the process that I have described is to provide a framework within which these developments can take place in response to market demand.
  There are three main objectives behind the Bill: first, to protect the interests of consumers; secondly, to stimulate the United Kingdom industry; and, thirdly, to promote greater flexibility of telecommunications systems. The key to this is the introduction of competition over as wide a field as possible. This will ensure a more responsive management of service and will encourage more choice and better service.
  We believe that the Bill will promote growth in the supply of services via the network and may extend to the provision of public network services where there is a market opportunity to supplement the main network services provided by BT.
  I shall now describe in more detail how we intend to use the powers in the Bill. First, we shall liberalise the supply, installation and maintenance of all equipment attached to the network, with the exception of the subscriber's first telephone and the maintenance of private branch exchanges. Technical approval of attachments to ensure compatibility with the network will be carried out by a self-financing independent body working to standards formulated by the British Standards Institution and approved by the Secretary of State.
  Secondly, we intend to liberalise the use of the network for third party services. We shall decide the extent of this liberalisation in the light of the study into its economic implications currently being carried out by Professor Beesley, of the London Business School. This should be ready early next year. Thirdly, we are exploring the scope for licensing the provision of transmission services in competition with BT and will be considering, on their merits, proposals for such services that are put to us. There is, for example, a crying demand for Telex and good digital fast lines. If consortia from the private sector can organise themselves with concrete proposals to meet this manifest market gap, I shall naturally consider them with sympathy. Any such proposal will add to the national capability, ease some of the immediate burden on BT and bring forward the benefits of an improved telecommunications infrastructure.
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  In all these areas, we hope, so far as possible, to proceed by means of general rather than individual licences, although specific licences are more likely for competitive networks. The powers will allow complete flexibility in the development of the new regime to take account of changing technology. They are framed in a way which we hope will enable us to avoid creating a new licensing bureaucracy on the lines of the American Federal Communications Commission.
  Mr. John Golding: How is it envisaged that the royalties on licences mentioned in the Bill will be determined? Who will receive the benefit from those royalties?
  Sir Keith Joseph: The hon. Gentleman refers to the royalties on licences. If the proposal is to use the network for value added services—the degree to which this will be within our policy depends on our study of the Beesley report—the proposal will, no doubt, contain within it a rental or equivalent system. BT will be in negotiation, no doubt, with any such proposers of value added network services.
  Mr. Golding: Can the Secretary of State say why provision is made for the payment of these moneys into the Consolidated Fund?
  Sir Keith Joseph: Perhaps at a later stage, or now, if he can find it, the hon. Gentleman will say to what he is referring. I think it is more likely that he may be referring to some charge that will be levied for service of the approval institution. The approval institution and the standards—setting institution will be self-financing. The hon. Gentleman is welcome to pursue the detailed point later.
  Mr. Golding: It is in clause 15(9).
  Sir Keith Joseph: I am grateful to the hon. Gentleman. This is in connection with licence proposals. It may well be to give freedom to the Secretary of State in his wide licensing powers and that there will be occasion for a charge to be made, in which case it will be payable into the Consolidated Fund. I do not think that there is any difficulty about that.
  Mr. John Silkin: I wonder whether I can assist the right hon. Gentleman in explaining his Bill to him. Clause 15(9) definitely says that any moneys obtained under the licences granted by him in respect of BT are to go into the Consolidated Fund. Under clause 65, the same process arises in the case of the Post Office. There can be no question, therefore, of BT or, later, the Post Office making any royalty deals with other people, because they will not get the advantage of the money. That is what my hon. Friend is saying.
  Sir Keith Joseph: We are talking of two overlapping contingencies. One is the value added network services, which to a large extent will be negotiated between the private sector and BT. The other is licences given for services which may or may not interconnect with the national network, where any licence fee chargeable by the Secretary of State will go to the Consolidated Fund.
  The powers of which I am speaking will allow complete flexibility in the development of the new regime to take account of changing technology framed in a way which, we hope, will enable us to avoid creating a new licensing bureaucracy on the lines of the American FCC.
  Mr. John McWilliam: I must go back to previous questions asked from the Opposition side. The reference in clause 15(9), if followed back, is to clause 12. clause 12 refers to everything that BT has power over, including the network. Therefore, value added services on the network must be licensed. If there is any fee from the licence, it must be applied to the Consolidated Fund. I reiterate the remarks made by my hon. Friend the Member for Newcastle-under-Lyme (Mr. Golding) that British Telecommunications cannot expect to receive any benefit from any licence so granted.
  Sir Keith Joseph: I think that the hon. Gentleman misunderstands BT will stand to get the normal revenue from the service that is used. The licence is additional to that. There will be a negotiation between the provider of the service and BT. It will be for both to ensure that they get the benefit that they seek. BT will stand to benefit from the increased use of its services and the charge made for them.
  At the same time, our existing telecommunications manufacturing industry, which in many of the most important terminal equipment areas has been dependent on he Post Office as its main customer, must have time to adjust to the new competitive conditions if it is successfully to resist the challenge from imports of overseas manufacturers who have not been so constrained. We therefore intend to phase in the liberalisation of attachments over a period of about three years.
  In the meantime, we intend to ensure so far as possible hat, where they do not already have them, our manufacturers obtain reciprocal trading opportunities in countries that will be exporting their products here. In advance of liberalisation, we shall be seeking assurances on this matter from overseas Governments in the countries mainly concerned.
  Within the EEC, our proposals are closely paralleled by proposals now before the Council for liberalisation of the market for telecommunications terminals on an equal basis throughout the Community. We shall be giving strong support to the early adoption of these proposals and their extension to all types of terminals. In so far as these proposals, do not go as far as our own intentions to liberalise the supply of all types of terminals, we shall seek trilateral assurances from other member States concerning reciprocal trading opportunities in respect of the remaining types of terminals. Progress in obtaining these various assurances may clearly have an impact on the timing of full liberalisation.
  Meanwhile, we are considering with BT the possibility of allowing the competitive supply of equipment which is already approved for supply through the Post Office, so that users will have an early opportunity to obtain equipment from independent suppliers ahead of general liberalisation. This will include PABXs, teleprinters, modems and telephones. Taken together, these changes will provide much greater opportunities for the country to make the most of the new technologies and will stimulate new industries and new jobs.
  Mr. John Bruce-Gardyne: Will my right hon. Friend explain in slightly more detail the motivation behind the decison to preserve for BT an extensive maintenance monopoly? It is a little hard to reconcile that with what he rightly said about the poor reputation of the Post Office in terms of service to the customer.
  Sir Keith Joseph: Yes. The Government's thinking is that it is crucial to safeguard the integrity of the network. That integrity depends upon the attachment to the network and the maintenance of the prime attachments, which are the first telephones and the PAB exchanges, which are conduits to many telephones. We have decided that the integrity of the network includes those particular connections. That is why maintenance has been preserved as a monopoly for BT. Maintenance of all other equipment attached to the network will not be within the monopoly.
  Mr. Geoffrey Robinson: On the point about the ancillary equipment, as this is a massive growth area—as the right hon. Gentleman has already indicated—I am sure that there will be concern on both sides of the House that there should not be massive damage to our balance of payments from imports of this sort of equipment. That is why we have the three-year transition period. Will the right hon. Gentleman give a categoric assurance and understanding to the House that, in the event that he is not able to negotiate very tight bilateral agreements for the reciprocal supply of this equipment with other countries, be they within or outside the Common Market, in respect of those countries that will not give to our industry the same advantages as we are considering giving them, he will not proceed with the liberalisation?
  Sir Keith Joseph: I have already said that the outcome of the consultations that will be taking place may well have an effect on the timing of liberalisation. I must preserve the obligations into which this country has entered under the EEC and GATT.
  I turn to the postal monopoly. The need for efficiency, the value of competition and the scope for innovation apply equally to the postal service as to telecommunications. We have, therefore, decided that certain changes to the exclusive privilege of the Post Office for the carriage of letters are needed—first, the derogation of express mail from the monopoly; secondly, that document exchanges will be allowed to carry mail in bulk between city centres; and, thirdly, that charities will be allowed to deliver Christmas cards.
  In addition, I have said that I would seek powers to make further derogations in certain circumstances—for example, where the Post Office does not react adequately to new market demand, when industrial action stops the service or causes it to deteriorate seriously, or if service declines for other reasons within the Post Office's control. I should make clear that primary considerations will be performance and the interests of consumers.
  I decided upon these measures in the light of the severe dissatisfaction expressed in the summer of 1979 with the postal service, as a result of which the Government instigated a review of the monopoly. The changes which I am now proposing take very much into account the views expressed in the consultations. I have also had in mind the report of the Monopolies and Mergers Commission on the inner London letter post, which drew attention to a number of shortcomings in the Post Office in London.
  Mr. Harry Ewing: Who will be the judge of an "adequate reaction" to market demands?
  Sir Keith Joseph: I have it in mind that the Government would not intervene suddenly and arbitrarily

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  but would put the Post Office on notice that it appeared from the figures and the information available to the Government that either the standard was falling below the service specified or that the market demand was not being met, and would give the Post Office reasonable time to correct the defect; and only after that time had elapsed, perhaps in vain, would the Government use the powers in the Bill to derogate from the monopoly.
  I believe that the measures that I am proposing will have the effect of stimulating the Post Office to greater efficiency and thus rendering a better service to customers.
  I shall now describe the principal clauses of the Bill. Clause I sets up the new corporation — the BT corporation. Clause 2 confers upon it the necessary powers, which also enable it to supply any telecommunications equipment and to provide services for the Post Office. Clause 3 lays down the general duty of the new corporation in terms which will not place it at a disadvantage where it is subject to competition. The duty is, therefore, limited to provision of the main network and the prime instrument, except where others are providing it, as is, for example, currently the case in Hull.
  Clause 4 empowers BT to set up Companies Act subsidiaries and to transfer parts of its undertaking to them. Transfers under this clause have to be agreed by the Secretary of State or made at his direction. These powers could be used to create a self-accounting subsidiary and to carry on BT's competitive activities.
  Clause 5 sets out controls over some activities of BT's wholly owned subsidiaries.
  Clause 6 contains the main powers of the Secretary of State over BT. These reflect the existing powers over the Post Office and include a power for the Secretary of State to direct the disposal of assets not required for the exercise of BT's duty.
  Clauses 7 and 8 provide for the control of BT's manufacturing and some of its purchasing activities, similar to those now applying to the Post Office.
  Clause 9 provides for the Post Office users' councils to have the same oversight of BT's activities as they do now over the Post Office. It also enables the Secretary of State, after consultation, to remove competitive activities from the detailed overview of the users' councils.
  Clauses 10 and 11 transfer all the relevant property rights and liabilities to BT. Clause 10 also deals with the transfer of employees. All present Post Office employees will remain with the Post Office or be transferred to BT. Those transferred will retain all their statutory rights under the Employment Protection Acts. In most cases, it will be obvious which corporation a particular employee will work for. For others, such as those in central headquarters, the Bill provides for agreements to be made between the Post Office and individual employees. These will be a matter for the Post Office and the employees concerned to work out.
  Clauses 12 to 15 transfer to BT the existing exclusive privilege with respect to telecommunications and enable the Secretary of State to license the running of telecommunications systems.
  Clause 16 provides for the Secretary of State or BT to approve apparatus for attachment to BT's network and also enables the Secretary of State to direct BT not to hinder
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  the attachment of any approved apparatus. It is these clauses which provide the enabling powers for the new regime which has already been announced.
  Clauses 17 to 19 cover the legal basis for the supply by BT of telecommunications services and its liability.
  The Post Office has long had a privileged position, and there is a need to give customers a greater legal right to redress while recognising the special nature of telecommunications services. Where there is competition, BT should have the same liability as competitors. The Bill secures just this. I think that this is a major advance that will be welcomed by customers.
  BT will be liable for attachments to networks supplied to subscribers in the same way as will be its competitors. Also, BT will be liable for errors in special entries in telephone directories — that is, all entries for which a charge is made, such as bold type. Thus, subscribers will be able to choose whether to pay more and receive additional protection. Any attempt by BT to limit such liability will be controlled by the Unfair Contract Terms Act, in the same way as anyone else.
  Clauses 20 to 28 contain the financial powers of BT and the ministerial parliamentary controls over them. They represent the current standard form for nationalised industries.
  The hon. Member for Thurrock (Dr. McDonald) asked me a question about pensions. Clauses 29 and 30 contain the pension provisions. No decision has yet been taken on the future of the Post Office pension fund. The enabling powers contained in clause 30 allow the Secretary of State either to split the fund or to retain a single fund for employees of both corporations. The Bill provides that no order of the Secretary of State can remove or reduce any existing pension right. The final decision on the future of the fund will be taken only after all interested parties have been able to make their views known to me.
  Clauses 31 to 54 re-enact existing legislation which relates to the telecommunications business, to rating, land or specific criminal offences. These are essentially unchanged, although some of them incorporate modifications to bring them up to date.
  Clause 55 contains the new powers of the Post Office. It will be allowed to undertake counter work for a wider range of public sector bodies. I shall reserve the right to debar specific transactions or work for specific bodies. General guidelines will be drawn up. The change is a precautionary one, designed to help safeguard the sub-post office network, especially in rural areas, in the event of loss of business from existing counter users.
  The post Office will have the power to provide electronic mail services where the material is either collected or delivered in hard copy form. It would not be right to give the Post Office a monopoly of this when important technological developments are taking place. The existing network puts the Post Office in a strong position to compete.
  Clause 56 lays down the general duty of the Post Office. It is on the same lines as that for BT—that is, in terms which will not place it at a disadvantage where it is subject to competition—and is therefore limited to the provision of letter services, except where others are providing such services.
  The intention of clause 59(3) is to provide power for the Secretary of State to direct the Post Office to establish subsidiary companies and, if necessary, to dispose of them to the private sector. There are similar provisions for

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  British Telecommunications and in other nationalised industry legislation. I do not intend to use my power of direction in the immediate future, but the scope for possible Post Office subsidiaries; is one of the matters that I would expect to see examined. I should use my powers only after full consultation with the Post Office Board.
  Clauses 57 to 62 contain the power to create Companies Act subsidiaries and modifications to the power of the Secretary of State to bring the Post Office into line with BT. Where the Post Office competes with the private sector, we need powers to ensure that it does so on fair and equal terms. Certain activities might, in the interests of efficiency of resource management, need to be undertaken on a separately accountable basis. Other activities might be more appropriately undertaken in the private sector.
  Mr. Dobson: I return to the matter that I raised earlier, which is related to cross-subsidisation. If the Director General of Fair Trading has special responsibilities in this sphere, will he be given powers to look into cross-transfers and cross-subsidisation within the existing companies which are not at present contrary to the law?
  Sir Keith Joseph: That raises interesting questions. As I understand it, there is nothing to stop a private enterprise company from cross-subsidising within its own subsidiaries. What the House will want to be sure about is that, in the case of a public sector activity, such cross-subsidisation shall be transparent—shall be seen—if it is to occur, provided that it is legally allowed to occur. The purpose of encouraging the creation of Companies Act self-accounting subsidiaries is to make sure that the competition with the private sector is as fair as practicable.
  Mr. Geoffrey Robinson: Surely that is grossly unfair. If it is to be made manifestly transparent that there is cress-subsidisation in the Post Office—the nationally owned sector—and if the private sector and the public sector are to compete on truly equal terms, the same criteria must be applied to and enforced on the private sector.
  Sir Keith Joseph: With the best will in the world, they are not the same animals. The private sector company can in the last resort go bankrupt. Under present laws, the public sector company cannot go bankrupt. These are two very different animals. It is from a desire to make competition between them as fair as practicable—it can never be made totally fair — that we propose these changes.
  Mr. Robinson Mr. Robinson rose—
  Sit Keith Joseph: This is very important, but I doubt whether we should pursue it. I have given way to hon. Members a great deal. I think that I ought to get on with my speech.
  Clause 62 enables the Secretary of State, after consultation with the Post Office and the Post Office Users' National Council, to exclude from the users' councils' oversight any services of the Post Office for which it does not hold a monopoly. The Post Office would be at a disadvantage compared with private operators providing competing services if it were subject to the scrutiny of the users' councils while they were not. It is intended that this power should be used at the earliest possible date to exclude the banking services of the Post Office National Giro, in which area the Post Office already faces competition.
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  Clauses 63 and 64 re-enact the exclusive privilege of the Post Office with respect to the conveyance of letters and specify exceptions. For the first time in legislaton, there is included a definition of "letter" — a very temerarious endeavour. The definition is intended to reflect the present position, and we have been helped in this by the views expressed during the monopoly consultations.
  Clauses 65 and 66 empower the Secretary of State to issue licences and to suspend the exclusive privilege. The powers will enable the Secretary of State to suspend the exclusive privilege locally or nationally for a specific category of letter. Suspension will be by order subject to annulment by either House. Licences can be issued to individuals or companies to carry mail otherwise within the monopoly.
  Clause 67 allows the Post Office to accept liability for loss of or damage to all postal packets and not just registered mail, as at present. This will also allow the arbitration in the code of practice to be legally binding on the Post Office. I am sure that these changes will be welcomed by customers generally.
  Clauses 68 to 72 contain the financial powers of the Post Office and the ministerial and parliamentary control over them. They are the same as those for BT.
  Clause 73 clarifies the criminal law for delivery to garden gate or central delivery points in blocks of flats. It does not give the Post Office power to insist that such boxes be provided by its customers, but it makes it easier to reach voluntary agreements.
  Clauses 74 and 75 deal with interpretation and application to the Channel Islands.
  Clause 76 empowers the Treasury to dispose of its shares in Cable and Wireless Ltd.
  Clause 77 is a technical change to ensure that all the protection given to Post Office telegraphic lines extends to cables made from optical fibres, thus recognising the role of BT in developing new technology.
  Clauses 78 and 79 deal with tax implications of the transfer of property under the Bill. They ensure that such transfer does not itself create any new tax liability. But no existing tax liability is removed.
  I repeat that this is an important Bill with great potential for new services and new jobs. I hope that the House will agree that we have tried to strike a proper balance between the interests of the customer and the interests of the public and the private sectors.
  I hope that the House will give the Bill its Second Reading.
  4.48 pm
  Mr. John Silkin: As the House is aware, there has been considerable argument and debate over a number of years — going back before 1977, the date mentioned by the Secretary of State—about whether the Post Office should be split. There are opinions on both sides. It is a question of balance. Some hon. Members take one view and some another. However, there is one aspect about which I agree with the Secretary of State. It was important to make a decision. To have left the position open for very much longer would have added to the uncertainty. Therefore, although I do not speak for right hon. and hon. Members, I accept that the right hon. Gentleman was right to make a decision.
  Such a decision is not made easily, nor is it carried out easily. To carry it out over a period of perhaps three years

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  will be an extremely difficult job. We have to see that the new methods of dealing with British Telecommunications and the Post Office are such that they learn to work well together and, above all, that the services which they give the country are not only maintained but improved. That must be the job. To expect that to be done easily, with no hiccups and no difficulties, would be folly.
  There are various factors to be considered. First, there is the question of the morale of the staff. During the past few months morale has not been at its best, and it may decline considerably. There is also the question of management. There have been management troubles in the Post Office as we all know. The departure of Sir William Barlow has left the right hon. Gentleman in a difficult position. There is now a double difficulty in management.
  There is also the difficulty of the boards themselves. There are now to be two, which will have to work out how they will interlock, as they must. They own a great deal of property and services in common and, as my hon. Friend the Member for Thurrock (Dr. McDonald) pointed out, they have a pension fund in common. All these matters will have to be worked out.
  The problem of getting the organisation working over the next three years and providing an efficient service for the customers, the country in general and those who work in the industries — industries they will be, not one industry—will be more than enough to cope with during the next three years, without bothering about anything else. That is an argument for leaving the monopoly as it is.
  With the splitting of the Post Office into two sections comes something else—another Bill hidden within the main Bill. The hidden Bill is the one which enables the Secretary of State to use his own powers to—as he puts it—privatise, or, as I would put it, to piratise, national assets and make them acceptable and workable by the private sector.
  The right hon. Gentleman has what is known in criminal law as a long course of conduct. In other words, one can go back over his various Bills produced when he has been in three different Departments. I can do that over some 17 years during which I have sat opposite him in Committee. One finds that his Bills fall into a simple pattern. They are simple—except that all the powers, the important matters that arise, are never dealt with in the Bill. They are dealt with by guidelines, by a memorandum here or a memorandum there. They are dealt with, above all, by enabling powers.
  That is how the right hon. Gentleman likes to work. It is, of course, very difficult in a democratic assembly to say "This power should not be in the Bill." The right hon. Gentleman smiles his Mona Lisa smile and says "I had not intended to use it except in such-and-such a case, such-and-such an emergency." It is a good, clever technique, which he used in the case of the National Health Service, the National Enterprise Board and the 1980 Industry Bill. He is attempting to use it now.
  The right hon. Gentleman gives himself in all his Bills, as in this Bill, the most enormous powers, which are practically dictatorial. Then comes the problem. After some turmoil, the Bill is given Royal Assent. Then the right hon. Gentleman has to decide how to use those powers and what to do with them. Then begins the long period of agonising. He walks up and down, worrying
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  whether to use those powers, whether to use some or all of them. That has been the course of his conduct over the years.
  The right hon. Gentleman makes up his mind to use some of the powers. He comes to a decision, which is usually the wrong one. Then, 20 years after the rest of us, the right hon. Gentleman makes a public confession, wringing his hands, that he was wrong in the first place.
  This Bill is a splendid example of what is yet to come. It is possible to look into the crystal ball and see what will happen. Let us consider what is happening in the Bill and the powers that the Secretary of State is giving himself. The right hon. Gentleman went through the clauses of the Bill but he did not halt long enough at each clause, so I shall do it for him. Under clauses 3 and 56, the corporation and the Post Office are, respectively, to provide telephone and postal services, but only where they are not provided by "other persons". The right hon. Gentleman believes that there should be no monopoly, so he has breached it. That is the first breach. But here we come to the interesting part. Who are those others to be? The right hon. Gentleman did not say. He said there would be others and that that would be to our great advantage, but he did not say who they were.
  What the right hon. Gentleman did say was that in his form of licensing, unlike that in the United States, there would be no bureaucracy. He was very proud of that. Certainly there is no bureaucracy, but let us see why. Under clause 15(1)(a), it is the Secretary of State himself who can grant licences, on any terms he likes — irrevocably, if he likes, without giving reasons, if he likes. Certainly there is no bureaucracy there, though there is not much democracy either.
  As was pointed out very cogently by my hon. Friend the Member for Newcastle-under-Lyme (Mr. Golding), the Secretary of State can actually make charges under those licence provisions, and the moneys gained by those licences go into the Consolidated Fund. They do nothing at all for British Telecommunications. Apparently, it came as rather a surprise to the right hon. Gentleman to learn that he had this power.
  To understand what is happening, we must go back to the right hon. Gentleman's technique of Bill-making, the basis of which is very strong on philosophy, much stronger on assertion but a little woozy on detail. So let me help him to clarify his mind. He disputed that there would be any real difficulty, though he said that there might possibly be a little overlapping. Of course, he had not really read his own Bill.
  Mr. Russell Kerr: I do not blame the right hon. Gentleman.
  Mr. Silkin: I do not blame the right hon. Gentleman, either, but it is rather important in trying to explain the Bill to the House to know what one is introducing and why it is so good.
  Clause 15(4) says that a licence may be granted, to anybody virtually, on
  "conditions requiring the rendering to the grantor of a payment on the grant of the licence or periodic payments during the currency of the licence or both."
  There is no restriction on that right. It can be used in any case the Secretary of State likes. The same is true of the postal services. So the right hon. Gentleman has now

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  learnt something about clause 15. He has learnt what his powers are under the clause, and he has learnt where the money comes when he proposes to charge it.
  The same is true, as I pointed out in an intervention, when it comes to the Post Office under clause 65(1) and 65(7), which is the twin subsection of the original clause.
  In addition, the light hon. Gentleman mentioned clause 4. He rightly received rather a grilling from my hon. Friends about it. Under clause 4—subsection (4) in particular—British Telecommunications is additionally shackled, because it is required to set up subsidiary companies in order, as the right hon. Gentleman said, to prevent the monopoly from subsidising less profitable ventures.
  Then there is the question of the Director General of Fair Trading. When one mentions him, a reverential hush always descends on the House. It is as though one were talking about the archangel Gabriel. But, whereas the archangel Gabriel's powers may be unlimited, the powers of the Director General are extremely limited. He is supposed to seek out monopolies. That is what he is there for. It is logical for the right hon. Gentleman to say "He must look into all these subsidiary companies which I have decided that British Telecommunications has to create." That is perfectly logical, because there might well be a monopoly there.
  What if the corporation is in competition with private companies? No question of a monopoly arises in a relationship between a holding company and its subsidiary. No question of a monopoly arises if a holding company decides that company A, in private hands, shall lose money so that company B can make money. That is a well-known trick. One does rot even have to go to the Rossminster company to find that out, although it was one of its dodges. The trick is operated by supermarkets. There, today's offer might be sugar or potatoes. Under the Bill, today's offer is Mickey Mouse telephones. A loss leader will operate and the Director General of Fair Trading will not be able to interfere. Apparently, the right hon. Gentleman envisages giving the Director General greater powers to intervene in the proposed subsidiaries.
  Even without the privatisation provisions, the Bill will take a whole Session. It is technical and complicated. Many elementary mistakes appear in the Bill and it is in for a justifiably rough passage. When we finish with it, it has to go to another place. I hope that the other place will have the time, energy and expertise to pick up these points. I am sure that Government Members would like the Bill to slide through in one Committee, but I believe in democracy.
  Clause 6 (6) imposes the final stranglehold over British Telecommunications and the postal services. Under that clause the Secretary of State can direct the corporation to dispose of its assets, or any of them, and ensure that its subsidiaries, or any of them, dispose of their assets, or any of them. The power is universal. Oliver Cromwell would have loved to have such a power, but he did not. If British Telecommunications is doing better than some other organisations, the Secretary of State can stop it doing so well and take away its assets. He does not even have to come to Parliament.
  Clause 76 deals with Cable and Wireless Ltd. This provision was shoved in as a secretive gesture towards the end of the Bill where, it was hoped, no one would notice it. Cable and Wireless Ltd. was formed like an ordinary company, but it is different. It is a special company 100
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  million shares of which are owned by the British Government. It was set up in 1949 with the agreement and full co-operation of the Commonwealth to provide worldwide external telecommunications. It was set up contractually by the British Government and members of the Commonwealth.
  The Secretary of State says that he might bother to consult the Commonwealth when he has a little time. He did not consult before he inserted the clause. I know of no other example, except possibly of the Minister of State when dealing with the Falkland Islands today, of anybody being so guilty not only of a lack of diplomacy but of a lack of common courtesy. The company has a —200 million turnover. It is supported throughout the world by the users of the service because it is backed by the British Government. That is its strength. This British Government, and Britain, at this time are in need of a bit of prestige. However, the right hon. Gentleman is proposing to throw it away.
  The company provides an external, and sometimes internal, telecommunications service for a large number of independent countries and some dependent territories. Examples involve the whole of the Caribbean, almost all the Gulf and in the Indian Ocean the Maldives, the Seychelles and Mauritius. In the Far East it serves Hong Kong and the Philippines. In the Pacific it serves the Solomon Islands, the New Hebrides, Fiji and Tonga. One could go on at length. Since the subject was raised earlier, may I say that it also serves the Falkland Islands and St. Helena in the South Atlantic.
  Another factor is involved. The Falkland Islands and St. Helena, for example, cannot operate the service themselves because they are not economically capable of doing so. We operate such services at a loss. The service is not a loss leader in the sense that I used the term earlier. We provide the service because it is a duty and because we acknowledge that it is a service. It has a social, economic and security content. What does the right hon. Gentleman believe will be the reaction if we say that the British Government propose to denationalise the service? If I were to advise the countries involved, I would say "You nationalise them."
  Why should there be a postal or telecommunications monopoly? The right hon. Gentleman is bad at detail but adept at philosophy and even better at assertion. He never gives us reasons, so let us explain why there should be a monopoly. Is it not the fact that the postal service since the days of Rowland Hill and long before has been based on a monopoly? It has been a monopoly for 300 years under many forms of economic development. Government after Government have agreed that it should be a monopoly. The great quality which Rowland Hill brought to our postal service and which has been emulated throughout the world is that it provides a national service at a uniform price. It does not matter whether one wishes to deliver a letter to the hills of Cumbria, the depths of Cornwall or across the street in Westminster—the price is the same. That is the whole basis of the system. The big conurbations pay for the rural services which could never be operated economically and would disappear if it were not for that uniformity. The Secretary of State should understand that.
  There was enough fuss last year about sub-postmasters. Surely, the right hon. Gentleman learnt his lesson then. Apparently, he did not. The service involves a high labour content and a high element of fixed costs. Volume is

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  essential in such circumstances. It costs exactly the same for one postman to deliver 20 letters to one address as one letter. Without volume, the service will deteriorate or the prices will go up—or both.
  As Nye Bevan used to ask, "Why look in the crystal when you can read the book?" We can read the book. In 1971, private enterprise broke the postal monopoly during the postmen's strike. Private enterprise had everything going for it. A fairly neutral, dispassionate observer of the day, The Daily Telegraph, stated on 12 March 1971:
  "About 5,000 letters were dumped at Luton post office yesterday by a man driving an unmarked van."
  It was not the Secretary of State.
  "Each carried the name Randall's Mail Service, Chelsea and charges ranging between 15 pence and 75 pence. Date stamps showed that the letters had been collected between January and February."
  That is the great service that private entrepreneurs will give us. Are we not lucky that such a kind Secretary of State will bring that benefit back to us once again? Some of us had hoped that it had gone for ever. So much for the service provided by private enterprise.
  The right hon. Gentleman talked, although not so strongly as he did in questions earlier, about the poor service from the postal monopoly. Frankly, that does not wash. It is about time that he stopped doing it. It is an insult to those who do a great deal of work extremely well and in difficult conditions, including being grossly understaffed. Let us be quite clear that the service always was as good as any in Europe and is now better. Nearly 90 per cent. of first class letters are delivered the next day. That is a better average than anywhere in Europe. With second class mail, 94 per cent. is delivered by the third day. That is what the postal service is about. That is the monopoly that the right hon. Gentleman proposes to break in order to bring back Randall's Mail Service of Chelsea.
  Many of the same considerations apply to the telecommunications monopoly. The loss of the monopoly will mean a worse service for the majority of people. Once again, the rural services will be at risk. It also means something else. The right hon. Gentleman tries hard to reassure us on this matter, because of this, at least, he is aware. It means the decline of our industries in a special way. At the present time the British telecommunications industry orders about 90 per cent. of its equipment from British firms. The right hon. Gentleman says that there will be a three-year initiation, intermediate, transitional period—how it reminds me of my dear old days in the EEC when we had a transitional period, which meant that we were being screwed even worse year by year—during which our industries can match up to our foreign competitors. He assures us that our industries will have that period of time subject, of course, to such little things as the Treaty of Rome or GATT or—although he does not mention it—the fact that any American, European or Japanese company can simply establish a private company in Britain if it so wishes. That company would then become, from our legal standpoint, a British company. It could undercut our companies. That is what the future holds. There can be no way in which the right hon. Gentleman can protect British industry, however much he may talk about reciprocal agreements.
  Mr. Geoffrey Robinson: There is one way in which we can protect our industries. If we do not obtain a
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  reciprocal agreement with other countries—or even if we do—we should continue to operate the system as it is now and ban their imports. We do that now despite our obligations under GATT. Why cannot we continue to do that irrespective of the transitional period? I am sure that my right hon. Friend would agree that our industries have a stranglehold grip on our market, as the Japanese or other successful countries would do in their case.
  Mr. Silkin: I shall come to the wider aspect of my hon. Friend's point in a moment. It depends on British Telecommunications having a monopoly. To destroy the monopoly will destroy the protection to which my hon. Friend referred. While that monopoly is being destroyed, the private sector has an interest only in one part of it—the profitable part. I spoke earlier about Cable and Wireless Ltd. What private company, if it took the shares in Cable and Wireless, would wish to take over the Falkland Islands and St. Helena and perform a useful social function? No private company would wish to do that. The answer is simple. British Telecommunications would be left with the less rewarding services and the creamy, profitable, get-rich-quick services would go—I had intended to say to the right hon. Gentleman's friends in the City, but that is not true—to Japan, the United States or other parts of Europe.
  While, inevitably, British Telecommunications became poorer and poorer, and while its service declined because of the attack from the private sector, the right hon. Gentleman would be wringing his hands and saying "But it is not providing the service that it should be providing. We must privatise—or piratise—them even further." How he expects the morale of the staff to continue in those circumstances is beyond me.
  If that is the basis of what is to happen, what should be done? As I said earlier, if the decision has been made to split the Post Office, so be it. I accept that. I would not ask my hon. Friends to go into the Division Lobby against that. There may be some who do not like it, but a decision had to be made one way or the other. That is where it should have ended. There will be work enough in that.
  We need the best possible postal and telecommunications service. We shall not have that with the cash limits that the Government are talking about today. For example, we need greater mechanisation in the Post Office. It is proceeding, but it needs to be increased enormously. The right hon. Gentleman mentioned electronic mail, which has an enormous future and needs all the support that it can get. But that means investment, which means money. It means not rigid cash limits but encouragement by the Government and full investment in the Post Office. That is the only way to preserve what I believe to be a fine record of service in the operation of the Post Office.
  I agree with the right hon. Gentleman—for the second time this afternoon—that telecommunications are the spearhead of new technology. I accept that that is so. Where we differ is how we should make that spearhead effective. I was interested in the right hon. Gentleman's statement on 21 July. I am sure that he said that one of the reasons for America's greater success was the freedom available there to entrepreneurs to develop new services and a wide range of equipment associated with telecommunications. I assume that he has not changed his mind since then, but, knowing and loving him as I do, even that is not beyond the bounds of possibility. Let us

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  examine what he is saying, because it is a splendid example of his ability to deal with an issue by assertion and not by detail.
  The United Kingdom is level with and may even be a head of the United States in the development of system X, which started operation in July 1980. We may have an integrated digital network system, before the United States. Therefore, in that respect we are slightly ahead of the United States. We are well ahead of the United States in the area of optical fibres. The United States; routes are short and experimental. By 1982 we shall have 15 fully operational routes. If we have the money and the investment, we can keep the lead.
  However, those are the developments of the future. What about present developments? We have fewer shared lines than the United States. Where we have party lines, they consist of two people. In the United States they have a larger percentage of party lines, with as many as eight people sharing one line. That does not say much for the American telephone system.
  As for international direct dialling, we can dial directly to more than 100 countries from Britain. That can be done by 90 percent, of our customers. In the United States, that can be done by only 40 per cent. of subscribers. Let us rot run away with the idea that the Americans are so much more efficient than we are. They are not. In viewdata systems, Prestel is streets ahead of systems in the United States and, incidentally, in almost any other country. I am rot denying that the United States has had some successes in telecommunications. It would be absurd to make that denial. The Secretary of State argues; that those successes should be put down to its great entrepreneurs. It is nothing of the sort. The successes of the United States axe attributable not to its entrepreneurs but to enormous sums of Government money spent on defence and space research and development.
  Furthermore, the United States is a rather larger continent than the United Kingdom. The right hon. Gentleman may have noticed that as he travelled around California. As a result, there is a population that inevitably wanted telecommunications long before we had become used to it Indeed, the United States was the home of the invention of the telephone for the simple reason that communications between large areas of the continent were au imperative. There is that historical reason.
  The United States Government are spending twice as much per head of the population as we are spending in the United Kingdom. That might add another reason for the successes that the Americans have had, apart from their entrepreneurs.
  We do not have to go very far to find a parallel. It is necessary only to look across the Channel. The House well knows my views on membership of the European Economic Community and on some of the policies of some of the members of the Community. However, I have never been foolish enough to underestimate the French, and I never will. I do not underestimate the French way of dealing with matters such as telecommunications. France is spending rather more than twice as much as we are on investment in telecommunications. It has a simple policy. It has 14 million telephone subscribers and it intends to have 34 million by the end of the decade. It intends to get the market in telecommunications, and it will probably succeed unless we are prepared to make every effort now.
  The French are not nearly as queasy as the right hon. Gentleman. For example, all contracts for viewdata
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  terminals go to French firms and French firms only. If the Treaty of Rome has anything to say about that, the French attitude is to say "To hell with the Treaty of Rome." As a result, the terminals will be able to be sold for not £500, which is about what they cost now, but £50. That is the French way of doing things in telecommunications. That policy means a great deal of investment. It means that public money has to be spent and that cash limits have to be forgotten in getting down to it.
  We are talking not only about customs or of those who work in an industry but of the future of the United Kingdom. Britain has a legitimate lead in telecommunications. That lead should be preserved, maintained and improved. That is what it is all about.
  The silly, queasy and foolish policy of the right hon. Gentleman's—
  Mr. Russell Kerr: And short-sighted.
  Mr. Silkin: —will put us way behind again. We shall repeat on a larger scale the stupidities of the past. We invent and our people's skills produce, but the Government and the British people are too small-minded to produce the finance that is necessary for us to take advantage of our own inventions. That is what I fear will happen as a consequence of the Bill.
  There is one consolation in the right hon. Gentleman's speech — only one. Whether he means it or not and whether he changes his mind or not, he is talking about a transitional period of three years. In three years we shall have a Labour Government — [Interruption.] Conservative Members may laugh as much as they like. There is an old proverb about who laughs last. Within three years, that Labour Government will be in a position to reverse what the right hon. Gentleman is doing and to ensure that telecommunications, our postal services and Cable and Wireless Ltd., I hope—I hope that we shall be able to stop the Cable and Wireless measure even before it starts—are prevented from being destroyed by the right hon. Gentleman's method, philosophy and assertions.
  I ask anyone who thinks that he is going to make a quick killing out of all this to stop and think about it. Think what will happen when a Labour Government are returned. We shall ensure that no one will make a profit out of the public sector and that no one will make a profit out of national assets.
  It is in that spirit — in the spirit and in the understanding that what could have been an acceptable technical Bill that could have passed through the House with little opposition has become a doctrinaire piece of private enterprise philosophy dating not from this century but from the middle of the last century—that I ask my right hon. and hon. Friends to oppose the Bill when the House divides.
  5.26 pm
  Mr. Kenneth Baker: In view of the remarks of the right hon. Member for Deptford (Mr. Silkin), there is no doubt about the strength of feeling of himself and his party against the Bill. He has made it clear that the Opposition are opposed to the Bill root and branch. They start tonight with a three-line Whip and, as the right hon. Gentleman has promised, they will go on in Committee—he promised a long Committee stage—and

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  there will be a fight on Report. Then the right hon. Gentleman said—I could not believe my ears—"And then we shall go to the House of Lords".
  I was under the impression that at the most recent Labour Party conference the official policy of the right hon. Gentleman's party was to dissolve the House of Lords as soon as possible. However, he is now using it as the constitutional longstop to defend the British Post Office. This was a total suspension of disbelief.
  Mr. John Silkin: We have the House of Lords at this moment. The fact that we are in favour of abolishing it does not mean that we would be stupid enough to let the Bill go unfought in the House of Lords. I merely say that we shall fight it.
  Mr. Baker: The depth of cynicism is unplumbed: "As it exists now"—that is, the House of Lords—"we shall use it." That is what it comes to.
  The right hon. Gentleman was stretching parliamentary convention to the very limit when he accused my right hon. Friend of being the Mona Lisa. I have heard my right hon. Friend accused of dogmatism, which I personally do not accept. I have heard him praised as pragmatic, which I think he is. I have never heard him accused of being enigmatic. My right hon. Friend is not in the least enigmatic. He wears his heart on his sleeve. His views on the Bill were clearly expressed.
  The Bill is important. I think that it is the most important Bill of this Session. It is profoundly important for three reasons. First, it splits the Post Office between telecommunications and postal services. Secondly, it reduces the telecommunications monopoly. Thirdly, it provides the hope of a much better system of funding for the remaining monopoly of the Post Office.
  I deal first with the splitting of the Post Office. The second Bill on which I served in Committee when I was elected to this place at the end of the 1960s was the Post Office Bill of 1969. That was the Bill which set up the Post Office corporation and transformed it into a nationalised industry. In 1969 I moved a series of amendments to split the Post Office between the postal side and the telecommunications side. At that time we were led by my hon. Friend the Member for Howden (Sir P. Bryan). We were accused of being barbarians and not understanding the issue. It has taken 11 years for the heresy to become absolutely accepted. A few of us kept the lamp of progress burning during those 11 years. I am glad that it has now become official Government policy, supported by the Carter committee, that postal services and telecommunications can be split.
  The logic of that split was as strong then as it is today. They are totally dissimilar businesses. The telecommunications side is capital intensive, highly technological and expanding. The postal side is labour intensive, less technological and in certain cases hostile to technology and contracting. It is right that the two businesses should be separated. I am only too pleased that all the work of 11 years sees fruition in the Bill.
  Mr. McWilliam: The hon. Gentleman's assertion that the postal side of the business is hostile to technology seems ill founded when the mechanised letter sorting centre at Newcastle cannot be fully brought into service because of Government cash limits and not because of objections from the postal side.
  Mr. Baker: I shall come to the question of the financing of the Post Office. The hon. Gentleman will find that I am in agreement with him on the system of cash limits and investment in nationalised industries.
  I am in favour of the split, and I am glad that it is to happen.
  The second major part of the Bill is concerned with the reduction of the monopoly of the Post Office. First, I echo some of the remarks of the right hon, Member for Deptford. I am familiar with the work of the Post Office in a rather detailed way. I would be the first to say that in its research activities it is in some respects a centre of excellence. It has produced various systems and equipment that have given us a world lead — for example, Prestel. There is no doubt that that is the best system of video text linking in the world. It is better than the Canadian system. It is infinitely better than the French system, which does not exist, although that does not prevent the French Government from selling it. It never does; they are highly imaginative. I have always encouraged my right hon. Friend and his colleagues on the Front Bench to give every support possible at ministerial level to the development of Prestel, its use in Government circles and its active promotion by Ministers wherever possible overseas. It is, of course, used in embassies. I start with that encomium for the Post Office.
  However, it is the absolute range of possibilities that lie before the Post Office that makes it necessary to open up opportunities wherever possible to co-operative ventures between the public and private sectors. We are on the threshold of a major revolution in information technology, which will create an enormous number of jobs in this country if we get it right over the next few years, at a time when job creation possibilities will get much smaller in conventional industry.
  Therefore, I have called in the past for a national strategy for information technology. I am pleased to see that my hon. Friend the Minister of State who will be replying tonight has been made responsible for that. It was only one point of my 10-point programme for information technology. The other nine remain yet unfulfilled. I shall be pressing him to develop them and spend a bit of money here and there to take the maximum advantage for our country in an area where in certain respects we have a world lead.
  I look upon the possibility of the private sector being invited to provide certain services that the Post Office provides as an opportunity. I appreciate the argument of the right hon. Member for Deptford that in an ideal world he would like the State monopoly to be continued. However, he has to recognise that we live in the real world of limited resources for State expenditure. Many more resources will be available for the development of telecommunications and information technology usage if the private sector is involved.
  As regards the extent of that involvement, I was interested to hear the various points made by my right hon. Friend today, which amplify his statement earlier this year. One was that private companies will be allowed to sell and provide PABXs of fewer than 100 lines. I was not quite clear what he said—perhaps the Minister of State can clarify it—about maintenance. The view has been put to me in the industry that the firms that provide PABXs should be allowed to maintain them. It is not entirely clear whether they will be allowed to do so. I express the hope that they will. They should not be given an exclusive right,

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  but the analogy with the other public utilities is clear. If an independent contractor installs central heating in a house, the householder can get either the electricity board or the original contractor to maintain it. That choice should also pertain in I he maintenance of PABXs with less than 100 lines.
  I was glad that my right hon. Friend made clear that an institution would be set up to test equipment to ensure that it was technologically correct to be fitted to the system and would not in any way cause its breakdown. I am very pleased that an independent institution will do that. It was thought at one time that perhaps the Post Office should do it, but it is clearly wrong when there are competing interests that one of them should also be the test body.
  I was also glad to hear that my right hon. Friend would consider the possibility of allowing competitive networks. I heard an example only this week of a major British oil company wanting to communicate with its offshore drilling rigs in the North Sea. That company can do that because it was allowed to set up its own system of communications by projecting a beam off which would bounce signals 10 the rigs. It is the only system that has teen allowed by the Post Office. It was the first one. The Post Office could not provide the service. It now says that companies cannot do that.
  The system was all very well for communicating in the North Sea, but the company also wants to communicate with its drilling operations on the; Western Approaches. It is not allowed by the Post Office to set up its own system. In order to communicate with a drilling rig on the Western Approaches, the company has to telephone on a normal line to America and the signal is bounced in America off a satellite back to the Western Approaches. That is absurd. It is one of the major British oil companies, and all that it is asking for is to put a saucer about 3 ft. wide on the roof of its offices in London so that signals can bounce off one of the many satellites in orbit.
  When asked for permission, the Post Office said that it was sorry but it was still considering its satellite policy. In such a case the customer's interests have not come first. Such a dog-in-the-manger attitude is fundamentally wrong. I hope that my right hon. Friend, in the exercise of his powers when the Bill is enacted, will bear such things in mind.
  Finally, I come to the financing of the Post Office. I cannot believe that we have a sensible system for the financing of those nationalised industries that are profitable. They come under the general consideration of public expenditure. Successive Treasury Ministers of both parties have maintained that they cannot give even profitable nationalised industries the complete powers that they want to invest. This Government have worked within the tradition of the previous Government, and we have external financing limits. Nationalised industries that are profitable find operate in a commercial way, competing for services, should be given the opportunity to raise their money in the private sector. Some of their financing should not be considered as part of the PSBR and part of the general level of Government expenditure.
  The advantage of the Bill is that that possibility opens up. Some say that it is easy to achieve more open financing by removing the Government guarantee for bodies such as the Post Office. That is not a realistic alternative. At the end of the day, if the Government remove their guarantee from the borrowing of the Post Office and, for instance, British Telecommunications gets into an appalling
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  financial mess, it is inconceivable that the Government, irrespective of which party is in power, would not have to intervene to ensure the maintenance and continuity of the monopoly national network. I do not believe for a moment that merely removing the guarantee would be anything more than a cosmetic operation which would have the disadvantage of slightly increasing the borrowing costs for the nationalised industry concerned.
  The only way forward is to look to various partnership operations between the public and private sectors, which are self-financing and in which the private sector combines with the public sector on particular projects. That possibility is opened up by the Bill in a dramatic way. That is why it is one of the most important Bills that we are likely to deal with this Session. It could, if it develops on the lines that I have outlined, provide an enormous inflow of capital into profitable ventures, in which both the public and private sectors are partners. There will be common agreement on both sides of the House that substantially more money will be needed in capital investment in the industry. We should, therefore, look in a co-operative way to see where the money can come from. It cannot possibly come, on the scale that is needed, from the public purse over the foreseeable future. Labour Members should recognise the reality of that.
  The Bill is not only right in its constitutional framework, in dividing the two bodies, reducing the monopoly and providing the enormous advantage of bringing in the private sector. It is also right in regard to the possibility of bringing in private sector money in substantial quantities. That is why the House should support the Bill and speed it on its way.
  5.40 pm
  Mr. Charles R. Morris: Few would deny that the Post Office faces formidable problems, particularly in the present economic climate, in seeking to improve Britain's postal and telecommunications services. The tragedy and reality of the Bill are that it does not address itself to any of the major difficulties currently confronting the Post Office or its customers.
  I listened carefully to the speech made by the Secretary of State in introducing the Bill. In recommending the Bill to the House, the right hon. Gentleman said that it has noticeable and worthwhile benefits. I went on listening, and the fact is that the right hon. Gentleman did not go on to identify any benefits, noticeable or worthwhile, for either the Post Office or the customers of the Post Office.
  The Bill, as I read it, has four main objectives: first, to split telecommunications from postal services; secondly, to breach the postal and telecommunications monopolies; thirdly, to legalise postal pirates in the event of industrial disputes in the Post Office; fourthly, to sell off shares in Cable and Wireless Ltd.
  I turn first to the question of the separation of telecommunications from postal services. I should like to question the whole justification of the Bill for the establishment of a separate business for telecommunications. We had precious few real or new arguments from the Secretary of State in favour of separation. He was showing all the signs of having been brainwashed by the bureaucrats.
  I listened to the admirable speech by my right lion. Friend the Member for Deptford (Mr. Silkin). He said that he would not advise his colleagues to go into the Lobby against the division of telecommunications services from

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  the Post Office. I take a completely contrary view, and I thought that an admirable speech by my right hon. Friend was marred when he sought to justify the separation by saying that it has been hanging around for quite some time now and has been discussed and debated since 1977. The hon. Member for St. Marylebone (Mr. Baker) said that it was discussed in the debate on the Post Office Bill of 1969. That is absolutely right. But there has been no great public debate on this major issue.
  Here is an industry which provides telecommunications and postal systems for the whole of the country and employs more than 400,000 workers, representing 2 per cent. of the working population in this country, and there has been no major public debate on the crucially important issue whether we should separate telecommunications from postal services. Why not? I shall suggest why there has not been any major debate. Equally, may I suggest why there is this commonality of view between the Front Benches on the question of the split? They know as well as I know that the separation has already taken place.
  What the Bill does, and what the bureaucrats at Post Office headquarters have achieved, is to reduce this House of Commons, this Parliament, to a rubber stamp, because the separation is a fait accompli. The two businesses have been established already in all but name. By the Second Reading and the Committee stage of the Bill, what we are embarking on is to give authority to that which has taken place. That is the reality of separation. Now, we are being invited to rubber-stamp the decision and the policies of Post Office headquarters and the Post Office Board.
  But have they always been right? Let us look at the record. These are the same people who in 1969 encouraged the Post Office and the politicians to believe that public corporation status would set the Post Office free, give it greater commercial freedom and lessen the control of the Treasury over the Post Office. What the Post Office Act 1969 did was to interpose a new Department of State, the Department of Industry, between the Post Office and the Treasury. It made Treasury control that much more strict and increased by thousands the number of bureaucrats at Post Office headquarters.
  When we are looking at the argument for separation, I suggest that it is not quite as compelling and convincing as the Secretary of State suggests and as is reflected by some of my right hon. and hon. Friends.
  The way that the argument for the split has been presented today is a sad commentary on ministerial accountability or, for that matter, accountability to Parliament. As I have indicated already, the Bill effectively reduces Parliament to the role of a rubber stamp.
  I read very carefully the parliamentary briefing that has been supplied by a number of interested bodies. In an eight-page parliamentary brief provided by British Telecom, the question of separation is dismissed in three lines. Paragraph 1 reads:
  "The separation of British Telecom from the Post Office makes business sense. They are two entirely different enterprises and they need managing in different ways."
  The question I pose to the House is: are they "two entirely different enterprises"? I submit that the transmission of letters and communication by telephone are merely two forms of communication. What has happened in recent years is that, given a free choice, the
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  public have opted for convenience. Understandably, they would prefer to pick up a telephone rather than sit down and write a letter. As a consequence, this has created a problem of an ever-expanding telecommunications industry, a capital-intensive problem and a labour-intensive problem with regard to Britain's postal service. But is that sufficient justification for the proposed division of postal services from telecommunications?
  I remind the House that if the Bill goes ahead and we divide telecommunications from postal services we shall be splitting the Post Office corporation at a time when technology is bringing them together.
  Reference has been made to electronic mail handling. We know that virtually every major post office, sorting office and parcel office in the country is now mechanised. We have recently learnt that it is now possible to send facsimile reproductions of letters from London to Canada by electronic means. We have seen the onset of optical character recognition processes. Reference has been made to Prestel. It is a fact of life that technology is moving fast. In my view, it is therefore short-sighted and unrealistic to talk about two entirely different enterprises.
  One might be tempted to believe that such a split is justified by the size of the business. But I have not seen any of the multinational companies, some of which are many times larger than the Post Office corporation, being encouraged to split because its area of operation covers more than one area of activity. Let us take for comparison a multinational company which is based in high technology and also is involved in household deliveries, namely, Shell-BP. That enterprise is based on high technology in extracting oil from the North Sea, and that same multinational company delivers it to the housewife in her home. No one ever suggests that it would be in the interests of Shell-BP to split those two operations. Yet here, without any public debate, we are discussing a Bill concerned with whether there is merit, advantage or disadvantage in splitting telecommunications and postal services. The proposal is that the split should go ahead.
  What will be the consequences of the split? I do not know how many Members have been privy to the negotiations that have already taken place with Post Office headquarters and some of the staff associations involved. It is proposed to split the research and development facility at Martlesham. There will be a research and development facility for the postal services, but if it is split from telecommunications it will not have the financial resources to embark upon the detailed research and development which Britain's future postal services will need. It will be forced to buy off the shelf in terms of computer and microtechnology- based postal systems.
  My hon. Friend the Member for Thurrock (Dr. McDonald) referred to the question of superannuation. The House is entitled to assurances with regard to the splitting of the superannuation fund. I believe that the Post Office superannuation fund is the largest single superannuation fund in this country. The staff of the Post Office, whether they operate in the telecommunications side or in the postal services side of the business, are entitled to binding assurances with regard to any proposal to split that superannuation fund. One might well ask how one would split an investment portfolio. How does one split the blue chips from the other shareholdings in companies? The Secretary of State has said that negotiations are proceeding with the unions. I wish them

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  well. But I would remind him that the staff of the Post Office will be watching this particular split very closely indeed.
  One may also ask why countries such as Germany, France, the Netherlands, Ireland and Finland have not split telecommunications from postal services. It is because the majority of countries recognise the value of a unified communications service.
  We shall be discussing many features of the Bill in great detail. I wish to refer briefly to the proposals for breaching the monopoly end legalising the postal pirates. I was very much at one with my right hon. Friend the Member for Deptford when he reminded the House of the chaos which arose in 1972 as a result of Randall's postal pirates. They conned the British public into posting letters at 75p per letter, waited for the strike to end and then posted all those letters back into the national postal system.
  It should be borne in mind that taking these powers will have a very serious impact on industrial relations in the Post Office. The Secretary of State gave the impression that there were major industrial relations problems in the Post Office. In reality, there has been only one national Post Office strike since 1657, and that was nine years ago. There has been only one major Post Office strike in the history of the Post Office. Yet in the Bill the Secretary of State is taking powers to encourage postal pirates to set up an alternative postal service.
  I can think of no other group of trade unionists who would sit back quiescent at such a development. If the Secretary of State is to exercise those powers at a time of Industrial difficulty with Post Office staff, I can think of nothing more ill judged. At a time when tact and sensitivity will be absolutely crucial, he is to exercise the most provocative line of action one could possibly envisage. Why is he doing that? We have had no explanation. There is no great industrial relations problem with Post Office workers either in telecommunications or in the postal services. There has never been a national strike on the telecommunications side of the Post Office. Yet the Government are embarking upon these enabling powers.
  In conclusion, I re-emphasise my right hon. Friend's point about clause 76 dealing with Cable and Wireless Ltd. I recently read the 1980 Cable and Wireless annual report and accounts. I particularly noted the comments of the chairman. Lord Glenamara. On page 4 of the report, under the heading "Chairman's Message", he says:
  "Cable and Wireless was set up and still operates under the Companies; Acts. I though the whole of our equity is owned by HM Government … a major part of our business arises from franchises grantee by independent countries where we provide the essential public utility of international and sometimes domestic telecommunications."
  He continues:
  "The present government of the United Kingdom came into office in 1979 with an electoral mandate to dispose of part of the equity in publicly owned companies."
  He adds:
  "If this policy is applied to Cable and Wireless it will be one of the most profound changes in our history. I must warn that the pursuit of profit—important as it is for both the Company and its shareholders—can never be the sole motivation of Cable and Wireless."
  He is absolutely right. Cable and Wireless is not some Fairey Engineering company or a Ferranti company. It is a major international company which provides the essential telecommunication systems for independent countries. Today we have seen a demonstration of a
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  Secretary of State who has not even consulted his colleagues in the Foreign Office on the implications of clause 76. The right hon. Gentleman has not even consulted his ministerial colleagues.
  What will be the attitude of Governments throughout the world when they learn that the British Government are taking powers in clause 76 to start selling off shares in Cable and Wireless Ltd., which provides essential telecommunications systems for those independent countries? The company's annual report demonstrates that only last year the Government of Oman exercised their right to assume complete responsibility for their own telecommunications system, and they have ended their agreement with Cable and Wireless Ltd. on that basis. If clause 76 is passed, Hong Kong and countries throughout the Caribbean and the Pacific which rely on Cable and Wireless for their telecommunications systems will begin to take precisely the same sort of action as Oman has already taken. That is the reality of the Bill. Frankly, this is a badly drafted, ill-thought-out, partly irrelevant Bill which in the interests of the Post Office and its customers ought to be rejected.
  6.3 pm
  Mr. John Gorst: I cannot possibly share the view of the right hon. Member for Manchester, Openshaw (Mr. Morris) or, indeed, the views expressed by the right hon. Member for Deptford (Mr. Silkin). I welcome the Secretary of State's desire to liberalise the telecommunications monopoly of the Post Office. Having fought and pressed for 15 or 16 years through the Telephone Users' Association, which no longer exists, but of which I was a founder, it would be strange if I did not welcome this step forward, which I believe to be a marked and valuable one.
  At this stage, I should declare an interest in the newly formed Telecommunications Council, even though I no longer have an interest in the TUA. The council provides a forum for users, manufacturers and suppliers of services to express common interests and have discussions on matters relating to the liberalisation of the telecommunications sector. It is common ground among everyone who wants to see such a liberalisation that British Telecom has an important and pivotal role to play. It has the responsibility to service and supply what I would describe as the telecommunications trunk roads—motorways, if one likes—but not the country lanes or the bridle paths of the system. It should certainly not handle the traffic which goes over them or, indeed, provide the garage and maintenance service of the equipment which travels either on the periphery or on the trunk roads.
  In the opening phase of two or three years, I hope that my right hon. Friend will be flexible about how much liberality there will be in relation to the maintenance of equipment. I believe that greater flexibility than has yet been suggested is necessary.
  I turn to the various options that were open to the Government. Basically, I believe that there were two options, either to transfer the monopoly to the Minister or, to transfer it to British Telecom. My right hon. Friend chose the latter. Some people believe that it would have been preferable to choose the former. But what matters is how things turn out in practice, and in practice there are two essential considerations—first, whether the user will benefit and, secondly, whether the industry and suppliers

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  will be stimulated to produce better results than they have done in recent years. Those are the key considerations, and they were certainly said to be so by my right hon. Friend the Secretary of State.
  However, one class of user does not emerge as happily from the proposed arrangements as it ought to. That group comprises those who have only one telephone, which is to be supplied by British Telecom. If an individual subscriber lives in a home in which only one telephone is appropriate and necessary, I do not see that he has anything to gain from the proposed changes. I should like the Minister to tell me what he thinks is contained in this new change for the ordinary, domestic subscriber.
  That is perhaps a weakness in the arrangement. There may be technical considerations which the Minister has in mind, but I am assured by people with technical knowledge that there are no real obstacles to prevent the monopoly ending at the front door, just as it does with gas, water and electricity. If some flexibility on this subject is also shown in the ensuing years, it may be that a great deal of benefit will accrue to the ordinary, domestic consumer, who must be in a majority of millions over all the others who will be affected.
  My main point concerns the monopoly itself. Why must the phrases contained in sections 24 and 25 of the Post Office Act 1969 be re-enshrined in clauses 12 to 14 of the Bill? Exactly the same words are used. I question that, because as it stands the wording means that things which have not yet been invented and which do not yet exist—forms of communication which have not yet been realised—are still to be nationalised and to be the subject of the monopoly. I do not regard that aspect as any form of liberation. Why must we do things that way? What have we learnt in the 11 years since the 1969 Act which makes us keep things as they are?
  Indeed, the Conservative Party appears to have changed its mind, because I recall that my right hon. Friend the Lord Privy Seal, who at the time served on the Committee which dealt with the then Post Office Bill, said:
  "It seems to me that to give this very general monopoly power to the Post Office is as if the Government in 1820 had given the whole monopoly of transport to the people who were then running stage coaches. They would then have been able to have controlled the railways and any other form of locomotion and communication which was set up. It seems to us"—
  that is, the Conservative Opposition of the day—
  "extremely undesirable that this monopoly power is vouchsafed to the Post Office in this form. It goes very wide indeed."
  He was right. He went on to query one aspect of what is repeated in the Bill. He said:
  "I understand that binoculars may become very dangerous instruments under this Bill, as at present drafted. If someone should happen to look at traffic lights through binoculars, he may well lay himself open to a £400 fine. If racegoers at Newmarket Heath should level their binoculars at a racehorse, the finishing photograph of the race may also be in trouble with the authorities."
  Nothing has changed. Indeed, the reply that was given by the then Minister—a most extraordinary reply—was:
  "It would be dangerous to take away an existing practice simply because we are transferring the monopoly from a Department. We must ensure that possible technical developments are caught within the monopoly before they are invented and before they become competitive with the monopoly, for that would be a very embarrassing position."—[Official Report, Standing Committee D, 11 February 1969; c. 691–92, 702.]
  I am puzzled that, when in Opposition in 1969, we felt that the monopoly should have been in the hands of the
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  Minister. I quote the words of my hon. Friend the Member for Howden (Sir P. Bryan), who led for the Opposition at that time:
  "one cannot foretell how the monopoly will develop, it is almost impossible to describe it. Therefore … since we do not know what nature the monopoly will take as the years go on, we should introduce some flexibility … the easiest way to do that is to put the monopoly in the hands of the Minister."
  That is not the way in which we appear to be proceeding. That view was repeated then by my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley), who is now the Minister of State, Foreign and Commonwealth Office. He said, in supporting that view:
  "it is wrong for that monopoly to belong to the Post Office. It should belong to the Minister, or perhaps some agency of the Minister, who can then give it to the Post Office for such purposes and at such times as it requires it."—[Official Report, Standing Committee D; 13 February 1969, c. 746.]
  That was sound thinking. What advice has my hon. Friend received since which makes him change his mind and after what was our corporate point of view 11 years ago?
  We should not be dogmatic. Nor will my hon. Friend the Minister wish to be arbitrary. We simply seek clarification, and we hope that the justification that my hon. Friend will give will be based on a reasonable explanation of what will be practical and effective, what will be in the best interests of users. What is required is that which will not stultify innovation, but will stimulate it. I am delighted to support the Bill.
  6.14 pm
  Mr. Roger Stott: I declare an interest in this debate in that I am a sponsored member of the Post Office Engineering Union and a qualified telecommunications engineer, and prior to my becoming a Member of Parliament I was employed by British Telecom as a telecommunications engineer.
  Over the last year and a half, we in this House have witnessed Ministers, and in particular the Secretary of State for Industry, presenting Bills or orders whose prime intention has been to rip off profitable sections of public enterprise. The Secretary of State has never presented a Bill to the House that would privatise those parts of publicly owned organisations that make considerable losses. In addition, he seems to have concentrated more and more power to direct and influence the policies of publicly owned industries into his own hands—a rather paradoxical view when this Government came into office on the premise of less interference in industry.
  I suppose that the Secretary of State would argue, with his usual evangelical zeal, that his activities on the industrial front have been in pursuit of the entrepreneurial lift-off that he claims will take place as a consequence of his industrial policies. On the present evidence of his industrial strategy, there has been no sort of entrepreneurial take-off. The Bill is a further example of the Secretary of State's tortured thinking.
  I said earlier that the Secretary of State has developed a habit of acquiring extraordinary powers unto himself. One of the more disreputable parts of the Bill is clause 15, under which the Secretary of State seeks to take unto himself unfettered powers to grant licences. As far as I can see, there is no provision for parliamentary scrutiny or debate about the granting of those licences. The Secretary of State can make fundamental changes in the structure of

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  the telecommunications industry without further reference to the House. Some of those changes could be far reaching and difficult to reverse.
  One of the unfortunate hallmarks of this Government is their contempt for proper accountability. I suggest that the largest business in Europe is of fundamental concern to this House and that anything that is done to change it, whether by licence or by any other subterfuge, should be discussed in the House and not left to the discretion of the Secretary of State.
  My union is strongly opposed to the Bill. It is convinced that the effects of the policies that the Secretary of State intends to implement would be damaging for the customer, particularly for the ordinary residential customer, and damaging also for the British telecommunications manufacturing industry. In addition, we believe that it would be damaging to Britain's future industrial performance. I say to Conservative Members, and particularly to those hon. Members who represent rural areas, that the Bill represents a blow to the quality of service that both the telecommunications and postal networks can provide. Services in rural areas are, by their very nature, unprofitable, and the measures to liberalise the supply of attachments and to open up the use of value added services will cream off the revenues and profits from British Telecommunications. Yet, at the same time, the corporation must keep its massive investment programme, which currently costs £4 million a day. That sort of investment should be increased if we are to have an efficient telecommunications network on the same level as that of cur European partners, who are updating their networks
  Crippled as the business is by the Government's short-sighted and destructive policy of cash limits, and further damaged by the losses of revenue that will arise as a result of the Bill, the corporation can only resort to increasing the price to the consumer—the customer. In addition, the improvements in the quality of the service that are still possible will have to be directed at the commercial business end. The cities will obviously pre-empt the large amounts that are required within the service, and as a result tie rural areas are bound to suffer.
  The Bill is bad for the British telecommunications manufacturing sector. Who will benefit from the markets that will be opened up for competition? The Post Office currently orders 90 per cent. by value of the supplies it requires from British sources. The remainder comes from abroad only when British manufacturers cannot make it. Such niceties will go by the board when British Telecommunications finds itself competing primarily with foreign firms. Big business in the: United States and Japan is watching what we are doing today with great interest. I have no doubt that some of its representatives will even be listening to me now. They are gearing themselves up to an assault or our market—[Interruption.] The hon. Member for St. Marylebone (Mr. Baker) may find this amusing, but I can assure him that British telecommunications manufacturers do not.
  Mr. Kenneth Baker: The hon. Gentleman's whole approach to this matter is immensely defeatist. The opportunity will be thrown open to British telecommunications manufacturers to provide equipment. For the hon. Gentleman to believe that they cannot provide—and quickly—the sort of equipment that the consumer uses is defeatist.
  Mr. Stott: I could argue the case as one who was working on that kind of equipment, but time prevents me from doing so, since I know that my hon. Friends wish to take part in the debate.
  Foreign telecommunications manufacturers cannot believe their luck that this country's Government, obsessed as they are with doctrinal free market views, are not prepared to back their indigenous telecommunications industry. Perhaps those Conservatives who believe that the Secretary of State's weak assurances that he will seek reciprocal trading opportunities for British manufacturers will provide them with any protection will, if I may take a leaf out of the book of my right hon. Friend the Leader of the Opposition, hold up their hands. We can then marvel at their faith in the right hon. Gentleman's ability to secure those agreements. We on the Labour Benches do not believe that they are possible.
  The Bill will damage the broader interests of British industry. Industry relies on an adequate telephone service. That which is currently provided is not good enough. I freely admit so and no one in my union would deny it. However, no one need be surprised that it is not good enough, because for years the British telecommunications industry has been underfinanced. The only way to secure a proper and competitive system is to put in the kind of finance that is obviously required.
  In a recent report, the advisory council for applied research and development on information technology made a point that I wish to stress:
  "This country's future trading performance will depend greatly on its ability to compete in world markets for products and services based on information technology".
  That is right. It is only fair for me to add that the report went on to agree with the Government's proposals, but while I accept much of its analysis I reject its conclusion. The deadly combination of restrictions on investment and measures that will reduce the income and profitability of British Telecommunications will delay the modernisation programme that is so urgently necessary.
  I have never in the past 15 or 16 years been an apologist for the Post Office board as it was or the British Telecommunications board as it now is. However, certain statements made in the House about the telecommunications network need to be firmly rebutted, and I am glad of the opportunity provided to me—I suggest that I know what I am talking about—by the debate to put on the record some facts about British Telecommunications.
  Its tariff increases this year are the first for over four years. It has met or exceeded the Government's financial target over the past 10 years. It is still meeting the target of an average 5 per cent. annual reduction in real cost per unit of output. Britain has the world's fourth largest public telecommunications system. It has more than doubled in the past decade with virtually no increase in staff.
  British Telecommunications plans to increase the system by half as much again by the 1990s. It is responsible for 27 million telephones, 4 million new ones having been installed last year. It handles 55 million telephone calls a day. More than 90 per cent. of United Kingdom telephone users can dial 101 countries—that is, 4 million telephone numbers—which is unmatched anywhere.
  I could go on in this direction, but time does not allow me. I merely wish to point out that that is not a bad record of achievement, particularly when the industry has been so long starved of finance. It is a laudable record for the

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  men and women who work in British Telecommunications, most of whom are members of my union.
  British Telecommunications employs hundreds of thousands throughout the country. Many of them are second or even third generation employees. Its employees work in town and country, in all weathers, 24 hours a day, 52 weeks of the year. From personal experience, I know that my colleagues are committed to the public service that they render and that they are proud of it. They have invested their lives and skills in an industry that, given the resources, could be as good as any in the world. My colleagues outside in the industry and here in the House view the Bill as both capricious and unnecessary. My right hon. and hon. Friends and I will vote against it.
  6.27 pm
  Mr. Gerry Neale: Like the hon. Member for Westhoughton (Mr. Stott), I declare an interest, but as a director of Telephone Rentals Limited. I hope that just as I respect his sincerity and his argument, he will respect mine. He seemed to make an extremely good case for British Telecommunications being only too ready to go into competition with any company or individual in the private sector.
  I congratulate my right hon. Friend the Secretary of State and my hon. Friend the Minister of State on the months of inquiries and research they have conducted and the research carried out by their advisers. We in the Conservative Party are committed, and have been for a number of years, to reducing the scale of public monopoly and to inhibiting its powers while increasing the degree of private enterprise competition and consumer choice. It is a remarkable feat that after only 18 months we are able to introduce such a significant Bill, and great credit goes to those who have worked so hard to produce it.
  I agree that the division of the Post Office into two separate entities is worth while. The retention of the network under some form of statutory control is essential. The fact that we are now moving into an area of greater freedom of choice in the purchase and supply of all forms of attachments and switchboards for the system is good news.
  The right hon. Member for Deptford (Mr. Silkin) delivered a lecture on monopoly and the impending collapse of the system if this measure were introduced. Similar arguments were advanced in Canada, the United States, France and Belgium when operations such as this were being considered. If the right hon. Gentleman were to make inquiries in those countries, he would find that former monopoly companies, such as Bell in the United States, have gained greatly from the change.
  It is excellent that private manufacturers and suppliers are to be allowed to compete at home and abroad. I take issue with Opposition Members on this aspect. If our manufacturers and suppliers are able to compete at home with products which are marketable abroad by reason of having similar standards, that must greatly improve the employment potential for British companies.
  I am pleased to see the relaxation of the stringent standards on attachments and the new regulatory proposals that we intend to bring in.
  I am sure that my right hon. Friend has long since realised that it is necessary to delve much deeper than the
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  principles involved in the Bill. It is necessary to go deeply into the technological and practical implications of these proposals. I accept that Second Reading is not the time to indulge in highly technical argument. That will be for detailed analysis in Committee. However, will my hon. Friend the Minister of State reflect again on the proposals for including in the Bill the maintenance of business switchboards and associated line wiring? Manufacturers and suppliers are worried that their freedom of manufacture, supply and sale will be inhibited by their inability to maintain what they supply direct to the consumer.
  My right hon. Friend the Secretary of State said that monopoly had stifled the private sector. As mention has been made of the situation in the United States, it should be noted that maintenance by private enterprise suppliers has existed since 1969. The right hon. Member for Deptford asked my right hon. Friend the Secretary of State about maintenance. My right hon. Friend indicated that his reason for retaining maintenance within the monopoly was to preserve the integrity of the network. It is no exaggeraion to say that the frustration of the manufacturers and suppliers is that they cannot find an argument on this matter which bears analysis. Lest my hon. Friend the Minister of State yields to the temptation of giving a broad brush reply, perhaps I can prompt him by advancing questions to which the answers would be most helpful.
  It may be the view that we cannot allow the corruption or so-called pollution of the network by improper voltages or power surges going through it. But the privately supplied and maintained PABX systems, as I am sure the hon. Member for Westhoughton will confirm, which have been evaluated and certified against the most rigorous technical standards laid down by the British Standards Institution or other bodies approved by the Secretary of State, fall within the requirements of the Post Office. Under the Bill the same situation would apply. We have fitted to the system attachments which have been approved for all purposes. Indeed, we have a number of approved privately supplied systems fitted to the network. Presumably they meet the standards laid down by the Post Office. Therefore, there does not seem to be any argument in terms of technical pollution.
  As has been indicated, it may be that the network should include the first telephone and the switchboard system on a consumer's premises. It may be suggested that, from a technical point of view, it is impossible to separate those parts of the network from the main part of the network operated by the Post Office.
  Does my hon. Friend see any sense in the view that the network should be split into a series of different parts? It is a complex arrangement of channel translation, connection and distribution frames. The network is already divided at many points. However, the most important factor is that in all premises into which the Post Office lines enter, before the system reaches the switchboard there is the main distribution frame which is a system similar to fusing. It has to be there to cope with problems such as lightning. It is a clear technological break. Some of my hon. Friends have pointed to similarities with the provision of fittings to the electricity network. It is the same in that sense as having a switchbox, a meter or a break point inside a house before the consumer starts to draw off power.
  Mr. McWilliam: I hope that the hon. Gentleman will accept that the analogy between the telephone network and the electricity and gas networks is false. It is illegal to fit anything into the gas or electricity networks. The telephone network is designed for just that. Despite what the hon. Gentleman may say about voltages and surges, with an integrated digital network the possibilities for damage at a point remote from the point where the force signals are generated and the opportunities to trace where the damage started and the time taken are such that the potential for damage is enormous. One of the shortcomings in the Bill is that it does not allow anyone reparation against such damage
  Mr. Neale: Even if we go on the system described by the hon. Gentleman, there will have to be a break. I accept that my analogy with the electricity network is not quite apposite, because one is feeding into the system. However, there has to be a break between the network as it enters premises and any attachments fitted. I shall come on to matters such as system X later. I repeat that there is a clear view that this argument, if it is relied on, is not valid.
  I turn now to the approach of system X and its introduction in the next decade or so. It is a marvellous system, but it is. dependent on the use of a series of break points throughout the network. There is a strong view that, although it will be capable of carrying and distributing calls to different parts of various; premises, there will still be a need for internally operated switching devices to cope with incoming calls. The industry feels that if it is to supply those attachments, even as an adjunct to system X, it should have the right to maintain them.
  Another argument on which reliance may have been placed is that there is a lack of maintenance resources in the private sector. The view may have been advanced that no other organisation can muster the resources to provide the quality of maintenance service to operate PABX or other business systems connecting with the current analogue network or the future digital network. Private industry can muster these resources to provide the quality of maintenance service nationwide not for the maintenance of the whole of the attachment of switchboards but simply for those that it has supplied. It now maintains about 20,000 private PAX and direct speech systems and networks throughout the country. It maintains a further 25,000 related communications systems. Radio paging, radio telephony and data communications are examples. It also installs and commissions 300 large PABX systems a year. This gives a clear indication of the capacity that the private sector possesses.
  The right hon. Member for Deptford talked of the possibility of "creaming off' by the private sector. There has also been reference to the rural areas. This is the traditional reaction of a monopoly. The American experience shows that it is not borne out by the facts. The use of the network in the United States has increased and revenue has therefore increased More interesting is the fact that the cost of articles to the consumer in a competitive market has reduced by as much as 7 per cent. If the private sector dealt with the maintenance element of what it supplies, this would have advantages for the consumer.
  The most curious argument is that British Telecom, if necessary, will subcontract to private maintenance contractors. This seems an astonishing admission. I ask
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  my hon. Friend the Minister of State to enlarge on the matter. All the technical arguments seem to be thrown out of the window as British Telecom goes on to admit that perhaps it cannot cope. One finds, in fact, that the private sector already spends a considerable time in assisting British Telecom or the telephone side in its work. It amounts to about £1,000 a day and about 200 man hours a month of private industry aid and expertise going to help the Post Office to maintain the private sector. Either there is a technological argument or there is possibly some reason connected with manning which explains why the Post Office wishes to keep this to itself. The industry deserves a clear indication of the basis of the argument.
  I should like to mention one example. A company such as Standard Telephones and Cables, which is part of ITT—this is not a company in which I have an interest—makes switchboard equipment for the system. It is permitted to install and maintain PABX 4s in its own premises and now wants to change to a more technical and updated system. The Post Office, however, says that it cannot maintain that system. This is a situation where Standard Telephones and Cables is putting in its own premises equipment that it has manufactured itself and has assisted the Post Office in maintaining it. Now, it faces a situation where it is not permitted to maintain its own equipment in its own premises. That is nonsense.
  I wish to draw attention to the problems of joint maintenance. This has been advanced as another reason, or perhaps the reason, for the refusal to countenance maintenance of equipment. The situation in the United States, Canada, France and Belgium is worthy of investigation. If there is a fault on a private system supplied and attached to the network and maintained privately, the company that supplied the equipment is approached by the consumer who is suffering. That company sends someone who not only checks out the equipment but also checks the line through to the exchange. This was made clear by the managing director of British Telecom in a letter in July this year when he said:
  "When faults develop on any installation, whether we have provided it or not, customers will have to tell us first; and no one else will be allowed to test apparatus while it is connected to our lines."
  If a fault is found on the line in the United States, the company that checked the equipment will call the Post Office or the equivalent, Bell, which will check it. If no break or fault is found on the line, the consumer gets it put right by the supplier of the equipment, who pays for the cost of calling in Bell to check it. The consumer does not get caught either way. The consumer has the situation put right for him for nothing. A joint maintenance system could work just as well in Britain.
  There is no technical reason why the company which supplies the switchboard equipment, fits it to the system, services and maintains it and checks it back to the main exchange should not operate in the same way. I hope that my hon. Friend the Minister, at the end of the debate or subsequently, will clarify these points. I can only repeat my congratulations to my right hon. Friend the Secretary of State and the Minister on the work they have done on the Bill. It is a remarkable achievement. It will contribute a great deal to providing a freer market in telecommunications. I am delighted to support it.
  6.48 pm
  Mr. Alfred Morris: This debate provides me with an opportunity that must not be allowed to go by default. My right hon. Friend the Leader of the Opposition has recently written a book entitled "Debts of Honour". I owe a very special debt of honour to the Post Office engineers of this country. That is why I am intervening briefly in the debate.
  When my Chronically Sick and Disabled Persons Bill became law in 1970, the Post Office Engineering Union was among the first of the organisations to ask itself how it could help to speed the full implementation of the new Act. Inevitably, its members took a special interest in section 2(l)(h ) of the Act, which provides for certain disabled people to be helped by their local authorities through the installation of a telephone and any special equipment needed for its use. Quite remarkably, as many will think, members of the Post Office Engineering Union decided that they would work without pay to install telephones under the Act.
  We hear a great deal today, not least from the Secretary of State for Industry, and have done throughout the decade since the Chronically Sick and Disabled Persons Act became law, about trade unionists grabbing as much as they can for themselves. But how many people know of the humane and compassionate decision of POEU members to work without pay to install a lifeline in the homes of countless thousands of their fellow citizens who are severely disabled? Who in the mass media, whether friend or foe of the trade union movement, has given even a moment's attention to this most striking act of Good Samaritanism? Why is it considered to be so lacking in newsworthiness when people who are often attacked for avarice decide to work, often at weekends, entirely without pay? Is there anyone in the media who is prepared even now to report an initiative that gives the lie to all that we are normally told about the values of contemporary trade unionism?
  The Chronically Sick and Disabled Persons Act has led to the installation of well over 100,000 telephones in the homes of severely disabled people. The cost, for taxpayer and ratepayer alike, would have been vastly higher but for the selflessness of so many Post Office engineers in working without pay to help people in special need. Their example is one of man's humanity to man, and I honour them and their union leaders—not least Brian Stanley, Norman Howard and my good and hon. Friend the Member for Newcastle-under-Lyme (Mr. Golding)—for the deeply important lead that they gave. They have helped to bring a new happiness and a new sense of security to many of the most needy people in Britain today.
  When the right hon. Gentleman, who was then Secretary of State for Social Services, was first approached about the decision of Post Office engineers to work without pay to install telephones for the disabled, he raised a snag that led to considerable delay in the implementation of the men's decision. He pointed out that if the men were not to be paid for their work in installing telephones under section 2(1)(h ) of the Act they would not, in consequence, be covered for the purposes of the industrial injuries scheme. In the end, the problem was overcome by the strategem of making a token payment of a few pence for each installation that would then be donated to charity. The right hon. Gentleman will no doubt remember our exchanges about the men's generosity
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  at that time. I hope that he will acknowledge it today, if only so as to give at least some balance to his unmerited, increasingly obsessional and tedious attacks on trade unionists and their organisations. It is a very narrow and ignorant view of trade unions to see their members as people who are concerned only with themselves and their immediate colleagues at work.
  Let the right hon. Gentleman also reflect on, and acknowledge today, the social responsibility of the very large number of postmen who willingly joined, under Tom Jackson's leadership, in the Good Neighbour Scheme and, in so doing, went far beyond the calls of duty in helping elderly and disabled people on their rounds. I honour them, too, and feel sure that they, like their engineering colleagues, will want to mark next year, the International Year of Disabled People, by doing still more to help the disabled.
  My right hon. Friend the Member for Deptford (Mr. Silkin) said that the Secretary of State has become notorious over the years for making no explicit mention in the Bills that he promotes in this House of many of then-most important objectives. It is, as my right hon. Friend said, the custom of the right hon. Gentleman to litter his legislation with enabling powers. The Bill before us is no exception. I hope, however, that there will be a firm assurance today that nothing in the Bill will inhibit those who work in the public service, as engineers and as postmen, from continuing to distinguish themselves by helping others who are less fortunate. Let us also hear Conservative Members, and not only Opposition Members, pay some tribute to the very special merit of those who work in the great public service whose future we are discussing in this debate. They deserve well of the House.
  6.54 pm
  Mr. John Butcher: Before I enter into the main aspect of this debate, which has been covered by a number of hon. Members, I should like to take up a few of the remarks of the right hon. Member for Deptford (Mr. Silkin). At the beginning of his speech he indulged in very witty semantics and compared the word "privatise" with the word "piratise". This theme has been emerging in the speeches of a number of Opposition Members.
  If the right hon. Gentleman were in the Chamber, I would ask him to consider the use of the word "piratise" in the context of the first Elizabethan age, because the pirates of those days were called privateers. It is no secret that those gentlemen were very successful in breaching a particular monopoly — the monopoly of Spaniards to mine and ship gold from the Caribbean and from South America. In those days, those who behaved in that highly laudable fashion were rewarded with knighthoods and they added to the wealth of our country. I hope to prove later in my remarks that that is precisely what should be happening in the course of the objective before us this evening.
  The Post Office has a monopoly. If one were looking for piratical behaviour, surely one would find it in the ability of a particular organisation to extract funds from the public for a service for which there is no competition. It may seem unusual to have to say such a thing, which is presumably a truism, but we must keep reminding ourselves that this is the position of British consumers at present.

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  In the second part of his remarks, the right hon. Member for Deptford drew across our field the red herring of the creaming off of services in the profitable areas in the big conurbations, perhaps to the detriment of the level of service in the rural areas. Again, I find it somewhat ironic that Opposition Members have suddenly become champions of the rural areas. But I believe that this argument is fundamentally flawed because it goes against two facts or trends.
  The first fact can be verified by those who read the Financial Times some two weeks ago and who may have noticed a story which said that an organisation called the British Export Managers Association was complaining very strongly indeed that managers were having great difficulty in obtaining, installing and getting service for the now very sophisticated pieces of equipment required for international communications in order to transfer their legal documentation around the world. Their problems were so immense that a number of them were saying publicly that some of these shipping, exporting and service companies were considering moving their headquarters out of the City of London to places such as Hong Kong and Dubai—in other words, to what we now jokingly call the underdeveloped nations, which seem to be far more capable of installing sophisticated communications equipment without any of the problems which seem to occur in Britain.
  The second part of the right hon. Gentleman's argument which is flawed lies in the fact that he fails to understand that the information technology revolution will be the first revolution which frees people from their place of work in the traditional sense. It will be the first industrial revolution which does not depend on the location of raw materials under a particular piece of ground. It is, therefore, freed from geographical inertia. It will be the first revolution which allows both managers and the managed to communicate between themselves at the places where they live, so that the home can also become the workplace.
  If it sounds a little futuristic to produce that kind of argument in this debate, I can only point Opposition Members to the literature which is being disseminated by many trade unions—I am reviewing a book on the subject—in which they, too, see this trend. They have an eye for the main chance. They see the profitable implications of the information society for working members of trade unions. The literature is on the record. It is by no means party political in its bias.
  When we consider the position of BT, I hope that we shall be aware that an information explosion is taking place in our midst, that it is increasing geometrically and that, if we do not come to terms with it, we shall be left in an industrial backwater.
  I could discuss the thoughts of a gentleman named Toffler, an American, who has coined the phrase "the electronic village". I could go on to discuss the electronic home or the electronic office. But these are trends with which we shall have to cope, and I see the sort of activities permissible here as running against current trends either for urbanisation or the concentration of jobs in the big conurbations. Sc we need not necessarily see a creaming off of profits in the urban areas, because work will be disseminated, and it is the telecommunications system which will permit us to do this.
  I am afraid that the right hon. Member for Deptford made another mistake, this time in his analysis of the
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  relationship of the public utilities, public expenditure and domestic industries in the United States and France and his comparison of it with our record in the United Kingdom. When my right hon. Friend the Secretary' of State moved the Second Reading of the Bill, he correctly used the word "partnership". If the right hon. Member for Deptford were here, I should say to him that, if he had used this word, he would have been more accurate in his prognostication of the effects of the Bill. I should have referred him to the ACARD report entitled "Research and development: a purchasing policy in the public sector", which asked us to consider the view that there may be too much in-house research and development done in our public utilities and that we could farm out more of this research and development work to the private sector, admittedly working to specifications laid down by the public utilities. Again, I hope that there could be some unanimity in the House that there is a strategy which should be beneficial to all concerned.
  Finally, the right hon. Member for Deptford said that no private company would make a profit out of our telecommunications system. The right hon. Gentleman used his usual languid and civilised language, but I am afraid that his words can be interpreted only as a rather shoddy threat aimed at trying to kill this magnificent experiment at birth. Unfortunately, an integral part of the right hon. Gentleman's logic is that there will be a change of Government at the next general election. But, as the newly formed Opposition Front Bench has decided to go in for even more reactionary economics and for more undiluted Marxism, that possibility may be a little more remote.
  Mr. Barry Henderson: Does my hon. Friend agree that that kind of remark made by the right hon. Member for Deptford (Mr. Silkin) could guarantee that the major British computer industry would go to the wall? Its success depends very largely on the ability to have effective communications systems. If it is not to make a profit through the effective use of those systems, what hope is there for a computer industry in this country?
  Mr. Butcher: My hon. Friend is right. There has to be some agreement that the freedom of communications, which we all see as desirable, should be maintained and that to go back to a monopoly position when many companies employing tens and hundreds of thousands of people in the electronics industry have made decisions which must of necessity be five, seven and 10-year decisions would be highly irresponsible.
  The right hon. Member for Manchester, Wythenshawe (Mr. Morris) made an eloquent defence of the status quo and asked that we should not divide the functions of letter delivery and electronic mail. He asked that we save and retain the system as it is. He argued that the delivery of letters or the delivery of electronic mail via BT was all part of the same function. I am bound to say that this logic was fundamentally flawed. It is as though I were to argue that I could travel from London to Coventry by road, rail or air. The exercise that I should be indulging in is that of travel. But to say that the whole facility should be monopolised by one carrier through all three media is surely not in the interests of the consumer.
  If I were to draw any parallel between this Bill and another piece of legislation, I should compare the Bill with the new Transport Act, which has increased competition

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  not just within the various modes of transport but within the road transport function itself. I should have thought that there was a clear comparison here. We all hope sincerely that this Bill will have the same effect in telecommunications.
  My right hon. Friend the Secretary of State referred to the huge demand for existing terminals available on the market. I am sure that he is aware that if a British consumer wishes to purchase and install a modern, a Telex or even a simple device such as an Ansafone, he experiences great difficulty and perhaps even anger compared with the ease of such an exercise in other parts of the world. My right hon. Friend was right to refer to the massive demand for Telex facilities. My hon. Friend the Minister of State will know that I have referred to him the issue of the very long waiting list for Telex facilities in a shipping company, where they are required for legal documentation to enable the company to pursue its job. The waiting list is six months in certain parts of the country, where there is no priority system for allocating facilities to those business users who find them essential and where some users or potential users are so fed up with waiting that they are renouncing their need for the service.
  There is a massive opportunity here to give benefits to consumers, to the economy generally and especially to British industry and our own software and hardware suppliers.
  British software engineers and development engineers are among the best in the world. There is something very British about the skills which they employ in that it is very difficult to "restrictively practise" someone who sits at a desk thinking. It is no surprise, therefore, that a lot of multinational companies, especially American multinationals, have disproportionately large software development teams when they set up their British companies.
  The market here is already huge. Within the nextwork system itself, with the devices needed to control and drive the system, in 1979 orders worth £1 billion were placed in the private sector and some £225 million worth of terminals were installed. All this is ready for take-off.
  At the centre of it all is BT. I say to Opposition Members that if the Bill is passed in the form in which it has been drafted, there is nothing for members of the Post Office Engineering Union to fear. If they pursue their objectives within their legitimate role in the network, they can share in the additional wealth which should be created by the massive increase in traffic. [Interruption.] While the hon. Member for Newcastle-under-Lyme (Mr. Golding) is waving his finger at me, perhaps I may put it on record that I have spent a day with his POEU colleagues. I have gone down the manholes and up the telegraph poles to see how they work. I respect the difficulty of their job, the unsocial hours that they work and their attitude, to which the right hon. Member for Wythenshawe referred, with regard to some of the charitable work that they do. But they have nothing to fear. It is irresponsible to try to encourage them to think that, somehow, their jobs are at stake or that their living standards or conditions of service are threatened. In fact, there are some opponents of the Bill outside the House who believe that the POEU may be getting slightly too
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  easy a ride in the Bill. If the Government have their Bill somewhere between these views, it may be that they have struck a happy medium.
  I have to refer to one very thorny problem. Where does the monopoly end? At the moment, there is a somewhat general definition that it should end at the first telephone. That I take to mean the first telephone at the end of each exchange line. Thus there may be a problem. We have to consider the position of a mainframe computer which has a number of points of entry in an interacting telecommunications system. Is each of these points to be construed as a first telephone?
  We have to solve the problem of PABXs. I commend to my hon. Friend the TEMA definition, which I know he has considered in his consultations, as being worthy of further investigation, particularly the proposal to have a network attachment point or socket considered as the first telephone or point of entry to the consumer's premises.
  There is some curious evidence which I think should be investigated in the context of some of the very new PABXs which have the facility actually to vet and monitor the network itself. There is evidence that some of these new PABXs are detecting faults in the network, rather than the network itself being corrupted by faults on the PABX. If we are to move to a digital system, we should countenance the possibility of two-way diagnostics. Although there was a challenge earlier on that matter, it should be borne in mind that things are developing rapidly.
  There is also a practical argument that we shall have to consider, presumably in Committee. It concerns the logistical and physical problems of having one whole team of POEU engineers who, within that work force, will have to be trained and capable of servicing a wide range of PABX equipment specifications. I fear that we may reach a position where a user who has a fault may telephone the local BT branch and be told "We are sorry, but Harry is on the training course for the Mark V D(3). He has to specialise in four pieces of equipment, and it so happens that he cannot pop round for the next month." That is a real danger. It happens at the moment. If BT personnel are to be responsible for all types of PABXs, there will be an immense management problem, particularly in connection with training.
  I endorse my right hon. Friend's remarks about the need for phasing. As I have said before, if I have a concern in this debate, it is to note the interests of the GEC, which is a large employer in Coventry and the lead contractor in the triumvirate which installs system X. It would be helpful if my hon. Friend the Minister of State could indicate the type of phasing which the Government have in mind. Could it be through the products themselves—for example, from telephones to terminal devices through to PABXs? Our domestic manufacturers are afraid that, having worked so far to equipment of a very high specification, as ordained by the old Post Office, if the specification moves downmarket and becomes less sophisticated, they may be left at a great disadvantage.
  In those circumstances, bearing in mind that we are constrained by the GATT and EEC agreements, there might be a temporary worsening in our trade balance if the phasing were not handled in the appropriate fashion.
  I welcome the magnificent news that my right hon. Friend gave about the £2 billion investment programme for BT. I welcome particularly has further remarks about the ability of BT to raise additional finance outside the market. If I could wave a magic wand this evening, it would be to

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  bring about the allocation of about —30 million to BT to rejig its purchasing programme for system X, which lies it the heart of the system, the whole of which is at the centre of this information revolution.
  I welcome the objective and the potential effects and conclusions of the Bill. It will do for telecommunications what the Transport Act is now doing for the road transport industry. It will affect one area of industry which is still projecting immense growth. Any computer company which is not projecting a 15 per cent. increase in income this year is considered to be a stagnant company. The Bill is rightly controversial and, most important, it lies at the very heart of Tory philosophy, representing the honouring of yet another election pledge.
  7.1.5 pm
  Mr. John Golding: I declare my interest as an assistant secretary of the Post Office Engineering Union. My hon. Friend the Member for Westhoughton (Mr. Stott) put the POEU's case very effectively, but I shall add my own views.
  The Bill will jeopardise both the job security and the job satisfaction of Post Office engineers. I do not consider that I am irresponsible in putting that point of view. Job security will be threatened because work will go to firms, both foreign and British,. outside British Telecommunications, as a consequence of the Bill. Therefore, work will not be available for British Telecommunications engineers to replace the work that is lost as a result of advancing technology.
  I want to emphasise the great disquiet and uncertainty that exists among telecommunications engineers at present because of the possible loss of work resulting from changing technology. When I joined the union 20 years ago. we saw a future that was moving ever upwards in terms of employment and expansion. Now, we have to bear in mind that technical change can itself destroy jobs.
  The POEU has constantly looked to the future and told its members "Even if jobs are destroyed in the maintenance of telephone exchanges, even if jobs are lost en the laying or maintenance of cables, additional work will be created in peripheral equipment." The challenge to tie POEU's members from the Bill and the threat to their jabs lies in the fact that that promised work will in all probability go to outside firms, including foreign firms, and will not be available to them.
  Mr. Henderson: It is here, I suspect, that there is a possibility of conflict of interest between the hon. Gentleman as an office-bearer of his union and the membership of that union. Is it not true that while the extension of private sector activities in some of the areas which are now a Post Office monopoly might reduce the work carried out by members of the Post Office Engineering Union, there will be no diminution of the kind of work carried out by the kind of person who is a member of the union? Surely, with the enhancement of the number of people competing for the considerable skills of members of that union, those members have an extremely exciting future.
  Mr. Golding: There is some truth in that statement that expansion will lead to greater demand for skilled technicians and craftsmen. But the truth does not rest there. The threat is to people in their present occupations. Job security in telecommunications has brought substantial
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  advantages, not only to the staff but to the subscriber and to the service. For example, it has meant that there has been adult recruitment and training. There has been no craft demarcation, and there has been a ready acceptance of technological change. Job security has made possible union initiatives leading to productivity bargaining and a productivity record in British telecommunications which was superior to that of other industries.
  In other words, the union has been able to do that which is pressed on other unions as being in the national interest. We have been able to do it because there has been among the membership a feeling that there is job security. If that job security is challenged, we take away the conditions under which we have been able to adopt rational policies over the past 20 years.
  Because so many spend their working lives in the Post Office, job security has also led to a great concern for job satisfaction, which itself has been totally in the interests of the public. For more than 20 years the POEU has campaigned for a more efficient service, more efficient in maintenance as well as installation, for the modernisation and growth of the system and the recognition of the social role of telecommunications, I was glad to hear my right hon. Friend the Member for Manchester, Wythenshawe (Mr. Morris) refer to one aspect of that.
  That is why the POEU not only supported the Post Office Act 1969, thereby accepting the loss of Civil Service status, but supports the separation of post and telecommunications provided for by the Bill. That is why it has pressed constantly for greater investment and an ending of the present crippling policy of cash limits. I have been pleased to hear hon. Members on both sides of the House ask the Government to change that policy.
  It is the desire to have a system of which its members can be proud to serve that has led the POEU to argue strongly for technical innovation—for system X and optical fibres—even when difficult problems have been created for the union as a consequence. For the same reason, the POEU has campaigned for an integrated telecommunications system with the unfettered right to manufacture its own equipment and has pressed hard for improved management, including industrial democracy and freedom from political interference.
  The Bill will undoubtedly undermine job satisfaction and will be harmful to customers, because it will increase State interference in the running of British Telecommunications and the Post Office. I could not have imagined that the Secretary of State and the Minister of State would argue for more State interference. The Secretary of State has given himself powers that are far too great.
  I do not share the desire of my hon. Friend the Member for Westhoughton for greater parliamentary accountability. It will be important for the management of British Telecommunications and the staff to have as much freedom as possible. We have already seen that managers leave British Telecommunications, praising the staff and their dedication to the service but critical of political interference in their managerial decision-making. Sir William Barlow is a recent example.
  The Bill is bound to undermine management's ability to manage. It is bound to lead to pressure on Ministers, however well intentioned, to reflect the Treasury's stop-go policies in their directions to the board of management of British Telecommunications and the Post Office. I very

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  much hope that Conservative Members who serve on the Committee considering the Bill will join us in reducing the power of the State to interfere in the industry.
  I think that the Bill will undermine the job satisfaction because it will reduce BT's duty to give a service. That could be harmful in country areas. Under the 1969 Act, the Post Office had the same responsibility throughout the country. Wherever one was, it could be assumed that there was a responsibility on the Post Office to provide a subscriber with, for example, an extension telephone or aid for the disabled. As I read the restrictions on the duties of British Telecommunications, that is no longer so. The responsibility is limited to providing the first handset; there is no responsibility on BT to provide anything else. If equipment or service is unprofitable, nobody outside will provide it. In that sense, we have taken a big step backwards in our attitude to providing service to those who live in outlying areas.
  Members of the POEU feel strongly that there will be a loss of job satisfaction when responsibility for the maintenance of some equipment is divided. This will never be satisfactory for the customer or staff. If he could speak in the debate, my right hon. Friend the Member for Wakefield (Mr. Harrison), our Deputy Chief Whip, would tell Conservative members how different is explaining the complexity of systems to customers from making speeches in the House. One of the matters causing the greatest aggravation to Post Office engineers will be rival teams of maintenance engineers declaring that a problem is the other's resonsibility. The "aggro" will often be beyond comprehension, and it will be the customer who suffers.
  I have said before that it is always my loss when I call someone to repair my television and I am told "It's the aerial", and then when I call the aerial man he swears that the problem is in the set. That is the dilemma with divided maintenance. It is difficult for the maintenance man to explain to the customer.
  Many members of the POEU are also upset about the decision to force British Telecommunications to set up subsidiaries, when its competitors are not forced to do the same thing. Having listened to the Secretary of State, I am not certain whether the Government will allow cross-subsidisation. Perhaps the Minister of State will tell us.
  The POEU will be very unhappy about the suggestion that we can get round artificial public sector borrowing requirement constraints by creating joint subsidiaries in which BT has a minority interest. That is an artificial device to avoid some technical restrictions.
  There will also be great dissatisfaction because of the creaming off of revenue, particularly on the use of leased lines. That revenue is needed to develop the network. The thought of competitive networks horrifies me. Nobody involved in transport is thinking of a duplication of railway lines. The railway lines have been rationalised. Nobody is thinking of introducing further toll-gates because the system is rationalised. We cannot afford a creaming off of revenue.
  The Bill is an irrelevance to the needs of telecommunications. The overriding priority is to modernise and expand the network, not to attach new equipment to the system. The Government propose to concentrate on increasing equipment fitted to the network at the expense of the network itself. We believe strongly that that network will be damaged severely. It is important
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  that we do not allow the Government to destroy telecommunications as they are destroying so many of our basic industries. We must vote against the Bill and give it careful scrutiny in Committee.
  7.31 pm
  Mr. Barry Henderson: The hon. Member for Newcastle-under-Lyme (Mr. Golding) was disappointing in his conclusion. He did something which I did not expect him to do. He might have talked me out of supporting the Government on the proposition that the Post Office should be responsible for the maintenance of PABXs whether it supplies them or not. His argument provides me with a considerable reason to reconsider supporting the Government in that respect. The simple way to solve the argument is to say that whoever supplies the equipment should maintain it. That should be the end of the story. To that extent, I must think further about many of the hon. Gentleman's arguments. I was going to apologise to the right hon. Member for Deptford (Mr. Silkin) for not hearing his speech, but as he is not present to hear mine I shall not.
  I have spent most of my working life in the computer and related industries. That gives me an interest in communication systems. To prove that I am unbiased, I declare an interest in that nearly 20 years ago I worked for a company which was responsible for supplying several hundred thousand pounds worth of kit to the British Post Office and to Cable and Wireless Ltd.
  I welcome the Bill. The right hon. Member for Manchester, Wythenshawe (Mr. Morris) asked Government Members to pay a tribute to Post Office staff. I take up that invitation. For an organisation of its size and with the hundreds of thousands of people who work for it, it contains much that is admirable. I admire the vast numbers of people who work for the service, not least those who come directly in contact with the customers, whether they are postmen on the beat, telephone operators or the men who go out in bad weather maintaining the lines. I pay tribute to such people, although I have criticisms to offer on certain matters.
  The split of this mammoth corporation which employs more than 420,000 people must be right and is long overdue in view of the developments in the two aspects of the business. We have worries about the decline of the postal service but a hope of great opportunities from technical revolution in telecommunications.
  In 1979, over 6,000 more people handled 817 million fewer items of mail than five years previously. The crunch came last summer, when the system nearly collapsed and the London letter service was referred to the Monopolies and Mergers Commission.
  In my right hon. Friend's recent statement we were glad to hear that in the last year the service has improved again. However, productivity is still low by any criterion, historically or internationally. The postal service will remain a big and important business. The improvements in the service and the control of its 175,000 employees should have the undivided attentions of a board responsible for that service.
  An industrial dispute has occurred recently in telecommunications. Nearly 250,000 people are employed in the telecommunications business. The damage to the Post Office and the telecommunications business by that industrial dispute will be a long-standing disadvantage to

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  the service and to the subscriber. It certainly cost the taxpayer dear, although it was little noticed by the public and involved only a small proportion of employees.
  More important for the future is the explosion of innovations in telecommunications technology. It has started a revolution in the operation of the service and offers immense scope for expansion by the industry in both the public and private sectors.
  That brings me to the parts of the Bill which have produced the liveliest controversy. Where should the boundary be drawn between the spheres which legitimately should form part of the monopoly and those which are better open to injection of private capital with the stimulus of free competition?
  Opposition Members have a blind doctrinaire belief in the benefits of state monopoly. That belief is held in the face of facts and almost all experience. Some hon. Members have the mistaken belief that the reduction of the monopoly will affect employees adversely. I do not believe that that is so.
  The Secretary of State said that monopoly was a privilege that must be earned. Many parts of both services should be based on a monopoly. The justification for that is that a decent service must be provided throughout the land on an equality of prices basis. I shall not take lessons from Opposition Members who talk about the interests of rural areas. Rural areas will be well served by the retention of most of the exclusive privileges, traditional in the old Post Office and now in the two corporations, which are retained by the Hill. Some of my hon. Friends are deeply concerned about the interests of the consumer. They feel that the interests of customers and employees will be best served by giving free rein to the force and energy of competitive enterprise in a free market formed by consumer needs and demands. I take my stance somewhere between both those views.
  In its overall emphasis, the Bill has the right balance between the conflicting viewpoiints—not only because the Government have been moderate in seeking the broadest compromise but because rational evaluation of the facts will, more often than not, lead an objective observer to the conclusions that have been reached in the Bill. That is especially true of the lines drawn for the postal business as foreshadowed by my right hon. Friend the Secretary of State for Industry in his statement: in July.
  Within the general lines proposed in the Bill for telecommunications there are points at which the Government may have been unduly cautious or, perhaps, over-influenced by technical arguments advanced by British Telecommunications. I hope that some of the arguments will be thoroughly scrutinised in Committee and that the point of balance of some specific decisions will be shifted, taking account of the best technical advice available.
  Mr. Leslie Spriggs: The hon. Gentleman referred to the town and city centre work and to the rural areas. If the Bill divides the business of the Post Office, who will handle the city and heavy conurbation centre work and who will handle the rural areas? Two different areas are involved. It will cost a great deal of money to deliver postal communications in rural areas. It will be cheaper in the city centres. Who will handle those areas?
  Mr. Henderson: The hon. Gentleman has revealed one of the great problems in dealing with the arguments
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  surrounding the Bill. I do not believe that the Bill proposes anything remotely like the hypothesis put forward by the hon. Gentleman. It has nothing to do with the Bill. It may be a scare and an anxiety for the future, but it has nothing to do with what is in the Bill. In the past, the gentlemanly and slow-moving paternalism of the Post Office has stifled much of the development of crucial sectors of the telecommunications and computer industries. There is a need for enormous investment in the industry and in what will be the telecommunications service.
  Mr. Me William: That point cannot go unchallenged. Twenty months ago I was working in a telecommunications planning office. The waiting list for a simple relay set from private industry was at least two years. It could not supply it. Where will the drive come from—private industry, which cannot supply it, or the Post Office, which is desperate to put in the lines? That is true about almost every sphere of Post Office activity today.
  Mr. Henderson: The supply position would have been easier today if we had not had the recent disruptions in the Post Office supplies department.
  I wish to return to an important point about which the Opposition share my concern, namely, the hunger for capital that will be created by British Telecommunications if it is to develop the central network service that we want to see over the next decade or two. That hunger for capital will be beyond what can reasonably be expected to be provided by the taxpayer and by public sector borrowing. It will be greatly aided if those sections that are not an essential part of the network are encouraged by the injection of private sector capital.
  While British Telecommunications should have the right, as the Bill allows, to engage in all sons of enterprises, it would be well advised to limit its enthusiasm for enterprises outside the new network or for enterprises that will directly increase the business of the network. I refer specifically to the part of the network for which it alone can have responsibility. If British Telecommunications has ambitions to expand beyond the basic task, it could lose the opportunity within the key task, which only it can perform, of becoming the biggest business in the country, without touching peripheral areas. The basic task will consume thousands of millions of pounds of capital investment, paid for by the customers and the taxpayers. Unless it can prove that it will positively enhance the use of its service, British Telecommunications does not have the right to use capital for inessential services.
  My right hon. Friend referred to partnership and cooperation between British Telecommunications and the private sector. The Bill does not make it clear where that co-operation will come from. Clause 4 refers to company subsidiaries, but my recollection is that that refers only to wholly owned subsidiaries and not to participative or sharing subsidiaries. Unless the sort of sharing envisaged by my right hon. Friend is dealt with under the general terms of power to do almost anything that is included in the Bill—which may be too general—I wonder what will control the growth of sharing, participative arrangements. In many cases that might be an excellent thing, but it might give rise to concern in other companies if the Post Office had a deal with one company.
  One of the great achievements of the Post Office is the establishment of the Prestel service. Without doubt, it is

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  an immensely important development for the future of telecommunications. The Post Office should think seriously of cashing in on the benefits of that service by selling either the service or the technology to others—not because it is profitable but because it will consume capital if it is to be developed as rapidly as we wish to see happen. In the using and the development of the service it will enhance the use and development of the network itself, which is where the responsibility of British Telecommunications primarily lies.
  Mr. Gregor Mackenzie: I am intrigued. As I understand it, for many years the Post Office, with others, has spent a great deal of money developing the Prestel service. The service is about to make money for the Post Office, which it can use to expand and develop its service. Is the hon. Gentleman seriously suggesting that the Post Office, having done all that work, should simply sell it off so that someone else can have the benefit of that work?
  Mr. Henderson: Yes, I am seriously suggesting that the Post Office should do that, and at a substantial profit. I am not suggesting that it should not make a profit through selling the service. It would be sensible for the Post Office seriously to consider that suggestion. The time, effort and money used in the development of the service should achieve profit. It might also make it easier for my constituents to obtain a basic telephone service now. Let us not forget that 12 million out of 17 million customers of telecommunications are domestic consumers. I am horrified at the number of people who write to me each month saying that they cannot obtain a basic, fundamental service in their homes. The queue is lengthening rather than shortening. The Bill has not had any effect on the existing supply of telephones to consumers. That applies in my constituency as far as I am aware. There is a shortage of capital to meet the requirements of the development of the service to the extent that the public want that service. Considerable attention should be paid to that.
  I mention briefly three areas in which I think that the influence of British Telecommunications might be kept under close review by my right hon. and hon. Friends. Much mention has been made of the way in which coin boxes have been vandalised. The Post Office is always telling us that it is an uneconomic service. Has it ever thought of inquiring whether anyone would run a franchise arrangement for coin boxes in housing schemes or elsewhere?
  What is the "first telephone"? How is it defined? It is not in the Bill but it has been referred to as the measure of where there will be the distinction between the end of the Post Office monopoly and the beginning of the opportunity for a private service. It is an especially unfortunate way of referring to the boundary when it is not included in the Bill. Indeed, a telecommunications service can often be provided without the need for a telephone.
  British Telecommunications says that satellite operations are uneconomic. I hope that it will not allow my right hon. Friend to stop others who take a different view about the economics of those operations from advancing in that technology if they wish to do so. I hope also that my right hon. Friend will ensure that the test for attachment to the network must not be whether British Telecommunications
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  happens to think that it would be a good thing or whether it would work well. I hope that the criterion will be whether such attachment would damage the network or another user.
  Lastly, I agree with the Government that British Telecommunications should be allowed to compete on fair terms outside the monopoly. However, I question whether it should be encouraged to do so in a period in which demands for new capital will exceed the ability to raise it without an unacceptable strain on the public sector borrowing requirement.
  7.53 pm
  Mr. Ken Weetch: I wish to make only a brief intervention. I want to focus attention on one aspect of the Bill, namely, the powers of the Secretary of State within the framework of its provisions, particularly because many of my constituents work in the Post Office research centre at Martlesham. On their behalf I raise some questions, voice some misgivings and ask for certain assurances.
  The main purpose of the Bill is to estabish a new public corporation with responsibilities for data processing and telecommunications. That is a principle with which I would not quarrel. The creation of a separate corporation with the responsibilities that are described in the Bill makes good sense.
  I take the opportunity to underline the argument of my right hon. Friend the Member for Deptford (Mr. Silkin) and my hon. Friend the Member for Newcastle-under-Lyme (Mr. Golding) that the telecommunications network is the central nervous system of the economy. Its health or otherwise will have a crucial effect on the course of Britain's industrial recovery. It is not too much to say that the quality of our telecommunications system will be a basic factor in the competitive performance of Britain as against other industrial economies.
  It goes without saying that two factors follow from that. Of first importance is the fact that we need a stable and substantial investment programme to finance a growing volume of technical research. In the second place, the new corporation will need freedom from arbitrary and politically motivated interference from the Secretary of State. Those two factors are interconnected and I put them both in the context of my constituents who work in the Martlesham research centre, which deservedly enjoys a high national and international reputation.
  The centre has developed considerable technical research in diverse areas. If system X succeeds in making any impact in foreign markets for British Telecommunications' equipment, much of that success will be due to the research that many of my constituents have participated in at Martlesham. I do not want any of these achievements to be lost by possible arbitrary political tinkering through the excessive powers of the Secretary of State that are enshrined in the Bill.
  I am concerned about clause 6, and especially subsection (8), which sets out the powers of the Secretary of State. I am anxious about its possible effect on technical research. The subsection provides:
  "The Corporation shall settle from time to time, after consultation with the Secretary of State, a general programme of technological research into matters affecting the services provided by it or its wholly owned subsidiaries and other matters affecting its or their functions, and of development connected with such matters, and shall secure the carrying out of any programme so settled."

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  I should like to know why the provision for consultation on the corporation's research and development programme has been included. The Secretary of State and his advisers have no expertise in these matters. Clause 6 provides a dangerous opportunity for irresponsible meddling in areas that involve technical matters about which the right hon. Gentleman and his advisers know nothing.
  In past years, investment in industrial research and development in Great Britain has been far too restricted. That is one basic reason for our poor industrial performance. It is evident that often the research has been too little directed to the commercial realities of this world. The research centre at Martlesham cannot be accused of that. Its research has been of real practical commercial value. It has taken place often in conjunction with the main industrial firms in the sector.
  The Under-Secretary of State for Industry (Mr. Michael Marshall): I think that the hon. Gentleman's argument is entirely valid. I add my voice to those who praise the technical researches at Martlesham, in his constituency. He has rightly said that in exploiting some of that research and development access has been used to the major commercial companies in the sector. He cited system X. Does he agree that that is a good example of the mix of public and private enterprise that has encouraged further development along the limes set out in the Bill?
  Mr. Weetch: Yes, I accept that. I was not speaking against co-operation between the public and private sectors. In many areas they can mix, to the benefit of both. I am voicing my misgivings about possible political interference with the proper functions of management in the new telecommunications corporation. I accept the Minister's comment.
  I seek some assurances from the Minister. First, I ask that there will be no political tinkering with the investment that is needed for essential and provenly successful technical research such as that which takes place at Martlesham. Secondly, I want an assurance that there will be no restriction of management initiative in the research aid development programme. To that end, will the Secretary of State seriously reconsider the whole of Clause 6 and the related provisions? I make these points in the interests of keeping Britain ahead in information technology.
  8 pm
  Mr. Gary Waller: Among all the uncertainties that face British industry, it can be claimed with some confidence that one industry can only expand—the information industry. It has been said chit the amount of recorded knowledge in the world doubles every decade. We can be sure that people will not only want to share that knowledge with one another but will seek speedier, cheaper and more efficient means of communication.
  The Bill is to be welcomed. It is a timely and appropriate response to a changing situation. It could be argued that posts and telephones should always have been kept apart. However, the technological developments of the past few years and those in the pipeline make the differences between the two even greater, necessitating different skills and approaches to the needs of the public.
  The bread and butter of British Telecom will for some time remain the basic telephone service. However, as it
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  approaches saturation in the number of subscribers served, in order to grow it must aim to increase the use made by those subscribers of its services. It must develop and expand new services.
  It is absolute nonsense for the hon. Member for Newcastle-under-Lyme (Mr. Golding) to suggest that the development of new equipment that can be linked to the line is of subsidiary importance. It does not take a genius to forecast that considerations of cost are bound to make business users turn increasingly in the next few years to electronic mail and developments of Prestel. However, as economies of scale start to operate, the real cost of postal communications will become relatively cheaper, eventually bringing those services within the reach of many, and eventually perhaps all, domestic users.
  The logic of those developments is, as so often is the case, easier to foresee than the time scale over which they will occur. However, I tentatively suggest that the coming decade will see a vast switch to electronic mail in commerce and industry. Perhaps the 1990s will be marked by similar developments in the domestic sector.
  What, then, are the implications for the postal side? Eventually, existing economies of scale will be lost, turning the screw particularly on the non-business user, who will not be able to switch so quickly to the alternatives, despite rises in the cost of mail, Those increases will result from various causes, such as the fact that, despite scope for some mechanisation, posts must always be relatively labour intensive and the rising cost of transport as oil and energy prices increase, as well as the lost economies of scale to which I have referred.
  The challenges will be very different from those faced by British Telecom. Given sufficient investment, British Telecom has almost unlimited scope for developing its business—and that includes exports. I am, however, a little concerned about the degree of control that clause 6 imparts to any future Secretary of State. Subsection (1) provides:
  "The Corporation shall give effect to any direction given to it by the Secretary of State under the provisions of this Part and shall secure, so far as appropriate"—
  I am not sure what that means—
  "that each of its wholly owned subsidiaries also give effect to any such direction."
  My anxiety comes about partly as a result of the present direction that investment in new technology, including electronic exchanges and system X equipment to replace the old Strowger electro-mechanical exchanges, must come from current income rather than borrowing in the market, desite the fact that, with British Telecom's plans and prospects, potential lenders will abound. If we say that we want British Telecom to operate on businesslike lines, we should allow it to do what any business would do in the circumstances.
  I understand the argument that with a publicly owned monopoly—and in many respects British Telecom will remain a monopoly, despite the introduction of competition into certain aspects of its business—it is necessary for the Government to fulfil the controlling functions that a banker would fulfil in the private sector. However, that only makes it more important for the Government to discriminate between those public users of capital that only consume resources and those, like British Telecom, that have the potential to be very profitable by

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  adopting equipment, such as system X, that is far more reliable and offers far more benefits to the user than the existing equivalents.
  The need to conquer inflation encompasses the necessity to control the public sector borrowing requirement, but I hope that the Government will discriminate more in favour of successful — and potentially even more successful — investments. That apart, it is surely not fair that existing subscribers should have to pay much higher telephone bills so that future users might benefit.
  I am also concerned that with the vast changes taking place in telecommunications there is no guarantee of continuity. Policy may be changed at the whim of any future Secretary of State. The Bill would be improved if it had built into it the requirement for the Secretary of State to submit his proposals for scrutiny by Parliament.
  The pension fund is dealt with in clauses 29 and 30. The question whether the existing Post Office pension fund is to be split is left open for future decision. As everyone knows, that fund is the largest pension fund. It may be considered that greater flexibility will result if it is split. However, against that we have to balance the fact that the fund is in the top quartile of pension funds in its performance over the past few years. Because of its leading position, it is often offered particularly favourable investment opportunities. At any rate, it will be natural for employees of British Telecom and the Post Office to seek assurances about the future of the fund. I hope that they will be given them.
  Conservatives believe in competition and deplore monopolies. The spur of competition provides an invaluable element which is often missing in nationalised industries. We welcome the opportunities for competition provided in the Bill. Several of my hon. Friends have said that the Bill does not go quite far enough. However, it is quite wrong to go from that position, as I am afraid that some do, to snipe continually at those who work in the public sector. I have met many in my constituency and elsewhere who work in the postal and telecommunications businesses. I find them to be as loyal and dedicated and to take just as much pride in the quality of their work as anyone. Most of them will welcome the opportunity to compete in the market place and will consider that they have nothing to be afraid of.
  There is always room for improvement, but it is demoralising that some people always complain about occasional failures and never compliment those responsible for the things that go right. The Bill has the potential to enable more things to go right. I therefore wholeheartedly welcome it.
  8.7 pm
  Mr. Harry Ewing: The hon. Member for Brighouse and Spenborough (Mr. Waller) must forgive me if I do not follow him in detail. I agree with him about the compliments that should be paid to workers in the Post Office postal and telecommunications services. It is far too easy to bounce cheap headlines off public servants, particularly those in the Post Office, as has been done in recent years. Nothing is more designed to undermine their morale.
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  I am a Member of Parliament sponsored by the Union of Communication Workers. I had the great misfortune to come back from my meal relief, as we used to say in the Post Office, and listen to the hon. Member for Fife, East (Mr. Henderson), whose memory has failed him badly tonight or whose research is not as good as hitherto. He said that he would take no lectures from Labour Members on services in rural areas. He must have forgotten that for seven years before I came to the House I was a rural postman in East Fife, before he came near the constituency.
  Mr. Henderson: I certainly have not forgotten it, and I am sure that I would not be alone in East Fife in believing that the hon. Gentleman was an extremely good postman. Perhaps he was an even better postman than a Member of Parliament.
  Mr. Ewing: The hon. Member for Fife, East would be alone in East Fife in thinking that I am not a very good Member of Parliament. If the hon. Member thinks for a minute that his constituents who live in the New Gelson area, the Montrave area or the area which surrounds the farms and farm cottages at Pilmuir or Blindwells will in years to come receive the same kind of postal service as they have received down the years, he is due for a very sad and bitter disappointment. When constituents from those areas, write letters of complaint to the hon. Member, I hope that he will reply by saying that he supported the Bill. If any areas are bound to suffer under the Bill, it is the rural areas, which in general are represented, I concede, by Conservative Members.
  Tonight we have seen the continuation of the syndrome that was started years ago by the Secretary of State for Industry. I well remember the right hon. Gentleman, who was then Secretary of State for Social Services, coming to the Dispatch Box in 1972 and displaying the same confidence that he had got it all right when he introduced the massive reorganisation of the Health Service. After about seven years had elapsed, his right hon. Friend the present Secretary of State for Social Services was able, prior to the last election, to stump the country and to gain votes at the expense of the bad structure of the Health Service that his right hon. Friend had created. If the people of Great Britain have a capacity for anything, it is a capacity to forget who are the guilty people. The present Secretary of State for Social Services was able to play on the fact that not many people in the country remembered that it was the present Secretary of State for Industry who reorganised the Health Service in such a disastrous way.
  In seven or eight years' time, when the Labour Government are getting ready to go to the country for a second time, I can foresee the hon. Member for Fife, East, who by that time will no doubt be Shadow Secretary of State for Industry—surely he will get some reward for his loyalty—going round the country talking about the bad Post Office services, hoping against hope that everyone has forgotten that on 2 December 1980 his right hon. Friend the Secretary of State for Industry introduced this bad reconstruction.
  I share many of the reservations that have been expressed from the Labour Benches, and I wish to make only one comment about British Telecom. One of the things which have incensed me about British Telecom in recent weeks is the way in which it has increased the land line rental of our hospital broadcasting services throughout

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  the country from £1,000 to £5,000 a year. There is no doubt that the hospital broadcasting services will die a death as a result of that decision because they will be unable to raise the revenue necessary to meet such a land line rental cost. I hope that British Telecom will have a greater degree of compassion than the present telecommunications section of the Post: Office which is about to disappear.
  I turn now to part II of the Bill, which deals primarily with the postal side of the business. Here, the purpose of the Bill is to give the Secretary of State for Industry powers to break the postal monopoly if he so desires. In certain ways and to a certain extent the postal monopoly has already been broken. The Secretary of State for Industry seems to take the view that the only people that a monopoly benefits are the company or the industry which, according to the Secretary of State, enjoys the monopoly, but very often monopolies are just as much in the interests of the customer., of the consumer, as they are in the interests of the industry concerned.
  This was never truer than in the case of the Post Office. My right hon. Friend the Member for Deptford (Mr. Silkin) cited what happened in 1971. I went through that strike. It began on 20 January 1971 and went on for nine weeks. We in the then Union of Post Office Workers had great difficulty in persuading our people to come out on strike; I openly admit that But we had even greater difficulty in persuading them to go back after they had seen how they were insulted by the right hon. Member for Sidcup (Mr. Heath), when he was Prime Minister, and by Christopher Chataway, who was the Minister responsible for the Post Office.
  At that time a private enterprise system of delivering letters was developed in this country, but no letters were delivered. The people operating the system charged astronomical rates for their services, but eventually, after the strike was over, they posted every letter through the Post Office system, so that postmen were delivering letters for which people had been charged 15 shillings or 75p. I forecast that that will happen again. If the monopoly is relaxed in the way in which the Secretary of State for Industry intends to relax it, some companies will attempt to abuse the system by accepting mail and feeding it through the Post Office system. It will be interesting to see whether the Secretary of State tells the new postal board that if that happens any letter that is stamped by a private company will in no circumstances be handled by the Post Office. It will be easy to identify such letters.
  Much has been said about the efficiency of the Post Office. As my right hon. Friend the Member for Manchester, Openshaw (Mr. Morris) said, all the main letter and parcel sorting offices are now mechanised, and the efficiency of those offices depends to a great extent, as computers do, on the information that is fed into the n mechanised letter-sorting machine. It is common knowledge that if an envelope with the wrong postal code is fed into the machine, the machine rejects the letter and it then has to be sorted by hand.
  I have a very interesting example in that connection. Almost every day I get letters from the Scottish Office. They are addressed to me at the House of Commons with the wrong postal code on the envelope. The postal code given on the envelope is "House of Commons, London SW1A 2AU" whereas the correct postal code for the House of Commons is "SW1A 0AA". The postal code on those letters is the postal code for the Scottish Office at Dover
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  House in Whitehall. A Minister criticises the efficiency of the Post Office, yet a Government Depertment, the Scottish Office, is sending out letters every day of the week with the wrong postal code on the envelope. How on earth can a highly mechanised service such as the Post Office be efficient when all these letters are fed in and rejected and have to be dealt with by hand?
  Much of the criticism levelled at postal workers is misdirected. It ought not to be levelled at postal workers. Much of the delay, in the case of the small percentage of letters not delivered on time, has nothing to do with the postal workers. It often has more to do with the customer.
  If I can enter one complaint on behalf of postal workers, it is against all those business organisations which have their own franking machines and which get an office girl to spend about three hours a day in running about 5,000 envelopes through the machine, all postmarked, for example, 2 December. But nothing goes into those envelopes until about 20 December. Then, lo and behold, there are complaints from people. The hospitals used to be the most guilty in this respect. Appointment cards were run through in their thousands and not sent out for another five or six days. As a result, those who receive them complain "This was posted on 2 December and I have only now received it." Such correspondence does not go through the Post Office franking machines. Business itself—this great, efficient private enterprise about which we hear so much—also has a lot to answer for with regard to late deliveries. About 8 per cent. of the total volume of mail that is handled by the Post Office arrives late. If an analysis were carried out on that 8 per cent., I believe that the two factors to which I have referred would be responsible, namely, wrong postal codes, as happens in the Scottish Office, and the use of franking machines with which young girls frank thousands of envelopes which are not used for another three or four weeks. Naturally, the customer complains because he thinks that the envelope has on it a Post Office postmark and time, whereas it has been franked by private business.
  Much of the critism against the efficiency of the Post Office has nothing to do with the postal worker, but it has a great deal to do with the bulk customer in the form of private business.
  As my right hon. Friend the Member for Deptford said, the postman or postwoman lends himself or herself to a greater increase in productivity than any other worker in this country. My right hon. Friend put his finger on the point when he said that it is just as easy to deliver 10 letters to an address as it is to deliver one. All the door-to-door delivery services in Great Britain are dying a death. The milk delivery service diminishes almost weekly, and the newspaper delivery service diminishes almost daily. All the other door-to-door services are dying. But the one door-to-door service that is being retained and maintained is the service provided by the Post Office. Conservative Members and those of my hon. Friends who are guilty of criticising the Post Office should appreciate that this is the finest door-to-door service in the world.
  The Secretary of State made a comparison with the United States, but the United States letter-carrying service has no obligation to make a door-to-door delivery and it does not do so. The people of the United States post many more items per head of population than do the people of the United Kingdom. If the people of the United Kingdom,

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  pro rata, posted the same number of items as are posted in the United States, the productivity of our postal workers would increase by leaps and bounds.
  It is appropriate that we should be holding this debate at the beginning of December. I can imagine Conservative Members queueing up at post offices at Christmas and saying "Well, lads, you are a great bunch of chaps, you have done a marvellous job, but if we can do so we shall take your job from you." I hope that they remember to tell the postmen that when they go into their post offices this coming Christmas.
  My worry is for the future of the service. There is no doubt that what is contained in the Bill is the beginning of an attack on the postal service. I still retain my interest with the people who were instrumental in helping me to become a Member of this House. For my part, I shall resist that attack with every ounce of my energy, and I shall be delighted to join my right hon. and hon. Friends in the Lobby tonight.
  8.23 pm
  Mr. Mark Lennox-Boyd: I am delighted to be called in the debate and happy to follow the hon. Member for Stirling, Falkirk and Grangemouth (Mr. Ewing). I should like to make several brief comments about his contribution. I do not wish to speak at length about the postal side of the Post Office or about that aspect in the Bill. Indeed, I defer to the hon. Gentleman's experience in this regard. It is something about which he clearly knows a lot.
  However, the hon. Gentleman said one thing to which I took exception. He said that monopolies were often in the interests of the customer. As a general proposition, I do not think that I could support that. But I have some sympathy with the hon. Gentleman's argument that there are many occasions when employees in the postal service are accused of malpractice when it is not their fault. Those words are true, and I am sure that the House took note of them. However, we must recognise that the postal service is not as good as it used to be. I do not seek to pass judgment on why that has happened, but undoubtedly that fact, about which I am sure there would be common agreement, is part of the history which has prompted the introduction of legislation of this kind.
  I am happy to support the Bill, even though I am called at that stage in the evening when all the good points have already been made and there is very little to be said. I notice that the Whips may want me to speak longer than I intend to do as only a few hon. Members remain to be called, but I shall not do so or delay the House any longer than necessary.
  There has not been much time for the telecommunications industry to present its undoubtedly strong feelings about the Bill, as the time between publication and this debate has been comparatively short. Perhaps that is a good thing, because it means that we must try to frame our own arguments and read the Bill as much as we can. I have read the Bill, and I fear that much of it has not completely penetrated the depths of my mind with total comprehension. However, my confusion over some of the small print is more than exceeded by my admiration for the immense hard work which must have gone into the preparation of this legislation by my right hon. and hon. Friends.
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  I wish to confine my remarks to the telephone monopoly and how it is to be reduced in some measure. I accept entirely—I believe that it is common ground among all my colleagues—the need for standards and licensing in respect of any equipment that is to be available from the private sector, as well as the installation and maintenance of the first telephone in any household.
  I should like to pursue the problem of maintenance a little further and invite my hon. Friend the Minister of State to deal with one or two aspects of it. I approach it on the basis of asking some questions. This is an area about which I do not claim to have any particular expert knowledge, although I have been briefed on the subject. Either this evening or on a future occasion, my hon. Friend should justify fully the Government's decision about the maintenance of the PABX systems and so on. As I see it, the public will be surprised to discover that the first telephone will be maintained by British Telecom as well as the wiring for the extension telephone within the household.
  As I understand, although it has not been expressly stated, any private household exchange system will be maintained by British Telecommunications. My hon. Friend nods assent. I imagine that a private household exchange would come under the category of a PABX system, and, of course, any PABX system is to be maintained and serviced by British Telecommunications. As my hon. Friend will appreciate—I know I am stating the obvious, but it is important to point it out—that means that every telephone in this country that is used by a member of the public for an ordinary domestic telephone call or for an ordinary business telephone call will be subject to the power of British Telecommunications to control and, in many cases, to maintain it, and in all cases to control the maintenance by a form of sub-contracting.
  That is not what the public would have expected of legislation of this sort, and, therefore, it calls for the clearest possible justification. The argument that was put forward by my right hon. Friend the Secretary of State and other hon. Members is based upon the wonderful words "the integrity of the telephone network". That is a magnificent phrase, but what does it mean? I suggest that it is a sort of phrase of science in the subject, which suggests greater meaning behind it than it has. It means that there must be no method of causing damage to the network. However, I find it confusing that private enterprise will be able to install the PABX system in the first place, although it will not be able to maintain it thereafter. I genuinely invite my hon. Friend to consider how it is possible for private enterprise to install the machine in the first place without damaging the system if there is any reasonable fear that on future occasions it will cause damage. That is a real objection.
  I also invite my hon. Friend to indicate the comparisons between the system that he proposes in this legislation and the systems that pertain in other countries. We have heard a certain amount about the system in the United States, but we have not heard anything about other countries in Europe. I have obtained some information about that. In the Netherlands, the whole of the telephone network is a state monopoly along the lines of the system that we currently have in the United Kingdom. In Germany, Denmark and Eire there is a degree of delegation from the State monopoly in respect of house exchange systems and PAXB systems for their maintenance and mending, but only to authorised sub-contractors, which, as I understand

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  it, can take place under this legislation. But, in the case of Belgium, France, Italy and Luxembourg—I draw my hon. Friend's attention in particular to those countries—it appears that the maintenance of both household exchange systems and PABX systems may be carried out by any licensed private contractor who is able to satisfy the conditions necessary for him to be licensed. That is substantially true, with a small exception in the case of Belgium for some household exchange systems and in the case of Italy for the supply and installation of some PABX systems.
  If that is the case, will my hon. Friend explain the position on "the integrity of the telephone network"? Do other countries accept lower standards, or is it that the question of "the integrity of the telephone network" is something, of a red herring? My hon. Friend will forgive me if I suggest that, from the information I have obtained, that is probably the case. But we are trying to gloss an argument of a different sort. I would be fully prepared to face up to it, arid in some circumstances I would be able to agree with it. But it is important to understand the argument. It is about the retention of the monopoly and the desire not to cause more antagonism to the powers that be in this area than is necessary and, as was mentioned by Labour Members, a desire not to affect unduly the morale of the staff who are responsible for maintenance. If it is that, I should he prepared to consider and debate it more filly along that line. Will my hon. Friend, however, reconsider the matter seriously? If we are conducting an argument on the basis of information from many experts which is to the effect that the argument is wrongly placed, it is much harder to accept it in the good faith that we are invited so to do by the Government.
  With that reservation, I strongly commend the legislation to the House.
  8.35 pm
  Mr. Bruce George: My contribution nay seem, given the contributions of almost all other hon. Members who have taken part, tangential to the Bill. However, it concerns a subject of great importance, namely, the need to control the proliferation of devices on the market to monitor people's conversations. Electronic surveillance has grown incredibly over the past 20 years, with the increased sophistication of the devices and with the growing desire by individuals and organisations to capitalise on the technology for illegal purposes.
  I have reached the same conclusion as Sir Robert Megarry at the close of the Malone telephone tapping trial, Mien he said that this was an area that cried out for legislation. It is regrettable that the 13ill, which could have provided a perfect opportunity to answer that cry, fails to correct many of the serious current deficiencies. The poverty of legislation on this subject underlines the potentially dangerous way in which the interception of communication can undermine the foundations of our democratic society. That is, rightly, a subject of concern within and outside Parliament. However, successive Home Secretaries have been tip-toeing about the subject for the past 23 years since the Birkett report.
  The most recent resurgence of interest was probably occasioned by the series of articles on surveilance by Duncan Campbell in the New Statesman and the excellent report produced by the Post Office Engineering Union on the subject of telephone tapping. In that important report the union calls for a full inquiry into all aspects of
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  interception of communications, and it and I have argued that public and private tapping and bugging are much more widespread than the Home Secretary either admits or, possibly, knows. The report says that tapping is now effectively out of political control, and since there is no adequate accountability of the Home Secretary to the House on the subject this is a matter of very serious concern.
  Unfortunately, the Home Secretary has not initiated the inquiry I should like to see undertaken. Earlier this year there was an inquiry into official bugging. I wrote to the Home Secretary asking him to expand its terms of reference to include official and unofficial tapping. One may find justification for official tapping and bugging. It o can be said that ostensibly it is in the public interest. No such case can be made for tapping by private individuals and investigators who are seeking to elicit information illegally and immorally.
  The report described the White Paper as
  "a totally unsatisfactory effort to reassure the public."
  I hope that when the Bill goes into Committee we shall not miss the opportunity of implementing the provisions essential for this crucial subject.
  There is a long list of points to be legislated upon, and I can mention only some of them, and briefly at that. They are not properly accommodated within the Bill. One of the most glaring deficiencies is the lack of any clear legal authority for the interception of mail and telephone calls. This is riot only highly dangerous but could probably be a breach of the European Convention on Human Rights, to which we are supposedly morally and formally bound.
  Most people mistakenly believe that the legal authority rests with the Home Secretary and some have argued that it is the prerogative right of the Crown. But it is a vague area and, regardless of where and exactly how the Home Secretary derives this power to issue warrants, the point remains that the whole issue is clouded. That may seem a vague statement, but it is true. In view of the extreme delicacy of interception, there should be an independent check on the Home Secretary's judgment. No one questions the Home Secretary's integrity, but such is the burdensome implication that it is too important for one man, however honest and hardworking he may be. With his other commitments to the Home Office, the Cabinet, the House and his constituency, it is doubtful whether the Home Secretary has the time to oversee officially Undertaken tapping.
  A second frequent criticism relates to the procedure for the issuing of warrants—a procedure which is far too weak. According to the Birkett committee 23 years ago, to obtain a warrant for interception three conditions had to be met: the offence must be really serious; normal methods of investigation must have been tried and failed; and there must have been good reason to think that an interception of communication would result ill a conviction.
  In a recent White Paper, even further complications have emerged. Some phrases in that White Paper cause me considerable worry about what is happening. The scope of the phraseology is so excessively wide, leaving a great deal of scope for varying interpretations, as to be positively frightening.
  The third criticism relates to the White Paper in which the Government admitted that

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  "one of the reasons for the present concern about interception is the fear that technological changes have made it much easier to intercept telephones".
  Yet in the Bill very few clauses deal with the unlawful, fraudulent and improper use of the public telecommunications system. It virtually ignores the enormous technological advances which have made electronic surveillance so easy, so accessible and so inexpensive. We have closed our eyes to the situation that has emerged. Much greater control should be exercised by the Home Secretary. In my view, there should be more control over the use of private surveillance. There should be an annual report to Parliament detailing the number of interceptions authorised in the previous year and there should be political accountability for tapping and electronic surveillance. At the moment, there is little meaningful accountability.
  Any person who suspects that his mail and telephone conversations are being illegally intercepted should have the opportunity to have his suspicions officially investigated and authoritatively confirmed or denied. Obviously there are difficulties, but I hope that these difficulties can be remedied.
  Bugging and tapping are not the prerogative of the wealthy, civil servants or captains of industry. Looking at Exchange and Mart, one sees that tapping and bugging have now come within anyone's reach. One can buy an effective bug for £15 or £20. One newspaper article, headed "Love Bug a Flop", stated:
  "Husband who fitted bugging device on his phone to check on his wife's alleged lover ordered to pay £35 costs and conditionally discharged 12 months."
  I should add that the bug did not work.
  Bugging is now easy. Not only are people in big business vulnerable to industrial espionage; virtually anyone is vulnerable to surveillance. Tapping and bugging equipment is now reasonably cheap. The likelihood of people using such equipment being caught appears to be very slim. When one thinks of the minuscule penalties which are meted out to those who get caught, there is a positive inducement to people, organisations, private investigators or whoever to indulge in this kind of illegal activity.
  Hon. Members with an interest in bugging or tapping, when they understand how simple it is to be bugged or for a telephone to be tapped, find themselves getting paranoid on realising that it can happen to them. There has been dramatic evidence of an increased use by private investigators and private security companies of electronic listening devices. It is an indication of the technology that one can be tapped from a telephone in San Francisco. The emergence of the infinity transmitter means that one does not even have to lift the telephone for a conversation in one's house to be monitored. The laser principle can be used. The vibrations on the window in the room where one is speaking can be transmitted to a person half-a-mile away using sophisticated equipment. That is the extent of electronic surveillance. Everyone is vulnerable.
  I have in my possession a manual published in the United States entitled "The Big Brother Game — Bugging, Wiretapping, Tailing, Optical and Electronic Surveillance, Surreptitious Entry—How to Stop It or Do It Back." That is available for anyone to use for his illicit advantage. We have not yet reached American
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  proportions, but there is no guarantee, unless we take firm action now, that we shall not catch up with the United States. I would regard that as reprehensible.
  The penalties in the Bill are derisory. In Committee we should stiffen the penalties to make sure that people who are caught are punished. The punishments and the legislation must not be confined to this country. Tapping and bugging are an international phenomenon. There is not much point in possessing purely domestic legislation if the penalties cannot be extended to someone abroad who may be involved in this activity. There should be a system of public licensing to ensure that any person employed as a private investigator or a private security company found to be transgressing must be busted and forbidden to practice within this sector again.
  The Bill does not address some of the problems that worry hon. Members. It deals with some aspects. I hope, however, that those who have been clamouring for tighter controls on electronic surveillance will realise that the Bill is a possible vehicle for tightening legislation. The clamour that has occurred in the House should be directed much more towards the Bill. I hope that there will be developments during the further stages of the Bill that will bring greater protection to people and bring to book those who are using an electronic system or devices independent of the telephone system. This is a growing phenomenon in this country that must be curbed. It can be curbed only by this legislation and by firm action on the part of the Home Secretary.
  8.48 pm
  Mr. John McWilliam: I rise, like my hon. Friend the Member for Westhoughton (Mr. Stott), to oppose the Second Reading of the Bill. I declare the same interest in the matter. The theme of the Bill is fragmentation. It fragments the responsibilities for the day-to-day running of the business between the chairman and the board and the Secretary of State through the greatly increased powers of intervention provided by the Bill for him. The powers that the Bill gives the Secretary of State to open up competition in the supply of attachments to the network will fragment maintenance responsibilities, to the detriment of the residential and the rural customer.
  The Bill gives the Secretary of State power to force the corporation to fragment itself by directing it to set up subsidiaries and to transfer functions to them. It empowers him also to disperse one of our great national assets by directing British Telecommunications to sell off both its functions and its assets. I shall try to show how damaging these developments are and how tragically they are timed. Telecommunications stands today on the verge of a host of exciting possibilities for technological change. To exploit these possibilities and to take full advantage of the technological possibilities opened up requires a unity of purpose and of effort and not the fragmentation proposed by the Bill
  The development that opens up the range of technical possibilities in telecommunications services is the possibility, through the use of digital switching and transmission facilities, of providing what is called "an integrated network facility". Currently, we have in this country a predominantly electro-mechanical switching facility together with an analogue transmission system. This copes adequately with voice transmission but is too slow to provide more than a limited facility for data transmission. The conversion to electronic high-speed

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  switching and digital transmission will allow data, voice and text, which means electronic mail facilities, together with pictures, all to be transmitted on the same—hence the word "integrated"—network. I regret that the hon. Member for Morecambe and Lonsdale (Mr. Lennox-Boyd), who spent so much time trying to find out what that was, is not in the Chamber to hear that.
  The pursuit of this ideal—the integrated network—has long been the goal of the POEU. Instead of the expensive duplication of networks for Telex, data and voice which we now provide, we see one network delivering not just the services I have listed already but other services as yet undreamed of. For those of us who work or have worked in telecommunications, the potential of our industry to bring people far removed from one another by distance together in conversation and our capacity to enable them to work together more efficiently with data interchange give our work a broad significance which few other industries possess.
  The main question that we must answer is whether the Bill will help us to provide these services. It certainly will not do so. The Bill seeks to cramp and confine the new corporation to the most limited definition of its function. It will be allowed to compete in other areas for which the Post Office already has responsibility, but with two hands tied behind its back. One hand is tied by inadequate investment due to cash limits and the other hand is tied by the requirement not to compete "unfairly".
  What does that mean? It means that BT will be required to set up subsidiaries which it will, not be able to support with any revenues from monopoly services. It will, apparently, not be able to engage in marginal cost pricing or in loss leader marketing strategy for new types of equipment. Private industry will, of course, not be so constrained. Unlike BT, it will be able to borrow as much as its credit rating allows for, and in providing services, unlike BT, private industry will not be prevented from normal commercial practices of subsidising new products.
  We have a Government whose belief in free competition apparently extends only to the private sector. If the public sector is to compete, it must be with a series of handicaps and impositions that ensure that the Government will not be embarrassed by the spectacle of Winning against the private sector. Perhaps the Secretary of State will explain to the House how he intends to use us power to force BT to set up subsidiaries. If I have it wrong, I shall be only too glad to be informed of it.
  I should like to examine further the problems that the Bill will cause to the customer. If he purchases approved equipment for attachment to the network and it develops a fault, where does he get it corrected? Does he go to the supplier? But the fault may be in the network. Does he go to BT? But the fault may be in the apparatus. He is likely to pay more for service and to suffer more in getting fault corrected than he does now.
  Even if the customer's own equipment is adequate, he may well suffer from problems caused from an attachment elsewhere. Clause 16 allows for approval of equipment for attachment even when detailed standards for safety and technical compatibility have not been established. Even more damagingly, as I read clause 17, if the attachment damages the network, as it well could, stopping services or damaging services to others, clause 17(2)(b) would prevent the corporation from recovering the money to pay for the damage caused.
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  I could go on at length pointing out clause by clause the unfair constraints placed on BT by the Bill. I shall not do so. The most likely result of the Bill may he to provide in the short term new facilities for some business customers at the expense of poorer service and higher prices for the many. It does not tackle the problems that currently prevent us from giving better service—the problems of achieving sufficient investment. It will make them worse by cutting BT's income and profitability.
  8.55 pm
  Mr. Frank Dobson: I thank my hon. Friend the Member for Blaydon (Mr. McWilliam) for his very brief contribution. It is rather ironic that, when we are discussing instantaneous communication, we have some very turgid and vapid speeches, especially from the almost totally empty Government Benches.
  Sometimes I feel like a Luddite in this place. It appears that virtually everyone subscribes to the view that it is a good idea to divide the Post Office from telecommunications. I have to express doubts about that. I have been brought up to be suspicious of any proposal supported by Government Front Benches, senior civil servants, university vice-chancellors and even some leading trade unionists. When I discover that this proposition is put forward by the Secretary of State for Industry, I become even more suspicious.
  Originally I was thinking in terms of Greeks bearing gifts. This place is practically the home of misquotation, so I checked what Virgil wrote, and I find that it is even more appropriate. He wrote:
  "Whatever it is, I fear the Greeks even when they bear gifts."
  All that I say to the Post Office engineers and anyone else who is in favour of this break-up is that, whatever it is, they should fear the Secretary of State, especially when he is bearing reorganisations. We have only to look at the monstrosity of the reorganisation which he imposed on the Health Service to appreciate the wisdom of that advice. It has actually killed people. People have died as a result of the appalling reorganisation of the Health Service for which the right hon. Gentleman was responsible. We should remember that, and we should also remember that he was aided and abetted in the murder of the Health Service — certainly there was grievous bodily harm inflicted upon it—by the management consultant firm of McKinsey.
  I am sure that other management consultants will have advised on this present proposal, and it is no surprise that they have transatlantic connections such as ITT, IBM and others who have been leaning on the Treasury Bench to propose these measures. We should bear in mind all the influences which have been brought to bear on the Secretary of State and to which he is bowing. They are not intended in any way to be to the benefit of the British people. The right hon. Gentleman said that he was sorry for what he did to the Health Service. I hope that we shall not all be too sorry about what he now proposes to do to the Post Office and telecommunications.
  I move to a topic which is unaffected by the break-up of the Post Office and telecommunications. They will continue to be financed by the Government. It should be remembered that when, in those halcyon days of May and June last year, the Chancellor of the Exchequer announced the Government's financial and economic proposals he was talking in terms of shifting the Government

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  contribution to the nationalised industries, which for last year was supposed to be about £2,300 million going in, so that by 1983–84 there would be £400 million coming out and going into the Treasury. That has been done by way of cash limits. Most of the right hon. and learned Gentleman's policies have collapsed in ruins, but he has kept the cash limits going reasonably well in the eyes of those who favour them and fairly well for the Post Office and telecommunications.
  One of the problems that both the post and telecommunications sides find is that if they cannot raise money externally they have to put up their prices. What is more, the famous cash limits assume, as they have done under all Governments, a lower rate of inflation than occurs in practice. This leads to an effort by the management of British Telecommunications or that of the Post Office to pay lower wages to the people working in the industry. There is also tremendous pressure to increase prices. Above all, there is less money for investment, and this shows up best in its effects on British Telecommunications.
  A very high level of investment is crucial to the future of British Telecommunications. It is a high-technology industry. It is part of the communications revolution about which the Secretary of State talked, and British Telecommunications is at the heart of it. As I understand it, it is talking about investing £4 million a day. As it is at the heart or spearpoint of technological thrust in Britain, one would have thought that it would get encouragement from the Secretary of State. But it is not. This year, 1980–81, it is getting £200 million less to invest than its management thinks is necessary.
  That is having an effect on its customers. In the area which I represent in central London, I constantly hear individuals and businesses complaining that British Telecommunications cannot provide them with telephones and various other services. The answer from British Telecommunications is that it cannot get the staff that it needs in central London and, above all, that the private equipment suppliers cannot supply the equipment and that that is holding things back.
  We must also consider the position of the private equipment suppliers. I understand that no fewer than 100,000 people are employed in manufacturing telecommunications equipment supplied to British Telecommunications. They, too, are being done down as a result of the cash limits. We have now reached the bizarre stage at which British Telecommunications management is having to ask some of its major suppliers whether it is all right to buy something now and to pay for it next year, because it cannot be paid for out of this year's budget. That will certainly be damaging to the suppliers, even if it is possible, given the current rate of interest that they will have to bear on money that they are, in effect, lending to British Telecommunications because it does not have the money.
  It seems to me to be the economics of Noddyland to go on in this way with a high-technology industry and to say, as the Government are saying, in effect, that a high proportion of the investment of British Telecommunications must come out of current income. That might be an appropriate way to run a grocer's shop in Grantham, but it is a quite inappropriate way to attempt to finance and run British Telecommunications.
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  Finally, I make two points about postal services. People have been talking, rightly, about the danger to letter services in rural areas, in the belief that everyone will do fine in London and the other major conurbations. But that is not true. If the monopoly is broken in central London, one can bet one's boots that both commercial and domestic users of the postal service will eventually suffer. The more that is creamed off, the more they will suffer.
  I make one final, technical point. As I understand it, the Bill gives a new definition for the delivery of letters. It provides that the Post Office may enter into an agreement with the occupiers of a block of premises about the delivery of mail to a central point. If that provision goes through, I hope that the Minister and the Post Office will interpret "occupiers" of a block of council flats to mean the occupiers of the individual flats. We do not want pressure for the Post Office and a council to come to an agreement that all the letters can be slung in a box just inside the front door of a multi-storey block. There needs to be the agreement of those living in the blocks of flats, not the owners or operators, be they in the private or the public sector. I trust that that will be the interpretation.
  Whatever the interpretation and whatever happens to the monopoly, vast amounts of public money will continue to be needed if the Post Office and British Telecommunications are to provide the service that the country will require if it is to be prosperous. There is no evidence at all that the Secretary of State or any of his loony crew at the Department of Industry are likely to produce that sort of money.
  9.4 pm
  Mr. Les Huckfield: My hon. Friend the Member for Holborn and St. Pancras, South (Mr. Dobson) has made one of his customary searching and revealing speeches, coming to the same kind of conclusion as I shall come to.
  A vast wealth of tehnical knowledge has been revealed on the Opposition Benches. Several of my right hon. and hon. Friends have personal experience of many long years of work in the industry, and I pay tribute to the technical expertise that they have brought to the debate. They have elevated the standard of the debate on what is, after all, a technical Bill.
  I wish that I could say the same of those on the Conservative Benches. When the hon. Member for Fife, East (Mr. Henderson) said that the Bill would cut the telephone waiting lists in his constituency, I wondered whether he had read it. It was clear from some of his other remarks that he had read one or two pages, but there is a woeful ignorance on the Conservative Benches of the effects of the Bill. When hon. Members, particularly from rural areas, extol the virtues and benefits of competition and how it will all be good for their constituents, it is clear that they cannot have read the Bill, let alone understood it.
  We hear from the Government soothing, syrupy phrases from time to time. They try to tell us that what they are doing is to take nationalised industry after nationalised industry out of politics. That is the message that the Minister of State gave us about the denationalisation of British Aerospace. That is what we were told about British Airways and the transport holding company. They say that they are trying for once and for all to take them out of politics, and that they want to provide a non-political solution. They have a daft way of doing it in the Bill.

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  To us, the Bill shows the typical Tory Pavlovian reaction to anything that is publicly owned. I can sum the matter up simply by saying that the Conservatives want to hammer, halt and cripple anything that is publicly owned. If any publicly owned enterprise looks as though it has a few profitable activities, they want to flog them off as soon as possible so that private enterprise can get all the rich pickings.
  Anybody who thought that the Bill was a rice endeavour by the Government to take the Post Office or British Telecommunications out of politics would have been sadly mistaken. It is the typical Tory reaction to anything that is publicly owned and that, in the case of both the Post Office and British Telecommunications, is doing well.
  The trouble is that Conservative Members are so determined to carry on with this typical doctrinaire Tory reaction to anything publicly owned that they seem not to realise that the majority of those who will be clobbered most, those who will be dealt the most severe blows, are their own constituents. The crazy thing is that city dwellers and those who live in towns may even obtain some marginal benefit from the Bill, but they do not live in the kind of constituencies that Conservative Members represent. In the main, their rural constituents are bound to come off worst.
  I ask the Secretary of State in particular why the Government, in being so doctrinaire, do not try to understand their proposals before bringing them to the House. It was clear when the right hon. Gentleman was questioned during his opening speech that he did not understand the Bill that he was introducing.
  The Tories always want to hamper anything that is publicly owned, giving it as many restrictions, as many onerous burdens, as they can. I was surprised that we did not find a reference to the so-called common carrier obligation, though the Government have almost written that in. I was surprised that we did not find that British Telecommunications and the Post Office must not show undue preference—the typical Tory way of making sure that anything that is publicly owned has great difficulty in surviving.
  However, although we did not find that matter in clauses 3 and 56, we found almost those words. If we do not see the kind of restrictions that the Conservatives usually want to place on publicly owned industries, we find their attitude towards them displayed in what we have already seen from the Government on cash limits.
  There is no doubt that if all the wonderful things which the Government believe are contained in the Bill are to be achieved the Government must have a completely different attitude to cash limits. Their attitude to cash limits will not secure any expansion of the basic telephone network. The Government's frequent changes of mind make it almost impossible for anybody in charge of the Post Office or British Telecommunications to plan ahead with any degree of certainty.
  It is remarkable that in all the Secretary of State said earlier there was no proposal to take the Post Office or British Telecommunications out of the public sector borrowing requirement. British Airways managed to do a dell under which it is out of the PSBR. Not so the Post Office. Not so British Telecommunications. They will be inside the PSBR. Until we have a change of attitude on cash limits and the PSBR, there will be no real expansion of the Post Office or British Telecommunications.
  Mr. Henderson: Will the hon. Gentleman give way?
  Mr. Huckfield: I shall give way to the hon. Gentleman once.
  Mr. Henderson: Surely, there is no change in the position which applied under the Labour Government. The Post Office borrowing limits were then part of the PSBR.
  Mr. Huckfield: The hon. Gentleman has not been here long. When he comes into the Chamber occasionally, he does not understand what is going on. The Labour Party's attitude to cash limits and the PSBR when in Government was different from the attitude now being displayed.—[Interruption.] The hon. Member for Gillingham (Sir F. Burden) has returned to the fold. We know that his contributions are always lively and completely irrelevant.
  If the telephone and other services deteriorate, as they will as a result of the Bill, the Government will put the blame on the Post Office and British Telecommunications being still publicly owned. That is what it is all about. They always heap the blame on public ownership.
  One must sympathise with the Post Office and British Telecommunications. If certain aspects of their services are doing well, they are likely to be told by the Secretary of State to flog those services. What an incentive that is to efficient management. If they do the job well and a service is expanding and profitable, such as Cable and Wireless Ltd. which is 100 per cent. Government-owned and profitable, the Secretary of State will use one of the many powers with which he has armed himself to tell the organisation to divest itself of profitable activities. What an attitude that is for a Secretary of State who is supposed to believe in entrepreneurial ability. The Secretary of State says "Do a service well, and you risk being told to get rid of it." That is what the Bill is all about.
  Some Government Members have the nerve to say that no one has anything to worry about in terms of jobs and morale. We have everything to be worried about in terms of employment, jobs and morale. Every time the Secretary of State comes to the Dispatch Box and introduces a Bill, he gives workers every reason to be worried. By his attitude the Secretary of State has shown that Post Office staff will not be allowed to be an exception.
  The Secretary of State says that he wants to leave as much as possible to management. He has always said that he believes that the Government should not intervene. Has he noticed the unlimited powers that he has given himself in clauses 3 and 56, where he is only prepared to allow the Post Office and British Telecommunications to provide services as long as no one else is providing them? What an incentive to entrepreneurial spirits. Has he noticed the powers that he has given himself in clauses 8 and 59? Under those powers, he can tell the Post Office and British Telecommunications to divest themselves of any of their activities. Has he noticed the powers that he has given himself in clauses 6, 7, 8, 65 and 66, which show that there is no doubt where the real management will lie? It will not be with anybody calling himself the chairman of British Telecommunications or the chairman of the Post Office. The real management and decision-taker will be the Secretary of State. The right hon. Gentleman is saying that once he has the enabling powers under the Bill he does not want to return to the House and say what he will do with them. He simply wants the powers. As a result of that, any chairman of either British Telecommunications

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  or the Post Office will get a stiff neck looking over his shoulder in an attempt to determine the current attitude — which changes occasionally — of the Secretary of State.
  The Secretary of State has armed himself with so many powers that to expect us to accede to the powers without returning to the House for further debate is an insult to the experience that we have gathered on the Labour side of the House. One of the amendments that we shall press time and time again in Committee is for further debate. We want the affirmative, not the negative, resolution procedure in both Houses of Parliament before the Secretary of State is allowed to exercise any of the powers.
  Let us consider the unique formula that the Government have devised for skimming off the cream. Many of us thought that the Minister of Transport was doing well when he came along with his formula for British Coachways. That is a good example of what will happen to the Post Office. One only has to consider what the Minister of Transport is doing to the National Bus Company and British Rail—[Interruption.] I am glad that Conservative Members have recognised the foretaste of things to come, We now have something called British Coachways that operates out of a left luggage locker in St. Pancras station, merrily undercutting the National Bus Company and British Rail. Why cannot Conservative Members understand the effect of the Minister of Transport's proposals which, at the end of the day, will deprive their rural constituents of any public transport at all? That is the forerunner of the sort of thing that will happen in the Post Office.
  Mr. Donald Thompson: Quite the opposite.
  Mr. Huckfield: The hon. Gentleman does not understand the Bill. He keeps proving that. We have already had some internal Post Office studies. I do not think that the Secretary of State needs a Post Office mole to tell him about them. He must have read some of the studies. When he frightened the living daylights out of the Post Office by telling it that he might derogate the monopoly, it carried out some investigations into the effects of derogation and the loss of certain aspects of the monopoly. The Post Office calculation was that if it lost only 12 per cent. of its traffic as a result of proposals like these it would have to raise its prices by up to 20 per cent. Its costs could increase by £40 million, and about 10,000 jobs could be lost in the Post Office. That is on the Post Office side—
  Mr. Russell Kerr: That would not worry Conservative Members.
  Mr. John Farr Mr. John Farr (Harborough) rose—
  Mr. Huckfield: The hon. Gentleman has only just come into the Chamber. He has not been here for most of the afternoon like most other hon. Members. Think of what that sort of increase in costs and difficulties would do to people living in rural areas. It is the same in the rural areas.
  Mr. Farr: Will the hon. Gentleman give way?
  Mr. Huckfield: Let me finish my sentence. The hon. Gentleman has not been in the Chamber until recently. I have had to be here all afternoon and evening. That is part of the job, and I stick with it.
  The proposals on the telephone side are exactly the same. The real needs in the rural areas will be extended telephone networks and new telephone exchanges. The Bill will not meet the needs of those living in rural areas.
  Mr. Farr: I have not been in the Chamber all day. However, I listened to the memorable opening speech of my right hon. Friend the Secretary of State. Having heard my right hon. Friend, I had to attend a committee meeting. I can assure the hon. Gentleman that he has not accurately reflected opinion and feeling about bus services in rural areas. Those who represent rural areas have found generally that since the Government introduced the Transport Act 1980 there has been a new potential for those who live in the countryside to enjoy the benefits of that measure, which has freed independent operators from the shackles of controls left by the former Socialist Government.
  Mr. Huckfield: I am almost sorry that I introduced the rural transport analogy. It is clear that the hon. Gentleman does not understand that in the not too distant future public transport will disappear in his constituency. It is clear that he does not understand that that will have the same effect as the proposals in the Bill will have on postal services and telephone services. He should remember what the sub-postmasters' lobby said to the House. Even he and his hon. Friends had to listen to it. They were persuaded by the forceful arguments that were advanced by that lobby. It is exactly the same argument, and the hon. Member should understand it.
  My right hon. Friend the Member for Deptford (Mr. Silkin) made some telling points about the Director General of Fair Trading—
  Mr. Michael Marshall: The hon. Gentleman is muddled.
  Mr. Huckfield: The hon. Gentleman is very muddled himself. He has shown that tonight.
  My right hon. Friend made some telling points about the way in which the Director General of Fair Trading will need to have access to the separate accounts of the separate subsidiary companies that will have to be formed by the Post Office and by British Telecommunications under the Bill.
  If the Director General of Fair Trading has powers to investigate the separate subsidiary companies that the Post Office and British Telecommunications will be forced to operate, he should have exactly the same powers to investigate the activities of GEC, Plessey, IBM and some of the other companies with which the Post Office and British Telecommunications will be in competition. However, whenever my hon. Friends make any reference to an investigation into GEC, they are told that that is beyond the powers of the Director General of Fair Trading
  If we are to have fair competition, let the Director General of Fair Trading have exactly the same powers to go into the private sector first. It was my hon. Friend the Member for Westhoughton (Mr. Stott) who said that our foreign competitors must be rubbing their hands with glee over the proposals in the Bill. The Post Office will be

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  forced to open all its books. It will be forced to give, all the details that are in the London Gazette. It will be forced to give the equipment manufacturers of Japan, Germany and America all the information that they want to enable them to dump their products in our market. That is what the Bill is all about. That is the competitive disadvantage under which the Post Office and British Telecommunications will be forced to operate.
  I turn from the almost malicious way in which burdens have been heaped on the Post Office and British Telecommunications to ask the Minister of State — I hope that he will be able to give me some answers when he replies—which of the problems revealed in pages 90 to 98 of the report of the Monopolies and Mergers Commission on the inner London postal monopoly will be solved by the Bill. The Monopolies and Mergers Commission investigation reached detailed conclusions. We cannot see how the proposals in the Bill relate to those conclusions.
  The same applies to telecommunications. On 31 October, 260,000 people were waiting to be connected to the telephone services. The exchange equipment was there, but in many cases handsets and other equipment had not arrived from the manufacturers. In addition, a further 207,000 people were waiting to be connected because the exchange equipment was not there. How will they be helped by the proposals in the Bill? They are the main problems for the Post Office. British Telecommunications does not have the money to invest to build up the network and. build new exchanges. The people on the waiting list will not be helped in any way by the Bill. The proposals in the Bill are irrelevant to the main problems of the telephone network and to improving the postal service.
  In a moment of doctrinal inspiration, the Secretary of State told us this afternoon that we have at our disposal the means to put within everyone's reach the power to store and retrieve information, which cannot be held back by inadequate telecommunications. However, the Bill will result in inadequate telecommunications. Does not the right hon. Gentleman understand that we must try to build an efficient and established network for voice and computer communications? In order to do that, we need digital transmission facilities and. vast investment in big new extensions of the established network.
  If the private sector carries out the expansion, we shall not have the national updating of the network that adequate voice and computer communications require. As a result of breaking the monopoly, we may once more deprive British industry of sufficient means to compete with our manufacturing competitors in the remainder of the world. The Secretary of State said that technical progress had rendered the postal and telecommunications monopoly outdated. I believe that technical progress reinforces the argument for monopoly. If we do not continue with the monopoly, we shall not get technical progress. if we miss out in establishing the right kind of national network, the secretary of State will have done yet one more disservice to the vital needs of British industry.
  The Secretary of State proposes an attachment policy. Conservative Members paid glowing tribute to the telephone equipment that is available. The hon. Member for Cornwall, North (Mr. Neale) made an extraordinary speech. After declaring his interest, he appeared to make a speech on behalf of the company of which he was a
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  director. I hope that his constituents will benefit from the attachments that he mentioned, if they are able to be connected to a telephone at all.
  The main problem will be policing the attachment policy. Already, much of the equipment that is advocated by Conservative Members is in the shops and is being connected to the telephone system, whether the legal permission exists or not.
  Those hon. Members who may be worried about the enforcement of the Wireless Telegraphy Acts and who may be worried about what are called video pirates and about some of the problems facing the Home Office ought to realise that we shall have exactly the same problem of enforcement with the provisions of the Bill. The Secretary of State ought at least to be coming to the House with proposals for type approval to stop foreign manufacturers dumping. He ought to have been talking as well about the licensing of wholesalers and retailers of the equipment, because at the end of the day we shall have a running dogfight between British Telecommunications and the equipment manufacturers about what ought to be properly attached to the network.
  We have not heard much about job implications, but many of my right hon. and hon. Friends are very fearful, as I am, about the job consequences in the equipment manufacturing companies as a result of the Bill. When the Secretary of State talks about trying to get reciprocal trading facilities, does he really think that we shall have reciprocal trading facilities with the Japanese, the Germans and the Americans to implement the provisions of the Bill? He is living in some kind of cloud-cuckoo-land if he thinks that the Japanese will give the Post Office the same kind of access — through system X — to their telephone system as he will be giving to their telephone equipment manufacturers in this country. If he wants to protect jobs in the manufacturing sector, he will have to do a lot better than the proposals that he is introducing this evening.
  We have had a lot of enabling Bills introduced by the Secretary of State for Industry. This is the same kind of enabling Bill as he introduced for the denationalisation of British Aerospace. It is the same kind of enabling Bill as his right hon. Friends introduced to denationalise British Airways and to flog off parts of the transport holding company. The principle is always the same—"Give us the Bill, trust us, and everything will be all right."
  I am not prepared to trust the Secretary of State as to what will happen if we give the Bill a Second Reading tonight. We already have a system under which we can see that the engineering system is collapsing as a result of the Government's policies. The steel industry is certainly collapsing as a result of the Government's policies.
  I therefore urge my right hon. and hon. Friends to join me in the Lobby tonight to ensure that the post offices and the telecommunication systems of this country do not collapse as well.
  9.33 pm
  The Minister of State, Department of Industry (Mr. Adam Butler): The hon. Member for Nuneaton (Mr. Huckfield) paid tribute to his hon. Friends who have contributed to the debate. I should like to do the same, but I should also like to pay tribute to those of my hon. Friends who spoke from their very considerable knowledge, although perhaps in some cases from a different point of view. Those of us on the Government Benches are quite

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  prepared to listen to hon. Members who speak from experience, such as those who are sponsored by the Post Office Engineering Union.
  We have inevitably, as happens in Second Reading debates, covered a vast amount of detail, and the House will not expect me to answer every point tonight. I do not doubt that we shall have a constructive Committee stage, when we reach it, and I do not doubt, equally, that it will be carried out in a spirit of good humour.
  I want to deal first with the matter of consultation prior to the presentation of the Bill. One or two hon. Members have suggested that there has been little or no consultation. I totally and utterly reject that suggestion.
  Prior to my right hon. Friend's statement in July last year, I, officials in my Department and my hon. Friend the Under-Secretary of State met a wide range of interested parties — manufacturers, union representatives and anyone conceivably with an interest. The July statement put the policy on the table for the industry to see, and since that time there has been a wide process of consultation. We are now going through the period of parliamentary debate.
  The Bill is concerned mainly with the Post Office and British Telecommunications. However, I first want to deal with the one item that is different, although related, because previous Post Office legislation has concerned itself with Cable and Wireless Ltd. We shall doubtless debate the question of whether shares should be sold. In the Bill, we are seeking only the power for them to be sold. We believe that the arguments which we have deployed on many occasions, and to which the hon. Member for Nuneaton referred, apply in the case of Cable and Wireless Ltd. as well as in respect of other companies. There is certainly an important extra consideration, which is the Government's relationship that can exist in relation to the franchise side of the activities of Cable and Wireless Ltd. We shall have to see what proportion of the shares is retained by the Government, but in this first instance we are looking merely for a power to dispose of them.
  In this connection, too, it was suggested that there had been no consultation. Indeed, the right hon. Member for Manchester, Openshaw (Mr. Morris) suggested that my right hon. Friend had not even consulted his ministerial colleagues. That may have been a slip of the tongue, but if the right hon. Gentleman thinks about it he will realise how foolish a statement that was. What is more important is whether the Government have consulted, or informed, those Governments who are most directly involved, and the answer is definitely "Yes".
  Mr. Charles R. Morris: Which Governments of which independent territories have the Government consulted about clause 76 and its implications?
  Mr. Butler: We have informed those Governments who are most concerned with the future. We have done it in such a way as to point out what is involved in the Bill. There have been close consultations with the Governor and other members of the Hong Kong Administration, to whom the largest activity relates.
  Mr. Morris: What was their reaction?
  Mr. Butler: At this stage, I cannot give the House the reactions of those Governments. All I can say is that the
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  talks particularly with the Hong Kong Government, because of their prime importance, have been carried out in an extremely constructive and friendly manner.
  Mr. John Silkin: I do not want to delay the hon. Gentleman, but this is a vital point. There are two aspects. We are not only concerned about the consultation with the various Governments. The Secretary of State—I hope that I do not do him an injustice—told us that he was proposing to have consultations. He did not say that consultations had actually taken place. Either he did not know what was happening or he is telling the plain truth, which is that there have been no consultations. This relates not only to Hong Kong but also to the Philippines, which has never been part of the Commonwealth.
  That is one stage. The other is that the Cable and Wireless Ltd. set-up was based upon a Commonwealth agreement. That was the basis in 1949. One must have the agreement of the CTO before one can deal with this matter. How can one possibly put it in the Bill before having the agreement of — not just the proposal to consult with—the CTO?
  Mr. Butler: I do not think that my right hon. Friend misled the House in any way.
  Mr. Silkin: I did not say that he did.
  Mr. Butler: I have just taken the opportunity to make the position somewhat clearer with regard to information about our intentions which, quite properly, has been passed to the major Governments concerned. Substantial discussons have already been held with the Government of Hong Kong. I am prepared to make clear now, as I have done previously, that before decisions are taken on the sale and proportion of shares to be sold there will be full consultation with the Governments involved.
  Mr. Silkin: Will the hon. Gentleman give way?
  Mr. Butler: The Bill is bigger than that.
  Mr. Silkin: The hon. Gentleman did not answer the question about the CTO. Have the Government had the agreement of the CTO—yes or no?
  Mr. Butler: The taking of powers to dispose of shares does not affect the arrangements, but the disposal of shares would. There will be full consultations before that happens.
  In view of the limited amount of time available, I move on to matters affecting the Post Office and British Telecommunications. There is a dispute between right hon. Members opposite about the split, and the right hon. Member for Deptford (Mr. Silkin) said that the split would take three years to fulfil. The two future corporations—the two sides of the Post Office—have been working effectively as two parts for many years. Over recent months they have made the necessary preparations for the full split, and I expect the split to take effect, to all intents and purposes, within two or three months after the Bill becomes law. There will be the important question of a pension fund, and I hope that if the remainder of the activities are to be split there will also be a split of the pension fund. That was recommended strongly by the Carter committee. It is generally agreed that the character of the two businesses is different. They are both sizeable businesses, with many tens of thousands of employees, and they will both benefit from proceeding in their separate but special ways.

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  I judge that the debate has concerned itself mainly with British Telecommunications, so I shall deal briefly with the question of the postal monopoly. The right hon. Member for Deptford took us back to Rowland Hill and to many years before—I did not follow the relevance of that—but he used the argument of volume, and the need for the retention of a monopoly because of the effects on the finances of the Post Office if that volume of traffic were to be affected in any substantial way. I assure him that the argument was persuasive, and for that reason we are, at least in the first instance, liberalising only express mail, work connected with document exchanges, the part carriage of mail through the private sector before it goes through the Post Office network, and Christmas cards. They are a small proportion of the whole, which I estimate to be about 1 or 2 per cent.
  The hon. Member for Nuneaton tried to raise a scare in connection with the Tabor report. He suggested that our plans would result in a loss of about 12 per cent. That is not the case, and I should be grateful if the hon. Gentleman would not attempt to raise scares, either in the Post Office or in the rural areas where he felt there might be a particular impact. The duty of the Post Office will be to provide a postal service throughout the United Kingdom, and, therefore, there can be no cause for concern among my hon. Friends who have fought strongly for the rural areas in the past.
  Mr. Les Huckfield: I am sure that the hon. Gentleman will not mislead the House and will not attempt to deny that those calculations have been made by the Post Office. That is the sort of abstraction of traffic that could take place, and an additional burden would thereby be placed on the Post Office as a result.
  Mr. Butler: It is possible for assumptions to be made, but if one arrived at the figures that the hon. Gentleman suggested it would imply a virtual suspension of the monopoly across the country, with widespread local services, high penetration by the private sector and substantial inter-city links. That is the advice that I have, but—[Interruption.] They are calculations worked out with a great deal more objectivity than the hon. Member for Nuneaton could muster.
  I have explained that we were persuaded by the argument that generally the postal monopoly should be retained, but we have made it fully clear that we are not prepared for the customer to be subjected to a significant deterioration in the service. In July 1971, the next-day delivery of first-class mail fell to less than three letters out of four—to 73 per cent. The public do not deserve that sort of performance and they should not be asked to tolerate it.
  Sir Keith Joseph: It was 1979.
  Mr. Butler: We have therefore explained clearly, as my right hon. Friend said in his July statement, that if, for reasons that are within the control of the Post Office, the service deteriorates and continues to deteriorate after suitable warnings, we reserve the right to open up to private contractors the delivery of letters.
  Mr. Harry Ewing: Does the Minister of State consider that his choice of the July 1971 date was fair given that by then the Conservative Government of the day had demoralised the Post Office to such an extent that it was
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  a miracle that 73 per cent. of the letters were being delivered on time? Will the Minister deal with the proposition to legalise the postal pirates?
  Mr. Butler: My right hon. Friend the Secretary of State rightly took the opportunity to correct me. I said 1971 because I IA as thinking of the example which had been used by the right hon. Member for Deptford of Randall carriers during the strike. It was a footling experience, but it served the hon. Gentleman's purpose. The correct date when the service deteriorated to 73 per cent. was July 1979. The Labour Party may be content with that sort of service from the Post Office, but we are not. At the moment, the first-class service has recovered, and although it has not reached the 90 per cent. mark it is somewhere near.
  I shall deal briefly—I have not been left as much time as I should like—with British Telecommunications and the effects of the Bill on the customer. It was significant that neither the right hon. Member for Deptford nor the hon. Member for Nuneaton mentioned the customer. They behaved true to form, because the right hon. Gentleman did not mention the customer at the time of my right hon. Friend's statement either.
  Mr. John Silkin: While the Minister of State was sleeping or talking to the Secretary of State, I mentioned the customer three times in the first six paragraphs of my speech, as the hon. Gentleman will see in Hansard tomorrow. I said that it was with the customer that we should be primarily concerned, but with the country as well. I take it that the Minister will now withdraw his remark.
  Mr. Butler: I listened to the right hon. Gentleman with some care. If I missed his reference to the customer, apologise. He will note the difference, however, that I put the customer at the head of the list.
  Mr. Silkin: So did I.
  Mr. Butler: The domestic customer will certainly benefit—not as much as he would have done had the prime telephone instrument been opened up to competitive supply—from a choice of equipment for secondary or other telephones and other types of equipment such as answering machines. That will be a significant benefit. After the phasing-in period, the business user will have the choice of competitive equipment, provided it meets the technical standards, and he will benefit substantially from that. At the moment, he is starved of such equipment.
  Concern has been expressed about the implications to suppliers of opening up competition. That is a damning sentiment. I hope that it will be refuted by the majority of suppliers in this country. One cannot get away from the fact that when dealing with a monopoly customer—the Post Office—they have not been subjected to the same competitive forces as they would otherwise be. For good reasons, the Post Office has standards for its equipment which are significantly higher than those required for equipment which generally sells in the world market. For those two reasons, if for no others, our manufacturers have been protected. Because of that, we propose to have this phasing-in period, which will affect various categories of equipment. Again, that point was made by some of my hon. Friends. We hope that the simpler equipment will be liberalised in the earlier stage. There will probably be two subsequent stages over a total of three years.

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  There is the important question of reciprocal arrangements with foreign Governments. We have obligations under the GATT and within the EEC. The policy within the EEC is not one of the greatest liberalisation. We shall have urgent and tough negotiations with countries which aspire to export equipment to us to ensure a fair trading opportunity for our manufacturers.
  I turn now to the effect on British Telecommunications—principally financing. Financing is outside the Bill, because, like other nationalised industries, British Telecommunications will be subject to the cash limit system. It is suggested that the cash limit system is strangling British Telecommunications of funds. The amount which will be available for investment in the next year will be greater than in the current year, in the same way as the current year is greater than last year in real terms. Expenditure of more than £2 billion is significant. Half of that will go for growth and new applications.
  The financial side of British Telecommunications is not as satisfactory as any of us would want, but, as the cash limit system has to be applied as a means of allocating resources, our judgment is that this allocation is right for the purpose. But—and this is where the Bill comes in—as my right hon. Friend made clear, money for investment can come not only through self-financing and the cash limit system but through the disposal of assets or the introduction of private capital into subsidiaries set up by British Telecommunications for that purpose. As the funds of British Telecommunications would not be used for the purposes for which its subsidiaries would be formed, more funds would be available for the central purpose of preserving the network.
  The question of maintenance of PABXs was raised by some of my hon. Friends. The very fact that certain Opposition Members suggested that the argument was not all one way indicates that we shall be debating this matter, perhaps at some length, in Committee. However, I have listened carefully to what my hon. Friends have said.
  The simple argument is that we are giving the continuing responsibility for the network to British Telecommunications, and if it has that responsibility it must also have the maintenance responsibility. We believe that the technical arguments on balance suggest PABX is an integral part of the network and that British Telecommunications should therefore have responsibility for maintaining it.
  I should like to say a few words about the effect on jobs. It is probably best to draw on experience in places where liberalisation has been practised. I refer to the position in the United States, where the operator of the network, in the shape of the Bell Telephone company, has, I am informed, experienced an increase in jobs. Liberalisation will, in my view, require an expansion in job opportunities.
  It is a defeatist attitude for Opposition Members to argue that the result will be a severe decline in jobs. It is best on these occasions to lean on experience. I would even go so far as to suggest that if the opportunities offered by liberalisation are not taken the job position will seriously deteriorate. If our various business companies are not able to buy the equipment that is most up to date and represents the best value, they will lose out in competitive markets and jobs will suffer.
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  My hon. Friend the Member for St. Marylebone (Mr. Baker) said that he thought that the Bill was the best of the Session. I suggest that it may even prove the most important of the decade. It touches upon the nation's entire industrial and commercial life and on the private lives of its citizens. Communication is the essence of commercial and personal relationships. The Bill and the Government policy that flows from it will help to ensure that the United Kingdom has the best possible arrangements in communications.
  Government policy is designed, first and foremost, to ensure that the customer has efficient communication systems at his disposal and receives the best value for money. Customers ranging from the personal user of services to the business user of the most sophisticated telecommunications equipment will benefit. I believe that the interests of the customer will be served. I also believe that the fruits of Government policy will benefit the providers of goods and services. The telephone network is the arterial system through which telecommunications flow.
  British Telecom will continue as the custodian of that network. The Bill proposes that it should have a statutory duty generally to ensure that a universal telephone service is provided, and powers which will, be given to the Secretary of State will not permit action which conflicts with that duty. I see British Telecom having a crucial role to play, with a unique opportunity to profit from the vastly increased volume of traffic.
  The advent of competing transmission services — I suggest that the Opposition Front Bench should at least listen to this — will result either from an expanded demand for services or from a failure to meet demand satisfactorily by British Telecom. British Telecom starts from a position of advantage over potential competitors and the opportunity is theirs.
  I believe that United Kingdom manufacturers are offered far-reaching opportunities. They stand to benefit from liberalisation. The Bill is essentially designed to open up opportunities to the users and providers of communications services. It promises greater efficiency of operation and better value for the customer through a massive injection of competition. I commend it to the House.
  Question put, That the Bill be now read a Second time:—
  The House divided: Ayes 303, Noes 234.

  Division No. 5]

  [10 pm

  AYES

  Adley, Robert

  Body, Richard

  Aitken, Jonathan

  Bonsor, Sir Nicholas

  Alexander, Richard

  Boscawen, Hon Robert

  Alison, Michael

  Bottomley, Rt Hon A.(M'b'ro)

  Amery, Rt Hon Julian

  Bowden, Andrew

  Ancram, Michael

  Braine, Sir Bernard

  Arnold, Tom

  Bright, Graham

  Aspinwall, Jack

  Brinton, Tim

  Baker, Kenneth(St. M'bone)

  Brocklebank-Fowler, C.

  Baker, Nicholas (N Dorset)

  Brooke, Hon Peter

  Beaumont-Dark, Anthony

  Brotherton, Michael

  Beith, A. J.

  Brown, Michael (Brigg & Sc'n)

  Bell, Sir Ronald

  Browne, John (Winchester)

  Bendall, Vivian

  Bruce-Gardyne, John

  Benyon, Thomas (A'don)

  Bryan, Sir Paul

  Benyon, W. (Buckingham)

  Buchanan-Smith, Alick

  Best, Keith

  Buck, Antony

  Bevan, David Gilroy

  Budgen, Nick

  Blackburn, John

  Bulmer, Esmond

  Blaker, Peter

  Burden, Sir Frederick

  213

  Butcher, John

  Henderson, Barry

  Butler, Hon Adam

  Heseltine, Rt Hon Michael

  Cadbury, Jocelyn

  Hicks, Robert

  Carlisle, John (Luton West)

  Higgins, Rt Hon Terence L.

  Carlisle, Kenneth (Lincoln)

  Hogg, Hon Douglas (Gr'th'm)

  Carlisle, Rt Hon M. (R'c'n )

  Holland, Philip (Carlton)

  Chalker, Mrs. Lynda

  Hooson, Tom

  Channon, Rt. Hon. Paul

  Hordern, Peter

  Chapman, Sydney

  Howe, Rt Hon Sir Geoffrey

  Churchill, W. S

  Howell, Rt Hon D. (G'ldf'd)

  Clark, Hon A. (Plym'th, S'n)

  Howell, Ralph (N Norfolk)

  Clark, Sir W. (Croydon S)

  Howells, Geraint

  Clarke, Kenneth (Rushcliffe)

  Hunt, David (Wirral)

  Clegg, Sir Walter

  Hunt, John (Ravensbourne)

  Cockeram, Eric

  Hurd, Hon Douglas

  Colvin, Michael

  Irving, Charles (Cheltenham)

  Cope, John

  Jenkin, Rt Hon Patrick

  Cormack, Patrick

  Johnson Smith, Geoffrey

  Corrie, John

  Jopling, Rt Hon Michael

  Costain, Sir Albert

  Joseph, Rt Hon Sir Keith

  Cranborne, Viscount

  Kaberry, Sir Donald

  Critchley, Julian

  Kilfedder, James A.

  Crouch, David

  Kimball, Marcus

  Dean, Paul (North Somerset)

  King, Rt Hon Tom

  Dickens, Geoffrey

  Knox, David

  Douglas-Hamilton, Lord J.

  Lamont, Norman

  Dover, Denshore

  Lung, Ian

  du Cann, Rt Hon Edward

  Latham, Michael

  Dunn, Robert (Dartford)

  Lawrence, Ivan

  Durant, Tony

  Lawson, Rt Hon Nigel

  Eden, Rt Hon Sir John

  Lee, John

  Edwards, Rt Hon N. (P'broke)

  Lennox-Boyd, Hon Mark

  Eggar, Tim

  Lester, Jim (Beeston)

  Elliott, Sir William

  Lewis, Kenneth (Rutland)

  Emery, Peter

  Lloyd, Ian (Havant & W'loo)

  Eyre, Reginald

  Lloyd, Peter (Fareham)

  Fairbairn, Nicholas

  Loveridge, John

  Fairgrieve, Russell

  Luce, Richard

  Faith, Mrs Sheila

  Lyell, Nicholas

  Farr, John

  McCrindle, Robert

  Fell, Anthony

  Macfarlane, Neil

  Fenner, Mrs Peggy

  MacGregor, John

  Finsberg, Geoffrey

  MacKay, John (Argyll)

  Fisher, Sir Nigel

  Macmillan, Rt Hon M.

  Fletcher, A. (Ed'nb'gh N)

  McNair-Wilson, M. (N'bury)

  Fookes, Miss Janet

  McNair-Wilson, P. (New F'st)

  Forman, Nigel

  McQuarrie, Albert

  Fowler, Rt Hon Norman

  Madel, David

  Fox, Marcus

  Major, John

  Fraser, Rt Hon Sir Hugh

  Marland, Paul

  Fraser, Peter (South Angus)

  Marlow, Tony

  Fry, Peter

  Marshall, Michael (Arundel)

  Galbraith, Hon T. G. D.

  Marten, Neil (Banbury)

  Gardiner, George (Reigate)

  Mates, Michael

  Gardner, Edward (S Fylde)

  Mather, Carol

  Garel-Jones, Tristan

  Maude, Rt Hon Sir Angus

  Gilmour, Rt Hon Sir Ian

  Mawby, Ray

  Goodhart, Philip

  Maxwell-Hyslop, Robin

  Goodhew, Victor

  Mayhew, Patrick

  Goodlad, Alastair

  Mellor, David

  Gorst, John

  Meyer, Sir Anthony

  Gow, Ian

  Miller, Hal (B'grove)

  Gower, Sir Raymond

  Mills, lain (Meriden)

  Gray, Hamish

  Mills, Peter (West Devon)

  Greenway, Harry

  Miscampbell, Norman

  Griffiths, E.(B'y St. Edm'ds)

  Mitchell, David (Basingstoke)

  Griffiths, Peter Portsm'th N)

  Moate, Roger

  Grist, Ian

  Molyneaux, James

  Grylls, Michael

  Monro, Hector

  Gummer, John Selwyn

  Montgomery, Fergus

  Hamilton, Hon A.

  Morris, M. (N'hampton S)

  Hamilton, Michael (Salisbury)

  Morrison, Hon C. (Devizes)

  Hampson, Dr Keith

  Morrison, Hon P. (Chester)

  Hannam, John

  Mudd, David

  Haselhurst, Alan

  Myles, David

  Hastings, Stephen

  Neale, Gerrard

  Havers, Rt Hon Sir Michael

  Needham, Richard

  Hawksley, Warren

  Nelson, Anthony

  Hayhoe, Barney

  Neubert, Michael

  Heddle, John

  Newton, Tony

  214

  Nott, Rt Hon John

  Squire, Robin

  Oppenheim, Rt Hon Mrs S.

  Stanbrook, Ivor

  Page, Rt Hon Sir G. (Crosby)

  Stanley, John

  Page, Richard (SW Herts)

  Steen, Anthony

  Paisley, Rev Ian

  Stevens, Martin

  Parris, Matthew

  Stewart, Ian (Hitchin)

  Patten, Christopher (Bath)

  Stewart, A.(E Renfrewshire)

  Patten, John (Oxford)

  Stokes, John

  Pawsey, James

  Stradling Thomas, J.

  Percival, Sir Ian

  Tapsell, Peter

  Peyton, Rt Hon John

  Taylor, Robert (Croydon NW)

  Pink, R. Bonner

  Taylor, Teddy (S'end E)

  Pollock, Alexander

  Temple-Morris, Peter

  Porter, Barry

  Thatcher, Rt Hon Mrs M.

  Powell, Rt Hon J.E. (S Down)

  Thomas, Rt Hon Peter

  Prentice, Rt Hon Reg

  Thompson, Donald

  Price, Sir David (Eastleigh)

  Thorne, Neil (Ilford South)

  Prior, Rt Hon James

  Thornton, Malcolm

  Proctor, K. Harvey

  Townend, John (Bridlington)

  Pym, Rt Hon Francis

  Townsend, Cyril D, (B'heath)

  Raison, Timothy

  Trippier, David

  Rathbone, Tim

  Trotter, Neville

  Rees, Peter (Dover and Deal)

  van Straubenzee, W. R.

  Rees-Davies, W. R.

  Vaughan, Dr Gerard

  Renton, Tim

  Viggers, Peter

  Rhodes James, Robert

  Waddington, David

  Rhys Williams, Sir Brandon

  Wakeham, John

  Ridley, Hon Nicholas

  Waldegrave, Hon William

  Ridsdale, Sir Julian

  Walker, Rt Hon P.(W'cester)

  Rifkind, Malcolm

  Walker, B. (Perth)

  Rippon, Rt Hon Geoffrey

  Walker-Smith, Rt Hon Sir D.

  Roberts, M. (Cardiff NW)

  Wall, Patrick

  Roberts, Wyn (Conway)

  Waller, Gary

  Ross, Stephen (Isle of Wight)

  Walters, Dennis

  Ross, Wm. (Londonderry)

  Ward, John

  Rossi, Hugh

  Warren, Kenneth

  Rost, Peter

  Watson, John

  Royle, Sir Anthony

  Wells, John (Maidstone)

  Sainsbury, Hon Timothy

  Wells, Bowen

  St. John-Stevas, Rt Hon N.

  Wheeler, John

  Scott, Nicholas

  Whitelaw, Rt Hon William

  Shaw, Michael (Scarborough)

  Whitney, Raymond

  Shelton, William (Streatham)

  Wickenden, Keith

  Shepherd, Colin (Hereford)

  Wiggin, Jerry

  Shepherd, Richard

  Williams, D.(Montgomery)

  Silvester, Fred

  Winterton, Nicholas

  Sims, Roger

  Wolfson, Mark

  Skeet, T. H. H.

  Young, Sir George (Acton)

  Speed, Keith

  Younger, Rt Hon George

  Speller, Tony

  Spence, John

  Tellers for the Ayes:

  Spicer, Jim (West Dorset)

  Mr. Spencer Le Marchant and

  Spicer, Michael (S Worcs)

  Mr. Anthony Berry.

  Sproat, lain

  NOES

  Abse, Leo

  Callaghan, Jim (Midd't'n & P)

  Adams, Allen

  Campbell, Ian

  Allaun, Frank

  Canavan, Dennis

  Anderson, Donald

  Cant, R. B.

  Archer, Rt Hon Peter

  Carmichael, Neil

  Armstrong, Rt Hon Ernest

  Carter-Jones, Lewis

  Ashley, Rt Hon Jack

  Cartwright, John

  Ashton, Joe

  Clark, Dr David (S Shields)

  Atkinson, N.(H'gey,)

  Cocks, Rt Hon M. (B'stol S)

  Bagier, Gordon AT.

  Cohen, Stanley

  Barnett, Guy (Greenwich)

  Coleman, Donald

  Barnett, Rt Hon Joel (H'wd)

  Conlan, Bernard

  Benn, Rt Hon A. Wedgwood

  Cook, Robin F.

  Bennett, Andrew(St'kp't N)

  Cowans, Harry

  Bidwell, Sydney

  Craigen, J. M.

  Boothroyd, Miss Betty

  Crowther, J. S.

  Bottomley, Rt Hon A.(M'b'ro)

  Cryer, Bob

  Bradley, Tom

  Cunliffe, Lawrence

  Bray, Dr Jeremy

  Cunningham, G. (Islington S)

  Brown, Hugh D. (Provan)

  Dalyell, Tam

  Brown, R. C. (N'castle W)

  Davidson, Arthur

  Brown, Ron (E'burgh, Leith)

  Davies, Rt Hon Denzil (L'lli)

  Buchan, Norman

  Davies, lfor (Gower)

  Callaghan, Rt Hon J.

  Davis, Clinton (Hackney C)

  215

  Deakins, Eric

  Mabon, Rt Hon Dr J. Dickson

  Dean, Joseph (Leeds West)

  McDonald, Dr Oonagh

  Dempsey, James

  McElhone, Frank

  Dewar, Donald

  McKay, Allen (Penistone)

  Dixon, Donald

  McKelvey, William

  Dobson, Frank

  MacKenzie, Rt Hon Gregor

  Dormand, Jack

  Maclennan, Robert

  Douglas, Dick

  McNally, Thomas

  Douglas-Hamilton, Lord J.

  McTaggart, Robert

  Dubs, Alfred

  McWilliam, John

  Duffy, A. E. P.

  Marks, Kenneth

  Dunnett, Jack

  Marshall, Dr Edmund (Goole)

  Dunwoody, Hon Mrs G.

  Marshall, Jim (Leicester S)

  Eadie, Alex

  Martin, M(G'gow S'burn)

  Eastham, Ken

  Mason, Rt Hon Roy

  Ellis, R. (NE D'bysh're)

  Maxton, John

  English, Michael

  Maynard, Miss Joan

  Ennals, Rt Hon David

  Meacher, Michael

  Evans, loan (Aberdare)

  Mellish, Rt Hon Robert

  Evans, John (Newton)

  Mikardo, Ian

  Ewing, Harry

  Millan, Rt Hon Bruce

  Faulds, Andrew

  Mitchell, Austin (Grimsby)

  Field, Frank

  Mitchell, R. C. (Soton Itchen)

  Fitch, Alan

  Morris, Rt Hon A. (W'shawe)

  Fitt, Gerard

  Morris, Rt Hon C. (O'shaw)

  Flannery, Martin

  Morris, Rt Hon J. (Aberavon)

  Fletcher, Ted (Darlington)

  Morton, George

  Foot, Rt Hon Michael

  Moyle, Rt Hon Roland

  Ford, Ben

  Newens, Stanley

  Forrester, John

  Oakes, Rt Hon Gordon

  Foster, Derek

  O'Halloran, Michael

  Fraser, J. (Lamb'th, N'w'd)

  O'Neill, Martin

  Freeson, Rt Hon Reginald

  Orme, Rt Hon Stanley

  Garrett, John (Norwich S)

  Owen, Rt Hon Dr David

  George, Bruce

  Palmer, Arthur

  Gilbert, Rt Hon Dr John

  Park, George

  Ginsburg, David

  Parker, John

  Golding, John

  Parry, Robert

  Gourlay, Harry

  Pendry, Tom

  Graham, Ted

  Powell, Raymond (Ogmore)

  Grant, George (Morpeth)

  Prescott, John

  Grant, John (Islington C)

  Price, C. (Lewisham W)

  Hamilton, James (Bothwell)

  Race, Reg

  Hamilton, W. W. (C'tral Fife)

  Radice, Giles

  Harrison, Rt Hon Walter

  Rees, Rt Hon M (Leeds S)

  Hart, Rt Hon Dame Judith

  Richardson, Jo

  Hattersley, Rt Hon Roy

  Roberts, Albert (Normanton)

  Haynes, Frank

  Roberts, Allan (Bootle)

  Healey, Rt Hon Denis

  Roberts, Ernest (Hackney N)

  Heffer, Eric S.

  Roberts, Gwilym (Cannock)

  Hogg, N. (E Dunb't'nshire)

  Robertson, George

  Home Robertson, John

  Robinson, G. (Coventry NW)

  Homewood, William

  Rodgers, Rt Hon William

  Hooley, Frank

  Rooker, J. W.

  Horam, John

  Roper, John

  Howell, Rt Hon D.

  Ross, Ernest (Dundee West)

  Huckfield, Les

  Rowlands, Ted

  Hughes, Mark (Durham)

  Ryman, John

  Hughes, Robert (Aberdeen N)

  Sandelson, Neville

  Hughes, Roy (Newport)

  Sheerman, Barry

  Janner, Hon Greville

  Sheldon, Rt Hon R.

  Jay, Rt Hon Douglas

  Shore, Rt Hon Peter

  John, Brynmor

  Short, Mrs Renée

  Johnson, James (Hull West)

  Silkin, Rt Hon J. (Deptford)

  Johnson, Walter (Derby S)

  Silkin, Rt Hon S. C. (Dulwich)

  Jones, Rt Hon Alec (Rh'dda)

  Silverman, Julius

  Jones, Barry (East Flint)

  Smith, Rt Hon J. (N Lanark)

  Jones, Dan (Burnley)

  Snape, Peter

  Kaufman, Rt Hon Gerald

  Soley, Clive

  Kerr, Russell

  Spearing, Nigel

  Kilroy-Silk, Robert

  Spriggs, Leslie

  Lambie, David

  Stallard, A. W.

  Lamborn, Harry

  Stewart, Rt Hon D. (W Isles)

  Leadbitter, Ted

  Stoddart, David

  Leighton, Ronald

  Stott, Roger

  Lestor, Miss Joan

  Straw, Jack

  Litherland, Robert

  Summerskill, Hon Dr Shirley

  Lofthouse, Geoffrey

  Taylor, Mrs Ann (Bolton W)

  Lyon, Alexander (York)

  Thomas, Dafydd (Merioneth)

  Lyons, Edward (Bradf'd W)

  Thomas, Jeffrey (Abertillery)

  216

  Thomas, Mike (Newcastle E)

  Whitlock, William

  Thomas, Dr R.(Carmarthen)

  Willey, Rt Hon Frederick

  Thome, Stan (Preston South)

  Williams, Rt Hon A.(S'sea W)

  Tilley, John

  Wilson, Gordon (Dundee E)

  Torney, Tom

  Wilson, Rt Hon Sir H.(H'ton)

  Varley, Rt Hon Eric G.

  Wilson, William (C'try SE)

  Wainwright, E.(Dearne V)

  Winnick, David

  Walker, Rt Hon H.(D'caster)

  Woodall, Alec

  Watkins, David

  Woolmer, Kenneth

  Weetch, Ken

  Wrigglesworth, Ian

  Wellbeloved, James

  Young, David (Bolton E)

  Welsh, Michael

  White, Frank R.

  Tellers for the Noes:

  White, J. (G'gow Pollok)

  Mr. Terry Davis and

  Whitehead, Phillip

  Mr. James Tinn.

  Question accordingly agreed to.
  Bill read a Second time.
  Bill committed to a Standing Committee pursuant to Standing Order No. 40 (Committal of Bills).

  BRITISH TELECOMMUNCATIONS [MONEY]
  Queen's Recommendation having been signified—
  Resolved,
  That, for the purposes of any Act of the present Session to establish a public corporation to be called British Telecommunications, to make provision with respect to its functions and to transfer to it certain property, rights and liabilities of the Post Office (hereinafter referred to as 'the Act'), it is expedient to authorise:
  A. Payments out of moneys provided by Parliament as follows.

  1. Sums required by the Treasury for acquiring an interest in any shares or stock of Cable and Wireless Limited or any of its subsidiaries, or in any rights to subscribe for any such shares.

  2. Any administrative expenses of the Secretary of State.

  3. Any increase attributable to the provisions of the Act in sums which, under any other enactment, are paid out of moneys so provided.

  B. Payments out of the Consolidated Fund as follows.

  1. Sums required by the Treasury for fulfilling any guarantee given by them under the Act for the repayment of, or the payment of interest on, any sums borrowed by British Telecommunications from a person other than the Secretary of State or any sums so borrowed by the Post Office the liability to repay which is transferred by the Act to British Telecommunications.

  2. Any increase attributable to the provisions of the Act in the sums which, under any other enactment, are paid out of that Fund.

  C. Payments out of the National Loans Fund as follows.

  1. Sums required by the Secretary of State to make loans to British Telecommunications, so long as the aggregate amount outstanding, otherwise than by way of interest, in respect of—

  (a) money borrowed by British Telecommunications or any of its wholly owned subsidiaries, other than money borrowed on excluded loans (within the meaning of the Act);

  (b) sums issued by the Treasury in fulfilment of guarantees given by them under the Act;

  (c) so much of the debt assumed by the Post Office under section 33 of the Post Office Act 1969 as is transferred to British Telecommunications by the Act; and

  (d) money borrowed by the Post Office the liability to repay which is so transferred,

  shall not at any time exceed £5,000 million or such greater sum not exceeding £6,500 million as the Secretary of State may by order specify.
  2. Any increase attributable to the provisions of the Act in the sums which, under section 37 of the Post Office Act 1969, are paid out of that Fund to enable the Secretary of State to make loans to the Post Office, so long as the aggregate of—

  (a) the amount outstanding, otherwise than by way of interest, in respect of—

  217

  (i) money borrowed by the Post Office or any of its wholly owned subsidiaries, other than money borrowed on excluded loans (within the meaning of the Act);

  (ii) sums issued by the Treasury in fulfilment of guarantees under section 38 of the said Act of 1969; and

  (iii) the debt assumed by the Post Office ender section 33 of that Act; and

  (b) sums received by the Post Office under section 3(1) of the Post Office (Banking Services) Act 1976 (public dividend capital),
  shall not, at any time on or after the appointed day within the meaning of the Act, exceed £1,200 million or such greater sum not exceeding £1,700 million as the Secretary of State may by order specify.
  3. Any increase attributable to the provisions of the Act in the sump which, under any other enactment, are paid out of that Fund.
  D. Any payment into the Consolidated Fund or the National Loans Fund. —[Mr. Adam Butler.]

  National Health Service (Drugs and Appliances Charges)
  10.16 pm
  Mr. Roland Moyle: I beg to move, That an humble Address be presented to Her Majesty. praying that the National Health Service (Charges for Drugs and Appliances) Regulations 1980 (S.I., 1980, No. 1503), dated 10 October 1980, a copy of which was laid before this House on 27 October, in the last Session of Parliament, be annulled.
  I place on record the intense annoyance that we feel that the charges came into operation yesterday and that we are debating the order nearly 48 hours later. That is not good enough. It underlines the increasing contempt of the House of Commons by the Government and it reinforces our opinion of the attitudes of the Secretary of State for the Environment and the Chancellor of the Exchequer in recent weeks. We do not expect this to happen again.
  There is a growing difference between the attitude of the Government and that of the Opposition to National Health Service policy. Government Members say that they intend to move towards a system under which the health care received by an individual is based upon what he can afford to pay through an insurance system. Regular increases in prescription charges are a preparation for a system under which people receive the health care that they can afford rather than the care that they need.
  Government and Opposition policies on prescription charges are diverging sharply. Prescription charges were fixed at 20p per item in 1971 by the right hon. Member for Leeds, North-East (Sir K. Joseph). We fought the 1974 election on phasing out prescription charges. Between 1974 and 1979, no increase in prescription charges took place. Inflation was allowed to erode their value substantially. Consequently, we fought the 1979 election on the basis that we would abolish the charges if we were returned to office.
  It is worth recalling that a bare 18 months ago prescription charges were 20p per item. They are now five times that amount. That is almost equal to the size and speed of the oil price increases in the 1974–75 period. There are consequences. We are indebted to the Office of Health Economics for the figures that it has provided for the debate. It is not exactly affiliated to the Labour Party. It is one of the many pharmaceutical organisations that are united in their total opposition to the increase in charges. It is interesting to note that in 1978 the number of prescriptions dispensed was 378 million. Following the first year of Conservative Government policy on prescription charges, the figure for 1979 had fallen to 372 million. That is a difference of 6 million prescriptions. I believe that there is a Government estimate that, following upon this latest increase, there will be a further decline of 12 million prescriptions in the ensuing 12 months. The Minister for Health is shaking his head. He will have the chance to explain his view. The evidence that we have to hand shows a sharp decline in prescriptions as a result of the charges.
  The Minister for Health (Dr. Gerard Vaughan): The right hon. Gentleman has been reading the Pharmaceutical Journal of 22 November, which forecast a reduction of 12 million prescriptions.
  Mr. Moyle: That is true, but the Pharmaceutical Society of Great Britain attributes the forecast to the Government.

  219
  Who are the people who are no longer obtaining prescriptions because of the increased charges? It is not an across-the-board reduction but a reduction concentrated entirely on those who have to pay for prescriptions. As the charge rises, the proportion of people able to enjoy free prescriptions is rising rapidly. In March 1980, 66 per cent. of prescriptions avoided charges. In August 1980, the figure had risen to 70 per cent. It is those who have to pay for their prescriptions who are ceasing to obtain them through the National Health Service. That leads to unqualified prescribing, which has its own dangers. It may lead to inadequate treatment, which eventually may be halted only by hospital treatment at a cost of £300 a week. That is false economics.
  The Royal Commission on the National Health Service supports our attitude. It took not a moralistic attitude towards prescription charges but a practical attitude. On page 342 it of its report, it states:
  "Indeed, we feel that, particularly with the irrational structure of charges we now have, there is a good case for their gradual but complete extinction, and we so recommend."
  That was the most recent and thorough examination of the Health Service by a group of outside experts. They totally reject the policy on which the Government have embarked.
  Charges do not reduce frivolous use of the Health Service. All use of the Health Service, especially medicines, is based on the advice of the medical profession. People who are not advised by their doctors to take medicines are in no position to obtain any part of the vast range of medicines that are available. Those who are urged by their doctors to take medicines are under considerable pressure to obtain the medicines and take them. There is no lay market available to be stimulated by a price reduction or damped down by a price increase.
  If there is frivolous use of the Health Service, it is based entirely on the medical profession's advice, and, therefore, incentives and disincentives should be directed towards doctors. Admittedly, that is a difficult problem, which has challenged the capacities of successive Secretaries of State and has not been solved. It is sloppy thinking to try to control that by applying prescription charges to patients who are in the hands of the medical profession either for primary care or for hospital treatment.
  There are practical arguments, but the Opposition's argument is a moral one. We believe that it is wrong to deny health care by fixing a price tag to medicines. Medicines and the whole of the National Health Service should be provided out of taxation, which is levied according to means, and should be free at the time of usage. That is the battle that we are striving to win. Sometimes we do not achieve our objectives, but that is the main objective.
  Prescription charges have nothing to do with economics. The Pharmaceutical Society of Great Britain and its negotiating committee say bluntly that they are a tax on medicines. If they are a tax, they are a doubly regressive tax. They are regressive because they are a poll tax in the same way as national insurance employee contributions, which are the same whether one is rich or poor. Whether one is rich or poor, except for those on supplementary benefit, one pays the same amount for prescriptions, which was increased to £1 yesterday.
  220
  Prescription charges are a regressive tax not only in that sense, because they are levied when someone is ill and possibly out of work. He or she may possibly be on a falling income. The figures tabled by the Office of Health Economics confirm that this tax is having a deleterious effect. About 6 million prescriptions that should have been taken from the NHS as a result of advice given by doctors are not being taken. By this time next year, the number may increase to 17 million or 18 million. That is because there is a tax of £1 on each item prescribed by the doctor. That can be extremely costly.
  The Government defend themselves by referring to those receiving social security benefits and low income groups who are exempt from prescription charges. What about the income groups immediately above supplementary benefit level? They often have serious economic problems and find that they can make ends meet only by doing without medicines that their doctor advises them to take.
  It is particularly bad that the policy should be applied now, because the nation is entering a slump. As incomes are declining, charges are rocketing. There has been a 500 per cent. increase in 18 months. There is a public sector wages policy of a 6 per cent. cash limit that the Government are trying to impose. However, even in this one recent step there has been a 30 per cent. increase in the cost of medicines. If the Government want to get themselves into difficulties with their wages policy, that is up to them. The Opposition are here to ensure, as far as we can, that no one is denied access to medical care when it is needed.
  I have one or two questions and a suggestion to put to the Minister. First, a rumour is being carried by the pharmaceutical press — it believes in it — that the Government are thinking of withdrawing the exemption from the prescription tax for those on the State retirement pension. Is that true? We ask for a categorical statement from the Government on that.
  Secondly, in the light of the substantial increase in prescription charges, are the Government to open discussions with the medical profession to increase the number of chronic ailments that are exempt from prescription charges? Such action is long overdue. The list is short. There are many chronic ailments that are outside the scope of the existing list. I appeal to the medical profession to co-operate with the Government if they go ahead with that. That is a palliative only. The best thing would be for the Government to get away entirely from the policy that they are following.
  Thirdly, with a prescription charge of £1 per item it may be that a doctor prescribes several items, each of which has to be paid for. The patient will have to pay several pounds to get his basket of prescriptions. If the patient tells the doctor that he cannot afford that basket of prescriptions, the doctor may be able to tell him that he can leave out one item. However, the patient may not discover that the £1 per item will be levied until he sees the pharmacist. Should the pharmacist tell him to go back to his doctor or advise him which of the prescriptions should be dropped, so that the total can be brought within the price that the patient can afford? The DHSS, the BMA and the Pharmaceutical Society of Great Britain should get together to try to work out a code of practice to advise pharmacists on their conduct in such a situation, which will become increasingly frequent.

  221
  I saw in The Times yesterday that the Prime Minister was comparing the state of the nation with
  "the rough ride of the patient A ho is ill and taking medicine who for a time is suffering from the illness and the medicine."
  An increasing number of her electorate in Finchley would very much like to have the chance to suffer from both the illness and the medicine. Such people are decreasing in number. They are put off by what is, in effect, a prescription tax, designed not for any economic purpose but purely to raise taxes while pretending not to do so.
  In the meantime, the right hon. Lady is supposed to be preparing us for a brave new world and is dishing out medicine of a sort. What she is doing — and these prescription charges are part of the package—is doing the nation with, an economic thalidomide in preparation a for that brave new world. There will be no compensation for the warped victims of the consequences of the policy.
  The Secretary of State is an ex-Treasury Minister. He has had long experience at the Treasury. He should know more than mw t that the proper people to raise revenue are the Board of Inland Revenue or the Board of Customs and Excise. Will the Minister convey to the Secretary of State for Social Services that it is high time that he went back to his old Department and told those there that he is not a tax collector? They are, and they had better relieve him
  10.32 pm
  Mr. Paul Dean: The right hon. Member for Lewisham. East (Mr. Moyle) has repeated his party's pledge to abolish prescription charges. How quickly the right hon. Gentleman forgets his past. Who first introduced prescription charges? It was a Labour Government. Who kept those charges year after year? It was a Labour Government.
  Mr. Stanley Orme: We did not increase them.
  Mr. Dean: The right hon. Gentleman had better be rather careful about his interventions. He cannot deny that a Labour Government first introduced prescription charges. Equally, he cannot deny that when he was a Minister his Administration kept prescription and other charges. How quickly right hon. Gentlemen forget their past.
  No one likes putting up charges for anything, but both Labour and Conservative Governments have found charges essential in maintaining the fabric of the National Health Service, They have found them in practice to be an important source of revenue.
  The right hon. Member for Lewisham, East said that prescription charges have nothing to do with economics. If so, why did vie Labour Government not abolish charges during the long years when they were in Government? This prayer tonight is wholly bogus. The Labour Parry's record in the past shows that very clearly.
  It is important to take into account not only the fact that Labour and Conservative Governments have found this to be an important source of revenue but that substantial exemptions exist. My hon. Friend the Minister for Health will no doubt be able to confirm, when he replies, that about 70 per cent. of prescriptions are exempt from the charges. In other words, it is only those who can reasonably be expected to afford the charges who pay them.
  The exemptions are clear from the regulations that we are debating. They include all people under the age of 16.
  222
  They include men over the age of 65 and women over the age of 60. They include expectant mothers and mothers with children under the age of one year. Exemptions are available for a number of medical conditions which are listed in regulation 7. There are exemptions for those who have certificates for accepted disablement. There are exemptions for all members of a family in receipt of family income supplement. There are exemptions for all those who are in receipt of supplementary pensions or allowances. The Government, in other words, have identified all the vulnerable groups and have ensured that they will get their prescriptions entirely free.
  I hope that my hon. Friend, when he replies, will he able to scotch the rumour to which the right hon. Gentleman referred and that he will be able to assure the House that the exemptions that I have read out are a correct interpretation of the position.
  Mr. Lewis Carter-Jones: Does the hon. Gentleman agree that some of the exemptions which are missing are very worrying? For example, multiple sclerosis is not included. If the diseases which ought to be included were included, would there not be a case for saying that the economic savings are counter-productive and that to find out who is to be exempted costs more than the saving on prescriptions?
  Mr. Dean: I share the hope of the hon. Gentleman that it will be possible to increase the number of medical conditions that can be exempted from the prescription charges. My hon. Friend may be able to say more about that in his reply.
  My point is that the main vulnerable groups in our community are already exempted from the charges. I understood that the £1 payment that is proposed will represent about one-third of the average cost. Therefore, the Government's proposition does not seem to be unreasonable. But, clearly, the higher the prescription charge becomes, the greater the number of prescriptions which may cost less than the £1 charge. I hope that if a significant number of prescriptions cost less than £1, it will be possible for my hon. Friend to make arrangements so that the people concerned—possibly by means of private arrangements with the pharmacists—will be able to pay the cost of the prescription rather than the cost-plus whatever is the difference between the cost and £1.
  It seems that we are being asked to agree to a reasonable contribution from those who can afford to pay towards maintaining the National Health Service. That is directly related to the announcement that was made by my right hon. and learned Friend the Chancellor of the Exchequer last week. The one service that was exempted from the 2 per cent. cut in public expenditure was the National Health Service. One of the reasons why the Government have been able to maintain the real value of expenditure on the National Health Service is that this increase in prescription charges will bring about an additional modest contribution. That is right, and I am delighted that the Government have been able to make that exception for the National Health Service. It is right because demand continues to increase.
  We all know from our constituency correspondence that there are still many people awaiting operations and anxiously awaiting treatment of various sorts. These regulations make a modest contribution towards reducing

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  the waiting lists. [HON. MEMBERS: No."] I congratulate the Government on the reductions in the waiting lists that have already taken place since they took office.
  Do the Opposition really want to increase the waiting lists again? Do they really want to deny these additional resources to the National Health Service? If they had any sense of reality and any regard to their past, they would be ashamed of this prayer to annul the regulations. If they persist in voting for the prayer, I shall have no hesitation in voting for the regulations and in voting for more money for the National Health Service.
  10.43 pm
  Mr. David Ennals: The speech of the hon. Member for Somerset, North (Mr. Dean) was below his normal standard. He said that no Government wanted to increase prescription charges. Let us look at what happened. The Government of which I was proud to be a member inherited prescription charges of 20p, and they remained at 20p for nearly six years. This Government have increased prescription charges three times—first to 40p, then to 70p and then to £1, an increase of 500 per cent. —in the last 18 months. The hon. Gentleman said that the Government do not want to increase the charges, but they are certainly prepared to do things that they do not want to do. They are also prepared to do things that during the election campaign the Prime Minister suggested that they would not do. [HON. MEMBERS: "That is right."]
  During the election campaign, I told the Prime Minister that in my view the Conservatives would increase prescription charges. The right hon. Lady, then the Leader of the Opposition, said that she had no plans to do so. Those were weasel words of the worst order. Perhaps she had no plans to increase prescription charges, but the Secretary of State — whose absence from the Front Bench is surprising on an issue such as this—had plans to do so. He had one plan to put up the charge to 40p, another plan to put it up to 70p and a third plan to put it up to £1. In addition, the higher charges have made their contribution — modest though it is — to pushing up inflation, which the Government say they are trying to reduce.
  The Government decided on these courses of action for two perfectly clear reasons. The first was to make the sick pay for their illness. We on the Labour Benches believe that it is morally wrong to do that. If more money must be raised for the Health Service, it should be raised from everyone—from the taxpayers—and not simply from those who suffer the inconvenience of being sick. As my hon. Friend the Member for Eccles (Mr. Carter-Jones) pointed out, many people are outside the exemptions.
  The second reason was to deter people from taking medicines that they need. My right hon. Friend the Member for Lewisham, East (Mr. Moyle) has quoted from the Office of Health Economics to show that even before the £1 charge people were not taking prescriptions given to them by their doctors. I have been asking my GP and my local chemists about the reaction. Already they are faced with the difficulty of the patient who has four prescriptions, cannot afford to pay for all of them and asks which is the most important. That is no decision for a
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  chemist to take. That is why the pharmacists strongly oppose the Government's action, as do the doctors and the Office of Health Economics.
  The hon. Member for Somerset, North pointed out that nearly 70 per cent. of patients are exempt. They number about 35 million, but about 20 million have to pay the new charge. The selection of many of the exempt categories is highly arbitrary. For instance, diabetics and epileptics do not pay, but anyone suffering the inconvenience of being a schizophrenic must pay. There is no logic in the system. Perhaps it did not matter when the charge was 20p, but it makes a lot of difference now that it is five times that amount.
  With the charge at £1, the absurdity arises that, unless the Minister gives the reassurance sought by the hon. Member for Somerset, North, patients will pay more for some prescriptions than the items would cost if purchased. A whole list of medical items—pain-killers, laxatives and pills for cardiovascular conditions, for example—would cost the patient less over the counter than if they were prescribed by the doctor. Panadol is an example. Twenty-four tablets of the pain-killer cost 39p from a chemist or supermarket, but from yesterday a non-exempt patient acquiring them with a prescription will have to pay 61p more.
  I submit that the Government have taken a shameful decision. I fear that this is just another step in introducing not only higher but more charges. It is a way of moving the burden of paying for the Health Service on to the sick and away from the generality of taxpayers. We are strongly opposed to that principle, and I hope that my right hon. and hon. Friends will vote against it in great strength.
  10.50 pm
  Mr. R. A. McCrindle: Before turning my attention to the details of the prayer, I should like to clear my mind on the differences between the two sides of the House on this matter.
  I listened with care to the right hon. Member for Lewisham, East (Mr. Moyle), a former Minister for Health, particularly when he said that there were growing differences between the Government and the Opposition on this matter. I cast my mind back to the time when the right hon. Gentleman had responsibility to decide—no doubt, in consultation with Cabinet colleagues—whether prescription charges should be phased out or increased. For reasons that he has tried to explain, they were neither phased out nor increased.
  The great burden of the right hon. Gentleman's complaint seems to be that prescription charges are now being increased in what he would no doubt describe as a fairly dramatic way. I cannot square that with what he then said about there being a moral objection. If the Opposition are putting forward a moral objection, surely it is a question not that the charge was 20p when they were in office and its being £1 when we are in office but that under a Labour Government there should not have been the slightest suggestion of there being a prescription charge at all. Yet, looking at the history of this matter, we find that the Labour Government not only kept a prescription charge in being but actually introduced it in the first place.
  It is proper for us to have differences about prescription charges, but it is going too far to suggest that the difference is based on a moral objection. Whatever else it may be, it clearly cannot be a moral objection, unless the right hon. Gentleman and his right hon. Friend the Member for

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  Norwich, North (Mr. Ennals), the former Secretary of State for Social Services, are now admitting that they failed to remove not only a financial irritant which caused financial difficulty to many people but a matter to which they took a strong moral objection. If they are saying that they failed when in office to take any steps to remove something to which they have a moral objection, they owe more explanation to the House than has so far been forthcoming.
  Mr. Moyle: The whole gravamen of my speech was that we failed finally to eliminate the prescription charge, but we got it so reduced that we fought the 1979 election on a pledge that if we were returned to office we would abolish it. We fought the 1974 election on the principle that we would phase out the charge, and we did phase it out as a result of inflation.
  Mr. McCrindle: That is such an eloquent illustration of just where the Opposition stand on this matter that no words of mine could possibly advance the argument put forward by the right hon. Gentleman.
  Mr. Orme: Where does the hon. Gentleman stand?
  Mr. McCrindle: I shall tell the right hon. Gentleman if he will give me time.
  I think that it is legitimate to probe the real reasons behind the Opposition's prayer to annul the regulations. The right hon. Member for Lewisham, East said that his real objection to the Government increasing the prescription charge to £1 was that it is another move towards an insurance-based system. I appreciate the opposition by Labour Members to what is broadly called an insurance-based system, yet at least two of our fellow members of the EEC have thriving health provision on the basis of what could be called an insurance-based system. I refer to France and Germany. When I recall that in Germany at least there is a Social Democrat Government, I cannot see why the Opposition continue to be so totally opposed to any exploration along those lines.
  Thirdly, the Opposition say that prescription charges should have nothing to do with the price of the medicine prescribed. I do not accept that that is so. Accepting that inflation has been with us during the period of office of our Predecessors and that it is still with us today, there is a very strong argument, unless the objection is one of principle, for keeping the prescription charge in some relationship to the actual cost of prescription.
  My simple point is that either the Opposition are opposed to prescription charges in principle and, therefore, they have a moral objection—in which case they stand condemned by their own record during the period they were in office—or they are objecting to the size of the charge. I do not believe that they can have it both ways. The House has not yet been treated to a real examination of how the Opposition believe they can take a high moral position on something that they failed to touch during five years of Labour Government.
  Mr. Ted Leadbitter: The hon. Member's speech will no doubt be widely reported in his constituency, so, as he objects to Opposition Members describing the rise as dramatic, will he say categorically first how he would describe it; secondly, whether he categorically supports the £1 charge; and, thirdly, when his Government are apparently boasting that inflation is falling, how he substantiates a 500 per cent. increase in the charge?
  Mr. McCrindle: I am happy, first, to reassure the hon. Member that all my speeches are widely reported in my constituency.
  Secondly, I believe that the level of the prescription charge at £1 in 1980, in relation to the cost of the average prescription, is not out of relationship in any greater fashion than 20p was out of relationship when that charge was introduced in 1971. If we are to have a system under which there is to be a contribution from the person requiring a prescription, it is nonsense to keep the contribution at such a level as to have no meaning in relation to the true cost of the prescription.
  I shall deal during the next few minutes with some of the other points about which I have been asked, but I wanted to intervene because I find it quite remarkable that no one has yet mentioned—with the possible exception of my hon. Friend the Member for Somerset, North (Mr. Dean)—that under the very considerable cutbacks in Government expenditure which have had to be introduced the NHS has survived virtually unscathed. I believe that that can be justified only if there is to be a contribution from the user of the NHS. Charges are needed. The charge that we are discussing is not extortionate in all the circumstances.
  The choice seems to be between contributing and allowing the NHS to run down. So ready are Opposition Members to remind us of the services which are being adversely affected by cutbacks in expenditure that they have failed so far to pay tribute to the fact that, amid all the difficulties, under the present Government expenditure on the NHS is being virtually maintained.
  In all the circumstances, I believe that very little hardship will be created by the increase to £1 for the prescription charge. I can no more graphically describe what I mean than by reminding the House that in asking a person to pay £1 for a prescription we are asking him to pay no more than the equivalent of 1½ pints of beer or 30 cigarettes.
  11 pm
  Mr. A. J. Beith: If Conservative Members do not understand the hardship generated by the £1 prescription charge, they do not understand what it is like to live on incomes which come just above the family income supplement level and to go to a chemist with a prescription with two or three items on it at £1 each and be expected to pay £3 on every visit—and there may be quite frequent visits during a series of illnesses going through several adult members of a family. If hon. Members do not appreciate the hardship involved, they are living in a dream world.
  I remind the Government first that they are going quite explicitly against an election pledge, as the right hon. Member for Norwich, North (Mr. Ennals) pointed out. It was not just the Prime Minister who made the pledge. The present Paymaster General said that a Labour Party leaflet had suggested that the Tories planned to increase prescription charges by 300 per cent. It was slightly inaccurate; it is 400 per cent. The Paymaster General commented:
  "This is a direct lie."
  Government supporters are now prepared to vote in defence of the breaking of yet another election pledge—this time the pledge that that kind of increase would not occur.

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  When many people get to a chemist with a prescription which he points out, once he has deciphered the doctor's handwriting, has not one but several items on it, they will ask "Cannot you give me just one of these? Surely I do not have to have them all. Cannot you give me something over the counter which does not cost as much?" There may be items prescribed by the doctor which cost less than the prescription fee, and a helpful pharmacist will tell the patient "You do not need this on prescription. I can give you this for less than that. Throw away the prescription, and I will give it to you now." But in many other cases patients will be saying "Please give me something which does not cost as much as this."
  It has happened to me. I have had pharmacists say to me "Do not hand in a prescription for that. You can get it for less than the prescription charge." Such a pharmacist is being helpful to the patient in doing that. Obviously, it is helpful to do that.
  Mr. Ennals: Does not the hon. Gentleman agree that in most cases that would not happen? This is taking away the rightful income of a pharmacist, who is entitled to be paid for the prescription written by the doctor, so that the burden is really placed upon him.
  Mr. Beith: That is right. The pharmacist is doing a service to his customer and a disservice to himself in giving that advice. But I am even more worried about the position of a pharmacist who is asked by a customer "Please give me something that costs less than this lot. Surely there is something which you can give me over the counter which does not cost as much."
  Another difficulty which will arise is that doctors will be put under pressure to prescribe larger quantities of drugs for which repeat prescriptions are needed, and that may be wasteful if they are not used and, even worse, may be dangerous. Larger quantities of pain-killing drugs and other materials will be left around, when previously it has been the practice of many doctors to prescribe in smaller quantities so that dangerous amounts are not left in the house. We all know the dangers involved from abuse of materials of this kind.
  A great many dangers arise from both the pharmacist and the doctor trying to help a patient out of the difficulty which arises from having to pay £3 or £4 to redeem even one prescription.
  For this enormous increase, we are getting no benefit in terms of new categories of exemption or, indeed, new inclusions on the list of items which can be prescribed. I have written to the Minister frequently, on the basis of my experience, about the problems of diabetics. I remind him that there are desperate pleas coining to him for certain items to be capable of being prescribed on the National Health Service. One example concerns disposable syringes. Has the Minister ever tried using a glass syringe with one hand to inject a small child because he needs the other hand to restrain the child? It is nearly impossible. As a result, many people buy disposable syringes which are not, available on prescription because that is the only way they can administer injections to small children. There are many pleas to the Minister for blood sugar monitoring strips to be available on prescription. That could save the NHS quite a bit of money if it kept diabetic patients out of hospital. But there are no inclusions on the list as a return for the heavy increase in the price of prescriptions.
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  Is the Minister doing anything else to reduce the overall cost of prescriptions, such as placing more emphasis on generic prescribing or encouraging pharmacists to supply the cheapest available version of a prescribed drug? There are many ways in which Ministers could try to keep down the costs of prescribing. The last thing they should be doing is to tell the patient who has already been advised that he needs a particular medicine that he will not be able to afford it. That is what high prescription charges mean.
  One might have been able to understand the Government's position a little more readily if they had returned to the system of a charge per prescription instead of a charge per item. They have given us the worst of all worlds by providing no new exemptions, no new inclusions on the list of materials that can be prescribed and no benefit in terms of development of prescribing policy in return for a high increase in charges.
  I strongly object to prescription charges as a means of financing the Health Service. I object even more strongly to this kind of ludicrous increase and the hardship that it will bring.
  11.6 pm
  Mr. Alfred Dubs: To get the record straight, it should be made clear that the National Health Service has suffered in real terms under this Government. VAT has been imposed on NHS expenditure, and the way in which cash limits are being applied in a period of high inflation means that in real terms the money available to the NHS is getting less and less.
  I should like to get the record straight on another point. The prescription charge was raised on 1 April 1971 by a Tory Government. It stayed at that level until it was raised last year. By any standard, that means that in real terms the charge was becoming smaller and smaller. Therefore, the burden on the sick was reducing each year, and it is not true that the Labour Government had the same attitude as the present Conservative Government have.
  The hon. Member for Somerset, North (Mr. Dean) was mistaken to suggest that the increase in prescription charges would make a difference to waiting lists or to NHS resources. Every hon. Member is well aware that the reason for the increase is to get the public sector borrowing requirement right or to bring sterling M3 to the right level. It has nothing to do with making the NHS operate better or with giving more resources to the NHS. There will not be one extra bed provided as a result of the additional income that will come from the heavy increase that is being imposed on sick people. Nothing we have heard tonight in any way justifies a fivefold increase in the charges.
  It is clear that despite the exemptions the increase will hurt people—for example, those who are just above the exemption limit. There are many in that category. Some hon. Members will ask "What about the season ticket, the prepayment certificate?" That is being increased to £15, which is a hefty charge to impose on people who have been told that a season ticket is an easier way to cope with the burden of prescription charges.
  Several hon. Members have referred to the comparison between the cost of some prescriptions and the price charged over the chemist's counter. Some general practitioners may well tell a patient "I shall not give you a prescription. Go down to the chemist and buy what is needed, and you will be OK." But some doctors fear that

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  this will reduce the authority of what they are suggesting the patient should have, and they may not want to do it, apart from whether chemists will want to do so.
  Where the cost of the product is less than the £1 prescription charge, the chemist should be under pressure from the Minister to sell it over the counter rather than go through the cumbersome and bureaucratic procedure which is costly to the patient and to the taxpayer.
  If the Government were serious about the costs of pharmaceuticals, they could take another tack. They could examine the extent to which general practitioners prescribe more expensive items than are necessary. There must be some reason why the drug companies put so much advertising effort into persuading general practitioners to prescribe new drugs when often they are only minutely different from drugs which are cheaper.
  Some years ago, a research scientist at a university told me that he thought he had made a breakthrough in a drug for a disease. He was reluctant to publicise it because he was afraid that the drug companies would seize upon it. He could not make the idea available without the pharmaceutical companies making an enormous profit. My friend wanted to ensure that the people would derive the benefit. That is not possible. Most of the important breakthroughs in developing new drugs are made not by the drug companies but by the universities and other research institutions.
  The drug companies concentrate on making only marginal improvements so that they can make a slight difference to a drug's name and advertise it. The Minister for Health shakes his head, but I should be surprised if he could provide evidence to back his opinion. If he is really serious about saving costs, he should do something about excessively expensive prescribing by general practitioners. Cheaper alternative drugs exist which are just as effective for many diseases. That is a better path than putting the burden on the sick who cannot afford the extra heavy cost which the hon. Gentleman is imposing.
  11.17 pm
  The Minister for Health (Dr. Gerard Vaughan): We are discussing an important subject and I have followed the debate closely. The right hon. Members for Lewisham, East (Mr. Moyle) and Norwich, North (Mr. Ennals) sounded like replays of rather tired and much overplayed records. When in Opposition, Labour right hon. and hon. Members always say that prescriptions will be reduced or abolished. However, in Government they always do the opposite. That is on record. [HON. MEMBERS: "Nonsense."] It is in history.
  The decision to raise the prescription charge to £1 was announced in the Chancellor of the Exchequer's Budget speech last March. I could not help noting, when the right hon. Member for Lewisham, East complained about short notice, that the application for the debate was made only on 20 November. The application was supported by only six signatures. That is not many for a debate of such importance.
  It is well known that the Government's general policy on Health Service charges is that in suitable cases people who want to contribute towards health care and the cost of the National Health Service should be able to do so. At present, the average cost of a prescription item is £3·12. As my hon. Friend the Member for Somerset, North (Mr. Dean) said, a charge of £1 is less than one-third of the cost. The money raised by prescription charges contributes
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  directly to financing the Health Service. A £1 prescription will contribute savings to the National Health Service of £5 million in 1980–81 and about £30 million a year from 1981–82 onwards.
  My hon. Friend the Member for Somerset, North pointed out the advantages of that in terms of patient care. I am surprised that Opposition Members did not look more concerned when he also pointed out that after five years in which waiting lists had risen every year we now have a steady fall every three months. The current waiting lists are more than 90,000 less than they were a year ago. With the increase in charges, we have not reduced the range of exemptions but have widened them slightly. I shall return to that point later.
  The right hon. Member for Lewisham, East said that the increased charge would result in 12 million fewer prescriptions in a year. I do not believe that it will be anything like that. Supposing that there is a reduction in the number of prescriptions, surely that is no bad thing provided that all who need real treatment can obtain it. We cannot on the one hand say that too many—
  Dr. Shirley Summerskill: The Minister admits that the number of prescriptions has fallen by 6 million since charges were increased. Is he saying that previously doctors were prescribing unnecessarily? Is he saying that since the charge was imposed many people have not received necessary drugs?
  Dr. Vaughan: I am surprised that the hon. Lady should ask such a question.
  Mr. Michael Morris: Will my hon. Friend remind the House that the figure of 12 million for the reduction in prescriptions sits on the memory of the right hon. Member for Lewisham, East (Mr. Moyle), because that was the fall that took place in 1968 when the right hon. Gentleman's party reintroduced prescription charges?
  Dr. Vaughan: I am grateful to my hon. Friend for his remarks. I am surprised that the hon. Member for Halifax (Dr. Summerskill) should make the point that she did. She well knows the difficulties at times between doctors and patients when patients ask for prescriptions. I do not think we can say that too many people are taking too many medicines and then complain if there is some reduction in unnecessary prescribing. Personally, I welcome the increased interest by the public in how drugs are used and in economies of drug-taking. In 1978 there were 307 million prescriptions, last year there were 304·6 million and this year we expect about 303 million.
  Mr. Moyle: If the Minister admits, as he has come close to doing, that doctors are prescribing unnecessarily, why does he not apply the disincentive to the doctor and not to the patient?
  Dr. Vaughan: A working group from the medical profession is examining that point.
  My hon. Friend the Member for Somerset, North made clear the importance of exemptions. I shall not repeat the list of exemptions that he gave, but in addition there are the low income groups — the families in receipt of supplementary benefit or family income supplement and others with low incomes. It will please the hon. Member for Berwick-upon-Tweed (Mr. Beith) to hear that there has been a slight change. After allowing for special expenses on mortgages and hire purchase, we have increased the

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  additional weekly allowance from £1·70 to £2·50. This modest increase will increase the number who are eligible. The exemptions amount to 64 per cent. of prescriptions. If we add the 5 per cent. who take up season tickets, the total is about 70 per cent.
  The right hon. Member for Lewisham, East asked whether we are considering withdrawing the exemption arrangements for pensioners. That rumour is totally and completely untrue. It is mischievous and malicious, and I hope that it does not cause too much anxiety to pensioners.
  Mr. Ennals Mr. Ennals rose—
  Dr. Vaughan: The right hon. Gentleman asked whether we are discussing with the medical profession any extension of the medical category exemption. I realise that there is great anxiety on both sides of the House about the number of medical conditions that are included. On 9 June, my hon. Friend the Under-Secretary of State said:
  "We have continued to think about the representations made on this matter, and we have decided reluctantly at this stage not to approach again the General Medical Services Committee in an attempt to have another look at the exempt medical conditions. Any approach to the medical profession would have to include a large number of conditions such as those mentioned in that debate. This would increase the cost substantially of any exemption."—[Official Report, 9 June 1980; Vol. 986, c. 92.]
  It is with reluctance that I have to tell the right hon. Gentleman that we are not contemplating discussions at this stage.
  The hon. Member for Battersea, South (Mr. Dubs) made some interesting comments, although some of them were misguided and misinformed. He spoke of the problems between doctors prescribing and pharmacists making up the prescriptions. An important element is the multiple prescription or season ticket. The cost of such tickets has been increased from £12 to £15 for a year or from £4·50 to £5·50 for four months. We have not, as was done in the past, raised the cost of the season ticket in proportion to the change in the prescription charge. We have set a limit. It is a very good buy for anyone who needs more than 15 items a year. We place great importance on the arrangement. It seems to be a fair way of limiting the burden of expenditure on certain patients for the cost of medicines.
  We have been ascertaining what we can do to bring the knowledge of the availability of season tickets to as many people as possible. From 10 November we ran a campaign in the national daily and Sunday newspapers—
  Mr. Ennals: How much did it cost?
  Dr. Vaughan: The cost was £39,000. I recorded a radio interview on exemptions for release by the COI. We have prepared a special poster for post offices, community health councils, family practitioner committees and doctors' surgeries. We have a further poster setting out the details of season tickets and the rights of their holders.
  I know that the House will feel that we have the needs of patients in mind. I hope it will agree that we are doing what is necessary to bring the information on exemptions and season tickets to as many members of the public as possible. However, I was astonished—perhaps I should not have been—to hear yet again the same old remarks from the Opposition in attacking the Government for increasing or continuing charges. It is on the record,
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  despite what the right hon. Member for Lewisham, East has said, that when in Opposition Labour Members always say that the next Labour Government will abolish or reduce charges. Then, when they are in Government, they do exactly the opposite.
  Mr. Moyle: The hon. Gentleman is mistaken. During the whole period of office of the Labour Government between 1974 and 1979, prescription charges fell substantially in cost. We did not put them up. We reduced them.
  Dr. Vaughan: It is an extraordinary remark to say that charges were reduced because of inflation. I do not see how the right hon. Gentleman can say that charges were kept steady when, in Opposition, his party said that they would be abolished. I have the quotation here. I do not see how the right hon. Gentleman can clear the record by such remarks.
  Mr. Ennals: What is the Minister's answer to the point that a firm assurance was given by the present Prime Minister during the general election campaign to the effect that the Tory Party would not do what it is now doing?
  Dr. Vaughan: The right hon. Member knows perfectly well that that is not how the pledge was given. Opposition Members know that it is not a matter of practising what they preach; it is a matter of preaching one thing in Opposition and doing something quite different in Government.
  My hon. Friend the Member for Somerset, North reminded the House, and Labour Members did not like it, that in 1949 it was a Labour Government who passed the Act allowing charges to be made. They introduced charges. That cannot be lived down. What my hon. Friend did not mention was that it was the then Labour Government in 1951 who, for the first time, imposed charges for dentures and spectacles. There is no denying that. In 1964, Labour said that charges would go as rapidly as possible. When Labour left office in 1970, what was the situation? Not only had charges not been abolished, as the Labour Party had said, but the charges were higher—considerably higher than when Labour took over.
  We have the ironic situation that the Labour Government have repeatedly done exactly the opposite to what they said they would do when in Opposition. When the Labour Party is out of office, out come the pledges. In office, they are forgotten. In 1973 the pledge was to phase out charges and in 1974 it was to abolish them—a distinct hardening of approach. In Government, the pledges are broken and the charges retained. The right hon. Member for Lewisham, East should be frank with the House and admit that a completely free service is not only undesirable but unrealistic and is not in keeping with any sensible system of priorities in the National Health Service.
  I was astonished to see the same old weary note from the right hon. Member for Salford, West (Mr. Orme). When talking about the Royal Commission report, he said:
  "To meet this requirement of the report, charges would have to be phased out by a future Labour Government, and that is our policy goal. I make that very clear. This recommendation is central to the Royal Commission report, and the Labour Party believes that it is crucial to the future of the National Health Service."—[Official Report, 23 January 1980; Vol. 977, c. 473.]
  What hollow words those are when one looks at the record and sees what the Labour Party does in office.

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  I had not intended to end on that note, but I was provoked by right hon. Members opposite. I hope that the House will recognise these demands, which come over and over again, for the reduction and abolition of charges for what they are—sheer political humbug.
  It being half-past Eleven o'clock, Mr. DEPUTY SPEAKER put the Question, pursuant to Standing Order No. 4 (Prayers against statutory instruments, &c. (negative procedure)):—
  The House divided: Ayes 229, Noes 280.

  AYES

  Division No. 6]

  [11.30 pm

  Abse, Leo

  Evans, John (Newton)

  Adams, Allen

  Ewing, Harry

  Allaun, Frank

  Faulds, Andrew

  Alton, David

  Field, Frank

  Anderson, Donald

  Fitch, Alan

  Archer, Rt Hon Peter

  Fitt, Gerard

  Armstrong, Rt Hon Ernest

  Flannery, Martin

  Ashley, Rt Hon Jack

  Fletcher, Ted (Darlington)

  Ashton, Joe

  Foot, Rt Hon Michael

  Atkinson, N.(H'gey,)

  Ford, Ben

  Bagier, Gordon AT.

  Foster, Derek

  Barnett, Guy (Greenwich)

  Foulkes, George

  Barnett, Rt Hon Joel (H'wd)

  Fraser, J. (Lamb'th, N'w'd)

  Beith, A. J.

  Freeson, Rt Hon Reginald

  Benn, Rt Hon A. Wedgwood

  Garrett, John (Norwich S)

  Bennett, Andrew(St'kp't N)

  Gilbert, Rt Hon Dr John

  Bidwell, Sydney

  Ginsburg, David

  Boothroyd, Miss Betty

  Golding, John

  Bradley, Tom

  Gourlay, Harry

  Bray, Dr Jeremy

  Graham, Ted

  Brown, Hugh D. (Provan)

  Grant, George (Morpeth)

  Brown, R. C. (N'castle W)

  Grant, John (Islington C)

  Brown, Ron (E'burgh, Leith)

  Hamilton, James (Bothwell)

  Buchan, Norman

  Harrison, Rt Hon Walter

  Callaghan, Jim (Midd't'n & P)

  Hart, Rt Hon Dame Judith

  Campbell, Ian

  Hattersley, Rt Hon Roy

  Canavan, Dennis

  Haynes, Frank

  Cant, R. B.

  Healey, Rt Hon Denis

  Carmichael, Neil

  Heffer, Eric S.

  Carter-Jones, Lewis

  Hogg, N. (E Dunb't'nshire)

  Cartwright, John

  Home Robertson, John

  Clark, Dr David (S Shields)

  Homewood, William

  Cocks, Rt Hon M (B'stol S)

  Hooley, Frank

  Cohen, Stanley

  Horam, John

  Coleman, Donald

  Howell, Rt Hon D. (G'ldf'd)

  Conlan, Bernard

  Howells, Geraint

  Cook, Robin F.

  Huckfielcl, Les

  Cowans, Marry

  Hughes, Mark (Durham)

  Craigen, J. M.

  Hughes, Robert (Aberdeen N)

  Crowther, J. S.

  Hughes, Roy (Newport)

  Cryer, Bob

  Janner, Hon Greville

  Cunliffe, Lawrence

  John, Brynmor

  Cunningham, G. (Islington S)

  Johnson, James (Hull West)

  Dalyell, Tam

  Johnson, Walter (Derby S)

  Davidson, Arthur

  Johnston, Russell (Inverness)

  Davies, Rt Hon Denzil (L'lli)

  Jones, Rt Hon Alec (Rh'dda)

  Davies, Ifor (Gower)

  Jones, Barry (East Flint)

  Davis, Clinton (Hackney C)

  Jones, Dan (Burnley)

  Davis, T. (B'ham, Stechf'd)

  Kaufman, Rt Hon Gerald

  Deakins, Eric

  Kerr, Russell

  Dean, Joseph (Leeds West)

  Kilroy-Silk, Robert

  Dempsey, lames

  Lambie, David

  Dewar, Donald

  Lamborn, Harry

  Dixon, Donald

  Leadbitter, Ted

  Dobson, Frank

  Leighton, Ronald

  Dormand, Jack

  Lestor, Miss Joan

  Douglas, Dick

  Litherland, Robert

  Dubs, Alfred

  Lofthouse, Geoffrey

  Duffy, A. E. P.

  Lyon, Alexander (York)

  Dunnett, Jack

  Lyons, Edward (Bradf'd W)

  Dunwoody, Hon Mrs G.

  Mabon, Rt Hon Dr J. Dickson

  Eadie, Alex

  McDonald, Dr Oonagh

  Eastham, Ken

  McElhone, Frank

  Ellis, R. (NE D'bysn're)

  McKay, Allen (Penistone)

  English, Michael

  McKelvey, William

  Ennals, Rt Hon David

  MacKenzie, Rt Hon Gregor

  Evans, loan (Aberdare)

  Maclennan, Robert

  234

  McNally, Thomas

  Sheerman, Barry

  McTaggart, Robert

  Sheldon, Rt Hon R.

  McWilliam, John

  Shore, Rt Hon Peter

  Marks, Kenneth

  Short, Mrs Renee

  Marshall, Dr Edmund (Goole)

  Silkin, Rt Hon J. (Deptford)

  Marshall, Jim (Leicester S)

  Silkin, Rt Hon S. C. (Dulwich)

  Martin, M(G'gow S'burn)

  Silverman, Julius

  Mason, Rt Hon Roy

  Smith, Rt Hon J. (N Lanark)

  Maxton, John

  Snape, Peter

  Maynard, Miss Joan

  Soley, Clive

  Meacher, Michael

  Spearing, Nigel

  Mellish, Rt Hon Robert

  Spriggs, Leslie

  Mikardo, Ian

  Stallard, A. W.

  Millan, Rt Hon Bruce

  Stewart, Rt Hon D. (W Isles)

  Mitchell, R. C. (Soton Itchen)

  Stoddart, David

  Morris, Rt Hon A. (W'shawe)

  Stott, Roger

  Morris, Rt Hon C. (O'shaw)

  Straw, Jack

  Morris, Rt Hon J. (Aberavon)

  Summerskill, Hon Dr Shirley

  Moyle, Rt Hon Roland

  Taylor, Mrs Ann (Bolton W)

  Newens, Stanley

  Thomas, Jeffrey (Abertillery)

  Oakes, Rt Hon Gordon

  Thomas, Mike (Newcastle E)

  O'Halloran, Michael

  Thomas, Dr H.(Carmarthen)

  O'Neill, Martin

  Thorne, Stan (Preston South)

  Orme, Rt Hon Stanley

  Tilley, John

  Owen, Rt Hon Dr David

  Tinn, James

  Paisley, Rev Ian

  Torney, Tom

  Palmer, Arthur

  Varley, Rt Hon Eric G.

  Park, George

  Wainwright, E.(Dearne V)

  Parker, John

  Walker, Rt Hon H.(D'caster)

  Parry, Robert

  Watkins, David

  Pendry, Tom

  Weetch, Ken

  Powell, Raymond (Ogmore)

  Wellbeloved, James

  Race, Reg

  Welsh, Michael

  Radice, Giles

  White, Frank R.

  Rees, Rt Hon M (Leeds S)

  White, J. (G'gow Pollok)

  Richardson, Jo

  Whitehead, Phillip

  Roberts, Albert (Normanton)

  Whitlock, William

  Roberts, Allan (Bootle)

  Willey, Rt Hon Frederick

  Roberts, Ernest (Hackney N)

  Williams, Rt Hon A. (S'sea W)

  Roberts, Gwilym (Cannock)

  Wilson, Gordon (Dundee E)

  Robertson, George

  Wilson, William (C'try SE)

  Robinson, G. (Coventry NW)

  Winnick, David

  Rodgers, Rt Hon William

  Woodall, Alec

  Rooker, J. W.

  Woolmer, Kenneth

  Roper, John

  Wrigglesworth, Ian

  Ross, Ernest (Dundee West)

  Young, David (Bolton E)

  Ross, Stephen (Isle of Wight)

  Tellers for the Ayes:

  Rowlands, Ted

  Mr. George Morton and

  Sandelson, Neville

  Mr. Austin Mitchell.

  NOES

  Adley, Robert

  Bryan, Sir Paul

  Alexander, Richard

  Buchanan-Smith, Hon Alick

  Ancram, Michael

  Buck, Antony

  Arnold, Tom

  Budgen, Nick

  Baker, Kenneth(St.M'bone)

  Bulmer, Esmond

  Baker, Nicholas (N Dorset)

  Burden, Sir Frederick

  Beaumont-Dark, Anthony

  Butcher, John

  Bell, Sir Ronald

  Cadbury, Jocelyn

  Bendall, Vivian

  Carlisle, John (Luton West)

  Benyon, Thomas (A'don)

  Carlisle, Kenneth (Lincoln)

  Benyon, W. (Buckingham)

  Carlisle, Rt Hon M. (R'c'n )

  Best, Keith

  Chalker, Mrs. Lynda

  Bevan, David Gilroy

  Channon, Rt. Hon. Paul

  Blackburn, John

  Chapman, Sydney

  Blaker, Peter

  Churchill, W. S.

  Body, Richard

  Clark, Hon A. (Plym'th, S'n)

  Bonsor, Sir Nicholas

  Clark, Sir W. (Croydon S)

  Boscawen, Hon Robert

  Clarke, Kenneth (Rushcliffe)

  Bottomley, Rt Hon A.(M'b'ro)

  Clegg, Sir Walter

  Bowden, Andrew

  Cockeram, Eric

  Braine, Sir Bernard

  Colvin, Michael

  Bright, Graham

  Cope, John

  Brinton, Tim

  Cormack, Patrick

  Brocklebank-Fowler, C.

  Corrie, John

  Brooke, Hon Peter

  Costain, Sir Albert

  Brotherton, Michael

  Cranborne, Viscount

  Brown, M.(Brigg and Scun)

  Critchley, Julian

  Browne, John (Winchester)

  Crouch, David

  Bruce-Gardyne, John

  Dean, Paul (North Somerset)

  235

  Dickens, Geoffrey

  Lewis, Kenneth (Rutland)

  Douglas-Hamilton, Lord J.

  Loveridge, John

  Dover, Denshore

  Luce, Richard

  du Cann, Rt Hon Edward

  McCrindle, Robert

  Dunn, James A.

  Macfarlane, Neil

  Durant, Tony

  MacGregor, John

  Eden, Rt Hon Sir John

  MacKay, John (Argyll)

  Edwards, Rt Hon N. (P'broke)

  Macmillan, Rt Hon M.

  Eggar, Tim

  McNair-Wilson, M. (N'bury)

  Elliott, Sir William

  McNair-Wilson, P. (New F'st)

  Eyre, Reginald

  McQuarrie, Albert

  Fairbairn, Nicholas

  Madel, David

  Fairgrieve, Russell

  Major, John

  Faith, Mrs Sheila

  Marland, Paul

  Farr, John

  Marlow, Tony

  Fenner, Mrs Peggy

  Marshall Michael (Arundel)

  Finsberg, Geoffrey

  Marten, Neil (Banbury)

  Fisher, Sir Nigel

  Mates, Michael

  Fletcher, A. (Ed'nb'gh N)

  Mather, Carol

  Fookes, Miss Janet

  Maude, Rt Hon Angus

  Forman, Nigel

  Mawby, Ray

  Fowler, Rt Hon Norman

  Maxwell-Hyslop, Robin

  Fox, Marcus

  Mayhew, Patrick

  Fraser, Rt Hon Sir Hugh

  Mellor, David

  Fraser, Peter (South Angus)

  Meyer, Sir Anthony

  Fry, Peter

  Miller, Hal (B'grove)

  Gardiner, George (Reigate)

  Mills, Iain (Meriden)

  Gardner, Edward (S Fylde)

  Mills, Peter (West Devon)

  Garel-Jones, Tristan

  Miscampbell, Norman

  Gilmour, Rt Hon Sir Ian

  Mitchell, David (Basingstoke)

  Goodhew, Victor

  Moate, Roger

  Goodlad, Alastair

  Monro, Hector

  Gow, Ian

  Montgomery, Fergus

  Gower, Sir Raymond

  Morris, M. (N'hampton S)

  Gray, Hamish

  Morrison, Hon C. (Devizes)

  Greenway, Harry

  Morrison, Hon P. (Chester)

  Griffiths, E.(B'y St. Edm'ds)

  Mudd, David

  Griffiths, Peter Portsm'th N)

  Myles, David

  Grist, Ian

  Neale, Gerrard

  Grylls, Michael

  Needham, Richard

  Gummer, John Selwyn

  Nelson, Anthony

  Hamilton, Hon A.

  Neubert, Michael

  Hamilton, Michael (Salisbury)

  Newton, Tony

  Hampson, Dr Keith

  Nott, Rt Hon John

  Hannam, John

  Oppenheim, Rt Hon Mrs S.

  Haselhurst, Alan

  Page, Rt Hon Sir G. (Crosby)

  Hastings, Stephen

  Page, Richard (SW Herts)

  Havers, Rt Hon Sir Michael

  Parris, Matthew

  Hawksley, Warren

  Patten, Christopher (Bath)

  Hayhoe, Barney

  Patten, John (Oxford)

  Heddle, John

  Pawsey, James

  Henderson, Barry

  Percival, Sir Ian

  Heseltine, Rt Hon Michael

  Peyton, Rt Hon John

  Hicks, Robert

  Pink, R. Bonner

  Higgins, Rt Hon Terence L.

  Pollock, Alexander

  Hogg, Hon Douglas (Gr'th'm)

  Porter, Barry

  Holland, Philip (Carlton)

  Prentice, Rt Hon Reg

  Hooson, Tom

  Price, Sir David (Eastleigh)

  Hordern, Peter

  Prior, Rt Hon James

  Howell, Rt Hon D. (G'ldf'd)

  Proctor, K. Harvey

  Howell, Ralph (N Norfolk)

  Pym, Rt Hon Francis

  Hunt, David (Wirral)

  Raison, Timothy

  Hunt, John (Ravensbourne)

  Rathbone, Tim

  Hurd, Hon Douglas

  Rees, Peter (Dover and Deal)

  Irving, Charles (Cheltenham)

  Rees-Davies, W. R.

  Jenkin, Rt Hon Patrick

  Renton, Tim

  Johnson, James (Hull West)

  Rhodes James, Robert

  Jopling, Rt Hon Michael

  Rhys Williams, Sir Brandon

  Kaberry, Sir Donald

  Ridley, Hon Nicholas

  Kimball, Marcus

  Ridsdale, Julian

  King, Rt Hon Tom

  Rifkind, Malcolm

  Knox, David

  Rippon, Rt Hon Geoffrey

  Lamont, Norman

  Roberts, M. (Cardiff NW)

  Lang, Ian

  Roberts, Wyn (Conway)

  Latham, Michael

  Rossi, Hugh

  Lawrence, Ivan

  Rost, Peter

  Lawson, Nigel

  Royle, Sir Anthony

  Lee, John

  Sainsbury, Hon Timothy

  Lennox-Boyd, Hon Mark

  St. John-Stevas, Rt Hon N.

  Lester Jim (Beeston)

  Scott, Nicholas

  236

  Shaw, Michael (Scarborough)

  Trippier, David

  Shelton, William (Streatham)

  Trotter, Neville

  Shepherd, Colin (Hereford)

  van Straubenzee, W. R.

  Shepherd, Richard

  Vaughan, Dr Gerard

  Silvester, Fred

  Viggers, Peter

  Sims, Roger

  Waddington, David

  Skeet, T. H. H.

  Wakeham, John

  Speed, Keith

  Waldegrave, Hon William

  Speller, Tony

  Walker, Rt Hon P.(W'cester)

  Spence, John

  Walker, B. (Perth)

  Spicer, Jim (West Dorset)

  Walker-Smith, Rt Hon Sir D.

  Spicer, Michael (S Worcs)

  Wall, Patrick

  Sproat, Ian

  Waller, Gary

  Squire, Robin

  Walters, Dennis

  Stanbrook, Ivor

  Ward, John

  Stanley, John

  Warren, Kenneth

  Steen, Anthony

  Watson, John

  Stevens, Martin

  Wells, John (Maidstone)

  Stewart, Ian (Hitchin)

  Wells, Bowen

  Stewart, J.(E Renfrewshire)

  Wheeler, John

  Stokes, John

  Whitelaw, Rt Hon William

  Stradling Thomas, J.

  Whitney, Raymond

  Tapsell, Peter

  Wickenden, Keith

  Taylor, Robert (Croydon NW)

  Wiggin, Jerry

  Taylor, Teddy (S'end E)

  Williams, D. (Montgomery)

  Temple-Morris, Peter

  Winterton, Nicholas

  Thatcher, Rt Hon Mrs M.

  Wolfson, Mark

  Thomas, Rt Hon Peter

  Young, Sir George (Acton)

  Thompson, Donald

  Younger, Rt Hon George

  Thorne, Neil (Ilford South)

  Thornton, Malcolm

  Tellers for the Noes:

  Townend, John (Bridlington)

  Mr. Spencer Le Marchant and

  Townsend, Cyril D, (B'heath)

  Mr. Anthony Berry

  Question accordingly negatived.

  WELSH GRAND COMMITTEE
  Ordered,
  That during the proceedings on the matter of Housing in Wales, the Welsh Grand Committee have leave to sit twice on the first day on which they shall meet; and that, notwithstanding the provisions of Standing Order No. 64 (Meetings of Standing Committees), the second such sitting shall not commence before Four o'clock nor continue after the Committee have considered the matter for two hours at that sitting.—[Mr. Brooke.]

Small Businesses (Liverpool)
Motion made, and Question proposed, That this House do now adjourn.—[Mr. Brooke.]
11.44 pm
Mr. Anthony Steen: I know that my hon. Friend the Minister will agree that no time is too late to discuss the problems of Liverpool. The only trouble is that we have been talking about the problems of Liverpool for a decade or more and the solutions are always seen in terms of further public finance and public intervention.
In 1968, the country woke up to the fact that there was an urban crisis, and the right hon. Member for Huyton (Sir H. Wilson), then Prime Minister, gave £20 million to solving it and launched the urban aid programme. This had three rather unfortunate consequences. It pinched money from the shire counties in order to bolster up the depleted inner city rate base. It diverted attention from underlying problems of economic decline by providing funds to build health centres and employ adventure playground leaders. It also made local authorities poorer by requiring them to find a quarter of the urban aid expenditure from the local authority rates.
The urban aid programme set the scene for a whole series of public interventionist programmes designed to

237
cure the ills of cities, each programme distinguished by its extravagant name, suggesting that a cure for the problems of cities had teen found.
You may remember, Mr. Deputy Speaker, that in 1968 solving the problems of the city was defined in terms of pockets of deprivation; all that the country needed to do was to extinguish those pockets of deprivation and the cities would be restored to health. But the pockets of deprivation theory, as expressed through the community development project of the Home Office and the educational priority areas of the Department of Education and Science, soon gave way to the fact that the pockets did not solve the problems, and neighbourhood schemes were all the rage. But neighbourhoods did not solve the problems, and the city as a whole became a study area through the inner area studies—the total approach.
Then it was concluded that it had nothing to do with the regions and localities of the cities and that the problems of the cities were to do with the people who lived there, and the transmitted deprivation theory was financed by the Department of Health and Social Security. Then there were the quality of life studies, then there was the urban deprivation unit to co-ordinate the lot through the Home Office, and then it was a question of priorities through the comprehensive community programme. Then there was partnership, which kept out the private sector, and more recently there have been the urban development corporations and enterprise zones.
Liverpool has had nearly every one of these special schemes, which have cost the country more than £100 million in the last 12 years. The only snag is that in Loverpool's case nearly every statistic of deprivation has increased, in spite of these schemes. There are fewer jobs, there are more unemployed, there are fewer small firms, there are fewer people and there is a lower per capita income.
The city will not revive by willing it, and what is clear is that public intervention has caused a great number of the problems from which we suffer today. For example, in Liverpool there has been an exodus of the population from the inner city — the result of the grand clearance schemes which destroyed homes and businesses and split neighbourhoods and families. Liverpool lost 150,000 people—22 per cent. of its population—in the 10-year period from 1966 to 1976. But what did the public authority do then? It built the vast soulless, apathetic council estates on the edges of the city and the green field sites, destroying good agricultural land, transferring people from the inner city old slums and making new slums of the new neighbourhoods.
The failure of the local authority to rebuild on cleared sites resulted in land hoarding by the local authority and the nationalised industries. Today, there is 1,200 acres and more of dormant, derelict and vacant land, at least half of which is in the hands of nationalised industries and local authorities. This has created land scarcity, it has created artificially high land values, and it has reduced the rate base by pushing up the rates for those who remain.
The mindless destruction of small firms was the result of the overall clearance strategies of the 1950s and 1960s. The preference for green field site development is understandable because it is cheaper and easier. There are inadequate resources for the necessary infrastructure for the inner city sites. The expansion beyond the city boundaries on green field sites throughout the country is gobbling up 60,000 acres of agricultural land annually.
238
Bearing in mind that we currently import half of our food, it is a national scandal that we continue to consume good agricultural land.
It is also worth mentioning that one of the problems that is created by the mindless destruction of small firms is that the local authority often has a monopoly, which results in its aggravating an already serious situation. For example, in the Stanley Market Association on the edges of the city, the local authority has a monopoly of steam. It provides the steam for the association and charges it £6·85 per thousand pounds of hot steam. That is in contrast to £3·54, about half that amount, for the same product if it is bought from private enterprise.
More problems are created by regional aid, and there are further distortions. About 100,000 jobs move from inner to outer Liverpool at a cost of over £14,000 per job from public money. Companies attracted by grants and subsidies are the first to leave when there is an economic downturn. There is a problem of housing in Liverpool, created by the Rent Acts, the decline of the old rented housing in the inner city and the local authority preferring to serve compulsory purchase orders rather than encourage a process of homesteading. The building societies are operating a red-lining programme, which discriminates against lending for the older housing in the inner area.
That is too much central and local government intervention, which is creating a distortion in Liverpool, resulting in the failure of the area to operate on the free market forces. It is not surprising that there is so little investment in the inner area. Why should the financial institutions put their money into an ailing city centre? We have to blame central and local government for creating the uncertainty and for dramatic changes in their policy. There is no chance of insurance companies, pension funds or banks investing money in urban revitalisation in Liverpool and other great cities unless there is a financial incentive for them to do so. I am not speaking about more grants and subsidies. It is the antithesis of grants and subsidies that distort the economy. We should not tax the windfall profits of the banks, as has been suggested by Labour Members, but we must make sure that there is a good reason why finance should be invested in the older inner city areas.
I have given a quick resume of the problems facing Liverpool that have been created by too much public intervention. There have been too many special programmes which have made matters worse and too much Government meddling with the economy locally, with the result that things have deteriorated rapidly.
Mr. David Alton: Will the hon. Gentleman give way?
Mr. Steen: No, I shall not give way to the hon. Gentleman. I would normally have given way, but I was in the House when he spoke for just over 30 minutes on the motion relating to the Queen's Speech. I was not called to speak in that debate, but I would have made the same speech. I should like to finish my speech, and if I have time I shall give way.
I was talking about the level of public intervention and the effect of it in Liverpool. The Government cannot withdraw the public money and put nothing in its place, although they are trying to do that. If the public sector money is withdrawn, there must be a transitional period

239
in which the public sector finance is used to lever private money into infrastructure and other facilities to encourage private money back.
People will put their money into urban revitalisation only if they believe it to be a sound investment. As things stand, there is no motivation for the private sector to invest in Liverpool. It certainly sees no chance of its money being safe or of the city being revitalised.
What, therefore, should the clearing banks be doing? Can they be persuaded to invest in the revitalisation process? Can the building societies be persuaded not to discriminate against older housing and not to operate a redlining programme? If they can, what role should the Government play in persuading them? The Government have an important task to see that the older housing stock in Liverpool does not deteriorate further. They cannot talk about inner city revitalisation while maintaining the importance of the Rent Acts. The two do not go hand in hand.
Compulsory purchase orders are served daily on older houses in Liverpool, and the bulldozers move in soon after. That is a complete antithesis of repeated statements by Ministers of both parties that the bulldozer has been pensioned off. It has not. It is operating at a tremendous speed in Liverpool, destroying houses and small firms. The Government cannot talk about an inner city policy while allowing the local authority to destroy the houses that would help to create the prosperity and the health of that inner area.
The problem with the inner city is that a lot of small firms have been destroyed. That has resulted in a severe depletion of the rate base. Not surprisingly, the rates have had to increase by 50 per cent. this year, and that has helped to drive more firms out. The problem is compounded by an inflexible and unenlightened planning department that continues to favour green field sites on the edges of the city to accommodate industrial development rather than ensuring that firms can expand and develop on their existing sites.
A small company in my constituency—Pakenhams—had a turnover of £250,000, employed a local work force and had an overseas trade. It was bulldozed about nine months ago to make way for more council housing. That company will never restart, and the men who worked in it are still unemployed. A more recent case concerns a warehouse owned by a constituent and let to Trust Houses Forte Ltd. on a lease with 21 years to run. It was the subject of a compulsory purchase notice. The lease has been terminated. The rent provided extra income for an elderly constituent, but that has been stopped. The area is becoming blighted. The city council has been responsible for the further destruction of good Victorian housing and warehousing in that inner area.
It is no good the Minister saying that he is doing what he can for small firms. No one doubts his integrity, his hard work, his conviction and the tremendous job that he has done for small firms since the Government took office. The problem is with the Government's total commitment to the inner area. It is no good one Minister in one Department talking about revitalisation if another Government Department is taking entirely contrary action.
The picture of Liverpool that is emerging is of a doughnut. The centre of the city is being emptied to form
240
the hole in the doughnut. What steps can my hon. Friend and his colleagues take to ensure that the doughnut is not left with an empty centre?
I turn next to the problems of companies such as Tate and Lyle. If the Ministry of Agriculture favours beet sugar over cane sugar, 1,400 jobs could be lost in that company. What is the point of talking about small firms and saving one or two jobs if Tate and Lyle might close with the loss of 1,400 jobs?
Similarly, there is little point in the Minister saying that he is concerned to see the enterprise zones working if within them there are hypermarkets which take the trade away from the small retailers in the inner areas and thereby destroy the inner city policy of the Department of the Environment.
Again, Department after Department pulls in different directions. It seems to be of little value to Liverpool unless we can have a total urban strategy. I hope that the Minister will say that he will push for such a strategy. Unless we can have real tools with which to revitalise and strengthen the local economy, there will be no chance of the inner area of Liverpool surviving. I am thinking of industrial revenue bonds, allowing local authorities to lever finance through municipal bonds, rate holidays, outlawing red lining, persuading the banks to use windfall profits in more socially useful projects, discouraging green field site development and auctioning off public land which is not used. Unless such an approach is adopted, people who have left Liverpool will not return. So long as they do not return, the rate base will continue to shrink, the local authority will continue to raise its rates in an effort to contain the services and small firms will continue to go to the wall.
Will the Minister make a commitment that he will not just use his best endeavours in his Department to revitalise the ailing centre of Liverpool but will take steps to consult all his colleagues in the other Departments which are making his job so much more difficult?
Mr. Alton Mr. Alton rose—
Mr. Steen: I will give way to the hon. Gentleman now.
Mr. Alton: I am grateful to the hon. Gentleman for giving way to me. Indeed, I gave way to him in the debate on the Queen's Speech, as he will recall. I am grateful to him for returning that courtesy.
I share the hon. Gentleman's concern about the future of small businesses. One thousand extra jobs will be bulldozed out of existence as a result of spending £100 million of taxpayers' and ratepayers' money on the construction of the Liverpool inner ring road. How can the hon. Gentleman support a policy which will mean the closure of additional small businesses?
Secondly, how can the hon. Gentleman justify the continuation of the moratorium, imposed by the Conservative Government, which is driving many small building firms on Merseyside out of business?
Mr. Steen: I am sorry that I gave way, because the points made by the hon. Gentleman go beyond this debate. There is some dispute between us, but I point out that the inner ring road is designed as a long-term project of revitalisation. I share the hon. Gentleman's view that we cannot displace small firms unless we can find somewhere else for them to operate at similar rents. Otherwise, they cannot afford to operate.

241
The problem seems to be that Government and local government departments are working in opposite directions. Although one Minister is responsible for small firms, another Department is destroying them. We have a constant conflict in the centre of Liverpool which needs to be resolved not by the urban aid programme but by a total strategy designed to see new private investment the rehabilitation of older houses, small firms and the auctioning off of derelict sites.
I am delighted that my hon. Friend the Minister is here to answer for one small par: of the Government, but it is clear that something far bigger and more comprehensive is needed if we are not to get the doughnut with the hole in the middle.
12.4 am
The Under-Secretary of State for Industry (Mr. David Mitchell): My hon. Friend the Member for Liverpool, Wavertree (Mr. Steen) raises the problems of Liverpool not for the first time. Indeed, he is much identified in this House and in a wider field as the voice of that city. I was fascinated as he sketched in the history of the various attempts which have been made in the past to deal with be very severe problems—we recognise their severity—of the city of Liverpool.
It is perhaps a tragedy that at this hour of the night, in the year 1980, we are looking at the problems of Liverpool—and Liverpool is not unique in this respect, although it is a very severe example—and casting our minds back over the years to the time when if had just been born and the original policies concerned with the depressed areas, as they were then called, were beginning to be evolved. When those fist policies were evolved, we found and identified structural weaknesses in employment in those areas. All these years later, with all this money and all the schemes that my hon. Friend has sketched in, we are still looking, perhaps somewhat shamefacedly, at the same areas and the same problems, having recognised that for all that has been done and all that has been spent we have hot been successful in making the real dramatic change which is needed.
I think that my hon. Friend has highlighted very much the heart of the problem. He referred to the doughnut with no jam in the middle. At one stage I thought that he would be asking me to provide the jam, but he will recognise that that is beyond the limitations imposed upon Under-Secretaries in the Department of Industry. But he dramatically demonstrated the problem when he referred to the 22 per cent. of the population removed from inner Liverpool to the surrounding areas.
I remember visiting Liverpool at my hon. Friend's suggestion last year and seeing for the first time exactly what it was like with that great inner dockland, heartland area, the really depressed area of housing around it, and outside the town the newer and more modern factory areas with the employment and the housing estates in the surrounding areas — just employment and housing estates, and precious little else.
What my hon. Friend has underlined is that what has happened in Liverpool—as has happened in London and so many others of our cities—is not something that was inherent, necessary and inevitable but is the result of decisions taken by the local authority and the local people in those areas to transport the commercial and industrial life and the people out from the centre of the city. Just as London did it to my constituency, Basingstoke, and
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Ashford and a circle of towns around it, so Liverpool has done the same. The tragedy is that this has worsened the problem instead of healing it. My hon. Friend is so right to draw attention to it in the way that he has done.
My hon. Friend referred to 1,200 acres, I think, of derelict land—that is rather more than the figure in my brief — and he mentioned the holdings of the nationalised industries. He will know that my right hon. Friend the Secretary of State for the Environment is deeply concerned about this problem, and that is why he has set up the Domesday Book of derelict land, which he will be using as a lever to force local authorities to put land on to the market when they do not need it, and the public undertakings likewise. This sort of approach, coupled with my hon. Friend's prodding, identifying areas of land which are not needed to be retained by public undertakings and seeking to bring them back on to the market, is the right way to move.
Mr. Steen: May I raise two matters in that connection? The first is that registers are all well and good, but unless the Minister makes a local authority or public undertaking put the land on the market by way of auction, the price that is likely to be asked will be far too high because of the historical land value.
The other way of doing it, which would be much more effective than registers, is to have a compulsory purchase order in reverse. In other words, any member of the public could serve a compulsory notice on a nationalised industry to show cause why it should not sell a piece of land. Registers are a step in the right direction, but they are too slow.
Mr. Mitchell: My hon. Friend has made an ingenious suggestion. The idea of a CPO in reverse is certainly an ingenious one. But my hon. Friend will appreciate that this is a matter for my right hon. Friend the Secretary of State for the Environment. I undertake to draw my hon. Friend's ideas to my right hon. Friend's attention.
My hon. Friend rightly highlights the damage which the high level of rates has done to the smaller business community. It is a tragedy to see a local authority, supposedly and probably with good intention, seeking to help small businesses to start up and at the same time pursuing policies which involve, in this case, a rate increase of more than 40 per cent. to become the fourth highest percentage increase in the country and against an average for metropolitan districts of only 25·2 per cent. To increase rates to that extent must inevitably have a severely damaging effect on the prospects of small businesses starting up.
Although my hon. Friend is somewhat contemptuous of Government intervention, in a way he is also still asking for it. We recognise that the Government have a role, and that is why special development area status, the highest possible rate of 22 per cent. regional development grant, the availability of additional selective financial assistance under section 7 of the Industry Act and the availability of 25 per cent. grant under the Product and Process Development scheme all are very important. I urge my hon. Friend not to denigrate them, because there has been a tendency, I am afraid, from the Opposition Benches to convey the impression that the present Government have done away with regional assistance and assistance to industry, and I believe that we are not getting as many people coming forward with projects asking for

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Government support because they believe that it has been swept away. I am glad to put on record that Liverpool has these very considerable advantages.
Mr. Alton: As the sole representative on the Opposition Benches, may I ask the Minister to deal with two very brief questions? Does he accept that the very high level of interest rates has been crippling for small businesses? Secondly, what will he do to ensure that the rate support grant settlement this year is such that the rates do not have to rise by an enormous amount, forcing small firms out of business?
Mr. Mitchell: I have only a little time at my disposal, and the hon. Gentleman is being a little unfair to my hon. Friend the Member for Wavertree.
My hon Friend referred to small businesses being driven out by mindless destruction. He knows the situation in Liverpool better than I do. I am alarmed by what he said, and I shall draw his views on that subject also to the attention of my right hon. Friend the Secretary of State for the Environment.
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My hon. Friend also spoke of the need for finance for small businesses. We have now arranged through the small firms counselling service of the Department of Industry a link with the Norwich Union Insurance Group. If there is a small business which he knows of and he puts it in touch with our consellors, and if it is an appropriate business for a pension fund to invest in, even though it is much smaller in size than a pension fund normally would invest in, our counselling service will do the monitoring, do the assessment and present the case to the Norwich Union investment fund. In that way, there is a real prospect of getting risk money into small businesses in Merseyside. I hope that my hon Friend will follow that up.
Finally, my hon Friend called on me virtually to act as a co-ordinator of all the Government's services. I cannot undertake to do that, even though I might like to do so and understand the problems to which he draws attention.
I have to say to my hon Friend "Well done."
Question put and agreed to.
Adjourned accordingly at fourteen minutes past Twelve o' clock.