HC Deb 01 April 1981 vol 2 cc473-508
Mr. Orme

I beg to move amendment No. 51, in page 24, line 20, leave out clause 23.

Mr. Deputy Speaker

With this we may take amendment No. 70, in page 60, line 25, leave out clause 71.

Mr. Orme

The amendments are probing amendments, because that is the only way that we can debate cash limits and consider the Government's handling of cash limits and BT's finances.

We are talking about the amount of money needed for BT. For example, BT wants to invest about £2,200 million a year, at current prices, for the next four or five years. It has tried to do nearly all that from its internal resources, but after two price increases, and in the current deep recession, it can do so no longer.

In addition, raising prices further would be grossly unfair to customers and would amount to extremely bad financial management. Long-term investment should be financed by long-term capital. More external finance is urgently needed. It is against that background that we are discussing the cash limits, and we shall want to go into the matter in detail. We want a detailed explanation of current financing and what the future is likely to be for British Telecommunications.

In March the 1980–81 figure of £78 million was grudgingly extended by the Government to £225 million. However, for 1981–82 it is reduced to £180 million. All suggestions about raising alternative finance, such as Telecom bonds, have been rejected. Even with Telecom bonds, most of the corporation's finance would still be found internally. The current financial limits are inadequate by up to £500 million a year.

British Telecom investment is being cut, orders are being cancelled, and jobs are being lost in supplying industries as a direct result of inadequate finance. It is monetarism gone mad. The Government are supposed to want investment in growth industries, yet they are preventing that happening in British Telecom, the technological industry of the future. Surely it is a winner on any terms. It needs Government support and investment.

I am sorry that the Secretary of State does not intend to reply to the debate, because we have heard him argue that British Telecom investment would crowd out the private sector. That is nonsense. Private invesment is continuing to decline fast, as the Government's figures show. That is because of lack of demand, not a shortage of finance, and because of the high rate of sterling and the MLR.

At a time of deep and damaging recession, large-scale public investment is needed. We believe in investment in wealth-producing assets that will pull the economy foward. The public corporations should be doing that. Preventing them because they are publicly owned is damaging to British industry, and does not make sense. To claim that such investment affects the PSBR and is therefore unclean is to let monetarist dogma triumph over common sense.

It is now widely accepted that the Government's position is totally unrealistic. The Bank of England's statement yesterday reaffirmed its view that the economic decline has not bottomed out and that the recession is not ending.

Over 95 per cent. of British Telecom's £2,200 million a year investment programme is spent within the United Kingdom. Over 75 per cent., or £1,600 million, goes to private sector companies that desperately need orders.

This is another link between the private sector and the public sector. In our mixed economy they live off each other and it would mean work in the private sector if this investment were to go ahead. I think that it is generally agreed that British Telecom's investment contributes overwhelmingly to the British economy. Nearly two-thirds of the investment goes on the network itself, in particular on telephone exchanges and transmission lines. This is a complex and integrated operation, which must be kept together under British Telecom.

To assume that in some vague way joint ventures, which we discussed in earlier debates, between British Telecom and private companies can be formed to run a telephone exchange is extremely naive. It deliberately ignores the nature of the telecommunications business.

The Government have written in in clause 4 the crucial provision that British Telecom cannot transfer to subsidiaries any of its activities deriving from its exclusive privilege if those subsidiaries are not wholly owned by British Telecom. This means the telecommunications network. The Government claim that joint ventures are the answer to the British Telecom's financial problems, but they are totally unworkable, because the vast majority of the BT investment is in the network, which cannot be given over to joint ventures.

Therefore, great frustration and anger at the Government's obstinate approach to financing is being expressed. Businesses, residential users and supplying companies are joining in a growing chorus of resentment against the Government. They are being deliberately prevented by the Government from getting a decent service, and the situation can only get much worse unless the Government change their policy. It is vital to prepare now for an upturn in the economy, when huge demands for new services will be made of British Telecom. With planning horizons of five years or more, the short-term financial constraints on the industry at the moment are totally unrelated to the needs of the business and are exceptionally damaging for everybody concerned.

It is against this background, and bearing in mind the serious economic situation in which the Government's cash limits are placing the telecommunications industry at the moment and the uncertainty that has been created by other parts of the Bill dealing with the proposed hiving-off, the ending of the monopoly and the selling off of parts to the private sector that we believe that there should be a long-term planning of financial investment for the British telecommunications industry. That is what we are urging in these amendments, and we urge the Government to see that the necessary finance is made available.

Mr. Golding

I begin by asking the Minister of State—if he is to reply—a question that I asked in Committee, at column 280. I have not yet received a reply, but I understand that and I am making no point about it.

In Committee I asked about the difference between the figures for future investment shown in the Post Office's telecommunications business plan and those shown in the White Paper on March 1980. I should like to know, either tonight or by letter, what is the difference between the figures, so that I can know what future investment in telecommunications is to be.

We firmly believe that cash limits are inappropriate for corporations of the type of British Telecom—corporations that are wealth-producing if there is investment in them. It was particularly absurd that in 1979 the Post Office had to repay £110 million. It is nonsensical for money to be taken out of an expanding and potentially very profitable business. It would have been far better if the money had gone into telecommunications investment.

Throughout the years I have supported an economic pricing policy. I shall not explain my reasons for doing so on this occasion. However, in the present recession there are substantial dangers in increasing prices too much. I put a question mark against the 30 per cent increase in tariffs that we have seen over the past year.

The difficulties that BT has found itself in because of cash limits are equalled by the difficulties that the manufacturers have been in because of the large investment cuts. Over the years it has been a bane of both the Post Office telecommunications service and the manufacturers that Governments of both complexions have pursued stop-go economic policies that have hit industry badly.

6.45 am

In Committee we added to the Bill our amendment allowing British Telecom to borrow from the market. That was extremely welcome. I am only sorry that the Minister has not yet persuaded the Treasury of the wisdom of going to the open market. The investment now is needed badly. The level of investment is less in real terms than in 1970. That is not acceptable, when we are even given a Minister for Industry and Information Technology. The level of investment is inadequate.

I cannot understand how it can be sensible to try to finance investment from revenue. It may be possible to do so on some occasions, but not in a recession. In Committee I referred to a gap of £320 million in the investment programme. The Budget gave welcome relief, but that relief was only £145 million.

British Telecommunications should be able to borrow on the open market. It has an excellent credit rating in New York. It does not make sense that it cannot go to New York and borrow. That would have no impact on financial arrangements in the City of London. It is nonsensical that the fiction should be maintained that because the Government are ultimately responsible for British Telecommunications the public sector borrowing requirement should come into play. It does not make sense to raise money in Britain, either through taxation or from borrowing, to finance British Telecom when it could go to the New York market and obtain all the capital that it requires.

The quicker that we gel rid of this odd PSBR rule the better for British Telecom. I cannot understand why the Treasury sticks doggedly to this rule. It makes it more difficult not only for the Treasury and the Government but for everyone. It is one of the dogmas that get adopted by institutions, and it is time that we abandoned it. That dogma is proving very expensive to British Telecommunications. It is having to abandon profitable projects. It has to abandon projects on the periphery because it has to concentrate on the network. That will cost BT money in the long term. Because of cash limits, it will have to pay higher prices if it is forced to wait to place orders that it could have placed earlier. It is having to place orders in small packets because of the cash limits policy, when it knows that it could order larger amounts, thereby saving money.

The cash limits affect not only BT but private industry. Orders have to be held up because smaller packets have to be purchased. The British manufacturing industry is suffering badly. That is nonsense. It is ridiculous to hold back orders that one knows one wants to place. One could have gone to New York to borrow the money to place them. If they were placed, employment would be created and all the costs of unemployment would be avoided.

It all comes back to the single point of the PSBR dogma in the Treasury. I wish the Minister of State well. I feel that he shares my point of view on this matter, however much we may differ on other matters. If we could obtain a change in that rule in the Treasury—a rule that one of my right hon. Friends introduced in a moment of aberration, not only could we do much good for BT; we could relieve the taxpayer and help bring down interest rates.

Let us work together to try to drive some sense into the heads of the Treasury. As ever, those people will be sleeping somewhere while we are trying to produce economic recovery in Britain.

Mr. Charles R. Morris

I support my right hon. Friend the Member Salford, West (Mr. Orme) and my hon. Friend the Member for Newcastle-under-Lyme (Mr. Golding) on amendment No. 51. Equally, I want to direct my comments essentially to amendment No. 70, with which my name is associated.

Amendment No. 70 seeks to challenge the Government's use of cash limits, which have the frustrating effect of inhibiting the Post Office's capital investment programme. I am seriously disturbed at the way in which Government policies are damaging the Post Office, which is facing a critical financial situation as a result.

A particular problem is the effect of cash limits in three vital operational areas of the Post Office's activities. Its mechanisation programme is being held up. Cash limits are preventing building replacement and are delaying vehicle replacement programmes.

Over the years there has been a gradual acceptance that major public corporations should be expected to meet certain financial objectives as a measure of their overall performance. I do not disagree with such procedures, but what is gravely disturbing is the confusion and the damaging effects that a simplistic worship of that objective creates. It would be wrong to suggest that the problem in the Post Office is as great as the problem in telecommunications. The capital investment requirements of the Post Office are relatively modest. My right hon. Friend referred to a capital investment programme of £2,200 million. The requirements are £76 million this year and £89 million next year. That shows the absurdity of the Government's attitude to cash limits generally.

Recently the whole question of financial objectives has been overshadowed by the Government's rigorous application of cash limits, or external borrowing limits, on the Post Office and other public corporations. In their blind adherence to a totally unrealistic medium-term financial strategy the Government are raising a measurement of external borrowing into a fundamental financial objective for the Post Office Corporation. They are assessing the performance of the Post Office by a financial yardstick. It is judgment by means, not results. The physical amount of external finance used by the Post Office Corporation does not in itself mean anything. It is the use to which it is put that matters most.

What takes priority in the Government's view? Is it normal financial objectives widely used in business, such as rates of return on net assets, or abnormal, perverse and arbitrary targets, such as the current policy on cash limits? By which is the Post Office to be measured? Who better to pass judgment on the impact on the Post Office than the Monopolies and Mergers Commission, which was asked by the Secretary of State to investigate the inner London letter monopoly. It said in March 1980, in recommendation No. 7: There is an urgent need to develop plans for mechanised packet sorting". It said in recommendation No. 8: We think that the sooner they"— the mechanisation plans— are implemented the better and further delay should not be allowed". It said in recommendation No. 13: We think that a younger van fleet might be more economical and could obviate the need for the Post Office to increase the proportion of reserve vehicles as they intend". In paragraph 10.41 it said: Many buildings provide neither suitable accommodation for their current functions nor good working conditions". Since the report was published, however, restrictions on borrowing have meant that the Post Office has not been able to press ahead as quickly as it would wish with changes that require capital expenditure. In other words, the Government have been quite happy for other commission recommendations about increased productivity to be implemented but unwilling to enable the Post Office to get on with the investment that the commission recommended.

One needs only to look at the mechanisation difficulties confronting the Post Office at present. The House will be aware that the letter post and parcel post plans are the two major features of current postal mechanisation activity. Those plans, which it was hoped to complete by 1983–84, have now been put back until 1984–85.

Shortage of capital has delayed the Post Office's vehicle replacement programme among its 27,000 vehicles. Sometimes it has even been forced to hire vehicles—and, of course, the older the fleet the higher the maintenance costs.

7 am

At present there are more than 800 Post Office buildings of 80 years of age or more. I recently read reports of the condition of some of these buildings. I invite hon. Members to look at the South-West district sorting office, in Victoria. It is an old prison building, and it is in an appalling state of repair. As a diversion from walking to Victoria, hon. Members might read the comments of a union branch secretary, who reported on the Post Office building at Camberley as follows: Recently more women are joining the Post Office, unfortunately we have only one toilet available to them, and only two men's toilets available amongst approximately seventy men which are also unhygienically insufficient. Seating arrangements in our Rest Room are now ludicrous. At the main meal relief times people are now having to eat breakfast in the Drying Room, Kitchen and Sorting Office". If hon. Members are not moved by that, the branch secretary at Marlow writes: a large piece of plaster fell from the ceiling to the floor, luckily this was during the night and no one was hurt. We now have to almost swim in the front section of the office when it rains from all the water that comes in. They finally came to fix the fallen piece of plaster wth the scaffolding poles resting on postmen's own individual sorting frames. If that was not enough they worked while people were underneath them working. So you can imagine we are just about up to our necks with what we have had to put up with. That is an indication of the appalling situation that exists in the Post Office building programme.

Those difficulties stem directly from the rigorous implementation of cash limits that we have seen in recent months under the Conservative Government. I hope that when the Minister replies he will deal with those three points—the impact of cash limits on the Post Office building programme, on vehicle replacement, and on the Post Office mechanisation programme.

Mr. Mikardo

My hon. Friend the Member for Newcastle-under-Lyme (Mr. Golding) referred to the difficulties being created for those two industries, as for many others, by what he called the dogma of the Treasury. In that, if in nothing else, he will have the warm support of the Minister, who, answering questions after his statement on Cable and Wireless the other day, said suddenly and, for him, with unaccustomed sharpness and heat, that we must get this enterprise away from the "dead hand" of the Treasury.

Clearly, therefore, the Minister understands perfectly what my right hon. and hon. Friends are talking about. He was right, of course. The obsession with monetarism carried to the most extreme limits and without any consideration for other, and sometimes countervailing considerations, has created a serious situation in many industries, not least the telecommunications industry and the Post Office. Both those industries are now severely under-capitalised. In fact they are starved of capital.

That capital starvation leads to a vicious circle. My right hon. Friend the Member for Manchester, Openshaw (Mr. Morris) gave some examples. If vehicles are allowed to run down, maintenance costs more. The books can be juggled, and it can be called revenue expenditure rather than capital expenditure, but that makes no difference to anyone except a theorist, because the lolly must be paid out in either case. If a vehicle has to be replaced, delay in doing so will increase the cost.

My right hon. Friend referred to building maintenance. The longer one leaves paintwork, the more one damages the woodwork underneath. The longer one leaves the pointing of brickwork, the more it will eventually cost. The arbitrary imposition of cash limits is a false economy; in the end it means more expense.

The delay in installations of new telephones was mentioned earlier. One or two of the younger and more moronic Conservative Members, who pop into the Chamber for 10 minutes every now and again after two hours outside refreshing themselves with potent liquors, jeered at that. But of course there is a delay, because there is not the money for new equipment. A line must be constructed, and that costs money. The delay, under successive Governments, has been entirely due to lack of money.

That too, is a vicious circle. Delay in installation means delaying a new source of revenue. A new telephone creates profit, and the fewer there are the less is the profit. That leads to further under-capitalisation and reduction in revenues.

The Secretary of State and other Ministers often claim that the regeneration of British industry depends on not propping up lame ducks. Instead, they say, we should identify the growth points in technological industry, pick the winners and put our shirts on them. "Pick the companies that are lively, inventive, best managed, and put your money into them instead of staving off the inevitable disaster with the business that is not sound." In other words, go for the anti-lame duck policy. I can see a good deal of substance in that.

Again, the Secretary of State does not practise what he preaches. In British Telecommunications he has an industry that is technologically advanced, profit-making

Mr. McNally

That fulfils all the criteria.

Mr. Mikardo

Far from being a lame duck, it is inventive, well-managed, profitable, expanding, and a generator of internal capital. As my hon. Friend the Member for Stockport, South (Mr. McNally) reminds me, it fulfils every one of the criteria for further investment. Yet such industries are being hamstrung by this blind, obsessive, idiotic, inflexible imposition of cash limits. I suppose that this will go on for as long as the Chancellor of the Exchequer and the Secretary of State for Industry occupy their respective positions. I do not think that that will be for very long. For as long as it does go on, it is flying in the face of the doctrine that they are practising and preaching every time one of them goes out to dinner as the guest of a chamber of commerce or a City livery company. They preach this doctrine, yet here they are, in an industry for which they are responsible, not practising it at all.

My right hon. Friend the Member for Salford, West (Mr. Orme) quoted figures upon which every hon. Member ought to ponder. I am bound to admit that I did not take them in as quickly as I might have done, but I shall read them with care in the Official Report, because my right hon. Friend was making out a very good case. It is on those grounds—and they certainly appear sufficient—that I support the amendment.

Mr. Reg Race (Wood Green)

The arguments put forward by my hon. Friend the Member for Bethnal Green and Bow (Mr. Mikardo) have been succinct. We are talking about the ability of a corporation to borrow money and not be hamstrung by cash limits that impinge on its ability to do its job. Our criticisms of the Bill have to be seen in the context of our criticisms of cash limits generally and the way in which they operate in the public sector. The amendments dealing with this matter draw attention to that. We oppose cash limits. I regret that the Labour Government introduced them. There is a sense in which the cash limits system has been detrimental to the entire public service.

7.15 am

If we wish to criticise the imposition of restrictions on borrowing powers we must criticise the system as a whole rather than the way in which it impinges on a corporation or sector of the economy. My criticism of the cash limit system is that any nationalised corporation—regardless of whether it includes private capital—should have the ability, to fund its services, without too many financial restrictions according to the consumer's needs and according to the demand in the economy. We are arguing for the restrictions on the corporation and on its ability to finance its activities to be swept aside. We argue that it should be able to meet demand at source without cutting back on its activities in an attempt to stay within rigidly imposed, unrealistic cash limits. That is important.

My hon. Friend the Member for Bethnal Green and Bow spoke about the provision of facilities and telephone lines. In my constituency, lack of financial support on the Post Office telecommunications side led to potential subscribers in Tottenham, in the eastern half of my constituency, having to wait for over two years for a telephone line. That delay was the direct result of the failure to invest money in new plant and equipment at the right time, when increases in demand should have been anticipated. In addition, it was the direct result of management's failure to identify the growth in demand.

That example is taken from just one of our 635 constituencies. It illustrates that if financial support to a nationalised industry is restricted there is a risk of seriously undermining the services that the industry can provide for the public good. Cash limits and financial restrictions involve monetarism. Cash limits are imposed to restrict the amount of money in circulation and the ability of corporations to spend beyond a certain limit. The basic premise is that if the amount of money in circulation and the amount of money that a public corporation or nationalised industry can borow is reduced, inflation will be hindered.

That assumption lies behind these provisions. We must decide whether that assumption is justified. In my view, it is not. There is very little empirical evidence—dare I say, given the recently announced conclusions of 364 economists academic evidence?—to justify it. Indeed, I shall not try to name all those economists, as I do not know all their names. However, they argued that the level of growth in the money supply—part of which represents nationalised industry borrowing and part of which represents the public sector borrowing requirement—was not a major factor in any explanation of the level of inflation.

Mr. Skinner

My hon. Friend referred to the 364 economists. Obviously they have views on the cash limits, borrowing powers, and so on, of BT. I hope that my hon. Friend does not want to give the impression that he is in line with the 364 economists. Many of them would not support the views that my hon. Friend put forward. It is rumoured that a few, though not many, are part of the Social Democratic outfit. I do not want my hon. Friend to think that what they say is gospel. He should tell the House which of the 364 economists he agrees with and which are on a different track altogether.

Mr. Race

It is clear that the economists who put forward arguments about monetarism, cash limits and the way in which they impinged on the economy had different views about the way in which the economy functioned. I have no doubt that some of them take the view that the Government are half wrong. Some take the view that the Government are completely wrong and others take the view that the Government are completely barmy. I support the latter view—that the Government are barmy—and the economists who have supported that line of approach. But they are united. My hon. Friend the Member for Bolsover (Mr. Skinner) is correct, because those economists united on the basis that monetarism, growth in the money supply and the restrictions that have been imposed on it had no real impact on inflation, but had damaging consequences for the corporation and the economy as a whole.

Mr. K. J. Woolmer (Batley and Morley)

Is it not true that not only the 364 economists felt that way but the Confederation of British Industry had the same reservations about the general policies of the Government, feeling that they were leading to a sustained fall in investment, production and employment, but that the Government's problem was that they were cutting capital investment in the areas of the economy in which we should be investing? It is not a question of academic economists only; the people whom the Government might have expected to support them have been criticising them for policies that have led to cutbacks in those areas of progressive industry

Mr. Speaker

Order. Is the hon. Gentleman intervening or making a speech?

Mr. Woolmer

I apologise, Mr. Speaker. I draw to my hon. Friend's attention the fact that it was not just people in academic institutions but the Confederation of British Industry that made his point. I ask my hon. Friend to comment on that important area of opinion, which has concentrated on the issue under debate.

Mr. Race

It is true that the CBI has made substantial comments on cash limits and the way in which they want the Government's monetary and fiscal policy to operate. Sir Terence Beckett came to visit the Back Bench Group of the Parliamentary Labour Party—I forget which day it was, as the days tend to run into each other. My hon. Friend the Member for Batley and Morley (Mr. Woolmer) was in the chair at that meeting and remembers it as well as I do. Sir Terence Beckett said that he believed that the Government were pursuing a mistaken policy—a policy that would have damaging consequences for the economy as a whole, that would drive unemployment higher and that would not, in the long term, have a lasting effect on inflation. He referred to cash limits and the Government's policy of investment in productive, profitable industries. The burden of his argument was that the Government were restricting investment in areas of the economy where even the CBI believed that there should be expansion.

I shall not list all the examples given by the CBI where State capitalism would be profitable, but they include water, sewerage and electrification of the railways. The CBI believes that more money should be pumped into the economy in such areas to allow public services to expand and productive industry to contribute to restoring full employment and positive growth in place of our present ludicrous negative growth. Such arguments come not only from the Opposition but from the CBI and other industrial friends of the Government—major companies, desperately concerned about the restriction on orders in, for instance, the telecommunications, railway and shipbuilding industries, where the Government have a stake in what happens. If the people in those industries are responsible they will argue for an expansion of public investment, which will in turn create jobs. The amendments will improve the financial ability of public corporations.

Government cash limits can work to the detriment of an industry. Rigidly imposed cash limits distort an industry's plan for growth. The Government may set an unrealistically low target for the public sector borrowing requirement. Industries may have restrictions imposed on their financial viability because of a political decision by the Treasury to place a tight corset on PSBR in a given year. The impact on an industry can be devastating.

A stop-go policy can operate in one financial year. The Social Services Committee criticised the stop-go policy for the NHS. I understand that Select Committees have criticised stop-go policies since 1972. The old Expenditure Committee criticised the way in which, before cash limits were invented, the financial regime impinged on the public sector. The stop-go ordering of hospital equipment resulted in devastation.

The authorities in an industry never know when new restrictions will be imposed. Sometimes they have to spend quickly to get to the end of the financial year before the cash limit runs out and the new one begins. More frequently, where an unrealistic cash limit has been imposed, which has been damaging to them, they cannot spend what is required to maintain existing services. How can the Government argue that that is right?

7.30 am

I do not believe that any Government, Labour or Conservative, should impose cash limits that are rigid in their application. Any policy of overseeing the amount of financial help given to an industry by the Government has to be pursued by other means. It is no good setting targets for nationalised industries and expecting them to maintain their expenditure and their borrowing within those limits without deviation.

Mr. Woolmer

Does my hon. Friend agree that it is ironical how the cash limits and the recession appear to have operated in defence spending, with its bearing on the telecommunications industry? The private sector apparently wished to fulfil orders because it had no other orders. This has resulted in a £400 million-£500 million overspend, beyond cash limits, in the defence industry. This has been beneficial for the telecommunications industry. Does my hon. Friend not agree, however, that the effect of the recession and cash limits in defence has led to a massive breaking of cash limits?

Mr. Race

My hon. Friend is right. It is a scandal that the defence budget has been allowed to overshoot.

Some telecommunications firms have no doubt brought forward their contracts with the Ministry of Defence in order to fulfil them at an earlier date than the Government had thought, because they have no other orders. Anyone who reads the financial press will realise that that is what has happened. It is another nail in the coffin of the system of cash limits. A major Government spending Department has been allowed to overshoot cash limits in a manner that I believe is unacceptable to hon. Members on both sides of the House. Many hon. Members have severely criticised the situation.

Mr. Flannery

Is my hon. Friend arguing that the Government, through clause 23 and their general policy, are proving so parsimonious and are forcing the economy to contract to such an extent that if the Secretary of State can, in an arbitrary manner, curtail funds to the corporation, as has happened in town halls' housing and education, it shows that the argument used yesterday at Question Time about the number of people lying around doing nothing really means that they should be sacked? That would add to the unemployment problem. Does my hon. Friend visualise such a situation arising if the clause stays in the Bill?

Mr. Race

I was intending to deal with that point. The clause would make possible such a situation. One of the consequences of rigid cash limits is that an industry finds itself with insufficient money to get through the financial year while maintaining its current level of activity. The words "current level of activity" mean, in common, everyday language, the level of service to the public and the number of jobs. My hon. Friend is right.

Restrictive cash limits threaten jobs in the supplying industry. This happens in other areas of the economy, such as the NHS, which I know particularly well, where there has been a big problem over the finances of area health authorities. I simply use that as an example, and will not go down that road.

The Government are acting in a shoddy and slipshod way over the clause, which should be removed from the Bill. The planning of a nationalised industry's finances is a very serious matter. The House should pay great attention to it, because large sums of taxpayers' money are involved. We must insist that there is public accountability for money spent, and for that we need a completely new system of public financing, which acknowledges that the public should play a role in determining the expenditure in the service or industry concerned.

The trade unions have an important role, but we should also open up the whole Public Expenditure Survey Committee exercise, which determines the overall support for nationalised industries and other industries that are outside the trading public sector areas. After the Budget there should be submissions from the public, the trade unions and anyone else who wants to argue about the services that are required and that should be provided by the corporation in the industry concerned. The exercise must start from the assumption that there is a particular level of demand and that the public require a particular level of service.

That is the opposite of the clause, because it gives the Government power to restrict the amount of money that the nationalised industries spend. The Government start from the opposite assumption—that whatever the demand is it must be curtailed within the financial limits that they set.

We should start the PESC exercise by asking trade unions and public bodies, including community groups, to make submissions about the level of service that they want in the telecommunications industry. Ministers consider the expenditure that they regard as desirable in their areas. By July they are beginning to see the kind of expenditure that is envisaged in particular areas of the economy.

Mr. Skinner

Not always.

Mr. Race

Ministers have the disadvantage of not seeing other Ministers' briefs and arguments at that stage. I favour a system in which, when the Ministers start receiving the papers following the submissions from the public, the Treasury and their own spending Departments, those papers are published. Those who had already put in statements in the PESC exercise could then respond to them. That would open out the whole of the telecommunications industry planning procedure to make sure that there was public discussion of the way in which the industry ran its affairs, with an acceptable level of expenditure.

In that way, the demands on the system would be fed in properly, there would be democratic discussion by all bodies about the required level of spending, and there would not be the kind of system proposed in the clause, under which Governments can restrict the amount of money in the interests of monetarism and the public sector borrowing requirement, and in the creation of higher unemployment and of an economy going in a downward spiral towards the depths of despair.

In the financial clauses the Government are proposing an extension of their own financial and economic policy. For that reason alone we must oppose them, because that policy is now so discredited that no Opposition Member could possibly support it.

Mr. Skinner

My hon. Friend should also bear in mind that while this Tory Government have got the PSBR wrong by about £5 billion—it was initially £5 billion, and it was subsequenly amended to £4½ billion in the following financial year—it can happen with any Government. There was a gigantic miscalculation when the Labour Government were in power. So in arguing that a reasonable amount of money should be made available, instead of the cash limits mentioned in clause 23, one has to find a device to enable the Government, of whichever political shade, to be able to estimate more exactly the amount of PSBR at any one time.

Mr. Race

My hon. Friend is right. In the second year of the cash limits system the amount of under-shoot was so serious that it was equivalent to two major deflationary Budgets. It had a major depresing effect on the economy. That is one reason why I am against cash limits in general. Cash limits in themselves are deflationary, and have deflationary effects on particular industries. They undermine the level of economic growth and employment because of the way in which they are drawn up.

Mr. Flannery

I want to reiterate that unemployment is now soaring at a level far beyond what the Government admit. I believe that it is over 3 million, because of the number of people who have not registered as unemployed.

I do not understand the underlying philosophy of the clause. I got the impression that the Government wanted to add to the number of unemployed. The clause is entitled Borrowing powers of the Corporation and its wholly owned subsidiaries". It should read "Restrictions on borrowing powers of the Corporation and its wholly owned subsidiaries".

Mr. Speaker

Order. I remind hon. Gentlemen who are interrupting that if an interruption goes on for too long I shall assume that it is a speech, and the hon. Member concerned will exhaust his right to speak.

Mr. Flannery

I want to put a fundamental question to my hon. Friend. Does he not think that the whole philosophy of this dangerous clause is bound to add to unemployment on a considerable scale? Certainly, it is a blow at the very thing that the Government profess that they want to help.

Mr. Race

There is a great disjunction of values between what Ministers say about the need to innovate, to create more jobs and to have innovative new technology-based industry, and the concept of cash limits. There is a major argument against what the Government profess to believe when they make general statements about their economic policy.

7.45 am

Subsection (7) states: A person lending money to the Corporation shall not be concerned to inquire whether the borrowing of the money is legal or regular". That is the most extraordinary subsection that I have ever read. The Government propose that someone lending money to the corporation ought not to be too concerned about what happens to it.

Mr. Mikardo

Not only not concerned about what happens to it, but not concerned whether it is a proper act to lend in the first place.

Mr. Race

My hon. Friend is right. I regard the subsection as a catch-all provision, which would enable the corporation essentially to do what it likes. The Minister is looking at the Bill. There seems to be some uncertainty on the matter. The Minister owes the House an explanation.

The subsection gets worse as it goes on. It says: or whether the money raised was properly applied". If the corporation is not to apply the money properly, what the hell will it do with it? Will it be spent on Concordes, on junkets to Jamaica, or on providing unemployment benefit? What on earth does that mean? Subsection (7) goes on: and shall not be prejudiced by any illegality or irregularity, or by the misapplication or non-application of any of the money". That goes against all prudent financial procedures. Presumably it means that if the corporation spends money on something that it should not spend money on, that will be all right, and there will be no public redress. The corporation has the right to do what it likes with money subscribed by the Government or others for public use. The Minister ought to make a statement on that point. It is so weird and extraordinary that my feeble brain is freaked out by it.

My hon. Friends have made it clear that we are concerned not only about the reputability of the financial arrangements to support the industry, but about jobs, stop-go policies in an industry that is forced to restrain itself within a rigid cash limit, and about the way in which Government and other money is applied.

The clause is restrictive, and gives far too many powers to the Secretary of State and the Treasury. The Treasury has to approve some of the borrowing powers in the Bill. I am in favour of removing the clause, because that will remove some of the restrictions on the corporation's activities.

Mr. Cryer

I shall speak first to amendment No. 51, which would delete the clause. It is a probing amendment, to find out the Government's role in the operation of cash limits.

The Government's policy is inconsistent. I assume that the clause is included so that the Government can control the borrowing powers of the corporation. No one will dispute that telecommunications is a high technology industry, with potential growth, even in our stagnant economy. Several hon. Members with knowledge and experience of the industry have said that it is an area of innovation. Why on earth are the Government pursuing close cash limits, particularly when the Department of Industry is positively encouraging the National Enterprise Board to invest in new computer technology and other "whiz-kid" ventures in order to hand them over to private enterprise?

The Government are imposing cash limits on public sector activities because they relate them to the PSBR. That places artificial restrictions on telecommunications, which, by common consent, is an industry with potential growth. The Government's obsession with curbing public sector borrowing is extraordinary.

During a debate on the Queen's Speech some time ago the Minister for Industry and Information Technology—this was at a time when he must have thought that he would never sit on the Front Bench—said, in effect that the wings of the party were like the wings of a bird—the brains were in the centre. He must surely be one of the wets in the Conservative Party who do not regard the public sector borrowing requirement as the great totem of governmental determination.

Despite the Government's determination, the clause does not curb the PSBR. What it does is to increase it, because by imposing cash limits in this artificial way on a public sector corporation that is a potential area of growth and development the Government are creating unemployment. They are doing it more obviously through local government, but this is exactly the same principle. This means that they are losing tax revenue and they are then, of course, having to pay supplementary benefit and unemployment benefit, and make retraining payments. [AN HON. MEMBER: "Earnings-related benefit."] That is going to finish very shortly, because that is the way in which they are cutting back on the public sector borrowing requirement. But they are producing all sorts of training programmes, which account for around £8½ billion of the PSBR. The extraordinary position is that as the Government curb the PSBR by the imposition of cash limits through clauses like this one, the PSBR, their totem, is actually growing by virtue of the fact that cutting back on the PSBR vitally affects jobs in the manufacturing sector.

Not only that; a significant proportion of public expenditure goes into the private sector. So the Government are starving the very sector of industry that they claim to represent. British Telecom has large contracts with companies such as GEC, Plessey and other providers of equipment and cable, for example. STC is a case in point. It provides a great deal of cable for telecommunications. All these companies, which frequently receive large contracts from British Telecom, have to make people redundant because of the cash limits. They put people on to the unemployed register and therefore increase the payments, and therefore the PSBR.

The other area that is affected is, of course, that of the small firms that feed the larger corporations, such as GEC, by making jigs and tools and fixtures and fittings for small contracts, and for bigger ones. Hon. Members would be deceiving themselves if they thought that small firms could exist in isolation. The vast majority depend on large firms, and when the latter start to lose contracts because of cash limits they, in turn, find the contracts drying up and they, too, have to make people redundant or, if they find that that is not the answer, go to the wall.

Mr. Mikardo

That is the downward multiplier.

Mr. Cryer

It is, indeed.

Mr. Skinner

Is there not another point about small firms, and large ones, for that matter? There have been some estimates made, not necessarily by the 364 economists but by a lot of academics on both sides of the political spectrum, that in terms of public sector cutbacks that could be the result of cash limits such as those described in the clause as much as 70 per cent. to 75 per cent. of all those cuts eventually finds its way back into the private sector, the small firms and the large firms.

Mr. Cryer

I am most grateful to my hon. Friend. I hesitated to provide a figure from memory, but certainly the effect of curtailing the borrowing power in this way might well result in a proportion as high as 70 per cent. or even more failing to find its way into the private sector, so that large, medium-sized and small firms would feel the ripple effect.

8 am

Mr. Mikardo

The Select Committee on Industry and Trade was interested in this. We examined job classes carefully and tried to quantify them. We obtained an estimate from British Leyland—a very large firm, and a main contractor—of how many jobs would be lost by the suppliers and subcontractors, for example, for each job lost in British Leyland. We wanted to establish the ratio of consequential losses to initial losses. The Department of Industry said that it was 1:1. The chairman of British Leyland pooh-poohd the idea and said that it was between 2.5:1 and 3:1. It is not 75 per cent., it is 250 per cent. plus.

Mr. Cryer

I am grateful to my hon. Friend for his careful addition to my speech. He is able to quantify, while I am not. However, I know that when I was an Under-Secretary of State for Industry the Department directed its attention to two large firms that were given a great deal of financial assistance and subsequently rescued by the Labour Government. The then Conservative Opposition voted against that assistance in both instances. I refer to British Leyland and Chrysler. Those two firms were supplied by no fewer than 10,000 small firms. I refer to manufacturing or service concerns that employ fewer than 200 workers. The effect of curtailment in borrowing powers on a large public corporation like British Telecommunications is paralleled by the effect on the hundreds of small concerns supplying components and services to British Telecommunications, and on several large corporations.

The Minister might say that the Government have to have the powers in the clause, that to remove them as the amendment suggests would be a serious handicap for the Government, and that the Opposition, with their concern for the level of unemployment, are exaggerating the case that cutbacks in public expenditure have an effect on the level of unemployment. The Government never ever use that argument about a particular area of public expenditure—namely, defence. I am certain that British Telecommunications has contracts with the MOD and with the defence industry in a variety of ways, including the provision of services. The parellel that I want to draw is that Ministers continually argue that we must maintain our defence expenditure. They claim that the Russians will come next week if we do not. I trust that the Russians do not know about the various Civil Service strikes. If they find out about them, they are almost certainly going to come.

Apart from that, and to boast of their argument, the Government say that if we do not spend the money thousands of jobs will be lost. That is an argument that they use consistently throughout the whole of the defence debate. If it is true for defence it is true for British Telecommunications. That is one of the factors about which we are expressing concern because of the high level of unemployment.

On temporary borrowing and on long-term borrowing otherwise than by way of temporary loan the clause states: The Corporation may borrow … in sterling from the Secretary of State or with the consent of the Secretary of State and the approval of the Treasury, in sterling or a currency other than sterling from a person other than the Secretary of State such sums as may be required for … the Corporation or any of its wholly owned subsidiaries. The corporation must have the consent of the Secretary of State and the approval of the Treasury. We understand the highly centralised organisation of Government Departments, in which the Treasury wishes to hold all the strings and to maintain strong centralised control. However, how would it work? Would the Secretary of State consult the Chancellor of the Exchequer or the Financial Secretary? Do Ministers discuss those matters?

I should like the Minister to reply to those questions, because Members of Parliament do not have the massive number of democratic rights that people outside suppose. If I tabled a question on this section it would be refused by the Table Office, because it would be a matter of internal government. We are not allowed to ask questions on the internal machinery of government. That is extraordinary, but it is a fact of life. Therefore, it is important that we should know how this section operates. It will condition the potential development of perhaps an important growth area of British Telecommunications.

The Secretary of State for Industry must give his consent. What criteria will he apply? It is extraordinary and completely in contrast with the claims that the Government do not intervene, that they do not want to govern and that they want less legislation. They say that people should make their own decisions. That cry often springs from the Government Benches, and particularly from the Prime Minister. She says that some situation or another has nothing to do with them, but that it is a matter entirely for private enterprise to make a decision. She says that they do not want to spread government everywhere.

That is in complete contrast, because the Secretary of State has to give his or her consent. What criteria will the Secretary of State exercise when that consent is given? Is the consent automatic or routine? If the corporation puts forward a submission, is it routinely accepted? If so, why have it in at all? Cannot the corporation be trusted?

Mr. Skinner

My hon. Friend is trying to establish what the criteria are in the matter of consent. I do not believe that he will receive an answer from the Secretary of State, although I have no doubt that the right hon. Gentleman will attempt to give an answer when he replies to the debate. In many ways, the corporation is not all that different from the National Coal Board, for example. My hon. Friend will reflect that there are occasions when such criteria would have to be thrown out of the window, as happened a few weeks ago, when the miners went on strike. Those criteria would be in jeopardy if the postal and telecommunications workers decided to strike, as they nearly did the other week. My hon. Friend must address himself to that matter.

Mr. Cryer

The other interesting thing about that matter is that if such a crisis arose the Secretary of State would have other powers at his elbow. If the crisis required a rescue, section 8 of the Industry Act 1972, as modified by the Industry Act 1975, could be used, or the right hon. Gentleman could bring in an additional Bill. He has powers to advance considerable sums of money, by way of grant or loan. If it is more than £5 million, he must come to the House for an affirmative order.

The Government eschew intervention, yet they choose to have the consent of the Secretary of State on what seem not extraordinary borrowing powers, as they are not to be used to meet a crisis and carry out a rescue. Perhaps the Minister will say whether it is a crisis. The consent seems to cover a fairly mundane number of situations such as the provision of working capital required by the corportion or any subsidiaries, in subsection (3)(b).

The Government have appointed people to BT, just as they have appointed a chairman of the Post Office. I know that the chairman of the Post Office, Mr. Ron Dearing, is a former deputy secretary in the Department of Industry. No doubt he worked closely with the Secretary of State, and I imagine that the Secretary of State entrusted him with that task in the full knowledge and confidence that he would carry it out successfully. Therefore, one wonders why BT will not carry out that task on the basis of independence. Why should it be unable to make that independent judgment?

My hon. Friend the Member for Newcastle-under-Lyme (Mr. Golding) said that BT should be able to obtain finance from the private sector. In my opinion, BT should be able to make that judgment. However, it cannot, because clause 24 states: The Corporation shall not have the power to borrow money except in accordance with section 23". that severely limits BT's power.

I should like to see a Secretary of State intervene and discuss investment with the large important public corporations. Indeed, I want to see a Secretary of State discussing investment with the large private corporations through compulsory planning agreements. But we are not talking about a Labour Government; we are talking about a Conservative Government who have often said "These corporations should be able to make their own way in the world and make their own decisions". I should therefore like some elucidation of the points that I have made.

Mr. James Lamond (Oldham, East)

That section of my hon. Friend's speech was devoted to restrictions on the borrowing powers. Will he now relate the sad story, which he mentioned earlier, about the effects of unemployment? He said that he would mention it, and I have been waiting to hear it.

Mr. Cryer

I referred to the Post Office section, and I shall come to that in a moment. I have not put it out of my mind.

Of course Secretaries of State must have powers. Recently there has been a small splinter from the Labour Party of people who say that they are concerned about parliamentary democracy. One of the duties of an Opposition is to supervise and scrutinise legislation which, among other things, hands over powers to Secretaries of State. Those Secretaries of State do not have to give their consent and then make a report to Parliament. They only give their consent. That right is contained in the Bill.

Successive Parliaments have handed over powers to Secretaries of State without too much probing and thought. There have even been occasions when I have served on a Committee, and have discovered years later how the powers are more widespread than we visualised because of two or three words in the legislation. Therefore, we must exercise scrutiny.

Tonight we are giving powers to the Secretary of State. It is an important parliamentary occasion. But I do not see any of these defenders of parliamentary democracy here to witness the occasion. The SDP Members are not present. If they are serious about their concern for democracy they should realise that this is the place where it is examined.

However many Select Committees we have—and I know that they are important and that many people do a great deal of useful work on them—we do not ever wish to see this Chamber undermined in its scrutiny of legislation. We are carrying out this albeit rather lengthy scrutiny because of our concern, among other things, for the nature of the parliamentary process.

8.15 am
Mr. Skinner

When the Labour Government were in office my hon. Friend used the same arguments about the need to scrutinise and spent many hours in the Chamber doing the self-same thing. I am therefore not making a party political point here. My hon. Friend is on to the kernel of the clause when he talks of the necessity to scrutinise at length and to probe the powers that are thus handed over. We remember well the devastating spectacle of Ministers trying to squirm out of the problem of the Crown Agents. I shall not go into that very distasteful affair, but I am pleased that my hon. Friend is dealing with that matter. My hon. Friend referred to people going outside this place and talking about those of us who have spent long hours here. I have been here since 11 o'clock and my hon. Friend since about 3 o'clock scrutinising the Bill. Yet those people come out with their parrot phrases, preaching against sin and the rest outside. I have been here since well before midnight, but not one Social Democrat has opened his mouth.

Mr. Cryer

My hon. Friend underlines the strength of my point. I merely add that when people of that ilk make claims about being defenders of Parliament, implying that in some way some of us are not, it annoys me deeply. There are no more fierce defenders of parliamentary process than my hon. Friends and myself, and we are so often here—sometimes to the Government's intense chagrin, I dare say—to prove it.

Amendment No. 70 seeks to remove clause 71. I shall not go into detail as I think that that is the same clause applied to the Post Office. This is a triple Bill, dealing with British Telecom, the Post Office and Cable and Wireless. To call it the British Telecommunications Bill is really a misnomer. That is why so much time has been taken. Again, I must say that another half day would be advantageous rather than continuing through the night. My own loquacity is certainly limited at this time of the morning. Amendment No. 70 is a probing amendment to discover the effect of the cash limits upon the Post Office.

My right hon. Friend the Member for Manchester, Openshaw (Mr. Morris), with his considerable knowledge of the Post Office, pointed out one or two practical instances in which the Post Office is in difficulties. The introduction of mechanical sorting, which is designed to speed the mail, is being hampered. If borrowing powers are limited in the same way as for telecommunications, engineering contracts for the mechanical sorting equipment and the computer control as well will be hampered. I dare say that a case could be made out that, without the efficiency of mechanical sorting—I say that with some hesitation, because great computer installations sometimes diminish efficiency—the hope of improved services will not be realised for years, and business and commerce will suffer. If the Government's expressed concern for business and commerce is serious, there should be investment and improvement in this area.

The record of the Post Office shows that it is prepared to do all it can to improve services despite its difficulties. Over the past five years it has gone from loss to surplus. Even the difficulties of the parcels service have been solved. Therefore, one wonders what the reason is for clause 71, except to impose cash limits on an organisation which, despite its difficulties, has a history of prudent financial management, careful investment and financial surplus.

Some post offices need a face lift, which would mean work for the building industry. About 300,000 building workers are on the dole because of the Government's policies. We should therefore know their policy towards expenditure by the Post Office on building and on mechanical sorting, for example.

The mention of rundown vehicles by my right hon. Friend the Member for Openshaw is an interesting sidelight on the economic situation. General Motors, which manufactures Bedford vans at Luton, and British Leyland are now in difficulties. We give the latter enormous amounts of money, but by cheeseparing m this clause we are missing the chance to help it by creating demand for its products in a public corporation. It is only one corporation, but it has a considerable fleet and its contracts would be welcome to a vehicle manufacturer.

Mr. Skinner

My hon. Friend, who is doing well, is, I think, edging towards the point that what is lacking in the public sector is interdependence. He mentioned commercial vehicles. Clauses 23 and 71 should provide for some interdependence, instead of cash limits, so that the nationalised industries prop one another up and thereby increase employment prospects throughout the economy.

Mr. Cryer

It is this aspect which causes particular concern on the Labour Benches. We want a successful Post Office. No doubt Ministers will say that they want that, too. They are going the wrong way about it. We are concerned about unemployment and about reducing it. We believe that one of the ways in which this can be done is by injecting money into the public corporations. Here we have two important corporations where this could be done.

Mr. Anderson

My hon. Friend is noted for his objective stance on these issues. Perhaps he could tell the House how much similarity there is between this situation and that of British Rail, in terms of rail electrification. In both cases a substantial amount of investment in the public sector can bring enormous benefits to the private sector because of this interdependence, which is not recognised by the Tories because of the extreme ideological stance that they take on such issues.

Mr. Cryer

That is a useful illustration by way of example. I do not intend to follow it, beyond saying that there is a parallel with the replacement vehicles needed for the Post Office, mentioned by my right hon. Friend the Member for Openshaw. I do not say that the vehicles are run down to the point of danger, but new vehicles would obviously be an enormous boost. The inspecting officer of the Railway Inspectorate, in his last report, drew attention to the dangers arising out of the limit placed on maintenance of track work following curtailed investment. I do not intend to follow that point—

Mr. Speaker

I am glad to hear it.

Mr. Cryer

I thought that it was a useful illustration. The running down of our public institutions is something that we want to reverse. We are constantly hearing of the much vaunted upturn. The Chief Secretary talks of it happening later this year. There are other predictions and we are never quite sure whether we are at the bottom of the recession or slithering down to approach the bottom. When we emerge from the recession we hope that we shall be very busy providing goods and services for all sorts of sectors of manufacturing and service industries. We may not then have the time to invest heavily in public services such as the Post Office and telecommunications. The time to make such investment is not at the upturn, it is now. In that way we contribute to the upturn.

Mr. Skinner

My hon. Friend will recall that some people who are not adherents of the policy that we propose—the CBI, for instance—have recognised that what is needed now is the expenditure of more money to finance firms that are going downhill. Some CBI people who have never been concerned about shedding a few workers are concerned now because they can see their Caribbean holiday at stake.


Mr. Cryer

My hon. Friend has illustrated a point that I sought to make in my final remarks, to the effect that the provision of public expenditure would help to reverse the trend. The majority of public expenditure goes into the private sector and does not stay in the public sector. Most of the money that the Government spend in the public sector goes into private enterprise. Conservative Members do not seem able to grasp that fact.

Unemployment is created by lack of public expenditure. Small family firms often owe part of their existence to public contracts. Such firms may make Post Office uniforms. A small firm in my constituency is closing. Last Friday, I went round it. Most of the looms are less than four years old.

Mr. Donald Thompson (Sowerby)


Mr. Cryer

If the Government Whip is raising a query, I should inform him that they weave with looms and make articles such as uniforms with them. I should have thought that he would know something about them. The firm is four generations old and has halved its work force. It now employs 30 people and is a small firm. It has done everything that the Conservative Party wants such firms to do. It has slimmed down and invested in relatively new machinery. Nevertheless, it is going out of business.

It is saddening, because it is a well-maintained mill. People like to work there and have done so for many years. They are particularly skilled in jacquard weaving, yet they will probably go on the dole. In my constituency, Silsden is known for the skill of jacquard weaving. It will suffer further skill erosion. Its traditions will to some extent be put on one side.

That is why we are concerned about these two clauses. What do the Government intend to use them for? What criteria will the Secretary of State use if he wishes to give consent to permanent or temporary borrowings? Are the Government simply using these clauses as a means of restricting borrowing by those two public sector industries? That would have a regressive and deflationary effect. Why are these clauses necessary if they are for any purpose other than the ones that I have described? This legislation is most disheartening for those who spend their lives working in those two industries and who devote their lives in the hope that their loyalty will receive some reward. It undermines their confidence. Clauses 71 and 23 are designed to cut those industries by preventing them from expanding and developing.

Mr. Skinner


Mr. Cryer

Does my hon. Friend wish to intervene?

Mr. Skinner


Mr. Speaker

Order. I think that this will be the hon. Gentleman's sixth intervention in the speech of his hon. Friend. The number of interventions is becoming unreasonable.

Mr. Skinner

At 2 o'clock or 4 o'clock I spoke on two or three occasions. I was interrupted many times.

Mr. Speaker

The hon. Gentleman may have been, but he must not continue to interrupt when other hon. Members are addressing the House. If he does so, I shall have to ask him to resume his seat.

Mr. Cryer

I should say, Mr. Speaker, that I was quite happy about that intervention. The interventions have been helpful and have illustrated one or two useful points. I was able to put a few words together, but they helped. It is useful to have a dialogue rather than a monologue.

The net effect of the provisions must be that it is the Government's deliberate policy to cut back on this sort of expenditure in these two sectors of industry, which desperately need the investment. The country, the private enterprise sector and, above all, the workers need the investment to get them back off the dole. If the Government produce these crackpot policies they will not be restricting the public sector borrowing requirement; they will be increasing it. They are the craziest and daftest economics that anyone could pursue.

Mr. Flannery

I shall speak briefly. I had no intention of speaking at all, but this morning at about 6 o'clock I was idly thumbing through the Bill for the umpteenth time when my attention became riveted on clause 23. One of the reasons for wanting to speak on it is because in general the Bill gives such draconian and unfettered power to the Secretary of State that I should have thought that the Conservative party, which always says that it dreads centralisation and want to decentralise, really want to fetter all of us in one of the most centralised ways possible.

In general—and in this clause especially—the Bill gives the Secretary of State unfettered power to do a whole group of things. It enables him to direct the setting up of wholly owned subsidiaries, to direct the disposal of assets—the term used in these days is "privatisation", which means denationalisation and even the issue of monopoly licences. But clause 23, which I want to remove, is almost unique in many ways. In an intervention, I tried to point out that although it describes itself to be about Borrowing powers in the corporation and its wholly owned subsidiaries its provisions mean restriction on borrowing powers.

The clause contains what is known as an embarrassment of riches—an embarras de richesse. [Interruption.] It is early, I know.

Mr. Skinner

I do not think that you were in the Chair at the time, Mr. Speaker, but I put a question to the then Prime Minister, the right hon. Member for Sidcup (Mr. Heath). He had just been over to France on one of these Common Market jaunts in his yacht. I put a question in French. I rehearsed it a great deal in the Library. I was only allowed to get about three or four words out before your predecessor put a halt to it. I wonder whether there has been a change in procedure.

Mr. Speaker

Order. I think that the hon. Gentleman got two words out.

Mr. Flannery

In Bolsover they talk of little else but my hon. Friend's fluency in French, which I have always admired.

The clause would appear to suggest that there are no limits on borrowing, but it contains the phrase: with the consent of the Secretary of State". It also uses the phrase: in sterling, or a currency other than sterling". My mind boggles about borrowing in a currency other than sterling. It goes on: from a person other than the Secretary of State "Sterling" crops up again and again. One purpose is: provision of money for meeting any expenses incurred by the Corporation or any of its subsidiaries". It appears that money will flow freely to British Telecom, but with his draconian powers the Secretary of State can easily curtail the borrowing powers. He has rigid cash limits at his disposal, which he will use.

The philosophy of the Conservative Party is also implicit in the measure. The fact emerges over and over again—it came up yesterday, at Question Time—that when a person does not function according to the and tenets of monetarism he is accused of lying around doing nothing. I do not know how the Goveernment can make such accusations when they have forced 3 million people to do nothing. They are using unlimited money from North Sea oil to pay 3 million people, who wish to be productive, to do nothing, but when they find a few people in a town hall who they believe are not functioning properly they order the authority to sack them. I therefore wonder what will happen when contraction takes place at the behest of the all-powerful Secretary of State, and money for British Telecom is stopped.

We all know the reason for the Bill. An expanding sector of great profit, which is giving a tremendous and increasing amount of work to many people, needs more and more cash. Through a public corporation we have tried to support a thriving industry, but, with their lust for profit, the Government want to pour the money into the pockets of those who are destroying the bulk of British industry. The Government blandly pretend that the measure will be good for the country, but the clause will mean more and more unemployment. They are contracting industry to balance the books. As I have said before, the books will balance perfectly if we produce nothing and sell nothing. The balance will be nought on either side. That is the philosophy of the Government. This dangerous clause reiterates the Secretary of State's power. It threatens the growing telecommunications industry.

8.45 am

If ever a subsection mirrored the confusion and nonsense that permeates the whole Bill, it is subsection (7). I would like the Minister to explain the wording. The subsection states: A person lending money to the Corporation shall not be concerned to inquire whether the borrowing of the money is legal or regular or whether the money raised was properly applied and shall not be prejudiced by any illegality or irregularity, or by the misapplication or non-application of any of the money. What in God's name does that mean? Who is this person? What kind of person has been produced by the party that tells everyone that it favours good housekeeping, that we should know how our money is spent and how it was raised? This is the party that lectures constantly and spends its own money individually and privately, but with profligacy. None of us has the amount of money possessed by the Conservative Party. Yet it has produced this curious person in the Bill.

Mr. Dafydd Wigley (Caernarvon)

A person lending money obviously includes the Secretary of State, who is provided with powers to lend money to the corporation. It is incredible if the clause means that the Secretary of State can lend money to the corporation but not inquire whether it is legal or illegal, regular or irregular. I do not know whether any other Bill includes this provision. It begs many questions.

Mr. Flannery

I believe that a detailed explanation is required. An individual investing money in a building society or any of many places where the Conservative Party invests its money privately will want to know precisely whether the money is to be used wisely and whether it will produce a profit. It is fundamental to the Conservative Party that there must be a profit.

If money were invested in a company—the Conservative Party knows more about companies than I know—everything would have to be known about the use of the money. Yet the clause under discussion almost enshrines some kind of criminality within it. It conveys the impression, almost, that we are a race of train robbers or Ronald Biggses, and that no one should inquire into the matter.

Mr. Mikardo

Or embezzlers. What the clause says is that if the chief cashier of the corporation walks into a branch of Barclays Bank—assuming that it is the corporation's bankers—with a small suitcase, plonks it down on the desk and says "I want £20,000 in used £1 notes" the chap behind the window is not allowed to ask why the money is wanted in £1 notes in a suitcase. Under the clause, he is not allowed to ask that question.

Mr. Flannery

My hon. Friend, with the insight that has come into play often throughout the night, sees something that I had not noticed. I understand that the £2 million or £3 million stolen in the Great Train Robbery consisted of used £1 notes. That is probably what stimulated my hon. Friend to intervene. I suggest that it could have been a big suitcase and not a small suitcase. That would imply that whoever received the money intended to invest more money, with no questions asked about where it was destined to go or the use to which it would be put.

Such action causes utter confusion and verges on the criminal, but the person from whom the money is being borrowed at the Secretary of State's behest has no right to raise the matter if he sees the money being put to a use that he thinks disgraceful. He is expected to give carte blanche to the Secretary of State, who can initiate cash limits whenever he feels like it, to use it as he wishes.

I have the impression that the Conservative Party urgently wants to know where its money is going, yet so far no hon. Member has questioned the subsection in question and asked for its removal because it not only verges on the criminal but is in conflict with the party's general philosophy.

Mr. Skinner

My hon. Friend is on a good point, but he has forgotten that while the theory of the Tory Government is to ensure that everything is done correctly, and money is not spent extravagantly, in practice the Secretary of State has recently had to go to the Cabinet, and subsequently come to the House, to get hold of those large suitcases full of money. There was £5 million in one for the steel industry, and he had £1,000 million in another for British Leyland. Then there was ICL, though the money has not been put in the suitcase yet. My hon. Friend's description of the Tories' theory is correct, but in practice, recently the theory has gone awry. Perhaps that is why the clause has been included.

Mr. Flannery

I bow to my hon. Friend's profound knowledge of the Conservative Party's philosophy, though my knowledge of it is reasonably extensive. I worked in education. When money is borrowed for a particular subject, such as education, I am sure that all hon. Members—including you, Mr. Speaker—will want to know how it is used. For example, in education we should want to know whether it was being used to build new schools or employ more teachers. In fact, the Conservatives would not borrow a great deal for education, because it is steadily contracting in their hands.

Mr. Anderson

Would not it be—

Mr. Speaker

Order. There have been many interruptions. It seems to me that it is impossible for anyone to make a speech this morning without steady interruptions, and we all know what that really means.

Mr. James Lamond

On a point of order, Mr. Speaker. I feel inhibited. I intervened in a speech of my hon. Friend the Member for Keighley (Mr. Cryer) on what I thought was a genuine point and he had no hesitation in giving way to my intervention. You have twice used the word "interruption". I would wish not to interrupt—that sounds rude—but, rather, to intervene. Is there a difference between an interruption and an intervention?

Mr. Speaker

No. Mr. Flannery.

Mr. Anderson


Mr. Flannery

I give way to my hon. Friend, who I think has a pungent point to make.

Mr. Anderson

I hope that when you listen to what I have to say, Mr. Speaker, you will understand that it is a serious point, relating to the interpretation of subsection (7), which appears simply to give protection to a private individual who lends money to the corporation. It gives him that protection, possibly, against the public interest, over the public purse. Therefore, it is protection of a private interest as against a public interest.

Mr. Flannery

I thank my hon. Friend for that explanation, but there could be other explanations. The Government could be saying something like this. "It is more than likely that the money which you are lending to us will be abused. We shall use it in ways to which you will object. But we do not want you to object. The clause will become law and we do not want any complaints from you about the way your money is being used. When the money was borrowed from you originally at certain rates of interest, you might have thought that we would use the money in a way which was acceptable to you and gave you a reasonable rate of interest, but we want no interference from you because we want to use the money in ways which may not be acceptable to you." So when the Minister tells us why the Government wish to retain the clause, I hope that he will give us a detailed explanation.

Most people outside the House do not read Bills. Moreover, any ordinary, normal person outside who reads the clause, and particularly the subsection, will not have the faintest idea what it means. It therefore requires a detailed explanation from the Minister.

Mr. Lamond

Before I take up one or two of the matters raised by my hon. Friend the Member for Sheffield, Hillsborough (Mr. Flannery), I warmly congratulate my hon. Friend the Member for Keighley (Mr. Cryer) on his excellent, well-constructed and logical speech.

There were a number of interventions in my hon. Friend's speech, and I plead guilty in that connection. I intervened because of the stimulating manner in which my hon. Friend spoke. He is a gifted orator and therefore encourages other hon. Members, in their excitement at the new vistas that he opens to them, to intervene—and, perhaps, interrupt, if that is a somewhat more rude form of intervention.

My hon. Friend the Member for Hillsborough said that when he read the Bill his attention was riveted on clause 23. Little wonder, because it is an important clause and has grave implications, on three counts. First, it has serious implications for the future of the whole telecommunications industry. There is no doubt that if the Minister has the power to impose cash limits, those cash limits will be at a lower level than the industry would wish. Secondly—and this matter was touched on by my hon. Friend the Member for Keighley—cash limits have an important effect on the morale of the thousands who work in the industry. They see the industry, of which they are so proud and in which they have invested so much of their lives, being starved of the capital investment that is necessary to enable them to provide the service that they would be proud to provide if the opportunity were available. Of course, if the capital investment programme is severely curtailed, services provided for the community cannot be as good as they would otherwise be. The public complain and the complaints find their way back to employees in the industry and further affect their morale.

9 am

Much of the ill-informed criticism of the Post Office is made by Conservative Members, who are always eager to make snide remarks and criticisms of nationalised industries and yet are prepared to pass legislation that will deny the Post Office and the communications industry generally the opportunity to provide and improve the services about which those Members are so fond of complaining.

Many working people do not receive many letters. Most are official letters, perhaps from their Member of Parliament or the Inland Revenue, and they would not be too sorry if some letters were delayed. But, due to the unemployment that is rife throughout the country, many people receive Giro benefit cheques through the post. They are of the utmost importance to the recipients. I receive many complaints from unemployed constituents and those on supplementary benefit when their Giro cheques are late. That leaves them in difficult financial circumstances and they often telephone me at home at the weekend to complain.

I do not blame the Post Office. Far from it. I blame the inadequacy of the Post Office's investment programme in the past. I do not wish to see that continued, and I believe that it would be if we agreed to clause 23.

My hon. Friend the Member for Wood Green (Mr. Race) has had to leave the Chamber, no doubt for much-needed refreshment.

Mr. Skinner

He is on a Committee.

Mr. Lamond

It is a tribute to the energy of my hon. Friend the Member for Wood Green that he should be ready to serve on a Committee that will be meeting soon. He mentioned cash limits, which are relevant to the clause and of great interest to me. I have been a member of the Public Accounts Committee for eight years. Hon. Members who have served on that Committee are well aware of the work that it does. We had deep discussions about cash limits when, I regret, they were introduced by the Labour Government.

At that time the able Chairman of the Committee was the right hon. Member for Taunton (Mr. du Cann). All four Chairmen of that Committee were able. It would be difficult to say who was the most able, but the right hon. Gentleman stands high in my regard. My hon. Friend the Member for Bolsover (Mr. Skinner) shakes his head, but at the risk of incurring his anger I persist in my high estimation of the right hon. Member because he shared with me a deep suspicion of cash limits. I remember questioning witnesses about the impact of cash limits.

Mr. Skinner

I shook my head for the simple reason that the right hon. Member for Taunton (Mr. du Cann) believes in cash limits, but when he was involved with Keyser Ullmann he got the cash limits wrong and he had to go the Government to bail the firm out. He did not bother about cash limits then.

Mr. Speaker

Order. The discussion has moved away from the amendment. The right hon. Member for Taunton (Mr. du Cann) has been paid his proper tribute and the House should continue discussing the amendment.

Mr. Lamond

I do not want to stray from the amendment. I shall not pursue my hon. Friend's argument because I do not want to detract from my tribute.

We began with cash limits on one or two Government Departments. It was immediately obvious that cash limits inhibited the development of Departments. The purpose of the experiment was to place on Departments inadequate cash limits. We were assured that the limits were targets. However, by questioning witnesses I discovered that only two parts of two Departments had ever exceeded the cash limits. The spending by most Departments was well below the cash limits placed upon them by the Government.

My hon. Friend the Member for Keighley correctly said that savings made on cash limits were equal to some of the big expenditure cuts which caused alarm and uproar in the country. Yet, stealthily, by use of cash limits, reductions in public expenditure were achieved. Sometimes the amount of cuts achieved was far greater than that publicly announced at the Dispatch Box. The relevance of all this is that today we are being asked to agree under clause 23 to further cash limits being imposed on this new organisation which is being set up. I for one am very much against it because I have seen the bad effects of cash limits not only within the Public Accounts Committee but elsewhere.

My hon. Friend the Member for Wood Green, with his very wide knowledge of the Health Service, touched on a matter in which I too am extremely interested and of which I may say, without wishing to boast, that I have had not a little experience. Before I came to the House of Commons I worked for 16 years as a design engineer employed by the North-East Scotland regional hospital board in the capital works department. Part of my duties at that time, apart from the occasions when I was serving the local council as Provost of Aberdeen—in which capacity I had occasion to entertain some of the hon. Gentlemen on the Government Benches who are now interrupting me—were concerned with new capital works for the Health Service.

At that time we had the system which my hon. Friend the Member for Wood Green went into in some detail, whereby we were allocated a certain amount of money for capital works and if that money was not spent by 31 March the regional board lost it. That was the worst possible restriction that could be placed on us from the point of view of forward planning. A date that has always been burnt into my memory is 31 March; it was the most crucial date in the entire calendar. Each year on 31 March I would get into my car and take cheques to contractors and make sure that they banked them, because if they did not the cheques could not be cashed later.

I give this example to show the situation that could arise in the Post Office and in telecommunications. People used to come to us—perhaps the secretary of the board—and say "Can you spend £35,000 by the end of the week? What can you buy?" It did not matter whether it was high on the priority list or was needed for the good of the Health Service; the only thing that mattered was that that item of capital equipment could be bought and paid for within a matter of a few days. That was some time ago, but it happened every year and, being a little farsighted and keen to assist in the work of the Health Service, my custom was to prepare a number of schemes which I thought should have high priority ready to be brought out at a momen's notice so that the money could be spent. We did not know whether we would get a penny. My employers were not concerned to encourage me to do additional work that might never come to fruition. My interest in the Health Service was such that I was prepared to do it. On many occasions I phoned various places in England and Scotland to ask whether they had stand-by generators, X-ray equipment and hospital laundry equipment ready to be loaded on a lorry and to be placed in position in Aberdeen or wherever it was to be placed on the day in question. The requirement was that it had to be in position. It was not enough for it to be on the way. The cheque would be given to me and I would take it to the agent so that he had it in his hand.

9.15 am

Can anyone imagine such a chaotic system being run by a Government? We are introducing that system once again into a most modern industry, which needs great capital expenditure. The same type of nonsensical financial control that I and others struggled with many years ago is being built into the Bill.

Lam only a common design engineer. I cannot give forth the financial jargon with which some of my hon. Friends and Conservative Members are familiar. However, I can recite the plain facts of my experience in life, an experience of 16 long years in the Health Service.

Mr. Skinner

I think that. I have the phrase for which my hon. Friend is searching. He says that he does not know the financial jargon, and my hon. Friend the Member for Keighley (Mr. Cryer) did not know it either. It is "counter-cyclical". I got it off Roy Jenkins.

Mr. Lamond

If that is an English word, I shall not be afraid to use it. We pick up these words from time to time. When we listen to Budget debates we soon learn about the J-curve, the crawling peg, fiscal drag and many other things. These terms come into fashion and go out of fashion. I have listened to many well-educated economists speaking from the Dispatch Box and presenting Budgets. I have listened in awe and admiration of their expertise. However, I might better have said "We should do the very opposite". Every financial policy that has been proposed from the Dispatch Box while I have been in this place has ended in disaster. To have done the opposite could have resulted in nothing very much worse.

I shall direct most of my attention to clause 23. Clause 71 is very similar, but it is applicable only to the Post Office. The clause must have a detrimental effect upon the morale of the workers in the telecommunications industry. They cannot have the pride in their industry which we wish them to have if they are starved of the capital with which to build up the new technology which is so essential and which is so much in demand and which will be essential if and when the upturn in our economic life takes place.

Some hon. Members have mentioned proposals made by various bodies such as the CBI, and by small groups such as the 364 economists who have written a letter of criticism of the Government's policy. There has been criticism from the TUC. Perhaps Conservative Members would like to say "They would say that, would not they?". I will set that aside.

I like to give homely examples in the same way as my hon. Friend the Member for Keighley likes to say something from time to time about the impact of unemployment and the need not to treat people merely as statistics.

There is a gentleman in Oldham by the name of Mr. Fred Broadbent. That is a good Oldham name. He is the chairman of the North West Commercial Hauliers Association. He wrote to the Prime Minister the other day to try to ring home to her as best he could the impact of the Government's policies—as in clause 23, which is part of the Government policies.

I am sorry, I made a mistake about the gentleman's name—the name is Fred Gartside.

Mr. Douglas Hogg (Grantham)

Another good old Oldham name.

Mr. Lamond

Yes, it is another good old Oldham name. I could tell hon. Members of many Gartsides, including Edmund Gartside, who is an extremely important man in the textile industry. As far as I know, Mr. Fred Gartside is no relative. The names of Broadbent and Gartside are both honourable. I would hesitate to say which is the most honourable, but I prefer the ring of Gartside.

This is an important matter, because Mr. Fred Gartside wrote to the Prime Minister. I believe that Mr. Gartside was a Tory supporter previously, because

Mr. Speaker

Order. It is very interesting, but we are dealing with the money for telecommunications and the Post Office. Mr. Gartside must be related to that.

Mr. Lamond

Yes, Mr. Speaker. I admit that that is anecdotal evidence, but it has a relevance which I shall try to draw on in a moment. It is relevant to the Government's economic policy, which gives rise to clause 23.

Many hon. Members have mentioned the Government's policy. I am trying to say that the Government's economic policy is wrong and that clause 23 should therefore not be in the Bill. It is not good enough for me to say that it is wrong, because many people would point a scornful finger and say that I have a long and reasonably good history in the Labour movement, so I would be critical. However, many others are critical, not just the CBI and the 364 economists but ordinary people in business, like that excellent man, Mr. Fred Gartside. He is in business in a reasonably big way, because he is the chairman of the North West Commercial Hauliers Association. He wrote to the Prime Minister because of the recent Budget. It was the last straw for Fred.

Mr. Speaker

Order. The hon. Gentleman is getting near the last straw, because he must not deal with the whole broad spectum of the Government's economic policy. We are discussing not the Budget but clause 23 and amendment No. 70.

Mr. Lamond

I shall do my utmost to comply with your requests, Mr. Speaker. Far be it for me in any way to stray out of order. I would not mean to do so. I apologise if I inadvertently do so. It is easy to stray out of order because one becomes rather angry at the impact of the Government's policy in one's constituency. It is seen everywhere in my constituency. Mr. Gartside was concerned with the textile industry, which has been decimated, and also—

Mr. Speaker

Order. If the hon. Gentleman persists, I shall ask him to resume his seat.

Mr. Lamond

I am sorry, Mr. Speaker, to have incurred that severe rebuke from you. I was only trying to follow up points that have been made in earlier contributions. I know that you are anxious to draw this part of today's business to a close, as there are many other amendments to be discussed.

My objections to clause 23 also relate to clause 71. I shall not stray into that argument, because it would take far too much time.

Clause 23 should be removed from the Bill because it has grave implications for those who work in the industry. Their morale will be sapped by the lack of adequate capital investment. As a result, we shall have unhappy employees who will be unable to contribute as efficiently as they would wish to the well-being of that important developing industry which has a great future.

The question of cash limits is also covered by clause 23. They are severely restricting on the industry. Last, but not least, there is the impact which in the long run this has on the consumer. After all, that is the person to whom, first and foremost, we are trying to supply a service. If clause 23 has these grave implications on the three sides of the question, surely anyone who has the well-being of this great industry at heart will agree with the amendments.

Mr. Flannery

On a point of order, Mr. Speaker. I notice that the Attorney-General is present. Is it possible for him to give an explanation of subsection (7), which no one—

Mr. Speaker

Order. That is not really a point of order. The hon. Gentleman made that point in his speech. The Minister may reply to it, but I do not know.

Mr. Wigley

On a point of order, Mr. Speaker. Can I be assured that you will not accept a closure motion on this debate after the Minister has spoken before we have had an opportunity to discuss the Welsh aspects, which are extremely important?

Mr. Speaker

The House has debated this subject for three hours. I can give no guarantees whatever.

Mr. Kenneth Baker

When the right hon. Member for Salford, West (Mr. Orme) opened the debate about three hours ago he rightly said that these were probing amendments. I strongly advise the House—whatever it may think of what I shall say—not to vote against these two clauses. They are central to the Bill. They contain the main borrowing powers, and it would totally hamstring both BT and the Post Office Corporation should they be defeated. I believe that the right hon. Gentleman indicated as much.

Mr. Orme

I accept what the Minister said. This was the only way in which we could hold this major debate. There are aspects in the clauses which we do not like, but their deletion would affect the borrowing powers. Therefore, I shall be advising my hon. Friends not to vote for the amendments.

Mr. Baker

I am grateful to the right hon. Gentleman. We are really discussing BT's external finance and the part which that can play in the financing of the corporation's investment programme.

9.30 am

Let me set the mind of the hon. member for Sheffield, Hillsborough (Mr. Flannery) at rest about subsection (7). It was indeed a subsection that I added to the Bill in Committee myself. I had as much difficulty in understanding it as did the hon. Gentleman and his hon. Friend the Member for Wood Green (Mr. Race), but I was advised that it was necessary. A similar provision, although not exactly in those terms, is found in other borrowing powers clauses. I was advised that it was necessary, in that the subsection protects the rights of lenders in the event of BT borrowing ultra vires, that is to say, if the borrowing takes BT's indebtedness over the statutory limit, or the money borrowed is used for a purpose other than what is permitted under the clause.

It is based in paragraph 20 of schedule 13 to the Local Government Act 1972.It does not imply that the Post Office is in the habit of borrowing illegally, or that BT is expected to do so. But the prudent borrower would normally require to be satisfied that the borrowing was legal in order to protect his position. The courts would not order BT to repay any sums that it had borrowed ultra vires. This subsection relieves the lender of the need to be so satisfied and thereby also relieves BT of the need to provide the necessary proof.

I appreciate that this is a complicated matter. When I moved the amendment in Committee the right hon. Member for Rutherglen (Mr. MacKenzie), who led for the Opposition, welcomed it, because it was a fairly normal provision.

Mr. Flannery

Do I understand that there is a similar provision in every Bill appertaining to other corporations? The hon. Gentleman read that out word for word from his brief. I suspect that he is no clearer now than I am, and that is why he had recourse to reading it word for word.

Mr. Baker

When I am given carefully phrased words by lawyers I usually stick to them. I find it safer that way. Let me say at the outset that the Government endorse the importance of the investment in telecommunications. The telecommunications network has a key role to play in the introduction of the new information technologies, which can do so much to improve our industrial efficiency and competitiveness. At present we have a system that contains much equipment that has been outdated by technological advances. We need to modernise the system, for example, by introducing new electronic switching systems that allow the transmission of signals in digital form. We need to expand the system to cater for customer demand, which is still growing, if more slowly, despite the recession. We need to use the system to introduce new services to the customer.

A few figures illustrate what is involved. I take it rather hard that hon. Members opposite criticise the level of investment of the Post Office and British Telecom, because the Labour Government's record was exceedingly disappointing, as those who follow these matters readily recognise. After the high levels of the early 1970s—and the highest level was achieved in the last year o f the previous Conservative Government—investment in the telecommunications system was reduced to a low point of £1.4 billion in 1977–78. That was the time of the post-IMF cuts. It has since climbed to £1.5 billion in 1978–79, £1.6 billion in 1979–80 and an estimated £1.7 billion in 1980–81. A further increase in investment levels is planned for 1981–82.

That is a record of which the Government can be proud, in that since we have been in office we have significantly increased the level of investment in British Telecom. All the figures that I have quoted are at constant 1981–82 outturn prices. They illustrate the magnitude of the programme.

Pushing ahead with this investment programme at a time of economic difficulties is no easy task. A major part of the programme can be financed from the cash flow from British Telecom's large depreciation provisions, but in addition, the corporation needs to make profits, and it needs to borrow. The Government, for their part, have increased British Telecom's external financing limit in the financial year just ended to £223 million. Though less than British Telecom would have liked, this marks a significant increase on recent years, when net repayments by British Telecom have been required.

Mr. Wigley

Will the Minister confirm that the modernisation of the network as British Telecom wished would have required £200 million more than it has had at its disposal to do this essential work?

Mr. Baker

Does the hon. Gentleman mean this year or next?

Mr. Wigley

This year.

Mr. Baker

The year that has just ended, or the year that we are in now?

Mr. Wigley

The year that has just ended.

Mr. Baker

We are discussing these figures at the moment with British Telecom—not only the overhang from last year but the future investment programme for this year. I can neither confirm nor deny that figure, because I regret to say that I do not carry it in my head.

We are likewise concerned to do everything possible to increase the finance available for telecommunications investment in 1981–82 and subsequent years. The best route lies through the introduction of private capital. I must emphasise this. To the extent that BT can raise money in partnership with the private sector, it does not have to come to me or a Treasury Minister to ask permission. If it can tap the private sector market through venture capital of that sort it does not fall within the PSBR.

I should like to see BT forming joint ventures in partnership with the private sector—for example, in the supply of attachments and the provision of services auxiliary to the main network. Provided that BT did not control such joint ventures, they would be genuinely private sector concerns, whose borrowings would lie outside the PSBR constraint.

Mr. Anderson

In those circumstances, when BT would be able to go on to the open market, and, either through joint venture or otherwise, participate with a private concern, would that private concern enjoy the guarantee of the Government?

Mr. Baker

It would depend upon the partnership and the proportions of the partnership, but if it were a partnership on a 50–50 basis, or anything of that sort, it would not enjoy the guarantee. It would be a separate commercial venture. That is what would allow BT to go to the private sector without coming back to the Government. Hon. Members will know that the Bill was amended in Committee so that BT would have the power, if the Government permitted, to borrow directly in the money market for long-term capital needs. As I said at the time, this is a permissive provision. Whether we can agree to this course involves difficult issues relating to the Government's general economic strategy and to the practicalities of raising finance by new types of financial instruments.

This is under review. The Treasury has to police the number of nationalised industries that would be wanting to go to the market. As I said in Committee, the queue has to be orderly, but at least the gateway exists. We are in discussion with BT and with the Treasury on its capital requirements for this year. We are conscious of the capital requirements of BT. We want to see a good flow of investment into BT and also into the postal side. We are actively reviewing this now, and I think that the debate has been helpful. It has emphasised the needs of BT in this area.

Several Hon. Members


The Parliamentary Secretary to the Treasury (Mr. Michael Jopling)

rose in his place and claimed to move, That the Question be now put.

Question put, That the Question be now put.

The House divided: Ayes 250, Noes 140.

Division No. 139] [9.38 am
Adley, Robert Benyon, W. (Buckingham)
Aitken, Jonathan Bevan, David Gilroy
Alexander, Richard Biffen, Rt Hon John
Alison, Michael Biggs-Davison, John
Ancram, Michael Blackburn, John
Arnold, Tom Bonsor, Sir Nicholas
Aspinwall, Jack Bottomley, Peter (W'wich W)
Atkins, Robert (Preston N) Bowden, Andrew
Atkinson, David (B'm'th, E) Boyson, Dr Rhodes
Baker, Kenneth (St. M'bone) Braine, Sir Bernard
Baker, Nicholas (N Dorset) Bright, Graham
Banks, Robert Brinton, Tim
Beaumont-Dark, Anthony Brittan, Leon
Bendall, Vivian Brooke, Hon Peter
Bennett, Sir Frederic (T'bay) Brotherton, Michael
Benyon, Thomas (A'don) Brown, Michael (Brigg & Sc'n)
Browne, John (Winchester) Jessel, Toby
Bruce-Gardyne, John Jopling, Rt Hon Michael
Buck, Antony Kaberry, Sir Donald
Budgen, Nick Kellett-Bowman, Mrs Elaine
Bulmer, Esmond Kershaw, Anthony
Butcher, John King, Rt Hon Tom
Carlisle, John (Luton West) Knight, Mrs Jill
Carlisle, Kenneth (Lincoln) Knox, David
Chalker, Mrs. Lynda Lamont, Norman
Channon, Rt. Hon. Paul Lang, Ian
Chapman, Sydney Latham, Michael
Churchill, W. S. Lawson, Rt Hon Nigel
Clark, Hon A. (Plym'th, S'n) Lee, John
Clark, Sir W. (Croydon S) Lennox-Boyd, Hon Mark
Cockeram, Eric Lester, Jim (Beeston)
Corrie, John Lewis, Kenneth (Rutland)
Costain, Sir Albert Lloyd, Peter (Fareham)
Cranborne, Viscount Loveridge, John
Critchley, Julian Luce, Richard
Crouch, David Lyell, Nicholas
Dean, Paul (North Somerset) McCrindle, Robert
Dorrell, Stephen MacGregor, John
Douglas-Hamilton, Lord J. MacKay, John (Argyll)
Dover, Denshore Macmillan, Rt Hon M.
du Cann, Rt Hon Edward McNair-Wilson, M. (N'bury)
Dunn, Robert (Dartford) McNair-Wilson, P. (New F'st)
Durant, Tony McQuarrie, Albert
Dykes, Hugh Madel, David
Eden, Rt Hon Sir John Major, John
Eggar, Tim Marland, Paul
Fairbairn, Nicholas Marshall, Michael (Arundel)
Faith, Mrs Sheila Mates, Michael
Farr, John Mather, Carol
Fell, Anthony Maude, Rt Hon Sir Angus
Fenner, Mrs Peggy Mawhinney, Dr Brian
Finsberg, Geoffrey Maxwell-Hyslop, Robin
Fisher, Sir Nigel Mayhew, Patrick
Fletcher, A. (Ed'nb'gh N) Meyer, Sir Anthony
Fletcher-Cooke, Sir Charles Miller, Hal (B'grove)
Fookes, Miss Janet Mills, Iain (Meriden)
Fowler, Rt Hon Norman Mills, Peter (West Devon)
Fox, Marcus Moate, Roger
Fraser, Peter (South Angus) Monro, Hector
Fry, Peter Montgomery, Fergus
Gardiner, George (Reigate) Moore, John
Gardner, Edward (S Fylde) Morgan, Geraint
Garel-Jones, Tristan Morris, M. (N'hampton S)
Gilmour, Rt Hon Sir Ian Morrison, Hon C. (Devizes)
Glyn, Dr Alan Morrison, Hon P. (Chester)
Goodlad, Alastair Mudd, David
Gorst, John Murphy, Christopher
Gow, Ian Neale, Gerrard
Gower, Sir Raymond Needham, Richard
Grant, Anthony (Harrow C) Nelson, Anthony
Greenway, Harry Neubert, Michael
Griffiths, E.(B'y St. Edm'ds) Newton, Tony
Griffiths, Peter Portsm'th N) Onslow, Cranley
Grist, Ian Oppenheim, Rt Hon Mrs S.
Grylls, Michael Osborn, John
Gummer, John Selwyn Page, Richard (SW Herts)
Hamilton, Hon A. Parris, Matthew
Hamilton, Michael (Salisbury) Patten, Christopher (Bath)
Hampson, Dr Keith Pawsey, James
Hannam, John Percival, Sir Ian
Haselhurst, Alan Pink, R. Bonner
Havers, Rt Hon Sir Michael Pollock, Alexander
Hawkins, Paul Porter, Barry
Hawksley, Warren Price, Sir David (Eastleigh)
Heddle, John Proctor, K. Harvey
Henderson, Barry Pym, Rt Hon Francis
Heseltine, Rt Hon Michael Raison, Timothy
Hicks, Robert Rathbone, Tim
Hill, James Rees-Davies, W. R.
Hogg, Hon Douglas (Gr'th'm) Renton, Tim
Hooson, Tom Rhodes James, Robert
Howe, Rt Hon Sir Geoffrey Rhys Williams, Sir Brandon
Howell, Rt Hon D. (G'ldf'd) Ridley, Hon Nicholas
Howell, Ralph (N Norfolk) Rifkind, Malcolm
Hunt, David (Wirral) Roberts, Wyn (Conway)
Jenkin, Rt Hon Patrick Rost, Peter
Sainsbury, Hon Timothy Townend, John (Bridlington)
Scott, Nicholas Townsend, Cyril D, (B'heath)
Shaw, Giles (Pudsey) Trippier, David
Shelton, William (Streatham) Trotter, Neville
Shepherd, Colin (Hereford) van Straubenzee, W. R.
Shepherd, Richard Vaughan, Dr Gerard
Shersby, Michael Viggers, Peter
Silvester, Fred Waddington, David
Sims, Roger Wakeham, John
Skeet, T. H. H. Waldegrave, Hon William
Smith, Dudley Walker, B. (Perth)
Speed, Keith Waller, Gary
Speller, Tony Ward, John
Spicer, Jim (West Dorset) Watson, John
Spicer, Michael (S Worcs) Wells, John (Maidstone)
Sproat, Iain Wells, Bowen
Squire, Robin Wheeler, John
Stanley, John Whitelaw, Rt Hon William
Steen, Anthony Whitney, Raymond
Stevens, Martin Wickenden, Keith
Stewart, Ian (Hitchin) Wiggin, Jerry
Stewart, A.(E Renfrewshire) Wilkinson, John
Stokes, John Williams, D.(Montgomery)
Stradling Thomas, J. Winterton, Nicholas
Taylor, Teddy (S'end E) Wolfson, Mark
Tebbit, Norman Young, Sir George (Acton)
Temple-Morris, Peter Younger, Rt Hon George
Thatcher, Rt Hon Mrs M.
Thomas, Rt Hon Peter Tellers for the Ayes:
Thompson, Donald Mr. Spencer Le Marchant and Mr. John Cope
Thornton, Malcolm
Adams, Allen Fletcher, Ted (Darlington)
Alton, David Forrester, John
Anderson, Donald Fraser, J. (Lamb'th, N'w'd)
Archer, Rt Hon Peter Freud, Clement
Ashton, Joe Garrett, John (Norwich S)
Atkinson, N. (H'gey,) George, Bruce
Barnett, Guy (Greenwich) Gilbert, Rt Hon Dr John
Beith, A. J. Graham, Ted
Benn, Rt Hon A. Wedgwood Grant, George (Morpeth)
Bennett, Andrew (St'kp't N) Hardy, Peter
Booth, Rt Hon Albert Harrison, Rt Hon Walter
Brocklebank-Fowler, C. Hart, Rt Hon Dame Judith
Brown, R. C. (N'castle W) Haynes, Frank
Brown, Ron (E'burgh, Leith) Hogg, N. (E Dunb't'nshire)
Brown, Ronald W. (H'ckn'y S) Holland, S. (L'b'th, Vauxh'll)
Callaghan, Jim (Midd't'n & P) Home Robertson, John
Campbell, Ian Huckfield, Les
Campbell-Savours, Dale Hughes, Robert (Aberdeen N)
Cant, R. B. Janner, Hon Greville
Carmichael, Neil Jones, Barry (East Flint)
Cocks, Rt Hon M. (B'stol S) Jones, Dan (Burnley)
Coleman, Donald Kaufman, Rt Hon Gerald
Cook, Robin F. Kilroy-Silk, Robert
Cowans, Harry Kinnock, Neil
Cryer, Bob Lamond, James
Cunliffe, Lawrence Lead bitter, Ted
Cunningham, G. (Islington S) Leighton, Ronald
Dalyell, Tam Lewis, Ron (Carlisle)
Davies, Rt Hon Denzil (L'lli) Litherland, Robert
Deakins, Eric Lofthouse, Geoffrey
Dean, Joseph (Leeds West) McCartney, Hugh
Dempsey, James McElhone, Frank
Dewar, Donald McGuire, Michael (Ince)
Dixon, Donald McKay, Allen (Penistone)
Dobson, Frank McKelvey, William
Dormand, Jack MacKenzie, Rt Hon Gregor
Douglas, Dick McNally, Thomas
Duffy, A. E. P. McNamara, Kevin
Dunwoody, Hon Mrs G. McTaggart, Robert
Eadie, Alex McWilliam, John
Eastham, Ken Magee, Bryan
Ellis, R. (NE D'bysh're) Marshall, Dr Edmund (Goole)
Ellis, Tom (Wrexham) Martin, M (G'gow S'burn)
English, Michael Maxton, John
Evans, Ioan (Aberdare) Mikardo, Ian
Evans, John (Newton) Millan, Rt Hon Bruce
Flannery, Martin Mitchell, Austin (Grimsby)
Morris, Rt Hon C. (O'shaw) Stoddart, David
Moyle, Rt Hon Roland Stott, Roger
O'Halloran, Michael Strang, Gavin
O'Neill, Martin Summerskill, Hon Dr Shirley
Orme, Rt Hon Stanley Taylor, Mrs Ann (Bolton W)
Pendry, Tom Thorne, Stan (Preston South)
Penhaligon, David Tilley, John
Powell, Raymond (Ogmore) Tinn, James
Price, C. (Lewisham W) Urwin, Rt Hon Tom
Richardson, Jo Varley, Rt Hon Eric G.
Roberts, Albert (Normanton) Wainwright, E. (Dearne V)
Robinson, G. (Coventry NW) Watkins, David
Rooker, J. W. Welsh, Michael
Roper, John White, Frank R.
Ross, Ernest (Dundee West) White, J. (G'gow Pollok)
Rowlands, Ted Wigley, Dafydd
Sheerman, Barry Williams, Rt Hon A. (S'sea W)
Sheldon, Rt Hon R. Wilson, William (C'try SE)
Silkin, Rt Hon J. (Deptford) Winnick, David
Skinner, Dennis Woodall, Alec
Soley, Clive Young, David (Bolton E)
Spearing, Nigel
Spriggs, Leslie Tellers for the Noes:
Steel, Rt Hon David Mr. James Hamilton and Mr. George Morton.
Stewart, Rt Hon D. (W Isles)

Question accordingly agreed to.

Question, That the amendment be made, put accordingly and negatived.

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