HC Deb 07 July 1981 vol 8 cc359-80

Lords amendment: No. 7, after clause 19, insert— A.—(1) A relevant authority shall have power to purchase apparatus, and to authorise any of their officers to purchase apparatus on their behalf, for the purpose of ascertaining whether sections 17 and 18 and orders made under those sections (in this section referred to as 'the relevant provisions') are being complied with. (2) Every local weights and measures authority in Great Britain shall have power to enforce the relevant provisions within their area; but nothing in this subsection shall be construed as authorising a local weights and measures authority in Scotland to institute proceedings for an offence. (3) In this section 'relevant authority' means—

  1. (a) in relation to Great Britain, the Secretary of State or a local weights and measures authority on whom a power to 360 enforce the relevant provisions is conferred by subsection (2);
  2. (b) in relation to Northern Ireland, the Department of Commerce for Northern Ireland; and
  3. (c) in relation to the Isle of Man, the Board of Consumer Affairs."

Mr. Kenneth Baker

I beg to move, That this House doth agree with the Lords in the said amendment.

Mr. Deputy Speaker (Mr. Bernard Weatherill)

With this we may take Lords amendments Nos. 8 to 13, 26, 88, 102 and 103.

Mr. Baker

The clause clarifies the means of enforcing the marking orders that will be made under clauses 17 and 18 concerning telecommunications apparatus. These clauses were added to the Bill on Report in this House. At the time I undertook to consider further whether additional enforcement powers were needed. This we have done. We have concluded that it would be appropriate for marking orders under the Bill to be enforced by local weights and measures authorities, and this clause makes the necessary provisions.

The clause is based on corresponding sections of the Trade Descriptions Act 1968, which also contain a power to make marking orders enforceable by local weights and measures authorities. Subsection (1) makes clear that relevant authorities, which include local weights and measures authorities and the Secretary of State, have the power to make test purchases of apparatus and prevent a defendant from claiming that the purchase had been made solely to entrap him into committing an offence.

Subsection (2) authorises local weights and measures authorities to enforce the marking order provisions and thus to bring prosecutions as and when they see fit, except in Scotland, where prosecutions are brought by the procurator fiscal.

I hope that hon. Members will agree that these enforcement provisions are right—bearing in mind that local weights and measures authorities deal with other marking orders—and will agree to the new clause. You have coupled this amendment, Mr. Deputy Speaker, with Lords amendments Nos. 8 to 13, 26, 88, 102 and 103, with which the Government also agree. The amendments may appear complicated, but their effect is simply to transfer the content of clause 25 to schedule 4 and to make the necessary consequential amendments.

Clause 25 relates to the transfer to British Telecom of that part of the pre-1969 Post Office borrowing that relates to telecommunications and is therefore essentially a transitional provision. These amendments achieve the transfer to schedule 4, which contains the rest of the transitional provisions.

Question put and agreed to.

Mr. Deputy Speaker

Lords amendments Nos. 8 to 13 have been discussed. Is it the wish of the House that I put them together?

Mr. John Golding (Newcastle-under-Lyme)

On a point of order, Mr. Deputy Speaker. Has amendment No. 9 been moved?

Mr. Deputy Speaker

It was discussed with Lords amendment No. 7.

Mr. Golding

I did not hear Lords amendment No. 9, to clause 26, called. It is an amendment on which Opposition Members wish to speak.

Mr. Deputy Speaker

I recognise that we are proceeding rather rapidly. I think, however, that I made the position clear when I read out the amendments linked with Lords amendment No. 7. Has the hon. Gentleman a list of the selected amendments? It is clearly stated. Does he wish to speak?

Mr. Gregor MacKenzie (Rutherglen)

Further to the point of order, Mr. Deputy Speaker. Opposition Members did wish to make contributions on Lords amendments Nos. 8 to 13, on the financial provisions. The Minister spent most of his time, quite properly, talking about marking regulations. I would have thought that a short discussion on the financial question would have been appropriate. I was not aware that Lords amendment No. 9, which we are concerned to discuss, had been dealt with by the Minister. I hope that the matter can be clarified.

Mr. Baker

Further to the point of order, Mr. Deputy Speaker. I shall be happy, if the right hon. Gentleman so wishes, to have a short debate on the finances of BT. This would be an appropriate amendment, I submit, for such a debate to take place.

Mr. MacKenzie

I am trying to be helpful. A short discussion on Lords amendment No. 9 would be appreciated.

Mr. Deputy Speaker

A debate is possible within this group of amendments. There is no need to wait until we reach the appropriate stage of the Bill.

Mr. MacKenzie

I regret the slight confusion. We are moving at some pace. The Opposition do not wish to prolong discussion unnecessarily. The amendment provides an opportunity to discuss the whole question of the financing of British Telecommunications although not at great length, as in Committee or on Report. I am not pressing a vote, but it would be sensible to spend a few minutes discussing the issue.

In Committee my hon. Friends and I pressed strongly an amendment that would allow BT to borrow sterling from non-Government sources. The Government were kind enough to accept the principle. There is, however, not much point in the Minister of State's accepting my suggestion if the principle of non-Government sterling borrowing is not to be carried out in practice.

For this year and, as things are working out, in the critical years ahead, BT will deliberately be kept short of investment finance. I understand that the shortfall for 1981–82 alone will be about £350 million. Investment in new, highly advanced equipment has already been cut by about £230 million. When every other advanced country is increasing greatly its investment in national telecommunications and providing the finance to do so, the Government are forcing BT to cut back.

The recent £200 million increase in BT's cash limit for one year is not good enough. At a time when investment throughout the economy is collapsing and it is evident that unemployment is increasing massively, it is economic nonsense to refuse BT the financial flexibility to invest in profitable projects that could be of great benefit to the nation for a great many years. That is political dogma at its worst.

The heart of the problem is the way in which the Treasury Ministers choose to operate the cash limits. For obscure theoretical reasons they choose to include in the definition of public borrowing all the net external borrowing of BT, irrespective of source. Even in the increasingly rare circumstances where finance is raised from non-Government sources and there is no real chance of BT's defaulting on the loan, it is still classed as a 100 per cent. borrowing.

The Treasury is often described as the nationalised industries' banker. If any commercial bank assumed that all its customers would default on all their loans, arid 100 per cent. provision had to be made for that, it would not survive in business for very long. Yet that is exactly the attitude of Treasury Ministers towards BT. They think that it is to be defined as a 100 per cent. bad risk. Some claim that additional finance for BT will crowd out private investment. Let it be said plainly that a dispassionate survey of all the evidence shows that, at best, the claim is not proven. The Opposition would go further. We believe that there is no evidence to support the crowding-out theory at a time of collapsing investment in the economy.

The practical reality is different from the theoretical world of Treasury Ministers. There is every reason to assume that city institutions will welcome BT's raising loan finance on the capital markets. All the inquiries into the availability of finance for investment show that there is no shortage of funds for profitable investment—and BT is certainly profitable. Underwriting a BT loan issue is not a problem, yet the Government refuse to allow BT to borrow and to do what they are encouraging other businesses to do, namely, invest in the high technology of tomorrow.

It is all too easily forgotten that the Government's refusal to allow BT to borrow finance for investment will force up telephone charges. That is because BT must provide most of its finance from within the business itself. As I understand it, a statement published only the other day by the chairman of BT, about a survey of BT's financial prospects, said that that would cost residential customers an additional £450 million and those who use pay telephones an additional £135 million. That is because of the extremely high self-financing ratio. To achieve that, prices have to be raised more than is necessary. That is grossly unfair on BT's customers.

It is disingenuous of the Government to blame BT and other nationalised industries for raising their prices more than other companies. The Government's cash limit policies have forced them to do that. If the Minister and his colleagues peruse the statement made by Sir George Jefferson—he was appointed by the Secretary of State, and I regard him highly—they will see that in his judgment that policy will cost that much more for residential customers and those who use pay phones.

That is something to which the Minister has to address himself. Sir George is not the only person to make such comments. My hon. Friend the Member for Newcastle-under-Lyme (Mr. Golding), who is associated with the Post Office Engineering Union, has made comments that are much in line with those made by Sir George. They raise questions that must be answered.

The refusal to give British Telecommunications the ability to borrow on anything like the scale that is necessary is extremely bad commercial practice. Sensible and prudent gearing is as relevant to British Telecommunications as it is to ICI or any other large commercial company. It is clear that BT will require financial flexibility. Other countries have learnt this over a long period.

The Opposition, the trade unions and BT have said that they are worried about cash limits. It is a worry, because the lack of flexibility caused by cash limits will have a serious effect on telephone users. The Minister must address himself to these issues and make a public response.

Mr. Golding

As my right hon. Friend the Member for Rutherglen (Mr. MacKenzie) said, I speak for the Post Office Engineering Union. The union is extremely concerned about cash limits, but it is the Beesley report that casts the largest shadow over British Telecommunications. We have had no opportunity to make our observations on the report on the liberalisation of the use of the BT network. We want modernisation and expansion for BT and the ability to fulfil a social role. It is BT's prime duty to provide an efficient telephone system at a price that the bulk of the public can afford to pay. If we are to achieve that, we must, among other things, invest heavily, and certainly more heavily than is being allowed. That argument was advanced eloquently by my right hon. Friend.

What contribution could the Beesley report make to the end that I have in mind? The answer must be "Nil". If the report is implemented, it will make it more difficult for both management and staff in BT to provide a service to the customer of which they can be proud. Both the chairman, Sir George Jefferson, and the unions speak with a common voice on the threat that it poses for an effective telecommunication system.

Professor Beesley advocates a free-for-all, with no protection for BT's revenue or for the interests of British manufacturers, who are becoming increasingly alarmed at the implications of the Beesley report. Professor Beesley advocates the unfettered use of rented circuits for all and sundry, both nationally and internationally. He advocates the creation of competing networks—that is, private transmission.

10.45 pm

On reading the report, my strong belief was that those were ideological conclusions, which were arrived at to support the ideological commitment of the Secretary of State. My view is shared by many who do not share my political commitment. I believe that the conclusions of the report were arrived at before the report was written. The report smacks of conclusions reached before the study was even begun.

The POEU, in submissions, has expressed its concern at the short length of time of the study. In the study it is admitted that it has taken only three months to complete. That is insufficient time to deal with the complex issues faced in this area. The union is also upset at the tight schedule for discussion and consultation. I think that it would be unreasonable to try to meet a deadline this month. It would be totally unreasonable, given the views of the chairman of British Telecommunications, who is critical of the time scale of discussion. If I do not put the chairman's words on the record, it is only because I want to be more brief this evening than I was yesterday.

The Minister of State knows that Sir George Jefferson not only says that precipitate implementation of the Beesley recommendations would cause irreversible damage but makes it clear that it would be wrong, in the short time that we have, to reach conclusions before the end of the month.

The Beesley report has been criticised. The POEU did an analysis of the way in which the evidence was collected. It appears to have been collected at a superficial level. When the people who are cited in Professor Beesley's report as having given evidence were approached, it was found that some of them did not appreciate the way in which their remarks would be used and had not understood that they had given evidence in any formal sense at all.

On the basis of the level of the collection of evidence, it seems that the report is an unsatisfactory basis on which to take a decision of such magnitude. There is no analysis worthy of the name in this short report. Its conclusions do not seem to be derived from the argument. For example, Professor Beesley finds that British Telecommunications is liberal and that Britain has led in Europe in data processing. He concludes, however, without any evidence, that as a matter of ideology increasing competition will further enhance the prospect of success.

If Professor Beesley had been given British Rail to examine, he would have built a line parallel to the Euston to Birmingham inter-city line to provide competition. He would have put a line between the motorway and the British Rail line. He would have allowed private carriers to run Pullman coaches on the inter-city line. He came to conclusions that would have allowed British Rail to become involved in British Telecommunications. That is the absurdity of his conclusions.

The POEU has taken the proposals seriously. It has tested them against the American experience. It commissioned a study by Logica, the firm used by Professor Beesley. From that study, it is clear that profitable business would be lost. It is clear also that that would be lost from a small number of business users rather than from the general residential subscriber. The consequences would be severe.

Logica estimated that the increase in cost to subscribers would be 25 per cent. One can understand that, because the fixed cost of sending one call is high. One must have a system to transmit any call. The high cost of installation, operation and maintenance of the system has to be met. The system is also needed for defence.

Profit is made from trunk and international calls. That is true of almost all countries. Local calls and rentals are subsidised from trunk and international calls. If we cream off trunk and international calls, nothing will be left to subsidise rentals and local calls. Residential and business subscribers will suffer.

It is not only the present subscriber who will suffer. It is clear from Sir George Jefferson's submission that he is concerned that there might not be revenue for the research and development that will be needed in years to come. It is no wonder that Sir George and many others are in a panic. My guess is that the Treasury, if it has woken up sufficiently to the financial implications of these proposals, will also be beginning to panic. If it is not, it ought to be, because the financial implications for the State and the Government are great. The Government cannot afford to give more public money to businesses in this indiscriminate way.

The increase in price is not the only evil consequence. British manufacturers are panicking because, according to at least one manufacturer, foreign equipment will put one-third of their output at risk.

More profoundly, British manufacturers are dependent for their well-being on the prosperity, modernisation and expansion of British Telecommunications, because 80 per cent. of their output goes to BT. It is no wonder that they are beginning to regret campaigning for the Bill. As I have said, foreign companies will gladly help the Government to smash British industry by this means.

I was interested to read in The Guardian of 29 June: The unannounced NEDC attack on Beesley was made by the electronics EDC—the only national forum for the industry including Whitehall, management and union representatives. It echoed many of British Telecom's arguments—that one effect of adopting Beesley would be to raise domestic phone charges; that much more time was needed to consider such fundamental changes; and that the industry was being damaged by the uncertainties. To a large extent, that sums up my position.

The POEU would wish to say in the loudest possible voice that it is imperative that the social role of telecommunications is allowed to continue, that we do not smash the telephone system in the rural areas, that we do not impede the modernisation and growth of the system for the residential subscriber and that we do everything possible to make it possible for all to have an efficient telephone service. The preservation of the monoply would mean the provision of telephones for many more people than would ever be likely under a Beesley regime.

I therefore appeal to the Minister. We do not want a Beeching axe on telecommunications. Professor Beesley's recommendations would clearly mean a Beeching-type operation, which would be devastating for the future of British Telecommunications.

11 pm

Mr. John McWilliam (Blaydon)

I intend to be brief. Like my hon. Friend the Member for Newcastle-under-Lyme (Mr. Golding), I am a sponsored member of the Post Office Engineering Union. I listened to the contributions made by my right hon. Friend the Member for Rutherglen (Mr. MacKenzie) and by my hon. Friend the Member for Newcastle-under-Lyme and I was reminded of events a year ago, when I first visited the United States of America. At that time the first privatisation took place, and American Telephone and Telegraph carried traffic for the first time to major centres on private lines that had been provided by others at a lower cost. At the time, American Telephone and Telegraph obviously objected.

When I visited the United States of America this year, American Telephone and Telegraph had gone further and had proposed legislation in Congress to enable it to compete fairly with those who were competing unfairly as a result of the alleged opening up of the system. American Telephone and Telegraph recognised the impact that opening up the system would have on the type of service that it provided.

Although I complain bitterly about the Government's acceptance of the Beesley report and all that that entails, my major complaint is that the report was published after the conclusion of our Committee proceedings. We did not have the opportunity to discuss the Beesley report when we debated the Bill, because it was not published until we had concluded our deliberations.

However, it was written some time before that. I condemn the Government because they had made up their mind about the answer that they wanted from the Beesley report. I condemn them because they knew what Beesley was saying and because in Committe we did not have the opportunity to discuss the Bill's provisions adequately—particularly its financial provisions.

We cannot accept the provisions that we have been left with as anything other than a shabby compromise and a tawdry structure of something that should have been discussed in Committee. However, the Government denied us the knowledge and evidence of Beesley. They denied us the opportunity to examine the report in detail in Committee. I invite the Government to accept that point and to accept that more important than political principle is the acceptance of the fact that we are dealing with a telecommunications system that is supposed to serve people, and not a political interest.

Mr. Kenneth Baker

Two separate subjects have been raised that are clearly interlocked. I refer to the points raised by the right hon. Member for Rutherglen (Mr. MacKenzie) about the financing of BT and the point raised by the hon. Member for Newcastle-under-Lyme (Mr. Golding) and the hon. Member for Blaydon (Mr. McWilliam) about the Beesley report.

I assure the right hon. Member for Rutherglen and the House that the Government give a high degree of priority to the capital programme for BT. It is the highest capital programme in the country and amounts to £6 million per day. I am glad to say that since we have been in office we have been able, each year, to increase the BT's capital investment programme. It now stands at £1.9 billion. That is a huge sum of money. Of all the nationalised industries, the first one to be allowed to increase its external finance limit was BT. Earlier this month I was pleased to announce that the external finance limit for BT had been increased by £200 million.

The Government are therefore concerned to make as much finance as possible available for BT's investment programme within the constraints of the current economic situation.

Following an adjustment for the financial limit for 1980–81 there was a net borrowing allowance of £223 million. That compares favourably with other recent years when net repayments to the Exchequer have been required. The financing available to BT in 1981–82 has been reset, after review, to a total net borrowing of £380 million.

Concern has been expressed about the operation of the Government's borrowing controls. The right hon. Member said that cash limits give him concern. He is not alone in that. Cash limits have given successive Governments and nationalised industries concern. However, there are good reasons why it is necessary for BT and other nationalised industries to be subject to limits on their external financing. The right hon. Member and his right hon. Friend the Member for Manchester, Openshaw (Mr. Morris), as members of the Labour Government, will readily recognise that. If one allowed all nationalised industries to borrow in the market, as I made clear in Commitee, there would be a great rush to the market. If they were all given carte blanche to go, it would have a massive effect of crowding out. It would also have a powerful thrust to push interest rates much higher very quickly. All Governments recognise that there must be an orderly queue for borrowing by State corporations.

It is clear that BT is well up that queue. It was the first of the nationalised industries to have its EFL increased this year. The Government are continuing to look at ways of maximising the finance available to BT, including the possibility of its borrowing directly from the money markets. The Government would welcome joint ventures that would inject private sector finances into some areas of investment, such as the supply of subscriber apparatus and the provision of services auxiliary to the main network. I hope that BT will make proposals in those areas. At the same time, the introduction of private sector competition in some areas, following the relaxation of the monopoly, would help to free resources for investment in the main telecommunications network.

The Government are seeking to develop a new form of financing instrument, analogous to equity in the private sector, whereby BT could raise finance directly from the money markets, which will increase the pressures on it to trade efficiently. The Bill provides the necessary powers to allow direct market borrowing, if an appropriate financial instrument can be designed. We are continuing to examine the possibility of designing one.

The House will also know that I announced earlier this month that international financial consultants would be considering our request to examine the internal operations of BT to see whether there is scope for savings, because one of the sources of finance available to the investment programme is self-generation through efficiency and a more effective way of doing things.

The hon. Members for Newcastle-under-Lyme and Blaydon both spoke with great experience about the Beesley report. I have read the Beesley report, as the House would expect. I have also read the submissions on the report—the yellow book from BT and the red book from the Post Office Engineering Union. I have written down two adjectives—"thoughtful" and "interesting". I did not put "convincing". The submissions add to the sum of human knowledge.

As the House and the two hon. Gentlemen will know, there was a useful conference last Friday at which BT, the Post Office Engineering Union and other interests were represented. The meeting was chaired by my Department and examined the case for and against the report. The case for Beesley was put not just by Professor Beesley but by other groups and associations. The case was also put against the Beesley report.

We are still considering the representations that we have had and the report. There are important decisions here—the question of whether we will permit value added network services and the question of the additional network. The House will know that a specific proposal has been made to the Government by a consortium—the Mercury proposal—and we shall consider it most carefully. There is also the question raised by Professor Beesley of the resale of international lines. As the hon. Member for Newcastle-under-Lyme said, the matter raises important questions concerning the operation and finances of British Telecom.

The hon. Gentleman said that he looked on the report as a threat to British Telecom.

Mr. Gregor MacKenzie

The Minister said that there was an interesting conference in the Department of Industry last Friday, when the Minister and/or his officials heard the views of British Telecom, the unions and others. He listened to and read the submissions. There is one notable and curious omission. Some of us hark back to the days when the House of Commons would be consulted from time to time on such matters. What about giving hon. Members a wee chance now and again to express a view? Will the Minister seek that advice and guidance before finally making up his mind about Beesley?

Mr. Baker

There was a wee chance tonight, which was taken by two of the right hon. Gentleman's hon. Friends. I understand the concern, but any decision on a significant aspect of Beesley would be reported to the House.

The hon. Member for Newcastle-under-Lyme said that he looked on the proposals as a series of threats to British Telecom, but some trade associations and companies look on them as a series of opportunities. There are two sides to the argument. The hon. Gentleman said that there was a possibility of smashing the rural network. That is not the Government's purpose. It would not be the purpose of any Government.

Mr. Golding

I did not say that it was the Government's purpose. It could be a consequence. I did not charge the Government with wishing to smash the rural network.

Mr. Baker

I am aware that that is one argument, which we shall have to take into account when considering the effect of the liberalisation and the whole financial situation of Beesley. However, as I made clear in Committee and on Report, we would not agree to proposals that would smash the rural network and impede growth in the domestic area. We are aware of the considerable services that British Telecom provides right across the nation.

The debate has been useful. We have had a short debate on the capital financing of BT, which is important, and a short debate on Beesley.

Lords amendments Nos. 8 to 13 agreed to.

  1. Clause 31
    1. c368
    3. Clause 33
    4. cc369-73
    6. Clause 55
    7. c373
    9. Clause 57
    10. cc373-4
    12. Clause 58
    13. c374
    14. POWERS OF THE POST OFFICE 312 words
    15. Clause 59
    16. c375
    18. Clause 66
    19. cc375-7
    21. Clause 69
    22. c377
    24. Clause 70
    25. c378
    27. Clause 80
    28. cc378-80
    30. Clause 82
    31. c380
    32. TAX PROVISIONS 198 words
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