HC Deb 29 July 1982 vol 28 cc1434-40 7.37 am
Mr. Ian Wrigglesworth (Thornaby)

I am grateful to the Minister and other hon. Members who curtailed their remarks to allow me to debate British Telecommuncations. I shall also curtail my remarks. I had hoped for a more relaxed debate, but at least I now have the opportunity before the recess to ask some serious questions about the Government's proposals, which it was not possible to do when the Minister made his statement about the future of British Telecommunications the other day.

I hope that the debate will continue throughout the recess so that we are more clear about the Government's intentions. My right hon. and hon. Friends are not in favour of unnecessary or unjustified changes in the boundaries between the public and private sectors. Therefore, when the Government propose to denationalise one of the major State industries we immediately ask why? Who will benefit? What is the basis of the change? Unless the change can be justified by improvement in services to the customer and unless it is of benefit to the customer and the country, we do not want to know about the proposal.

The way in which the Government are acting makes one sceptical about their objectives and motivation. The speed with which the Government are moving from liberalisation to denationalisation is almost breath-taking. We accept that the industry is moving with enormous speed and that it is, probably more than any other, pushing us all into the end of the twentieth century and into the twenty-first century. However, we must ask why the Government are moving with such incredible speed after already having introduced Mercury, moving onwards from liberalisation and adding valuable features to the network.

We have major doubts about the timing that the Government are proposing to adopt for denationalising the telecommunications corporation. The process will straddle the next general election. I fear for the future of this core industry if it is to become the political football that the steel industry became as a result of the debate of the 1950s, 1960s and 1970s. The Government will seek to put their legislation through the House before the general election but will not sell shares in the denationalised corporation until after the election. There is the danger that BT will become a political football, and the course that the Government are proposing will make that danger all the greater. One wonders whether that is the Government's intention. Are they seeking to make the issue of denationalisation a major general election issue? That may interest the doctrinaire denizens of the Opposition and Government Benches, but it will not interest the majority of those working in the industry or the customers. I hope that the Government will think again about the timing that they are proposing and will try to ensure that the future of telecommunications does not become a political football.

There are some major commercial and philosophical arguments over the Government's proposals. They are proposing to remove BT from the stranglehold of Government control and to bring it into the market place. Is that what will be achieved by the action that the Government are proposing? My right hon. and hon. Friends and I are not opposed to bringing the industry, or any other industry, into the world of competition to try to ensure that market forces operate to make it as efficient and competitive as we possibly can both internationally and in the domestic economy. But is that possible with this industry? Is it possible to have true competition and a real market for telecommunications services?

There is no doubt that the liberalisation measures that have been introduced have provided the pressure of market forces and there have been some welcome results flowing from that, but can there be real competition on the main network? How much of the central telecommunications network will be subject to competition? Is the Minister saying that there will be 50 per cent. of the network under BT's control and that 50 per cent. will be under someone else's control? Are there to be three operators of the network so that there is real competition?

Is it not really the case that the market for telecommunications services, whether BT is in the private sector or the public sector, will be dominated by BT? If that is so we shall have a monopoly; and, if that is in the private sector, how is it to be regulated? The Government's answer is that they intend to set up a director of telecommunications rather like the Director General of Fair Trading.

Will the Government's proposals bring British Telecom out of the frying pan of Government control into the fire of quango control? A new quango is being established by a Government who are opposed to them? Will the control that that body must exercise because of the company's monopoly be any better than having British Telecom as a public sector organisation controlled by the Government? Who will control its prices and access to the market and who will determine how uneconomic services, if they must be provided, should be paid for? Must BT pay for them or will companies such as Mercury, which will plug into the BT network, pay for them through the licence fee? Who will decide what Mercury must pay for access to the network? If a regulatory body is to monitor and control those matters, it will be the alternative to market forces. According to the Government's philosophy, it will arbitrate. Why is it better to have a regulatory body operating in lieu of the market than to have the Government controlling BT as they do today?

Individuals cannot invest money in BT if it is a limited company in the same way as one would invest in ICI or any other company quoted on the Stock Exchange. If BT controls 80 per cent. of the market and is the dominant supplier of telecommunications services—if it is a monopoly—how can the investor judge the return on his investment? Who will determine the dividends? Might it not be cheaper and better to do what the Government should do anyway—to distinguish between capital expenditure and current expenditure, so that the PSBR is not a mish-mash of money spent on day-to-day Government services and capital investment in long-term projects? Would it not be cheaper for the Government to raise capital in the gilts market, as they do at the moment, and invest that in British Telecom? Would that not be better than going through the rigmarole of denationalising BT to obtain the same amount of money at a higher price on the stock market? I hope that the Minister will address himself to those questions during the next few months.

Why do we need a new regulatory body? Why cannot the Office of Fair Trading do the job? In my view, with liberalisation, there is already a need for a regulatory body. It is wrong that Ministers should blow the whistle on such matters. It may lead to embarrassment for Ministers, so an independent body should take over the job. The Government have been using the Monopolies and Mergers Commission to monitor the nationalised industries. Why not use the commission?

Another major issue on which the Government must answer some questions and recognise the dangers is the future of the telecommunications equipment industry. If the industry is to be internationally competitive, it must have a large enough home market to be able to sell abroad. If the market is to be split up, damaged and opened by the Government action, it could be that our telecommunications equipment manufacturers will be put at a disadvantage when compared to the American and other suppliers abroad, who have much larger domestic markets than our industry has to supply.

The Government have to keep a clear eye on the future of the market and ensure that our telecommunications equipment manufacturers are not in the position where they are beaten hands down by overseas suppliers in years ahead because of the market being broken up here. The Government have to look hard at the number of telecommunication manufacturers that we have and decide whether the present structure, which has partly arisen out of the cosy relationship that existed between the Post Office and its suppliers in the past, is the right one for the future.

We are moving into a period of exciting, new and dramatic developments. We have direct broadcasting by satellite and the whole prospect of cable being laid for television and other services, which raises major questions about how our telecommunications are to be provided. The Government have to demonstrate in the actions that they are proposing that they will safeguard the interests of the industry and those that work in it, safeguard the interests of the consumers who use the telecommunications service and ensure that the competition that they are suggesting will not be bogus competition, and BT will not be jumping out of the frying pan into the fire with these new arrangements.

7.52 am
Mr. John Golding (Newcastle-under-Lyme)

My hon. Friend the Member for Blaydon (Mr. McWilliam) and I have been on standby all night to express our complete opposition to the Government proposals. We, too, are interested to hear the answers to the questions posed by the hon. Member for Thornaby (Mr. Wrigglesworth). Unlike the hon. Member, however, we do not support the creation of another quango regulatory body outside Government.

My one question to the Government is this: how can it be in the interests of telecommunication to distribute its profits by way of dividend rather than plough those profits back into the development and improvement of telecommunications?

7.53 am
The Under-Secretary of State for Industry (Mr. John Butcher)

I thank the hon. Member for Thornaby (Mr. Wrigglesworth) for raising this subject. It is a touchstone of the Government's attitude to public monopoly and to the requirements of the British telecommunications industry and BT, in particular, that we should look at this issue.

The hon. Gentleman asked about the character of the regulatory body and to what extent we shall have a hybrid monopoly within the network. We have decided to create a new regulatory body for the regulation of telecommunications which will probably be called the Office of Telecommunications. It will be modelled on the Office of Fair Trading.

The head of the new body will be the director of telecommunications and will have powers and duties on the telecom market similar to those of the Director General of Fair Trading. It would not be appropriate to leave the task of regulating telecommunications with the Office of Fair Trading, since the present activities of that body would be swamped.

The importance of telecommunications also demands the creation of a new body that is properly answerable to Parliament. In a ideal world there would be no need to regulate telecommunications as the best regulation comes from market forces.

However, we must be realistic and accept that—in the near future, at least—BT will have perhaps 95 per cent. of the United Kingdom telecommunications market. As with any dominant interest, there will have to be controls to protect both the customer and the competitor, and the director of telecommunications will be responsible for monitoring the compliance of all licensees, not just BT. It is likely that it will be the major concern of the director that he will investigate anti-competitive practices throughout the telecommunications market. He will also take over the duties of POUNC in the investigation of consumer complaints.

British Telecom will remain a dominant force in telecommunications, although competition with BT will continue to grow. We have already seen the beneficial effects of the implied threat of project Mercury on some of BT's business activities. The Office of Telecommunications will prevent abuse of the monopoly power of the organisation. Furthermore, we propose to give opportunities to all BT's employees to become more involved in the business through employee shareholdings, and management will be freed from the present Government restrictions on borrowing, and hence on investment. I am confident that the response by BT to our proposals represents a considerable challenge, that it will be a major change in motivation and efficiency, and will lead to a better allocation of resources. The new challenge will be met in a way which should give real benefits to all.

The hon. Gentleman asked a number of specific questions. He asked whether we would have true competition. I am sure that he is aware that the process of introducing true competition has been proceeding apace—certainly in connecting a variety of devices to the network. We are also introducing project Mercury, which, as I said earlier, is starting to have a tangible effect on the behaviour of BT. Changes are taking place in its provision for business users. Those changes can only be welcomed. So there is competition at the edge of the network and in the supply of devices to the network. Within the network, we shall have to find our way as we go along, but I am sure that the hon. Gentleman will agree that today is not the day to try to say what the proportion will be. That will be decided by a number of forces, as BT becomes privatised.

The hon. Gentleman made the assertion that we should guard against unjustified change. Pressures for change in some cases have little to do with the relationship with Government or with the method by which BT is controlled. The pressure comes from the technology changes themselves. There is such a huge sea of change now in the variety and impact of information technology in telecommunications—which, in turn, affects the need for funds, which will be growing at a massive rate during the next few years—that we have little choice but to free BT from the current restrictions on it in the PSBR.

The hon. Gentleman asked whether there would he a benefit to consumers—and, indeed, to the country and employees. We were encouraged by the announcement made by the Telecommunications Users Association on the day that my right hon. Friend came to this Dispatch Box with his White Paper. That association saw immense benefit for telecommunications users in this country, and went so far as to say it saw much healthier trends arising from this in the pricing of BT services and its charges to the customer.

Mr. John McWilliam (Blaydon)

I thank the Minister for giving way. Would he describe as one of the beneficial changes the relatively higher increases in charges to the consumer accruing from recent changes?

Mr. Butcher

The consumer will benefit because the style of management within BT will benefit from a new attitude. The people who will be attracted into the upper levels of BT's directorate will be used to operating in competitive environments for the benefit of consumers in driving prices down.

We are aware that BT has had to undergo many changes in recent years, but we must not forget that it was once a Civil Service department. There have been changes in the way it has attacked its business plans in its current role. Whereas BT has behaved in a somewhat predatory manner—I know that Sir George Jefferson will call me to task for saying that—it may have had the less healthy aspects of a monopoly, albeit a public monopoly. We now wish to see the other side of a business-like approach, an increase in efficiency. Therefore, we are delighted to see Sir George setting himself the target of a 25 per cent. increase in efficiency within BT over the next three years. That is an issue that will continue regardless of BT's ownership. We wish to accelerate that trend.

Mr. Richard Page (Hertfordshire, South-West)

Already customers have told me that the liberalisation within BT has produced more efficiency and interest in providing a service to the customer than ever before. I ask the Minister to resist vehemently the softly, softly approach of the hon. Member for Thornaby (Mr. Wrigglesworth) and of some Labour Members. We need to liberalise BT if we are to compete against the Japannese and other electrical manufacturers in the world.

Mr. Butcher

I notice that the hon. Member for Thornaby (Mr. Wrigglesworth) said that the speed at which liberalisation had occurred in BT had been breathtaking. I hope that all those who are writing to me from the supplier side of the industry, and indeed from some of the consumer bodies, will note the hon. Gentleman's words. I am accused of not taking the liberalisation process forward sufficiently rapidly. Some hon. Members in the House now are constantly exhorting me to take that process through the standards making and testing procedures at a much greater rate. My hon. Friend's remarks will be reported to critics, particularly those in the supply companies.

The hon. Member for Thornaby said that BT had been a political football. It is precisely because of that that we now wish, once and for all, to free it from the clammy fingers of politicians. We are a benign party in that respect. We wish to give BT the freedom to react to market forces. We wish to take it out of the political arena, and, as the hon. Gentleman hinted, I suspect that that will be an election issue.

It will be an election issue, not simply because we get a vicarious thrill out of adding this to our manifesto commitments, but because the impact of the timing required to sell shares will restrain us. It will be a massive sale which may have to be phased. It could take some time and I think that it is right that we should take the approach that seeks to put the regulatory body in place and then prepare the groundwork for a share sale in the aftermath of the next general election. That is a responsible attitude to take and I commend it to the House.

The hon. Gentleman made a thoroughly relevant point regarding equipment suppliers. There has been concern that within the cosy relationship, as he called it, between the equipment suppliers and BT, we have not produced the products that are internationally competitive and which sell in the Third world markets. I do not want to enter into a debate on this accasion as to how effective the communications industry has been in the United Kingdom, but it is fair to assert that the share of world trade that BT equipment manufacturers have had internationally has plumetted over the past 15 years. It may be that within the relationship between BT and supply equipment companies the overspecification and overinvolvement of BT in laying down those specifications has produced products that have not been very relevant or even competitive in the international market.

We shall make BT an election issue. We shall take our case to the country. There is immense scope within the proposed Bill for domestic manufacturers and for those who wish to offer such things as value-added network services. It is absolutely right that BT should be free to obtain money on the open market without constant haggling over its impact on the public sector borrowing requirement. The difficulties that Sir George Jefferson and his staff have faced in raising capital have had an impact on pricing the services of BT. How many corporations that size have to fund their investment from their current income? How many times have hon. Members received letters from their constituents about the high standing charges for telephones and the charges for usage?

In reaction to such pressure we said that BT should have another rush of adrenalin and another breath of fresh air. We said that it should invite participation from the market in its ownership, and that that should have an impact on its management methods and motivation. I notice that two expert hon. Members are in the Chamber who have close links with the Post Office Engineering Union. I should have thought that the POEU was one of the happiest unions in the United Kingdom now. It can look forward to a dramatic increase in its workload. If its members take this opportunity to maximise their skills, they presumably will be able to continue to get a proper return for their labour, if not a comfortable living.

Furthermore, we hope to offer BT employees participation in the ownership of their own organisation. At present ownership is a nebulous thing. The State apparently, and in theory, owns BT. I suppose that Opposition Members would argue that it does so in practice. However, to most people it remains a remote corporation, which has suffered from the unkind attentions of Ministers and which has perhaps not had enough influence exerted on it by consumers. Again, the hon. Member for Thornaby was right. In the final analysis the impact on consumers is what matters. We do not denationalise simply for the sake of dogma. I happen not to like the word "privatise" and I would sooner use the phrase "wider ownership".

Mr. Toby Jessel (Twickenham)

I apologise for the fact that I had to leave the Chamber for part of my hon. Friend's speech. However, he has just referred to consumer interests. Has he heard a rumour to the effect that BT intends to charge for directory inquiries? If so, on compassionate grounds, will he consider making BT aware of the interests of blind subscribers? The directory inquiry service is vital to them because they cannot look up telephone numbers in directories. It is essential that they should have a link with the outside world. Therefore, will my hon. Friend ask BT to make an exception for registered blind persons?

Mr. Butcher

My hon. Friend should make a happy temporary alliance with the hon. Member for Newcastle-under-Lyme (Mr. Golding). He and I will be discussing—

Mr. Golding

May we invite the hon. Member for Twickenham (Mr. Jessel) to attend the House at 2.30 to make his points for the handicapped?

Mr. Butcher

The last event of this Session of Parliament will be a debate on that subject during which the hon. Member for Newcastle-under-Lyme and I will look at that type of topic. If it is only a rumour that my hon. Friend has heard he would not expect me to comment, but if it is more than a rumour—I shall check that this morning—I shall be happy to write to him and give the Department's view on whether we can do things for the disadvantaged people to whom he has referred.

We are, at the end of a long debate, hoping to send £46,333,677,300 on its way to Her Majesty. I know that my hon. Friend the Financial Secretary to the Treasury is waiting to wrestle with the impact of that on the velocity of sterling M3. It is with that happy passing of the buck that I commend the Bill to the House.

Question put and agreed to.

Bill accordingly read a Second time and committed to a Committee of the whole House; immediately considered in Committee, pursuant to the Order of the House this day; reported, without amendment.

Motion made, and Question, That the Bill be now read the Third time, put forthwith pursuant to Standing Order No. 93 (Consolidated Fund Bills), and agreed to.

Bill accordingly read the Third time and passed.