HL Deb 12 July 1938 vol 110 cc747-58

Order of the Day for the Second Reading read.


My Lords, I beg to move that this Bill be now read a second time. I believe it is the invariable custom of your Lordships' House to extend a measure of indulgence to any member addressing it for the first time. I must claim that that indulgence be extended in full to me, for I am only taking this Bill on account of the unexpected loss of voice of my noble friend Lord Temple-more, who should have taken it, and I am bound to confess to your Lordships that I have not had as much time as I should like to render myself master of the rather complicated and technical provisions of the Bill. On the other hand, I am emboldened to introduce this Bill by the fact that, unlike the vast majority of Bills which come before your Lordships' House, or any other House, this is a very good and sensible Bill, which robs no man of his property or his liberty and confers substantial benefit upon the great mass of the people of the country. We have seen few Bills of that type since the Reform Bill.

The position is that the Government have recently entered into a new agreement with the great firm of Cables & Wireless, Limited, subject where necessary to Parliamentary authority. The purpose of this Bill is to give that authority of Parliament to those sections of the agreement which require legislation. I must make a short excursion into the previous history in order that your Lordships may appreciate the present position. Ten years ago an unsatisfactory position had arisen in competition between the Post Office and the beam system which it owned and operated and the Cable Services. After a conference at which all the Governments of the British Commonwealth were represented, an arrangement was reached, which was confirmed by the Imperial Telegraphs Act of 1929. As a result of that agreement a company, known as Cables and Wireless, Limited, was set up to conduct all the main overseas telegraph services of the British Commonwealth. The Postmaster-General leased to the company the four beam wireless stations which he possessed, at Skegness, Bodmin, Bridgewater and Grimsby, at a yearly rental of £250,000, plus 12 per cent. of any surplus profits earned by Cables and Wireless over and above a standard revenue of 6 per cent. on its capital of £30,000,000—namely, £1,865,000. The Postmaster-General, in addition, gave Cables and Wireless a free use of the telegraphic circuits required for working the stations, and the company was subjected to various measures of Government control. In particular, the Chairman has to be approved by the Government; the company are bound to maintain those cables which have great strategic importance, even although they are uneconomic; the Government have the right to take over in time of war, and the Imperial Communications Advisory Committee, consisting of the representatives of the various Governments concerned, was set up to exercise a certain control over the company.

Another feature of the arrangement of 1929 was that half of any surplus revenue over the standard 6 per cent. was to be applied either to the reduction of rates or to the development of services. Unhappily, owing to unfavourable world conditions, Cables and Wireless, Limited, never have been able to earn the expected income, and the standard revenue of 6 per cent. on the share capital has never been attained. Last year, its best year, the company paid 3½ per cent. The year before it paid, I think,2½per cent., and the average from 1930 to 1935 has been 1.7 per cent. Therefore the company has not been able to reduce telegraph rates as much as had been expected and hoped, although there have been substantial reductions, and in recent times the threat has developed of foreign competition on Empire routes by direct wireless telegraphy.

The Governments concerned, and the Imperial Communications Advisory Committee, have reviewed the position in the light of these circumstances, and prolonged negotiations with Cables and Wireless, Limited, have resulted in a new agreement which commands the general assent of the Governments of the Dominions and India. The broad effect of the agreement is two-fold. In the first place the company have already, from April 25 last, introduced an immediate and substantial reduction of Empire telegraph rates. So far as is practicable, and the system cannot be absolutely uniform, the rates between different parts of the Empire are to be on a uniform basis of Is. 3d. a word for plain language telegrams, with a code rate of 10d. a word, but existing rates which are already below this level will not be increased. This reduction is in many cases a very substantial one. For instance, the new rate of is. 3d. a word which came into force on April 25 compares with a pre-agreement rate of 4s. 7d. a word in the case of Hong Kong, of 3s. 5d. a word in the case of Australia, and 3s. a word in the case of the West African Colonies.

The second part of the effect of the agreement is that it is proposed to relieve the present strain on the finances of the company by cancelling the rental payable to His Majesty's Government, in return for a share in the equity of the undertaking. That two-fold result has been achieved by the following arrangements. The freehold of the beam stations is transferred to the company, and the rental of £250,000 a year ceases as from March 1 of this year. The company is given the continued free use of the necessary circuits. The company's licence is extended from 1953, which was its terminal date by arrangement in 1929, until 1963, and it will then remain in force unless definite action is taken. On the other hand the company, for its part, transfers to the Government 2,600,000 £I shares out of its existing capital of £30,000,000, with dividend as from March I. The standard revenue, which as I told your Lordships was fixed under the 1929 Agreement at 6 per cent., is reduced to 4 per cent.—namely, £1,200,000 as against £1,865,000. The effect of this change will be that the money available for further reductions, or further development of services, will start accruing on less revenue than heretofore. All the obligations on the company as regards the maintenance of strategic cables, and control by the Imperial Communications Advisory Committee, will remain as heretofore.

I should perha ps add that the agreement also provides that the Postmaster-General may waive a small claim, which has never been settled with the company for the last seven years, in respect of a right conceded to them to operate a wireless telegraph service with Kenya, and further, that a joint purse arrangement between the Post Office and the company is set up in connection with the European services. This joint purse arrangement will, it is hoped, diminish competition and prove a businesslike basis of operation. I cannot, naturally, say what the precise financial effect of the agreement will be. Neither I nor anybody else can forecast the future revenue of the company, but it is true that there may be some financial sacrifice on the part of the Government by the exchange of a rental of a quarter of a million pounds a year for a holding in the equity of the company; but I would ask your Lordships to remember that in arriving at this general settlement account has been taken of the obligation on the company to maintain even uneconomic and unremunerative cables which may be required for strategic purposes. It might easily be cheaper to scrap certain cables altogether, but we cannot allow ourselves to become wholly dependent upon wireless, and these cables must be maintained in case of emergency in time of war, because wireless always can be tapped.

It should also be remembered that the rate reductions which have already come into force will on the basis of the present traffics benefit the general public to the extent of about £500,000 a year, and that as the result of the reduction of the standard revenue to which I have referred, there is a possibility of further developments and further reductions in the cost. It is thought, moreover, that the maintenance and development of this undertaking will be a very real contribution to inter-Imperial trade, to the interchange of news and views and to the drawing closer of Imperial relations. His Majesty's Government in the United Kingdom are not alone in making sacrifices. Financial concessions have also been made by Australia, New Zealand, India and a number of Colonial Governments, as well as by the company itself, on whom will fall the main cost of the rate reduction.

I will not detain your Lordships more than a moment with the details of the clauses. Clause r deals with such features of the arrangements which I have detailed as require Parliamentary sanction. Clause 2 provides that the Post Office Fund shall not bear the whole of the loss involved in the surrender of the rental for the beam stations. The total loss is £250,000 a year, of which the Post Office Fund will bear £100,000, while the remaining £150,000 will be borne by the Exchequer, which will re- ceive the dividends on the shares which become the property of His Majesty's Government. I think I cannot better sum up the Bill than in terms similar to the concluding words of the White Paper which accompanied it when it was first circulated: All in all, the Government are satisfied that as a general contribution to a settlement the cost of the proposed concession is more than balanced by the great importance on political, commercial, and strategic grounds of maintaining intact the great system of Imperial communications for which the company is responsible. I beg to move.

Moved, That the Bill be now read 2a.—(The Duke of Devonshire.)


My Lords, apart from the importance of this measure, I would have risen to offer the congratulations of my noble friends and myself to the noble Duke for the excellent account he has given in his maiden speech of this complicated, and indeed intricate, measure. Your Lordships, I am sure, can congratulate yourselves on the accession to our debating strength of an eloquent speaker, and the Government in particular, I am sure, are fortunate in having the assistance of the noble Duke with his long Parliamentary experience and his undoubted abilities as illustrated in to-day's proceedings.

With regard to the Bill itself, I cannot offer any congratulations whatsoever. Ten years ago a confused and complicated situation had arisen. The submarine telegraph cables were being under-cut and supplanted by the new invention of the beam wireless. They were being undercut and supplanted in other directions as well, and, as the noble Duke has quite rightly said, it was necessary to keep these cables in being for Imperial strategic and commercial reasons. The most obvious thing to do was for the State to take over these cables. The State has wireless telegraphy, and runs it very well indeed. The State at that time had the beam wireless, and it was making a great success of it, and the State has the telephones also. The obvious thing to do surely was to take over the cables as well. At that time the Postmaster-General was an honourable member who has since become a member of your Lordships' House, Lord Selsdon —I have not seen him in his place to-day. He and his advisers drew up the original agreement and ten years ago they brought forward a Bill in another place which I had the satisfaction of describing as a ramp. It was a ramp, and a wicked ramp at that, in order to bolster up this sacred principle of private enterprise, which on every occasion must be allowed to override the public weal under a Conservative, or Tory, or so-called National Government. Once more the then Conservative Government of the present Earl Baldwin must needs enter into the arrangement which your Lordships have now heard described by the Government spokesman as having fallen to pieces.

At that time this profitable, successful, efficient, beam wireless system was handed over to an amalgamation of all these cable companies, winch was grossly over-capitalised—a great. unwieldy, sprawling amalgamation—at a rental, a cheap rental of £250,000 a year, which the noble Duke has been frank enough to tell us we are now ending. The £250,000 a year has been given up in ex change for 2,600,000 £1 shares in this over-watered, over-capitalised conglomeration of private companies, known now as the Communications Company, with its total capital of £30,000,000. That means that in future the Exchequer will be entitled to 8½per cent. of problematic dividends. The noble Duke made no attempt to forecast what those dividends were likely to be, but judging by the past records of the company the 8½per cent. will represent a sum of between £6,000 and £100,000 a year. It may be as low as £6,000 and as high as £100,000. It will not at any rate reach anything like the original rental of £250,000 a year.

This is a very sad business. The noble Duke made a great deal, and quite rightly, of the reduction in cable rates. Of course, the cable rates had to be reduced. They must be, in face of the competition, and part of the competition, which the noble Duke did not mention—I do not make any complaint, he had to deal with a large subject—is the increasing speed and efficiency of the growing air mail services. Of course, they must reduce their rates, just as the telephone rates have to be reduced continually in order to increase the turnover and to keep the business alive at all. It is difficult for us, a small Opposition, to divide. It will be useless on this occasion to oppose the Bill, otherwise I should have had the greatest pleasure in dividing against it. It is a very bad example of the effect of a fetish on a Government's mind and their refusal to undertake the obvious course of the formation of a great popularly controlled corporation for all communications, in order to bolster up these private companies. I hope it will not be long before one of my noble friends in this House occupies the place so brilliantly held by the noble Duke at the present moment, and introduces and carries through a Bill to repeal this iniquitous legislation.


My Lords, I should like on behalf of those with whom I am usually associated here to congratulate the noble Duke on his maiden effort in this House. At very short notice he has delivered a remarkable speech—so lucid that any of us could fully understand exactly what the proposals on this complicated subject are. I am not going into the merits of these proposals, but as an ex-Postmaster-General during the War I realised how important it was that we should have cable ships and should be able, if necessary, to tap foreign cables as well as to take them up and divert them to our own uses. Therefore I am glad that in this Bill the Government retain power of that kind. In regard to the proposals in the Bill, I am glad that the Government have a belief in the company with whom they have been negotiating this agreement and that they feel satisfied they can be trusted to carry out certain negotiations. The Government in my judgment conduct quite enough without unnecessarily interfering with private enterprise. I congratulate them on having introduced this Bill and hope it will work satisfactorily to the advantage of the whole community.


My Lords, may I say a word or two, although I have already tried your Lordships' patience this afternoon? I should like to answer the noble Lord, Lord Strabolgi, and my excuse for intervening is that I was Chairman of one of the Committees that drew up in 1928 the Cables and Wireless Agreement when I was at the Treasury. I also took part in the earlier conference presided over by Sir John Gilmour which came to the decision that there should be an amalgamation of Cables and Wireless and that a private company should take over the concern. In the first place Lord Strabolgi mentioned the interference or interposition of Lord Selsdon the then Postmaster-General. I was present at nearly every one of the various meetings, and so far as I can remember I never saw Lord Selsdon there once. He made no impression of interference on my mind, at any rate; I am not conscious of his intervention, seen or unseen.


I hope I did not create any impression of that kind. Lord Selsdon was Postmaster-General at the time, and he introduced the Bill into the House of Commons. When I described the Bill as a ramp, I was describing policy, not the action of the Postmaster-General. I have the highest regard for the integrity of Lord Selsdon.


I thought I introduced one Bill there forming part of this amalgamation. May I remind the noble Lord of an episode that occurred when he and I were both in the House of Commons? He was asking that guns of a certain calibre should not be introduced on certain new vessels, adding that they never had been used on certain of our vessels. A new member got up and said he was wrong. The noble Lord—Commander Kenworthy as he was then—persisted and asked why the other honourable member had contradicted him. "Well," said the other member, "the honourable Member for Hull has made a statement and has just contradicted me. I know what I am talking about because I was at the battle" of which he gave the name. "and guns of the calibre that he mentioned as not being used on the ships he specified were actually on the ship that I helped to fight." Lord Strabolgi is, if I may say so with all respect, doing the same thing now. He is now saying things that I think are not the case. I took a continuous part in these cable and wireless negotiations.

The first fact that the noble Lord must realise is this. He argues that the Government should have taken over this amalgamation. It was. not the British Government's decision at all. In the conference over which Sir John Gilmour presided were the representatives of Ireland, India (Sir Atul Chatterjee), New Zealand (Sir James Parr), Australia (Mr. Ballalieu), South Africa, Canada (Sir Campbell Stuart), and others representing the Crown Colonies and Dominions, besides the British Government, and they as a body came to the conclusion that His Majesty's Government should do what they did. The conference passed the resolution on which this company was formed. For that reason Lord Strabolgi should have no quarrel with the British Home Government. He should know that the Home Government did not act alone but in accord with His Majesty's Dominions and Colonies. I did not come prepared to speak on this matter, which happened eleven years ago. But I think the figures were brought out to form the capitalization, not by the British Government and not by the Post Office and not by the Conference, but by Sir William McLintock and another highly skilled accountant—I think Lord Plender. These figures were brought out by two very highly responsible men with all the accounts before their eyes, who knew what they were about, and who were advising both sides. I make this confession; as Chairman of the conference at the Treasury afterwards, I never could understand why the companies paid the Government so much for the beam. They gave, I think, £250,00o a year for twenty-five years. When I moved one of the Cables and Wireless Bills in the other House the late Mr. Ramsay MacDonald in following me used an expression that has always stuck in my mind, because he was not accustomed to use slang. He said that the companies had "sold the Government a pup." So far from the companies having "sold us a pup," they agreed to pay us too much. And this Bill is proof of it. The Government really got a greater price than we were entitled to get on the basis of earning power. I consider this is a wholesome and reasonable Bill, and I beg to support it.


My Lords, I should like to associate myself with what has been said with regard to the noble Duke coming into our House. I have known him for a good many years. We all know that he earned his spurs in another place and that, as we say in Scotland, he is a "bonny fechter." We are very glad to welcome him to this House, and after the speech to which we have listened to-day I feel quite sure he is going to take a very distinguished part in our proceedings. I have risen to participate in what the noble Duke said might be "harmonious proceedings." He must be somewhat disturbed in his mind at the way these harmonious proceedings have continued. I should like, so far as I am concerned, to give my blessing to this Bill. I speak on behalf of the Federation of Chambers of Commerce, all of whom have for a number of years been advocating a revision of cable rates. Now that these reductions are coining into force, as to why, how, or wherefor we are quite unconcerned. So long as the rates are reduced, by arrangements which have been come to between the Government and the Cable and Wireless Company, we are satisfied with the result. These rates are going to improve trade and communications between the different parts of the Empire to an extent which is perhaps not realised by many of your Lordships. The noble Duke has indicated how, in one case to the East, the charge will be is. 3d. per word whereas it has been 3s. 9d. per word up to date. That will make all the difference in the world in relation to easy and quick communications between business firms and between different communities in the Empire.

I cannot sit down without saying one word with regard to the expressions which have fallen from the noble Lord, Lord Strabolgi. He has indicated to us that if there were a sufficient number of members on the Opposition Benches he would go into the Lobby against this Bill. In fact he would be prepared to kill this Bill. And why? For a fetish—merely, with the object of bringing Socialistic measures into this very practical arena. I feel sure that that is not the sort of argument that would have moved your Lordships if a Division had been possible. You are bound, as my noble friend has said, to build up these matters by degrees. We have lived under the capitalistic system, and I hope we may continue to live under such a system a great deal longer. The noble Lord, Lord Snell, throws up his hands in despair. Well, the country has yet to say whether they agree with the noble Lord or whether they agree with the present Government. I believe that at the next General Election they will show that they continue to agree with the present Government and not with the noble Lord's Party. In conclusion I would say that this Bill, whether it be based on capitalism or whether it be based on bad finance or good finance, or upon bad negotiation or good negotiation as between the Government and the company, is of enormous advantage to the commercial communities and to the trade of this country and the Empire. I wish the Government all success with it.

On Question, Bill read 2a, and committed to a Committee of the Whole House.