TELECOMMUNICATIONS INDUSTRY

HL Deb 12 May 1976 vol 370 cc978-1012

4.18 p.m.

Lord DAVIES of LEEK rose to call attention to the problems of the telecommunications industry in this country, its serious competitive weaknesses and the need for more investment in research and development; and to move for Papers. The noble Lord said: My Lords, it is with pleasure that I take this opportunity to initiate a short debate on the problems of the telecommunications industry. Many people may be of the opinion that telecommunications are modern. Far from being modern, the Indians knew what they meant when they sent up smoke signals, and as my noble friend Lord Ritchie-Calder wrote in a famous book some time ago entitled The Story of Man and the World he Made, which I am proud to possess: The All-Seeing"— that was the chapter heading. This sense of the All-Seeing Inca was maintained by an elaborate system of communications. In time of emergency, fire and smoke codes were used by lighting dry-cotton tinder with concave mirrors.".

He went on to write that they were able to communicate from one end of Inca-land to the other faster than could the Romans at the time of the Roman Empire. I know that they used the heliograph because, for my sins, when I took what are now called A-levels in Welsh I had to study a book called Plant yr Haul, which means The Children of the Sun, and they sent messages when they were lighting guerrilla wars against the Spaniards by flashing their news via gold shields from mountain top to mountain top. Alas, the Incas of Peru are no longer in existence; neither shall we be if we do not understand the meaning and importance of telecommunications in the very difficult world in which we live today.

Noble Lords who have read Alvin Toffler's famous book, Future Shock, will be aware that he used the ugly phrase, "The technotronic society". What was he trying to say? Pompous people often use big words to give little communication, though I do not consider Toifier's book to be pompous. It is valuable and dynamic. The technotronic society in which we live today is a dangerous one based heavily on advanced communications and electronics. One of the most difficult hugs to control in society is the electronic one—a taxi cab could set off a nuclear device if its microwaves were on the correct oscillations. In a telecommunications world—and we are entirely surrounded by telecommunications—our bodies stay at home while our eyes and our ears extend to the distant places of the moon and to the rim of the universe. We sit there critical and comfortable while men risk their lives in all these telecommunications devices to expedite, as they hope, the civilisation of mankind. This is telecommunications.

How did all this magic come about? I wish we had time to discuss it, because it is a fascinating thing to think about. What are the impedimenta which make up telecommunications? I do not want to bore your Lordships—some old buffer wrote that I was one of the bores of the House—and I apologise if I bore your Lordships. How did this magic come about? It came about through telex, television, telegraphs, radio, movies, telephones, data communications, computers —the most dangerous of all—satellites, masers (microwave amplification by stimulated emission of radiation, the death ray) and lasers; that is, light amplification by stimulated emission of radiation. I remember watching this in a laboratory in Switzerland and being careful that I did not get my eyes in front of it. In Denver, USA, kids in the fifth and sixth form can buy an apparatus to set up a little laser beam outfit. Man messes about with toys like nuclear weapons and knows not what he does because, despite all our science, we do not know the answer to the magic and miracle of creation. Therefore, it behoves us to go carefully.

How do I want to deal with this subject in a short debate?—much as one would have liked a long one. I have cited my little talk as one to call attention to the problems of the telecommunications industry in this country, its serious competitive weakness and the need for more investment and research and development, and to move for Papers. There is a sad fact about the modern economic world in which we live. I see some notable economists present, whose heights of erudition it is now too late for me to reach, and I humbly apologise if they do not agree with my Celtic analysis, but I believe that, when the economist uses differential calculus and mathematics to prove that his sociological emanations are scientific, he is going a bit too far. I believe that economics is not a science but is like medicine; that is, an art and a science mixed. I believe that one must look upon it in that sort of way.

It is all right to talk about the need for more investment, but one can pour in money like a gambler into a kitty. It is not more investment which is needed; it is what is done with the investment which we have already put into the telecommunications industry. It is like UNCTAD and the United Nations setting up study group after study group ad infinitum. I have been on some of them and one studies until one is going grey and turns out pamphlets and nobody takes any action. What we need is less investment and more development from the sources with which we are now working. I am sure that that is true. I therefore put out this caveat: we should be careful how we use the phrase "research and development". Researchers can develop but, if there is a lack of impetus, development is not encouraged. The world and the society in which we are living are a world and a society where man is allegedly at the top of the biological tree. Look at him!—with his religions, his prejudices and his telecommunications, which give him information about where to lay bombs and blow his fellow men up. He is one of the most pathetic animals on earth. Yet, there is a terrible and complex paradox: side by side with that, we have saints—men and women who dedicate themselves to improving the world. Those of us who still believe in something and have faith and hope to develop a creative society, despite all these dilemmas, must move on and keep trying to get a decent world. I believe we can get it if we use our telecommunications systems, which are the result of the discovery of the electromagnet and electro-magnetic forces sent over a piece of wire. If we learn how to use these things together with the projecting of vision from one rim of the universe to the other, mankind can raise his standards of life and of culture—without using that word "culture" in a horrible, pseudo sense—and still become a happy animal upon earth.

How can we do this? I am not interested in a cheap witch hunt, but, whenever the word "telecommunications" is used, the Post Office jumps in. It is pathetic sometimes to hear the witch hunt which goes on against the Post Office—never mind whether it is nationalised or publicly owned. People do not realise that about 20 million telephones have been put in and that per head we have more telephones than any nation in the world. Despite all the criticism of the British Post Office and despite its idiosyncrasies, it is still a first-class organisation. You try telephoning Seattle from, say, the Commodore Hotel, 42nd Street, New York, and talking politely to the operator. You should hear the kind of answer you will get from a gum-chewing operator—the crack of the gum plus the crackle of the voice. You will find that all they want to know is, "Why can't ya say Seattle 4242 ' and have done with it?" This is the kind of crude world one can sometimes get when men are thinking of nothing else but getting profit on earth.

I agree with the noble Lord, Lord Peddie—I do not know whether he is here—and his organisation, the Post Office Users' National Council, that there is a need to watch it. The Council asked last August, for fresh constructive thinking which could enhance Post Office prospects, revitalise its public service and give encouragement to all engaged in this great enterprise.

I believe that co-operation—never mind the question of nationalised and private industry—is necessary, taking the world as it is and telecommunications as they are now. I am glad that the noble Lord, Lord Orr-Ewing, is to take part in this little debate. It is of vital importance to defence. Conferences on electronic warfare will be taking place this very month. It is that kind of world in which we live today. It is essential that we now "cut the cackle" about whether there should be private enterprise or nationalised undertakings. The whole world, including the United States, which is the acme of private enterprise, now accepts that we must, in certain areas, if not all, have co-operation between private ownership and public ownership.

If ever there was a crying need for that co-operation it is in the telecommunications industry, because the greatest purchaser today of telecommunications equipment and of the tools of telecommuncations is the Post Office. Since development is now probably more important than research, I believe that a committee of co-operation should be set up between private industry and the Post Office. The big firms should be involved in this; those which work on cables, those which produce the magnificent tools we use today. I have in mind firms such as Plessey, GEC, STC, Siemens, Philips, ITT, and Ericsson. They won a contract for £25 million here in London, which we should have had, because they have computer switchgear.

We should be able to get these firms and organisations working together. Clearly there are great difficulties in comparing spending in this field. The Financial Times stated on 20th November 1975 that firms like: Siemens spent around £75 million on telecommunications research. The Post Office estimates that the whole U.K. telecommunications industry last year spent, about £30 million—£40 million in its own laboratories, including contracts ' (worth at least £7 million) paid for by the Post Office '.

The private industries of which I speak could not function without the work of the Post Office, and so instead of shouting that we should privatise" or nationalise everything, let us, in this vital sphere of telecommunications, have co-operation between the great big elephants of telecommunications and the publicly-owned Post Office, or the new system of Post Office ownership. I do not think that that is beyond the wit of man. If a committee such as I suggest was to be set up it could do the same kind of work as that done at present by the council which deals with electronics in England.

I have been speaking for 14 minutes and do not wish to bore your Lordships by quoting figures on investment by these firms, although I have the exact figures with me. But arithmetic is not as important as the spirit of the thing. Telecommunications, television, radio, computerisation and such are developing and investment is needed. Most noble Lords will, like myself, have travelled around the world and so they will know that nowhere else are the television programmes as good as those which we have in Britain, despite criticisms made of the BBC. Sometimes I moan about the trivialisation of political questions on television and the seeking for instantaneous comments, but I believe that the British people should pay a tribute to our broadcasting service. At least comments and discussions are sought on television in this country, and there are not hours of advertising with only 10 seconds devoted to a constructive discussion. So I believe that we can be proud of broadcasting in Britain, whatever criticism may be made of it.

Last November in an adjournment debate in the other place there was criticism of the unemployment caused because of the cutbacks. As technology progresses less labour will be used. Thus this committee of co-operation which I suggest, involving private industry and the Post Office, should also involve sections of trade unions, including the engineers who could justly claim that they should have a say in what is discussed. If this three-legged stool of discussion were to be set up on a permanent basis, and outside of Government influence, comprising representatives of the Post Office, the engineers, the trade unions and the great elephants of telecommunications, it would be a very useful instrument to keep the public clearly and honestly informed.

What encouragement are the Government giving the Post Office to make more rapid progress from outdated equipment? Why is more rapid progress not being made from the old-fashioned Strowger, through to the Crossbar system, to TXE 4, and ultimately to the computerised system of switchgear? Such progress is vital. This is a knowledgeable Chamber and I shall not go into details, because 99 per cent. of those present will know about these matters. is development in Britain far enough ahead to abandon the Crossbar system in the exchanges and move nearer to computer switching? Computer switching would be completely electronic. We are now working on a second system of switching to electromechanical control. If we want rapidity and improvement, with fewer errors, we must move as quickly as possible to computerisation.

The Post Office Act 1969 states in Section 35(1): The Post Office may borrow…from the Minister or, with…the approval of the Treasury, from any other person, such sums in sterling as it may require for meeting its obligations and performing its functions.

What encouragement are the Government giving to the Post Office to borrow even abroad? I would take petrodollars, or Arab oil money. Anyway, we are encouraging improvement in the standard of life of the Arabs, although we are forced to use the oil because we need it. This kind of co-operation leads to understanding. Is the necessary encouragement coming forward?

The Post Office Users' National Council and this House have asked for a Committee to be set up: so the Carter Committee has been set up and is now sitting. When is this Committee likely to report? Its terms of reference arc: To examine the performance and main features of the organisation of the Post Office and its use of its resources and assets; and to consider whether any changes would better enable it to perform its functions under the Post Office Act 1969.

The Committee is under the chairmanship of Mr. C. F. Carter, Vice-Chancellor of Lancaster University. It has been asked: To assess the policies, prospects and social significance of the postal business"— I shall not go into that, because everybody talks about it— including methods of financing as a self-supporting public service; to consider whether the Post Office Act 1969 places"— note this, my Lords— undue restrictions on the activities of the Post Office; and to make recommendations.

I hope that the Carter Committee will make recommendations in the esoteric section of telecommunications and that it will deal with computerisation as well as matters of co-operation between the Post Office and private enterprise. If that is done, both the public and the Post Office would benefit from such a review.

I wish to make two further points, my Lords. Many firms in the telecommunications industry do a first-class job of work, and the miracle of undersea cables is often forgotten. For instance, STC laid the last new cable between Canada and this country on which Prime Minister Wilson spoke to Mr. Trudeau a year or so ago. The magic of the cable is such that thousands of calls can be put through one cable across the ocean. Satellites are good for photography and transmitting pictures, but are not at the moment so good for transmitting speech. Countries such as Korea and Nigeria and others are moving towards using cables rather than satellites, because cables give a better return. You have to replace a cable after about 20 years, which is its life. In the case of a satellite, like Telstar, you are overworking it if you keep it 10 years in the sky. We should get the economics of the cable and of the satellite worked out. They are both needed, and in some cases are absolutely necessary; but I think the world should make sure where it stands on this. I shall not develop that any further because I am sure my noble friend who is to reply knows as much about this as I do, and perhaps more.

My Lords, I think I will number the points before I sit down. I hope the Carter Committee will deal with the four main problems of the industry. I hope it will deal with the cuts in ordering that have been made by the Post Office, because they are creating unemployment, and will see that consultation with the trade union movement and with the Post Office engineers is really worked out effectively. I hope it will discuss the effect of technological and technical changes in switchgear, and their cost in manpower; and the need, if there be need, for major reorganisation. I hope it will recommend, as I have, co-operation between the Post Office and private industry, and will set up a joint consultation committee where nationalised telecommunications are side by side with private telecommunications, and the trade unions have an appropriate voice. Because, whatever one may say, a tribute must be paid to the trade union movement over the last few years. For all our criticisms, there is no trade union movement in the world which has approached so realistically the problems of inflation as has the British trade union movement.

The last one is my bête noire. If one takes the blue book and looks at the money we get from the Common Market and the money we put in, one sees that we are putting in more than we get out. One of my points—and I should like the Carter Committee to note it—is what the impact of the Common Market is to be, because, to quote the Financial Times again, the EEC Committee, is of the opinion that European based companies require markets of European scale if they are to achieve the dimensions and capabilities to improve their position in world markets".

In other words, they could insist that we in Britain accept an Italian or a Swedish firm's contract for telecommunications. They are aiming at harmonization. If they are aiming at harmonisation, let us see that they use the black notes as well as the white. You will not get harmony unless the British, too, who have been pioneers in telecommunications, get an equal chance. Finally, the Carter Committee should point out the vital place that telecommunications play in defence.

My Lords, I have kept your Lordships long enough and I have made enough points, I hope, to get a tidy little debate out of this Short Debate this evening. All I would add, finally, is a tribute to private industry, which has done such magnificent work in telecommunications and, indeed, whose investments, despite the trans-national and the multinational firms, have kept British telecommunications in the forefront of modern telecommunication technology. My Lords, I beg to move for Papers.

4.44 p.m.

Lord REDESDALE

My Lords, to follow such an eloquent speaker as the noble Lord, Lord Davies of Leek, is extremely difficult; and I must congratulate him on putting forward so many constructive suggestions. I also appreciate the role of the Government vis-à-vis the Post Office. I could not help but think of the exchange the other day between the noble Lord, Lord Melchett, and the noble Baroness, Lady Ward of North Tyneside, when, as the exchange went on (in the terms of this industry) the level went up. I appreciate that the Post Office is separate, and, like the noble Lord, Lord Davies of Leek, who made this point so clearly, I do not wish to indulge in a "Post Office bashing spree "; but I think there are a large number of points to be made. I am sorry if they may sound overcritical when I raise them, but I am putting them forward in as constructive a way as I can, because no one is perfect, oneself included.

My Lords, the Post Office, I feel, must realise that times have changed. We are now talking about large overseas markets, not about the situation, which did exist, in which the Post Office had a monopoly in this country, it could do what it liked, it was a big market and a number of companies wished to supply it and were prepared to meet its particular needs. This is no longer the case, I am afraid. We have to look upon the industry as supplying the Post Office and any market where a gap can be found. Finding a gap is not too easy, because the industries in the developed countries—mainly Europe, America and Japan—are highly sophisticated. They are extremely competitive; in fact, there is much more equipment than there is a potential market. So we have to fight extremely hard, and we can fight extremely hard only if we have a market in this country which can be satisfied by the industry but which is such a market that the equipment which is produced for it is compatible with overseas markets.

Now we are competing against countries which have companies which operate in an extremely chauvinistic manner. We in this country compete on the basis of five companies offering equipment to the Post Office. In the other countries, this does not really occur: the market is fixed, because you never get more than one company from one country competing for an export order. In some ways this is unhealthy; in other ways, I am afraid, in these times, it is probably essential, so that a company can concentrate on its particular sector and do it well. There are gaps in every country. There was a gap, as the noble Lord, Lord Davies of Leek, said, when Ericsson got their order, so they came in here. But the same has applied the other way round, and our companies have found gaps in a sophisticated overseas market and have supplied against considerable odds—and all credit to them for doing this.

The point I want to come back to is that there must be co-operation between the industry and the Post Office, which is a point the noble Lord raised. As I have said, the Post Office does not seem to realise entirely that times have changed. It specifies equipment in such a way that it requires many integral features to be added to this equipment to satisfy its own very special requirements. If we are to compete, we must have a simple specification (I do not mean technologically simple, but a simple specification) to which all the additions required may be added. In motor car terms, the slang is that you have a basic model and then you can have all the "bolt-on goodies" that you require. This applies in this market. Different overseas markets require additional features. The Post Office requires additional features; but if we could get round to co-operating in such a way that we start off with a basic simple model which is acceptable to the overseas markets, we would stand a much better chance of competing, not so much in the sophisticated markets but much more so in the big potential markets, such as Africa and other developing countries.

To take one point on this, there is the question of racking dimensions. The Post Office have large, much wider equipment. They like it single-racked, as opposed to having it so that it can be put in back to back. There are many other features, too. For instance, they require larger printed circuits. What it all boils down to is that the equipment which meets the requirements of the Post Office is not as acceptable to overseas markets as if we designed it from scratch for overseas markets and the Post Office then said what it wanted in addition to it. It is a fairly simple matter but it is a change of philosophy. In fact, what I was saying was that if we are to sell and to compete we must provide our customers abroad with what they want and not with what the Post Office thinks they should want. In this particular debate it is very tempting to go after one of a myriad subjects. It requires a considerable amount of self-discipline to keep down to the simple facts of what one is required to do to make this industry more effective and to survive.

On the question of co-operation, I think that one of the perfect examples is that of the Japanese Government; because the Japanese Government, the administration of the services and the suppliers are co-operating entirely together to gain export orders. They are flexible. Each section does its bit to satisfy the order. For instance, the industry goes after orders, the administration is flexible in saying what they will specify and the Government do their part in tremendous encouragement in terms of finance, providing loans and organising loans to the countries concerned. I am not saying that it does not happen here but that it does not happen to the same extent.

On the question of co-operation, TEMA, the industry's association, have put forward a document to the Post Office mainly on transmission equipment which lays down in detail—certainly I will not bore your Lordships with it—all the areas in which Post Office requirements differ from export requirements. The facts are there, the Post Office is aware of them; and I am sure that the Government are aware of them. It really means that everyone must get together fairly quickly so that this co-operation is effected.

My Lords, the noble Lord, Lord Davies of Leek, went into the question of exchanges. He talked about the TXE4. The TXE4 came in after the TXE2 but, unfortunately, it is an interim model because we missed out on the first generation. I am not harking back to apply blame, but we did miss out on the first generation of computerised exchange and we are now going to have an interim model. This is not as advanced as the other system and it is, unfortunately, totally unexportable. We are going to be stuck with this model for some time because exchanges cost a considerable sum of money; they last for a long time, they have to go into a special building and you just cannot tear them out. The TXE4 is an electronic exchange but it is hardware as opposed to computer-controlled and it is not as satisfactory as the system we could have gone for. The real golden opportunity—and this ties into the question of R & D—lies with system "X", the computer-controlled system. The Post Office is helping industry to fund the development work on this system. If I do not make any other point, this must be brought home to your Lordships and to the country. System "X" is like a game of tennis; it is match point. If we lose out on this match point, then we are out of the game. We must get this one right and we can do so only by the co-operation that we have been talking about so far.

I have mentioned R & D. Large sums of money are spent on R & D and the amounts vary: but I believe that the Post Office spends about £27 million a year on R & D. This money is produced on specifications and, to a degree, on the development; but the main point is that at the end of the day it does not actually produce any real hardware. I have the feeling that this sum of money must be looked at very carefully, in terms of the co-operation that we have been talking about, as to how best it could be spent. I am not saying that it is very much more effective, but one company, Marconi, with a turnover of £40 million, spends £3 million on R & D. They have managed to get into a whole number of export markets by fighting their way in through the expenditure of this sum of money.

The noble Lord, Lord Davies of Leek, touched on the subject of harmonisation. Harmonisation is, of course, a worry. In some ways it can be the answer; because if everybody specified the same way this would make life easier although it would make competition fiercer, too; but the whole point is that we cannot liberalise our side until everybody else does. Otherwise, we are opening the Post Office market to be eaten alive by our competitors. It must be a phased operation; but I am sure the the Government have this in mind at the moment.

My Lords, I come on now to—and I know that I sound as though I am Post Office" bashing", but I am trying to do this in as constructive a way as possible—

Lord SLATER

My Lords, in regard to the noble Lord's reference to the export market, it would appear from what he is saying that tile Post Office at no time has given serious consideration to the export markets. May I say for the benefit of Members of this House that it was my privilege to go to Mexico with the object of trying to find a market for certain developments we had put through the Post Office by Post Office investigation and through scientific research. When I got to Mexico and met the trade representatives, I found that these trade representatives seeking to get markets in telecommunications were knocking their heads against a stone wall; because Mexico, as one area, was overloaded with the power that was coming from America. They could not in any way make inroads into that export field; with the result that I was able to get the Minister to come away from Mexico with his team to this country to see whether we could sell him something.

Lord REDESDALE

My Lords, I am sure we are all grateful for that statement. Noble Lords will appreciate that I did say that perhaps not as much was being done as might he done. The industry feels that there is an area for improvement and perhaps that is the best way of leaving it. A certain amount is being done and has been done, and great credit should be given to the people who are making the effort. What I said at the beginning was that I was trying to look at this in as constructive a way as possible to improve the situation. I was not saying that nothing had been done but that perhaps more could be done.

However, to come back to the subject of Post Office procurement (and perhaps to leave myself wide open again) I should like to come on to the subject of some of the planning which has fallen down a little on Post Office procurement. I think it probably has happened through the Post Office attempting to be as fair as possible and, at the same time, trying to achieve as competitive a price as possible; but I feel that this is a little misguided. If your Lordships will bear with me for a moment I should like to give a small example on Modem 7 which is a relatively small unit used at the subscriber's premises to permit the transmission of data over public telephone networks. Three of the most recent orders for Modem 7 were placed in August 1973,April 1975 and November 1975. In practice, the two suppliers who have competed for this business are Marconi and STC. The first of these orders was split roughly equally between the two companies with about 1,800 units going to STC and 2,200 to Marconi.

When the second order came along, for reasons either of marginal price or delivery advantage, the total quantity of 2,000 was given to STC. Marconi were thus left with a vacuum in their production facilities and so that they had to run down somewhat and generally re-deploy people. In November 1975, however, the trend was reversed and the total requirement of 3,000 further Modem 7s was placed with Marconi, STC getting none. STC will very soon come to the end of their run of 2,000 which must have represented a substantial increase in their activity on this product, whereas Marconi are now faced with winding up from a zero situation to a situation of a substantial level of production. It was probably done with the best possible motives but it meant that labour was laid off and labour was brought on. It is a question of planning so that the best use of labour can be made.

I should like to come on to another problem which is related to that, and that is on defence communications. Here again there are so many operations required in the specification of equipment on defence, for the sponsor branch, finance branch, CER planning, procurement executive engineering, contracts, quality assurance, radio introduction branch, handbook/technical writing department, spares ranging department, test equipment standardisation, maintenance experts, post design services and operational staff. It all has to go up and down the line and it takes a lot of time. It is a bureaucratic process, one in which savings could be made in terms of time and money if it could be simplified.

There is one little case in point. Perhaps I am poking fun at the MOD, but I am sure they will not mind that. The piece of equipment was a morse key and a considerable amount of thought was given as to whether this should be for left-handed or right-handed operators or whether the key should be interchangeable. Finally somebody came to the momentous decision to put a piece of wire long enough for the morse key to be moved from the right hand to the left hand. In that way the situation was solved. This took time, it delayed the process and it cost money. I know this is trivial, but it tends to happen from time to time.

On the brighter side, the Ministry of Defence are encouraging discussion of operational requirements before finalising specifications. This is excellent and is something which I hope will happen more and more with the Post Office. Returning to it, I should like to come on to one other item—I am probably taking too long but this is the major field of tropospheric scatter equipment. This equipment, I am sure your Lordships know, is ideal for communicating across hostile environments I think that is a lovely phrase!—or across the sea. It is very important equipment which is used on the North Sea oil rigs. The Post Office, I am afraid, was rather slow in appreciating its potential on the North Sea and in fact acted not quite as well as it might.

Originally BP decided that they would use this type of equipment and they bought their own tropospheric scatter equipment which they placed on the oil rigs with a relay station on the mainland. They paid for this semi-automatic equipment. It operates very well with very little trouble at all. Two years later the Post Office thought that this was an excellent idea and was one way of making a lot of money. They went a bit hard on the money aspect of this because in real terms what they said was that the oil company had to put its terminal on the difficult end, on the oil rig, and the Post Office would look after the land based end. Nevertheless, its charges have been a little stiff.

The Post Office tariff for the equivalent number of channels to those used by BP is such that had BP leased the shore end of their system from the Post Office they would have paid in nine months as much as the total cost of both ends of their system. Your Lordships will realise that the Post Office tariff offers the oil company only the shore end of the system and roughly the capital cost still falls on the oil operator to deal with the sea end. The Post Office tariff is such that it would have offered BP almost equivalent to half the investment, or four and a half months of tariff. This expense is considerable; the Post Office are asking BP to pay a lot of money for a service which, if they bought it and operated it themselves, would cost only around nine months' of operation.

One other point which I should like to raise briefly is the question of Post Office procurement on this type of equipment. Originally it was stated that they wanted to have a 2 kW. transmitter. Nobody makes such a transmitter and it would have had to be made separately. They either make 1 kW. or 10 kW. transmitters. However, in the end the Post Office agreed to this somewhat reluctantly, because it felt there would be a breakdown in the service. Rather amusingly, when the Post Office started to operate this it was very pleased and said that on its first telephone call it found that the quality was excellent although the levels were perhaps a little low. Somebody else said, "Yes, but of course that was in the afternoon: until that time, we could not get through to Aberdeen". This is an area where perhaps there is a lot to be desired.

There is the question of overmanning, and I do not want to take up too much of your Lordships' time on this aspect. We overman marginally in the Post Office. It is difficult to compare, but you can do it on the number of telephone communications per employee. It is about 82 in this country compared with a figure of 118 in Sweden. This brings me to the question of putting a lot of engineers in on the scatter equipment sites, whereas the BP site is a totally automatic operation. The Post Office one has 17 men, all obviously having to use cars and on a roster which amounts to four or five people. There is more equipment in the Post Office station but it is basically semi-automatic equipment. The BP station is actually staffed by a dog. A dog is required because of the Tartan army and a handler is required for the dog because of the regulations which we have brought in. Perhaps that is a slight overstatement of the facts, but I am sure the noble Lord will appreciate that.

I should like to raise one vitally important point which affects this industry considerably. That is the question of orders overseas. After a lot of work, an order has been negotiated with South Africa amounting to about £8 million for the tropospheric scatter equipment. This is being purchased by the South African Armaments Commission, but is interrelated as a communications system—it is only a communications system—with a number of other orders because the South African Government purchases in such a way that all of the companies are related. There appears to be some question as to whether a licence will now have to be obtained, and whether a licence will be granted. If this is stopped for reasons which the Government have of their own it will affect other orders. It is not just the £8 million of orders which is involved—which we cannot afford to lose—but the total will probably be in the region of £100 million. It would be a great pity for this industry to lose out on this for reasons which I feel might be more emotional than actual, since it is a communications system and nothing more. I hope that when the noble Lord replies he may be able to say that there is hope that this order will be allowed to go through. My Lords, I am sure I have spoken for far too long. I should like to thank the noble Lord, Lord Davies of Leek, for initiating this debate and giving the opportunity for saying that there is a need for co-operation between the Post Office and the industry.

5.10 p.m.

Lord ORR-EWING

My Lords, I must apologise for not being present when the noble Lord, Lord Davies of Leek, began his introduction to this debate; it came on a little earlier than I had anticipated. I apologise for this discourtesy, but the noble Lord had told me a little of what he might say and I am sorry that I missed hearing it in the Chamber. I want to draw attention to a phenomena which is happening—and which I believe is increasingly happening—in that qualified engineers in the telecommunications and associated industries are being tempted away from the private and wealth creating sector, the sector which earns the vast majority of our exports, into the public sector by higher salary scales and constant upgrading and of course fully-indexed pensions. That is not possible in the private sector, in spite of what a Government spokesman said on an earlier occasion, because no private company that I know of is able to index its pensions at 26.1 per cent., which is what happened in the case of retired civil servants last year.

I have already had an opportunity of drawing attention to that anomaly, and today I should like to draw attention to the anomaly which exists in the telecommunications and particularly the electronics area. Perhaps I should declare an interest, having all my life, when not on Parliamentary business—which is, or was then, ill-paid—earned my keep in the electronics engineering industry, where I took a graduate apprenticeship when I was very young. So I am speaking with some knowledge of the problem and must declare an interest, because the figures I shall quote come from the Institute of Electrical Engineers, of which I have been a member for 40 years or more.

A remuneration survey has been carried out by that learned body to try to compare how engineers in the electrical field generally, which goes a little wider than just telecoms, are paid in the private sector as against the public sector, the nationalised industries and central Government. I do not want to bore the House to extinction by quoting a mass of figures which, in any case, cannot be fully taken in. I always feel that other Parliaments, and particularly Congress, are better equipped than we are because they are able to have displays and one can project facts and figures to enhance one's argument. I, being numerate and having a visual memory, can take in information much more easily when I can see facts illustrated than when I hear them spoken.

This survey was unique. A questionnaire was sent out on 2nd January 1976 to 9,995 fellows, members and associate members in the United Kingdom and Ireland. By the 12th January, 30 per cent. of them had answered. I am very surprised at that, because I do not know of any other organisation where you can get a response of 30 per cent. ten days after posting the inquiry—which means that this was probably in the hands of the recipient for only seven days. After one month they had replies from 66 per cent. giving full details of their pay and remuneration. I would say straight away, if someone says that I am not comparing like with like because of the fringe benefits in industry as compared with the public sector, that 11 per cent. was noted to be the difference, and this was carefully calculated.

The outcome of this very deeply-studied remuneration survey absolutely confirms what many of us have felt for some time. I should like to take first a comparison of figures for skilled graduates, that is fellows and members of the Institute. In the 30/34 age bracket—and this is a very important age bracket because it probably concerns a third-job man and certainly a degree graduate—in the median quantile these graduates were getting £5,760 per annum in the nationalised public industries, and £4,800 in the private sector; that is to say, they are paid 20 per cent. more in the public sector. Taking now a slightly older man, aged 40/44, he is probably in charge of a project and again is extremely important to private industry, if it is to remain competitive. That man in private industry was getting £5,460 and, in the public sector, £6,430—nearly £1,000, or nearly 20 per cent. more.

When we get to the 50-year-old man, we can compare remuneration in central Government as well, and it may surprise some of your Lordships to know that central Government pay even more highly than the nationalised industries or the public sector. In central Government, a qualified engineer who is 50/54 years old, again in the median range, gets £7,330; in the nationalised industries and public sector he was getting £7,070, and in industrial and commercial companies he was getting £6,010. There is a difference of £1,060—very substantial indeed. The same applies, though to a less marked degree, if we go to the less skilled persona non-graduate who probably took an HNC. So what we have suspected in industry for some time has been borne out by this survey.

I have not included the Post Office, but I would say that many of our skilled personnel are being tempted away or, to be brutal about it, being bought away by the Post Office. Of course none of us would wish to see an unadventurous Post Office. I think at last they have woken up to the fact that we are in an electronic age; and under new leadership I hope the new Ministers are giving extra attention to this because we are now trying to drag ourselves forward towards a really modern telephone system. For too long it has been the poor relation of Governments; and nothing is more important to the industry of our country and to the infrastructure of our country than an efficient telephone system, not only internally but internationally, because so much business is done on the telephone now in the City of London and elsewhere by all of us in the export field. So I would not wish to see the Post Office in any way inhibited in paying good rewards. But there seems to be something rather odd when the Government have given instructions that the public sector is to economise in manpower and in remuneration. That is to happen wherever it may be, in local government and so on, but we find that the public sector is paying far more than the private sector is able to afford for the same type of qualified person.

5.18 p.m.

The PARLIAMENTARY UNDERSECRETARY of STATE, DEPARTMENT of INDUSTRY (Lord Melchett)

My Lords, as the noble Lord has made reference to the Government's urging of the public and private sectors to economise, it would be helpful if we got one thing straight. He is not suggesting that the public enterprises he has talked of have broken the £6 limit by paying more than private industry has been allowed to?

Lord ORR-EWING

My Lords, I was not suggesting that they were paying internally more than the £6 limit. They have a regrading of people and I do not want to discuss that in this debate because I have not looked up the figures. What I am saying is that they are tempting people away, because if you change your job you are not inhibited by the £6 limit. This is one of the great disadvantages of having any pay limit; you give a real incentive for someone to change his job. There is nothing to stop someone from getting £1,000 more, or even more, if he starts a new job with a new firm, a new designation and new responsibilities. Such a system makes for more movement, and every time a person moves some of his productivity is lost. The firm he leaves loses his trained ability and knowledge of the firm's work, and the organisation to which he goes cannot get full value for their money probably for the first six months or even a year. So any system which actually stimulates movement is not helpful in the long run to the productivity of the engineers to whom I am referring.

I should like to draw the Government's attention to the Civil Service Pay Research Unit. I recognise, and we have all recognised on previous occasions, that this is an extremely well-meaning body. In such dealings as I have had with them I have always found them to be people of very high integrity, desperately anxious to get their figures right. I spoke earlier about pensions and their indexation, and I do not think they have the right remit. For this reason I would ask the Government to look again at this, because it is a very strange situation. They have to work out what the comparative remuneration is in the so-called private sector and they then say that in the central Government field people in similar employment must not be any less well paid. In fact, their pay is fixed on a basis of comparison. But in the private sector, they take into account the inflated rates of the Post Office, which I have just mentioned. They are counted as private sector so far as the Pay Research Unit is concerned. The Post Office's remuneration, the nationalised industries' remuneration and the public sector remuneration are taken into account. So if they are paying £1,000 a year more, then, automatically, the salary which is produced for central Government is built up that much more than it should be. They are not comparing like with like. They are not looking at private sector remuneration and then making sure that central Government is just as good. So I would ask the Government to look at the terms of reference and see whether there is not a strange anomaly which ought to be put right.

I do not want to take up the time of the House any longer, but we must remember that we are utterly dependent in the telecommunications area on good people, well trained, experienced people, properly and decently remunerated, and with a chance to take on extra responsibilities and to realise their ambitions. It is not right, at a time when we in private industry are being prevented by the present Government restraints—and I support them on a short-term basis—when we cannot pay people more, that we should lose people to the public sector, which is not creating our exports and is able to pay £1,000 more to the same kind of person; thereby, it seems to me, breaking the Government instruction that there should be strict economy in the public sector at a time when it is more or less out of control.

5.21 p.m.

Lord MELCHETT

My Lords, this debate has been fairly short even by mini-debate standards but is, none the less, valuable for that. Indeed, the telecommunications industry is an extremely important sector of the economy, and, as my noble friend Lord Davies of Leek has pointed out, it is facing serious problems at the moment. It might he helpful if I started by making clear what I understand the telecommunications industry to cover. I apologise if my survey of the industry is a little more mundane than one ranging from Incas to Future Shock, and from death rays to nuclear taxicabs, as my noble friend's did. The industry is usually understood to comprise those companies which manufacture switching equipment (public and private telephone exchanges), transmission equipment (carrier systems and broad band radio links) and subscribers' apparatus (telephone instruments and so on). Associated sectors, whose fortunes are to a considerable extent tied up with the industry. are those covering telecommunication cables and satellite communications.

The telecommunications industry in the United Kingdom is largely accounted for by three companies—GEC, Plessey and STC, with a fourth, Pye TMC, also participating. These companies between them account for some 90 per cent. of the industry's output of around £400 million per annum. As noble Lords will know, GEC and Plessey are British owned; STC is part of the American ITT group, while Pye TMC is owned by Philips. Excluding work on cables, the companies employ about 65,000 people, which is considerably fewer than they employed two years ago. More than half of the employment is in Assisted Areas and is, therefore, extremely important to those areas of the country where jobs are scarce and unemployment is very much too high. Some 45,000 of the employees of these companies are engaged in producing telephone switching equipment for the Post Office. By world standards, the industry has shown itself reasonably efficient in many fields, but I accept that it has some weaknesses. Its annual output of about £400 million is in the ratio 4:1:1 as between switching, transmission and subscribers' apparatus. About three-quarters of production goes to the Post Office, with the remainder divided between other home customers and exports. Decisions by the Post Office on the type of equipment, particularly switching systems, required for the United Kingdom network are of crucial importance to the industry's competitive position in export markets.

Two years ago the Post Office's plans for modernising the telephone network were approved by the Government. These included the introduction of a new large and partly-electronic local exchange, TXE4, a phasing out of the electro-mechanical Strowger equipment, but with a continuing requirement for some Crossbar equipment, which is also electro-mechanical, but much more modern in design. Work would also be pressed ahead on the design and development of equipment for a new network for the 1980s, System X, to which noble Lords have referred. This would include computer controlled, electronic switching equipment which we would expect to be sufficiently advanced to attract large export orders. We have to accept that, desirable as speed in the development of System X is, as my noble friend in particular pointed out, faster development will cost more, and cause even greater employment problems than are already caused by the change from the older equipment to the new equipment.

When the modernisation plan was approved, it was realised that it meant a reduction in the labour force of the industry. This was because of the phasing out of the labour-intensive Strowger equipment and its replacement mainly by the less labour-intensive TXE4. It was planned that this reduction in the labour force would be carefully arranged with the Post Office's co-operation, to avoid redundancies as far as possible, although it was thought that some might be unavoidable. The present difficulties of the industry spring directly from its heavy reliance on the Post Office market, exacerbated by problems which arise from the worldwide changeover from electromechanical switching systems, such as Strowger and Crossbar, to the more efficient but less labour-intensive electronic designs. But, to be frank, I should add that in the past specialised domestic requirements have not always been beneficial to the industry's export potential. This is a point made by the noble Lord, Lord Redesdale, with which I agree.

In the long-term, there is a clear pattern of steady growth in demand for the telephone service in the United Kingdom. This has been reflected in Post Office orders for switching equipment. Given this pattern, the manufacturers have in the past been able to cope with the unavoidable peaks and troughs which occur from time to time in the ordering programme without any major effect on employment in the industry. They also expected to be able to absorb the change to electronic equipment without major redundancies. However, in the early 1970s demand was grossly inflated by the previous Government's policy of restricting Post Office prices. Additional equipment had to be ordered to keep the waiting list within bounds. As a result, there was serious distortion of the normal growth pattern and by 1973 orders (and, therefore, also employment in the industry) were running at an unnaturally high level. This was closely followed by an arbitrary cut of some £20 million rate in 1973 as part of the same Government's economy measures.

When this Government came to power in 1974 we decided, with the full support of the TUC, that a policy of economic pricing must be applied to the nationalised industries. The tariff increases which resulted, coupled with a general downturn in economic activity, stabilised demand. As a result the Post Office found that, with equipment delivered or on order, it had several years' spare capacity at this reduced rate of demand for telecommunications services. It was obviously prudent for it to cut its ordering programme, and it made increasingly heavy cuts during 1975 as the new pattern of demand became clearer to it. Full information was given to the companies concerned. Unfortunately, because of the situation I have outlined, the companies could not immediately cushion the effect of Post Office cuts by taking more export business. As a result, several thousand redundancies have occurred in the industry, and more are likely, many, regretfully, in development areas. Ministers are extremely concerned about these redundancies and have met the unions, the Post Office and the employers to see what can be done to help. Last October the Secretary of State for Industry asked Sir William Ryland to review his ordering programme, and as a result some adjustments were made and some jobs in the industry saved.

There have been calls—not in this debate, I know—for a reinstatement of the 1973 ordering pattern. But it would be inconsistent with the Government's overall financial strategy to press the Post Office to buy equipment it does not need and then provide money from the public purse to enable it to purchase that equipment. The industry must, therefore, look to exports and to the sale of private telephone installations to bolster its order book and keep more of its staff in employment in the face of the present downturn in demand from the Post Office.

In contrast to what the noble Lord, Lord Redesdale, said, my understanding is that there are encouraging signs that this is beginning to happen, particularly with the semi-electronic TXE2 system. But despite any increase in export orders there will be some plant closures. Partly for historic reasons as a result of various mergers and partly as the outcome of successive Governments' policies of regional development, the industry has about 40 factories in different parts of the United Kingdom. Some of these factories are quite small. Many, particularly the newer ones, are in development areas. If the industry is to become more efficient and effective in world markets, which we all agree is desirable, it seems likely that it will have to concentrate its activities on a smaller number of the larger plants. Some closure of the smaller plants is already under way, due to the cuts in the Post Office's ordering programme and the shrinking demand for the older types of equipment.

At one time the industry had a bigger share of export markets, particularly in the Commonwealth and other countries subject to British influence. There was a tendency for such countries to follow Post Office standards and buy their equipment from the same suppliers. But in the post-war period, as political links with the United Kingdom became more tenuous, Administrations in those countries began to establish differing standards of their own. In the meantime, the United Kingdom suppliers, in the face of diverging home and export requirements, concentrated on the Post Office market. As the noble Lord, Lord Redesdale, said, the result was that some of the traditional British markets overseas were lost to foreign competitors. Overseas markets for earlier systems supplied traditionally by United Kingdom manufacturers will soon be coming to an end. Only orders for additions to existing systems and replacement parts can be expected in future.

So far as the next generation of exchanges is concerned, it has been demonstrated that there are export prospects for variations of TXE2, and there are similar hopes for TXE4. Although these systems are often described as "electronic" they are not completely so, the switching devices being in the form of a magnetically operated reed and not a semi-conductor device. As used by the Post Office in the United Kingdom, they are not computer controlled, but I understand that their design lends itself to development so that such control may be possible.

My noble friend Lord Davies of Leek touched in particular on the levels of expenditure on research and development in this industry. As the noble Lord, Lord Redesdale, said, in the financial year 1974–75, the Post Office spent £27.1 million on telecommunications research and development. Fifty-nine per cent. was spent on new systems, 25 per cent. on existing systems and the remaining 16 per cent. on exploratory research. It has been estimated that the United Kingdom telecommunications industry spends a further £30 million to £40 million a year on research, about a quarter of which is under Post Office contracts.

I know that trades union representatives have expressed fears that companies are not undertaking adequate research and development. We have explored these points with parts of the industry who maintain that it is their policy to develop new products whenever they see a commercially viable future for them. But research and development is not an end in itself. It makes commercial sense to undertake it only if the product resulting from research will be profitable. My noble friend can rest assured that the industry and the Government agree with him that the development of profitable products is what is most important for the future.

I should like to deal with one or two of the points which various noble Lords have raised during the debate. My noble friend said that under the terms of Section 35 of the Post Office Act, the Post Office has considerable scope to borrow money from a variety of sources. I understand that in practice a proportion of its domestic requirements are met from foreign currency loans. This will almost certainly include the Arab money which my noble friend mentioned. I understand that recently loans have also been negotiated from the European Investment Bank.

To deal with the two European questions which my noble friend raised, I can assure him that we are taking our full part in the various international forums where harmonisation of operating conditions and equipment parameters are being discussed. My noble friend also referred to the need for a European policy for the electronics industry as a whole, including computers and telecommunications. This is an important subject upon which the European Commission rightly places much emphasis, and again we are participating fully in on-going discussions in Brussels on European collaboration in this field. My noble friend can rest assured that the interests of this country are being fully taken into account in any discussions that take place in a European context.

Both my noble friend and the noble Lord, Lord Redesdale, mentioned the Post Office's order with a Swedish firm which was placed in 1974. As noble Lords know, the Post Office customarily places virtually all of its orders for telecommunications equipment with United Kingdom firms. In the summer of 1974 the chairman of the Post Office wrote to the then Secretary of State for Industry, Tony Benn, indicating that the Post Office had concluded that it had to buy exchange equipment for a new international exchange in London from Ericsson of Sweden. After full consideration of the facts and following representations from British industry, the Secretary of State reluctantly concluded that it would be wrong to object to the Post Office's intention to place this order with Ericsson. It was a condition of the contract that part of the work would be carried out at Ericsson's factory at Scunthorpe. I can assure my noble friend that that decision of the Post Office in no way implies a significant change of attitude by the Post Office towards its traditional suppliers.

The noble Lord, Lord Redesdale, mentioned the tropospheric scatter equipment and in particular its use in the North Sea. As the noble Lord will know from previous exchanges in this House, the question of the price charged by the Post Office for this equipment is a matter for the commercial management of the Post Office, and I have no doubt that it will take note of what the noble Lord has said about the price being charged. The noble Lord touched also on the question of the export of this equipment to South Africa. Because this equipment was considered "sensitive", it was placed under specific export licensing control. In the case of any application for a licence to export such equipment, the end uses to which it will be put will need to be explained. I cannot, of course, prejudge the outcome of any such application that might be made, but I can assure the noble Lord that the points which he has made in the debate will be borne in mind by the Government when any application is considered.

The noble Lord, Lord Orr-Ewing, dealt with the pay differentials which, he told me, a survey showed between the public and the private sector—particularly, I think, for people qualified in engineering. It would be very difficult to do so and I do not think that the noble Lord would expect me to comment in any detail on the figures that he produced, because one would want to see the survey, exactly what questions were asked and in particular whether like was being compared with like. I am glad that the noble Lord made it clear that he was not saying that the public sector had been getting round the current pay limit. I very much regret, however, that in making that clear the noble Lord appeared to make the insinuation that the public sector, compared with the private sector, had been using the regrading of jobs to get round the pay limit.

As has been made clear by my right honourable friend the Chancellor of the Exchequer, there is a certain amount of drift when any pay limit is imposed but I see absolutely no evidence to suggest that the public sector, more than any other sector of industry, is re-grading jobs. Indeed, bearing in mind the very close eye which Ministers and other people keep on all pay negotiations and pay awards in the public sector, my own suspicion is that if there is more drift in one sector than another it is more likely to be in the private sector of industry. But as I say, I have absolutely no evidence to suggest that one or the other sector of industry is making use of re-grading to get round the pay limit, and I think that the noble Lord was a little unfair to suggest that the public sector was doing so—if that, indeed, is what he suggested.

Lord ORR-EWING

My Lords, I must intervene to say that I did not suggest that. Each Civil Service organisation has re-grading as people move up. I by no means suggested that that was a way of getting round the pay freeze. If the noble Lord will look at Hansard and the words I used, they will, I think, bear me out that there was no such imputation. I said merely that they have re-grading, which industry also has. We re-grade. But I was not seeking to make that point. I was seeking to make the point—and perhaps the noble Lord could deal with it—that it is not healthy to pay substantially more for the same-qualified person of the same age as is revealed by this survey, and I hope that he will take that criticism very seriously.

Lord MELCHETT

My Lords, I am glad we have cleared up that point because it is important, and particularly now that we have settled the next pay round it is important for public and private industry—and indeed the whole country—to pull together to make sure that the agreement sticks. I am glad that we have got rid of any suggestion that one section of industry or another is making an attempt to get round the limit. As I said, it is difficult to comment on the figures without seeing the survey in detail. My own reaction would be that if the public sector is paying engineers more than private industry that is the fault of private industry rather than the fault of the public sector.

The noble Lord will know from previous debates that we have had in this House that one of the major concerns of industry in this country is the lack of suitably qualified engineers. Indeed, since my time at the Department of Industry one of the main preoccupations has been looking for the up-turn in the economy, which we expect and which indeed appears to be under way at the moment; one of the major bottlenecks is likely to be the shortage of skilled people in industry, particularly skilled engineers, and one of the criticisms that was made of the pay levels in industry—certainly to Ministers in the Department of Industry—is that engineers are not given sufficient rewards and that when training places are made available for engineers no young people from school are available to fill them. Indeed, I have been to parts of the country where that very criticism has been made: that companies desperately need engineers, there are training facilities available but that the engineers simply are not coming forward to be trained.

Similar criticisms have been levelled at the educational system; that not enough emphasis has been placed upon training people, particularly engineers, in technical I skills; and one of the answers, for example, that directors of polytechnics have given me in discussions on this problem, is that it is very difficult to encourage people to go into engineering and into industry if the pay levels are not right. I do not want to comment on the figures given by the noble Lord, Lord Orr-Ewing, because I do not know the basis on which they were collected; but it may be that the whole country should think of rewarding people with technical skills, particularly engineers, a little more highly than we have in the past.

Lord ORR-EWING

My Lords, I should like to come back to the point—the noble Lord will understand. It is not right that people should be tempted away on the same standard to get £1,000 a year more—20 per cent. More—by changing their jobs from the wealth-creating industry to the public sector. Can the noble Lord deal with that point, because that is the whole criticism that I have? It really is not fair to say that we should be paying more. In private industry we are rigidly controlled. We cannot even pass on the extra cost of our labour; we have to bear that on our profits, and we are always, quite rightly, criticised that out profits in industry are already too slender to invest them as we should do.

Lord MELCHETT

My Lords, I have said to the noble Lord several times that I do not wish to comment upon the figures because I do not know the basis on which they were collected and whether the noble Lord is comparing like with like. I should be happy and interested to study them. I have emphasised that the problem of the shortage of engineers in manufacturing industry is one of which the Government are acutely aware and to which they attach considerable importance. I think the noble Lord is a little unfair to claim, as he appears to be doing, that this problem is caused or exacerbated by the recent pay limits. It seems to me that all the evidence points to a long-term shortage of engineering skills in British industry and that the recent round of pay limits cannot, by any stretch of the imagination or any recent survey, possibly be blamed for a shortage of engineers in industry or indeed a differential between the pay in manufacturing industry and the public sector, if such differential exists. It seems to me that this is a long-term problem. I agree with the noble Lord that the shortage of engineers overall is a serious problem, and I can assure him that we are giving considerable thought to it.

Finally my noble friend referred to the committee, under the chairmanship of Professor Carter, which is carrying out a review of the Post Office. I know that we shall all look forward to the report with considerable interest. I anticipate that this will be available in 1977, hopefully in the early part of that year. In the meantime, of course, it would be wrong of me to anticipate the outcome of Mr. Carter's committee, but I am sure that note will be taken of the various points which my noble friend made with particular reference to the Carter Committee.

In conclusion, I should like briefly to touch on the future of this industry. The future of the industry rests primarily with the development of a new range of fully electronic equipment—System X—and its full exploitation in overseas markets. The system is a joint venture between the Post Office and its major suppliers, and the Government are giving every encouragement to the partners to press on as fast as possible, taking into account the needs of potential overseas buyers. I think the approach to System X exemplifies the change of philosophy that the noble Lord, Lord Redesdale, said was needed. I certainly agree with him about that, and the Government have laid great emphasis on this need to make sure that System X has a full export potential. Great emphasis has been laid on this to all concerned.

We are confident that there is a prosperous future for the industry and for those who work in it. But this needs to be on the basis of the fullest co-operation between all the parties concerned. This process is being advanced by the "Little Neddy" for the electronics industry, on which the Government, the industry, the unions and the Post Office are all represented. We lay the greatest emphasis on a tripartite approach to all British industries' problems, not least the telecommunications industry. This Government's industrial strategy is based on this approach, and I warmly welcome my noble friend's support for our policy of tackling the problems of the telecommunications industry on this tripartite basis.

5.47 p.m.

Lord DAVIES of LEEK

My Lords, I am grateful to noble Lords who have taken part in this debate and for the expertise of both noble Lords who have spoken from the other side of the House. I have listened many times to the noble Lord, Lord Orr-Ewing, and I know that he himself had earned his living in the electrical engineering industry. I wish he had taken a little more time, after he dealt with the questions of pay, and had come on to some of the points in which he is an expert. However, I am grateful to him for what he said. I did not know the figures that he has given but I suppose that publically-owned industry tries to win the best talent in just the same way as there are a few pirates in private industry. I do not justify it. I take his figures as being accurate. He has made his point and I am sure the Government will take note of it. I hope that competition for labour will be as fair in that field as it ought to be in others, and I thank him indeed. I was hoping that the noble Lord would have made a bigger contribution because I would make a plea to spend a little more on electronics on account of its contribution to defence; but because of the time factor I know the noble Lord did not want to weary the House, and neither do I.

I am grateful to the noble Lord who spoke from the Front Bench. I let him know what I was going to say, so I had no magic cards up my sleeve. I was concerned with the industry proper, and I wanted the best reply I could possibly get from my noble friend who spoke so eloquently from the Front Bench and I am grateful for the answers he gave. I am certain that the whole House and the nation are waiting for the Carter Report. I am sure it will be constructive and it may contain suggestions. There is no doubt that the telecommunications industry is moving ahead as fast as biochemistry. In the field of biochemistry, in which I have an interest, movement is so rapid that one can hardly keep pace with it. It is moving faster than knowledge of space.

For instance, for the first time in history a glamorous side of telecommunications was pointed out in the Financial Times only a short while ago, when here in London the Institution of Electrical Engineers had a world conference for the first time in history discussing optical fibre communication, which means that we are now making glassfibres so fine and so wonderful that we can use them for telecommunications and get thousands of calls on a 15 kilometre stretch of glassfibre inside a cable and we do not want boosters along the line. It will alter entirely the economics of cable communication. There are about 50 other movements in the telecommunications world which have evolved as a result of the co-operation of Post Office engineering—and I use that word. "Post Office" has become an ugly word; we must dust it and make it a good word. I should like to see the Post Office uniforms made a little better, too, for the old postman to come round in. I am grateful to the Government, and I hope they will keep the organisation on its toes, and let us know from time to time if there could be some interim report on the way the Carter Committee is working.

My Lords, I wish to thank all noble Lords who have taken the trouble to take part in our debate on what I consider is one of the growth industries, worth £14 billion if worked properly. I say "thank you" to all, and beg leave to withdraw the Motion.

Motion for Papers, by leave, withdrawn.