HL Deb 16 March 1977 vol 381 cc116-30

8.21 p.m.

Lord FERRIER rose to ask Her Majesty's Government whether they will ensure that the telecommunication authorities now review their policy regarding installation and standingcharges. The noble Lord said: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper. Some of my correspondence connected with our debate on night-store heaters a month ago confirmed my belief that the present cost of installing and maintaining a telephone is, as in the case of heaters, an obstacle to many underprivileged people installing equipment to match conditions today. But the telephone may well be a lifeline.

When, a fortnight ago, the Press reported that telecommunications were showing a £400 million profit and, simultaneously, that four factories were going to have to close down through a lack of orders for Post Office equipment, and when, on top of that, we heard that the Post Office were contemplating increasing the postal charges, I felt that your Lordships would like to discuss the matter, and hence this Question. Little did I guess that, on the very day that it appeared in the Minutes—that was on the 7th—the other place, in their debate on the Consolidated Fund (No. 2) Bill, would devote a couple of hours to a discussion which, though mainly on the problem of the factory closures, was very wide-ranging. Indeed, that debate covered so many of the points that I had in mind to mention here that there is no need to elaborate them. I recommend that debate to your Lordships for study, and particularly the Minister's speech; but I can be brief in consequence.

When, only yesterday, the Consumer Council included a complaint about telephone charges in a representation to the Prime Minister, it might well have been thought that the matter had been processed until it was absolutely threadbare. I consequently half apologise for taking your Lordships' time—but only half. There are a number of issues which are still worth an airing. In the first place, I do not propose to refer to the tariff of charges, to the rates for telephone calls. Indeed, I have deliberately not included this matter in my Question. Our telephone bills may be shockers, as every bill seems to be these days, but, on the whole, the tariff structure, with its varying scales, is in my view well designed for conditions in this country, is flexible, and compares reasonably in terms of cost with those in other countries.

The only really bitter complaint which, until recently, I had had—I live in Scotland—was that so many exchanges, particularly in the South of England, which were available for trunk dialling from London, had to be handled, and still have to be handled, through the operator in Scotland, of course at the relatively higher tariff. But this has recently been put right, so I no longer have a grouse about it, in that the charge is adapted to accord with what would have been the charge had the number been obtainable on STD.

However, where I believe revision should be considered is by the adjustment downward of the charge for installation and, similarly, the rental or the standing charge. As for the former, the installation, in the debate in the other place one speaker contended that changes could be made in the Post Office's sales policy, and another Member, coupling the apparent profitability of the present system with the Plessey closures, felt that the high cost of installation could be drastically reduced. One must realise that this may not be so easy to carry out or to implement when it is remembered that the subscriber who most needs what really amounts to a subsidy is probably the consumer farthest away from existing networks. I have in mind the far-off areas in my native land.

It is often people such as these who need a lifeline more than most. I deliberately use and repeat the word "lifeline" because so many people with whom I have discussed this question have used it to me, and I have sounded out a large number of the public. It is so often the aged and the lonely, the handicapped and the housebound, whether by physical disability or by domestic responsibilities, who should, I believe, come first in our considerations. Of course, it must be recognised that assistance is given by the social services, but my information is that this has not been as easy to obtain recently as it once was, and I should like to ask whether it could be stepped up.

What with the high cost of petrol, the reduced postal services and the very limited and costly availability of public transport in remote areas, it is, as I have said, those in such areas who would seem to be entitled to the greatest consideration. People are inclined to say that, whereas one might afford £20 or £25 for a telephone, £45 or £50 is just not on. This is so, of course. But there is another angle to it which is worth looking at, and that is that a large number of the younger and more active people prefer to have a television set or a smart car than to have a telephone, and they can nip over to the call box, provided that it has not been vandalised.

To turn to the quarterly rental of, say, £8 or £9—I use the words "£8 or £9" because VAT is involved here; and, incidentally, it must be remembered that this rental is payable in advance—it bears hardest on the limited user. The smaller the user the heavier the bearing of the charge. I calculate that a householder whose quarterly charge is for 600 units at 3p plus rental and VAT pays 4.62p per unit, of which the rental and VAT accounts for 1.62p per unit. This is more than the comparable charge in a call-box—a point drawn to my attention only this afternoon.

To take what may be an extreme case, say, some old body who is afraid to use the telephone anyway, and who may initiate only two unit calls per week, she, I work out, would pay 35p per unit for those calls, of which 32p is the tranche of the rental. This is a particular case; and I have had more than one case mentioned to me where families install a telephone for old people. Although this may sound an extreme case, your Lordships will remember I am talking about outgoing calls. These installations very often provide a considerable contribution to income by virtue of the incoming calls that they prompt. At the other extreme, I know one subscriber who is the secretary of an organisation of which I am the chairman, who the other day had a quarterly bill for £300. This, of course, includes many long distance calls, mainly to London. At this level, the incidence of the rental is of minimal significance. These are extremes.

My Lords, I suggest that a valuable concession—and I am referring to the rental—which is also, in my view, a sales gimmick, would be to reduce the incidence of the standing charge by a return to the old system of so many free calls per quarter. Can this be done? In terms of modern mechanical accounting it may be more complicated than one thinks, but it would be a sales gimmick. Can the number of such calls, if such a concession is granted, be varied as between different classes of user? In general terms, it can be urged that telephone usage and the consequent overall profitability might be worth encouraging by some such means. The social gain and the social benefit to the under-privileged would be considerable.

My Lords, there are one or two matters that I might refer to. I have already referred to the call boxes which in many areas, because of vandalism, cannot really be relied upon by old people. One noble Lord said to me this afternoon, "There is a van standing outside the House with 'Instal a telephone now!' written upon it. 'Now,' is the word," he said. Is this quite fair trading?—when we all know there is a substantial waiting list and a substantial waiting time except for special categories. Of course, special categories such as doctors and the like must come first; but when can the backlog he reduced?

In conclusion, my Lords, the high cost of postage has a bearing on all of this, as has also the cessation of Sunday collections. The fewer the postal facilities, the more the need for widespread access to a telephone. May I finally turn to the very useful overnight letter telegram service? The text of this Unstarred Question which we are now discussing was sent to the Table by this service. The overnight letter telegram costs 50p standing charge plus 4p a word. I think that the 50p is a fairly recent addition. Of course, telegrams themselves are increasingly costly. Gone are the days of such telegrams as the P. G. Wodehouse characters used to send to each other at a "bob" (5p) for 12 words. Would it be worth contemplating cutting out the 50p standing charge on Saturdays and Sundays—rather like the lower rate for the ordinary telephone tariff— to encourage the use of the overnight letter telegram service which, in any case, closes at 10 p.m. on any night of the week?

As I have no right of reply, I thank in advance those noble Lords who are contributing to this debate. I only hope that I have not wasted the time of the House in raising this matter which I believe to be of real importance to many people of limited means; the more so as it may be one about which something can he done in this age of increasing burdens, especially in old age.

8.36 p.m.

Lord REDESDALE

My Lords, I am sure that all noble Lords will be grateful to the noble Lord, Lord Ferrier, for giving us this opportunity of discussing telephone rentals and charges. I think that all of us have a few shocks from time to time when we get our telephone bill. With six loquacious daughters, for me it can be quite painful to see the bill. I would slightly take issue with the noble Lord over the question of charges for the calls. He had said that he was not going to mention it, but he brought it into his speech later when he spoke of overall costs. I took his point fully. I think we must look at the whole charge, because it is a composite charge. If I might take your Lordships on a very quick tour round Europe, I think it is of interest to know what is being charged in other countries. The Unstarred Question itself refers to installation and standing charges. Figures are always difficult to come by and most of them have been converted from French francs because the headquarters of the organisation is in Paris.

It might interest your Lordships to know that, on the installation side, we come pretty well in the middle of the range of charges with £45—which, let us face it, is for a totally new installation. Where there has been a disconnection and all the facilities are there, it can go down to £8 or so. There is a degree of discretion there, I admit. In France, it costs £100 to install a telephone. In West Germany it costs £42. In Switzerland there is no charge for telephone installation. It is free. The charge comes on the other side; so that one must look at the rental charges. Here, I do not think that compared overall with the rest of Europe, we are too expensive. The noble Lord, Lord Ferrier, talked about quarterly charges; but, working on a monthly charge, with VAT, we pay about £2.83 a month which is not too bad when you think that people can be paying a lot more (about £8) for colour television. To put the matter into perspective, the cost per month in France is £4.88 and in West Germany £6.80.

An interesting point is what happens in those other countries where the idea of bulk selling is important. For instance, in Canada you can make unlimited local calls for a rental of £4.90 a month, which is good value. Again, in Boston the charge is £8.50, with unlimited local calls. Our charges, I think, are rather on the high side because in so many of these countries which I have just mentioned—Germany and France for instance—the duration of local calls is not measured. As it used to be here in the old days, one can talk for as long as one likes. When you talk for a long time in this country the meter is really ticking away. On that side we tend to be rather pricey.

It does not really matter so much when we are talking about the social need, the lifeline call, because these people are not going to make many calls. Although they may talk for some time, it will not cost too much in real terms. I take the point entirely that the lifeline call is an enormous social need—and I do not think we can underestimate it—for people who are ill, handicapped, crippled or very old. But it must be remembered that it costs £300 to have a line installed. That is with the switchgear—the handset costs £9. Therefore, when one talks about £33 a year, it has to be put into context with the £300 it costs to install the unit.

The area I am more concerned about is the total profit we are making; what we do about it and what we will do in the future. It is rumoured that this year's telecommunications profit for the year ended 31st March will be about £350 million to £400 million. That is not a bagatelle in anybody's language; that is real money. This money has started to pour in at quite a rate since the panic decison in 1975. POUNC and the Telephone Users' Association said that the Post Office was being too hasty. This comes back to the whole question of forecasting. I agree—and I have been involved in it—that forecasting is extremely difficult. If one gets the right figure, perhaps there is a degree of luck, but one is very pleased to get it right. The Post Office did not get it right at that time, although there is a backlog of debt.

By increasing the prices so greatly we are in a rather excessive, almost embarrassing profit situation. Perhaps some of this money should he allocated to social responsibility. The Chronically Sick and Disabled Act allows local authorities to pay for a telephone line for certain people. The trouble is that local authorities are now very short of cash and they are therefore not really in a position to install many of these telephones. Sadly, this is the case. Perhaps a little of the responsibility should be taken off the local authorities. I hope the noble Lord, Lord Pitt of Hampstead, at least, will support me.

Regarding business charges, I get worried on that point because we are art exporting country. Communications are absolutely essential. One has to use the telephone if one is going to make money abroad, and this country has to make money abroad. Last year—not this year—international telecommunications made a profit of £59 million. It is going to be much more this year. That is 40 per cent. of the total profit, or about 31 per cent. return on capital. That is a little too hard, because to a certain extent you are inflicting these prices on the people who are making the money to make this country work. We must accept this point. Sonic people go so far as to call it an exercise in Gadarene greed, which is rather a nice remark!

We must remember that it is a heavy cost on our exporters. We have to be careful. I hope that at least with these profits the prices will be pegged. We have had an assurance that the prices will be pegged for some time to come; but I think they must be pegged for a long time. It will still leave money in the "kitty" in order to cover the social responsibility to which I have referred.

As I have said, the subject of forecasting and demand was considered in 1975. The figures were wrong. We await the Michael Posner Report. This will be fascinating. Perhaps we are now talking in advance of this. Then the Carter Committee will have an effect on what is happening. It is a question of marketing and what we want to do. All Governments in the past have been only too ready to interfere with the Post Office. There has been a lot of "stop/go". Let us be sensible about this—we are looking to the future. I have made this plea on a number of occasions, and I shall make it on another subject in the future. Let us be more courageous, take a long-term view and try to stick to it. There is nothing more expensive than switching on and off the electric light.

There is not much that we can do about the Plessey situation at the moment. A great deal has been said, but one of the things which people forget is that much of that plant is Strowger equipment. It was invented in 1896 and was brilliant; it is a beautiful piece of equipment. I have visited many exchanges and one realises how enormous the whole business of telecommunications is when one visits a big, international exchange. The equipment is of incredible complexity. But we still have these wonderful antiques. You hear the Strowger click when you telephone. On a crossbar it is much quicker. The Strowger equipment is out of date and we have not moved on fast enough. This is because we have not had a telecommunications policy—and we desperately need one. We are installing Strowgers, but we are putting in mainly crossbars now. Crossbars are still, in my view out of the Ark. We only have a few TXE-2s and TXE-4s; the TXE-2s are for smaller exchanges and the TXE-4s are for bigger exchanges. They are coming on stream, but they are enormously expensive.

In this day and age, the thought of having to have mechanical switchgear is incredible. Let us hope that we will get it right with "System X". We have to grasp the nettle: new equipment, especially electronic equipment, requires fewer people to operate it. On 5,000 lines a year the number of operators required to produce the equipment will drop from 3,300 to 1,250. There will be an ongoing problem regarding jobs. On the maintenance side, it will take fewer and fewer people to look after more and more complex equipment. We are going to have a jobs problem in the future. There are going to be people out of work. This is a social responsibility job.

I will not detain your Lordships for much longer, but I must say that we need an ongoing telecommunications policy, and perhaps we need a telecommunications policy board with everybody who is concerned involved: the consumers and the business lines, which take up the lion's share. We have only 50 per cent. of households on line at the moment. This could be increased. If we have this policy, we would be able to increase demand in a controlled way and not with "stop/go". If demand is increased now, there will be waiting lists.

The Government must be in a minor role, because Governments get involved too much. The unions must be involved because of the social responsibility regarding jobs. The manufacturers must be there, and the whole aspect of our export potential must be kept in mind, because we export this equipment and we need an ongoing long-term policy so that we can talk about charges and other matters, including how to look after those people who need a communications lifeline.

8.50 p.m.

The Earl of KINNOULL

My Lords, I rise to support my noble friend and to congratulate him on raising a matter of very deep concern. My noble friend is a master of such issues, and particularly a master of the Unstarred Question. I know that the whole House is richer for his many Questions and for his probing on these matters. I am sure the noble Lord, Lord Winterbottom, will agree that the spirit of the Question concerns not so much the business users as the private users.

My noble friend has described the telephone as a "lifeline of communication" for many people. It is a lifeline of communication. I support that description. We have to think of the aged, the handicapped and single people living alone, together with large families who depend upon the telephone for keeping in touch with their relations. They all depend very much on the telephone and yet my noble friend has given us a figure of only 50 per cent. of people who are connected to a telephone. Many are deprived because of the prohibitive cost of connection and rental. What faces an old-age pensioner who wishes to be connected and to make one call a week? He will find that the cost in the first year will be about £1.50 before he even makes the call, and so we see how meaningless the benefits of the off-peak tariff and of the various other tariffs introduced by the Post Office have become.

I hope the noble Lord, Lord Winter-bottom, will be able to give some sympathetic consideration to this matter. The noble Lord is renowned for his sympathy and for his generous heart. I hope that his brief will show equal sympathy; that it will also show that the Government accept that this is a special case and that they will seek to persuade the Post Office to adopt a more humane policy towards those who depend on this line of communication.

In this connection I should like briefly to ask the noble Lord one or two simple questions. First, what annual income does the Post Office receive from installation charges, and do the Post Office weight their connection costs more heavily for business users than for domestic users? Is there any variation? Another topic which was touched upon by my noble friend Lord Ferrier, and which also concerns my noble friend Lord Redesdale, was the recent tragedy of the collapse of the Plessey factories. That is indeed a very severe setback for the whole of the British telecommunications industry. We know that many accusations have been levelled against the Post Office for their apparently erratic support for the industry at a time when they have announced an all-time record profit. We know the Government's undoubted concern, expressed in their appointment of Professor Posner and his Committee to look into the whole matter. I hope, as I am sure others also hope, that he will come up with some constructive ideas and suggestions to help the industry. But the basic fact is that many thousands of people will be thrown out of work and valuable export orders have been lost. An industry with a proud, world-wide reputation has been shown to be technically out of date. Whatever the cause, one cannot escape the fact that the Post Office have a very great responsibility to the industry, as the home purchaser.

I should like to ask the noble Lord how soon Professor Posner is likely to report, whether the report will be published, and what active steps the Government are taking to assist those who have been thrown out of work, by finding them alternative work at this time, while we are awaiting the Posner Committee's report. I should also like to ask whether the Government were advised in advance of the Post Office decision regarding the TXE2 and the TXE4, which I understand triggered off the Plessey closures. Finally, I should like to ask: What is the value of the orders the Post Office are at present placing abroad for telecommunication equipment?

I do not know whether the noble Lord can answer these questions, because I realise they go a little outside the scope of the Question which is on the Order Paper. I hope he will be able to give some reassurance tonight, and that whatever he is able to say on this particular aspect will bring hope to the people concerned; that will be very much appreciated not only by the few of us who are here tonight but also by the many people outside who seem likely to be deprived of their livelihood.

8.56 p.m.

Lord WINTERBOTTOM

My Lords, I know that the House is grateful to the noble Lord, Lord Ferrier, for introducing this matter, which is obviously close to your Lordships' hearts. May I say he has also given me a very ueful tip, for which I thank him, concerning the overnight telegraph service. When I got his telegram, or whatever the document was, I thought that he must be taking this matter very seriously because it must have cost him a fiver. However, I rather gather it was less than that.

Lord FERRIER

Oh yes, my Lords.

Lord WINTERBOTTOM

My Lords, I am grateful for his good commercial advice. I am afraid I must display cowardice and confine myself purely to the terms of the noble Lord's Question, which asked whether the Government would ensure that the telecommunication authorities now review their policy regarding installation and standing charges. That Question must be linked with the general policy about capital installations, which brings in the Plessey problem, raised by several noble Lords. However, the latter is rather outside the time-scale we are discussing this evening and so is not exactly relevant. The noble Earl, Lord Kinnoull, asked me when the Posner Committee would report. I would say it will be within two or three months. The Government are seriously considering publishing that report when it becomes available, but obviously we cannot commit ourselves because it may contain material which is not relevant. Nevertheless, I hope noble Lords will forgive me if I do not plunge into matters concerning the Plessey Company and the technology of the exchanges, because that is not what I have been asked.

First, I should like to tackle the economics of the Post Office, because that is basic to everything we are talking about. Noble Lords have spoken of great profits coming our way. I am glad to say that is true; but we must not forget that we are speaking of a very large industry which has a turnover annually of £3,500 million. So it is a very large industry indeed and one should not be surprised if it produced equivalent profits, if properly run. May I remind your Lordships that, in the three years to March 1976, not far short of £450 million of taxpayers' money was paid to the Post Office, in compensation for losses due to price restraint. This is what happens when one starts using the nationalised industries as a controlling factor in the price index.

Taxpayers, some of whom are telephone subscribers and some of whom are not, can reasonably ask that the first priority should be to restore the situation. But while it is true that telecommunications made a profit of £155 million in the last financial year, and are expected to make a substantially larger one this year, all this and more is needed to help finance the £1,000 million investment programme. Every £1 of this programme which can he financed internally offers potential for lower taxes or for increased public expenditure elsewhere. But the chairman of the Post Office has promised that there will be no increase in telecommunications charges before April 1978, and that will represent a standstill of two and a half years at a time of rapidly rising inflation. I wonder how many nationalised industries can have so good a record.

But having said that as a defensive measure, may I say that I agree completely with the point which the noble Lord, Lord Redesdale, made, that profits of this size—and they will be substantial—place upon the Post Office a measure of social responsibility, which local authorities who, at this moment, are being squeezed, will find it difficult to discharge. I agree that there is an Act of 1970 which enables them to provide free telephones, or bedside telephones, where there is a case of special need, which is the kind of person the noble Lord, Lord Ferrier, was contemplating. But we know the situation of local authorities at the moment, and it is quite clear that it will take a lot of pleading to get cheap or free telephone installations for old people, or people with special needs.

I think it is one of the virtues of a debate of this type, even if it is within a rather closed circle, that I personally, and I am sure other noble Lords, learn a great deal which we did not know before; for example, the overnight telegram service. May I make a summing-up point? We have been asked to ensure that the Post Office should reduce their installation and standing charges. This goes beyond the Government's formal powers, but these matters are regularly discussed with the Post Office and, not least, when there is a Parliamentary interest. I know that tonight's debate has not passed unnoticed. Because the Post Office are now run as an industrial corporation, regional directors are given powers of discretion which they are free to exercise if they so wish. Where there are sound reasons for reducing connection charges temporarily, where there is spare capacity, the Post Office have given regional directors discretion in this respect. They can, in fact, reduce the installation charges, and we are trying to see how far this power can be reasonably extended.

The Earl of KINNOULL

My Lords, the noble Lord has just made a very important statement about the discretion which the Post Office have. Can he say how often it has exercised this discretion, and in what cases? I hope that they are the special needy.

Lord WINTERBOTTOM

No, my Lords. While I had been given a certain amount of advance warning, I cannot give any precise figures. I understand that cuts in installation charges have taken place in Wales, I believe in East Anglia, and in some parts along the Scottish Border. But if I have misinformed the House, I will correct what I have said. However, no such reductions in charges have been introduced for Scotland, where the noble Lord's interest lies. He may find that information of use.

Lord FERRIER

My Lords, I look forward to seeing vans with "Install an instrument now" on them.

Lord WINTERBOTTOM

My Lords, that is another point. I am trying to help the noble Lord, but he is pulling my leg. I understand that the waiting list for the installation of telephones, which we all agree was once very long, has now been shortened considerably and is at its shortest for several years. How short is "short" is like "how long is a piece of string?" But the list is shorter than it has been for many years, and we are getting on top of the problem.

Baroness WARD of NORTH TYNESIDE

My Lords, I thank the noble Lord for allowing me to interevene. Can he tell us something about the special needs? Is there a similar programme in every area, or does one area give more help than another area? I should like to know what the special needs are. Can the noble Lord give me some examples?

Lord WINTERBOTTOM

No, my Lords. There are two problems. The regional director has an apparatus, a telephone network, which is not overloaded. If, in his commercial judgment, by lowering the charge for installing telephones he can get more installed and used, his income from the operational charges will increase. It lies within the commercial judgment of the regional director. The other aspect of the matter is: who judges whether an individual needs a lifeline telephone? That must be the Department of Health and Social Security, through its local offices.

All I can say is that I think that the point made by the noble Lord, Lord Redesdale, is absolutely right: because the Post Office are becoming increasingly profitable—part of the profits must wipe out the losses of the past, although we are now getting back to commercial pricing—they will have some money in the till. At present they should perhaps take a greater measure of social responsibility than local authorities which are under very severe pressure, in my view quite rightly, from central Government to reduce their overall expenditure.

That is all I can say. If noble Lords wish me to do so, I can enter into a rather interesting argument on the economics of free telephones, but at this hour of the night I do not think that your Lordships would wish it. Once again may I thank the noble Lord for raising the issue. I hope that the one point I made to him will be of help in his battle for cheaper installations in Scotland.