HL Deb 15 June 1981 vol 421 cc493-523

Further considered on Report.

Lord Morris moved Amendment No. 27: Page 18, line 14, leave out subsection (2).

The noble Lord said: My Lords, the purpose of this amendment is to delete Clause 15(2) from the Bill. This is one of the clauses which is new—new, that is to say, from the point of view of the equivalent section of the 1969 Act. I move it to eludicate from Her Majesty's Government the reason for this clause. Your Lordships will remember that Clause 15(1)(b) says that: (1) A licence may be granted— … (b) with the consent of, or in accordance with the terms of a general authority given by, the Secretary of State, by the Corporation, …". I have difficulty in understanding why the separate power is required for the Secretary of State to direct the corporation to grant licences when the Secretary of State himself can grant a licence by virtue of the provisions of Clause 15(1)(a). The only reason I can see in which such circumstances could arise is where the Secretary of State, rather than take upon himself the responsibility to grant the licence, chooses that the corportion shall grant the licence. The problem there is that it is that much more difficult to get to the decision-making process of the corporation than it is necessarily with the Secretary of State. With that, I beg to move Amendment No. 27.

Lord Lyell

My Lords, as I am sure my noble friend will be aware, the relaxation of the monopoly is indeed the policy of the Government. We believe that it is right that the Secretary of State, who is answerable to Parliament, should be responsible for granting the main licences in the strategic sense that will make a reality of liberalisation and, indeed, which will define its principal directions. Most of these cardinal licences will be general licences that are granted under this clause and others which will give everybody the right to run a system of a specified kind.

Through his statutory consultations with BT, my right honourable friend the Secretary of State, as well as holding wider consultations with other interested bodies, will be able to ensure that these relatively few key licences are not in any technical respect defective. But of course from time to time there may well be cases of individual licence applications that are very important, for example, as precedents in the carrying forward of the main thrust of this Bill in liberalising the monopoly. Individual licences are more likely to involve quite detailed technical considerations that only the network operator can deal with satisfactorily.

If and when that is the case, Clause 15(2) will allow the Secretary of State to take responsibility by directing BT to license, while at same time allowing BT to deal directly with any special terms that would call for detailed and specialised knowledge of the network or indeed of BT's operating methods. Clause 15(2) neatly combines the Secretary of State's responsibility for overall policy with a sensible method of dealing with technical detail, however fine. I hope that that brief, but not too detailed, explanation may go some way towards helping my noble friend.

Lord Morris

My Lords, that has, indeed, gone a long way towards helping me. May I, on a point of further clarification, ask my noble friend whether it is envisaged that the licence granted by the Secretary of State, by virtue of Clause 15(1)(a), will be of only a general character, and that a licence granted through the direction mechanism, by virtue of Clause 15(2), will be of a more specific or detailed nature?

Lord Lyell

My Lords, we should need to take great care in defining the areas. My noble friend talked about general areas in respect of Clause 15(1)(a), and areas of a more detailed kind under Clause 15(2). The wording in subsection (2) seems to overlap a licence covered by either subsection (1)(a) or subsection (I)(b). Therefore, given this overlap of possible details, some licences might go into a reasonable amount of detail and yet, at the same time, cover fairly wide generalities in a certain sector of communication, be it voice, speech, light and so on.

I do not think that an analysis of subsection (1) or subsection (2) would necessarily lead into the classifications mentioned by my noble friend. Probably, there could be other divisions. But I wonder whether we could consider exactly what has been said by my noble friend. I undertake to be expeditious and to be in much closer and swifter touch with him on this point than I was the last time, when I promised my noble friend that I would inform him. I certainly undertake to attempt some analysis of the problems of Clause 15(1)(a) and Clause 15(2) before the next stage.

Lord Morris

My Lords, I am most grateful. With that, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

7.55 p.m.

Lord Morris moved Amendment No. 28: Page 18, line 43, leave out subsection (7).

The noble Lord said: My Lords, at the Committee stage I argued in some detail about my concern that a licence granted under this clause could not be impugned on the grounds that it was granted neither with the consent of, nor in accordance with the terms of a general authority given by, the Secretary of State. My concern centres around the fact that subsection (7) vitiates the corporation's duty under Clause 15(1)(b) to seek the consent of, or to look to the terms of a general authority given by, the Secretary of State prior to the granting of a licence.

In answer to that, my noble friend Lord Lyell said, among other things: I am advised that the main object of subsection (7) is to ensure that a licensee will not be penalised for any illegal acts done wittingly or unwittingly by British Telecommunications".—[Official Report, 18/5/81; col. 790.]

The only observation one could possibly make on that is: I should think so, too!

But my major concern, which was not really dealt with, although my noble friend Lord Lyell promised to return to it at a later stage, was where a licence could be granted by the corporation to favour one private sector company to the disfavour of its competitors, without the consent of, or within the terms of a general authority given by, the Secretary of State. This could happen and, for the harmed or wronged company to have no recourse to the licensing authority—namely, the corporation—could constitute a very serious wrong. My Lords, I beg to move.

Lord Lyell

My Lords, it is clear from my noble friend's speech, and from various comments of other noble Lords, that there is still some misunderstanding about the exact scope and purpose of subsection (7). I hope that, in the course of my brief remarks, I shall be able to alleviate some of the concern that is felt about this subsection.

First, the subsection in no way gives to British Telecom, or to any of its licensees, carte blanche to disregard the rights of any third party or its other legal obligations or duties. If British Telecom were to infringe some such rights in issuing a licence, the aggrieved party would be fully able to explore the usual and proper legal remedies in the normal way, just as it would be able to do at the moment.

All that subsection (7) seeks to do is to protect the licensees of British Telecom against the unlikely event of a licence being granted by BT ultra vires, without the consent of the Secretary of State. Were this to happen, it would render the licensees unwittingly open to charges of infringing the monopoly and thus to criminal sanctions. It would plainly be unsatisfactory if BT's licensees could be put at even a slight risk of infringing BT's monopoly as a result of the fault of BT itself. The provision that we have included in subsection (7) enables licensees to operate without having to undergo the inordinate, lengthy and unnecessary delay involved in checking that the Secretary of State's consent had been given to the licence. The subsection can be found in exactly analogous form in Section 27(6) of the 1969 Act. We believe that subsection (7) of the Bill will be even more desirable in the future when we envisage greater competition being allowed under licences.

May I take this opportunity to stress and reiterate most strongly that the subsection in no way allows British Telecommunications to disregard its wider legal duties and obligations. I hope that this firm and categorical reassurance will go a long way towards clearing up any misunderstanding there may still be in my noble friend's mind and that, far more importantly, it will reassure him.

Lord Morris

My Lords, I am most grateful to my noble friend for his response. It goes further than a long way; it goes to the end of the road. Not only I, but many others who have been concerned about the subsection, will be most grateful to him for explaining it so clearly. With that, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 29, 30, 31 and 32 not moved.]

Clause 17 [Marking orders]:

8.4 p.m.

The Earl of Gowrie moved Amendment No. 33: Page 21, line 19, leave out from ("to") to end of line 20 and insert ("a fine").

The noble Earl said: My Lords, the House will recall that when we discussed the Bill during its Committee stage my noble friend Lord De La Warr tabled some amendments to remove the penalty of imprisonment from the offences in Clauses 17 and 18. At that time I promised the Committee to consider the point and to undertake consultations to see whether there were any wider policy implications which should be considered. I am very happy to say that I have done this. In the light of this wider consideration, I can now agree that imprisonment would not be an appropriate penalty in these cases. The penalty on indictment will therefore simply be an unlimited fine. I am most grateful to my noble friend for the great contribution which he has made. These Government amendments make the necessary changes. I beg to move.

Earl De La Warr

My Lords, I am sure that the whole House will be very grateful to the Government for having taken on board this point and for having moved the two amendments which were suggested at an earlier stage.

Lord Morris

My Lords, before we leave the amendment, may I ask my noble friend what precisely "unlimited fine" means? I was puzzled to see that there is no ceiling for the offence of conviction on indictment.

The Earl of Gowrie

"Unlimited fine" means a fine on which there is no limit.

On Question, amendment agreed to.

Clause 18 [Information etc. to be given in advertisements]:

The Earl of Gowrie moved Amendment No. 34: Page 22, line 12, leave out from ("to") to end of line 13 and insert ("a fine").

The noble Earl said: My Lords, this is consequential on the previous amendment.

On Question, amendment agreed to.

Clause 19 [Offences under sections 17 and 18 due to default of third person]:

The Earl of Gowrie moved Amendment No. 35: After Clause 19, insert the following new clause:

("Enforcement of sections 17 and 18

.—(1) A relevant authority shall have power to purchase apparatus, and to authorise any of their officers to purchase apparatus on their behalf, for the purpose of ascertaining whether sections 17 and 18 and orders made under those sections (in this section referred to as "the relevant provisions") are being complied with.

(2) Every local weights and measures authority in Great Britain shall have power to enforce the relevant provisions within their area; but nothing in this subsection shall be construed as authorising a local weights and measures authority in Scotland to institute proceedings for an offence.

(3) In this section "relevant authority" means—

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

The noble Earl said: My Lords, this new clause clarifies the means of enforcing the marking orders which will be made under Clauses 17 and 18 of the Bill concerning telecommunications apparatus. In general, these provisions are based on the corresponding sections of the Trade Descriptions Act 1968 which also contains a power to make marking orders enforceable by local weights and measures authorities. It is our intention that marking orders under the Bill should be enforced by local weights and measures authorities and this clause makes the necessary provisions. I beg to move.

Lord Ponsonby of Shulbrede

My Lords, the implications of this amendment, as the noble Earl said in moving it, are that local weights and measures authorities are to be the enforcement authority for Clauses 17 and 18 in respect of all apparatus, whether marked or unmarked. This implies the purchase and testing of equipment and the undertaking of prosecutions, all of which could be very costly for the local authority. No mention is made of any role for British Telecom. This placee additional duties on local authorities. There is no assurance that local authorities will receive any additional financial compensation as a result of having to carry out these duties. The public and British Telecom will expect the enforcement of these provisions by local weights and measures authorities to be properly carried out.

Unless local authorities have the additional financial resources available to them to carry out these duties, they will only be able to try to fit in this task with the other priorities which they have, including their mandatory duties, at a time when their resources are already overstretched and when authorities as a whole are under extreme pressure to reduce expenditure. Local authorities will no doubt have to decide what priority to give to this particular function. I hope that the noble Earl will be able to give a satisfactory assurance to local authorities.

The Earl of Gowrie

My Lords, I share the concern and desire of the noble Lord, Lord Ponsonby of Shulbrede, that local authoriies should not have placed upon them additional burdens at a time when we are anxious that so far as expenditure is concerned they should put their own house in order. We have therefore not thought it right to impose upon them a duty to enforce the order. We are confident that they will be able, and will wish, to take the steps which they feel to be necessary to enforce marking orders within their areas.

It will continue to be the duty of local weights and measures authorities to enforce the comparable provisions of the Trade Descriptions Act where that is relevant to telecommunications; but in practical terms we envisage that the corporation itself will participate in the enforcement of these matters and will cooperate with local authorities and relieve any burdens on them. For instance, I would expect British Telecom to undertake any testing which may be necessary and, if need be, to give evidence on technical matters. So I believe that, in practice, marking orders will have a substantial deterrent effect on the supply of wrongly marked or unmarked equipment, that enforcement will be a co-operative venture which is not enforced on local authorities and that in fact it will prove to be no very great burden upon them.

On Question, amendment agreed to.

[Amendment No. 35A not moved.]

Lord Winstanley had given notice of his intention to move Amendment No. 36: After Clause 20, insert the following new clause:

("Duties of Secretary of State

.—(1) The Secretary of State shall institute and publish formal procedures for carrying out the functions reserved to him under sections 6, 12, 15 and 16.

(2) The said procedures shall include formal provision for consultation on a regular basis between representatives of the Corporation, business and domestic users of the Corporation's systems, suppliers of telecommunications systems and services, and others with relevant interests or experience to the said functions.").

The noble Lord said: My Lords, Amendment No. 36 stands in the name of the noble Lord, Lord Lloyd of Kilgerran, and myself. In the absence of my noble friend, who I understand is either in Hong Kong or on his way to your Lordships' House therefrom, may I say a brief word. If my recollection is correct, I understand—

The Earl of Gowrie

My Lords, I am most grateful to the noble Lord but in fact we debated this clause with Amendment No. 15 and I think I had the consent of the then leader of the Liberal Benches that we should do so. Does the noble Lord wish to debate it again?

Lord Winstanley

My Lords, I am grateful to the noble Earl. That indeed was my understanding of the situation and I am glad to have it confirmed. Having had it confirmed, the amendment is not moved.

[Amendment No. 36 not moved.]

Clause 21 [Deemed contracts in certain cases]:

Lord Mottistone moved Amendment No. 37: Page 24, line 15, leave out ("in pursuance of a scheme made under section 20").

The noble Lord said: My Lords, at the Committee stage I tabled an amendment (No. 96) which covered this general area, and my noble friend Lord Trefgarne was very helpful and drew my attention to Clause 21 of the Bill. He pointed out that schemes, as they are called, had been exempt from contractual liability in the past but were now not going to be so exempt, and he said, at col. 801 of Hansard of 18th May: Generally speaking, almost all Post Office telecommunications services are supplied under schemes". That is absolutely true in questions of total numbers but in fact there are some services and associated apparatus, such as wide band and international and digital circuits rented to business which are not in schemes, and it is very important that these kinds of contracts—which is what they are—should have the same exemption from Clause 22 of the Bill as the other schemes which are mentioned in Clause 21.

So I should be grateful if my noble friend could tell me whether it is known to him that there are these very important provisions on equipment and circuits which fall outside the scheme's arrangement. It is in this area that delay in provision can be very costly to a company—and we are really talking only about big companies in this area—that has invested in a complete new communications system if it cannot then exploit it for lack of circuits, and it has no redress. That is the point. This is the exemption, that the Post Office and British Telecom remove the redress. Fundamentally, those areas in which British Telecom does not face competition now are precisely those areas in which the customer needs protection because he has no alternative supplier.

At a later point in his speech my noble friend Lord Trefgarne referred to the right balance between the rights of the individual subscriber and the costs to users in general. I would suggest to my noble friend that this is a misleading way of putting things. We are really talking about business errors. If none of us made errors there would be no problem over contracts and later actions. The costs of all business errors are either charged to the customers in general or to the owners in general. Such errors should be firmly dealt with by good management.

For example, I should like to ask my noble friend (although I do not suppose it would be fair to expect him to reply immediately) how much it would cost to pay the penalty of one year's failures and delays in British Telecom. It would be a very interesting thing to look into. So I think it would be only fair if the amendment that I propose, which leaves out the particular reference in Clause 21 to "in pursuance of a scheme" so that the provision then becomes general, covering all services that the corporation may supply, would be a very fair one, because it allows for the special cases to which I have been referring. I beg to move.

Lord Morris

My Lords, while I support entirely the spirit behind the amendment moved by my noble friend, I am a little puzzled as to the necessity for it because, if a customer of British Telecommunications were to enter into a contract outside their scheme, I imagine that the normal common law of contract would prevail and the necessity for this amendment would become doubtful, although I may be quite wrong in saying that.

Likewise, as regards the terms and presumably the customer problem—although I have a great sympathy with this amendment—there is a problem whereby a customer or putative customer of British Telecommunications is under the sanction that if BT are the only people who can provide this particular service or part of the service, if they write into the contract a term which says that there is no recourse under that contract, the customer will be forced to accept that.

Lord Mottistone

My Lords, before my noble friend sits down, perhaps I may draw his attention to Clause 22(1), which was the one I sought to amend before, which gives the let-out to British Telecom.

Lord Morris

My Lords, that is in tort, not in contract.

Lord Lyell

My Lords, before I attempt to reply to the amendment which has been moved by my noble friend Lord Mottistone, or indeed attempt to put any quantity upon the penalty for the total delays in one year of British Telecom—or words to that effect; we shall certainly be able to garner it from the Official Report—before I attempt any such Herculean intellectual feat, I am sure the House would find it helpful if I were to try first to explain the intention which lies behind Clause 21.

Under the 1969 Act, the Post Office was able to provide its services under schemes made under Section 28 of that Act. In view of the little legal tussle—or dare I call it a dialogue?—between my two noble friends, Lord Mottistone and Lord Morris, as to what was contract and what was tort, I am instructed that these schemes in Clause 21, which indeed are made currently under Section 28 of the 1969 Act, are not contracts and that therefore the Post Office had, and still has, no contractual liability. Generally speaking, almost all Post Office telecommunications services are supplied in this way—namely, under schemes—and Clause 20 gives to British Telecom a similar power to supply its equipment under schemes.

Clause 21(1) of the Bill deals specifically with the supply of apparatus and deems supply of apparatus under schemes to be contractual. This process ensures that the subscriber has all the same rights as under a contract. It also means that, broadly speaking, British Telecom will be supplying apparatus under the same legal framework as its competitors. This change, which is a significant improvement—and we believe a very welcome improvement—in the rights of customers, has been welcomed both here and in another place. Without Clause 21(1), schemes would continue to be non-contractual as far as the supply of apparatus is concerned, as for everything else. So we regard it as essential that the clause contains a reference to schemes. But there is no need for there to be any reference in this clause to any other form of supply by British Telecom, since this would automatically involve a contract of one kind or another and British Telecom would have the normal contractual liability in the same way as anybody else.

I hope this explanation has been of some assistance to my noble friend Lord Mottistone. I hope it has also been of some help to my noble friend Lord Morris. I am sure the House would welcome that I should read carefully the particular questions posed to me by my noble friend Lord Mottistone and that I should reply to him as expeditiously as far as I can, but I would warn him and the House that such figures as he has asked me to supply are very broad ranging and probably extremely difficult to obtain with any reasonable degree of accuracy; but, nevertheless, as in all cases, I will do my best.

Lord Mottistone

I must thank both my noble friends, particularly my noble friend Lord Lyell, for his closing remarks. Of course nobody will ever supply them to him; it would not suit them to do so. But it would be very nice to get the figures. I really think, if I may speak on behalf of my noble friend Lord Morris, that they have both told me the same story; that is, that a contract which is not in a scheme is a contract. That is very useful to have in print. I thank my noble friends very much and beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos 38 and 39 not moved.]

Clause 22 [Exclusion of certain liabilities in tort in relation to telecommunications]:

Lord Morris moved Amendment No. 40: Page 25, line 5, at beginning insert ("unreasonable").

The noble Lord said: My Lords, I think it would be for the convenience of the House if I were to speak to Amendments Nos. 40 to 44 en bloc because the same principle attaches to all five amendments. Your Lordships will be aware that there is a duty cast upon the corporation by virtue of the provisions of Clause 3 to supply telephone services as satisfy all reasonable demands for them. The intention of this amendment is so to apply the same test of reasonableness for actions in tort. I believe this is extremely important because this would be setting the corporation on precisely the same basis as competitors in the private sector. I do not need to develop this because I know your Lordships are more than well aware of the damage that can be done to companies and to individuals by unreasonable delay or unreasonable failure, interruption or suspension of the service to the customer by the corporation.

If I may move forward to the unreasonable omission from the directory for use in connection with the telecommunication service, perhaps I can illustrate this with a case I was closely connected with. A company involved in what are commonly called "car telephones" was refused an entry in the Yellow Pages directory by the Post Office on totally spurious grounds, which I will not go into. Although the customer wanted it under this heading, which is perfectly proper—most people think of car telephones as just that—there was a feeling that the Post Office were determined to make life as difficult as possible for their competitors. It is for this sort of practice that I believe the test of reasonableness would be extremely useful. I beg to move.

Lord Lyell

My Lords, the effect of the five amendments which have been spoken to by my noble friend would, I understand, be to give to British Telecom an exemption from liability in tort only for unreasonable actions which are covered by Clause 22(1). Thus presumably if British Telecom caused a person loss or damage when acting reasonably in such cases it could be held liable. I appreciate that the tort of negligence, which is the one we are mainly concerned with in this case, is primarily concerned with what we call unreasonable actions. It has been described somewhat irreverently as "leaving undone those things which ought to have been done and doing those things which ought not have been done". I am sure that will help my noble friend Lord Morris; it is beginning to help me anyhow. However, I am advised that this is not invariably the case; my quotation does not always match up with what the noble Lord seeks to apply in Clause 22(1). Therefore, we think it would be very strange to give British Telecom an exemption for its unreasonable actions but not for its reasonable ones, however remote the chance might be of a case brought in this latter example.

I did point out earlier in Commitee that the amendments of my noble friend would lead to great uncertainty in the operation of Clause 22 since a court would have to decide whether or not a particular act, or indeed a failure to act, was unreasonable. I hope that will be of considerable help to my noble friend. Certainly I think we should not go too far in further definitions of the law of tort. We should wait for my noble and learned friend who is normally upon the Woolsack.

Lord Morris

My Lords, I think that is very wise advice. With that I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 41 to 44 not moved.]

8.29 p.m.

Lord Winstanley moved Amendment No. 45: After Clause 22, insert the following new clause:

("Telecommunications Authority

.—(1) The Secretary of State shall establish a public authority to be called the Telecommunications Authority hereinafter referred to in this Act as "The Authority".

(2) The Authority shall be responsible to the Secretary of State for the management of the telecommunications environment of the British Islands including the performing of the functions of the Secretary of State under sections 6, 12, 15 and 16 of this Act and shall publish an annual report in relation to its activities.").

The noble Lord said: My Lords, in the absence of my noble friend Lord Lloyd of Kilgerran, I beg to move Amendment No. 45, which, as your Lordships will see, consists of a new clause which seeks to do little, save to establish a public authority to be called the Telecommunications Authority and set out certain functions which that authority must fulfil.

Then it requires that authority to publish an annual report in relation to its activities. My recollection is that this is a matter which was ventilated in Committee and I do not think it would serve the interests of your Lordships' House if I went over the argument again. What I think might be helpful to the House would be if we were to hear the arguments or comments of the noble Earl who is to reply to this second bite of the cherry, if I may so put it. I beg to move.

The Earl of Gowrie

My Lords, I appreciate the position which the noble Lord, Lord Winstanley, is in. I believe the noble Lord, Lord Lloyd of Kilgerran, is even now winging his way towards us from the far East. It may be that my remarks will percolate through the scaffolding and reach him in one way or another sooner or later. This amendment is in fact quite plainly a narrow variation of one introduced by the noble Lord, Lord Lloyd, in Committee.

The noble Lord has sought to make this amendment less detailed, perhaps in an attempt to reduce the functions of the body which he proposes should be created although I am surprised to see that the noble Lord considers that the new body should also exercise the Secretary of State's powers under Clause 6 of the Bill. In fact this is a departure from the noble Lord's suggestion and it is not acceptable to the Government. The powers in Clause 6, such as those concerning the control of British Telecom's investment programme and the powers to give directions in the interests of national security or in relations with other Governments, are surely not those which would be practical or appropriate for the Secretary of State to delegate to a Quango. I do not base my opposition to the proposed clause on those grounds alone, but rather to the wider principle that the amendment advocates an additional layer of decision-taking and one that can only be thought necessary if the new regime is to be based on regulated competition, whereas the Government want to see as much competition as possible. Our proposals go a long way to complete deregulation without the intermediate of regulated competition.

The logic of that is that the trend is of rapidly increasing momentum in the United States, where the concept of regulated competition originated. In our judgment it will be only a matter of time before, in this industry, that tendency also gains momentum in Europe. Our proposal would put this country in the lead in Europe and fully on a par with the world leaders in the field. Also, the implication is that any regulatory effort required would be relatively small. Much liberalisation can be achieved through the handful of strategic general licences, which is at the core of the mechanics of the Bill and as your Lordships' House is aware, our view is that this responsibility should rest firmly with the Secretary of State, who is also responsible to Parliament.

We had quite a debate in this House earlier this afternoon regarding the various safeguards which exist. The same is true of the continuing regulatory licensing effort that will be required, which the department has the capacity to deal with and which has access to expert and technical advice. I have tried to look sympathetically at the noble Lord's amendment, as I did in Committee, but he proposes expensive additional machinery—certainly out of kilter with general Liberal Party positions on bureaucracy—and I hope that he, or the noble Lord, Lord Winstanley, by proxy, will be willing to withdraw the amendment.

Lord Morris

My Lords, is my noble friend the Minister confident that the Department of Industry will have the necessary know-how, and expertise to fulfil its highly onerous function by virtue of this Bill? At the same time, may I also ask my noble friend whether serious consideration has been given to moving the regulatory department from the Home Office to the Department of Industry? I believe such a move is absolutely vital because, with the integration of the information technology and telecommunications technology, proper and careful planning of the electromagnetic spectrum is essential. I would most humbly suggest that the Cinderella of the departments of state—namely, the Home Office—is the wrong girl, so to speak, to be looking after the increasingly important question of the radio spectrum.

The Earl of Gowrie

My Lords, I am not sure that I think of my right honourable friend the Home Secretary as Cinderella; it is not an easy role for him to take.

Lord Morris

My Lords, I meant that the Home Office was the Cinderella of the departments of state, in that everything is thrown at it.

The Earl of Gowrie

My Lords, my comment still stands. For the duration of the Government my right honourable friend is the Home Office and, as I said, I feel that Cinderella is a curious role in which to cast him. In fact it is the radio regulatory matters which are for the Home Office, and they exercise those powers very well. Our intention is that the bulk of the regulatory work will be achieved under general licences, as I said. I do not think my noble friend need be too alarmed about the issue of whether departments of state have sufficient expertise. Departments of state are long-used to dealing with specialised areas of activity in the economy. My own department, the Department of Industry and the Department of Energy, all have their own boffins, if I may put it that way. It is perfectly possible to sub-contract work to boffins outside one's own department where necessary, and so I do not believe there need be any great anxiety on that score.

Lord Winstanley

My Lords, I have no way of knowing whether my noble friend Lord Lloyd of Kilgerran will find the noble Earl's answer wholly acceptable and satisfactory, but I am bound to say that having read carefully the noble Earl's answer on a previous occasion, at Committee stage, it seems to me that he has gone a little further on this occasion and into other matters. It may well be that my noble friend will not wish to pursue the matter further. The noble Earl the Minister was entirely right when he said that noble Lords on these Benches are wholly opposed to unnecessary, inefficient and cumbersome bureaucracy—whether it be the Cinderella in the Home Office or the ugly sisters in the Department of Industry, I do not know. We certainly accept the noble Earl's remarks and we are glad to see unnecessary bureaucracy disappearing. I believe my noble friend felt that bureaucracy would be under more direct public control were it vested in an authority of the kind proposed in his amendment rather than being hidden away somewhere in the labyrinths of Whitehall. However, having heard the noble Earl's answer, which I am sure my noble friend will wish to study, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

8.38 p.m.

Lord Ponsonby of Shulbrede moved Amendment No. 46: Page 26, leave out lines 7 to 9.

The noble Lord said: My Lords, Clause 23(1) imposes upon British Telecom the general financial duty at least to break even. This is a common provision in nationalised industry legislation, and a corresponding duty is presently in force for the Post Office under Section 31 of the Post Office Act 1969. Further to this general duty, Clause 23(2) allows the Secretary of State to set specific financial targets in relation to different assets and activities of the corporation.

Provisions concerning the setting of financial targets for nationalised industries have become increasingly common in recent legislation. For example, Section 14 of the Iron and Steel Act 1975 gives the Secretary of State the power to determine the rate of return on net assets as a whole which the British Steel Corporation would be required to achieve. Section 5 of the Petroleum and Submarine Pipe-Lines Act 1975 contains a much wider power which requires BNOC to perform such financial duties as the Secretary of State may specify. Similar powers were incorporated in the Aircraft and Shipbuilding Industries Act 1977.

The proposals in this Bill differ from the precedents I have mentioned in that they are more specific. Clause 23(2)(a) provides that different targets may be set at different times for different activities and assets. This power is sufficiently wide to enable the Secretary of State to interfere with British Telecom's pricing structure—for example, by specifying an especially high rate of return for a particularly competitive activity. British Telecom would naturally be opposed to any such interference. This amendment deletes that paragraph.

We believe that the provisions of this paragraph are unprecedented and give the Secretary of State very considerable power—too much power—and he could use the paragraph to meddle in British Telecom's pricing policy if, for example, British Telecom came through fair but effective competition to dominate a particular sector or a competitive market.

We appreciate the Government's concern to stop British Telecom pricing competitive activities unfairly by, for example, cross-subsidising from monopoly revenues. Having said that, this paragraph as it stands gives the Secretary of State powers way beyond those powers which he needs. As I have said, the paragraph enables the Secretary of State to interfere in the day-to-day running of British Telecom. One would have thought from the remarks which the noble Earl made earlier this evening that that was against the Government's philosophies. I hope that the noble Earl will be able to clarify how the Government intend to use these powers. I beg to move.

Earl De La Warr

My Lords, I have assumed, like the noble Lord, Lord Ponsonby of Shulbrede, that the purpose of this particular paragraph was to make sure—and to do no more than make sure—that the corporation did not make use of its monopoly activities to subsidise its competitive activities. In so far as that is its sole purpose, I am perfectly happy with it and I think that it is quite fair.

Having said that, I must say that any noble Lord who has worked in a large and diverse corporation like British Telecom will know that never is there a time when one part of the business is not in trouble—it might be the overseas business, it might be Prestel or it might be a number of things. When that happens it is the duty of the board of directors—and they are a body of gentlemen who, I think, have not been referred to enough during the course of our debates—to decide whether they are able to put it right; and, if they think that they can put it right, whether they are justified in subsidising what they must regard as the temporarily unprofitable side of the business until it gets on its feet again.

Therefore, let us not use the word "cross-subsidisation" in too pejorative a way. If the directors conclude that it cannot be put right, then they sometimes have to take the chopper to it. The reason I am saying this is that I am so anxious to hear from the Government that they do regard the board of directors as people who have that sort of duty, just like the board of directors in any other company whether it be public or private. So if my noble friend could help us by confirming that there is a narrow but wholly legitimate reason for this paragraph and that in general terms it is not the Secretary of State's intention to go beyond that, then I think that there are many of us who would be extremely relieved.

The Earl of Gowrie

My Lords, perhaps I may take up first the point made by my noble friend. It obviously is necessary to have powers to set different targets for BT's monopoly and competitive activities. However, it did prove extremely intractable to us to draft the clause in such a way that the powers were explicitly limited to that. Ministers have told the corporation that they have no intention of using powers in this way.

From what the noble Lord, Lord Ponsonby, said, he supports the general principle of Government setting the financial target for nationalised industries and, since it is a fundamental part of the relationship between Government and industry, of giving the target a statutory basis. So there is no difference between us. Of course, there is no difference also between my noble friend and myself in that we want the board of directors to behave like a board of directors and we do not want to interfere in their detailed management decisions. But we cannot pretend that we are in anything other than public sector monopoly territory and as noble Lords know, wherever they stand on these particular industries, that does give Parliament, the Secretary of State, the Government, the Treasury and so on—but essentially the Government and Parliament—a special relationship with these industries. One can try to leave them to manage their affairs as if they were private sector industries and, indeed, that is what we seek to do. However, one cannot get away from the fact that they are providing great public services and also they are subject to Government guarantees in financial terms which are inherently and essentially different from the conditions under which private sector industry operates.

The noble Lord's amendment questions the need for the powers to extend to setting different targets for different parts of the corporation's business. It seems to us that the obvious example where this would be necessary would be those parts of the business which are open to competition. It is by no means clear that the same financial target as applies to the corporation's monopoly functions, should also apply to its competitive activities. They are inherently different in kind. Indeed, it might be that no statutory financial target would be appropriate for this part of the business.

We therefore are inexorably drawn by logic to the fact that flexibility is needed and the flexibility needed would be removed if this amendment were made. I cannot feel that a restriction to a single financial target, applicable to the whole business, would either be helpful to the Government with the necessary eye that has to be kept on broad external financial limits or to the hoard of directors of BT. I hope, therefore, that the frank explanation that I have given of the need for the powers will satisfy the noble Lord and that, if satisfied, he will feel able to withdraw the amendment.

Lord Ponsonby of Shulbrede

My Lords, I should like to thank the noble Earl for his explanation and for his indication of how he would see the Secretary of State using his powers. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

8.50 p.m.

Clause 25 [Borrowing powers of the Corporation and its wholly owned subsidiaries]:

Lord Glenamara moved Amendment No. 47: Page 27, line 1, leave out ("temporarily").

The noble Lord said: My Lords, three amendments go with this amendment. The noble Lord, Lord Lyell, quoted the 1662 Book of Common Prayer, Cranmer's book. I am glad that he quoted Cranmer's book and not the Alternative Service Book. We come now to a group of amendments on cash limits, on which I am afraid that the Government have erred and strayed from their ways like lost sheep and followed too much the devices and desires of the Treasury. The purpose of our amendments is to give the Government a chance to return to the fold of sanity and common sense.

The amendments seek to remove the distinction between temporary and long-term borrowing and to alter the requirement from that of gaining the consent of the Secretary of State for Industry and the approval of the Treasury to a process of consultation with the Treasury. Essentially, these amendments seek to give a much freer hand to BT to determine where it should raise finance.

The noble Earl, Lord Gowrie, occupied a lonely position during the Committee stage debate on the cash limits issue. On 19th May, he defended cash limits on three main grounds: first, that if British Telecom was able to borrow freely, it would crowd out or divert funds from the private sector. The Wilson Committee Report is the most recent of a number of reports that have stated that there is no shortage of investment finance for projects with an adequate rate of return. Even the reduction of BT's real rate of return target from 5 per cent. to 4 per cent., announced on 2nd June, is virtually double the average rate of return of 2 per cent. for British business quoted in a recent Bank of England report. So there is not much substance in the first point made by the noble Earl.

Secondly, he argued that the national and international money markets perceive: nationalised industry borrowing as carrying an implicit Government guarantee". Therefore, presumably, Governments have to control borrowing. To the extent that this statement is true, the difficulty surely is self-created by the Government's insistence on the idea of a notional guarantee. So far as I know, no other European Government has adopted a cash limits policy on telecommunications finance or, to my knowledge, classes investment by nationalised industries as public investment. That was the second reason which the noble Earl gave.

Thirdly, he maintained that the sheer size and recent increase in BT's investment proves its adequacy. The fact is, that we are still investing less per head of population in telecommunications than almost any other competitor country. At constant prices, current investment has merely returned to the level it achieved in 1973–74. This is too important an issue to be sacrificed to ideological fixations.

The noble Earl, Lord Gowrie, was the sole contributor to the debate during the Committee stage to defend the Government's policies—the only one in the whole Committee. Increased investment in Telecom is vital for our industrial future. At the moment, the customer is paying the price for that investment through increased prices—there were two major increases last year; a policy which has, in the depths of the recession, proved self-defeating, as disconnections are increasing. If the Government believe in letting market forces rule—and they are always saying that they do—they should let the market determine the size of BT's investment by letting the market judge just how willing it is to lend to British Telecom.

The House of Lords' existence is justified by its supporters in terms, first, of its ability to put common sense before party dogma and, secondly, its capacity to introduce essential improvements to poorly drafted Bills. On both of those grounds, I would commend this amendment to your Lordships. We believe that there can be no clearer case for revision by a revising Chamber than to support an amendment on the issue of cash limits. With the exception of Treasury Ministers reading gloomily from Great George Street briefs, no volunteer can be found to support the absurd doctrine of cash limits, which is preventing so much essential investment in publicly-owned industries such as British Telecommunications.

I do not believe that we need to run through all the arguments again which we deployed in Committee. It is surely sufficient to say that, although there are widely different opinions on many other aspects of the Government's policy towards telecommunications, on the issue of cash limits all those involved in the industry stand united.

In an earlier amendment, I quoted the letter from the managing director of Plessey's. The Government expect telecommunications manufacturers to be able to respond to the challenge of competition in the terminal apparatus markets and to be able to resist the very real threat of a flood of foreign imports, as I said on the last amendment that I moved. But while industry is seeking to gear itself to this competition it is being subjected to considerable uncertainty as regards its major customer. The recent NEDO publication, to which I have already referred, pointed out that order books for certain types of telecommunication equipment had been more than halved as a direct result of the restrictions on BT investment imposed by the Government's doctrine of cash limits.

We know from earlier debates in Committee and on Second Reading that we have the support of all parties in the House of Lords on this issue. We also know from earlier debates that despite that support, some noble Lords feel reluctant to follow the logic of their thinking into the Division Lobby. But, I would ask them to think again. An amendment forced on the Government on this issue would clearly demonstrate to the Government and to the country the strength of feeling about the absurdity of current Government policy on this point. I have no doubt that the noble Earl, Lord Gowrie, will suggest that the amendment would leave the Bill in an inappropriate form. If that is so, then it is purely a technical matter and the Government could correct any technical problems through tabling amendments in another place. Doubtless, in his response, the noble Earl will suggest that it would be particularly inappropriate to amend the Bill at this time; first, because the Government have recently offered some concession by announcing an increase in BT's external financing limit for the current year, and, secondly, because the matter is now under consideration both by a Select Committee of another place, and by a NEDO committee, and we are glad that it is. However, in our view, neither of these two reasons has much force.

Although it is true that on 2nd June, the Government announced a £200 million extension on BT's cash limit, this still leaves British Telecom £120 million short of the resources it requires even to maintain the investment programme at current levels. In practice, no one who works in the industry is in any doubt that we should be investing very much more than we are. Moreover, above all, what is required both by the manufacturers and by British Telecom is financial stability and certainty. Financial stability will enable BT to plan its investment sensibly, and to maintain its orders from the manufacturers without continual chopping and changing in order to meet the financial problems caused by current Government policy. Again I would remind noble Lords of the letter from the managing director of Plessey.

It is the uncertainty caused by the present situation, the requirement continually to revise investment plans, that is the most damaging feature of the cash limit policy so far as the manufacturers are concerned. The uncertainty is not overcome by short-term concessions, welcome as the extra £200 million was this year. It will only be overcome, my Lords, when British Telecom is free to determine its investment programme on the basis of commercial considerations and commercial judgments.

We on our side of the House welcome very much the fact that NEDO and the Select Committee have chosen to examine the issues posed by cash limits on nationalised industries. Both inquiries provide overdue recognition of the relevance of these problems to our economic development over the next decade. But what better opportunity could be provided to this House to set a lead to both the NEDO Committee and the Select Committee? Both committees are considering the issue as it affects nationalised industries in general.

Of course, these industries vary a great deal. They range enormously from the profitable, like British Telecom, to the unprofitable; from those that provide the seed corn of future industrial development, like British Telecom, and those that are to a substantial degree relics of the past industrial pattern. All, for a variety of reasons, must in my view, and the view of my party, be publicly owned. And yet the priority we should accord to them varies. But the one area of total unanimity is the industry we are considering today. It is an industry which is highly profitable and which is in the forefront of advanced technology.

No commentator, so far as I am aware, can or has resisted, or failed to acknowledge, the strength of the case for substantially greater investment in British Telecom. Indeed, it is the absurdity of the restrictions on BT's investment that has led many commentators to consider the broader issues of cash limits on nationalised industries generally. This is an issue on which, for once, we find ourselves united in this House, so far as one can judge from the Committee stage. I say united because I venture to suggest, as I did last time, that if the noble Earl, Lord Gowrie, were speaking from his own convictions, he too would speak in favour of the amendment we are putting forward today. If the House of Lords has a role it is in expressing a unity of purpose, a commonsense consensus of the kind that has emerged over cash limits, and so I beg your Lordships to take the opportunity to pass this set of amendments. I beg to move.

9.4 p.m.

The Earl of Gowrie

My Lords, it is nice to imagine that we all enjoy unanimity about external financing limits. I can console the noble Lord, and indeed the House, by saying that the Government will unconditionally welcome any valid means of raising extra finance for telecommunications investment outside public sector borrowing requirement constraints. It is not good enough, however, for the noble Lord, Lord Glenamara, to say that the Government are entwined in dogma, or doctrine over this issue, because the mechanisms, and indeed the whole philosophy of external financing limits, were introduced into our system by the previous Government, of which Lord Glenamara was a distinguished Member and is indeed associated, I suppose, more than with any other single individual, with his right honourable friend the former Chancellor, Mr. Healey. I do not think that, whatever our differences with Mr. Healey, we would accuse him of ideological fixations.

The fact is that Mr. Healey analysed, and successive Governments have had to analyse, that the scale of the operations of the public sector monopolies does give them a unique and curious position in this economy. We have gone over those arguments, and I do not intend to repeat them now. What I can do is to repeat my original remark that the Government will welcome a valid means of raising extra finance for telecommunications investment outside PSBR constraints, and indeed one of the central purposes of the kind of liberalising policies in whose direction we are taking a few first cautious steps this evening is to see that in the future more financing outside PSBR can be achieved.

The other thing that I would contest in the remarks made by the noble Lord is that it is true that we would like to see even greater investment in this sector—investment nearer, say, French and German levels. Nevertheless, since this Government have been in office we have increased in real terms, in constant prices, the amount of money available for the external financing limits in this field. It has been a steady increase, and the increase is planned to continue through to 1984. It is a substantial advance on the sums provided for by the previous Government, who indeed as part of their public expenditure cuts policy had to hit this sector, particularly the capital programmes, particularly hard.

An earnest of our intentions is that my honourable friend the Minister of State for Information Technology recently announced in another place that British Telecom's external financing cover for this financial year, for 1981–82, was to be increased by £200 million. That in a year when all EFLs are subject to considerable restraint is an earnest of the confidence we feel in this industry and its need to invest.

It is not the choice of this Government that British Governments have got into the relation with the public trading sector monopolies that they have. This was a system inflicted on our political economy by socialism, and it has borne a very heavy cost and made it difficult for such industries to behave as their modern managements would like them to behave. Part of the whole purpose, as I said, of our policy in this field is to try to chip away at this system, to liberalise it and get it more in line with the competitive demands of a late 20th century economy rather than an economy run on principles arising out of injustices or whatever in the 19th century. It is a slow and intractable business, and I recommend the Bill and its provisions as a substantial step forward in the direction which, rather curiously, the noble Lord, Lord Glenamara, himself appears also to desire.

Lord Underhill

My Lords, what disappoints me about the noble Earl's reply is something I have mentioned on more than one occasion; namely, that I am certain he believes in a mixed economy, though one would never believe that from the arguments he frequently adduces from the Government Front Bench. I believe in a mixed economy, which means there must be efficient, properly run national industries—that is the phrase to use—and therefore we are playing a different ball game from the one the noble Earl outlined. First, we have the need to develop British Telecom's national network to the utmost extent and we must enable BT to compete on fair commercial terms with the on-moving private sector. That requires finance. We must also, as my noble friend pointed out, be in a position to help manufacturers of equipment who need the stability and long-term basis of orders which can be given only by BT, and BT can give that only if they have the necessary finance. Dare I also mention that we are in the ball game of having 2½ million unemployed? Any investment which is directed towards constructive industry can only be to the advantage of the whole nation.

I repeat what has been said often before, namely that BT needs investment of £2.2 billion a year, and about 90 per cent. of that is found from its own resources. How many other businesses would think it right to provide nearly 90 per cent. of a £2 billion investment programme a year out of its own resources? It is a great credit to a national industry that it is able to do it. I am wondering whether, even at this stage, we can begin to think what difference there is between an industry of this kind—which is efficient and able to pay its way and pay the interest on any financing it borrows—and the same industry under private control.

The Earl of Gowrie

My Lords, as the noble Lord put the question squarely to me, perhaps I might answer it now. The essential difference is that it is not so much that Governments, whether the previous or present Government, make the judgment about the financing of nationalised industries. It is that the money markets do, and the money markets judge that financing in this sector on this scale carries an explicit Government guarantee. If I or my right honourable friend the Chancellor were to announce to the world that the Government were abolishing a guarantee in this area, the noble Lord, Lord Underhill, would probably find that the financing for such industries was very much harder to achieve. That really is the nub of the issue. It has not changed between this Government and their predecessor, and when the noble Lord makes political points, which it is perfectly fair for him to do, he should also recognise that continuity.

Lord Underhill

I was not aware that I was making any political points, my Lords. I thought I was putting forward a sensible and logical argument free of party politics. I must draw attention to some earlier comments of the noble Earl in a similar context. The only reason I am on my feet now is that, unfortunately, this issue came up at about 9.30 at night in Committee and it is coming up again late tonight, yet this is the most crucial issue facing the development of British Telecom.

What did the noble Earl say on that occasion? I quote from col. 813 of the Official Report of 18th May: I got the feeling that what he"— he was referring to me— really wanted was nationalisation without tears. We on this side of the Committee are not over-enamoured of nationalisation"— that surprises me!— but in the provision of great public services we can often see its logic and indeed we have kept more of the special privilege or the monopoly power of British Telecommunications than some of our own supporters would have liked. But one does pay for having a nationalised industry …". Well, frankly, my Lords, surely that is not the language that we ought to be using. It is not a question of whether we are to pay for a nationalised industry, for bailing someone out. This is a matter concerning a great public national industry, and it is surely in the interests of the whole nation that we help British Telecom, first, to develop its own network, and, secondly, to help to develop the position of the private manufacturers who rely on BT. Surely that is the way that we ought to be looking at it, and I hope that the noble Earl will reconsider what he has said—

The Earl of Gowrie

My Lords, I am most grateful to the noble Lord for giving way. With the leave of the House, before the noble Lord sits down I wish to mention that in the passage that he quoted from my speech in Committee he was making an error of interpretation which might have been due to a fault of mine. I did not mean it as a complaint that one has to pay for investment. Of course investment has to be paid for, and money has to be found. When I spoke about the noble Lord wanting nationalisation without tears, I was saying that where a nationalised industry whose financing, whether current or capital, carries implicit Government guarantee, one is in the territory of external financial limits, whether one likes it or not. That is the difficulty which successive Governments have had to face, and which no Government have yet found their way out of.

Lord Underhill

My Lords, I do not want to prolong the argument, but the noble Earl asked me to give way to him, and I should in turn like to ask what might have been the position of Rolls-Royce?—an undertaking which was in a more difficult position than the one that we are now considering. I do not think that the argument we are now hearing about obtained then.

Lord Morris

My Lords, at the Committee stage of the Bill on this issue I raised a point which, no doubt unwittingly, was not taken up by my noble friend Lord Gowrie. That was not really surprising since the point was not put in interrogative form. I have a suspicion that I am being very naive about it, but, very simply, it is as follows. In the private sector when a private corporation guarantees a loan, the guarantee does not form any part of the monetary measure of that company. It is included solely by way of a note on the balance sheet. I have never quite been able to understand why in the accounts of nationalised industries a guarantee, expressed or implied, has to be included as part of the PSBR. I should be most grateful for an explanation.

Lord Winstanley

My Lords, in discussing this group of amendments so ably and persuasively spoken to by the noble Lord, Lord Glenamara, and so eloquently, though briefly, supported by the noble Lord, Lord Morris, I wonder whether at the same time we may discuss Amendment No. 51. It deals with precisely the same point, and appears in the names of my noble friends Lord Lloyd of Kilgerran and Lady Seear, as well as my name. Amendment No. 51 does not perhaps go the whole way, as do certain of the amendments of the noble Lord, Lord Glenamara, but it goes part of the way, and so perhaps it would be convenient to the House if we were to get rid of Amendment No. 51 at the same time as we deal with the other group of amendments, since it deals with precisely the same point.

The point in question was raised on Second Reading by my noble friend Lord Byers, the Leader of the Liberal Party in your Lordships' House. He spoke very persuasively and very powerfully on the importance of the telecommunications industry being able to raise its finance, its capital, on the market in the ordinary way. The main argument advanced against that point by the noble Earl tonight, as well as at Second Reading and in Committee, has always been the same; namely, that if a nationalised industry is allowed to raise capital on the market, somehow investors know that behind the industry stand the Government. I do not think that potential investors would be greatly reassured by such a statement. I believe that their confidence is in the telecommunications industry. There is an enthusiasm to invest. This is not for a moment regarded as risk capital. It is regarded as an area in which the City would like to invest, given the opportunity.

I am not a Keynesian economist; indeed, I am not an economist at all. I am not a Keynesian of the kind who thinks that at the moment Britain can spend her way out of all her problems. However, I believe that it is desperately important that we pour investment into certain areas, in particular into the science-based industries and into industries such as telecommunications. By doing that we can certainly do much to avoid in future many of the difficulties that we now face.

I really think that we must get away from this preoccupation with the fact that the ability to raise finance on the market, which Telecom undoubtedly could, somehow is a factor in the public sector borrowing requirement. I do not see how that can be; I do not see why it need be. The noble Lord, Lord Glenamara, said that this is a matter on which there is agreement in all parts of your Lordships' House. There is not necessarily agreement in all parts of all parts of your Lordships' House, but I think the noble Earl would certainly accept that there are noble Lords of all political persuasions and all political viewpoints who take the view which has been expressed by the noble Lord, Lord Glenamara, that the restraints must now be removed.

I merely say to the noble Earl that the last of these amendments, which I should like to be considered along with these others, which I am sure would save your Lordships' time, perhaps goes less far than any of the others. It leaves the Secretary of State with the power to intervene and prevent developments of this kind, and merely takes out the words "and the approval of the Treasury". It removes what we perhaps might regard as the nigger in the woodpile, if that is not considered a racial and wholly improper remark at the moment. I hope that perhaps the noble Earl can respond to that amendment.

The Earl of Gowrie

My Lords, if I may answer the very direct question put to me by my noble friend—

Lord Ponsonby of Shulbrede


The Earl of Gowrie

My Lords, I was asked a question by my noble friend and I sought to answer it, but if your Lordships do not wish me to then I shall not.

Lord Ponsonby of Shulbrede

I think it is "by leave", probably, my Lords.

The Earl of Gowrie

My Lords, by rising to my feet I am seeking the leave of the House. I will sit down if the leave is not granted to me. I think the answer to the very straightforward question put to me very clearly by my noble friend Lord Morris could also answer the general points made by the noble Lord, Lord Winstanley. The difficulty is that behind private sector borrowing there is the assumption that competition or investment can end in failure. Behind public sector borrowing that assumption does not exist, and that quite radically alters the character of the borrowing. In my contention it alters the character of one's decisions at a very micro-level in private life. If you get money from somebody who cannot go broke as against money from somebody who can, the terms and conditions of your borrowing alter in degree; and, of course, it is a very much larger degree where Governments are concerned.

That said, I do not find the position wholly satisfactory. What I find unsatisfactory is that these conditions are imposed upon Ministers by the nature of the nationalised sector itself. I go back to my previous remarks to the noble Lord, Lord Underhill, that there may he very good and justifiable arguments for having a large public sector, but if you do have a large public sector you have to pay for it by submitting yourself to the constraints of the fact that the Government stand behind the borrowing. If you can in some way demolish the public sector, or have less of it, you have fewer of such constraints on the borrowing. That is what I meant by saying that you pay for this privilege or for this burden, according to which way you look at it, of having a large public sector.

But I would try to give a ray of light, if you like, to the House. In my original remarks I said that if the Government can find ways, if there are ways, for financing in the public sector generally—I am not just talking about British Telecom—to be done outside public sector borrowing funding guarantees, we would greatly welcome them. I hope that with that asurance, and in view of the fact that we have been over this argument in great detail at Committee stage, noble Lords will not seek to press their amendment.

Lord Glenamara

My Lords, I thank the noble Earl for what he said in his opening reply and for what he said just now. I imagine he chose his words very carefully, as it is a matter of some significance. We shall look at what he said very carefully indeed, but it looks to me as though it might be the first slight sign of a thaw in the Government's attitude; so I am grateful to him for that. The noble Earl quoted the Labour Government. Of course there is a very great difference. We are now in the depths of a major recession. In these circumstances, it is surely quite ridiculous to limit profitable investment in an industry in this arbitrary way—and it is arbitrary—simply because it is publicly-owned. The limitation does not apply to a privately-owned industry. If this were lifted, a major contribution could be made to creating jobs and, as the noble Lord, Lord Winstanley, has said, to creating the kind of infrastructure that this country, a highly-developed technological society, will need when we come out of the recession.

The noble Earl talked about the guarantee, but this is purely academic in the case of an industry like British telecommunications. There is not the slightest possibility of British Telecom reneging on borrowing in the market. Therefore, the Government's notional guarantee in the case of an industry like this—not in the case of some industries, I agree, but in the case of this industry and one or two others—means nothing at all. There is no earthly reason why BT, like any other major profitable industry, should not be free to determine its own investment programme and to borrow freely where it wishes. The noble Earl appeared to be saying that external financing limits are an essential characteristic of a publicly-owned firm. Is that what the noble Earl was saying?

The Earl of Gowrie

Broadly, my Lords.

Lord Glenamara

Then, my Lords, will the noble Earl reply to the question that I asked him in the last debate and tell me about Cable and Wireless, with which this Bill deals? They are 100 per cent. owned by the Government, but external financing limits do not apply to them. They are free to borrow wherever they can get the best terms in the world, and they do so successfully—in this country, in Hong Kong, in the Gulf or anywhere else. That is a public wholly-owned industry in the same kind of business as British Telecom but external financial limits do not apply, and rightly so. There is no problem about raising money.

I am grateful to the noble Earl for what he has said but we feel so strongly about this matter that I am afraid that my noble friends and I must carry it to a Division.

9.27 p.m.

On Question, Whether the said amendment (No. 47) shall be agreed to?

Their Lordships divided: Contents. 27; Not-Contents, 60.

Ardwick, L. Howie of Troon, L.
Bishopston, L. [Teller.] John-Mackie, L.
Boston of Faversham, L. Northfield, L.
Brooks of Tremorfa, L. Peart, L.
Caccia, L. Pitt of Hampstead, L.
Collison, L. Ponsonby of Shulbrede, L.
David, B. [Teller.] Rochester, L.
De La Warr, E. Ross of Marnock, L.
Elwyn-Jones, L. Shackleton, L.
Glenamara, L. Stedman, B.
Stewart of Alvechurch, B. Underhill, L.
Stewart of Fulham, L. Wells-Pestell, L.
Stone, L. Winstanley, L.
Tordoff, L.
Airey of Abingdon, B. Loudoun, C.
Ampthill, L. Lyell, L.
Avon, E. Macleod of Borve, B.
Belstead, L. Mansfield, E.
Boardman, L. Marley, L.
Boyd of Merton, V. Monk Bretton, L.
Brabazon of Tara, L. Morris, L.
Bridgeman, V. Mottistone, L.
Brougham and Vaux, L. Murton of Lindisfarne, L.
Chelwood, L. Newall, L.
Cockfield, L. Rankeillour, L.
Colville of Culross, V. Redesdale, L.
Craigmyle, L. Reigate, L.
Croft, L. Sandford, L.
Cullen of Ashbourne, L. Sandys, L. [Teller.]
de Clifford, L. Savile, L.
Denham, L. [Teller.] Sharples, B.
Dormer, L. Skelmersdale, L.
Dundee, E. Stradbroke, E.
Eccles, V. Strathclyde, L.
Elliot of Harwood, B. Swinton, E.
Ferrers, E. Trefgarne, L.
Fortescue, E. Trenchard, V.
Gowrie, E. Trumpington, B.
Grimston of Westbury, L. Vaizey, L.
Hailsham of Saint Marylebone, L. Vaux of Harrowden, L.
Vickers, B.
Hive, L. Vivian, L.
Inglewood, L. Ward of Witley, V.
Kinloss, Ly. Westbury, L.
Long, V.

Resolved in the negative, and amendment disagreed to accordingly.

[Amendments Nos. 48 to 51 not moved.]

9.35 p.m.

Lord Morris moved Amendment No. 52: Page 27, line 20, at end insert ("and where consent or approval by virtue of the provisions of paragraph (2)(b) above is withheld reasons for withholding such consent or approval shall be given in writing by the Secretary of State to the Corporation").

The noble Lord said: My Lords, I have the feeling that by moving this amendment I am whistling in the wind: for, in my experience, the one thing that Ministers and Departments of State do not like doing is justifying their decisions. It is rather like putting oneself on a ducking stool or putting one's own head into a pillory. In worshipping at the altar of "more open government" I believe this amendment would prove of value to the Government, for what it does fundamentally is to support the Conservative Government's fundamental tenet that it is not the business of Government to be in business. Where the Treasury in practice effectively takes a business decision by withholding consent to a loan for British Telecom—

The Earl of Gowrie

My Lords, I am most grateful to my noble friend for giving way. I am very much under the impression that this was debated, because the substantive issue is the same and was indeed brought to a decision following the last debate. We are still on the external financing limit territory, are we not?

Lord Morris

My Lords, as I understand it, this amendment raises a very different principle: that is that Her Majesty's Government must give reasons to the corporation as to why they withhold consent. It is slightly different from the previous amendment, but I believe that is the case. I must repeat what I said: if Her Majesty's Government take a business decision on behalf of the corporation, I think it is only fair that they should give reasons to the corporation for the withholding of consent for external borrowing by British Telecom. With that, I beg leave to move the amendment.

Lord Lyell

My Lords, we believe this amendment proposes that in the event of the Government going so far as to withhold their consent or approval from British Telecom's application for any long-term finance in the money markets, the Secretary of State should write to British Telecom, giving the reasons for a particular decision. If any amendment is required—and I would remind the House, as I am sure my noble friend is aware, that the Government have recently announced an increase in British Telecom's external financing limit for 1981–82—this is agreed with the business as a matter of general policy, not as a special decision on whether a particular loan will, or will not, obtain Government consent.

The general guidelines on the type of borrowing which a nationalised industry, or something like British Telecom, may undertake—for example, relating to the permitted sources of short-term funding—are likewise settled as a matter of general policy. When nationalised industries feel that a certain aspect of Government policy on their borrowing is causing them difficulty, discussions are held to see whether any changes can be made.

Any industry such as British Telecom is aware of which loan applications are likely to prove acceptable to the Government, and thus can avoid the embarrassing and disruptive situation which would arise if it submitted a loan application which the Government felt obliged to refuse. The amendment of my noble friend is unnecessary since, in practice, the reasons for the Government's policies are explained to the nationalised industries, and it would not help the process of explanation which needs to be carried out before any formal loan applications are submitted.

Lord Morris

My Lords, I am most grateful for my noble friend's explanation. Not for the first time, I have learned something tonight. I was under the impression that loans were applied for at the Treasury on a piecemeal basis. I did not realise that the general blanket control was handled in that way. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 30 [The Corporation's accounts and audit thereof]:

Lord Morris moved Amendment No. 53: Page 31, line 24, leave out ("161(1)(a)") and insert ("13").

The noble Lord said: My Lords, I think it would be convenient if I spoke to Amendments Nos. 53 and 54 together. I spoke to these amendments at a very late hour in the Committee stage, and I am sure that my noble friend and your Lordships are aware of the point underlying them. As I have no desire to delay your Lordships any further, I beg to move.

Lord Lyell

My Lords, it was I who explained to my noble friend at that late hour in our deliberations that Section 13 of the Companies Act 1976 does not supersede or in any way replace Section 161(1)(a) of the Companies Act 1948. What that section in the 1948 Act does is to define a person who is qualified for appointment as auditor of a company as, a member of a body of accountants established in the United Kingdom and for the time being recognised for the purposes of this provision by the Secretary of State". Section 13 of the 1976 Act lists the bodies of accountants now recognised by the Secretary of State for the purposes of Section 161(1)(a) of the 1948 Act. That is all that Section 13 is designed to do. I hope that that further clarifies the position for my noble friend. Fortunately, the hour is not so late as it was when we discussed this subject at the last stage.

Lord Morris

My Lords, my noble friend is certainly right on that last point. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 54 not moved.]

Clause 32 [Power of the Secretary of State to make orders about pensions]:

The Earl of Gowrie moved Amendment No. 54A: Page 32, line 24, after ("of") insert ("any").

The noble Earl said: My Lords, with the leave of the House, I should like to speak to Amendments Nos. 54A and 54B, as well as Amendments Nos. 55A to 55F and 77A and 77B en bloc. This is a series of amendments to Clause 32 which clarify the drafting of the pensions clause in a number of ways. It may be helpful, therefore, if we take them all together.

The House will be aware that my honourable friend the Minister of State for Industry and Information Technology has been consulting the Post Office, the trustees of the Post Office Pension Fund and the unions concerning the future of the fund. These consultations are now almost complete, but the Government want a little time to reflect on the issues and do not propose to take any hasty decisions. I gave the House an assurance during Committee that no final decision will be taken without full consultation. I should like to repeat that assurance on this occasion.

The House may be aware that the Post Office Board has recommended that the existing pensions fund should be split into two, with one fund for each corporation, but that the trustees and the unions would prefer the single fund to be maintained. A number of compromise solutions have also been suggested which involve varying degrees of separation, including the possibility of two sets of trustees or two schemes but enjoying a common investment fund. I think it will be readily agreed that the Bill should not exclude the possibility of implementing any solution which had the support of all the parties concerned or which was felt to be the most acceptable compromise between them. These amendments are designed to achieve this end. They are necessarily a complex set of amendments, but I should like to stress again that many of them are merely to ensure that all possible solutions to the pensions fund debate and issue can be implemented under the Bill. The Government have not yet come to a conclusion. We intend to proceed with the maximum degree of consent. I am sure your Lordships will agree that it would be wrong for the drafting of the Bill to rule out particular solutions before any such decisions have been taken. I hope therefore that the House can accept this package of amendments.

Lord Ponsonby of Shulbrede

My Lords, the noble Earl has explained very fully this package of amendments. This makes it unnecessary for me to make the speech which I was going to make on my Amendment No. 55. That amendment was tabled specifically for the purpose of finding out what is the present state of the Government's thinking with regard to the splitting of the fund. I am glad to know that the Government are still maintaining a very flexible attitude and that they intend to move with the fullest support and co-operation of all those involved.

On Question, amendment agreed to.

The Deputy Speaker (Lord Ampthill): My Lords, before calling Amendment No. 54B, I have to point out that if it is agreed to I cannot call Amendment No. 55.

9.47 p.m.

The Earl of Gowrie moved Amendment No. 54B:

Page 32, leave out lines 27 to 32 and insert— ("(b) the transfer of rights and liabilities as respects any persons to whom this section applies from trustees of a Post Office scheme to trustees of a Corporation scheme; (bb) the requiring of persons who are both trustees of a Post Office scheme and trustees of a Corporation scheme to hold the whole or any part of a pension fund held for the purposes of the Post Office scheme partly for those purposes and partly for the purposes of the Corporation scheme; (bc) the transfer to investment trustees appointed both in pursuance of a Post Office scheme and a Corporation scheme of the whole or any part of a pension fund held for the purposes of either of those schemes or partly for the purposes of one and partly for the purposes of the other; (c) the apportionment between trustees of a Post Office scheme and trustees of a Corporation scheme of a pension fund held for the purposes of the Post Office scheme or partly for the purposes of that scheme and partly for the purposes of the Corporation scheme;").

On Question, amendment agreed to.

The Earl of Gowrie moved Amendments Nos. 55A, 55B, 55C, 55D, 55E and 55F:

Page 32, line 34, leave out ("that") and insert ("the 1969")

Page 32, line 37, leave out ("this") and insert ("that")

Page 32, line 38, after ("supplemental") insert ("or incidental")

Page 32, line 39, at end insert ("any statutory provision, any contract of employment and")

Page 33, line 2, after ("payment") insert ("or purposes connected with the payment")

Page 33, line 10, after ("ceases") insert ("or ceased").

On Question, amendments agreed to.

Clause 52 [Documentary evidence as to sums due for services]:

Lord Morris moved Amendment No. 56: Page 43, line 8, after ("services") insert ("or under an agreement with respect to telecommunication services provided by it (subject to any term of the agreement to the contrary)").

The noble Lord said: My Lords, this is purely a drafting amendment. I believe that it aids the Bill in that it clarifies and shortens Clause 52. Your Lordships will be aware that there is no substantive change to the meaning of this clause, with one minor exception. By drafting effectively subsections (1) and (2) in this way, the phrase "subject to any term of the agreement to the contrary" attaches to both a certificate under a scheme under Section 20 and to an agreement with respect to telecommunications provided other than under a scheme under Section 20. I do not think that this does any harm at all. As I see it, there is no reason why British Telecommunications should not wish to write this presumption of documentary evidence out of their scheme under Section 20, should they so wish. I believe that this is a very minor improvement to the Bill. I beg to move.

Lord Lyell

My Lords, I am sure the House will appreciate the efforts of my noble friend to add clarity to the Bill tonight. Of course we accept my noble friend's wish that the Bill should include nothing that is excessive and indeed that he wishes to cut any unnecessary verbiage from the Bill, and, above all, to see that it is as short and as understandable as possible. But I hope my noble friend may be able to accept that his drafting is not adequate in this particular case. The proviso, "subject to any terms of the agreement to the contrary", has to qualify the verb "shall" as in line 14 on page 43 of the Bill and the amendment simply cannot be construed in a way that is consistent with what is in the Bill.

Although it might be possible to combine the subsections 52(1) and 52(2) we believe that the outcome would be more than a little clumsy and, above all, more difficult to understand and I am afraid that would vitiate the laudable efforts of my noble friend to see that the Bill is clearer than he believes it to be at the moment. I hope my noble friend will accept that the Bill as it stands is as clear as we can make it.

Lord Morris

My Lords, I am grateful to my noble friend for that explanation and I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 57 not moved.]

Clause 54 [Power of local authorities to contribute towards new offices or facilities]:

Lord Lyell moved Amendment No. 58: Page 44, line 2, after ("authorise") insert ("the giving of an undertaking as respects").

The noble Lord said: My Lords, this is a brief drafting amendment. Subsection (1) of the clause provides for the giving of undertakings by local authorities which can recompense British Telecom's losses in connection with facilities which it provides and not for local authorities to authorise British Telecom to provide those facilities. The amendment corrects the drafting of subsection (3) accordingly. I beg to move.

On Question, amendment agreed to.

Clause 56 [Interpretation and extent of Part I]:

Lord Lyell moved Amendment No. 59: Page 45, leave out line 10.

The noble Lord said: My Lords, I hope it will be for the convenience of the House if I speak also to Amendment No. 82. These are two simple drafting amendments which move the definition of the word "pension" from Clause 56, interpretation and extent of Part to Clause 84, the general interpretation. This is necessary because the term "pension" appears also in Clause 75. I beg to move.

On Question, amendment agreed to.

Clause 57 [Powers of the Post Office]:

The Deputy Speaker: My Lords, Amendment No. 60 should read "Page 46, line 4, after ("For") insert ("paragraphs (a) to (d) of").

Lord Lyell moved Amendments 60–64:

Page 46, line 4, after ("For") insert ("paragraphs (a) to (b) of")

Page 46, leave out lines 6 and 7 and insert ("paragraphs")

Page 46, line 21, after ("authorities") insert—

("(1A) At the end of that subsection there shall be inserted the words")

Page 46, line 28, at end insert—

("(1B) After that subsection there shall be inserted the following subsection").

Page 47, line 31, leave out ("This section") and insert ("Subsections (1) and (2)").

The noble Lord said: My Lords, I wish to point out first of all that there is a small printing error in the Marshalled List. I apologise to the House for this. I understand that Amendment 60 should read "after ("For") insert ("paragraphs (a) to (d) of"). Granted that, I hope it will be for the convenience of the House if I move Amendments Nos 60 to 64 en bloc and speak also to Amendments 97 and to 99 to 102 inclusive.

This group of amendments, which appears numerous and possibly complicated, performs, as I am sure the House will accept, a simple and, I hope, a useful function. At present, Clause 57 sets out the powers of the new Post Office and this is due to come into operation on the appointed day after the passage of this Bill. This is clearly the case because, by virtue of Clause 1(2), British Telecom will not take on its full powers until that day. But the Post Office has notified us that it would like to take advantage of its new power to provide counter services for nationalised industries before that date. Therefore these amendments provide this particular power contained in Section 7(1)(f) of the 1969 Act as inserted by Clause 57(1) of the Bill tonight. This power will come into effect at Royal Assent. I am sure the House will agree that the Post Office should be allowed to avail itself of its new power as it wishes at the earliest opportunity. I hope, therefore, the House will support this vast block of amendmens. I beg to move.

Lord Ponsonby of Shulbrede

My Lords, I welcome the tabling of these amendments and I am only sorry that the Government have not been able to see fit to extend the range of counter services which the Post Office could provide to the private sector as well as to the nationalised sector.

On Question, amendments agreed to.

Clause 59 [Redistribution of property, rights and liabilities among wholly owned subsidiaries]:

Lord Lyell moved Amendments Nos. 65 and 66:

Page 49, line 19, after second ("to") insert("a transfer by or"). Page 49, line 20, after ("as") insert ("a reference to a transfer by or").

The noble Lord said: My Lords, I spoke to these amendments when I moved Amendment No. 7 earlier this afternoon. I hope it will be for the convenience of the House if I move Amendments Nos. 65 and 66 together. I beg to move.

On Question, amendments agreed to.

Clause 65 [Exclusive privilege of the Post Office with respect to the conveyance etc. of letters]:

The Earl of Gowrie moved Amendments Nos. 67 to 69:

Page 55, line 1, leave out ("Part") and insert ("section and section 66— correspondent", in relation to a letter or other communication, means the sender or the addressee; employee", in relation to a body corporate, includes any officer or director of the body corporate and any other person taking part in its management, and "employer" and other cognate expressions shall be construed accordingly;")

Page 55, line 7, leave out ("the sender or the addressee") and insert ("either correspondent")

Page 55, line 14, leave out ("Post Office Acts") and insert "1953 Act, the 1969 Act or this Part").

The noble Earl said: My Lords, Amendments Nos. 67 to 69 are formal drafting amendments. I beg to move.

On Question, amendments agreed to.

Lord Lyell

My Lords, I understand it has been agreed through the usual channels that this might be a convenient place to adjourn consideration of the Bill on Report. I see my noble friend, who will have further information on this.

Lord Sandys

My Lords, I think this would be a convenient moment to adjourn the consideration on Report. I beg to move.

Moved accordingly, and, on Question, Motion agreed to.