British Telecommunications Bill

HL Deb 12 May 1981 vol 420 cc461-551

4.2 p.m.

House again in Committee.

Clause 2 [Powers of the Corporation]:

Lord Morris moved Amendment No. 3: Page 2, line 21, leave out ("and data processing") and insert ("carriage of non-voice transmission").

The noble Lord said: I believe it would be to the convenience of your Lordships if I also spoke to Amendments Nos. 15, 57, 58 and 134, which also stand in my name; these are all consequential on this amendment. We now come to Clause 2, which is concerned with the powers of the corporation, and the whole of this clause has virtually been lifted from Clause 7 of the Stonehouse Act, the Post Office Act 1969. I make this point not because of the fact that it agrees so well with the Stonehouse Act of 1969, but to draw attention to those areas in which it differs. The major substantive difference between Clause 2 of the 1981 British Telecommunications Bill and the Stonehouse Act of 1969 is the inclusion of the words "and data processing services".

During the Second Reading debate on this Bill my noble friend Lord Trefgarne referred to a statement which I had not in fact made. He then said: The Government's policy is that British Telecoms should indeed be free to compete in the provision of telecommunications equipment and services, provided that such competition is on a fair basis".—(Official Report, 27/4/81, col. 1087.) That is not the same thing as saying that they should be free to enter into the other field of data processing, which has nothing whatever to do with the carriage of information. In support of that policy, he went on to draw comfort from the report of the Advisory Council of Applied Research and Development (ACARD in shorthand) which recommended that British Telecommunications should be free to supply terminal equipment and information technology services for use with the network. That indeed is a recommendation. They go into the fields of the processing of the information which the public switch telephone network might be used to carry.

I should like to ask my noble friend whether they go further and support the ACARD report when they say that British Telecommunications should be free to supply this equipment without having exclusive right to do so; in other words, is it the Government's intention, in offering a general licence, that they will erode the provisions in the Bill whereby British Telecommunications have a sole monopoly over the supply and maintenance of end user equipment?

The other point behind the thinking of this amendment is this. On the admission of British Telecommunications themselves, it appears to me, and indeed to many other people, that British Telecommunications in the future are going to have a great deal of their work cut out with regard to the public switch telephone network alone, without having their minds diverted by the supply of equipment which the private sector could so easily, and I suspect more efficiently, supply. Indeed, they themselves have said that the development of the network is the core of their strategy. All their plans depend in some way on expanding, enhancing and exploiting the network and this will continue to dominate the investment programme for the foreseeable future. They admit that 70 per cent. of connections still go through Strowger exchanges, a system invented some 90 years ago, and that many of these exchanges have been using the same equipment for 30 or 40 years. Again, they admit the shortcomings of the cabling and state that they have a great deal to do with regard to updating the cabling by the use of fibre optics. Rather coyly British Telecommunications go on to say, There is a lot of work to be done if we are to modernise and improve our services". That is an enormous understatement. If Her Majesty's Government wish to maintain British Telecommunications and not to be party to bringing it down, I suggest they place it in a position whereby they can enhance the work they have done over so many years and be very careful in encouraging them to diversify their work. I beg to move.

The Earl of Gowrie

I am grateful to my noble friend for the way in which he has moved this amendment, and, if I may say so, he did it with great clarity and expressed his concern in a way that brought it home to all of us. I am also grateful to him for agreeing to take with this amendment his comparable amendments to Clauses 3 and 10. I should like to follow suit and deal with all these at the same time, if I may.

The issue is essentially whether British Telecommunications should be able to provide data processing services as well as the main telecommunications network. The Government have made their policy on this quite clear. We wish to see a lively and vigorous British Telecommunications and we do not wish to limit its operations in those areas which are clearly related to its main business. Where it competes with the private sector it must do so on a fair basis, and this must necessarily exclude the use of its monopoly resources to cross-subsidise its competitive activities. The need to ensure that accounts make it clear when such cross-subsidisation occurs is one reason for requiring British Telecommunications to act through subsidiaries when it competes with the private sector.

However, there can be little doubt that telecommunications and data processing are increasingly drawing together and I cannot believe that it would be in the interests of British Telecommunications or of the country as a whole to prevent the corporation from providing data processing services to others. Information technology must include the ability to process data and to provide the services to others, although I can assure my noble friend that British Telecommunications will only have a monopoly of the prime telephone instrument and all other terminal equipment will be open to competitive supply.

However, in the case of the existing system the Post Office already provides data processing services. For instance, it provides some data processing services in connection with cargo handling at Heathrow. That and other contracts have been won by the Post Office in competition and I certainly see no reason why the successor corporation, why British Telecommunications, should not carry on this part of the Post Office's business. The power to provide data processing services also covers part of the Post Office's activity in relation to the Prestel service and again I do not think it right that British Telecommunications should be prevented by statute—which would be the effect of my noble friend's amendments being accepted—from participating in areas which are clearly very closely related to its main telecommunications functions. Therefore, I hope that my noble friend can agree with this and withdraw his amendment; his corresponding amendments to Clauses 3 and 57 would fall at the same time.

My noble friend has tabled similar amendments to Clause 10. The references here to data processing are, however, necessary because they refer to the present activities of the Post Office. Whatever view the Committee might take of the scope of British Telecommunications' activities in data processing, it is surely right that the assets and liabilities associated with that part of the Post Office's business should be transferred to British Telecommunications rather than remain with the Post Office. I hope that my noble friend will agree to withdraw those amendments as well, particularly in the light of my repeated assurance that British Telecommunications will only have a monopoly of the prime telephone instrument.

Lord Morris

I am most grateful to my noble friend for that answer. It will not have been lost on him that the major reason for tabling this series of amendments was to probe for an answer from my noble friend with regard to this vitally important issue and to make absolurely clear what I believe has not been made absolutely clear in the past by his right honourable friend. I know that his answer will be read with immense interest not only by the industry but by the users and, indeed, by British Telecommunications itself. With those remarks, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

4.14 p.m.

Lord Morris moved Amendment No. 4: Page 2, line 23, leave out paragraph (6).

The noble Lord said: I beg to move Amendment No. 4 and I think that it would be convenient to the Committee if I were to speak also to Amendment No. 5 because the principle underlying these amendments is precisely the same. These amendments are probing in nature because I wish to ask my noble friend a question in relation to the powers and duties of the corporation under Clause 2(1). Clause 2(1)(b) provides that the corporation shall have the power inter alia: to perform services for the Post Office or any subsidiary of the Post Office". Under sub-section (1)(d) it says: '. to perform services for local authorities or national health services". Why is it necessary to have those two subsections in the Bill? Surely British Telecommunications is at liberty to provide telecommunications or data processing services to whomsoever it wishes or whomsoever chooses to have their needs supplied by it? As a rider to that question, do those two provisions restrict local authorities, national health service authorities or the Post Office to having only British Telecommunications supply them with their telecommunication and data processing needs?

The Parliamentary Under-Secretary of State, Department of Trade (Lord Trefgarne)

I think that my noble friend is saying, in proposing this amendment, that, if in this Bill we are separating the two businesses of posts and telecommunications, then it should not be necessary for one to continue to perform services for the other. However, I must disagree with my noble friend—

Lord Morris

With respect I was not suggesting that at all. If my noble friend had listened to me with more care he would realise that I have not said that at all.

Lord Trefgarne

If my noble friend will allow me to utter more than one sentence, I shall come in mere detail to the remarks that my noble friend offered in moving his amendment. The two businesses have provided certain services for each other for many years, in particular in the areas of vehicle maintenance, procurement and research and development. This provision in Clause 2(1)(b) and its parallel in Part II of the Bill, Clause 58, simply allows these services to continue. To agree to this amendment and thus prevent British Telecommunications from providing services for the Post Office would, I feel, lead to an unnecessary disruption of the activities of the two businesses. I hope that my noble friend will agree with me, at least that far.

Turning to the second amendment of this pair—and my noble friend did indicate that he was speaking to both simultaneously—I think that my noble friend feels that this second subsection is unnecessary given the general power in subsection 1(a) of this clause to provide telecommunications and data processing services. But if that is the case I must explain that subsection 1(d) is intended to cover services other than those covered in subsection 1(a)—that is, services aimed primarily at bodies such as the national health service authorities and not available to the general public. Such services will be performed under specially negotiated contracts. British Telecom already provides some such services under the equivalent section—Section 7(1)(d)—of what my noble friend has referred to as the "1969 Stonehouse Act"; for example, the procurement of hearing aids for the National Health Service which are, of course, small electronic devices, and an agreement to provide emergency power supplies for hospitals where again British Telecom has particular expertise. Clause 2(1)(d) allows those services to continue.

I think that this is a useful power for British Telecom to have. In providing these services, it will, of course be competing with the private sector and the national health service and local authorities will, of course, be able to choose whichever supplier they prefer. I hope therefore that the fears expressed by my noble friend will now be seen by him to be unfounded and I hope that he will feel able not to press these two amendments.

Lord Morris

I regret having to press this point, but the noble Lord, expressed my "fears"—I have no fears whatever. I wish that he had listened more carefully to what I said—indeed, exercised the same care which he exercised when he read from his brief. The only point that I was making was that if paragraphs (b) and (d) did not appear in the Bill at all it would make no difference whatever to the power, as I see it, of British Telecommunications to provide any services that it wishes to whomsoever it wishes. I am only asking him—and I will ask him again even more simply if I can—what is the necessity for having these paragraphs in the Bill? From the legal point of view I do not understand why it is necessary to have them in the Bill, particularly when one bears in mind that if they were not there it would make no difference whatever.

Lord Trefgarne

The legal advice from the draftsman is that the retention of these paragraphs is necessary in order, in particular, to enable British Telecom to perform the functions to which I referred in my earlier remarks. This is a rather detailed legal argument and I must tell my noble friend that I prefer the advice of my officials on the matter.

Earl De La Warr

This is rather a curious situation. I misunderstood the intention of my noble friend Lord Morris in just the same way as my noble friend Lord Trefgarne and the department, and I had prepared a defence to say that it was quite wrong that British Telecom should be denied the opportunity to compete in these fields. But it appears that the argument which my noble friend has adduced is exactly the opposite. Therefore, although it does no harm there, perhaps on the whole it ought to stay. Even from the second answer of my noble friend Lord Trefgarne it appears, if I may say so, that the department's brief was based on a misunderstanding of the intention of this amendment.

Lord Trefgarne

I am sorry if I misunderstood what both my noble friends put to me, but I remain convinced that the retention of these paragraphs, and in particular the powers that they clarify in the hands of British Telecom remain appropriate. I hope that my noble friend will see the merit of this argument and not press his amendments.

Lord Young of Dartington

I very much agree with what has been said by the noble Lord opposite. On grounds of common sense I do not understand why paragraphs (b), (c) and (d) are in the Bill at all. If the noble Lord says, as he has, that this is a matter for the legal draftsman, could he not at least give us a hint as to what the legal reason might be why these apparently superfluous paragraphs have to be included?

The Earl of Gowrie

I think that my noble friend has tried to deal with the matter, but perhaps it would help if I intervened here. We are dealing with fairly wide existing powers in respect of the Post Office, which are currently in the statute. Of course, one of the purposes of the Bill is to enshrine the separation and to vest powers in the new corporation. Therefore, I imagine that it was felt necessary to spell out again even the obvious in order that it would pertain to the new corporation. However, if the noble Lord on the Back-Benches opposite is not happy, I can certainly look further at the matter.

Lord Young of Dartington

My fear is that by spelling it out in this way it could be implied that there is some restriction on the powers of the corporation. The powers set out in paragraph (a) seem to be all that is needed and seem to be fully comprehensive. But then to go on from a statement of a comprehensive power to state more precise powers would, if anything, to an observer coming to this as it were from some distance, seem as though it was a restriction and that these extra powers were added only because there must be some other powers that were being excluded. So it does not seem to me to make any sense whatever.

The Earl of Gowrie

I can only say that I have tried to meet the objection made by the noble Lord, and that is the advice that we have received from parliamentary counsel. I do not think that the noble Lord has made out a case that these paragraphs should not be in the Bill, but, if he cares to table an amendment to remove them at a later stage, I shall of course look at the matter again.

Lord Morris

As f am sure my noble friend is aware, I do not table amendments lightly. There was behind this amendment a very serious intention to probe for an answer, and it would have been courteous to the Committee had my noble friend given a full reason for the necessity of including these paragraphs, notwithstanding the question—which has still not been answered—whether this restricts the Post Office, the local authorities or the National Health Service authorities from obtaining services for which they might go to British Telecom. Whether they have to go there or whether they can go outside f do not know.

Lord Trefgarne

My noble friend accused me of not listening to what he said. I do not think that he listened to what I said. I very clearly covered that point.

Lord Morris

I shall read Hansard carefully tomorrow, as I am sure my noble friend will realise. However, if my noble friend undertakes to have another look at this at the Report stage should this amendment be tabled, then I shall withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 5 not moved.]

4.27 p.m.

Lord Morris moved Amendment No. 6: Page 3, line 13, leave out ("requisite, advantageous or convenient") and insert ("expedient").

The noble Lord said: As your Lordships will be aware, this amendment is fundamentally a drafting amendment. Subsection (3) of Clause 2 of the Bill is, in a sense, a catch-all provision whereby: The corporation shall have power, for the purpose of securing the effective exercise of any of the powers conferred on it by the foregoing subsections…to do anything that appears to the Corporation to be requisite, advantageous or convenient for it to do". I am none too happy about the legal test of "expediency", but I am totally puzzled as to how one would legally test "convenience". I believe—and I may be quite wrong, and in so saying I seek in particular help from the noble and technically almost learned Lord, Lord Lloyd of Kilgerran—that the word "expedient", which has many precedents in modern Acts, covers the three tests of "requisite", "advantageous" and "convenient". With that, I beg to move.

Lord Trefgarne

As my noble friend has pointed out, his amendment would restrict the scope of activities that British Telecom could carry on to a narrower range than that now available to the Post Office. This is not the Government's intention and I believe that the present restriction on the scope of British Telecom's subsidiary powers—merely that they should he exercised only for the purpose of exercising its main powers under Clauses 2(1) and 2(2)—is sufficient. This already prevents British Telecom from diversifying outside those activities proper to it. In any case it would not always be easy to prove that a particular activity was expedient and this could give rise to uncertainty as to the practical extent of British Telecom's powers. I think that my noble friend recognised that point in his opening remarks. This would surely be undesirable and, in the light of that short explanation, I hope that my noble friend will be satisfied with what I have said.

Earl De La Warr

It seems to me to be very useful to spell out this particular power that is given to British Telecom. It makes it quite clear that this is one of the ways that is open to it to run its business. Incidentally, as I understand it, although I happen to believe that it is not sufficient, it is one of the ways by which British Telecom can raise money from outside. I think that there is a clue in this clause to the way in which the Government wish it to conduct its business. I regarded it as an important clause, so I was surprised when my noble friend Lord Morris said that it was a drafting amendment. It is surely much more than that.

Lord Lloyd of Kilgerran

Unfortunately, I was not listening very carefully to the noble Lord, Lord Morris, when he mentioned my name invoking my assistance on this matter. I am very sorry that I cannot be of much assistance to him. I wonder whether the words, "requisite, advantageous or convenient", appear in any other Post Office Acts. They seem to me to be a strange collection of words used together, and in some ways, although this is merely a drafting way, I would have preferred perhaps to put the word "expedient" in this general sense. Perhaps there is a history in relation to many of these words, and sometimes it is useful to maintain the words of past Acts when passing over powers in this way.

Lord Trefgarne

I am sorry, but I am not a walking compendium, as I should be, on all the Post Office Acts down the ages. I will however inquire into that interesting point and perhaps let the noble Lord know in due course.

Lord Morris

This unfortunate and unhappy three-worded phrase "requisite, advantageous or convenient" has a precedent in the Stonehouse Act of 1969. It is taken straight from that. In response to the moving of this amendment, my noble friend Lord Trefgarne suggested the difficulties of the legal test of the word "expedient". I was wondering whether he felt that it might be any easier to test "convenient" as opposed to "expedient". Could he possibly assist me in that?

Lord Trefgarne

Again, I would not want to give a precise legal definition of the two words except to say that the word, "convenient", is there as we would wish to take the wider meaning and to maintain these powers as we desire them to be.

Lord Morris

I must repeat again that the reason why I tabled this amendment was to get a proper answer out of the Government, and not just an answer which in effect said that the Government happened to disagree with the mover of the amendment. If my noble friend can assure me that they will write to me about this, it would be extremely helpful, or alternatively give a full answer at Report stage.

Lord Trefgarne

I shall certainly write to my noble friend with whatever additional information I can find on this point. Of course, in the last resort the definition of words in a Bill which becomes an Act must be for the courts.

On Question, amendment negatived.

4.34 p.m.

Lord Morris moved Amendment No. 7: Page 3, line 16, leave out ("others") and insert ("outside persons").

The noble Lord said: This again is a drafting amendment which is highlighted by comparing the provisions of Section 7 of the 1969 Act with Clause 2 of this particular Bill. Modern drafting appeared to favour the phrase "outside persons" to the older word in the 1969 Act "others". I am sure that there is nothing sinister in this at all, but for the sake of consistency in drafting I should have thought it preferable to use the term "outside persons" which appears to be to the liking of the parliamentary draftsman responsible for this current Bill. I beg to move.

Lord Trefgarne

I think my noble friend will have gathered from my reaction to his earlier amendments that the Government do not wish to restrict British Telecom's powers in the way that he has proposed. That remains so in relation to these amendments, although I am advised that they would not have that effect in practice because of British Telecom's power to do anything requisite, advantageous or convenient—to which we were referring just now—for the exercise of its main powers under Clause 2(1).

If, on the other hand, my noble friend is trying to bring the wording of the first two subsections in this subclause into line—as indeed he said he was—with Clause 2(3)(c), I am advised that that would be inappropriate. The use of the words "outside persons" rather than "others" in Clause 2(3)(c) follows from the fact that British Telecom already has the power to manufacture and supply to the Post Office by virtue of Clause 2(2). There is no need to repeat this in Clause 2(3). Clause 2(2) contains no powers similar to those in Clause 2(3)(a) and (b), and therefore it is right to use "others" in lines 16 and 21. I hope that my noble friend, again, will be satisfied with that explanation and will not seek to take the matter further.

Lord Morris

Clause 2(3)(c) is the parallel of Section 7(2)(b) of the 1969 Act. The original word there was, "others", and they have changed it in this Bill to, "outside persons". What I was trying to do was to probe whether there was a distinction between, "outside persons", and, "others".

Lord Trefgarne

I think the word "others" goes wider than the term, "outside persons", and that was deliberate.

Lord Morris

With that explanation, I beg leave to withdraw withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 8 not moved.]

Lord Morris moved Amendment No. 9: Page 4, line 1, leave out paragraph (g).

The noble Lord said: The purpose of this amendment is to remove paragraph 2(3)(g). It is in its nature a paving amendment for amendments in my name later in the Bill. My concern about this, although I in no way wish to restrict the powers of the Post Office to engage in business in a form which suits them, is that if this power remains in the Bill the Post Office will have the power completely to avoid the provisions of the clauses in the Bill with regard to the forming of subsidiary companies.

The Earl of Gowrie

I think my noble friend means British Telecom, not the Post Office.

Lord Morris

Of course I do. I beg your Lordships' pardon. The inclusion of this paragraph would give the corporation the power to fly in the face of the Government's intent as expressed legislatively in Clause 4, and indeed in Clause 5, the two clauses giving the corporation power to make such schemes for re-organisation and amalgamation of wholly-owned subsidiaries, and the control of those wholly-owned subsidiaries under Clause 5. Could my noble friend fully answer whether I am right in this fear that, despite all the good intentions of the Government, this public corporation which, after all, is funded by taxpayers' money, will not be controllable, where necessary, by the Secretary of State to discourage cross-subsidisation'? This is the fundamental reason for tabling this amendment. I beg to move.

The Earl of Gowrie

In so far as my noble friend has moved a probing amendment to find out about the position with regard to cross-subsidisation, I think I can reassure him. On Second Reading my noble friend expressed concern that this power might enable British Telecommunications to avoid the Secretary of State's controls over wholly-owned subsidiaries by establishing 99 per cent. subsidiaries under this provision rather than wholly-owned subsidiaries under Clause 4. We do not envisage that that will happen in practice. It is technically possible that it could happen, but I can assure my noble friend that if BT followed that course, the Secretary of State would in any case be able to exercise his power under Clause 6(6) and direct BT to dispose of its interest in the subsidiary concerned. I hope that answer reassures him.

Lord Morris

In the light of that explanation, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Morris moved Amendment No. 10: Page 4, line 39, leave out ("or promote the activities of").

The noble Lord said: The inclusion of the words "or promote the activities of" within the powers of British Telecommunications under Clause 2 is a new addition in the sense that Clause 2(3)(I) is the parallel of Section 7(2)(m) of the 1969 Act. I was wondering whether this addition to the powers of BT was conceived as necessary, and perhaps my noble friend could explain why the promotion of activities should be included in the Bill. I am not asking for specific examples of where the power might be used; I was puzzled why the wording of that provision in the 1969 Act should have been changed. I beg to move.

Lord Trefgarne

My noble friend has drawn attention to the fact that the words "or promote the activities of" do not occur in the corresponding power in the Post Office Act. They have been added deliberately to clarify BT's power to promote the exports of United Kingdom goods. I am sure your Lordships will agree that it is desirable that BT should be active in this regard, and indeed the Post Office has taken a large part in promoting the export of System X, which the Committee will know is a modern exchange system. The words in question have been added to put beyond question that BT can undertake activities which further the interests of outside bodies but which may not consist of assistance given to them. An example would be exhibiting in support of United Kingdom manufacturers. I hope that gives my noble friend the explanation he has sought.

Lord Morris

I am grateful to my noble friend and I am sure that the whole Committee is for that explanation. Accordingly, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Morris moved Amendment No. 11: Page 5, line 16, leave out ("enure") and insert ("ensure").

The noble Lord said: When the Bill first came before another place, the phrase to which I am drawing attention was "will ensure for its benefit", but the word has now been changed to "enure". Was there an amendment in another place covering that substantive change?

The Earl of Gowrie

My advice is that my noble friend is entirely correct in pointing out that a printing error was corrected when the Bill was reprinted for Report stage in another place. I can assure him that it is standard practice for such errors to be corrected without formal amendment by agreement with the House authorities. I am sure he would agree that this avoids the need to waste parliamentary time.

Lord Morris

I accept the point that it was almost certainly a printing error. However, it resulted in a substantive change in the meaning of the clause and as I pointed the fact out to the department in November, I feel they might have taken a few seconds of parliamentary time to get the necessary amendment through the House of Commons rather than doing it in the way they did. I appreciate, of course, that with an obvious printing or spelling error one does not want to waste parliamentary time, but where the issue involves a totally different word, we should be careful not to create a precedent. However, in view of my noble friend's explanation, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

4.46 p.m.

Lord Morris moved Amendment No. 12: Page 5, line 19, leave out from ("Parliament") to ("and") in line 20.

The noble Lord said: This is a probing amendment. Subsection (5) is a straight crib of Section 10 of the 1969 Act, the difference being that for the words, "proposed Measures in the Northern Ireland Assembly", there are in the 1969 Act the words, "Bills in the Parliament of Northern Ireland". I appreciate the reason for the difference. On the other hand, as there has been no amendment or repeal of Section 10 in the repeals schedule to this Bill, it seems odd that there should in effect be one rule for the Post Office and one for British Telecommunications with regard to this rather technical substantive point in the body of the Bill, and I should be grateful for an explanation from my noble friend. I beg to move.

Lord Trefgarne

The power to promote and oppose measures in the Northern Ireland Assembly, which this amendment would remove, is a common provision in nationalised industry statutes: it appears for instance, in the Aircraft and Shipbuilding Industries Act 1977 and there are good reasons for sticking with precedent in this case.

Although the Northern Ireland Assembly has not functioned since 1974, it has not been abolished; it is, by dint of the Northern Ireland Act 1974, in a state of suspense, and the responsibilities which it would have exercised are now undertaken at Westminster. Because the Northern Ireland Constitution Act 1973 remains on the statute book and because the 1974 Act, and the responsibilities which that Act places upon Parliament, are regarded as being of a temporary nature only (as the preamble to the 1974 Act makes clear) it is quite consistent and technically correct to include reference to the Northern Ireland Assembly in the Bill. This reference is automatically modified by Schedule 1 to the 1974 Act, which provides that references to measures in any enactment passed before or after the 1974 Act shall, so far as the context permits, be deemed to include references to Orders in Council. As your Lordships know, Order in Council is the method generally used under the 1974 Act to enact primary legislation which would have been enacted by a measure of the Assembly.

Were this amendment to be accepted, and the words in question deleted, the effect would be that the corporation would not have any statutory authority to seek to promote or to oppose Northern Ireland Orders in Council during direct rule, and I do not think that is the intention of my noble friend's amendment; I think he is proposing it in a probing spirit. Of course that would be a considerable handicap for the corporation. Furthermore, should there be a return to devolved government in Northern. Ireland, then the absence of this provision would mean that without further amending legislation the corporation would not have the statutory right to promote and oppose legislation in the Assembly. For those reasons I hope that my noble friend will not proceed further.

Lord Morris

I am most grateful to my noble friend for that full and detailed explanation and, if I may say so, the explanations appear to be getting better and better. I hope that he maintains the same standard throughout the proceedings on the Bill. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

On Question, Whether Clause 2 shall stand part of the Bill?

4.50 p.m.

Lord Lloyd of Kilgerran

My purpose in intervening on the Question that Clause 2 shall stand part of the Bill is to ensure that certain powers of the Post Office-have not been lost in this massive transfer of powers which has to take place in order to give the corporation the powers that it now has under Clause 2. The powers that I have in mind are those which the Post Office has had, and is stiil exercising, to encourage innovation and invention among its staff, and to reward members of the staff for the inventions and innovations which they have put forward and which have been of great help.

It is within my personal knowledge that the Post Office has done much to encourage invention and innovation. Hundreds of suggestions come from the stalf each year, and tens of thousands of pounds have been paid by the Post Office to its staff in respect of the inventions that they have put forward. Perhaps Post Office award schemes could be even more generous and comprehensive than they now are. Nevertheless, the example of the Post Office in recognising and awarding inventors on its staff could well be followed with very great advantage by many industrial firms in British industry.

It is obviously in the public interest that the corporation continues positively to encourage innovation and invention generally among its staff. The Government have made many pronouncements on the desirability of doing that. Indeed, the Prime Minister held a meeting—perhaps it was a seminar—at 10 Downing Street, to which she invited a number of inventors and persons concerned with inventions, in order to express her views on how important it was for nationalised industries and private industry to encourage invention and innovation in the technical field.

Perhaps I have overlooked something in the wide powers in Clause 2. We have heard from the noble Lords, Lord Morris and Lord Kilmarnock, of their objections to certain paragraphs in Clause 2. But it might be helpful if I say that British Telecommunications is now a corporation and Clause 2 is in effect comparable with the articles of association of an ordinary company. Therefore, there will be very wide powers. But so far I have not found anything that would directly deal with the power that the Post Office now has in regard to promotion of invention and innovation.

The noble Lord the Minister will notice that in paragraph (i) on page 4, the corporation has the power to do anything for the purpose of advancing the skill of persons employed…". As a result of that power advancing the skill of the employees concerned, inventions, innovations and new ideas are bound to arise. In the succeeding paragraph, paragraph (j), there is the power to promote research fairly generally. Here I should like to take the opportunity to add my praise to the international reputation of the Post Office for the results of its research. Many of its research projects are the most successful in the world.

Therefore, it seems to me that the powers of the corporation should include a general provision that inventions and innovations are to be encouraged. However, perhaps the Minister will consider that such a provision would be more suitably included in Clause 3, which deals with the general duty of the corporation. I believe that in either Clause 2 or Clause 3 there should be included a provision that forms an assurance that the Government are at least supporting innovation and invention as strongly as possible.

Lord Glenamara

It should not be assumed by your Lordships' Committee that because my collegue and I are not rising to support the noble Lord, Lord Lloyd of Kilgerran, we do not agree with him; we agree with everything that he has said. However, we are not raising the matter now because there will be an opportunity under Amendment No. 43 to discuss research and innovation in the Post Office. That is the only reason why we do not rise at this stage to support the noble Lord.

The Earl of Gowrie

I am grateful to the noble Lord, Lord Glenamara, for making one of the points that I would have made. I also want to use the intervention of the noble Lord, Lord Lloyd of Kilgerran, to take the opportunity to pay tribute to the research and innovatory work which the Post Office has performed over the years, and to underline the fact that this will of course go on and, we would hope, be very much added to through the joint ventures and the rest, in the work of British Telecommunications.

With regard to the technical point about which the noble Lord asked me, the powers in Clause 2(2) are effectively an extension of those in subsection (1). The latter subsection gives British Telecommunications power to run the basic services as well as—and this is where I think that continued reciprocally good relations between British Telecom and the Post Office are enshrined in statute—power to provide services for the Post Office, or any subsidiary of it, and to perform services for Her Majesty's Government and indeed for other Governments, local authorities, and the National Health Service.

On the issue of the term "manufacture" in subsection (2), I would say that that includes making relatively small numbers of particular articles. British Telecom needs the power to manufacture for three main reasons. It manufactures some products in the course of its research and development programme (to which the noble Lord referred) which develops among other things new types of apparatus and prototypes, such as the exciting innovation of optical fibres for cables, and our old friend the micro chip in its capacity of controlling new digital transmission systems. I underline that point because I would not wish the noble Lord to think other than that we would expect a great increase in the amount of research into and manufacture of such products by British Telecommunications and by others in order that they should exploit the mainframe system which British Telecommunications is there to provide. Secondly, as I said at the beginning, I should like to indicate that much of this function has been admirably performed by the existing Post Office, and this will of course continue in the work of the new corporation.

Clause 2 agreed to.

Clause 3 [General duty of the Corporation]:

4.59 p.m.

Lord Glenamara moved Amendment No. 13: Page 5, line 35, after second (" to ") insert (" meet the social, industrial and commercial needs of the British Islands with respect to matters that are subserved by its powers as to").

The noble Lord said: With this amendment I should like to discuss also Amendment No. 14, which is consequential. We feel that this amendment raises a quite fundamental issue. It seeks to return to the 1969 wording of the general duty of the telecommunications section of the then Post Office. In the current draft of the Bill before the Committee the duty to, meet the social, industrial and commercial needs of the British islands", is demoted from being at the very heart of the corporation's duty, as it was previously, to being one matter among others to which it must have regard under subsection (2). It has been demoted. We wish to re-insert the very broad duty under the 1969 Act because, in our view, telecommunications is a service which is much more properly handled by a public sector corporation that has a duty to meet the broader interests of the community and the country at large than by private sector bodies which have much narrower duties to their shareholders laid down by company law.

The Government have sought to narrow the duties placed on BT as a quid pro quo for opening up competition. They take the view that if BT is to compete in many areas it is no longer fair to place such an onerous duty on it. One major question that is therefore posed by our amendment is whether the interests of the customer will be best served by BT having a more onerous duty and retaining more of its monopoly or, on the other hand, by BT having a restricted duty and competition being opened up.

The arguments for this amendment in our view therefore have to range to some extent more broadly than the particular part of the clause to which it is directed, as it is quite a fundamental issue. The question it poses is whether the vast bulk of ordinary customers will be better served by BT retaining the monopoly and the duty or by the Government's proposals in this Bill. BT currently has a duty to provide a telephone service to the best of its ability to any customer wherever he is located throughout the United Kingdom. On many occasions especially in rural areas, services are provided at a loss—for example, where a telephone line is taken across many fields to reach a remote farm.

Clause 3 as drafted by the Government restricts the duty of BT in several ways. First, it will only be required to provide the first instrument and it is only required to provide it where another person is not providing it. Private sector competitors of BT will wish to provide services only—and I do not criticise them for this—where it is profitable to do so. In many parts of the country it will not be profitable for firms to provide many of the services provided by BT. It is unlikely to be profitable, for example, to supply a small PABX (a private automatic branch exchange) to an offshore island of Scotland. It is not likely to be profitable to supply an answering machine to a doctor in a rural surgery. Certainly it is unlikely to be profitable to maintain an answering machine in a remote rural surgery.

We could fairly argue that the most likely consequence of this change will therefore be that people who have until now regarded and received a telephone service as a matter of right will now find themselves in some difficulty in getting such a service if they are not located in a city. I think that it is simply dishonest of the Government to avoid recognising this fact. The private sector will frequently simply not be willing to provide services in rural areas except at a prohibitive cost.

This effect will be exacerbated by the fact that competition will itself reduce BT's revenue. In combination with the Government policy of cash limits, which already means that BT is investing less in real terms than it was in 1970, it will restrict BT's ability to invest and improve services and force it to continue to raise the great bulk of its investment through price increases. All noble Lords will remember that in the past 12 months, two price rises have been announced which together add 30 per cent. to the bill of the average customer. Rural services and rural needs must suffer under this Bill and so also will the social role of BT. Traditionally, the Post Office has taken the view that it has some responsibility to disadvantaged groups, a view which I think would be unlikely to be shared by a purely private sector concern—not because they have no social conscience but because company law lays down where their duty lies.

Let me give two examples. Public call offices, which run at a substantial loss but which may provide the only lifeline for a community, are one example. BT may ask a local authority for financial assistance in the provision of a public call office, but the increasing pressure on BT to cut down on loss-making call offices in rural communities would clearly be substantially increased by the loss of revenues that could result from Government proposals. Secondly, similarly, BT has to date provided a special range of equipment and facilities for the disabled at a loss or, at best, on a break-even basis. Indeed, BT and the principal union in BT, the POEU, are marking the International Year of the Disabled by the provision, without any installation charge, throughout that year of inductive couplers. These ingenious devices interact with most modern hearing aids to provide an extraordinary clarity of reception even for the very hard of hearing. I take this opportunity here to pay tribute to the Post Office engineers who have agreed to fit such devices in their own time, so enabling them to be provided without labour charges. BT has traditionally devoted considerable effort to developing products which enable the disabled to use the telephone. This social role must be under threat from losses of revenue flowing from Government proposals.

The Government may argue that one group will certainly benefit from the opening up of competition—that is, the industrial and commercial users. However, we would argue that, again, the benefit will be concentrated on a relatively small group of industrial and commercial users. It will be principally the very large firms which will require the most modern and advanced technology, and which have the money to spare to invest large sums in receiving it, which may benefit from an increased range of provision of terminal equipment. But, as this Government have been quick to point out, the future of British industry does not depend on a handful of very large companies, many of which are in practice subsidiaries of multinationals or foreign-owned.

The Government have recently gone to great lengths to promote small firms. The future of British industry depends upon the growth and expansion of a large number of small and medium companies whose business will not he attractive to competitors of BT and who will find themselves in precisely the same situation as ordinary customers; that is to say, they may find difficulty in getting service. They are certainly likely to have to pay a higher price for service and will suffer from split maintenance responsibilities in finding out whether a fault lies in the network or in the terminal apparatus. The "prime instrument" policy may assist but will not resolve the potential problem. BT have experience of this problem in providing Datel services which indicates that difficulties in tracing faults, especially intermittent faults, will be much greater than the Government are acknowleding.

Above all, we do not believe that the changes to the monopoly and the consequent restriction of BT's duty are in the wider interests of the country as a whole. Nobody would now seriously dispute the assertion that information technology is the only major area of the world economy that is growing rapidly and will continue to do so for the next decade. Britain's capacity to exploit the potential of this market depends upon investment by BT in updating and improving its network by electronic switching, digital transmission and so on. Policies that will erode BT's revenue in competition with the existing policy of cash limits threaten that modernisation process and therefore threaten Britain's potential involvement in information technology.

I have gone on a bit, but all this is to explain why we believe that this 1969 wording of the general duty should be reinstalled at the centre, the very heart, of the duty of the corporation and should not be relegated to being a matter among others to which BT has to have regard under subsection (2). I beg to move.

5.10 p.m.

Lord Orr-Ewing

I want to raise a point in a slightly different context. Whereas this amendment seeks to bring forward Clause 3(2)(b) into the main sector, I should like some clarification from the Minister about the responsibility. It is a very broad term to give the duty of British Telecom as meeting the social, industrial and commercial needs of the British Isles; but surely what is of paramount importance to the wellbeing of the Post Office is the industrial health of the telecommunications industry who must be their main suppliers. There was a time when I thought that they had much too cosy a relationship which lasted for several decades between three or four major suppliers who shared the telecom business for the exchanges. But this has become more open and more competitive. There has been a tendency for the Post Office area of British Telecom to feel that they have some obligation to go to the cheapest supplier, albeit overseas, and not an obligation to the look after the wellbeing of the British telecom industry.

One of our most successful firms is Marks and Spencer which insist that their main suppliers not only keep to the quality of the product which Marks and Spencer are ordering but, above all, that they have enough profit in order to make sure that they have on-going research and development in their works so that they always have competitive supply. The same principle should be provided for British Telecom. There was some discussion on this matter in another place when this clause was discussed, and the Minister at the time (I think it was the Minister of State) gave some assurance that the wellbeing of British industry should include the wellbeing of British Telecom's industry. It may be more clearly spelt out by the Minister either now or when he comes to speak on the Question, That the clause shall stand part of the Bill. I wanted this point to be made forcefully in order to get a forceful assurance from the Minister.

Lord Caccia

May I take up the subsidiary point which the noble Lord has just raised? Before doing so, I must declare an interest. For many years I was the chairman of Standard Telephones and I am now the chairman of ITT United Kingdom.

In drawing attention to the requirement of Clause 3(2)(b) that the corporation shall have regard to the social, industrial and commercial needs of the British Isles, may we assume that a consideration (and I carefully do not say "the consideration") among others will include regard to the wellbeing of the United Kingdom telecommunications industry?

In the past—and I raise this for the same reason as the noble Lord, Lord Orr-Ewing, did—the Post Office has been known to seek to justify particular purchasing decisions on the sole ground that it was their duty to get the goods at the lowest possible price, regardless of whether the supplier was in the United Kingdom or overseas, and regardless therefore of the attitude of foreign Governments either in support of their own industries or in the openness of their markets when British industries are trying to compete. Therefore it would be most helpful to the industry if the noble Earl could give some assurance that a consideration would be given, among others, to this aspect of purchasing, and that this duty will in effect be taken into account when decisions are made regarding where to purchase the equipment that they are looking for.

Earl De La Warr

The noble Lord has implied that in the past British Telecom have put the British manufacturers at risk. Is he implying that there have been substantial orders placed abroad to the exclusion of British manufacturers? If he is, I should be very surprised to hear that. Could he enlarge on that implication?

Lord Caccia

I said carefully that it has been known that there had been supplies from abroad. The reason given in each case was that the supply was the cheapest one available.

Earl De La Warr

I was trying to get the risk in its proper perspective, that is all.

Lord Caccia

It may not be a great risk but it would be of comfort and I should have thought that the Government would not find it very difficult to come some way to meet this point. As the Minister has said, what he wishes to see is a lively and prosperous telecommunications industry—not only the BT but also the industrial companies supporting it.

Lord Morris

I am slightly puzzled by the excitement of the noble Lord, Lord Glenamara, regarding Clause 3, because in substance Clause 3 is precisely the same as the old Clause 9 of the 1969 Act. By shifting the duty to exercise its powers to meet the social, industrial and commercial needs of the British Islands to a duty to have regard to, must be an immense improvement. Under the Stonehouse Act it was virtually a piece of declaratory law which could not possibly be met by anybody, let alone British Telecommunications. In a strict interpretation of the general duty as defined under the Stonehouse Act the Post Office, as it was then, manifestly failed in that duty. How can they possibly meet the social, industrial and commercial needs of this country?

Lord Glenamara

Perhaps the noble Lord has not read the whole of the amendment. It says: meet the social, industrial and commercial needs of the British Islands with respect to matters that are subserved by its powers as to".

Lord Morris

That is precisely the same wording as the 1969 Act and indeed the 1981 Bill. I had indeed read it. By switching the duty that is a change in the Bill which is an improvement. The original 1969 Act was asking the impossible.

The Earl of Gowrie

Although I have some misgivings about the nomenclature which my noble friend Lord Morris uses to describe the 1969 Act—perhaps the Committee will think it funny if I suggested that we refer to this Bill as the Gowrie Bill for the purposes of any discussions in Committee—I think my noble friend has answered Lord Glenamara's point quite accurately in that in the 1969 Act expectations were set up which could not conceivably be realised. I do not believe anyone in the Committee believes that the Post Office is now in any practical sense under an obligation or duty to meet the country's needs for data processing services. It obviously could not do that in any practical interpretation of the words.

Strictly interpreted, that is the meaning of Section 9 of the 1969 Act; but the new duty in the present Bill makes it quite clear in Clause 3(2) that British Telecommunications shall have to have regard to: the social, industrial and commercial needs of the British Islands with respect to matters that are subserved by its powers". That is why I am very glad that both my noble friend Lord Orr-Ewing and the noble Lord, Lord Caccia, from the Cross-Benches, reminded us of the importance of this; but, equally well, I do not think that they were castigating me that the Government neglected it because here it is fairly and squarely in the Bill. So I hope that on both those points the Bill as it is drafted is satisfactory.

I paid tribute before, and I do so again, to the experience of the noble Lord, Lord Glenamara, in this field and also to the great service he has rendered both in commercial terms and also in Parliament in this area. I think we are all allowed to take latitude in Opposition which we rigorously deny ourselves when in Government; but even allowing for both those phenomena, the noble Lord, Lord Glenamara, really must not talk as if cash limits, or external financing limits as they are sometimes called, are a new and sinister invention of the present Government. They were instituted in this field, as in others, by the Government of which the noble Lord was a distinguished member—and quite right too, and we supported it at the time; and if one is in a mood to lash Parliament or the economy on the principle of cash limits, one has then to paint a scenario where such things do not exist. That is a scenario that I think most of us would find quite frightening.

I would also, if not castigate, certainly gently chide the noble Lord, Lord Glenamara, for stirring up doubts about the continued social duties or social service, as it were, provided by the mainframe system and the duties of British Telecom in this regard. He really should not, in my view, stir up anxieties among the disabled or people in rural areas that in some way they are going to be denied access to a telephone. This is the most astonishing charge, and the Bill could not make it more clear. Again I quote the passage I referred to when dealing with the industrial anxieties or the need to underscore the industrial needs made clear by my noble friend Lord Orr-Ewing and the noble Lord, Lord Caccia. The passage I quoted said that BT had to have regard to the industrial and commercial needs of the British Islands. In the same passage it is said that it also must have regard to the social needs of the British Islands. I can assure your Lordships that this certainly, particularly under a Conservative Government, if you like, includes the rural areas. If British Telecom were to fail to provide reasonable services in any part of the country—and I have absolutely no indication from them or anyone else that they are likely to fail to provide reasonable services—then it is open to the Secretary of State to give them directions to do so either under Clause 6(2) or (3), or under Clause 6(5).

The Secretary of State operates through and with the consent of Parliament, and I should have thought that Parliament would give a Secretary of State of any description a bad time if it was found that constituents in rural areas or among the disabled, or whomsoever, were being denied access to these services which the Secretary of State was statutorily under an obligation to provide. I therefore think that the noble Lord's amendments are not right; they are ill-founded and liable to cause needless anxiety and they would, if passed, impose unnecessary constraints on British Telecom's ability to act commercially when it faces competition. I hope therefore that the Committee will roundly reject them.

Lord Glenamara

I am sorry the noble Earl takes that view. I shall not follow him on cash limits because we shall have an opportunity to debate them later in connection with Amendments Nos. 102 and 103. With regard to rural areas, I am not the only one who has said that this Bill will result in an increase in charges in rural areas; it has been said by many people inside and outside the Post Office. I should like an assurance from the noble Earl that it will not result in an increase in charges in rural areas. He cannot give that assurance because he knows quite well that it will.

This amendment is not creating alarm, despondency or anything else. All it does is to enshrine the duty of the Post Office to serve the social, industrial and commercial needs of the British Islands with respect to matters which subserve its powers and to enshrine that at the heart of it—nothing more than that—instead of relegating it to a matter to which the Post Office must have regard, among many other things which are quite unrelated. This is in a category of its own: it is not in the same sort of league as the other things to which the Post Office must have regard here.

That is all I am suggesting, and I should have thought that every noble Lord on the other side of the Committee would support me in this. All I am suggesting is that the interests of Britain and the social, commercial and industrial needs of Britain—that includes the point put by two noble Lords opposite and one on the Cross-Benches—shall be paramount and shall be at the very heart and centre of the Post Office's duty and not put in a list of also-rans. That is all I am proposing.

The Earl of Gowrie

I should like just to deal with the point made about charges. The point I was making in response to the noble Lord—and I shall of coure read carefully tomorrow what he has said—was that he was laying an emphasis which in my view could give rise to anxiety that in some way services would not be available in rural areas or to the disabled, because in some way the Government were demoting the social role as well as the industrial and commercial role of the new corporation. I was roundly rejecting that. The noble Lord knows perfectly well that as regards charges all sorts of factors are involved. There is the ability of one Government or another to control inflation, and there is the need for this economy not to take too much in terms of pay. I hope that his desire, which I certainly share, to keep down the charges for telephone services will be echoed in his exhorting the public sector unions to have regard to that when pursuing wage claims.

I think I have made the central point, that it really would require an act of paranoia to think that this function is demoted in any serious way. As I said, the powers for the Secretary of State are still there. He is answerable to Parliament, and Parliament is not known for its silence if the interests of one group or another in our society are being unfairly neglected by public facilities; so I really cannot see the necessity for these amendments.

5.28 p.m.

On Question, Whether the said amendment (No. 13) shall be agreed to?

Their Lordships divided: Contents, 70; Not-Contents, 128.

CONTENTS
Aylestone, L.	Listowel, E.
Bacon, B.	Llewelyn-Davies of Hastoe, B.
Beswick, L.	Longford, E.
Birk, B.	McCarthy, L.
Blease, L.	McCluskey, L.
Blyton, L.	Maelor, L.
Boston of Faversham, L.	Mersey, V.
Briginshaw, L.	Noel-Baker, L.
Brockway, L.	Oram, L.
Brooks of Tremorfa, L.	Peart, L.
Chitnis, L.	Phillips, B.
Cledwyn of Penrhos, L.	Plant, L.
Collison, L.	Ponsonby of Shulbrede, L.
Cooper of Stockton Heath, L.	Ritchie-Calder, L.
Crowther-Hunt, L.	Ross of Marnock, L.
Darling of Hillsborough, L.	Rugby, L.
David, B. [Teller.]	Sefton of Garston, L.
Davies of Penrhys, L.	Shinwell, L.
Donaldson of Kingsbridge, L.	Sligo, M.
Donnet of Balgay, L.	Stedman, B.
Elwyn-Jones, L.	Stewart of Alvechurch, B.
Gardiner, L.	Stewart of Fulham, L.
Glenamara, L.	Taylor of Gryfe, L.
Gosford, E.	Taylor of Mansfield, L.
Greenwood of Rossendale, L.	Thomson of Monifieth, L.
Gregson, L.	Underhill, L.
Hale, L.	Wallace of Coslany, L. [Teller.]
Hanworth, V.
Houghton of Sowerby, L.	Walston, L.
Hunt, L.	Wedderburn of Charlton, L.
Jacques, L.	Wells-Pestell, L.
Janner, L.	White, B.
Jeger, B.	Winterbottom, L.
Kennet, L.	Wootton of Abinger, B.
Kilmarnock, L.	Young of Dartington, L.
Lee of Newton, L.

NOT-CONTENTS
Abinger, L.	Amherst, E.
Airey of Abingdon, B.	Auckland, L.
Alexander of Tunis, E.	Avon, E. [Teller.]
Allerton, L.	Balfour of Burleigh, L.

Balfour of Inchrye, L.	Lindsey and Abingdon, E.
Barnby, L.	Lloyd of Kilgerran, L.
Bathurst, E.	Long, V.
Beaumont of Whitley, L.	Loudoun, C.
Bellwin, L.	Lucas of Chilworth, L.
Belstead, L.	Mackay of Clashfern, L.
Bessborough, E.	McNair, L.
Blake, L.	Malmesbury, E.
Boothby, L.	Mancroft, L.
Bridgeman, V.	Mansfield, E.
Buxton of Alsa, L.	Margadale, L.
Byers, L.	Marley, L.
Caccia, L.	Massereene and Ferrard, V.
Campbell of Croy, L.	Milverton, L.
Cathcart, E.	Morris, L.
Chelwood, L.	Mowbray and Stourton, L.
Chesham, L.	Newall, L.
Clifford of Chudleigh, L.	Nugent of Guildford, L.
Cockfield, L.	Onslow, E.
Cork and Orrery, E.	Orkney, E.
Cottesloe, L.	Orr-Ewing, L.
Craigavon, V.	Pender, L.
Cullen of Ashbourne, L.	Portland, D.
Daventry, V.	Rankeillour, L.
de Clifford, L.	Renton, L.
De La Warr, E.	Renwick, L.
Denham, L.	Roberthall, L.
Drumalbyn, L.	Rochdale, V.
Ebbisham, L.	Rochester, L.
Eccles, V.	Romney, E.
Ellenborough, L.	St. Aldwyn, E.
Elles, B.	St. Germans, E.
Elliot of Harwood, B.	Saint Oswald, L.
Elphinstone, L.	Sandys, L. [Teller.]
Ferrers, E.	Savile, L.
Ferrier, L.	Selkirk, E.
Foot, L.	Sempill, Ly.
Fortescue, E.	Sharples, B.
Gainford, L.	Skelmersdale, L.
Gisborough, L.	Soames, L.
Gormanston, V.	Spens, L.
Gowrie, E.	Stradbroke, E.
Granville of Eye, L.	Strathclyde, L.
Gray, L.	Strathspey, L.
Grey, E.	Sudeley, L.
Gridley, L.	Terrington, L.
Grimston of Westbury, L.	Teviot, L.
Haig, E.	Thorneycroft, L.
Hailsham of Saint Marylebone, L.	Torphichen, L.
	Tranmire, L.
Hampton, L.	Trefgarne, L.
Harmar-Nicholls, L.	Tweedsmuir, L.
Hayter, L.	Vaizey, L.
Henley, L.	Vaux of Harrowden, L.
Holderness, L.	Vickers, B.
Hylton-Foster, B.	Vivian, L.
Killearn, L.	Westbury, L.
Kilmany, L.	Wigoder, L.
Kimberley, E.	Willoughby de Broke, L.
Kinloss, Ly.	Young, B.
Lauderdale, E.

Resolved in the negative, and amendment disagreed to accordingly.

[Amendments Nos. 14 and 15 not moved.]

5.37 p.m.

Lord Lloyd of Kilgerran moved Amendment No. 16:

Page 6, line 7, at end insert— ("(e) the protection of the privacy and confidentiality of the information conveyed.").

The noble Lord said: Before I deal with the merits of this amendment, I have two formal matters which, with the leave of the Committee, I must put to your Lordships. The first is that I did not have the consent of the noble Lord, Lord Orr-Ewing, to have his name formally put down in connection with this amendment. Something has happened in relation to the procedure of this House. The noble Lord, Lord Orr-Ewing, agreed to have his name put down in connection with my amendment in relation to the formation of the Telecommunication Authority, about which my noble friend Lord Byers spoke so robustly on Second Reading, supported by the noble Lord, Lord Orr-Ewing. But, somehow, on all the other amendments where my name has appeared, the noble Lord, Lord Orr-Ewing, has been formally associated with me. I understand that, in many of these instances, there is no real disagreement between the noble Lord, Lord Orr-Ewing, and myself, except on a question of pure formality. The second formality is that I have been advised by Mr. Keith of the Office, that there should be an "and" inserted before my amendment.

The amendment which I am now moving is to the effect that, among the general duties of the corporation, it should, in exercising its powers, have regard to, the protection of the privacy and confidentiality of the information conveyed". So far this afternoon in addressing your Lordships, I have raised matters which concern the staff, and this amendment is directed to the domestic issue of the protection of privacy and the confidentiality of the information conveyed, in relation to the operations of employees concerned with the corporation.

The amendment is not concerned with the general public worry which exists, arising out of the so-called tapping of information by persons outside the control of the corporation or the Post Office. This is really putting into the duties of the corporation a duty which, somehow or other, the Post Office still exercise as a kind of good citizenship in relation to the operations of their employees. I am not asking the Government to insert into the Bill something which in effect, by other means, the Post Office are no doubt doing and the corporation will do. But now that British Telecom is to be a corporation, it seems to me that it will be helpful to have this included in its general duties, as set out in Clause 3. I beg to move.

Lord Morris

In principle, I support the noble Lord, Lord Lloyd of Kilgerran. I find it very puzzling that by virtue of Clause 50 on page 42 of the Bill, an obligation of secrecy should be placed upon the corporation or, indeed, upon any person in the course of providing the service under this part of the Bill but that this is only with regard to the provision of data processing services, or services connected therewith. As I understand it, although I may be quite wrong, the amendment of the noble Lord, Lord Lloyd of Kilgerran, would cover the provision of telephone services which it is a specific duty to provide under Clause 3. I find it rather odd, too, concerning the obligation of secrecy which is sanctioned in Clause 50, that hideous penalties for contravention of imprisonment and fines should come about only when the person who abuses this information does so without the consent of the other. However, I believe that this should be discussed when we reach that particular stage.

It is quite clear that the Government ought to have a very close look at this point. In one part of the Bill they seem to be supporting the spirit of the amendment moved by the noble Lord, Lord Lloyd of Kilgerran, without following up that spirit in relation to very important obligations regarding the provision of telephone services.

5.43 p.m.

Lord Orr-Ewing

I must confess that I found my name surprisingly on this amendment, as on every other amendment moved by the noble Lord, Lord Lloyd of Kilgerran. However, I could have been much more embarrassed if it had been somebody else's name which headed each of these amendments rather than that of the noble Lord, Lord Lloyd, because broadly I agree with most of them. Nevertheless, when the Bill is reprinted I hope that I shall not automatically be associated with every amendment which he puts down.

I want to show moral support for the amendment. For 20 years I have wondered why it has not been a criminal action either for staff or for somebody else, like Mr. Reagan recently, on a private basis to sell some of the secrets and some of the telephone conversations. It is now so easy to tap, to bug and to record that tapping that it becomes ever more necessary to try to protect the privacy of the subject and of the network.

This seems to me to be a perfectly valid and very important point, and it will become increasingly important as our technology expands. Not only should it cover the data processing side or, if that term is amended later, the non-voice transmission side. Above all, it ought to protect the integrity of the network and its tapping by people who may be hired to do so. I am sure that 99.9 per cent. of the Post Office staff are loyal to the Post Office and that they respect privacy, but there are always black sheep in every sector of our economy. I feel that we should be strengthening and improving the Bill if we could say that they have a duty to protect to their utmost the secrecy and the privacy of the communications network.

Lord Young of Dartington

May I join with other noble Lords who have spoken in support of this amendment. I hope to move an amendment to Clause 50 which has already been mentioned and which bears on the same subject. It seems to me that although we shall be debating the question again there would be considerable virtue in having in the Bill the amendment which has been proposed to make it very clear at the outset that the telecom corporation has a duty of the kind listed here, on top of the other duties which are also mentioned in this clause.

My hope is that the Government will find themselves able to accept the amendment, in part because Mr. Baker, the Minister of State at the Department of Industry, according to The Times and other newspapers has just announced that the Government are willing to sign the Council of Europe convention to protect citizens against the misuse of personal information stored on computers and the like. This will be a very welcome step to those who are concerned with civil liberties as well as to those in industry who are concerned with the difficulties which some sections of British industry are placed in because we do not have the same protection for personal data which is filed on computers as obtains in other countries. Unfortunately, signing the convention is only the first step on what is a long road. I hope that when we come to Clause 50 the Committee will agree that even in this Bill we might be able to take some steps to make the duty regarding the protection of privacy rather more specific than it is.

I should be very pleased and grateful if the Government were able to accept the amendment. Whatever happens regarding Clause 50, it would help to allay the increasing anxieties to which the noble Lord, Lord Orr-Ewing, has referred. These anxieties do not arise only out of what happened in Australia. There are many other examples which many of us know about where information has been disclosed to unauthorised people. All of us who use the services of the Post Office, for telephoning or for the conveyance of data, surely want to feel that those whom we trust in this regard will be conscious all the time of the duty placed upon them to respect the confidentiality of any information which they gain. Along, therefore, with other noble Lords who have spoken, I hope that the Government will be able to accept the amendment.

Lord Trefgarne

First may I say to the noble Lord, Lord Young of Dartington, how much we appreciate his appreciation, if that is the right way to put it, of the recent announcement by my honourable friend about the European convention in relation to the use of computer-stored personal information.

I want to say also that we understand the concern expressed by various noble Lords who have spoken to this amendment. The subject of the privacy of telecommunications has become particularly topical recently. Messages or information transmitted over British Telecom's network or entrusted to British Telecom for data processing purposes already enjoy a substantial measure of protection under the criminal law.

Section 45 of the Telegraph Act 1863 makes it an offence punishable by a fine for any employee of British Telecom improperly to divulge any message, and Section 20 of the Telegraph Act 1868 makes it an offence for anyone having official duties connected with British Telecom to disclose any telegraphic message contrary to his duty, punishable by imprisonment. Section 11 of the Post Office Protection Act 1884 safeguards the privacy of telegrams and hard copy electronic mail, and Clause 50 of this Bill will make it an offence for any person to disclose without consent any information gained in the provision of data processing services under the Bill. I hope your Lordships will agree that this is a very substantial measure of protection against improper disclosure by British Telecom's employees.

In addition, tampering with British Telecom's system, such as may be involved in tapping, could attract criminal or civil sanctions at the suit of the corporation. In view of all this I hope that noble Lords will agree that the present law already meets the spirit of their amendment.

May I add, in the light of what I think in particular my noble friend Lord Orr-Ewing said, that unauthorised tapping by other than British Telecom's employees would almost certainly be an offence—according to the circumstances, of course—under either the Wireless Telegraphy Act, if, for example, radio transmissions were involved; under the Theft Act, which provides for the offence of stealing electricity, and indeed Clause 12 of this Bill, which relates to infringements of British Telecom's monopoly, and there would be the further provision of a civil trespass against British Telecom itself.

The duty that the amendment would impose would not, I think be enforceable on British Telecom in any court because of subsection 3(4) and it is difficult to see what additional protection it would confer. We are to debate this matter at a later stage in the Bill, at what your Lordships may think is a slightly more appropriate point, but I want to emphasise the sympathy with which I accept the spirit in which these amendments have been put forward. I hope, however, that your Lordships will accept the difficulties that I have described and also be satisfied, in some measure at least, about the existing provisions.

Lord Young of Dartington

I should like to ask the Minister one question. The noble Lord said that, even if this amendment were accepted, it would not be enforceable under subsection (4), but likewise this must apply to all the duties which are set out in subsection (2), and yet it is not thought to be without point to list the chief duties which are being imposed upon the corporation. If it is not without point to insist that these four duties are duties, even if they are not enforceable in this context, why not accept that a further duty, which would not be adding burdens to the Post Office but reassuring the public, should be there along with the duties already listed, even though not enforceable?

Lord Trefgarne

I think that the spirit of these amendments, which the noble Lord has reiterated and with which I have already expressed some sympathy, is as far as I can really go at this stage. As for the enforcement point which the noble Lord, Lord Young, has put to me, this is a rather esoteric point and, while I would wish to stand by the present wording of the clause, I will certainly look into the point raised by the noble Lord to see whether I can elucidate further to him in private.

Lord Morris

I find it very useful that my noble friend Lord Trefgarne should have told us of the various provisions scattered all over the statute book for over 100 years with regard to the various offences that people can be charged with. They can be charged with invading privacy on the PSTN. But would it be possible to gather these together and bring them within the body of the Bill, say into Clause 50, so that we know at least what penalties exist in the statute, and repeal those provisions in the original statute so that it is quite clear for the public to see where the whole issue of the obligation of secrecy stands?

Lord Trefgarne

I have endeavoured to make clear the legal position in this matter, which I agree is somewhat diverse. However, I think what my noble friend is asking for is really something of a consolidation measure and, as my noble friend and the Committee will be aware, that is of course something to which I could not commit myself at present.

Lord Orr-Ewing

I should just like to add my voice to the others. I am not over-persuaded that "pinching" electricity is likely to catch many criminals since "bugs" have extremely tiny batteries now and transmit over a few hundred metres to a receiver which could well be in a private house; and thus payment is made for the electricity for the receiver. No electricity is being "pinched" in that case. As for trespass, who is going to be caught up a telegraph pole fixing a very small "bug" to a line? It may be on the edge of a road or even on a private road out of a park. I feel that this is an unconvincing excuse for not doing something, and I hope that my noble friend, who is very forthcoming on this issue, will look at this question before the Report stage to see whether the simple duty could not be covered. It would seem to me to be so much simpler than the multitude of possible ways of catching a transgressor, to say that it is an obligation on the Post Office to protect the privacy of their networks. It is simple and it seems to me, for all the reasons adduced by the noble Lord, Lord Young, that it would improve the Bill. Perhaps my noble friend could look at that proposal sympathetically before we come to Report stage.

Lord Trefgarne

I am aware, of course, that in the light of recent events which have been referred to there is particular current concern about this matter, but I am persuaded that the present legal position is adequate. My noble friend referred to the stealing of electricity, which would be an offence under the Theft Act. I am speaking purely from my own personal knowledge in this matter, which may be at fault, but my recollection is that there have been a number of successful prosecutions based upon that offence and it may indeed be the principal course which the authorities would wish to take if an appropriate case came before them.

Lord Lloyd of Kilgerran

I am grateful to noble Lords who have supported me on this amendment and I am also grateful for the sympathy expressed by the Minister with the general tenor of this amendment, but I should like to ask a question. The noble Lord, Lord Morris, pointed out the contents of Clause 50—of which I was fully aware—that impose criminal sanctions. I was also fully aware, though not in detail, of all the Acts previously to 1981 which made it an offence to do certain things with certain instruments relating to the telephone. A new situation has now arisen. The Post Office is having transferred from it powers in relation to telecommunications and the new corporation is being set up. That is a totally different situation.

I should have thought it would allay the existing and increasing anxieties about the internal functions of this new corporation if a clause could be added to the general duties of the new corporation. I wonder whether the noble Lord the Minister would at this stage be good enough to say that he would consider this matter in relation to the discussions which are bound to take place in regard to Clause 50, so that the matter can be reconsidered at Report stage.

Lord Trefgarne

I have endeavoured to explain at some length the whole panoply of legal apparatus which exists, and which I must confess seems to me to be more than adequate to deal with the very understandable current anxieties which noble Lords have expressed. Despite the depth of those anxieties, which I share and which I appreciate, I hope noble Lords will agree that it is sometimes unwise to leap to the statute book with new proposals in the light of some very topical current problem which really ought to be dealt with, if it needs dealing with, after quiet and detailed and lengthy consideration. I remain convinced that the legal arrangements which I have described are adequate, and we shall in any event have an opportunity to consider this matter at greater length at a later stage in the Bill. I hope, therefore, under these circumstances the noble Lord will not wish to pursue his amendment at this moment.

Earl Bathurst

May I ask my noble friend Lord Trefgarne whether he would be satisfied with these penalties under Clause 50. I see there is no mention other than two years imprisonment. Under Clause 49, for improper use the penalty is £200, or imprisonment, or both. I wonder whether my noble friend is satisfied, and if noble Lords, Lord Young and Lord Orr-Ewing, in particular, are satisfied with the cash penalties which are not specified? I wonder whether my noble friend would give further thought to that at another stage.

Lord Trefgarne

That is a rather different point and certainly I would be happy to consider that if my noble friend wishes to raise it when we get to that point in the Bill.

Lord Beswick

May I ask the noble Lord one question? If this amendment were made in the Bill, what would be the position of the activities of Government departments who do on occasion intercept private messages?

The Earl of Gowrie

That would be entirely a matter for the Home Secretary. The position in this country is that any form of use of public services in that way can be done only by application to the Home Secretary.

Lord Lloyd of Kilgerran

In so far as I understood the noble Lord, Lord Trefgarne, in his reply to the question I had asked, he is going perhaps a little further than merely expressing sympathy for the general theme in the amendment. So far as I understood him, he said that this was a matter which would be discussed at a later stage, even of this Committee, in general terms. If my understanding is correct that this is a matter that can come up for discussion at a later stage, regarding the duties of this new corporation, in those circumstances I would beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Morris moved Amendment No. 17: Page 6, line 13, after ("court") insert ("otherwise than by virtue of the provisions of section 22(1)(a)").

The noble Lord said: This amendment is a paving amendment for two others standing in my name, Nos. 97 and 98, which I do not think I should discuss in detail now because those two amendments do raise matters of principle which directly affect Clause 3 of the Bill.

Noble Lords will be aware of, and many might be puzzled to appreciate that, the general duties of the corporation, the duty to provide a telephone service satisfying reasonable demands, the duty "to have regard to" should be so whittled down by the provision of subsection (4), which states: Nothing in this section shall be construed as imposing upon the Corporation, either directly or indirectly, any form of duty or liability enforceable by proceedings before any court". One can see the possibility of multiplicity of actions by consumers who are meant to benefit from provision of this duty imposed on the corporation and that it is probably wise to have such a catch-all provision within the Bill. I referred to the further two amendments down in my name, touching on the limitation of liability under Clause 22, where there is an exclusion of liability in tort, namely for any loss or damage suffered by any person by reason of failure to provide, or failure, interruption or suspension of the service. I believe this is quite wrong. It is a policy which has been stated on numerous occasions—by the Secretary of State in another place in his statement on 21st July 1980, in his statement in December, and indeed again by my noble friend Lord Trefgarne at Second Reading—that it is one of the fundamental intentions of the Bill that the public corporation in place of its monopolistic situation should provide a service fairly. If they are not placed in the same legal position as private corporations, I cannot see how they can in the same breath suggest that they can be acting in fair competition. I would be very much obliged if my noble friend could consider this point. I beg to move.

Lord Trefgarne

I am grateful again to my noble friend for the explanation he has given of this amendment. It is common practice in nationalised industry legislation for a public corporation's general duty not to be enforceable at law. The provisions in Clause 3(1) and (2) are essentially a general statement of British Telecom's role, and are not drafted in a way that would facilitate a court deciding how they might apply in a specific case. I can assure my noble friend that Clause 3(4) in no way detracts from British Telecom's obligations imposed under other parts of the Bill, and certainly does nothing to remove any legal liability they may have under the general law or Clauses 21 and 22. In the light of this explanation, I hope my noble friend will not wish to proceed further.

Lord Morris

I am much obliged for that explanation, which certainly clarifies what I laughingly describe as my mind. In the light of that, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

6.10 p.m.

Lord Morris moved Amendment No. 18: Page 6, line 16, leave out ("apart from a single telephone instrument").

The noble Lord said: This amendment to Clause 3(5) relates to a point which was discussed at great length in Standing Committee in another place. As your Lordships will be aware, the deletion of the phrase, "apart from a single telephone instrument", would have the effect of casting upon the corporation a duty merely to provide the wire coming into the house or the hereditament, and no duty to provide the end consumer equipment—in other words, the telephone. The analogy which is normally drawn is why should the public corporation, the British Telecommunications Corporation, have a duty to provide the end consumer equipment—namely, the telephone—when the water boards have no duty to provide washing machines; the electricity board's have no duty to be the sole providers of cookers and the gas boards have no duty to be the sole providers of central heating apparatus? That is the reason which was argued so ably and at such length in another place.

I should like to speak against the amendment in a small way because I am slightly concerned, as regards the amendment that was made in another place from "telephone hand set" to "telephone instrument", that "telephone instrument", which is not defined anywhere in the Bill, might also cover junction boxes which are necessary from all-weather wiring to internal wiring, because that, in a sense, is a part of the telephone instrument. I am concerned whether it covers PABX's or any other more sophisticated telephone equipment which works other than just the ordinary telephone. I beg to move.

Earl De La Warr

The mention of "single telephone instrument" at this point is in fact the only time that "single telephone instrument" is mentioned in the Bill. It is absolutely crucial, therefore, that it should stay in because although it talks about duties it is, in fact, at this point that we find the protection for British Telecom from the danger that it should have the right to provide the first telephone removed from it. I believe that in financial and practical engineering terms British Telecom would be at a grave disadvantage if it had this right removed from it. After all, telecommunications explosion or not, it has the duty to provide a first-class telephone service, and that, I believe, will always be its prime duty.

Out of the many arguments applicable to this matter, I should like to pick just three and I shall take up a little of your Lordships' time—and for that I apologise—in order to indicate how important it is that this right should remain with it. The first argument relates to installation and maintenance. As regards maintenance, I can draw from my own experience because I have spent many years putting television signals down cables to a television set at the end. Time and again I have experience of trouble when one man was responsible for maintaining the television set and another man was responsible for maintaining the cable and each one indicating that it was the other person's fault when things went wrong. So I regard the telephone as being an essential part of the network in this context. That also applies to installations. One can test a network to see whether it is working right with some very sophisticated equipment, or one can put a telephone on the end of it and listen to the telephone to find out whether it is making the right noises and performing correctly when one dials it. That to me is a reasonable and eminently practical reason why the first telephone should be regarded as the responsibility and the right of British Telecom.

Secondly, let us remember that telephone rentals make an enormous contribution to British Telecom's revenue. If the right to have the rental of the first telephone is removed and there is erosion of that revenue, then I think that the viability of British Telecom might be put severely at risk. Thirdly, in my opinion the retention of British Telecom's right to have the first telephone is a major protection to British manufacturers. Whatever may have happened in the past it is a fact that British Telecom, while it has a responsibility for buying the telephones and renting them out to customers, is far more likely to go to British manufacturers than to go abroad. I know that there was a case which arose in the past and I referred indirectly to that situation. The noble Lord, Lord Caccia, could have told me—but he did not wish to do so—that there was the case of Ericssons. Quite properly he told me afterwards that he did not mention it as he was the chairman of a very large competitor. Therefore, this has happened, but there is no reason why it should happen in future. If we do open up the first telephone to all and sundry, then I believe that British manufacturers will suffer very severely. Therefore, I make a plea—whether or not my noble friend Lord Morris had as his intention the destruction of the sole right to put in the first telephone—that we should see this amendment in that light and see it as a very dangerous amendment. I, therefore, invite the Government to have nothing to do with it.

Lord Orr-Ewing

I take exactly the opposite view. Am I right in thinking that 90 per cent. of the homes in this country, or a figure of that order, have a single telephone? If that is so are we not, by leaving this phrase in the Bill, restricting the competition very considerably and making sure that 90 per cent. of the domestic users do not feel any of the winds of competition at all in any of the choices which they are meant to be given under this Bill or in any of the liberalising factors under the Bill? Admittedly, if they are prepared to pay the extra money they can presumably get someone to disconnect their telephone and put in a fancy one which they may prefer. However, that is a very small choice.

Let us be honest. This provision was put into the Bill because it is what the Post Office engineering unions said that they wanted in the Bill and if they got it they would go along with it. Do not let us pretend that it will benefit the consumer. It will certainly benefit industry; it will benefit the users of the PABXs to some extent—particularly the new advanced ones—and I expect that this liberalisation will benefit hotels and other mass users of the telephone. Indeed, before I leave that particular matter I should like to say that I read somewhere that they were not only concerned about the wiring of the first telephone, but also concerned about the carrying out of the wiring of the other branches in a domestic house. Could I have an assurance that that is not so, and that once a single telephone has been installed with a junction box at the entrance to the house anyone is free to get a person to run domestic telephone wiring to extensions and to use their own extensions thereafter? I should have liked to see some sort of escape clause, because what happens if British Telecom does not match up to the duties given to it in the clause that we are discussing?

Let us suppose that it is not able to operate a telephone service with efficiency and economy—and there is no yardstick for that. Let us suppose that it is not able to meet the points made in paragraph (c) of: improving and developing its operating systems". In those circumstances it would be nice to have an escape clause to say that if it is not able to match up to its responsibility, the Minister would reserve the right to license other people to make these installations.

How do we measure efficiency? I suggest we say that if the waiting time is more than 10 times what it is in the private system in the United States it is not unreasonable to give someone else the opportunity to provide this service to 90 per cent. of the homes in this country. As noble Lords will know, if you open up a new business in the United States you generally expect to get the telephone the next day. Here you can wait three months. Of course, the telephone organisation is doing its best to catch up and it has made very substantial progress. But it is still an intolerably long time for someone to get his telephone system adapted if he is moving into a new house, changing his requirement or dividing up a large house into a number of flats in order to provide extra accommodation for people.

Earl De La Warr

If my noble friend will give way for a moment, is he not getting confused? We are talking about the instrument; we are not talking about the network. Of course, it sometimes takes a long time to get the telephone; it is taking me a long time down in Sussex to get some cottages on the telephone. But that is not because telephones are short; it is because the lines from the network are short. Will he please consider confining his remarks to the particular issue under discussion, which is the provision of telephones by British Telecom ordered from various manufacturers, and no more than that?

Lord Orr-Ewing

It is true that in the rural areas the circumstances are different, but in a town it is a question, if the cable is in your roadway, of getting someone to come along—and generally it is two or three people—to extend the line into your house at a terminal point, which I hope will be a plug and socket. Thereafter, a person could plug in his telephone and arrange for other rooms in his house to be wired so that the telephone could be plugged into another room, for instance a bedroom for evenings and nights, or perhaps in a further room where a person is sick. That would give the greatest flexibility and the optimum use of capital equipment.

However, at the moment that first telephone must be the responsibility of British Telecom and I am only suggesting that the Minister should have a little more liberty to say that in certain circumstances, and perhaps in certain areas, there should be some freedom for other people to offer this service instead of leaving the monopoly entirely in the hands of British Telecom.

Lord Ponsonby of Shulbrede

I take exactly the opposite view from that of the noble Lord, Lord Orr-Ewing, and in fact find myself very much in agreement with the remarks made previously by the noble Earl, Lord De La Warr. I think that it is quite essential that British Telecom should have the means of carrying out end-to-end testing of telephone lines in the interests of ensuring a satisfactory and efficient service to customers generally.

This end-to-end testing means that there must be a reliable and clearly specified termination for which British Telecom has maintenance responsibility on every first line of an installation. The prime instrument policy provides for this and it is the simplest way of ensuring against a known set of parameters by which it is possible to test a particular line. Unless each installation includes at least one British Telecom telephone instrument, maintenance engineers would have to visit an installation after a fault had been reported to carry out the end-to-end tests which enable most faults to be diagnosed. This diagnosis is currently carried out from within the network and on many occasions shows a visit to the customers premises to be unnecessary.

Without such a testing facility the arrangements would be much less efficient and there would undoubtedly be needless visits to customers' premises. These visits would be substantial in number, and their costs could be about £20 a visit. Indeed, in speaking to this amendment, the noble Lord, Lord Morris, tried to draw the analogy of the electricity industry and the gas industry and the provision of facilities to those services. I think that all noble Lords will appreciate the terrible problems with which one is occasionally faced in obtaining repairs to those particular facilities. Obviously the responsiblity for repairs to those facilities could not in any way be that of British Telecom.

Undoubtedly, if the situation which the noble Lords, Lord Orr-Ewing and Lord Morris, envisage comes about, the costs to the customer would escalate. Indeed, the charges would have to be spread between all customers as a whole. Customers could be further inconvenienced by demarcation disputes where, for example, British Telecom found a line to be satisfactory but the private instrument supplier was not prepared to repair the instrument or, despite British Telecom's evidence, denied that the instrument was, indeed, faulty. In referring to his widespread experience in the television rentals industry, I think that the noble Earl, Lord De La Warr, was making just that point.

Earl De La Warr

I was using a very close analogy.

Lord Ponsonby of Shulbrede

Yes. To sum up, I think one can say that the prime instrument policy, as envisaged in the Bill, would be strongly in the customers' interests in terms of cost, service and practicability. The noble Earl, Lord De La Warr, also very properly referred to the disadvantages which would fall to British industry if, in fact, the prime instrument policy was to be abandoned. The vast majority of telephone instruments which are available, other than those from British Telecom, are of foreign manufacture, and it is likely that to abandon the prime instrument policy would result in a large share of the new market going to overseas manufacturers, with a consequent loss of jobs for British industry and an increase in imports. Therefore, this prime instrument policy also protects the overall national interest.

Perhaps I could say a few words on the question of wiring, as the noble Lord, Lord Orr-Ewing, spoke on this. As proposed, the prime instrument policy implies a monopoly of provision of internal wiring up to and including the socket or terminating point for any privately supplied extension instruments or other apparatus. This wiring is not necessarily simple, though superficially it may appear to be so. For example, there are possible safety hazards if it is run adjacent to mains wiring, and standards to avoid this possibility would be complex and, indeed, very difficult to enforce. Moreover, instruments which are wholly compatible with the network may not be compatible with each other. Only by retaining control of the internal wiring can British Telecom hope to minimise these problems, which would not be in the customers' interests. Therefore, it is important that internal wiring should continue to be included in the prime instrument policy. No doubt when he replies the noble Earl, Lord Gowrie, will say something on this.

In conclusion, British Telecom's instruments are not expensive; they are reliable and there is countrywide maintenance support for them. The requirement for one British Telecom instrument on each first line would not be onerous for the customers, and the advantages to them would be considerable. I hope that the Government will resist this amendment.

6.30 p.m.

Lord Torphichen

There is a saying of the Arabs something like, "Never let the camel's nose inside your tent". I am afraid that the prime instrument policy, which somehow has been sold to this Government, is very much the camel's nose followed by the entire camel right into the tent. The question that I have to ask of my noble friend on the Front Bench is: when this prime instrument is installed, possibly with some wiring specified by the customer or forced on the customer, is the customer then allowed to disconnect the instrument to connect his apparatus, or must he keep connected to the exchange line this prime instrument?

The best way to illustrate the problem is to point out that if you have a single telephone set installed in your house at present, and you go and buy for £1, £2, or £10 a surplus telephone set and try to connect it up in parallel, it does not work because you have to disconnect the coils of one instrument while you dial with the other instrument, otherwise the transformer in the instrument not being used damps down the dialling pulses from the one you are using and you cannot dial out properly. If you wish to do it properly you have to take the first instrument apart, alter some of the connections on the back of it, and put it together again with a third wire on it to lead to the other telepone set, or fourth, or fifth wire depending on how complicated an installation you want.

The serviceman then comes round at some later stage because your wife, or nanny, or housekeeper, has complained that the phone is not working. He sees that you have altered the contacts on the back of the telephone and says, "Ah, you have altered that for two instrument use. You must have another handset in here. That is illegal". He then goes round, snip, snip, snip, and takes away your illegal handset. In the same way, regardless of what this Bill purports to have done to the telephone monopoly, if British Telecom can now enforce that you have a telephone handset attached to your exchange wire which is quite incompatible with what you wish to attach in the way of a PABX or other handset within the house, then there is nothing you can do about it. You might as well not have had the monopoly altered at all.

Lord Lloyd of Kilgerran

As my name is associated with this amendment, it appears that the noble Lord, Lord Morris, and I put down identical amendments. We have had a wide-ranging debate. May I indicate why I put down this amendment. The logical boundary of the monopoly of the new corporation should be the point of entry into a subscriber's premises. I am very glad to hear so many noble Lords agreeing with me. Therefore, from that point onwards, in the spirit of liberalisation which the Government have so accentuated from time to time, it should be free for all—if I may use that expression to supply any apparatus which can be joined to that point. I would therefore be surprised, in this atmosphere of liberalisation which the Government have introduced into this matter so properly, if the arguments of the noble Earl, Lord De La Warr, were to be accepted in this matter. I am sure that certainly the Government will not accept the arguments of the noble Lord, Lord Ponsonby, when he emphasised how important it was to instal a telephone for the purposes of testing. This is really not the present procedure.

As the noble Lord, Lord Ponsonby, has said, the answer, of course, to my proposition that the boundary for the monopoly should be at the point of entry into the subscriber's premises, is that you must be able to test it. If the noble Lord, Lord Ponsonby, had seen one of these expert Post Office engineers at work he would know that the telephone is not an adequate testing device. Any British Telecom engineer would adopt the same kind of practice prevalent with Post Office engineers, and that is to use a portable testing device in order to try to locate where the fault is. If no fault is found in this way then, equipped only with non-British Telecom apparatus, the onus will be on the subscriber to call the supplier of that apparatus to resolve the fault.

It is not necessary for the purpose of this Bill that there should be services which include the installation of one telephone device. In the spirit of liberalisation of the Government, I would be very surprised indeed that they would reject this amendment out of hand, because it seems to me that the logical boundary for the British Telecom monopoly is at the point of entry into a subscriber's premises.

Lord Swinfen

One of the advantages to British Telecom if this amendment is carried is that they themselves will be able to sell the first instrument to the consumer, and would therefore be able to reduce their own capital and borrowing requirement, which I think in the future could be extremely important. It has also been said that they would be at a disadvantage against competitors in acquiring telephones to supply to customers. I would have thought that they were in an ideal position at the moment, being the holders of a monopoly, whereby they could acquire telephones in much larger numbers and therefore obtain better contract prices from the suppliers to enable them to sell the telephone to their clients at lower costs than anyone else.

The Earl of Gowrie

This has been a lively debate. I enjoyed other stages of the Committee but it seems to have really woken up in the last few moments. I think though that there is some misunderstanding in the Committee about what is here, if not the prime instrument, the prime policy of the Government. What the Government have effectively done is to recognise—and I refer the Committee back to the debates we had at an earlier stage this afternoon—the social service element in the installation of the prime instrument, and that we are not in that regard thinking about competition at present. I refer your Lordships to the considerations of providing on demand to the citizen in all parts of the country, including uncommercial areas, access to the telecommunications network.

What we are trying to liberalise is the goods and services which can be provided on that network. I do not think that that should be allowed to be confused. But there is an element—and I shall put this bluntly, and I hope it may reassure some of my noble friends particularly—of trials, as it were, for British Telecommunications in their provision of the network into which these goods and services can slot. Under the Bill the Secretary of State will have power to licence competing services and the Government will be watching British Telecommunication's performance very carefully. But at present we intend to leave the responsibility of the first telephone solely to British Telecommunications and we want to see how this new régime, so to speak, works out.

My noble friend Lord Morris wanted a more scientific definition of "telephone". I think that for legislative purposes a telephone is a telephone is a telephone, as Gertrude Stein would have said. A dictionary might define "telephone" in this context as "any terminal apparatus with a voice transducer", and those technically-minded among the Committee will, I hope, nod wisely at that and be reassured by what I have said.

That brings me to another point of importance, one raised by my noble friend Lord Orr-Ewing. He said, and to some degree the noble Lord, Lord Lloyd of Kilgerran, echoed him, although in rather a different context, "This is rather woolley liberalisation because 90 per cent. of domestic users have just one telephone". In fact, the percentage is 85, but that is not the point I am making; rhetorically, as it were, 85 and 90 are no different for the purpose of argument. The point is that most of us have a telephone as a form of public service for which we pay. What we are dealing with in this area is predicted expansion all over the western world of information technology which can slot in, so to speak, to the mainframe service which is being maintained as a service under licence by British Telecommunications, both of which—both the new goods and services which the customer, whether as an individual consumer or as a business, may be attracted by—can be found compatible with the ordinary basic service that he or she gets as a citizen. Therefore, I do not think there is any incompatibility there.

The point of allowing for the time being British Telecommunications to maintain a monopoly of the network—this point was made clearly by the noble Lord, Lord Ponsonby—is that all these new goods and services (in what is a lively field for industrial expansion, both at home and abroad) must have a compatible network on which to operate. To give a simple but not wholly accurate analogy, although it has some accuracy: we are comparing the provision of the road network with the vehicles that travel along it. It seems therefore at the moment sensible that there should be a closely observed and scrutinised monopoly by the Secretary of State of the road service in my analogy, although we are encouraging the free winds of competition (with some staging arrangements to protect the British industry and allow it where we can to have time to adapt to the competition) to provide the vehicles. I hope that with those assurances and with a wholehearted endorsement of what my noble friend Lord De La Warr said, the amendment will not be pressed.

Lord Orr-Ewing

I was comforted by the phrase used by my noble friend Lord Gowrie, "At present the first prime instrument will remain British Telecom's monopoly ", because that signifies that perhaps a time may come when it will be less monopolistic. I was not persuaded by the noble Lord, Lord Ponsonby, saying that testing a telephone was a highly technical business. If my telephone goes wrong I say to the engineer, if I can get through, "You put your instrument on the end and I will go round the dial ". He replies, "OK, guv" and I then dial 0, 1 2, and all the way round the dial and I am told if there is a fault on the timing of my dial. There may be some other fault, and on the whole the telephone instruments are not the things that go wrong, and more and more as we come to solid state, microprocessors and the like, it will not be those parts that go wrong. The fault is generally in the wiring between one's home and the nearest telephone pole, or further down the line; perhaps in rural areas a branch or tree has fallen across the line. Very seldom have I found the fault to be the telephone itself. So I was not greatly inspired by the argument of the noble Lord, Lord Ponsonby.

I must return to the question of extensions. We really are coming to an era of DIY. It is the biggest expanding industry in this country. Home improvements and DIY are, with a shorter working week and more recreational facilities, pastimes almost every person indulges in. People arrange extra aerials for their television sets so that, say, an old person in the house, a relation or grandmother, can watch TV in another part of the house. I should like to see more TV extensions put in by people themselves. After all, nowadays many people wire up their own burglar and fire alarms. Why should one not wire up telephone extensions in the same way?

I have always been suspicious when people say, "To do that yourself is a highly technical problem". The classic case was the Suez Canal. Users were told that to get a ship through the Suez Canal was such a technical business that if the pilots were withdrawn no ships would go through. In fact, the Egyptians were taking ships through 48 hours later, and there was not one accident. That blew the idea that it was a frightfully technical business. Since 1956 I have been deeply suspicious when I have been told, "That is a desperately technical thing to do ", meaning to wire in an extension to one's telephone or place in position an antenna for a television. Let us allow people to stand on their own feet and make their own home improvements without risk—and if they make a mistake and the thing does not work they will soon learn how to put it right.

The Earl of Gowrie

I followed my noble friend's eloquence all the way, but I could not help having a sort of Pavlovian reaction when he mentioned burglar alarms. My life is made intolerable and miserable, as one who lives in a commercial rather than a residential area in the centre of London. At weekends in particular we have a plurality of burglar alarms, all amateurously installed, all going off and wrecking my ability to mug up debates for your Lordships.

The serious point I wish to make is that I am not trying to discourage people in any way from do-it-yourself activities and such pursuits. However, one person's DIY must not interfere with the basic network. All must be compatible with the basic network, which we all use as a form of service or communication link. That is why we have, initially with some delay or consideration—it was not a sort of automatic response—decided under licence to see how the network or service monopoly might work out in the hands of British Telecommunications, while encouraging a great plurality of goods and services that can be developed for that system to use. Just as we have done, I hope my noble friends will give that monopoly the benefit of the doubt, reassured that there exist in the Bill the powers to licence other network alterations or alternative services to the Secretary of State, should that need become clear.

Lord Morris

I am grateful to my noble friend for his comprehensive explanation in rebuttal to the amendment. I wish in particular to pay tribute to my noble friend Lord Swinfen for the valuable point he made, which I had neither the wit nor understanding to consider, and arising out of that, the Minister may be able to assist me by answering a question. Let us suppose that a telephone engineer were to install a telephone and the customer writes back and says, "To my astonishment not only was the telephone engineer efficient and quick, but he placed the wires in the position that I wanted rather than he wanted. Thank you very much indeed, but I do not particularly like the telephone that you rent out. I do not want anything more and I enclose it herewith".

Surely the Post Office would be in a far better position if it could sell its instruments; Post Office people are the first people to gain entry into the house. They could sell to the customer in a far better way than under a law compelling them to provide an instrument where the choice is limited. I believe that the point that my noble friend made is certainly worthy of consideration. Not only Members of your Lordships' House, but also Members of the other place felt very strongly about this matter and I feel sure that we shall return to it at a later stage. But for the moment I beg leave to withdraw it.

Amendment, by leave, withdrawn.

The Deputy Chairman of Committees (The Earl of Listowel)

The question is that Clause 3 stand part of the Bill?

Lord Caccia

With your Lordships' permission, before Clause 3 comes before you, I should like to move a separate, additional clause, in Amendment No. 19, if that is in order—

The Deputy Chairman of Committees

I think that the Chair must first put the question on Clause 3. The question is that Clause 3 stand part of the Bill? As many as are of that opinion will say "Content", to the contrary, "Not-Content"; the Contents have it.

6.52 p.m.

Lord Caccia: moved Amendment No. 19: After Clause 3, insert the following new clause:

("Restrictions on subsidiaries

. In carrying out any activities other than those to which section 12 applies, the Corporation shall act as if it were a company engaged in a commercial enterprise and it shall so exercise its control over each of its wholly owned subsidiaries that carry on such activities to ensure that the subsidiary so acts, and in particular that such activities are carried on by each subsidiary, without financial subsidy from the activities of the Corporation or any of its other subsidiaries.").

The noble Lord said: I wish to move this amendment and, as the Committee will recognise, it does not question the general purposes of the Bill, but rather it is concerned with the way in which the Bill will be administered when enacted, within the general aims which the Minister has more than once underlined. Those are the general aims of a prosperous—I think his words were "vigorous and lively "—telecommunications industry; that is, British Telecommunications and the private sector together.

Whenever the corporation sets up wholly-owned subsidiaries which can engage in activities that are in competition with the private sector, as licensed under Clause 15, it is surely of some importance that the competition should as nearly as possible be on level terms. Since the corporation will retain its monopoly of running the national telecommunications network, from which it derives the major part of its revenue, it is not unnatural that the private sector should be anxious that the operation of such subsidiaries should not be indefinitely subsidised by revenue so generated.

Admittedly it might be argued that private sector companies will not be under any similar constraint and can, if they wish, subsidise any activity in competition with the corporation. Commercial enterprises cannot, however, afford to subsidise indefinitely loss-making activities, and will normally abandon them if they show no reasonable prospect of becoming profitable and providing a proper return on the investment in them. It would, however, be possible for the corporation to provide indefinite subsidies, since it has freedom to vary its tariffs for use of the network, and can thus derive the necessary revenue from its monopoly activities.

Of course, in the start-up phase funds are normally made available by the parent organisation, but these are expected to be repaid eventually and are interest-bearing. Such a provision of funds is therefore quite different from an ongoing annual subsidy.

We are not the only country where this problem has arisen, nor is this the only industry where the private sector does not always face fair competition, however that might be defined. In Germany, for instance, it has, I understand, been before the cartel office and it has recommended that the market for telecommunications terminal equipment should be liberalised and it has recognised that the strength of the Bundespost is so great in the market that it should be restrained altogether from competing.

Of course this amendment does not go as far as that. It simply seeks some restraint on the use of the monopoly power possessed under the Bill by British Telecommunications. I move the amendment in the hope, indeed with some confidence, following what the Minister has already said on Clause 3, that the Government will be able to say something to give some comfort to the private sector without in any way taking the rug from underneath British Telecommunications. I beg leave to move Amendment No. 19.

The Earl of Gowrie

This new clause, moved very clearly by the noble Lord, Lord Caccia, falls into two parts. The first part enjoins BT and its wholly-owned subsidiaries to act as a commercial organisation in those activities not covered by its exclusive privilege. I can understand, and indeed sympathise with, the intention behind the amendment, which clearly accepts that BT has a wider responsibility towards the community in its role of provider of the basic services. As I said when we discussed the point earlier this afternoon, this is recognised in Clause 3(2) of the Bill. What are underlined there are the social, commercial and industrial needs of the country, as well as efficiency and economy.

I understand that in drafting the amendment the noble Lord has sought to limit the constraint to activities not covered by the monopoly and I admire his ingenuity, though I do not think that his solution is altogether successful. The terms of Clause 12 refer only to the running of telecommunications systems and would not cover all the ancillary activities necessary to provide a system. Clause 12 does not indeed cover even the prime instrument, the provision of which would therefore be caught within the terms of the amendment, and we should be back in the territory of the previous debate. Where, however, British Telecommunications and its wholly-owned subsidiaries are diversifying outside the main functions of the corporation, it is subject to the controls in Clause 8 of the Bill, and Clause 8(4) contains words almost identical to those in the first part of this new clause. That might reassure the noble Lord, Lord Caccia, and allay his worries on that score.

The second part of the new clause seeks to prevent by statute any cross-subsidisation between different competitive activities, whether carried out by British Telecommunications or its wholly-owned subsidiaries. The Government have made clear that we expect British Telecommunications, when in competition with the private sector, to do so through subsidiaries. That will ensure that the accounts will clearly show whether there is indeed any cross-subsidisation. But it would not be right to prohibit all cross-subsidisation by statute. The Director General of Fair Trading will monitor the development of competition in telecommunications and will be able to consider taking action if there is any unfair competition. Of course I agree that it might well be unfair for the corporation to use its monopoly revenues to subsidise its competitive activities, but it is not necessarily unfair for one competitive activity to support another. That is of course very appropriate when starting a new project and is indeed common practice throughout the private sector of industry. The key question is whether or not a particular cross-subsidy is unfair in competition terms, and the proper person to consider that is the Director General of Fair Trading. So I find the last three lines of the new clause a little inflexible and I would suggest that they might run counter to the spirit—with which I agree—of the first part of the new clause.

I have sought to give an assurance of two kinds to the noble Lord, Lord Caccia. One is that the spirit behind the first part of his new clause is, in fact, echoed in the Bill and the other is that the competition which we seek to encourage is subject to disciplines which allow judgments to be made as to whether it is fair. I hope that with those assurances, the noble Lord will not feel it necessary to press this amendment.

Lord Glenamara

I apologise for speaking after the Minister. I thought I saw the noble Earl, Lord De La Warr, rise. I looked away and when I looked back the Minister was on his feet. This new clause appears to do two things. First of all, it says that the corporation and its subsidiaries must act as if they were commercial enterprises and, secondly, in particular, it says, there should be no cross-subsidisation between BT and its subsidiaries or among the subsidiaries. The words "in particular" are clearly in the context of the subsidiaries acting as if they were commercial enterprises. In other words, there is inherent in this new clause an assumption, a premise, which says that commercial enterprises do not cross-subsidise—and that is plainly nonsense.

Lord Caccia

If the noble Lord will allow me, I specifically accepted what he is now saying, that this is a practice which goes on, but only for strictly limited periods.

Lord Glenamara

The noble Lord did say that. All that I am saying is that, in the wording of the new clause, that is implied. On the question of public spiritedness, this is an extremely important point and a point on which the Post Office has always had a great deal of pride.

British Telecom, under Clause 3 of this Bill, will have a duty to provide a public service in every part of the United Kingdom. I think that it would be a great pity if, in this new competitive environment, BT lost any of their public spiritedness. It has always been a most remarkable and agreeable feature of the British Post Office. I agree that these activities have got to have a cutting edge, and I used that very term in the Second Reading debate. But it has always been a question of balance between having that, on the one hand, and, on the other hand, having (as I say) a very public-spirited attitude towards their activities. The noble Earl, Lord Gowrie, spoke about the social service aspect of it. I think that that term is a bit more restricted, but we broadly mean the same sort of thing. I think the Post Office has always been very proud of that. It is a question of balance. I feel that this Bill may upset the balance and I think the noble Lord's new clause will certainly upset that balance.

If the Post Office does lose that, or lose any of it, it is going to be because of what the Government are doing to it in this Bill: that is, forcing it to compete with private enterprise, but with its hands tied behind its back by the ridiculous borrowing constraints they impose on it. We have said this many times before and we have got to go on saying it. I am not spreading alarm and despondency. It is the duty of an Opposition to point out the consequences of proposals which the Government bring forward. As the noble Lord who introduced this said, private enterprise will do what it pays it to do. If it does not pay it, it will stop doing it. I believe that ultimately BT may also do only what it pays them to do.

They will be at a double disadvantage, I think, if this is carried. The noble Lord wants to tie their feet as well as their hands by forbidding cross-subsidisation. I do not think—and this is the purpose of my intervention and this is why I am so sorry that the noble Earl spoke before I did—that, for all the hints we have had dropped about cross-subsidisation—(and I was pleased to hear the noble Earl saying it was not going to be forbidden) we are entitled to ask a few questions about it, to ask the Government what their intentions are. That is the purpose of my intervening. I hope that the noble Earl might feel able to rise again and lift the veil a little more about their intentions with regard to subsidiaries.

I hope that he will not insult our intelligence by quoting the arm's length subsidiaries of AT & T, in the United States. AT & T is a different animal altogether from British Telecoms. There is one rumour about a type of subsidiary which alarms me, as a Northerner, very much indeed. It is the rumour that it is the intention of the Government to have set up regional subsidies, subsidies to carry out the functions of the Post Office on a regional basis. Coming from the region of Britain which has the highest unemployment (apart from North Ireland), I must say that I would take a very dim view of that if regional subsidies were set up without any kind of cross-subsidisation. This may only be a rumour and perhaps the noble Earl will reassure us on this.

There are many other questions I would like to ask. Do the Government intend to stop BT from subsidising the development of new competitive products and services? If the answer to that is, Yes, how can this be justified when there will be no similar inhibition on private sector companies nor, indeed, on foreign-owned private sector companies adopting such conventional marketing techniques for new products as loss leaders and marginal pricing?

I apologise for speaking so long on this subject but I am simply intervening to ask the noble Earl, Lord Gowrie, for a little more information about the Government's intention on subsidies. I shall be interested to hear anything he has to say on it. As far as the new clause is concerned, we oppose that because, (a) it may upset this very important and rather treasured balance between commercial considerations and public service considerations which has always characterised the British Post Office, and (b) it would forbid cross-subsidisation; and that would impose an additional disadvantage on BT to which its private enterprise competitors would not be subject. That would not lead to fair competition but to grossly unfair competition.

Lord Orr-Ewing

Before the noble Earl replies, may I say that I think it is very difficult when one wants to liberalise and have competition to ensure that it is fair competition. I would support the spirit of this amendment. I had two experiences in my industrial life of trying to compete with British Steel. To try to run your own steel stockholders when they are running steel stockholders in competition with you and when they have a special tie line to British Steel is very difficult—particularly when you have to raise your own finance while all their finance is underwritten by the Government of the day, as indeed every nationalised industry must be. One is in competition for finance; they get a very much cheaper rate.

The same applies to British Shipbuilders. We were assured there would be no unfair competition when British Shipbuilders was nationalised by the previous Government. I hope it is the last of their nationalisation Acts. We were told that ship repairers would have fair competition. In fact, they have been undermined; and British Shipbuilders, with the help of the taxpayer, are quoting repair prices at less than half the actual costs. Who is going to stop them? We are told that the Office of Fair Trading will stop them. Well, they do their best, but they are awfully slow-acting people. The case of spectacles, which came up in Question Time today, was referred to the Office of Fair Trading a year and a half ago. It was pointed out that one could buy admirable spectacles—this is a pair—for nine dollars in the States whereas if you try to get them here you pay five or six times as much. We asked that the Office of Fair Trading should examine this. We have not heard anything.

There is not much time. If small firms wish to compete with big monopolies, then a quick reaction is important. I would hope that perhaps some improved and quicker procedure can be found if the Office of Fair Trading are to be the arbiters of this issue. Otherwise, some of these small firms will go to the wall while they are waiting for a judgment as to what is fair.

The noble Lord, Lord Glenamara, makes his points in such a reasonable and sensible voice that one sometimes wonders whether he really means what he says. Here is the poor Post Office, which has had a monopoly for 90 years. That is a fairly good start. It has done all its research and development. The research department used to be on the edge of my constituency at Dollis Hill—and very good they are. Does the noble Lord mean to say that, after 90 years of monopoly a little bit of wind of competition is to blow them off course and into bankruptcy? I think he underrates the ingenuity, thrust and the power of the Post Office which, incidentally, is endorsed in this Act rather more than I would wish. To pretend that they are tied hand and foot—the poor little Post Office! They are only given £2,000-million of capital expenditure in the current year. Poor chaps! My God! What would private industry do if they were given £2,000 million of capital to spend in one year? They would throw their hats in the air. If they had been given a monopoly for 90 years before that, they would be even more joyous. I do not think that it is fair comment.

Lord Glenamara

Would the noble Lord bear in mind that private enterprise do spend £2,000 million a year?

Lord Orr-Ewing

One firm?

Lord Underhill

The noble Lord, Lord Orr-Ewing, is concentrating upon the position of the huge monopoly of BT as against small firms. But there is also the other angle; it would be the position of some of the big private competitors. These are the people who might quite easily run the loss leader process. It has been argued that this can be continued by a company only for a short period. I am not a great company expert, but we all know the history of by-products where the major process has been run at a loss in order to get the continued profits from by-products. We must ensure that when people talk about fair trading, it must be two-way.

I should like to ask the noble Earl whether when any complaint is to be made against British Telecom and that goes to the Office of Fair Trading, will there be any facility for British Telecom to complain about what may be a similar complaint of unfair trading on the part of any private sector company? It seems to me that if we are talking about fair competition that must work both ways. I hope that the noble Earl might be able to answer that.

The Earl of Gowrie

We seem to have strayed back into the area of the private versus the public sector, a debate which has been going on in this economy for a long time and which I often think has misleading elements in it. I wonder whether I could clear up some of these simply and expeditiously by quoting some words uttered by my right honourable friend the Secretary of State for Industry explaining the Government's intentions in this area at Second Reading in another place. He said: We need a strong and successful British Telecommunications not only competing with the private sector but co-operating with it in joint ventures. We hope to see BT co-operating with the private sector in, for example, funding auxiliary services which depend on the telecommunications network and attracting private capital into subsidiaries set up to market subscribers' apparatus. Provided BT is not in control of a partnership, its financing can be conducted outside the PSBR and in addition to the investment programme of which I have spoken". I do not think it is a simple matter any more in this economy of "public sector, bad"; "private sector, good"; or vice versa. These two sectors are very much related and I would have thought, with the expansion of information technology in the way that we would predict, that relationship will strengthen rather than weaken.

If the noble Lord, Lord Glenamara, is kind enough to read what I said in answer to the noble Lord, Lord Caccia, in Hansard tomorrow—and I read that part very carefully from my brief—he will see what the Government's attitude to the cross-subsidisation is. I do not mind repeating it if he would like me to do so. I said that the Government have made it clear that we expect British Telecom when in competition with the private sector to be in competition through subsidiaries and this would ensure that the accounts will show whether there is indeed any cross-subsidisation.

On the point that my noble friend Lord Orr-Ewing made, that all of us or any of us who happen to be in business, whether it be a small business or a business trying to develop products to operate within this system, cannot spend all our time waiting around from the Director General of Fair Trading, that is fair enough. What I was saying in answer to the noble Lord, Lord Caccia, was that it would not be right to prohibit all cross-subsidisation by statute. As the noble Lord, Lord Caccia, pointed out—and as I echoed in my original answer—there are various forms of cross-subsidisation which of course are not only right but eminently necessary. One might use the assured success of a product that one had developed to take a "punt" on developing another and riskier product, and none of us would wish to discourage that. It seems to me that the key question is whether a particular cross-subsidy is, as it were, crossing from the monopoly sector of British Telecommunications' activities to the sector in which it must fairly compete.

I also altogether endorse the remarks made by my noble friend Lord Orr-Ewing that we should not be too miserable about prospects for competition of the Post Office in its new British Telecommunications guise. It has a long lead, a great deal of respectability in this field, admirable men and women working in it, a backlog of a marvellous research programme as the noble Lord, Lord Lloyd, mentioned, and I think that it is being over-protected by the noble Lord, Lord Glenamara, in the tones of a mother tigress fighting for her young.

I do not think that is the right kind of image to ascribe to the present Post Office or the new telecommunications corporation. What we want is the kind of compatible system within the network publicly provided and the private opportunities which that network gives and which the breaking of monopolies which this legislation gives. I hope that with that assurance the noble Lord, Lord Caccia, will feel able to withdraw his amendment.

Lord Caccia

I am grateful to the Minister for what he has said both on Clause 8, one part of the amendment, and the Director-General of Fair Trading on the other. This is obviously a difficult area to prescribe in statute. This was more in the sense of a probing amendment to get information and I happily withdraw the amendment.

Amendment, by leave, withdrawn.

The Earl of Gowrie

I do not know whether it will be convenient for the Committee if we now adjourn. It is a matter for the Committee to decide, but I suggest that we adjourn until to eight o'clock. I beg to move.

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

[The Sitting was suspended from 7.18 until 8 p.m.]

Clause 4 [Redistribution of property, rights and liabilities among wholly owned subsidiaries]:

Lord Morris moved Amendment No. 20: Page 6, line 33, leave out ("provision of services") and insert ("running of telecommunication systems").

The noble Lord said: As your Lordships know, this clause provides for the redistribution of property, rights and liabilities among wholly owned subsidiaries. In Clause 4(3), there is a specific reference to the transferor's undertaking …concerned with the provision of services which, by virtue of the provisions of this Part, the Corporation has the exclusive privilege of providing…". Nowhere in this Bill is there any right for the corporation to provide; in other words, the exclusive privilege of providing. It can only mean a reference to the provisions of Clause 12, which refers throughout to the exclusive privilege of running telecommunications systems". The reference to this exclusive privilege is not the same thing as the running of a system. If one refers to Clause 15(1), the clause by which the Secretary of State may issue licences, there is a direct reference for the running of such telecommunications systems. The reason I have tabled this amendment, and indeed also Amendments Nos. 21 and 22, 34, 35 and 36, is to draw your Lordships' attention to the fact that the Act appears to refer to a power, while there is in fact an exclusive privilege to provide by stealth, if you like, without any such power existing—there is only the exclusive privilege to run systems, which is not the same thing as an exclusive privilege to provide services. I beg to move.

Lord Lyell

The noble Lord was good enough to speak to three amendments in Clause 4. He has explained very lucidly and is entirely correct in mentioning the British Telecom monopoly, in terms of the running of the system and not necessarily in dealing with particular services as such. I hope he would accept that there are a number of places in the Bill where we believe it is much more easily understood if one refers to what we call the provision of services rather than the running of systems.

I hope this is not too much a matter of semantics. But I am sure the Committee would agree that the concept of what we would call "monopoly services" is far more easily understood. The definition of what we call "monopoly services" can be found in Clause 12(4) of the Bill. The services are defined as …services the provision of which by any person other than the Corporation would necessarily infringe the exclusive privilege which is conferred by subsection (1)". This link in Clause 12 provides the exact connection my noble friend is seeking. Therefore, I hope that, despite the semantics which may have crept in, he would agree that the three amendments proposed in Clause 4, and the three later amendments in Clause 6, are not necessary and that what is in the Bill covers what he seeks and what we seek.

Lord Morris

I am most grateful to my noble friend for the explanation. I cannot say that I am the least bit happy with it. It was this very point I wished to raise, because in Clause 12(4) there is a reference back to subsection (1) which specifically uses the term the exclusive privilege of running telecommunications systems". Then, as it were, by stealth we have: references in this Act to services which, by virtue of the provision of this Part, the Corporation has the exclusive privilege of providing…". I am not being pedantic here and I will certainly look at it again. It might suit my noble friend on the Front Bench to delete the words, "exclusive privilege" and insert, "power to provide". Under the provisions of Clause 2 of the Bill there is no doubt that the British Telecommunications Corporation is granted the power to provide services, which is not the same thing as to refer to the exclusive privilege of running telecommunications systems. Before withdrawing this amendment, may I ask my noble friend whether his department could be asked to have a close look at this because I believe that it is an important, even if minor, flaw in the Bill?

Lord Lyell

This is indeed a question of definition and semantics, and I will certainly give my noble friend an undertaking that I will consult my advisers and get in touch with him about these queries before the next stage, or during the next stage.

Lord Morris

I am most grateful to my noble friend for what he has said and I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 21 and 22 not moved.]

Clause 4 agreed to.

Clause 5 [Control of wholly owned subsidiaries]:

Lord Morris moved Amendment No. 23: Page 7, line 26, after ("any") insert ("subsidiary or").

The noble Lord said: In moving this amendment, it might be convenient to your Lordships if I say that I wish to speak at the same time to Amendments Nos. 24, 26, 27, 29, 32, 37, 42, 44, 45, 47 to 53, 104, 113, and 114. In so doing I have learned a lesson—that my attempts to include all the consequential amendments were not really necessary. I bitterly regret doing so because it took me a considerable time. The only benefit that flowed from that was that it forced me to take a very close look at the Bill. That is something I do not regret.

This series of amendments raises a very important point. I believe, because the provisions of Clause 5 refer to the control of wholly-owned subsidiaries of the British Telecommunications Corporation. Yet by virtue of Clause 4(4) of the Bill, the Corporation may establish subsidiaries for the purpose of schemes under subsection (1)(b)".

With regard to wholly owned subsidiaries, I am talking of their definition in Section 150(4) of the Companies Act 1948, which I shall not read out because it is fairly self-evident. However, if Her Majesty's Government wish to exercise their desire to encourage the corporation to set up subsidiary companies for subsidiary operations, then I am concerned that it can drive a horse and cart through the provisions of Clause 5 by setting up subsidiaries, as opposed to wholly owned subsidiaries. Indeed, it does not even have to go as far as that, when one bears in mind the provisions of Clause 2(3)(g), whereby it has the power to subscribe for a very small minority interest in any undertaking, should it so wish. Of direct relevance to this point is that the provisions of subsection (4) state only that the corporation may establish such schemes—it does not have to do so—and I am concerned that, if the control of these subsidiaries is limited to wholly owned subsidiaries, then the Government's intentions can be thwarted by the corporation. I beg to move.

Lord Trefgarne

My noble friend has made clear his view that partly owned subsidiaries of British Telecom should be subject to the same statutory controls as wholly owned subsidiaries. I should like to explain why this is not appropriate and it may be helpful if I deal, as my noble friend did, with all his amendments on this point. I agree with him that the list of amendments which he read out is, indeed, the appropriate list in this context. There is, of course, no question that wholly owned subsidiaries of British Telecom should not be treated in the same way as British Telecom itself; a wholly owned subsidiary is, clearly, a creature of its parent and should be treated accordingly. But the position is different with partly owned subsidiaries, where there are other shareholders to be considered.

Directors of a company are required to take into account the interests of all shareholders. This has been strengthened by Section 75 of the Companies Act 1980, which allows any shareholder to obtain a court order restraining the directors from doing anything "unfairly prejudicial" to the particular shareholder's interest. Once appointed, therefore, the directors of a partly owned subsidiary of British Telecom cannot act solely in the interests, or to the orders, of British Telecom and this makes it inappropriate for there to be direct statutory controls over the activities of partly owned subsidiaries. This principle has been incorporated throughout this Bill, with only two exceptions. These are the power to give directions in the interests of national security or membership of international organisations under Clause 6(4) which is surely necessary, and the power to call for information under Clause 6(11) which cannot infringe the rights of minority shareholders.

I hope that my noble friend can agree that this is the right way to deal with the issues raised by the presence of private shareholders, Certainly, I believe that it is right for such joint companies to be governed by the general law relating to companies. The absence of statutory controls does not, of course, mean that British Telecom is free to do entirely as it wishes and to evade the controls on its own activities—which I think was the fear expressed by my noble friend—by working through partly owned subsidiaries. For example, borrowing by a partly owned subsidiary will count against British Telecom's external financing limit, but it will be for British Telecom and its subsidiary, and not the statute book, to decide whether this borrowing takes place. I hope that that will not bring the noble Lord, Lord Glenamara, to his feet—at least, not at this precise moment.

In the last resort, the Secretary of State could use his power to direct British Telecom to dispose of its shares in a subsidiary which it was using to evade statutory controls, but I do not foresee British Telecom acting in this way. I hope that that explanation, which is of course intended to cover my noble friend's other amendments on this same point, will satisfy him and that he will not seek to press this matter further.

Lord Morris

I have listened with very great care indeed to my noble friend on this point and, at the moment, at any rate, I am entirely satisfied with his explanation. In the light of that, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 24 not moved.]

8.16 p.m.

Lord Morris moved Amendment No. 25: Page 7, line 43, leave out sub-paragraph (ii).

The noble Lord said: This amendment seeks to delete the provision in subsection (2)(b) of Clause 5 which provides, certainly by inference, that the British Telecommunications Corporation can hide behind the skirts of a nominee shareholding when it sets up subsidiaries. I was puzzled as to why a public corporation should have a need so to do. I was wondering whether my noble friend on the Front Bench could clarify this point. I beg to move.

Lord Trefgarne

I am sorry to have to say that, owing to some difficulty in the staff work, I am not so fully briefed to deal with this matter as I ought to be. I apologise to my noble friend for that, but I will do my best. I think that my noble friend may now realise that the explanation which I gave on his previous amendment stemmed from the definition of a wholly owned subsidiary of another body corporate in Section 150(4) of the Companies Act 1948. I am not entirely certain that that is the correct riposte to my noble friend's amendment. It might be better if I undertook to look at what my noble friend has said, and reply to him between now and the next stage. If we are not able to reach agreement by that means, then my noble friend had better raise it again at the next stage.

Lord Morris

That sounds like a very good idea indeed to me. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 26 and 27 not moved.]

Lord Morris had given notice of his intention to move Amendment No. 28: Page 8, leave out lines 10 to 13.

The noble Lord said: The principle behind this amendment is precisely the same as that of the previous amendment to which I spoke. In the light of what my noble friend said, I shall not move it.

[Amendment No. 28 not moved.]

[Amendment No. 29 not moved.]

Lord Glenamara moved Amendment No. 30:

Page 8, line 32, at end insert— ("(5) As regards any wholly owned subsidiary of the Corporation, the Corporation shall secure that, notwithstanding anything in the subsidiary's Memorandum or Articles of Association, the employees of the subsidiary are employed at all times on terms and conditions of employment which, other than as to the identity of the employer, are the same as those of employees of the Corporation employed on like work. An employee of a wholly owned subsidiary is to be regarded as employed on like work with an employee of the Corporation if their work is of the same or a broadly similar nature and the differences (if any) between the things they do are not of practical importance in relation to terms and conditions of employment; and accordingly in comparing their work regard should be had to the frequency or otherwise with which any such differences occur in practice as well as to the nature and extent of the differences.").

The noble Lord said: Subsidiaries will mean transfers of staff from BT to the subsidiaries, and probably from one subsidiary to another. I believe that two factors are vital in securing the consent of employees to their transfer to subsidiaries—without that support, the prospects of the subsidiaries will be severely hampered from the beginning. The first factor has I think been secured to a considerable extent by a Government amendment at the Report stage in the other place, providing a statutory obligation to consult the unions.

The second of these factors in securing the consent of employees is the assurance which would be gained by acceptance of this amendment that their terms and conditions will remain the same in the subsidiary as they would have been in the parent corporation. In order to understand the significance of this point, I think the noble Earl should be aware that one of the reasons why in the past there have been very few demarcation disputes in the Post Office is that grading in the engineering and technical workforce is restricted to a very limited number of sizable umbrella grades. Although each grade encompasses work of broadly similar standards, the grading embraces a very large variety of different types of job requiring different types of skill, so members of a particular speciality can be transferred to a different type of work while remaining in the same grade. This has greatly facilitated changes of work and movement of staff.

We believe it is essential that the same flexibility is secured in the new subsidiaries which are going to be set up under the Bill. Indeed, we believe that the flow of employees to the subsidiaries will not necessarily be one way. If BT are to retain the flexibility that will be required in their future operations, they will doubtless on occasion wish to transfer employees back from the subsidiary to the corporation and, maybe, back once again to the subsidiary—and, maybe, back again to the corporation.

In such a context it is essential that the grading and the pay structure remains in the subsidiaries as in the parent body. However, we believe that it is necessary to enshrine this requirement in the legislation. In the absence of such a provision it might well be that BT would seek to solve short-term problems about the transfer of staff—and there will be considerable problems about this from the start—by buying out objections in a way which would be disadvantageous to the long-term industrial relations structure within the corporation and its subsidiaries. It may of course operate in exactly the opposite way. Workers in the Post Office fear the reverse. They believe that if subsidiaries are set up in a number of different areas, the pay and conditions in those subsidiaries may be less advantageous than in the parent body. If they had any fear of such an outcome emerging, it would severely affect their willingness to accept a transfer to a subsidiary. Once again, the passing of this amendment would ensure that they were under no such apprehension.

I expect that the noble Earl who is to reply has noticed—maybe he has not but maybe he has—that the amendment borrows heavily from the form of words used in the equal pay Act (I see that the noble Earl has noticed) concerning the test of like work. I hope he will agree that it is sensible to use a test which has already been provided in statute. We are encouraged in our view that the Government will accept this amendment by the response of the Minister of State when the amendment was moved at the Committee stage in the other place. He stated then: It is clearly our intention that if employees in the Post Office are moved to subsidiaries, their terms and conditions of work will remain the same".

At the Committee stage in another place, the Government argued that the EEC directive of 4th February 1977 provides a perfectly adequate safeguard for the interests of staff who are transferred to subsidiaries. In case the noble Earl is going to mention that today, I want to say a word about it. He will find on examination that the directive does not bear out this construction. First, it applies only at the moment of transfer and for a limited period thereafter. There is therefore no continuing requirement for terms and conditions of employment to remain as they were on transfer. Secondly, many of the more desirable features of the EEC directive are permissive only. Member states are not required to introduce them. Moreover, Article 6(4) requires member states to limit the obligations set out in the rest of Article 6. The third problem with the directive is that the Department of Employment is nearly two years overdue on the project of turning it into regulations. Therefore I think that we should be buying a pig in a poke if we accepted assurances that it is all going to be taken care of by this EEC directive: that regulations made under the directive, regulations which we have not seen, will achieve all that is wished.

Finally, the directive in no way inhibits the Government from accepting our amendment. The directive makes it clear that member states are free to provide in any other legislation or regulations: provisions which are more favourable to employees". I am sure the Government will appreciate that the proposals in this Bill have introduced extraordinary uncertainty and anxiety into the minds of many BT employees about their future. If the Government genuinely want to give BT a fair wind and a good start in the competitive environment which they are now forcing it to enter, I believe that they should accept this amendment in order to allay some of the anxieties of BT staff. In view of what the Minister of State said in the other place, I hope that this is one amendment which the Government may feel able to accept. I beg to move.

Lord Torphichen

May I query this amendment? It sounds as though the noble Lord, Lord Glenamara, is ruling out that any form of financial inducement could be offered to employees to move to a new subsidiary. I am sure that if a company in the private sector wished to set up a subsidiary in an outpost it would have to take some of its key men there first, and nine times out of 10 I suspect that they would do so at a very pleasant premium. Is the noble Lord ruling this out for the Post Office?

Lord Glenamara

I did indeed mention that point. I said that BT would be tempted to buy out objections. If they did so, this would upset the whole structure in BT.

8.28 p.m.

The Earl of Gowrie

As the noble Lord, Lord Glenamara, acknowledged, this amendment was discussed at some length in another place. I can tell him that it has also been raised with the chairman-designate of British Telecommunications. I have to disappoint the noble Lord. The Government's position has not changed on the issue, not because we are obdurate but because we are satisfied that the Bill already makes adequate provision in respect of the worry he is caused. If one puts Clause 4 together with paragraph 2 of Schedule 2, it provides that contracts of employment will be transferred intact when staff are transferred to subsidiaries. Thus, immediately after the reorganisation, employees in subsidiaries will be employed on exactly the same terms and conditions as they were beforehand.

The noble Lord, Lord Glenamara, mentioned the EEC directive. He said that this directive is rather permissive, that it is not implemented as yet and that the Government cannot coast upon it. But the Government are not doing so. The position which I have outlined will be reinforced once the EEC directive on transfers of undertakings is implemented. However, the point is covered by our own legislation and the particular legislation which we are discussing this evening.

The noble Lord's amendment would also prevent employees in subsidiaries from negotiating improvements in their terms and conditions which were not, for whatever reason, available to corresponding employees of British Telecom. A profit-sharing scheme is an obvious example. I do not believe that would be right and it certainly would not be consistent with the idea of giving the management and the workforce of wholly-owned subsidiaries the opportunity of greater identification with the particular work that they do. Therefore, in the first place I think the point is covered and, secondly. I think the noble Lord's amendment, if anything, would make the position worse for employees, and in the light of that I hope he will not press the amendment.

Lord Glenamara

I should like to ask the noble Earl about this point. I think he said that this would apply at the moment of transfer and for a limited period perhaps afterwards and therefore there would be no continuing requirement that the terms and conditions of employment should remain as they were at the point of transfer. Am I right in saying that or not?

The Earl of Gowrie

It is right that the provision that I mentioned about transfer will take place after the employees have been transferred and will be limited in time. But it surely would not be appropriate for terms and conditions of employment to remain the same indefinitely. As I understand it, the provision is a kind of moving provision. As the noble Lord said, when there is a great re-structuring in an industry there can be uncertainties and anxieties on the part of employees and this provision is to allay their uncertainties; to say that during the transition period, while the move takes place, and immediately thereafter, the terms and conditions will be the same. But it is not the same, nor would it be sensible, to say that once they have gone into British Telecommunications, their terms and conditions will be frozen for ever on one basis. They would not wish that, nor would the employer.

Lord Glenamara

I am sorry to push this point but will the noble Earl not apply himself to the point that I have made about flexibility. Surely British Telecommunications wish to preserve their flexibility and to transfer employees to subsidiaries and back from subsidiaries to the corporation, and it may be from one subsidiary to another. Would that not be facilitated if the terms and conditions were the same throughout?

The Earl of Gowrie

As I have said, I think it is a matter of an argument about the time. Obviously the terms and conditions of employment are for negotiation between the employer and the employees who are operating within a free collective bargaining framework. Nevertheless, to allay these anxieties, the transfer period is covered by certain protections and therefore it seems to me that the interests of employees, first, to be protected while the transfer takes place and, secondly, to be able to bargain collectively in the traditional way with their employer, is protected on both fronts.

Lord Glenamara

I thank the noble Earl for his reply. Naturally, it does not satisfy me, but I will not push it to the point of a Division. Perhaps the unions will take up where we have been unable to do anything, but I had hoped that this could be embodied in the legislation. However, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 5 agreed to.

8.33 p.m.

Lord Ponsonby of Shulbrede moved Amendment No. 31: After Clause 5, insert the following new clause:

("Right to strike

.—(1) No person being an employee of the Post Office or of British Telecommunications shall be guilty of an offence under any of the statutory provisions referred to in subsection (4) of this section if the conduct complained of takes place exclusively or primarily in contemplation or furtherance of a trade dispute with either the Post Office or British Telecommunications.

(2) No person shall be guilty of soliciting, inciting or procuring or attempting to solicit, incite or procure or aiding or abetting the commission by any employee of the Post Office or British Telecommunications of an offence under any of the statutory provisions referred to in subsection (4) (other than subsection (4) (c)) of this section unless it be established that one or more of the persons so solicited, incited or procured, or aided or abetted or in relation to them an attempt to solicit, incite or procure as aforesaid is alleged to have been made would not have been entitled to the immunity conferred by subsection (1) in the event of his or their being charged with the relevant substantive offence under any of the said provisions.

(3) Where in pursuance of any agreement the acts in question in relation to any of the offences referred to in subsection (4) hereof are to be done exclusively or primarily in contemplation or furtherance of a trade dispute with either the Post Office or British Telecommunications that offence or those offences are to be disregarded for the purposes of section 1(1) of the Criminal Law Act 1977.

(4) The statutory provisions referred to in this section are:—

1. (a) section 55 of the Post Office Act 1953, as amended, insofar as that section makes it an offence for any person or, when required by an officer of the Post Office, to neglect or refuse to deliver up any postal packet in the circumstances there described;
2. (b) section 58(1) of the Post Office Act 1953, as amended, insofar as that section makes it an offence for any officer of the Post Office, contrary to his duty, to wilfully detain or delay or procure or suffer to be detained or delayed any postal packet in the course of transmission by post;
3. (c) section 68 of the Post Office Act 1953;
4. (d) section 45 of the Telegraph Act 1863, insofar as that section makes it an offence for any person employed by the Post Office wilfully to omit or delay to transmit or deliver any message or by any wilful act or omission to prevent or delay the transmission or delivery of any message; and
5. (e) section 20 of the Telegraph Act 1868, as amended, insofar as that section makes it an offence for any person having official duties connected with the Post Office, or acting on behalf of the Postmaster General, contrary to his duty, to intercept the contents or any part of the contents of any telegraphic messages or any message entrusted to the Postmaster General for the purpose of transmission.

(5) In this section a reference to "trade dispute" has the same meaning as in the Trade Union and Labour Relations Act 1974.").

The noble Lord said: This is a complex amendment about a complex subject, and I am aware that in tabling this I have tabled an amendment which is not entirely foolproof. However, I have tabled if for the specific purpose of getting an assurance from the Government that they accepted that this is an area requiring legislation. I am comforted in my difficulties about the drafting of the amendment by the remark of the Minister of State, Mr. Kenneth Baker, at the Committee stage of this Bill, in the House of Commons on the 1st April, when he said, "This is a complex issue for which it is difficult to draft legislation".

The purpose of this amendment is to remove the legal anomaly preventing workers in the Post Office and British Telecom from taking industrial action. At present, they are in a unique position in being prevented from doing so by legal provisions that were never intended for this purpose, and we are seeking to remedy what amounts to a legislative accident. But, equally, it is important to stress that the new clause provides solely and exclusively for industrial action taken against the Post Office and against British Telecom as the employers. It is a narrow right that we are asking for, much less than other workers have, either generally or even in the key public services.

First, there should surely be no dispute about the right of workers in the Post Office and in British Telecom to take industrial action when involved in a trade dispute with their employer. Indeed, official spokesmen for the party opposite over the years have supported that right specifically so far as the Post Office is concerned.

For example, Mr. Norman Lamont, speaking for the Conservative Opposition in February 1978, said: We recognise that post office workers feel that they are in a unique position. They feel that while others, such as electricity workers, have the right, the post office workers are in an anomalous position and I should find it difficult to argue that post office workers are more like policemen than power workers". He went on to say that when Post Office workers say they are in almost a unique position in not having the right to strike, it should be pointed out that they are also in the privileged position of being a statutory, protected monopoly and if it is right to reconsider the sanctions against strike action it must also be right that the position of the monopoly should be considered.

The Government have now taken steps in this Bill to alter the position of the monopoly; therefore, why can they not accept some version of this new clause? The Government appear on this matter to have been arguing that there is little or nothing to worry about so far as an all-out strike is concerned. We are not sure whether the Government are prepared to support in office what they said in Opposition but the Minister, Mr. Kenneth Baker, wrote in a letter to the General Secretary of the Union of Communications Workers—the former Union of Post Office Workers—on 30th January this year: There appears to be a clear distinction between delay or misconduct in the handling of mail or telecommunications on the one hand and a strike involving the withdrawal of labour on the other. While some kinds of industrial action, short of a complete withdrawal of labour, could constitute offences, particularly where the action involved a breach of the employee's contractual obligation to his employer, a strike involving withdrawal of labour should not amount to a criminal offence. Neither the decision of the Court of Appeal nor the House of Lords in the Gouriet case, to which you refer, suggests a contrary view. In fact Lord Denning's judgment points clearly to the view that the right to strike is unaffected. The law therefore seems to be as you wish it.".

That was Mr. Kenneth Baker, the Minister of State. It appears that eminent legal opinion does not support the Minister in this contention. Counsel advising the Union of Communications Workers has advised something that both the Attorney General and the Minister have conceded; namely, that anything less than a complete withdrawal of labour could be illegal.

That is an intolerable position. Why should post office workers or British Telecommunications' workers be penalised for overtime bans, for working to rule, or for short-term stoppages? I should add that the Attorney General in his speech to the Committee said: …some forms of industrial action which fall short of strike action while such employees remain at work may fall foul of the law. It is impossible to advise the Committee in firm terms which are also general terms because every case must he looked at on its own facts and industrial action which falls short of full withdrawal of labour may take a number of different forms".

So we are faced with a ludicrous position in which the Attorney General appears to be saying, with Government support, "It is all out or nothing; take 100 per cent. strike action or do not bother because lesser forms of action might well land you in court". It is most unlikely that an Attorney General, of whatever party, would agree to bring a prosecution against the workers in the Post Office or in British Telecommunications. But what is the position about a private party taking out a private prosecution for infringement of the criminal law? That would be possible unless this clause is accepted.

This problem has only arisen in recent years, for up until November 1976 when the Union of Post Office Workers boycotted the mail going to Grunwick members of the Union of Post Office Workers assumed that they had a right to strike. In 1976, following that stoppage at Grunwick, the National Association for Freedom took out an injunction alleging that the Union of Post Office Workers was committing a criminal offence, being in breach of the 1953 Post Office Act, but on the assurance that the company would agree to arbitration the Union of Post Office Workers suspended action on that occasion.

However, this issue was not put to the test until January 1977, when the National Association for Freedom asked the Attorney General to institute an injunction against the Union of Post Office Workers and the Post Office Engineering Union over plans to boycott post and telecommunications to South Africa. The Attorney General refused, but the National Association for Freedom obtained the support of the Appeal Court presided over by Lord Denning. The court decided the unions were violating the Post Office Act and the Telegraphs Act and issued an injunction. Lord Denning stated on that occasion that it was clearly an offence wilfully to delay or detain the mail, to interfere with telephone calls, or to procure others to do so.

Although the House of Lords decided, in July 1977, that the Appeal Court had acted wrongly in granting an injunction, the issues at stake were not primarily about the right to strike. Indeed, the Law Lords endorsed Lord Denning's view that it was a criminal offence to black mail or telephone calls. Rather the issues before the Law Lords concerned, first, whether the Attorney General's discretion should be challenged by the courts, and, secondly, whether any private citizen could bypass him and obtain an injunction against a trade union.

Therefore, the union's victory before the Law Lords only prevented postal workers from being the target of civil injunctions, and they remain just as vulnerable to criminal prosecution if they decide to withdraw their labour. As Lord Diplock put it, that such conduct by postal workers would constitute a criminal offence punishable on indictment by imprisonment or a fine is plainly beyond argument. Thus the Post Office workers are in a unique position. They alone among members of the Trades Union Congress cannot exercise the inalienable right of every worker to withdraw his labour. Their situation is, above all, an anomaly as compared with other public service industries.

Under Section 4 of the 1875 Conspiracy and Protection of Property Act gas and water workers were on the same footing as postal workers; they were guilty of a criminal offence if they did anything wilfully to deprive people of their gas or water supplies. The same applied to electricity workers under Section 31 of the Electricity Supply Act 1919. But those provisions as to gas, water and electricity were repealed under Schedule 9 of the Industrial Relations Act 1971.

For some reason postal workers did not have similar sections referring to their rights repealed at that time. In fact, the Post Office Act 1979 confirmed them. Thus, we have the situation that gas, water and electricity workers, along with all other recognised trade unions, enjoy the protection afforc'ed by the Trade Union and Labour Relations Act 1974, whereas the Post Office workers do not. It is quite clear that in law it is a criminal offence to interfere with mail or telecommunications, but it is equally clear from a reading of the relevant sections of Post Office legislation that this was directed primarily at what may he termed criminal rather than trade union disruption. Therefore, it can be argued that this new clause merely seeks to clarify the existing law on that point.

I hope I have made it clear to the noble Lord opposite that we are very much concerned that this restriction on the right to strike among Post Office workers and British Telecom workers should be brought into line with workers in other public services. I have accepted that the actual wording of the amendment which I have moved this evening is not entirely foolproof. What I would seek this evening is an assurance from the Government that they accept that there is a problem here and that they will look into it and see if they can come back with an acceptable amendment on Report. I beg to move.

Lord Lloyd of Kilgerran

I should like, briefly, to support the proposition put forward so fluently and ably by the noble Lord, Lord Ponsonby. I have read the speeches in another place. I have read the opinion of the Attorney General; I have studied that opinion very carefully. But in the other place, it seems to me, the Government did not deal with the basic commonsense attitude which should apply to the facts of this case. It is agreed that we have now a new corporation to be set up called British Telecom. It is agreed that in so far as Post Office workers are concerned, before this Act comes into force, there is an anomaly in the sense that the postal workers are in a different situation from other workers in nationalised industries.

With the transfer to British Telecom of the powers of the Post Office relating to the employees the anomaly becomes even more acute. Here we will have a British corporation with workers who will be dealt with, in so far as these industrial relations matters are concerned, differently from workers in other spheres. The commonsense approach, which it seems to me with great respect the Government have not so far dealt with, is that there are, therefore, double standards as regards the employees of British Telecom in relation to these matters. If these double standards occur, surely it is a matter of commonsense that the Government ought to take some step in order to try to resolve that position.

I entirely agree that the problem is very difficult indeed, and I am not sure that the scope of this amendment adequately deals with the problem, as the noble Lord, Lord Ponsonby, so fairly put forward. But the problem is there that it appears that different standards would be applied to engineers and employees of British Telecom as against other employees in other areas. I think that is the fact, and I should have thought that the Government, at this stage at any rate, would take this amendment away and think about it for the purpose of trying to resolve what the noble Lord, Lord Ponsonby, said so clearly and so rightly: that here we have a real anomaly to which the attention of the Government should be drawn.

Lord Torphichen

There is no law in this land which says that I may not buy an electricity standby generator; there is no law which says that I may not dig a well: there is no law which says that I may not go down to BOC and buy gas in bottles. However, there is a law—and it is being re-enacted in Clause 12 of this Bill—which says that I may not run, build, hire out et cetera a telecommunications system. There is no anomaly in that the right to strike of workers in the telecommunications industries is circumscribed. They do have an absolute monopoly enforced by law and a customer cannot break that. There must be some quid pro quo. The Government must not give away the unions' right to strike too easily until the monopoly of the telecommunications service has been (shall I say?) eroded sufficiently to compensate.

The Earl of Gowrie

This is particularly interesting for me because it is, of course, an arena where my work as a wholly-owned subsidiary of my honourable friend Mr. Kenneth Baker, so to speak, and my own free enterprise activity in the Department of Employment coincide. I have noted the concern expressed that Post Office and British Telecom workers might be in a position such that if they were to take industrial action in furtherance of a trade dispute with their employer, they could be held to be committing an offence under one of several provisions contained in the Post Office Act 1953 and the 1863 Telegraph Act. Effectively, therefore, it is being argued that Post Office workers do not have the right to strike and, indeed, my noble friend is exhorting me that I should not surrender this non-right to strike too cheaply.

When this rather knotty issue arose in the other place my right honourable and learned friend the Attorney General took great pains to give this impartial interpretation of the legal position. He said that in his view: There is no fetter under the Post Office Act 1953 or the Telegraph Act 1863 upon Post Office workers (or after the Bill is enacted the workers of British Telecommunications) to withdraw their labour as such". He went on to say, however, that some forms of industrial action falling short of strike action while such employees remained at work may fall foul of the law. Expanding on this remark he said that while each case of industrial action short of total withdrawal of labour would have to be considered on its own facts, he did not consider that a conviction would be possible under any one of the provisions in question where it could not be proved that the employee was in breach of his contractual obligations. For instance, withdrawal of voluntary overtime and genuine working to rule do not, in the Attorney General's opinion, amount to an offence. However, he did consider that discriminatory action against particular individuals or countries would justify prosecution although none have been introduced to date.

The two cases to which the noble Lord, Lord Ponsonby, referred involved not an ordinary strike, as he rather implied, but discriminatory action. In the case of Gouriet there was the blacking of South African mail and in the case of Harold Stephens there was the blacking of mail to Grunwick. I do not think that the Committee would welcome the legalisation, particularly in a Bill of this kind, of discriminatory action and particularly where a large measure of monopoly will be still enjoyed, as my noble friend pointed out.

My right honourable and learned friend the Attorney General suggested, however, that legislation to immunise such activities might not be welcomed and I can say that that is certainly the Government's view. In sum, he felt that there was no need to clarify the legal position as he had no doubt that Post Office workers did, in fact, have the right to strike. Again this is somewhat metaphorical language because, as your Lordships know, there is no such thing in British law as a right to strike.

After that debate in Commons Committee my honourable friend the Minister of State received further representation from Mr. Jackson, the General Secretary of the Union of Communications Workers. He consulted the Attorney General again on this matter but my right honourable and learned friend found no reason to change his view.

I should like to put this historical background, although it is fairly contemporary history, on one side for a minute and look at the merits of this new particular clause. I should like to comment on one or two specific points. I endorse what my honourable friend the Minister of State said, namely, that this is an extremely complex issue and one for which it is difficult to draft. That, I think, was also demonstrated in 1978 when a Private Member's Bill on this issue was considered in another place. But I do think that the new clause as drafted here contains substantial loopholes, and those, indeed, were pointed out by my honourable friend the Minister of State. First, under subsection (1) of the new clause it would seem that employees of the Post Office could take industrial action in furtherance of a trade dispute with British Telecommunications and vice versa. I am sure that this is not the intention, but nevertheless it is the effect. Then I see that subsection (1) refers to conduct taking place "exclusively or primarily" in contemplation of furtherance of a trade dispute. What exactly does that mean? Those words appear to plant further mines in an area which is already a notorious legal minefield, as I well know from my own work in the department. Then, again, I have already said that I do not believe that it would be desirable for discriminatory action of the kind that I have described in the case of Gouriet and Harold Stephens to be exempt from the offences listed in subsection (4) of the new clause, and there is no specific mention of this anywhere in the clause. This is surely a very important point which should be clearly provided for.

Mention has been made by the noble Lord, Lord Ponsonby, of honourable friends of mine who spoke in support of the Private Member's Bill tabled in another place when we were in Opposition in 1978 and which sought to legislate for this very subject. My honourable friends the Members for Kingston on Thames and Surrey North-West both spoke at that time in favour of Post Office workers having the right to strike. Subject to my qualifications about the metaphorical language, I would not argue with that principle, but I do not believe that it is under debate today. What is under debate is the question as to whether or not it is necessary to lay down in statute a provision saying that this is the case. So I come back to the legal advice which the Government sought and were given.

My right honourable and learned friend gave his opinion that the Post Office, and after the separation of the businesses, British Telecom workers do, in fact, have the right to strike already and that they would not be committing an offence by withdrawing their labour. So I could not, for reasons I have described, accept the new clause as drafted, because I believe that it contains undesirable features in detail, but I do not in any case feel, in general and in the light of the legal advice that the Government have received, that it is, in fact, in any way necessary. I think that it is raising something of a mare's nest, and I hope that the noble Lord will withdraw it.

Lord Ponsonby of Shulbrede

In responding to this debate, the noble Earl has taken much the same line as his honourable friend the Minister of State took in another place, but in the earlier part of his speech did admit that there was a problem here. He went on to point out, as I did in moving the amendment, that there were indeed loopholes in the amendment. I asked the noble Earl for an undertaking that he would look at the problem to see whether he was able to come back on Report with an amendment which covered this issue. His view, which your Lordships have heard, is that in fact no amendment is necessary. The view which we take, on advice, is that in fact an amendment is necessary. In that case I should like to press the amendment.

9 p.m.

On Question, Whether the said amendment (No. 31) shall be agreed to?

Their Lordships divided: Contents, 34; Not-Contents, 66.

CONTENTS
Airedale, L.	Oram, L.
Bacon, B.	Peart, L.
Birk, B.	Phillips, B.
Boston of Faversham, L.	Pitt of Hampstead, L.
Bruce of Donington, L.	Ponsonby of Shulbrede, L.
Collison, L.	Rochester, L.
David, B. [Teller.]	Ross of Marnock, L.
Elwyn-Jones, L.	Sefton of Garston, L.
Glenamara, L.	Segal, L.
Greenwood of Rossendale, L.	Stedman, B.
Hall, V.	Stewart of Alvechurch, B.
Houghton of Sowerby, L.	Stewart of Fulham, L.
Jeger, B.	Stone, L.
Llewelyn-Davies of Hastoe, B. [Teller.]	Underhill, L.
	Wells-Pestell, L.
Lloyd of Kilgerran, L.	White, B.
McNair, L.	Young of Dartington, L.
Maelor, L.

NOT-CONTENTS
Abinger, L.	Denham, L. [Teller.]
Airey of Abingdon, B.	Drumalbyn, L.
Avon, E.	Ellenborough, L.
Bathurst, E.	Elliot of Harwood, B.
Belstead, L.	Erroll of Hale, L.
Boardman, L.	Ferrier, L.
Caccia, L.	Geoffrey-Lloyd, L.
Cathcart, E.	Gisborough, L.
Clifford of Chudleigh, L.	Gowrie, E.
Cockfield, L.	Gridley, L.
Cork and Orrery, E.	Grimston of Westbury, L.
Craigmyle, L.	Hives, L.
Crathorne, L.	Hylton-Foster, B.
Croft, L.	Inglewood, L.
Cullen of Ashbourne, L.	Killearn, L.
de Clifford, L.	Kilmany, L.
De La Warr, E.	Long, V.

Loudoun, C.	Rochdale, V.
Lyell, L.	Romney, E.
Mackay of Clashfern, L.	St. Davids, V.
Mackintosh of Halifax, V.	Sandys, L. [Teller.]
Mancroft, L.	Savile, L.
Mansfield, E.	Sempill, Ly.
Morris, L.	Skelmersdale, L.
Mottistone, L.	Soames, L.
Orkney, E.	Stamp, L.
Orr-Ewing, L.	Stradbroke, E.
Polwarth, L.	Strathclyde, L.
Portland, D.	Torphichen, L.
Rankeillour, L.	Trefgarne, L.
Rawlinson of Ewell, L.	Trenchard, V.
Redesdale, L.	Vaux of Harrowden, L.
Renton, L.	Vivian, L.

Resolved in the negative, and amendment disagreed to accordingly.

Clause 6 [General control and supervision by the Secretary of State]:

[Amendment No. 32 not moved.]

9.10 p.m.

Lord Morris moved Amendment No. 33: Page 9, line 12, after ("agreement") insert ("and in particular to facilitate the discharge of the obligations by virtue of the provisions of Article 90(1) of the Treaty of Rome;").

The noble Lord said: This amendment is a little difficult. I shall do my best. I shall not be long, but I believe it to be of the greatest importance. The starting point with regard to this issue is the rules of competition contained in the EEC Treaty in Articles 85 and 86. The European Court has held, and it is now well established, that these provisions may, as well as imposing obligations on individual undertakings, also directly confer rights on them in that the provisions may be relied upon in proceedings before a national court.

Article 86 prohibits as incompatible with the Common Market any abuse by one or more undertakings of a dominant position within the Common Market or a substantial part of it. In this regard the territory of a single member state can constitute a sufficient substantial part of the Common Market. The prohibition bites in so far as the abuse may affect trade between member states.

One should note that Article 86 expressly provides that the abuse may in particular consist, among other things, in

1. "(a) the direct or indirect imposition of unfair purchase or selling prices or of other unfair trading conditions;
2. (b) the limitation of production, markets or technical development to the prejudice of consumers;".

Special provisions apply to public undertakings, and the undertakings to which member states grant special or exclusive rights.

In the case of these undertakings Article 90—and therein lies the relevance of the reference to Article 90— states: …Member States shall neither enact nor maintain in force any measure contrary to the rules contained in this Treaty, in particular to those rules provided for in Article 7 and Articles 85 to 94"— in other words, those articles with regard to competition. However, it should be stated that Article 90, subsection 2, provides a limited exception to the operation of the treaty in that, Undertakings entrusted with the supply of services of general economic interest or having [the character of a revenue producing] monopoly shall be subject to the rules contained in this treaty, in particular to the rules on competition, in so far as [the application] of such rules does not obstruct [performance] in law or in fact of the particular tasks assigned to them. The development of trade must not be affected to such an extent as would be contrary to the interests of the Community".

Accordingly, if the Government can show that the application of Article 86 to British Telecommunications will obstruct the task of that body, then British Telecommunications would not be subject to the prohibition in Article 86, but such exemption does not operate if British Telecommunications' activities affected the development of trade in a manner contrary to the interests of the Community.

The granting to British Telecommunications of special or exclusive rights does not per se infringe Article 86. However, if BT abused its monopoly—for example, by imposing unfair charges or conditions on users of its services, or by discriminating between commercial operators or between national products and the products of other member states—such conduct would certainly be capable of falling within the prohibitions of Article 86.

Furthermore, the rules on competition apply to activities involving not only the supply of goods but also the provision of services. In this context, the distinction drawn by the European Court in Sacchi (1974 European Court Reports, 409) is relevant. That case concerned the monopoly granted under Italian law to RAI of televised commercial advertising between the transmission of signals, which fell within the treaty provisions on services, and trade in materials—namely, sound recordings, films, apparatus and other products used for the diffusion of television signals—which fell within the treaty provisions on goods.

Thus, one can see that in so far as the monopoly relates to the transmission of signals—that is, services—there can be no possible argument that the rules on competition are somehow inapplicable because the applicable provisions are those of Articles 37 dealing with state monopolies of a commercial character as to goods. In so far as the monopoly relates to trade in goods for the diffusion of such signals—for example, telex equipment—such an argument exists but it is fallacious. The argument incorrectly presupposes that the treaty provisions on goods and those on competition are mutally exclusive.

The whole of this problem could be neatly avoided by the Government if they were to take seriously the amendment of the noble Lord, Lord Lloyd of Kilgerran, to Clause 12 of the Bill, and if they were to move the monopoly from the Post Office to where it rightly belongs, namely, in the hands of Government. But that is a wider issue which it would be wrong to discuss just now, and to deal with that issue we must wait, unfortunately, until we debate Clause 12.

Lord Lloyd of Kilgerran

I did not expect that at this late hour I should hear two old friends of mine being described so clearly and aptly as they were by the noble Lord, Lord Morris. I refer to my friends as being Articles 85 and 86 of the Treaty of Rome dealing with the competition policy of the EEC, with which I have been acquainted professionally since that treaty descended upon us in 1958. The problem of Article 86, which the noble Lord described—and I shall not go into the technicalities of that article now—has recently descended on a very eminent telecommunications firm which is currently struggling with it; fortunately, I am not concerned in any way with that.

Without dealing further with the technicalities of the matter, I suggest it would seem helpful to include an amendment to Clause 6 such as that proposed by the noble Lord, Lord Morris. At any rate, if it is not helpful it is certainly unobjectionable and would indicate a difficulty, a morass indeed, into which United Kingdom companies can fall and have so easily fallen in the past 20 years. Therefore I support the amendment.

9.19 p.m.

Lord Trefgarne

My noble friend Lord Morris in moving the amendment covered a number of aspects of the Treaty of Rome and raised a number of legal points. I hope my noble friend and the Committee will forgive me if I do not now offer a considered response to the difficult legal matters he raised. I am none the less grateful to him for drawing the Committee's attention to the importance of legislating in accordance with the United Kingdom's obligations under the Treaty of Rome.

I think my noble friend agrees that Clause 6 as it stands contains all that is necessary to enable Her Majesty's Government to ensure that British Telecom conducts its business in a way that is consistent with our obligations to the European Community. The amendment therefore does not add anything of substance to the Bill. However, what I am afraid it does—by picking out the Treaty of Rome for special mention—is to weaken the powers of Clause 6 in relation to other international obligations.

I am sure your Lordships' Committee will agree that that would not be satisfactory. While I am certain that that was not my noble friend's intention, it is none the less the effect of his amendment. I can assure your Lordships that the Government will take full account of the United Kingdom's EEC obligations when they come to use the powers contained in the Bill, and I hope that in the light of that assurance my noble friend will not feel inclined to press the matter further.

Perhaps I can go a little further in connection with the point on monopolies, to which my noble friend referred. I think that my noble friend believes that monopolies are inherently contrary to the Treaty of Rome. That of course is not the case. The treaty governs the way in which monopolies, like any other commercial entity, may act, but it does not prohibit them. For example, Article 37 refers to the "adjustment" of monopolies, not to their dismantlement. But the treaty does prohibit discrimination on grounds of country of origin, barriers to trade, and abuse of a dominant position. The Government intend to use the powers contained in the Bill to bring about a very substantial liberalisation of trade in telecommunications equipment and services, and I therefore firmly believe that the Bill is wholly consistent with both the letter and the spirit of our EEC obligations.

Lord Lloyd of Kilgerran

I am very surprised indeed that the noble Lord the Minister should reply in that way to a very carefully presented case involving (as the Minister indicated) legal technicalities. I should have thought that, instead of saying that the amendment is bound to weaken the powers of British industry—or whatever he said about weakening the powers of British Telecommunications—without giving any reason, he would have wished to take it back to reconsider it in the light of the highly technical matters involved. Within my professional knowledge large numbers of British companies have in the past 20 years got themselves into a terrible mess in relation to their EEC business activities because they have forgotten—some have never heard of—Articles 85 and 86 of the Treaty of Rome. The amendment is purely introducing a warning to British industry in relation to an important area.

Lord Trefgarne

I do not wish to sound unsympathetic to the very detailed points which my noble friend raised. I should much prefer an opportunity to study in detail what my noble friend Lord Morris said in his opening remarks, when he referred to a number of provisions of the Treaty of Rome, and perhaps give him a private response at a later date, if there is anything that I can add to what I have said this evening.

Lord Lloyd of Kilgerran

I am very much obliged to the noble Lord.

Lord Morris

I am very much obliged to the noble Lord, Lord Lloyd of Kilgerran, for his assistance, and I am comforted by the knowledge that my noble friend will come to this point at a later date. However, at this stage I must say that I was astonished to hear him say that the amendment would in any way weaken the provisions of Clause 6, in particular subsection (4)(b), which writes in an obligation on Her Majesty's Government to facilitate the discharge of obligations under international agreement. If my noble friend had done me the courtesy of reading my amendment more carefully, he would have noticed that it starts with the-phrase "in particular ". That phrase does not in any way make the matter exclusive, but merely highlights it, and in my view it in no way erodes the responsibility in other areas of international agreement—

Lord Trefgarne

I do not wish to interrupt my noble friend, but the fact is that there is good legal basis for saying what I said: that where in a situation such as this one identifies a particular international agreement—for example the Treaty of Rome, to which my noble friend and I have referred—then in certain circumstances one tends to imply that other international agreements are not therefore necessarily covered.

Lord Morris

I defer to that; my noble friend is almost certainly right, though I should be much obliged to hear detailed argument in that respect. Notwithstanding that point, I consider that my noble friend did me a slight unfairness by suggesting that I did not raise the point that the granting to British Telecommunications of special or exclusive rights, or indeed a monopoly, was not as such an infringement under the Treaty of Rome. I did say that the granting to British Telecom of special rights does not per se infringe Article 86. All I did, as the noble Lord, Lord Lloyd of Kilgerran, pointed out, was to pass this warning of a real hindrance not only to British Telecom but to many companies in the industry. With that I beg to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 34 and 35 not moved.]

9.26 p.m.

Lord Ponsonby of Shulbrede moved Amendment No. 36: Page 9, line 36, leave out subsection (6).

The noble Lord said: The purpose of this amendment is to remove the power of the Secretary of State under this subsection to force British Telecom into setting up subsidiaries or into this disposal of assets of the corporation or of its wholly-owned subsidiaries. The power given to the Secretary of State under Clause 6(5) to force the setting up of subsidiaries is intended to achieve two objectives. First, it is seen as an important part of their armoury in ensuring what they call fair and equal competition between BT and the private sector under the new régime. The Government have already stated their intention to ensure that BT set up Company Act subsidiaries in order to ensure that any flows of cash between the corporation and the subsidiaries are transparent.

It would be interesting to know what the Government mean by this. Do the Government intend to stop BT from subsidising the development of new competitive products and services? If the answer is, yes, how can this be justified when there will be no inhibition on private sector companies and, indeed, on foreign-owned private sector companies adopting such conventional market techniques for new products as loss leaders or marginal pricing? The Government may argue that their inspiration for wishing to create these subsidiaries and possibly to prevent cross-subsidies is the American experience, where the American Telephone and Telegraph Company have been forced by the Federal Communication Commission to set up what are known as arm's length subsidiaries. But the American corporation is a totally different animal from BT. This corporation has vastly greater resources and these resources include a very substantial manufacturing subsidiary—in stark contrast to BT—and it is able to borrow massively on the open market and therefore to sustain a much more substantial programme of investment. We shall be returning to this question of the borrowing powers of the corporation later in the Committee stage.

The second point that your Lordships should have in mind when considering the advisability of the inclusion of this subsection is that several protections already exist against what can be called unfair competition by British Telecom. To begin with, the Office of Fair Trading has a duty to monitor competition and to prevent unfair competition under the Competition Act 1980. Secondly, the EEC take an active role in ensuring fair competition, and has a whole directorate whose job is to correct any abuses or unfair competition.

One wonders what sort of subsidiaries the Government wish to see BT set up. Will such subsidiaries be functionally based? That is, will they be based on places of work? Will they be based on particular factories? Will they be based on a procurement subsidiary, for example? Is there any possibility that the Government will seek to establish subsidiaries within the basic network on a regional basis: for example, British Telecom (Northern Ireland) and British Telecom (Scotland)? Such a development would be likely to lead to a degeneration of the national network as different subsidiaries moved at different paces of development in modernising the network as a whole. This would undoubtedly create unnecessary bureaucracy and duplication of effort, and would lead ultimately to different charges for different parts of the country. Some regions, such as London, would have substantial incomes; others, such as Northern Ireland, the North East and possibly Scotland, would be in danger of running at a perpetual loss.

I hope that the noble Earl will be able to enlighten the Committee about the kinds of subsidiaries that the Government have in mind would be created as a result of this clause of the Bill. The juxtaposition of the power of direction to create subsidiaries and direct British Telecom to dispose of assets is not, we believe, coincidental. Under Clause 6(6)(a) British Telecom can be forced to set up subsidiaries, for example, a subsidiary to market Prestel. Then under Clause 6(6)(b) the Secretary of State can direct them to sell the subsidiary off. The Government can and may well intend to use the powers within Clause 6(6)(a) and (b) to turn what is currently a strong, profitable and vigorous corporation into an ailing loss-making corporation like British Rail. It can cream off and hand over to the private sector all the exciting, new and profitable developments in telecommunications, leaving British Telecom with the intrinsically unprofitable parts of the telephone service.

The Government should tell the Committee what their intentions are. Fair and equal competition in the Government's eyes and in the eyes of some noble Lords opposite will never consist of British Telecom winning a dominant share of the market under the new régime. It will consist only of British Telecom's most successful areas being amputated and handed over to the private sector. If under fair and equal competition British Telecom succeeded in achieving a dominant position in the competitive markets, the referee—that is the Government—would undoubtedly stop the game and use the weapons which are contained within this clause. However, I think I should say that the strongest argument in favour of the deletion of Clause 6(6) is that it gives the Secretary of State an unprecedented power to interfere in the day-to-day running of British Telecom.

The Government are committed by their manifesto to reduce the extent to which they intervene in the day-to-day management of nationalised industry but, far from honouring that commitment, they have, under this Bill, massively increased their power to interfere in British Telecom not only in this clause but in many subsequent clauses. There can be no doubt that the only reason for the existence of this subsection is to overrule the commercial judgment of British Telecom which already has the power under Clause 4 to create such subsidiaries as it thinks fit in its own commercial judgment.

It would appear that the Secretary of State intends to act as a quasi chairman of British Telecommunications rather than as its sponsoring Minister. This is not the role for which he is fitted. The unfair and unequal approach the Government are taking towards British Telecom is clearly demonstrated by the fact that British Telecom will suffer all the disadvantages and none of the advantages of setting up wholly-owned subsidiaries. Cross-subsidiaries are likely to be prevented but, typically, the Government will not allow wholly-owned subsidiaries to be released to borrow fully from the market. Clause 26(6) requires Government approval for any external borrowing by wholly-owned subsidiaries.

I think I have explained to your Lordships why we feel that this subsection should not be included in the Bill. It gives far too wide powers to the Secretary of State. In theory of course the subsidiaries which are to be created under these headings would give their dividends to British Telecom, but in practice there would be a strong disincentive for them to do that since, if the Government intend to stop British Telecom borrowing and providing its own financial support to its subsidiaries, then the subsidiaries would be continually confronted with the possiblity of cash starvation and therefore would be likely to respond by hoarding their retained profits. This is something we feel should not be included in the Bill, and I beg to move.

The Deputy Chairman of Committees (Lord Segal)

I have to point out to the Committee that if Amendment No. 36 is agreed to I cannot call Amendment No. 37.

Lord Morris

This amendment I think should be vigourously opposed. It runs to the very philosophy of the Bill and although these powers may appear swingeing they are, in my view, very necessary. In arguing the case, the noble Lord, Lord Ponsonby of Shulbrede, has made it quite clear that he does not appreciate the fact that it is fundamentally a role of Government and not of a public trading corporation placed in a monopolistic position to gear the tempo of change. My fear is that if it is left to Government alone, God help us all! But it is manifestly wrong that the tempo of change, which is so important for the industrial future of this country, should be in the hands of a public trading corporation.

Neither does this clause in any way fly in the face of the recommendations in the Beesley Report. One recommendation stated there says briefly: BT should be free to engage in competition in the non-voice markets, subject to regulatory safeguards involving the Department, and the pro-competitive mechanisms of the UK and EEC. My Amendment No. 33 refers to this. In his summary of conclusions there is a further reference to this where it says—and I would ask my noble friend whether he could comment on the Government's reaction to this recommendation of Beesley— To require this to be done via a separately accounting subsidiary is useful, but of less importance than the rules governing transactions, for which the Department and the Director-General should share a monitoring role".

9.40 p.m.

Lord Underhill

The comments that we have just had from the noble Lord, Lord Morris, indicate the complete difference between his views and those of my noble friends and myself; that is, set up a corporation, then have no faith in it but try to tell it what to do. The Bill proposes in subsection (7) that all the Minister has to do is to lay a report of the directive before each House. There is no need at all for any approval by Parliament. We are told in various clauses—and the Minister has said this repeatedly—that British Telecom must act commercially. Yet we find that this is a typical example of where it is being prevented from using its own commercial judgment.

I should like to ask one or two questions. What will be the criteria which the Secretary of State will use for intervention? Where will the Secretary of State get his advice, because subsection (6) states "after consultation with the corporation "? If the corporation supports what he proposes, then there is no need for it to get a direction. But, apparently, if the corporation disagrees on its commercial judgment, the Secretary of State may still decide to give a direction. That seems to be a complete negation of leaving a corporation free to exercise its commercial judgment. We have heard from the Minister that we should not be timid and that the corporation has great opportunities. But, apparently, if the Government accept the advice of the noble Lord, Lord Morris, they will put the corporation into a straitjacket and the Minister will be directing it what to do, against the advice of the corporation, after he has consulted with it.

The Earl of Gowrie

I must say at the beginning that some of these charges from members of the Labour Party are really extraordinary, because we are still here dealing with a great public sector corporation. If you look at the constitution of public sector corporations, you will find that there are relationships with the sponsoring Secretary of State, who is, after all, the chap responsible to Parliament, as well as the Executive within a Government, with particular charge over that business. The general intention of the Bill is that the relationship between the Secretary of State and British Telecommunications should be similiar to that between other sponsoring Ministers and the nationalised industries for which they are responsible, and the clause is similar to Section 11 of the 1969 Act.

The noble Lord, Lord Ponsonby, talked about unprecedented powers, but of course the powers are not unprecedented. There are a number of nationalised industry Acts which allow the relevant Minister to call for reviews of the structure of the industry and to give directions as a result—an example is Section 45 of the Transport Act, which the party opposite introduced in 1968—and, obviously, important strategic powers in public sector industries will be for the Secretary of State.

In our earlier debates, too, I tried to make very clear to the Committee that the Government were drawing a distinction between what could be called the mainframe or the main line service—with, among other things, its social or public interest content—and the competitive or liberalised elements which could enter into this arena and act in concert, and sometimes in competition, with the provider of the main line service. But from the tenor of the remarks of the noble Lord, Lord Ponsonby, and of his noble friend Lord Underhill, one would think that we were talking only of a private corporation and not at all of a great public sector corporation. Obviously, Clause 6 of the British Telecommunications Bill—which is the area we are debating at the moment—is the arena of the Secretary of State's powers and the clause contains most of the Secretary of State's powers over British Telecom.

My brief on the amendment indicated that the interest of the noble Lord, Lord Ponsonby, was over a particular direction, a particular power—the ability to dispose of any part of the undertaking or of the assets, or to cause a disposal of any part of a wholly-owned subsidiary's undertaking or assets not required for its duty under Clause 3(1). But, in fact, the noble Lord, Lord Ponsonby, went into rather wider issues than that, which of course he is perfectly at liberty to do and I make no criticism of it. If we were to suggest that the Secretary of State should have no powers over this great public sector industry, I think noble Lords opposite would be falling over themselves to put down amendments to give him some. Therefore I am rather puzzled about this, particularly in view of their own attitudes to the public sector.

At this late hour I do not want to go again over the arguments about the creation of subsidiaries, because in at least two debates I have gone over them. I think my noble friend has itemised them as well. I just want to make clear once more the distinction I have already made between using monopoly revenues to subsidise competitive activities, which is an option not available to private companies, and the normal commercial cross-subsidisation between different competitive activities, which I think is widely acceptable.

If I could turn to the particular power itemised in the amendment about hiving off assets, again noble Lords opposite have made much of the inclusion of this power in the Bill. It has been suggested that my right honourable friend Sir Keith Joseph is a kind of nationalised industry chairman manqué, which those of us who know him find a rather curious description of his character. I think they must themselves recognise that this is "business as usual" where public sector accountability is involved, including all the Acts which nationalised gas, electricity and transport as well as the Iron and Steel Act 1967.

In the case of this Bill, it is a strategic power which it is surely right for the Government to have. I do not anticipate that my right honourable friend will need to use it, because overwhelmingly it will be for the hoard of British Telecom to consider the deacquisition or the disposal of their assets, whether that be surplus land or other such assets, as they feel may be necessary in order to raise essential funds. Nevertheless, there may be circumstances in which it is necessary for the Secretary of State to use this power—he is accountable for this industry—and it is absurd to suggest that the Bill should not have it.

My last word on this would be the point made by the noble Lord, Lord Ponsonby of Shulbrede, that in some way the Government are strangling the competitive potential of British Telecommunications by the cash limits which are to be imposed upon them. There is nothing new about cash limits. Cash limits under this Government, as under the previous Government, have to cover capital activities as well. It is for the participation that we were talking about earlier between managers and employees to demonstrate that profits have to be retained for capital investment in this as in any other industry and not leaked through purely to wages, social benefits and the rest. There is nothing new about that.

I would also repeat a sentence by my right honourable friend the Secretary of State about the possibility of joint ventures outside the PSBR system. I think we would all welcome this where genuine risk is involved, and of course the corporation is at liberty to pursue this possibility. So with considerable rhetorical skill—I enjoyed his speech—the noble Lord, Lord Ponsonby of Shulbrede, has done the old trick of trying to pretend that the Government are doing something which is the reverse of their intentions and has then proceeded to analyse and point to flaws in a case which the Government have not in fact been making. On that, as well as on pretty well every other ground which I can recall, I must oppose the amendment.

Lord Ponsonby of Shulbrede

I do not wish to argue this evening the question of cash limits. As I said earlier, I know that there are specific amendments relating to this later in the Committee stage. I think I must be quite frank that what we are concerned about here is that, knowing the complexion of the present Government and of their propensity to sell off national assets whenever they see some potential commercial advantage in doing so, they take that course of action.

It may well be that in previous Acts there were general powers which would have allowed the Coal Board, or British Rail to sell off individual hotels or property, but seeing this particular subsection in this Bill put forward by the present Government immediately leads us to the conclusion that the intention of putting this subsection in the Bill is so that assets can be created and sold off so as to fulfil the Government's overall intention of selling off as many national assets as they can. We are implacably opposed to this policy of depriving the nation of its own assets and it is primarily for that reason that we feel that this particular subsection should not be in the Bill.

The Earl of Gowrie

Perhaps the noble Lord could help me by saying what kind of assets he imagines British Telecommunications are liable to own, other than perhaps some surplus property. The idea that this particular kind of corporation is a large asset-forming corporation seems to me to be inconsistent with its aims or its own intentions, let alone what any Government are interested in.

Lord Ponsonby of Shulbrede

Of course British Telecom has enormous assets, and what immediately comes to mind is that Prestel could be formed into a subsidiary company and sold off, but there are many others.

9.53 p.m.

On Question, Whether the said amendment (No. 36) shall be agreed to?

Their Lordships divided: Contents, 26; Not-Contents, 58.

CONTENTS
Birk, B.	Peart, L.
Boston of Faversham, L.	Pitt of Hampstead, L.
Bruce of Donington, L.	Ponsonby of Shulbrede, L.
Collison, L.	Ross of Marnock, L.
David, B. [Teller.]	Segal, L.
Elwyn-Jones, L.	Stedman, B.
Glenamara, L.	Stewart of Alvechurch, B.
Greenwood of Rossendale, L.	Stewart of Fulham, L.
Houghton of Sowerby, L.	Stone, L.
Jeger, B.	Underhill, L.
Llewelyn-Davies of Hastoe, B. [Teller.]	Wells-Pestell, L.
	White, B.
Lloyd of Kilgerran, L.	Young of Dartington, L.
McNair, L.

NOT-CONTENTS
Abinger, L.	Cork and Orrery, E.
Airey of Abingdon, B.	Craigmyle, L.
Avon, E.	Crathorne, L.
Bathurst, E.	Croft, L.
Belstead, L.	Cullen of Ashbourne, L.
Bessborough, E.	de Clifford, L.
Boardman, L.	De La Warr, E.
Caccia, L.	Denham, L. [Teller.]

Cathcart, E.	Digby, L.
Cockfield, L.	Drumalbyn, L.
Ellenborough, L.	Orr-Ewing, L.
Elliot of Harwood, B.	Portland, D.
Ferrier, L.	Rankeillour, L.
Gisborough, L.	Rawlinson of Ewell, L.
Gowrie, E.	Redesdale, L.
Gridley, L.	Renton, L.
Grimston of Westbury, L.	Rochdale, V.
Hives, L.	Romney, E.
Hylton-Foster, B.	Sandys, L. [Teller.]
Inglewood, L.	Savile, L.
Killearn, L.	Sempill, Ly.
Long, V.	Skelmersdale, L.
Loudoun, C.	Soames, L.
Lyell, L.	Stradbroke, E.
Mackay of Clashfern, L.	Strathclyde, L.
Mancroft, L.	Torphichen, L.
Mansfield, E.	Trefgarne, L.
Morris, L.	Vivian, L.
Mottistone, L.	Young, B.

Resolved in the negative, and amendment disagreed to accordingly.

[Amendment No. 37 not moved.]

10 p.m.

Lord Ponsonby of Shulbrede moved Amendment No. 38:

Page 10, line 4, at end insert— ("( ) A direction under subsection (b) shall be given by order made by statutory instrument and no such order shall be made unless a draft thereof has been laid before Parliament and has been approved by resolution of each House of Parliament.").

The noble Lord said: I beg to move Amendment No. 38 and, with your Lordships' permission, I should like to speak to Amendments Nos. 39, 40 and 41, which indicates an element of progress in your Lordships' proceedings. Under the previous amendment we were talking about curtailing the Secretary of State's powers—in fact removing certain powers from Clause 6. We are still dealing with Clause 6, but this amendment is concerned with fettering the Secretary of State's powers. At present, as we said on the previous amendment, his powers are unfettered despite the fact that this Act will no doubt be on the statute book for many years and the powers contained in this Act will be able to be exercised by generations of Secretaries of State.

There is no accountability to Parliament written into this clause of the Bill. I know that on Second Reading a number of noble Lords expressed concern about this and whether in fact, if the Secretary of State made a direction under subsection (b), he should seek to lay a draft order before Parliament before taking such action. There is undoubtedly an argument as to whether it should be by an affirmative or by a negative procedure. The proposal in this particular amendment is that a direction under this subsection shall be laid before Parliament and shall be approved by resolution of each House of Parliament—that is, an affirmative procedure.

I think that one should realise that this type of procedure has occurred in a number of previous Acts. There are precedents for the proposed provisions in the Coal Industry Act 1971, the Gas Act 1972 and the Iron and Steel Act 1975. In those instances the directions are subject to a negative resolution procedure as opposed to an affirmative resolution procedure.

One should realise that some of the licences which the Secretary of State is given powers to grant under this clause will be irrevocable licences which will be effective for a very long period of time. Therefore, it seems that it is only right, having given these very wide powers to the Secretary of State, that he should have the duty imposed on him to get his proposed directions scrutinised by Parliament, as and when he makes them, by the procedures proposed. It may be that the Government think that the Negative Resolution procedure would be better than the Affirmative Resolution procedure, but I am quite certain that there should be some form of procedure here. I beg to move.

The Earl of Gowrie

We now turn to the issues of parliamentary accountability. I could, of course, say that when a Labour Government included powers similar to those in Clause 6(6)(b) in their Bills, they, in fact, did not see fit to subject their use to an Affirmative Resolution procedure. But I would not rely on that as being the substantial argument, particularly as I am glad to note that the noble Lord, Lord Ponsonby, did not display any rhetorical indignation, and put his case very moderately.

There can be no question but that any Minister is accountable to Parliament for the exercise of his statutory powers. In fact, when we were debating the previous amendment I made great play of the fact that it would be curious, under the terms of the last amendment, to suggest that in some way the Secretary of State should not have accountable powers in respect of a public sector industry. It is always open to both Houses of Parliament to ask parliamentary Questions or raise matters for debate, and it is then for Ministers to justify their actions. We all accept that and nothing in the Bill derogates from it in any way.

We have given very careful consideration to the points which have been made both here and in another place. We concluded that there was some advantage in ensuring that, wherever possible, directions under Clause 6(6) should be reported to Parliament so that Parliament should be aware that they had been given, and their content. Clause 6(7) gives effect to this consideration. But we believe that there are likely to be directions which contain commercially confidential information, the disclosure of which could jeopardise the commercial interests of British Telecom, one of its subsidiaries or, indeed, one of its competitors. The requirement to lay the directions before Parliament is, therefore, subject to the possibility of the Secretary of State excluding directions, the disclosure of which would be against commercial confidentiality.

In the same way, if there are directions whose disclosure would damage the commercial interests of someone other than British Telecommunications, it would be wrong for the corporation to disclose it, and that is given balancing effect, as it were, in Clause 6(8). But there is no question of these directions never being published and Clause 6(12) requires all directions to be given to British Telecom to be published in its annual report, unless national security is involved, and this includes even those which contained commercially confidential material. This will mean that the Secretary of State's use of his powers over a period will become public, admittedly some time after the event, but nevertheless the pattern will be clear and open to question in this House and in another place. I think that the provisions that we have included in the Bill following these considerations altogether meet the spirit of the noble Lords' amendments, and, to put the boot on the other foot, I would hope that they could accept them.

Lord Ponsonby of Shulbrede

I should like to thank the noble Earl for his reply. I was interested in what he said in response to my moving of this particular amendment. I intend to study his reply in detail and possibly come back to it on Report. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 39 to 42 not moved.]

The Chairman of Committees (Lord Aberdare)

I have to point out that if Amendment No. 43 is accepted I cannot call Amendment No. 44.

10.10 p.m.

Lord Glenamara moved Amendment No. 43: Page 10, line 18, leave out subsection (9).

The noble Lord said: This is an amendment to delete the subsection which gives the Secretary of State a new right—and it is a new right—of consultation over British Telecom's research programme. I believe that there are three arguments for the deletion of these new powers which the Government are proposing to take. I think the first and foremost argument is, quite simply, why mess about with an area of British Telecom which has international renown as a centre of excellence?

Martlesham—I am pleased to say that I took the decision to transfer it from Dollis Hill to Martlesham—has been involved in most of the recent successes of British Telecommunications. Prestel was developed there, there was System X development, and the world leadership established by BT in the use of optical fibres. Those are three examples. I should like to add my congratulations to what the noble Lord, Lord Lloyd, said about the excellence of the work which is done at Martlesham; it is something of which this country can be extremely proud.

The first argument simply is, why mess about with that when it all works so splendidly? This Government are publicly committed to the pursuit of excellence. Rightly so. I am all for that. We should pursue excellence much more than we do. I see the noble Lord, Lord Trefgarne, nodding in agreement. But if that is so, why take new powers to bureaucratise this centre of excellence? Why do that? That is the first argument. The second argument is that I believe—and I speak with some experience—that the Department of Industry does not have the personnel capable of advising on the research programme.

I say that as somebody who has enormous regard for the British Civil Service. I have been around the world quite a bit and for quite a long time, and I would say certainly it is the best Civil Service I have seen anywhere in the world. I am not making criticism of the Civil Service. All I say is that it does not have highly specialised personnel who are capable of advising the Secretary of State on the research programme. British Telecom's research is frequently undertaken in collaboration with, or indeed subcontracted out to, the private sector. So if BT's programme is slowed down by this new power it is not only BT that will suffer but the private sector as well. That is my second argument. The first is why mess about with it; the second is that the DoI does not have the personnel capable of advising the Minister.

Thirdly, the Department of Industry does not have enough staff with commercial judgment to know whether a project is viable in this highly specialised area. If noble Lords are interested in this, and I am sure they are, I would advise them to look at the annual research review of the Post Office. They will see there the enormous range and the specialist nature of the projects undertaken at Martlesham.

The Conservative Party won the last election on a manifesto commitment to interfere less with the day-to-day running of the nationalised industries. Perhaps I could refresh the noble Earl's memory about what it said. I quote from it: We want to see those industries that remain nationalised running more successfully and we will therefore interfere less with their management". I do not know whether the noble Earl saw a lecture by Sir William Barlow a few months ago in which he quoted his experience. He quoted the new numerical incidences of interference by the department. I think he found they had multiplied by five under this Government compared with the previous Government. That was my own experience as well. In my case it was about four times as many incidents of interference, if I can so put it, under this Government than under their Labour predecessors.

The Minister will probably argue that the subsection is concerned only with consultation, and that it does not give the Secretary of State power to determine BT's research programme, and that is correct. However, in practice we are all aware that the inclusion in the Bill of a statutory reference to the Secretary of State's involvement will make it almost impossible for BT to resist Government pressures, even where BT is deeply opposed to what Government propose.

I know, and the noble Lord knows, exactly how Ministers operate. I can imagine what the Secretary of State will say in that sort of situation. He will say to BT, "Both Houses of Parliament have agreed that I should be involved. If you do not carry out my wishes you will be defying Parliament". That is the sort of argument the department will use. With only the right of being consulted, the pressures will be such that they will ensure compliance without resort to powers of direction.

I support the Conservative Party manifesto in that one respect—I support it in hardly any others, but I certainly do in that one—because for years successive Governments, including Labour Governments, have sought to find a balance between ensuring accountability to Parliament via Ministry, yet leaving industries free in day-to-day management, but so far no Government have found that balance. There could in my view be no clearer example of getting that balance wrong than the new provisions in Clause 6(9).

Martlesham, as successive Ministers have acknowledged, is a centre of excellence of which this country can be really proud. It has the distinction not only of being deeply involved in many of the most potentially successful recent developments in telecoms—I have quoted Prestel, System X and optical fibres—but it has also developed a close and co-operative relationship with private sector manufacturers, and that has been exemplified in the development programme for System X in recent years. This is not a great doctrinal issue and I hope your Lordships will join me in pressing the Government to think again. Martlesham is a success and I implore the Government to leave well alone.

Earl De La Warr

When I studied this series of amendments I came to the conclusion that the Government would be well advised to give way on them. Having heard the noble Lord, Lord Glenamara, argue in favour of this amendment, I am more than ever convinced that they should do so. The requirement in the Bill goes one stage too far in enabling, indeed forcing, the Secretary of State to interfere in things which are by definition absolutely the prerogative of management. I therefore hope the Government will accept the amendment.

Lord Orr-Ewing

I take a contrary view, I am afraid; my noble friend seems to favour the monopoly in every way. I agree that Martlesham does very good work, but for every £100 that is spent on research, about 20 times that is spent on development, and to put that into production, whether it be by the Post Office or the private sector, is generally 400 times that. The tooling up and putting into production, now with automatic assembly, means the ratio from research going up to 400 times. One can therefore quite cheaply do a number of research projects, but as one who has spent the whole of his working life in the electronics industry, I assure the Committee that it is not the starting of research which is difficult but deciding what to cut out of the development and production programme. Every team believes that it has a tremendously promising gadget which will revolutionise this, that or the other—

Earl De La Warr

Does my noble friend not think that a competent chairman and a competent managing director are well capable themselves of controlling a function like that?

Lord Orr-Ewing

Yes, but I do not happen to believe that the whole monopoly of wisdom rests with the Post Office. The Minister of Industry sees a far broader spectrum than just the Post Office. The managing director of the Post Office and his board see what is going on in the Post Office, and they tend to believe that all their ducks are swans. The Minister has a much wider aspect. He sees, and is in touch with, the whole of the production and research problems of our entire defence industries. He sees the broader picture. He sees the impact on our competitive position, both in this country and for exports. Let us be honest about it—in the last few decades the Post Office has been blind to the export potentiality. We have over-designed. I remember very well producing pieces of equipment for which were demanded on every connector Post Office standards of four times more covering of gold than was demanded by any other company or Post Office in the world. It was grossly over-designed, entirely over-expensive, and therefore not exportable.

I am a person who criticises placing too much power in the hands of a Minister, but I believe that the broader spectrum that the Minister possesses warrants this particular aspect. I am sorry to oppose my noble friend here, but, like him, I speak from the basis of a great knowledge of the industry, and my experience tells me that it is well worth while to have someone who can look at the broader picture, and we should retain the power.

Earl De La Warr

I think that my noble friend has been arguing against standards that are unnecessarily high, not against R and D.

Lord Morris

I have the misfortune totally to disagree with my noble friend Lord De La Warr. I believe that he has fallen into the trap into which noble Lords opposite so often fall, of forgetting that public corporations can rarely be compared with the private sector, because in the end it is the taxpayer who carries the can. As we all know only too well, programmes of technological research and development are enormously expensive, and it is fundamentally correct that the Secretary of State should have a very broad oversee duty—there is nothing at all draconian in this—with regard to programmes such as this.

Lord Trefgarne

The noble Lord, Lord Glenamara, has repeated, as he was entitled to do, some of the arguments that had been put in another place on this very matter. During the Committee stage there my honourable friend the Parliamentary Under-Secretary agreed to consider the matter further with the chairman of British Telecommunications. As he made clear, that we have done, but the Government remain convinced of the need for this provision which, although new in relation to the Post Office, has precedents in legislation introduced by Governments from both sides of the House.

First, let me say, as indeed my honourable friends have already made clear, that the Government are well aware of the high standard of work carried out at Martlesham. In many respects it is well known as a world leader. But that is not necessarily an argument against a requirement for consultation with the Government; in some ways it is indeed an argument in favour of Clause 6(9). There are two main reasons for this. The first is that British Telecom's R and D may be of very considerable importance for its future investment programme, since the outcome of the research at any time may determine, at least in part, the next generation of telecommunications equipment. My noble friend Lord Orr-Ewing indicated the ratio of expenditure as regards research, development and production, and the figures are fairly substantial. In my view it is entirely right that the Government should be consulted about research which could lead to such substantial future capital investment. Indeed I should have thought it would be in British Telecom's interests as well to have early contact with the Government in this area.

Secondly, BT's research and development may be of great importance for the United Kingdom telecommunications industry, it may open up new services or new types of equipment and, again, early consultation with Government is surely in the interests of all. This is in keeping with the recommendation of the ACARD report on public sector research and development. My noble friend Lord Orr-Ewing pointed out how the Government (the Department of Industry in this case) can have a much wider view of the capabilities and capacities of the telecommunications industry outside BT and are therefore in a good position to act as a link in regard to new concepts and new products that may be developed from within BT.

In neither case are the Government seeking to approve—and I emphasise the word "approve"—the R and D programme as for example is provided for in Section 46 of the Transport Act 1968 which, if my memory serves me aright, was passed at the time of another Administration. The Government are merely seeking consultation. BT will retain its commercial freedom exactly as at present. I am convinced that it is right that this should be so. But given that this consultation is both right and necessary I believe that it should be reflected in this legislation, and that is what Clause 6(9) does. I have already made clear that the requirement is only for consultation and, to my mind, the clause makes that clear.

I should like to point out that the Government accepted an amendment in the other place to give greater emphasis to the fact that only consultation is required and to put beyond any doubt that BT's research and development programme can be changed to meet the changing circumstances of the new technologies. I hope that this meets the principal worries expressed by noble Lords opposite and by one at least of the noble Lords sitting behind me, and that the noble Lord, Lord Glenamara, will not seek to press this amendment.

Lord Glenamara

I am disappointed with the Minister's reply. I thought he would have accepted this amendment. He talked about a precedent. There is no precedent for Martlesham. It is quite sui generis, there is not another institution in the country anything like it. There is no precedent, none anywhere in the country. The noble Lord talked about the ratios of expenditure on research and development and production and export. The Post Office has always shown an awareness of this. If the noble Lord looks at the history of Post Office research, at Martlesham and at Dollis Hill before it, he will see that it is one of success stretching over many years. The noble Lord spoke about the desirability—

Lord Orr-Ewing

May I—

Lord Glenamara

I know that the noble Lord, Lord Orr-Ewing, is opposed to every aspect of public enterprise, to research, to the lot. Whatever it is, if it is public enterprise it is wrong. We understand that. We know what he will say whenever he gets up. He is opposed to anything to do with public enterprise.

The noble Lord spoke about the desirability of early contact with the Government. I never thought I would hear a Conservative Minister say that—that the man in Whitehall knows best. What about the commitment in the manifesto that I read out?—that they would interfere less with these industries? Here is a new interference, a new power of interference that they take in this Bill which did not exist before. The man in Whitehall does not know best. Is the noble Lord really saying that the civil servants who advise the Minister are in a better position to advise him on the Post Office research programme than the chairman and the board of the Post Office? Is he really saying that? If he is, then it does not bear examination.

Lord Trefgarne

I am not saying that.

Lord Glenamara

Then I misunderstood the noble Lord. I thought he was implying that. What does he mean by "early contact with the Government is desirable"? I am sorry that the noble Lord would not accept this amendment, but in view of this late hour—and we have made our point—I will not press this amendment to a Division. I beg leave to withdraw it.

Amendment, by leave, withdrawn.

[Amendments Nos. 44 and 45 not moved.]

10.30 p.m.

Lord Lloyd of Kilgerran moved Amendment No. 46:

Page 11, line 9, at end insert— ("(14) The Secretary of State shall in addition to his power under section 15 give such directions to the Corporation as may be necessary to ensure that in providing products and services competing with those provided by others licensed under section 15, the Corporation competes fairly.").

The noble Lord said: The object of this amendment is to give further powers to the Secretary of State so that he can give directions to the corporation as may be necessary to ensure that in providing products and services competing with those provided by others licensed under the Bill the corporation competes fairly. This raises a really practical problem in industrial life particularly associated with inventions, new ideas and competing equipment.

The corporation will in the course of its business become aware quite naturally of the plans of competitors whose products have to be connected or maintained by British Telecom. This amendment, if adopted, would give a commercial assurance to competitors and assist, in my submission, the commercial activities of the new corporation. Many of these projects disclosed to British Telecom will not be covered by the Secretary of State's reserve powers to direct the corporation to form separately accounting subsidiaries. It seems to me therefore that the Secretary of State as a matter of commercial prudence will need a more general power such as I have suggested, not limited to the services which the corporation has the exclusive privilege of providing. This general assurance about dealing fairly could give very considerable encouragement to the private sector and assist British Telecom in development generally. I beg to move.

Lord Morris

I hope that the Government will look at this amendment with very great care. I support it in its entirety for two very good reasons: it is directly in line with the expressed intentions and views of the Secretary of State for Industry in his Statement on 15th April 1981, when he said that British Telecommunications should be free to compete subject to safeguards of fair competition. There is the test there and there is exactly the same test in Professor Beesley's report. No less an authority than my noble friend Lord Trefgarne said at Second Reading that the Government's policy is that British Telecom should be free to compete in the provision of telecommunications equipment services, provided such competition is on a fair basis. This amendment in its entirety is underlying this vitally important principle. I believe very strongly that it should be dignified by inclusion in the substantive Part of this Bill.

Lord Lyell

I listened carefully to what the noble Lord, Lord Lloyd, had to say, and I took careful note of Lord Morris's comments. I hope that my noble friend will excuse me from being entirely responsible for every nuance of what my noble friend the Minister had to say at Second Reading. I am fascinated that my noble friend believes that there is genuine driving force in Amendment No. 46 in some obiter dicta of my right honourable friend the Secretary of State in another place.

I hope that the Committee may bear with me if I were to accept that there is possibly some merit in Amendment No. 46 but the Government regard it as very important that British Telecom, when competing against the private sector, does so fairly. Indeed, if the Committee consults Clause 6(5) and Clause 16(4) this would be seen to be pre-eminently displayed there. The Government's intention is indeed that British Telecom should operate through any subsidiaries so that the transactions between the corporation and subsidiaries will be evident.

It would in any case be for the Director General of Fair Trading to take note and, indeed it goes further than that, to monitor any development of competition. If he thought there was any problem it would be for him to take steps to recommend any changes in practices which have grown up which he may regard as undesirable.

Of course the Government recognise, even though it is unlikely for it to be used immediately, that there is a case for a reserve power for the Secretary of State to direct the corporation to cease any particular practice and to cease to act unfairly in any particular field or particular instance. Such a power already exists in Section 11(4) of the 1969 Act, and this particular measure has been repeated in Clause 6(5). This allows the Secretary of State to direct the corporation to cease showing undue discrimination or preference in relation to its terms and conditions of service.

In some of the comments made by the noble Lord, Lord Lloyd of Kilgerran, I thought I detected certain elements taken directly from Clause 6(5). He mentioned the exclusive privilege of providing services, and I thought he was quoting immediately from that clause. So it seems to me that his particular point there was covered; but in addition to this particular power which is covered under the general control of supervision by the Secretary of State as far as any unfair practice is concerned, we find the new power in Clause 15(4). This allows the Secretary of State to give particular directions if the corporation shows unfair practices or undue discrimination in relation to any connection to a corporation system of apparatus which is approved either directly by the corporation or indirectly through standard procedures, or alternatively in relation to the corporation's terms and conditions which are applicable to this particular apparatus which is hooked on to the network. This particular power in Clause 16 extends to any activity of the corporation which is concerned with the apparatus which is approved and indeed it covers anything that could be achieved through the noble Lord's amendment.

I hope I have been detailed enough and that..the noble Lord, Lord Lloyd, and possibly my noble friend might see that their fears are unjustified in this case and that the problems raised in their amendment are covered in Clauses 6 and 16.

Lord Lloyd of Kilgerran

I thank the noble Lord for his very detailed reply. I am afraid I cannot go along with him on this matter, but I will read what he has said and consider whether the matter should be raised again at a later stage I therefore beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 6 agreed to.

[Amendments Nos. 47 to 50 not moved.]

Clause 7 agreed to.

[Amendments Nos. 51 to 53 not moved.]

Clause 8 agreed to.

10.39 p.m.

Lord Lloyd of Kilgerran moved Amendment No, 54: After Clause 8, insert the following new clause:

("Telecommunication Authority

.—(1) There shall be established a public authority to be called the Telecommunication Authority, hereinafter referred to in this Act as "the Authority".

(2) The Authority shall consist of representatives of the Corporation, business and domestic users of the Corporation's services, suppliers of telecommunication systems and such others having academic, professional or commercial experience relevant to the duties of the Authority.

(3) The Authority shall be responsible to the Secretary of State for the management of the telecommunications environment of the British Islands. Without prejudice to the generality of the foregoing, it shall be the duty of the Authority—

1. (a) to perform the functions reserved to the Secretary of State under sections, 12, 15 and 16 of this Part;
2. (b) to secure that telecommunication systems are provided which satisfy all substantial categories of public demand so far as is reasonably practicable at the lowest charges consistent with safe operation and an economic return to efficient operators on the sums invested in providing the systems;
3. (c) to further the reasonable interests of users of telecommunications systems;
4. (d) to perform its licensing functions under section 15 in the manner which it considers is best calculated to secure the sound development of the telecommunications industry in the United Kingdom and to secure that the Corporation and others have comparably fair opportunities to participate in providing telecommunication systems other than the basic facility for conveyance licensed to the Corporation under subsection (1) of section 15;
5. (e) to review the adequacy of the network facilities provided by the Corporation and the reasonableness of the specification by the Corporation of the interface to these facilities;
6. (f) to monitor all tariffs and practices of the Corporation and of other suppliers of telecommunication systems and to cause any it considers unreasonable or restrictive to be reviewed;
7. (g) to represent the United Kingdom in international standards bodies.

(4)(a) It shall be the duty of the Authority to publish from time to time a statement of the policies it intends to adopt in performing its functions under this Part.

(b) If the Secretary of State considers it appropriate to do so, he may by notice in writing require the Authority to publish a statement of the policy it intends to adopt with respect to any particular matter in performing those functions (or any of them).").

The noble Lord said: This is an important amendment which received considerable support on Second Reading. It proposes that a new statutory authority should be set up, known as the Telecommunication Authority. It is felt on these Benches that the key to effective management of the complex situation and complex environment envisaged under this Bill would be the setting up of this independent statutory authority to deal with questions of management and to fulfil the complex managerial functions which will arise.

As the noble Lord, Lord Glenamara, indicated earlier, it is felt that unless such an independent authority is set up, so much of management in relation to high technology will fall upon civil servants. Like the noble Lord, Lord Glenamara, I am full of respect for the Civil Service, but in these areas of high technology it cannot be expected that they will be able to fulfil management functions which are required for dealing with this matter.

The fundamental justification for establishing an independent telecommunications authority is that the management of the telecommunications environment needs to be separated from the provision of facilities and services by British Telecom, as a largely network operator. This Bill does not achieve that, because it transfers the exclusive privilege in telecommunications to British Telecom, and then authorises the Secretary of State to erode it in potentially extensive, but largely undefined, areas.

As I said, in doing so it will have to rely on civil servants—who do not possess specialised knowledge—on various public and private bodies and on informal consultations. Some powers are likely to be devolved to, for example, the British Standards Institution and the Office of Fair Trading. This diffusion will result in power too fragmened to be effective and is liable to leave a lot of influence to British Telecom by default.

In my view, the Minister, in the circumstances of the formation of this new corporation, is expected to lay down the objectives but not to deal with the detailed methods by which those objectives are to be reached. Exploitation of the technological possibilities of information technology is crucial to the success of the British economy, especially of its service industries on which it most substantially depends. The environment must, therefore, encourage innovation, but that proposed could well deter entrepreneurs and investors, because of the uncertainty arising from the imposition of the Bill and from the differing approaches of successive Secretaries of State and their advisers.

The ultimate power must always be in political hands but, in my submission, confidence would be greatly increased by allocating the responsibility—under this political direction—for licensing, for setting standards and for strategic planning to an independent authority, staffed by technically competent and commercially experienced people, representing the interests of users, suppliers, British Telecom and its employees and professional bodies.

Even at this late hour, I feel that this is a matter of such importance that I must draw your Lordships' attention to the details of this proposed new clause. Under subsection (3), The Authority shall be responsible to the Secretary of State for the management of the telecommunications environment of the British Islands. Without prejudice to the generality of the foregoing, it shall be the duty of the Authority— (a) to perform the functions reserved to the Secretary of State under sections 12, 15 and 16 of this Part", including licensing arrangements. It seems to me most appropriate that the licensing arrangements should be under a permanent independent authority, still responsible, of course, to the Secretary of State. Under paragraph (b) the authority would have the duty to secure that telecommunication systems are provided which satisfy all substantial categories of public demand", social requirements and so on.

I shall not read the exact words of paragraph (b). It shall be the duty of the authority, in paragraph (c), …to further the reasonable interests of users of telecommunications systems". Paragraph (d) deals more fully with the authority's licensing functions. These seem to me to be most appropriate for an authority of this kind. In paragraph (e) the authority has a duty to review the adequacy of the network facilities provided by the corporation. Under paragraph (f) the authority has to monitor all tariffs and practices of the corporation, and under paragraph (g) the authority has to represent the United Kingdom in international standards bodies. Subsection (4) of the amendment is based on the Civil Aviation Act 1980 which was introduced by the Government to create reserve powers.

There is an analogy between the functions of this new authority in the field of new technology and the position of the aviation industry some years ago. The Civil Aviation Authority has acted in a very successful way. Because of its independence and the high expertise of its members, it has done a great deal for aviation in this country. All analogies are difficult to substantiate, but to those of us on these Benches it seems that the advancement of the interests of British Telecom would be assisted by the provision of an independent telecommunications authority on the lines which I have suggested. I do not want to press this matter at any greater length. I think I have made it clear that I am proposing that an independent statutory body should be set up to deal with many matters with which the Secretary of State has so far been saddled. I have taken a considerable time upon this amendment, which I beg to move.

Lord Mottistone

While having great sympathy, in broad principle, for what the noble Lord, Lord Lloyd of Kilgerran, has proposed, I think he has given far too many diverse jobs to this body. I do not believe they will be able to do any of them properly. If he was attacking on a narrower front, it would be much easier to see whether one could support him. When the time comes, I hope that the noble Lord will withdraw his amendment and then narrow it right down. There will be a very real problem for the Government. Forgetting all about looking after consumers' interests and the rest, very good technical advice will be needed in order to combat the statutory advice which it will have to take from British Telecom. It is most unfortunate that in many places in this Bill the Government are statutorily required (I believe this was inserted in another place) to consult British Telecommunications. They are required to consult BT about all sorts of things. I see great difficulty over getting the right sort of expertise. To that extent it may be that an independent body might be a good thing in order to provide another source of information. But that would overcomplicate the issue. It would be very nice to hear from my noble friend on the Front Bench whether he is giving thought to the question of high expertise which has a totally different base from that provided by the Post Office as it exists now.

Lord Orr-Ewing

I deployed my arguments on this point, I hope reasonably effectively, at Second Reading. It was argued that there was no case for an intermediary body. I would argue that a small bureaucracy, albeit a Quango, is better than a large bureaucracy. There are 9,000 people on the staff of the Ministry for Industry. This is a fairly substantial bureaucracy in size, but when one looks at the list of their responsibilities, one is amazed that they can cover all of them. Why, therefore, add one further responsibility, the supervision of British Telecom, to all these other responsibilities? In a Ministry they have to think about the career structure; they move people around as they are promoted up the ladder. In a smaller bureaucracy you can engage staff on a programme contract, as it were, for a short time. In a smaller bureaucracy it can be more specialised and more in touch with a highly technological industry and have more expertise. Therefore, I still support the idea that an authority of this type, not necessarily with these terms of reference, would be a considerable gain for the Government and for this Bill.

The Earl of Gowrie

The noble Lord, Lord Lloyd of Kilgerran, in whose name this amendment stands, as well as my noble friend, have also tabled amendments that would take the exclusive telecommunications privilege away from BT and give it to the Secretary of State. I am bound to agree with them that if this were done there would be no option but to set up a sizeable regulatory body that would be our counterpart of the Federal Communications Commission in America. But your Lordships might like to be reminded that the FCC has a staff of over 2,000. Even taking into account the differences of scale, the establishment of an authority of that size would make a very substantial increase in bureaucracy, which would surely offset the benefits of liberalisation. This has been an important consideration in our decision to leave the exclusive privilege with British Telecom and to achieve liberalisation by progressively licencing derogations from that privilege.

Lord Morris

I am most grateful to my noble friend. for giving way. During the Second Reading the noble Lord, Lord Trefgarne, expressed his disappointment that the analogy between the British Telecommunications and the FCC was not drawn. It was drawn with the Civil Aviation Authority and the reason why that analogy was carefully drawn was the very simple fact that the FCC are by no means a model upon which this proposed telecommunications authority could be based. I do not think it is very fair of my noble friend Lord Gowrie.

The Earl of Gowrie

I am not suggesting for a moment that it would be the model. What I am saying is that there would be a comparable licensing or regulatory authority. I am not saying that they would be comparable in scale or would have exactly the same functions. You would have to set up a body and even, as I said, take into account the differences between them, which my noble friend is quite right to underscore. You are nevertheless making a jumbo Quango here, if I may put it that way, which in our judgment would offset the benefits, not least the cost benefits, of the liberalisation that the legislation is designed to achieve.

So we are not resting on our laurels, but we prefer to look, wherever possible, to existing bodies (I would say to my noble friend Lord Orr-Ewing, particularly, so far as possible, within the private sector) to carry out the detailed tasks which of course liberalisation entails. The writing of standards has been entrusted to the British Standards Institution and we have asked the British Electro-Technical Approvals Board to undertake the approval of subscriber apparatus in accordance with such standards. The Director General for Fair Trading and his staff have been mentioned and they stand ready to monitor BT's response to the new competitive conditions and to take action if need be. Radio regulatory matters are already within the responsibilities of the Home Office, which possesses appropriate resources. What remains is the critical licensing of competitive services and the supply of subscriber apparatus.

The Government are concerned to see as much competition as possible, and we are convinced, with the noble Lord, Lord Lloyd, that this is the way for Britain to make the most out of the information revolution, where success depends upon the freedom to innovate and the ability to respond rapidly to technological and market changes. That is why our proposals go a long way towards de-regulation, without the intermediate step of regulated competition, which is what is being suggested.

I would say again to my noble friend Lord Morris that this trend is rapidly increasing its momentum in the United States and it can only be a matter of time before the same happens in Europe. Our proposal would put this country in the lead in this movement and indeed on a par with world leaders. The implication is that the regulatory effort required should be relatively small. In my view, much liberalisation can be accomplished through a handful of strategic general licences, and I am sure it is right that the responsibility for these should rest with the Secretary of State who is answerable to Parliament. This is also true of the continuing regulatory and licensing effort that will be required, which the Department of Industry does have capacity to deal with. In short, there is no need for the expensive machinery proposed in the amendment, which I hope noble Lords will be willing to withdraw.

Lord Lloyd of Kilgerran

I am grateful to the noble Earl. He indicated quite clearly in his opening remarks that he was dealing with a difficulty and a kind of authority with which I was not concerned. He emphasised at the beginning of his speech something that has happened in America in circumstances totally different from those which arise in this country. Nevertheless, it is a late hour; I will read what the noble Earl has said and consider whether the matter should be raised at a later stage. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 9 [Users' Councils]:

10.56 p.m.

Lord Young of Dartington moved Amendment No. 55:

Page 13, line 7, at end insert— ("( ) It shall be the duty of the Corporation and the Post Office—

1. (a) to consult during their own decision making processes the Users' Councils on all issues relevant to the industry's consumers; and
2. (b) to disclose to the Users' Councils all such financial and other information, records, data, memoranda and plans as those bodies shall reasonably require for that purpose.

( ) Section 14(9) of the Post Office Act 1969 shall be amended by inserting the following after paragraph (c)— ('(d) to monitor and report on the performance of the Corporation and Post Office and report to and make representations to the Secretary of State on matters affecting the interests of the consumer.' ( ) The Secretary of State shall lay before each House of Parliament a statement on any representation to him by the Users' Council on which the Corporation or the Post Office do not intend taking action and on which the Secretary of State does not intend to make a direction.").

The noble Lord said: I should like to begin, if may, by congratulating the noble Earl the Minister on his stamina. He said a moment ago that he feared he was flagging, but I must say he seems to put up a very good show from my viewpoint. No doubt he will in response to what I am going to say on the amendment I now have pleasure in moving.

My complaint is that the Government have here lost an opportunity to strengthen the users' councils which have been attached to the Post Office and are now going to do double duty for the Post Office and the new corporation. I should make it clear that I am by no means a critic of POUNC and the other users' councils—far from it; I think they have done an extremely good job. I hope my noble friend Lady Elliott would agree about the reputation that POUNC has achieved in this world of consumer councils. In a report on the subject of consumer councils submitted to a previous Government from the National Consumer Council at the time when I was the chairman of that body, POUNC was singled out for rather special praise.

If that be so, then why am I urging, particularly at this late hour, that some strengthening of this body and the country users' councils is needed? The basic reason, as I see it, is that there is going to be, even with the very welcome relaxation of the monopoly proposed in the Bill, a very substantial element of statutory monopoly left. The new corporation will still have extensive monopoly powers, and it is because of that that we need the special kind of protection that a consumer council will give. Even this monopoly that we are creating here tonight, and have been for some time, will over quite a range of its activities be able to do more or less what it wants so far as pricing and standards are concerned. It has something like the equivalent of a power of taxation without the check that competition can provide when there is competition. Telephone charges go up; sometimes they go up by 25 per cent.; some years they seem to double. They go up inexorably and the consumer has no recourse; there is very little he can do about it unless he is going to do without a telephone altogether.

There are many other complaints, as the noble Minister will be aware. Even now it is not possible for consumers to get itemised billing which will show them what they are being charged for at what they think are inordinate rates. What is more important is that, as regards the general tariff policy which has been pursued and which will be pursued in the future, consumers, unfortunately, have very little influence indeed.

It has puzzled me, and it may have puzzled my friends opposite, that the telephone service has never followed the Roland Hill principle which has guided—as far as pricing is concerned—the postal service. The same price is charged to send a letter from Penzance to London as to send one from Westminster to Victoria, but we all know that the costs are a great deal higher. It certainly does not cost anything like the same, as we all know, to make a phone call from Penzance to London as it does from Victoria to Westminster. I do not think that anyone has ever claimed that the costs of long-distance calls should be as proportionately high as the charges, and that the proportionate charges are justified by the proportionate difference in costs.

Certainly when System 'X' is fully introduced, as we hope it will be, as rapidly as possible, we should be able to have distance independent tariffs—that is, the Roland Hill principle in the telephone service—which will be the greatest possible advantage to rural areas and people living in remote areas generally. When that time comes, a call from North Devon to London should cost the same as from Victoria to Westminster. But even before that the proportionate differences are not, in my view, justified. That is just the sort of point that consumers would wish to raise, and can only raise at the moment through such a vehicle as the Post Office Users' National Council and the country councils.

Most of this has been said before. It was said in the report to which I have already referred. It was said to a large extent in the report of the Select Committee on Nationalised Industries for the Session 1978–79 on the subject of consumer councils. Their conclusion was: Your Committee are convinced that consumer councils should have the strength and independence to command the confidence of the public in their ability to help the individual in complaints against the industry, while the councils should also have access to the information necessary for them to form responsible judgments on the future policy of the nationalised industries, including pricing policy. The alternative is a number of toothless watchdogs barking at any form of price rise regardless of its merits or the longer term interests of the consumer". Since those wise words were written, I think we can say that precisely nothing has happened to strengthen the consumer council that we are specially concerned with tonight, or indeed, any other consumer councils.

Soon after the last election, the Government started a review of the whole subject. The Department of Trade was responsible. They have been working on it for 18 months or nearly two years. It was referred to in the other place and the excuse that the Minister gave there for not adding to the powers of the Post Office Users' National Council was precisely that this review was being undertaken and that, therefore, nothing could be said until it was completed and published. I hope that we can hear from one or another of the Ministers opposite about that review and the bearing that it has on the amendment that I propose and the clause which is under discussion.

To come to the amendment, the first part of it provides for fuller disclosure of information than is provided for in the statute itself or in the Post Office Act 1969. Neither this nor any other consumer council can do its job properly without adequate information. POUNC has certainly had a decent supply of information from the Post Office in the past, and the objection to this part of the amendment might well be that there is no great complaint on the part of POUNC. I can only say that there is a profoundly conservative purpose behind this part of the amendment, but I am proposing that the status quo should be buttressed in the statute.

The second part of the amendment provides for the amendment of the Post Office Act 1969, which sets out the constitution of users' councils, and the proposal that is made here would, in my submission, make for a much clearer statement of the duties of POUNC and the other bodies concerned than was contained in that Act, which is now in some ways outdated.

However, the last part of the amendment is the most important because it provides that the Secretary of State should be involved, and that he should be under a duty to lay before each House of Parliament a statement on any representation made to him by the users' councils on which the corporation or the Post Office do not intend to take action. This has been proposed before as a generalisation for consumer councils and if it were accepted for this particular consumer council it would set a precedent for what might happen in a number of other nationalised industries which have the same kind of statutory monopolies as we shall have in this industry in the future.

In conclusion, I can only say that I hope that, as well as explaining what has happened about this very long-delayed review on the subject of consumer councils, the noble Lords the Ministers may be able to accept at least some part of the three-barrelled amendment which I have moved. I can assure tham that, if they do, it will be a source of much comfort to many people who are members of the Consumers' Association and other consumers organisations, which are specially concerned with this aspect of the Bill that is before us. I beg to move.

Baroness Elliot of Harwood

I shall very briefly support the noble Lord, Lord Young of Dartington. He has put the case for consultation with the advice which can be given by consumer councils on individual projects, of which this is one, very well indeed. It was the Conservative Government of Sir Harold Macmillan that started the first Conswner Council. They have gone on since then and have been very valuable to the railways, air services and to all the other organisations that are advised by consumer councils.

I very much hope that the Government will take this proposal very seriously indeed. I am quite sure that it will be a tremendous help to the new corporation, and also a great help to all of us who use the Post Office and who use telecommunications, and are anxious that they should be a great success. I hope that the noble Earl will realise that this is going to be something which would be a tremendous help. I hope that, if he cannot accept this amendment as it is, he will indicate that he will look favourably upon it, and possibly bring in some amendment himself at a later stage.

Lord Lloyd of Kilgerran

From these Benches we support Lord Young's amendment in these matters. I should also like to say, despite the unhappiness on the face of the noble Lord, Lord Denham, at this moment, that my noble friend Lord Winstanley had hoped to be here to speak upon this important amendment, but unhappily public duties prevented him from being present.

The Earl of Gowrie

I should like to thank the noble Lord, Lord Young, for his kind personal remarks and reciprocate them, in that we all know what a great expert he is in this field and what valuable work he has done in it. I am aware of what I hope is a cherished reputation for being as helpful on as many occasions as I can be in this House, but I am aware that I have been a bit obdurate this evening.

I can give some comfort to the noble Lord, Lord Young, in that while it would stretch credibility to go so far as to say that I can accept his amendment, I have some words of encouragement to give because he will be aware—indeed, he has mentioned it—that we currently have in hand a review of the powers and functions of all the nationalised industries consumer councils and we shall be undertaking consultations on these as soon as possible. The statutory rights of consumer councils to information and their powers and duties are among the areas under consideration. Therefore, the proposals which the noble Lord has made should, I suggest, be pursued in the context of that review. It certainly would not be appropriate in our view—I hope that my noble friend would also take this on board—to amend existing law until the conclusions of the review are known.

In the meantime, POUNC has proposed that for the Post Office and for British Telecom there should be an annual "customer audit" procedure whereby yardsticks, which would be discussed between POUNC and the businesses, would be established for measuring financial, quality of service and productivity performance. The objective would be to enable the businesses to account publicly for their performance and for customers to get a better idea of whether they are getting value for money. Discussions are going on between the Government, the Post Office and POUNC, and we hope that these discussions will result in a constructive experiment. To sum up, there is therefore a great amount of activity going on in this arena. In view of that activity, I do not think that it would be appropriate for me to make these amendments at this time, but I can assure the noble Lord that we are on the same side in stressing the importance of the activities.

Lord Young of Dartington

I had hoped that the words, especially at this time of night, would be somewhat more comforting than the words we have just heard. It was perhaps gruel when I was hoping for honey. I am grateful for what the noble Minister said about the customer audit which POUNC has proposed and which seems to me to mark an important step forward. The members of POUNC, at any rate, will be grateful for those words because they suggest that there is going to be a good reception not just from the Post Office, which has already warmly welcomed the proposal from POUNC, but also we might suggest that the new corporation is going to give the same kind of welcome to this proposal.

For that small meed may I express my thanks. Particularly in view of the time at this point in the evening's proceedings, I should like to urge the Minister to do better and to consult with his colleagues and see if something more could not be said of a constructive kind at a later stage, if only something can be extracted from this long-delayed review that would be of immediate relevance to the Bill. The circumstances being what they are and my thanks having been expressed, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 56 and 57 not moved.]

Clause 9 agreed to.

[Amendment No. 58 not moved.]

Clause 10 agreed to.

Schedule 2 agreed to.

Clause 11 agreed to.

House resumed.