HL Deb 18 May 1981 vol 420 cc783-823

House again in Committee.

[Amendment No. 79 not moved.]

Lord Morris moved Amendment No. 80: Page 18, line 34, leave out ("required") and insert ("exigible").

The noble Lord said: As your Lordships will be aware, this is purely a drafting amendment. The provisions of Clause 15(4) require the rendering of a payment upon the granting of a licence. I felt that the word "exigible", which actually means "extractable" is a rather more appropriate word than "required"; where rendering of an impost or charge is called into being. I should like to have my noble friend's view on this.

Lord Trefgarne

I am grateful to my noble friend for his attempt to improve the drafting of the Bill and to make the wording more consistent. "Exigible" is indeed used in Clause 20(6) which follows Section 28(5) of the Post Office Act. However, that provision is concerned with payments under schemes, which will, of course, only be payable to BT. Given this constraint, the drafting can be more economical than in Clause 15, where licences can require payments to be made to either BT or to the Secretary of State. Clause 15(5) has to make clear that both can recover sums due to them and this is why it differs from Clause 20(6). I hope that my noble friend will see the force of this argument and will see fit not to press his amendment.

Lord Morris

I do indeed, and in the light of what my noble friend has said I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Glenamara moved Amendment No. 81: Page 18, line 38, after ("subsection (1)") insert ("(b)").

The noble Lord said: I should like to discuss No. 84 with this one. Of course, this is second best. We are opposed to the whole idea of licences and directives but, if this is going to be enacted, they are of such importance that we believe they should be brought to Parliament for approval by affirmative resolution.

The Bill would give the Secretary of State quite unprecedented powers to direct our telecommunications system in a way which could profoundly affect the future economy of the country. These amendments seem to me to raise both the old question of the extent to which a Government should ask for enabling legislation and at the same time the broader question of the function of the legislature in relation to the executive in our democratic system. I think it is important to remember that it is this relationship between the executive and the legislature that has broken down and so often in the past led to dictatorship.

We have always believed and said that an essential function of the legislature is to monitor and, in the last analysis, to control the executive; but we have now reached a position in this country, with the development of political parties in Parliament and the whipping system that goes with them, where in effect the executive controls the legislature and uses it as little more than a validating body to legitimise what it is doing. For example, the Cabinet decides what our parliamentary programme is to be, it decides when we shall sit, what legislation we shall consider and what result it wants in our Divisions. I think there is no doubt whatever that a combination of this changed function of the legislature and the growing device of Ministers asking for enabling powers to enable them to legislate on the broadest possible categories written into Acts of Parliament—so broad, for example, that in this Bill we have little idea of what the Secretary of State will do with them—is the very negation of parliamentary democracy.

In 1980 2,051 statutory instruments were made. The number of these that were drawn to the attention of Parliament, either because they required affirmative resolution or because of the scrutiny of a Select Committee, was a very tiny proportion. So there is a vast stream of law being churned out all the time from Whitehall without parliamentarians of either House being aware of what is happening. When this Bill was discussed in Committee in another place, Mr. Butcher, a Conservative member of the Committee, commenting on the Secretary of State's enabling powers, said that he found it a "bruising experience" to find his Government extending executive powers in this way.

Clearly some of these statutory instruments are quite minor matters and in that case the statutory instrument which does not require an affirmative resolution is an appropriate way of legislating; but when matters of great social and economic importance are involved, as they are in this Bill, it is not an appropriate method. However, I have got to be realistic: it is a method which I recognise the present Secretary of State is very fond of. As I said on Second Reading, if you look at his ministerial record and at all the Bills he has introduced, he uses this device over and over again. What he says in effect is that he is leaving out the details and he simply asks Parliament to trust him to legislate on our behalf. I personally do not trust him not to license the greater part of our telecommunications system to outside private interests.

I realise that your Lordships will almost certainly give these enabling powers to the Minister and so what I am suggesting in this amendment is that when he makes an order he brings it to Parliament for approval by a resolution from each House: the affirmative procedure instead of the negative procedure. I forecast that very few orders will be made under this Bill and I should like to ask the Minister whether he would hazard a guess. I should not think it would be more than half a dozen in the year, but of course they will all be of sufficient importance to merit this procedure.

We are told that the great merit of the House of Lords is that it is a revising Chamber. That indeed is the main reason why it claims its right to continue to exist. But I think I might be forgiven by your Lordships for saying that, on this Bill so far, I have seen precious little sign of its being a revising Chamber. We have put forward some excellent, excellent amendments—many of them entirely non-political—which have been simply steam-rollered by the Government, so there is very little evidence of the revising Chamber concept. If this amendment were accepted it would strike a blow for the supremacy of Parliament in our democracy. I have pleasure in moving the amendment, and I hope your Lordships will support me.

Lord Trefgarne

Despite a certain amount of levity on this side, this debate has raised, not for the first time, an important subject—the nature of parliamentary control over a Minister's exercise of his statutory powers. The noble Lord has suggested that a Secretary of State would be able to issue licences or to direct British Telecom to license, without Parliament having any chance to express its views. I do not think that this is accurate. Parliamentary accountability is, of course, one of the fundamental principles of our Constitution. Any Minister can always be called to account for his actions before one or other House of Parliament.

There are, of course, many ways in which this can be done, whether by Questions, adjournment debates, Unstarred Questions or some other procedure. To my mind—and I speak as one who spends a great deal of his time answering Questions in your Lordships' House, answering Unstarred Questions in your Lordships' House and replying to debates of every kind—this provides a good check on the ministerial exercise of statutory powers. There is no question of the Secretary of State using his powers in secret. Any licence or direction can be given only after consultation with British Telecom, and Clause 15(6) requires that licences be published. A licence will, therefore, be public knowledge.

Therefore, the question underlying this amendment and the ones following it is not so much whether there should be any form of parliamentary accountability, but what form that accountability should take. An affirmative resolution procedure must take up parliamentary time, which, heaven knows!, is at enough of a premium at present, anyway, and it is not suitable as a check on an activity which, in many cases, will be of a routine nature. I cannot believe that your Lordships would welcome a debate every time a new PABX was to be licensed. It would be a waste of everybody's time and could delay the issue of a licence which was, perhaps, needed very quickly for a particular purpose.

But that is what the amendment would require and that is why the Government are unhappy with it. I am sure that it is sufficient to rely upon the normal and well-tried procedures of your Lordships' House and the other place, and upon the fact that the Bill requires consultation with British Telecom before using the powers of publication of licences once granted. I hope that the noble Lord will not see fit to press his amendment.

He asked me a specific question, which was how many licences we thought might be issued and—if the amendment is agreed—therefore, how many statutory instruments might come before the House. I really could not hazard a guess as to how many it would be. But certainly, if the licensing of every new piece of equipment is to be accompanied by a statutory instrument, which, in turn, must have an affirmative resolution, I can see some hundreds, if not thousands, of these coming before your Lordships in the course of time. I hope your Lordships will agree with me that it would not be appropriate to proceed in this way.

Lord Glenamara

It depends on how long the course of time is. But if the noble Lord is saying that there will be thousands in one year, that is alarming. We shall have to consider this most carefully indeed. He selected the most minor one he could find, but there will be licences for extremely important activities. All I am suggesting is that they should be debated in Parliament. I pointed out that out of just over 2,000 statutory instruments last year, a very small proportion—something like 10 per cent.—were called to the attention of Parliament, either because they required an affirmative resolution, or because a Select Committee had drawn them to the attention of Parliament. So what it amounts to is that about 90 per cent. of this Minister-made law, which is being churned out all the time, does not come to the attention of parliamentarians of either House. They know nothing about it. That is a negation of democracy. However, I have made my point and I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

8.25 p.m.

Lord Morris moved Amendment No. 82: Page 18, line 41, leave out ("persons for whose benefit it will enure") and insert ("grantee").

The noble Lord said: This is a drafting amendment. I am not criticising the drafting of the present Administration's Bill so much as the Act of 1969, from which Clause 15(6) has been lifted. It is, in fact, precisely the same, other than minor drafting amendments, as Section 27(5) of the 1969 Act. I was surprised to see that the Government have kept the original wording, because by using the phrase, persons for whose benefit it will enure", there is no presumption of freedom, and for a Conservative Government to exhibit, by the use of this phrase, their belief that to lift a prohibition is necessarily the granting of a right, is slightly astonishing. The effect of the amendment is in no way to change the sense or effect of the clause. It also has the manifest advantage of making the subsection slightly shorter. I beg to move.

Lord Lyell

We are very grateful to my noble friend for moving his amendment so briefly and so succinctly. The House is always grateful when one of your Lordships attempts to clarify any legislation. I was interested that my noble friend added a touch of Conservative philosophy when he spoke about giving greater freedom. But I hope my noble friend will understand that, despite his intention to shorten and clarify the wording of subsection (6), the amendment is a little faulty.

I think that the phrase which causes my noble friend some concern is, persons for whose benefit it will enure". I agree with him that, on the face of it, that appears to be a trifle clumsy. But my legal advice is that the phrase is necessary, because, in the case where a licence is granted to an unspecified person, there is no actual or identifiable grantee to whose attention the licence can be drawn. There has to be an individual who can be identified, in order for my noble friend's amendment to work, and in this instance the word "grantee" does not meet the case.

Lord Morris

I am most grateful to my noble friend for that very clear explanation. I should like to apologise to the Committee for wasting its time, because I had not the wit to appreciate that point. In the light of that, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Glenamara had given notice of his intention to move Amendment No. 83: Page 18, line 43, leave out subsection (7).

The noble Lord said: I do not move this amendment.

Lord Morris

My name is also down to this amendment.

The Deputy Chairman of Committees (Lord Alport)

If the noble Lord wishes to move the amendment, he may do so.

Lord Morris

I suspect that my reason for moving this amendment is totally different from that of the noble Lord, Lord Glenamara. I am concerned here about the effect of Clause 15(7) on Clause 15(1)(b), which, as I read it, gives power to the British Telecommunications Corporation to grant licences, with the consent of, or in accordance with the terms of a general authority given by, the Secretary of State". Subsection (7) specifically states that no-one can impugn the validity of a licence. What on earth, I ask, is the reason for putting the constraints contained in Clause 15(1)(b) upon the British Telecommunications Corporation as a grantor of licences when no recourse is open to those persons for whose benefit they will enure, to quote the Bill, if this consent or the terms of the general authority are eroded? I beg to move.

Lord Lyell

My noble friend seems to have a point, in that he believes that there is a clash between subsection (7) and Clause 15(1)(b). My noble friend will find that this subsection comes directly from the 1969 Act and that in the 1969 Act it is subsection (6) of Section 27. I hope he will accept that the purpose of Section 27(6) of the 1969 Act is incorporated in this Bill. The purpose of subsection (7) is to protect the licensee from any consequences, especially of failure on the part of British Telecommunications to obtain the consent of or to comply with the authority of the Secretary of State under Clause 15(1)(b).

This may appear to be slightly obscure, but I think my noble friend will agree that it would be absurd to require any licensee to obtain additional confirmation from British Telecommunications that the licence had been issued legally before he, the licensee, was able to use it. This certainly would not be to the advantage either of the licensee or of British Telecommunications. It would merely add one more layer of delay and trouble to any legitimate and worthwhile application for a licence. I hope this explanation will go some way towards satisfying my noble friend.

Lord Orr-Ewing

I am sorry to have to intervene and even to delay the proceedings on the Bill, but I am not altogether happy about this. It seems to me that in subsection (7) the Government are saying that nobody shall inquire whether the corporation has behaved respectably or not respectably. If the Government had said that appeal could be made to the Secretary of State as to whether this was or was not within their terms of reference, I should have gone along with it. However, this subsection says, "You are not entitled to inquire whether it is or whether it is not within the terms of reference", which seems to be going too far.

I am not suggesting that British Telecommunications will transgress in any way, but there could be a time in the future when they decided to give a licence to somebody and when nobody who might have put up their own money, ideas and technology would be able to challenge their right to do so. They would be unable to appeal to anybody. I would ask my noble friend to look again at this before the Report stage to see whether or not there is an explanation which I myself have not understood and which would satisfy us that at least they would be moving, if they give this licence, in accordance with the general direction given by the Secretary of State.

Lord Mottistone

There are problems over importing clauses from the 1969 Act. The Government need to think very carefully before doing so. I had to say this regarding an earlier amendment. The Government are putting British Telecom into a rather peculiar hybrid situation, because they will be partly in authority under Clause 15, giving licences and so on, and partly in fierce competition with the rest of the industry. This is a very difficult role for them to perform. Secondly, this subsection may not be suitable for this Bill. If it was suitable when the Post Office was a wholly monopolistic organisation and when it faced no competition at all, such a subsection will not necessarily be appropriate to this new, hybrid creature which the Government are creating by this Bill. The Government ought to look carefully at all the clauses which they have imported from the 1969 Act and ask themselves whether they are really appropriate for this new, competitive creature. I am not saying that it should not be competitive. I think that it should; that part of the Bill is excellent. On the other hand, British Telecom have got to behave like a competitive, free enterprise outfit which does not have too many ministerial duties delegated to it.

Lord Lloyd of Kilgerran

I am unhappy about the subsection. I agree with noble Lords opposite that it would be a good idea for the Government to think about it again. The noble Lord, Lord Trefgarne, has told us that there are likely to be thousands of licences. That was his main reason for not agreeing with Lord Glenamara's amendment that an affirmative resolution should be used and that these licences should be laid before the House. If that is so, it is quite likely, with the best intention in the world, that British Telecommunications may make a mistake. In fact, it may be that some of their acts will be illegal. I am not suggesting in any way that this would be deliberate, but these things do happen. Therefore it seems to me that, before these very wide powers are given under statute, the Government ought to consider the matter again.

Lord Lyell

It seems that there is concern about Clause 15(7). When I first looked at Clause 15(7) in conjunction with Clause 15(1)(b) it seemed to be talking about a person in subsection (7) and it went on to speak about the validity of a licence not being impugned. I thought that this was a reference to the licensee and that Clause 15(7) was attempting to protect a licensee from any legal action if he had acquired the licence in good faith from British Telecom. However, I see that there is more than one way of looking at subsection (7). My noble friend Lord Orr-Ewing pointed out that subsection (7) could also relate to somebody who might feel that his licence was being infringed or that British Telecommunications might have acted illegally. The point was well put by the noble Lord, Lord Lloyd of Kilgerran, that this is no mandate for British Telecommunications to ride roughshod over the patent laws and the laws of equity, granting licences which belong elsewhere and thus to act illegally.

I am advised that the main object of subsection (7) is to ensure that a licensee will not be penalised for any illegal acts done wittingly or unwittingly by British Telecommunications. Great concern has been expressed about the interpretation of subsection (7). With that in mind, I will undertake to check upon the precise definition. We may possibly return to the point at a later stage. I undertake to look closely at everything that has been said tonight.

Lord Morris

I am most grateful for the support of my noble friends Lord Orr-Ewing and Lord Mottistone and, not for the first time, for the support of the elegant and erudite Lord Lloyd of Kilgerran.

Lord Lloyd of Kilgerran


Lord Morris

Elegant in words, always! In the light of that very helpful reassurance from my noble friend Lord Lyell, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 84 and 85 not moved.]

8.40 p.m.

Lord Lloyd of Kilgerran moved Amendment No. 86:

Page 19, line 10, at end insert— ("(10) An application for a licence under subsection (1) shall not be refused unless it appears to the grantor that one or more of the following circumstances applies—

  1. (a) the system which is the subject of the licence does not conform to the relevant standards defined under section 16;
  2. (b) the system which is the subject of the licence is not sufficiently distinct from systems already offered by the Corporation or by other licensees;
  3. (c) in the case of goods or services not originating in the United Kingdom, the Secretary of State is not satisfied that in the country or origin there is adequate opportunity for the supply of equivalent goods and services originating in the United Kingdom;
  4. (d) for a limited period specified when this section comes into force, in the case of goods or services not originating in the United Kingdom, the Secretary of State is not satisfied that suppliers in the United Kingdom have the opportunity to compete on fair terms;
  5. (e) it is not in the common interests of subscribers, of the Corporation and other suppliers and of their employees.").

The noble Lord said: I was delighted to hear the noble Lord, Lord Trefgarne, say earlier how important it is for a Government to reduce, so far as possible, obscurities in a Bill. Goodness knows! there are many obscurities in this Bill. The result of obscurities in a Bill only entails more work for lawyers, and that is always a very unhappy situation to create. I hope that my noble friend Lord Foot does not demur from that statement. In fact, at the moment I am supporting some friends of mine in America who, in the State Department of the present Government there, have introduced into at least one of their legal committees a theme which is known by a very unhappy word—"delawyerisation". The object is to deal with certain amendments to anti-trust law and the fewer the lawyers who are involved in the matter, the better.

Several noble Lords

Hear, hear!

Lord Lloyd of Kilgerran

I entirely agree with the noble Lords opposite who have supported that general theme. So far as this amendment is concerned, it is an attempt to clarify the position of the grant of licences under Clause 15 by setting out a few general guidelines. There are a number of these guidelines which I have presumed to draft because here we are entering an area where people do not know what the Secretary of State or Telecom are likely to do. Therefore, there are certain types of licences which could be rejected and the reasons could be found clearly set out in the statute if my amendment No. 86 were to be accepted.

The main aim of this amendment (which is rather a long one) is to require the Secretary of State or British Telecom in certain circumstances to give reasons if the licence is refused or to make it quite clear under this statute why a licence has been refused. In my view these guidelines will reduce enormously the number of applications which are made to the corporation or to the Secretary of State. My amendment is worded necessarily to give leave to the grantor and to give him plenty of discretion to grant a licence and also to prevent him from acting arbitrarily. This will make the context somewhat more predictable for entrepreneurs contemplating risky innovations and wondering whether or not they will get a licence under Clause 15.

Referring to paragraph (b) of my amendment, that allows licences to be limited to innovative services and in particular permits refusal of any attempt to break British Telecom's monopoly of basic public network, either directly or by exploiting tariff structure to offer services on leased lines which do not add significant value. I am sure that at least paragraph (b) in this amendment will appeal to the noble Lord, Lord Glenamara. Then paragraph (c) would allow British manufacturers time to adjust to world market needs from the special requirements dictated by the Post Office to their suppliers in the past.

Paragraph (e) is intended to cover unforeseen contingencies but only those where all four parties concerned would be adversely affected. I fully appreciate that this Government intend to permit most value added services on BT network under general licence and rarely to refuse any sound application. Nevertheless, I feel that some guidelines in this statute—not necessarily the ones that I have submitted in this amendment—could be of some help to prospective licensees. Earlier today the noble Earl, Lord De La Warr, said that he was against having guidelines in a statute, but I think he will agree that we are now entering on a territory which involves high technology and involves the Government in encouraging entrepreneurs to come forward with new ideas in order to develop this high technology. I am sure that many people will not appreciate some of the basic difficulties with which they will be faced in their applications. Consequently it seemed to me that it would be helpful for the Government to introduce some guidelines into this Bill. I beg to move.

Lord Caccia

Before the Minister replies, I should like to take another side to the same line of thought as that just put forward by the noble Lord, Lord Lloyd. It is for the particular reason that a telecommunications system is nowhere defined in the Bill, and as the noble Earl, Lord Gowrie, said earlier, that the Government wish to find entrepreneurs, the suppliers and so on, who will adapt themselves readily to the new circumstances provided by the Bill, that there is a case for the Minister to help when he replies by giving some instances of the kind of telecommunications systems which will be licensed.

From informal discussions it is understood, for instance, that a PABX is likely to be a "system" within the meaning of the Bill, but presumably a single telephone instrument could hardly be described as a "system", even if an approved instrument were attached in an entirely legal manner. Therefore, if the Minister can do anything to explain the situation it will be of assistance. If he does not want guidelines perhaps he can at least say something which would help in showing what the Government have in mind. That would be of general help, certainly to entrepreneurs, and maybe to the Committee of this House.

Lord Trefgarne

Perhaps I may deal first with the point made by the noble Lord, Lord Caccia. There is a definition of a telecommunications system offered in Clause 12(1) of the Bill, to which the noble Lord may care to turn. I understand—and indeed to a large extent sympathise with—the intentions behind these amendments. But this amendment would compel the Secretary of State, or indeed British Telecom, to grant all applications for licences except on grounds specified in the amendment.

Nothing is said about the financial soundness or technical competence of the applicant. British Telecom or the Secretary of State could find themselves obliged to grant frivolous applications and in some cases thereby pre-empt serious applications where certain considerations necessarily limit the number of licences that can be given. Indeed, paragraph (b) of the amendment recognises this possibility. I doubt whether it is possible to produce a list which adequately covers all eventualities, now and in the future, and if it is argued that paragraph (e) provides a catch—[...] to deal with difficult or unusual cases, I must say that I cannot quite see what the amendment actually achieves.

Finally, paragraphs (c) and d) both give legal force to discrimination against goods on grounds of country of origin. I am afraid this is contrary to this country's obligations under the Treaty of Rome and these two grounds are therefore inadmissible. In the light of these difficulties, I hope that the noble Lord, Lord Lloyd, will not wish to take the matter further.

Lord Lloyd of Kilgerran

I am grateful to the noble Lord, Lord Trefgarne, for his reply. I have been looking round the Committee to see whether any distinguished lawyer was present tonight other than my noble friend Lord Foot, sitting behind me. In the absence of lawyers from this Committee, I thought there would be far greater support and sympathy for my general theme of "delawyerisation". Nevertheless, I will consider what the noble Lord, Lord Trefgarne, has said in his reply and consider whether this matter is appropriate to come forward at a later stage. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 15, as amended, agreed to.

Clause 16 [Approval of apparatus which is to be connected to a system run by the Corporation]:

[Amendments Nos. 87 and 88 not moved.]

8.50 p.m.

Lord Lloyd of Kilgerran moved Amendment No. 89:

Page 20, line 44, at end insert— ("(9) It shall be the duty of any person or body who defines a standard under subsection (1) to have due regard to the need for harmonisation with any relevant standards which have been defined or are proposed to be defined by any international body authorised to define such standards.").

The noble Lord said: This is a probing amendment and it is to require that those to whom the Secretary of State delegates the power to define standards should be obligated under the statute to take account of the international implications so as to ensure that goods made in Britain can be exported elsewhere. It means that any person or body who defines a standard under subsection (1) shall have due regard to the harmonisation, for example, and also to any relevant standards that apply abroad. In these days it is not enough merely to leave people to prepare their products at their own discretion because it increases the exporting difficulties of companies in this country. It is well known that many foreign countries introduce standards which are certainly not the same as standards in this country. The noble Lord, Lord Torphichen, earlier today referred to the problems arising because of the standards imposed by the Post Office and the inability of British manufacturers to export those products as well as they otherwise could. So this is really a probing amendment to ensure that regard is paid to relevant standards of countries abroad in the manufacture of goods in this country. I beg to move.

Lord Trefgarne

I must say that I very much agree with the noble Lord's aim of harmonising the new British standards for telecommunications with the work of relevant international bodies so far as this is practicable and in the national interest. I can assure the Committee that the Government intend relevant international standards to be fully taken into account and that there are means for ensuring this in the procedures of the British Standards Institution, which has been entrusted with writing new British standards for telecommunication.

However, this amendment would give statutory recognition to this one aspect of the standards. It would be wrong to give the impression that harmonisation with international standards is the overriding aim of the new standards. In fact this stands alongside others, such as the key aims of ensuring that equipment does not damage the network, injure BT's staff or cause interference to other users. All of these will be taken into account by the British Standards Institution and by the Secretary of State when he comes to approve the standards. There is a risk that by giving statutory force to particular objectives of the standards that an unintended obstacle to innovation may be created, and I therefore think it best to leave these technical matters to BSI, which is subject under its charter to a general duty of care to make sure that its standards are not deficient. I hope these assurances will persuade the noble Lord not to proceed further.

Lord Lloyd of Kilgerran

I thank the noble Lord for his explanation and in those circumstances beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

On Question, Whether Clause 16 shall stand part of the Bill?

Lord Caccia

I would like to ask if the Minister could help, not so much about the future but about the immediate present. Clause 16(2) makes provision for the approval of subscriber apparatus where a standard is not for the time being approved under subsection (1). The necessary technical committees of the British Standards Institution are just in process of being set up to begin the work of preparing standards. On form it is, understandably, unusual for a new standard to be published in less than about a year after work preparing it has begun. Thus it seems certain that there will be no standards when the Bill comes into force later this year. In order to give effect to the intention to liberalise the supply of subscriber apparatus it will be necessary to grant approvals under subsection (2), and this raises to my mind two questions. First, do the Government intend to approve all apparatus currently accepted by the Post Office for connection to their system, and also apparatus currently purchased by them and supplied to their customers whether or not formally approved by them? Secondly, will the Government consider appointing a person under Clause 16(2)(b)? It looks as if this is in mind, that there may be a person or body other than the corporation alone who could be appointed with appropriate technical competence to consider whether new types of subscriber apparatus should be approved for the corporation's network prior to publication of the relevant standards. Such a body might be only temporary during this period, it might be ad hoc. Could it perhaps include representatives not only of the British Standards institution but also of the BEAB, the corporation and perhaps other expert bodies including the suppliers?

Lord Glenamara

Before the noble Lord replies, I should like to ask a question on enforcement. This is a matter which will, we hope, be subject to further provision. Our concern is to ensure that uncertified equipment is not connected to the network. This is to protect both customers and staff working in BT and also to avoid any degradation of network performance, and at the same time to support UK manufacturers. United Kingdom manufacturers will, we expect, manufacture to BSI standards, whereas foreign competitors already mass produce apparatus to different and inappropriate standards. Foreign standards are often based on a different view of the balance between apparatus cost, network cost and maintenance cost, with the initial cost of the apparatus being lower than is normal in the UK. This Bill provides for the Secretary of State to make orders about the marking of apparatus and to control information given in advertisements, and there are penalties for non-compliance. Provided such orders were effective, the problem of uncertified apparatus should be contained. But it is far from clear how compliance with any order is going to be enforced. This is the question I should like to ask. What plans have the Government in mind for enforcing orders?

Lord Trefgarne

I confess I do not know the answer to the question put by the noble Lord, Lord Glenamara, but I shall certainly undertake to find out and perhaps respond during the discussion on another amendment or later in these proceedings.

As for the points put to me by the noble Lord, Lord Caccia, I can tell him that all the apparatus currently approved—that is, approved as of now—will be automatically approved under the Bill when it comes into force. New types of apparatus will be approved for the time being by British Telecom itself and also possibly at a later stage by the BEAB, to which the noble Lord referred. I hope, therefore, that he is satisfied that there will be no hiatus between the coming into force of the Bill and the preparation and implementation of standards by the BSI.

Lord Orr-Ewing

I am sorry to say that I do feel that my noble friend's reassurance gives cause for further anxiety. He says that there is no temporary authority to be set up and British Telecom will be the temporary authority. They have already been the authority for the design of all equipment up to date and they are apparently going to be the design authority in the interregnum until such time as BSI can pick it up. The BSI are a very worthy body and I have known them very well for very many years, but they have no expertise in this field, and they have got to generate this expertise as quickly as possible. It is my fear that, in the interregnum, either they or British Telecom will lay down the rather restrictive standards set in the past by the Post Office requirements. Those will come to be de facto what is recognised for the future until such time as the BSI has built up its expertise and has formed a good technical judgment as to whether the apparatus coming forward is acceptable.

Lord Trefgarne

If I may say so, I believe that my noble friend has slightly over-simplified the difficulties. Most of the equipment presently in use belongs, as of today, to the Post Office. After this Bill becomes an Act—as I hope it will—this equipment will then become the property of British Telecom and will automatically enjoy approval. There is, of course, the facility of the BEAB to which I have referred and to which the noble Lord, Lord Caccia, and my noble friend Lord Gowrie referred earlier. I can sense the fear in the mind of my noble friend; that British Telecom should become the sole approving authority, if only for a short period, of equipment which has been produced by some other company, or indeed by a firm outside the United Kingdom.

I should now like to return to the point made by the noble Lord, Lord Glenamara, who asked me about the enforcement of the approval provisions. I am informed that infringement of a marking order—and marking is one of the things required in case of imported equipment—will be a criminal offence, and any fraudulent marking will be an offence under the Trade Descriptions Act. We are still considering whether any specific powers of entry will be required to enforce these marking orders.

Lord Morris

May I ask my noble friend whether, in the interim period, before the setting up of the standards approval body in this field, he will ask British Telecom whether it would consider transferring its staff on the approval side to the BEAB or BSI, or whatever, so that the staff are not directly employed by British Telecom itself?

Lord Trefgarne

I must say that at first sight that suggestion seems to present all sorts of difficulties. I am afraid that I cannot give any assurance that we will proceed along that route. I have no doubt whatever that the expertise available to British Telecom will, if necessary, be available to the bodies to which my noble friend has referred.

Lord Torphichen

In framing these rules and regulations, is it the Government's intention to produce both a negative and positive form of vetting? There could be defined a very large class of (shall I say?) receive-only terminals for telephone equipment which would need no more approval than their ability to meet conditions which ensure that they do not put dangerous voltages on the line. In other words, in approving such equipment nothing more complicated is required than the kind of approval that might be given to an attachment for a vacuum cleaner or some other item of household equipment. If there is only one full-blooded rigmarole for positive examination of equipment that is to be attached, I believe that the sheer number of appliances which will come forward for approval in time—perhaps not this year, but maybe next year—could swamp the approvals system and prevent it working properly.

Lord Trefgarne

My noble friend Lord Torphichen is asking me to enter into discussion about a technical detail of approval. My noble friend is certainly competent to indulge in such a discussion, but I fear that I am not. I hope that my noble friend will forgive me if I do not follow him along that r[...]ad, but I will certainly ensure that what he has said will be borne in mind in the framing of these requirements.

Lord Glenamara

From what the noble Lord the Minister has said to me, can I take it that there is a possibility that he might bring forward amendments at Report stage?

Lord Trefgarne

I would not want the noble Lord, Lord Glenamara, to go away with that impression in deciding the fate of this amendment. I do not believe that I gave such an assurance.

Clause 16 agreed to.

Clause 17 [Marking orders]:

9.6 p.m.

Earl De La Warr moved Amendment No. 90: Page 21, line 19, leave out ("to imprisonment for a term not exceeding two years or").

The noble Earl said: In moving this amendment I should also like to speak to Amendment No. 91, Amendment No. 92 and Amendment No. 93; so there are in effect two pairs of amendments, each with the same intention. They both seek to remove imprisonment as a penalty for offences committed under Clause 17 and Clause 18. Your Lordships will be aware—because it has been discussed already this evening—that Clause 12(2) makes any infringement of British Telcom's privilege an offence. Such an offence is not punishable by imprisonment but only by a fine; up to a statutory maximum on summary conviction and unlimited upon conviction by indictment. Yet in Clause 17 and Clause 18 there are two offences which can result in someone going to prison for up to two years. Taking this in conjunction with the absence of imprisonment in Clause 12, I do not believe that we are presented here with a proposal that is wholly logical. Furthermore, incorrect marking of apparatus, which is the offence covered in Clause 17, or incorrect description which is the offence referred to in Clause 18, do not seem to me to be anything near the type of offence for which one should go to gaol.

A few of your Lordships who were there at the time will recall that I raised this same point in the Wildlife and Countryside Bill, where imprisonment was to be imposed if some infuriated farmer tore up a hedgerow in an SSSI. For those of your Lordships who want to know what that stands for, an SSSI is a Site of Special Scientific Interest. The two things are very different, but, so far as I can see, exactly the same arguments apply. I believe that these offences are just not grave enough to justify imprisonment. A fine—if necessary an unlimited fine—is in my opinion all that is needed and I hope that my noble friend will find himself able to accept these amendments.

Lord Avebury

I wish to make only a few comments in support of the amendment moved by the noble Earl, Lord De La Warr, because I agree with him whole-heartedly that we should watch very carefully the tendency of certain Ministers to negate and to nullify the policy of the Home Secretary who is trying as hard as he can to prevent the prison population from growing any further. Recently he published some proposals on how we can improve the parole system so as to cut down the number of short sentence prisoners.

The Home Secretary is doing this excellent work but at the same time we are busy creating new offences which will result in people going to prison for what I must say, looking at these two clauses, are really not the kind of offences for which one would expect anybody to be sent to prison. For example, under Clause 17 if somebody offers for sale an article which is not marked in accordance with regulations made by the Secretary of State—it may even be inadvertent—he will nevertheless be liable on conviction on indictment to imprisonment for a term not exceeding two years. I think that that is a most astonishingly harsh penalty to impose for such an offence and I think that Clause 18 is, if anything, even more ridiculous.

I wish that the Government would co-ordinate their policy a little better because while the Home Secretary is doing this excellent work in trying to prevent the courts from sending people to prison for trivial offences, Parliament is continually, at the instigation of other Ministers, manufacturing new offences. I hope that, not only in respect of these two clauses to which the noble Earl, Lord De La Warr, has drawn attention, but in respect of every other Bill which is now being drafted by the Government, more careful attention will be given to the multiplication of new offences.

The Earl of Gowrie

I have listened to my noble friend with care, and I must say that I have very considerable sympathy with his views. The point does however—this was underscored by the contribution of the noble Lord, Lord Avebury—raise some questions of general policy concerning offences of this kind and I would therefore like to put myself in a position to carry out some consultations on the wider implications. Therefore, I shall consider the issue carefully and return to it at the Report stage. I hope that in the light of that and with gratitude to him for the contribution he has made, my noble friend might withdraw the amendment.

Earl De La Warr

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

Amendment, by leave, withdrawn.

[Amendment No. 91 not moved.]

Clause 17 agreed to.

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

[Amendments Nos. 92 and 93 not moved.]

Lord Morris moved Aemndment No. 94: Page 22, line, 22, leave out ("and").

The noble Lord said: I beg to move Amendment No. 94. As your Lordships will be aware, this is purely a drafting amendment. Clause 18(5) attempts to widen the meaning of "advertisement" by saying that "advertisement" includes, for the purposes of this Act: a catalogue, a circular and a price list". As I understand it, one of the characteristics of "advertisement" is that it is usually broadcast or published. I believe that this is a very modest attempt to catch also an advertisement by means of a letter to an individual person or group of persons and also advertising by means of a telecommunications system—in other words, many people put advertisements on answering machines on the end of the telephone. I believe that this is a modest improvement to the Bill. I beg to move.

Lord Lyell

I am sure that we all understand my noble friend's concern about advertisements, especially that the power to require any information which has to be included in the advertisement of telecommunications apparatus should extend to "any kind of advertisement", because I think that "any kind of advertisement" is included in subsection (3) in "advertisements of any description".

If we look at advertisements in earlier subsections in the clause, it seems that they are advertisements of apparatus, dealing exclusively with the advertising of telecommunications equipment, which the consumer, indeed, individuals or companies, might want. It would seem that subsection (3) covers advertisements of all kinds. However, I am sure that my noble friend will be aware that Clause 18, in considering this question of advertisements, follows almost exactly, not Section 9 of the earlier Telecommunications Bill, but Section 9 of the Trade Descriptions Act 1968, and I think that even he will agree that this is particularly relevant. I assure my noble friend—indeed, I assure the Committee—that no loophole is either intended or implicit, or indeed any loophole of any sort.

Clause 18 makes it clear that the power, which is envisaged in the clause, extends to any description of advertisements of articles of objects. This clearly covers advertising in any medium, including that which is transmitted by telecommunications. The powers in the clause also cover advertising contained in a letter, whether of an individual nature or a circular, the latter of which is specifically mentioned in Clause 18(5); indeed, a circular was mentioned by my noble friend. Therefore, I hope that my noble friend will agree that his amendment adds nothing to the clause and that in this instance his fears are groundless, and so will accept the clause as drafted.

Lord Morris

I am most grateful to my noble friend for that explanation; he has been most helpful. I tabled this amendment on the Pekinese principle, which I shall not bother to explain. But it was precisely that point which occurred to me before I tabled the amendment. If Clause 18(3) refers to "advertisements of any description" as it does, why then the necessity in subsection (5) to say that: 'advertisement' includes a catalogue, a circular and a pricelist"?

Lord Lyell

It seems to me that subsection (5) is something of a definition subsection in that many of us, including my noble friend, might think that "advertisements of any description" might have referred to advertisements in subsection (1) which I mentioned, and to: …advertisement of any apparatus to be supplied in the course of any trade or business (which) fails to comply with any requirement imposed under this section in subsection (2).

I should have thought that that related to telecommunications, but it can be seen that it matches the definition of "advertisement" in subsection (3). In view of the somewhat imprecise nature of what the advertisement might refer to, subsection (5) seeks to clarify further what the definition of "advertisement" shall include. I hope that my noble friend will accept that catalogue, and circular and price list, however they are transmitted, are included in the subsection.

Lord Avebury

Would it not be a good move in drafting statutes to look at what has been said in similar legislation? Obviously, the "advertisement" must have occurred in many Acts of Parliament in the past. Therefore, might I suggest that in order to save the time of your Lordships' Committee, the Minister should agree to look at any statutes in which the word "advertisement" occurs in order to see whether there is a definition which will be as comprehensive as the whole Committee requires and to which reference could be made in this clause, so as to avoid having two different definitions of the word "advertisement" in different statutes.

Lord Lyell

The noble Lord doth tempt me and I believe that he tempts the entire Committee to remain here until I am certainly over pensionable age by the time we have sorted through every definition of "advertisement" and indeed every statute which contains a definition of the word "advertisement". The earlier remarks I made about the Trade Descriptions Act are especially relevant and I hope that that deals with the particular point at issue which was raised by my noble friend. I hope that by reproducing in this Bill the relevant section from the Trade Description Act, we shall meet the particular case. If the noble Lord, Lord Avebury, were to glance at the printing in the margin at the bottom of page 21 of the Bill, on the right hand side, he would see: Information, etc. to be given in advertisements". This is to do with advertisements which are connected with and come to the consumer by means of telecommunications, of whatever type. I hope he will accept that such advertisements are, as I mentioned, covered by the Trade Descriptions Act.

Lord Morris

The picture that springs to mind should my noble friend Lord Lyell take up the suggestion of the noble Lord, Lord Avebury, fills me with joy. However, I sincerely hope that he does not take up his suggestion, and I am most grateful for my noble friend's full explanation. With that, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 95 not moved.]

Clause 18 agreed to.

Clauses 19 to 21 agreed to.

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

9.21 p.m.

Lord Mottistone moved Amendment No. 96: Page 25, line 5, leave out paragraph (a).

The noble Lord said: With the permission of the Committee, I should like to speak also to Amendments Nos. 98A and 99A. The total effect of these amendments is to leave out paragraphs (a) and (c) of Clause 22(1) and to amend the text of Clause 22(1)(b) as in Amendment No. 98A. Clause 22 unamended confers on the corporation the same immunity from civil action for defects or defaults in provision of telecommunication services as that which the Post Office now enjoys.

In speaking in the debate on Amendment No. 83 I drew attention to the fact that the Post Office in its new role will be both a competitive industrial enterprise and also in certain respects official. In the area in which these immunities that we are talking about are relevant it is in its competitive role that British Telecom will principally function. It is considered strongly that British Telecom should be under the same obligations to their customers as other businesses in order to achieve the Government's intention of making them equal in competition. My noble friend Lord Gowrie will remember that he made reference to the point of competition at Second Reading, in column 1033.

It may be said by British Telecom that subjection to ordinary commercial obligations would put up charges. Indeed, noble Lords opposite have been producing this as a strong argument against the whole Bill. But if this is so, there are no facts to prove it. It is all supposition. I strongly recommend to the Government that in this particular case the facts can only emerge when we have tried it out. Indeed, it might well be that the real cost to the consumer of the present Post Office privileges is much higher than at first sight it appears because all sorts of hidden costs are involved in the particular way in which they operate together. The point of this amendment is to reduce, but not do away with, the immunities to a fair competitive level. I beg to move.

Lord Trefgarne

My noble friend Lord Mottistone has raised important points of principle on this question of liability, and I am grateful to him for the moderate way in which he has done so. It may be helpful if I make two introductory points. The first is to emphasise that the exemption from liability in tort conferred on BT by Clause 22(1) which repeats the corresponding provision of the 1969 Act is in fact tightly drafted. It is confined to failure or delay in the supply of telecommunications apparatus or services, and to that alone. It does not exempt BT from any other liability in tort due to faults in apparatus—for instance, any damage or personal injury. I ought also to add that this régime is broadly similar to that in other European countries and in the USA.

The second point I should like to make relates to Clause 21 of the Bill since this deals with some of the issues raised by your Lordships. Under the 1969 Act the Post Office was able to provide its services under schemes made under Section 28 of that Act. These schemes are not contracts and the Post Office therefore had no contractual liability.

Generally speaking, almost all Post Office Telecommunication services are supplied under schemes. Clause 21(1) of the Bill deals specifically with the supply of apparatus and deems supply of apparatus under schemes to be contractual. This ensures that the subscriber has all the same rights as under a contract. It also means that BT will, broadly speaking, be supplying apparatus under the same legal framework as its competitors. I am sure my noble friend will welcome this change, which is a significant improvement in the rights of customers. Given this new provision, the exemption from liability in tort in Clause 22(1) assumes less significance, since a subscriber will have recourse under contract. In practice, because of the provisions of Clause 21, Clause 22 is chiefly concerned with those areas where BT does not face competition; that is, essentially the provision of the main public network.

My noble friend has recognised in his amendment that it is appropriate to treat liability for the public network in a special way. The cost of any compensation would have to be borne by the generality of customers, since the claims from business would be the largest and removal of the exemption could have the effect of the residential subscriber in effect contributing towards insuring the larger user, and I cannot believe that would be desirable.

I hope my noble friend will agree that the Bill as drafted achieves the spirit of his amendment without attempting to define "public network". I feel sure my noble friend will agree that that would be difficult to achieve in an unambiguous way that would also be flexible enough to deal with changing technologies.

Perhaps I might, while on my feet, deal with Amendments Nos. 97 and 98 standing in the name of my noble friend Lord Morris. As drafted, they retain the exemption in Clause 22(1)(a) but only for unreasonable failures or delays. While I take the point that the law in tort is concerned primarily with unreasonable actions, I am advised that that is not invariably the case. There might also be uncertainty about the operation of Clause 22 if my noble friend's proposal was accepted, since the court would have to decide whether or not a particular act or failure to act was unreasonable or, in the case of the other amendment, was caused by negligence.

Given the changes we have made to BT's liability for apparatus, I believe the Bill as drafted now strikes the right balance between the rights of the individual subscriber and the costs to the users in general. I hope my noble friend Lord Morris will forgive me for taking the liberty of speaking to his amendments before he has moved them, but I think it was of convenience to the Committee to consider those very similar related points at the same time. I hope also that my noble friend Lord Mottistone will not press his amendment.

Lord Mottistone

I am grateful to my noble friend for clarifying the issue and for explaining how limited the liabilities now are as opposed to what they were. I am not altogether happy with what I think he said, but I shall read his remarks in Hansard with great care, and on the understanding that I may return to the matter at a later stage, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

9.28 p.m.

Lord Morris had given notice of his intention to move Amendment No. 97: Page 25, line 5, at beginning insert ("unreasonable").

The noble Lord said: I am grateful to my noble friend Lord Trefgarne for his explanation of the issue raised by this amendment when dealing with the previous one. That was most helpful, and I confess that I had not done my homework properly in regard to Clause 21 and had not appreciated the significant change the Government had made under the rëgime of the 1969 Act. I shall take the opportunity of reading in Hansard what my noble friend said and seek counsel on it, and if necessary raise the matter at the next stage of the Bill. In the meantime, I shall not move this amendment and those related to it.

[Amendments Nos. 97 to 100 not moved.]

Clause 22 agreed to.

Clauses 23 and 24 agreed to.

Clause 25 [The Corporation's commencing capital debt]:

On Question, Whether Clause 25 shall stand part of the Bill?

Lord Lyell

It might seem, or might not seem, surprising that the Government propose leaving out an entire clause of the Bill, and I shall try to explain why we believe this to be necessary. At the same time I wish to speak to a series of amendments; namely, Amendments Nos. 109, 111, 112, 115, 116, 133, 189 and 190. These are all drafting amendments, and I propose to give a brief explanation of the situation.

Your Lordships' Committee may recall that although the Post Office became a nationalised industry in 1969, for some years before that it had its own independent, and independently verified, accounts. The money that was borrowed during that period was of course transferred to the Post Office and to the relevant accounts in 1969, and Clause 25 transfers to British Telecom that part of the pre-1969 Post Office borrowing which relates to telecommunications. I hope that the Committee will appreciate that Clause 25 is essentially a transitional provision.

The effect of this plethora of amendments, and of our proposal to leave out Clause 25, is to transfer the present content of Clause 25 to Schedule 4, which contains the rest of the transitional provisions. At the same time the amendments remove the references to the corporation's commencing capital debt in Clauses 26, 27 and 30, while Amendment No. 189 (to Schedule 4) provides that for the purposes of these clauses any money borrowed by the Post Office and transferred to British Telecom shall be treated as money borrowed by the corporation. The amendments have a similar effect in respect of Treasury guarantees. I hope that the Committee will agree that the amendments improve the drafting of the Bill and that it will accept them.

On Question, Clause 25 disagreed to.

Clause 26 [Borrowing powers of the Corporation and its wholly owned subsidiaries]:

[Amendment No. 101 not moved.]

9.34 p.m.

Lord Lloyd of Kilgerran moved Amendment No. 102: Page 27, line 21, leave out ("with the consent of the Secretary of State and the approval of the Treasury").

The noble Lord said: The amendment concerns the borrowing powers of the corporation and its wholly-owned subsidiaries, and what I now propose to raise is a very important matter. It is the view of my noble friends on these Benches that British Telecom should be free to fund in the private market its own money for capital investment. Therefore the amendment seeks to delete from Clause 26 the provision that the borrowing should be undertaken, with the consent of the Secretary of State and the approval of the Treasury". A massive investment is required in this field, and I do not propose to emphasise that point any further.

The amendment is designed to avoid a burden being placed on the so-called PSBR. We hear much about the difficulties that arise because of the burden on the PSBR, and the amendment is intended simply to enable British Telecommunications to be free to fund its own money for capital investment by going to the private market.

I am not proposing to elaborate the question any further. My noble friend Lord Byers put it very robustly and clearly at Second Reading. Therefore, the object of this amendment is simply to avoid the burden on the PSBR by allowing Telecom to go to the private market for its money for its investment without having first of all to have the permission or the approval of the Secretary of State or the Treasury. I beg to move.

The Chairman of Committees (Lord Aberdare)

I have to point out that if this amendment is accepted I cannot call Amendment No. 103.

Earl De La Warr

I am most grateful to the noble Lord, Lord Lloyd, for giving us the opportunity to discuss this matter, which I agree with him is extremely important. I must say immediately that I do not in fact agree with his amendment. I am sure that the arguments will be well put by my noble friend, but in simple terms it seems to me that in a nationalised industry and in a matter of this type the Secretary of State must have the last word and the Treasury must have a look-in—although I suspect that it is the other way round, and that the last word in fact lies with the Treasury.

Consider this sequence. It is the duty of the Secretary of State to approve every year the amount of the capital investment programme, and for this year, a considerable time ago, he approved a programme worth £2.2 billion. The Secretary of State also dictates the rate of return from each part of the business and from the business as a whole; and if that rate is achieved then, to give an example, this year £1.5 billion of cash will be internally generated by the corporation. Given those two facts, surely the £700 million of bridging is an absolute, and is not susceptible to political judgment. But now the Treasury steps in. It offers £200 million, and up to now it denies British Telecom the right to borrow elsewhere. So British Telecom and the Secretary of State must now recast their capital programme; and planned and already approved investment must be cut—and cut, mark you, in an industry which, to put it briefly, is fundamental to the onset of the new industrial revolution.

Surely it is the logic of the looking glass to say that private sector borrowing must be treated as being part of the public sector borrowing requirement. I may not be very expert in these esoteric matters, but it seems to me fairly obvious that the first, the private sector borrowing, is a contingent liability, and that the second, the public sector borrowing requirement, is a matter of current cash borrowing. Surely borrowing from the institutions must save the taxpayer money, and not the other way round; so at least let us be given a better reason than that which we have had up to now.

Most people (and I hope that the Chancellor of the Exchequer and my noble friend are two of them) think that the capital market is a good judge of a company's efficiency and prospects, particularly when it comes to lending them money. For, after all, that is their job. They are professionals in this matter. My noble friend knows that the market is ready to risk its money. I will not go into the matter any further but will confine myself to saying that it is very ready to risk its money, and leave it at that. But so far the Treasury have rejected all the formulae that have been put to it, although I have been assured, and I accept it readily, that the matter is by no means dead and is still being looked at carefully.

So what I ask of my noble friend when he comes to reply is that he will do his very best to explain the reasons behind the Treasury's posture. It has not been explained in this House and not in another place, and certainly it was not explained by the Chancellor of the Exchequer when he appeared about 10 days ago on a television programme in which the managing director of British Telecommunications also appeared. If he can do that, then this Committee will be the better able to make a proper judgment of where the balance of argument lies. I simply conclude by repeating what I said before: I am grateful to the noble Lord for raising this matter, although I cannot in any way support his amendment.

Lord Winstanley

Before the noble Lord sits down, may I ask him this: Having made a speech which appeared to be wholly in support of my noble friend's amendment—and I listened with interest and I agree with everything he said; and the speech was in support of my noble friend's amendment—he then sits down with the words that he cannot support the amendment. Can be explain that?

Earl De La Warr

Indeed, I can. I said quite clearly—and, fortunately, I was doing perhaps what I ought not to do; that is, I was working very carefully from a script—when you have a nationalised industry, that in matters of this sort the Secretary of State must have the last word and the Treasury must have a look in. From that it will, I hope, be obvious to the noble Lord that I cannot accept the amendment. I welcomed the amendment because it gave me the opportunity to make some comments on this matter of private sector borrowing.

Lord Glenamara

All Governments adopt a monolithic posture; no crack, no crevice must mark the facade of the monolith. But we know that behind the facade is quite otherwise. On the question of cash limits being applied to British Telecom, we know it is quite otherwise. We believe that, left to their own devices, the DOI would agree to the Post Office going to the market to raise money for its investment programme. It is on that premise that my noble friend and I based our Amendments Nos. 103 and 108.

The recognition that it is wrong to restrict BT's investment through the mechanism of cash limits is very widespread. We have had it tonight from both the Liberal Party and the Conservative Party—although the noble Earl, Lord De La Warr, reached a rather surprising conclusion. Economic commentators on The Times and the Financial Times and all the economic and technical journals are united in urging the Government to stop applying a policy of cash limits to British Telecom. What are the effects of that policy? First, it is delaying the very modernisation programme that the Government are urging upon British Telecommunications. This year, around £300 million worth of investment has had to be cut. That means that the business and residential user will continue to suffer the service that is less good than it should be, less good than was planned.

Secondly, the suppliers lose out on orders and on work. The Committee may have noticed that every time BT announces an investment cut-back the telecom manufacturers' shares "catch a cold"—not that that is all that important as it is a very neurotic index. Nevertheless, it happens and it shows that the dependence of BT and its suppliers is very close indeed. During last week's debate one of the noble Lords opposite spoke of BT's investment as public expenditure, with the inference of course that it should be cut to make way for private sector investment and expansion.

That is to misunderstand the facts. Over 95 percent. of BT's investment spending goes directly to the British private sector. That is what I tried to tell the noble Lord, Lord Orr-Ewing, when he spoke about the figure of £2,000 million. If the Government want to strengthen that sector to meet the threat of an import war, far from cutting BT's investment, they should be urging it to spend more than it plans to advance projects and not defer them as it is doing at the moment,

Thirdly, the requirement to raise the great bulk of its investment requirement from revenue is a very great strain upon the customer. In the past year, the customer has suffered a price increase—indeed, two price increases—adding up to 30 per cent. A large Part of that was required to finance improvements which will benefit future customers. Did we put a toll on the Severn Bridge before the bridge existed? Of course we did not. It is not fair to charge today's customers for benefits in which they may not share. That is what is happening in the Post Office.

British Telecom wishes to be free to raise funds not from the National Loans Fund, but from a private market. Tomorrow we shall be discussing Cable and Wireless. Cable and Wireless is a wholly-owned company but it is not subject to the Government's cash limits. It has no external borrowing limit. It is free to borrow wherever it wishes and it does so wherever it can get the best terms throughout the world. It borrows nothing from the National Loans Fund. An example of the illogicality of this is that it has to be applied to BT but it does not apply to Cable and Wireless.

Last week another noble Lord spoke of BT as though it were a charge on the taxpayer. That again reveals a gross misunderstanding. BT raises its investment funds from three sources: from depreciation, from revenue and from the National Loans Fund. To that fund it pays the rate of interest that the Government themselves pay to obtain finance on the gilts market. There is no preferential treatment. There is no charge to the taxpayer, unless it is a minimal charge for administration. BT would welcome nothing more than the chance to stop even that small burden by borrowing privately.

What will the noble Earl, Lord Gowrie, say in opposing the amendment? I always try to anticipate what he will say. He is going to point out first, I guess, BT's chance to raise additional revenue from joint ventures. As he well knows, the potential yield of such revenues is peanuts in terms of BT's needs. The Committee may not be aware of it, but the Government themselves acknowledged this fact, because in their expenditure White Paper they forecast only £150 million in two years being raised from this source against an annual investment requirement of well in excess of £2 billion. That is their estimate of the amount of revenue BT will raise from joint ventures—£150 million in two years. In those two years their investment programme will be way in excess of £2 billion.

Next, I think that the Minister will talk of an implicit Government guarantee which requires BT's borrowing to be classed as public expenditure. He will add, in Lewis Carroll terms, the sage advice that if a sufficiently risky project can be found, this can be excluded from the PSBR. How silly can we be? I think that the Treasury has a great deal to answer for to the people of this country. The Treasury's fingerprints are clearly revealed on such absurd arguments. It is a triumph of the elevation of doctrine over commonsense. If a public sector project is risky because there is a good chance that it will not pay off it will be backed by private borrowing. If it is a cast-iron certainty for success it cannot.

The oddest part of it is that I do not believe anybody in the Government except the Treasury really holds these views. The Industry Ministers, I think, sincerely wish that BT could be free to borrow but the Treasury is a very powerful body. It terrorises Ministers, curdles their blood with dire warnings of catastrophe if it does not get its way. I have experienced it and know what the Treasury does. Then, in retro spect, they have almost always been wrong. I said in this House a few months ago that the Treasury is the biggest impediment to good government in Great Britain. I do hope that your Lordships will help Ministers to resolve their painful conflict between the demands of reality and the demands of Great George Street by supporting this amendment. If it is carried, technically it will not make very much difference, but I think the Government will then be compelled to find a satisfactory outcome to the theological trap in which they find themselves.

Lord Morris

It is not important so much that I support this amendment but it is important that it is supported by no less an authority than Professor Beesley. He has also argued, that it is illogical to maintain present constraints on BT's pricing and investment in a régime of freer competition…". It is supported by Sir George Jefferson and also, as I read it, by no less a person than my right honourable friend the Secretary of State for Industry. On 15th April 1981, in col. 324, in a statement in another place, he said: I am discussing with BT the possibility of increasing the amount of external finance available to safeguard BT's vital investment programme". I think I was probably reading a little too much into that, but the argument put forward by the noble Lord, Lord Trefgarne, on 27th April on Second Reading, which I believe emanates straight from the Treasury, I honestly do not think bears examination. Perhaps I might read what he said, at column 1084: those who lend money to public sector organisations do so in the informal expectation, at least, that the Government stand behind those borrowings. That is why, in the eyes of the Government, all such borrowings have to form part of the so-called PSBR, because"— and I stress these words— in the last resort the Government stand behind the borrowers should the unthinkable happen to any of these organisations". I fail to understand why a Government guarantee has to go on to the public sector borrowing requirement figures. The standard practice in any corporation is to account for what is in effect a contingent liability by way of a note on the balance sheet and does not form any part of the monetary measure as far as the assets and liabilities of the company are concerned. If there is any degree of expectation that a guarantee would be called down in the near future then it would be understandable, but I fail to understand why this argument is eternally trotted out by the Treasury. I have a great deal of sympathy for the argument of the noble Lord, Lord Glenamara, and I support his argument in its entirety.

Lord Avebury

I should like to say one word on this because I, like my noble friend Lord Winstanley, was totally unable to follow the remarks of the noble Earl, Lord De La Warr, who, having adduced several very powerful arguments in favour of the amendment, finally concluded that he could not support it. When my noble friend asked him why, he said that ex cathedra the Secretary of State must have the last resort and the Treasury must have a look in. Is that not precisely what we are arguing about? We are saying that the Secretary of State ought not to have the last word, and that the Treasury ought not to have a look in—

Earl De La Warr

I am obliged to the noble Lord for giving way. I think he is really trying to read into what I said more than was there. To me, it is unthinkable that, when you have a nationalised industry, the Secretary of State and the Treasury should not have some back-up responsibility. It is unthinkable that they should be removed. I am not suggesting that they should be removed. I am suggesting that they should stay. I am merely discussing how they use their powers. Surely the noble Lord can accept that.

Lord Avebury

By definition, it is not unthinkable, because authorities as diverse as the noble Lord, Lord Glenamara, my noble friend Lord Lloyd and the noble Lord, Lord Morris, have all argued that the Secretary of State should not have a look in. I cannot think of a group of more different authorities who could be brought to agree on a single proposition.

I was hoping that I could persuade the noble Earl, Lord De La Warr—who said, in an intervention in the speech of the noble Lord, Lord Glenamara, that he was the logical one—to take another look at this and see whether he could be brought round to the proposition that we are seeking to advance. We are saying: let us do away with what the noble Lord, Lord Glenamara, calls the theology of putting these items into the public sector borrowing requirement, when, as has been said, we are talking about what is a contingent liability; one which in private enterprise is treated as a contingent liability.

Surely the object of my noble friend, and the object of everybody in this House, must be to create a situation where British Telecom is nearer to a private sector company, with all the effects that that will have on its competitive ability, its psychological benefits for management and so on. Therefore, the less intervention there is by the Secretary of State and the Treasury, the more British Telecom will thrive in that more invigorating environment; the more benefit it will bring to the national economy as a whole and, by the kind of expansion that my noble friend would enable it to aim at, give business to the suppliers, help the subscribers and create flourishing industries which help Britain to compete in export markets. All these benefits can flow from putting an end to this theological restriction which it is now in the power of your Lordships to do. If we take the opportunity of pressing this amendment this evening, we can not only have struck a blow in favour of British Telecom, but can have created a new environment in which public sector enterprises can flourish.

9.58 p.m.

Lord Underhill

This is a crucial amendment, which would not be necessary if both the Government and the Treasury would adopt a logical attitude, and not have a fixation to a policy which is not relevant to the needs of British Telecom. As has been emphasised by other noble Lords, the BT investment is one of the largest investment programmes in the United Kingdom and, when one realises that the bulk of this has to be financed from revenue, one must obviously ask for an explanation as to why this policy is necessary. To raise this huge sum from its own resources means that there has to be a difference between revenue and expenditure.

The noble Lord, Lord Mottistone, referred to higher charges in other connections being supposition. It is not supposition in this case, because the only way in which British Telecom can finance investment from its own resources is by ensuring that it has sufficient revenue, and that can only mean by having charges which would otherwise not have to be imposed. It is absolutely wrong—and I am certain that most noble Lords will recognise this—to finance investment by price rises. I am certain that every private company would regard that as a bad commercial practice, and we ought to look at that in this connection this evening. If it was borrowing by a private company for investment in construction work, the Government would give three cheers because that is what they want to achieve.

What is the difference between borrowing by a private British Telecom and a public British Telecom in the circumstances in which the telecommunications industry finds itself today? A great part of British Telecom investment is in equipment. As has been stressed, this equipment is purchased from the private sector—from private manufacturers. In relation to British Telecom, is this not a question of the PSBR being a completely artificial distinction? We really must see whether or not we can obtain an explanation.

British Telecom is not a bad risk. It is a sound concern. I do not believe anybody would get up and deny that. It shows a good return on investment. As has been emphasised, British Telecom must be allowed to borrow on the open market. The Government must explain what seems to be just Treasury pigheadedness. Surely it is not going to be argued that there is a shortage of investment funds. We have been told time and time again in your Lordships' House that money is available for investment. This is a going concern which requires money for investment. To achieve a fully modernised network of services for British Telecom there must be substantial investment, and outside borrowing by British Telecom must be allowed.

It seems to me that there can be only one of two explanations: either an attack is being made on the public sector, because British Telecom will not have the wherewithal to compete with its rivals in the private sector, or the nonsensical attitude is being adopted of dealing with British Telecom expenditure as though it were expenditure by any other Government department.

Is there any real distinction between borrowing by a private British Telecom and by a public British Telecom? It cannot be compared with expenditure by a Government department or by a local authority which is never expected to produce a financial return. British Telecom is not a Government department. It invests in revenue-producing assets, just like any commercial undertaking, and it has a viability, with a sound basis of return. I must repeat: How on earth can borrowing by British Telecom be considered to be public spending in the way we normally refer to public spending?

At this time the country sorely needs this type of investment for constructive production. This amend ment will help British Telecom to modernise. It will also help both manufacturers in private industry and British Telecom customers. I appeal to all noble Lords who have a commercial outlook to say that this is an investment which will show a good return and to support efforts to modernise British Telecom. I ask them to support the amendment and to remove an illogicality which I am certain it will be very difficult for this Government to justify.

Lord Caccia

Perhaps the Minister would allow me just one word before he replies to the debate. All sides of the Committee have urged that flexibility should be shown by the Government. May I from these Benches be allowed to urge the same theme. I was given to understand earlier by the noble Earl, Lord De La Warr, that some moves might be afoot which would allow for a certain amount of flexibility and that in the commercial market there was a confident prospect that, provided permission were given, money would be available without much difficulty from the private sector. This is subject, of course, to some move in that direction being in prospect.

It seems to me, therefore, that the object which has been urged on all sides, that British Telecommunications should have a greater possibility of raising the money they need for their development programme in the national interest, is something which the Minister may have in mind. I should very much like to hear what the argument might be and what the suggestion might hold before deciding whether or not to support this amendment. The object is to try to get something with a prospect for the future of Britain, as has been said again and again in this debate. This is not supporting some old industry which is having all the difficulties in this country which are common to those industries overseas. We know that this is something with a future. Therefore, the object is surely to see whether this money can be provided and whether it is by virtue of the amendment or by virtue of what the Minister says. I shall wait to hear what he says.

10.6 p.m.

The Earl of Gowrie

I do not think anyone likes to be a teetotaller at a birthday party and this is somewhat the role in which I have been cast this evening. Being the odd man out in this way and in this debate is not entirely new to me because, as the noble Lord, Lord Glenamara, reminded us, it is conventional within all Governments to "have a go" and a grumble at the Treasury. Because I spent some years in your Lordships' House in Opposition as a Treasury spokesman the corrupting influence of that department, so to speak, rubbed off on me a little and when I arrived at the Department of Employment I once, in the early days, suggested that I thought the Treasury was right on one or two points. There was a terrible silence, as if one had strayed into an H.M. Bateman cartoon.

I have listened carefully to the arguments put forward, and I shall try to argue them rather closely as I think this is probably the most important debate we have had on the Bill so far. If I may, I shall repeat something that I said in a very different context in an economic debate in your Lordships' House: that it seems to me that almost the central issue in British politics at the moment is about the scale and method of funding of Government debt and that this problem and the challenges and difficulties of this subject cross parties and as a result create quite a lot of frustration within both political camps.

Before I come to try to argue closely some of the points which have been made, perhaps I may do so very colloquially and briefly. The real difficulty is that there is a distinction empirically in ordinary life between money that is given to you as a present, money that someone invests in you and money that you borrow. If we think about it, most of us recognise the differences that arise from those various pieces of innocent economic activity.

The other great problem is that I think all noble Lords who have spoken have failed to mention and have underestimated the nature of monopoly. When I listened to the speech of the noble Lord, Lord Underhill, I got the feeling that what he really wanted was nationalisation without tears. We on this side of the Committee are not over-enamoured of nationalisation but in the provision of great public services we can often see its logic and indeed we have kept more of the special privilege or the monopoly power of British Telecommunications than some of our own supporters would have liked. But one does pay for having a nationalised industry and one of the ways in which one pays for a large nationalised industry monopoly is over this intractable issue of what must be the limitations and controls on its borrowing behaviour.

Also, when I heard the debate, my mind was inevitably cast back to the days in which the previous Conservative Government—all credit to them—and the recent Labour Government—all credit to them—engaged in the most far-reaching, even revolutionary series of investments in very good risk activities. British Steel and British Leyland come to mind. But alas! the ways things turned out, admirable though those risks were, a very large charge of an unanticipated kind ended up devolving on the public.

It seems to me, therefore, that the trouble with which we are dealing at the moment is not so much theology, nor indeed Treasury dog-in-the-manager behaviour, but the intractable facts of arithmetic. As the Committee will know, it is a standard part of statutes relating to nationalised industries that their borrowing from sources other than the Government requires consent, and so partially we are dealing with issues of consent by Ministers. My noble friend Lord De La Warr, who supported the spirit behind the amendment, nevertheless recognised and made the point very well that the consent of sponsoring Ministers is necessary. And inevitably in practical life, whatever one thinks of the Treasury, it would be quite inconsistent or impossible for a sponsoring Minister to give his OK, so to speak, without reference to the Treasury or to what in fact he was ticking off on his paper.

The other thing, as I have said, is that a vast majority of nationalised industries, including British Telecom, are very large businesses indeed; they have considerable monopoly powers or market powers and they are not subject to formal price regulation. So if no controls, no consents—let us use an even lighter word than "control"—are imposed on the borrowing of such industries, if one is not even aware of what might be going on in such industries, they would have, notionally, but I think also in practice, a very wide discretion as to the amount they borrowed, and they could in theory, and again possibly in practice, use that position to raise large sums, push up interest rates, divert funds from the private sector. They could also threaten money supply controls—controls, I may say, which are not unique or dogmatic to this Government but which were formerly introduced into the British system by the previous Government, with our support at the time.

Again it seems to me that an important point to make is that it is not so much what the Government, or even the Chancellor of the Exchequer, think about nationalised industry borrowing, or what does or does not or should or should not come within the sphere of the PSBR. What really counts is what the national and international money markets perceive nationalised industry borrowing to be, because the Government, like any other person, has to go on to the money markets for their borrowing. The tendency of the money markets is to perceive nationalised industry borrowing as carrying an implicit Government guarantee, whether or not this guarantee is formalised, and that also is another reason why there has to be some Government control on borrowing where a Government liability could arise. And again, where your are dealing with a great public sector service with monopoly powers, it is all too easy to construct scenarios where collapse is simply unthinkable; the genuine risk, the genuine collapse, genuine failure, cannot, for social reasons, for employment reasons or for reasons of the continued provision of the service, in fact occur.

The other point is that the timing and source of the borrowing of these large public sector bodies, just because they are so large, does create a ripple in the money pond, and whether they are borrowing in sterling or in foreign currency, borrowing on their scale and size does send out ripples elsewhere. Such borrowing has important macro-economic implications, and Governments are naturally an interested party to these. There is absolutely no change between ourselves and the previous Administration in that concern or in its formal and legislative expression.

It does not, therefore, seem to me to be realistic to suppose that the borrowing of public sector bodies of the size of British Telecom or indeed the Post Office could be altogether free from Government interest—and in practical terms Government interest means Government control. That is not to say that we fail to recognise the great problems which tight borrowing constraints can impose on public corporations. In fairness to these public corporations and as some noble Lords have said, we do expect them to behave in a commercial manner and I do not underestimate the amount of time which top management and board members spend in grappling with these problems. I can say to these people through the Committee that the Government are sympathetic and the Government are looking very carefully indeed at what can be done to enable profitable nationalised industries to find more money for productive investment within our overall monetary objectives.

The noble Lord, Lord Glenamara, teased me by saying that I would mention joint ventures, but they were a relatively small ripple in the pond. In a very fast growth area such as this there is no reason why they should not proliferate and become very large pebbles on the beach. We should like to see British Telecom forming joint ventures in partnership with the private sector—for instance in the supply of attachments and the provision of auxiliary services—so long as British Telecom does not control, and the Government by proxy do not control, such joint ventures. Then they would be genuine risk concerns whose borrowing would lie outside the public sector borrowing constraints. As the Committee will recall from the Second Reading debate, Clause 26 of the Bill was amended in another place so that British Telecom, and indeed the Post Office, would have the power—subject to overriding Government consent—to borrow in the money markets for long-term capital needs. We are exploring the possibilities of enabling them to do this.

It would be misleading to leave the Committee with the impression that public expenditure constraints have resulted in British Telecom having to cut or defer major investment projects or improvements. From some of the speeches made in this debate—notably that by the noble Lord, Lord Glenamara—and in debates on other amendments, one might think that this organisation was on its uppers in terms of present and future capital investment needs. The plain truth is that British Telecom's major investment has increased steadily from an average of about £100 million a year in constant price terms since 1977–78.

The noble Lord, Lord Glenamara, mentioned that British Telecom had recently disclosed a cut of some £200 million in capital expenditure planned for 1981–82 and that we in the Government have been kept fully informed of this development. These cuts are principally the result of the corporation having reappraised its own demand forecasts, as any private sector corporation would do, for the next year or two in the light, alas! of revised growth forecasts in the present recession. Therefore, my information is that these cuts relate almost entirely to investment and growth, which in terms of the activities of this corporation mean the rate at which new connections are applied for, and that in fact they reflect the corporation's own judgment of economic prospects and not any public expenditure restrictions imposed by the Government. It is most important that we should be clear about this and also about the fact that British Telecom is still planning a capital programme for 1981–82 not far short of £2,000 million—an increase in constant price terms of some £½billion compared with three or four years ago. The noble Lord, Lord Glenamara, keeps complaining about the way in which the corporation has its hands tied. Some hands! Some knot!

I hope that I have said enough to put in a rather truer perspective an issue which I recognise causes great concern on all sides of the Committee. As I said at the beginning, would that this were simply a matter of cutting through esoteric magic or dogma. Unfortunately it is as much dictated, as I said, by the intractable facts of the arithmetic of borrowing.

Coming back finally and briefly to the amendments, I should like to turn to one other aspect which they raise. Clause 26 as drafted does, in fact, distinguish very clearly between temporary borrowing, which can be used to meet any obligations and discharge any functions of the corporation, and longer term borrowing, which is restricted to the capital purposes set out in subsection (3). So the distinction for which the Committee has called is, in fact, there. The effect of the amendments, however, would be to remove this distinction so that British Telecom could borrow long term to finance wage increases—again remember that it is a monopoly—or other current account expenditures. The noble Lord, Lord Glenamara, once more has given dire warnings of the price increases that he feels the Bill is laying on the consumer and the public. But price increases are very largely related in this economy to the unit labour costs of the labour servicing activities. I wonder if the noble Lords who framed the amendment really intended this consequence, or, if they did, whether they were right in so doing. It is surely desirable in principle that the long term borrowing of British Telecom should be confined to purposes for which capital moneys are properly applicable, and I would suggest with great respect that we should keep this principle very explicit in the legislation.

I hope that I have not used theological language. I have tried to illustrate the real constraints within which any large corporation, including the Government, have to operate; the knock-on effects, in prices and elsewhere of unrestricted powers and the necessity which all Governments have felt, where nationalisation exists, for the Government to be a necessarily involved partner.

10.23 p.m.

Lord Orr-Ewing

I should like to add my support and also to say that I am persuaded by some of the logic which my noble friend has presented to the Committee. I think that it is in order for a monopoly to borrow from its present users, which is what was condemned by the noble Lord, Lord Glenamara. He said that he did not think it right for present day subscribers to have to pay for the future. That is exactly what happened when the BBC started. There were no television licences at all; sound broadcasting licences financed television for its first 10 years. Now the situation is the reverse and television licences provide the money and sound broadcasting is thrown in free.

However, there comes a time in public monopolies of this sort where the present users may have to finance for the future. The noble Lord, Lord Glenamara, seems to think that his Government did not come under Treasury persuasion. I think that that is not true. I can think of all the ambitious projects for the future which were cancelled by his Government. I shall not mention some of the defence projects—TSR II and things of that import which would have been very promising and saved us buying a lot of sophisticated aircraft from overseas—but I shall mention, in particular, the Channel Tunnel. In that case the Channel Tunnel was financed by the City of London, but it was argued that there was an implied guarantee of the Government standing behind the City of London and they somehow must have been persuaded by the Treasury that it was not acceptable.

I wonder now, if we had only gone ahead with the Channel Tunnel at that time, whether the flow of goods across the Channel and our competitive position in Western Europe would not have been very much better and the number of jobs provided directly and indirectly by that project would have been very much healthier for our economy as a whole. So I go along with him in believing that there are a number of occasions when the Treasury have been short-sighted and have not cast their eyes forward to see what ought to be done for the better economic vitality and competitive position of this country.

I fall absolutely within the area of those who say that British Telecom is the most important infrastructure for the business and industrial community of this country. Therefore, I think that the Government are absolutely right. I must confess very quickly that, because I was an electronics engineer in the Government when I was serving in the Air Ministry, the one job I wanted to go to was the Post Office because I felt that that was the place where electronics ought to have been introduced years ago. It was not because successive Governments—either through lack of imagination of their appointees as Postmaster-Generals or because of Treasury controls—never drummed the idea of electronics, and now the System X exchange, as they should have done at the time.

However, I absolutely concede that although this Government have allowed the Post Office, if it can raise the finance, an enormous expansion of capital expenditure, public expenditure figures show that in 1978–79, the last year of the Labour Government, the figure permitted to the Post Office was £1,094 million. The figure given today for the current year, 1981–82, is exactly double that. Some of it, of course, is in respect of inflation, but that is a substantial increase.

But British Telecom pleads, although it has been given the permission and the great majority of that can be obtained, that it is short of some £100 million or £200 million. That is not a tremendous burden of difference, particularly in a period of recession. But if at any time British Telecom comes forward and says that it could now go rather faster if it could borrow another £200 million from overseas, it would seem to me to be illogical to say to it, "No, you cannot do that"; for in the past local authorities have been able to borrow their money from overseas with no difficulty at all. They are spending it on revenue and not on capital expenditure for the future.

Therefore, I would urge the Government to be as enlightened as they can. I am afraid that I do not go along with the amendment. I still think that ultimately the Treasury, and in particular the Minister responsible, must at least know what will happen, for the reasons that my noble friend put very clearly before the Committee. So in spirit I do not want to contain the expansion for the future of British Telecom. I would ask the Government to be as forthcoming as they conceivably can and if British Telecom can make out a good case for borrowing from the private sector or from overseas, then we should allow it to do so in the long term interests of our nation.

Lord Winstanley

Frankly, I listened to the reply of the noble Earl, Lord Gowrie, with some despondency. I rise merely to express the somewhat vain hope that some day a Government will conduct their affairs in accordance with the political philosophy on which their policies are based. We have, I think, what the Conservatives like to call a non-interventionist Govern ment. They appear to be a Government that are determined to intervene in any territory into which they can squeeze their nose.

The noble Earl reminded us that there are three ways of getting money: gifts, investments and loans. To the best of my knowledge, British Telecom has had no gifts. I can only remember one occasion on which it has needed a loan and that was during the period of the computer strike when telephone bills were not being paid and the Post Office, because of the present Government's insistence on its cash limits, and on the Post Office's requirement to return 6 per cent. on capital employed, was obliged to borrow £1,200 at very high rates of interest, for which the telephone subscribers later had to pay. That is a non-interventionist Government.

As a parallel the noble Earl cited British Leyland. As a parallel that is just about perpendicular. We are not dealing with a risk situation here.

The Earl of Gowrie

I am most grateful to the noble Lord for giving way. I produced no such parallel with British Leyland or British Steel. I simply said that the arguments that we have heard tonight were also put forward at that time. I did not think that they were pertinent then and I do not think that they are pertinent now, but we have heard them before.

Lord Winstanley

I am grateful to the noble Earl for making his position clear and I am sorry if I in any way misrepresented it. Let me go on with the general theme. As some noble Lords will know, I had the privilege and pleasure of serving for two years as a part-time member of the Post Office Board under the distinguished chairmanship of Sir William Barlow. I am informed—reliably I think, but I will not say by whom—that during the period from 1st January 1978, when Sir William Barlow was first appointed chairman of the Post Office, until May 1979, when there was a general election, Sir William Barlow was called in on three occasions by the then Secretary of State for industry, Mr. Eric Varley, for instruction, or perhaps a better word would be "advice".

I am informed that, subsequently, from May 1979 until Sir William Barlow retired in 1981 he was called in by the then Secretary of State for Industry of the present non-interventionist Conservative Government, Sir Keith Joseph, 30 times. That is a non-interventionist Government! All I say is that I think that the less the Government interfere with British Telecom the better both for British Telecom and for our economy as a whole.

Lord Lloyd of Kilgerran

At this late hour I am not proposing to analyse the many statesmanlike speeches we have heard this evening. I am presuming to approach the matter in a summing-up mood. I shall endeavour to sum up in four or five broad sentences on what I think the conclusion of this interesting debate should be. It is accepted that in this field there should be a massive investment. It is accepted that the private capital market in this country is a very good judge of where to invest its money. It seems from the words of the noble Earl, Lord De La Warr, that at the present time the market seems to be ready to risk its money in this field.

Then as the noble Lord, Lord Glenamara, indicated there is strong support from experts outside the Palace of Westminster for the proposition which I am now putting forward. In my view it is an almost inevitable and logical conclusion of this debate that BT should be left free to find its own money for capital investment in the private market at this time and thus reduce the burden of PSBR. At this late hour I am sure your Lordships will excuse me for being brief, but those are the four or five broad conclusions to which I come this evening. I beg to move.

10.32 p.m.

On Question, Whether the said amendment (No. 102) shall be agreed to?

Their Lordships divided: Contents, 25; Not-Contents, 43.

Avebury, L. Masham of Ilton, B.
Blease, L. Molloy, L.
Boston of Faversham, L. Morris, L.
Collison, L. Peart, L.
David, B. [Teller.] Pitt of Hampstead, L.
Davies of Leek, L. Ponsonby of Shulbrede, L.
Elwyn-Jones, L. Stewart of Alvechurch, B.
Evans of Claughton, L. Stewart of Fulham, L.
Glenamara, L. Stone, L.
Houghton of Sowerby, L. Strabolgi, L.
Lloyd of Kilgerran, L. [Teller.] Underhill, L.
Wells-Pestell, L.
McCarthy, L. Winstanley, L.
Airey of Abingdon, B. Loudoun, C.
Avon, E. Lyell, L. [Teller.]
Bellwin, L. Margadale, L.
Belstead, L. Marley, L.
Boardman, L. Mottistone, L.
Brougham and Vaux, L. Murton of Lindisfarne, L.
Caccia, L. Orkney, E.
Caithness, E. Orr-Ewing, L.
Campbell of Croy, L. Rankeillour, L.
Cathcart, E. Renton, L.
Chelwood, L. St. Aldwyn, E.
Cockfield, L. Sandford, L.
Colville of Culross, V. Sandys, L. [Teller.]
Cranbrook, E. Sharples, B.
Cullen of Ashbourne, L. Skelmersdale, L.
De La Warr, E. Swinton, E.
Donegall, M. Teviot, L.
Fortescue, E. Torphichen, L.
Gowrie, E. Trefgarne, L.
Holderness, L. Trenchard, V.
Long, V. Vivian, L.
Westbury, L.

Resolved in the negative, and amendment disagreed to accordingly.

[Amendments Nos. 103 to 108 not moved.]

10.40 p.m.

Lord Lyell moved Amendment No. 109: Page 28, leave out lines 13 to 16.

The noble Lord said: This is one of a series of amendments, to which I spoke earlier. I beg to move.

On Question, amendment agreed to.

Lord Ponsonby of Shulbrede moved Amendment No. 110: Page 28, line 27, leave out subsection (6).

The noble Lord said: We have just been discussing the question of the financing of BT. We are concerned here with the question of British Telecom's wholly-owned subsidiaries, and the amendment proposes to take the wholly-owned subsidiaries out of the external borrowing limit imposed on British Telecom itself.

The Government have consistently argued that a definite line should be drawn between the operation of British Telecom's exclusive privilege or monopoly services and its competitive activities. For that reason the wholly-owned subsidiaries of British Telecom will be created under the Companies Act to operate these competitive services. The object is to ensure that the competitive services will operate at arm's length from British Telecom and will thereby be in fair competition with non-British Telecom companies. However, while it may be fair competition for British Telecom's competitors, is it fair competition for British Telecom's own subsidiaries? In the important area of finance the answer must be that that is not so, and the amendment seeks to rectify the situation.

Clause 26(6) lays down that wholly-owned subsidiaries of British Telecom cannot borrow externally, except with the consent of the Secretary of State and the approval of the Treasury. That is so that their external borrowing will count as a part of the public sector borrowing requirement. So right from the outset British Telecom's companies will be at a serious disadvantage compared with their competitors.

The Government's stringent operation of cash limits is such that British Telecom itself cannot obtain sufficient external financing to maintain its own investment programme. This is an integral part of the so-called medium-term financial strategy.

I should yet again make it plain that we are opposed to the creation of these wholly-owned subsidiaries. We believe that they could be used as a step towards selling off parts of British Telecom's operations. Despite all the assurances to the contrary, the Government's actions over other nationalised industries, such as Sealink, do not in any way reassure us about the objectives of establishing these new wholly-owned subsidiaries.

But if they are to be set up, it is only fair and reasonable that they be allowed to compete on an equal basis with other companies. Without the flexibility to raise finance in their own right, the subsidiaries will be unable to plan their operations sensibly. They will be looking ahead in the knowledge that at any time sudden and arbitrarily imposed cash limits could wreck their plans at a stroke.

By controlling their reserves under Clause 24 the Secretary of State would also effectively deprive the subsidiaries of the ability to build up sufficient internal funds which could be used to mount a realistic competitive challenge in the market place. Undoubtedly, the natural tendency of management to conserve scarce resources could also be undermined at a stroke.

The prevention of British Telecom from helping out its own subsidiaries financially by cross-subsidisation will mean that the only remaining source of finance will effectively be choked off. The effect of this, therefore, is that the subsidiaries will be put into a financial straitjacket, so ensuring that they cannot compete fairly, on equal terms, with other companies. As I have said, the purpose of this amendment is to put the BT subsidiaries on a par with similar companies in the private sector. I beg to move.

The Earl of Gowrie

I was a little unclear as to the purpose of the amendment. It appeared to me to intend to remove the duty of British Telecom to secure that the borrowing of its wholly-owned subsidiaries is contrained in the same way as that of the corporation itself. In speaking to the previous amendment, on which we have just divided, I dealt with the constraints on the corporation itself. It seems to me that the noble Lord, Lord Ponsonby, is in fact rather overestimating the difficulties posed for the wholly-owned subsidiaries. Obviously they cannot exist to create a theoretical or actual gigantic loophole for the borrowing of the corporation, but they are not in fact prevented from borrowing on the market; they are constrained only by the need to obtain the necessary consent—and, again, in the previous debate we went over the issues of consent.

I should perhaps emphasise that these statutory controls and consents need apply only to wholly-owned subsidiaries; when British Telecom enters into joint ventures with the private sector they will have the corresponding statutory freedom to attract private capital. I also hope that the explanation I gave my noble friend Lord Morris about the need to treat wholly and partly owned subsidiaries somewhat differently in statute will also deal with similar amendments set down by the noble Lord.

Lord Ponsonby of Shulbrede

I thank the noble Earl for his response to my amendment. I shall look carefully at his reply to this amendment and at his response to the earlier debate, and will possibly come back to this at Report stage.

Amendment, by leave, withdrawn.

Clause 26, as amended, agreed to.

Clause 27 [Limitation of indebtedness]:

Lord Lyell moved Amendments Nos. 111 and 112:

Page 28, line 45, at end insert ("and")

Page 29, leave out lines 3 to 6.

The noble Lord said: It might be to the convenience of the Committee if I were to move Nos. 111 and 112 together. I spoke to them earlier. They are consequential upon the removal of Clause 25. I beg to move.

On Question, amendments agreed to.

Clause 27, as amended, agreed to.

Clauses 28 and 29 agreed to.

Clause 30 [Accounts of the Secretary of State with reference to the Corporation's indebtedness to him]:

Lord Lyell moved Amendments Nos. 115 and 116:

Page 30, leave out line 21.

Page 30, line 23, at end insert— ("( ) sums received by him as mentioned in paragraph 9(5) of Schedule 4 (interest on, or repayment of, the Corporation's assumed debt);").

The noble Lord said: I beg to move Nos. 115 and 116 en bloc. These are two further amendments in the series consequential upon the removal of Clause 25. I beg to move.

On Question, amendments agreed to.

Clause 30, as amended, agreed to.

Clause 31 [The Corporation's accounts and audit thereof]:

Lord Lyell moved Amendment No. 117: Page 31, line 20, after ("has") insert ("after consultation with the Corporation and").

The noble Lord said: I beg to move Amendment No. 117, and it might be to the convenience of the Committee if I spoke to Amendment No. 177 as well. Clause 31(3) enables the Secretary of State (among other things) to determine the general principles which are to govern the accounts of British Telecom and to require BT to include particular information of various sorts in these accounts. This is, of course, common form for nationalised industry statutes.

The purpose of these two amendments—No. 117 and the consequential No. 177—which have been agreed with BT is to require the Secretary of State to consult BT before giving the corporation notice of any such determination. Such consultation would naturally take place in any event, but I hope that the Committee will agree that it is sensible to recognise it in the Bill. Amendment No. 177, which amends Clause 75, makes the corresponding change in the provisions dealing with Post Office accounts. I beg to move.

On Question, amendment agreed to.

Lord Morris moved Amendment No. 118: Page 32, line 2, leave out ("161(1 )(a)") and insert ("13").

The noble Lord said: At this very late hour I will not go into the detail of this amendment—not only because of the hour but because it is incredibly boring. My understanding—and I have probably got it wrong—is that the provisions of Section 161(I)(a) have been superseded by and embraced by Section 13 of the Companies Act 1967 and, by coincidence by the same numbered section, Section 13, of the Companies Act 1976. This amendment is an attempt to draw this to the attention of Her Majesty's Government at this stage of the Bill. I beg to move.

Lord Lyell

Interventions from my noble friend are always welcome in this Committee whatever the hour of day or night. I hope that what I may have to say may go some way to satisfying him and the Committee. We appreciate my noble friend's efforts to improve the clarity and drafting of this Bill, but I think that he and the Committee may agree with me that by his amendment we are going a little far since it is, I understand, laid down that BT's auditors must belong to one of the bodies recognised for the purposes of Section 161(1)(a) of the Companies Act 1948 and not for the purposes of Section 13 of the 1976 Act.

Section 13 of the 1976 Act merely repeats and states which accounting bodies are to be recognised for the purposes of Section 161(I)(a) of the master Act, the 1948 Companies Act. It appears that Section 13 of the 1976 Act refers back to Section 161(1)(a) and it is correct for the Bill before us tonight to do the same. It is purely a matter of legal and drafting technicalities, but I would assure my noble friend that our legal advice is that the reference in Clause 31 before us is correct. I hope that this brief explanation at this late hour will satisfy my noble friend that his fears are unfounded.

Lord Morris

This drafting is different from that under the 1969 Post Office Act where the various institutes of chartered accountants in this country and in Scotland and Ireland are specifically mentioned. The reference to Section 161(1)(a) was included also in that Act. I would like to know whether these various learned bodies are excluded from being qualified to audit the accounts of BT.

Lord Lyell

I would hope that they are not; but I understand that Section 161 of the 1948 Act is the master section as far as this particular provision in Clause 31 is concerned. I understand that all the bodies mentioned in Section 161 are allowed to carry out the audit of BT.

Lord Mottistone

When the current Companies Bill went through your Lordships' House, we made the point that a consolidated Companies Bill would be of extreme value to the country. I suspect that this interchange on this amendment gives point to that. Perhaps the Government could take note about the need for a consolidated Companies Act as soon as possible.

Lord Lyell

The Committee will always take note of relevant and forceful comments from my noble friend Lord Mottistone. Indeed we take note of them. The "winged messengers" have sent a brief rejoinder to the remarks of my noble friend Lord Morris. I am informed that the bodies which are listed in the 1969 Post Office Act are indeed those which are listed in Section 13 of the 1976 Act. I hope that that may satisfy him on that particular point.

Lord Morris

But the whole point is that Section 13 of the 1976 Act does not apply to this particular Bill.

Lord Lyell

But Section 161 applies to this Bill, and that is the master section.

Lord Morris

In the light of that explanation, and particularly of the lateness of the hour, I beg leave to withdraw this amendment.

Amendment, by leave, withdrawn.

[Amendment No. 119 not moved.]

Clause 31, as amended, agreed to.

Clause 32 agreed to.

The Earl of Gowrie

I beg to move that the House do now resume.

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

House resumed.