§ 4.8 p.m.
§ Second Reading debate resumed.
§ Lord Beaumont of Whitley
My Lords, the Liberal Party's attitude towards nationalisation has always been a coherent one which has been opposed to the extreme views sometimes—at any rate in theory—held by both the Conservative and the Labour Parties. I have never believed that we are naturally a party of the centre, but. in this case, the centre—which in this matter includes large parts of both the parties I have mentioned—has, I believe, got it about right. On the one hand, we do not believe that nationalisation is a cure-all. In so far as it replaces workable and well regulated competition, it is to be resisted. On the other hand, there are various parts of today's economy which are natural monopolies, and, if they are to work, it is far better that they should be owned and regulated by society a a whole rather than by private enterprise, since private enterprise, as its description implies, will always, or almost always, put private interest first.
It might be thought that a neat way through the horns of this particular dilemma is to hive off as much as possible from the central enterprise and to privatise that. That is the course which is being taken by the Government with this Bill. But we believe that this, although it may sound somewhat enticing, does not in fact work because if one hives off the more competitive parts at the edges of an organisation one leaves a rump which is reduced to a social service but without the structure of motivation which powers the engines of a social service. It finds that it is designated as a profit-making body but without any of the resources which make that possible. That is a very bad situation. It is for that reason, basically, that we oppose the Bill and believe it would have been an excellent candidate for a star place on the Tories' list of legislation to be avoided in order to reduce legislation by the state.
The Bill is basically unnecessary and undesirable. There are three major reasons for that. First, picking up the point I have just made, competition is only feasible in the attachments to BT's network, the auxiliary services on it, and special purpose networks. The core network and the basic telephone service are natural monopolies and there is no merit, as I have said, in substituting a private near-monopoly for a public monopoly.
421 Secondly, BT could readily raise the extra capital it needs for investment, beyond the figure that the Government will allow it to borrow, from private sources, probably by bonds and certainly without selling a majority interest in its equity, if it were not prevented by Treasury orthodoxy. The noble Lord the Minister who introduced the Bill mentioned the remarks made by my noble Leader Lord Byers, and others, about the necessity for raising capital outside the normal public sector borrowing structure. But there was no need to go to the extreme of producing a Bill as thick as the one we now have merely to do that small thing. It could have been done in other ways.
Thirdly, we cannot afford to have this vital infrastructural industry disrupted and inhibited from long-term planning by being made a political football in the way that the steel industry has been. Although no one would say, I suppose, that BT is quite the most startling of industries in this country and not quite vying with Marks and Spencer's, nevertheless it is in a good working situation and improving all the time. It seems to me that the position into which we are now being thrown—with BT becoming a political football and, I suspect, likely to stay one for quite a long time, and at the same time subject to all kinds of speculation, in every sense of the term, about how it is to develop, who is to run various parts of it, whether or not they are to employ British firms as their suppliers, and all the various other questions which that produces—creates a situation which is most uncomfortable and "ungood" for the industry and for the country.
Those are the three major reasons for our opposition and I now turn to the various parts of the Bill. Parts I to III of the Bill are intended to come into force before Part IV, which provides for privatisation, and could be implemented without the latter—and that might be a very good thing. In that case it would be a welcome step further in the direction set by the British Telecommunications Act 1981 of liberalising telecommunications by reducing the ability of BT to abuse its dominant position.
We welcome the belated acceptance by the Government of two changes which Liberals urged in the debates on the 1981 Act. We support the removal of BT's exclusive privilege and, instead, its being made subject to a licence which defines its qualified monopoly and all its powers and duties. We rightly predicted that the Government's previous approach of derogating from BT's monopoly by granting licences to others would be insufficiently effective. The terms of the BT licence are so critical to the proper scrutiny of the Bill that the Government should table a draft before the Committee stage in your Lordships' House, not in June but now, even though it is presumed that BT is still disputing many of the views put forward by the Government in the document published in January.
Secondly, we support the establishment of the Office of Telecommunications as going some way towards a telecommunications authority, as we advocated in 1981. However, we would prefer to see it modelled on the Civil Aviation Authority, responsible for licensing competition between a dominant public corporation and a number of private competitors. It should also have responsibility for strategic management of the 422 telecommunications environment within the policies determined by Parliament and should be constituted to be explicitly representative of users, suppliers, management and employees. The Government are proposing a debilitating fragmentation of power between the Department of Industry, Oftel, the Monopolies and Mergers Commission, the Radio Regulatory Department at the Home Office, the British Approvals Board for Telecommunications and the cable authority proposed by the Hunt Committee. That combination could well allow BT to divide and rule. It would be better to concentrate all the technical expertise and commercial experience needed in Oftel to enable it to tackle the difficulties which have delayed liberalisation under the 1981 Act.
Like many noble Lords, I have some specific questions to ask, some of which are those which the noble Lord, Lord Lloyd of Kilgerran, would have been probing had he been able to be here. However, I am pleased to say that both he and my noble friend Lord Winstanley will be able to take part in the Committee stage.
The skills and research of British Telecom are undeniable. There is the danger that, like so many of the nation's resources, they will be frittered away in the cause of doctrinaire ideology—a charge which the Tories used to delight in being able to throw at the Socialists but which is now rebounding on to their own heads. We need reassurances on this matter. There are specific things we want to know. On the future of the Maltesham research centre, what changes will affect the centre? What effect will they have on the skilled labour force and the research team with its very high quality? What steps will be taken to encourage innovation by the skilled technicians? Will there be cuts in research and development if the new policy is to be effected for more commercial consideration? If the answer to that, as it presumably will be, is, No, then what guarantees have we of it? Is lower cost to be based on the import of foreign equipment? Unfortunately, there are tremendous signs of this at the moment. Finally, on the cable system can we perhaps have a little more explanation of what is meant by the franchise system? How long are franchises likely to last? Will present cable operators be given special privileges as suggested in the Hunt Report?
These are important questions, and clearly they are most important for the industry. Other important questions that have already been raised today, not least by the noble Lord, Lord Ponsonby of Shulbrede, concern the position of the blind and the really splendid record of this industry in the employment of the blind. That is something which must not be thrown away for any short-term ideological advantage.
In political terms the heart of the Bill lies in Clause 3, and there, indeed, lies the heart of the Government's dilemma. The Government have done a good job on their Clause 3 and I congratulate them on it, but in the last resort they have not given those of us who are trying to protect the consumer, and particularly the rural consumer, what we need, let alone what we demand.
It is on these two words that I suspect the problem lies. As we all know, the problem is that we wish to guarantee (and I include the Government in this on 423 their statements) telecommunication services to all. In order to do this we must subsidise some, including, for instance, those who live in remote parts of the countryside. The Government have been lavish—and we are delighted—in assurances in correspondence (although sometimes the assurances lack clarity).
There is one particular one about which I should like to ask the Minister. What, for instance, does the department mean when it tells the NFU in a letter which the NFU has been circulating that it will regard a demand as unreasonable where the person demanding services:will not pay BT the costs attributable to the supply to that person of the services"?That may be shorthand for something that I do not particularly understand, but it sounds on the face of it to be a charter to disregard all needs for subsidy.
But, more important, assurances given in letters like this are not binding on future Governments and they are easily avoided in the light of changing technology: "Oh, of course, when the Minister said that, and when we wrote that letter, we did not foresee the coming of universal sprockets", or whatever the particular reason may happen to be. The only way of meeting this point is to write onto the face of the Bill tie assurances which are necessary.
As my friend Alan Beith said in another place, we want a commitment to meet needs, and not to meet demands, to be written into the Bill. At a cursory look "needs" may seem to be a more restrictive word; but an obligation to meet demands can easily become an obligation to meet "demand", and demand for economic man, let alone economic Governments, can easily mean only demand backed by cash. We are still a rich enough country to meet our people's needs, even in the remote countryside. Let us write this into the Bill.
Nothing—even in this fallen world of ours—is all bad. We welcome the increased powers to deal with breaches of the Wireless Telegraphy Acts by pirate radio transmitters which Part V of the Bill provides. However, apart from that, we regard the prospect of this legislation with gloom but not without hope that the sound common sense of this House may in the course of the coming weeks be able to make some improvements.
§ 4.22 p.m.
§ Lord Orr-Ewing
My Lords, I think that this is a good Bill. I think that it needs and thoroughly deserves the most careful attention. I think that it is not right to say that it was skimped or not attended to assiduously in another place. Admittedly, they had 110 hours of discussion and they still had not finished with Clause 3 before the guillotine was put on. But, after the guillotine was applied, all the clauses, I think possibly with the exception of about six, were discussed. Out of 91, that is a pretty good coverage for a complicated Bill. I agree that perhaps Part V (the one dealing with wireless telegraphy) was the least discussed and I hope perhaps that we can discuss it rather more deeply in your Lordships' House when it comes to that part.
§ Lord Ponsonby of Shulbrede
My Lords, I am sorry to interrupt the noble Lord, but my information is 424 that, of the total number of clauses in the Bill, 41 were barely discussed at all.
§ Lord Orr-Ewing
My Lords, our sources of information differ. Mine are very respectable, and I have no doubt that the noble Lord's are respectable. When my noble friend comes to wind up he may act as an adjudicator. He also has good sources.
I should like to take up one or two minor points in the opening speeches. The noble Lord, Lord Ponsonby, mentioned the question of costs. I have always tried to compare costs but it is very difficult to compare like with like and to find the exact figure. Sometimes rentals are very high; they are very high in London. The quarterly rental for a telephone is very expensive if you are not going to use it very much; whereas in other countries there is no rental and the money is recovered on the price of calls. Also one should take into account the respective standard or cost of living in the various countries—what percentage is it of the average industrial wage in the country? There are lots of variables in the equation.
I think that what many of us discover when we go to America on business or on holidays is that the standard of service, particularly in speed, is immeasurably better there than it is in this country. I know of a number of instances—and when I tell the story I always find new examples—whereby you have to wait in Britain not days, not even weeks, but sometimes months to get a telephone connected. If it is longer than days in the United States you get an abject apology. What is perhaps more irrirating is that, once it is connected, it sometimes takes a very long time for them to notify your number to directory inquiries. It is no good having a telephone if for six months it is not known to directory inquiries that you are connected.
When I asked why there was this unconscionable delay, was told that it is all done in longhand and written out on slips of paper. I said, "Good gracious! Do you mean to say that after 70 years of telephone monopoly they are still using methods that were used in 1913? Have they not heard of cheap computers so that the directory ought to be up to date within a few minutes (if not micro-seconds) of the connection and of the number being given to you?" Of course the delay is very costly for some businesses. Businesses are advertising widely. Clients may wish to telephone. They ring to try to find the telephone number and find that it is not registered, although later they learn that the telephone is there. Under this Bill, incidentally, a person who is wronged in that manner by delays of that sort will be free to sue BT and claim damages. Surely that is likely to effect an improvement in the service.
I make one other point and that is in respect of what the noble Lord, Lord Beaumont of Whitley, said. I would have thought that for remote connections, if after a reasonable period the cost of providing a line to an outlying farm or some essential service is too heavy, there should be an automatic right to have an automatic wireless link across the intervening space. There is no reason why it should not be done. It is done all over the place at very short notice. It is highly satisfactory now. Unmanned radio links can and should be used. I think that that point might be pressed later.
425 After nearly 70 years of a telephone monopoly, I think that it is high time that a little competition was introduced. During that period of monopoly four or five large companies shared orders of hundreds of millions of pounds of exchange equipment every year. Incidentally, the number of companies is now down to about three. The time is very ripe, with new technologies emerging, to let in some private sector companies.
Lord Ponsonby seemed to think that BT would be decimated. In the year 1987, it is estimated that it will be handling 97 per cent. of the telephone business in this country. Mercury is hoping to be handling 3 per cent. on its network, but that 3 per cent. will be confined largely to the very big public companies. With 70 years' start and with the 97 per cent., it would be unthinkable if BT were not in a competitive position and well able to look after itself. My fear is that it may drag its feet in all sorts of ways and the private sector may be delayed. I shall come to that point later.
I was sad that the British Telecom unions started the "Hands off Telephone" campaign, and in their letter which they circulated to us said:We are opposed to the Telecom's Bill".I would remind them that just 30 years ago, in 1952, when we sought to introduce a little competition to the BBC by breaking their monopoly, the BBC's staff union, the Association of Broadcasting Staffs, circulated us all at that time saying that they were totally against breaking the monopoly. Once the monopoly was broken, they did notice that their members benefited: more jobs were available and better pay, the bright chaps were attracted to the rival network and, above all, you had the ability that, if your face did not fit, you could "sack your boss". That incidentally is a valuable liberty for anyone living in this democracy. I believe that the rewards and the opportunities for bright people—and there are many of them in British Telecom—will be greatly expanded, and if five years after the Bill has become law we look back, we shall see that that has been self-evident.
When privatisation is to take place, Ministers always assure both Houses that competition will he scrupulously fair. But, my Lords, witness what happened when British Shipbuilders competed with private sector ship repairers. Incidentally, British Shipbuilders has been propped up with £700 million pounds of taxpayers' money in the period since nationalisation. It is a sad fact that very often tenders, as quoted by British Shipbuilders, for the repair of ships are half of the actual price and in those circumstances how can the private sector continue? Very often they are driven near to, or into, bankruptcy. That is why I attach much importance to the clauses that the noble Lord, Lord Beaumont of Whitley, mentioned—I have in mind Clause 3 and protection mechanisms—so as to make sure that fairness exists.
I hope that BT will co-operate. A cousin of mine ran Tate and Lyle at the time when that company was under threat of nationalisation and was running a campaign to preserve its independence. I recall that I asked him, "What do you feel about the British Sugar Corporation, which is the only competitor you have?" 426 He said, "We actually feed them business. If we didn't have a competitor, we would have no way of measuring our own efficiency, and we might become self-satisfied, over-manned, and slow on new technologies". So I should have thought that it was a good thing for British Telecom to have pace-makers in the form of some value-added service companies and in a measure from the Mercury network. I believe that, regrettably, there will be endless opportunities for British Telecom to procrastinate, and that is where the Minister and the director will have to watch progress very carefully.
Fairness also means that there should not be flagrant cross-subsidisation. This is a very difficult situation. In any company if a new technology is being launched, it must be financed out of the profits from products which are currently being marketed, and this will have to take place to some extent in British Telecom, but cross-subsidisation must not be so flagrant that it drives all new competition into liquidation. The strange thing is that British Telecom does not know whether it is making profits on rural lines; it believes that it is, but it does not know. It has no cost centres at all.
At last, thanks to the Bill, there is now a whiff of competitive grapeshot. What a difference it makes. Suddenly we are all being deluged with material advertising new as well as existing services, and now 61 cost centres are being set up. Is it not fantastic? If, after 70 years, a company in the private sector did not know which of its products or services were making profits and which were making losses, it would have gone bankrupt, and deservedly so. I am glad that this stimulus has at least meant that there is to be some measurement and some facts.
The Bill's solution in regard to monitoring, to ensure that things are as fair as can be, lies in the office of Telecom. At last a kind of embryo Federal Communications Commission seems to be coming into existence. Some of your Lordships will remember the Beveridge Report, which was published in 1951. The minority report stated that is was considered important that we set up a type of Federal Communications Commission. The minority report was before Lord Ponsonby's day. The Beveridge Committee was set up in 1949, and it reported in 1951. It was suggested—I think that it was in the Selwyn Lloyd Report; I have not had time to check the reference—that we ought to have had a Federal Communications Commission long ago. At last that is coming about. But what is sad is that the responsiblility will continue to be divided; the noble Lord, Lord Beaumont of Whitley, made this point, too, and I entirely agree with him. Some of the responsibility will fall under Oftel, under the Department of Industry sponsorship. Some of the responsibility will remain with the Home Office—the radio regulatory department. Some of the trade associations advocated that it should all come under one heading; the Liberal Party here has just advocated that, and so, too, have even the trade unions. I think that in the other place the Labour Party also took the view that the responsibililty should be under one head.
The sad fact is that the Secretary of State at the Home Office is the Senior secretary of State and Mr Willie Whitelaw probably carries in Cabinet rather 427 more guns than do some other Ministers; but I still think that it is wrong to have divided responsiblility. If the Labour Party puts down amendments on this, I shall find it hard not to agree with them, and perhaps support them. Of course responsiblility for programme content should remain with the Home Office. But frequencies, whether relating to broadcasting, microwaves, or satellites, ought all to be dealt with by one department, and I believe that Oftel would be the natural home for that.
Lord Bruce of Donington
My Lords, I am grateful to the noble Lord for giving way. Will he clarify one point, since he has brought into the debate the whole question of the Home Office's involvement? Will he say whether he is in favour of the retention by the Home Office of powers to allocate wave bands and wave lengths, over which at the moment it has jurisdiction? This point has some bearing on the noble Lord's earlier observation about the desirability of providing a fixed radio communication between two points in substitution for a telephone line. Will he clarify his position on the Home Office involvement?
§ Lord Orr-Ewing
My Lords, international wave lengths are fixed by the International Telecommunications Union, and we are in Region 1, which covers the allocation of wave bands in Western Europe and Britain. Under the rules it is laid down what wave bands should be used. I believe that that responsibility should be transferred to Oftel under the sponsorship of the Department of Industry. I should like to go further into this question, but time does not permit.
The point that I am making is made very much better by the three trade associations concerned. I have here a copy of a letter which they wrote on 4th August 1982 to the Secretary of State for Industry. The letter is from TEMA (the Telecommunication Engineering and Manufacturing Association), the EEA (the Electronic Engineering Association), of which I used to be the chairman and president, and the Business Equipment Trade Association, which deals with computers. These are the three trade associations most concerned with the matter, and in the letter they state:The Department of Industry has a very limited number of staff with appropriate technical expertise and commercial experience to deal with the complex problems raised by liberalisation, and is statutorily required to consult British Telecom for advice and guidance. Since British Telecom is the biggest competitor in the market place, this practice cannot give applicants confidence in the impartiality of any decision".I think that everyone, in every part of the House, will agree with that view.
A later part of the letter states:Since information (in the form of voice messages, text, data and visual images) can be transmitted both by means of radio and by cables, there are no logical grounds for dividing the regulatory control between two Departments of State according to the means used".I think that most of us would say, "Hear, hear" to that. I hope that the Government will look most seriously at this question and see whether there ought not to be another go, as there was in another place, to try to put it right.
I now turn to the question of the type of 428 person—and this, too, is important—who is to be the director of Oftel. I believe that it is currently rumoured that the person appointed might be someone of permanent secretary grade from, possibly, the Department of Industry. I should have thought that it was wiser to go outside the Civil Service and to advertise the post. Someone who has grown up in one department and reached senior rank may not be thought to be completely objective when dealing with the various claims of industry, the export trade, and the like. I suggest that someone of the stature of a High Court judge, and preferably someone with some experience in the area of patent law, would be admirably suited to deal with the technicalities concerned with this new department.
If a company, possibly a small, new, high technology company, is wronged, I believe that it should be compensated. In another place it was suggested that this should be done by B-Tel. if it is proved to have been wrong. I believe that there are difficulties here and I should like the Department and the Minister to look at this matter again because B-Tel. has tended to argue, to fillibuster, to query and to delay the general introduction of competition. Whereas it has resources which will allow delay, some small and struggling companies may be pushed to the edge of bankruptcy if these delays continue. I believe that they should be financially compensated where that situation exists.
As regards this next matter I may differ with the Government's approach. In his opening speech my noble friend Lord Trefgarne said that we were preparing the ground for the total denationalisation of British Telecoms. I have the feeling that the working out of the prospectus for the forecasts of where the profits will be made not only this year but perhaps three or more years ahead—which would be necessary for a large public issue of this character and which would be something that the institutions would have to know—may all lead to further delay. If that delay comes about, I wonder whether they could not take two large bites at this cherry, attacking first—because the urgency is there—the value added services. Perhaps I should list them because they are multifarious. They are: telex, radio telephones, radio paging—these are all under British Telecoms at the moment although sometimes they are competitors—Prestel, data services, answering services, teletex, the maritime radio services and, of course, the radio interference monitoring to which my noble friend referred. Surely it would be good to privatise that chunk so that they could get going and create the jobs which are so essential in high technology, and above all create the exports.
The Government plan to allow the public, the employees and the institutions to have an equity share: I think that it is realised by Sir George Jefferson that this is Government policy and that it may even have some salutory and helpful effects on British Telecom itself. Certainly we have noticed signs of new vigour approaching. It is important that we should consider whether this is in line with overseas experience. I recently looked at the experience of Bell Telephones when it was broken up. That was a private monopoly, an immense private monopoly, employing no fewer than one million people in the United States. It was 429 divided up into the "long line"—which in our parlance is trunks and international—which was left with AT and T and Western Electrics. It was also divided into "locals"—that is, local telephone exchanges—under the Bell Operating Company and split up into the various localities. Then there was American Bell which does all the value added services.
I feel that perhaps there is some merit in separating the value added services with their flexibility, with the need to get on and to create jobs, from the public switched network service which, goodness knows! is enough of a task for any organisation to take on where it has to tailor it for the 21st century and modernise it as regard optical fibres and the like. It is a tremendous undertaking. I would leave British Telecom for the moment to get on with that while hiving off the others. I think that Sir George Jefferson has acknowledged that competition will be here to stay. My message to the Government is: please do not let BT procrastinate. There are potential new information technology methods. I should like to see them encouraged and the new technologies encouraged. Above all, I should like to see new jobs created as a result of this stimulus.
§ 4.44 p.m.
The Lord Bishop of Lincoln
My Lords, I should like to touch on one point which noble Lords have already mentioned and that is the anxiety that is felt in rural areas about the effects of these proposals on services there. I detected in the speech of the noble Lord the Minister a note of reassurance about this, and I recognise that it is in black and white in the document that we have. But I also recognise that behind these assurances there are, presumably, very complicated financial and technical matters. Therefore, I should like to support what the noble Lord, Lord Beaumont of Whitley, has said: the Government's intentions should be very clearly spelt out about this, making need the criterion rather than demand, because I know that anxiety is still very much present in the rural areas.
§ 4.45 p.m.
§ Baroness Lane-Fox
My Lords, it is an understatement to say that efficient telecommunications are of immense importance to the United Kingdom, particularly when information technology is growing almost daily in significance in so many spheres including—very much from the point of view that I am representing—making life simpler for very many disabled people. Therefore, I find it very hard to see that this Bill is irrelevant.
I would humbly suggest that up to now the progress of telecommunications has been bedevilled by too much interference, especially political. Politicians of both parties have caused delays by imposing the financial restrictions so clearly described by my noble friend the Minister in his opening speech; perhaps worst of all in tying down and treating this sprouting and dynamic industry as though it was something like gas or electricity—failing to take account of the volatile innovatory element and of its need to exercise profitability; the need to encourage the investment which must be its seed corn and especially 430 shareholding among BT employees, so proceeding towards a property-owning democracy.
This Bill gets us nearer, surely, to coping effectively with information technology. Freedom to compete should nudge along progress in various directions. Let us take one small example: the aspect of the cordless telephone. This really has great relevance for handicapped people and I should hope that it will also be invaluable in hospital wards. It always seems to me so wrong that busy and sometimes highly-trained nurses should be battling to drag a telephone trolley from a patient at one end of a long ward to another patient at the other end of the ward, then to try and plug it in with all the trailing wires and attendant hazards. A cordless telephone, easily carried, could give such release and improvement in this area alone, while for the ambulatory disabled and wheelchair people its advantages are legion.
It will be a relief when these instruments can eventually be purchased legally. I may say that when a patients' association hoped to introduce a cordless telephone into a ward for the reasons I have given, they were very quickly warned that such a step could cause serious demarcation and other troubles. Knowing that telephone union members are generally so helpful in trying to assist hospitals and others among us who are particularly dependent on the telephone because of physical disabilities, I agree with other noble Lords that it is at least saddening to hear the telecommunications unions' committee condemning the Bill outright. Their reason appears to be chiefly based on fears as to what will happen to the rural areas and to the kiosks, et cetera. Their views have been made very widely known and have caused considerable and understandable anxiety. Yet, as I understand it, in issuing BT's licence the Secretary of State, and the director general of Oftel in monitoring it, undertake a duty to ensure that BT provides a universal telephone service—that anyone who has a telephone or who wants one will be able to have one.
There has been an assumption that rural area telephones lose money; but accounts show this to be unlikely since equipment for small country communities is much smaller than for the urban, and rural land acquisition is cheaper. I am told that overhead wires are usually easier and cheaper to maintain and repair than those underground. The threat of wholesale closures of boxes seems most improbable. Yet it is worth noting that even in 1979–80, 32 boxes were closed; in 1980–81, 30 boxes were closed; and in 1981–82, 63 were closed. It must be right to look for new methods to match the changing circumstances of advanced techonlogy, and it is interesting to note that, as local authorities have the power to pay a subsidy towards the maintenance of uneconomic boxes, about seven are already maintained by local authorities in Wales.
There is no denying that the telephone fulfils a very important social service. For the first time, the maintenance of the call box service will be a social obligation of BT under the law in this Bill, and let us hope that some of those boxes are made to work, unlike those that have been vandalised.
At the moment many of us know that the charge for a domestic connection is £70, which seems a dreadful amount when you have it to pay, but not so much 431 when you consider that there will be no extra charge for the first 100 hours of work needed, which means that no extra charge will be levied unless the work takes longer than two and a half weeks. Under the Bill, the potential rural customer will be empowered to complain to Oftel if the charge seems higher than the standard charge, and if the director decides that the quotation is too high, he can instruct BT to provide the service and reduce the charge. Although under present arrangements the potential subscriber can go to the Post Office Users' National Council, which can take up the complaint with BT, that council has no power over BT. So, with the Bill, the potential rural customer considerably increases his right of appeal. Also, there is every likelihood that design of instruments will become improved in many respects. Users will have a wider choice of apparatus, and of whether to rent or to buy with most of it. Telecom will lose its monopoly on the first telephone in each home or business.
I, too, have received two very apprehensive, even anxious, letters from the Royal National Institute for the Blind. The noble Lord, Lord Ponsonby, must have received the same ones, because I recognise the wording. The telephone provides a major employment option in this country for blind people. Even now there are, as the noble Lord mentioned, between 1,000 and 1,200 visually handicapped telephonists in employment and, despite the recession, placement figures are still in the region of 100 per annum. BT has contrived that most of the smaller boards which they market can be adapted for use by blind operators, but some of the smaller boards now being marketed will not require operators. The institute writes very reasonably, but hopes that this shortfall can be made good by blind people being enabled to operate larger boards.
The worry is that, with the increased range of switchboards now to be sold in the United Kingdom, most may not be suitable for operation by blind telephonists. The institute, of course, feels bound to protect the interests of those it represents. Nevertheless, in order not to inhibit manufacturers in their development of new switchboards, it asks:that all switchboards marketed in the UK be capable of adaptation for use by blind operators".A plea is also put in for blind people working in offices who may have to operate small call-routeing devices.
These are the problems upon which the RNIB asks for adequate safeguards so as to ensure that with a privatised British Telecom there is not an increase of switchboards which cannot be adapted for use by blind operators. It appears that the Government have shown some acceptance of this difficulty, and I implore the Minister to apply his usual and customary understanding to such a delicate matter. It affects individuals who have proudly mastered their profession, often against mind-boggling odds.
I have kept this reservation on behalf of blind people until very late in my remarks, believing as I do that the solutions to it can and will be found. Certainly that is my hope. It is also my hope that the unions' committee will read the remarks about the effects on employees made by my noble friend Lord Orr-Ewing when the BBC monopoly was broken, and that with this knowledge they will grow to appreciate that, to give the innovation and manufacture of information 432 technology every advantage and freedom to develop with responsibility, not as a monopoly, will be to the advantage of all. Therefore, I support the Bill.
§ 4.55 p.m.
§ Lord Donaldson of Kingsbridge
My Lords, it is a great pleasure to follow the noble Baroness, who made such an agreeable speech from her most mobile stance or seat. I am never quite sure whether she speaks from the Cross-Benches or from the Tory Benches.
§ Lord Donaldson of Kingsbridge
My Lords, from one or two of the things that the noble Baroness said, I suspected so, but I very much respect the line she took, particularly over the disabled with regard to both the cordless telephone and the extremely important business of the blind operators. I am sure that the Government will be just as keen to work this as we all are.
In a Bill of 180 pages it is difficult not to find a certain number of good points, and I think that most of the matters which the noble Baroness mentioned are matters which I would regard as good. One of two of the points made by the noble Lord, Lord Orr-Ewing, I thought good, too, and particularly that you can now sue for damages if you do not get what you want—a very healthy proviso.
I was not entirely pacified in my objections to the Bill by the noble Lord's opening remarks. They were very clear and he did ease some of one's worries. But, on the whole, I find myself agreeing—in a surprising way, one may think—with the noble Lord, Lord Ponsonby. We have slight differences in approach, but there is very little difference in the effect of our approach. In particular, he emphasised the old slogan: "This is now going to be for profit not service". I know that we were all brought up on this 60 years ago, but the fact is that it remains true. It is quite impossible for certain things to be given nationally on a wide scale without what the noble Lord, Lord Orr-Ewing, described as blatant, flagrant, cross-subsidisation, which he said was totally unfair. The objective of giving high-quality service to citizens irrespective of their wealth or geographical position is not aiming at fairness—except in the sense that each shall get something equivalent to the other—nor that each provision shall cost the same. It is an elementary statement and I think it should hardly need correction. I am sure that the noble Lord will agree.
We believe fairness to mean that the man at the end of a telephone at Land's End can hear as well as the man in London, and at the moment I think that that is true. But as the noble Lord, Lord Beaumont, said, one must never get away from the fact that the provisions of some services look very much like being natural monopolies. Although I did not object to the introduction of some competition in the 1981 Act, I think that the total bouleversement of the present system is extremely dangerous.
I want to underline a few generalisations rather than deal in detail, because it is a very long and complex Bill and it will have to be dealt with in great detail in Committee. I am glad to say that my noble friend Lord 433 Perry, who is now in America, will do that, and I am speaking only because I think that our party's views ought to be expressed on this important Bill.
We believe in a mixed economy—rather more earnestly, I think, than either of the main parties—so we are not especially opposed to this Bill on the question of private or public ownership as such. But we are very much aware that national services like the post, telephones, railways, public transport, electricity, sewerage and others must, as I have just said, always involve an element of subsidy from the easy to the difficult cases, whether the difficulty be geographical, through rural isolation, or due to poverty, the people concerned being dependent on public rather than privately-owned facilities. Historically, the way of dealing with this has always been cross-subsidisation. I believe that it should continue to be so. I certainly think that we should insist that it remains so in relation to difficult cases.
For example, for years we subsidised the supply of eggs from Northern Ireland—I am not sure whether we still do or do not—on the grounds that British producers should not be at too much of a disadvantage due to their distance from the main centres of consumption. This is the exact opposite of the general approach which I think the noble Lord, Lord Orr-Ewing, is recommending, and which I think the Government are recommending.
In the vast extension of the electrification of the country since the war the more remote farms and villages were, quite rightly, connected at less than the real cost and subsidised by the much cheaper cost of connection in urban areas. Again, a cross-subsidisation devoutly to be recommended. We are thoroughly suspicious of this Bill not on principle but in the fear that the reason for introducing it is based on a doctrinaire belief in private enterprise and a desire to save money which we think will be ruthlessly effected at the expense of the more remote areas and the people who cannot afford their own telephones and have to depend on the public provision.
People who believe sincerely in anything are impressive, and I think that the noble Lord who opened the debate, and the noble Lord, Lord Orr-Ewing, and possibly the noble Baroness, Lady Lane-Fox, really believe that private enterprise, uninterfered with by anybody, produces efficiency for everybody. When I was a member of the Labour Party I did not, and now I am a member of the Social Democratic Party, I do not. It is perfectly clear that there are gaps at the end and sometimes in the middle which need subsidy, and without it what I call fairness does not exist.
We have heard about the risk of a big reduction in public kiosks. The noble Lord who opened said: ignore this, it is not the least likely to be true. It seems to me that the provision and maintenance of kiosks will be a major expense to any private company which deals with that particular side of communications, and hard-headed business is surely bound to sacrifice some convenience for the public in favour of greater profits, or indeed less loss.
The crucial clause is Clause 3. The very fact that the safeguards it contains had to be inserted after long and heated debate in another place, and after much lobbying from rural users such as the NFU, suggests 434 that the dangers are real. The safeguards seem to be circumnavigable by any competent lawyer. Phrases such as,save in so far as the provision thereof is impracticable or not reasonably practicable",and to,satisfy all reasonable demands",depend for their interpretation on the premises you start from. Is it as reasonable that every citizen should have easy access to a telephone as that he should own a TV set? There is room for much variety of interpretation here and only the lawyers will benefit. The department has made some statements, among other things about the shape of the earth and acts of God, but they will not be in the Act and they can have no legal force.
§ Lord Gibson-Watt
My Lords, would the noble Lord allow me? The noble Lord has mentioned the attitude of the National Farmers' Union. I expect that he is aware that recently the National Farmers' Union have expressed their view that they are, to a very large extent, satisfied with the assurances that the Government have given.
§ Lord Donaldson of Kingsbridge
My Lords, I would not put it quite in those terms, but I am aware that they thought that the additions which are contained in this Bill are very much more satisfactory than the old provisions. I said that this was caused through the lobbying of people like the NFU. I did not say they were satisfied or dissatisfied with this, if the noble Lord will allow me to continue. These statements of the department will not be in the Bill and can have no legal force. As one speaker mentioned, there is no promise that new provision for distant and expensive facilities will not be charged at an exorbitant price.
Lastly, the question of the employees in the six unions concerned. We are less certain than our old colleagues in the Labour party that the trade unions are always right, but in this case we think that they are, at any rate for the moment. I was much attracted by Lord Orr-Ewing's suggestion that you leave the British Telecom alone with the routine work and take off what he describes as the value added things, which in fact are the new things which require innovation, over which people have to take risks because they may fail, and privatise that. I would be much more in favour of that than of what this Bill is in fact going to do.
Of course, we favour competition in general, and if the Bill merely reduced the present monopoly, as did the 1981 Act, we should be prepared to look at any such suggestions with an open mind. However, as it is we are opposed to the Bill which we think is doctrinaire in motive and unnecessary in practice, and is almost certain to lead to a reduction in the quality of service, at least to the more remote parts of the country. We shall observe the customs of the House by not refusing a Second Reading, but we shall vote solidly through the Committee stage with its opponents, and hope in the end to make it at least comparatively harmless.
§ 5.6 p.m.
Earl De La Warr
My Lords, I want to give my fullest support to this Bill to denationalise BT. I should 435 start by saying that I was a little disappointed that my noble friend Lord Orr-Ewing sought to split up the denationalisation in the way he proposed. I will not argue it right through, but he is of course cutting right at the heart of the method that the Government have proposed. I could not go along with him on that.
§ Lord Orr-Ewing
My Lords, would my noble friend allow me? Perhaps I did not make it clear that I was in favour of the complete privatisation if that were possible in a short time factor, but, if the delays were built in and endless wrangles went on, two bites of the cherry might be better than no bite at the cherry.
Earl De La Warr
My Lords, I am most grateful to my noble friend. I certainly agree with him on the first part. My support rests not on the relatively narrow grounds of what one might call the failure of the Buzby bond initiative, and still less, I assure your Lordships, does it rest on a dogmatic belief that all nationalised industries are doomed to stagnation and decay unless they are denationalised. I support this Bill because, as I see it, it is one of the most far-sighted Bills of this Parliament, and because I believe that the telecommunications industry is, by a long way, the greatest growth industry of our time. We are only just beginning to perceive the increasing variety of ways by which energy can be harnessed in order, among other things, to store and transmit information, and we are only just beginning to see the growing number of media through which this can be done.
The telecommunications industry, like all industries during a time of explosive growth, is in a period of intense national and international competition. It is essential that the United Kingdom gets it share of the business. I believe that in this effort BT has a real opportunity to act, as it were, as this country's flagship, whether it be at home or whether it be overseas, and indeed I see this as being its proper role. It will be able to fulfil this role only if it is prepared to join, in every way, in the hurly-burly of the market place. It can only do this if it is freed from the shackles of Government purse strings and from what my right honourable friend the Secretary of State has called the web of Government controls.
I want to enlarge on this question of freedom from regulation, because I believe that there is a real danger that this Bill, and what follows from it, could seek to lay down too strict a framework. If this were to happen, it would affect not British Telecommunications alone but other telecommunications operators too as they appear; that is to say, the whole new competition of the future. We must ensure that the Government and the newly-created Director General of Telecommunications—an appointment which I enormously welcome—have sufficient fall-back powers to fulfil their duties under the licence, which at this moment, as we know, is being threshed out with BT. But far, far more important is the need to let Sir George Jefferson, and Sir Michael Edwardes, too, run their own businesses in the splendidly efficient entrepreneurial way in which they are both so expert.
It is argued that strict regulations are needed, and it has been argued strongly that they are needed in those areas in which BT will continue to have a monopoly 436 for a very long time such as public telephone kiosks, the 999 services and other services that have been dealt with. The BT unions have, of course, latched on to this for a very good reason—their dislike of the whole ethos of the Bill. They are suggesting that there are dangers of all sorts in cuts in various services. But in doing that, are they not ignoring Clause 3(1)(a)? Are they not ignoring the cross subsidy system already worked out, whereby Mercury access fees are available to BT for loss-making public services? If they are ignoring that I refer them to the speech made by my honourable friend Mr. Kenneth Baker to Standing Committee H on 8th February, in which he dealt at great length with this aspect. If they want a reference, it is column 922. In any case, do the unions really think that Sir George Jefferson and his board will just chuck away their reputation for giving public service? Would that even be good business? I ask them and I ask noble Lords on the other side of the House to think well on this aspect of the matter.
I seek one particular assurance from the Government about regulation. Will they look again at the fact that Clause 3, the all-important guidance clause, is a reference point to the Secretary of State and the director general, but at the moment it relates only to their duties under Part II of the Bill? Yet your Lordships will know that there are many important duties for the director general under Part III and there he is not required to pay attention to the Clause 3 guidelines. I hope the Government will have a careful look at this, because it is not a technical matter but one of important principle.
Finally, I want to deal with the pace at which all these changes are required to be made. I have in mind particularly the recent proposals made by Professor Littlechild and accepted by the Government. To my mind it is quite remarkable (this is not the first time that this has been said today) that in the 18 months since the Royal Assent to the 1981 Act such a lot has been achieved by BT. I believe that too few people realise just how much its attitude has changed. Incidentally, I will say again how much of that is due to the leadership of Sir George Jefferson himself.
I ask the Government not to push BT too far and, particularly, not too fast. At least give it 18 months to two years to activate everything that is before it, including the Littlechild proposals. Parliament has no power to regulate the speed at which accepted recommendations are implemented and a great deal will still be left in the hands of the director general and the Secretary of State. I suggest that we should let him be constantly advised by BT itself on just how much it can swallow and, more importantly, at what rate. This brave experiment has to be made to work. So much in the field of wealth creation in the United Kingdom, I believe, depends upon its success.
§ 5.17 p.m.
§ Lord McIntosh of Haringey
My Lords, the noble Lord, Lord Trefgarne, in his opening speech gave a very lucid expose of the provisions of the Bill. What he totally failed to do was to give any business case for the very complicated measure which is before your Lordships' House. He described the company which would follow the present British Telecom, the PLC, as 437 being an ordinary company; a rather remarkable ordinary company that needs 178 pages of introduction without even getting to the Memorandum and Articles of Association which have been promised so often and have still not yet been produced.
I should like to ask the Government on what business criteria it is considered to make this change? That I think is one of the most important aspects of this Bill. Is it, for example, on investment? British Telecom is undoubtedly one of the biggest investors in British industry. It covers at least 90 per cent. of its needs, self-financed. Where it borrows, it borrows from the public sector perfectly successfully and the Government charge a market rate for the money lent to British Telecom. There has been no shortage of investment capital available to British Telecom, other than that imposed by the external financing limit, to which I shall return, and which seems to me to be a totally arbitrary limitation which does not require a Bill of this kind to overcome.
Is it then a question of price competition? My noble friend Lord Ponsonby of Shulbrede referred to the differences in prices internationally between British Telecom and other competitive organisations. It is clear that, by the standards of consumer prices, British Telecom has a good record and there is no particular complaint, as far as I know, by the Government at either the pricing policy or the pricing levels of British Telecom. Is it a question of cash flow? That has never been suggested as being a problem for British Telecom. I should like to hear if that is one of the reasons put forward for this change.
Is it a question of technological advance? The noble Lord, Lord Orr-Ewing, made unfavourable comparisons between between British Telecom and various bodies in the United States. I should like to make another comparison, one between British Telecom and the French publicly-owned telecommunications organisation. If, as a domestic householder, you wish to become a subscriber to French telecommunications, if you wish to have a telephone installed, you do not have to write in longhand to the communications authority; you ring them up. They take down all the details of what you want on the telephone and the only reply comes to you from a computer. There is no need ever for pen to be put to paper in the whole process. Very efficient it is—and publicly owned.
Is it a question of labour productivity which drives the Government to this measure? Even before the liberalisation Act of 1981, the record of British Telecom shows that the number of subscribers increased from just over 9 million to just over 18 million, with an increase in the number of employees of only 16,000 on an original total of 232,000—an admirable record, I would say, of labour productivity and one which certainly takes some beating in the private sector as well as in the public sector.
Is it a question of industrial relations and industrial peace? I am going to come back to the issue of the right to strike in a minute or two; but, even during the period of 114 years when it was thought that the Telegraph Acts did not prohibit to the workers in British Telecom the right to strike, their record of industrial responsibility and discipline was virtually unequalled. There were hardly any strikes in the whole 438 of that period and hardly any occasions of the interruption of messages which is the subject of the Telegraph Acts.
By any standard that one cares to apply, there is no business case for a change from British Telecom to what is now proposed. If I have omitted any of the criteria on which a business case might be produced, then I apologise to the House and would be very interested to see how the Government add to them in order to produce a business case. I would suggest to your Lordships that what we have here is an act not of liberalisation or of reform but of dogma, and that behind that dogma is the undoubted wish for certain people to make profits, and to make quick profits, if they can possibly do so, at the expense of many years of public investment.
What will the likely effect of this legislation be? First of all, let us be quite clear that there is not going to be a significant increase in competition. That has been admitted by the Government and it was admitted by the noble Lord, Lord Orr-Ewing, when he said that 97 per cent. would still be the same monopoly, only it would be a slightly different monopoly. The evidence of Mercury is very clear. What we are going to have with Mercury is an additional service for a few subscribers in 26 main cities. It is admitted that there will be no change in the quality of the service and it is admitted that there will be no change in the technology offered. All that will happen, so far as we can see from the experience of the Mercury project so far, is that 50 per cent. of the investment for Mercury will go overseas, instead of, as now, 95 per cent. going to British industry and helping to create jobs in Britain.
What is the experience of AT and T after several years of liberalisation and after many years of private ownership? The experience is that 80 per cent. of the trunk lines and all of the local lines are still in the same monopolistic hands. There is no pointer there, I would suggest to your Lordships, to need for any dramatic change or to the kind of benefits which noble Lords opposite would like to see. I think that what is far more likely is that there will be a lengthy period of financial insecurity which will be enormously to the detriment of the telecommunications industry, producing exactly the opposite effect from that which the noble Earl, Lord De La Warr, would like to see. First of all, there is the issue of the licence for access to the public switching network. There has been no indication from the Government of the way in which that licence can be assessed. It clearly could be assessed to make huge profits for the licensees or it could be assessed in such a way as to make it virtually impossible for any licences to make a profit. And that licence could be changed at virtually any time; so that there is no security either for the licensees, for British Telecom or for Oftel as to a continuing stable financial relationship.
Then there is the question, to which I have already referred, of the memorandum and articles. Why is it proving so difficult for the Government to produce memorandum and articles for a company which has got to follow in a relatively short period from the enactment of this legislation? Is it not the case that the Government are finding it difficult to find a statement of objects which would satisfy company legislation and which would make clear the real purpose of this 439 new company? Then there is the question of capital. I have already referred to the lack of business justification in terms of investment. But, of course, the risks in the market place of the enactment of legislation and the actual coming into effect of the legislation are absolutely enormous. The risk of huge windfall profits to the private sector that occurred when Amersham International and other publicly-owned industries went into the market place are very great. So, unfortunately, too, is the opposite risk, the Britoil risk, of a under-subscription for British Telecom shares which would be equally unsettling for the investment plans of British Telecom.
Even if the Government on this one occasion were to get it just right and to have a successful launch, what would be the effect? It would be that we would have a group of institutional investors. Let us not have any wild talk about a property-owning democracy; it will be the pension funds who will be the only ones who will have any real significant stake in this point; it will be the pension funds and the institutional investors. What we will find is that these people will have a different idea of the priorities for a telecommunications service from that which the much-lauded—and rightly-lauded—Sir George Jefferson and his colleagues have; that there will be all sorts of additional pressures, conflicting pressures, on them. If, as seems most likely, there is a windfall profit for speculators in this launch, then there will be the expectation of a grossly inflated price/earnings ratio on the part of those who have paid more for their shares than has been received by British Telecom. That is another major source of financial insecurity. I would suggest that the Government have got to have some very good answers if they are going to claim seriously that we are going to have greater financial security and greater security stability under the provisions of the Bill.
I said that I wanted to refer to two other matters. I merely want to put down markers for Committee so that the Government do not think that they are going to get away with some parts of this Bill. The first is on the right to strike. I note that, in Standing Committee in another place, the Solicitor-General had to attend and give an explanation, which lasted for well over an hour, of what the provisions of Clause 50 meant in relation to the Telegraph Acts of 1863 and 1868. There is the Solicitor-General's opinion; there is the opinion of your Lordships' House in its appellate capacity; there is the opinion of counsel for the unions. All these are different opinions about whether there will be a right to strike under the new legislation or a right to take other forms of industrial action. May I say in parenthesis that if it is found that there is a right to strike but no right to take lesser forms of industrial action, that is an incitement to extremism which I do not think this Government would seriously wish to support.
The question to the Government is simple: if there is any doubt whatsoever that the workers of BT, who will then of course be in private industry—in a public limited company—will have any less right to strike than anybody else in private or in public industry, then why not take away that doubt by repealing all the provisions of the Telegraph Acts? It is not such a 440 revolutionary proposal. Similar provisions were made in earlier legislation for gas, electricity and water workers. They were taken away by the Industrial Relations Act 1971. I have my reservations about that Act, but I would assume that noble Lords opposite do not have those reservations and I cannot think why they should want now to be tortuously causing themselves so much difficulty to retain the provisions of the Telegraph Acts and to have these unprecedented and now virtually unique restrictions on the right to strike.
Secondly, there is the issue of industrial democracy. It may be said that that is water under the bridge, in that Sir Keith Joseph three years ago got rid of the experiment in industrial democracy in British Telecom. But if the Government mean what they say when they talk about democracy, and if they mean that there is to be any really substantial change as a result of this Bill, then why not do the bold and imaginative thing and bring back the industrial democracy provisions arising from Bullock which were in force until 1980? If they cannot do that, let them at least write into the Act some provisions for consultation with the workforce, which one would have thought would be a necessary pre-condition for good industrial relations in the private or in the public sector.
This Bill has so many other defects that I do not think I can trespass on your Lordships' time any longer, except to say that it requires a lot more in defence of this Bill than a simple assertion—what Walter Bagehot would have called "a mere asseveration"—of the benefits of private enterprise. It requires some proof.
§ 5.33 p.m.
§ Baroness Elliot of Harwood
My Lords, there is no doubt at all that this Bill is a very important one, and I should like to add my congratulations to the noble Lord, Lord Trefgarne, on the way he introduced very simply, very clearly and very straightforwardly what is a long and complicated Bill.
I speak tonight only briefly about two main interests on which I should like to comment. The first is the importance of the telephone service in rural areas. In Clause 3(1) the Government have included a very important clause about the rural telephone services and rural call boxes. I would support that very strongly and I know that other agriculturalists and other members of the National Farmers' Union will feel just the same. Inevitably, of course, this service will be expensive—it cannot be anything else—because the numbers of people using it, although extremely important in every way, will be much fewer than those who are using it in the towns. On the other hand, it will pay handsomely for people living in rural areas if the communications which they enjoy and employ and which are vital to their work are kept up and kept up as efficiently as possible. Where transport is difficult and one has to go a long way to get to urban centres, telecommunications are vital to all in those rural areas.
I think it will be difficult for British Telecom to carry on those services unless there is a guarantee that they will get help from the Government in this matter. But 441 I do hope they will be given the responsibility for this service and that the Government will be prepared to help with a subsidy, unless the service can be made to pay—which is still, I think, a little doubtful. People living in rural areas should not have to pay more for their telephone service than people living in towns. This again means a guarantee that the cost in the town and in the country will be kept at the same level.
My other concern is for the representation of consumers on the advisory board which is to be set up. Under Clause 1 there is to be a Director General with very wide responsibilities—so wide were those responsibilities that I felt as I read the Bill that obviously some of the interests would clash and it would be necessary for the Director General, or whoever was dealing with these differences, to be able to cover a very varied field and get advice and help from the great number of different interests involved.
At present the Post Office Users' National Council is the consultative body for the existing services, representing a very wide range of consumers. Once this Bill is passed, Clause 49(5) will cease to exist and the consumer will have to make his complaints or comments to the Director General. I hope this means that the Director General will have an advisory committee on which representatives of consumers of all kinds and interests will serve. As consumers vary in a hundred different ways, it will be necessary for the Director General, his office and his staff to be in touch with many different groups and organisations. These will include the rural community as well as all the others, and I hope that the interests of all consumers will be catered for as much as possible.
I have been listening to all the speeches made in this debate and I support those who think that competition is a good thing. The speech made by the noble Lord, Lord Orr-Ewing, referred to many important matters and the fact that, as those of us who have travelled to the States all know, the American telephone service is incredibly efficient. It also shows that by changing one can sometimes improve the services that are rendered because we know that the American telephone service was revolutionised when the monopoly of the Bell telephone service was done away with.
The other speech I should like to refer to is that of the noble Baroness, Lady Lane-Fox. I am sure that the needs of handicapped people should have a very good priority in the service. I am no expert on the modern inventions which we now have in the telephone service, but clearly it is an enormous asset for people who are handicapped and who cannot get about easily to be able to get a telephone service without wires. That is something which is quite new and I think that, if we can help those people who have these handicaps, that is something we ought to do.
Obviously, there is a great difference of opinion between the two sides of the House about this Bill. But I feel quite sure that this is a brave attempt to do something which will revolutionise some of the telephone services, and which will in the end prove to be modern, up-to-date and of benefit to everybody, provided that their interests are looked after, as I am sure they will be, by this Government.
§ 5.40 p.m.
§ Lord Wise
My Lords, while generally welcoming this Bill, I want briefly to follow the right reverend Prelate the Bishop of Lincoln and my noble friend Lady Elliot in emphasising the apprehension which is felt among people living in rural areas—most especially, those living in the more remote places. I make no apologies for this for, notwithstanding the safeguards in Clause 3, there are real fears in the rural areas that there will be a drastic curtailment of telephone services. There is concern, also, that the number of kiosks will be considerably reduced and these kiosks, as my noble friend Lady Elliot said, are in many instances a lifeline and an absolute necessity for the well-being of isolated communities. However, they must be uneconomic and the annual loss on many of them is undoubtedly considerable and far too great for any private company to sustain.
There is also concern that the costs of new installations and, indeed, repairs will be prohibitive if the whole sum has to be borne by the individual customer. I hope that the Minister can give an assurance that the standard charge for new connections will remain the same for all customers, wherever they may happen to live. I am not too happy about the safeguards for rural services which have been written into Clause 3, because of certain qualifying conditions that have been included. Everything depends upon the interpretation of these qualifying phrases. It is vital that the Government give an absolutely firm assurance that the rural consumers' interests will be wholly covered, that under the conditions of the licences issued there must not be any diminution of services and that they must be provided at reasonable, cost. As circumstances change from time to time, it is also imperative that these guarantees should be written into the Bill.
§ 5.42 p.m.
My Lords, I am very glad, very late in the day, to have received the Department of Industry's paper called Ringing the Changes and to have had the definition of the word "impracticable", in Clause 3 of this Bill, which it contains in paragraph 18.However, like the noble Lord, Lord Wise, I am still a little concerned by the definition of "no reasonable demand" in paragraph 19B, and I am also not too happy with paragraph 20 which explains that British Telecom, or whatever the successor company is to be called, will be "permitted", not "obliged", to subsidise rural services other than "ordinary voice telephony"—the telephone service to you and me—services out of revenues earned from other services.
The legislation before us is clearly designed to last not just for five or 10 years but for the foreseeable future, and it is vital that it should do so. I have been doing some crystal ball gazing, and what my crystal ball tells me is that in the not too distant future all business communications and ultimately all private and personal communications which are at present conducted by letter post, will be conducted by a system of telecommunications which is considerably more sophisticated than "ordinary voice telephony".
As a result of this, it seems to me inevitable that the postal service, as we know it, will cease to exist and will 443 be replaced by a very much more expensive messenger service designed primarily for the conveyance of documents. Therefore, people will no longer be able to write letters unless they can afford to send them by messenger service. For many reasons, this will be a pity and not only because I scarcely think that a transcript of Cicero's or Lord Chesterfield's telephone calls would have made quite the same contribution to literature that their letters have done. But that is by the way.
However, when the time comes when we are entirely dependent on telecommunications, it will be essential that every home in this country, however remote, should be provided with whatever equipment is necessary to enable the inhabitants, who may be quite poor, to send and receive communications, some of which may be of a confidential nature, and any home without these facilities should be considered substandard, as a house without a bathroom or a kitchen is today. If this should not be so, their inhabitants, in remote rural areas especially, will be back to a pre-1914 penny post state of affairs which would be quite unacceptable.
I quite accept that to put the onus of paying for this on British Telecom, or its successor, whatever its name is, might shackle them to the extent that they would not make the profit that a public company must make to be viable or to attract investment, but I should be interested to know the Government's thinking on this.
As regards public call boxes, paragraph 24 explains that the Act would,permit the withdrawal of any public call box in accordance with procedures agreed by the Director General".Although my crystal ball also tells me that one day we will all have personal portable cordless telephones, which we will take everywhere with us and which will eliminate the necessity for public call boxes, until that time comes the public call box, especially in a remote area, can be a lifeline even if it is used only once or twice a year and is totally uneconomic. Perhaps the wording of the paragraph is misleading, but I should like to know under what circumstances the director general might agree to withdraw a public call box.
I am in two minds about this Bill. I think that it has a lot to be said for it, and the noble Lord, Lord Orr-Ewing, and the noble Earl, Lord De La Warr, have said much of it. I am quite sure that private enterprise is more enterprising than public enterprise, and at this stage in the development of telecommunications that is very important. But I have some reservations.
The noble Lord, Lord Ponsonby of Shulbrede, has voiced the concern of many, lest the domestic subscriber should find himself paying higher and higher charges, and this worries me, particularly in view of what I see as the increasing girth of Buzby in years to come. Then I cannot help wondering whether, if telecommunications are to become virtually our only means of communication, it is altogether wise to let them out of British Government hands, particularly because I wonder whether, in the event of war, it is wise to have part of the network possibly in foreign and less than friendly hands.
Finally, should the Government be re-elected and this Bill become law, we still have to face the fact that, 444 unless I am very much mistaken, there is a distinct possibility that in another five years' time a Labour Government might renationalise British Telecom and any other telecommunications companies. With that threat hanging over their heads, I wonder whether investors might be a little chary of buying shares in British Telecoms' successor. In any event, the existence of that threat—real or imaginary—will scarcely make for confidence and stability in the industry.
§ 5.48 p.m.
§ Lord Glanusk
My Lords, may I first declare an interest in that I am the chairman of a small telecommunications company, whose main customers are British Telecom and their suppliers. I rise to add my support to this Bill, although I have some reservations on some of its detail which I will come to shortly. Some 30 years ago, we undoubtedly had one of the best telephone systems in the world and for some time we managed to maintain this position. But slowly, in subsequent years, the quality of the system started to decline and an air of lethargy or complacency crept in within both what was then the GPO and their industrial suppliers. There was a noticeable lack of innovation and marketing enterprise and the customer was left to accept whatever was offered to him. Consequently, our export markets declined disastrously. Meanwhile, overseas, and particularly in the USA, the opposite was happening. A somewhat fragmented and haphazard national system rapidly developed into the finest in the world, with a thriving development programme keeping pace in turn with the introduction of the transistor, the computer, the chip and the microcomputer.
But over the past few years our vast sleeping giant, with a staff of a quarter of a million, began to wake up and has made quite extraordinary strides both in its acquisition of new and better systems and equipment and in its attitude to its somewhat neglected customers. Some of this great improvement is certainly due to the threat of denationalisation which arose in 1979 or 1980 with the discussions over the prospect of separating the GPO, as it then was, into its two basic elements of telecommunications and the postal service. This is now continuing with the talks over the Bill now before us and will continue next year when BT is re-formed into a public limited company. I have been trying to avoid the terrible word "privatisation", but because of the rate at which it is being used in this debate I am afraid I am on a losing wicket.
If I may come to the detail of the Bill, Part II lays down the duties of the director, but in so doing the Secretary of State in several clauses reserves to himself the right to perform certain functions, such as the issuing of some licences over the head of the director. This appears to be totally unnecessary ministerial interference which can lead only to confusion. In his opening remarks my noble friend Lord Trefgarne referred to the need for this dual control, but I am afraid I did not quite follow his reasoning. Tomorrow I shall study Hansard to find out whether I can make it clear to myself. Surely, however, it would be possible for all licences to be issued from the office of the director and for the Secretary of State to be given 445 powers to instruct the director on such matters as national security, which must clearly remain in his hands, and foreign relations.
As recently as last Wednesday in a debate entitled Nationalised Industries: Relations with Government the noble Lord, Lord Ezra, in an excellent speech outlined to your Lordships the tragic situation that can arise with too much ministerial interference into what is supposed to be a straight commercial enterprise. I believe it is essential that the director should be allowed as free a hand as possible at all times.
This fear of over-regulation is again present when one considers the very difficult subject of British Telecom's relationship to the Government, especially during the interval between this Bill becoming an Act and the full freeing of BT by the public sale of shares. During this period, which is likely to be 18 months or two years, the unfortunate BT will have three masters: the Treasury, the Minister and the Director—and this just at the time when they are not only trying to negotiate their licence but also preparing to meet the commercial competition and reorganise their financial controls.
This brings me to my next point. When it becomes a public company, BT will presumably be able to start its own manufacturing units and compete with private industry, if this is considered advisable by them. In my opinion, there can be no objection to this, provided—this is important—that the accounting procedures for these units are on a comparable basis to the rest of industry. That is to say, the costing for each product must carry its full share of the overheads of that manufacturing unit and make an equitable contribution to development and research. There must be no possibility of operating profits being used to subsidise the cost of manufacture or development.
My next point concerns the licensing of systems and apparatus. In Clauses 19 and 22 of the Bill the Secretary of State is authorised to charge fees to the manufacturer for the testing and approval of his equipment. This process has already begun with certain equipments. Some of the quotations for these fees have been extremely high—so high, in fact, as to make the project uneconomic. It would appear, therefore, that there is a need for a scale of approximate charges to be published—and quickly—by the approval authority so that due account can be taken of them at an early stage, when the product estimating is being done, and during the market research stage.
I was going to mention rural telephones but that question has been fully covered by previous speakers. It only remains for me to say I personally believe that the safeguards written into the Bill are sufficient for that purpose. I hope that this Bill, and the next one to follow after the next election, will allow us to see a thriving and modern telecommunications national network without equal in the world, and supplying not only the United Kingdom but also exporting to Europe, the United States of America and the developing world.
§ 5.56 p.m.
§ Lord Ferrier
My Lords, I want to preface my remarks by a mild complaint. This is the second time that the Second Reading of an important Bill has been 446 taken on a Monday. I speak as one of those who come from quite far afield. It is important that we should let the powers-that-be know that it is very difficult for certain Members when important debates take place on a Monday. Indeed, I am surprised that so many noble Lords are here today.
We have had an interesting debate. One advantage of speaking late, as I am now, is that nearly all the material which one has studied has already been dealt with by previous speakers. However, I wish to emphasise one or two points. I need hardly say that they stem from what I said in the debate on the gracious Speech on 4th November. They relate to the worry which has been expressed today by so many noble Lords and noble Baronesses about how handicapped, old and ill people in rural areas are going to be catered for. The Bill does not make this clear. Therefore I look forward with the greatest of interest to the Committee stage of the Bill.
POUNC say in their circular:So far however the Government has not published how the access mechanism will operate and there is no means by which the adequacy of the funds can be assessed. Thus there is still considerable uncertainty about the future of these services".The services referred to are those in rural areas, including the 999 calls from public telephone boxes. This problem must be tackled. It is important that there should be a clear division between the social provision of a telephone, which today is a lifeline for people, and the intrinsic cost of installing and connecting the instrument. Therefore I was interested in the suggestion made by my noble friend Lord Orr-Ewing about the use of radio links to cover points far away from exchanges.
The problem of what I call "granny-up-the-glen" has got to be tackled and the calculations made very carefully. I understand that the value of a telephone today is measured by the number of calls which originate from it. Some elderly people hate using the telephone. They may not use it more than once or twice a week, but this does not mean that that is all the machine is used for. Elderly people are rung up by tradesmen, doctors, the police, their children and their grandchildren. I should like to know whether BT will properly calculate the intrinsic value of the service and whether there will be some arrangement whereby that will be clearly distinguished from the intrinsic cost of the apparatus. It is quite unreasonable that British Telecom should have to pay for what is a social service, just as it would be quite unreasonable for it to work the other way around.
I do not find in the Bill any reference to the telemessage service which is being promoted by the telephone people today. In fact, I have put down a Question for Written Answer on this subject. This is an important matter, and the noble Lady, Lady Saltoun, mentioned it also. I do not believe that people consider the aspect of recording what has been done, and perhaps we should consider it more in connection with this Bill. The telemessage has a value in law, in terms of putting down in black and white what one has said. One might wish to state that one rejects an offer or accepts it, for example; or one might make a bet and get it down in black and white by use of the telemessage service. When we reach Committee stage, 447 perhaps we can give some thought as to how this service can be incorporated into the Bill.
That particular point is the last item I have in mind to mention, other than to say that I am one of those who entirely support the background of this Bill and the need to privatise the telephone system. It was only yesterday that I was in touch with a powerful figure in the ship repairing industry in the North-East, who attributed the news that the "Cunard Countess" had gone to Malta to the fact that one cannot trust the unions. It is not the unions themselves but the fact that there are too many of them. As I and many other noble Lords have said before, so long as one has the business of craft unions, so will it be difficult to control what should be done by an industry-wide union. This Bill will make it possible for unions to be properly represented on the management, but in terms of one industry-wide union, I hope.
§ 6.3 p.m.
My Lords, when he introduced this Bill, the noble Lord, Lord Trefgarne, was his usual clear and enthusiastic self, but he did not go quite as far as the Minister of Industry in another place, at Third Reading, who characterised this Bill as being the most important Bill in this Parliament. I am inclined to agree with that description, except that the Minister there implied that it was the most important for the good that would flow from it, whereas I believe it is important for us to consider it for the opposite reason, that it will do considerable harm. But in another place Mr. Kenneth Baker really let himself go when he spoke about the new arrangements for ownership in the industry. He said that the Bill would return proper ownership to the people, and I notice that the noble Lord, Lord Trefgarne, not only said this in his speech but is nodding approval of that phrase now. I suggest to him that that is nothing but nonsense.
We have seen, in the cases of Cable and Wireless and Amersham International, that although small shareholdings may be taken up in the first few days and weeks by employees and ordinary members of the public, those shareholdings soon find their way into the hands of major investors. It is, of course, the major investors who are taking advantage of the privatisation measures, one after the other, that we are suffering under this Government. It is the major shareholders who have control by virtue of their major shareholdings. Therefore, to suggest that this Bill or any of the other Bills is a means of bringing those interests into the ownership of the people is misleading in the extreme.
At the moment, the control of the telecommunications services is in the hands of society at large, through state ownership. I recognise at once that the methods of that form of control are imperfect, and that we need to examine them and improve upon them. I myself have long been a critic of the "public corporation" method of control of nationalised industries, particularly because of its inadequate representation—as we have seen so far—of the workers in the industries and of consumers. But imperfect though the public corporation may be from the point of view of public control, it is vastly superior 448 to the concentration of power that is very likely to emerge through the implemention of this Bill in the telecommunications industry.
With my co-operative background, I naturally take what might be called a flexible or even liberal—with a small "1"—attitude towards industrial ownership; by which I mean that there are many varied forms by which society at large (that is to say, the general public) can enter into ownership and control other than by the Morrisonian public corporation model. I have stated this case before in your Lordships' House and do not intend to repeat it this evening, but whenever I do state that case, I make it quite clear—and I do so again now—that there is a large sector of industry for which state ownership is the supremely appropriate method. I now make it perfectly clear that, in my view, telecommunications constitutes par excellence an industry for which public ownership is a prime requirement. This does not mean, however, that the particular boundaries of the operations of British Telecom as at the moment are sacrosanct. It may well be that subsidiary sectors of the services could appropriately be socially owned in some other way, but I stress "socially owned" and not privately owned.
There was an example of what I have in mind when Parliament was dealing with transport. When hiving-off within transport was the order of the day, the National Freight Corporation was hived off. But, in this case, it was not hived off in the way that Cable and Wireless, Amersham International, or North Sea oil were hived off; not, in other words, to blatant private enterprise. The National Freight Corporation was hived off to a co-operative of the management and employees of the business. I do not claim to have any inner knowledge of the constitution of the new organisation or of what is going on there other than that which I, together with other noble Lords, may read in the press. But I did notice that when the new body, which is management and worker controlled, reported to its first annual general meeting just before Easter it was a story of success that they were able to put before their worker shareholders. I believe that that is a moral, and although it does not necessarily conform with all the ideas that I personally have, as a co-operator, about the control of industry, it is a form of social ownership which should be considered in all these cases of hiving off.
So it is with that kind of thought in mind that I approach this Telecommunications Bill. I believe it to be completely wrong in principle. State ownership should be preserved, and—as has been made clear—it goes without saying that the Labour Party will include this item within its election manifesto, and when it forms the next Government it will repeal this Act, if it does become an Act. But if in the unfortunate event of a less progressive Government of any colour being elected, and if it proceeded to implement this Bill or something like it, I hope it will not be too late at that stage for second thoughts to prevail and for certain sectors of the telecommunications industry to be hived off—if hiving off is proved to be necessary—to the management and to the workers on the pattern of the National Freight Corporation, and one would hope that it would have the same kind of success as seems to be the lot of that organisation.
449 If changes in structure are needed, and indeed if changes of ownership are unavoidable—I am not saying they are; I do not accept it; but for purposes of argument if changes of structure and ownership are unavoidable—then I would say bring the unions into greater areas of responsibility in running the industry, and let the workers see that they have a new constructive and indeed proud role to play. I believe that the path that the Government are inviting the country to go along in this respect is a doom-laden path of confrontation with the unions, and we ought to seek a solution to problems connected with the expansion of this industry in collaboration and co-operation with the unions rather than, as is threatened, in confrontation with them.
Let me remind your Lordships that when we speak of unions in this industry we are not speaking of any irresponsible bodies, which is the mythical image of unions in many Conservative minds. The unions with which we are dealing in this matter have been the most moderate, the most constructive and the most reasonable sector of the TUC spectrum. I would have no hesitation in putting my trust in those workers in this industry in working out a new régime of ownership. Then indeed I believe this industry—which all speakers recognise as having a bright future technologically—would have a bright future in terms of industrial relations, and that should be our objective.
I have no doubt that many noble Lords have received from these unions representations about how deeply they feel about this Bill, and I can assure your Lordships that those feelings are indeed deep. But the unions are not alone, as has been explained by previous speakers. We have all had correspondence from many other organisations as well. I should like, before I conclude, to refer to two that came in my post and I am sure to others of your Lordships, only this morning: those from Telecom itself and from the Post Officers Users' National Council. The British Telecom document, as we might expect, is responsible and mild in its criticisms of the Bill. Perhaps it is mild because Telecom knows that it may have to live with the animal later on. But it is clear if one reads between the lines of the document we received that the practical telecommunications people who run the industry are deeply worried still, despite some changes in the Bill which were achieved in another place. In particular they advise caution in opening up the industry to further competition, especially in relation to international services, and they obviously also have their doubts about ministerial assurances which were given in another place about the fate of residential customers.
If I can quote from the British Telecom document, they say loyally:BT is prepared to work with Government to see whether a practicable scheme of this kind"—that is assurances to residential customers—can be evolved,"—There is a note of hesitation I think in that expression—taking account of the need, within a competitive environment, to relate prices more closely to costs. But again the temptation to seek to impose a highly restrictive formula must be resisted".450 Similar anxieties to those are expressed even more strongly in the other document to which I have referred, that which came from the Post Office Users' National Council. I am sure that their anxieties on this matter are very well-founded. I am equally sure that their more general criticisms of the Bill from the consumer's point of view are fully justified. In particular I believe, as I think my noble friend Lord Ponsonby made clear in his speech, there is a need to provide an independent voice for the consumer, whether by maintaining POUNC in its present form or by some other means. It seems to me that in this connection—namely, the provision of safeguards for the consumer—your Lordships' House has a special responsibility because many matters germane to the consumer's interest were the victims of the guillotine in another place during the discussions. There was some exchange between my noble friend Lord Ponsonby and the noble Lord, Lord Orr-Ewing, as to the exact effect of that guillotine, how many clauses were not debated as a result of it. But I looked at the Report stage in another place, which of course is the opportunity, as distinct from your Lordships' House, for all Members of another place to speak on these matters if they have not been on the Standing Committee. I found at the Report stage in another place items like this: Clause 47 (Investigation of complaints), Clause 51 (Powers to require information), Clause 48 (Powers to establish advisory bodies), new Clause 8 (Recognition of bodies representing consumers). Those clauses, obviously related to the interests of consumers in respect of this Bill, were all dealt with at Report stage with no debate at all. Therefore, my Lords, I believe not only that this Bill is a bad Bill, as has been made patently clear by my noble friends Lord Ponsonby and Lord McIntosh, but I believe the procedures in another place were inadequate and bad. There may have been faults on both sides because, after all, some of my colleagues in the other place made full use of their powers of oratory well into the night, and that might have invited the guillotine to descend. But the fact is that wherever the cause lies, the result was that many of those important issues were not debated. I believe for that reason this House, in respect of this Bill, has a particular responsibility.
§ 6.20 p.m.
§ Lord Mottistone
My Lords, I must start by apologising to my noble friend Lord Trefgarne for not being here for his opening remarks. I gather from what other noble Lords have said that he presented the Bill to us with his customary skill. I welcome the principles of the Bill which seeks to introduce the commercial discipline of competition into the telecommunications market. I put it in those terms because I think that that is more important than who owns what. I am very open-minded about these things and I think that what the noble Lord, Lord Oram, had to say about the National Freight Corporation is a very good example of one way of doing it. I did not like most of the other things that the noble Lord said although, of course, I recognise that as a co-operator he does not extend his co-operation to everyone.
I noticed that most noble Lords opposite pursued their own dogma. They accused us of dogma, but they produced their dogma that somehow there is 451 something different between profit and service. I think that is a misnomer of great importance, particularly in this area. I had the good fortune, as indeed did my noble friend Lord De La Warr, to serve in the television rental business at one time. If ever anything showed how in telecommunications a really good service can be developed by private enterprise, without any interference from Government, and provide that service as thoroughly as is needed, television rental provides that example. Moreover, it makes a profit. The prices of television sets over the past 10 to 20 years have been falling in real terms and are substantially down in money terms due to the high inflation created by noble Lords opposite. Surely that is a great triumph for the telecommunications world and for electronics generally. It is an area in which one can both make a profit and provide an excellent service. Therefore, I disagree most strongly with noble Lords opposite.
I have two points of concern and in both cases it is somewhat different from the concern of practically everyone else who has spoken. My first point of concern is that the fears expressed by the Economist on page 30 of its 5th February edition may be realised. If my noble friend has not seen it perhaps he might like to obtain a copy between now and the next stage of the Bill. The Economist states that it fears that a liberated British Telecom will turn out to be an even more powerful monopoly than it is today. Notwithstanding the transfer to private ownership, British Telecom will have an excessively major share of the market for many years. My noble friend Lord Orr-Ewing said it was 97 per cent. until the 1990s. Whether that is accurate or not I do not know, but it will be something like that. So British Telecom will have a major share of the market whatever we do.
It has been drawn to my attention several times from different sources during the past few years how difficult it is when an industry has an excessively major share of the market. The best examples of this can be found in the nationalised industries. I have become deeply concerned that where such large industries are in competition with much smaller private enterprise companies the large industries are able to squeeze the smaller companies by dictating prices. This particularly occurs—and this will apply to British Telecom—when the large nationalised industry is a major customer of the smaller suppliers as well as being in competition with them as suppliers. This situation has enabled some of these large industries to squeeze some of their small competitors, so that the situation is extremely unfair. It is not clear to me from the Bill as received from another place whether sufficient safeguards exist to ensure that there will be fair competition under these circumstances. I would be most grateful if my noble friend could let me know whether he is confident that such safeguards for fair competition exist. If he cannot do so in this debate perhaps he will write to me. I hope he can do that.
My other point of difficulty is on a matter of detail which is similar to the fears expressed by many noble Lords in all parts of the House. This relates to Clause 3 and the question of rural communications and that sort of thing. It has been drawn to my attention by the General Council of British Shipping that there is no 452 mention in Clause 3 of the special importance for the director to ensure that maritime communications services are safeguarded. Ships at sea are entirely dependent on the radio path for safety, for commercial and for social communications. The provision of that communication is quite as important, if not more so because there is no alternative, as call boxes and rural services. I support my noble friends who have drawn attention to the importance of rural services. I hope that my noble friend on the Front Bench will be able to provide the reassurances for them that I see in the Bill because there is mention of rural services in Clause 3 as well as the provision in Clause 8, and others, for licensing which would presumably be the second line of defence in addition to the fact that these things are mentioned in Clause 3.
It might be thought by my noble friends that sufficient safeguards for maritime communications could be written into British Telecom's licence under Clause 8, but exactly the same argument could be advanced for the rural services and in another place they would not take that as an answer. I suggest to my noble friends that the particular position of commercial maritime radio services is of such importance that it deserves a mention in Clause 3 as well. Therefore, I will be tabling an appropraite amendment to the Bill in the event that my noble friend cannot satisfy me. In the meantime, I wish the Bill well and I hope that my noble friend will be able to shackle British Telecom, in whatever guise it appears, so that it does not ruin the commercial possibilities of its rivals in the market.
§ 6.29 p.m.
§ Lord Nelson of Stafford
My Lords, in rising to speak to this debate, I must first of all declare an interest, as I am connected with a firm which is a major supplier of equipment to British Telecom. My noble friend Lord Trefgarne, in opening this debate in his very clear way, touched on the problems of the control of nationalised industries. A number of other noble Lords have mentioned that during the course of this debate. We are all well aware of the problems of the maintenance and measurement of efficiency, the responsibility for the direction and the appointment of chairmen and their colleagues on the board, the raising of capital and the difference between capital and revenue. These matters have been debated in your Lordships' House and elsewhere on many occasions, and many questions have remained unanswered. Perhaps that is the reason why today there is much public support for the so-called privatisation measures which are currently being proposed.
This Bill is a further privatisation measure along the same lines. Where practical, hopefully, this will bring many advantages. It is designed to promote a more efficient industry, increase competitiveness, produce greater wealth creation, improve job security and afford greater customer choice and improved service and, one might add hopefully, reduce bureaucracy. In as much as the measure is able to achieve these objectives, it is much to be welcomed by everybody.
During the course of this debate, your Lordships have heard a number of the anxieties which have been expressed about the impact which this Bill might have. There is no doubt about it: there are areas of concern, 453 and I think that they should be looked at. I shall concentrate on only one—that of the telecommunications manufacturing industry. I was very glad that the noble Lord, Lord Ponsonby of Shulbrede, referred to this in his speech earlier this afternoon. The noble Lord said that the supply industry to the British telecommunications services employs some 70,000 people. I would add to that that there are probably an equal number who are suppliers to them in the form of components and sub-systems. We are talking, therefore, about a very important element of British industry and one which is very active in what is rightly very popular at the moment—the high technology field.
If this Bill is able to provide opportunities for the expansion of new ideas and the promotion of enterprise and initiative and to stimulate efficiency and competitiveness, I am sure that everybody will welcome that and benefit by it. I am sure that the industry will respond to that challenge and to those opportunities. But there are some worries within the industry to which I would draw your Lordships' attention. These are said to be taken care of in Clause 3 of the Bill, about which I think we shall hear a lot more before we are through with this. Clause 3 refers all the way through to the promotion of the effective operation of the "United Kingdom operators" in the industry. It was not until I came to the last three lines of the clause, which seems to be rather an afterthought, that I found that "United Kingdom operator" includes producers and manufacturers of equipment. That is the first time that I, as a manufacturer, have been referred to as an operator. Operators are usually my customers. I hope that it was not added as an afterthought. I hope that the concern is just as much with the manufacturers of the equipment as it is with the telecommunications services and their customers.
If I may, I shall express three areas of particular concern to your Lordships at this stage of the discussion on the Bill. First of all, there is concern that the measure could lead to the opening up of the British market unnecessarily—I repeat, unnecessarily—to foreign suppliers, particularly without comparable reciprocal opportunities. I wonder whether your Lordships believe that the French, Germans or Japanese will open their markets to our industries if we buy equipment from them. I doubt it very much.
Lord Bruce of Donington
My Lords, will the noble Lord clarify one point? Is he expressing a fear that the new company formed under the Companies Act to operate quite independently, free from all the shackles of the state, is to be prevented from buying equipment from wherever it wants, as cheaply as it can? Is he suggesting that?
§ Lord Nelson of Stafford
My Lords, if the noble Lord will allow me to proceed a little further, I shall clarify the position. I am concerned about what Clause 3 really means. There is another aspect about foreign suppliers and the reciprocal position, and that is where we have the situation of a smaller country which may be very glad to give opportunities to British suppliers provided that it is able to come in here and 454 take a major slice of a very big market such as our own. That is concern number one.
The second concern is the question of research and development. Your Lordships have discussed the subject on a number of occasions and I think you are well aware of the importance of scale of research and the necessity for continuity of research and development if products are to remain competitive. Are we to be faced with a situation whereby products may be offered in this country by foreign suppliers where the research and development has already been paid for in their home market and therefore the price structure may be such that the research and development effort in this country will be curtailed? We have seen some of this in the defence field. It is a real worry.
The third area of concern is one to which my noble friend Lord Glanusk referred. It is the question of the operator—the company giving the service—going into manufacture itself. It is always extremely difficult to compete with your own customer if he is also a manufacturer. There is a danger that this might arise. It might also arise in conjunction with licences from a foreign manufacturer from whom again no research and development costs would be involved. It will present a danger to the level of research and development which British manufacturers can afford.
While these manufacturers' interests cannot be taken care of at the expense of the consumer—I would not advocate that for a moment—they are extremely important. They are important at the time when our industry is faced, as my noble friend Lord De La Warr mentioned earlier, with strenuous competition in world markets. It is said that these issues will be taken care of by the licences which will be issued—here I come to the main point—but will they? We have not seen a licence or the draft of a licence yet. We shall not see one before the Bill has been debated and passed. Manufacturers of equipment are very much dependent upon the terms of these licences taking care of the sort of issues which are of concern to British industry at the present time. The granting of these licences, I understand, will rest with the Secretary of State and his successors, and they will determine the terms.
In supporting the principle of privatisation and the advantages which one can get through this measure, I should like to ask the Government whether they will clarify the position on these licences, and particularly the provisions of Clause 3 as they relate to the telecommunications equipment manufacturing industry and how they will be fulfilled. Will they ensure that the inquiries—I repeat, inquiries—for equipment supply will be issued merely to foreign manufacturers of countries who offer an economically reciprocal position to United Kingdom manufacturers? Will they ensure that the licensers take into account the health of the manufacturing industry of this country? This should be a factor to be taken into account in granting a licence and in considering the offer of services, and such an obligation particularly applies to the maintenance of an adequate United Kingdom research and development programme. Finally, will the Government ensure that licensed operators will not have manufacturing rights unless and until the Minister has reviewed the need and given his approval?
455 In mentioning these factors in the closing phases of the debate, I should like to say that I believe that they are important from the point of view of the general public acceptability of the implementation of this measure when the time comes. I also think that they will be of considerable help in avoiding the danger, which was referred to earlier by the noble Lord, Lord Beaumont of Whitley, that over time the measure will become a political football, which I am sure should be avoided.
§ 6.41 p.m.
Lord Bruce of Donington
The noble Lord, Lord Trefgarne, introduced the Bill with his usual ebullience and complete confidence. So far as the Bill was concerned, the uncertainties of life did not exist. The Bill was, he said, a vital part of the Government's legislative programme. The change to private ownership was widely supported by the public, and the noble Lord was quite sure of the enthusiastic support of the electorate. One is accustomed to those kinds of expressions of view from the noble Lord, who always adds a certain combative elegance to the briefs that are so diligently prepared for him by his department.
He might have been enthusiastic and confident, but that can hardly be said of the other noble Lords who express adherence to his party who have so far spoken on the Bill—with the notable exception of the noble Earl, Lord De La Warr, who invariably supports the political dictum that emanates so succinctly from his own Front Bench. If there is enthusiastic support, it certainly did not come from the noble Lords opposite who have contributed so valuably to the debate—
Lord Bruce of Donington
Yes, my Lords, there is support, but there is anxiety. In fact the noble Baroness herself articulated many of the anxieties. She wondered whether the new proposals made adequate provision for blind people, disabled people, and those living in rural districts. Most noble Lords had anxieties of one kind or another. Practically all of them were very anxious that services in rural areas should not be adversely affected as a consequence of privatisation. One wonders why they have such anxiety, since they have a quite implicit trust in their own Government, who have given very specific guarantees about the preservation of services in rural areas. But notwithstanding that, and notwithstanding their loyalty to their party, noble Lords still have doubts. These doubts have been articulated today—perhaps not in a strong way by the noble Baroness, Lady Lane-Fox, but certainly by the remainder of the speakers.
There was also an underlying anxiety about increased charges, and then there was an extraordinary anxiety about unfair competition. On the assumption that British Telecom is converted by privatisation into a limied company, subject to any provisions in the Bill that have any effect on it at all, it will be free to follow its own bent. That, I am told on reliable authority, is what privatisation is all about. Noble Lords opposite, and indeed the noble Lord himself, refer to freeing 456 British Telecom's operations from shackles. Those shackles, or rather the removal of them, bothered noble Lords opposite. There was an instinctive fear that this new, big corporation, responsible to nobody but itself—certainly not responsible to the public—might suddenly intrude into competitive fields previously occupied by the private producers of telephone and electronic equipment. That indeed was an anxiety that was expressed by several noble Lords.
There was also the misgiving that this new, private organisation that was to be established in place of British Telecom, that was to acquire all its assets and liabilities, and was to have its own corporate independent responsibility, might exercise the new freedom that is given to it implicitly in the Bill to buy unfairly from foreign component and instrument manufacturers. Therefore it seems that already there are serious misgivings about the way in which this new-found and highly applauded independence from any Government will be exercised when it comes to the actuality. So all is really not well.
The fact is that the existing British Telecom set-up, which like any other corporation has its occasional wart or so—and there are very few organisations which do not—has over the years pursued policies that have been recognised and widely accepted as being in the public interest. There has been no need for British Telecom to have written out for it the same detailed responsibilities and safeguards as have been inserted in Clause 3 of the Bill. British Telecom already performs such responsibilities, and it does so because it is a public corporation, conscious of the fact that in the ultimate it is responsible to the Government and to Parliament. It does not need all the safeguards that are written into the Bill; and, by and large, it has fulfilled its responsibilities to the United Kingdom very successfully indeed.
Occasionally when I dial directory enquiries I am infuriated by the delay in answering my call. I am not alone in this. In my personal experience, both residentially and professionally, there have been times when the system has given me cause for irritation. But I also have experience of the use of telephone systems in the United States, France, Germany, Belgium, Luxembourg, Denmark, Sweden, and elsewhere; and they, too, occasionally give me cause for irritation. No telephone system in the world is free of fault. But in general I think it can be said that British Telecom has served the nation well, and that there really is no need for a Bill of this kind, at this time, going so far as it does.
I can quite understand, and sympathise with, those who say that British Telecom and the services that it provides must take account of the enormous changes that have taken place in the electronics field over the past 10 or 20 years extending to new means of displaying and transmitting information, data storage, and the like. I quite agree that the British system has to be updated to take full advantage of these new facilities, in order, as many noble Lords have said, that the telecommunications industry, the electronics industry and all associated industries in this country under private ownership—and I make no complaint about that—can contribute to the prosperity of the country and, indeed, may help to pull it out of the absymal depression into which it has been precipitated by 457 Governmental action over the past four years. That much I agree.
If it could be argued—and I am convinced that it could be argued—that changes are required in the Telegraph Act, in the various parts of the Wireless Telegraphy Act and in the Telecommunications Act, to enable outside interests, outside data purveyors, display purveyors or whatever we call them, to have access to the ordinary telecom network subject to all the technical and other safeguards, I would have very little argument against that at all. Within a free society, particularly those practising a mixed economy—which we used to do at one time—it is quite right for consumer tastes and consumer preferences to be determined through the medium of private enterprise. I have no objection to that at all. Indeed, I entirely agree with it. However, this Bill goes much further.
The Government are quite conscious of the need to make progress in the fields which I have described. They are quite conscious of the need to give new industries new scope in order that on the periphery of the remaining services and making use of those services, there can be further expansion. But they have seized this opportunity to privatise.
A lot has been said about privatisation and public ownership. It is necessary that we should check through the stages of what the noble Lord and his Government propose. First, let us consider within the context of British Telecom what is the value per se of a change of ownership. Let us limit it to ownership at the moment. If the shares are owned by an individual it has very little effect at all on anything; it is a swap in ownership. But, as my noble friends on this side of the House have pointed out, the inevitable result of any insure of shares is that most of them land up in the institutions; in the pension funds maybe, in some cases, in the investment banks, in the insurance companies, and so on. It is they who become the big shareholders.
There is, of course, an initial flurry by virtue of which a queer breed of animals called "stags" operating within the Stock Exchange subscribe for a limited number of shares and then clear out before the settlement day or soon thereafter having made a capital profit when the institutions take their shares from them. As my noble friend Lord Oram has pointed out, the illusion that the issue of such shares amounts to a broad distribution and diversification of ownership throughout the population as a whole, is a lot of nonsense; 75 per cent. of the people in any event cannot possibly afford to invest in shares. In the event the ownership of the shares resides in the hands of a few individuals, perhaps in very small numbers or among trusts and individuals belonging to those 5 per cent. who own a fair section of the public wealth. Alternatively, they land up in the institutions that I have mentioned.
So far what effect has that had on British Telecom? The ownership has changed; That is all. What effect so far has that change of ownership had? It means that money has passed. What effect has it had upon the management? What effect has it had anywhere? It certainly—as in the circumstances which I shall presently describe—will have been of considerable financial benefit to the various institutions, the financial institutions of the City and, more particularly, 458 to their advisers who normally do very well in terms of millions of pounds out of every issue that takes place. What effect has it had upon British Telecom?
Those of us who have had experience in commerce—and I am looking now at the noble Lord, Lord Mottistone—know that the power of the shareholders in relation to the conduct of an undertaking of an ordinary limited company (and I am talking on a large scale as distinct from a private company) is very limited. Most shareholders rarely go along to annual general meetings; they express no opinion whatever. In fact if you send them proxies in order that they may vote for certain resolutions most of them flip them into the wastepaper basket or ignore them unless there is one unholy row in the company, which is very rare.
What influence do the institutions exercise upon the company? If they are large enough or if their holding is large enough, they may put directors on the board. But what is important—and it is important that the country should realise this—is that the mere turning of British Telecom into a company achieves nothing at all except the transfer of ownership. However, there is one thing it does do: it means that the new company is accountable only to its shareholders, whereas the existing British Telecom is accountable to the nation as a whole through Parliament. That is the difference.
What is the value of privatisation in so far as it ensures that changes in policy or changes of control take place? What follows from it? Is it suggested that when the new company has been formed and its institutional shareholders in the main have appointed a new board of directors, the new board of directors will immediately sweep away the existing system of management, the existing directors? They would be very unwise to do so because most of the institutional representatives on the boards of directors, as non-executive directors, have very little knowledge about what goes on in the telecommunications industry at all. In point of fact, the people who will be left in control will be those sections of management in this country that are already in control of it—the existing management.
Is it suggested that the resources of private industry are such that they can improve materially the management and technical performance of British Telecom?—My Lords, do not tell me that! When it came to finding somebody to take over a section of the steel industry and, later on, somebody to take control over the coal industry, they could not find anyone in the United Kingdom. Is it suggested that there is so much surplus talent that the existing managerial structure of British Telecom could be improved by replacement? I do not think so. Is it suggested that they should pursue different lines of policy? Of course, the lines of policy will be dictated ultimately by the requirements of the shareholders themselves. The requirements of the shareholders themselves will be determined by the state of the Stock Market itself, and by the market in shares. At the present time, as over the last six years, if your Lordships cared to inspect the accounts of British Telecom it would be found that the operating profit represented an outturn of 6 per cent. on the total capital employed in the business. As will be seen from page 43 of the accounts, this has been so on average.
459 Moreover, not only has the return been maintained at a steady 6 per cent. or above—actually, it works out at 6.8 per cent. over the six years—but British Telecom has been completely self-financing during those six years in regard to its capital requirements. Its capital requirements over six years were £6,901.9 million and, in fact, it provided £7,040 million, which represents 102.1 per cent. of its own capital requirements. During that time it also repaid a net £394 milllion to the Exchequer in reduction of its own borrowing. It did that while maintaining its price levels consistently below the level of the retail price index. This has been done by British Telecom in spite of all the criticisms made of it.
I should now like to return to the required return on capital that has been achieved and which, in fact, has been British Telecom's target over the past six years. I have shown that 6.8 per cent. over the period is quite adequate for British Telecom's purposes, not only in providing its capital requirements but also in keeping its prices below those in the retail price index generally. Indeed, one should not expect anything more that that. That is its task. It is not there to make a vast profit; it is there for the benefit of the consumers while balancing its accounts year by year. This it has done. But note the required return was 6 per cent. on capital employed. What private investor today will make an investment on the basis of a 6 per cent. return on capital? If the noble Lord can answer that question—what individual is prepared to make an investment on a return of 6 per cent. on capital employed?—I shall be greatly obliged.
As the noble Lord knows quite well, the prevailing rate is 25 per cent. required return on capital employed, or perhaps 20 per cent. If the investor is to make an investment in British Telecom on the expectation of a significantly higher return than 6 per cent., that means one of two things: the offer price for British Telecom itself will have to be a mere fraction of the £13,000 million net assets which it has at the moment, or else it will mean that the revenue return will have to come from increased charges.
These are the compelling necessities which the shareholders of the new company that is formed will force upon that company. It is not a question of will. One knows perfectly well that the sentiments of the noble Lords opposite in regard to the preservation of rural telephones and all the rest of the emergency services are very good. But if investors are to get a return on their money, something has to give. If, for example, the required return was 25 per cent. on capital employed in the business, charges would have to go up by 50 per cent. If the required rate was 20 per cent., the charges would have to go up by 30 per cent., because an extra £2,067 million worth of revenue would be required. If the required rate was 15 per cent., charges would have to go up by 18 per cent., and if the actual return required—which is now 6 per cent.—was converted to 10 per cent., charges would have to go up by 11.18 per cent., because an extra £638 million would be required. I am speaking on the basis of the 1982 accounts.
Noble Lords of any experience in the City must know that what I say is perfect sense. They know quite well that there is no investment demand on the basis of a 6 per cent. return on capital employed. 460 Consequently, they know that the very parts of this Bill to which they pay so much homage will in fact produce a situation where, if a commercial return on capital is to be ensured, the pressures on the new company are bound to result in a cut down in the amenities, to which the noble Lord and the noble Baroness referred in terms of rural amenities, and in terms of all the other items that have been written into Clause 3. There will have to be some give there. There cannot be much more to be gained out of productivity because productivity has increased enormously over the last six years. There may be a bit more, but nothing to bridge the gap.
Therefore, it amounts to this. The picture put forward by the noble Lord, Lord Trefgarne—mainly, I suspect, for the purposes of the electorate—in political terms amounts to a fraudulent prospectus. I make no imputation on the honour of the noble Lord; I am talking in political terms. However inadvertent it may be, it is a fraudulent prospectus. This Bill is entirely unnecessary; it is completely unsound. It cannot be translated into effective action for the benefit of the people of the United Kingdom as a whole or the consumers of the telephone service. Its main purpose—and I suspect its quite overt political purpose—is to provide some return, some reward, to the financial institutions and other institutions in the City that give such valuable political support and which must be paid off somehow. This is one way in which to do it. I stand by that. In due course the matter can be taken up in Committee and if what I have said today can be proved to be wrong, I shall be very pleased. I shall be very pleased indeed to answer, and to answer in detail. This Bill is merely an expression of the political prejudice of the party opposite which it hopes to be able to inflict on the population at large by virtue, of course, of the usual uncritical support it will obtain from its own media and from the money it will be able to spend in propounding its cause, come any election.
§ 7.9 p.m.
§ Lord Glenarthur
My Lords, we have started tonight what I foresee will be quite a lengthy debate on this Bill. It certainly broke at least one record for length in one respect in another place, but it has already started by breaking a record here in the notably short intervention of the right reverend Prelate the Bishop of Lincoln about rural areas, a point upon which I hope to be able to reassure him later. I look forward to the stages to follow and I am sure that with a Bill of such importance, we shall have—and the noble Lord, Lord Bruce, has certainly given indications of this—some interesting discussions ahead of us.
In their speeches today several of your Lordships have given us a foretaste of these matters and have raised some important questions. Of course we shall consider these in detail later, but I should like now to answer as many points that have been raised as possible in the hope that I shall be able to set some minds at rest by doing so. Many points were raised about political dogma both from one side and the other, and I do not think it would be helpful for me to get drawn into those now at so late a stage in the day.
I shall start first with the noble Lord, Lord Ponsonby, who raised the question of privatisation leading to loss of jobs. What the Government believe 461 is that their proposals will benefit employment. Once BT has commercial and managerial freedom it can expand its services to meet the increasing demand. Telecoms is a major growth industry even at a time of world recession, and our proposals are designed to enable BT and the United Kingdom telecoms industry to take advantage of these opportunities for expansion. The noble Lord might like to know that in the United States over the past few years employment in telecom companies has grown at the rate of 6 per cent. or so a year, and we see no reason to suppose that there will not be a similar effect here.
The noble Lord also asked about the security of index-linked pensions for British Telecom pensioners; a point which I know has been widely reported. The trustees of the British Telecom pension fund have the duty of providing pensions to BT pensioners and of holding in trust the contributions paid by British Telecom and its employees. The benefits paid to pensioners are governed by the pension fund trust deed. Under rules established by this deed, British Telecom pensioners are entitled to periodic increases in their pensions in line with the increases enjoyed by most civil servants. The trust deed prohibits changes which would reduce the benefits of any person already entitled to the receipt of a pension. Therefore, it would not be open to the successor company, even if it wanted to do so, to reduce this entitlement.
§ Lord Ponsonby of Shulbrede
My Lords, the noble Lord said that it would not be open to the successor company to reduce the pension. Is he referring to pensions earned before the date of change or to pensions earned after the date when British Telecom becomes a plc?
§ Lord Glenarthur
My Lords, so far as I am aware it is both, but if I am wrong I shall let the noble Lord know. On the general question of privatisation, the Government cannot agree with the view of Lord Bruce of Donington that the record of this Government is anything but good on previous privatisations, and it will be good on this one too. The experience of Amersham and Britoil highlights the genuine problems that exist in pricing new issues. The noble Lord knows this quite well. In the case of Britoil I think that five merchant banks as well as the Government worked out the figure that the shares were to be floated at. It all shows that it is not so easy as people will claim.
The Government claim no special expertise in such matters, which is why we believe that it is better for business and industry to be in the private rather than in the state sector, and the sale of BT presents its own problems and opportunities. Neither Amersham nor Britoil had 19 million separate subscribers, nor nearly a quarter of a million employees with a direct interest in its future.
I should like now to turn to the question of the rural areas, which is one which has been spoken about by many noble Lords this afternoon. Much concern has been expressed about the effects of this Bill on telephone services, and I should like to say first that I fully understand the reasons behind that concern. Indeed, coming as I do from rural Aberdeenshire, perhaps I should declare a personal interest in this subject. But I, my Lords, am quite confident that the concerns which have been expressed are groundless. The Bill, and the licence which will govern BT's future operations, will ensure that the interests of rural 462 consumers are fully protected. Indeed, the safeguards contained in the Bill, and to be included in the licence, are stronger than in the present legislation.
My noble friend Lord Trefgarne has outlined how the Bill will ensure that services are supplied. But I believe it would be helpful if I gave a more detailed explanation. First, I should like to take the provision of service. I can say categorically that services will continue to be provided, and that anyone who has access to a telephone now will continue to do so in the future. BT now, as a nationalised industry, is obliged to provide a universal telephone service, and in future BT's licence will also oblige it to provide a universal service. But this obligation will not simply be in the licence. It will also be in the legislation in Clause 3, which requires the Secretary of State to issue licences and include conditions in them to ensure that the universal service is secured.
Some of your Lordships have expressed concern about what is meant by a reasonable demand, and practicability of provision. This was certainly raised by the noble Lady, Lady Saltoun. These two aspects, reasonable demand and practicability of provision, qualify both the Secretary of State's duties in Clause 3 and BT's obligations in its licence. The noble Lords, Lord Beaumont and Lord Donaldson, raised aspects of this which I hope I shall find in a second, but my papers appear to have got out of order. I hope your Lordships will bear with me if there is a short pause.
The noble Lord, Lord Beaumont, particularly referred to the National Farmers' Union, where the Government have said that the obligation to meet reasonable demands for services excludes circumstances where customers will not meet the costs attributable to the supply to them of services. The Government mean by that that British Telecom will not be obliged to provide services if customers do not pay for them. If someone wants to be connected to the telephone system, he will have to pay a charge for installing the necessary telephone line.
Your Lordships have referred to the standard charge of £70 for domestic connections, and £80 for business connections for a connection taking less than 100 hours. We expect this arrangement to continue. In other words, the charge for connection will in general be averaged to spread the variable costs of connection. Once connected, customers will of course have to pay the cost of the line rental and the cost of telephone calls.
The qualifications to which I referred repeat word for word the qualifications on British Telecom's present statutory duty. Far from being a let-out, the consumers' position will be strengthened. At present BT decides what is impracticable or unreasonable. In future it will be for the director—an independent third party—to do so. The noble Lord, Lord Orr-Ewing, asked about the Director General of Telecommunications. It might be appropriate if I say here that no decisions have been taken, but I can assure the noble Lord that whoever is appointed will be a person of considerable stature. The Government attach great importance to the job of director. It is a role of responsibility and will require both knowledge and authority.
§ Lord Glenarthur
I can assure the noble Lord that the person appointed will have these qualities. The 463 appointment will be made in accordance with the normal procedures for all public appointments. We are certainly looking into the possibility of advertising the post in order to attract the best possible field of candidates.
§ Lord Glenarthur
My Lords, my noble friend Lady Lane-Fox raised a number of questions about the disabled. It might be convenient if I were now to deal with those matters specifically. She asked about cordless telephones, and the idea that perhaps they could be used in a hospital ward to prevent the need for moving around a mobile piece of apparatus such as exists at present. The Department of Industry announced last week that two models of cordless telephone have been approved for connection to the British Telecom network. Any subscriber can now purchase a cordless telephone either from BT or from the manufacturer. Four other models of cordless telephone are at present undergoing approval. I hope that disabled subscribers will take early benefit from this, and from the fruit of the Government's liberalisation policy in this field.
In general, the noble Baroness asked what the Government will do to ensure that the needs of the disabled are met. I first assure her that the needs of the disabled, who include the partially deaf and blind, have been at the forefront of the Government's mind. The Bill not only includes powers to enable that to be done but in Clause 3 places a particular duty on the Secretary of State and the director to exercise their functions to promote the interests of disabled persons. This is the first time that their needs have been specifically referred to in telecommunications legislation and it is, I think the noble Baroness will agree, an important safeguard.
As far as PABXs for the blind are concerned, the Government fully appreciate the importance of specially adapted PABXs which provide employment for blind telephonists, are determined that this should continue, and are looking at ways in which this can be done. I do not think I can go to any further length on this now.
I now revert to the question of prices in rural areas. Fears about higher prices in rural areas also are unfounded. There is no evidence that it costs more to provide services in rural areas than in cities. Indeed, there is evidence to the contrary—the noble Lord, Lord Bruce, laughs, but I live in a part of the world where I see more overhead wires than I detect underground cables. There is evidence to the contrary, since overhead wires which are generally used in the country are cheaper than those underground as used in towns. In addition, new technology is serving to reduce costs all the time. However, we accept that some doubt remains. That is why we shall ensure that rural consumers are safeguarded.
The noble Lord, Lord Orr-Ewing, asked a particular point about automatic radio links. If I may mention that here, the scope or application of radio links in place of the traditional post and wire connections will increase with the advent of new technology, especially cellular radio and satellite links. I personally know of only one such installation at the moment and that is at Kinloch Hall. I am bound to say that when I wanted 464 to use it, it did not work but I am sure that it is something which will improve as time goes on.
British Telecom's licence will contain a condition limiting increases in prices in certain monopoly areas, such as local calls and residential rentals, to less than inflation the so-called RPI-minus formula, advocated by Professor Littlechild and the subject of a statement which I repeated to your Lordships on 7th February. This means that the cost of telephone services will decline in real terms to all consumers, including those in rural areas. Secondly, despite the present lack of evidence, if it were shown that services to some rural and remote areas ran at a loss these too would be covered by the access fee mentioned by my noble friend and which I shall describe shortly. Either way, I assure your Lordships that the Government are determined that customers in rural and remote areas will not suffer discrimination on the grounds of price or access to telecommunications.
We intend that everyone should benefit from the proposals. Fears have also been expressed that installation charges will shoot up. Again, this is a claim without foundation. At present, as we have heard, BT makes a standard charge for all installations that take no more than 100 hours. Only when installation is so difficult that it takes more than 2½ weeks of a man's time is any extra charge made. This occurs less than once in every 1.000 connections, or less than 0.1 per cent. This is only reasonable and I expect BT to continue such arrangements. But, in any event, customers will be in a stronger position in future than they are now. At present, a customer has no formal means of complaint other than through POUNC. In future when BT's licence will prohibit undue discrimination against any class of customer, including those living in rural areas, any potential customer who thinks the installation charge quoted amounts to undue discrimination will be able to complain to the director. Unlike POUNC, the director will have powers to oblige BT to reduce charges to a level which is reasonable in the circumstancs.
The noble Lord, Lord Ponsonby of Shulbrede, raised the whole question of POUNC and expressed the view that the Bill represented a step back for consumers. I do not see how greater choice of goods and services and a guarantee of lower prices can be other than an improvement. I should also draw attention to the provisions in the Bill which require BT to supply services under contract in future. The noble Lord's main complaint was directed towards the abolition of POUNC. I believe that the establishment of Oftel will bring greater protection to the consumer, not the reverse.
Clause 49 places the Director General of Telecommunications under a duty to consider complaints, including those made to him by the posts and telecom advisory committees. He is also under a duty to exercise such of his functions as he sees fit with respect to complaints. I should also remind your Lordships that the director is obliged by Clause 3 to promote the interests of consumers. The national advisory committees, which the director is again under a duty to establish by Clause 50, will no doubt take a leading role in putting the view of the consumer to the director. I do not know why there should be any doubt that these measures will be effective, and I repeat that they provide a real step forward for the consumer.
465 The question of kiosks also has been raised. It has drawn a great deal of attention of late and I want to reassure those of your Lordships who have referred to this matter. Let me repeat that claims that a significant proportion of the present number of kiosks will be removed after privatisation are absolute nonsense and amount to nothing short of irresponsible scaremongering. The kiosk service will stay. It will stay because Clause 3 of the Bill imposes a duty on the Secretary of State and the director to ensure that kiosks are provided. This duty will be met by including in BT's licence an obligation to provide kiosks throughout the United Kingdom to satisfy all reasonable demands for them. This obligation is enforceable in the courts and I hope that your Lordships are reassured by this.
But I should also like to say a few words about withdrawal of loss-making kiosks. As your Lordships may know, at present POUNC and BT agree guidelines governing when the least profitable kiosks can be removed. Since these were instituted in May 1979 only 125 out of 77,000 kiosks have been removed on the grounds of insufficient revenue. It is important to realise that more kiosks have been removed for other reasons such as road widening and land development. The director will continue to agree similar guidelines with BT, and BT's licence will prohibit removal of kiosks unless in accordance with the agreed guidelines.
On the positive side—this is the point which is frequently overlooked—about 25,000 new payphones in cafes, restaurants, boarding houses and so on, have been installed over the past few years and there are now about 300,000 payphones in total throughout the United Kingdom. That is in addition to the 77,000 kiosks. I expect this number to increase. Payphones are not a full substitute for kiosks but they give the public better access to telecommunications services. They provide a commercial service which fills a social need.
The noble Lord, Lord Mottistone, raised the question of maritime services. The position is that maritime services are being looked at. I cannot give more information than that at the moment, but I hope to write to him with more details when we have them. The matter is under review. Access fees, finance for lossmaking services such as kiosks, 999 services and services in rural areas were raised by several of your Lordships. The noble Lady, Lady Saltoun, raised this, and concern has been expressed that if BT is obliged to provide these services they will surely have to stop them because they are loss-making. This is another quite groundless claim. As well as obliging British Telecom to provide the services, we are also proposing new arrangements for their finance. These will take the form of the access fees which I mentioned earlier, and perhaps it might be helpful if I explained what an access fee is. It is a fee which will be payable by all providers of services, including BT's trunk networks, Mercury and the radio telephone companies, when they connect into BT's local networks.
It is these local networks that provide the loss-making services that BT will be obliged to provide. On the basis of present information, we know there are two loss-making services, the call-box network and the 999 service. It is possible that services in remote areas also are run at a loss, but at present there is no firm evidence to support this view. If this service were to be 466 shown to be unprofitable in particular parts of the country, it, too, could be covered by the access fee arrangements. The purpose of charging access fees is to provide the local areas of BT with a source of finance to make a fair contribution towards loss-making but socially desirable services which BT is obliged to provide.
My noble friend, Lord Nelson, and the noble Lord, Lord Beaumont, raised the question of the licence and it might be as well if I were to cover that point now. The Government have already published their preliminary views on what the BT licence should contain. Comments were invited on these proposals, and the Government look forward to hearing the views of interested parties, including the unions, consumer organisations, industry and others. Once these are received, a draft licence will be prepared in legal terms and this will be placed in the Library of the House before the Summer Recess.
I have concentrated at some length on the safeguards we are including to protect consumers and, particularly, those in rural areas. The proposals will also bring positive benefits to consumers and I should like to draw these to your Lordships' attention. First and foremost are the benefits that will come from increased competition which is the most effective way to greater efficiency, lower prices, better quality and more variety of service. We are already seeing this happen as the result of measures that we have taken in the past. On apparatus, there is a greater variety available than every before. This not only benefits customers but has a two-way effect in that greater variety stimulates demand; which increases the market for manufacturers. The Bill will further increase consumer choice. Not only will new companies be able to enter the market but BT will be free to respond to its customers' demands. BT's customers will benefit also from BT's freedom to look to the markets rather than to its customers for finance for investment.
Concern has been expressed that the Bill will not benefit the United Kingdom telecom industry but will harm them by resulting in increased imports. I realise that this is a genuine concern; but it is misconceived. Let me make it clear, first of all, that all has not been well with BT as a nationalised industry. The facts speak for themselves. In the post-war years, Britain's share of world trade in telecommunications products has fallen steadily from some 25 per cent. to no more than 6 per cent. now. Users of telecommunications over that period have been all too well aware of one of the reasons for the decline—a static and unimaginative range of subscribers' apparatus, often over-priced, with little customer appeal. What were the causes of this decline? For an answer, I think we have to look at the monopoly; that is, the monopoly of the old Post Office, and now BT, over the supply of apparatus which meant a lack of real competition among the supplying companies. Deprived of the stimulus of competition, the United Kingdom companies fell behind their world competitors. It is as simple as that. But we are changing it, first, by the process of liberalisation (on which we are already embarked); and, secondly, on the privatisation of BT provided for by this Bill. I firmly believe that both these processes will revitalise BT's traditional suppliers and provide opportunities which never existed before.
I must emphasise that telecommunications is a 467 market that is growing, even at a time of recession, in line with all other aspects of, and as part and parcel of, what in reality is a new industrial revolution in micro-electronics and information technology. I think this was a point raised by the noble Earl, Lord De La Warr, and that answers the point he raised. The question of cable was also raised. Cable is something which is being looked at and it is something on which a White Paper is to be produced in due course. Cable fits into the Bill through Clause 4. No doubt there will be further discussion upon this when we get to later stages of the Bill. Oftel will monitor the licences issued for the running of the cable systems. The cable authority will award cable franchises and will have the responsibility for the choice of cable operator and programme provider, which was a point raised by the noble Lord, Lord Beaumont.
Research and development was raised also by the noble Lord, Lord Beaumont. He referred particularly to the effect of the Bill on Martlesham. I should like to pay tribute to the work done at BT's research centre at Martlesham. It is a place which is to be visited shortly by my noble friend Lord Trefgarne. It is a place of the highest quality and there is no question but that it will continue to flourish. Indeed, this Bill will be positively helpful. First, BT's freedom from the constraints of the public sector borrowing requirement will mean a greater ability to raise finance for investment in R & D. Secondly, an expanding BT will generate its own demand for research and the fruits of this will be more easily applied to the market.
I have already trespassed a lot on your Lordships' time. I should now like to talk about liberalisation. To date, over 100 products have been liberalised; that is to say, they have been approved for private supply. We estimate that 60 per cent. to 70 per cent. of the value of these products is added in Britain. There is an encouraging surge in home growth technology benefiting consumers. Liberalisation, with the opportunities it creates, is giving BT's established suppliers a chance to regenerate their product range and recapture the overseas markets that they have lost over so many years. But our programme of liberalisation has not been at random; has been phased and the timing of this phasing has been carefully managed to give our own manufacturers time to prepare for competition, and to give them a privileged access to the market place. I think that that answers, to some extent, a point raised by my noble friend Lord Nelson of Stafford.
Similarly, it is nonsense to say that privatisation is against the interests of United Kingdom manufacturers. BT, whether in public or private hands, will want to see this country having a strong, healthy and innovative manufacturing industry able to provide first-class products and to capture world markets. Liberalisation will help achieve the latter but I submit that privatisation will not change either BT's will or its motivation. What will change is the determination of the privately-controlled company, BT plc, to be competitive. During the last 20 years, with the telephone service as a public monopoly, our share of exports has declined. We want it to increase. I ask the United Kingdom companies to understand that industry's interest will be well served by a strong and independent BT, willing and able to stick up for our national interests.
468 The noble Lord, Lord Orr-Ewing, raised the question of responsibility for the allocation of radio frequencies, a point which is covered specifically in the Bill. Your Lordships will know that my right honourable friend the Home Secretary set up last summer an independent review of the radio spectrum under the chairmanship of Dr. Merriman. In its terms of reference, it was asked to consider among other things the adequacy of the existing machinery for consultation regarding the use of the frequency spectrum and the assignment of frequencies and to recommend any changes that might be made in the interests of public confidence in the system. Dr. Merriman and his team have been taking a great deal of evidence on this and related matters and are due to make their final report in June. My right honourable friend the Home Secretary takes the view that it would he wrong for the Government to take any action which might pre-empt any recommendations that may be made by the review team in this area. But there will, no doubt, be a further opportunity for Parliament to consider the whole matter when the review team has reported.
There are a number of other points which have not been answered but I have been talking now for half an hour and I think I have covered the main areas of concern. I also feel certain that we are bound to return to the areas in detail at later stages of the Bill. I should like to re-emphasise that the Bill contains both strong safeguards and positive benefits for consumers of all types—business consumers, both large and small, domestic consumers in towns and domestic consumers in remote rural areas, and special groups such as the partially deaf or the blind. It will also bring benefits to British Telecommunications, to British Telecommunications' employees, to other United Kingdom telecommunication companies and to those who work for them. All in all, I am convinced that this Bill is in the national interest, and I commend it to your Lordships.
Lord Bruce of Donington
My Lords, would the noble Lord just clarify one point for the information of prospective investors as well as for the information of the actual telephone users? As I understood the noble Lord, he gave an undertaking that any price increases for the consumer would be below the rate of inflation by what I believe he called "an X factor". Is he therefore saying—and would he be quite specific about this—that the Government are going to enforce a price control over the new privatised British Telecom? If so, will it be enforced by legislation or regulation, or is it at the moment merely an aspiration?
§ Lord Glenarthur
My Lords, the details of how the RPI minus X formula will apply are not yet fully complete. The noble Lord will remember that I repeated a Statement on 7th February, to which I referred. That is something which I could go into at great length but I honestly do not think it would be in the interests of your Lordships' House to go into it now. It is something which will be covered in due time. The suggestion made by Professor Littlechild, if I remember rightly, is that it would be maintained for five years; but whether or not that will be the case is something which the Government are considering at the moment.
Lord Bruce of Donington
My Lords, there will in fact be price controls.
469 On Question, Bill read a second time, and committed to a Committee of the Whole House.
§ House adjourned at eighteen minutes before eight o'clock.