Nationalised Industries and Price Rises (Hansard, 22 October 1984)

§ Baroness Burton of Coventry
My Lords, I beg leave to ask the Question standing in my name on the Order Paper.

§ Lord Glenarthur
My Lords, no general guidelines have been issued, but in some cases there is a statutory requirement for industries to consult consumer interests before changes in tariffs are implemented. Additionally, I understand that non-statutory arrangements for consultation exist in a number of industries.

§ Baroness Burton of Coventry
My Lords, I wonder whether the Minister can comment on something concerning British Telecom and the fact that increased telephone charges are to come into effect next month. My information is that prior consultation with users did not take place and that the very short notice before the charges come into effect has greatly been deplored. Secondly, can the noble Lord tell the House what were the profits of British Telecom as at 31st March this year?

§ Lord Glenarthur
My Lords, if the noble Baroness is hinting that BT may not have complied with the conditions of its licence in terms of the recently announced prices increases, I have to tell her that this is a matter for the Director General of Telecommunications. British Telecommunications' profits were £990 million in 1983–84.

§ Baroness Burton of Coventry
My Lords, is the Minister aware that the first part of his reply is really disgraceful in that the consumer associations were not consulted at all on this matter? May I ask him whether he is aware that the public statement issued by British Telecom stated that the telephone increases were to achieve—and I quote—"a sounder financial footing"? To most of us, a figure of £990 million profit is a pretty sound financial footing. How much more would the Minister suggest is needed before that is reached? Finally, before he answers me on this matter of the nationalised industries, I should like to ask him whether he is aware that British Gas had an operating profit at 31st March this year of £667.9 million, and that the electricity industry had an operating profit of £901 million. Are consumers to go on paying, however enormous these profits are?

§ Lord Glenarthur
My Lords, the fact that British Telecom made a profit of £990 million has to be seen in the context of the rate of return that that represents upon the net current cost assets employed. I think, too, that the noble Baroness will realise that when we are talking about a profit of £990 million for BT, BT's massive investments and the massive scale of its business requirements are such that that kind of profit is not as extravagant or as vast as the noble Baroness suggests it is. The fact is that BT accounted for some 2 per cent. of the income-based gross domestic product in 1983. That is a very substantial amount. I think that the figures which I have quoted simply illustrate the fact that the investment and the size of the operation are so enormous.

Lord Bruce of Donington
My Lords, is the noble Lord aware that his answers only fully justify the contentions which were put forward at the time of the Telecommunications Bill and various other privatisation Bills that the reason prices were being forced upwards was so that the Government could 10 subsequently privatise these assets at the expense of the taxpayer in order to yield a satisfactory return for their rentier friends?

§ Lord Glenarthur
My Lords, I remember having many exchanges with the noble Lord, Lord Bruce, over the passage of that Bill. As he will know, BT is a public limited company. It is wholly owned by the Government, operating under the terms and conditions of a licence granted by the Secretary of State for Trade and Industry. There are restrictions on the extent to which BT can increase the prices of certain of its telephone services, but those controls are monitored and enforced by the Director General of Telecommunications.

Lord Morris
My Lords, does my noble friend recall that when the nationalised industries made vast losses, the Government used to be upbraided from all sides of the House? Now that the nationalised industries are making profits, it appears that they are upbraided only by noble Lords opposite.

§ Lord Glenarthur
My Lords, my noble friend is quite right.

§ Baroness Burton of Coventry
My Lords, is the Minister aware that all these facts—and I call them facts—that he quotes really cut no ice at all with the ordinary consumer, who is absolutely convinced that these enormous profits should in some way mitigate the charges to consumers? Does the noble Lord recall—although he himself did not answer the Question—that we raised this matter as regards the electricity charges earlier this year, and is he aware that we shall be returning to the matter next week, when I hope he will have a better reply?

§ Lord Glenarthur
My Lords, in that case I had better wait until next week, but I shall look forward to what the noble Baroness has to say then.

§ Lord Harmar-Nicholls
My Lords, does not my noble friend agree that, as privatisation is a very important part of the Government's policy, in order to avoid the misconceptions which have been shown in the questions which he has been asked so far, ought not the profits to be shown in terms of profits per share? Until the return on a share justifies people investing, we shall not get the investment—and it is investment that we need in order to deal with the unemployment figures. Ought not that presentation to be looked at as a way of making quite clear to the public the true nature of the business dealings?

§ Lord Glenarthur
My Lords, I am sure that my noble friend is quite right. Off the top of my head I am not quite clear how precisely it could be done, but I should have thought that this is a matter which could be given consideration by the industries concerned, particularly when they produce rather easily understood glossy brochures illustrating exactly what their profits have been. I am sure that they will bear my noble friend's remarks in mind.

§ Lord Diamond
My Lords, if the noble Lord is not in agreement with my noble friend as to the adequacy of 11 this service, why does he not tell us what is the return on the assets, and then we could form our own judgment?

§ Lord Glenarthur
My Lords, I can tell the noble Lord that in regard to the electricity industry the rate of return was about 2 per cent. and I think that the figure for the gas industry was about 5 per cent., but I might need to check on that.