§ 11.14 a.m.
§ Lord Orr-EwingMy Lords, I beg leave to ask the Question standing in my name on the Order Paper.
§ The Question was as follows:
§ To ask Her Majesty's Government whether British Telecom's announced expenditure of £100 million to purchase System Y from Sweden and £25 million to purchase United States equipment for their derived services network (Freefone) is in accordance with the undertaking given to this House on 16th February 1984 (col. 1429).
§ The Parliamentary Under-Secretary of State, Department of Trade and Industry (Lord Lucas of Chilworth)My Lords, the Government have never given any undertaking in respect of British Telecom's purchasing decisions, which are a commercial matter for the company. The two contracts cited represent approximately 3½ per cent. of BT's total planned procurement over the two years concerned, well over 90 per cent. of which procurement will be placed in the United Kingdom.
§ Lord Orr-EwingMy Lords, is my noble friend aware that we were told in February last year that 5 per cent. might be purchased abroad? We were told in this House by my noble friend Lord Brabazon on 13th March this year that it might be 10 per cent. and I have in my hands a press notice issued by British Telecom which says that in 1987 it will be buying between 300,000 and 500,000 lines from overseas sources. That amounts to 20 per cent. What is bogey for this hole? Surely it is important that this vitally strategic industry in this country should be maintained in a healthy condition, not only to supply our own requirements but also to obtain exports for our nation?
§ Lord Lucas of ChilworthMy Lords, my noble friend asks me so many questions that the best I can do is pick out what I think is the most pertinent one.
§ Lord Lucas of ChilworthMy Lords, no doubt if the noble Lord opposite does not find the answer convenient he will ask me another question. My noble friend quotes a number of figures. The truth of the matter is that the orders for System Y which BT have placed represent, over two years, 10 per cent. of its main switching requirement. Of its total procurement of some £1,750 million in 1983–84, and something in excess of that for 1984–85, the switching gear accounts for about one-quarter of the total procurement. Therefore, taking all those figures together, not one of the figures to which my noble friend refers is incorrect within its own context.
Lord Bruce of DoningtonIs the noble Lord aware that the assurances given by his noble friend Lord Cockfield in the course of the debate on the Bill relating to British Telecom were sufficiently favourable to secure the wholehearted support of his noble friend Lord Orr-Ewing to the entire privatisation measure? Therefore, the assurances must have been very firm. Does the noble Lord not agree that the anxieties that have been expressed today, and which have been expressed over the past few weeks, are only an illustration of how effectively, when British Telecom was accountable to the public, it was possible for British Telecom to play a part in support of British industry similar to that played in Japan, Germany and France? In the circumstances, will the noble Lord see his right honourable friend the Prime Minister to ask whether she will apply the same degree of pressure to British Telecom to comply with the national interest as she did recently in the case of Courtaulds, where an unemployment situation arose in Wrexham?
§ Lord Lucas of ChilworthMy Lords, I am surprised that the noble Lord, Lord Bruce of Donington, referred to what he said were assurances given by my noble friend Lord Cockfield some months ago. As my noble friend Lord Brabazon of Tara explained when replying to a similar Question in March this year, my noble friend Lord Cockfield gave no such assurances. If noble Lords refer to Hansard they will see that what my noble friend did was to repeat an understanding which had been given by the Chairman of British Telecom, which my noble friend said seemed to him to be a reasonable assurance. The Chairman of British Telecom has not, in fact, breached that understanding. Whether my noble friend Lord Orr-Ewing was influenced by those debates into supporting the Bill I would doubt, because I think he would have been influenced by a number of other issues. As regards British Telecom, the Government made it abundantly clear during the passage of the Bill, and in 1979 and again in November of last year, that the Government's shareholding would not in any way lead them to influence British Telecom's commercial decisions.
§ Lord Orr-EwingMy Lords, is my noble friend aware that I was a reluctant supporter of that Bill because there was not enough competition in it? It was an agreed carve-up among two or three big companies. Although I support competition, after a cosy relationship lasting 60 years when three or four companies supplied all the equipment, I think that the 1481 British industry needs time to restructure itself before it faces the competition from overseas suppliers which themselves have a firm home base and healthy exports. Jobs will be affected. Although Thorn-Ericsson may eventually make some of its equipment in this country, jobs at the present manufacturing centres will go and new ones will not be immediately created.
§ Lord Lucas of ChilworthMy Lords, the commercial companies in this country engaged in that activity had at least seven years to arrange their affairs. The truth of the matter is of course that GEC-Plessey are way down the international ranking lists in size. They do not even come in the first eight. They are outclassed in monetary terms by both European and American suppliers. Modern technology is such that it is unlikely that the production of major switchboard gear, to which the Question really refers, will employ more people. It is the application of that switchboard gear which will provide the employment for those who service it.
Lord Bruce of DoningtonMy Lords, perhaps on reflection the noble Lord will consider revising somewhat his downgrading of two famous British companies, GEC and Plessey, whose workers and management have contributed significantly to the development of the electronics and telecommunications industry in this country. Are we to be given to understand that it is money power overseas in the large conglomerates that will feature largely in Government considerations on these matters?
§ Lord Lucas of ChilworthMy Lords, it is not Government considerations that matter. It is the commercial decisions of the companies concerned. The American company, AT & T, has a turnover of 12 billion dollars, the Canadian firm of Northern Telecom has a turnover of 3½ billion dollars and Siemens of West Germany has a turnover of 4½ billion dollars. The combined telecommunications turnover of GEC and Plessey is but 1½ billion dollars.
§ Lord Lucas of ChilworthMy Lords, it would appear to me that they are fairly low in the international league. That is what I said. I have no reason to suppose that I should reconsider what I said.
§ Lord Cledwyn of PenrhosMy Lords, the noble Lord is making some very important statements about British industry. Will he clarify one thing for the House? What does he mean when he says that those companies are low in the international league? It is true that from the figures he cites the other companies are bigger in capital terms, but is he saying that they are also more efficient than GEC-Plessey, which seems to the House to be the important consideration?
§ Lord Lucas of ChilworthMy Lords, let me put it to the noble Lord, Lord Cledwyn, this way. I gave an international ranking in monetary terms related to turnover. Why is it that West Germany's telecommunication system has a 30 per cent. 1482 American content and a 70 per cent. German content? The Italian system has an American, Swedish and Italian content. The fact of the matter is that the product of GEC-Plessey, good as it is—and it is very good—cannot survive in the United Kingdom market, which totals rounds about £500 million, alone. It is necessary to have at least a £1 billion turnover to stay in the game. They should be amalgamating with or collaborating with other companies to secure the export markets which they cannot secure, and they will not survive at their present turnover on United Kingdom only purchasing.
§ Lord Lucas of ChilworthYes, my Lords.
Lord Bruce of DoningtonMy Lords, the noble Lord has just made a most extraordinary statement on what we must assume is official Government policy towards Plessey and GEC.
§ Lord Stoddart of SwindonTalking down British industry, my Lords.
Lord Bruce of DoningtonMy Lords, does the noble Lord think that in the existing climate for British manufacturing industry, which has been so seriously damaged by Government policies, it lies in his mouth, in effect, to denigrate two leaders in the field in this country?
§ Lord Lucas of ChilworthMy Lords, I am not denigrating; I am stating facts. The facts and figures speak for themselves. The Government have released British Telecom from the public sector. They therefore have enabled worldwide suppliers, GEC and Plessey included, to compete for that business. But that amount of business is small in world terms. There is an overcapacity of telecommunications production, and GEC-Plessey, with a very good product, have to find their way into the international market to survive. No governmental interference will help that one.
§ Lord Boyd-CarpenterMy Lords, will my noble friend make it clear, as I think he was seeking to do, that the international ranking which he gave to those two great British companies related solely to their size and turnover and conveyed no imputation whatever against the well known very high quality of their products and their technological advance?
§ Lord Lucas of ChilworthMy Lords, my noble friend underlines exactly what I sought to do—to list in an order some rankings. The product is good but those two very good companies, with a very good product, cannot rely on the small United Kingdom market. It represents about half of what they need. They will have to go into the export market. They are then in a highly competitive business.
Lord Bruce of DoningtonMy Lords, in those circumstances, and in view of the fact that the House would not wish to continue the discussion of such an important matter at Question Time, I put the Government on notice that this matter will be raised in full debate in order that the elucidation that the noble 1483 Lord has presumed to give us on Government policy can be thoroughly debated.
§ Lord Lucas of ChilworthMy Lords, I have sought to answer every question that your Lordships have put to me. I have sought to do that in commercial terms—in number terms. Your Lordships have not invited me, and nor have I sought, to introduce, as the noble Lord suggests, Government policy. He knows full well that Government policy is designed to encourage our home-based manufacturing industry. We do that in a number of ways both at home and overseas in export markets.