British Telecom: Tenders (Hansard, 13 March 1985)

§ Lord Mottistone
My Lords, I beg leave to ask the Question standing in my name on the Order Paper.

§ Lord Brabazon of Tara
My Lords, the licence granted to British Telecom under Section 7 of the Act takes full account of the duties set out in Section 3. As British Telecom is a private-sector company, its choice of a second digital switching system is a commercial decision.

§ Lord Mottistone
My Lords, while I thank my noble friend for that Answer, may I point out that it really does not go quite far enough in view of the fact that 174 British Telecom is such a vast monopoly and has more power than it should have? Would it not have been more in keeping with the duties in the reference that I gave to have given an opportunity to the manufacturers of System X at least to tender last October?

§ Lord Brabazon of Tara
My Lords, British Telecom's decision to introduce a second digital switching system into the main network is intended to accelerate its modernisation programme and to provide a yardstick against which the competitiveness of System X can be measured. That is why it went to other manufacturers, I believe, and not to the manufacturers of System X.

Lord Bruce of Donington
My Lords, is the noble Lord aware that the requirements laid on British Telecom in terms of the statute as cited by the noble Lord, Lord Mottistone, are quite specific? The requirements on British Telecom are to enable persons procuring telecommunications apparatus in the United Kingdom to compete effectively in the supply of such apparatus. How can British firms compete if they are not permitted to tender and no inquiry goes out to them? Will the noble Lord give the House an assurance that the attitude of British Telecom has in no way been influenced by the outrageous attack on GEC last Friday by his right honourable friend the Secretary of State for Wales, as reported in the Financial Times of the next day?

§ Lord Brabazon of Tara
My Lords, as to the second part of the noble Lord's question, I am not fully familiar with what my right honourable friend said about GEC and therefore I would not wish to comment upon it. Regarding the introduction of the second digital switching system, the pre-evaluation proposals went to six companies, of which one, a British company, STC, was involved. This was then narrowed down to three companies which were invited to tender—Northern Telecom, Thorn-Ericsson, which is, I believe, 50 per cent. British in any case, and AT and T/Philips—and they made offers which were technically and commercially acceptable to BT.

§ Lord Orr-Ewing
My Lords, does my noble friend recall that on 16th February last year we debated this matter extensively and the Opposition were probing very carefully to see whether British Telecom would keep to the 95 per cent. purchase of British equipment? Is it not therefore the responsibility—which was laid under the subsection referred to—of the Secretary of State and Oftel to see that British firms are given a proper opportunity? Can my noble friend say whether that 95 per cent., which we were assured came from the noble Lord, Lord Cockfield, in reply, is being upheld, or is this to be whittled away by the present intentions of British Telecom?

§ Lord Brabazon of Tara
My Lords, I understand that the order for the new System Y will amount to about 10 per cent. of British Telecom's requirements. I understand also that those manufacturers—although I am not entirely clear how it will be done—will give substantial orders to be made in this country.

§ Lord Thorneycroft
My Lords, I represent telecommunications interests and I declare my interest. I ask the noble Lord whether he is aware that unless the British electronics industry can open up its ideas to the whole of Europe, and persuade Europe to open up that market to us, there is little prospect of our being able to compete in future with either the Japanese or the Amercans.

§ Lord Brabazon of Tara
My Lords, I am most grateful to my noble friend for his remarks. If British Telecom is giving a yardstick against which the competitiveness of System X can be compared, I should have thought that was admirable.

§ Lord Mackie of Benshie
My Lords, with regard to the earlier less friendly question from his noble friend the noble Lord, Lord Orr-Ewing, can the Minister say whether they are sticking to the 95 per cent. British orders as promised in the previous debate?

§ Lord Brabazon of Tara
My Lords, I am afraid I cannot answer that. I have a figure: as I said, I am told that the figure on this new order would be about 10 per cent. I am not aware of the promise of 95 per cent. which was made; I shall have to look into it and write to the noble Lord.

Lord Morris
My Lords, does not my noble friend consider that he has been most seriously ill-advised to hide behind the skirts of commercial decision in his original Answer? I ask that because the Act makes it quite plain that it is the duty of both the Secretary of State and the Director-General of the Office of Telecommunications to exercise their functions in such a way as to enable those producing telecommunications apparatus in the United Kingdom to act in a fair and proper manner.

§ Lord Brabazon of Tara
My Lords, I am informed that there is no basis for the inference that the Government refused to intervene. Any understanding of that kind would have led the Government into immediate conflict with its international obligations under GATT and the Treaty of Rome.

Lord Bruce of Donington
My Lords, perhaps I may ask the noble Lord an easier question. Will the noble Lord unequivocally confirm to the House that it is the intention of Her Majesty's Government to comply with the law, with Section 3(2)(h) of the Telecommunications Act 1984, as mentioned by the noble Lord, Lord Mottistone, in his original Question?

§ Lord Brabazon of Tara
My Lords, naturally, the Government will always conform with the law, especially when it is in Acts which they have themselves brought in.

§ Lord Shinwell
My Lords, is not the noble Lord misunderstanding—I am not saying that he is being misleading—the purport of these questions, which is that when we adopt a new technique in electronics or in any other project, there is a danger of creating more unemployment unless British firms receive a fair share of the work? What is the answer to that?

§ Lord Brabazon of Tara
My Lords. I am sure that the noble Lord is quite right. However, if British industry is to continue to be competitive, or is to become as competitive as possible, it is in my view essential that there should be some element of a spur to make sure that it is competitive.

§ Lord Shinwell
But, my Lords, is it not likely that sometimes you can be over-competitive and yet create more unemployment? Is not that a factor to be taken into consideration?

§ Lord Brabazon of Tara
My Lords, I think that the more competitive industry becomes. the more chance it has of receiving overseas orders and creating employment.

§ Lord Molloy
My Lords, would the noble Lord not agree that the first of the points enumerated in the supplementary question of the noble Lord, Lord Mottistone, is of fascinating interest to many of us in this House and to many people in the City, in industry and in commerce? The noble Lord was quite honest and said that he did not know what his right honourable friend the Secretary of State for Wales said last Friday. That inhibits us from asking further questions on that point. Will he therefore please find out what his right honourable friend said and then write to my noble friend Lord Bruce of Donington with his views on the statement made by his right honourable friend?

§ Lord Brabazon of Tara
No, my Lords: I think that what my right honourable friend said is his affair. No doubt when I read what he said I shall understand it better.

§ Lord Glenamara
My Lords, in view of what the noble Lord, Lord Shinwell, has said. how can we ever make an impact on the appallingly high level of unemployment in this country when a major utility such as British Telecom limits the tenders for a major order to foreign firms? Cannot a 49 per cent. shareholder assert some influence in such a situation?

§ Lord Brabazon of Tara
My Lords, in the prospectus for British Telecom the Government made it quite clear that: Her Majesty's Government does not intend to use its right as an ordinary shareholder to intervene in the commercial decisions of British Telecom".

§ Lord Mottistone
My Lords, if the manufacturers of System X had been allowed to tender, maybe they would not have got the contract, but at least they would have known what was the specification. That would have helped them to improve their manufacture in the future so as to make themselves competitive in the world, as my noble friend Lord Thorneycroft so clearly pointed out to us. Indeed, as my noble friend the Minister has said, it would also have helped the unemployment situation by making us more competitive in the world market. This particular ploy has not helped manufacture in Britain and I submit to your Lordships is therefore still contrary to Section 3(2)(h).

§ Lord Brabazon of Tara
My Lords, British Telecom has made it clear that System X will remain the dominant system in the United Kingdom network and it has placed huge orders with the suppliers of System X, GEC and Plessey. Providing those companies are competing effectively, they will have nothing to fear from whichever second source BT chooses. However, I hope that the two United Kingdom suppliers will use their large BT ordering programme as a springboard from which to pursue with vigour export opportunities.