British Telecom: Foreign Purchases (Hansard, 15 October 1985)

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

§ Lord Brabazon of Tara
My Lords, as the Government have frequently stated, the procurement practices of British Telecom are a matter for the commercial judgment of the company. The director general's advice-giving role apart, the director general's powers to intervene in BT's decisions stem from BT's licence responsibilities. In this instance, the director general's conclusion was that BT had acted within those responsibilities. However, he intends to keep BT's future buying policy for digital exchanges under careful review in the light of the competition legislation. The Government have been pleased to note and regard as significant the chairman of BT's confirmation of his company's continuing commitment to System X as the basis of investment in digital switching.

§ Lord Taylor of Gryfe
My Lords, I thank the Minister for his reply. May I quote to him the report of OFTEL in connection with this matter? They say: their duty is to promote research and development in the industry. The System Y"—— that is the order to Sweden—— increased the difficulty of maintaining an independent United Kingdom switching technology. The report goes on to say: It must be recognised that much of the main work to develop the next generation of Ericsson technology will inevitably be done in Sweden and not in the United Kingdom. Has this not serious implications for job opportunities in the United Kingdom and for expanding our technology in this field?
Finally, is the Minister aware that partly as a result of this decision GEC have just declared 921 redundancies, many of them in Scotland in the Kirkcaldy area, and that this should be a matter of deep concern not only to OFTEL who have some responsibility, but to Her Majesty's Government?

§ Lord Brabazon of Tara
My Lords, I have indeed read the director general's report and I commend your Lordships to read it. As I said in my original Answer, he did not find that BT had acted outside their responsibilities. As regards the loss of jobs at Plessey and GEC recently, we are of course sorry to hear about that and we accept that in part those may have been 476 due to lower-than-expected orders from BT for System X. But on the other hand the rundown of old product lines was already an important feature in both instances. We are of course hopeful that extra jobs will be created in this country by Thorn Ericsson as a result of the BT order.

§ Lord Orr-Ewing
My Lords, does my noble friend recall that when we were debating the matter in this House and before OFTEL came into existence we specifically strengthened their terms of reference? We made them responsible for the wellbeing of the electronics industry and particularly for exports. Now that OFTEL have produced an admirable report and have suggested that BT should give more time and consideration to buying overseas, is it not seriously going to affect our opportunities of exporting and selling our equipment all over the world? How does any British salesman go abroad and try to sell British equipment when our own telecommunications organisation is buying from overseas?

§ Lord Brabazon of Tara
My Lords, as regards the powers of OFTEL, the director general's duties are set out in the legislation agreed by your Lordships' House last year. It is of course open to the director general to suggest that his duties should be altered, but he has not done so.
Regarding the export of System X, the Government have lent considerable support to the efforts of GEC and Plessey to secure export orders for System X—for example, through the aid and trade provisions and other measures—to counter the support available to competitor companies. This support is available for both current and future export campaigns, as is the backing and encouragement of Ministers and our representatives overseas.

Lord Bruce of Donington
My Lords, is the noble Lord aware that during the passage of the Telecommunications Bill through this House we on this side and many noble Lords on the other side forecast exactly what would happen? Is he further aware that during the debates which took place on the Bill his noble friend Lord Cockfield and others gave repeated assurances that the position of British industries would not be prejudiced by the passing of the Bill? Will the noble Lord state whether or not he is prepared to back the creature of his own creation, OFTEL, in its recommendations? Will he give the appropriate directives, as he is entitled to do, to British Telecom?

§ Lord Brabazon of Tara
My Lords, we are obviously very interested in what the Director General has had to say and we find the report most valuable. As regards what was said in this House during the passage of the Bill, I think the noble Lord will find that, as the director general has reported, British Telecom have not acted outside their responsibilities.

§ Lord Bruce-Gardyne
My Lords, is it not conceivable that the moral of this particular incident is that there is really no adequate substitute for proper competition once industries are privatised? Should we not draw from this the conclusion that perhaps the Transport Bill which is at present before your 477 Lordships' House might provide a very good model for the privatisation of British Gas when that matter comes before us next year?

§ Lord Brabazon of Tara
My Lords, I would not wish to anticipate the privatisation of British Gas; but my noble friend has no doubt seen OFTEL's decision, as reported in the newspapers this morning, regarding the interconnection of the Mercury network, and that is promoting competition.

Lord Bruce of Donington
My Lords, arising from the noble Lord's last answer, may I ask whether he will also add that as a result of the recommendation of OFTEL, in fact the charges to residential and small business users for calls will go up, and that is a result of exactly the factor he has mentioned?

§ Lord Brabazon of Tara
My Lords, we shall have to wait and see what happens over that matter. It is reported that BT have said charges will go up. We shall have to wait and see whether that actually happens.

§ Lord Ezra
My Lords, would the noble Lord not agree that at this time when there is a substantial net import of manufactured goods into this country large-scale enterprise, whether in the public or the private sector, should bend all its endeavours to stimulate suppliers within Britain? What measures do the Government intend to take to secure that objective?

§ Lord Brabazon of Tara
My Lords, we naturally hope that large manufacturers will succeed in Britain, but that is a very different question from the one which is on the Order Paper.

§ Lord Orr-Ewing
My Lords, has my noble friend any examples where Western European countries have bought from overseas rather than from their own manufacturers, or is BT the only example?

§ Lord Brabazon of Tara
My Lords, I do not have the figures for other European countries as to whether or not they buy from overseas. However, I can assure my noble friend that we are continuing our efforts to press other European countries to follow our lead in liberalising their markets, thereby creating an equality of opportunity for commercial sales as well as benefits to the customers.

§ Lord Taylor of Gryfe
My Lords, is it not a fact that every country except the United States supports its domestic telecommunications industry substantially and there is no reciprocity on exports provided by any other country? To that extent, Britain is opening up the market to foreign competition despite the investment of £350 million by the Post Office, GEC and Plessey in the development of this British system which is now being departed from.

§ Lord Brabazon of Tara
My Lords, I disagree that the system is being departed from. British Telecom have said on many occasions, including in the press notice which they issued concerning this report, that they regard System X as their main system in 478 modernising their network. They also regard their commitment as most important and it certainly remains their main supplier.