§ 3.33 p.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 they have asked the Office of Telecommunications to investigate urgently whether British Telecom, with a de facto monopoly, are justified in increasing on 1st November all their charges by the maximum permissible amount, while giving the minimum notice of 28 days.
1294§ The Parliamentary Under-Secretary of State, Department of Trade and Industry (Lord Lucas of Chilworth)My Lords, no. British Telecom complied with their licence by informing the Director General of Telecommunications of their proposed price increases. The director general has already confirmed that the revised charges meet the requirements in BT's licence.
§ Lord Orr-EwingMy Lords, is my noble friend aware that last year BT increased their profits by 39 per cent. to nearly £1.5 billion and this year on present form they are likely to make £1.8 billion? Rather than being invested in new and joint ventures with America and elsewhere, and even, as we read yesterday, in the Channel tunnel, should not part of those huge sums go towards improving the service and stabilising or lowering prices to the benefit of our communications industry and our peoples?
§ Lord Lucas of ChilworthMy Lords, BT are to be congratulated on their profit levels, which demonstrate the efficiency and competitiveness of that business. In regard to where BT invest their profits, it is entirely for a company in the private sector to decide where they put their money. It is for that company's commercial judgment and not for Her Majesty's Government.
§ Lord GrimondMy Lords, as there are many people in this country for whom a telephone is essential and who are badly off, will the Government look again at the remedies available to them? They are faced with a private monopoly making enormous profits, which is not responsible to Parliament, which is not responsible to any market and which totally ignores the views of the consumer associations. Surely something should be done to remedy that situation.
§ Lord Lucas of ChilworthMy Lords, I dispute that BT ignore the consumers. Parliament in its wisdom set up OFTEL, with a director general quite independent of Government, precisely to ensure that the consumers' views were taken account of. BT's licence is extremely strict. The director general examines their acitivities to ensure that they stay within the licence prescribed by Parliament.
Lord MorrisMy Lords, will my noble friend be good enough to refresh his memory about the duties of the Secretary of State with regard to telecommunications by reading Section 3(1) and (2)(a) in particular of the Telecommunications Act 1984? That section makes it quite clear that the Secretary of State and the director shall each have a duty:
to promote the interests of consumers … in respect of the prices charged for … telecommunication services".He cannot hide behind the skirts of the Director General of Telecommunications.
§ Lord Lucas of ChilworthMy Lords, I have no intention of hiding behind the skirts of anybody. I am well aware of the responsibilities laid upon the Secretary of State and the Director General of OFTEL, as set out in the Act. It is in the first part of the Act; I think that it is actually on page 5. I am quite content that both my Secretary of State and the director general are carrying out their functions properly.
Lord Bruce of DoningtonMy Lords, is the noble Lord aware that the terms of the licence set the annual ceiling above which charges ought not to go, and that there is no obligation on BT persistently to press against the limits set out in the licence, regardless of their public performance? Is he further aware that all the evidence accumulated since the privatisation—which he supports—is that BT and the Government are quite content to regard their public duty as screwing as much as possible out of the consumer?
§ Lord Lucas of ChilworthMy Lords, Parliament decided that for their first five years BT may not increase their level of charges above the RPI minus 3 formula, and it is not for the Government to dictate to a private sector company how far up to that limit their prices shall be increased. I believe that some noble Lords forget that there are a number of obligations laid upon the company in the licence, only one of which is the supply of telephones to either residential or business premises. I totally refute the second part of the remark made by the noble Lord, Lord Bruce of Donington.
§ Lord Bruce-GardyneMy Lords, as a shareholder in British Telecom may I ask my noble friend whether it is not appropriately the duty of the management of this business to charge the prices they believe their market will carry within the terms of their licence? If there are any grounds for disquiet in this situation, do they not arise exclusively from the degree of monopoly privilege which is left with British Telecom? Does my noble friend draw from that the conclusion that we should ensure that British Gas, when they come on the market, do not enjoy a similar degree of monopoly privilege?
§ Lord Lucas of ChilworthMy Lords, in response to my noble friend Lord Bruce-Gardyne, I congratulate him on being a shareholder in a successful company. In regard to the monopoly position, he will no doubt recall with pleasure that the Director General of OFTEL obliged British Telecom to allow (if I may use the expression) the plugging into the system of Mercury. That is a competitive element and to some extent removes some element of monopoly. Both my Secretary of State and the Director General of OFTEL in carrying out their duties have regard to the increasing opportunity for competition in this field of activity.
§ Lord Taylor of GryfeMy Lords, does the noble Lord the Minister accept that the Mercury contribution in this matter could be only 5 per cent. and that it does not make any serious impact on the monopoly power of British Telecom in the market place? Does the noble Lord accept also that the proposed increase structure bears heavily on local subscribers and on small businesses which use a short service facility as against the long-distance calls where they will suffer some competition from Mercury? Is there a danger that the local subscriber will be subsidising the long-distance business calls against Mercury in the future? May I ask—
§ Lord Lucas of ChilworthMy Lords, I do not accept what the noble Lord, Lord Taylor of Gryfe, says with regard to the entry of Mercury. This is the start of a competitive process which will help British Telecom to maintain sensible prices. On the pricing structure, perhaps I may commend to your Lordships a careful study which shows that although some prices have been increased there are additional advantages being offered in that price structure.
§ Lord HankeyMy Lords, are the Government aware that a great many people are enormously impressed by the great technological progress and initiative which British Telecom have shown? The fact that they make profits instead of losing money like so many nationalised industries is really proof that the Government have followed the right policy in this matter.
§ Lord Lucas of ChilworthMy Lords, I am most grateful to the noble Lord, Lord Hankey, who has put the position quite succinctly.
§ Lord Campbell of AllowayMy Lords, is my noble friend the Minister aware of any specific ground of justifiable criticism which could be levelled against the Director General of OFTEL in the discharge of his duties as the watchdog?
§ Lord Lucas of ChilworthMy Lords, in answer to my noble friend Lord Campbell of Alloway, the Government certainly have no cause to complain about the way in which the Director General of OFTEL undertakes his duties, which have been shown quite specifically in his recent report as being fair and reasonable in accordance with the Act.
§ Lord Orr-EwingMy Lords, is the noble Lord—
§ Lord Orr-EwingMy Lords, a last point. Is the noble Lord aware that the price control in the licence applies only to a narrow sector indeed; that is, local calls and local lines and nowhere else? Is the noble Lord aware that more competition is the only way of reducing the prices of this monopoly? Will he encourage competition to that end?
§ Lord Lucas of ChilworthMy Lords, the RPI minus 3 formula covers across-the-board charges and is designed to ensure that over the first five years British Telecom's charges fall in real terms. On the second question raised by my noble friend, yes, certainly; every endeavour will be made by my Secretary of State and by the director general to promote further competition in this exciting new field of technology.