HL Deb 20 May 1991 vol 529 cc92-100

8.32 p.m.

The Earl of Shrewsbury rose to ask Her Majesty's Government what is their policy towards the development of mobile telephones in the United Kingdom.

The noble Earl said: My Lords, I am most grateful to your Lordships for allowing me a slot in which to pose my Unstarred Question this evening. I should declare an interest as I possess a mobile telephone.

I shall detain your Lordships for as brief a time as possible. However, I feel the matter to be of great significance to the business community. I wrote to the right honourable gentleman the Chancellor of the Exchequer on it on 25th March and to date I have only received an acknowledgment of receipt of that letter from his private secretary. This is a matter of considerable import and I feel quite justified in bringing the subject to your Lordships' attention without further delay.

It is an accepted fact that the cellular telephone is an essential business tool in the United Kingdom. Since 1983, when the Government awarded licences to operate cellular radio communications networks to two companies, the systems designed and operating in this country have become the envy of the world. Great Britain is acknowledged as the world leader in the field. The network is improving and expanding daily and vast sums of money have been invested by British companies in the development of the systems.

Indeed, in the year 1990–91 the Cellnet Company alone invested over £200 million in order to triple the size of its network. The total cellular market now exceeds 11 million customers, who enjoy the use of a far more efficient and high quality service than was the case it the early years of the system.

I am advised by both the Road Haulage Association and the Freight Transport Association that vast numbers of their members' vehicles are now equipped with cellular telephones. In the commercial world, banks, insurance companies, building societies —I could go on for ever but will not at this late hour —provide such communications facilities to their employees.

The UK now has the highest number of cellular customers in the world outside the United States. The range of choice and price of user equipment is wide and the facilities provided are available to both the large and small business user. For example, mobile phones are used by jockeys, who have little time in their heavy schedule to sit at a conventional phone to book rides. They are used by one-man businesses which Are almost totally reliant on, as BT says in its advertisements, "being in when you're out".

As I mentioned, the systems are used by freight transport operators to track their drivers and vehicles, to enable drivers to communicate when vehicles break down and to alter schedules in bad weather. In addition, the possible availability and procurement of a return load for these hauliers can often make the difference between profit and loss. The margins are very tight indeed in this industry—about 3.5 per cent. to 4 per cent. With so many manufacturers using the "Just in Time" system of deliveries, which is vitally important to their cashflow, often a delay of 24 hours can cause massive production problems arising from lack of parts and raw materials. The road transport haulier needs to be available at a moment's notice and to act with efficiency and speed when the opportunity arises. The mobile phone is thus a vital facility for the smooth running of business operations. It helps to prevent the needless waste of resources and promotes the efficient use of vehicles. Dare I say that the system is used by many of your Lordships?

In his recent Budget speech, my right honourable friend the Chancellor of the Exchequer indicated that it was his intention to levy tax on the benefit in kind enjoyed by the mobile telephone user when using the system For private calls. These proposals are included in the Finance Bill at present in the other place.

I am completely unclear as to how the Inland Revenue intends to define "private use". I shall be grateful if my noble friend on the Front Bench can help me. For example, how will telephone calls be treated if they have an element of private use but are mainly business? I have in mind a lorry driver who telephones his wife late at night while a long way from home, having probably been away for a number of days. He may ask what instructions for the morning pick-up of freight have been left with her by his employer. This is surely a business use. But then the poor chap spends the last 30 seconds of his call asking how his children are—presumably a private use. Can my noble friend say how it is intended to treat this type of case?

It also seems grossly unfair to me that it would appear in my reading of the clause in the Finance Bill that the use of a mobile phone for just one call of a private nature in a tax year would make the user liable to a tax charge on the benefit in kind. This cannot be right. I ask my noble friend whether he would agree that there should be a minimum threshold at least of a number of private calls below which there would be no tax charge unless the threshold were exceeded in the relevant tax year—that is, should there be any sensible need whatsoever to impose this punitive tax in the first instance.

I find it quite impossible to see the difference between the mobile telephone and all the other equipment used to facilitate the efficient and competitive working of a business. In short, it is as essential a facility as is a typewriter, calculator, telephone, telex or fax machine. In every office from time to time an employee uses these facilities for a private purpose. It is well known and accepted. There is no tax charge for benefit in kind on such use, therefore why should mobile telephone users he singled out as the whipping-boy?

It is of course sad that there is no code of conduct when it comes to the use of mobile phones. Inevitably, a small minority insist on posing in restaurants with these items of equipment, probably to the great discomfort of other diners, doubtless including the right honourable gentleman, the Chancellor of the Exchequer. The use of such equipment has become a thoroughly normal part of everyday life which we have to accept.

Since I put down this Question, I have received a considerable amount of mail from many companies and organisations, including trade unions, which use or whose members use cellular telephones. To a person, they all oppose the Chancellor's intentions in this area. For example, I am advised by Dixons, the high street retailer, in its letter to me, that: As a major user of cellular telephones, we support the view so clearly expressed by Sir William Clark during the Second Reading of the Finance Bill in the Commons, that mobile phones are an essential business tool. To tax them, therefore, would be detrimental to those who rely on mobile communications to increase the efficiency of their business throughout the country&We are disappointed at the Government's decision to impose an additional burden on the telecommunications industry when the Government has given so much support to the [United Kingdom's] position as world leader in this rapidly expanding market".

The Transport and General Workers' Union has advised me that the basic weekly wage of a heavy goods vehicle driver is £150.67 per week before stoppages. There is no way in which these employees can afford to pay any levy whatsoever imposed on the private use of a cellular phone. These phones are in their cabs. They are there to help their business. Neither can their employers afford to pay this when the margins in their industry are so tight. The employees of most businesses already repay their employers for the cost of any private calls. They should not have a further charge imposed on them when they already pay substantial amounts of income tax, national insurance and now even higher rates of VAT.

It is my view that such a tax on mobile telephones would be detrimental to the future growth of a highly successful area of the telecommunications industry. It would be detrimental to all types of business which use cellular facilities. It would be an unfair and selective tax which would not be beneficial to the Government's reputation, and it would be a tax fraught with difficulties in terms of collection, open to abuse, and not a substantial earner of revenue. It would be a tax that would smack of the bad old days of central government interference. These are not simply my own views; these are also the views I have received from many branches of trade, commerce and industry and indeed the trade unions. They are very widespread views.

I wish to ask my noble friend the Minister one final question. In view of the very substantial and widespread opposition to the Government's line of thought with regard to mobile telephones and their taxation, would it not be in the best interests of all concerned if the Government were to lay this particular measure in the Finance Bill on one side for the time being while establishing a consultative process involving all the representative bodies such as the CBI, the Chambers of Commerce, the various trade bodies and the trade unions to seek the views of the user before legislation is finally passed which will be widely damaging and thoroughly unpopular?

As I know that I do not have the right of reply, perhaps I may express my gratitude to noble Lords who are to speak to this Question this evening. I look forward to listening to their views and I look forward to my noble friend's reply. Commerce and industry are under very great pressure at the present, and need help not hindrance. I am most grateful.

8.42 p.m.

The Earl of Lindsay

My Lords, I am most grateful to my noble friend for raising this matter. Like many other small businessmen, I was astonished at the tone of the Chancellor's Budget when he dismissed the mobile telephone as a scourge of modern society, especially as those remarks appeared in a Budget that he described as encouraging to small businesses.

My noble friend has already described the wide variety of benefits that accumulate to small businesses as a result of better communications. My own small business, which comprises a landscape practice, is an example of that. Mobility is essential. I started the business in 1982, but it was 1986 before we purchased a mobile telephone. The subsequent improvement in efficiency and management has been significant. No longer do I leave decisions unmade and problems unsolved for the best part of a day or longer simply because I am unaware of them. No longer am I desk bound at the start of each day making and receiving calls that should have been made the previous day. The ability of a mobile telephone to keep one in touch with clients and colleagues wherever one is has contributed to a growing business and to a growing payroll. At every stage of this expansion the Government are a beneficiary, as are those in the dole queue.

No small business would consider it unfair if the Inland Revenue targeted private usage that was simply and quickly defined. Small businesses would consider it unfair, however, if the tone adopted by the Inland Revenue was similar to that of the Chancellor's personal irritation. The mobile telephone may well be a symptom of a certain lifestyle which causes annoyance to those eating in London restaurants. However, as a percentage of the usage of mobile telephones, such irritating occurrences must be infinitesimal. I warn the Government and my noble friend that there is a danger of the Government throwing out a business baby with the yuppy bathwater.

8.44 p.m.

Lord Williams of Elvel

My Lords, the House will be grateful to the noble Earl, Lord Shrewsbury, for raising the matter this evening. I believe it is some 10 years since mobile telephones appeared in the form of car telephones. As the noble Earl quite rightly pointed out, the technology has grown explosively ever since. Like all new technologies, we should certainly encourage it if it is of use to business and industry. We cannot ignore such technology.

As both noble Earls have pointed out, the Chancellor made a rather silly and cheap joke in his Budget Statement. I believe businesses will consider that that joke will rebound on the Chancellor. Mobile telephones are necessary for efficient business across the whole range. They are also necessary for efficient services such as the delivery of goods. They are necessary to enable lorries to be in the right place at the right time and for vans to deliver goods at the right time. They are necessary for home services such as painters and plumbers so they can be contacted and sent to the right place at the right time. As the noble Earl, Lord Shrewsbury, said, mobile telephones are necessary for long-distance work. It is therefore absurd to sneer at their use. I believe that the Chancellor did that in his Budget Statement.

I join with both noble Earls in the belief that it is a travesty to tax the private use of mobile telephones as a form of perk without taxing the same use of telephones by businessmen who may be in Tokyo, for example, and wish to ring their wives. Why should a businessman in Tokyo, New York, Chicago or San Francisco telephone his wife to inquire how she and the family are, and not be taxed for such a phone call, as is the case at present, while a lorry driver who telephones his wife at the end of a day's stint to find out what messages have been left for him and then adds on 30 seconds to ask how the kids are is to be taxed on that? That situation does not make sense to me. There is also the problem of collection.

I join with both noble Earls in thinking that this is an ill-advised measure by the Chancellor. I believe he will come to regret it. Nevertheless we have to accept that, as with all new technologies, certain uses can be a nuisance to the public in general. It is on that point that the Government should concentrate. I believe it is illegal for drivers to use their car telephones while they are d riving. However, one can drive along the motorway any day of the week and see many people using Their car telephones while they are driving. My noble friend Lord Underhill tried to introduce an amendment into the Road Traffic Bill which would have prohibited the practice. However, the Government resisted it. The Government should crack down on the practice.

There is then the matter of the use of mobile telephones in public places. The noble Earl, Lord Shrewsbury, has drawn attention to the problem. It can be a nuisance to hear someone forever ringing different people when one is sitting in a restaurant or on a train and expecting a little peace and quiet. That is another point the Government should concentrate on. Possibly the only serious use of a mobile telephone, apart from business use, was described in Mr. Jeffrey Bernard's column in The Spectator this week. The noble Viscount may have read the article. A man was described as entering a pub which Mr. Bernard regularly frequents. I believe the pub is called The Coach and Horses. The man had a mobile telephone and he decided its only proper use was to stand at the bar, ring the number of the pub and ask the owner, who had not served him with a drink for the past five minutes, whether it was possible to get a drink. That sparked off instant action from the pub owner, who was known to be a somewhat bad tempered gentleman.

That may appear to be a somewhat frivolous account but I am making the serious point that a balance should be struck. Like all new technologies these telephones are useful, increase productivity, are at the forefront of technology and should be encouraged. On the other hand, there are times when they can be a public nuisance. There must be some regulation, whether a code of conduct, code of practice or some other form, which would ensure that they were properly used to enhance business, industrial and service productivity and not be a nuisance to the public in general.

Viscount Astor

My Lords, I am grateful to my noble friend Lord Shrewsbury for giving me this opportunity to put on the record once again the Government's strong support for the mobile telephone industry in this country. To answer my noble friend's Question directly, the Government have fully supported the development of mobile telephones in the UK. We continue to support that development and look forward to it continuing in the future. The growth of the mobile telephone industry in this country has been a major success story, and one which owes much to the policies of this Government.

Perhaps it would be helpful if I reminded noble Lords of a little of the industry's history. Until 1985, the only two-way mobile telephone system generally available was the radio telephone system run by British Telecom. The technology in use at that time resulted in bulky equipment and limited network capacity. In 1985 the Government issued licences to two new competing networks, run by Cellnet and Racal-vodafone. The services they provided were sold to users through a tier of retailers or service providers.

That structure resulted in a highly competitive market and one which has expanded rapidly. There are now well over 1 million mobile telephone subscribers in this country, giving the UK the two largest cellular radio networks in the world. This has generated an estimated 20,000 jobs in the UK, directly in the operators as well as in service providers, dealers, and among manufacturers of telecommunications equipment.

There is, therefore, already a very significant mobile telephone industry in this country, and one which the Government have actively supported. The Government do not want to see the development of the mobile telephone market stop there. In 1989 the Government announced that they would issue licences to three new operators of personal communications networks. Those operators will provide the next generation of mobile telephones which are expected to bring the benefits of mobile telephony to a wider section of the population than is currently served by them. At the same time, the existing cellular operators will take part in the pan-European mobile network with all the benefits of mobility throughout Europe which that will bring.

The Government's consistent policy has, therefore, been one of encouraging competition in the provision of mobile telephone services. That approach was continued in the Government's recent White Paper on telecommunications policy which, most notably, abolished the duopoly previously enjoyed by British Telecom and Mercury in the provision of telecommunication services over fixed links. It also significantly extended the range of services which mobile operators will be able to provide to their customers. In particular, mobile operators will in future be able to come forward for extensions to their licences in order to provide a range of fixed services. That will increase the opportunities available to mobile telephone operators and the benefits which they will be able to provide to customers.

The Government, therefore, have a clear and consistent record of encouraging the growth and development of mobile telecommunications in the UK and supporting the excellent efforts of the companies involved. That approach has helped the country to lead the world in new developments in mobile telephony.

Perhaps I may now turn to some of the specific concerns raised by noble Lords, and in particular by my two noble friends behind me. The first is the proposed tax on mobile telephones provided by employers. It has been suggested that the changes announced in the Budget relating to the taxation of mobile telephones provided by employers indicates a reduction of the Government's commitment to mobile telephones. I can assure noble Lords that that is not the case. The intention of the changes is simply to bring mobile telephones in employer-provided cars, which were previously not separately charged to tax, properly within the tax system and to simplify the arrangements for taxing other mobile telephones provided by employers and available for employees' private use. The proposal will not introduce a new levy on telephones bought by individuals for their own use.

Nor will telephones used purely for business be taxed. Where an employee is required to reimburse his or her employer in full for the cost of private calls made, and does so, no tax will be payable. Noble Lords will appreciate the importance of ensuring that all benefits in kind are properly and equitably taxed. The Budget proposals are intended to ensure that that happens in the case of mobile telephones provided to employees.

My noble friend Lord Shrewsbury asked how private use will be defined. The answer is that private use is defined in the Finance Bill as the use of the telephone to make calls other than calls which are wholly and exclusively necessary for the purpose of the employer's business. If there is private use the standard charge will apply unless the employee is required to pay his employer for the cost of private use.

My noble friend also asked me how the element of private use will be treated. The important factor is the purpose of the call. In general, the Inland Revenue will not seek to treat as a private call a call made for the purpose of the employer's business which contained an incidental, non-business element. For example, if a lorry driver phoned home to find out what his tasks were for the next day that would be regarded as a business call. If there was a brief enquiry as to the wellbeing or health of his wife or children that would not disqualify the call as a business call. However, it might be a different matter if, after a brief inquiry about his tasks for the day, he then spent the next 20 minutes telling his children bedtime stories. There must be a balance. In those circumstances the Inland Revenue is likely to argue that the purpose of the call was a private one.

My noble friend Lord Shrewsbury referred to a person making one call and asked whether that would be taxed. The answer is simple. If he makes one call and he pays his employer—it might be only 40p—then he has paid for the private call and the tax does not apply. That would apply to someone who does not spend much time on the telephone.

In his Budget speech my right honourable friend the Chancellor of the Exchequer announced that taxation of mobile phones would be simplified and a modest charge introduced. We must get the matter into perspective. I believe that the noble Lord, Lord Williams, was wrong. My right honourable friend the Chancellor in no way sneered at mobile telephones or their users. That is not the case. To put the matter in perspective, the maximum tax bill that anyone will receive as a result of the measure is £80. Basic rate taxpayers will pay only £50. I cannot believe that that is a major threat to the British telecommunications industry.

Noble Lords, including the noble Lord, Lord Williams, asked why mobile telephones should be differentiated from other modern business equipment. Mobile telephones are increasingly provided by employers as a benefit for their employees in the same way as company cars and private medical insurance. Unlike office equipment, mobile phones are often available outside the office and outside office hours —in the evening and at weekends. Their use is unlikely to be subject to immediate supervision whereas the use of telephones within an office tends to be supervised. More and more companies now have systems which are able to produce itemised bills and it is easy for them to identify private use of telephones.

The noble Lord, Lord Williams, talked about a code of practice for the use of mobile telephones. There is not much room for the Government to act to stop people causing a nuisance with their telephones in public places. We leave that to the good sense of the individual. Someone can cause a nuisance with or without a telephone.

The other point related to cars. We dealt with that matter in the recent Bill. It is now possible to obtain car phones which are activated by voice rather than by pushing buttons. Cars may also have speakers, which makes it unnecessary for people to clutch something to their ear while driving— a practice, as the noble Lord, Lord Williams, said, which one often sees and which is not to be encouraged.

This country has one of the world's most successful mobile telephone industries. I can assure noble Lords that the Government will do all they can to ensure that that success continues.

Lord Williams of Elvel

My Lords, before the noble Viscount sits down, can be explain exactly what he meant by his reference to a brief family discussion after a business call?

Viscount Astor

My Lords, it is quite simple. Brief is brief. If the call is very brief but the individual thinks that he may pay tax on the benefit he can reimburse his employer for the modest amount of money that that call cost.

House adjourned at nine o'clock.