BT Profits and Prices (Hansard, 12 November 1991)

§ The Parliamentary Under-Secretary of State, Department of Trade and Industry (Lord Reay)
My Lords, the Government have established a strong independent regulator, the Director General of Telecommunications, who regulates these matters. Under the present price control formula changes in BT's main prices are limited to 6.25 per cent. less than the increase in the retail prices index. It means that at 475 today's inflation rate they are falling in nominal as well as real terms. This price control ensures that cost increases cannot be passed on to customers.

§ Lord Molloy
My Lords, I thank the Minister for that Answer. Is it not the fact that British Telecom has made outrageous profits from excessive prices? Does the Minister agree that whoever was responsible for checking an upheaval which means that many poor people cannot afford a telephone should be replaced as quickly as possible? Will the Minister make a big effort to answer the question of whether a public inquiry will be set up?

§ Lord Reay
My Lords, as regards a public inquiry, Sir Bryan Carsberg has announced his intention to issue a consultative document in January next year inviting views from all interested parties before deciding on any new price controls. He took similar action in 1988 when the price gap was previously reviewed.

§ Lord Boyd-Carpenter
My Lords, in the light of my noble friend's comments about price movements, is it not d ear that the improvement in the profit performance of British Telecom derives from greater efficiency?

§ Lord Reay
My Lords, I agree with my noble friend. The profits of British Telecom must be seen in perspective. It is one of the United Kingdom's largest companies with an annual turnover of £13 billion and an investment programme of more than £2.5 billion per year.

§ Lord Mackie of Benshie
My Lords, is the Minister saying that the results of improved efficiency should not be passed on to the customer as well as to the shareh older?

§ Lord Reay
My Lords, they are being passed on to the customer. The effect of the price controls has been that since privatisation in 1984 BT's main prices have fallen in real terms by about 27 per cent.

Lord Bruce of Donington
My Lords, is the Minister aware that arguments put forward by Members on these Benches when British Telecom was privatised have proved to be right and that this private monopoly is nothing more than a rip off of the general public'' Does the Minister agree that there is a strong case not merely for a public inquiry but for the intervention of the Government to ensure that this public rip off by a private monopoly does not continue?

§ Lord Reay
My Lords, I do not agree with the noble Lord. In our view effective competition is the best way to defend consumers' interests. The Government have progressively introduced competition throughout the British telecommunications market. However, such competition takes time to develop and while it does the consumer needs the additional protection of a strong independent regulator. That is a protection that the consumer has with the results that I have quoted.

§ Lord Tordoff
My Lords, will the Minister invite his noble friend the Leader of the House to ask the noble Lord, Lord Bruce of Donington, not to bellow in our ears quite so much but perhaps to use the telephone?

§ Lord Reay
My Lords, I am sure that the noble Lord will do what he can to take advantage of that advice.

Lord Bruce of Donington
My Lords, will the Government agree that occasionally it is necessary to use a loud voice in order that the politically dumb on the Liberal Benches may hear?

Noble Lords
Oh!

§ Lord Reay
My Lords, I do not believe that any Members of this House have ever had difficulty in hearing the noble Lord.

§ Lord Williams of Elvel
My Lords, I shall endeavour to speak softly—

§ Lord Hailsham of Saint Marylebone
Speak up!

§ Lord Williams of Elvel
My Lords, does the Minister agree that the increased prices announced by British Telecom on 1st August 1991, averaging 4.5 per cent., hide back-door increases in rental and installation charges of 7.8 per cent., which is above the rate of inflation? Will the Minister further reflect that the decision by British Telecom to charge telephone users 44½p plus VAT to use directory inquiries has incensed many consumers, myself included?

Noble Lords
Hear, hear!

§ Lord Reay
My Lords, charging for the service of directory inquiries has meant that rather than BT recovering the cost from everyone indiscriminately only those who make use of the service now pay for it. The most intensive users are businesses. Therefore, introducing charges has removed a cross subsidy from domestic consumers to business. Domestic call charges were reduced by between 4.5 and 7.3 per cent. as a result of introducing those charges.

§ Lord Harmar-Nicholls
My Lords, is my noble friend aware that Members on all sides of the House recognise the point behind the question asked by the noble Lord, Lord Williams. However, can he explain the reason for the criticism of profits by people who object to profits being made but who were silent when the nationalised steel industry was making great losses?

§ Lord Reay
My Lords, I believe that my noble friend was asking a rhetorical question of the noble Lord opposite. As I have indicated, BT's profits must be seen in perspective taking into account factors such as the need for massive investment.

§ Lord Greenway
My Lords, will the Minister find a way of pressurising British Telecom to utilise some of its enormous profits to produce a pay-phone box which provides change? What happens at present amounts to nothing less than daylight robbery.

§ Lord Reay
My Lords, I must consider that question. The quality levels throughout BT's services 477 have never been higher. Ninety-six per cent. of all call boxes are now functioning whereas in 1987 the number was less than 75 per cent. Before that date the number was undoubtedly lower although no statistics were kept.

Lord Morris
My Lords, is it right that British Telecom controls more than 95 per cent. of the telephone services market? Can my noble friend say whether the sale of 49 per cent. of the shares of BT presently held by the Government will further encourage competition within that market?

§ Lord Reay
My Lords, our policy is to ensure that business and residential customers have the widest possible choice of high quality services at the most competitive price. In our view open and vigorous competition is the best way to achieve that aim. We have sought to introduce effective competition and customers now have many new choices. That pattern will be extended.

§ Lord Molloy
My Lords, does the Minister agree that such massive profits can have been made only as a result of excessive price increases? I hope that he will consider and send to British Telecom a poignant argument; that the poorer section of our community, which relies on the telephone to keep in touch with doctors, local authorities and so forth, are discovering that they cannot afford a BT telephone. Will the Minister take that into consideration when an examination is made?

§ Lord Reay
My Lords, we believe that competitive prices and quality matter to the consumer. The system which we have established will ensure that those are delivered.