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3.31 pm

The Secretary of State for Trade and Industry and President of the Board of Trade (Mr. Peter Lilley) : With permission, Mr. Speaker, I should like to make a statement on telecommunications.

I shall make proposals aimed at increasing competition, stimulating innovation and widening customer choice in all areas of the market. In November 1983 the Government gave a commitment that-- [Interruption.]

Mr. Speaker : Order. Will hon. Members who are leaving the Chamber do so quietly, please?

Mr. Lilley : --for a period of seven years, they did not intend to license operators other than British Telecom and Mercury to provide basic telecommunications services over fixed links. We said that this commitment, which became known as the duopoly policy, would be reviewed at the end of that period.

I am today publishing a wide-ranging consultative document entitled "Competition and Choice : Telecommunications Policy for the 1990s". Copies are available in the Vote Office and will be placed in the Libraries of both Houses. The document invites comments by 14 January 1991. I will announce the conclusions as soon as possible thereafter.

This country enjoys one of the most open and dynamic

telecommunications markets in the world. In the past 10 years, the Government have introduced competition into all sectors of the market, including the supply of equipment, the running of networks and the provision of services. We have also privatised our main operating company, British Telecom.

The benefits of those decisions are now clear. Customers have a real choice in the equipment that they buy ; they no longer have to wait for months to have a telephone line installed ; BT investment has doubled to around £3 billion a year ; Mercury is established as a serious competitor and has installed a national digital network that far exceeds in coverage its licence obligations ; prices have fallen by over 20 per cent. in real terms since BT's privatisation and by a third in areas where competition is strongest, for example trunk calls ; we have the two largest mobile phone networks in the world ; and companies are now committed to major investments in cable television and personal communications networks.

Those benefits have been greatest where the market is most open and competition is strongest. It is time to build on these achievements by further opening up our telecommunications market to increased choice and competition.

My main proposal is that we should end the present duopoly policy. There would in future be a presumption that applications for licences to run telecommunications systems should be granted unless there were specific reasons to the contrary. The proposals in the document are aimed at strengthening competition and increasing customer choice in all three tiers of the telecommunications system : the local network, the trunk network and international services.

In the local network there is little competition as yet, but nearly 70 per cent. of the homes in the country fall within franchises awarded to cable television companies.

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The Government and the Director General of Telecommunications wish to encourage these companies to provide telecommunications as well as entertainment services. The director general proposes several measures, in particular to reconsider the restriction on cable companies providing voice telephony except in conjunction with BT or Mercury.

I have considered whether BT and other national public telecommunications operators should be allowed to provide entertainment services over their main networks. Consumers might theoretically benefit from that through lower prices. However, the prospect of BT entering the market might deter cable companies from investing, even if BT did not enter the market itself. The consumer would then lose out, both on the provision of cable entertainment and on the benefits of competition in local telephone services. I am therefore proposing that BT should not be allowed to provide entertainment services until 10 years after the completion of the duopoly review. If, however, seven years after the completion of the review the director general advises that an earlier date would be likely to promote more effective competition, we would consider bringing forward the 10-year limit.

In the trunk area of the market, I would be inclined to consider favourably applications for new licences to run networks. The director general favours the progressive introduction of equal access to give customers greater choice over who should carry their calls. I also propose that utilities should be able to develop their assets for telecommunications purposes, provided that the resulting competition is fair and firmly in the private sector.

In the area of international telecommunications, the director general has already made it clear that he intends to seek a price cap on BT's international services. The director general has also considered the remaining restrictions on the ability of companies to compete with BT and Mercury by leasing circuits from them and reselling capacity to third parties. He has advised me that those restrictions should be lifted in relation to countries which allow an equivalent resale of international capacity. I welcome that advice and invite comments on the director general's conclusions and on the timing of their implementation.

I propose that the duopoly policy should be ended for international telecommunications as elsewhere. I propose also a major liberalisation of two-way satellite services.

BT's prices are subject to regulatory control. It argues that its call charges are too high relative to cost, while its charges for exchange line rental and connection are too low. It therefore seeks to be allowed to restructure its prices, so as to recover more revenue from rentals and connection charges and correspondingly less from calls.

BT is already allowed to restructure its prices to a certain extent as part of the existing price controls that it agreed as recently as 1988. In the light of that and other considerations, the director general has concluded that a case has not yet been made for any greater restructuring than is currently allowed. He therefore proposes that the present price constraints should remain in place until they are reviewed in 1993.

This country has already benefited from our policies of privatisation and competition. Other countries are now following our example. Privatisation has recently taken place in New Zealand and is being actively considered in countries as diverse as Malaysia, Poland and Mexico.

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Competition is being introduced not just in places such as Japan and Australia, but even in the tightly regulated markets elsewhere in Europe. Moreover, because of the United Kingdom's lead, this country is becoming a telecommunications "hub" for western Europe. The Government are committed to reinforce that lead and to ensure that consumers have the widest possible choice of high quality services at the most competitive price.

Mr. Gordon Brown (Dunfermline, East) : Does the Minister agree that the real test of his duopoly review will not be theoretical but practical-- that of a genuine improvement in standards and of a reduction in cost for the 19 million households currently each paying a £78 standing charge, a 15 per cent. increase in cheap rate local calls, and an average 9 per cent. rise in bills? All that is on top of a £148 connection charge, for a service that generates half a million complaints every year.

Why do the Minister's proposals do nothing to set targets for the quality of service, set no objectives for long-term research and investment, offer no promise of lower prices and do nothing for more than 3 million households that cannot afford a phone? While we welcome competition in the area of mobile communications and personal communication networks, and believe that, if there is to be genuine competition, British Telecom should not be excluded from competing in those areas--as the Minister has proposed today--or from distributing television pictures, and although we will endorse further competition where it is in the public interest, we hold the view that competition is not itself a substitute for regulation in the interests of the consumer. No telephone company in Europe or the world successfully meets the needs of ordinary consumers without active public regulation.

Will the Minister explain why, according to his statement, Britain is to be the only country in Europe that intends to reduce consumer regulation over the coming years? Will he repudiate the Minister of State's statement that regulation should be reduced and instead state clearly that competition in new areas will not provide the excuse for the Government's complete abdication of their responsibilities? Will the Minister now face up to his regulatory responsibilities in the public interest? Will he impose on all companies clear quality of service targets encompassing speed of repairs, accuracy of bills and automatic refunds where service is poor? Will he set the objective for all companies of reducing installation and standing charges? Given that British Telecom is enjoying record profits, will he act to prevent charges to ordinary consumers for directory inquiry services? Will he lay down guidelines for improved investment in new high technology, to make Britain genuinely a world leader and put an end to the situation in which British Telecom spends only 2 per cent. of its income on research-- and Cable and Wireless substantially less--compared with 4 per cent. in Japan, France and other competitor countries?

Given that 90 per cent. of homes in Germany, 93 per cent. in America and 98 per cent. in France have telephones, but that only 86 per cent. of British households have a phone, will the Minister set targets for increasing connections, so that phone ownership will reach the level enjoyed by our major competitors by the year 2000? Will the Minister insist on the provision of a proper service for

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low-income users of the telephone--one that does not offer most benefits to rich people having high incomes and second homes, when those in real difficulty are people on low incomes living in their first and only homes?

Will the Minister expand Oftel's role to that of a genuine consumer protection commission whose activities will include public hearings, so that telephone executives will not be able to hide from public criticisms, which should be answered, concerning British Telecom's pricing policy, quality of service, profits, and future plans? Six years after privatisation, Britain's call costs are the highest in Europe. Its connection and standing charges are also among the highest and now there are plans for new charges. However, the Minister spoke today only of "the theoretical" benefit of his proposals to the ordinary consumer. When will he realise that 19 million households want not a charter primarily to allow foreign cable companies to make money, but one that serves British consumers--and a Government who are prepared to act in the public interest in ensuring improved standards, lower prices, and a telecommunications service that is run for the many and not simply to make huge profits for the few?

Mr. Lilley : The hon. Member for Dunfermline, East (Mr. Brown) wants to go back to a nationalised system, fully regulated, with no choice, no competition, poor standards and the difficulties we once had to get lines installed. He pays lip service to competition, but all his emphasis is on regulation. That is an extraordinary paradox, because under Labour there was no regulator for the

telecommunications industry. The Fabian Society document, which I note the hon. Gentleman has read, recorded that the Post Office was left to regulate itself. We introduced a regulator independent of the Government and of the telecommunications suppliers, which is by far the best system and much superior to the one that preceded it. The hon. Gentleman has claimed that we are the only country to be reducing regulations, but that is nonsense. Throughout the world, countries are learning from our example and are seeking to reduce unnecessary regulation and introduce more competition. Competition is beneficial, but it cannot be relied on exclusively in an industry where there is a single, dominant supplier. That is why we continue with an effective regulator.

The hon. Gentleman wants us to lay down quality standards, but he ignores the fact that, for the first time, we have introduced penalties for delays in repairs or the installation of a new line. We are the only country to have such penalties and they are much more effective than the mere indicative standards that the hon. Gentleman has sought.

The hon. Gentleman wants to increase the mismatch between prices and costs. That is an extraordinarily bad policy to adopt towards prices ; I believe that it ismore sensible that they should reflect underlying costs. The hon. Gentleman wants to go back to a system whereby £250 million is paid by ordinary households for directory inquiries, when the bulk of them are undertaken by commercial organisations. Now that BT is introducing a charge for directory inquiries, the costs will be transferred to the people who seek those inquiries and, as a result, a quarter of a billion pounds will be taken off the charges that households face. In March next year, charges will be

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reduced by 4.5 per cent. on local calls and 7 per cent. on trunk calls. Those reductions will be introduced at the same time as the charges for directory inquiries.

The hon. Gentleman claims that British Telecom only spends 1.9 per cent. on R and D. That is correct, and it is exactly the same as was spent under the previous Labour Government. The big difference is that BT's turnover has increased enormously, so the extent of R and D has increased. The international comparisons in which the hon.Gentleman indulged are a dangerous game, because in different countries research and development might be carried out by the telecom operators or by the equipment suppliers. In this country, our equipment suppliers invest a higher proportion of turnover in R and D than do our continental competitors.

The hon. Gentleman has claimed that our charges are higher than those on the continent, but the director general carried out an independent survey of a basket of charges and deduced that our charges are broadly the same. The hon. Gentleman has argued that the benefits will go primarily to foreign cable operators, but I believe that the harm that the Labour party would cause would be felt by the millions of shareholders in BT and Cable and Wireless who directly participate in the industry. We should support them and pay no attention to the criticisms of the Labour party.

Several Hon. Members rose --

Mr. Speaker : Order. I remind the House that we have an important debate ahead of us today, when a large number of right hon. and hon. Members want to participate. I shall allow questions on this statement to continue until 4.15. We will then have the introduction of Members, followed by that important debate.

Mr. Kenneth Warren (Hastings and Rye) : Will my right hon. Friend confirm that, in the course of the consultations, the office of the regulator and the efficiency with which that office carries out its task will be taken into account and be open to discussion? May I also be assured that the regulatory system that is introduced after the consultations will in no way debilitate the ability of Mercury and British Telecom, because of increased competition available thereafter to foreigners in this country, in the world markets in which they seek to operate?

Mr. Lilley : My hon. Friend makes two good points. First, I assure him that the director general will be consulted at all stages of the consultation, that he has participated fully in drawing up the document and that he supports all the recommendations in it. Secondly, I agree that it is important that British companies should be enabled and encouraged to participate on the world stage. Indeed, they are well placed to do so, because they are privately owned and are the favoured operators in many countries. That is why British Telecom, for example, has won a contract for 3 million telephones to be installed in Thailand, Cable and Wireless is a participant in Japan and so on. We shall do nothing to undermine that and everything to support it.

Mr. Alfred Morris (Manchester, Wythenshawe) : Why are there no proposals in the document about the particular problems and needs of disabled people?

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Mr. Lilley : That matter is discussed in the document. I appreciate that the right hon. Gentleman will not have had time to read it in full. The director general has consulted British Telecom and is seeking to encourage BT to spend yet more. Last year it spent £3 million on the disabled. I believe that it is committed to spending £4 million on a special unit for the deaf and, naturally, we support BT undertaking such social obligations.

Mr. Michael Grylls (Surrey, North-West) : It is odd to hear the hon. Member for Dunfermline, East (Mr. Brown) running down BT, when his party's Fabian Society said recently that it was hard not to be impressed with the pace of change in the last few years. Is it not a fact that the Government's telecommunications policy has been one of our great success stories? Following liberalisation and privatisation, we now have two international companies of great esteem, BT and Mercury and, even more important, thousands of small companies that could never have entered the market without that liberalisation. May we have an assurance that, under his proposals, there will not be any unfair advantage to nationalised companies compared with private sector companies, which want competition to be increased? In other words, may we be assured that he will not lean in favour of public sector companies?

Mr. Lilley : My hon. Friend is right to draw attention to the excellent Fabian Society document, with which I found much to agree, and to emphasise the importance of jobs in the industry, in the many subsidiary companies engaged in activities related to

telecommunications, in the importance for industry as a whole of having an efficient and dynamic telecommunications sector and in the importance of winning markets abroad. As for the position of foreign state-owned companies that wish to participate in this country, I shall, of course, pay close attention to the degree of state ownership when considering granting a licence. Privatisation has been successful, and we do not wish to encourage nationalisation by the back door.

Mr. Alex Carlile (Montgomery) : Does the right hon. Gentleman agree that, while all the smart waffle from the Labour Front Bench fails to disguise the freephone line to renationalisation, the Minister's commitment to privatisation appears to be somewhat limited? Is it not a fact that the apparent decision not to liberalise the price regime until 1993 is likely to keep British Telecom profits up artificially? How far is that related to the Government's wish to maintain a high value of their own shareholding of BT? Will the right hon. Gentleman assure the House that, whatever happens in the necessary freeing of the telecommunications industry to market forces, a fair deal is ensured for rural subscribers?

Mr. Lilley : I am not sure that I understood the point that the hon. and learned Gentleman was trying to make. The regulatory system puts a limit on the amount by which prices can rise. It does not boost prices. We have in the review increased the scope and extent of competition, which may keep prices below their limit in some areas of the market, and increasingly so as competition spreads. The agreement with the director general runs to 1993 and can subsequently be extended with another agreement.

We have made it absolutely clear, as has the director general, that we wish to see continuing adequate provision

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for rural users. There must be grave doubts about whether it is more expensive to supply them, as some people suggest, or much the same, as others allege.

Mr. Edward Heath (Old Bexley and Sidcup) : Is my right hon. Friend aware that British Telecom has dramatically, in one step, raised the cost of a wake-up call to £2.49 per call--£17.46 a week? Therefore, is he surprised that the greater part of the nation can no longer afford to be woken up?

Mr. Lilley : I am sure that my right hon. Friend has never had that problem or needed that service. He will be pleased to know that, now that there is competition on so-called value added services over the line, he will be able to seek a more cost-effective competitor, and I suggest he does so.

Mr. John McWilliam (Blaydon) : May I declare my interest, which is the same as that of my hon. Friend the Member for Wigan (Mr. Stott)? I am sponsored by the engineering section of the National Communications Union. Does not the Minister accept that his proposals for the local loop will produce no competition in reality, particularly in rural districts? Does he also accept that the development of a national broad band network, which industry and commerce need going into the next century, will not happen under his proposals? Finally, does he accept that the proposals to allow foreign cable competitors into our market, while we do not have equal access into theirs, could be widely seen by many of us as little short of economic treason?

Mr. Lilley : First, I pay tribute to the members of the hon. Member's union and employees of British Telecom and other companies generally. They have demonstrated that, once freed from the shackles of nationalisation, they are well able to compete internationally, and produce excellent and improving services and that there is nothing wrong with them.

I do not agree with the hon. Gentleman's points. His suggestion that there has been no additional competition in rural districts is not necessarily the case. We are looking for competition to come into local networks in three ways--first, the cable operation, which might not extend into some regional districts ; secondly, the expansion of the mobile networks, possibly allowing them to introduce relationships with fixed links that might be of value in those districts--radio communication is already being used by BT in rural districts, which is one reason, as I have said, that it is not necessarily more expensive ; and thirdly, equal access will be made available to people progressively across the country, if that is the eventual conclusion of the consultation. That will ultimately be just as available to those in rural districts as to those in urban ones. As for international companies, we are seeking to enable BT and other companies to participate in other markets, just as we allow other companies to participate in ours.

Mr. John Gorst (Hendon, North) : In welcoming my right hon. Friend's statement, may I ask him whether it is possible to hope now, as a result of what he is implementing, a reduction in the cost of calls from car telephones and other forms of mobile telephones? Can we now look forward to an acceleration in the use of mobile telephones in Europe?

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Mr. Lilley : As my hon. Friend knows, we recently licensed three new PCN operators, in addition to the two mobile operators and the four telepoint operators. Competition between them should extend the coverage of mobile networks and ultimately reduce charges, which I am sure my hon. Friend will welcome.

Mr. Ted Rowlands (Merthyr Tydfil and Rhymney) : Does the right hon. Gentleman realise that there is no competition over telephones in my community and there is no likelihood of delivering the number of television services unless cable television is introduced? The Minister has shut the door on the possibility of British Telecom delivering cable television. Surely that option should remain open if the Minister is to force other cable television companies to come into communities such as mine.

Mr. Lilley : The danger is that, if we gave British Telecom the right to pass entertainment services over its network, the cable operators would never invest in the necessary network because they would fear the eventual entry of BT. So we might end up with the worst of all possible worlds : neither BT nor the cable operators. That is why we believe that there is a need for a degree of regulation in this area to allow alternative competitors to build up over a period of up to 10 years. I am not sure that the hon. Gentleman will find that those on the Opposition Front Bench agree with him on this.

Sir Peter Hordern (Horsham) : Will my right hon. Friend increase the powers of Oftel? Is he aware that the Director General of Oftel wrote to me a short while ago agreeing with me that the restrictive practices that British Telecom operates by not allowing the addresses which are freely available in telephone directories to be revealed to those who inquire of telephone directory inquiries are indeed restrictive practices and should be abolished? Why should a service that is so widely in demand by people who merely want to write a letter to someone who happens to live in another part of the country be refused by British Telecom and not be allowed to be provided to any other agencies that might like to provide it?

Mr. Lilley : My hon. Friend makes a good point. I shall discuss it with the Director General and see whether there is a case for taking it forward.

Mr. Dick Douglas (Dunfermline, West) : Does the right hon. Gentleman accept that he is dealing with a complicated and important issue in the context of areas such as Scotland? Not only do the proposals deal with communications by telephone ; they have an important impact on information technology, too.

Why does the infant industry argument apply to protecting areas in which 70 per cent. of people have cable television but not to rural areas? Why is there no positive discrimination to ensure that rural areas and other parts of Scotland get the services they require if industry and commerce are to be sited there after 1992?

Mr. Lilley : I am surprised that the hon. Gentleman is not aware that the Highlands and Islands area made a principal sales pitch out of the fact that it is in the forefront of introducing digital technology, which is a great attraction to new service industries and companies coming to the area. That has been achieved by this Government.

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Mr. Roger Knapman (Stroud) : May I congratulate my right hon. Friend on his excellent statement? Will he disagree with the opinion that BT is a natural and necessary monopoly, the phrase used by the right hon. and learned Member for Monklands, East (Mr. Smith)?

Mr. Lilley : It is clearly the dominant supplier at the moment. Through these proposals and this review we are seeking to determine whether we can extend competition into areas that it has not reached and deepen it where it exists already. There is nothing natural and inevitable about a monopoly in this area, especially as new technologies open up new opportunities for introducing competition. Happily, we are at the forefront of exploiting these new technologies world wide.

Mr. Terry Lewis (Worsley) : With the introduction of new players to the field, will the Secretary of State consider statutory supervision of the entertainment services?

Mr. Lilley : I appreciate the hon. Gentleman's point and the campaign that he has waged on this, with which I have some sympathy. He will know that people already can be prosecuted for obscene communications over the telecommunications network, either by individuals or by the police ; and that there is a voluntary code of practice with a number of safeguards to prevent the abuse of these services.

Mr. Robert Hayward (Kingswood) : Like the hon. Member for Blaydon (Mr. McWilliam), I declare a financial interest in this matter : it is the subject of public record. Will my right hon. Friend give serious attention not only to state-owned companies but to privately owned monopolies in other countries that might make bids for trunk operations? What time scale does he have in mind for implementing this document?

Mr. Lilley : It is not our practice to exclude foreign private investment in this country. As one of the largest investors overseas, we would be the last to try to introduce barriers to the flow of investment in either direction. We shall try to ensure that companies that inhibit BT, Cable and Wireless or other companies from operating in their countries remove those restrictions. We shall argue that within the context of the GATT round.

Mr. Stuart Randall (Kingston upon Hull, West) : Is the Secretary of State aware that, when considering in his statement the various organisations that are competing in the telecommunications market, he made a serious omission? He left out Kingston Telecommunications a company which provides cheaper telephone services and a far better quality service than BT and which is developing value-added networks. Will he confirm that the review will in no way impair the excellent work over recent years to develop this high-technology company, which is much loved by the people of Humberside?

Mr. Lilley : I can confirm that to the hon. Gentleman. That company has been a little beacon of competition in the former state sector and it has pioneered a form of equal access which will undoubtedly have lessons for the rest of the country. We welcome that.

Mr. Phillip Oppenheim (Amber Valley) : Bearing in mind the fact that, since 1979, the Opposition have opposed every attempt by the Government to introduce more competition to the telecommunications system, does

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my right hon. Friend agree that they have a cheek to sneer at his statement? Do they think that people easily forget that if they had had their way over the past 11 years we would still have a telecommunications system that was a cosy state-run monopoly, run for the benefit of the unions and not the consumers, and probably still supplying dial telephones after a six-month wait?

Mr. Lilley : My hon. Friend is absolutely right. If one wants a case study, one has only to look at the introduction of mobile telephones in Britain and Germany. Here we introduced two competitors, but in Germany there is a state-run monopoly. Now Britain has a market that is five times the size of the market in Germany.

Mr. Harry Ewing (Falkirk, East) : Does the Secretary of State appreciate that at least part of the increased profits shown by British Telecommunications arises from its disgraceful decision to take a contributions holiday from the workers' pension fund because it decided that there was a surplus in that fund? When the Secretary of State pays tribute to those workers, will he condemn the action of BT in robbing the pension fund in order to inflate its profits? When he was asked about provision for disabled people, he said that it was mentioned in the document. What are the specific proposals?

Mr. Lilley : I mentioned some of the specific proposals in answer to an earlier question. Already BT spends about £3 million on the disabled. There is special provision in the charge for directory inquiries to exempt blind people, and they will have the benefit of lower call charges and so on.

Mr. Peter Viggers (Gosport) : Does my right hon. Friend agree that the cable television industry is poised to make an investment of some £4 billion in the infrastructure of this country and that that will have considerable benefits for both domestic and business consumers? I think that my right hon. Friend may know about my interest in this case. Does he agree that that investment would be prejudiced unless it is made on fair terms and that therefore the bar on BT carrying entertainment is critical? will he explain how the 10-year bar on BT carrying entertainment might be reduced to seven years and how that would operate?

Mr. Lilley : My hon. Friend makes a very good point. In our judgment, a guarantee period is necessary. Initially, we propose 10 years, but it is suggested in the document that if, after seven years, the director general believes that the industry is sufficiently well established and profitable and that competition can be further enhanced by shortening that time scale, he will do that. However, he will not make that decision until seven years have passed and then only if he judges that things have gone very well until then. The hon. Member for Falkirk, East (Mr. Ewing) asked about pension funds. I never question points made by actuaries. I can only assume that the actuary was well satisfied with the success of British Telecom's pension fund in investing in other healthy British companies.

Mr. Roger Stott (Wigan) : The Secretary of State will be aware of the great strides made by British Telecom in the fibre-optic broad band networks. Before that network can be introduced to the local loop, it will be necessary for British Telecom to provide finance for the loop. Is the Secretary of State aware that that can only be done if the

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asymmetry rule is withdrawn? Why is he forbidding competition by not allowing British Telecom to carry entertainment on its lines? That would provide finance for fibre optics in the local loop. Why is he against such competition?

Mr. Lilley : The hon. Member is right. There have been considerable advances in the use of fibre optics. Before privatisation, BT had 13, 000 km of fibre optics entrenched. It now has 1.1 million km of fibre optics installed. The question is whether we should compel or artificially encourage the further extension of this. The Labour party is committed to making BT cover the country with fibre optics. I agree with the Fabian Society that that is a silly policy and that it is not for the Government to choose between alternative technologies. As to whether this could be facilitated by removing the asymmetrical policy, I believe that my other arguments are compelling. It is open to BT to introduce fibre optics and other devices to bring telephony to the household before the 10 years are up, if it so wishes.

Mr. Quentin Davies (Stamford and Spalding) : My right hon. Friend will be aware of the view, promoted by Mercury among others, that ending the duopoly at this point will reinforce BT in its predominant market share, while myriad smaller suppliers compete for 15 per cent. or whatever of the market, in turn making it difficult for any competitor of comparable size to BT to emerge. I do not necessarily subscribe to that view, which could be dismissed in the case of Mercury by saying, "It would say that anyway," but I invite my right hon. Friend to give us his views on that issue.

Mr. Lilley : Yes, that is an important question, to which one needs to respond. Mercury is well established and a viable and strong company. It will potentially benefit from a number of proposals in this document. For example, the extension of competition to local networks will, even if not carried by Mercury itself, feed more calls into the Mercury network as, very often, those new competitors will wish to channel calls through the competitive Mercury system. The introduction of equal access, if we go ahead with it, will also probably help Mercury, and it has advocated it. A number of the measures that we have proposed will strengthen rather than undermine Mercury.

Mr. Roy Beggs (Antrim, East) : I warmly welcome the statement, because competition and choice will benefit customers. As we have two of the largest mobile telephone networks in the world, has the Minister any plans to recommend to the manufacturers of mobile telephones that they should carry a security warning?

Mr. Lilley : The hon. Gentleman may be pleased to know that the introduction of the new digital technology next year will make interception far more difficult. I shall make sure that a certain Minister in the Northern Ireland Office is one of the first to receive the new technology.

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Mr. David Tredinnick (Bosworth) : My right hon. Friend referred to the importance of fibre optics. Will he undertake to allow British Rail to use its fibre optic network? Does he think that the decision to offer more licences will have any impact on BT's proposals to charge for directory inquiries?

Mr. Lilley : I propose in the document that utilities such as British Rail should be able to compete and receive licences so long as they do so fairly and firmly in the private sector. That means that they must not give exclusive wayleaves over their land to one private company, and if they participate in a private company, it should be majority private owned. I hope that that will meet my hon. Friend's concerns.

Mr. D. N. Campbell-Savours (Workington) : Did the Secretary of State use the clout that goes with retaining 49 per cent. of the shares in BT to argue against the introduction of charges for directory inquiries? Does he intend to sell that stake before May 1992?

Mr. Lilley : The hon. Member is quite unaware that the quarter of a billion pounds spent on directory inquiries will be paid by those making the inquiries and that every penny of it will come off the charges paid by ordinary users. Charges will be reduced by 4.5 per cent. for local calls and 7.3 per cent. on trunk calls, at the same time as charges are introduced. Many of these inquiries are carried out by commercial organisations such as marketing firms. I see no reason why households should subsidise marketing organisations.

Mr. Peter Bottomley (Eltham) : My right hon. Friend has referred to the fact that the Government remain a 49 per cent. shareholder in BT, and he alluded to the fact that, although some things may be legal, they are highly undesirable, such as nasty phone lines. We know that BT responded to widespread anger at the way in which they were being used. May I refer my right hon. Friend to the BT advertisement that appears on page 19 of The Sun and to that on page 10, which draws attention to the privatisation of electricity supply, and say to him, as the thought of the day, that we should judge people by their supporters and that Government advertising should no longer support The Sun if is behaves as it did on the front page of today's edition, which is how the Russians behaved during the mid-1960s to Commander Courtney?

Mr. Lilley : I entirely endorse my hon. Friend's remarks. I thought that the front page of The Sun was disgusting and I did not get to page 19. I hope that it will not be repeated. However, I do not want to see Government advertising used in a discriminatory way according to the contents of newspapers.


The following Members took and subscribed the oath :

Terence Henry Rooney Esq., for Bradford, North.

Joseph Edward Benton Esq., for Bootle.

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Personal Statement

Mr. Speaker : I remind the House that a resignation statement is heard in silence and without interruption.

4.19 pm

Sir Geoffrey Howe (Surrey, East) : I find to my astonishment that a quarter of a century has passed since I last spoke from one of the Back Benches. Fortunately, however, it has been my privilege to serve for the past 12 months of that time as Leader of the House of Commons, so I have been reminded quite recently of the traditional generosity and tolerance of this place. I hope that I may count on that today as I offer to the House a statement about my resignation from the Government.

It has been suggested--even, indeed, by some of my right hon. and hon. Friends--that I decided to resign solely because of questions of style and not on matters of substance at all. Indeed, if some of my former colleagues are to be believed, I must be the first Minister in history who has resigned because he was in full agreement with Government policy. The truth is that, in many aspects of politics, style and substance complement each other. Very often, they are two sides of the same coin.

The Prime Minister and I have shared something like 700 meetings of Cabinet or shadow Cabinet during the past 18 years, and some 400 hours alongside each other, at more than 30 international summit meetings. For both of us, I suspect, it is a pretty daunting record. The House might well feel that something more than simple matters of style would be necessary to rupture such a well-tried relationship. It was a privilege to serve as my right hon. Friend's first Chancellor of the Exchequer ; to share in the transformation of our industrial relations scene ; to help launch our free market programme, commencing with the abolition of exchange control ; and, above all, to achieve such substantial success against inflation, getting it down within four years from 22 per cent. to 4 per cent. upon the basis of the strict monetary discipline involved in the medium-term financial strategy. Not one of our economic achievements would have been possible without the courage and leadership of my right hon. Friend--and, if I may say so, they possibly derived some little benefit from the presence of a Chancellor who was not exactly a wet himself.

It was a great honour to serve for six years as Foreign and Commonwealth Secretary and to share with my right hon. Friend in some notable achievements in the European Community--from Fontainebleau to the Single European Act. But it was as we moved on to consider the crucial monetary issues in the European context that I came to feel increasing concern. Some of the reasons for that anxiety were made very clear by my right hon. Friend the Member for Blaby (Mr. Lawson) in his resignation speech just over 12 months ago. Like him, I concluded at least five years ago that the conduct of our policy against inflation could no longer rest solely on attempts to measure and control the domestic money supply. We had no doubt that we should be helped in that battle, and, indeed, in other respects, by joining the exchange rate mechanism of the European monetary system. There was, or should have been, nothing novel about joining the ERM ; it has been a long-standing commitment. For a quarter of a century after the second

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