House of Commons Hansard Debates for 14 Mar 1991

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Telecommunications

8.14 pm

Mr. Andrew Mitchell (Gedling) : I want to speak this evening on the important subject of choice and competition and the British telecommunications industry. This is not the first time on which I have been fortunate enough to win a place in the ballot for the Consolidated Fund Bill, but it is the first time on which I have won a place at the civilised hour of 8.15 pm. The other occasions have involved the hour of 5 am.

I am probably as pleased as my hon. Friend the Minister and my hon. Friends are that this debate has been called rather earlier than it might have been. I am especially pleased that my hon. Friend the Minister for Corporate Affairs is on the Front Bench. He is well known in industry, in the City and in the telecommunications industry for the skill and experience that he has brought to this important area. I am sure that he will take us a little further in the direction in which the Government are minded that the

telecommunications industry should go. That will be of great benefit for this debate.

I am glad that my hon. Friends the Members for Wyre Forest (Mr. Coombs), for Wyre (Mr. Mans) and for Cornwall, North (Sir G. Neale) will contribute to this debate. They will cover a number of areas, and each has far greater expertise than I do. I want to look at the facts and draw together a number of strands of Government policy in this important area.

This debate is extremely difficult and embarrassing for the Labour party, because it goes to the heart of the difference between the two parties. This debate is about not only the telecommunications industry--

Mr. Terry Fields (Liverpool, Broadgreen) : No.

Mr. Mitchell : If the hon. Gentleman will contain himself, I will explain why it is so difficult and embarrassing for the Labour party. The debate goes to the heart of the difference between the two parties. Our debate is not only about the British telecommunications industry, but about choice. Therein lies one of the great differences between the two parties. The Conservative party believes passionately in choice and opportunity, and in spreading power and opportunity, which results from choice. The Labour party does not believe in that. The telecommunications industry is an excellent area in which to explore the fundamental difference between the two major parties in the House.

The telecommunications industry represents in the clearest way the Government's political and economic priorities. It makes it clear that we are intent on enhancing competition, on reducing the scope of the public sector and on promoting choice for the consumer. Those policies have been an unambiguous success in

telecommunications. Since British Telecom was privatised in 1984, the British telecommunications industry has become one of the most dynamic and open in the world. There has been a wide range of benefits, including lower prices, more choice, better service, more investment, more competition and a more fulfilled work force. It is a measure of the Labour party's embarrassment that its Benches this evening are so empty. Labour Members have stolen away into the night, ashamed of their record and embarrassed by the terms of my motion.

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I mentioned earlier that the debate was about choice. Choice is the hallmark of Conservatism. It is choice not only in the area of telecommunications, but in a range of other areas that affect so many people in their everyday lives. In housing, choice is personified by the Government's right-to-buy policy, which has spread choice, opportunity and ownership to many people. More than 1 million homes have been sold under that scheme. The council tenants--tenants of the state --who have been enabled by that Conservative policy to enfranchise themselves into home ownership are the first to comment with great approval on that aspect of choice.

Ms. Joyce Quin (Gateshead, East) : A minute ago, the hon. Gentleman referred to investment. Is it not the case that investment in new technology has lagged behind that of our competitors? British Telecom, for example, spends only 1.9 per cent. of sales on research and development, compared with 4.7 per cent. spent in France, 3.8 per cent. in Japan and 3.9 per cent. in Sweden. Will the hon. Gentleman confirm that our telecommunications equipment industry has gone from a trade surplus in 1979 to a trade deficit today?

Mr. Mitchell : If the hon. Lady will bear with me a little longer, I shall give her an explanation that I hope will be to her satisfaction. Those statistics are not only meaningless but bogus. I intend to dwell at some length on particular areas of the telecommunications industry where Britain is a world leader. In the meantime, I want to return to what I was saying about choice. I have talked about housing, but choice is very evident in our schools as well. One has only to consider the tremendous opportunities that local management has unleashed. At present, many schools are considering whether grant-maintained status could be very suitable for them. Grant-maintained status has been catching on perhaps a little more slowly than some of us anticipated at the beginning. However, I believe that it will gather pace and, in terms of public support for a policy that extends choice, will be the educational equivalent of the right to buy. One thinks of the assisted places schemes. Dare I mention my ten-minute Bill, which was given an unopposed First Reading yesterday? The purpose of that Bill is to compel all schools to make their examination results available in common form for publication. Thus, in education, too, choice is at the heart of the policies of the Conservative party.

In the case of the health service, one need only look at the way in which provider resistance to the Government's health reforms has evaporated to see how GP budget-holding is gaining in popularity, how trust hospitals are gaining in popularity, and how the health reforms have helped patients. Provider resistance has slowly but surely disappeared. Competition, improving standards for the public, choice, opportunity for the many rather than privilege for the few--these are the hallmark of 1990s Conservatism, and they are at the heart of this debate, although it refers specifically to the British

telecommunications industry.

Privatisation has quite simply been a brilliant success--and not only for telecommunications. One thinks of the privatisation, in the last few days, of the electricity industry, which has been such an outstanding success. This policy has been copied all around the world. Even in Russia, people are beginning to wonder whether

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privatisation policies would help their enormous and ailing economy. Only from the Opposition, whose Members are too embarrassed to be here tonight, do we get an indication that this policy, which is popular all round the world, has failed to penetrate. British Telecom is a very good example. The Labour party opposed every change we made : it is all quite clearly on the record.

I want to take the House back to 1981. In July of that year, the British Telecommunication Act separated British Telecom from the Post Office, and the Secretary of State took powers to license competitors. That was opposed by the Opposition. In October of that year, the first tranche of Cable and Wireless shares was sold, the remainder being sold in 1983 and 1985. That too was opposed by the Labour party. In February 1982, Mercury was licensed as a Cable and Wireless/Barclays/BP joint venture, later becoming wholly owned by Cable and Wireless. That was opposed by the Labour party. In March 1982, terminal equipment supply was liberalised, and the British Approvals Board for Telecommunications was set up. In October, value-added services over fixed networks were liberalised. In November 1983, we had the duopoly statement, and the first broad-band cable franchises were announced.

In April 1984, we had the Telecommunication Act, establishing Oftel and the current licensing regime. In June of that year, new licences were issued to BT and Hull. In November, 51 per cent, of British Telecom shares were offered for sale. That was all opposed by the Labour party. In June 1985, two cellular radio licences were issued. In October, the BT-Mercury interconnect determination was issued by the director-general. In March 1986, two national private mobile radio operators and five additional national radio pagers were selected, four existing operators having already been licensed by British Telecom. In October 1986, the 100,000th cellular subscriber appeared. In December, equipment approval powers were delegated by the Government to the director-general.

In February 1987, data services over fixed networks were liberalised. In October, the first television cable franchise--Windsor, I think--was permitted to start trial telephone services. In November, Mercury was permitted to provide public call boxes. In October 1988, specialist satellite service operators--United Kingdom services only--were announced. In January 1989, four telepoint operators were announced. In the same month, the consultation document "Phone on the Move" was issued. In September, the telepoint services began. In November, the full resale of British Telecom and Mercury leased lines was permitted. In the same month, specialised satellite services operators were permitted to provide European services. In December, three personal communication network operators were announced. In 1990, the one millionth cellular subscriber came forward. In July, arrangements for the duopoly review were announced. In November, the duopoly review consultative paper was published. At this point, we can see the hand of the recently appointed Secretary of State for Trade and Industry at work. The Secretary of State deserves a very special tribute for his personal style and success. His contribution is quite clear from the changes that have been made in the White Paper since the consultative document was published. I have traced six such changes.

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First, whereas the Government were going to support progressive introduction, equal access is now to be introduced as soon as possible.

Secondly, the Secretary of State has decided that, for the foreseeable future, BT and Mercury will not be allowed to provide entertainment services at a national level in their own right. In the past, as I understand the position, the proposal was to permit provision after 10 years, with the possibility of a review after seven years.

Thirdly, "neighbourhood telepoint" is to be licensed. That too represents a change from what was proposed in the consultative paper. Now retailing is to be permitted--another change. Interconnection arrangements are to be streamlined and strengthened. That is the fifth change. The sixth is that number portability is to be introduced, subject to a cost-benefit study. Number portability will be very helpful to many hon. Members who live in two places--in London during the week, and in their constituencies at the weekend. The entire White Paper on telecommunications policy in the 1990s is a great tribute to the skill, beliefs and dynamism of my right hon. Friend the Member for St. Albans (Mr. Lilley), who is a very good Secretary of State for Trade and Industry. In my view, the key measures in the recently announced White Paper have received insufficient attention. They are staggering. They mark the ending of the present duopoly policy. New companies will be allowed to apply for licences to run new telecommunications networks. That is a very major and substantial change.

There will be new, tougher annual call price capping. Increases will be limited to the retail price index figure less 6.25 per cent., whereas previously it was that figure less 4.5 per cent. That represents a staggering fall, in real terms, in the cost of using the telephone. It is a remarkable success.

There is to be a 10 per cent. cut in charges for international calls. That, too, is remarkable. As I shall demonstrate shortly, it is very different from what happened when British Telecom was nationalised and was under the control of the Labour party. There will be a more effective low-user scheme, benefiting up to 2 million customers who make the least use of the telephone but may rely on it as a lifeline. This is an enormously important change. It should also be welcomed by the Opposition, as it relates to many very poor folk who, without a telephone, would be in very serious danger. It is a great tribute to the Government and to British Telecom.

There have been a host of other developments that I shall not deal with in this short debate. A wide range of new satellite services serving niche markets will be permitted--that change will be greatly to our advantage. All this comes on top of the many other changes that have been achieved over the past 12 years. In 1984, there were 20 million British Telecom phone lines. In 1990, there were no fewer than 25 million--an increase of 26 per cent. That is most impressive. Since privatisation, prices have fallen by more than 20 per cent. in real terms. That too is a most impressive statistic.

Mercury is established as a serious competitor and has installed a national digital network that exceeds the company's coverage by far. Seventy-five per cent. of customers can have a choice of trunk operator to carry their calls. That includes the magnificent Gedling

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Conservative Association headquarters, recently opened by my right hon. and learned Friend the Member for Surrey, East (Sir G. Howe), which has to its great advantage benefited from that excellent change.

BT is today investing about £3 billion a year in modern equipment. That is part of the answer to the hon. Lady's earlier intervention. In 1984, BT had 13,000 km of optical fibre in its network ; today, it has 1.1 million km. In 1984 we could dial 137 countries direct. Now there has been a 45 per cent. increase, and we can reach 99 per cent. of the worlds 700 million phones.

In 1979, less than half of all installation orders were completed within two weeks. We can all remember what it was like then. Now 96 per cent. are completed by the day agreed with the customer. Now 96 per cent. of phone boxes work--an amazing change. Equipment is much cheaper than elsewhere in Europe and call charges are lower. The United Kingdom now has the two largest cellular radio networks in the world.

All that is against a background of innovative services--satellite news gathering, store and forward fax machines, call follow-me and the development of the 0800 numbers. That is a most impressive performance.

What of the Labour party? While Telekon Malaysia is shortly to pass into the private sector, while Mexico has sold its biggest telecommunications company, Telecons de Mexico, in 1990, while Argentina sold Entel last year, while the eastern bloc is considering the advantages of privatisation, the Labour party specifically commits itself to renationalise BT. Its policy document "Meet the Challenge, Make the Change"--known affectionately to my hon. Friends as "Duck the Challenge, Fake the Change"--makes it clear that it is intent on renationalisation.

Moreover, Labour would renationalise on the cheap. Labour leaders recognise the vast expense of renationalisation and have tried to devise schemes to realise their aims without paying the full price. The Government's successful policies of liberalisation and deregulation of telecommunications have inspired Governments throughout the world to follow a similar course.

Meanwhile, the Labour party is moving in the opposite direction. It has put forward no convincing rationale for its threat to renationalise BT. It cannot be justified on monopoly grounds because BT operates in an increasingly competitive market. It cannot be justified on the grounds that BT is a utility because the Labour party appears to have dropped plans to renationalise British Gas. The form of words used in "Modern Manufacturing Strength" the Opposition's latest policy document, suggests that the Labour party wants to renationalise BT because of a

"long-term commitment to technological advance in

telecommunications and elsewhere."

The hon. Lady will find that on page 16. That is no justification at all. BT's investment has soared since its successful privatisation.

The Labour party has still failed to come clean on the cost of its policies. Statements in "Modern Manufacturing Strength" that a Labour Government would not be "dirigiste"--page 5--are difficult to take seriously when contrasted with Opposition's policy on

telecommunications. Labour has committed itself to the view that "a national fibre optic cable network cannot be left to the free market". That is on page 12. Therefore, BT must be empowered and directed to undertake this major investment programme in the public interest.

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The Labour party's plans could cost the taxpayer as much as £20, 000 million. It is high time that the Opposition put a price tag on their promises. They would pour taxpayers' money down the drain. Britain is already benefiting enormously from private sector investment without charging that bill to the taxpayers. Fibre optics and broad band cable should be developed at the speed and in the way that the market demands. There is no point installing capacity that will not be used, or offering people services that they do not want. The rapid growth of telecommunications systems in Britain shows that the Government's policy works. Britain already has more fibre installed than France or Germany which, geographically, are rather larger countries than we are.

But above all, we know from experience that the Labour party's industrial policy does not work, because we have the example of what happened in the 1970s. Britain had a nationalised monopoly. We have the record. We know what happened. Labour put up prices by more than inflation and, if I am correct, in one year it doubled prices. A quarter of the 77,000 call boxes did not work. The nationalised BT was starved of money for investment in those days--that is another part of the answer to the hon. Lady's earlier intervention--and it was cut off from international technology. What an amazing contrast. We have ensured that the customer comes first. BT has put the days of subsidy and state control behind it. It is no wonder that Labour Members are too embarrassed to attend tonight in any number to debate the motion with me and my hon. Friends. I invite the hon. Lady to cast off the Labour party's absurd and ridiculous policies. After all, there are not many hon. Members here to witness that tonight if she does. She can recant publicly tonight and end the absurdity of the Labour party's policy in this area.

The British public will not be deceived by the Labour party's absurd proposals, however they are dressed up. We know perfectly well, and so does the British public, that beneath the veneer of respectability the Labour party cannot cast out the nakedness of socialism in all its ugliness as revealed by its telecommunications policy.

The Labour party's electoral appeal at the next election will depend on persuading the public of two key factors. The first is that the Labour party is a true supporter of markets and free enterprise, and the second is that it can run a liberal market economy better than Conservative Members who believe in it and always believed in it before it became so popular not only in Britain but around the world.

The Labour party's telecommunications policy stands as a beacon, a monument to the fact that nothing could be further from the truth. 8.36 pm

Sir Gerrard Neale (Cornwall, North) : I declare my interest in this subject and I congratulate my hon. Friend the Member for Gedling (Mr. Mitchell) on the spirited way in which he has addressed the subject and on his success in the ballot which has allowed him to introduce this important subject.

Last week marked yet another mutation in the development of telecommunications policy in Britain. As my hon. Friend has said, it saw the ending of the duopoly policy, the beginning of the end of restricted access and a whole range of other measures which he so ably listed. But the process started back in 1980. In another incarnation,

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my hon. Friend the Minister for Corporate Affairs was very much involved in that at the time and he has been following it enthusiastically since, even when he has not had ministerial responsibility for it.

It was Lord Joseph, when Secretary of State for Trade and industry, who saw the great need to introduce competition and he made the statement in July 1980 which shook many people and started the process of liberalisation. It certainly rattled the Opposition to their boots. They could not come to terms with the fact that not only were the Post Office and BT to be separated--to be fair, they were not against that policy--but we were about to embark on the liberalisation of the monopoly.

As my hon. Friend has pointed out, there were a series of landmarks or mutations in the development of that telecommunications policy. Successive Secretaries of State and Ministers, the Home Secretary, my hon. Friend the Member for Coventry, South-West (Mr. Butcher), who unfortunately is not too well at the moment, right through to my hon. Friend the Minister, have pushed and pushed to ensure that our telecommunications policy has become more conscious of competition and consumer choice.

Those who served on the Committee which considered the legislation will remember that it was lost because of the 1983 election. It was reintroduced in 1984 and was subsequently enacted. I do not think that the hon. Member for Gateshead (Ms. Quin) was a Member at that time, but Labour Members defended British Telecom to the hilt without being aware of the cost of supplying the service to a consumer. It transpired that British Telecom had only one qualified accountant. Its knowledge of the cost of the service that it provided was lamentable, but it has been driven to change by the policies of Ministers, whole-heartedly supported by Conservative Members. Rather than go over the ground that was more than ably covered by my hon. Friend the Member for Gedling, I shall deal with the statement that my right hon. Friend the Secretary of State for Trade and Industry made last week. I find it difficult to dislike the hon. Member for Dunfermline, East (Mr. Brown), and because of his performances at the Dispatch Box, I find it difficult to disrespect him. It was extremely unusual, therefore, that he crashed in against my right hon. Friend the Secretary of State, which showed either that he had not studied his brief as carefully as he should have or--I hope for his sake that this is not true--he cannot make Labour policy on industry and telecommunications stand up. One of his first points was on research and development. British Telecom is a private company. It is not for the Government to dictate its research and development policy, any more than it is for them to dictate the policy of Mercury or any other company.

As my hon. Friend the Member for Gedling said, British telecommunications products and services lead the world. I am sure that my hon. Friend the Minister will confirm that the Department is bombarded by people from around the world who want to study the way in which our policy has opened up telecommunications. My hon. Friend the Member for Gedling mentioned the countries that have followed our example, and some of the countries that the hon. Member for Dunfermline, East used to show that our policy is wrong are in the process of not only liberalising but privatising.

The hon. Member for Dunfermline, East mentioned prices. He has a considerable grasp of economics and cannot be unaware that inflation is falling quickly. British

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Telecom's prices are not increasing by the rate of inflation but are falling. It is extraordinary that he did not grasp that point. The hon. Gentleman said that domestic consumers would not gain from the reduction in the cost of international calls. I do not know whether he imagines that domestic users never make international calls.

The most extraordinary feature of the hon. Gentleman's speech was a question that he put to my right hon. Friend the Secretary of State :

"Will the right hon. Gentleman confirm that the difference between us is that, while he supports competition with reduced regulation, we believe that the real issue is that competition should be accompanied by proper regulation in the interests of the whole public."--[ Official Report, 5 March 1991 ; Vol. 187, c. 140.]

He put that point as if he were trying to elicit from my right hon. Friend the Secretary of State an admission that that was the Government's hidden agenda, but we have been pursuing that policy since 1980. I am sure that Ministers have sometimes been frustrated by the length of time that it has taken to implement it, but we have been proud to promote it, because we want more competition and choice and because we believe that strong private sector companies will create competition and strength without regulation. The purchasing power of the consumer must be encouraged to create the choice that we are seeking.

We recognised in 1983 or 1984 that, because of its dominance of the marketplace, British Telecom had to be regulated by Oftel. I was sad last week to hear one of my hon. Friends impugn the operation of Oftel. Doubt was expressed in 1983 or 1984 about whether it would be strong enough, but no one who is involved in telecommunications can doubt that it has performed extraordinarily well. Tribute must be paid to Sir Bryan Carsberg and his team for the way in which they have assisted Ministers to achieve further choice.

I can only echo the comments of my hon. Friend the Member for Gedling on Labour policy--nothing has changed. On the Second Reading of the British Telecommunications Bill, Labour's spokesman said exactly the same as the hon. Member for Dunfermline, East : "The loss of the monopoly will mean a worse service for the majority of more people. Once again, the rural services will be at risk. It also means something else. The right hon. Gentleman"-- my noble Friend Lord Joseph--

"tries hard to reassure us on this matter, because of this, at least, he is aware. It means the decline of our industries in a special way."--[ Official Report, 2 December 1980 ; Vol. 995, c. 151.]

We have heard numerous examples--my hon. Friend the Member for Gedling could have been given many more of how British Telecom's performance has improved dramatically over the years.

Amusingly--I must draw the attention of the House to this--in the same debate, Labour's spokesman, John Silkin, who, tragically, is now dead, made it plain that Labour would buy back not only British Telecom but Cable and Wireless. He said that, on the strength of that policy, Labour would win the next election. As we know, the Conservative party had a majority of more than 100. That shows that Labour has learnt nothing from the performance of British Telecom and other players such as

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Mercury. Labour Members will never fool the public that they have a sensible policy, but perhaps they will go on fooling themselves. Although we have created choice for Members of Parliament in their various walks of life or in their homes, it is still almost impossible for any competitor of British Telecom to gain access to the Palace of Westminster to provide alternative services for us. I make that comment because the House ought to reflect on the choice that is available outside the Palace of Westminster. In making that observation, I do not seek in any way to cast any reflection on the Officers of the House ; the responsibility falls upon Members of Parliament.

A comment by the then chairman of British Telecom shortly after British Telecom was privatised epitomises the debate. The hon. Member for Gateshead, East might wish to reflect upon it. He said that the great challenge that faced him was to get all his staff, from top to bottom, to treat people at the end of the telephone, who pay the bills, not as subscribers but as customers. As long as the hon. Lady and all her parliamentary colleagues seek to treat people as subscribers--on the basis that, if they benefit from state services they should think themselves lucky--they will fall into the trap of not giving people the choice they deserve in terms of competitive products and services and of not treating them as customers, as they ought to be.

8.51 pm

Mr. Keith Mans (Wyre) : I am grateful for the opportunity to contribute to the debate. I intend to make three points. First, I want to look back over the past 12 years and to see what we have achieved. I pay tribute to my hon. Friend the Member for Gedling (Mr. Mitchell), whose description of what has happened was a tour de force. Secondly, I want to look forward to what we shall do in terms of providing cabling and an increasing variety of services for our customers, as opposed to subscribers. Thirdly, I shall say something about the product. We must always remember that we are trying to serve the consumers of this service-- private individuals in their homes and businesses. If the telecommunications industry manages to do that, it will succeed. If all that it wants to do is to go in the direction that the Government or outside forces suggest, it will fail. The industry must always be clear about what the customer wants.

It is worth looking back at what has happened during the past 10 or 12 years. There was one monopoly supplier in the public sector. We were not even allowed to buy a telephone. In the mid-1970s British Telecom--part of the Post Office--reluctantly allowed us the choice of three colours of the same type of telephone--black, ivory or red. If, however, we asked for an ivory or red telephone, almost certainly we got a black one. It was perfectly clear that there had been no research into what consumers wanted. Now there are literally hundreds of styles, colours and different types of telephone. Moreover, we can buy our telephone. As an example of what we have done about the pricing of telephones and services, there are telephones on the market now that cost less than a year's rental. The rental system was much promoted by the Opposition and, as far as I am aware, they still promote that policy. That is an example of what has happened to the pricing structure of the telephone industry.

The hon. Member for Dunfermline, East (Mr. Brown) asks what we have done for the less fortunate members of

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society, such as pensioners and those on low incomes. We have made both the product cheaper and the service cheaper. I could quote figures, going back over many years, to show that that is so. Between 1987 and 1990 the price of telephones and calls has risen less than the rate of inflation. In 1987 and 1988 the weighted average of telephone calls did not rise, and in 1986 it fell. Those figures were provided by Oftel. During this Government's period in office, and particularly since the industry was privatised, clearly efficiency has increased and the service has become cheaper.

That has to be compared with what the Opposition have done. They have consistently opposed every move that we have made to give the consumer choice, to make the service cheaper and to provide competition. In the early 1980s, they did not support the privatisation legislation. Then they tried to persuade all British Telecom's employees not to buy shares. However, 90 per cent. of them did so. During the election campaign in 1986, they said that they would renationalise the service.

It is interesting to note the comments of the hon. Member for Dunfermline, East in exchanges with my right hon. Friend the Member for St. Albans (Mr. Lilley). He referred to an extension of competition and then showed what he meant by that. He said that he believed that British Telecom should be set clear performance targets. Who is to set those targets? Not the consumer, not businesses using the service ; the Government would set those targets. He also said that there should be an increase in telephone connections. There was no thought to whether telephone connections were required by the consumer, or what kind of connections the consumer required. Moreover, no thought was given to whether the market would lead the desire for such connections. It was simply a target--set, no doubt, by a new Department of State for the number of connections that should be made by the year 2000, or whenever. Finally, the hon. Member for Dunfermline, East said that that would ensure that telecommunications benefited not just a few competing companies but the country as a whole. What did he mean by "the country as a whole"? Over the past five to 10 years, and with several competing companies, consumers and businesses that use the telecommunications system have been seen to benefit.

So much for the past. We now have a highly competitive system that is responsive to the market, and we can move forward to provide a variety of services. In the not too distant future, people may not have to be given hard-wired installations in their homes ; they may be able to take advantage of the sort of facilities that the Telepoint system is increasingly providing around the country. That will bring down the cost of connections and make them more easily available.

The fact that we have a highly liberal and competitive telephone and telecommunications system is already encouraging companies to set up headquarters in this country instead of in Germany, France and the rest of Europe. Unlike Opposition Members, they look at the figures and see that that will benefit their companies. That shows the success of what we have achieved, and it will help business in this country in the future.

When cabling comes, it must be in response to demand, not in response to documents cobbled together by politicians who believe that we need the whole country

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cabled by a particular year at huge cost to the public purse. Cabling must follow demand by business and by the people who want to pay for it.

I must also mention the products themselves before I end. This is an area of which we cannot be quite so proud as we can of the others that I have mentioned. Far too many products today are manufactured abroad, not as a result of a lack of research and development here but because of the lack of marketing skills in companies such as GEC. I exempt Plessey, which could call on considerable marketing skills and made quite a number of telephones in this country. In future, we must improve on that record so as to ensure that we can supply more of our large and liberalised market with indigenous products. I hope that, after 1992, such products will move out from here into Europe, and that we will not import large numbers of instruments from the far east.

Over the past 10 years, we have experienced a telecommunications revolution. Now we point the way forward for the rest of Europe, which, as my hon. Friend the Member for Gedling said, is following our example. It is a pity that the Opposition cannot admit their mistakes of the past and that they want to renationalise British Telecom and give it set targets instead of letting the market do that. Why cannot they go forward with us and show the rest of Europe how these things are done? We in this country pioneered the way forward, and I am convinced that it represents the way forward for telecommunications.

9.2 pm

Mr. Anthony Coombs (Wyre Forest) : First, I congratulate my hon. Friend the Member for Gedling (Mr. Mitchell) not only on initiating an important debate and on his Mexican--or was it

Spanish?--pronunciation, but on making the important point that the Labour party's recent apparent conversion to the market is bogus and hypocritical. On this issue, as on so many others, that party is walking backwards into the future, eyes firmly fixed on the past and on the ideologies of the past.

I should also mention what my hon. Friend the Member for Wyre (Mr. Mans) said. He emphasised that the huge revolution, especially of the past six years, has resulted from the market being flexible to consumer demand. It has been a market-led, not a centrally regulated, expansion. It has been led by the demands and needs of the consumer. That is why British Telecom is in the middle of a £3 billion investment programme ; it is why competition has so successfully produced dividends for the consumer.

We have already heard that, as a result of this competition and liberalised approach, prices have fallen by 20 per cent. in the past four years. What is more, it is estimated that, over the next three, they will fall again by about 26 per cent. in real terms--and they may even fall in absolute terms. We have also heard how 75 per cent. of the country is now open to competition from Mercury, and that 96 per cent. of customers' installations are fixed on time. Fewer than half of them were in 1979. We have heard, too, how the network of phone boxes throughout the country has grown by a third.

Possibly more significant than all these figures is the fact that because new products have been developed--Cellphone, Vodaphone and Cellnet are classic examples--the growth in this market has been stupendous. Between 1986 and 1990, there was an increase from 100,000 to

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1 million cellphone users. There is a huge variety of equipment, and investment has been of a consumer variety. In 1984, we had 13,000 km of optic fibre equipment and now we have no less than 1.1 million km.

Sir Gerrard Neale : Is my hon. Friend aware that, because the Government grasped the challenge offered by cellphones and set standards that were marketable around the world, products made in Britain are being exported, even to Japan?

Mr. Coombs : Precisely. That is the result of a policy that is competition and consumer-based.

British Telecom is a private company, but it would not be right to say that everything about it is perfect. I wish to show why it is by no means perfect and why the measures that my right hon. Friend the Secretary of State for Trade and Industry brought forward last week were necessary and extremely important in extending the idea of consumer choice and competition still further.

British Telecom says that domestic calls are subsidised by international calls, and international comparisons made recently show that domestic or short-range calls--not trunk calls--are five times more expensive here than they are in France, Italy and Germany. It costs £148 for the installation of a telephone in Britain whereas it costs only £20 in France and Germany. Admittedly, long-distance calls are cheaper in Britain than in those two countries. On revenue per employee and the number of BT employees per 10,000 lines, we lag behind the best. British Telecom has a revenue of $97,000 per employee per year. Pacific Telesis in the United States has a revenue of $147,000, while NYMEX, which is also in the United States, has a revenue of $166,000. The revenue of STET in Italy is $129,000. The figures show that there is a great deal to be made up by BT. BT has nearly 100 employees per 10,000 lines, Pacific Telesis has fewer than 50, and STET of Italy has fewer than 60. When BT mentioned that it had no fewer than 12 layers of management, it was clear that there was a great deal of scope for improvement. That is despite the fact that it is making £2.3 billion in profit, which is a 22 per cent rate of return on capital. That is significantly more than is made by its German or French counterparts. The Government are right, as was the Secretary of State last week, to call for more competition in what is still a highly monopolised sector. After all, 95 per cent. of domestic calls still go through BT. It is to the credit of my right hon. Friend the Secretary of State that he has identified that as a problem which requires radical action.

My right hon. Friend the Secretary of State is right to allow licences to anyone who is qualified to operate networks. He is right also to introduce price caps. That will mean that domestic calls will decrease in price over the next few years, while the cost of international calls will fall by 10 per cent. I hope that those reductions will happen quickly. The profit margins of BT on international calls vary from 43 per cent. to calls to France to 86 per cent. on turnover to Italy and 76 per cent. to South Africa. There is significant room for improvement in providing value for money on international calls.

My right hon. Friend the Secretary of State is right to push for more equal access. I urge him to examine the proposals, by Mercury which imply that equal access can

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be gained immediately. That is admittedly by the substantial investment, which I am sure it would be happy to make, of £300 million through System X into the domestic telephone market. It would then be able immediately to compete meaningfully with BT. The Secretary of State is right to allow time for cable companies to build investment for their telephony services by being protected from competition from British Telecom and Mercury for seven years. It has not been mentioned so far, but he is also right to allow reduced rental charges and 120 minutes of non-peak time per quarter for low-rate users of the telephone service.

Most of all, the Secretary of State is right to recognise that making further inroads into the market demands still further opening up of the telecommunications market to new technologies. That is what it is all about. If the market is opened up and new technologies are provided, that will inevitably lead to the competition and choice that the consumer wants.

The personal communication network licences, of which there are three, will revolutionise the telephone industry. I understand that some big players are already coming into the market. As to very small aperture terminals, VSATs, I understand that in America there are 30, 000 whereas in Europe, with a bigger population, there are only 600. They will bring further competition and technological innovation into the telecommunications industry.

I want to make four brief points on where the telecommunications industry should be going. First, British Telecom is, by its own definition, still grossly overstaffed. Its Sovereign operation seeks to reduce the number of workers from 240,000 to 160,000 over the next five years. That shows that there is significant overstaffing. I hope that it gets on with the reduction of staff in the interests of the consumer.

Secondly, although we have seen an expansion in quantity of Cellnet and Vodaphone services, I am afraid that the quality in many areas is not good. In London people often have to make four of five calls before they get a proper connection. Even then they may be interrupted by crossed lines. I urge the Government, through Oftel, to ask Cellnet and Vodaphone to provide a better quality service. Thirdly, there is scope for British Telecom to reconsider the charge of 45p for a directory inquiry. I know that the service costs £250 million a year. Those who make most use of it-- companies which use it to subsidise their activities--should be charged, but there is a case for a lower rate for consumers who make up to only 10 directory inquiries per quarter.

Fourthly, and most important in view of what we heard earlier, there is a strong case for the Government to make further disposals of its 48.7 per cent. holding in British Telecom. On the current market value of 335p per share, that holding is worth about £10 billion. I see no justification why, in an increasingly competitive market, the Government should have a 48.7 per cent. holding in any company--

Mr. Andrew Mitchell : My hon. Friend makes a very important point. Can my hon. Friend give any indication, when he replies to the debate, of the Government's thinking on further sales of a proportion of their shareholding in BT? It would be eminently sensible not only for the reasons set out by my hon. Friend the Member for Wyre Forest (Mr. Coombs) but because it would make

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it more difficult, were we ever to suffer the inexplicable circumstance of a Labour Government coming to power, for them to privatise the company.

Mr. Coombs : I agree with my hon. Friend. It is unlikely, given Labour's policies and the esteem in which it is held by the electorate, that that eventuality would come about, but on grounds of principle it is wrong for the Government to have a 48.7 per cent. holding in any company that can make its own investment and which is properly regulated. The Government should make swift disposal of their holding, and the money should be reimbursed to the taxpayer. We have heard some excellent speeches. The recurring theme has been that Labour's policies on public utilities generally, and particularly in respect of British Telecom are irrelevant, inefficient, and ideological. They belong not to the 21st century but the 19th century, and that is where we should consign them. 9.14 pm

Ms. Joyce Quin (Gateshead, East) : I congratulate the hon. Member for Gedling (Mr. Mitchell) on his good luck in winning such a high place in the order of tonight's debates, though I can hardly congratulate him on the wild misrepresentation of Opposition views in which he indulged. Perhaps the hon. Gentleman should display more humility when reviewing the Government's overall industrial record, particularly given the current economic recession.

The hon. Members for Cornwall, North (Sir G. Neale), for Wyre (Mr. Mans), and for Wyre Forest (Mr. Coombs)--perhaps I should resist the temptation to make puns about Conservative Members' crossed wires--were at least rather more measured in their comments, which I welcome. The hon. Member for Gedling referred to the size of the attendance for these debates, but right hon. and hon. Members in all parts of the House acknowledge that they are the province of the Members of Parliament who introduce them, and that attendance by right hon. and hon. Members of all parties tends to be similar, depending on the subject.

Despite the Government's fine words, they have given no real guarantee that consumers will benefit from the extraordinary advances in telecommunications technology, which can bring down costs and increase the range of services. There is a danger that the Government, who are very ideological, may end up supporting competition for competition's sake, even at the expense of proper regulation to ensure that all consumers benefit from new technology. The Government risk sacrificing regulation on the altar of free market ideology. The Government have not helped either British telecommunications equipment manufacturers. I referred earlier to the trade deficit in that sector, details of which were made available to my hon. Friend the Member for Newcastle-upon-Tyne, North (Mr. Henderson) by the Library, using official statistics. Nor have the Government assisted telecommunications research and development. We accept that private companies must take responsibility for their own R and D, but their European competitors work closely in partnership with private industry more positively than is the case in Britain.

Seven years after British Telecom's privatisation, Britain still has the highest charge for local calls in Europe, according to a national utility services report published on

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