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Mr. Ian Bruce: There has been quite a long time between the Committee and Report stages of the Bill. I emphasise my hon. Friend's point about commitments from the Government Front Bench about funding. Although we are only a few days away from the Budget, I wonder whether we can have a better steer from the Minister about exactly how much she is now expecting. Has there been any change in her expectation?

Mr. Lansley: I am grateful to my hon. Friend, not least because he takes me directly to the third set of points that I want to make, which relate specifically to amendments Nos. 16, 17 and 18. To save time, I shall not explain why those three amendments are linked. There are two questions. The first is slightly tangential. We have not really found out anything much, even since the Committee proceedings four months ago, about what Ministers expect to be the broad quantum of increases in charges to operators by way of administrative pricing.

Many of us would be hard put to know the orders of magnitude. Will the cost of licences increase by perhaps 20 or 30 per cent? One might say that that is a significant increase. Are we talking about much greater increases? It would be helpful if the Minister would say what orders of magnitude of increases--

Mr. Ian Bruce: Or decreases.

Mr. Lansley: Of course. The purpose of administrative pricing is not necessarily to raise money but more efficiently to utilise the spectrum, which, in certain circumstances, may mean reducing fees to promote active use of the spectrum.

Mr. Bruce: I do not want to delay the proceedings, and I know that I do not really need to remind the Minister of

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this, but I recollect that, in Committee, we talked about fishermen's and other licences. The new regulations will give the Minister the opportunity to make adjustments. Pleasure craft pay far less than fishermen, and fishermen get very upset about that, especially as their radios are a safety mechanism.

Mr. Lansley: I agree with my hon. Friend. He will forgive me if, being quite so landlocked as we are in Cambridgeshire, I do not know as much about the fishing industry as he does. It would be helpful if the Minister would tell us both the quantum of the increases that are contemplated under administrative pricing and why Ministers feel that relatively large increases in some cases might be justified by reference to the benefits in the utilisation of spectrum. Some operators, including some of the mobile phone operators, have considerable commercial pressures to utilise spectrum as efficiently as they can. It does not necessarily follow that paying much larger fees will change their behaviour. One wonders whether the increases in fees that they might have to pay are objectively justified by reference to the economic utilisation of spectrum allocated to them.

2.30 am

The benefits of amendment No. 18 may not be immediately obvious to hon. Members. An auction where people can bid whatever they like, which maximises income, might seem the most obvious course. By extension, to stipulate no more than 5 per cent. of the income attributable to the holding of the licence might simply restrict the Government's revenue and might therefore seem undesirable. However, Ministers should actively contemplate the amendment, as it has specific benefits.

The first benefit, which is related to amendments Nos. 16 and 17 as well, is that instead of a cash sum being payable up front, periodic payments are implied. The income to Government is specifically related to the roll-out of investment and the undertaking of the economic activity in question. The Government become, in that sense, a risk sharer. That reminds me of the time when, in the Department of Trade and Industry, we were engaged in launch aid for aerospace activity. If the Government are to be involved in commercial decision taking, it is good that they should be a risk participant.

The second benefit is that people who are making bids to the Secretary of State will have to specify not just what they are willing to pay, but how that is to be raised by economic use of the spectrum. That means that one will see, from those who are making bids, how the utilisation of the spectrum will generate income. The heart of the purpose of the Bill will be disclosed in the bidding process, whereas, otherwise, many of those who are making bids may meet the stated requirements that the Secretary of State may stipulate by regulation, but rest the burden of their case simply on the amount that is to be raised. That may lead us into a situation where the less valuable economic utilisation is the highest bidder, but comes to grief.

Ministers may not warm to the third benefit of amendment No. 18. It sets a limit on the amount that is to be raised in the tax, in relation to the income stream to

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which it is to be applied. Conservative Members, and perhaps Labour Members to a lesser extent, hold the view that, if we must have taxes, as we do, the taxes applied at a relatively low percentage rate in relation to the income stream to which they are applied will have less damaging economic effects than those that rise to a relatively high percentage level.

The sum of £1.5 billion, which is the maximum figure referred to in the explanatory and financial memorandum to the Bill to be raised through auctions, may be 5 per cent. of the income stream attributable to those licences, or it may be 10, 15 or 20 per cent. I have no way of knowing. All I know is that about £2.7 billion of turnover is attributable to the mobile phone operators. If that is any guide, £1.5 billion by way of revenue on the auction seems to be an extremely high sum, and therefore potentially a very high percentage sum in relation to the income stream to which it is to be applied.

I endorse all that was said by my hon. Friends, especially by my hon. Friend the Member for Esher and Walton (Mr. Taylor), who had responsibility for these matters, about the fact that the first-mover advantages of telecommunications liberalisation, mobile telephony and so on in British industry have been tremendously important in wider economic terms. The last thing we should do by way of auctions of spectrum is to leave that important section of British industry in a position where it is effectively taxed to a relatively higher proportionate level on its income stream, and therefore on its investment and its opportunity to exploit economically the spectrum it has bought.

If the Minister can assure us that the £1 billion or £1.5 billion about which she is speaking will be less than 5 per cent. of the income stream--a figure which I picked because it was a modest percentage--I would be happy not to press my amendment. However, we need some sign from the Minister of what tax level she is contemplating by way of the auction pricing mechanism.

Mrs. Roche: The amendments and new clauses in this group concern the operation of spectrum pricing in the form of administrative pricing or auctions. New clause 10 would allow higher fees to be set for less spectrum-efficient technologies. I understand the underlying thought behind it, but clause 2(2)(c)(i) already obliges the Secretary of State, in setting fees, to have regard in particular to the desirability of promoting the efficient use of the radio spectrum.

I am grateful to hon. Members for explaining the purpose of new clause 16. I do not believe that it would serve a useful purpose. I would point out, however, that among the matters the Secretary of State is required to take into account, are


To the limited extent that the experience of auctions is likely to be relevant to decisions on administrative pricing, the Secretary of State will take into account the lessons to be learnt. In the light of this assurance, I hope that the hon. Member for Daventry (Mr. Boswell) will be willing to withdraw the amendment.

I do not believe that new clause 17 would improve the operation of administrative pricing under clause 2, which requires the Secretary of State to have regard to factors

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such as spectrum efficiency, economic benefits, innovation and competition. The new clause refers to the fee that might be levied if the section of the spectrum was used for a different purpose, but it leaves completely undefined the nature of the different purpose. Much spectrum may have more than one alternative use. How the fee would be assessed is left open. Moreover, the new clause could lead to some substantial increases in fees, especially for fixed links occupying spectrum around 2 GHz that could be used for mobile communications.

New clause 18 also concerns the setting of administrative prices. I have sympathy with the underlying proposition that spectrum pricing should take into account differences in the intrinsic value of different parts of the spectrum and should not distort competition, but it is not necessary to amend the Bill to achieve this.

It is axiomatic in spectrum pricing that fees should reflect the value of the spectrum. Clause 2(2)(c) already requires the Secretary of State to have regard to the desirability of promoting the efficient use of the spectrum, any economic benefits arising from the use of wireless telegraphy and, most important in this context, competition in telecommunications. I hope that I have convinced the hon. Member for Daventry that it is not necessary.

Amendment No. 2 would undermine the effective operation of spectrum pricing. We have given repeated assurances during the passage of the Bill that spectrum pricing will be used for the purposes of spectrum management, not revenue raising.

As the hon. Member for Daventry knows, we have continued to work closely with the industry since the consultation document was published. One of the most significant issues that we addressed was the fees to be paid by cellular and personal communications network operators whose fees under the present cost-based regime are much less than those of other mobile communications users.

I am pleased to tell the House that my officials have held a series of meetings with each of the four main mobile telecommunications operators to consider how the new fee arrangements might best be introduced. There has been an open and transparent consultation process with the operators and I am grateful for the contributions that they have made and their helpful and constructive participation.

We agreed with the operators that the increase in the forthcoming regulations would be the first step in phasing in the higher fees over a period of at least three years. As a first step towards the new fees, we agreed with the four operators to apply a single percentage increase of 120 per cent. to the fees that cellular and PCN operators would have paid under the current regulations. The new fees will take account of changes in the spectrum assigned to them and the original escalator applied to PCN operators' fees.

The other change that we propose to make in the first regulations is to introduce reduced fees for users of on-site private business radio systems. These are typically used in industrial applications or in high street stores. There are some 22,000 on-site services that currently pay on the same basis as systems that cover a wide area. At present the minimum fee is £140, increasing progressively with the number of mobiles used, irrespective of the number of sites, so that, for example, a licensee with 26 to 60 mobiles would currently pay £500.

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I am pleased to announce that we propose to introduce in July a flat fee of £125 for each on-site system, irrespective of the number of mobiles used. The majority of users will therefore benefit from a significant reduction, although a few users with multiple sites and only a few mobiles may pay slightly more than under the current regulations. We intend most users to benefit from a further reduction in 1999, although those in areas of heavy congestion, and users with multiple frequency assignments at a single location, may face an increase.

We intend to undertake further consultation on the proposals for the new regulations prior to the statutory consultation under clause 6. Subject to the passage of the Bill, the new regulations will represent an important step forward in levelling the playing field between the various categories of radio users. It is important that we continue that process.

The hon. Member for South Dorset (Mr. Bruce) mentioned the important issue of fisheries. I have considerable sympathy with the view and have concluded that we do not need to wait for the introduction of new powers to rectify the situation. Therefore, last week, I laid before Parliament amending regulations to introduce a number of helpful changes to the current regime. As a result, from 1 April, up to 10,000 commercial vessel owners will benefit from a reduction of 45 per cent. in the ships radio licence fees that they now pay.

I am grateful to the hon. Gentleman for his approval; I was slightly disappointed that his hon. Friends prayed against the order. I am rather confused about that, as the hon. Gentleman raised the issue, which found favour with me.


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