HC Deb 30 May 1938 vol 336 cc1671-727

Order for Second Reading read.

3.49 p.m.

The Financial Secretary to the Treasury (Captain Euan Wallace)

I beg to move, "That the Bill be now read a Second time."

In normal circumstances the House would have been listening to my right hon. and gallant Friend the Postmaster-General introducing this Bill, and I am sure that hon. Members in all parts of the House will join with me in commiserating with him on his illness and in wishing him a speedy recovery.

On 8th April an official announcement was issued, and I will, if I may, read the first two paragraphs: The Imperial Communications Advisory Committee (Chairman, Sir Campbell Stuart), on which are represented the Government of the United Kingdom, the Governments of the Dominions, the Government of India, the Crown Colonies, Protectorates and Mandated Territories, state that, as the result of negotiations which have been in progress since July, 1936, general agreement has now been reached with Cable and Wireless, Limited, through its chairman Mr. Edward Wilshaw, and its associated companies oversea, which will enable a far-reaching scheme of reductions in telegraph rates between the different countries of the Empire to be introduced on April 25th, 1938. This new rates scheme brings for the first time into the sphere of oversea telegraphy the principle of a uniform rate, which has long been applied with such advantage to postal traffic. On the next day a White Paper, Command 5716, which I shall not assume that every hon. Member present has read, was issued to explain that the Government intended shortly to introduce a Bill to give the necessary legislative authority to those parts of this agreement for which it was required, and on the same day, 9th April, the "Times" began a leader in the following words: Yesterday's announcement that henceforth telegraphic communications between all the countries of the Empire would be at uniform and greatly cheapened rates has the simplicity of all the great steps in progress, although, as an article in an adjoining column shows, the simplicity has been achieved by intricate contrivance and negotiation. It is because this simplicity has been achieved by intricate negotiation that I am obliged to ask for the atten- tion and patience of the House while I go over some previous history which is very essential to an appreciation of this Bill. In 1928, the Imperial Wireless and Cable Conference was held in London, and presided over by my right hon. Friend the Member for Pollok (Sir J. Gilmour), to examine the situation created by the competition of the beam wireless service operated by the Post Office with the cable services operated by the cable companies, with a view to the adoption of some common policy by all the Governments concerned. The Governments represented at that conference were those the names of which I have already read out. In accordance with the recommendations of that conference, after very carefully considering the problem, a company known as Imperial and International Communications, Limited, was formed, which was subsequently renamed Cable and Wireless, Limited; and it is with the affairs of that company that this Bill has largely to do.

Cable and Wireless, Limited, was set up as an operating company to conduct the main overseas telegraphic services of the British Commonwealth. The capital of the company was fixed at £30,000,000, all in ordinary shares. An agreement was made between the company and His Majesty's Government in May, 1929, but operating as from 1st April, 1928, which can be summarised under five main heads. First, the Postmaster-General leased to the company the four Post Office beam wireless stations situated at Skegness, Bodmin, Bridgwater and Grimsby respectively. They were leased for 25 years at a yearly rent of £250,000 plus 12 per cent. of any surplus profits which Cable and Wireless, Limited, might earn over a standard revenue which was then fixed at £1,865,000, representing 6 per cent. on the capital of the company. Secondly, the Postmaster-General gave to Cable and Wireless, Limited, the free use of the necessary telegraphic circuits for working those beam wireless stations. Thirdly, and on the other side, the company paid the Governments concerned a sum of £1,267,000 for the cables which were Government-owned.

Fourthly, a number of measures of Government control were imposed on Cable and Wireless, Limited. That is essential to the whole agreement, because a main point of the negotiations has been to conserve intact and in working order the Imperial cable system which, in certain circumstances, is not remunerative, but which it is very essential to keep in working order against emergencies. The first item in the measures of Government control to which Cable and Wireless, Limited, submitted under the agreement was an obligation to maintain the cables even if they were unremunerative. The second was that the chairman of Cable and Wireless, Limited, was to be approved by His Majesty's Government. Thirdly, there was, and is, power to the Government to take over the whole of the plant and staff of Cable and Wireless, Limited, in the event of war. There was then a provision to ensure that control should remain in British hands, and the Imperial Communications Advisory Committee, which is a body upon which all the Governments concerned in this great enterprise are represented, was given certain special powers over the company; for instance the company is not allowed to increase rates without the prior sanction of the Advisory Committee, nor may they dispose of any of their assets; and the Advisory Committee has to be consulted on any changes of policy. I put all those items under the fourth heading—measures of Government control.

The fifth and last main item of the agreement was that one-half of any surplus revenue over the standard (plus the 12 per cent. which was to go to the Government straight away) was to be applied either to the reduction of rates or to the development of services. The company was, therefore, not able under that agreement to derive any direct advantage from increasing its business except to the extent of half of the surplus over their standard revenue of 6 per cent. on the capital, after paying our 12 per cent. of that surplus. The object of this agreement, as I have already indicated, was to provide for co-operation among the various Governments of the British Commonwealth of Nations, to maintain and develop under British control the overseas cable and wireless system of the Empire, operating under private enterprise in the United Kingdom, but under conditions which I think can be accurately described as quasi-public-utility.

During the years immediately subsequent to that agreement, various events occurred in the world which made the world not a very good place for cable companies. Cable companies depend very directly for their prosperity or otherwise upon the flow of international communications and international trade. We have to face the fact that since Cable and Wireless, Limited, was created it has been unable to earn the revenue which everybody expected it would earn, and in fact it has never earned even the standard revenue of 6 per cent. The average dividend paid between the years 1930 and 1935 was 1.7 per cent., and in 1936 the company succeeded in paying a dividend of 2½ per cent. The result of that was that, so far as the Government and the public were concerned, there was, so to speak, no surplus cash in the kitty. The telegraph rates could not be reduced as much as was hoped, although in point of fact certain reductions were made. As the telegraph rates could not be reduced, there loomed up on the horizon the possible threat of foreign competition on Empire routes by the use of direct wireless telegraphy.

The position was accordingly reviewed in 1936 and 1937 by this body to which I have already referred, the Imperial Communications Advisory Committee, and also by the Governments concerned. A long and complicated series of negotiations proceeded with Cable and Wireless, Limited. The result of those negotiations has been the agreement which is outlined to the House in the White Paper, and the proposals to which His Majesty's Government, with the general assent of the Governments of the Dominions and of India, are now prepared to give legislative effect, subject to the authority of Parliament.

When a series of negotiations of this magnitude results in agreement there is generally one person on either side who has been the main driving force and to whom congratulations are most prominently due. I think that the House should recognise the great services which have been performed in this connection by Sir Campbell Stuart, the Chairman of the Advisory Committee, and Mr. Edward Wilshaw, the Chairman of the Company. The broad effects of the proposals to which this Bill gives the necessary legislative authority where it is required, are two the first one is an immediate and substantial reduction of Empire telegraph rates. That has already taken place without waiting for the Bill. The second is the proposal to relieve the present strain on the finances of Cable and Wireless Limited, by cancelling the rental payable to the Postmaster-General for the four beam wireless stations in return for the acquisition by His Majesty's Government of a share in the equity of the whole undertaking.

I will, if I may, give the House very briefly the details of this agreement. First of all the freehold of the four beam wireless stations is transferred to the company as from 1st March and the rental of £250,000 a year ceases. Secondly, the Postmaster-General has agreed to give to Cable and Wireless Limited, the continued use of the inland telegraph circuits which are necessary to the working of these beam stations. In the third place it is proposed that the Government should extend the life of the licence granted to Cable and Wireless Limited, from 1953 to 1963, and it will then remain in force unless definite action is taken by the Government of the day.

On the other side 2,600,000 £1 shares out of the existing issued capital of £30,000,000 are to be transferred to His Majesty's Government, carrying dividend as from 1st March of this year. [HON. MEMBERS: "What is their value?"] The value is £1 nominal, but they may be worth a great deal more. [HON. MEMBERS: "What is the current market price?"] I could not give it off-hand. My hon. Friend the Assistant Postmaster-General is to intervene in the Debate later and he will be delighted to answer any questions the replies to which I do not carry in my head. Obviously, it does not matter very much what the market value of the shares is at this moment. What really matters is their earning capacity in future and it is not possible for anyone to forecast what dividends this company is going to earn. It depends to a great extent on imponderables like world trade. But the dividend last year was 3½ per cent., which would mean a payment to the Government on this block of shares of £91,000 a year. The next thing, beside the giving of these shares to the Government, is that the company has agreed that the standard revenue of Cables and Wireless, Limited, shall be reduced from £1,865,000 a year to £1,200,000; that is a reduction of the standard revenue from 6 per cent. to 4 per cent. of the capital. The House will see from that arrangement, that there will be money available for the public's share of excess profits, that is, for further reductions in the cable rates, at an earlier point. The benefits for the consumer will begin to operate when the company has earned £1,200,000 instead of waiting until it has earned £1,865,000.

Mr. Graham White

Has it ever earned that amount?

Captain Wallace

The company never has actually earned the standard revenue. The fact that the company never did earn its standard revenue is one of the reasons that caused this new agreement.

Mr. White

Has it earned the suggested standard?

Captain Wallace

I cannot say offhand. The next point is that all the obligations which were previously imposed on Cable and Wireless, Limited, as to the maintenance of strategic cables and as to the control of the company in certain respects by the Imperial Communications Advisory Committee, are to remain. The rate reductions which have actually operated since 25th April amount to £500,000 a year on the basis of the present traffic. As I have already endeavoured to explain, the present traffic does not represent by any means the amount of traffic which we hope and believe the company will get in future.

Those are the main features of the agreement, and there are only three subsidiary points which I must mention and which I will leave the Assistant Postmaster-General to deal with in more detail if hon. Members show any curiosity in regard to them. First of all is the waiver by the Postmaster-General of a claim in connection with the direct wireless service to Kenya, which amounts on paper to about £35,000 in a lump sum. Secondly, there is to be a joint purse arrangement for working of the European service between the company and the Post Office; and, thirdly, there is a financial arrangement between the Post Office and the Exchequer.

I see that there is on the Paper a reasoned Amendment suggesting that the Bill should not have a Second Reading.

The Amendment is sponsored by very eminent gentlemen and, apparently, some very big guns are to be discharged this afternoon. It is obvious that the objections to the Bill by hon. Gentlemen opposite are based on the principle of the quasi-private ownership under which this company operates. The relative merits of public or quasi-private ownership for this particular purpose, that is for operating the cables and wireless service of the Empire, were pretty exhaustively discussed in 1929. The company may not have earned since then what everyone thought and hoped for, but it is very questionable whether, if it had been a public utility, it would have earned so much. That is a very large question to beg. It seems to me an impossibility, from the practical point of view, to go back on the previous decision, and I would remind the House that we are not the only Government concerned, and that it is absolutely essential, if we are to work the Imperial communications system to the best advantage of the consumer, that we should have some form of unified arrangement which commands the assent of all the Governments who are partners in this concern.

It is for that as well as many other reasons that His Majesty's Government remain convinced that the most efficient service will be obtained by a company working under these quasi-public utility conditions, that is, Government control in the public interest in all essentials and liberty of operation, and an element of risk for the shareholders, which would not be possible in a purely public utility undertaking in which all of us, in our capacity as taxpayers, would have to meet the loss.

I am sorry that four hon. Gentlemen so eminent and so distinguished should see a nigger in this particular wood-pile and should have put down an Amendment to reject a Bill which is merely the continuation of a principle which was decided some years ago and which for practical reasons it would be difficult, if not impossible, to reverse. I conclude by repeating that my hon. Friend the Assistant Postmaster-General intends to intervene when he has accumulated sufficient queries from the benches opposite, and, if necessary, my noble Friend the Secretary of State for the Dominions will wind up the Debate.

4.15 p.m.

Mr. Lees-Smith

I beg to move, to leave out from the word "That," to the end of the Question, and to add instead thereof: this House regrets that, under the Imperial Telegraphs Act, 1929, public utility was sacrificed to private gain by the disposal of valuable State undertakings to private interests, regards the continuation and development of this policy by the proposal to alienate the freehold of the beam wireless stations as directly contrary to the national interest, and is of opinion that the arrangements now proposed and the financial basis of the scheme are wholly unsatisfactory. I begin by associating myself with the reference which the right hon. and gallant Gentleman made to the illness of the Postmaster-General. We all hope that the kindly good humour which gets the Postmaster-General through his difficulties in this House will stand him in good stead now. The Financial Secretary to the Treasury confined himself, mainly, to an exposition of the White Paper and an account of the actual financial proposals which this new scheme contains, without entering into any discussion on whether the basis of the scheme is sound or where we shall find ourselves a few years hence as a result of the alienation of the nation's property to-day. As he pointed out, this Bill has a history, and this Amendment contains our protest against this further handing over of national property which we predicted at the time would be the result, when the scheme of 1928 was forced through this House in the last days of a dying Parliament and the final signature given to it on the day before the Postmaster-General of that time left office. Indeed, the last remnants of this scheme were left to be carried through by me, when I succeeded the former Postmaster-General and found the contract already signed.

The Financial Secretary has given some account of the reasons for the action taken in 1928. As the Assistant Postmaster-General is to reply, I suggest that he should refer to the Debates in 1928 extending over three days. He will find that the Postmaster-General of that time never said a word in those Debates. The Financial Secretary pointed out in his account of the origin of this scheme, that for many years the oversea telegraphic services of this country were carried out by those great submarine cables, which constituted one of the wonders of the world about 40 years ago. Then there came upon the world the amazing invention of beam wireless telegraphy due to the inventiveness of Signor Marconi and due also, it should be remembered, to the co-operation which he received during his early struggles from the British Post Office. They gave him his opportunity which he could get nowhere else, an opportunity which he remembered, and for which he expressed his gratitude in the very last conversation I had with him.

As a consequence of this development a situation arose in which one found cable telegraphy side by side with beam wireless telegraphy, and it became clear that if the two were to compete, cable telegraphy would be swept out of existence. It became equally clear that some form of rationalisation was needed by which cables and wireless could be brought under one control. It was clear also that what common sense called for was a form of nationalisation which would prevent any competition of any kind in these oversea communications. Competition came from several sources. There are the cables competing with wireless telegraphy. There is the air mail. There is wireless telephony, which may be a very serious competitor with telegraphy and is, I think, in the ascendant as regards internal communications. In addition, there is the possibility of submarine cable telephony, which would have been developed under the auspices of the Post Office had it not been for the slump in trade. So we come to this, that a decision had to be given at that time as to what authority should control all over-sea communications. You had the cables, on the one side, by themselves. The Post Office, by its enterprise, was already in possession of the beam wireless stations and held the key position. There was the air mail and there was the possibility of oversea telephony by submarine cables becoming a factor.

In those conditions common sense dictated that the simplest method of dealing with the problem, was that the Post Office, which had four of these services already, should buy up these obsolescent cables. It could have done so, at an exceedingly low price, because the cables people had already said that if they were not bought out they would scrap the whole system, in which case they would not have got a halfpenny for the lot. That was, obviously, the sensible step to take at that time, but the Government of that day were obsessed by the fetish of private enterprise and decided that at all costs they must have quasi-private enterprise, if not full-blooded private enterprise in this matter. As a consequence of sheer political prejudice in the economic sphere, and nothing else, and of old-fashioned political doctrine, a great mistake was made by which, instead of taking the simple step which I have indicated, they attempted to meet the problem by the creation of an overcapitalised, sprawling, watered, incoherent combination or combine—Cable and Wireless—which was created amid a fever of Stock Exchange speculation. The absurd solution was chosen by which these obsolete submarine cables became the dominating financial interest of the new concern and, through the combine, took over on a lease of 25 years at £250,000 a year, the beam wireless stations which the enterprise of the Post Office had created.

That is the story. The Financial Secretary has pointed out that the Cable and Wireless Company has done badly since. Of course, everybody has done badly. But if you base a scheme of this sort on an essential error of policy at the beginning, everybody suffers, and I venture to say that if those concerned had known in 1928 what they have learned since, the advice of the Labour party then would have been accepted by the shareholders and the financial gamblers in Cable and Wireless itself. The Financial Secretary said that one of the reasons for this change, and, in fact, the main purpose of the original scheme, was to maintain our strategical cables. The whole point was the maintenance in working order of the Imperial cables system in case of national emergency. If that is the point, I can tell the right hon. and gallant Gentleman, from my experience at the Post Office, that they have not succeeded in maintaining the Imperial cables system in effective working order. I do not know the position at present, of course, but when I was at the Post Office great parts of this Imperial cables system were faulty. Great parts were absolutely broken for six months at a time, and not more than a few miles of wire and cable were ever purchased by the cable company for years together.

If the whole point of the scheme is to preserve our strategical cables in good order, surely the best way of securing that result would be by putting the system under a State Department, where that is the only object, instead of putting it under a company who take it as an unwanted child and who all the time, if they maintain it in proper order, are spending money at the expense of the shareholders to whom they are responsible. Which is the better system has been shown in practice, and again I give my own experience. While these Imperial cables were, as I have said, broken for six months at a time, if you take the oversea cables of the Post Office—it has oversea cables still—you will not find any cases in which they were permitted to remain broken for more than a fortnight. Therefore, I do not think that the right hon. and gallant Gentleman's argument on that head is a very strong one.

Before I deal with the financial position there is one point which has been brought to my attention, and to which I would like the Assistant Postmaster-General to give a considered answer. What is to be the security for the Post Office staff who are to be affected by this alteration and about whom nothing is said in the White Paper? The position may have altered since, but my recollection is that in the case of overseas wireless telegraphy—not Imperial telegraphy—by a rather anomalous arrangement, some of the oversea telegraphic services, such as the European telegraphic services, are under the Post Office. I think, for instance, if you telegraph to Italy you do so through the Post Office. By an arrangement—if it has not since been altered—other communications are leased to the Marconi Company, and I think if you telephone by wireless to France it is through the Marconi Company. The White Paper says that these services are to be fused. The Post Office has the right, I believe, at specified intervals, to take over the wireless telephone services leased to the Marconi Company. I am speaking only of the European services. It is proposed that these shall be fused, and we should like some assurance as to the manner in which a portion of the Post Office cables staff will be affected by the change. I have had various complaints. I have here a statement that when the Cable and Wireless Company took over the Indo-European Telegraph Company the staff were not guaranteed, and there have been bitter complaints that they have been left stranded. Therefore, the Assistant Postmaster-General will realise that his observations on this subject will be of considerable importance to a certain proportion of those at present under his authority.

Now I come to the immediate financial proposals of this White Paper. As is pointed out, and as the Financial Secretary pointed out, the Cable and Wireless Company are carrying through a very considerable reduction and unification of rates. I fully appreciate the significance and value of unifying and reducing the rates for telegraphic messages from here to the other parts of the British Commonwealth, but that is not the point at issue, and I do not accept the suggestion that this reduction in rates by the Cable and Wireless Company has anything to do with financial concessions to them from the Government. After all, every postal administration knows that it has continually to reduce rates—the British Post Office does it—for telephones, telegrams, mails. It is always reducing rates, and when an administration reduces its rates, it must expect its return to come from an increase of the business which it finally does. As a matter of fact, that is where the Cable and Wireless Company expect their return to come from. Last Tuesday they held their annual general meeting, and this is from the speech of the Chairman, Lord Pender, about that matter: Some decrease in the revenue of Cable and Wireless, Limited, during the initial stages of the flat rate scheme must, of course, be expected, but‥‥the directors are convinced…that the ultimate result of these proposals will be a great stimulation of traffic and a consequent increase in revenue which the holding company derives from that source. Therefore, there is no argument whatever for giving away the property of the nation on account of the fact that the company are decreasing their rates, which, according to the statement of the chairman himself, will pay for itself in the long run.

Now I come to the Financial Secretary's explanation of the nature of the financial transaction between the Government and the company. The Government are giving up £250,000 in return, as he said, for a share of the equity of the undertaking, and that share amounts to £2,600,000 worth of shares out of a total share capital of £30,000,000, so that it is about 8½ per cent. The Government are giving up £250,000 a year and are getting in return about 8½ per cent. of the dividends of this company. That is what it comes to. What are they getting in return, in figures? I have worked them out. As the right hon. and gallant Gentleman said, last year they got £91,000, but according to the figures of the year before, when the dividend was not so high, they got only £62,000, and going back further, in 1933 they got more, in 1934 they got £50,000, in 1933 £15,000, and in 1932 and 1931 a little over £6,000, so that in return for £250,000 the Government are getting dividends which have never amounted to more than £100,000 and which go down to about £6,000. The company obviously are bound to gain, and unless a miracle which no one in this country expects should occur, the Government are absolutely bound to lose in the end. Indeed, the right hon. and gallant Gentleman inferentially admitted it; he practically said so.

What is the reason for this transaction? The reason that we are giving these financial concessions is that the company have never earned their standard revenue. This has nothing to do with a reduction of rates. The company have been unable to earn the revenue which everyone expected them to earn, and, therefore, they are to be presented with a sum of from £100,000 to £250,000 a year. Why should they? They entered into this bargain in 1928 with their eyes open. We did not force it on them; they clamoured for it. Surely they knew, and surely the shareholders knew, when they insisted on this bargain, that they were undertaking a business in which revenue fluctuates according to the state of trade. They knew they would be under continual pressure to reduce their rates, as every communication administration always is. As soon as the chance of getting this bargain was announced, there was a boom in the shares on the Stock Exchange, and as soon as it was known that this merger was to be created, the shares of the Great Eastern Telegraph Company, for instance, went up from 148 for a £10 share to 248 in a few days. On what ground of principle accepted by either side of this House can it be said that the result of the fact that they had not earned their revenue was to give them this enormous sum of money of £250,000 every year? I took part in one of those ragged Debates in this House, some six months ago, on Socialism, and I heard a lot about private enterprise and a lot of credit claimed for it.

Mr. George Griffiths

It was on 24th November.

Mr. Lees-Smith

Yes. I remember that the great merit of private enterprise was claimed to be that those who went into it were willing to take risks. I take them at their word, and I say, therefore, that when they take up a gambling counter on the Stock Exchange and the risk goes against them, the proposition which is now being put up before the House, that a share in their losses should be borne by the nation, is one that we on this side of the House are not prepared to entertain. If the right hon. and gallant Gentleman knew the history of this company, he would not talk about it in the way in which he has talked about it; he would not speak of it as a quasi public utility concern, as if it were a highly dignified corporation willing and worthy to talk on equal terms with the British Post Office, something like the British Broadcasting Corporation, whose managers simply act as trustees for the nation, without any notion of private profit for themselves. That is not the case. I had dealings with this company when I was at the Post Office, and I say that they are a profit-making concern. Certainly the opinion which I formed then, and which I repeat now, is that their standard of conduct towards the Post Office was on a lower level than that of the other commercial companies with whom we had business relations.

I will say something more about them. The right hon. and gallant Gentleman said they had been unable to earn their revenue, but the reason for that has largely been their own fault. They had a towering over-capitalisation, with their capital completely watered, they had the most incoherent internal administration, they had a continual rivalry and clash between the wireless interests and the old cable interests, and they had the most extravagant system of administration, with the result that soon after I left Mr. Wilfrid Greene, as he then was, was asked to inquire into the administration, and he explained that economies amounting to £1,250,000 could easily be effected. If that was the nature of the extravagance, the House will see that even if they had got these beam wireless stations for nothing, they would still have been in financial difficulties, owing to their own internal faults.

The right hon. and gallant Gentleman the Financial Secretary used another argument. He said, "We are not the only people concerned," and he suggested that whatever we might think, the Dominions also would have to he considered and carried with us. The experience of the Post Office is that whatever lead the British Post Office gives, that lead will be followed by the Dominions. Therefore, there is no right to use the Dominions as any argument at all in this connection. I will give an example of that from the story of what happened when the Labour Administration was in office, and when a lead given by the Post Office was followed by the Dominions. This scheme is one by which wireless telegraphy, overseas telegraphy, is handed over to this company, but when the discussion of 1928 was taking place the question of overseas telephony came up, and no final decision was taken. Therefore, that was left open for the incoming Labour Administration to decide, and when I got there I found that the Cable and Wireless Company took the decision for granted. I got one day a very cool letter, signed, I think, by Mr. Kellaway, rather suggesting that although it was not in the deed, it was quite understood and talked over by my predecessor; and, therefore, would I meet them and make the earliest arrangement possible for handing over the overseas telephony as well to them? I replied that I was quite unaware of any such arrangement, and that I was not prepared to implement it. As a consequence, there were six months of Press attacks on the Post Office, largely emanating from this company, as we all knew, and indeed giving to the Press information which was given to them confidentially by the Government.

At the end of it all, the matter was brought before this House and debated, and we carried through the arrangement by which we kept our national property to ourselves, and, of course, the Dominions, which had to co-operate, accepted it. They took our lead, and I believe that neither the Postmaster-General, nor the Assistant Postmaster-General, nor anyone else would say to-day that they would welcome it if we had handed over to a private concern this great overseas telephony service, by which we are able to talk from the Post Office at Rugby to Canada, to the United States, to New Zealand, and to over 90 per cent. of the inhabitants of the world. That is the difference between the outlook of one administration and another. The suggestion that we should let the company off this £250,000 a year for some inadequate return is familiar to me because I first heard of it when I was at the Post Office. I understood they were going to wait to revive it in full force until they had a more amenable Government to deal with. What did they claim in those days? They only claimed that they should be let off the rent, or a part of the rent; the station should belong to the Post Office and they should be let off their rent. When the original Bill of 1928 was going through the House there was some resentment on both sides and some suspicion about the circumstances, and the spokesman of the Government, in winding up the Debate, asked the House to realise that the beam stations were being let only on a lease of 25 years, but that the freehold had been maintained by the Government. Now, however, with this Government the company has managed to carry through a complete coup d'état. They have not only got their rent diminished, but the whole of our property in absolute possession without, I suppose they imagine, any hope of our recovering it.

I began by saying that the right hon. Gentleman had not looked into the future. May I suggest some of the problems about the future which this transaction, following upon the error of 1928, now opens up? The original scheme was carried through because a new system of wireless communications had come into operation and we could not allow competition between the new system and the old. This world of wireless and cable telephony and telegraphy is a rapidly moving world. This problem is only 10 years old, and it is difficult to deal now with problems which are bound to arise in the next 20 or 30 years. In internal communications telephony is driving telegraphy out. Suppose that happens in overseas communications, where will this scheme lead us then? We shall have the beam wireless telegraphy and submarine telegraphy under this combine, and wireless telephony, submarine cable telephony and the air mail under the Post Office. The same competition will arise once again as the result of new inventions. What will the choice be then? We shall have to choose whether we shall go further forward with this plan that the Government have selected and hand over all the existing national property to this combine, or whether we shall go back and repair the mistake which was originally made—and I take this opportunity of warning this combine—and get the whole of this property back, not at an inflated price, but at a price which will recognise that this property to-day is being given to the combine for nothing.

4.50 p.m.

Mr. Benson

My right hon. Friend the Member for Keighley (Mr. Lees-Smith) has approached this matter from the point of view of the alienation of State property to a private company. I want to approach it, not from the standpoint of political and social theory, which is perhaps the more important, but from the purely commercial standpoint. I want to ask three questions: First, what are we selling? Second, what price are we getting for it? Third, to whom are we selling? We are selling two things, one which we can calculate simply, and another the value of which we cannot calculate, but which we know is very considerable. We are selling the essential and the only profitable element in the telecommunication system. We are selling the right to resume possession of this system in 15 years without compensation, because at the end of 15 years, if the lease were not renewed, the company have to go out and would not be entitled to one penny. We are selling to the company the right to claim, or virtually the right to claim, compensation upon an earnings basis because if there is a Government like the present in power and they wish in 25 years' time to resume possession, the company will be compensated on an earnings basis—and they know it, and that is the reason why they are anxious for this bargain. Finally, we are selling a 10 years' extension of their lease. These are valuable things although we cannot calculate their present value.

In addition, we are selling something the value of which we can calculate: that is, the leasehold rent of £250,000 for 15 years. The value of that on a 3½ per cent, basis is £2,875,000. The price we are getting is 2,600,000 shares nominal. The Financial Secretary was asked the value of these shares on the market and he could not answer. As a matter of fact, there is no market value because the shares under agreement may not be put upon the market. It is a simple matter to calculate their market value, however, because they are part and parcel of the assets in Cable and Wireless Holdings, Limited, which are quoted. We can calculate approximately the market value of the shares if we examine the structure of this precious merger. It consists of, first, Cable and Wireless, Limited, second, Cable and Wireless Holdings, Limited, and, third, the four communication companies—Eastern, Eastern extension, Marconi and Western. These three groups are interlocked. Cable and Wireless, Limited, is the company which owns all the plant and operating machinery. It owns little or nothing else. The four communication companies own all the 30,000,000 £1 shares in Cable and Wireless, Limited. Cable and Wireless Holdings, Limited, which are quoted on the Stock Exchange, hold the ordinary, but not the preference shares, of the four communication companies.

If we sort that out we find that the position is that Cable and Wireless Holdings, Limited, which are quoted, hold all the assets of Cable and Wireless, Limited, and, in addition, the net assets of the four communication companies. The latter amount to £7,000,000. They have £12,500,000 in investments and £5,500,000 in preference and mortgage, leaving a net £7,000,000. The present quotation for the total shares of Cable and Wireless Holdings on the Stock Exchange is £20,000,000. Cable and Wireless Holdings, Limited, hold Cable and Wireless, Limited, plus £7,000,000, and, therefore, the value, as judged by the Stock Exchange, of Cable and Wireless, Limited, amounts to £13,000,000 for 30,000,000 shares, that is, 8s. 8d. per share. So that our 2,600,000 £1 shares in Cable and Wireless, Limited, on the Stock Exchange valuation, are worth £1,100,000. That is the price we are getting for a leasehold rent which is worth £2,875,000 and all the intangible, immeasurable assets of holding the freehold and of the possibility of continuing it in future. There is only one word for that, and that is "ramp."

I have no doubt that the Assistant Postmaster-General will say that that is only one part of the price and that the real price is a reduction in rates and a reduction in the standard rate of profit. Let us analyse that and see what it means. Will the Assistant Postmaster tell us whether the £500,000 is estimated on the present traffic or upon some future problematical traffic? Let us see how far the £500,000 is a real sacrifice by the company and whether it is a figure that can be included in the price that we are obtaining for the very valuable assets which are being transferred to the company. The reduction in rates can only be regarded as part of the price if we should not have got that reduction apart from this agreement. Had the Cable Company been able to maintain their position without this agreement, it might be regarded as part of the price, but that is not the position. The Cable Company would have been incapable of maintaining their rates. They have been unable to maintain them in the past and, owing to the growing competition, it was obvious that they would be unable to maintain them in future. We should, therefore, have got a reduction in rates irrespective of this bargain. As a matter of fact, it was the fear of growing competition and of a reduction in rates in unfortunate circumstances which was one of the main factors that urged the company to force this agreement upon an all too willing Government.

In the White Paper one of the reasons given by the Government is the threat of foreign competition on Empire routes by the introduction of new direct wireless services competing with the company's system. What does the company itself say? Lord Pender put it very clearly at the last general meeting: Moreover, it must be borne in mind that in the past few years rate reductions throughout the whole of the system, which we had no alternative but to introduce, have been estimated to cost from £400,000 to £450,000 per annum, and the new Empire scheme does stabilise rate reductions within the Empire for five years. That is what they were after—the stabilisation of rates, the crushing of competition and the attaining for themselves of a monopoly. He went on: The company is to be safeguarded against direct services designed to penetrate and weaken the Empire system of communications, and this provision affords a most valuable security. The company and its associates are also afforded an opportunity of taking over competing commercial wireless services operated by the Governments of extra-European systems. So that is the position—not that we are getting a bargain voluntarily offered to us, but that the company have manoeuvred themselves into obtaining a monopoly inside the Empire which will enable them to stabilise rates. The company were faced with alternative positions: they had either to face reductions in rates forced upon them by loss of traffic, or they had to give a reduction in rates with a monopoly and increased traffic as a result. Naturally they took the monopoly with the increased traffic. The right hon. Member for Keighley has quoted the words of Lord Pender. I quote them again: The ultimate result of these proposals will be a great stimulation of traffic and a consequent increase in revenue. This increase in traffic is very important, because cable companies are in rather a unique position. They have basic overhead charges which they cannot reduce, and any increased traffic is practically all profit. As Lord Pender himself said, speaking at the Cable and Wireless meeting in July, 1931, their system could carry many times the present traffic without any material increase in the cost. They are getting that already with the reduction of rates, because though the reduction has been in operation for only a short time Lord Pender said recently: We have definite information that we are receiving a volume of fresh traffic which we have never had before. The Government's White Paper speaks of this reduction as a burden, Lord Pender speaks of it as a stimulation of profits. When the Government engineer a ramp like this they ought to put their heads together, with their accessories, and decide to tell the same tale in public. In calculating what the company paid for these assets which they are obtaining we can entirely ignore this decrease in rates. The monopoly which they are getting inside the Empire will far more than compensate them; in fact, it will lead to an increase of their already very excessive profits. To whom are we selling? This is an important point, because it is not a cash sale. We are accepting shares in this company; in other words, we are becoming partners in the company; and I strongly object to Government prestige being given to a concern which is utterly and completely unworthy of it. Let us look at the financial history of this company. As the right hon. Member for Keighley said, it has been a case of gross and unscrupulous over-capitalisation from the beginning. He did not give any figures, but I will. Take, first, Cable and Wireless, Limited, that is, the operating company. What are their assets? They are, first, the private cables taken over from the four cable companies. Those private cables, when they took them over, were practically worn out. The right hon. Member has given his experience of them immediately after they were taken over and while he was Postmaster-General. Apart from one or two, the cables taken over from the communication companies were junk, and nothing more, and from that time to this not only have they been steadily breaking down but they are being steadily abandoned, because they are getting into a state in which they cannot be repaired.

A cable's life is about 45 years. When these cables were taken over practically every one of them was over 40 years old. They are being abandoned now, one after the other. What is going to happen to the strategic position I do not know. As soon as the beam wireless came into operation the cables taken over from the cable companies were not assets but liabilities, because they could not compete with beam wireless. In addition, Cable and Wireless hold the modern cables, not 40 years old, which they took over from the Government and the lease of the beam wireless. For those they paid £1,267,000. They also bought one or two other cables later for something in the neighbourhood of £1,000,000. The total cash they put up was under £3,000,000. They put up cash of under £3,000,000, added all this antiquated junk, and then capitalised it at £30,000,000. But that was not the ramp, it was the basis for a still bigger ramp. Cable and Wireless Holding, Limited, hold, indirectly, the assets to which I have just referred, and in addition hold some £7,000,000 of net assets. This was capitalised at £52,600,000 and unloaded upon an unwary public, in many cases at a premium. I do not propose to follow the extraordinary jumps and changes in the capital of this company, but this fantastic over-capitalisation could not possibly continue, and last year they went to court and had to cancel 70 per cent. of their A stock and 92½ per cent. of their B stock, and the owners of it lost it. That reduced their capital to £23,000,000. Immediately afterwards, by resolution, they increased their authorised capital to £47,000,000. I am utterly at a loss to explain why that paper increase took place, except that it was the first step in a future ramp.

The Government refer in the White Paper to one of the reasons why they introduced this scheme: The operating company has been unable to earn the revenue which it was expected to receive under the old conditions. Cable and Wireless put up £1,200,000 to purchase the Government cables and the lease of the beam, and they put up another £1,000,000 a little later, that is, under £3,000,000 in all, and this year they have earned £1,250,000. What more do they want? This is the poverty-striken Company to which the Government propose to hand over a leasehold rent of £250,000. This is the Company which the Government feel they must bolster up. I know they have paid only 3¼ per cent. upon their inflated capital, but if they put another nought on, and make it £300 millions, it would have been still a smaller percentage. I object to this bargain because the Government are willingly allowing the country to be "rooked," but I more strongly object to the Government being partners in a shark firm like this.

5.13 p.m.

Mr. Viant

I must confess to a measure of sympathy with the Financial Secretary to the Treasury when he was standing at the box advocating this agreement. Had he known the history of what took place in this House in 1928 I feel that he would have been less inclined to advocate the Agreement. We are invariably taunted by our opponents with the statement that State enterprise is never a success, that it lacks initiative, but in the beam wireless we had initiative by State enterprise and development carried to such an extent that it was jeopardising the business of the cable companies. Then, in 1928, the Government of that day, exceedingly solicitous, as is the Government of to-day, about the well-being of private enterprise, rushed in to the assistance of the cable companies. I remember that in the debates on that occasion the financial position of the cable companies was well discussed, as it has been this afternoon, by the hon. Member for Chesterfield (Mr. Benson). I feel sure that the financial standing of those undertakings did not inspire the House in 1928, and it is evident from the number of Members on the Government Benches this afternoon that there is very little inspiration among the Government supporters to-day. It can at least be said that those of us who are sitting on this side have taken the trouble to acquaint ourselves with the facts. What is more important, we outnumber the supporters of the Government on those benches, when the strength of the Opposition and the strength of the Government are compared at the present time.

It is interesting to recall the arguments that were advanced in 1928, when we considered the Financial Resolution giving sanction to the Bill. Consider the amount of financial assistance that has already been given to this merger. As is stated in the White Paper, when the agreement was placed before the House we were informed that we could expect a sum of £250,000 for 25 years. In the period of 10 years we have received roughly £2,500,000 when we should have received about £6,250,000. We are making considerable sacrifices from the public point of view and from the public purse in foregoing or cutting through the lease. I remember that we endeavoured to impress upon the Government in 1928 that they had no right to hand over the beam wireless system or to lease it because they were only the public trustee, and they had no mandate from the country for leasing out the beam wireless system. The Government suggest to-day going even further.

The lease is to be ended and the freehold is to be handed over. I challenge the Government that they have no right, as trustees for public property, to go as far as handing over this property to a private company. If the issue were fully understood by the country I am persuaded that authority would not be given to the Government to do this thing, which is a great abuse of power by the Govern- ment of the day. The power was conceded to them by the community and they are abusing it by handing this property over to a private company. It is true that some of the cables to which reference has been made were junk, but some should be perfectly good, especially the Government cables. The Atlantic cable was made in 1902 and the initial cost was £2,050,000. The Pacific cable was valued, from figures given in the House, at £4,720,000, and the West Indian cable at £364,797, making a total of £7,134,797. Are they to go to the merger for £1,267,000? It is a great gift from the public purse, not to mention what one calls, in ordinary commercial business, goodwill. It was a going concern, and all that the company had to do was to take it over and use it. No initiative was necessary.

We asked the Financial Secretary on 21st November, 1928, the estimated cost of the beam wireless system, and he replied that he supposed it would be about £4,000,000. Possibly that was so, but if we add to it the enormous sum of over £7,000,000 for the cables, there is £11,000,000 as a gift to this company. We are now asked to accept a nominal sum in regard to shares. Various calculations have been made this afternoon as to the market value of the shares. It is well that the House should consider the manner in which this company has has already been spoon-fed financially by the Government in 1928, and now by their successors, who are giving them another gift from the public purse. Anywhere else than in this House it would not be attempted. The general public appear to be oblivious of what is taking place.

The argument will now be advanced, of course, that we shall get benefit by way of reduced rates. That may be so, but from my experience at the Post Office I am convinced that that Department could have run this concern far more effectively and efficiently than it has been run by this private company. The services would have been better and the general public—this is far more important —would not have been robbed as they have been, on the evidence submitted by my hon. Friend the Member for Chesterfield. Those of us who have taken an interest in this matter and read the public Press have from time to time pointed out the financial manipulations of this company. I ask the House, in the light of that financial history, whether they are inspired with such confidence that they can willingly go into the Lobby and back up this agreement. It will, of course, be backed by those who are not present and had not heard any of the evidence submitted. Possibly a large number of Members will be quite unconscious of the White Paper embodying the recommendations. It is not fair to the country or to this House. The benches opposite are equally as indifferent to it as they were in 1928, and it is a deplorable condition of affairs.

We sincerely believe in the Amendment which we have placed on the Paper, and we shall go into the Lobby and back it whole-heartedly. We regret that the Postmaster-General is not in his place. I remember that in 1928 the then Postmaster-General did not take part in the Debate. He had such a high regard for the Post Office as an efficient Department that he was not prepared to defend principles of this kind. Everyone acquainted with the Post Office Department is convinced of its efficiency, but the salary of the Postmaster-General would not compare with the salary of the chairman of this Company and the salaries of the heads of the Department are much less than are paid in the company. This much is to be said for the Post Office: They know their job; they are on top of their job every time. In the light of these facts, what conclusive argument can be advanced to convince this House that the Post Office should not have taken this business over and made a success of it, as it has made with similar businesses? There is no argument of a conclusive character. What it amounts to is that there is a possibility of money in it. The Government of the day will retain for private interests and private enterprise anything that is likely to yield a profit.

I shall be interested to hear the arguments of the Assistant Postmaster-General why the Post Office could not have run this business more efficiently than this private company. We have had it suggested that the Post Office might have experienced difficulty with the Dominions in persuading them to agree to the Post Office taking over the service, but the Post Office business is of an international character, and there is no reason why it could not have carried on this matter. The position is rather the reverse. In its experience and history the Post Office Department has invariably overcome all difficulties and obstacles. Where the matter becomes one of having a firm grip on those communities for purposes of stategy, the argument is so conclusive, as my right hon. Friend the Member for Keighley (Mr. Lees-Smith) has sai1d, that it should remain in the hands of the State.

On those grounds alone the Government should have refused to hand this business over to any private concern. I hope we shall hear conclusive reasons why the Government have kept out of the business and have allowed a private company to take it over. I conclude with these words: This is none other than a ramp, supported by the Government of the day, in which their own friends are dipping their hands deep into the public purse—a thing which should not have been permitted, and a thing which this House should have turned its face against in the public interest and in the interests of all concerned.

5.30 p.m.

The Assistant Postmaster-General (Sir Walter Womersley)

May I say in the first place that I welcome the contribution which has been made to the Debate by the hon. Member for West Willesden (Mr. Viant), who occupied the position which I now occupy when the Labour Government was in office? With regard to the illness of my right hon. Friend the Postmaster-General, to which reference has already been made, I want to assure the House that, if he had been here, he would have been at this Box defending the proposals of the Bill which I have to defend in his absence. I am glad to be able to inform the right hon. Gentleman, who made inquiries, and I am sure the House as a whole will be pleased to know, that my right hon. Friend is progressing very satisfactorily. The latest report we have had is that his progress is being maintained, and the doctors hope for his speedy recovery. I am sure we shall all welcome him back to this House, and I myself shall certainly welcome him back, not only here, but at the General Post Office.

I think it will be for the convenience of the House if I state briefly the position in regard to this particular arrangement, and afterwards deal with the points that have been raised. Our great object is to secure better and cheaper communica- tions at home and abroad. That is the definite policy of the Post Office, and it was the policy of the Post Office during the time that the right hon. Gentleman opposite was in charge of it. We have maintained that policy, and have done our level best to make it a success. Home communications are our own monopoly, and we can deal with these as we like. We have undoubtedly made good progress as regards terms and conditions and as regards popularising the service. For instance, it is well known that we reduced the maximum telephone charge for night trunk calls to 1s., and the day charge for trunk calls to 2s. 6d. We introduced again the sixpenny telegram. These changes have proved that we could increase the traffic by making a reduction in charges. Whether it means an increase in profit is another matter; that is not always the case; but it does undoubtedly bring in a return.

Overseas communications are not our monopoly, but our policy there is the same, namely, to try to get the lowest possible rates that we can in order to attract people to use the services. We have demonstrated that in the methods we have been able to arrange for decreased charges for the Empire air mail services. All these arrangements are designed with one definite object, with which, I am sure, hon. and right hon. Gentlemen opposite will agree, namely, the object of bringing the Empire countries closer together, and, in addition, helping, as we can help in this way, commercial interests and furthering trade and commerce between the Mother country and the Dominions and Colonies. We want as far as we can to develop the policy of reducing charges in all directions, but we have found, as I have already said, that in the earlier stages there has been an initial loss. We have been able to stand that in our internal services, and in connection with our overseas communication services we have had to stand it for the time being, although, of course, the increased traffic has made up for any losses, and in some cases has produced a bigger profit.

Long-distance telegraphy is not a monopoly at the present time. The right hon. Gentleman opposite mentioned, in the course of his speech, that it is not really in our own hands. We have to consider the other partners in this great business. In 1928, when this matter was brought before the House of Commons, the arrangement made was entered into between the Dominions and all parties concerned, and was agreed to by the Dominions as well as by the British Government of that day. I do not want to weary the House with quotations from the Debate of that time, but I was a Member of the House and listened to the Debate. Recently, in order to refresh my memory, I have carefully re-read it, and I am satisfied that the arrangement then made was, in the light of the circumstances then obtaining, the best arrangement that could be made. We are now entering into a fresh arrangement, the reasons for which I will detail shortly. It means that the Post Office will be involved in a loss of £100,000 in revenue, but the reason for that is that there are going to be rate reductions of the order of £500,000.

May I say here, in reply to a question that was put to me by the right hon. Gentleman the Member for Keighley (Mr. Lees-Smith), that this is calculated on the present traffic of the company, and not upon any anticipated increase or reduction of traffic; it is the amount of loss that would accrue on the basis of the present traffic from these reductions. if there is an increase in traffic, and, consequently, a lessening of the loss, the Government will get its share. The Post Office is sacrificing £100,000. Speaking for my right hon. Friend and myself, I say we are glad to do that in order to obtain these big reductions in rates, because we believe it to be the right policy, pot only as regards our internal communications but as regards our communications within the great Empire itself.

I should like to refer to a little past history, so far as the Post Office is concerned. Under the arrangement which was approved by the House in 1928, the Post Office leased the four beam wireless stations to the company for a period of 25 years, and the company, as has already been stated, undertook to pay £250,000 a year to the Post Office, plus 12 per cent. of any surplus profits earned by the company in any year above a standard revenue, the standard revenue then being fixed at 6 per cent., which I am sure the right hon. Gentleman will agree with me was a reasonable standard rate. In addition to the use of the beam stations, the rental of £250,000 covered the use of 12 Post Office telegraph circuits required for the working of the stations. This rental of £250,000 was based mainly on the profits of the Post Office from the beam wireless telegraph services when they were in their hands, and that was considered to be a fair and proper method of calculation. It must, however, be borne in mind that in the very next year the slump, which has been referred to on many occasions as a world financial blizzard, came along, and it had its effect on overseas telegraph communications just as it had upon every other form of business. Indeed, it probably had a bigger effect on that kind of business, because, even in the years of recovery, when this country internally showed a tremendous improvement, the external trade of the country, upon which these services depend for their revenue, had not expanded to the same extent as had the internal trade. Accordingly, the revenue of the company was tremendously affected by the slump in world trade, and, in addition, it had to face a good deal of foreign competition.

I will give some figures to show what the effect was. Taking the revenue of the year 1929 as 100, the company's average index figure of traffic receipts dropped to 87 in 1930, to 74 in 1931, to 70 in 1933, and the average for the past 12 months has been 74½, while the figure for April of this year is 71½. In view of these figures, I think it will be realised that the annual payment of £250,000 arranged for was a bit of a burden on the company. Nevertheless they paid it. There has never been any question of their being granted a reduction; they have paid the £250,000 right up to date.

Mr. Benson

Do the figures which the hon. Gentleman has just given relate to the total traffic of Cable and Wireless, Limited, or only to the beam service traffic?

Sir W. Womersley

You are bound to take the average—

Mr. Benson

No, you are not.

Sir W. Womersley

There is no other way to do it. The whole intention was to put our cable and wireless communications on a sound basis, and to preserve them for this country and the Empire. We are all agreed upon that. For reasons which I am sure will be obvious to every Member of the House, we must take the whole business of the company, and I am giving the figures for the whole business of the company. The beam wireless system was affected by the world slump equally with the cables. The new arrangement is described in the White Paper and in the Memorandum which accompanies the Bill. The company will be relieved of the obligation to pay the £250,000 a year for the use of the beam wireless stations, and will be given greater security of tenure. My right hon. Friend the Financial Secretary has explained to the House that the Government will receive a share in the equity of the company, and this share in the equity of the company will also cover the continued provision of the 12 Post Office circuits required for the working of the stations. Sub-section (2) of Clause 1 of the Bill provides for the necessary arrangement between the Post Office and the company for the continued provision of those circuits.

No mention has been made hitherto of that part of the Bill which deals with the agreement as regards the Kenya claim, but I want to put the whole case before the House, because it is a matter upon which there has been a little dispute between the Postmaster-General and the company, and we have had to make provision for it in the Bill because we have never reached an agreement with the company. My right hon. Friend considered that certain compensation should be paid to the Post Office, and that compensation was estimated in 1930, when the right hon. Gentleman opposite was Postmaster-General, at something like £35,000. We have been arguing with the company ever since. They said that a lesser sum should be accepted, but no figure has ever been agreed upon. The reason was that we wanted to get the main issue out of the way first. We wanted the House to leave it open to my right hon. Friend and myself to argue it out with the company, and I think we can claim at any rate that the matter is in safe hands. I will try to see that your confidence is justified.

Now I come to Clause 2, under which it will be seen that the Post Office is called upon to sacrifice £100,000 a year. This may fairly be looked upon as a contribution towards the reductions made in the rates of the Empire telegraph services. The right hon. Gentleman opposite has said, "Do not use that as an argument." That is an old debating dodge, to tell your opponent not to use his best argument; but I am sure that if the right hon. Gentleman had been in the position of my right hon. Friend he would have been very pleased with such an arrangement. The company has already reduced the rates of its services. On 25th April it reduced its rate to 1s. 3d. a word for full-rate telegrams, 10d. a word for code, 7½d. for deferred, and 5d. for letter telegrams. Where a lower rate was already in force that is being retained. This new uniform rate of 1s. 3d. a word compares with a wide range of rates previously in force. For example, let me take the rate to Australia from this country, which was 2s. a word by cable and 1s. 8d. by wireless; it is now 1s. 3d. To New Zealand it was 1s. 8d.; to the West African Colonies it was 3s., and to Singapore it was 2s. 10d. From India to Australia it was 3s. 5d. Those are very substantial reductions, and they will be of very great benefit not only to the public at home but to the public overseas. We at the Post Office attach the greatest importance to these reductions because they are in harmony with our own policy of reducing rates wherever possible.

There is also included in the Bill an arrangement with regard to European services. That is described as a joint purse arrangement, and the provisions will be found in Clause 1, Sub-section (4), which empowers the Postmaster-General to enter into a joint purse arrangement with the company. Previously there has been much overlapping and competition, and during the past few years we have tried to reduce this by making arrangements from time to time. We have now come to the definite conclusion that it is far better to have a working arrangement as between the company and the Post Office, than to work in competition with each other. This arrangement will be made to include all telegrams within the European system which make use of a service of either party, the Post Office or the company. This will achieve a threefold object. It will facilitate the interchange of traffic between the available routes, in the public interest and to the benefit of both parties; it will enable the service of both parties to be organised to the best advantage; and it will reduce the costs of competitive canvassing and advertisement.

The amount of the earnings paid into the joint purse account on behalf of the Post Office and the company will be divided between them in specified proportions, based on the traffic receipts of each party in the years 1934, 1935 and 1936, subject to modifications in certain details and subject to a maximum payment in any one year by one party to the other of £25,000. The arrangement will be so designed as to give no financial advantage to either party as long as circumstances remain substantially unchanged. It will however, preserve a balance in the distribution of traffic and receipts between the two parties. The arrangement will be subject to termination or revision at the end of five years, or thereafter at six months' notice. Actually the position is this: It has to be left to our financial advisers to settle this question, subject of course to the £25,000 that, as I stated, is a limit, and I am sure that the right hon. Gentleman will agree with me that one can depend on our financial advisers to get the best arrangement possible. I am satisfied that it is a sound arrangement, and I am sure the House will take the same view.

Mr. Lees-Smith

With regard to these services to the Continent—I am not talking about the Imperial routes—the Post Office have the right to take over those services at specified figures. Why have they entered into this joint purse arrangement at all when they can take over those services for themselves?

Sir W. Womersley

The short answer is that we did not think it wise at this moment to take them over. I want to assure the right hon. Gentleman that we run the Post Office on sound businesslike lines, and both my right hon. Friend and myself, after applying whatever business experience we have and giving very careful consideration to the matter, were satisfied that the right thing at the moment was not to take over these services but to enter into this arrangement, and to consider it later on in the light of our experience. This House laid it down definitely in 1928 that it was necessary, in the interests of all concerned, to continue the cable services. These services have been operated since 1928 by the company's staff. The fact that the company is being given a freehold instead of a leasehold will not affect the staff in any way.

We at the Post Office are in a position to deal with any staffs that may be considered redundant owing to less competition from continental services. We have already made provision that jobs shall be made for any of our people who may be affected; that there shall be no disturbance, and that their employment shall not suffer in any way through the effect of the joint purse arrangement. Our own staff will be kept, as we have made arrangements to provide employment for them in other departments where necessary. We are hopeful that the company may be able to do the same thing to any of their staff who have to be removed from these services. My right hon. Friend the Postmaster-General and myself are taking a very deep interest in the question of staffs. We have got assurances already, although I am not in a position to give details of those assurances. We are going to keep this matter carefully within our view.

Mr. Viant

The hon. Gentleman knows that it invariably happens that when an agreement of this kind takes place certain members of the staff lose their chances of promotion for all time. Has attention been given in the present case to the possibility of these people being transferred to another department where their chances of promotion are not impaired?

Sir W. Womersley

I appreciate that point. I know that it does often happen that when there is a large reduction in a department, and people have to be transferred to another department, their promotion chances are affected. In this case the number affected is so small that I do not think there will be any appreciable effect on promotion. That is the position so far as the Post Office is concerned.

I want to refer to a remark which the right hon. Gentleman the Member for Keighley made, about a previous case. When the offer was made to the staff of choosing whether they should remain with the Post Office and be transferred into some other department, or go into the service of the company, a large number were so satisfied that the Post Office was the best employer that they remained. Others went into the company's service. I believe there have been complaints from those who went into the company's service when they discovered that their position was not so good as that of those who remained in the Post Office's service. There will be nothing of that kind this time. The only changes in staff would be those which may possibly result from the joint purse arrangement. The number affected would be very small. It would be so small on our side that it would not make any difference to promotion. We have made arrangements to meet that, and we hope that the company will do the same. My right hon. Friend and myself have both taken a personal interest in this matter.

Mr. Viant

Is it possible to get the agreement before the Bill goes through?

Sir W. Womersley

I do not think it is a matter which would justify our holding up the Bill.

Mr. Viant

It is important.

Sir W. Womersley

I am sure the hon. Member will agree that it is in safe hands. [Interruption.] I have given my pledge to the House, on behalf of my right hon. Friend and myself, that we shall give the matter close consideration.

Mr. Maxton

Within the last 12 months we have left a matter of this sort entirely in the hon. Gentleman's hands, in connection with fellows who were engaged in collecting advertisements for the telephone directory. When the directory was taken over from the company operating it, the men were flung out on the streets, and they received no consideration whatever. The hon. Gentleman remembers that very well.

Sir W. Womersley

I do remember it, and I remember the action I took. I was instrumental in placing in similar employment all except three, one of whom had obtained a position already, and the other two were of such an age that it was considered that they could not get an occupation of a similar kind with any other firm. I did everything I could, even for the two older men. I think that the hon. Gentleman will agree that I carried out the promise that I made to the House at the time. I went personally into the question and interviewed everyone. We cannot hold up the Bill over a matter of this kind, because we are already dealing with the question, and I have given a pledge to the House, and my right hon. Friend and myself will carry it out. I think that I have stated the position of the Post Office clearly, but if any other hon. Gentleman wishes to ask a question, I will try to deal with it.

It is right and proper that the House should know exactly the position of the Post Office with regard to this agreement. The right hon. Gentleman mentioned the question of staff security, and I hope that I have dealt with the subject to his satisfaction. He also mentioned that when the company began its operations and got hold of these stations cables were in a very bad condition. Some of them were, at that time. No doubt owing to representations made by the right hon. Gentleman, immediate steps were taken to see that they were put into good condition, and they have been well maintained since. We have kept a very watchful eye on this matter because we know what it means in case of emergency if cables are not in a proper working condition. Though some of the cables at that time were temporarily out of order, they were put into repair, and I am glad to say that, since the right hon. Gentleman left office, they have been kept in good repair and condition.

Mr. Benson

How many have been abandoned?

Sir W. Womersley

I cannot say, but if any have been abandoned, they will have had to convince the Advisory Committee that it was in the interests of all concerned that they should be abandoned. I will get to know and let the hon. Member have the information. We are satisfied that, with the existing cables in the condition in which they are to-day, we have every facility for any strategic communications that we may require, should eventualities come along. That is a point to which the Post Office must have regard in considering the national interest. I am sorry that the experience of the right hon. Gentleman in negotiating with the company was not a very happy one. We have been a little more fortunate, probably because of the good seed which he sowed in those days. The right hon. Gentleman spoke about Stock Exchange speculation and feverish movements, and the hon. Gentleman the Member for Chesterfield had a good deal to say about it, and I would join issue with him. He really made a wonderful peroration, speaking of "this commercial speculation," "feverish activity" and so forth. It is the fact that, if a rumour gets around that the Government are to assist a particular industry or company, there is a rush of foolish people—I say this advisedly—to purchase shares, hoping that there will be a rise in the market price.

I am sure that the hon. Member for Chesterfield, with his wide experience of the business of accountancy and commercial matters of all kinds, knows as well as I do that the law of supply and demand rules in the stock market as it does in every other market of the world. The hon. Gentleman knows that there are more ways of profitably investing money than investing in speculative shares. You will always have people who want to speculate and get a little from the other fellow. I have known directors of companies—I am not speaking of this company—who have done their level best to persuade people not to enter into mad speculations, because they realise that, if a£share runs up to 30s., 40s. or 50s. those who are directing the company's affairs are expected to provide a dividend, not on £1 but on the enhanced values of the shares. I have been shown a letter from a constituent of an hon. Member of this House, in which the writer said: I note you are a director."— mentioning a particular company— A few years ago I saved up a few pounds and I invested in some of your shares and paid XL for them. That brings me in five per cent., but I have discovered "— and he is a Welshman— a neighbour of mine who is getting seven per cent. on his investment. Can I not be transferred from the five per cents. to seven per cents.? If people pay an enhanced price for shares it is not for them to complain about the directors.

Mr. Benson

I did not refer to shares of £1 running up to 30s., 40s. or 50s. I referred to the disgraceful fact that very inadequate assets were capitalised—£52,600,000—by the directors in this concern and then put on to the market. It is that of which I complain.

Sir W. Womersley

If I was here as a director of this concern and had to defend the financial policy of the company, per- haps I should be able to give the hon. Member a lot of information about it, but I do not think that it is my job to do it.

Mr. Maxton

You could do it in a businesslike way.

Sir W. Womersley

Not on that basis. I am sure that the hon. Gentleman will give my right hon. and gallant Friend and me a little credit for not being landed into a show like that. The arrangement with the company is for the payment of a dividend of 4 per cent. The Treasury has accepted shares in the company.

Mr. Benson

You have become guinea-pigs.

Sir W. Womersley

As long as we get 4 per cent., which is what we expect, it will be satisfactory to us. It gives us a holding in the company, but as far as its finances are concerned, one would have to go back to the very beginnings of under-sea cables, to the pioneers and the money that was raised in the first place. The railways might be quoted in the same way. There is no doubt that the Wireless Holding Company was a very profitable concern when it was first introduced, and as trade improves it will be in the future. The right hon. Gentleman asks, "What about the future?" Some system might be introduced which might put that company right out of business, but one would not argue that it should be wiped out if it was considered to be in the public interest to keep it in existence. The hon. Member for Chesterfield dragged in a financial issue of this sort, going back into the dim and distant ages, and I do not think that it is quite fair to expect me to defend it. He also referred to the great monopoly of these people on the Empire services. It is true that they will have a monopoly as far as this country and Empire countries are concerned, and that is what we desire them to have. The right hon. Gentleman the Member for Keighley will agree that, if the State owned the services, the State should have a monopoly, but, unfortunately it cannot own them

One of the reasons why it is desirable to reduce these rates and give the company Government assistance, is because of foreign competition. Every hon. and right hon. Member will agree that it is not in the best interests of this country that foreign services should be operating between countries within the Empire. It is true that the company have a monopoly up to a point, and we must give them that monopoly, otherwise, how can they compete with the foreign companies that are trying to get this traffic? If the right hon. Gentleman will study the Bill very closely and the White Paper closer still, he will agree with me that we are doing the best thing in the interests of the Empire as a whole by entering into this arrangement. A question was asked about the value of the shares the Treasury is to receive, and the hon. Member for Chesterfield replied to it on my behalf, and I am glad that he did it so well. He gave a wonderful explanation. He told the House about Cable and Wireless Holding and referred to the various companies whose shares are involved. He did not tell the House that, as far as those companies are concerned, it is something more than just a question of their being telegraph companies. He knows as well as I do that they also engage in manufacture.

Mr. Benson

The manufacturing assets of the Marconi Company are not included in Cable and Wireless, but definitely excluded.

Sir W. Womersley

We are dealing with the Cable and Wireless Holding, and they operate on behalf of the four companies that were mentioned.

Mr. Benson

The hon. Gentleman is misrepresenting me.

Sir W. Womersley

I would not like to do that.

Mr. Benson

I was calculating the value of Cable and Wireless, Limited. These various things to which the hon. Gentleman referred are excluded from Cable and Wireless, Limited, and only included in Cable and Wireless Holdings, Limited.

Sir W. Womersley

I am sorry to have to correct the hon. Member. I have specially obtained this information in anticipation of his question, and I want to know all about these companies myself. Three of these companies, the Eastern Telegraph, the Eastern Extension and the Western Telegraph Company, have considerable investments and other interests from which they derive dividends. The fourth company, the Marconi Company, has—and this is a definite statement—manufacturing and other interests from which it derives profits. The first three companies have debenture interest to pay, and the Eastern Telegraph also has to pay a dividend on preference stock before dividend goes to the ordinary shareholders. The hon. Gentleman will understand that operation.

Mr. G. Griffiths

What about the Prime Minister? Does he understand it?

Sir W. Womersley

He is not in the House.

Mr. Griffiths

He is there.

Sir W. Womersley

I want to clear up this point, and that is why I am reading from this document. I repeat that the first three companies have debenture interest to pay and the Eastern Telegraph Company has also to pay a dividend on preference stock. The greater part of the shares of these four companies has passed from public shareholders into the hands of Cable and Wireless Holding, Limited, originally known as Cable and Wireless, Limited, the holding company, which receives the dividends from the four older companies. It also receives dividends and interest from other investments. The capital of Cable and Wireless Holding, Limited—£23,649,694—is held by the public and the dividends pass to the shareholders. For 1937 the dividend was 5i per cent. on the cumulative preference stocks and shares and 4 per cent. on the ordinary stock. Therefore I submit that there is no need for me to defend the company from the alleged ramp. The hon. Member would not dare to repeat that statement outside the House. I will leave it at that.

We regard this agreement as sound business because the reduction in rates has brought and will bring a great benefit to this country and the Empire. It will mean that we can face foreign competition. The standard net revenue above which half the profits are to be used for the reduction of rates has been reduced from £1,863,000 to £1,200,000, so that there is a prospect of further reduction in rates in the future, even greater than those that have already been made. The arrangement meets with the approval of the Empire countries. The reduced rates and the better working of the services will be of great advantage to this country, the Dominions and other parts of the Empire with which we desire to keep the closest communication whilst extending our com- merce with them and making the Empire more and more united.

Mr. Edmund Harvey

Can the Assistant Postmaster-General say whether any consideration has been given to the possibility of Government representation on the board of the company, which has been described as a semi-public utility company?

Sir W. Womersley

The hon. Member wishes to know about the question of control.

Mr. Harvey

Government representation on the board.

Sir W. Womersley

That is the same thing. The Government have the right to approve the appointment of the chairman. He cannot be appointed without the approval of the Government. Under the Treasury agreement, published in Command Paper 3338 resulting from the 1928 conference, many points in the constitution of the companies are fixed. British control is secured. The chairman and one other director of Cable and Wireless, Limited, are to be approved by the Government. Powers are conferred on the Imperial Communications Advisory Committee, which includes representatives appointed by the Dominion Governments, the Government of India and a representative of the Colonies. This committee must be consulted on matters of general policy, and without its consent rates must not be increased or routes discontinued. Under the United Kingdom licence further powers are reserved to the Postmaster-General. If anything happens of which the Postmaster-General does not approve he has the right to suggest to his colleagues in the Government that certain action be taken. I maintain therefore that we have complete control over the affairs of the company.

6.20 p.m.

Mr. R. Acland

In the course of his charming and delightful speech the Assistant Postmaster-General has raised several points of which I should like an explanation. Is there any inevitable or essential connection between the reduction of rates, to which he has referred, and the bargain that has been made about these wireless stations, which results in a loss of £100,000 or more to the Government? Throughout his speech there was a balancing of this reduction of rates and the bargain that has been made. Are these two things really connected, except that they happen to come before the House at the same time? As a matter of fact, the reduction of rates does not come before the House, because it has already happened. Is the connection anything more than a lucky chance, under which the reduction of rates has come at a time which has enabled the Assistant Postmaster-General to give a good deal of attention to it in proposing the Second Reading of a Bill which simply deals with the particular bargain?

It seems to me that this is the case of a private company which was meeting with competition, just as many private companies have to meet with competition, and it found itself in danger of losing trade, or actually losing, trade, in the ordinary course of business. With the object, as the chairman's speech pointed out, of regaining trade and of making a higher profit, it reduced its rates. On that reduction it will lose money at first, but probably it will get money back later in increased revenue. Why should not this private company lose money? Why should it not earn less profit than it has been earning in the past? Why should it not, so far as this House and the taxpayers are concerned, make a loss? It has happened before that private companies have made a loss; sometimes they go out of business, as did the stage coach companies and other undertakings in the past.

We are told that the services of this company are vital to the State and that we cannot allow them to cease to be carried on. If that is the position, would it not be better and more straightforward, if the services cannot be carried out by private enterprise, for the State to carry them out, or else to control the services, rather than to make a bad bargain, as we contend is being done under this scheme, which means that we are to lose £100,000. It is not a straightforward or reasonable way or doing business for the Government to come forward and say that unless we enter into a bargain which means a loss to the taxpayers of £100,000, the company will not be able to carry on these services which are essential to the State. Where there is a service which must be a monopoly we submit that there must be control. The Government have not sufficient control.

We have been told, in response to an interruption, that the Government must approve the directorate; but the directorate is working in the interests of the shareholders and not necessarily in the interests of the public service. There has not been sufficient Government control to prevent a financial business which, at the very best, is a matter of question. With regard to the standard rate of dividend, I admit that it is a modest enough rate, but we have to take into account the watering of capital on which that dividend has been paid, and when we have done that, the rate of interest is quite high enough for a company which seems to be in the position of knowing that it will always receive benefits from the Government if it should be in danger of going out of business.

There is one idea which is advocated on these benches, which I admit is rather difficult to put into practice, and that is that the man who has enterprise should receive a reward, whether he has capital or not. We say, and I believe the House says and the country will say, that that is a right principle; but the opposite principle is advocated by the Government, namely, that the man who has capital, even the man who has watered capital, must receive a reward whether he has enterprise or not. That is a serious inversion of what ought to be the proper principle, and this Bill is an example of that. I do not see why we should make this bad bargain.

I would ask whoever winds up the Debate for the Government to answer this question. What would have been the position if this bargain had not been between a Government acting with taxpayers' money and the company, but it had been a bargain between two companies, both of them staking the money of their shareholders? I would ask the Minister to consider what would have happened if one or other of those companies had brought forward a bargain of this kind before the shareholders' meeting. If they had been dealing with shareholders" money and property in the way that the Government have been dealing with the taxpayers' money, the directors would have been dismissed by the shareholders at their next meeting. In this case, the taxpayers are shareholders in the concern.

Is it not a fact that this company is finding great difficulty in meeting the competition of the air mail? Is not the growth of the air mail the thing that is at the bottom of the unsound financial position of this company? Is there not a danger that the air mail will do to the wireless communications exactly what the wireless communications did to the cables and what presumably the cables did to the earlier transport of letters? If that is so, are not the affairs of this company in a somewhat analogous state to those of Imperial Airways, and would it not be better to make a thorough-going job of the matter and for the Government to take over the company as a State concern which, incidentally, could make a profit, as the Post Office does? If the Debate ends at an early hour, which I hope will not be the case, I shall not be able to hear the reply of the Minister, in which case I hope the Minister will forgive my absence, because I shall have to read what he says in the OFFICIAL REPORT.

6.29 p.m.

Sir Arnold Wilson

If the Postmaster-General were present he would have been amused to hear the hon. Member for Barnstaple (Mr. Acland) saying that the Post Office is a public service which, incidentally, makes a profit. I am afraid that the Postmaster-General would have had a wry smile on his features, remembering his negotiations with the Chancellor of the Exchequer and the amount that the Treasury takes annually from the Post Office. There is one point I should like to raise from my own experience and knowledge in the East of the arrangements that were make when the staff of the Indo-European Telegraph Company were taken over by Cable and Wireless. The Assistant Postmaster-General has told us that the Government have effective control over the company with which this Bill is concerned. If so, I hope they will keep a careful eye upon the interests of the staff. Cable and Wireless Limited did not give a fair deal to the staff when they took over from the Indo-European Telegraph Company.

I have many documents, but I will not trouble the House with them, showing that the staff were treated shabbily, in a manner which no Government Department would have treated the staff had the company been taken over by the Government. In this case the Government are dealing with a staff one or two removes, but it is none the less incumbent upon them, when they are making an agreement of this sort, to ensure that these men who are in a highly specialised service abroad are dealt with as though they were dealing with their own staff. These telegraphists are peculiarly unsuited by the nature of their work for other employment if they are transferred or removed. They have spent their whole lives abroad in distant and remote stations and in circumstances of great difficulty, and they deserve particularly favourable and kindly treatment.

I see nothing in the Bill, although there may be something in the agreement, which will enable the Post Office to exercise some form of beneficent control over the attitude which the company may adopt to its old staff, and to any future staff they may take on. I am not in the least impressed by the argument of the hon. Member for Barnstaple that the air mail is going to destroy cables and wireless. That is not in the least likely to happen. On the contrary, improvements in communications will make for more air mail liners carrying a greater number of people, we shall have more wireless communications and better, and possibly even more cables. Whether it is for civil or military purposes, we must keep our telegraphic communications in the best possible state, and that requires the best possible staff. You can only get the best possible staff, not by paying higher salaries, but by making them realise that they are being treated in the same honourable way in which the Government of this country deals generally with its staffs abroad. I hope the Postmaster-General will bear this point in mind when we come to the further stages of the Bill.

6.34 p.m.

Mr. Pethick-Lawrence

The hon. Member for Hitchin (Sir A. Wilson) has brought up the question of the treatment of the staff, originally referred to by my right hon. Friend the Member for Keighley (Mr. Lees-Smith) and replied to by the Assistant Postmaster-General. I shall have something to say on that point later. Hon. Members, I am sure, must recognise that although we have had a very chatty and entertaining speech from the Assistant Postmaster-General, the crushing case made against the Bill by the. right hon. Member for Keighley, the hon. Member for Chesterfield (Mr. Benson) and the hon. Member for Willesden (Mr. Viant) remains entirely unanswered. It is one of the misfortunes of this House that we have a somewhat fluctuating audience, and on looking around I see present at the moment very few Members who listened to the speeches which were made by hon. Members on these benches. The Financial Secretary, in opening the Debate, imagined that the case to be put forward from this side would be a purely theoretical Socialist case, and he said that as the House was dealing with a practical question the Socialist case might be allowed to go by the board. Those hon. Members who were present and listened to the speeches from hon. Members on this side will bear me out in saying that they heard something entirely different from a theoretical case.

My right hon. Friend the Member for Keighley, an ex-Postmaster-General, spoke from a rich experience and knowledge of the facts, and demonstrated conclusively that the arrangements made 10 years ago had not worked out in the least as expected, and that it would have been much better had the arrangement been put through in the way we thought it should have been done. He made out, in fact, a complete commercial case against the Bill, and showed that the only argument which could possibly be brought in favour of the Bill was that the Government had succeeded in bringing about a reduction in rates. The point which my right hon. Friend and also the hon. Member for Barnstaple (Mr. Acland) made, was a perfectly straightforward one; whether it would be necessary for the company to make these reductions quite independent of the concessions which are being made? There is no doubt that the company, faced with the competition which prevails and with the prospect of an increased revenue from a cheaper service, would in its own interests be compelled sooner or later to make the reductions they have in fact consented to make now. There is no proof whatever that in the long run they will not benefit very considerably from these reductions. The Assistant Postmaster-General has said perfectly accurately that the first effect would be a loss, but that does not mean that in the long run it will not be of advantage to the company, and there is no sign in the Bill and no argument has been put forward, that these two things, a reduction of rates and a gift to the company, are part of one scheme.

The hon. Member for Chesterfield in a brilliant speech, as I thought, made a powerful financial attack on the Bill; and the Assistant Postmaster-General did not answer him by picking out one small point and entering into a long discussion of the financial position of the company. My hon. Friend asked, first, what were we giving away? He showed that we were giving away several things, certain things which cannot be reckoned in money, and one thing which can. Among the things which cannot be reckoned in money are the sacrifice of the freehold of these beam stations; prolonging the right of the company to the licence; and that we were giving what may be construed as almost a vested interest in perpetuity. Among the things which can be measured financially was the release of the rental which they had at present to pay, £250,000, and the substitution of shares which will not bring in an income in excess of £100,000.

Incidentally, my hon. Friend asked to what sort of company we were making these concessions, and on that comparatively small point the Assistant Postmaster-General discussed the financial position of the company. Towards the end of his speech the Assistant Postmaster-General professed to have demolished the statistics and facts of my hon. Friend. He did nothing of the kind. What he told us was in fact what my hon. Friend had actually said. Let me say this that if instead of being the custodians of the national purse we were shareholders in a private company we certainly should not agree to the bargain which the Government are making on our behalf. That contention has been supported by the hon. Member who spoke for the Liberal party. Of course, the great bulk of hon. Members, who ought to be considering the affairs of their clients, the public of this country, have been absent from the Debate and have not heard the case, but they will come trooping into the Lobby and will vote for the Government.

I propose to put another count in the indictment against the Postmaster-General. But before I come to that there are two minor points to be discussed.

There is the question of the staff. However much we may differ from the Assistant Postmaster-General on this issue, he is a thoroughly honourable man and he says that we can trust him to do the straight thing. Is that enough? It is perfectly true that the House is willing to forgo having it stated in the Bill and to trust Members of the Government when they make promises, provided that those promises are of a sufficiently specific kind, but the Minister has not given us a specific promise up to the moment, and unless we can get it we shall have to maintain our attitude towards the Bill on this point. The Assistant Postmaster-General said earlier that whatever happens to members of the staff he will see that they get other positions. That is not enough. These people are civil servants. They have at the present time a contract of service, and if they are on the permanent staff it is a contract lasting for their working life, with a pension at the end. What we want to know is this: Are these civil servants going to get another position where their present rights as regards salary and rises in salary and pensions, will be just as good in their new positions as they are at present? If we can have an assurance on that point we shall be satisfied, and I think the hon. and gallant Member for Hitchin (Sir A. Wilson) would also be satisfied so far as they are concerned. As to the servants of the company, I do not see that we can ask the Minister for a specific guarantee concerning their position, for they are not under his control, but we would like to know what he can tell us in regard to them, because this arrangement will be thoroughly unsatisfactory if, while the civil servants are protected, the servants of the company are being pushed out of their jobs owing to the arrangement that is being made.

Sir A. Wilson

Is the right hon. Gentleman aware that the Pacific Cable Board protected their staff by the following clause in their agreement?— That the company will employ him [the employė] on terms at least as favourable as those on which he was employed by the board, including tenure of office, remuneration, allowances, gratuities, pensions, superannuation. sick fund, or any other customary privileges, whether enjoyed as of right or by the customary practice of the board. I take it that the right hon. Gentleman agrees that if that can be done by the Pacific Cable Board, it can be done by Cable and Wireless, Limited.

Mr. Pethick-Lawrence

I say that all the Assistant Postmaster-General can assure us is that he will obtain adequate guarantees with regard to the men who are servants of the company. That is as much as we can expect from him in their case. But as far as the civil servants are concerned, he must give an absolute guarantee that their position will not be worsened by the change.

There is one other small matter to which I expected the Financial Secretary to the Treasury to refer, because it seems to me to be a matter of some slight importance. The House seems to be under the impression that the Government are giving up £250,000, and that they are going to get whatever value there may be from the dividends on the shares. In taking that view, the House has not separated the two entities, the Treasury and the Post Office. What the arrangement provides is a little different from that. Under the old arrangement, the Post Office was entitled to £25,000 a year in rent, which sum went to swell the funds out of which the Post Office was entitled to so much every year, without the Treasury being able to dip their hands into the till. The Post Office is to sacrifice the whole of that amount of £250,000. The interest or dividend on the shares will not go to the Post Office, but to the Treasury, and the Treasury undertake that£150,000 shall be paid out of the Exchequer to the Post Office. The Post Office will definitely be worse off by the sum of£100,000 a year. The Treasury will have to pay£150,000 a year to the Post Office and to recoup itself, as far as it goes, by the dividend on the shares. If one assumes that the dividend will be £90,000, the Treasury will lose £60,000 and the Post Office will lose£100,000. That seems to me to be of some importance, because it affects the available surplus. Clearly, the Post Office will sacrifice£100,000 and will get nothing for itself in return. It does not seem to me to be a very desirable thing that the Post Office should suffer the whole of that loss.

I would like now to pass from those two minor points to the main issue. The case which has been put by my right hon. Friend the Member for Keighley, my hon. Friend the Member for Chesterfield, and other hon. Members, is a strong one. It is that if, instead of being the House of Commons, concerned with the affairs of the nation, we were a private concern, we ought not, on commercial and financial grounds, to make this bargain. In point of fact, the case against the proposal is very much stronger than that. We are not a private concern making a bargain by which we lose part of our property; we are speaking and acting on behalf of the nation; and there are in this question large national and imperial interests which the Government are prepared to sacrifice. After all, communications are not simply commodities which can be bought and sold, which hon. Members opposite think ought to be a matter of private enterprise, and hon. Members on this side of the House think ought to be public enterprise. Communications are vital services of the nation and the Empire. They cannot be bandied about with the same freedom as in the case of merchandise.

Of course, not only hon. Members on these benches, but hon. and right hon. Gentlemen opposite recognise that in war time it is absolutely essential that communications should be in national hands and not in private hands. Hon. Members opposite may say that that is provided for, and that it is made clear that these communications would be taken over by the Government in the event of war breaking out. But would it be as good to "swop" horses while crossing the stream as to have the same team throughout? I should have thought that it would have been very much better if these communications had been, were and would be in Government hands all the time, than that there should be a transfer of authority at a time when the greatest difficulty would be experienced in other ways at the outbreak of a war. But it is not merely in time of war that it is of such great importance that communications should be in Government hands. Even in peace time, the service of communications is of vital importance to our well-being. The Government constantly use these means of communication, they are constantly sending cables and communications of all sorts to other Governments. It would be very much better if this service were in the hands of civil servants rather than that private persons should have access to the secret and important telegrams which the Gov- ernment may be sending to other Governments.

What does the Bill do? The Financial Secretary says that no doubt hon. and right hon. Gentlemen on these benches would like to reverse the 1928 decision. That, of course, is true, but it is a question which does not arise on this Bill. What the Bill does is to extend the concession, and to extend it in the most objectionable manner by alienating Government freehold property. These important beam stations, and all their apparatus, are being handed over in perpetuity to a private company. In the case of the Continental business, the Government, instead of acting upon the power which they already have, are further depriving the nation of control over this essential service of communications.

My hon. Friends on these benches have made out the business case against the Bill. I venture to believe that I have further made out the national and Imperial case against it. I believe that if this Measure is carried, the House will be sacrificing a vital and essential national asset, and giving it up for no valid reason. Even if the Government had had to make some slight concession to the company in order to get them to agree to the reduction of rates, it was not by any means necessary to make it in this form. It was not necessary to sacrifice the freehold property of the Government. It was not necessary to hand these things over to the company in perpetuity. It was not necessary to extend for another 10 years the power of the company to run the service. None of these things need have been done. It would have been possible to retain all that was necessary in national hands under the control of the Government. My right hon. Friend the Member for Keighley said that no one can foresee what the development of communications of all kinds will be in the course of the next 15, 20 or 25 years. That is undoubtedly true; and it would have been a very much wiser course, and one much more in the interests of the country as a whole, if the Government had held their hand and not made this alienation of Government rights and property to a private company.

6.57 p.m.

The Secretary of State for Dominion Affairs (Lord Stanley)

I apologise to the House for being the third speaker from this Bench to take part in a comparatively short Debate, but as soon as it was seen that the Opposition had put down a reasoned Amendment for the rejection of the Bill, it was decided that, in the general interests of the House, it would be better if the Assistant Postmaster-General spoke fairly early in the Debate and gave all the information possible, and another Member of the Government wound up the Debate. We felt that if hon. Members opposite were really doubtful as to the propriety or advisability of this agreement, we should not in any way shirk inquiries, and we should give them all the information at our disposal. I do not think any hon. Member will deny that very little was left unsaid on his own Department by my hon. Friend the Assistant Postmaster-General. I do not want to spoil the effects of my hon. Friend's speech or that of the Financial Secretary to the Treasury by vain repetition.

One point in the speech of my hon. Friend the Assistant Postmaster-General was specifically raised by my hon. Friend the Member for Hitchin (Sir A. Wilson) and by the right hon. Gentleman the Member for East Edinburgh (Mr. Pethick Lawrence), namely, the question of staff, which is one which closely affects every hon. Member. I am glad to be able to tell the House that the Assistant Postmaster-General is able to give the assurance that the rights of civil servants will be maintained in every respect, both as regards pensions and terms of employment, and in every other way. With regard to the servants of the company, who are not directly under his control, he has given the definite promise that he and the Postmaster-General will do everything they can to see that the servants of the company are well treated in every respect. I think the right hon. Gentleman will agree that that is as far as we can go at this stage.

Mr. Pethick-Lawrence

I do not think that goes very far. It is one of those vague utterances that do not go anywhere at all. Have they, or will they get from the company, any undertaking in the matter?

Sir Charles Barrie

As a director of the Cable Company I can give the House an assurance that those servants who will have to be dispensed with will be treated in no worse manner than they are being treated at the moment.

Mr. Benjamin Smith

They ought to have the protection of the Government. It should be a term of the agreement that no one should be worsened as the result of it.

Lord Stanley

I have already said Ely right hon. Friend will assure himself that the servants of the company will not suffer in any way, and we have already had an assurance, unofficial though it may be, from a director of the company speaking only a minute ago.

Sir John Withers

I have seen a good many amalgamations of statutory undertakings under the Board of Trade. They insist upon a clause being put in, if I understand it, that no employé of the company taken over shall be in the least worsened position than before.

Mr. Lees-Smith

Will the hon. Member for Southampton (Sir C. Barrie) tell us that he will give that or a similar guarantee?

Sir C. Barrie

The guarantee that the company is willing to give is what I have already stated, that the position of those servants who may not be continued will be taken care of, and they will be in no worse position than if they had continued in their present service.

Lord Stanley

No one desires more than I do that the staff should be properly treated.

The Debate has in no way been conducted upon theoretical, but rather upon practical lines. The right hon. Gentleman the Member for Keighley (Mr. Lees-Smith) took a general principle which has been a sort of tenour running through the Debate that he would continue the protest made by his party in 1928, and I think that in doing so, he is falling into the same mistake as his party made 10 years ago. Their feelings are so outraged by the idea of an agreement with private enterprise, and particularly with the Cable Company, which they look upon as the weakest link in the chain of communications, that they overlook the really dominating factor of the whole business, which is the measure of agreement arrived at between ourselves and the other Governments in the British Commonwealth. The right hon. Gentleman seemed to take it for granted that they would follow the lead given by the Government, or by the Post Office, and he gave an instance where this example was followed during the time when he was Postmaster-General. I understand that when those discussions were taking place, before the original agreement was made in 1928, the Governments of the Dominions informed the committee that was looking into it that they would not have agreed to any sort of Imperial utility company which deprived them of their independent control and that the placing of the whole system under the control of the United Kingdom Government was equally unacceptable. I also understand that this scheme would have been almost impossibly expensive. We should have had to buy out the control of the wireless stations overseas and also take over the working of the far end of the cables, even if the owners had been ready to sell.

There seem to be two essential questions that have to be answered. The first is whether these arrangements, which concern all the component parts of the British Commonwealth of Nations, command the support of those component parts. The other is whether the interests of the public are adequately served by the agreement that we propose to make. With regard to the first, the other Governments approved the original arrangement and also approve the present arrangement, and it is not at all clear that any general agreement could have been secured on any other basis. It is with regard to the second question that we have been mainly concerned to-day. We believe that an agreement on the lines that we propose is essential, and the whole argument is whether this particular agreement is the best that could be obtained. I think we might forget that the words "ramp," "robbery" and "favouritism" were ever used, because it is obvious that, on whichever side of the House we may be sitting, we all want to get the best agreement for the general public that we possibly can. It is no crime, surely, to sell national property provided that the sale is justified in the public interest, and we claim that the sale of these four beam stations was amply justified by the advantages that are going to accrue from the new arrangement. In the first place —a point that was amplified by the right hon. Gentleman the Member for East Edinburgh—the strategic aspect of these communications has been amply safeguarded, because it is essential that for secrecy and for strategic reasons these essential cables should be maintained. The other great advantage that we have got out of it is the drastic reduction of rates. We have been asked whether the reduction of rates is in any way bound up with the fact that we have let the company off the rent that they had to pay for the beam stations. Of course it has, because, unless we had done so, the company could not possibly have carried out these reductions on the terms of the original agreement.

You cannot deal in a case of this kind with concrete factors only. There are a great many intangible factors as well, and, taking them into consideration, I feel that we have made a good bargain, because not only have we a very drastic reduction in the rates but we have also quickened communications between various parts of the Empire, we have done a great deal to assist the commercial community in carrying on trade at a very difficult time and we have completely safeguarded the strategic aspects of the question. We cannot talk as if we were one commercial company bargaining with another, because the Government must bear in mind the great responsibilities that they have and the great advantages that may accrue quite irrespective of finance. Two commercial companies would deal in terms of finance only. We have to face the question on a very much wider basis, and it is on that wider basis that I claim that the agreement is fully justified. We have also been asked whether we ought not to wait and see whether the air mail will not become a serious competitor with this company, necessitating a fresh agreement in a few years' time. I am afraid that even under the dynamic influence of the newly-appointed Secretary of State for Air it will be a very long time before the air mail can catch up with telegraphy.

The Opposition have criticised the Government in 1928, and again in 1938 more or less on the same lines. They object to the solution that we have put forward. I think we ought to say to them that this solution is agreed upon by the other Governments, we think that it is acceptable as a financial agreement and they themselves, although they oppose what we wish to do, have never put forward a solution which has satisfied anyone but themselves. We are told that the ques- tion has been dealt with to-day from the point of view of business and of national and Imperial importance, and it is from all those points of view that I have a perfectly clear conscience in asking the House to support the Second Reading

Question put, "That the words proposed to be left out stand part of the Question."

The House divided: Ayes, 186; Noes, 110.

Division No. 223. AYES. 7.15 p.m.
Acland-Troyte, Lt.-Col. G. J. Fremantle, Sir F. E. O'Neill, Rt. Hon. Sir Hugh
Adams, S. V. T. (Leeds, W.) Furness, S. N. Perkins, W. R. D.
Agnew, Lieut.-Comdr. P. G. Fyfe, D. P. M. Petherick, M.
Amery, Rt. Hon. L. C. M. S. Gluckstein, L. H. Pickthorn, K. W. M.
Anderson, Rt. Hn. Sir J. (Sc'h Univ's) Glyn, Major Sir R. G. C. Pilkington, R.
Aske, Sir R. W. Goldie, N. B. Ponsonby, Col. C. E.
Astor, Major Hon. J. J. (Dover) Gower, Sir R. V. Procter, Major H. A.
Astor, Viscountess (Plymouth, Sutton) Graham, Captain A. C. (Wirral) Ramsay, Captain A. H. M.
Astor, Hon. W. W. (Fulham, E.) Grant-Ferris, R. Rathbone, J. R. (Bodmin)
Barrie, Sir C. C. Gridley, Sir A. B. Reed, A. C. (Exeter)
Beechman, N. A. Grimston, R. V. Reed, Sir H. S. (Aylesbury)
Beit, Sir A. L. Guest, Lieut.-Colonel H. (Drake) Reid, W. Allan (Derby)
Bernays, R. H. Hambro, A. V. Remer, J. R.
Bossom, A. C. Hannah, I. C. Rickards, G. W. (Skipton)
Boyce, H. Leslie Harbord, A. Ropner, Colonel L.
Bracken, B. Haslam, Sir J. (Bolton) Ross Taylor, W. (Woodbridge)
Briscoe, Capt. R. G. Heilgers, Captain F. F. A. Rowlands, G.
Broadbridge, Sir G. T. Holy-Hutchinson, M. R. Royds, Admiral Sir P. M. R.
Brown, Col. D. C. (Hexham) Heneage, Lieut.-Colonel A. P. Russell, R. J. (Eddisbury)
Brown, Brig.-Gen. H. C. (Newbury) Hepburn, P. G. T. Buchan- Salmon, Sir I.
Bull, B. B. Hope, Captain Hon. A. O. J. Salt, E. W.
Butcher, H. W. Hopkinson, A. Samuel, M. R. A.
Campbell, Sir E. T. Howitt, Dr. A. B. Sandeman, Sir N. S.
Cartland, J. R. H. Hudson, Capt. A. U. M. (Hack., N.) Sanderson, Sir F. B.
Carver, Major W. H. Hutchinson, G. C. Sandys, E. D.
Cayzer, Sir C. W. (City of Chester) Inskip, Rt. Hon. Sir T. W. H. Scott, Lord William
Channon, H. Jones, Sir G. W. H. (S'k N'w'gt'n) Shepperson, Sir E. W.
Chapman, A. (Rutherglen) Keeling, E. H. Smith, Bracewell (Dulwich)
Chapman, Sir S. (Edinburgh, S.) Kerr, Colonel C. I. (Montrose) Smith, Sir R. W. (Aberdeen)
Christie, J. A. Kerr, J. Graham (Scottish Univs.) Somervell, Sir D. B. (Crowe)
Clarke, Frank (Dartford) Latham, Sir P. Somerville, A. A. (Windsor)
Colville, Rt. Hon. John Law, Sir A. J. (High Peak) Stanley, Rt. Hon. Lord (Fylde)
Conant, Captain R. J. E. Law, R. K. (Hull, S.W.) Stanley, Rt. Hon. Oliver (W'm'l'd)
Cooke, J. D. (Hammersmith, S.) Leech, Sir J. W. Storey, S.
Cooper, Rt. Hn. T. M. (E'nburgh, W.) Leighton, Major B. E. P. Stourton, Major Hon. J. J.
Courtauld, Major J. S. Lennox-Boyd, A. T. L. Strauss, E. A. (Southwark, N.)
Cook, H. B. Trevor Lipson, D. L. Strauss, H. G. (Norwich)
Cranborne, Viscount Lloyd, G. W. Stuart, Hon. J. (Moray and Nairn)
Crooke, Sir J. S. Locker-Lampson, Comdr. O. S. Sueter, Rear-Admiral Sir M F.
Crookshank, Capt. H. F. C. Loftus, P. C. Tasker, Sir R. I.
Croom-Johnson, R. P. Lyons, A. M. Tate, Mavis C.
Cross, R. H. Macdonald, Capt. P. (Isle of Wight) Tufnell, Lieut.-Commander R. L.
Crossley, A. C. McKie, J. H. Wakefield, W. W.
Crowder, J. F. E. Macnamara, Major J. R. J. Wallace, Capt. Rt. Hon. Euan
Culverwell, C. T. Macquisten, F. A. Ward, Lieut.-Col. Sir A. L. (Hull)
Davies, C. (Montgomery) Magnay, T. Ward, Irene M. B. (Wallsend)
Davies, Major Sir G. F. (Yeovil) Makins, Brig.-Gen. E. Wardlaw-Milne Sir J. S.
Denman, Hon. R. D. Margesson, Capt. Rt. Hon. H. D. R. Watt, Major G. S. Harvie
Denville, Alfred Markham, S. F. Wayland, Sir W. A
Dixon, Capt. Rt. Hon. H. Mason, Lt.-Col. Hon. G. K. M. Wedderburn, H. J. S.
Doland, G. F. Mayhew, Lt.-Col. J. Wells, S. R.
Duckworth, W. R. (Moss Side) Mills, Sir F. (Leyton, E.) Whiteley, Major J. P. (Buckingham)
Duggan, H. J. Mills, Major J. D. (New Forest) Wickham, Lt.-Col. E. T. R.
Dunglass, Lord Mitchell, Sir W. Lane (Streatham) Williams, H. G. (Croydon, S.)
Edmondson, Major Sir J. Moore, Lieut.-Col. Sir T. C. R. Wilson, Lt.-Col. Sir A. T. (Hitchin)
Elliot, Rt. Hon. W. E. Moreing, A. C. Winterton, Rt. Hon. Earl
Emrys-Evans, P. V. Morgan, R. H. Withers. Sir J. J.
Entwistle, Sir C. F. Morris-Jones, Sir Henry Womersley, Sir W. J.
Errington, E. Morrison, G. A. (Scottish Univ's.) Wright, Wing-Commander J. A. C.
Erskine-Hill, A. G. Morrison, Rt. Hon. W. S. (Cirencester) Young, A. S. L. (Partick)
Evans, Capt. A. (Cardiff, S.) Muirhead, Lt.-Col. A. J.
Fleming, E. L. Munro, P. TELLERS FOR THE AYES.—
Fox, Sir G. W. G. O'Connor, Sir Terence J. Captain Dugdale and Major Herbert.
Adams, D. (Consett) Benn, Rt. Hon. W. W. Brown, C. (Mansfield)
Adams, D. M. (Poplar, S.) Benson, G. Burke, W. A.
Ammon, C. G. Bevan, A. Cape, T.
Barnes, A. J. Broad, F. A. Cluse, W. S.
Bellenger, F. J. Bromfield, W. Clynes, Rt. Hon. J. R.
Cove, W. G. Kirby, B. V. Salter, Dr. A. (Bermondsey)
Cripps, Hon. Sir Stafford Lansbury, Rt. Hon. G. Seely, Sir H. M.
Daggar, G. Lathan, G. Sexton. T. M.
Davidson, J. J. (Maryhill) Lawson, J. J. Shinwell, E.
Davies, R. J. (Westhoughton) Leach, W. Silkin, L.
Davies, S. O. (Merthyr) Leslie, J. R. Simpson, F. B.
Dobbie, W. Logan, D. G. Smith, Ben (Rotherhithe)
Dunn, E. (Rother Valley) Macdonald, G. (Ince) Smith, E. (Stoke)
Ede, J. C. McEntee, V. La T. Smith, Rt. Hon. H. B. Lees- (K'ly)
Edwards, A. (Middlesbrough E.) McGhee, H. G. Smith, T. (Normanton)
Edwards, Sir C. (Bodwellty) McGovern, J. Stephen, C.
Fool, D. M. MacLaren, A. Stewart, W. J (H'ght'n-le-Sp'ng)
Frankel, D. Maclean, N. Strauss. G. R. (Lambeth, N.)
Gardner, B. W. Marshall, F. Summerskill, Edith
George, Major G. Lloyd (Pembroke) Mathers, G. Taylor, R. J. (Morpeth)
Greenwood, Rt. Hon. A. Maxton, J. Thorne, W.
Griffith, F. Kingsley (M'ddl'sbro, W.) Messer, F. Thurtle, E.
Griffiths, G. A. (Hemsworth) Milner, Major J. Tinker, J. J.
Groves, T. E. Morrison, Rt. Hon. H. (Hackney, S.) Viant, S. P.
Guest, Dr. L. H. (Islington, N.) Morrison, R. C. (Tottenham, N.) Watkins, F. C.
Hall, G. H. (Aberdare) Muff, G. Watson, W. McL.
Hardie, Agnes Nathan, Colonel H. L. White, H. Graham
Harris, Sir P. A. Noel-Baker, P. J. Whiteley, W. (Blaydon)
Harvey, T. E. (Eng. Univ's.) Oliver, G. H. Wilkinson, Ellen
Hayday, A. Paling, W. Williams, E. J. (Ogmore)
Henderson, A. (Kingswinford) Parker, J. Williams, T. (Don Valley)
Henderson, T. (Tradeston) Pearson, A. Wilson, C. H. (Attercliffe)
Hills, A. (Pontefract) Pethick-Lawrence, Rt. Hon. F. W. Windsor, W. (Hull, C.)
Hopkin, D. Price, M. P. Young, Sir R. (Newton)
Jones, Sir H. Haydn (Merioneth) Quibell, D. J. K.
Jones, Morgan (Caerphilly) Ridley, G. TELLERS FOR THE NOES.—
Kelly, W. T. Ritson, J. Mr. John and Mr. Adamson.
Kennedy, Rt. Hon. T. Robinson. W. A. (St. Helens)

Bill read a Second time.

Bill committed to a Committee of the Whole House for To-morrow.— [Captain Margesson.]