HL Deb 21 February 1984 vol 448 cc711-54

House again in Committee on Clause 59.

Lord Stoddart of Swindon moved Amendment No. 132: Page 53, line 3, leave out ("the Consolidated Fund") and insert ("a specifically designated fund for the promotion of and assistance to the recovery of British manufacturing industry")

The noble Lord said: I beg to move Amendment No. 132. The Government expect to gain some £4,000 million, as I understand it, from the sale of British Telecom shares. That is an enormous amount of money by any standards. But the receipts from capital assets have been built up over many years by the public through their investment in telecommunications and also by those who have worked in the industry, by their effort, their expertise and diligence over some 70 years. It is the public and those working in the industry who have built up those assets over a long period of time.

I want to make it quite clear that we on these Benches are diametrically opposed to the sale of British Telecom shares; but since the Government seem quite determined to override common sense with dogma and intend to proceed to privatise BT come what may, we must turn our attention to the use that is to be made of the proceeds of the sale—as I have said, some £4,000 million.

The Government, as we see it, plainly intend to use the profits of the sale to reduce taxes at the most appropriate time to assist their electoral chances. Noble Lords may laugh, but Conservative Governments have been known to do that in the past and I am quite certain that they intend to do so in the future. It is our view that that is precisely what they intend to do with this £4,000 million; but by doing so they will be applying capital receipts to revenue consumption—a course which they frown upon when it is embarked upon by others; for example, local authorities. I well remember being told by my officials when I was leader of a county borough council, when perhaps I wanted to do the same sort of thing, that the Government did not permit it. I came to understand that it was a wrong process anyway and did not seek to do it. But the Government now seek themselves to do what they tell other people it is wrong to do: that is, to apply capital receipts to revenue consumption.

What is worse is that these capital monies which will be applied to consumption will, due to the weak state of the manufacturing sector in Britain, be used to buy manufacturing imports. Thus the sale of BT shares will benefit not British manufacturers but foreign suppliers. There is a crying need for investment in manufacturing industry, particularly in the new technologies. If that is not done and if that investment does not take place—the noble Lord, Lord Weinstock, referred to this the other night when he rightly complained that those people who are engaged in manufacturing get "the neck of the chicken"—the service industries, in the long term, will not supply the real consumption needs of this country. Yet we are using this money for immediate consumption, in spite of the fact that if we do not invest in manufacturing industry Britain will be absolutely pauperised when North Sea oil runs out, as it assuredly will in the next decade. Indeed, the peak of the oil supply will come in 1985–86, according to the Government's own statistics, and from then on it is downhill all the way. What we are saying is that there is a great need for more money to be applied to our manufacturing industry in order that we can take up the slack when North Sea oil begins to run out. This amendment seeks to ensure that capital receipts from the sale of BT shares are used for the capital reconstruction of this country.

Over the past four or five years the Government have embarked upon a veritable rake's progress with Britain's state assets, and that rake's progress is being continued by this Bill, which is opposed by a large section of this Chamber. Certainly it has not found favour on the Labour Benches; it has not found favour on the Liberal Benches or, indeed, so far as I can see, on the Cross-Benches. Basically, I think people understand that the Government are embarked upon this rake's progress with these assets from British Telecom and with other assets which will be sold and the proceeds used for consumption.

The Government will argue of course that to do what we are suggesting in this amendment amounts to the hypothecation of revenues, and we all know that the Exchequer hates that. But, frankly, I believe that in this instance it is necessary to ensure that when the BT shares are sold, the people of this country shall know—whether they agree or disagree individually with the sale—that the capital receipts which they have built up are going to be used for the rebuilding of industry. I hope therefore that our amendment will be supported.

Lord Cockfield

Perhaps I might start by assuring the noble Lord that I am in complete disagreement with his views on matters of economic policy. I shall be only too glad to debate these methods with him on a more appropriate occasion. I would only ask him to compare the state of the economy today with the appalling state it was in when it was brought to its knees under a Labour Government in 1976, when they had to go crawling to the IMF to bail them out of bankruptcy. So let us leave those matters on one side. If the noble Lord wishes to float them, I am always prepared to argue them with him.

What I will do is simply to say that this amendment runs contrary to our general policy towards industry. The general approach is to allow the operation of the economy to reflect, so far as possible, the play of market forces. Our policy of privatising British Telecom is implementing this approach in the telecommunications sector. It would be inconsistent with this approach to use the proceeds of sale to set up a fund to hand out money to manufacturing industry as an addition to the existing instruments of regional and industrial policy. Who would decide which industries and firms were to receive the cash injections? What criteria would they apply? The proposal is a recipe for duplication with existing schemes and an increase in interventionism, when the Government are seeking to move in the opposite direction.

The amendment is, moreover, inconsistent with good financial management of the public purse. It would clearly be wrong and wasteful to earmark proceeds from the BT sale to industry, without considering the assistance that is already given to industry and the assistance that may be required. In addition, there are other calls on public funds and the priority attached to these calls can be properly determined only by considering them together against the funds available in the course of the public expenditure exercise. This is the correct approach to public expenditure and it is the approach that the Bill provides for as it is currently drafted. For these reasons, I ask your Lordships to oppose the amendment.

Lord Bruce of Donington

I am very grateful that the noble Lord should have replied in the terms that he has, because it will give us an opportunity, as time and events unfold, to reproduce his words precisely to him. We all know perfectly well—and it has attracted public comment far outside the cloisters of Government—that it is not good housekeeping to sell the family silver in order to pay the wages of the butler. This is one of those elementary Victorian values to which the Prime Minister so often and so eloquently refers. It is not good policy to sell off assets in order to pay for revenue expenditure; and, sooner or later, this will catch up with the noble Lord, who still seems to be cocooned in those extraordinary economic policies which he enunciated from the moment of his arrival in this House and which have since been repudiated by most members of his own party. He seems to be isolated by an incredible sense of innocence.

What we are trying to do by this amendment is to protect the noble Lord from his own naïvete in the matter. It seems to us to be good housekeeping—I am talking of ordinary housekeeping as the British housewife understands it—if you fall short in one year and your income does not meet your current expenditure, that you do not immediately sell off the house in order to meet your current expenditure. You try to trim your expenditure to your income. The noble Lord has read the Government's expenditure White Paper and the recent effusions from the Treasury that may or may not bear his name, and he knows quite well that the only reason why Government expenditure has been held down to what his right honourable friend calls "acceptable limits" is that capital receipts have been deducted from capital expenditure prior to their presentation to the public.

The noble Lord does not seem able, and I am trying desperately to help him, to depart from the elementary accountancy of the cashbook; that is to say, what we are concerned with is sums received in and sums paid out. This is the basis of the Treasury's accounts. They take account of no assets at all. They do not even take account of liabilities, except in the theoretical sense when they try to assess the public sector borrowing requirement, on which they are normally thousands of millions of pounds out.

So it does not strike the noble Lord as at all incongruous that you should realise vast assets which you cannot replace, and then spend the money out on ordinary current expenditure. That does not seem to bother the noble Lord in the slightest. First-year accountancy students would tell him that that is not normal accountancy practice or normal economic practice, either. There may be economists on the noble Lord's side who could fortify his conviction in his own rectitude; but, if so. I do not see them and they certainly have not been very vocal recently.

All we are trying to do is safeguard the realisation of funds. I should have thought that this would commend itself to the noble Lord, on the assumption that the amounts received from the sale of British Telecom will result in a profit to the Government anyway. What I may seek to show at later stages is that, although the Government may be receiving upwards of £4,000 million from the sale of a half-share in British Telecom, the burden on the taxpayer in cash terms will ultimately be more, and the taxpayer will lose money on the transaction. I shall take the noble Lord through all the detailed calculations in due course.

In the meantime, I do not see why those of your Lordships who are concerned with financial prudence —and who in your Lordships' House is not concerned with financial prudence?—should object to the notional segregation of this sum, in order to repair investment in British industry? It is well known—the noble Lord's party has emphasised it more than often and so has the noble Lord—that one of the defects in industry in the United Kingdom is that it has had no capital policy. It has had plenty of incomes policy, but it has never had a capital policy.

The noble Lord knows perfectly well that the right honourable gentleman to whom he was at one time financial adviser complained more than once about the deficiencies of British industry in making investment. All that this amendment seeks to do is to give the Government the ability to exercise a little common sense as and when they wake up to the necessity to do so, which is the paramount necessity for investing in British industry. If private finance will not do it then, quite clearly, the state must in order that a correct capital policy can be maintained in this country.

Before concluding on this somewhat sombre note, I must apologise to the noble Lord, Lord Peyton of Yeovil, with whom I seem to have crossed swords inadvertently earlier in the evening. I regret it if the forcefulness of my language offended him. All I can assure him about is that I have followed his career in another place. I am used to his incisiveness, and I feel that I am a dove in comparison with his reputation.

Lord Lloyd of Kilgerran

Before the noble Lord sits down, as he has had the advantage of seeing the Government's financial notes on this matter, may I, as another innocent—if I may associate myself with the noble Lord. Lord Cockfield—ask him about subsection (6) of Clause 59, which refers to "Any dividend or other sums"? Is there any information in the financial notes about the amount involved? It would be very interesting to know what we are talking about in terms of finance.

Lord Bruce of Donington

If I may reply, by leave of the Committee, the memorandum which I have received and which is extremely informative—I do not wish to cast any aspersion on it—does not quantify the sums involved. Those are a matter of divination and examination of the accounts.

9 p.m.

Lord Cockfield

The noble Lord, Lord Bruce of Donington, put down a Question for Written Answer, and my reply to that Question gave him a very great deal of information which is printed in Hansard. The noble Lord, Lord Lloyd of Kilgerran, may like to refer to it. The figures will be misinterpreted by the noble Lord, Lord Bruce of Donington, but I await his so doing. The noble Lord indicated earlier that he proposes misinterpreting them.

There are only three points to which I wish to refer. First, the noble Lord's argument about the family silver is based upon a total fallacy. What is happening is that the ownership of British Telecom is being transferred to the British people. There is no reduction in wealth. It is much better for the British people themselves to own an industry of this kind than for it to be owned by one of these amorphous state corporations.

My second point is that the noble Lord will find an analysis of Government capital expenditure in the public expenditure White Paper which has just been published. There he will see that Government capital expenditure amounts to about £20 billion a year, a figure very greatly in excess of anything likely to be realised from the sale of British Telecom. This is only a question of fact.

Thirdly, investment in British industry depends upon the profitability of British industry. If the profitability is there, there is no shortage of money—and no difficulty in laying your hands on it, either. The policies of the Government are directed towards improving the profitability of industry. It is down that route rather than down the route of Government hand-outs that increased investment, on a sound basis, will be achieved.

Lord Weinstock

Am I to understand from what the noble Lord said with regard to the first of the three points he mentioned—namely, that the transfer which is to take place will be to the British people from the amorphous state ownership in which it is presently held—that no attempt will be made to market shares in British Telecom pic on Wall Street or anywhere else outside the United Kingdom?

Lord Cockfield

I am not excluding the possibility that foreign investors may purchase some part of the shares in exactly the same way as they hold shares in other companies—and, no doubt, in the company of which the noble Lord is so distinguished an ornament (I use that term in its correct and proper sense). Noble Lords opposite frequently criticise the United Kingdom because we are investing a very large amount of money overseas. I do not see any grounds on which they would criticise other people if they invest money in the United Kingdom.

Lord Stoddart of Swindon

I am sorry that the noble Lord, Lord Cockfield, should have given such a cool reception to my amendment. I had expected him to welcome it with open arms. I am also sorry that he should have turned the issue into a party political dogfight, which I had certainly not intended it to be. For example, the noble Lord asked me to compare the economic state of the country in 1976 with that at the present time. I am happy to do so. In 1976, unemployment was one-third what it is today; total industrial production was higher than it is today, although that was eight years ago; and investment in industry was one-third higher than it is today. So the state of the economy in 1976, despite certain financial difficulties which we had, was on a rising trend. There was higher production every year, more investment in industry every year—one year taken with another—and there were 2½ million more people at work, producing something for the country. That is the comparison, and it favours a Labour Government.

The noble Lord appears to be very critical of the Labour Government, but when he criticises the Labour Government of 1976 for having to go to the IMF for a loan he forgets that at that time no North Sea oil was flowing. This Government are deriving in total some £13 billion a year from their oil revenues. But under the noble Lord's Government those oil revenues are being squandered upon unemployment pay for people who are doing nothing, whereas they would love to be producing goods for themselves, for their families and for other people's families.

The noble Lord is also concerned about who will decide where the money in this special fund is to be spent. The answer is comparatively simple. The last Labour Government set up the National Enterprise Board, which invested in Britain. One of its investments in Britain was its investment in British Leyland. I well remember that in another place 150 of the noble Lord's colleagues voted against investment in British Leyland and said openly that they would prefer it to go into liquidation. British Leyland is now thriving. It is thriving so well that the noble Lord's Government are thinking of selling off part of it to private enterprise. So the hypothecation of certain revenues for investment in industry has paid off very well for the nation. And it appears that that investment by a Labour Government will assist this Government in selling off assets in order that they can cut taxes before the next general election, to help them win it. That is the real situation.

The noble Lord, Lord Weinstock, dealt with the point made by the noble Lord, Lord Cockfield, that these shares are going to be sold to the British people. Grave doubts have been expressed in the City as to whether British financial institutions will be able to take up an issue of £4,000 million. According to financial experts, it is almost certain that a great deal of the money will come from abroad. So it is not going to be sold to the British people; a good part of it will be sold to foreign investors, wherever they may be. That is not selling to the British people.

Indeed, I believe that a good deal of the British people's assets will be sold at knock-down prices. They will be knock-down prices, because the assets of British Telecom are, in my view, very much undervalued in their books. Those assets at knockdown prices will go to the benefit not of the British people but of people living abroad. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

On Question, Whether Clause 59 shall stand part of the Bill?

Lord Weinstock

If we can return from the realms of economic debate to the Bill, Clause 59 refers to shares—and the noble Lord, Lord Cockfield, mentioned equity, it may be that it will not be only equity in the event—to be allotted to the Government as a consequence of the vesting of the undertaking of BT in the successor company, British Telecommunications pic. Some noble Lords may have seen a copy of the Memorandum of Association for British Telecommunications pic. That document certainly does not lack for flexibility, giving powers to operate any sort of business—from a betting shop to a boarding-house.

What we have not seen are the articles of association of the company. In particular, we do not know what rights it is proposed to attach to the shares held by the Government. Ministers have referred to the need to free BT from the fetters of Government control. Noble Lords on all sides of the Committee, on the other hand, are greatly exercised about the operation of a national monopoly free from Government control. That is why many noble Lords have sought to amend the Bill. That is why so much interest is taken in the licence.

If the same rights are to be attached to all the shares of the company, the Government, as holders of 49 per cent, of the shares, must be in a position to exercise effective control. Therefore, it will surely be of interest to your Lordships to know whether it is intended that the shares to be held by the Government will have attached to them the same rights as the other shares to be sold—and if not, in what respect are those rights to differ, and for what reasons?

Lord Cockfield

The noble Lord is raising a number of points which really relate to the flotation. I doubt whether it is possible to answer them specifically at this stage. Clearly, before the flotation takes place, the new company will have to be incorporated, and it will need its articles of association—and a prospectus will have to be issued.

So far as the shares are concerned, it is not proposed that the rights attaching to the equity shares should differ according to those shares which are sold by the Secretary of State as part of the flotation and those shares which are retained by the Secretary of State.

Lord Bruce of Donington

Can the noble Lord take us further than that? Can he say when the articles of association will be available to Members of Parliament and to Members of your Lordships' House, so that we may consider them? They must have received consideration in his department over the past few months. After all, we are not dealing in peanuts here; we are dealing in some thousands of millions of pounds. I suggest that we have a right as a House—in the same way that another place has—to know exactly what rights the Government have in mind.

I am bound to say, in anticipation of the noble Lord's reply, that I have the impression—particularly after yesterday—that the Government are still in the process of making up their minds on a whole number of factors; and that they are so confused at the present time as to what exactly they are going to do that securing an intelligible statement of detailed policy is almost out of the question. I do not find this satisfactory, and I am sure that your Lordships do not.

Lord Mottistone

The noble Earl, Lord Halsbury, obtained copies of the articles of association through the Library of this House a good week or fortnight ago. I do not know why noble Lords opposite have not secured access to that document; they can go to the Library like the rest of us.

9.13 p.m.

Lord Weinstock

With respect to the noble Lord, I myself have not been to the Library but a colleague has done so; he has obtained the memorandum of association but not the articles of association.

I am grateful for the reply given by the noble Lord, Lord Cockfield. I understood him to say that the equity held by the Secretary of State will have the same rights attaching to it as the shares to be sold. In that event, I do not wish to press the noble Lord because there may indeed be matters upon which the Government have not made up their minds. But I do not see how British Telecommunications pic can be described as free from Government control if 49 per cent, of the shares are in the hands of the Secretary of State.

Lord Cockfield

Perhaps I may expand upon the reply that I gave earlier, because I now discover that a draft of the articles of association was in fact laid in another place. It is, therefore, available. That is the first point. Secondly, as I said, the equity shares will all carry the same weight, but in addition the Secretary of State will hold a special share to protect certain provisions designed to ensure the independence of the company. The equity shares all carry the same weight. The noble Lord, Lord Weinstock, was referring to the 49 per cent, retained by the Secretary of State as compared with the 51 per cent. sold. All of those shares carry an equal weight, but in addition the Secretary of State will hold a special share to protect certain provisions designed to ensure the independence of the company. This has been done in the case of other privatisations.

Lord Bruce of Donington

Is the noble Lord aware that what he has just said only reinforces the point made by the noble Lord, Lord Weinstock? It is not necessary where the shares in a public company are spread widely, and the noble Lord seems to wish them to be as widely diffused as possible, even though in practice they will be spread over at the most 20 institutions or insurance companies, which will take up most of the issue. Is he aware that a concentrated holding of 49 per cent, as against a fragmented holding of 51 per cent. in fact ensures control for the 49 per cent. for all practical purposes? The point made by the noble Lord, Lord Weinstock, is perfectly valid: the Government will, in effect, even apart from the 1 per cent., still remain in effective control of the company.

Lord Cockfield

I should only like to say, if I may, in relation to that last point, that we have made it clear that we adopt a policy of not intervening in the management of the company by virtue of the 49 per cent. shareholding. That statement has been made quite clearly and publicly.

Lord Weinstock

I do not want to press the noble Lord unduly; and I am sorry to have to persist with this. Is it to be expected that restrictions on the rights attaching to the 49 per cent. will be written into the articles or some other authoritative documents which will make clear the rights of the 51 per cent. of the shares which are to be sold to third parties?

Lord Cockfield

No, I did not say that at all. In fact, on the contrary, I said that all equity shares would have exactly the same rights but there would be an additional special share held by the Government.

Lord Weinstock

In that case, would it be the intention, for example in the resolution proposing the appointment or dismissal of directors, to use their 49 per cent. in the vote?

Lord Cockfield

The noble Lord is now trying to forecast what will happen in the future. He must realise that the Government have made it quite clear that they do not propose using their shareholding as a means of controlling the management or operations of the company.

Lord Bruce of Donington

What about future Governments?

Clause 59 agreed to.

Clause 60 [Conversion of certain loans transferred to the successor company]:

Lord Bruce of Donington had given notice of his intention to move Amendment No. 133: Page 53, leave out lines 32 and 33.

The noble Lord said: Since these amendments were tabled I have received, only last week, a memorandum, very courteously made available by the noble Lord, which describes in a little greater detail the workings of Part V of the Bill. It is going to take some time, in view of the ambiguities that are still inherent not only in the Bill but in the more detailed explanation with which I have been provided, to assess and to be able to quantify the financial implications of the Bill. It had been my intention—and I sought the advice of the Clerks on this—to move the deletion of Part V altogether, because it would have had no effect on the other Parts, anyway, but I was advised that this was not feasible and that one therefore had to move this individually, section by section.

In order to shorten the proceedings, I do not propose to take advantage of that facility, and I do not intend to move Amendments Nos. 133 to 139. But on behalf of Her Majesty's Opposition, I give notice that a comprehensive series of amendments will probably be presented to the House for its consideration at the Report stage.

[Amendment No. 133 not moved.]

[Amendments Nos. 134 to 139 not moved.]

Clause 60 agreed to.

Clauses 61 and 62 agreed to.

Clause 63 [Target investment limit for Government shareholding]:

Lord Bruce of Donington moved Amendment No. 140: Page 55, line 30, leave out ("by order") and insert ("after approval by resolution of each House of Parliament").

The noble Lord said: Amendments Nos. 140 and 141 to Clause 63 are designed to put the ratchet effects of the provisions of this clause under some kind of parliamentary control. Amendment No. 141: Page 55, line 33, leave out paragraph (a). Clause 63 has been very cleverly drafted. In fact, for once one must pay tribute to its clarity in the midst of a sea of other financial provisions which are rather more obscure. It is clearly designed to ensure that the interest in British Telecom of Her Majesty's Government, of whatever political complexion, progressively diminishes. By this means, on a change of Government, it is hoped to avoid any possibility of restoring British Telecom to its former status of a public utility responsible and responsive to Parliament and the people at large.

The endeavour to put into a Bill this ratchet mechanism which in statute ensures that the interests of the state progressively diminish is rather childish. It shows an inferiority complex which I suspect must be born of a growing consciousness of failure in the Government's carrying out of their policies over the past five years. If the noble Lord really thinks that a measure of this kind will prevent a future Labour Government from re-establishing the public utility of British Telecom to the position that it formerly occupied, I venture to suggest that he is in for a grave shock. In the meantime, we think that the progress of the ratchet ought to be subject to some kind of parliamentary supervision.

It is for that reason that these amendments are introduced. After what I have said they should be self-explanatory. I have no doubt that the noble Lord will reject them. I expect him to. Indeed, I should be surprised, and possibly disappointed, if he did otherwise. I beg to move.

Lord Cockfield

I shall not disappoint the noble Lord, Lord Bruce. The order-making powers for setting a new target investment limit under Clause 63 (4) are exercisable by statutory instrument and subject to the negative resolution procedure by virtue of Clause 92. That applies the negative resolution procedure to all order-making powers in the Bill. As the Committee will appreciate, the underlying aim is to avoid taking up parliamentary time unless it is absolutely necessary. The negative resolution procedure achieves that aim while still allowing Parliament the opportunity to make its views known on contentious issues, if it so wishes.

The amendment proposes an affirmative resolution procedure. We do not accept that setting a new target investment limit warrants such exceptional treatment. A new limit would normally follow a Government sale of shares which would already have been in the public eye. Therefore the new limit would be consequential upon a much more public event. An automatic debate is not called for in those circumstances. The negative resolution procedure would still provide an opportunity for Parliament to raise any issue arising from the sale of shares and to negate the order if it chose to do so. Accordingly, we believe that the arrangements made in the Bill fully meet the needs of parliamentary supervision and control. I feel that on those grounds I should oppose the amendment.

Lord Bruce of Donington

I am very glad to have the noble Lord's views, which will of course be on the record, and which I shall be able to cite to him in the fullness of time. I am greatly obliged to him. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 141 not moved.]

Clause 63 agreed to.

9.27 p.m.

Lord Donaldson of Kingsbridge moved Amendment No. 142: After Clause 63. insert the following new clause:

("Share-holding by individual subscribers.

.The Secretary of State shall by statutory instrument make provision for the widest possible distribution of shares among individual subscribers for the services of the Company and shall provide appropriate incentives for the continued retention by those subscribers of those shares.")

The noble Lord said: This is a probing amendment, which was rather a pet (if I may say so) of my noble friend Lord Taylor of Gryfe, who has been summoned to the far North, and so I am left to put it forward as best I can. I think that the objective is quite obvious from the words on the Marshalled List. The objective is that telephone subscribers, of which there will be a very large number, should be given the opportunity to buy a limited number of shares, perhaps £50 or £100 worth. The amendment refers to: appropriate incentives for the continued retention of shares, and those would take the form of a discount from the bill which subscribers will receive each quarter, and which we all receive now. There would be no technical difficulty at all in doing that because bills have to be sent every quarter and with modern computerisation it would be easy enough to find out which subscribers were also shareholders.

The amendment would have the effect of bringing about a very wide, small—and I may say generally humble—shareholding, which we think is very healthy for any near monopoly to have. It would also provide a certain consumers' element of independence and authority to complain and possibly the chance to work together regionally.

Something of the kind was done by European Ferries not so very long ago, and it worked extremely well. It is just an idea which I believe, if carried out, would make the whole situation rather more satisfactory and rather more consumer-orientated. We believe that the ordinary man-in-the-street is the person who is likely to suffer from this privatisation. That has been the main motive for our objection to the Bill as a whole, and we believe that what is proposed in the amendment would give back to the man-in-the-street a little something, so that he could get together with other subscribers, complain hard and loud in an organised way as a shareholder, and have a little more control over the way in which the business was run. I beg to move.

Lord Mackay of Clashfern

We are in sympathy with the aims of this amendment. It has been said in another place that the Government's aim is to encourage a very wide take-up of shares by the public, and my noble friend Lord Cockfield indicated this a little while ago. In this way, the public will have a much more direct say in the running of British Telecom than they have had to date. Your Lordships will have seen the Government amendments that facilitate the despatch of share application forms so that the public at large may have the opportunity of subscribing. I refer to Amendment No. 143A which we shall be moving soon. We are also considering a number of ways for making British Telecom shares more attractive to individual subscribers and small investors although no decisions on the various options have yet been made.

The amendment calls for the widest possible distribution of shares. We are hoping to do that. We doubt whether anything is necessary in the shape of a particular provision such as this amendment proposes. What is required is the mechanism by which it should be carried out. That, as I say, we are going to attend to. The amendment also calls for share retention or its encouragement. The best incentive for the retention of British Telecom shares is British Telecom's own performance. Nevertheless, as your Lordships will know, we introduced a loyalty bonus as an incentive to retain shares in the Britoil flotation to encourage the longer term small investor. A similar bonus is under consideration to see whether or not it would be appropriate in this case. We will not be making any decision on this until the overall share offering has been firmed up. It would be unduly limiting to be bound to offer an extra incentive for retention at this stage.

Accordingly, I hope that the noble Lord, Lord Donaldson, will feel that the spirit of the amendment is very much in accordance with the Government's thinking; but the precise form of the amendment, we believe, is not desirable. The aims would be better achieved in the way that I have sought to explain.

Lord McIntosh of Haringey

I fear that the Minister has made the absolute minimum of concessions to the noble Lord, Lord Donaldson, who has moved what to us appears an admirable amendment. The noble and learned Lord is, in effect, asking for a blank cheque. He is asking the Committee to accept his assurance that at some stage the flotation documents, the prospectus, will carry some reference to shares for subscribers. The amendment—in my view, rightly—is much more precise. It asks that this should be an intention by statutory instrument. It asks that there should be the authority of Parliament, which I would have thought desirable and necessary, for the appropriate incentives for the continued retention of shares. I would simply ask the Minister whether incentives for the retention of shares might not be subject to challenge if they were inserted in the prospectus without parliamentary authority.

Lord Donaldson of Kingsbridge

I am not only pleased but also a little surprised at the modest welcome which the noble and learned Lord gave to the amendment. I am happy that the Government are thinking along these lines. We have been reduced to that as the most that we can get out of the majority of our amendments. After all, it is a good deal. Even if the Government will not accept amendments, the fact that they agree with them is rather a help. All that I should like to point out is that one of the significant aspects of the amendment, which is a probing one, is that the incentive for the telephone user to take up shares should be specifically offered in the sense of a discount of his bill. This is a matter to which the noble and learned Lord did not refer. I shall not be pressing the amendment. However, before withdrawing it, I should like to ask whether there is any way that this could be included in the general benevolence which the noble and learned Lord has shown towards this idea.

Lord Mackay of Clashfern

Certainly that possibility will be kept in mind. It is right to retain flexibility in the way in which this matter will be taken forward, because it is right to make these decisions as a whole towards the time of actual flotation. But I can certainly assure the noble Lord that his suggestions will be kept in mind.

Lord Bruce of Donington

Will the noble and learned Lord be slightly more forthcoming on this matter? If the shares in the new successor company are to be floated to raise a sum, reputedly for 51 per cent., amounting to some £4,000 million, is the noble and learned Lord not aware that, for the issue to be a success, the main bulk has got to come from the institutions themselves, otherwise the issue would be a flop and we should be faced with a similar situation of governmental losses to those that have taken place in certain other issues which I shall not mention here?

In those circumstances, is not the noble and learned Lord aware that the real chance for the ordinary members of the public, or such small numbers of the public who are still in possession of capital funds, to invest—and they comprise a remarkably small proportion of our population—is likely to come from original applicants for the shares in terms of the institutions unloading their shares on the public through the normal brokerage facilities? That is what will happen. In that connection, the acquisition of shares to the tune of, for example, £500 will cost the prospective shareholder some £40 or £50 in terms of commission, stamp duty and so on. In those circumstances, will he disabuse the general public of the idea that there is to be a very widespread individual shareholding in British Telecom when it is privatised?

Lord Mackay of Clashfern

I think that I have said as much as I reasonably can about this matter, and I do not want to add anything, seductive as the noble Lord's invitation may be.

Lord Donaldson of Kingsbridge

Before I withdraw the amendment. I should like to point out that the noble Lord, Lord Bruce, said—and this is clearly true—that with a very large issue of this kind the bulk will be taken up by the institutions. What I am asking—and what I think the noble and learned Lord suggested was not an unwelcome idea—is that provision should be made at issue for the very large number of telephone subscribers (I do not know whether there are 12 million or 15 million of them) to have a special right to acquire a limited number of shares, perhaps £ 15 worth or £ 100 worth, because they are subscribers. That is the point I made, and I think that it is a point which the noble and learned Lord took on board.

If the Government did in the end do something like that—and I hope very much that they will do so—it would mean that, in spite of the bulk going to the major institutions, there would be quite a large allocation of shares (if there are 12 million subscribers, perhaps half might take up the offer) to small people throughout the country, which would be very valuable. I am grateful for the friendly reception given to this suggestion of my noble friend and colleague Lord Taylor, and I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 143 not moved.]

Clauses 64 and 65 agreed to.

Clause 66 [Liability of Secretary of State in respect of liabilities vesting in successor company]:

9.40 p.m.

On Question, Whether Clause 66 shall stand part of the Bill?

Lord Weinstock

I wonder whether the noble Lord, Lord Cockfield, is yet in a position to reply to the point I raised earlier, when we were discussing Amendment No. 126, concerning the elements of subsidy inherent in the Bill?

Lord Mackay of Clashfern

As I understood the point which the noble Lord, Lord Weinstock, made earlier, it was that the Secretary of State is taking responsibility for the liabilities of British Telecom as at the date of transfer if the successor company, on being wound up, does not meet those liabilities. The reason for that is that up until the time of transfer British Telecom, being a nationalised operation, would be understood to be supported by the Government and, therefore, those who were creditors of it would have become creditors on that basis.

Among these obligations perhaps the one of most interest is that relating to the pension provision for the employees of British Telecom as at that date. I think that that is perhaps particularly the point to which the noble Lord, Lord Weinstock, referred. Under Clause 66 the Government stand behind British Telecom pic in backing the fulfilment of those pension liabilities which are vested in British Telecom plc at the transfer date, so that the employees as at that date have the backing of the Government for their pension arrangements, which seems a very reasonable provision.

One of the liabilities so vested would be a requirement under the pension fund trust deed to ensure that there are sufficient funds available to meet the pension entitlements of current employees who are already members of the pension scheme at the time of the transfer when they come to retire in the future. Accordingly, the Government stand behind the pension entitlement of current employees in respect of all their service to retirement; that is to say, service both before and after the transfer date.

The Government also stand behind the British Telecom public limited company's liability to ensure that there are sufficient funds available to meet the entitlement of British Telecom pensioners at the time of the transfer; that is to say, those who are already pensioners. However, there will not be any Government backing for pension obligations for new recruits who join British Telecom plc and the pension scheme after the transfer date.

This is not a subsidy because, first, the Government guarantee would come into effect only if British Telecom plc were to go into liquidation, and would be directed to recompensing the creditors, not saving the company. The guarantee—and this is the second reason why it is not a subsidy—does not apply to fresh obligations which British Telecom plc would take on after the transfer date. Therefore, while making clear the nature of the obligations which are covered by this clause, I do not accept that these amount in any sense to a subsidy to British Telecom plc.

Lord Weinstock

I am grateful to the noble and learned Lord for that full explanation. Is the noble and learned Lord satisfied that the situation in British Telecom plc, in which some employees have index-linked pensions and other employees do not, will prove satisfactory?

Lord Mackay of Clashfern

That is a slightly different matter from the one with which I have been endeavouring to deal. Clause 66 is not designed to make good every possible improvement that could be made in the situation. It is concerned only with making certain that so far as current employees' pension entitlements are concerned, they have the same backing for the performance of these as they would have if the company were in state ownership.

Clause 66 agreed to.

Clause 67 [Dissolution of British Telecommunications]:

9.45 p.m.

Lord Mackay of Clashfern moved Amendment No. 143ZA:

Page 58, line 34, leave out subsection (3) and insert— ("(3) During the transitional period section 1(4) of the 1981 Act (composition of British Telecommunications) shall have effect as if for the word "six" there were substituted the word "one" and paragraph 9 of Schedule 1 to that Act (quorum of British Telecommunications) shall have effect as if after the word "three" there were inserted the words "or the number of its members, whichever is the less".").

The noble and learned Lord said: This amendment is a consequential amendment. As Clause 67(3) is currently drafted the minimum number of corporation board members in addition to the chairman has changed from the six members originally in Section 1(4) of the 1981 Act to one member; that is to say, this is for the shell company, after the transfer takes place. That is because the intention of Clause 67(3) is to allow a small board to operate during the long period in which the shell corporation will be dealing with the various matters with which it requires to deal in the transitional period. There is no need for a larger board to supervise this relatively straightforward task. It is sufficient to have just the chairman and one other board member.

A further change to the 1981 Act is also required. Paragraph 9 of Schedule 1 to that Act provides that the quorum for the board shall be three board members. Since we are reducing the board to a chairman and one other, it is apparent that that particular provision requires to be changed, and that is what the second part of the amendment does. I beg to move.

On Question, amendment agreed to.

On Question, Whether Clause 67, as amended, shall stand part of the Bill?

Lord Bruce of Donington

The noble Lord has been kind enough to reply to the noble Lord. Lord Weinstock, in respect to his inquiries with regard to Clause 66, which, of course, deals with certain liabilities vesting in the successor company. Clause 67 gives the Government the power in effect to dissolve BT after its obligations under Schedule 5 are deemed to be completed.

I should like to redirect the attention of the noble Lord to the obligations of BT under Schedule 5. The noble Lord referred to the fact that the pensions in BT as it is now, the liability for which is stated in its balance-sheet to be £1,250 million and is probably more by now, are going to be transferred to a separate company. The noble Lord conveyed the fact that the Government stood behind that liability, that they accepted responsibility for it. On the assumption that the Government accept responsibility for it, where is the money coming from to discharge that liability? Is it coming from the Exchequer; is it coming from the Consolidated Fund; or where is it coming from? Perhaps the noble Lord can reply.

Lord Mackay of Clashfern

If the noble Lord, Lord Bruce of Donington, is referring to the obligation under Clause 66, the standing behind British Telecom pic—and I think that is what the noble Lord is referring to—then the situation is that we expect British Telecom plc to be able to meet those liabilities. Clause 66 makes it perfectly plain that it is only if British Telecom plc came to be wound up that the Government would have any responsibility to pay anything under Clause 66. Accordingly, our fervent belief is that no actual payment will be required under Clause 66.

Lord Bruce of Donington

I am sorry to press the noble Lord, but he will recall that under Clause 58 the assets and liabilities of BT are transferred to a successor company except for the excepted liabilities. The excepted liabilities comprise a liability stated in the balance sheet of BT as at 31st March 1983 of £1,250 million. At that date that was a liability of British Telecom stated in its balance sheet, and there is every reason to suppose that that figure is still there. That liability is not being transferred. In fact, it is expressly excepted in the terms of Clause 58; but that liability has got to be satisfied by someone at some time. If the noble Lord says that the successor company to BT has got to satisfy it, that will have a very depressing effect on the prospects of the issue being successful, because this is part of the restructuring of the balance sheet, without which the noble Lord will not get his money anyway. I am asking, who is going to discharge the excepted liability which the successor company will not take over? It still remains a liability. Who is going to pay it and where are the resources coming from?

Lord Mackay of Clashfern

I can only answer one question at a time, and the excepted liabilities are not liabilities in respect of the pensions which are payable, or which are a responsibility, a liability, of British Telecom at the transfer date. The excepted liabilities are not those that are covered under Clause 66 at all. The excepted liabilities are liabilities which subsist by virtue of a deed of covenant of 22nd November 1978 made between the Post Office and the then trustees of the Post Office staff superannuation scheme to make good a deficiency in the pension arrangements up to that point. Much earlier.

Lord Bruce of Donington

Who is going to pay?

Lord Mackay of Clashfern

I am trying to distinguish between the two questions. It is important that we distinguish between the questions asked here. The noble Lord in the first attack on this point was talking about liabilities that I referred to in answer to the noble Lord, Lord Weinstock, which are not the same as the excepted liabilities. The provision so far as the excepted liabilities are concerned is that they remain liabilities of British Telecom, the shell company, and the arrangements under which these are discharged are set out in Schedule 5. The manner in which they are to be discharged is provided for under the provisions of various paragraphs in that schedule, and particularly at paragraph 39.

Lord Bruce of Donington

I still ask the noble and learned Lord where the money is coming from? He has said, and I now quote him, that that liability, although an excepted liability, will remain the liability of British Telecom. I am quoting him exactly. But British Telecom has transferred all its assets to a successor company. How is it going to satisfy the liability? The answer surely is that the Government have to lie behind British Telecom, because otherwise they would have a liability and no asset. Is the noble and learned Lord seized of the point, or do I have to spell it out more simply?

Lord Mackay of Clashfern

I have no difficulty in understanding the point once the noble Lord has come to focus on this question. The answer is contained in the provisions of paragraph 39 of the Fifth Schedule.

Clause 67, as amended, agreed to.

Lord Mackay of Clashfern moved Amendment No. 143A: Before Clause 68, insert the following new clause:

("Application of law in relation lo offer of shares or debentures of the successor company.

.—(1) This section applies where the Secretary of State or a nominee of his offers for sale to the public shares or debentures of the successor company at a time when that company is wholly owned by the Crown: and in this section "full prospectus" means a prospectus which complies, or is deemed to comply, with the requirements of Schedule 4 to the Companies Act 1948 (matters to be specified in prospectus and reports to be set out therein).

(2) If the shares or debentures are offered by a full prospectus as respects which the conditions mentioned in subsection (3) below are fulfilled (in this section referred to as "the offer prospectus"), any form of application for the shares or debentures may (instead of being issued with a full prospectus) be issued with a notice given by the Secretary of State which includes—

  1. (a) a brief description of the shares or debentures offered, the terms of the offer, the successor company"s business and its financial position;
  2. (b) an indication of the places in the United Kingdom where copies of the offer prospectus are to be available for inspection by members of the public; and
  3. (c) a statement of the effect of subsections (4) and (5) below,

(3)The said conditions are—

  1. (a) that a copy of the prospectus has been delivered to the registrar of companies in pursuance of section 41 of the said Act of 1948; and
  2. (b)that arrangements have been made with a view to securing—
    1. (i) that on or before the date of receipt of the form of application by a member of the public a copy of the prospectus is published in not less than four national newspapers: and
    2. (ii) that on that date copies of the prospectus are generally available in the United Kingdom for inspection by members of the public.

(4) Where a form of application is issued without a full prospectus but with a notice given by the Secretary of State under subsection (2) above, then, for the purposes of any enactment or any rule of law—

  1. (a) the notice shall be taken to have incorporated the offer prospectus; and
  2. (b) any application for the shares or debentures which is made in pursuance of the notice shall be taken to have been made in pursuance of that prospectus.

(5)Where a form of application is issued without a full prospectus, neither the form of application nor any document which is issued with it shall be regarded—

  1. (a) as a prospectus for the purposes of sections 37 to 46 of the said Act of 1948 (prospectus requirements); or
  2. 730
  3. (b) as a circular for the purposes of section 14 of the Prevention of Fraud (Investments) Act 1958 or section 13 of the Prevention of Fraud (Investments) Act (Northern Ireland) 1940 (circulars relating to investments).
but only, where the form of application is issued without a notice given by the Secretary of State under subsection (2) above, for the purpose of determining the liability of persons other than the Secretary of State.").

The noble and learned Lord said: This is the amendment to which I referred when I was answering the noble Lord, Lord Donaldson of Kingsbridge, on an amendment that he moved earlier. The purpose of this amendment is to make possible, in the special circumstances of this flotation, application forms to be distributed other than with full prospectuses. Your Lordships will know that the present law on the distribution of application forms for shares is contained in Section 38 of the Companies Act 1948, which states that it shall not be lawful to issue shares unless the form of application is issued with a prospectus complying with the requirements of the Act.

The desirability of this stipulation is not in question, but we are concerned here with an offer unprecedented both in its size and the number of potential subscribers. It is not physically possible within the timeframe within which a prospectus must be completed and issued to produce, say, five million copies. The Government accordingly propose through the amendment to meet an exceptional need with an exceptional measure. Their aim is not to provide itself with a short cut but to remove, for this single purpose, a barrier to wide ownership of shares that would otherwise be impassable.

I believe that the amendment is perfectly consistent with the relevant European Community regulation, the council directive on listing particulars. This requires only that listing particulars should be made widely available, for example by publication in newspapers or by free availability at a variety of addresses.

It may be of some use if I take a little time to spell out what this new clause does. Where certain conditions about publication and availability are met, the. Secretary of State is permitted to issue application forms for British Telecom PLC shares without a full prospectus, although with a notice containing a brief description of the shares and the company. The Secretary of State will be required to make arrangements to publish the prospectus in four national newspapers and to make it generally available, for example, at major banks and possibly Post Offices. Given the wide availability of the prospectus, the Government have come to the view that it is reasonable for any application made in these circumstances to be treated as having been made on the basis of the full prospectus. This is in subsection (4).

Your Lordships may wish to know that the purpose of subsection (5) is to disapply certain provisions of the Companies Acts to make the circulation of a brief notice, to which I referred earlier, a possibility. Your Lordships may also like to know how the clause deals with the question of liability. The effect of subsections (4) and (5) is that the notice issued under the new clause will be treated as including the full prospectus. As long as the notice is correctly issued, the Secretary of State will not be liable for any loss suffered by an investor because the notice did not contain all the information in the full prospectus. As I have said before, this is thought to be justified because the full prospectus will be so widely available.

In the unlikely event that the notice was not properly issued, the Secretary of State would take sole responsibility for it. So if anything went wrong about the notice that would be solely the responsibility of the Secretary of State. The subsections make it clear that no one else, including the directors of British Telecom, can be liable in respect of that. The investor will have the full remedies available in the event of the full prospectus containing any information which would be actionable. This is purely a means of achieving, in the very special circumstances of this case, the possibility of the widest subscription that one could imagine for this issue. I commend this amendment to your Lordships and I beg to move.

Lord Weinstock

The purpose of this amendment is to enable the Government to offer shares in BT PLC to the public on a simple application form which does not comply with the requirements of the Companies Acts and the Prevention of Fraud (Investments) Act. It is probably intended that forms of application will be enclosed with telephone bills. I submit to your Lordships that it is quite wrong that the elaborate code of investor protection contained in those Acts should be cast aside simply because the Government are the sellers. There can be no justification for having one set of rules for the Secretary of State when he wants to offer shares to the public, and another set of rules for everyone else. In any case, there is an inevitable conflict of interest if the Secretary of State is doing his duty. On the one hand, he must get as much as possible for the public property he is selling in the form of BT shares. On the other hand, he must, through the licence and the regulatory procedure protect the public and others against monopoly practice by British Telecom PLC. It follows that the conditions to be imposed on the operations of BT PLC must have an important bearing on the value of the shares and must be disclosed in detail to prospective purchasers. For the reasons I have given, and in the light of other experience. I ask your Lordships to reject this amendment so that potential investors would have the full and normal protection of the law in this matter.

Lord Lloyd of Kilgerran

Before the noble and learned Lord answers that question, I have a question which is to some extent supplementary to what the noble Lord, Lord Weinstock, had in mind. The noble and learned Lord, in his cogent and clear presentation of the substance of this amendment, said that it was an exceptional method for exceptional needs. He then went on to say that he was satisfied that it conformed with the relevant EEC regulations in respect of certain aspects with which this amendment is concerned. Will he tell the Committee, either now or at a later stage, what are the EEC regulations that he has in mind? I realise that this is a technical question but in some way it supplements what the noble Lord, Lord Weinstock, has raised as a possible problem to deal with.

10 p.m.

Lord Bruce of Donington

We on these Benches would wish to agree with the noble Lord, Lord Weinstock, in the observations that he has made. The Prevention of Fraud (Investments) Act went through a very lengthy procedure in the other place and in this House and so have the Companies Acts. Schedule 4 has received attention not only from the other place and this House but also from the Stock Exchange. There can be no justification for withdrawing the protection of the law from a person purely because he may onlv have £5 or £50 to invest, as distinct from £1,000, £50,000 or £100,000. In fact, to quite a large number or our citizens, £10 is worth more than possibly is £100 or £1,000 to those who are vastly better circumstanced.

It is no answer for the noble Lord to say that the full prospectus, in compliance with Schedule 4 of the Companies Act 1948, will be published in four national newspapers. Why do they not end up with the Chinese method and have a wall newspaper and put it on there so that it can be seen by all? The law does not provide for that. The requirements of the law are very specific. They require that every application form that is sent out should be accompanied by a prospectus. The reason for that is this. The prospective investor can consider the matter in solitude if necessary; he can look through the printed words and he can ponder over them; he need not necessarily take the printed form in the Sunday Express or the Daily Telegraph or other newspapers. He may not require to read them. He is entitled to look through the same documents as a person who is investing £100.000 wishes to look through.

I do not approve of this short circuiting of the requirements of the Act purely because the Government are under such desperate pressure for Mr. Nigel Lawson to raise the money—which is the main purpose of this Bill, anyway. I am not impressed by what the Government nave said. The law should be applicable to all, including the Government; and the Prime Minister has said so on more than one occasion. Why should the Government seek to be exempt purely because of the magnitude of the proposed issue? They should be even more careful. The more people that are invited to invest, probably the people with smaller incomes—and there are a lot of people with small incomes—ought to be afforded even greater protection than those that employ professional advice to examine prospectuses, and the like, on their behalf.

I sincerely hope that the Government will take back this amendment and think again. I am quite sure that it is one that the City of London in its right mind would not dream of countenancing. The Stock Exchange have prepared their own regulations which I have with me. I was going to go through them with the noble Lord and find out to which ones he objected; but I will not subject him to that this evening. This is an amendment which the Government should take back. It is not required this time.

Lord Kilmarnock

Before the noble and learned Lord the Lord Advocate rises, can he tell me about his use of the word "disapplying"? I believe he referred to "disapplying" with the provisions of the Companies Act. Is this now current usage in lieu of the words "overriding" or "overruling"?

Lord Mackay of Clashfern

May I say first of all that the EEC provision I had in mind particularly was the listing directive—the Council directive on listing particulars, which requires that listing particulars should be widely available, for example, by publication in newspapers or by free availability at a variety of addresses.

Lord Lloyd of Kilgerran

Can the noble Lord give the reference number?

Lord Mackay of Clashfern

I do not have it in my head but I am sure I shall be able to give the noble Lord a note of it. It is one of the three Council directives regulating what I might broadly call Stock Exchange matters and the one that seems most relevant is that on listing particulars.

The noble Lord, Lord Bruce of Donington, speaks about the protection of the law, but of course what we are seeking to do here is, by Act of Parliament, to make a law which will include these particular provisions. It is a very common situation that a provision of an Act of Parliament of general application is not applied to a particular circumstance where, for one reason or another, it is not appropriate thai it should apply. That is what I meant by "disapply" in this situation.

The noble Lord, Lord Weinstock, mentioned the Prevention of Fraud (Investments) Act 1958. The only provision of that Act which is affected by this amendment is the prohibition in Section 14 of that Act and its Northern Ireland equivalent on the distribution of circulars inviting people to purchase securities. That is disapplied for the reasons that I have explained, namely that noble Lords opposite, agreeing with the noble Lord, Lord Donaldson of Kingsbridge, were in favour of wide ownership of these shares. If you are going to get that you must have some method for a wide distribution of a document under which one may apply for these shares. Does the noble Lord wish to make some comment?

Lord Bruce of Donington

Yes; I said "not on the basis of conning them". They have to see the whole of the facts and not merely a summary of them. They should know the facts as well as anybody else.

Lord Mackay of Clashfern

There is absolutely no question of people being in any way conned. They will be given a notice which will direct their attention to the full terms of the prospectus and they will have the full protection that any investor has, whether he is investing £5 or £500,000 under the general law. In addition, they will have the protection of the Secretary of State standing behind the notice, so if there is anything at all they can find fault with in the notice along the lines that the noble Lord, Lord Bruce of Donington, is suggesting, the Secretary of State will be responsible for that. So we have made every possible protection available for the subscribers at the same time as taking the practical step necessary in order to secure that their subscriptions may be invited.

Accordingly, far from withdrawing the protection of the law from these investors, we are giving them all the protection of the law and making available to them a possibility which, but for this amendment, would not exist to achieve the very aims which noble Lords opposite, as well as my noble friends and those in other parts of the Chamber, seem to think are desirable aims. In my submission, this is a perfectly reasonable amendment to achieve that purpose and nobody has yet suggested how it could be achieved other than by means of this amendment. I hope that it will commend itself to your Lordships.

Lord Weinstock

If the noble Lord is faithful to the belief of his party in wider share ownership, and if he thinks that this is the way in which shares should be sold, should his Government not advocate this method of selling shares more generally? Why should it be restricted to this single Bill?

Lord Mackay of Clashfern

Of course, this Bill is concerned with British Telecommunications. It would not be possible in this Bill to make a provision of general application. But I think that the Council directive on listing particulars might well encourage a more general provision. I would not want to involve myself in a matter that is irrelevant to this Bill tonight. In this Bill we are concerned only with the desirability of doing it in this particular situation. A more general one will await another time. The noble Lord may feel that this is such a desirable way of proceeding that he will wish to bring in a measure of his own.

Lord Weinstock

With due respect, I do not. I think that investors need a certain amount of protection, and the offerings by the Government of shareholdings in other companies do not fill one brimful with confidence. I would not suggest for a second that there would be anything defective in the prospectus. But if the law prescribes that a certain degree of protection is necessary for investors, I cannot see why an exception should be made in this case. Surely, the same protection should be afforded to investors who want to put money into BT plc, as would apply to any other company.

Lord Mackay of Clashfern

As I said, in my submission the protection is at least as good here as it is in the general case, but it is applied in a slightly different way which is appropriate to this case.

The Countess of Mar

Can the noble and learned Lord the Lord Advocate explain to us why everything is being rushed through with so much haste? Why is there not time to prepare a proper prospectus and put it out? Are the Government so much in need of the money?

Lord Mackay of Clashfern

I do not know where the suggestion came from that a proper prospectus will not be prepared. I certainly did not say that, and I do not think anybody else did either. There is no question whatever of there not being a proper prospectus prepared; but the prospectus has to state the position as near as possible to the date of flotation, because circumstances can change rather quickly. Therefore, it is a very important aspect of the preparation of a prospectus that it is done very close to the time that is important for the flotation, and it has to go out in a very large number of copies if this operation which I have described, and which I understood your Lordships to feel was desirable, is to be achieved.

That is the reason for this. There is no question of an inadequate prospectus or anything of that kind being prepared. The prospectus will be absolutely in accordance with the provisions which apply to every other prospectus. The point is that, instead of the people having to get a copy of the prospectus, they will get a notice which refers them to that prospectus although it is not copied in full.

Lord Weinstock

The very large number of prospectuses that will be required in this matter is a consequence of the very large sum of money that is involved. Is that any reason to abrogate the law?

Lord Bruce of Donington

While the noble and learned Lord is considering that, perhaps he can answer this question also. It is said that one of the reasons why there will be a shortened form of prospectus is that in issues of this kind, matters change almost up to the date of the issue of the prospectus itself. Many of us who are engaged professionally in this kind of business know well that steps have to be taken to ensure that the prospectus is accurate up to the last moment when all people are still committed to it.

What the noble Lord has just said, in effect, is that this cannot apply in this case where there is a shortened prospectus, so what is likely to happen is that even the shortened prospectus may not comply with the actual prospectus at the time when it is issued. Does the noble and learned Lord consider that to be satisfactory?

Lord Mackay of Clashfern

I never said that at all. The noble Lord is completely misrepresenting what I said. What I said in answer to the noble Countess, Lady Mar, was that, for the reasons which the noble Lord, Lord Bruce, has just explained, one has to bring out the full prospectus (which is what we are talking about) at a time that is close to the date of the flotation. We seem to be agreed about that, so we are making some progress.

The reason why it is not practicable to send the full copy round to the large number of people whom we would wish to subscribe to this offer is that it is not practicable to send out that number of prospectuses of that length in the time that would be available. The only way in which it can be done is by shortening the notice, but referring to a prospectus which is absolutely full and which entirely accords with all the provisions that refer to any other company. It will be entirely full and complete and there is no question of a shortened or a defective prospectus or anything of that sort. So far as the noble Lord, Lord Weinstock, is concerned, we are adding to the particular circumstances of this case an adaptation of the law which gives entirely adequate protection to those who will subscribe by this method. I hope that now the amendment will commend itself to your Lordships.

Lord Weinstock

Surely the noble and learned Lord the Lord Advocate would agree that what he is suggesting is an abrogation of the requirements of the law for protecting investors in the interests of administrative convenience. I should have thought that that was the last thing the Committee ought to agree to.

10.16 p.m.

On Question, Whether the said amendment (Amendment No. 143A) shall be agreed to?

Their Lordships divided: Contents, 47; Not-Contents, 28.

Avon, E. Lyell, L.
Bellwin, L. Mackay of Clashfern, L.
Belstead, L. Macleod of Borve, B.
Brookeborough, V. Mansfield, E.
Brougham and Vaux, L. Marley, L.
Cockfield, L. Marshall of Leeds, L.
Colwyn, L. Maude of Stratford-upon-Avon, L.
Cork and Orrery, E.
Craigmyle, L. Morris, L.
Crawshaw, L. Mottistone, L.
Denham, L. [Teller.] Murton of Lindisfarne, L.
Elliot of Harwood, B. O'Neill, L.
Elton, L. Plummer of St. Marylebone, L.
Enniskillen, E. Rochdale, V.
Glenarthur, L. Sandford, L.
Gray of Contin, L. Skelmersdale, L.
Grimston of Westbury, L. Stodart of Leaston, L.
Hives, L. Suffield, L.
Hornsby-Smith, B. Swinton, E. [Teller.]
Ingrow, L. Trumpington, B.
Killearn, L. Vaux of Harrowden, L.
Kilmany, L. Vickers, B.
Long, V. Whitelaw, V.
Lucas of Chilworth, L. Young, B.
Airedale, L. Lloyd of Kilgerran, L. [Teller.]
Attlee, E. Lockwood, B.
Bishopston, L. McIntosh of Haringey, L.
Bruce of Donington, L. Mar, C.
Carmichael of Kelvingrove, L. Nicol, B.
David, B. Pitt of Hamstead, L.
Dean of Beswick, L. Ponsonby of Shulbrede, L. [Teller.]
Elphinstone, L.
Ennals, L. Raglan, L.
Fitt, L. Rea, L.
Greenway, L. Stedman, B.
Grey, E. Stoddart of Swindon, L.
Houghton of Sowerby, L. Tordoff, L.
Kilmarnock, L. Weinstock, L.
Lawrence, L.

Resolved in the affirmative, and amendment agreed to accordingly.

Clause 68 agreed to.

Clause 69 [Tax provisions]:

10.24 p.m.

Lord Mackay of Clashfern moved Amendment No. 143AB: Page 60, line 3, leave out ("21 of the Finance Act 1972") and insert ("29 of the Value Added Tax Act 1983")

The noble and learned Lord said: This is a technical amendment consequential upon the enactment of the Value Added Tax Act 1983. That Act superseded provisions of the Finance Act 1972 on VAT group registration, to which Clause 69(5) makes reference. This amendment seeks only to update the clause to take account of the new Act. I beg to move.

On Question, amendment agreed to.

Clause 69, as amended, agreed to.

Clause 70 [Interpretation of Part V]:

[Amendment No. 14SB not moved.]

Lord Mackay of Clashfern moved Amendment No. 143BA: Page 60, line 15, leave out ("of the successor") and insert ("in relation to a").

The noble and learned Lord said: This is a technical amendment. Securities are currently defined in Clause 70(1) in relation only to the successor company. This definition needs to be widened to define what is meant by securities in any subsidiaries of the successor company which are referred to in Clauses 61(1) and 63(6). The amendment achieves this aim by applying the definition of securities in Clause 70(1) to any company referred to in Part V of the Bill rather than just the successor company. I beg to move.

On Question, amendment agreed to.

[Amendment No. 143C not moved.]

Clause 70, as amended, agreed to.

Lord Glanusk moved Amendment No. 144: Before Clause 71, insert the following new clause:

("Conditions of licences under the 1949 Act. .In section 1 of the 1949 Act (licensing of wireless telegraphy) after subsection (4) there shall be inserted the following subsection— (4A) Notwithstanding provisions of subsections (3) and (4) above a wireless telegraphy licence granted to a person authorised by a licence under section 7 of the Telecommunications Act 1984 to run a telecommunication system (within the meaning of Part II of the said Act of 1984) and required in connection with the running of that system may include provisions for its continuation in force for such period as may be specified in or determined by or under the licence, unless revoked in accordance with any term in that behalf contained in the licence.".")

The noble Lord said: I beg to move Amendment No. 144 in the names of my noble friend Lord Trenchard, the noble Lord, Lord Spens, and myself. This amendment is being tabled at the request of Mercury Communications Limited and it will in fact be required by other public telecommunications operators when the first duopoly expires; it will also be required by cable system operators when they require to use radio links, be they VHF, UHF, microwave, laser or any other method. On these occasions when they require to use these links they will need another licence under the Wireless Telegraphy Act 1949.

The difficulty arises in that this latter licence under the 1949 Act can be revoked at any time by the Secretary of State without any rules or guidance as to when or why. If this were to happen it would mean the complete closedown of the telecommunications system, although the operator in fact holds a valid telecommunications licence. So Amendment No. 144 is designed to make it possible for these two essential licences to run concurrently, and they can only be revoked as a pair and not individually in accordance with the rules laid down under the Telecommunications Bill.

We have had sympathetic noises from the Front Bench. I am sure they will not like our drafting of this amendment, but we would very much like to hear how sympathetic they are going to be to us.

Lord Glenarthur

Having listened to my noble friend's explanation of the intention of his amendment, I can certainly say that the Government sympathise with the intentions behind it and agree that there is a need for some security of tenure when wireless telegraphy licences are issued to holders of public telecommunication licences, such as Mercury, the cellular radio consortia, and of course British Telecom. The Government would like to table an amendment on Report which I fear will be rather longer than the amendment of my noble friend but which I think will more certainly achieve his desired aims. I hope that with that undertaking, he will see fit to withdraw his amendment.

Lord Glanusk

I am most grateful to my noble friend on the Front Bench. I shall wait to see the final version of the amendment and meanwhile withdraw my amendment.

Amendment, by leave, withdrawn.

[Amendment No. 145 not moved.]

Clause 71 agreed to.

Schedule 3 agreed to.

Clauses 72 and 73 agreed to.

Clause 74 [Regulations with respect to resistance to interference]:

Lord Lyell moved Amendments Nos. 145A, 145B and 145C: Page 65, leave out lines 10 to 15. Page 65, line 18, leave out ("or requirements with respect to the marking of any apparatus") Page 65, line 31, leave out ("or with any requirements as to marking").

The noble Lord said: With the permission of the Committee, I should like to speak to Amendments Nos. 145A, 145Band 145C together.

All these amendments make minor alterations to Clause 74, and this itself adds a new Section 12A to the Wireless Telegraphy Act 1949.

I should also like to include in my remarks Amendments Nos. 154 and 155. Amendment No. 154: In the Title, line 15, leave out ("and") Amendment No. 155: In the Title, line 16, at end insert (", and otherwise to make provision with respect to wireless telegraphy apparatus and certain related apparatus;")

These amendments lengthen the Long Title of the Bill to reflect the inclusion of the new clauses about wireless telegraphy and associated apparatus.

Under the terms of the new clause, we find such things as marking orders, which require apparatus to be marked as complying with the requirements of statutory regulations made under the Wireless Telegraphy Acts. Subsection (4) of new Section 12A in the 1949 Act which is inserted by virtue of Clause 74 is redundant and can be omitted, as indeed can references to marking requirements which appear later in that clause. This is what Amendments Nos. 145A, 145B and 145C would achieve.

Amendments Nos. 154 and 155 to the Long Title of the Bill are necessary because at present the Long Title refers only to amending the Wireless Telegraphy Acts of 1949 to 1967 and to making: further provision for facilitating enforcement of those Acts".

The new clauses which will be inserted by Amendments Nos. 145D, 145E and 145F do neither of these things. They make fresh provision in relation to wireless telegraphy and to related apparatus. It is necessary to amend the Long Title of the Bill to ensure that it will embrace these provisions. That is what Amendments Nos. 154 and 155 do. I beg to move Amendments Nos.145A, 145B and 145C en bloc.

On Question, amendments agreed to.

Clause 74, as amended, agreed to.

Clauses 75 to 79 agreed to.

10.34 p.m.

Lord Lyell moved Amendment No. 145D: After Clause 79. insert the following new clause:

("Approval of wireless telegraphy apparatus, etc.

.—(1) Where any of the following instruments, namely—

  1. (a) any licence granted under section 1 of the 1949 Act (licensing of wireless telegraphy).
  2. (b) any regulations made under that section,
  3. (c) any regulations made undersection 10of thatAct (regulations as to radiation of electro-magnetic energy etc.),
  4. (d) any order made under section 7 of the 1967 Act (restriction on dealings in and custody of certain apparatus), or
  5. (e) any authority given for the purposes of that section.
contains any provision which is framed by reference to relevant apparatus for the time being approved under this section for the purposes of that instrument, such apparatus may be approved for those purposes by the Secretary of State.

In this subsection "relevant apparatus" means wireless telegraphy apparatus or apparatus designed or adapted for use in connection with wireless telegraphy apparatus.

(2) A person applying for an approval under this section may be required by the Secretary of State to comply with such requirements as the Secretary of State may think appropriate: and those requirements may include a requirement to satisfy some other person with respect to any matter.

(3) An approval under this section may apply either to particular apparatus or to any apparatus of a description specified in the approval, and may so apply either for the purposes of a particular instrument falling within any of paragraphs (a) to (e) of subsection (1) above or for the purposes of instruments falling within any of those paragraphs of a description so specified.

(4) An approval under this section may specify conditions which must be complied with if the approval is to apply, for any purposes specified in the approval, to any apparatus which is so specified or is of a description so specified, and any such condition may impose on the person to whom the approval is given a requirement from time to time to satisfy any person with respect to any matter.

(5) The Secretary of State may at any time vary or withdraw any approval given by him under this section.

(6) A person appointed by the Secretary of State may exercise any function conferred on the Secretary of State by the preceding provisions of this section to such extent and subject to such conditions as may be specified in the appointment.

(7) The Secretary of State may by order provide for the charging of fees in respect of the exercise of any function in pursuance of this section by or on behalf of the Secretary of State: and an appointment under subsection (6) above may authorise the person appointed to retain any fees received by him in pursuance of any such order.

(8) Nothing in subsection (7) above shall preclude a person (not being the Secretary of State or a person acting on his behalf) by whom any matter falls to be determined for the purposes of any requirement imposed in pursuance of subsection (2) or (4) above from charging any fee in respect of the carrying out of any test or other assessment made by him.

(9) Any sums received by the Secretary of State under this section shall be paid into the Consolidated Fund.")

The noble Lord said: I should like to begin with an apology. The amendment that we find on the Marshalled List today is starred as it was put down so late. I hope that your Lordships will see, by comparing the original amendment, Amendment No. 145D, with the revised edition today, that it is just mildly revised. The substitution was needed because subsections (3) and (6) of the new clause as originally put down were not quite right and we found it necessary to redraft them slightly to achieve the desired effect. With the permission of the Committee, it would save time if together with this amendment I spoke to Amendments Nos. 145E, 145Fand 145G. Amendment No. 145E: After Clause 79, insert the following new clause:

("Information etc. to be marked on or to accompany apparatus.

(1) Where it appears to the Secretary of State expedient that any description of relevant apparatus should be marked with or accompanied by any information or instruction relating to the apparatus or its installation or use, the Secretary of State may by order—

  1. (a) impose requirements for securing that relevant apparatus of that description is so marked or accompanied, and
  2. (b) regulate or prohibit the supply of any such apparatus with respect to which the requirements are not complied with;
and the requirements may extend to the form and manner in which the information or instruction is given.

(2) An order under this section may, in the case of apparatus supplied in circumstances where the information or instruction required by the order would not be conveyed until after delivery, require the whole or part thereof to be also displayed near the apparatus.

(3) Where an order under this section is in force with respect to relevant apparatus of any description, any person who, in the course of any trade or business, supplies or offers to supply relevant apparatus of that description in contravention of the order shall, subject to section (Offences due to default of third person) below, be guilty of an offence and liable on summary conviction to a fine not exceeding level 5 on the standard scale.

(4) For the purposes of this section a person exposing relevant apparatus for supply or having such apparatus in his possession shall be deemed to offer to supply it.

(5) In this section and section (Information etc. to be given in advertisements) below—

  1. (a) "relevant apparatus" means wireless telegraphy apparatus or apparatus designed or adapted for use in connection with wireless telegraphy apparatus; and
  2. (b) "supply" shall be construed in accordance with section 9 of the Consumer Safety Act 1978.")

Amendment So. 145F: After Clause 79, insert the following new clause:

(" Information etc. to he given in advertisements.

.—(1) Where it appears to the Secretary of State expedient that any description of advertisements of relevant apparatus should contain or refer to any information relating to the apparatus or its installation or use, the Secretary of State may by order impose requirements as to the inclusion of the information, or an indication of the means by which it may be obtained, in advertisements of that description.

(2) An order under this section may specify the form and manner in which any information or indication required by the order is to be included in advertisements of any description.

(3) Where an advertisement of any relevant apparatus which is to be supplied in the course of any trade or business fails to comply with any requirement imposed under this section, any person who publishes the advertisement shall, subject to section (Offences due to default of third person) below, be guilty of an offence and liable on summary conviction to a fine not exceeding level 5 on the standard scale.

(4) Section (Information etc. to he marked on or to accompany apparatus) (5) above applies for the purposes of this section; and in this section "advertisement" includes a catalogue, a circular and a price list.")

Amendment No. 145G: After Clause 79, insert the following new clause:

("Offences due to default of third person.

.—(1) Where the commission by any person of an offence under section (Information etc. to he marked on or to accompany apparatus) or (Information etc. to he given in advertisements) above is due to the act or default of some other person, that other person shall be guilty of the offence; and a person may be charged with and convicted of the offence by virtue of this subsection whether or not proceedings are taken against the first-mentioned person.

(2) In any proceedings for an offence under either of those sections it shall, subject to subsection (3) below, be a defence for the person charged to prove that he took all reasonable steps and exercised all due diligence to avoid committing the offence.

(3) Where the defence provided by subsection (2) above involves an allegation that the commission of the offence was due to the act or default of another person, the person charged shall not, without leave of the court, be entitled to rely on that defence unless, within a period ending seven clear days before the hearing, he has served on the prosecutor a notice in writing giving such information identifying or assisting in the identification of that other person as was then in his possession.

(4) In any proceedings for an offence under section (Information etc. to he given in advertisements) above it shall be a defence for the person charged to prove that he is a person whose business it is to publish or arrange for the publication of advertisements and that he received the advertisement for publication in the ordinary course of business and did not know and had no reason to suspect that its publication would amount to an offence under that section.")

The type approval of wireless telegraphy apparatus is at present carried out by the Secretary of State for Trade and Industry on a non-statutory basis. Samples of equipment are tested by the department's laboratory at Kenley against the relevant performance specification produced by the department in consultation with manufacturers. Such type approval by radio regulatory authorities is a well-established practice not only in this country, but also in Europe, and generally it works satisfactorily. However, the lack of any mention in the Wireless Telegraphy Acts of the approval system has become increasingly unsatisfactory because of the uncertainty that it creates about the powers of the Secretary of State to approve apparatus or to require the use of approved apparatus. The Government have therefore decided to make statutory provision on this subject. This will have the advantage of bringing the arrangements for approving wireless telegraphy apparatus more into line with those for telecommunications apparatus.

Amendment No. 145D is designed to achieve those aims. It also makes provision for approval to be given on the basis of independent tests (that is in subsection (2)), or indeed to delegate the whole approvals procedure (that is in subsection (6), at the bottom of page 17 of the Marshalled List) should it prove desirable to do so in the future. An example would be in order to bring together in a single place the approvals procedures for telecommunications apparatus and wireless telegraphy apparatus.

One important benefit of type approval is to remove from the user the burden of having to satisfy himself that the equipment that he buys and uses complies with the specifications laid down for that particular use and that in using it he is therefore not committing an offence. In order to realise that benefit we think that it is desirable that the equipment should be marked or labelled.

The purpose of Amendment No. 145E is precisely to enable the Secretary of State to require equipment to be marked and in some cases to be accompanied by instructions concerning its installation or use; for example, whether it is necessary to obtain a wireless telegraphy licence or, in the case of approved cordless telephones, stating that the equipment is exempt from that requirement. This provision will be particularly helpful when the Government exempt from licensing, as they hope to do before long, a wide range of low-power radio devices. Apparatus will then be required to be marked to show whether or not it qualifies for use without a licence.

Amendment No. 145F is concerned with advertising. Advertising can also mislead by failing to show clearly and in an unambiguous way whether or not the apparatus advertised is approved for use in the United Kingdom and under what conditions. Amendment No. 145F is designed to enable the Secretary of State to remedy the situation by requiring in an order the inclusion of specific information in advertisements covered by that order. Contravention of any marking or advertising order will be an offence, liable on summary conviction to a fine not exceeding level 5, which is currently £1,000.

Finally, the new clause in Amendment No. 145G, which is concerned with offences due to the default of a third person, makes provisions similar to those in Clauses 5 and 29 relating to offences committed by a person which are due to the acts or defaults of a third person. These are designed to ensure that it is open to a person who contravenes a marking or advertising order to show that he had in fact acted in good faith and, where appropriate, had taken such steps as he could to avoid committing an offence.

I think that I have covered, I hope to the satisfaction of your Lordships' Committee, the reasons why we seek to move these amendments, and accordingly I beg to move.

On Question, amendment agreed to.

Lord Lyell moved Amendments Nos. 145E, 145F and 145G:

[Printed above.]

The noble Lord said: Perhaps it will be for the convenience of the Committee if I move Amendments Nos. 145E, 145F and 145G en bloc. I beg to move.

Lord Morris

I wish to refer to Amendment No. 145E. In moving amendments my noble friend referred to the load power of certain wireless telegraphy apparatus. I should like to ask a simple question. Is the measure of power the intrinsic power of the transmission or the range in which the power of the transmission can be received?

Lord Mottistone

Perhaps I might intervene. If you talk about power, that is the power in watts at transmission from the aerial. The range depends entirely on the conditions under which it operates and the circumstances in which it operates. That varies immensely. When the Bill refers to power, it means the power transmitted by the aerial.

Lord Morris

My noble friend has pointed out precisely why I asked the question in the first place.

Lord Lyell

The explanation of my noble friend Lord Mottistone is far more technical than I would be able to give. I am advised that power refers to the power of the transmission, not necessarily to the range or the radius, as explained by my noble friend. In a house or elsewhere, perhaps in the open, the range of the hand-held telephone might be greater. It is the power of the transmission.

On Question, amendments agreed to.

Clauses 80 to 82 agreed to.

Clause 83 [Power of Secretary of State to promote interests of disabled persons]:

[Amendment No. 146 not moved.]

Lord McIntosh of Haringey moved Amendment No. 147:

Page 74, line 14, at end insert— ("( ) The results of all research pertaining to subsection (2) above shall be laid before Parliament by the Secretary of State annually in a report from the Director. ( ) In making any report under this section available to the Secretary of State the Director shall have regard to the need for excluding, so far that it is practicable, the matters specified in section 48(2)(a) and (b) above.")

The noble Lord said: It is sad that the noble Baroness, Lady Macleod, the noble Baroness, Lady Lane-Fox, and the noble Lord, Lord Spens, are not here to move Amendment No. 146—

Lord Mottistone

If I might intervene, the reason that the amendment is not moved is that it is already covered by other amendments which the Government accepted at an earlier stage. It was one of a block overtaken by the Government's acceptance of about seven or eight amendments.

Lord McIntosh of Haringey

I am grateful to the noble Lord for that reminder. I do not think that my pen was moving fast enough at that stage. I can curtail my remarks on Amendment No. 147 and simply ask whether the second subsection that is proposed in the amendment would also be acceptable to the Government. It simply seeks to provide that no such report should infringe the interests either of individuals or of corporate bodies as provided in Clause 48 of the Bill.

Lord Glenarthur

No. I am afraid that the amendment is not acceptable in the way that the noble Lord describes. The aim of the amendment is to ensure that Parliament is informed about research and development of telecommunications apparatus especially constructed for the disabled. I agree that this is a legitimate aim, but I think that it is already achieved by amendments to Clauses 52 and 53 which the noble Lord was told about just now. In particular. Amendment No. 123AA obliges the director to include in his report a general view of development in telecommunications in respect of the director's functions particularly affecting those who are disabled and of pensionable age. One of the director's functions under Clause 47 is to keep under review activities in telecommunications and this includes research and development. Therefore, the director's report must include a mention of research and development and will include that financed by the Secretary of State under Clause 83.

In addition, your Lordships have already agreed to the establishment of a separate advice body for the disabled and no doubt it will wish to look into this area and will include it in its annual report. The report will be included in the director's annual report to the Secretary of State which will be laid before Parliament and published as the Secretary of State thinks appropriate. I hope that with that explanation the noble Lord will not press the amendment.

Lord McIntosh of Haringey

I am grateful to the Minister for that explanation. Subject to any further thoughts that I may have when I read his answer and the answer on the previous amendments, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 83 agreed to.

Clause 84 [Power of local authorities to contribute towards provision of facilities]:

Lord Stoddart of Swindon moved Amendment No. 148: Page 74, line 29, at end insert ("and such payments shall qualify for a specific Government grant amounting to 50 per cent, of the total payment").

The noble Lord said: I beg to move Amendment No. 148 standing in my name and the names of my noble friends. This amendment refers to Clause 84 which gives a local authority the power to make a contribution to a public telecommunications operator towards the cost of a public telephone call box, if they feel that it is desirable. We are a little worried about this clause because it seems to us that it could very well be that, under certain circumstances, the blame for the removal of a public telephone kiosk could be transferred from the telecommunications operator to the local authority, if the local authority decline to make a grant. We think that that would be unjust, but we will not particularly quarrel with it.

Nevertheless, a public telephone call box is a social service, particularly in rural areas. We believe that, since it is a social service and that a public telecommunications system is something of a national asset, the Government should play some part in assisting the retention of public telephone boxes, particularly in rural areas. Therefore, we believe that if a local authority should feel that it is desirable that a public telephone call box should be retained in their area they should be able to claim a 50 per cent, grant from the Government. It would not be very costly and I feel quite sure that the Government will have every sympathy with this amendment, which I hope that they will accept.

Lord Glenarthur

I have certainly listened to what the noble Lord has said in support of his amendment, but I think that his proposals may be based on a misunderstanding of the extent of local authorities' contributions towards supporting public call boxes and, indeed, what these contributions are for. Let me first say that there is nothing new about the power in Clause 84 which enables local authorities to contribute towards either existing or additional call boxes in their area. This is something which I brought out when dealing with an earlier amendment yesterday. A similar power was included in the British Telecommunications Act 1981, which in turn followed a similar provision in the Post Office Act 1969.

Contributions by local authorities under this power are entirely voluntary. There is absolutely no compulsion on the local authorities to do so, but if they wish to make a contribution the Government do not see why they should be prevented. However, in the past very few councils have in fact used this power. Contributions in the last couple of years have been very small; for example, in 1981–82 only seven call boxes—out of a nationwide network of nearly 77,000—were subsidised by local authorities to bring up their takings to the guideline level of £185. In 1982–83, nine call boxes had been so subsidised by local authorities to a total of less than £500.

The Government do not expect these sums to increase significantly in the future. We are not looking to local authorities to take over responsibility of ensuring public call boxes in their area. The primary responsibility for ensuring a national network of public call boxes lies with the Secretary of State and the director in accordance with their paramount duty in Clause 3(1)(a) to ensure that there are provided throughout the United Kingdom, in so far as it is practicable to do so, public call box services to satisfy all reasonable demands for them. In fulfilment of this duty the responsibility for providing these call boxes will lie primarily with BT through obligations in its licence.

We have already discussed the security of the public call box network at some considerable length under Amendment No. 48, so your Lordships will know that BT will not be able to withdraw loss-making kiosks except in accordance with procedures agreed with the director. These procedures, which in fact are very similar to the present arrangements, will specify a minimum figure for the annual takings of a call box below which it may be withdrawn.

I hope that in our earlier discussion—I think it was yesterday—I satisfied the noble Lord and the Committee that call boxes will continue to be provided throughout the United Kingdom, including in rural areas. I also explained the proposal for access charges to ensure that BT is not put at an unfair competitive disadvantage on account of its obligation to provide call boxes.

The effect of the duty on the Secretary of State and the obligations on BT is that we are not looking to local authorities to provide the large sums of money which the noble Lord suggested in moving his amendment. Indeed, I doubt whether there will be much need for local authorities to contribute, but I do not see why they should not do so if they wish to, and Clause 84 enables them to do so. With that explanation, I hope that the noble Lord will withdraw his amendment.

Lord Stoddart of Swindon

Yes, in the light of that very full explanation, and bearing in mind that so small a number of local authorities have contributed in this way—and that being the case, the administrative cost of paying the 50 per cent. would probably exceed the 50 per cent. itself—I beg leave to withdraw this amendment.

Amendment, by leave, withdrawn.

10.52 p.m.

Lord Stoddart of Swindon moved Amendment No. 149: Page 74, line 29, at end insert ("and such payments shall not cause any penalty under the General Rate Act 1967 and target expenditure limits")

The noble Lord said: I think I can move this amendment even faster, because all I really require is an assurance that, if a local authority contributes, that sum would not tip it over the limit which would cause it to suffer a penalty from the Government. I beg to move.

Lord Glenarthur

I think I can be equally brief. I am afraid that I cannot accept this amendment. In amplification of what the noble Lord said, I presume that by this amendment he intends to ensure that any expenditure by a local authority under Clause 84 does not count towards its expenditure target and, therefore, could not cause grant penalties. Amendment No. 149 refers to the General Rate Act 1967, but I think that this must be a mistake, as expenditure targets are set under the Local Government Finance Act 1982.

However, quite apart from this apparent error, I cannot accept the principle of this amendment. As I have explained, only a very tiny amount of expenditure is expected under Clause 84, and I do not think that the case for disregarding it when assessing local authorities' performance against expenditure targets has yet been made out. However, if local authorities wish to make representations to my right honourable friend the Secretary of State for the Environment that this or any item of expenditure should not score against their targets, then there is already statutory provision for this, and I know that my right honourable friend will consider most carefully the points they make. Again, I hope that the noble Lord will withdraw his amendment.

Lord Stoddart of Swindon

Yes, in the light of what the noble Lord has said, and bearing in mind that I want to think about this amendment again, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

On Question, Whether Clause 84 shall stand part of the Bill?

Lord Morris

In view of what was said on the previous amendment, I would ask my noble friend whether, at a later stage, the Government would seriously consider removing this clause from the Bill.

In view of the fact that the opportunity is placed in previous similar enactments, it seems rather unnecessary. The powers that have been taken up by local authorities have been minimal in the extreme. Although there is local government involvement in the provision of a telecommunications service, it brings it back somewhat into the political arena. I would suggest that the necessity for this particular clause should be considered with very great care.

Lord Glenarthur

I am sure that if it was possible to cut out a clause from this Bill under any circumstances the Government would be only too pleased to do so. But the fact remains that the description of the reason for retaining Clause 84 which I gave to the noble Lord opposite just now applies, and the Government think it is only right that, if a local authority should want to contribute towards the maintenance of a telephone box in any particular area, it should be able to do so. Therefore, I am afraid that I cannot agree with what my noble friend says.

Clause 84 agreed to.

Clause 85 [Use of certain conduits for telecommunication purposes]:

Lord Glenarthur moved Amendment No.149A:

Page 75, line 22, at end insert— ("(2A) Where the doing by an authority with control of a public sewer of anything authorised by this section would, apart from this subsection, constitute a contravention of any obligation imposed (whether by virtue of any conveyance or agreement or otherwise) on the authority, the doing of that thing shall not constitute such a contravention to the extent that it consists in, or in authorising, the carrying out of works or inspections, or keeping of apparatus, wholly inside a public sewer. (2B) Subject to subsections (2) and (2A) above, subsection (1) above is without prejudice to the rights of any person with an interest in land on, under or over which a relevant conduit is situated.")

The noble Lord said: These amendments are in response to concerns expressed by the water authorities that, as drafted, subsection (7) of Clause 85 might inhibit them in making use of the powers of the clause in relation to public sewers. This is not our intention.

As drafted, subsection (7) does not cater adequately for the variety of arrangements under which the various kinds of ducts referred to in Clause 85 may be installed. It was included in the context of electricity ducts and provides that the extension of the relevant authorities' statutory powers is without prejudice to the rights of any person with an interest in land on, under or above which the relevant conduit is situated. This is necessary because electricity ducts are installed under the terms of wayleave agreements and ownership is not vested in the electricity boards.

As far as public sewers are concerned, the position is rather different. The water authorities operate under statutes which provide for the vesting in them of public sewers. It was originally thought that they owned an unrestricted fee simple in all public sewers and that third party rights could not be affected by the carrying out of works wholly inside them. It all sounds rather bizarre, but I will see this through. It now appears, however, that there is some doubt whether this is always the case. I will pass to Clause 85(7), which was primarily intended to protect third party rights in relation to electricity conduits, and which may inadvertently inhibit the exercise of these new powers by water authorities. Since the intention is that water authorities should not need to obtain the consent of third parties for works done wholly inside a public sewer, it is very desirable to make this clear. The amendments therefore repeal subsection (7) of Clause 85 and replace it with a provision which, in relation to public sewers, provides that the authorisation of any works in such sewers will not constitute a contravention of any obligation imposed on a water authority by virtue of any conveyance or agreement.

We are concerned here with works carried out within these sewers. We think it is right to meet the concern of the water authorities in this regard. I beg to move.

On Question, amendment agreed to.

Lord Glenarthur moved Amendment No.149B: Page 75, line 34, leve out ("giving a supply of water") and insert ("conveying water from one place to another").

The noble Lord said: I have already had an opportunity to explain the general purpose of Clause 85, which is to enable us to maximise the potential of our physical infrastructure. Amendment No. 149B is a minor improvement in the drafting of the clause which should help to promote that objective. A number of water authorities are seriously considering the installation of cables in conduits. While there are no definite plans as yet, the Government believe it would be wrong to inhibit development in this area because of a technical defect in the legislation. I beg to move.

On Question, amendment agreed to.

Lord Glenarthur moved Amendment No.149C: Page 77, line 17, leave out subsection (7).

On Question, amendment agreed to.

Clause 85, as amended, agreed to.

Clauses 86 to 91 agreed to.

[Amendment No. 150 not moved]

Clause 92 agreed to.

Clause 93 agreed to.

Clause 94 [General interpretation]:

Lord Glenarthur moved Amendment No.150A:

Page 82, line 30, at end insert— (" "telecommunications operator" has the meaning given by section 16(1) above;")

The noble Lord said: This amendment has already been spoken to on an earlier amendment. I beg to move.

On Question, amendment agreed to.

Lord Glenarthur moved Amendment No.150B:

[Printed earlier: col. 491.]

The noble Lord said: This also was spoken to with Amendment No. 70A. I beg to move.

On Question, amendment agreed to.

Clause 94, as amended, agreed to.

Clause 95 agreed to.

Clause 96 [Amendments, transitional provisions and repeals]:

11 p.m.

Lord Glenarthur moved Amendments Nos. 150C, 150Dand 150E:

Page 84. line 12. after ("order") insert ("(a)")

Page 84, line 15, at end insert (" or (b) repeal any enactment in a local telegraph Act which appears to him to be spent or no longer of practical utility")

Page 84, line 17, leave out from ("1978") to end of line 20 and insert ("and in subsection (3) above "local telegraph Act" means a local Act which incorporated a telegraph company or the Bill for which was promoted by such a company")

The noble Lord said: These amendments are designed to extend slightly a power already in Clause 96 which enables the Secretary of State to repeal, or amend, by order provisions in local Acts which are made unnecessary by, or are inconsistent with, the Bill. The extension is designed to bring within the scope of the order-making power, provisions in local telegraph companies Acts which are either spent or are no longer of practical utility.

The first amendment is a paving one. The second gives the necessary enabling power which can only be exercised by order subject to the negative resolution procedure. The third amendment provides a definition of "local telegraph Act" for the purpose of the subsection, and also corrects a missed consequential resulting from the bringing together in Clause 92 of all the references to the negative resolution procedure. I beg to move.

On Question, amendments agreed to.

Clause 96, as amended, agreed to.

Schedule 4 [Minor and consequential amendments]:

Lord Glenarthur moved Amendment No. 150F: Page 155, line 33, after ("Schedule 9") insert ("before the appointed day")

The noble Lord said: This amendment corrects an omission of words in the current drafting, and is as simple as that. I beg to move.

Lord Bruce of Donington

Under what circumstances was it discovered that "before the appointed day" ought to be inserted here? It seems that this should have been thought of beforehand. The date is obviously important.

Lord Glenarthur

Sub-paragraph (2) of paragraph 57 of Schedule 4 is a transitional provision. It is intended to provide that when a road is diverted or closed under the Drainage (Northern Ireland) Order 1973 before the appointed day, the savings for the rights of British Telecom under the existing legislation will remain in effect after the appointed day. Unfortunately the words "before the appointed day" are missing from the sub-paragraph as drafted. This amendment inserts them.

On Question, amendment agreed to.

Schedule 4, as amended, agreed to.

Schedule 5 [General transitional provisions and savings]:

Lord Glenarthur moved Amendment No.150G: Page 179, line 18, leave out sub-paragraph (6).

The noble Lord said: This amendment is designed simply to remove a transitional provision which we have concluded is unnecessary and which, if left in place, could lead to misunderstandings about the Government's intentions. Paragraph 1(6) of Schedule 5 provides that neither the requirement to consult with the director imposed by Section 7(l)(a) of the Bill when the Secretary of State grants a licence, nor the requirements as to public notification when it is proposed to include Clause 8 type conditions in licences and when the application of the telecommunications code is being considered, need apply for a transitional period of up to two years from the appointed day. This provision was originally included in the Bill to cover the transition in relation to the very many licences already granted by BT and which may have to be re-issued when the Bill becomes law. In this connection our particular concern was to ensure that a requirement to consult the director in every case did not become a major administrative problem.

However, we are aware that paragraph 1(6) is open to a wider interpretation since it would mean that the public notification and consultation procedures need not be followed in relation to any licence granted by the Secretary of State during a period of up to two years from the appointed day. It was never the Government's intention that licences which involve Clause 8 type conditions and licences which apply the powers of the telecommunications code should be issued without that due process. We have concluded, therefore, that the simplest course is to delete paragraph 1(6) altogether so that there can be no misunderstanding about our intention.

On Question, amendment agreed to.

11.6 p.m.

Lord Bruce of Donington moved Amendment No. 151: Page 185, line 47, after ("pensions") insert ("(which should not discriminate as between pre- and post-privatisation members of the staff of British Telecommunications and the successor company)").

The noble Lord said: Paragraph 37 is one of those inevitable paragraphs in the transitional aspects of Bills of this kind where things are declared, "for the avoidance of doubt". Your Lordships will see at line 38 on page 185 that the paragraph commences: It is hereby declared for the avoidance of doubt".

The amendment seeks to make it clear that on vesting: the rights and liabilities of British Telecommunications under any agreement or arrangement for the payment of pensions which should not discriminate as between pre- and post-privatisation members of the staff of British Telecommunications and the successor company". If one reads Hansard one will find that the undertakings have already been given by the noble and learned Lord Advocate in the course of the debate earlier today. There does not appear to be any reason, therefore, why this should not be inserted in this declaratory paragraph. I beg to move.

Lord Glenarthur

This amendment seeks to bind the successor company's pensions policy towards recruits taken on after privatisation. BT's pension policy is not controlled in this way at present and to attempt to bind the successor company's future pensions policy could be wholly inappropriate to its private sector status. The amendment is in any case defective in many respects since paragraph 37 of Schedule 5 deals with pension obligations which exist at the time of transfer and cannot include future pension rights of new recruits after transfer.

In so far as the amendment might relate to current employees, may I restate the position which has been made amply clear in another place. The pension rights of current employees are not altered by the Bill or privatisation in any way. They are safeguarded under the BT Pension Fund Trust Deed, the rules of which require that any changes to the current entitlement of current employees on their retirement would have to be unanimously agreed by the trustees of the pension fund. Four out of the nine trustees represent BT's workforce and all the trustees are required by law to act in the best interests of the trust's beneficiaries. So it is most unlikely that there would be a change to the rules which would reduce the pension entitlement of current employees. Certainly such a change could not be forced on the employees by the successor company against their will.

I think, then, that the amendment does not enhance the rights of current employees after privatisation in the way that the noble Lord seeks that it should. It is objectionable in attempting to bind the succesor company's policy towards pensions for staff taken on after the privatisation, and is defective. I hope that the noble Lord will not press it to a Division.

Lord Bruce of Donington

I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 152 not moved.]

[Amendment No. 153 not moved.]

Lord Glenarthur moved Amendments Nos. 153XA and 153YA: Page 187, line 32, at end insert ("shall, as respects its duties under this paragraph, keep proper accounts and proper records in relation thereto and") Page 187, line 35, leave out ("its duties under this paragraph") and insert ("those duties")

The noble Lord said: This amendment makes explicit the requirement on the shell corporation to keep proper accounts in respect of the discharging of the excepted liabilities under paragraph 39 of Schedule 5. The expected liabilities are payments due to the BT and Post Office pension funds in respect of the pre-1969 pension fund deficiency. These liabilities are to be retained by the corporation after the rest of the business has been transferred to the successor company and discharged in the manner set out in paragraph 39.

It has already been provided in subsection (6) of the paragraph that the corporation will prepare and submit a report to the Secretary of State at the end its financial year and that this report will be laid before Parliament. This amendment merely makes explicit, where it was hitherto assumed, that the coporation will also keep proper accounts and records. In speaking to and moving Amendment No. 153XA, I speak to and move also Amendment No. 153YA. I hope that the Committee will accept these amendments.

Lord Bruce of Donington

The noble Lord has repeated the words used by an earlier spokesman on the Government side that the excepted liabilities which amount to £l,250-million as shown on the balance sheet of British Telecom as at 31st March 1983 will be excepted liabilities and will not therefore become the liability of the successor company. They still, however, remain a liability. The noble Lord has said that this liability will be discharged in the manner as determined by Schedule 5. It is very difficult on reading Schedule 5 as a whole to find exactly how this liability is going to be discharged. Will the noble Lord short circuit the matter and say who is going to pay the money?

On Question, amendments agreed to.

Schedule 5, as amended, agreed to.

Schedule 6 agreed to.

Schedule 7 [Repeals]:

Lord Mottistone moved Amendment No. 153ZA: Page 196, leave out lines 53 to 55.

The noble Lord said: The two lines which I seek to remove repeal certain provisions of the Water Act 1945. The provisions confer powers on the statutory water undertakers relating to the establishment of telegraphic and telephonic and other electrical communication between their offices and any part of their works and between different parts of their works. The powers are of considerable operational significance, particularly with the increased use of telemetry in the provision of water services. The effect of repealing these powers will be to deprive water undertakers of powers which many of them have enjoyed and exercised for years, going back in some cases long before they were codified in the Third Schedule to the Water Act 1945.

In place of these powers, they will have to apply for licences. There are difficulties about the licences—and I will not spell them out because of the late hour—about which the water industry has been in touch with the Department of Trade and Industry and understand that there will be certain arrangements for them to facilitate the obtaining of licences. The amendment therefore is proposed either in the hope that my noble friend will agree to it and not to repeal those sections of the Water Act or to tell us in a little detail whether I am right in thinking that there are special arrangements being made for the water industry. I beg to move.

Lord Glenarthur

Without going into the detail of the amendment which my noble friend proposes, I can confirm that officials from the Department of Trade and Industry have been in touch with the Department of the Environment about the arrangements for putting into effect the assurances given to the chief executives of the regional water authorities in the circular letter. The Department of Trade and Industry have just written to the water authorities to begin the process of negotiating the licences that will need to be in place when the Bill becomes law. I hope that that reassures my noble friend and that he will be able to withdraw his amendment.

Lord Mottistone

Does my noble friend mean that there are going to be special arrangements that so far as possible meet the needs of the water industry?

Lord Glenarthur

I am not sure whether my noble friend is aware of the contents of the letter, but under Section 5 of Schedule 3 to the Water Act 1945 the water authorities were given power to install telegraphic systems for their own internal use. Schedule 7 to the Bill proposes the repeal of this power, and the amendment he has proposed seeks to delete that repeal. A circular letter from the Department of the Environment on 13th January 1983 informed chief executives of the regional water authorities of the Government's decision to seek to repeal this power, and the reasons for that decision. The main reason was that, given the rationalisation being effected by the Telecommunications Bill, it made little real sense having one-off provisions standing outside it. The circular letter, however, explained that it was the Government's intention that the water authorities should be enabled to continue to install and run telecommunications systems which they have had power to install under the Water Act 1945. This will be done by authorising the water authorities to operate the telecommunications code. I should like to confirm that this is the Government's intention.

Lord Mottistone

I am deeply grateful to my noble friend for confirming that. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Lyell moved Amendments Nos. 153A and 153B:

[Primed earlier: col. 609.]

The noble Lord said: These amendments are consequential to an amendment which I moved yesterday. I beg to move.

On Question, amendments agreed to.

Lord Lyell moved Amendment No. 153C:

[Printed earlier: col. 609.]

On Question, amendment agreed to.

Schedule 7, as amended, agreed to.

Clause 97 agreed to.

In the Title:

Lord Lyell moved Amendments Nos. 154 and 155:

[Printed earlier: col. 738.]

The noble Lord said: I beg to move these two amendments together. I spoke to them when dealing with Amendment No. 145D and the large group of amendments. I beg to move.

On Question, amendments agreed to.

Title, as amended, agreed to.

House resumed: Bill reported with amendments.