Telephone Service

– in the House of Commons at 12:00 am on 1st March 1972.

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The following Question stood upon the Order Paper:

Photo of Mr Norman Fowler Mr Norman Fowler , Nottingham South

To ask the Minister of Posts and Telecommunications whether he is yet in a position to make a statement on his discussions with the Post Office about the rise in the demand for new telephones.

Photo of Mr Christopher Chataway Mr Christopher Chataway , Chichester

With permission, Mr. Speaker, I will answer Written Question No. 1. Demand for new telephones is more than 30 per cent. up on last year. The Post Office has greatly increased the rate of installation but, with exchange capacity limited by the availability of equipment ordered in the past, the waiting list is growing. I have encouraged the Post Office to increase investment mainly in exchange equipment to the limit it can achieve, and I have recently approved a total addition to its investment of £100 million. Of this, £60 million will be spent in the next three years, the major part in development areas.

The Post Office believes that some increase in tariffs is also necessary if it is to continue to find some 50 per cent. of its rising investment out of revenue and is to deal with rapidly growing demand. It proposes to increase the rentals and connection charges, which do not now cover costs, the former by 50p a quarter and the latter at the maximum from £25 to £35. This would raise users' costs on average by 3 per cent. against the C.B.I.s 5 per cent. limit. The proposals have been referred to the Post Office Users' National Council, and meanwhile the Government reserve their position on them.

Photo of Mr Norman Fowler Mr Norman Fowler , Nottingham South

Is my right hon. Friend aware that his new efforts to meet the demand for telephones will be widely welcomed, as will the news that charges for calls will not be increased? When does he expect the public to start benefiting from the increased investment he has just announced?

Photo of Mr Christopher Chataway Mr Christopher Chataway , Chichester

Unfortunately, the lead times in installing exchange equipment are considerable. In the planning, ordering and installation of exchange equipment the period varies from three to five years. So the Post Office is up against a situation in which demand is outrunning the estimates which were made some years ago and on which investment was based. But the current increases in investment will enable the Post Office to move as fast as possible to increase the capacity of the system.

Photo of Mr Ivor Richard Mr Ivor Richard , Barons Court

Is the Minister aware that he has just made an absolutely disgraceful statement? Against a background of an industry that last year made a profit of £93 million and which increased its return on capital from 8·4 per cent. to 9·8 per cent., for him now to ask people to pay an increased installation charge of £35, compared with £25, is little short of shameful. We on this side take a strong view of the matter. If the Post Office has to ration demand, it should do it in an honest and straightforward way, not by price.

Photo of Mr Christopher Chataway Mr Christopher Chataway , Chichester

The hon. and learned Gentleman was a member of the Government that passed the 1969 Act, which required the Post Office to act as a commercial concern. It has met a large part of the increased costs of the past year out of increased productivity. Manpower productivity is rising by 8 per cent. What is proposed here is an increase amounting to 3 per cent. It is ludicrous for the hon. and learned Gentleman to suggest that the Post Office should alone be unable to take any steps to meet rising costs. If it is to finance its rising investment, it is reasonable that it should move some way towards correcting the under-pricing of some of its services. The average cost of installation is over £150. In that situation it is essential that the Post Office should at least consider some increases, and on that basis they have been referred to the Users' Council.

Photo of Mr Hugh Fraser Mr Hugh Fraser , Stafford and Stone

Will my right hon. Friend explain why this public corporation has to finance new equipment out of revenue? Surely it would be much more sensible for this very well-run commercial organisation to go to the market in the same way as any other business? As a merchant banker, I should be very pleased to see my right hon. Friend after Questions.

Photo of Mr Christopher Chataway Mr Christopher Chataway , Chichester

If the Post Office as constituted under present arrangements were to go to the market, that would mean in effect going with a Government guarantee, a situation that would differ very little from that which prevails now. The Post Office has to show a 10 per cent. return on capital. That return was fixed by the previous Government. Even if in the light of the Users' Council's reaction the present increases are granted, the Post Office would still have difficulty in meeting that target.

Photo of Mr Tom Driberg Mr Tom Driberg , Barking

Will the whole of the new connection charge have to be met by old and infirm people living alone, for whom a telephone is essential?

Photo of Mr Christopher Chataway Mr Christopher Chataway , Chichester

The Post Office still intends to install at much below the cost of installation. Local authorities have powers to help in cases where there is need, but it was made clear in the 1969 Act that it is not for the Post Office to take decisions about which sections of the community should be subsidised.

Photo of Captain Walter Elliot Captain Walter Elliot , Carshalton

Is it not surprising that in conditions of strong and rising demand prices go up also? Surely in private industry the reverse is the case? Cannot a lesson be learned from this?

Photo of Mr Christopher Chataway Mr Christopher Chataway , Chichester

It is a relatively modest overall increase that the Post Office suggests. Where a service is being supplied at below cost whether by a private concern or a public concern, rising demand can only lead the organisation concerned into further trouble if no steps are taken to correct the price structure.

Photo of Mr Ivor Richard Mr Ivor Richard , Barons Court

Reverting to the suggestion made by the right hon. Member for Stafford and Stone (Mr. Hugh Fraser), I feel that the Minister should know from the accounts, that the amount of capital investment which has been financed from internal sources in the Post Office has increased from 50·6 per cent. in 1969–70 to 56·6 per cent. in 1970–71. If the Minister adopted his right hon. Friend's suggestion, the increases would not be necessary. Why does he not do it?

Photo of Mr Christopher Chataway Mr Christopher Chataway , Chichester

If the Post Office is to finance 50 per cent. of its investment, which is the reasonable target set by the previous Administration even in the coming year some price increase is necessary.

Photo of Mr Arthur Lewis Mr Arthur Lewis , West Ham North

On a point of order, Mr. Speaker. You will recall that when the hon. Member for Hendon, North (Mr. Gorst) raised a question during Question Time on the matter which has just been the subject of an announcement by the Minister of Posts and Telecommunications, the Minister said that he would make a statement in answer to the hon. Gentleman—

Photo of Mr Selwyn Lloyd Mr Selwyn Lloyd , Wirral

That is not a matter of order.

Photo of Mr Selwyn Lloyd Mr Selwyn Lloyd , Wirral

Order. I would ask the hon. Gentleman's help in these matters. The content of a Minister's answer is nothing to do with the Chair. Points of order can only be to do with the Standing Orders of the House. The content of a Minister's statement or answer, unless it is out of order, repetitious or something of that sort, is a matter on which the Chair cannot intervene. It is not a matter for me.

Photo of Mr Arthur Lewis Mr Arthur Lewis , West Ham North

Further to that point of order, Mr. Speaker. You heard my introductory remarks, but you did not hear the conclusion, in which I was going to put to you a point of order. With the greatest respect, if you never heard it, how can you rule? I was going to say that you were present and heard the Minister say that he would answer the points made by his hon. Friend the Member for Hendon, North. I was going to say: if the right hon. Gentleman said that he was going to answer and you gave him permission to make a statement but during that statement he not only did not answer but made no attempt to answer, is he not deceiving both the House and you by making such a statement knowing it to be dishonest and false?

Photo of Mr Selwyn Lloyd Mr Selwyn Lloyd , Wirral

I want the help of the House in these matters. My instinct led me, correctly, to believe that the hon. Gentleman was not going to raise a point of order at all. That is why I interrupted him. The Chair must be allowed to intervene as soon as, by instinct, it realises that a point of order being raised is not, in fact, a point of order but is in the category described by one of my predecessors as "bogus points of order", although I am not making that particular allegation about the point put to me by the hon. Gentleman. In such circumstances, the Chair cannot be expected to wait until the end of the submission. Even if everything the hon. Gentleman has said is right, it is not a point of order.