2.18 pm

The Minister for Science and Technology (Mr. Ian Taylor): I warmly welcome the initiative of my hon. Friend the Member for South Dorset (Mr. Bruce) in introducing this Bill and clearly explaining its purposes. I also welcome the contribution by the hon. Member for Ashfield (Mr. Hoon) in support of the Bill. It is good to have cross-party amity on a Friday. I am sure that that will continue right through Christmas and beyond. My only caution to the hon. Gentleman in getting excited about the Bill is that it has to go through another place. I hope that he will use his constructive influence there before he gets involved in any other changes that he wants to propose for the other House. We would like the Bill to go through all its stages in both Houses as soon as possible. It is a sensible addition to the armoury of those attempting to fight fraud in the rapidly changing telecommunications era.

The "loophole"--as the hon. Member for Ashfield described it--was not left open by lack of foresight but by the difficulty of foreseeing technological change. The Telecommunications Act 1984 was passed in 1984, and the first mobile telephone call by Vodaphone was made on 1 January 1986. There are now 6 million mobile telephone users in the United Kingdom, and, by 2000, the figure is predicted to rise to between 12 and 15 million users. It is a remarkable success story, and the growth was based on private sector initiative and sensible management of the radio spectrum--for which I pay tribute to the Radiocommunications Agency.

Mr. Stephen Timms (Newham, North-East): The Minister mentioned the Bill's importance for the mobile telephone industry. Will he confirm that the cable communications industry also awaits the powers that the Bill will provide it to combat fraud?

Mr. Taylor: I entirely endorse the hon. Gentleman's comments. The Bill--although initially identified as an urgent necessity by the mobile communications industry--deals with telecommunications fraud in its broadest sense, whether such fraud is by cable or by other, fixed-link operators.

Overall revenue for all telecommunications operators in the UK is about £13 billion, and there are 28 million-plus customers. The hon. Member for Ashfield said that each week 20,000 mobile telephones are stolen. Thefts put customers at personal risk from mugging and cost them--not least in insurance--to replace. Telephone thefts from parked cars have contributed to 40 per cent. of car break-ins in city centres, and therefore lead to much of the casual crime that so upsets our constituents.

Telephone cloning is a major problem. We estimate that, last year, an average of 8,000 analogue telephones were cloned each month, which is a 100 per cent. increase on the previous year. The costs of cloning inevitably and

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Criminals now resort to high-technology fraud, which they consider to be low-risk. New devices to defraud the industry are appearing on our streets, and new names are being coined, such as "grabbers", "tumblers", "dongles" and "magic phones". The terms now form part of our lexicon, with which we were unfamiliar when drafting the Telecommunications Act 1984, and the new devices present serious difficulties for those who are attempting to eradicate fraud.

"Grabbers" can trigger a mobile telephone and cause it to transmit its identity, which is then used to create a clone. Cloners are also using "dongles", which are about the size of a matchbox and can be used rapidly to reprogramme and change the identity of a stolen telephone. We have heard of so-called "magic phones", in the far east, which grab the identity numbers of nearby telephones and use them to make cloned calls. The identities are subsequently discarded.

Such developments mean that we must introduce new legislation to combat them. As we move into the era of digital telephones, cloning will probably be more difficult. Sadly, however, we should never underestimate the skill of those employed in criminal activities, and we must prepare, so far as possible, to anticipate new difficulties. I compliment the industry on taking significant action to prevent fraud, such as its crime prevention scheme--which it introduced at its own initiative--and its urging telephone owners to protect their equipment, not least by marking it.

My hon. Friend's Bill is designed to ensure that we can win the battle against criminals, who--as hon. Members who have spoken in this debate have said--make use of free telephone calls, which they sometimes sell widely as packages. Criminals encourage dealers to obtain commissions for new connections that should not be made, and they provide anonymity to drug dealers and to money launderers.

As I said, the Bill rightly covers all forms of telecommunications fraud, not just that suffered by mobile phone operators. I am thinking of activities such as dial-through fraud, where hackers get into a PABX system in order to make international calls, which is clearly a great expense for honest phone owners.

The Bill specifically does not affect those who have no intent to defraud--it targets only the fraudsters. It creates two new offences covering the possession or supply of anything capable of use in dishonestly obtaining a telecommunications service with intent to avoid payment. In the Government's view, the existing penalties are too low to deter organised criminals who are committing large-scale fraud. I am therefore pleased that the Bill sets the maximum penalties for these new offences at five years rather than the current arrangements, in much more loosely defined circumstances, which provide for two.

I am confident that the Bill will be a major deterrent to the increasing number of criminals who regard telecommunications fraud as an easy, relatively risk-free and highly profitable activity. It will hit the criminals where it hurts and be of major benefit to the police.

In this newly advancing industry, it is important to reassure members of the public--I think that the Bill will help to do just that. In many aspects of the developing

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I have consulted many people in the industry about these matters. Indeed, we were hoping to develop further action plans when we found that my hon. Friend the Member for South Dorset was lucky enough to draw a top position in the private Members' ballot and had the initiative to introduce the Bill. His drafting skill means that we have no objections to it.

Of course, the Bill needs to be set against the wider background of the development of the information society. Telecommunications themselves have been dramatically transformed since our liberalisation measures in 1984. There are now 150 licensed telecommunications operators; the real cost of a package of telecommunication calls has fallen by 40 per cent.; and there have obviously been quality improvements and new systems such as call divert and call monitoring, which can themselves however make systems vulnerable to criminal activity. Nevertheless, so long as we can reassure the consumer that we are taking action in that respect, there is no doubt that these call improvements and enhancements are of great benefit to the great British public.

We have also established our position internationally, not only with mobiles, where the GSN code has become the worldwide standard thanks to the research and development that took place in this country, but in terms of the fall in the cost of international telecommunications. I hope to be able to announce a series of licences for international telecommunications which will open the UK market to much more competition, thereby reducing the cost of international communications and attracting inward investment, which will be welcomed by all hon. Members.

The fact is often neglected that the telecommunications infrastructure--and thus the ability to get high-quality reliable services at an increasingly competitive cost--is one of the principal features in attracting inward investment into this country. Often it ranks only second, third or fourth in the list of priorities.

The Government's initiatives have enabled us to develop and deliver one of the most effective telecommunications systems anywhere in the world and to attract a huge amount of inward investment, not least from north America. That in turn has stimulated industrial production, the development of technology and an improvement in the quality of services.

The telecommunications revolution is itself the backbone of the information society, leading to convergence and not only increasing the ability of the telecommunications networks to interface but enabling even mobile telephony to integrate back into computing systems. We also have the ability to monitor a series of laptop computers using mobile telephony rather than fixed links telephony.

In the expansion of these technologies and the ability ultimately to allow even broadcast signals to come up on a laptop computer--and certainly on a personal

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Question put and agreed to.

Bill accordingly read a Second time.

Bill committed to a Committee of the whole House.--[Mr. I. Bruce.]

Bill immediately considered in Committee; reported, without amendment.

Motion made, and Question, That the Bill be now read the Third time, put forthwith pursuant to Standing Order No. 75 (Third Reading), and agreed to.

Bill accordingly read the Third time, and passed, without amendment.