§ MR. HUDSON (Newcastle-on-Tyne)To ask the Postmaster-General, whether he is prepared to make any statement as to the future policy of the Post Office on the subject of telephone rates, and especially in regard to the financial basis on which he proposes that the Post Office telephone system should be conducted.
(Answered by Mr. Sydney Buxton). I am glad to have an opportunity of stating my views on the question of the future policy of the Post Office in regard to telephone rates. I consider that the Post Office telephone system should be conducted on a sound business basis, that is to say, that the revenue should be sufficient to provide for current expenditure of all kinds, for the maintenance and adequate renewal of plant, and for interest at 3 per cent. on capital ex- 476 penditure, together with a moderate but not excessive margin of profit. In order to ascertain whether the rates are fixed at a level sufficient to satisfy these conditions, and to put the telephone service on a business footing, it is necessary that there should be a clear separation between the revenue and expenditure of the telephone service and the revenue and expenditure of other branches of the Post Office, especially the telegraphs. It is in this way alone that the telephone system can be made to stand on its own basis, unaffected by the profit and loss made on other Post Office services. The various branches of Post Office work are, in practice, frequently conducted in the same building, sometimes by means of the same plant and under the supervision of the same persons. The separation of the cost is consequently a matter of some difficulty. Last autumn, therefore, I appointed an expert committee, including the President of the Institute of Chartered Accountants, to investigate this question and to advise me as to the best method to be adopted for separating the accounts. The committee has not yet finished its work; but, as a first result of their investigation, the Estimates for 1908–9 have been presented to the House in such a manner as to separate the expenditure on telegraphs and telephones, and the telephone revenue will be shown separately. The new telephone rates must to some extent be regarded as experimental. Longer experience is required before it is possible to say what may be the permanent cost of operating a fully developed system, or to ascertain with any accuracy the life of the varying descriptions of telephone plant, having regard especially to probabilities of obsolescence, and the consequent necessity of replacing plant before it is worn out. Moreover, the conditions under which the Post Office service is conducted will be considerably modified when the system of the National Telephone Company is taken over by the Post Office at the beginning of 1912. Although it is not possible for me to pledge my successors, I should anticipate that the principles winch I have stated above as those which should determine the rates will be accepted by them, and the rates will doubtless be from time to 477 time modified in accordance with those principles.