HC Deb 25 March 1965 vol 709 cc745-50
The Postmaster-General (Mr. Anthony Wedgwood Benn)

With your permission, Mr. Speaker, I wish to make a statement.

As I warned the House last November, I discovered upon taking office that the finances of the postal services were in a serious condition and were deteriorating. Projections over the five-year period then indicated a shortfall of more than £120 million below the target set by the previous Government. The latest assessment is that, in terms of their share of the Post Office financial target for file five years beginning 1963–64, there will be a cumulative shortfall amounting to about £32 million at the end of this month, about £64 million by March 1966, and about £150 million by March 1968.

This situation arises for two main reasons. First, there is an inherited burden due to the failure of the previous Government to take obviously necessary steps at the proper time. Secondly, there is the fundamental character of the postal services, with their heavy dependence on men to collect, handle and deliver the mail, which makes it very difficult to absorb rapidly rising costs, especially in the field of wages.

The first and most important task is, therefore, to improve the productivity and profitability of the postal services. I have accordingly commissioned a fundamental and far-reaching examination of the problem by Messrs. McKinsey—the eminent management consultants. We have proposed a joint working party with the staff to work in parallel with them. I shall also press forward with modernisation, to speed up postal mechanisation and prepare the way for its more effective application by firmly encouraging the use of standardised envelopes and progressively extending the use of postal codes to the country as a whole.

But these and other measures which I have in mind cannot yield the substantial sums now required to meet the shortfall. Nor would drastic and immediate cuts in service provide a remedy even if they were acceptable to the community. The telecommunications services are in no position to fill the gap—even if it were right for them to do so—because they are only just about achieving the financial target themselves.

The Government have, therefore, reluctantly concluded that an increase in postal charges is inescapable. The extent of this increase has been decided in the light of the Joint Statement of Intent on Productivity, Prices and Incomes. My colleagues and I thought it right that the principles of price reviews which it is intended to establish should be both tested out and applied as vigorously in this case as in the private sector. The proposals on productivity and modernisation must be seen in this context.

The main change proposed is an increase in the minimum charge for inland letters to 4d. The first weight step will, in future, be 2 oz. thus actually reducing the cost of the 2 oz. letter by ½d. This is estimated to yield £21 million in a full year. Other proposed increases affect inland postcards, printed papers and samples, newspapers, parcels and express services. Commonwealth rates which are linked with inland rates will be brought into line, but, to help exporters, overseas rates generally will not be increased. I propose altogether to abolish inland charges on articles for the blind.

The total yield of the changes is estimated to be £37 million in a full year. These changes will come into force on 17th May next.

A White Paper, giving details of the proposed changes and explaining the situation more fully, is now available in the Vote Office. Regulations to give effect to the proposals are being laid before Parliament today.

Sir P. Rawlinson

Does not the right hon. Gentleman recollect that the statement which he made in November, and to which he has now referred, was challenged by my right hon. Friend the Member for Bexley (Mr. Heath) as being misleading? Is not this proposal for an overall increase a very clumsy and drastic thing to do over the whole of the postal services when the letter and postcard rate is earning a profit?

Is he aware of the resentment which will be aroused by this increase in charges in an organisation which is making a profit and at a time when the right hon. Gentleman the First Secretary is continually urging employers and employees to keep prices down?

Mr. Benn

The state and the finances of the postal services were very well known to the previous Government, who chose not to make them known to the public. The shortfall over the five-year period makes nonsense of the Conservative claim during the election to have costed their own programme.

The point about raising the revenue on the first-class letter is that since the last increase first-class letter costs have risen 25 per cent. and on our estimate it is calculated that the profitability of the first-class letter will have fallen to about £400,000 next year, whereas a 1 per cent. increase in pay amounts to £2 million for the Post Office. The fact is that the shortage of staff, which is not unconnected with remuneration for the postal services, is becoming very acute. The postal services need more money to finance mechanisation, which is the only way in which we can provide the postal services which are needed for the future.

As to public opinion, at the time of the postal dispute, last July, there was a public opinion survey as a result of which 64 per cent. of the people asked said that they were in favour of increased charges if they were necessary to meet the postmen's wage claim.

Mr. Crawshaw

Is my hon. Friend aware that, while appreciating the difficulty which he experienced on taking office, many hon. Members on this side of the House will view with alarm the increase in the postal charges? Is he also aware that this could be used as an excuse by many manufacturers to in- crease the cost of their goods out of all proportion to their increased postage costs?

Mr. Benn

Nobody likes an increase of prices of any sort or kind, but the House has consistently gone on record on the basis that the Post Office should be run on a proper business basis, and in these circumstances there is no alternative to this increase.

Mr. Hogg

Is not the right hon. Gentleman's failure to absorb increased costs in marked contrast to the policy of the Government towards farmers, shopkeepers and manufacturers?

Mr. Benn

Even if the postal services were reduced to one delivery a day—and it would take two or three years to introduce a cut of this kind, which would be quite unacceptable—that would save about £15 million as against a shortfall of well over £100 million left by the right hon. and learned Gentleman and his right hon. Friends when they left office.

Mr. Driberg

In the interests of a good many thousand families in this country, will my right hon. Friend give an assurance that there will be no increase in the charge for Forces air mail?

Mr. Benn

There is no increase in the overseas charges. We have made that decision partly with that thought in mind and partly with a view to the export position.

Mr. Mawby

Is the right hon. Gentleman aware that in his opening remarks, as in last November, he ran into the danger of misleading the House by quoting figures of losses which separate different sectors of the Post Office when taking into account the 8 per cent. on net assets? Does he know of any other nationalised industry which is expected to make this amount on net assets? Does he intend in future to make certain that every sector earns 8 per cent. on net assets? If so, what does he intend to do about public telephone kiosks, telegrams and many other services with a social content?

Mr. Benn

Of all hon. Members in the House I suppose that the hon. Member for Totnes (Mr. Mawby) ought to have known the position better than anyone, because he knew exactly what the situation was.

The finances of posts and telephones have always been separately treated, for one is a labour intensive industry and the other is a highly capitalised industry. If the hon. Member studies the Press hand-out, handed out by Conservative Central Office when Mr. Bevins first assumed office, he will see that it said: We ought to aim at making each individual service ray for itself. I can refer the hon. Gentleman to that hand-out.

Mr. Randall

Is my right hon. Friend aware that his decision to make almost free postage to the blind will be widely and warmly appreciated? Is he aware that it was the Tory Government who were responsible for commercialising the Post Office and expecting it to be self-financing and to make about 8 per cent. on capital invested? Is he aware that towards the end of 1963–64, when it was evident that there ought to be an increase in postal charges, the then Government did not make the increase?

Mr. Benn

I am grateful for what my hon. Friend says about articles for the blind which, I hope, will be generally welcomed. It is a fact that this is not a very large increase compared with the increases made in previous years by the party opposite, in earlier years before the oncoming of the 1964 General Election. The profit now expected on first-class letters is below that for 1959–60 and 1960–61.

Mr. Bessell

Is the right hon. Gentleman aware, first, that the increase will enable him to review the wages of postal workers? Secondly, what arrangements will be made for amending postal stamp machines? Thirdly, what will be the costs of employing a firm of consultants? Fourthly, why was an American instead of a British firm engaged for this purpose?

Mr. Benn

To answer the last question first, we picked the firm which we thought best able to handle a job of this kind. We are now in receipt of, or just about to receive, a report of the study group on postal pay which was set up last July at the time of the industrial action.

The machines will continue to provide ½d., 1d. and 2d. stamps. There will be no necessity to make changes.

Several Hon. Members


Mr. Speaker

It looks as though we may have a chance to debate this on a Question at a not so remote time.