§ It shall be the duty of the Postmaster General so to conduct the business of providing services and facilities for the processing of data by computer as to secure that the 1669 revenue received from the business in any financial year is not less than sufficient as taking one year with another and after meeting all proper charges to revenue (including interest on capital at current market rates, making proper provision for the depreciation or renewal of assets, proper allocations to reserve and debiting the business with so much of the establishment expenses of the Postmaster General as is attributable to the business) will provide a proper return on the capital employed in the business.
The object of this Clause is to empower the Postmaster-General to keep a separate account in respect of the data processing services which he will be providing under the terms of the Bill. The House will recall that in Committee we moved a new Clause to create a separate data processing fund. That proposition did not find favour with the Government. I shall not repeat the arguments we deployed in favour of a separate fund. I still think that a separate fund would be the best method of handling the many financial problems which will arise from the establishment of these new E.D.P. services. The problems remain. Our proposals for meeting them lie in this new Clause and in new Clause No. 1.
In new Clause No. 4 we are seeking to establish a separate data processing account, separate from the general accounts of the Post Office. I think that the House will recognise that new Clause No. 1 is the logical consequence of establishing a separate data processing fund. I shall concentrate on new Clause No. 4 and the creation of a separate account. No doubt my hon. Friends will endeavour to catch your eye, Mr. Deputy Speaker, and will deploy arguments in support of new Clause No. 1. I trust that at this stage it will not prove necessary to develop the case for a separate fund at any length. Our proposal, I am sure, must appeal to the Government.
I remind the House that in countering our arguments in favour of a separate fund the Assistant Postmaster-General gave a clear undertaking that the Post Office would keep a separate account for its data processing services. In his Second Reading speech, the Postmaster-General indicated something similar when he said:Needless to say, this service will be operated on the same financial basis as the others we provide. It must make a profit each year and generate its contribution to 1670 capital requirements of the Post Office."—[OFFICIAL REPORT, 19th April, 1967; Vol. 745, c. 505–6.]This suggested to many of us that the Postmaster-General had in mind something akin to what is embodied in new Clause No. 4.
The Assistant Postmaster-General was even more forthright in Committee, when he said:there will be separate accounts of the data processing service. …"—[OFFICIAL REPORT, Standing Committee B, 13th June, 1967; c. 25.]The Parliamentary Secretary to the Ministry of Technology was equally forthright in winding up the Second Reading debate. He said:The national data processing service will be set up separately, on a separate accounting basis, and will have its own accounts, which will be published."—[OFFICIAL REPORT, 4th April, 1967; Vol. 745, c. 1110.]Therefore, I suggest that on the principle of our new Clause there can be no controversy at all. The desirability of having a separate account for these new E.D.P. services seems firmly established and the principle cannot be at issue. It is agreed by the three Ministers who handled the Bill.
Therefore, I am full of hope that the Postmaster-General will accept the new Clause. Of course, he may object to the drafting. I think that the drafting is correct, but I have been in the House long enough to have the highest respect for the ability of the Government's legal advisers to find fault with the drafting of any new Clause put forward by any hon. or right hon. Member. This we accept as part of the facts of British life, along with our weather. If it should be the case—I do not suppose for a moment it will be—I shall willingly seek leave to withdraw the Clause, provided that the Government undertake to introduce a new Clause of their own to fulfil the same object when the Bill goes to another place.
The House will observe that our drafting appertains to the present method of Post Office financing and does not anticipate the implementation of the White Paper on the reorganisation of the Post Office, which the Postmaster-General presented earlier this year. That is why we make reference to Section 9 of the Post Office Act, 1961. It is also the reason 1671 why we follow normal Government accounting methods and speak of "the establishment expenses" and not to current account and capital account as I would prefer for such a service.
I have taken on many occasions, and shall continue to take, every opportunity to criticise the Government on public accounting and the failure in Government services to make a distinction between current and capital account, but it would be quite wrong in moving this sort of new Clause, to expect the Post Office, under its present accounting dispensation, to act differently from the Army, the Navy and the Air Force and the remainder of public bodies. I hope that when we get the legislative proposals of the Postmaster-General, doubtless during the next Session of Parliament, he will be minded to move over from the Treasury's cash flow accounting on to current and capital account.
In the new Clause we speak ofproper provision for the depreciation of the assets employed and the renewal of assets.This is essential, but I must confess that I am not entirely happy about the current Post Office practice of depreciating computers over 10 years. This is too long. I should have thought that in the present state of the computer art, five to seven years would be sufficient, but this is a matter of detail and I have not written into the new Clause the precise number of years over which I think it right to depreciate assets.
In an art which is changing as rapidly as that of computers, it is probably right to allow a rate of depreciation in the light of new knowledge. We also refer to "a proper return on capital".
§ Mr. R. F. H. Dobson (Bristol, North-East)
Would the hon. Member think that there was a need to depreciate at different rates or for different sizes of computers?
That is quite a possibility. I would put it the other way round and would say that those computers which are most established in current use should probably be depreciated over a rather longer period than entirely new models which are not well-established and are more likely to fall down on technological redundancy. My concern is not that they will actually physically work out, but that 1672 they will become technologically redundant.
We also refer to "a proper return on capital". This is something which I am sure appeals to the whole Treasury Bench, and particularly to the Treasury itself. We are of the opinion that there should be a substantial specific target placed on the Post Office E.D.P. services which, in our view, should certainly be different from the global target placed on the Post Office as a whole. In our view, that target should be after the payment of interest and not before, as is the present Post Office target under the provisions of the 1961 White Paper. I would have thought that this change would commend itself to everybody.
I do not wish to engage the House in a detailed discussion, important though it is, on what should be the appropriate rate of return on capital for these services. I realise that the Government will be setting new targets soon for all the nationalised industries. We know that the current target for the Post Office will run out in March of next year. I am, therefore, prepared to wait for the results of the Government's deliberations and whatever they decide as the necessary financial targets for nationalised industries, including the Post Office; although, no doubt, when the time comes one would wish to debate the aptness of the figure chosen.
That is why we have deliberately used a somewhat vague phrase:proper return on the capital employed …I am content to leave the definition of "proper" until the Government produce next Session, as doubtless they will, their new White Paper on the financial and economic obligations of the nationalised industries, but that there should be a proper return on capital is a completely unexceptionable statement on which the whole House, I am sure, would agree.
We have tried to phrase this Clause before the reorganisation of the Post Office takes place, in the knowledge that the Postmaster-General will be bringing us a comprehensive Bill in the next Session. But I must make this reference to the effect of the reorganisation of the Post Office on our Clause, because we have borne this in mind.
I will make two brief comments. In the Postmaster-General's White Paper, 1673 Cmnd. 3233, "Reorganisation of the Post Office", he refers in paragraph 14 to the fact thatThe Corporation will have the same sort of financial obligations as other nationalised industries.I hope that the E.D.P. services will have a specific target of their own and that they will not be swept together with the myriad of other Post Office services in a single global figure. I do not want to pursue this any further tonight, but I am sure the Postmaster-General will agree that to lump them all together will defeat the purpose of having these targets, and that what is necessary is to get a grouping of services together, providing a homogeneous and comprehensive whole. I suggest that the E.D.P. services would survive one such grouping within the totality of the Post Office services.
My second point relates to paragraph 15 of the Command Paper where we read:The Corporation will inherit a number of public services which cannot be made financially viable at any reasonable level of charge.I trust that neither the Postmaster-General nor any of his staff will suggest that any of the new E.D.P. services will be one of those services which cannot be madefinancially viable at any reasonable level of charge".I know that the Postmaster-General has agreed with nearly everything that I have said in moving this Clause. All that could possibly be left to divide us is whether it is necessary to get this new Clause into the Bill. I see the Assistant Postmaster-General shaking his head. I knew that I would anticipate his objection. The Postmaster-General and the Assistant Postmaster-General have given us their verbal undertakings during the course of the Bill that they will act in a manner which will fulfil the same purpose as our Clause. We know that the Postmaster-General is a man of honour and that he will certainly honour his undertakings, but these undertakings have no legal validity, and Postmaster-Generals come and go. All Ministers come and go, but I think that Postmaster-Generals come and go rather more rapidly than some other of their Ministerial colleagues. The verbal undertakings of earlier Post- 1674 master-Generals have not the same hold on their successors as a legal undertaking.
I believe, too, that if the Government will accept the principle of our Clause this will be valuable to them when they are considering the details of the financing and the accountability of the Post Office when it is presented to us in its new form as a nationalised industry. I believe this is right in itself, and productive in the general exercise that the Postmaster-General is conducting on the appropriate form of accounting for the Post Office in its new form. This is why we want our Clause to be incorporated in the Bill.
This is not a matter which need detain us long. The principle is established. All we can disagree about is whether the new Clause should be incorporated in the Bill. I believe that it would be right to do so from the country's point of view, and, in the long run, it will assist the Postmaster-General in the many tasks he has ahead in making the new E.D.P. services a success and in his major task of reorganising the Post Office.
§ 8.45 p.m.
§ Mr. John H. Osborn (Sheffield, Hallam)
My hon. Friend the Member for Eastleigh (Mr. David Price) has put extremely well the argument for some compromise between these three new Clauses. He has already referred to paragraph 14 of the White Paper on the Reorganisation of the Post Office, which tells us thatThe Corporation will have the same sort of financial obligations as other nationalised industries".and refers to charges and conditions. In paragraph 23 says:… the Corporation will itself have statutory power to fix charges for its services and facilities and the conditions on which they are to be provided.I draw attention to the words of new Clause No. 2:It shall be the duty of the Postmaster-General so to conduct the business of providing services and facilities for the processing of data by computer as to secure that the revenue received from the business in any financial ytar is not less than sufficient …and so on. This is picked from the Post Office Act, 1961. My hon. Friend referred to the powers under Section 9.
1675 Under Section 6 there is a general duty of the Postmaster-General as to finance:It shall be the duty of the Postmaster-General so to conduct the business of the Post Office as to secure that its revenue is not less than sufficient, taking one year with another, to meet its outgoings which are properly chargeable to revenue account (including proper allocations to the general reserve established under the next following section).
§ Mr. David Webster (Weston-super-Mare)
If my hon. Friend will refer to the Report of the Select Committee on Nationalised Industries which looked into the Post Office, he will see from page 170 that the Post Office interpreted the words he was quoted as a statutory duty to do rather better than break even. I think that the point is apt.
§ Mr. Osborn
I am much obliged to my hon. Friend for that intervenion, which raises an important point. I reaffirm that the statement of principle made by my hon. Friend the Member for Eastleigh, that any activity such as this—this is particularly so in the case of electronic data processing or the computer advisory services as distinct from transmission—must be subject a a whole to proper financial disciplines such as industry would be exposed to and, for that matter, such as the computer industry itself, and particularly the bureaux, is exposed to at present. The independent bureaux are in business. There are roughly 100 to 120 such independent bureaux. Because they are in private business, they will be subject to financial criteria and the conditions of the market.
We have covered a lot of ground on this subject. The whole matter was raised on Second Reading. My hon. Friend the Member for the Isle of Ely (Sir H. Legge-Bourke) referred to the borrowing powers under Section 8 of the 1961 Act—that is column 1104 of the OFFICIAL REPORT—and the Parliamentary Secretary to the Ministry of Technology said in reply:We can look at the experience of the Post Office to see how far this has paid offand he went on to deal with the Post Office computer project, saying that it wasexpected to show at least an 8 per cent. rate on a d.c.f. basis".—[OFFICIAL REPORT, 24th April, 1967; Vol. 745, c. 1108.]We asked many questions in Committee. On 13th June, the Assistant Postmaster-General said: 1676I undertake that we shall publish all the information for which hon. Members have asked this morning, and I must invite the Committee to reject the idea behind the Amendment.So we went on until finally, referring to questions raised by my hon. Friend the Member for Eastleigh, the Postmaster-General said:There is a very simple reason for that. The Committee knows, I think, that the Post Office has a target of an 8 per cent. return on its capital. This was agreed during the period of the Conservative Government"—[OFFICIAL REPORT, Standing Committee B, 20th June, 1967; cc. 26 and 111.]In Committee and on Second Reading, we discussed the very points which my hon. Friend has raised. In the Financial Times of 26th June, since the publication of the Bill and since some of our discussions, there was a long review of targets for industry. The Post Office was compared with B.O.A.C., coal, gas and electricity, where returns of the order of 12 or 12.6 per cent. have been recorded, whereas the Post Office return has been low.
Eight per cent. is low. Where risk capital is involved, of which there are many cases, the fixed interest for a loan might easily be of the order of 8 per cent. for the person requiring finance to provide a service. After interest has been paid, it is quite impossible to assess what would be a reasonable commercial return. I imagine that any financier backing a computer bureau would hope within a reasonable period to have at least 10 per cent. and probably considerably more. That is the sort of return in the open market that anyone providing such a service would be expected to give.
We do not know whether the Post Office will be subjected to the same criteria. As part of a nationalised industry, if it is not subjected to those criteria, undoubtedly there will be conditions which will amount to unfair competition. I think that the Postmaster-General is indicating a certain amount of approval of what I say. Unfortunately, what we say tonight is irrelevant if it is wrong. We must establish a situation where those running service bureaux find that, because of competition, they are still able to remain in business and not be forced out by unfair competition.
My hon. Friend has said that the Postmaster-General can give us assurances, but those assurances may not be 1677 binding on his successors. Hon. Members on this side of the House and the public at large would like to see something binding written into the Bill before it passes through this House and the other place. I should be willing to accept a compromise between new Clause No. 4, new Clause No. 1 and the Clause which I put forward as an alternative. I hope that the Postmaster-General will realise that, unless he binds the electronic data processing service to financial disciplines which amount to fair competition, he will create a monopoly which will destroy the private bureaux. Therefore, I hope that he will ensure that there is fair competition by providing the correct financial criteria.
§ Mr. Webster
My hon. Friend the Member for Sheffield, Hallam (Mr. J. H. Osborn) has quoted extensively from the Report of the Select Committee on Nationalised Industries and, very rightly, he has talked about the duty laid on the Post Office under the Act of 1961, which sets out the financial responsibilities of the Postmaster-General for the Post Office as a whole. Later on in the Report, those responsibilities are divided as between the postal section and the telecommunications section. On page 172, the Committee deals with the point about depreciation, and there is supporting evidence from witnesses, who were very helpful on the subject. My hon. Friend has emphasised that the principal duty laid on the Post Office, as Chapter XV of the Report on page 170, is that… they should so conduct their business as to secure their revenue is not less than …".a certain amount. The important thing is that the Post Office very rightly interpreted this as a statutory duty to do rather better than to break even. That makes me optimistic that the Postmaster-General will either accept one of the new Clauses or submit a manuscript Amendment, which I am sure you will accept, Mr. Deputy Speaker, so that we may go on our way.
Paragraph XV(3) says:Until 1965–66"—and this is where I have a slight doubt—the Post Office maintained separate general, capital and taxation reserves.1678 This is also important, but it has now ceased.
There is the rigid but very moderate financial objective of an 8 per cent. return on capital. The Post Office has fulfilled it, and has always attempted to do more than its statutory obligation. We respect it for this. In 1965–66 there was a change from maintaining separate general, capital and taxation reserves. This year borrowing power has been raised from £1,320 million to £1,750 million, with provision for extension to a maximum of £2,200 million, which is presumably obtainable as usual, by an affirmative Resolution of the House.
This is at a time when, as my hon. Friend said, the private sector, the bureaux which are at risk here, are savagely frozen. They would be unable to borrow money at the rate at which we see from paragraph XV(5) on page 171 the Post Office has been borrowing—a rate of 4.44 per cent.,… being the average rate chargeable in respect of this liability as at 31st March, 1961.The paragraph also says that since 1961 further advances had rates of interest ranging from 5⅜per cent. to 6⅞ per cent. This is very different from the rates at which even the most reputable company in the private sector could borrow. It would be extremely lucky if it borrowed at less than 2¼ per cent. over prime bill rate, which is at present about 5½ per cent. Well over 8 per cent. interest must already be paid on the vast borrowings that have been raised. I am talking about the absolutely blue chip companies, and not the smaller bureaux. But the small firm of today is the blue chip company of 20 years' time if it is successful.
The Prime Minister often talks about developing the technological aspect of industry. But such a firm has not the slightest chance of getting with 2½ per cent. of prime bill rate of 5½ per cent. I will be lucky if it borrows at between 9 and 10 per cent., at the very lowest. The interest rate will be higher because the operator and anybody who backs him at the present time with debenture money know that the Bill makes the project all the more risky. I hate to use the word "speculative" but such projects are becoming speculative because of such a Bill. Therefore, the dice are very heavily loaded.
1679 The Post Office has always been very good in the past. The Select Committee says that it always maintained its financial obligations and sought to do further. But the Committee points out also time and again in Chapter XV that the Post Office has very considerable advantages over private industry. The chapter also says that the Post Office is exempt from the taxes to which industry in general is subject. It accepts the obligation to bear a burden corresponding to the taxes paid by industry, but the legal exemption remains.
Mr. Deputy Speaker
Order. Under the new Clause we are dealing only with the financing of data processing. I do not think that it is relevant to go into Post Office services generally at that great length.
§ 9.0 p.m.
§ Mr. Webster
I was one of the signatories to the Report. We took many weeks to go into the matter, and we had to examine the meeting of the financial obligation and the submission of proper accounts to the House. The point that you are making, Mr. Deputy Speaker, is extremely apposite, and I am grateful to you for it. We have to break down these things to make sure that there is not the slightest doubt on the part of the public that there is any unfair advantage against them. This is what the three new Clauses are all the time emphasising, that the public want to know that there is no unfair advantage against them. As I have been explaining, and as you will know, Mr. Deputy Speaker, about the subject of prime bill rate, this is a great disadvantage against the private operator. What we are seeking—
Mr. Deputy Speaker
No, I cannot agree with the hon. Member. It is not obvious that what he is saying is relevant to any of the three proposed new Clauses, and I should be grateful if he would tell me to which of the three he thinks what he is saying is particularly relevant.
§ Sir Harry Legge-Bourke (Isle of Ely)
On a point of order, Mr. Deputy Speaker. Arising from your Ruling, might I ask you to consider that one of the big issues between the two sides of the matter on this 1680 issue is whether or not the data processing and the provision of equipment to carry it out should be in a separate account from the general account? This is one of the main burdens of contention in the debate. I suggest that my hon. Friend the Member for Weston-super-Mare (Mr. Webster), although perhaps not going into other nationalised industries, might be entitled to argue the case for the provision of both capital and revenue accounts for data processing?
Mr. Deputy Speaker
I agree. It is in order to argue the case for a separate account for the data processing services, but it does not seem to me in order on the proposed new Clauses to go into the whole question of Post Office finance generally.
§ Mr. Webster
I am very much obliged, Mr. Deputy Speaker. You will see in new Clause No. 4(3):There shall be debited to the Date Processing Account … all expenses incurred by the Postmaster-General in connection with the provision of data processing services.This covers the interest charged on borrowings to raise the capital to provide the service. I think, Mr. Deputy Speaker, that you will readily appreciate that this is the nub of the argument that I am putting forward. All these things have to be laid out absolutely clearly and fairly so that people know what the position is.
I will not labour the point because I want very much to get on, but I am saying that there is an interest rate difference of 2 per cent. as between private industry and the Post Office, the bureaux and the Post Office itself. I will not go as yet as far as my hon. Friend the Member for the Isle of Ely (Sir H. Legge-Bourke), but I shall later on be splitting up between capital and revenue. At the present moment I am simply talking about the interest rate on the massive borrowing that the House has given the Post Office, and this will have to be incorporated—
Mr. Deputy Speaker
Order. It appears to me that the hon. Gentleman has not understood what I have told him. He is entitled to argue the case for separate accounting for data processing, but he is not entitled to deal with the whole question of interest charges on Post Office finance generally.
§ Mr. Webster
But in the Post Office accounts, Mr. Deputy Speaker, you will 1681 find a reference to interest on capital debt. This is in the accounts.
Mr. Deputy Speaker
Order. I do not want the hon. Gentleman to keep arguing with me. I have given my Ruling, and I want him either to observe it or resume his seat.
§ Mr. Webster
I have resumed my seat on a number of occasions, Mr. Deputy Speaker. I shall be very interested to see what is the difference between the processing account which is definitely set out in the proposed new Clause No. 4(3) and these accounts which include amortisation charges. But, with respect to you, Mr. Deputy Speaker, I will move on. I always respect the Chair, particularly you, Sir.
But, Mr. Deputy Speaker, am I allowed to talk about taxation? This is clearly shown in the accounts about which we are talking.
Mr. Deputy Speaker
It does not matter if it is shown in the accounts. What is being asked for in the proposed new Clause is a separate account for data processing. This does not entitle the hon. Member to argue the question as to whether Post Office finances are affected generally.
§ Mr. Webster
I accept that, Mr. Deputy Speaker, but if one is talking about the accounts, one has to talk about the items in the accounts, and reserve taxation is a point in the accounts. Again with respect to you, Mr. Deputy Speaker, I move on from there.
I have looked closely at the accounts of nationalised industries. They are detailed and thorough and include not only taxation and amortisation but also rate burden, which has been very much discussed as a point of these accounts. The Post Office is exempt from rates, although it makes a payment in respect of other taxes and duties and also makes a payment to local authorities in lieu of rates. It also does its best to make provision for supplementary depreciation.
I simply make the point that we are seeking to stress that the new service—which we believe to be beyond the terms of the Post Office—should be given to serve the line and should not be an actual data processing service. We want to 1682 make certain that there is no unfair advantage as against the taxpayer who is providing the money.
The Post Office has said that it does not want to have an unfair advantage as against the taxpayer, and if it really believes that it will accept one of these three new Clauses, prove the accounts with overheads, amortisation, taxation and rate burden and show that it is not getting an unfair advantage as against the taxpayer who, at the end of the day, is footing the bill.
§ The Postmaster-General (Mr. Edward Short)
I thank the hon. Member for Eastleigh (Mr. David Price) and the hon. Member for Sheffield, Hallam (Mr. J. H. Osborn) for the reasonable way in which they have supported new Clause No. 4. I understand, Mr. Deputy Speaker, that you were kind enough to say that we could discuss at the same time new Clauses Nos. 1 and 2, and I propose to say something about each.
Perhaps I can deal, first, with new Clause No. 2. This seeks to impose on the new data processing service two obligations. The first is that of bearing fairly and squarely on its own account all the expenditure which arises from its operations. None of the expenditure is to be hidden elsewhere in any other account. None of it is to be carried by the other Post Office services, such as telecommunications or the postal service. I entirely agree with that principle. There is nothing between us on that, and I suport it entirely. I have said so on many occasions.
The second obligation that would be imposed by new Clause No. 2 is that the new service should earn income, not just enough to balance the books but more than enough so that it will continuously be aiming at a financial target. This target is expressed in new Clause No. 2 as… a proper return on the capital employed in the business.I do not quarrel with that, either. I think that a service like the Post Office should have a financial target at which to aim.
But I would mention that there is more than one valid way of expressing a financial target. At this juncture, I would not want every other possibility to be ruled out. I hope that hon. Members will not 1683 read more into this than I said in Committee, but we are at the moment engaged in discussing our target for the next few years, because, as the hon. Gentleman the Member for Eastleigh rightly observed, the present target for the Post Office ends in March next year. Thus, I agree also with this principle. Indeed, I have no option.
The Select Committee on Nationalised Industries advocated different targets for different services. This is a possibility. I have no objection in principle to it. I am sorry that I cannot enlighten the House any more about it, but we are engaged in discussion at the present time. It would be perfectly reasonable if the data processing service had a different target.
The hon. Member for Hallam indicated that the present Post Office target of 8 per cent. on capital is low compared with the others. However, if he looks carefully he will see that the targets for the nationalised industries are assessed on a variety of different bases. If they were all calculated on the same basis, the Post Office's 8 per cent. would be quite a high target compared with the others. I am not sure that it probably is not as high as any of them if they were all calculated on the same basis.
Clause 2 sets out to explain how we now run the existing main Post Office services. I have already said that a data processing service, if approved by Parliament, would itself be a main service subject to a predetermined financial target. If it were not operated on this basis the other Post Office services would suffer. I will say a word about that later.
New Clause No. 1 places on the new service a much lighter obligation. It is merely to earn enough money to balance the books. If the obligations imposed by new Clause No. 2 are effectively met, then everything that new Clause No. 1 allows for will inevitably be covered. It is a case of the greater including the lesser. Therefore, I need say no more about new Clause No. 1.
With these obligations duly set up, new Clause No. 4 seeks to arrange for the compilation of accounts which will accurately reflect the income and expenditure of the data processing service and will show the actual financial target 1684 achieved and the allocations made to a General Reserve. I entirely accept all the principles underlying this new Clause.
In all these new Clauses, as the hon. Member for Eastleigh feared, there are drafting points which would, I am told, make them inoperable. I do not think, however, that the House will wish me to take up time in analysing the Clauses phrase by phrase. It is clear that the point at issue is not whether these exact words should be carried into a statute, but whether there should be legislation on these points.
Reverting to the financial obligations, hon. members have made it clear that they have a fear. They have made this clear on Second Reading, in Committee, and here on Report. They fear that I shall deliberately and systematically run a data processing service at a loss and make up the income needed by the Post Office as a whole by imposing inflated charges on customers who use the monopoly services of posts and telecommunications. I think that this is putting their fear fairly, but it is difficult to think of anything sillier.
At the end of the first year in which I did it, the fact of my having done it would be disclosed by the annual accounts. This would be so whether or not there was legislation about them. In their present state of financial health neither the postal nor the telephone services can afford to carry other people's burdens, and I shall not be able to put up their prices without the news leaking out and giving rise to a lot of questions which I shall have to answer. I said in Committee that anybody who imagines that any Postmaster-General would start up any other unremunerative service knows very little about the Post Office. One of our main preoccupations is to try and get rid of existing unremunerative services without starting up others.
The hon. Member for Eastleigh raised the question of depreciation and he expressed some doubts about our method of doing it. However, I understood that he congratulated me in Committee on the method by which we were doing it after I had explained it in simple terms.
As for the accounts, I have already undertaken that we shall publish them for a data processing service on the same 1685 lines as we do for the other main services and all the information for which hon. Members are asking will be there. All we need to consider is what practical purpose would be served by a Clause, once we had the words right, which obliged me to prepare separate accounts of a data processing service. The answer is very simple: it will serve no practical purpose whatever. If I thought that it could serve any purpose, I would be only too happy to take away this Clause, to knock it into shape and to offer hon. Members opposite something which would achieve their exact purpose but in different words. However, all that effort would be to no avail.
I cannot accept the Clauses as they stand. However, I repeat that I am open to challenge in the House on so many occasions and I am open to challenge in the Press in a way which no private bureau is if I depart from my undertakings that the House has nothing to gain by devising a set of new statutory controls over this one isolated feature of Post Office business. In the knowledge that there is no difference of principle between the two sides of the House about the financial duty which a data processing service should bear or the kind of financial information which it should publish about itself, I ask the House to reject the Clauses.
§ Sir H. Legge-Bourke
I feel rather an intruder coming in on the Report stage of the Bill, not having been able, because of my other duties to the House, to be a member of the Standing Committee. However, I have studied from beginning to end all the proceedings in that Committee and I think that I am well aware of the attitude there expressed by the Postmaster-General himself, the Assistant Postmaster-General and the Parliamentary Secretary to the Ministry of Technology.
I was hoping that this evening there would be a slight move in our direction by the right hon. Gentleman. From what had happened in Standing Committee, we already knew that the right hon. Gentleman was in broad agreement on practically all the main issues raised by my hon. Friends during those preceedings. We were hoping that he would feel obliged to try to agree to some form of words which would give legal force to 1686 his undertaking. We all know that, with the best of intentions, Ministers sometimes give assurances to the House, but that if something is challenged outside, especially in the courts, and there is no provision in the Bill, whatever the Minister has said does not carry the force of law. This has been one of our difficulties all along. The right hon. Gentleman was very conciliatory tonight, but what he said more than justified the activities of my hon. Friends and myself in trying to draw more attention to this matter than the Press was apparently prepared to give it when the Postmaster-General first announced the Bill.
The right hon. Gentleman said that he was open to challenge. In his present capacity as Postmaster-General, that is largely true, but there is to be a consideration diminution in our right to challenge him if the proposed reorganisation of the Post Office takes place. We have to see the Bill in the context of the proposals in the White Paper, because the existing state of affairs in the Post Office will not prevail for very long. We have therefore to consider the Bill against the present and future organisation of the Post Office.
§ Mr. Edward Short
I understand the hon. Gentleman's argument. The issue between us is about the method of presenting accounts. Under corporation status, the Corporation would still have to present its accounts to the House.
§ Sir H. Legge-Bourke
I am grateful to the right hon. Gentleman for making that clear. Like my hon. Friends, I have studied the paragraphs of the White Paper dealing with the financial obligations of the Post Office. There is a reference to the financial and economic obligations of the nationalised industries in Cmnd. 1337. It would be quite wrong to try to broaden this into a general debate on the nationalised industries. All that I wish to do is to relate my remarks to the Post Office, and particularly to the data processing services which are proposed.
§ Mr. J. H. Osborn
My hon. Friend referred to the financial obligations. Paragraph 15 of the White Paper says:The Corporation will inherit a number of public services which cannot be made financially viable …1687 I hope that my hon. Friend will refer to this possibility arising in three or four years' time.
§ Sir H. Legge-Bourke
I am grateful to my hon. Friend. This had not escaped my notice, but I should like to refer to paragraph 33 of Command 1337 which says:The nationalised industries are from their size and nature bound to play a major rôle in the economic life of the country.I do not think anyone would dispute for a moment that the Bill will do that. It is not worth introducing unless it is.They cannot, however, be regarded only as very large commercial concerns which may be judged mainly on their economic results; all have, although in varying degrees, wider obligations than commercial concerns in the private sector. The object of these proposals is to find for each industry or Board a reasonable balance between these two concepts.The right hon. Gentleman, much to our relief, has stressed throughout the proceedings, and so have his hon. Friends, that this is intended to be a commercial service, and it is supposed to be a highly competitive one. We welcome this, but we have to recognise that it is only part of all the activities of the Post Office, and some parts of the activities receive rather more assistance, than, for example, telecommunications and data processing.
We are keen to lay down an obligation for a separate accounting because in the global total of the Post Office we have to bring in rather more forcefully the fact that certain matters which are vital in the national interest might have to be run uneconomically. If we are to preserve the right to competition, if we are to preserve the right of the individual firms concerned, it is vital to insist that the criteria against which the data processing service is to be run are those which apply in the private sector as well. This is our principal object, and this is why we feel that something ought to go into the Bill.
My hon. Friends have elaborated considerably on the arguments, and I do not intend to repeat what was said upstairs in Committee, beyond saying that I have read everything said by my hon. Friend the Member for Eastleigh (Mr. David Price) and I support it. I think we must ensure that not only do we have a statement by the Minister, but that before the 1688 Bill finally goes out of Parliament and becomes an Act the Postmaster-General will give one more thought to this matter, because I think that all that has been said tonight by the right hon. Gentleman and by my hon. Friends indicates that we all want the same thing. It is no good us wanting it if it is challenged outside, and found wanting, and a different sort of want. We want to make sure that everybody knows what the law is. If something is done by the Post Office or by anybody else outside which infringes the law, we want a categorical statement somewhere in the Statute which others can quote and use.
I think we have to recognise that if the Treasury is allowed a free run, an unfair measure of competition may creep in. This might happen as a result of the Post Office itself running its data processing fund, and being able to credit capital sums from the purchase of equipment, but if the depreciation is spread over 10 years this might—and I am only saying "might"—give unfair advantage over those outside.
That is a matter that the Postmaster-General might care to consider. I agree that if we had new Clause No. 2 new Clause No. 1 would be unnecessary, but it is important to provide some obligation not only to balance but, if possible, to make a profit. I hope that the Postmaster-General will agree that the first obligation—
§ Mr. Webster
My hon. Friend has quoted the Postmaster-General as saying that if new Clause No. 2 is accepted new Clause No. 1 is not necessary, but we do not appear to be getting any of the new Clauses.
§ Sir H. Legge-Bourke
My hon. Friend may think that. I accept the agument that new Clause No. 2 covers all that we want in new Clause No. 1. It would be better if we could have new Clause No. 4 coupled with new Clause No. 1. It would then ensure at least a balance and, if possible, that the whole service was running profitably. It would write in the minimum obligation of a balance and give scope for a really profitable operation to be carried out on commercial lines. That is what we all want.
I agree that it is difficult now to decide exactly what should be the rate of interest, and so forth, but if we examine the 1689 recent article in the Financial Times to which my hon. Friend the Member for Sheffield, Hallam (Mr. J. H. Osborn) referred, we can see that the Post Office, as compared with other nationalised industries, has been doing fairly well. We want to make sure, however, that no complacency sets in in the Post Office, because 8 per cent. is a low rate when we are dealing with a service rather than manufacturing—
§ Mr. Speaker
Order. The hon. Member must not discuss the Post Office in general. He has just drifted out of order.
§ Sir H. Legge-Bourke
I am not trying to make a general argument, Mr. Speaker, but this data processing is a service, and it is dangerous to take as a criterion a rate of interest arrived at by taking an amalgam of manufacturing and the provision of a service. This is essentially the provision of a service, and it seems to me that it should give a higher return than 8 per cent. I agree that to fix a figure tonight would be absurd, but I hope that the Postmaster-General will give further thought to the matter before the Bill goes to another place, and see if there is not yet a way in which he can write something into the Bill.
With the approval of my hon. Friends, I beg to ask leave to withdraw the Motion.
§ Motion and Clause, by leave, withdrawn.