HC Deb 15 March 1967 vol 743 cc432-55

11.17 a.m.

The Postmaster-General (Mr. Edward Short)

I beg to move: That the Postmaster-General be authorised, as provided for in section 5 of the Post Office Act 1961, to make payments out of the Post Office Fund in the financial year ending with the 31st March 1968. This is an occasion in the year when I come to the House in my rôle as company chairman of one of the biggest commercial organisations in the country. It is my task to report to the House on the achievements of the Post Office in the financial year now coming to an end, and to outline prospects for the year to come. Like any other company chairman, I should like to be able to report substantial profits, a buoyant return on capital, and a dividend of even better service for the coming year. However, during the past year the return on capital was, for a number of reasons, not so good as we would have wished, and service, while generally improving, still leaves some room for improvement in a number of places.

We have earned 7.8 per cent. overall on capital. This is only a little below our target of 8 per cent., but the predicted return on capital for 1967–68 at 7.4 per cent. leaves no room for complacency. I shall describe some of the steps we are taking to improve the productivity of both sides of our business. Over the whole five years—the target was fixed for five years under the Conservative Government—we will have fallen short of 8 per cent. return on capital on the postal side, although not on the telecommunications side. We fell short on the postal side mainly because the increases in tariffs needed to make good shortfalls in the first two years of the five-year period were rejected by the Government of the day. This means that during this five-year period the Post Office will have generated a fair amount of its own capital requirements.

When any business organisation finds that its profit or return on capital is falling, there are three things that it can do: it can put up its prices; it can reduce the quality or quantity of the product or service it sells; or it can increase its own internal efficiency and productivity. When one is operating a monopoly like the Post Office, it is only too easy to put up prices or reduce the quality of the service, for the customer is captive and cannot go elsewhere for his stamps, postal orders or telephone calls. In a Parliamentary democracy there is also a temptation on the other hand, to maintain the same service at the same prices through fear of unpopularity and thereby driving the service into the red by selling below cost.

The course which I propose to adopt is the third, that of improving internal efficiency, and I intend to show later in my speech what measures the Post Office now has in hand to do just this. I do not want to raise any false hopes that I will be able to hold prices down indefinitely—I am no magician—but one thing I promise: there will be no general tariff increase until I am absolutely satisfied that the Post Office machine is running as efficiently and as profitably as possible. But before going further I would like to say a word about the longer-term financial outlook of posts and telecommunications in turn.

The main characteristic of the postal service is that it is highly labour intensive. This means that it is particularly vulnerable to wage inflation. By contrast, when wages are kept in check, as they have been during the past nine months, the postal service is given welcome respite.

The great difficulty confronting posts is that a very large part of the work offers little or no scope for increased mechanisation. In fact, about 40 per cent. of postal costs are incurred in collecting and delivering mail. We just cannot mechanise the postman who walks up the garden path every morning. Thus the postal side of our business will retain, though to a decreasing degree, a built-in sensitivity to wage inflation. It is also likely to continue to suffer from recurrent shortages of labour in the Midlands and the South-East—though the Government's policy of redeployment has brought a welcomed improvement in this situation, although not in all areas and certainly not in the South-East.

This rather difficult long-term prospect is not altered by the fact that posts will be making a profit of £4 million this year and are likely to do so next year. Indeed, when considered in relation to income and expenditure of about £340 million, this profit is not very great at all. Of course, posts, like other parts of the Post Office business, are affected by our obligation to provide a basic service throughout the country at common tariffs. In many rural areas the cost of delivering a letter far exceeds the 4d. which we charge for it. This to a large extent explains the fact that the profit margin is little more than 1 per cent. of turnover. I shall say something in a moment about the steps we are taking to improve the profitability of the postal side of our business.

On the telecommunications side the problems are very different. Here, too, there is a large labour force, but the scope for improving the design, performance and profitability of the capital equipment which lies at the heart of the service is very great indeed. However, good equipment and good labour techniques can be prevented from producing a good financial performance if they are not accompanied by sound pricing policy. At the moment our price structure is grossly unbalanced. It is this more than any other factor which is casting a blight on the telephone service's financial performance.

The nub of the problem, this imbalance, is that the inland telephone service has been carried for years on the profitability of trunk calls. Local calls and business and residential rentals are all running at a loss and, if present charges remain unchanged, they will continue to do so. The effect of this tariff pattern is that, when trunk traffic is buoyant, the overall profit is large enough to achieve our target return on capital, despite the losing services. When the rate of trunk growth falls, the performance of the entire service reflects this, and we know from sad experience that trunk traffic is particularly sensitive to any reduction in the level of business activity. In the business world the first economies are usually on trunk calls. This means that the telephone service has too many eggs in one basket—a very foolish position to be in.

What we must do is to put our tariff structure on to a sound footing to correct the imbalance, so that every service pays its way. We made a move in this direction at the beginning of this year by increasing call office charges while reducing the cost of cheap-rate trunk calls. A further major operation is required to correct the imbalance at some time in the future. I do not think we can really get the Post Office finances on a sound footing until this very large operation is carried out fully.

Now I would like to turn to some of the ways in which we are making a determined onslaught to step up our efficiency and our productivity. The telephone side offers some excellent examples.

STD is now available on three-quarters of the telephones in this country. We are also replacing the remaining local manual exchanges. By the end of this year, fewer than 3 per cent, of subscribers will be connected to manual exchanges, and there will be none at all after 1970–71. If it were not for this automation programme, the cost of providing telephone operator services would increase by £4 million in each of the next two years; and the cost to the public of making calls in the old way would be some £12 million higher each year.

We are also widening the scope of the existing S.T.D. system by developing what is known as the transit network. At present, subscribers on S.T.D. exchanges can dial on average only about 80 per cent. of their calls; the rest have to go via the operator. To enable them ultimately to dial all the exchanges in the country, we are planning to install 36 special trunk exchanges throughout the country at a cost of £6½ million. A new network of trunk lines will join these exchanges. We have ordered the first of these, and savings will start to build up from 1968–69 onwards as the number of calls which have to be handled by operators is cut down. When the transit system is completed in 1972, it will produce a saving of about £12 million a year, and the public will gain from having full access to the cheaper and quicker S.T.D. service.

We are also making wide-ranging changes in exchanges to improve efficiency and reduce costs in telephone operating. The turnover of staff—especially of young girl telephonists leaving to marry or for other jobs—is very high, and training is a significant item in the operating budget. By using programmed learning techniques, which cut the period of training by about a sixth and which we are pioneering with full staff co-operation, we hope to save up to £1 million per year. We are also starting to simplify some time-honoured procedures in handling calls, with a saving of a further £1 million per year.

In the longer term, cordless switchboards, which are now gradually coming into service to replace the older "plug and cords" switchboards in public telephone exchanges, will reduce the time taken to connect calls via the operator by up to 25 per cent. Clerical processes are also being reviewed by O. & M. techniques and savings so far are about £½ million a year.

On the engineering side of the telecommunications business there are also striking examples of the progress we are making. We have successfully introduced the first production electronic telephone exchange, which I opened at Amber-gate in Derbyshire in December, and will be installing another 30 or so this year, to come into service in 1968. This type of equipment is intrinsically more reliable than the old electromechanical system and its high switching speeds offer a whole new range of facilities and advantages. Yet much less maintenance will be required, and thus we will significantly reduce demands on our skilled manpower, and, at the same time, we will lower running costs.

On the transmission side, more and larger capacity coaxial cables are being used. The capacity of radio links too has been increased. By measures such as these, the cost of each added trunk circuit has been reduced by about one third since 1964.

Pulse code modulation systems, which will increase the capacity of other existing short-distance cables, will be put into regular service within one year from now, and we are starting an experiment soon which should lead to further reductions in the cost of these shorter lines.

We are putting considerable emphasis on improving the maintenance of existing plant, and early detection of faults. For example, in exchanges we are providing more automatic testing plant, and plan to introduce new equipment that will detect failures automatically and take the line out of service.

In co-operation with industry, we are taking advantage of value engineering techniques to cut the cost of equipment. The application of these techniques to the telephone instrument has enabled us to reduce the cost of its manufacture by 10 per cent. For example, we have discovered that in the dial we can reduce the number of parts from 101 to 30, and reduce the number of screws from 30 to three.

We are also making great strides in putting our engineering manpower to better use, so much so that we now confidently expect to be able to increase the size of the telephone system by about 50 per cent. in the next five years or so, with little or no growth in our engineering labour force. This will be the measure of our success. It says much for the sense of responsibility of the unions that these improvements in productivity have been made possible with the fullest co-operation of the staff involved.

Some of these improvements in the telecommunications and engineering fields are the fruits of our research and development groups. Others are the work of the efficiency groups we have set up to run the rule over the whole of our activities. At the local level, efficiency is being stimulated by service and productivity improvement plans which will, among other things, set new and better quality of service targets for individual telephone exchanges.

Similarly, the postal side offers many opportunities for increased productivity though—as I have said—it will remain labour intensive to a considerable degree. Our attack on this problem is two-fold: to mechanise wherever we can with profit and elsewhere to make an intensive drive to improve management and operating methods so that each man employed can make a maximum contribution to output.

Mechanisation of postal processes has proved difficult. But we have set on foot an ambitious programme, which makes us a world leader in this field.

We have not sought to mechanise indiscriminately, but only where it will show profit. Schemes so far introduced have shown a return on capital of more than 10 per cent. The most dramatic changes in mail handling are, however, just starting with the new coding desks and automatic letter sorting machines which I have described to the House before. These machines, which code-mark and sort letters with minimum human processing, are now going through their final trials at Norwich, which this year will become the first fully automated sorting office in the country. If all goes well we shall embark on a programme of equipping our 75 largest offices with these machines.

We plant to spend £45 million in the next 10 years on sorting office mechanisation and more than half will be invested in the new coding and automatic letter sorting machines. We expect this investment to produce a return of 25 per cent. and substantial economies in manpower. By the end of the 1970s, upwards of 75 per cent. of letter mail and practically all parcel mail will be sorted mechanically.

We are also increasing the number of staff trained in the latest management techniques of work study and operational research. By improving operating practice, providing better performance measurement and control, and generally raising management efficiency we are confident that we can significantly improve productivity.

These activities apply to the Post Office counters as well as to the mail service. Here the task is to adjust our counter staffing to local customer needs, so as to avoid excessive queueing on the one hand and waste of staff time on the other.

To bring all these efforts together at the effective management level and ensure that they pay off in the field, we have introduced a system of postal operations improvement plans, and we are extending arrangements under which managers are called upon to set themselves challenging targets for the period ahead. This will provide stimulus for individual managers. They will be assessed in the light of their achievements, and their future advancement determined accordingly.

These measures will be complemented by an overhaul of the pattern of local postal administration. We have in hand a plan for the rationalisation of the postal administrative centres throughout the country which I hope will be completed and implemented within the next year or two because so often the present pattern was laid down 50, 60 or 70 years ago.

As on the telecommunications side, I should like to pay tribute to the splendid co-operation we have received from the unions in all our efforts to improve productivity.

I will now comment on our use of computers. About £4 million worth of them are already installed and working. Others, worth £3 million, are on order. By 1971, we shall have 20 large, modern computers in operation.

One of the biggest computer jobs we have tackled so far is telephone accounting. Already some 9 million bills a year are produced by computer for customers in London. In about two years' time, when this system will have been developed to serve the rest of the country, we expect it to save over 2,500 clerical staff.

Miss J. M. Quennell (Petersfield)

Could the right hon. Gentleman tell the House about the nature of these computers? For example, are they British-built or imported computers?

Mr. Short

The Assistant Postmaster-General, who will be replying to the debate, will give the hon. Lady that information. We are short of time for this debate and I do not want to delay the House by giving information which my hon. Friend may need to detail later.

Other computer projects, covering a wide range of tasks, should bring total savings in posts and telecommunications to over 12,000 staff in the next few years, and I doubt whether any other concern in the country could do better than that.

But we are not proposing to use computers solely to save staff, essential though that is. We shall be using them more and more to help manage our resources of lines and exchange equipment, to plan our postal motor transport services and to improve the circulation of mail across the country. The National Giro of course will be fully computerised from the start. The Post Office is, and intends to stay, in the forefront of developments in computer technology and its practical application. Moreover, it is well fitted to do this since it numbers among its staff one of the biggest civil forces of systems analysts and programmers in the world.

Before closing, I should like to make an announcement about something of great importance in the context of improving Post Office efficiency which has been my theme this morning. It concerns the top organisation of the Post Office.

About 10 days ago I presented to Parliament a White Paper on the prospects for 1967–68, in which I said that the traditional Civil Service pattern or organisation is not best suited to what is in effect the biggest service industry in the country.

At present we have a Deputy Director General for Posts and another for Telecommunications. Their titles define their responsibilities but they do not have full authority to match these responsibilities. I am making a number of changes to put this right and the first of these will be made next month on the retirement, due to ill-health, of the Engineer-in-Chief. I shall then introduce a new organisation making it clear where, under myself and the Deputy Chairman, responsibilities lie for engineering policy.

The two Deputy Directors General will become Managing Directors, one for Posts and the other for Telecommunications. The post of Engineer-in-Chief will be replaced by one for a Senior Director of Engineering, who will not be directly answerable to the Board although he will be on the Board. He will be responsible to the Managing Director (Posts) for postal engineering matters and to the Managing Director (Telecommunications) for all telecommunication engineering matters. A Senior Director of Telecommunications will be responsible to the Managing Director for the non-engineering aspect of internal and external telecommunications.

These important changes will be followed by others affecting the Post Office from top to bottom over the next 18 months. In dividing up the common service departments, the guiding principle will be to give each of the two businesses its own supporting services where this can be done without unnecessary and costly duplication. In some cases, the common services will be completely split between the two businesses and come under the two Managing Directors. In others, for example in the case of finance, a small central department will remain under the Board. The present all-purpose regional organisation will in most cases be ended, and will be split into separate Postal and Telecommunications regions. The object of all these changes will be to enable managerial drive to make itself felt throughout the whole structure from top to bottom, from Managing Director down to field level.

These changes will begin the process of creating a more dynamic coherent and purposeful management structure in the Post Office. The object will be to group people together according to the tasks to be done rather than the grades and hierarchies to which they belong, to place the process of decision-making closer to the point of implementation and to make that process quicker and surer in operation. It will speed the drive to give better service and improved productivity.

Mr. Stratton Mills (Belfast, North)

Could the Postmaster-General say whether these very important structural management changes follow the exact pattern of the McKinsey Report?

Mr. Short

There is no McKinsey Report. McKinsey's, who have been working with us for some time and should end their association at the end of the month, have been reporting to me regularly, but there is no such thing as a McKinsey Report. The changes broadly follow McKinsey's recommendations, but not exactly by any means.

I hope that all the major managerial changes will have taken place by the spring or early summer of 1969.

I do not want to leave the House with the impression that Post Office management is bad. This is very far from being the case. Nor would I like it to be thought that this reorganisation is a reflection on Post Office engineers. As I said recently, they are a very talented group of people and I believe they are one of the best groups of engineers in the world. There is no reflection on them at all. It is simply that in a growing industry like telecommunications, with its dependence on technological advance, the place of engineers in the Post Office is assured and will undoubtedly grow, but it must be made clear that they are part of an organisation which is responsible to the Managing Directors and, through them, to me.

Because the Post Office is still part of the Civil Service, and because I must not anticipate Parliament's approval of the proposed change in status of the Post Office, I am making these changes within the context of the Civil Service, and they have been agreed by my right hon. Friend the Prime Minister. No doubt they are not the ultimate organisation which the Corporation will want, but I hope that they will be regarded by the House as a very valuable move towards it.

I am quite sure that, with a modernised management structure, and with the continued efforts I have been describing to achieve greater efficiency and greater productivity, the Post Office will be able to give an even better service to the country in the years to come.

11.45 a.m.

Mr. Paul Bryan (Howden)

Last year, this Motion was moved on the eve of greater things, on the eve of battle when everything was in a rush. The White Paper on Post Office prospects had been published literally only minutes before the debate, so we did not expect a great discussion. This debate has in years gone by varied in its length from five hours to five minutes, and I suggest that as this is a crucial year and as we have this morning a somewhat longer amount of time we should have a rather longer debate. I am glad that the Postmaster-General has used this occasion to give us a very full account. We are very grateful for all the information given to us, and before the debate is through we shall try to extract more.

It is of immense interest to everyone, and especially for those working for the Post Office, to have some idea of the Parliamentary programme in relation to the Department. We have had the White Paper on prospects, and a week or two ago we had the Report of the Select Committee on Nationalised Industries. We were told that we would have a White Paper on future organisation before Easter. We will presumably have a debate on that, coupled, no doubt, with the Report of the Select Committee some time after Easter. I do not ask for exact dates, I seek general guidance only.

After that, will legislation be expected in the autumn? If so, I assume that it will be fairly long and complicated. Does the right hon. Gentleman see it going through the autumn, with the Queen's Consent in the New Year, and vesting date—when? These things are of some importance, especially to those in the industry because they need to know where they are and how long they will have to wait before knowing their fate. I appreciate that every effort is being made and that staff relations in the Post Office are good, but this is inevitably a period of great worry for everybody working in it, in whatever grade they may be.

A period of takeover, whether it be of this sort or a business takeover, cannot help but be a time of worry. There is bound to be worry about redundancy and the changes that will take place. I agree that fears about redundancy should not be very great, from what we know of staff shortages, but in almost every other aspect those working for the Post Office will have misgivings and fears. The Post Office has published pamphlets giving employees a certain amount of information, but the uncertainty is still there, and there cannot be too much reassurance given to the staff during this handover period. The Assistant Postmaster-General might well use this present occasion personally to repeat the reassurances already given, and relieve any remaining doubts there may be.

I have been in touch with various Post Office employees and I know that they would like reassurance as to their exact position up to vesting date. They would like to know when vesting day will be. The Post Office staff continue to be civil servants until then. What rights have they to recourse to the Civil Service Arbitration Tribunal? We are told that negotiations on conditions of service will start after the Royal Assent has been received, and that is why the date of that Royal Assent is very important to these people. What is important to them is to know exactly what is happening now. Consultations are obviously taking place. Is it possible to give month-to-month information on how the consultations are going, or are they so private that that cannot be done?

I say that because I have received a letter, which is probably representative, which says this: … rumours … are rife predicting loss of annual leave, normal service extended to 65 years of age, telescoping of grades, etc., and the most disturbing aspect, was that in common with the official of the union in question he seemed prepared to accept these retrograde measures, his only reassurance being that we could be sure that such loss of conditions of service would be at a price. We are deeply concerned that our own national officers should talk in this way and yet feel unable to disclose anything of the negotiations now in hand. The more so since, as I have already said, the changes proposed have not been voted on in Parliament, nor have we, the staff, had any opportunity to approve or otherwise. I obviously do not comment on how justified these worries are. They are, however, the type of worries which are being voiced, because this is not the only letter I have received. It would be worth while for the Postmaster-General to use this occasion to try to put these worries at rest.

I have been asked this question on the matter of Civil Service status. If a Post Office employee wishes, when the time comes, not to lose his Civil Service status but to move to another branch of the Civil Service, will he have the opportunity to do so? There is in the Civil Service a certain indefinable sense of privilege which is much valued.

It is important to know how security of tenure will compare with present conditions. There is a feeling that in the Civil Service there is an extremely sound basis of security of tenure. Under the new system will the basis be as reassuring?

I have been asked whether superannuation will be contributory or noncontributory. If contributory, a pay rise would presumably be implied. If so, what about the freeze? People are clearly frightened of how pay will be adjusted in conditions of freeze.

Is it too early to start talking in any detail about grading structure and annual leave'? Will there be a new basis for the leave allowance for grades fixed in accordance with Civil Service grades? I do not expect detailed replies to these questions. I am listing the matters which have been brought to my attention and which seem worth airing and getting assurances on, if possible.

By the very nature of events people are obviously worried. I do not know from the Report whether this is a tactless time to start talking about innovations. The Report of the Select Committee shows how important it is for the Post Office to try to get more part-time workers and women workers if they can be accepted by the unions. The emphasis on the problems of peak work makes this industry ideal for part-time work. Part-time work is ideal for the Post Office. It is an ideal outlet for many thousands of good people who need more money and who want part-time work.

One of the tragedies of the S.E.T. is that it hits part-time work, which is the most efficient work there can be. I dare say there are many lazy people doing full-time work, but there are very few lazy people doing part-time work. Part-time workers have only gone there because they want to work and earn money. While great changes which have to be made are being made, if we could come in on that tack it would be of great value to the Post Office.

I should like some clarification on one statement on the Report of the Select Committee which I do not understand. The Report states that Post Office recruitment has been handicapped by the Civil Service framework within which agreements have to be made.

There is so much in the Report of the Select Committee that obviously this is not the occasion to debate it. The Report will be our bible and work of reference in the coming debates, especially that on the White Paper. As the Chairman of the Select Committee is here, may I say how much I admire the product of his Committee. I am sure that all hon. Members are grateful to the hon. Gentleman and to his Committee for producing it at such an appropriate time. If I have any complaint, it is certainly not a complaint about the working of the Committee or about the personnel who took part in that work. My complaint would be about the nature of the Report. Apart from the Chairman with his professional background, on this occasion the investigators have been too much like us. They seem often to have gone through the circle of the same arguments; they have seen the same difficulties; they have come to the same conclusions. Perhaps this is because those are the only conclusions which it is possible to come to. There is not in the Report the breath of fresh air or the new look that I had hoped would be there. There is, perhaps, a new look, but what we want is a look from a new angle.

The Government made a wise decision in appointing McKinsey's in the early days. I am sure that the Post Office must have been a treasure trove for this firm, treasure comparable with the North Sea findings. The Post Office as it stands must be the answer to a consultant's prayer. It is a super-massive organisation; it has a turnover of £700 million; it has an annual capital expenditure of £200 million; it has 400,000 employees. The Post Office has gone peacefully along for 400 years unstimulated by competition, as the Postmaster-General has wisely pointed out, and unfertilised by talent from outside the Post Office until the appointment of Mr. Wall. It is a labour-intensive industry with good industrial relations. At the moment when the firm started work it had been almost agreed that a structural change was scheduled and ready. McKinsey's could hardly have come in on a better scene. Any firm of consultants, especially a firm of such a calibre, could not but expect to make a pretty startling impact.

So far we have merely known that McKinsey's are there. We have only in a half-hearted way asked for reports on their progress, because we know that consultants take their time. We know that from the bills they send in. Results are not achieved overnight. This is not a routine investigation to keep the Post Office up to date. It is an investigation which should have a tremendous impact and influence on the future shape of the Department.

So far we have said that it is impossible to have a report from McKinseys which is publishable. However, it would be interesting to see some before and after examples in some detail. This would reassure people that things are happening in the Post Office on a bigger scale than a normal improvement, although that in itself would be good. The Report of the Select Committee occasionally indicates areas where McKinseys should be of great help. It also contains traces of where obviously the firm appears to have had some effect.

For instance, it appears from page 23 of the Report that the Post Office statistics for postal services are not particularly good. This is serious. With an organisation as large as this, if a statistic is only a small fraction of a per cent. out it will be multiplied to such a degree that the fault will in the end become huge and costly. I imagine that on this matter a consultant firm like McKinseys can be very effective.

The whole chapter on tariff policy seems to show up what I would call by modern standards a pretty rough-and-ready costing. Proceeding along the route of rationalisation which the Postmaster-General is now taking, a system of costing is desired in which there is great confidence. We want to be right up to the modern methods. We have all studied and followed the progress of mechanisation in the Post Office and we are all interested in the experiments, and so on. In modern business, the thing that is getting it ahead, and which is enabling it to make progress, just as fast as mechanisation and computerisation, is far better planning of the performance of the human being. The measurement of and reward for human performance is something which has developed tremendously in business over the last five years.

I welcome the progress that one sees in this Report, especially on page 149, where we read: In addition the McKinsey consultants have recommended a new system of staff assessment on the postal side based on performance and financial results. The particular points to which the consultants have drawn attention are cost control and the identification of improvement oportunities. That seems to me to be very important indeed. The next paragraph says: The existing system of staff appraisal, which has been developed in consultation with the staff sides, hinges on personal attributes rather than the specific achievements of staff. However, recent proposals, including those made by McKinseys will lead to a shift of emphasis here which will be helped by the use of performance targets, the forming of local improvement plans, and the periodic definition of job objectives. That is highly commendable and is the sort of way that we should be going.

I had always thought until the last few years that industry had been somewhat backward in this respect. I used to think that the Army did better at this. In the Army one never did anything before one knew what the object was and before one had all the information. But in the more backward firms of industry, people are far from clear about what are the objects and targets. I am glad to see this sort of tendency coming into the management side.

In the Report of the Select Committee we are told that the Industrial Reorganisation Corporation will look into the question of relations between the telecommunications side and the industry. Perhaps we could hear a little more about that.

I should like to finish by firing a few questions from the Report of the Postmaster-General. All these Questions will be on the postal side. One of my hon. Friends, if he catches your eye, Mr. Speaker, will be talking about the telecommunications side.

On the question of the conveyance of mails, I was impressed, on reading the Report, by the immense dependence on British Railways. Apparently 75 per per cent. of all letters and 91 per cent. of all parcels go by British Railways. Of this huge bill of £22 million—nearest account to that is about £1 million for the airways—the huge preponderance of costs falls on British Railways.

I should like to know what effect the reorganisation of the railways has had. In other words, has the reduction of the linage over the last few years made a great difference to the Post Office, or not? What has been the effect of the improvement of some of the lines, such as the electrification of the service to Manchester? Has it taken a lot of mail off the airways and on to the railways, like it has with passengers?

Can the Assistant Postmaster-General tell us a little more about the experiment in East Anglia, which is referred to in page 25 of the Report. It says: As an experiment, the Post Office are using their own vehicles for carrying parcels to East Anglia. The Post Office claim that this has proved a better and cheaper service and that costs are lower than rail costs under the pre-January, 1965, Parcel Post contract. The experiment has also enabled the Post Office to have the railways national conveyance charges reduced by £3 million to £4 million a year. Elsewhere road services are used mainly for local distribution and for routes where there are no suitable rail services. Does this mean that where rail services were available an experiment was tried using the Post Office's own vehicles and that a great reduction or saving resulted? If that is so, can the Assistant Postmaster-General tell us whether further experiments will take place? Can he also tell us whether it shows that British Railways were, in fact, overcharging in the past? Because of this bargaining power of being able to use one's own vehicles, it would appear that it was found possible to force the British Railways to reduce their charges.

Another very alarming thing that comes out of this chapter on conveyance of mails is, of course, the standard of service provided by British Railways. I am bound to say that this is astonishing, because it says: Although the Post Office expressed reasonable satisfaction"— I am surprised that it did— … with the service provided by British Railways for letter traffic, they were not satisfied with the punctuality of mail trains. In January to June, 1966, only 34 per cent. of travelling post offices ran to schedule and 19 per cent. were more than 20 minutes late. That seems incredibly serious— The consequences of such delays are serious because the letter service depends upon a 'closely integrated network' of mail trains and failure to make connections on time not only dislocates the service but also causes mail to miss a delivery. It goes on to say: While claiming that the majority of mail trains had a good punctuality record the British Railways' witnesses admitted that the crucial service between Euston and Glasgow was 'most unsatisfactory.' This particular train was on time at Glasgow on only 10 out of 150 journeys between January and June, 1966; I wonder whether the Assistant Postmaster-General could tell us how long this situation has been going on, and what sort of improvements are taking place.

It goes on to say: There was no single cause of this unpuctuality, but British Railways hope that electrification and re-routing will produce some improvement by March, 1967. March was the month in which we debated this matter. I wonder whether the Assistant Postmaster-General can give us details of any report that has arrived on his desk which might give us better news.

On the quality of service, on page 30 we are told that this was deteriorating.

It says: The Post Office admitted to your Committtee in February, 1966 that the general quality of services was deteriorating. On the other hand, the White Paper entitled "Post Office Prospects," says: Some improvement has been made over the last twelve months and further progress in this direction is one of the aims of the Post Office for Quality and Reliability year.' I take it that we are in the "Quality and Reliability Year". Did it start at the beginning of the year, on 5th April, or when? Perhaps we could have that small piece of information.

On the question of mechanisation, what the Postmaster-General had to say about Norwich was extremely interesting. I believe that the test was due to end in February, 1967, which is now. Do I gather from what the Postmaster-General said that this test has proved a success? Is there a report on this matter, which might be of interest to hon. Members? It seems to be a technical matter, but it might be of interest to read. If it is a success, is it likely to be multiplied in accordance with the money to be spent?

Incidentally, as a Yorkshire Member, may I ask a question which is important to quite a big lump of Yorkshire? It was said that a sorting office was to be established above Leeds City station, or that this was being considered. Has this been built?

Other hon. Members will want to speak, and we are not treating this as a debate on the Report of the Select Committee, but more as a preparatory and probing operation to clear the deck for the big debate which is coming, on the results of which so much will depend, both in respect of postal services to the public and in respect of the lives and prospects of the 400,000 good people who give us these services.

12.11 p.m.

Mr. Ian Mikardo (Poplar)

I desire first to express my thanks to the hon. Member for Howden (Mr. Bryan) for the most kindly references he made to the work and report of the Select Committee on Nationalised Industries, and I am sure that my gratitude and pleasure will he shared by my fellow members of the Committee.

As the hon. Gentleman said, this is not an occasion on which we ought to debate that Report. We ought to have a go at it later when we have also got my right hon. Friend's White Paper on changes proposed in the structure.

The hon. Gentleman criticised the Report for being of a piece with our own work without a real breath of fresh air. Far from resenting that criticism, I think that the hon. Gentleman is right, and, if I may say so without sounding horribly condescending, which I do not want to be, I thought that it was a very shrewd observation and analysis on his part.

Being wise after the event, if we were having another go at the job, I think we might look at fewer subjects in much greater depth, rather than at so many subjects in less depth. The great advantage of a consultant, which the hon. Gentleman hinted at more than once, is that he comes into an organisation with a fresh mind and he can see the wood for the trees. The chaps on the job, who have the responsibility of day-to-day decisions, with three telephones on their desks all liable to ring at any minute, are tied down by the trees. The consultant, without any obligation for day-to-day decisions, comes in without having to poke down to every bit of detail, and can take a broader view because he is not cluttered up with details. I feel that if we were doing this job again we might avoid climbing up so many trees as we did on this occasion, and might therefore get a clearer overall picture of the wood.

I make only one observation on the suggestions made by my right hon. Friend for changes in the management structure. My right hon. Friend has had to do an extremely difficult job, because in creating a management structure for an organisation like the Post Office, or in changing such a structure to meet such greatly changed circumstances as are created by the change in status as well as all the other changes which one wants to make on their merits, there are no absolutely right answers.

Every method which my right hon. Friend could have brought forward would have had some advantages over all the others, and some disadvantages compared with all the others. It is a very delicate decision to make, and it becomes even more delicate in an organisation which is running two very different industries, one which is highly capital-intensive, and one which is highly labour-intensive, one which is up to the very last minute of our technological advance, and one whose methods have not changed enormously for a century or so.

There was one school of thought which considered that we ought to divide the two things into two separate corporations. I think that my right hon. Friend's decision not to take that view was the right one, and that a good deal would have been lost by that totality of separation. At the same time, I think that this division of operational responsibility and operational accountability, the unblurring of some of the blurred frontiers between the two parts of the organisation, which my right hon. Friend has announced this morning is altogether to the good.

It struck me, as it manifestly struck my right hon. Friend, that the situation of engineering without direct responsibility to those who had to run and show a profit on the sevices for which the engineering was being supplied was altogether too hazy, and I am sure that my right hon. Friend is right.

I think that my right hon. Friend will have some administrative trouble, no more than that, in taking that degree of separation down to the regional level where the intertwining becomes very complicated indeed, and where it really will be impossible to separate the Siamese twins without supplying more blood and bones, in other words, without increasing the overheads by adding more executive staff.

On balance, I think my own predilection would have been not to carry the separation too far along at that level, but I concede that it is possible to take the other view, and that there may be very little in it as between the two views.

I look forward to a further and better occasion for going into some of these matters in detail, and perhaps I might content myself with saying that I am sure that what my hon. Friend said this morning will be warmly welcomed by those who are to have the job of running this great enterprise and improving it even beyond its present standards which, generally speaking, are by no means too bad.

12.17 p.m.

Miss J. M. Quennell (Petersfield)

I agree with the hon. Member for Poplar (Mr. Mikardo) in what he said about the speech of my hon. Friend the Member for Howden (Mr. Bryan). I think it is probably true that if one can get away from the pressure of constant management one can get a clearer view and take time to think clearly about the problems confronting interrelated a structure as the Post Office.

I shall not pursue the hon. Gentleman's argument too far, because when he was talking about separating the Siamese twins, and supplying them with more blood and bones, I was a little worried about the biological implications of pursuing the matter very much further.

I think that this debate is of the greatest interest, because the Post Office finds itself in a curious position. On the one hand, it is reaching for the stars. Advances in telecommunications and in satellite communications present a story of progress and advance in modern techniques. On the other hand, we have to face the fact that the British public, the average post office user, the chap who uses his telephone either in his office or at home, the man who posts a letter either for business reasons or for purely domestic ones, are becoming more and more critical of the service which they are getting.

It may have something to do with the fact that the Report and Accounts which we are discussing are for the year ended 31st March, 1966, and here we are debating them on 15th March, 1967. Therefore, to a certain extent, this debate is probably out of date and hon. Members' suggestions and inquiries will probably be out of date and might already have been covered in some other sphere.

My right hon. Friend raised the important question of the dilemma of the Post Office's dependence on British Railways. The Report makes it clear that British Railways is not offering the Post Office a service which is all that could be wished. The Postmaster-General is accountable to this House and we can question him about the Post Office, but we cannot call here and question the Chairman of British Railways. Therefore, our dilemma is that we cannot find out from British Railways why it cannot offer the Post Office a more reliable service.

Running throughout the Report are references to staff shortages and the difficulties of getting trained and highly qualified staff. Before I entered the House—to some extent this is still the case—I was fairly closely involved in technical education. One of the colleges with which I was connected ran courses in telecommunications for Post Office staff.

Appendix 8 of the Report gives staff numbers by class, amounting to nearly 400,000 of one grade or another, and the constant references in the Report to shortage of trained and qualified personnel and the difficulties of obtaining them led me to hope to find a reference to some improvement in the training schemes available to the Post Office. There is implicit in these references to the difficulties an admission that the present system of intake is inadequate. It might, therefore, be advisable for the Post Office to consider providing its own training college.

The last three entries in Appendix 8, leaving out miscellaneous staff, relate to professional engineers, scientific and technical staff, supervising engineers and other engineering grades—totalling 105,209 engineers of one sort or another. In the new technological age, personnel will need constant refresher courses. With that large number of existing personnel and the need to train and retrain, the Post Office should be able to maintain a viable training establishment of its own to help meet the need. Two other classes, in this Appendix, postal and telegraph officers and telegraph and radio operators, will also need considerable training initially and retraining with modern advances in technique.

Another inadequacy of the service referred to in the Report is its inability to meet the demand for telephones. In the Introduction, we read: Much has been achieved, but the service is still not as good as it should be and will be. Demands for telephone connections cannot he met everywhere as they arise, mainly because of shortages of exchange equipment. With our much more mobile society, people have moved about the country and the Post Office has been taken unawares that a large demand for additional telephonic equipment has grown up, particularly in the South of England. This could hardly have been predicted by the Post Office, since even the most critical subscriber does not expect the Postmaster-General to be clairvoyant as well as the "chairman" of a big public company.

But there should be some way of detecting much earlier the movements of population, so that the Post Office is not caught unawares. Some rudimentary liaison machinery was established some years ago with the planning authorities in the South of England, but this does not appear to have been enough. Another weapon which the Post Office could use to fight this problem is the Registrar-General's returns, which will show a useful pattern of population movements, as he is now taking spot censuses as well as the 10-year census.

If there is a large repatriation of Service men to this country—according to the Defence White Paper, about 20,000 men and 6,000 families will be involved—will the Post Office or the Services be responsible for the necessary telecommunications? If it is the Post Office, there will shortly be a far bigger call on its provision than we had thought—

Mr. James Dance (Bromsgrove)

All these married families coming back will represent another problem, in that they will need some telephone communication. Will they get it? We should want to know this, too.

Miss Quennell

This is another aspect of the problem; my hon. Friend is absolutely right. About 6,000 families are to come back, according to the Defence Estimates, and about £20 million has been provided for the purchase of private houses, caravans and mobile homes. Already, the Army is buying—certainly in my constituency—large numbers of private development houses. These problems will be acute if not faced early and a solution found.

I wish that the result of the opinion poll referred to in paragraph 92 could have been published in the Report, as it would have been interesting.

There is another reference on page 37 to the difficulties of obtaining staff, certainly in the Midlands and the South, but there is no reference to the employment of postwomen. One wonders whether it would not be possible to alleviate the shortages of postmen by at least considering the employment of post-women. I cannot find a reference to postwomen being employed. I seem to recall having seen postwomen and—

It being half-past Twelve o'clock, the debate stood adjourned.

Debate to be resumed Tomorrow.