POST OFFICE (BORROWING POWERS)

HC Deb 06 April 1971 vol 815 cc375-401

9.59 p.m.

The Minister of Posts and Telecommunications (Mr. Christopher Chataway)

I beg to move, That the Post Office (Borrowing Powers) Order. 1971, a draft of which was laid before this House on 24th March, be approved. This Order would raise the limit of the Post Office's debt from £2,300 million to £2,800 million, as provided for in Section 36 of the Post Office Act, 1969. The further debt may be incurred in three ways. First, the Post Office may borrow sterling for capital purposes from the Minister out of the National Loans Fund. Second, it may borrow sterling temporarily from the Minister or from other sources with the Minister's approval. Third, it may borrow foreign currency temporarily or for capital purposes from a source specified by the Minister.

Almost all the borrowing will in fact be from the National Loans Fund. Ever since 1961 the Post Office has been treated, in certain financial respects, as if it were a nationalised industry, and its borrowing between 1961 and 1969, when it became a public authority, was regulated by a series of borrowing powers Acts and Orders. Section 36 of the Post Office Act, 1969, was in effect a borrowing powers enactment, and the commencing capital debt of the Corporation, £1,786 million, was the amount outstanding from previous borrowings.

In the first six months of the Corporation's existence, as is recorded in the Report and Accounts which I laid before the House on 26th November, 1970, the Post Office borrowed £135 million from the National Loans Fund. During the financial year 1970–71, it borrowed a further £253 million, again from the National Loans Fund. In addition, it borrowed £8 million abroad, making its total long-term debt £2,182 million at 31st March this year.

In other circumstances, despite the very high and rising level of investment by the Post Office, I should not have had to lay an Order before the House for some months, but the strike has, on the one hand, deprived the Post Office of a substantial amount of postal income, and, on the other, caused a serious disruption in the collection of telecommunications revenue.

It was for these reasons that, with the approval of my right hon. Friend the Chancellor, I recently authorised the Post Office to increase its overdraft at the Bank of England to a maximum of £100 million. It is this extra amount of temporary borrowing which has brought the Post Office close to its ceiling and has made this Order necessary. Expenditure has not been disrupted over these recent weeks in the same way as income, and, without this Order, the Post Office would be in danger of exceeding its statutory limit, because its cash flow is subject to large and unpredictable fluctuations from day to day.

When Section 36 of the Post Office Act was discussed in Committee the then Postmaster-General, the right hon. Member for Wednesbury (Mr. Stonehouse) said: We have it in mind that Parliament will be able to check the Post Office borrowing in 1971, when it will be asked to approve a new extension of powers, and that a new Bill will he required in 1973."—[OFFICIAL REPORT, Standing Committee D, 27th February, 1969; c. 913.] So, although this Order has been advanced as a result of the strike by a few months, we are still generally in line with the right hon. Gentleman's prediction. The timetable which he forecast has not proved far wrong.

Capital spending since the Post Office became a public authority has continued at much the same level as was envisaged in 1969. The programme of postal mechanisation and the replacement of postal buildings has gone somewhat more slowly than was then forecast in the letter sorting field, but it is on schedule in parcel mechanisation.

On the telecommunications side, the business has been faced with a considerably higher level of demand for its services than was foreseen. The level of most of the spending is determined by the output of the telecommunications manufacturing industry. The industry has not been able to expand its output more than was envisaged in 1969. The amount of borrowing depends not only on the level of expenditure but also on the proportion of capital requirements which can be financed from internal resources, that is to say from profits and depreciation allowances.

On revenue account, the Post Office, in common with industry generally, has been faced with steep rises in costs during the last 18 months, particularly in labour costs. On the telecommunications side these increases have been partly absorbed by increases in productivity and partly offset by an increase in tariffs although in the short term the cash flow has been seriously diminished by reason of the postal strike, among other things, through delays in collecting money owing on telephone bills. On the posts side a revenue loss of over £40 million was expected in any case during 1970–71. The effects of the strike have increased this deficit to something in the neighbourhood of £70 million. Accordingly, while spending has remained at much the same level as was envisaged in 1969 borrowing has increased.

The amount for which I am asking for approval in this Order is £500 million. During the last financial year the Post Office spent £450 million on capital investment. Its spending is increasing rapidly to keep pace with demand. Supported by self—financing at the sort of level which has prevailed in the recent past the extra £500 million should suffice as originally planned for the next two financial years. The time when a new Borrowing Powers Act will be needed will depend to some extent on factors which cannot be forecast precisely, such as future trading conditions, the results of the Committee of Settlement which started its proceedings today, and other reviews which I have initiated.

I shall examine very carefully the investment programmes which the Post Office submits to me annually to establish that they are justified and productive. I do not expect these factors to affect the timing of the Bill more than marginally so that the next time we shall be discussing Post Office borrowing is likely to be in 1973 which was the date originally forecast at the time of the passing of the Post Office Act 1969.

This further borrowing will be needed for investment in the expansion and modernisation of the Post Office businesses in the next two financial years. The future of the postal business will depend to some extent on the findings of the Committee of Settlement, so that at present I do not feel that it would be to anyone's advantage to speculate on the immediate financial prospects of the business. The most pressing Post Office need for finance is for the expansion of the telecommunications network in response to the demand for its services.

It is to this that the lion's share of the borrowing will be devoted. Demand for the telephone service is now running at a rate of more than one million connections a year and the system is growing by more than 8.5 per cent. a year. The telex network is growing by 17 per cent. a year and perhaps the most startling figure of all, the rate of growth in the number of Datel terminals increased by nearly 150 per cent. in the last year. Inland telephone traffic is forecast to increase by 11 per cent. a year, Continental traffic by 18 per cent. a year and inter—Continental traffic by 25 per cent. a year, so that we are at a period of rapid growth in telecommunications.

I am sure that there is agreement on all sides of the House that the Post Office should do all it can to meet this demand for its services. It is to keep pace with this demand that the telecommunications business is investing more than £500 million a year. The House will recall that, in the recent review of investment in nationalised industries, the investment programme of the Post Office was confirmed at its full level.

The need for and urgency of this investment will be widely acknowledged, and it is mainly for this purpose that the extra borrowing will be needed. Naturally, I am anxious to keep the cost to public funds to a minimum. A small portion of investment is undertaken abroad, particularly in respect of United Kingdom participation in international telecommunications satellite projects, and for this I have authorised the Post Office to borrow abroad a modest sum of £8 million. At present, more than half the investment is financed from profit and from depreciation allowances, and I would not be prepared to sanction investment plans which were not self—financed at least to this extent.

Expenditure on telecommunications is running at its present high level because of the pressure of demand. Supply is largely limited by the output of the telecommunications manufacturing industry, which has had difficulty in the past in meeting the Post Office's requirements. The result has been shortages on many occasions, causing long queues of people waiting for telephone services and congestion in the telephone network, particularly the trunk system. The Post Office tells me that a number of the difficulties which it and the manufacturers have been wrestling with for some time are being overcome, although it is too early yet to say that all the problems are past. Meanwhile, technological change proceeds quickly.

At present, three sorts of switching equipment are being installed in the network—the electro-mechanical strowger, the crossbar system which uses an intermediate technology, and the new electronic system. Part of the advantage of the later systems is that they give better service and require less maintenance because no longer are moving parts and electrical contacts exposed to the open air and the hazard of dust. The other great advantage of the newer systems is that they incorporate electronic control mechanisms which allow a much greater degree of flexibility and economy in the use of circuits by enabling individual components to perform a variety of functions as the need arises.

As a number of hon. Members will know, this transitional phase in the technology of the Post Office has caused the Post Office and the manufacturers particular problems, and a number of those problems remain to be solved. For the future, the development of even more advanced systems can be foreseen and this, together with developments in the technology of long-distance circuits and the increasing use of the telecommunications system for data transmission, gives the Post Office great challenges for the future.

But these are matters for the longer term. The House will be concerned with the large-scale use of resources which is involved on the telecommunications side of the Post Office. My function is the one given to me in Section 11 (8) of the Post Office Act, 1969—of approving the general programme of the Post Office's capital development, and the purpose of this Order is the immediate one of meeting the Post Office's clear need for further investment to expand its business in the face of demand in accordance with plans which have already been approved, and it is for that reason that I commend the Order to the House.

10.14 p.m.

Mr. Ivor Richard (Barons Court)

I congratulate the Minister on preserving intact the capital expenditure programme and the investment programme of the Post Office against the depredations of his colleagues on the Treasury Bench. It is encouraging to note that in this respect, at any rate, the Government have shown wisdom and perception in their approach to the problems of a public industry. I trust that that wisdom will continue.

We on this side would not dream of opposing the Order, but there are one or two questions, I hope not over-technical, that I want to ask, particularly in respect of Sections 36, 35 and 33 of the Post Office Act; and one or two other points that I want to make.

From a mere reading of the Act, I understand that the limit to which the Post Office is entitled to borrow, as laid down by Section 36, was £2,300 million … or such greater sum, not exceeding £2,800 million, as the Minister may from time to time by order specify. I understand that this is the first Order that has been made under that Section, so that in one jump, so to speak, the Post Office borrowing is increased by this Order to the total increase authorised in the Section. Will the right hon. Gentleman tell us why he is doing this in one jump? He will know that since the Post Office Act established the Post Office as a nationalised industry rather than a Government Department, the degree of scrutiny of the affairs of the Post Office by the House and by the public is very much less. I am not complaining about this, but pointing out that it is one of the inevitable results of conversion to a nationalised industry in this form. The one way in which the House and the country can scrutinise the Post Office borrowing powers, their extent and the purpose for which the borrowing is done is on this type of Order.

The furthest I got with my arithmetic while the figures were being given to us is that the total borrowing facilities which the Post Office may require are now some £20 million less than the £2,300 million which is the present total authorised sum. If the Order goes through as it stands tonight, as it undoubtedly will, this will be the last opportunity the House of Commons will have of looking at the Post Office borrowing powers and at the whole capital expenditure programmes until we get a borrowing powers Measure in, perhaps, 1973. Whether or not this is a satisfactory procedure from the Minister's point of view—and I can see the advantage there is from that point of view in not being accountable or over-regularly accountable to the House in this respect—we on this side would have felt happier had the Order not sought the whole £500 million at one jump. Going from £2,300 million to £2,500 million, with perhaps another Order in this form laid at a later date, would have been more satisfactory.

Section 36 gives the Post Office the right to borrow the sums which it is authorised to borrow under Section 35. This is, even for a lawyer, a tortuous exercise, but occasionally it throws up one or two questions. Under Section 35 the borrowing which the Post Office is entitled to effect consists of four different portions. First, it can … borrow temporarily, by way of overdraft or otherwise, either from the Minister "— Or, with his consent from anyone else such sums … as it may require for meeting its obligations and performing its functions. I believe that the Minister said tonight, but perhaps he will confirm it, that the financial effects of the strike, in so far as they are at all relevant to the Order, relate purely to the temporary borrowing facilities under subsection (1) of Section 35. In other words, there has been what the right lion. Gentleman called a reduction in the cash flow; a temporary liquidity problem caused by the fact that people have not been paying their telephone bills as quickly as they normally do. If that is the case, one would expect in the normal course of events that the temporary facility would rapidly become unnecessary as honest citizens decided that they should pay for the privilege of having used the telephone in the last three or four months.

The second chunk of borrowing under Section 35 is for provision of working capital and for what can broadly be called, I suppose, the capital investment account. There is, however, one interesting provision, which is that it also includes any sums borrowed in order to repay the debt which the Post Office took over under Section 33 when it was set up. I do not know whether in fact any payments have been made to repay the £1,748 million which the Post Office acquired when it became a nationalised industry. I doubt it very much. I should be grateful for the Minister's confirmation of that.

Section 36(4) provides, however, that References in this Section to borrowing by the Post Office do not include borrowing by it from a body corporate which is its subsidiary. Is there any body corporate which is the Post Office's subsidiary from which it has borrowed any money, which might have had an effect upon the total borrowing limits had it been borrowing from something which was not a wholly owned subsidiary of the Post Office? Either way, if this increase is to finance long-term capital programmes, that is one thing; if, on the other hand, it is merely to get over a short-term liquidity or cash flow problem, that is a different one.

I turn now to the capital programme. On 19th January of last year, my right hon. Friend the then Postmaster-General in answer to the hon. Gentleman who was then the Member for Acton but is now the Member for St. Marylebone (Mr. Kenneth Baker), gave the figures for the capital programme of the Post Office, and he put investment in this way, as expenditure on fixed assets, for posts and Giro, from £34.5 million for 1969–70, to £41.2 million for 1971–72; on telecommunications, from £362.4 million in 1969–70 to £448.9 million for 1971–72; and NDPS from £6.2 million for 1969–70 to £7.6 million for 1971–72. All those figures were at March, 1969, prices.

On 2nd November last year the right hon. Gentleman told my hon. Friend the Member for Newcastle-under-Lyme (Mr. Golding) that the cuts which were announced in Cmnd. 4515 last year would not affect the capital expenditure programme of the Post Office. May we, therefore, take it that the figures which the Minister has been working on, and the figures which he has quoted tonight as the capital expenditure and investment figures of the Post Office, are in fact those which were set out in HANSARD on 19th January, 1970, at column 19, merely being updated because, obviously, of increased prices between 1969–70 and 1971–72. If that is so, and I assume that it is, will the right hon. Gentleman confirm that, included in his figure, is a figure of £41.2 million at March, 1969, prices which includes the additional investment on the Giro services? If the Minister follows the point, if one goes back to the figures given in January, 1970, which apparently form the basis of the figures which he has given tonight, they include a provision for additional capital investment on the Giro services. Will the Minister confirm tonight that that additional investment is to take place on the Giro services?

Second, it includes additional expenditure on NDPS. Can the Minister again confirm that the figures he has given tonight in fact include that additional expenditure?

Third, it includes a massive increase in the capital investment programme for telecommunications. If the Minister is asking the House to give him the right to lend the Post Office up to another £500 million, particularly so that the telecommunications side of the Post Office's investment can be increased—in the not too distant future—any proposals for hiving off any part of the telecommunications service will get short shrift from this side of the House.

Finally, I have two points of a rather more general nature. The Order will authorise the Post Office to borrow up to an additional £500 million. It is important that at some time in the nottoo-distant future the Minister should turn his mind to the question of who it is that will do the borrowing. It is now five months since the right hon. Gentleman summarily dismissed Lord Hall, with the consequential effects that that dismissal clearly had upon morale within the Post Office. I know that the Minister takes the view that he was justified in dismissing Lord Hall. He will agree, however, that the effects of the dismissal upon the moral and efficiency of the Post Office are still being felt. The Post Office now is also trying to recover from a long and bitter strike which, as the Minister knows full well, we on this side believe that he personally did little to try to settle.

If confidence is to be re-established, particularly on the part of the workers in the industry, it is essential that a new Chairman be appointed soon and that a fresh start be made. I do not want to press the Minister too much tonight, particularly as, judging from the Press reports of the last day or two, it seems that to talk to a Conservative Minister about appointing a new Chairman to the board of a nationalised industry is almost an invitation to raid the Opposition Front Bench. I would not want to deplete our ranks to a greater extent than has been done already.

It is high time that a new appointment was made and that the Post Office got back to normal. I hope that the Minister will be able to make an announcement on this fairly soon.

I have said something about the question of public accountability in relation to the timing and the amount of the Order. The Post Office is now much less accountable than it ever used to be. On the whole, this is probably a good thing. It is particularly true that it is less accountable now in terms of investment decisions. Some massive decisions will have to be taken fairly soon, particularly in relation to investment in the telecommunications sector. The Minister referred to three technical possibilities. Although I do not profess to understand exactly what is involved in all the technical possibilities, I am given to understand that a good deal of money will depend upon his getting the decisions right.

Therefore, it is critical that greater public discussion of these matters takes place, particularly on the technical side, before these decisions are taken by the Post Office. I know that the Minister cannot devise on an Order like this a method of having this type of public discussion. However, he will agree that such a discussion can no longer take place on the question of the Post Office Economic Development Council. The House does not now discuss this subject to the same extent as it used to. The Select Committee on Nationalised Industries will be deeply involved in discussing other nationalised industries before it gets round to the Post Office.

It would be helpful if the Minister could devise, in one form or another, a system by which public discussion of these very difficult and expensive decisions could take place. Subject to those discussions, we on this side welcome the Order. I suspect that, had the election gone the other way on 18th June last, we would almost certainly have been introducing something like it.

Mr. Charles R. Morris (Manchester, Openshaw)

I am grateful for the opportunity to contribute to this important debate. The Order gives the House a useful opportunity to look at the developing financial strategy of the Post Office against the background of the Bill which will be presented to the House in 1973.

In commenting on the Order, I wish to draw attention to what the Minister had to say on 23rd July last year. Hon. Members will recall that on that occasion the right hon. Gentleman announced increases in postage rates, increases which constituted the largest single rise in postage charges in the history of the Post Office. Those rates became operative in January this year. The Minister said—this is col. 761 of HANSARD for that date—that the increases which he then announced should be sufficient for the five-year target period.

In the light of the present Order, the financial estimates which the Post Office has made, and the difficulties to which the Minister has referred to, does he still hold the view which he expressed last year, that the financial targets for the five-year period remain the same and will be sufficient? The right hon. Gentleman said also on that occasion that the accumulated short-fall in relation to the quinquennial target period would be £88 million by the end of 1970. What is the estimated short-fall in relation to the target period now?

As my hon. Friend the Member for Barons Court (Mr. Richard) said, there have been a number of serious developments in Post Office finances since the Minister's announcement in July last year. There has been the advent of decimalisation, estimated to cost £10 million. The acting chairman of the Post Office Corporation has said that the industrial dispute had created a situation in which the Post Office had lost £27 million of revenue. The House is entitled to know what will be the conse- quential effect of these losses on Post Office finances overall and its targets for the future.

One of the Minister's most illuminating statements during the recent unfortunate industrial dispute came when he suggested that one of the consequences of meeting the claim advanced by the Post Office staff was the prospect of a nine-penny post. The Minister and the Government encouraged the Post Office to resist what I thought was the legitimate claim of the staff for improved salaries and wages, thereby involving the Post Office Corporation in a loss of £27 million. Will that bring nearer the advent of the ninepenny post to which the right hon. Gentleman referred? Can he assure the House that he will not during the next twelve months announce a further increase in postage rates as a result of the difficulties which the Government have encouraged the Post Office Corporation to create in the way I have described?

In the halcyon days of the Labour Government, the hon. Member for How-den (Mr. Bryan), in his usual humourless way, used to criticise the financial forecasting of the Post Office. I hope that the Minister will be able to justify the forecasting of Post Office finances to which he has referred this evening. I accept his point that financial forecasting will have to await the outcome of the deliberations of the committee of settlement which is examining the recent industrial dispute in the Post Office. But the nation needs to be assured that he will not introduce another increase in postage rates in the months ahead.

After the trauma of one of the longest national industrial disputes of all time, which was seemingly deliberately provoked by a Government determined to make an example of those who serve the community, there are a number of points that merit examination. In his lucid exposition of the Order, the Minister referred to the way in which the revenue was raised to finance the Post Office. He spoke of the element of self-financing. Last April it was said that 52 per cent. of the Post Office's capital was raised by self-financing. The Minister said tonight that the level of self-financing would be of the order of that which had existed in recent times. Is he indicating that it is envisaged that 52 per cent. of self-financing will continue in the sources of revenue available to the Corporation?

All the Corporation's estimates on financing depend on increased productivity of 1½ per cent. in the Post Office. One of the important elements for that envisaged increase, and continuing increase, is to a large extent the good will and co-operation that the Corporation can engender amongst its staff. I sometimes feel, certainly against the background of the recent dispute, that there is a failure by the Post Office to comprehend the discontent of the staff. After the recent industrial dispute everyone felt that the opportunity should be grasped to improve relationships between the staff and the Corporation. There were many niggling points which the Post Office, in its wisdom, felt it should bring up after the dispute. I could quote a host of different instances to highlight points which came to the surface after the dispute ended, and which have to some extent militated against the resumption of normal relationships between the Post Office and its staff. I could quote the actions of the head postmaster at Birmingham, who, after the overwhelming majority of his staff had resumed normal working, chose to send a letter to those who did not join in the dispute. Hon. Members on both sides would probably term those people industrial blacklegs. After the dispute was over he wrote to them as follows: Your support for the Post Office during the strike will not under any circumstances be held against you in the course of your career. Should you have any problems on which you require advice, please feel free to consult me personally. Thank you very much for your loyalty during the past difficult weeks. I understand your motives. A record will be maintained of your action in your personal papers and your loyalty will never be to your detriment in the course of your Post Office career". This is a head postmaster writing to an infinitesimal number of industrial "blacklegs". Yes, these are the words of a responsible official of the Post Office. The same gentleman, after the dispute had come to an end because of the reasonableness of both sides in the final stages of the negotiation, thought fit to close the gates of the sorting office and to deny access to the returning postal workers from nine o'clock on the morning of resumption of work to 12.20 p.m. the same day. When the postal workers wished to return to work, he kept them locked out for three hours twenty minutes to prove that he did not accept the nationally agreed hour for resumption of nine a.m.

These are only some of the points that arose. Probably the point which galls Post Office workers generally about the last dispute was the decision of the Post Office to withhold the entitlement to three days annual leave to those who were involved in the dispute. The only people who had that three days withheld were those who had not enjoyed the three days leave before the dispute started. If one is seeking to restore good relationships between the two sides in the Post Office, these decisions should not have been made and these actions should not be endorsed. I hope that the Minister will use the period ahead to take positive action to demonstrate to the Post Office staff that he now recognises some of the justification for their discontent.

10.43 p.m.

Dame Patricia Hornsby-Smith (Chislehurst)

The hon. Member for Manchester, Openshaw (Mr. Charles R. Morris) will not expect me to endorse his condemnation of those very loyal members of the Post Office service who stayed on to pay out the old age pensioners. Not all of them did. The service was kept going in many areas, but not in every area.

Mr. Charles R. Morrisrose—

Dame Patricia Hornsby-Smith

I shall not give way. I disagree with the hon. Gentleman's view. He is entitled to his view; I am equally entitled to mine.

Mr. Richard

The right hon. Lady is being less than charitable to the union. She will know—or if she does not I am sure that her right hon. Friend will be only too pleased to confirm—that large numbers of the Union of Post Office members went in voluntarily without pay from the Post Office to pay the pensions.

Dame Patricia Hornsby-Smith

I did not deny that. I gave credit to those who did. But there were areas where workers did not do so and there was very grave hardship to old age pensioners as a result. I am entitled to record that fact while saluting the many members who went in so that hardship should not result to old age pensioners.

What constituents are asking me now is when we shall get back to a normal Post Office service. The hon. Member for Barons Court (Mr. Richard) made great play with the increase in postal charges. He seems to have forgotten that not only were those increases agreed by his Government but the stamps had been printed. However, that was not revealed to the electorate until after the election. It fell to my right hon. Friend to bring in those increases and, to his credit, he delayed doing so as long as was practicable. But nobody likes them.

But what concerns us is that, despite the fact that the postal strike has been over for some weeks, the service has not yet returned to normal. Five of the letters which I received as first-class mail this morning were posted before noon on Friday only 12 miles away in my constituency. This sort of thing is happening with first-class mail day after day.

I am one of those who, like, I am sure dozens of hon. Members, received demand notices for electricity and gas bills posted after the strike, although the bills were rushed out four days before the strike started in order, as it was thought, that we might receive them and be able to pay them before the strike started. Those of us more experienced in these matters do not get frightened to death by final demand notices and realise what has happened, but great anxiety has been caused to constituents who have never been in debt in their lives and who have suddenly had final demand notices, although both the gas and electricity boards have gone out of their way, through public relations and so on, to make it clear that this misfortune was not of their making and that they would not dream of proceeding against any of the old people affected. But harassment has been caused by delay in delivery even before the strike started and thereafter by the backlog still being cleared while the new mail goes forward.

I am especially interested in my right hon. Friend's telecommunications programme. In my constituency is one of the most important manufacturers of the equipment. There is always a division of opinion: Ministers say that the Post Office cannot meet demand because of the manufacturers; the manufacturers complain that often they cannot get sufficiently long-term contracts to merit increasing capacity to meet the demand, that there is no guarantee from the Government of the day of forthcoming orders within a given period to justify increasing capacity.

I come to a more personal aspect of the supply of telephones. Over the years, there has been a substantial and rapid housing development in my constituency with two vast estates, and for years there has been a queue for telephones. I confess that over the last 12 or 15 months, under both the previous Government and this, there has been an acceleration in supply. But what worries me is the embarrassment and invasion of privacy which comes from a grossly disproportionate number of new telephones installed on shared lines.

Over the last two years, the great majority of telephones provided in my constituency, under both Governments, seem to have been on shared lines. I have had complaints from a social worker, an insurance agent, a teacher, a stockbroker and a probation officer, all people who may well be dealing with highly personal and confidential matters on the telephone with clients, patients, schoolchildren, and so on.

I have known a schoolteacher caused the greatest possible embarrassment by discussing a child, as she thought, privately, with a parent, and later being attacked, harangued and nearly slandered by the mother, who said that she must have disclosed the information; a gossip had enjoyed herself listening on the tied line, and then gossiped about the daughter. The same thing happened to the stockbroker and the insurance agent. These are only a few of the cases in which they could give me chapter and verse.

I appreciate the difficulty, that it is better to have a telephone than none at all, but I should like some idea of what proportion of the new telephones are shared lines. There is no protection of privacy on these lines. On Friday, I received a message to ring a constituent, at his office if before 5.30 and at his home if after 6.30. I rang for 45 minutes—22 times. When I finally got him I said that he could not have been so anxious for me to ring, because he had been on the telephone for 45 minutes. He said that he had not, that he and his wife had been watching television, and had left the phone free because they knew that I would ring. But it was a shared line, he said, his next door neighbour's daughter had just got engaged and she was probably ringing her boy friend.

That did not matter very much, except that they were anxious that I should contact them, they did not have the use of a telephone, and they might have thought that I was uninterested and did not try to ring them. What is important is that, if I had rung them and the young lady had tried to ring her boyfriend in the middle of our conversation, she might have been interested to hear my constituents pouring out their hearts over the problem which they wished me to take up for them, which they regarded as a matter of considerable confidence and which, naturally, I would treat in the same confidence. It is important to give more people exclusive lines as soon as possible, and that the Minister's figures should be split between exclusive and shared lines.

There is one other small point, on which I should like the understanding of whoever allocates the numbers for the telephones. This may seem a very small matter to my hon. Friend, but it is very aggravating to possibly 120 telephone subscribers in my constituency.

There are three telephone exchanges: Imperial, code 467, Foots Cray, code 300, and the old-fashioned Orpington exchange which covers the vast St. Paul's Cray Estate which is obtained by dialling 66 and then five digits. That estate is so near to Foots Cray that people think that it is on the Foots Cray exchange and automatically dial 300 without 01. Alternatively, if they wish to ring an Orpington number they forget they have first to dial 66, and only dial the five digits.

I know of two old age pensioners who have been got out of bed on many occasions in the early hours of the morning to answer the telephone to people who are ringing up a doctor on the Foots Cray exchange whose number begins 300–25 and two more digits. If the 100 or so people on the Orpington exchange with numbers beginning with 300 could be switched to 301 or 302 they would not be worried by agitated people ringing Foots Cray from Orpington and forgetting to dial 01 first. The people who have been bedevilled with calls for the doctor have asked and asked about this and have been told not to be stupid, to go away and forget it. This may be a small matter to my right hon. Friend, but to these 100 or 200 local constituents it is an everlasting misery.

My right hon. Friend has asked for a great deal of money. I hope that he will use his initiative and ability to see that the postal service is restored, so that we have real first-class mail. I hope ere long he will give us a much larger proportion of private lines rather than the shared ones which bring embarrassment and delays to people who need private lines because of the nature of their jobs.

10.57 p.m.

Mr. John Golding (Newcastle-under-Lyme)

I welcome the increase in borrowing powers. I refer the House to a Press statement of the Post Office Corporation of 1st October, 1969, which said: The Board of the new Post Office Corporation will prepare and complete a broad development plan by mid-1971. It will then put into effect over the following five years this blueprint for the Post Office of the future. This statement also referred to the greatest asset of the new Corporation being the loyal staff, the 42,000 people who are the new Post Office Corporation. It also revealed that there would be a 50 per cent. increase in the number of telephone connections in the coming five years without an increase in staff.

Where is that broad development plan? What has happened to the loyal staff? Can the Post Office now rely on ever-increasing labour productivity? All of us realise that the staff of the Post Office face the future now with less confidence than they did on 1st October, 1969, and many of them then were apprehensive about the loss of Civil Service status.

The years 1964–70 were relatively good years for the Post Office. Despite what the right hon. Gentleman and the Prime Minister would have people believe, the Post Office was far from being broke when the Government took office. The last time the Post Office made a loss was in 1956–67, when the right hon. Member for Wallasey (Mr. Marples) was Postmaster-General. After those days, it began to recover. I say that in joke, but there is a myth that at one time things were bright and now are much worse.

In 1964, the Post Office made a profit of £20 million; in 1965, it was £40 million; in 1966, it was £44 million; in 1967, it was £39 million; in 1968, it was £44 million; in 1969, it was £36 million. Those were the overall surpluses. There have been massive surpluses on telecommunications. That is not surprising when one looks at the productivity record of telecommunications.

I keep asking the right hon. Gentleman to announce loudly the productivity achievements of telecommunications. I wish he would do the job himself. Since 1964, over 41,000 rank and file engineering jobs on the telecommunications side alone have been saved as a result of the union's initiative in productivity bargaining. There are now only about two-thirds of the staff that would have been needed had the union not taken that initiative. Productivity has increased by 8 per cent. per year compared with 2½ per cent. national average. This is something of which the members of my union, the Post Office Engineering Union, are proud.

There was a revealing Answer recently. I do not know what prompted the hon. Member for Wembley, South (Sir R. Russell) to put the Question down, but he asked what was the increase in prices in telecommunications between 1964 and 1970 and how much of that increase had been contributed to by wage increases. The Answer was that prices increased by only 8 per cent. and of that 8 per cent. only 27 per cent. was due to increases in wages. That is to say, wage-cost inflation in telecommunications was .03 per cent. during the years of the Labour Government. That is a record of which we can be very proud.

Profitability has come not only from changes in working practices, which have not been easily introduced; it has also come through a massive increase in investment. When I first prepared speeches for Post Office debates back in 1960–61, the investment figure was £94 million. That was in the days of the dynamic Tory Administration before 1964. Today the Minister is able to tell us about sums amounting to £400 million. It is clear that between 1964 and 1970 a revolution took place within telecommunications because for the first time Ministers took their jobs seriously in the matter of investment. Such sums as £400 million a year are massive and they need public control. I do not want to go over the arguments that I adduced in the debate on the Committee of Public Accounts on 16th November, but I argued at that time that the Public Accounts Committee was right to call for continuing scrutiny of Post Office investment because the figures were so large.

I should like to refer to the arguments put to me in that debate by the Financial Secretary to the Treasury, whom I am glad to see on the Treasury Bench tonight. He referred to the "constant stimulus" of setting financial targets. He referred also to the commercial accountants, Cooper Brothers, and Touch Ross Bailey and Smart. He also mentioned the Select Committee on Nationalised Industries. None of these is appropriate to the problem of assessing the correctness or otherwise of Post Office investment because the decisions which are taken are technical decisions, and these bodies are not appropriate to examine the type of technical decisions which are taken in the Post Office.

The target setting is a laughable exercise. Hon. Members such as my hon. Friend the Member for Westhoughton (Mr. J. T. Price) can tell the House of the Select Committee on Nationalised Industries Report on Ministerial responsibility, and of the Report which has just been made on the British Airports Authority. They can speak of the cynicism within the Select Committee towards target setting. In the case of the Post Office, it began with "Think of a number and halve it." Last year the system was changed. My right hon. Friend the Member for Wednesbury (Mr. Stonehouse) took the figure of 8½ per cent. and increased it to 10 per cent. in order to increase self-financing. It is a most arbitrary piece of mumbo-jumbo. The quicker that the Government look again at target setting, the better it will be for each of the nationalised industries.

Commercial accountants are not really appropriate. We are not charging the Post Office officials with dishonesty. We are not concerned with a check of the books. This is the mistake that was made in the case of Rolls-Royce. It is the technical decision, the technical future, that really requires assessment. We do not need an examination of the books to see whether anything is being fiddled. I am very sorry to have seen the ending of the Post Office E.D.C. There was a body that was doing a very useful job in making assessments of developments within telecommunications.

I will not refer again to the problems of people who are waiting for telephones because private manufacturers fail time and time again to deliver on dates that they have promised. Neither is it necessary to draw attention again to the declining griup that the telecommunications equipment industry has on world trade. I am content to echo the sentiments expressed by my hon. Friends and to point out that, apart from certain commercial difficulties like increasing the calling rate, the Post Office's big problem at the moment is to regain the loyalty of its staff and to give leadership to its staff. It has crumbled. I am not surprised when my post is late. Morale is lower in the Post Office today than it has ever been. We do not want to anticipate the arguments that will be put to the Committee of Inquiry, but many of us associated with the Post Office unions have been disgusted with the behaviour of the present leadership of the Post Office. We cannot bring ourselves to persuade our people, as we persuaded them between 1964 and 1970, to accept changes, to drive on towards greater productivity, and to do the best that they can in the knowledge that their efforts will be rewarded. We cannot do that because we see them facing a Government and an employer who are determined that they will not get a fair deal.

11.12 p.m.

Mr. John Gorst (Hendon, North)

I see this debate as an opportunity to give a slight tug to the tail of the sacred cow beloved by hon. Gentlemen opposite. I assure them that my intention is not to milk that sacred cow. It is to make some reference to the borrowing powers of this nationalised industry.

I ought perhaps to declare a slight interest in this matter. I was the founder of a telephone users' association and, until last year, I acted as its secretary. It is a non-s profit-making body and is supported by members of all parties.

I am not concerned with the Post Office's vested interests as a monopoly supplier of labour, even though it slipped a little in its monopoly during the recent postal strike. Nor am I concerned with its monopoly position as a purchaser of equipment. My concern is with what I think will be in the best interests of the consumer.

The Post Office needs to borrow an additional £500 million. I suggest that some of the money should be obtained from private sources. The policy of this Government is to disengage from industry wherever possible in the interests of efficiency and of satisfying the requirements of the consumers, whether they be in the public or the private sector of the community. In view of the mounting numbers of telephone users, the private sector should be given the opportunity of entering into the supply of some of the capital requirements of the postal and telecommunications services.

There are a number of reasons why this is desirable. First and foremost if we could have an element of private capital involved in the telecommunications service it would act as a yardstick by which comparison of what is done in the public sector could be made and it would also act as a form of discipline. Furthermore, it would enable some of the possibilities to be excavated more quickly than they are nowadays by the slow-moving research carried out by the Post Office.

Above all, and this is the most important reason, it would be a more appropriate proposition for private capital to be taking the risks inherent in any rapidly-developing technological industry. One of the major drawbacks which this country's telecommunications service has had to face throughout past decades under Governments, both Conservative and Labour, has been the fact that equipment which has become obsolescent has remained in use simply to avoid the apparent wastage that would be involved if it were taken out of use.

It is not appropriate for taxpayers' money to be used to take high risks in a technologically developing area. This is a proper area for private money to be put at risk. I ask my right hon. Friend to deal with this. Has he considered that some of the £500 million which is needed could come from private sources? If he has considered this and rejected it at the moment could he give some indication that he is considering for the future, if not necessarily in the next year at any rate by 1973 when we shall be considering the next borrowing powers Measure, whether some of the capital requirements voraciously required by this growing industry could be obtained from private sources?

The position is that we are requiring more and more capital for this rapidly-growing industry and unfortunately, as the experience of consumers shows, the more we put in the more we succeed in marking time. There is an inadequate amount of capital available for all the unexplored, uninvented and development possibilities. This is the area in which I urge my right hon. Friend to give consideration to the use of private capital.

Mr. Speaker

Mr. Chataway.

Mr. J. T. Price (Westhoughton)

On a point of order. I wish to take part in this debate. I have risen in my place since the beginning of the debate and I have something of substance to offer to the House. I claim the right to do so, although the hour is late. I must apologise to the House for that reason, but it is not my fault that I am called late in the evening.

Mr. Speaker

There is a time limit and the Minister wants to reply. I think that the House would like him to do so. No doubt if the hon. Member could confine himself to about two minutes then the Minister will allow him to speak.

11.19 p.m.

Mr. J. T. Price (Westhoughton)

I am grateful. I will be brief, although I am always provoked into speaking for longer than I intend. This is the end of an arduous day for some of us who have been here since early this morning. I submit that, although any Minister who comes to the House at any time of day or night for such large sums as £500 million must be prepared to run the gauntlet of criticism from all parts of the House, the right hon. Gentleman has no right to complain if I put to him a substantial point, even if it is late and even if I am limited by the Standing Order.

In submitting his Order he has in his usual fluent and good-humoured way said that he expects the Post Office to incur a loss of the order of £70 million. He did not say whether this was on the domestic side of the Post Office or on the telecommunications plus domestic side.

My recollection, as a member of the Standing Committee which considered the 1969 Measure in depth, and as a member of the Select Committee on Nationalised Industries, when I made myself familiar with some of the figures involved, makes with me believe that the Minister's earlier statement in support of his Order that 50 per cent. of the Post Office's capital requirements has to be produced from internal resources, is a very serious denial of sound principles of public finance.

If the forecasts of the Post Office or of any Government Department require current revenue to produce such a high proportion of capital for renewal of capital works, current resources are being seriously overcharged. If the right hon. Gentleman would be good enough to spend an hour with one of the classic books on public finance, written by our late lamented colleague and friend, Dr. Hugh Dalton, he would find that that view has never been seriously challenged.

I support what the hon. Member for Hendon, North (Mr. Gorst) has said about the source of financing these great industries. I sometimes run the gauntlet of being slightly heretical on this side in speaking as did the hon. Gentleman at perhaps greater length, and quoting Italian and other authorities in support of my argument. On another occasion, I should like to develop my arguments more cogently, rationally and fluently than time has permitted me this evening.

11.22 p.m.

Mr. Chataway

I make no complaint about the cogency, the fluency and the rationality of the argument advanced by the hon. Member for Westhoughton (Mr. J. T. Price). The figure I quoted was for posts. I said that a revenue loss of over £40 million was expected in any case during the current financial year, 1970–71, and that the effects of the strike had added £30 million, to make a sum of £70 million.

The hon. Gentleman spoke of a self-financing ratio. A target was set by my predecessor, the right hon. Gentleman the Member for Wednesbury (Mr. Stone-house), and I am sure that the House would not think it unreasonable, because it is based on a 10 per cent, return on capital.

My hon. Friend the Member for Hendon, North (Mr. Gorst) argued persuasively that the Post Office ought to go for perhaps some part of its capital requirements to the market. He will know that the Government as a whole are looking at the nationalised industries with a view to promoting just such a policy. But it will be appreciated by the hon. Member for Westhoughton and other hon. Members that a 10 per cent. return on capital can hardly be said to be an excessive return in a rapidly expanding industry such as this, of a technologically advanced nature. If one were seeking to provide capital for the Post Office, one would certainly have to look at that figure.

Nearly all those who have spoken have drawn attention to the very large sums involved, and to the difficulties which the Post Office almost inevitably faces in meeting the rapidly exploding demand. One can appreciate the scale from four figures: roughly speaking, the number of telephones in 1950 was 5 million; in 1960, 8 million; in 1970, 14 million, and by 1980, the last estimate—which is now reckoned to be probably an underestimate—was 34 million. So we are at the moment in a period of very rapid expansion indeed.

My right hon. Friend the Member for Chislehurst (Dame Patricia Hornsby-Smith) drew attention to the difficulties that have been faced by her constituents. There are two broad reasons for the delays about which she and other hon. Members complained. The first is that, all the time, forecasts of demand are being exceeded in reality. To give just one figure, the forecast made in 1969, for example, of the supply of connections in 1970–71 was 1,030,000. In reality, the number of connections which are likely to have been made during the year 1970–71 is 1,150,000. So the Post Office succeeded, by a very substantial margin, in exceeding the estimated number of connections. But despite that fact, during the year there was a growth in the waiting list from 110,000 to 140,000. The growth is largely due to the fact that manufacturers are being asked consequently to do more than it was expected would be required of them.

The second reason is that there are technological difficulties associated with the present transition from strowger to crossbar to electronic exchanges. There are unresolved technical problems here. There would be no point in trying now to apportion blame between the parties concerned. There are those who would argue that the wrong decision was taken by the Post Office in the early 1950s initially, in trying to go straight from strowger to electronic by-passing the intermediate technology of the crossbar system. That is an argument that is still hotly contested on both sides. There are difficulties which everyone in the Post Office would readily concede are by no means the fault only of the manufacturers. But the need for expanding output is very readily accepted on all sides.

The hon. Member for Manchester, Openshaw (Mr. Charles R. Morris) and the hon. Member for Newcastle-under-Lyme (Mr. Golding) referred to the effects of the postal strike. I certainly do not want to be drawn into any argument on the details of the dispute at a time when the Committee of Settlement is looking into these matters.

However, I was asked by the hon. Member for Manchester, Openshaw whether the loss of £27 million on the postal side of the Post Office as a result of the postal strike would have an effect upon the future estimates of the Post Office. Clearly it will. He asked whether I was justified in forecasting that if the original demand of the Union of Post Office Workers for ½19 per cent. had been met, this would inevitably have meant a nine old penny stamp next year. The hon. Gentleman will know that, in broad terms, to have met that particular increase at that time would have meant a direct increase of costs of £37 million, with consequentials some £50 million, since there could have been no further tariff increases this year, a major tariff increase having been already effected. This would have meant £100 million to be met by next year, which would have involved an increase of two old pence, or one new penny. Those figures are to be contrasted with the £27 million which the hon. Gentleman mentioned.

I was sorry that the hon. Gentleman used this debate for an attack upon an official of the Post Office. I resist strongly some of the implications of his remarks. I draw his attention to the fact that there was a" no victimisation" agreement to which the official to whom he referred was undoubtedly drawing the attention of employees.

The hon. Member for Barons Court (Mr. Richard) asked me a number of questions, and I hope that by nods and shakings of the head at the time I was able to give him a number of answers.

It being half-past Eleven o'clock, Mr. SPEAKER put the Question, pursuant to Standing Order No.3 (Exempted business).

Question agreed to.

Resolved, That the Post Office (Borrowing Powers) Order, 1971, a draft of which was laid before this House on 24th March, be approved.