POST OFFICE (BORROWING POWERS)

HC Deb 02 December 1974 vol 882 cc1289-318

11.40 p.m.

The Under-Secretary of State for Industry (Mr. Gregor Mackenzie)

I beg to move, That the Post Office (Borrowing Powers) Order 1974, a draft of which was laid before this House on 11th November, be approved. The order would increase the limit of the total indebtedness of the Post Office from £3,800 million to £4,800 million. These are the limits laid down by the Post Office (Borrowing) Act 1972, under which the order is laid. When I am asking for an extra £1,000 million, it is only

Office employees have nothing to fear as of this moment about their pensions being intact. That is the main point that should be emphasised in this debate.

Mr. Stanley

On the pension fund, I should like to raise an important matter to which the Minister has not referred at all. Will he tell the House—[Interruption.]

Question put:—

The House divided: Ayes 43, Noes 11.

Division No. 20.]	AYES	[11.30 p.m.
Bagler, Gordon A. T.	Ellis, John (Brigg & Scun)	Penhallgon, David
Benn, Rt Hn Anthony Wedgwood	Ford, Ben T.	Roberts, Albert (Normanton)
Boardman, H.	George, Bruce	Smith, Cyril (Rochdale)
Buchanan, Richard	Golding, John	Snape, Peter
Campbell, Ian	Harrison, Walter (Wakefield)	Watkinson, John
Carmichael, Nell	Hughes, Rt Hon C. (Anglesey)	Weetch, Ken
Carter-Jones, Lewis	Leadbitter, Ted	White, James (Glasgow, P)
Cocks, Michael (Bristol S)	Lyons, Edward (Bradford W)	Whitehead, Phillip
Cox, Thomas (Wands, Toot)	McElhone, Frank	Wise, Mrs Audrey
Cralgen, J. M. (Glasgow, M)	Mackenzie, Gregor	Woof, Robert
Cryer, Bob	Magee, Bryan	Wrigglesworth, Ian
Dalyell, Tam	Maynard, Miss Joan
Dean, Joseph (Leeds West)	Noble, Mike	TELLERS FOR THE AYES:
de Freitas, Rt Hon Sir Geoffrey	Oakes, Gordon	Mr. Joseph Harper and
Dormand, Jack	Palmer, Arthur	Mr. Donald Coleman.
Dunn, James A.	Parry, Robert

NOES
Clarke, Kenneth (Rushcliffe)	Mayhew, Patrick	Tebbit, Norman
Eyre, Reginald	Montgomery, Fergus	Young, Sir George (Eallng)
Gow, I. (Eastbourne)	Renton, Tim (Mid-Sussex)
James, David	Shaw, Giles (Pudsey)	TELLERS FOR THE NOES:
Marshall, Michael (Arundel)		Mr. John Stanley and
		Mr. Tom King.

right that we should spend some time considering some of the serious points about Post Office services.

It has been the long-established practice of the House to set limits to the borrowing of all nationalised industries which may be extended alternately by order and by fresh legislation. The limits are customarily calculated to provide for a full-scale examination, such as I hope we shall have tonight, of an industry's financial needs and the operational background every four years or so, with an interim debate at the mid-point of this period. This present occasion is one of the interim debates, and, as it happens, is taking place exactly two years after the passage of the Post Office (Borrowing) Act.

In the Second Reading debate on the Act the right hon. Member for Bournemouth, West (Sir J. Eden), who was then the Minister for Posts and Telecommunications, said that the net new borrowings of the Post Office had in recent years been on a rising scale and that they were expected in 1972–73 to exceed £400 million. With the continuing growth in capital requirements then foreseen, the net borrowings in the next four or five years were expected to lie between £400 million and £500 million a year. Provision was, therefore, made in Clause 1(1) to increase the borrowing limit by £2,000 million, and it was expected that this would be sufficient for 1972–73 and the next four years. The increase in the borrowing powers was divided into two equal tranches, and the further approval of the House is needed before the second tranche can be granted.

It so happens that borrowings have followed fairly closely the pattern forecast by the right hon. Gentleman. The Post Office borrowed £423 million in 1972–73 and £526 million in 1973–74. Borrowing in 1974–75 is expected to be considerably higher, but there are special reasons for this, and the underlying trend is similar to that forecast in 1972. So we may expect next tranche of borrowing to last well into 1976, and further legislation will probably be required during the financial year 1976–77.

However, although the rate of Post Office borrowing has not departed very far from the long-term trend, it would unfortunately not be true to say that this was because the Post Office's financial affairs were in a healthy state. The borrowing requirement is determined by a number of factors. The underlying need is to finance the Post Office's investment programme, and the indebtedness of the Post Office should grow in line with the expansion of the business, just as a firm's issued share capital might in normal times be expected to increase as the firm grew.

The capital investment of the Post Office is, as hon. Members will know, regulated by the Government as part of the general control of public expenditure. The right hon. Gentleman said in the debate I have already referred to that, whilst expenditure in the current financial year was expected to be about £700 million, the Post Office had forecast that over the five years from March 1973 more than £4,000 million of further investment will be needed—in other words, an average of over £800 million a year from 1973–74 onwards.

Unfortunately, events turned out differently. The energy crisis in the last financial year, and the three-day working week, meant that the Post Office was not able to achieve its planned level of investment, and spent £723 million against the originally planned £739 million. In physical terms this means that 1,460,000 new telephones were installed, as opposed to the planned level of 1,670,000. The investment programme for 1974–75 was also disrupted. The three-day week would have been enough to cause some reduction in investment in the current year, but on top of this the then Chancellor of the Exchequer slashed the programme by 20 per cent. in December 1973. Only by a death-bed repentance some time during the General Election campaign of February this year, did the right hon. Gentleman reduce the cut to 14 per cent. We were grateful that he did so, even though 14 per cent. was not an easy figure. We were able to reduce that figure still further, from 14 per cent. to 12 per cent., for the second half of this year. I should like to pay a warm tribute to the management and staff of the Post Office, and in the supplying industry who have coped with this very difficult problem which caused trouble, especially in the assisted areas.

This, then, is the story of the investment which has been financed by the first tranche of borrowing under the Post Office (Borrowing) Act. I am not at the moment in a position to talk in detail about the investment to be financed by the next tranche. Post Office investment is considered together with other public expenditure programmes in the light of the Government's social and economic priorities and of the level of Government resources available in the economy.

I have already indicated the prospects for the rest of 1974–75, which will, of course, be financed out of the next tranche. The levels of investment for future years will be contained in the annual Public Expenditure White Paper. It is in practice impossible to recover from the sharply reduced level of investment in a single year. However, we hope that over the next few years it will be possible to recover from the set-back. The Post Office aims to continue to pursue its objectives of expanding and improving the telephone network and other telecommunications services, to introduce new services, and to replace obsolete equipment with modern designs.

Special efforts will be made to improve the international services, and top priority is being given to services connected with the exploitation of the British sector of the Continental Shelf. At the same time, efforts will be made to improve the service by converting the few remaining manual telephone exchanges to automatic working, reducing the proportion of shared lines, and completing the coverage of subscriber trunk dialling.

Although dwarfed by expenditure on the telecommunications side, the postal business has a substantial capital investment programme which is equally essential if existing services are to be maintained, and which is also aimed at increasing the efficiency of the business. As I have already indicated, levels of investment for future years will be contained in the Public Expenditure White Paper. I can say tonight, however, that the larger part of the postal share of the programme will need to be devoted to the provision of accommodation, mainly to replace obsolete buildings which are seriously deficient in space and to give service in new areas of population growth. Investment will also be required for the replacement and growth of the motor vehicle fleet and for office machines.

The remainder of the programme is expected to be spent on mechanising the sorting process for both letters and parcels. The postal business is labour intensive, with staff costs accounting for three quarters of the total cost of running the service.

It is this heavy dependence on manpower that causes the postal service to be particularly badly hit at times and in areas where labour is scarce, as many of its users have been aware over recent months. While it is too early to reach any firm conclusion about the results of the special pay review for Post Office staff which the Government sanctioned earlier this year, there is some sign of improving recruitment.

Technology cannot solve the problems of the postal business. The only way of getting a letter delivered is for one man to take it up the street, come hail, rain or snow, and put it through the letter box. But mechanisation of the sorting process offers significant manpower savings over the traditional manual methods. This in turn should make it easier for the Post Office in future to avoid the chronic staff shortages which recently have so disrupted the quality of service.

The programme envisages substantial progress towards the completion of letter and parcel mechanisation. However desirable this programme of mechanisation may be, hon. Members may be aware that some installations have not yet been brought into use. This—along with other matters—is the subject of negotiations between the Post Office and its unions, and I hope that a settlement will be arrived at that will be to the benefit of the Post Office, its staff and its customers.

I have spoken at some length about investment because of its importance in determining the standard of service given to the customer, and because of the close connection between investment and borrowing. To complete the story, however, we must also consider the Post Office's ability to raise finance from internal sources. That constitutes the third side of the triangle. Traditionally, the Post Office has been set financial targets under which it raised about half its financing needs from internal resources—that is, from depreciation and from retained profits. However, the last targets lapsed in April 1973, and were not renewed.

At the same time, the previous administration's policy of holding down the prices of nationalised industries has meant that losses have been recorded by the Post Office from 1972–73 onwards, and the self-financing ratio has suffered accordingly. I am glad to say that the contribution being made from depreciation still outweighs the losses, but there is unfortunately a great deal of leeway to be made up.

The Post Office does not at the end of the day have to finance its deficits from borrowing, because successive Governments have thought it right to pay compensation for price restraint. We have just had a debate on an order to pay compensation to the Post Office, and the House will, therefore, not expect me to deal at length with the subject of compensation in discussing the borrowing powers order. I will confine myself to the effect of compensation on borrowing.

There are two effects which need to be noted. First, there is a considerable time lag between the incurring of the deficit and the payment of compensation. That means that the Post Office has to take out a temporary borrowing at the time of the deficit to cover the time lag until compensation is paid, and that is the special factor which has inflated borrowing in 1974–75. The Post Office took a bridging loan of £120 million from the National Loans Fund earlier this year, which will be repaid when the compensation for 1973–74 is paid.

The other effect is that compensation does nothing to alleviate the basic problem of under-pricing, so that the underlying deficit in one year is carried forward into the following year and any tariff increase has to combat both the inherited deficit and new increases in costs. In this way deficits increase very fast in the absence of corrective tariff action. The Post Office made a profit in 1971–72, but in the following year it incurred a deficit of £64 million. By 1973–74 the deficit had doubled to £128 million, and in the current year we expect it to be even greater still.

The question of the reduction of the deficit which I dealt with in the previous debate is not, however, central to the increase in borrowing powers, since it remains Government policy to make up, by means of compensation, deficits which are the consequence of price restraint. The new borrowing envisaged in the order will, therefore, be used for the maintenance and expansion of Post Office services on the lines I have outlined, and I am sure that the House will wish to approve it, if for no other reason than that without it the Post Office would within a month be unable to carry on its normal business. I therefore commend the order to the House.

11.55 p.m.

Mr. Michael Heseltine (Henley)

The Under-Secretary of State was right in setting the context of the debate. He made it clear that this is the interim debate which comes once every two years and that every four years there is a major review of the Post Office's activities. But I wonder whether the House feels— perhaps the Minister shares our anxieties—when one considers the scale of opera- tions—the number of people, the degree of capital investment, the complexity of the problems—that Parliament is able to exercise the sort of control over the sums and activities involved on that sort of scale in a debate lasting one and a half hours at two-yearly intervals.

I do not wish to criticise the hon. Gentleman for the inadequacy of the briefing he may have received, but perhaps the debate reveals the doubts and anxieties we have. The House will have listened to the answers he gave, and its judgment would be that a large number of questions were asked in the last debate which have not been answered. Yet there is nothing that we on this side of the House can effectively do to get the answers. Now, another two years is to pass before we have another of these grand one and a half hour probes into the Post Office's activities, and that is the lot as far as I can gather. I do not wish to pursue the last debate again, but the evidence is sufficiently strong in itself for the conclusions I would draw.

Does the hon. Gentleman believe that he has told us anything tonight on which we can make any sort of judgment as to the way in which the strategy for the Post Office is to be modelled over the time to come? He is right in pointing out the levels of capital investment, which are astronomic by any normal commercial terms, that the Post Office will absorb. That, we understand.

One realises that a considerable part of this will have to be borrowed, and it was always envisaged under the Conservative Government that it would have to be. That is not in dispute. But what the House should be discussing is whether the strategy of the borrowing and the rate at which the borrowing is taken up is right, set in the context of the internally generated resources which the Post Office is capable of producing. It is this side of the equation into which the House is not allowed so much as a peep.

The hon. Gentleman has several times quoted the words of the Chancellor of the Exchequer in the Budget debate, in which the Chancellor said that his strategy is to move towards the financial viability of the nationalised industries— a target I would praise—as fast as possible. The hon. Gentleman may agree with me when I say that I do not know what that means—whether it is to be done this month or next month or this year or next year or over the next five years. I do not know how the figures are to be broken down between the postal services and the telecommunications services. I do not know whether they are to be broken down between one class of user and another. In no way are we in the House invited to play any part in that deliberation.

That the deliberation is proceeding we all know. We know that all the arguments are available for scrutiny by Ministers. We know that the Post Office has the evidence. But we do not have it.

Mr. Gregor Mackenzie

How does this differ from what has happened in past years?

Mr. Heseltine

That is a perfectly fair intervention. I am only making the point—I think that the hon. Gentleman agrees—that the House is playing no part in that process. In the scenario which the hon. Gentleman outlined, of one and a half hours of debate every two years, there is no way in which it can play a part. That is my complaint. I have no doubt that it has been made with great eloquence by members of the Government party when they sat on this side. The reality is that not only are these sums of money very large but they are, from Parliament's point of view, uncontrolled.

Mr. Ian Wrigglesworth (Thornaby)

Will the hon. Gentleman make clear whether he wants the Post Office run by the House or whether he does not?

Mr. Heseltine

I want Parliament to have an opportunity to debate and to scrutinise the problems which we are discussing. In reality, we have no such opportunity. Of course, everyone knows— although no one has yet found a way of making it happen—that the ideal arrangement would be for us here in the political forum to determine the strategy and the policies and for management to carry on the executive work. But in reality it is not like that, as anyone who has ever held a Government post knows very well. In fact, interference from Ministers on a day-to-day continuing basis is deep and constant, and we all know that there is no way by which, in the context in which we arrange our affairs, Ministers can be persuaded to do anything other than inter- vene constantly from day to day, being pressed by hon. Members on both sides to do so ever more deeply.

But the harsh reality is that, while we press for intervention, we are never allowed to be part of the process of deciding the consequences of the intervention which we seek, and no clearer indication of that could one have than tonight's debate, in which none of the options has been put to the House, none of the strategy, none of the figures, none of the costs, and none of the rates. None of that has been made available, although all of it is available to Ministers in charge of the Post Office.

It is not only a question of the figures. There is the associated question of the standard of service. My right hon. Friend the Member for Bournemouth, West (Sir J. Eden), when the Minister in charge, requested the Post Office to commission a report setting out the options which could be pursued by the Government or by the Post Office, whichever was responsible for carrying out the decisions. That was a report in depth examining the quality of service, examining the options, examining what services would have to be withdrawn in a given range of circumstances. That report was available to the Minister in January this year, and, I dare say, available to the Post Office Users' National Council. But it has not been available for public scrutiny, and there has been no action as a consequence of that report.

What is the precise situation regarding that report which was in Ministers' hands in January this year? It has not seen the light of day, and at present it is identified only by the rumours which are published or leaked occasionally with regard to, for instance, the withdrawal of Saturday postal services or the like. Why has the Minister not given us any indication of what is in that report? Why did he not even refer to its existence in his speech tonight?

I welcome the suggestion by the hon. Member for Thornaby (Mr. Wriggles-worth) that we get too much Government intervention. I admit that that rings a loud bell with me, but it leads me to my third question. I want to know how much of the borrowing which the Minister is seeking could be used, or is planned to be used, for the purchase of private sector contractors to the Post Office. There are two questions. First, could the money be used, for example, in the way that ASTMS has suggested, encouraged, I believe, by the right hon. Gentleman the Secretary of State for Industry; that is, for the purchase of contractors in the private sector? Plessey has been named. Can the money being voted tonight be used by the Post Office for the purchase of private sector contractors? Are there any plans that it should be so used?

My next point was drawn to my attention by the Book Development Council. I have a personal interest to declare in the matter in that I have a publishing concern, and, although it is not a book publishing concern, it is related to the general issues I wish to raise. Since the matter has been widely circulated it is forgivable that I should do so.

The problem is that the industry may be faced with substantial increases in the cost of postage for books overseas. The industry is a major foreign exchange earner and has a substantial record internationally for the sale of books, particularly books which have an academic interest. The whole concept of Britain's influence abroad cannot be dissociated from the part that the industry has played.

Governments, through the UPU and associated post offices, have agreed that a balancing charge should be imposed where there is an imbalance between two countries in the weight of postage received and the weight of postage delivered in return. The effect of this will be greatly to increase the cost of posting books to countries with which we may hold an unfavourable balance simply because of the success of our book publishing industry. As a result, the publishers may be invoiced with the charge the Post Office will have to pay to cover the differential, and this will put the industry at a disadvantage compared with less successful publishing industries in other countries.

Since these regulations have a quasi-governmental nature, is there not a case for this charge not being passed on to the industry in view of the adverse effect that the charge could have on the industry's competitive position?

My next point concerns recruitment to the Post Office. With the wave of terrorism in this country, few people can ignore the fear that arises from postal deliveries, the sorting of mail and so on stemming from this appalling phenomenon of modern society. Recruitment is never easy in the Post Office, but it will not be helped by the additional risks and fears that these gallant men have to face.

How are the negotiations progressing to try to persuade the union that there is now a need to move to a greater degree of mechanisation and to introduce part-time working and the employment of women? Will the Minister give more detail about the precise date of the negotiations? Can he say whether the current review he is undertaking will seek to achieve a genuine agreement which will lead to the sort of productivity the industry needs as opposed to increasing wages without increasing productivity?

My concern for the industry is general. I doubt whether the House will feel satisfied that the time allocated for this debate has been sufficient to permit a detailed probe of the dilemmas facing the Post Office. The general conclusion that must be drawn is that if we seek to understand the difficulties of running British industry we should learn the moral from this situation, that we have not the time or the skill in Britain to extend the areas of Government ownership and control over industry. No better example can be found than in tonight's debate.

12.10 a.m.

Mr. John Golding (Newcastle-under-Lyme)

I hope that this debate will not be followed, as was the last debate, by Opposition Members trying to put the pay and superannuation of Post Office employees at risk. [HON. MEMBERS: "Rubbish."] That was a disgraceful vote. To try to deny the possibilities of pay and financial stability to the Post Office Superannuation Fund was one of the most disgraceful things I have heard in a debate in the House for many years.

Mr. John Stanley (Tonbridge and Malling)

Will not the hon. Gentleman accept that the sole reason for the Division at the end of the last debate was the Minister's failure to reply to the question of whether £98 million of taxpayers' money was within the statutory provision of the 1974 Act? That was a legitimate question, which in no way jeopardised the superannuation entitlement of members of the Post Office.

Mr. Golding

The argument in the last debate was that the Post Office staff should not have been included. A year ago those staff were troubled about the stability of their pension fund, and it took a great deal of effort on our part to persuade them that there was no reason for that fear. They will look askance at the Opposition's arguments tonight, followed by that vote. I regard the Opposition's actions as despicable and irresponsible.

I must tell the Shadow Minister, the hon. Member for Henley (Mr. Heseltine), who has demonstrated tonight that he has come new to Post Office affairs, that we have not been restricted over the past four to six years to debates every two years on the matter of Post Office finance. The order that we discussed in the previous debate arose from a Bill debated in December last year and January this year. We then had long debates on the subject of Post Office finance and prospects. It is not true that these matters are discussed at the intervals which the hon. Gentleman suggested.

I expressed disappointment earlier that the two orders had not been taken together, because the subject is indivisible. If it has been the too stringent restriction on tariff increases that has led the Post Office to be entitled to compensation, and has led to the borrowing powers order, I would prefer to have neither order. I would prefer to see a greater degree of self-financing in the Post Office, avoiding the necessity for the compensation order and for borrowing such large amounts.

We welcomed the statement of my right hon. Friend the Chancellor of the Exchequer that there would be a return to commercial pricing in the public sector. I wish that we could have had that statement from the Treasury last December and January. Had the Treasury at that time adopted that policy there would have been no nit-picking now at the amounts that will be involved in the years to come.

Mr. Mike Noble (Rossendale)

Is my hon. Friend aware that in the sixth paragraph of page 113 of the Conservative Campaign Guide for the February General Election the Conservative Party boasted that it used the publicly-owned industries to hold down prices?

Mr. Golding

I cannot say that I have read the Conservative Campaign Guide. It is not necessary in my constituency to respond to such literature. I can only commiserate with my hon. Friend for having to resort to such reading. Perhaps his electoral situation is more difficult than mine.

For too long the Post Office has been providing postal and telecommunications services too cheaply to commerce, industry and the community. Both services and staff have suffered because the Post Office has been forced to subsidise private industry and commerce. The extent of the difference in price rises is not generally appreciated. We are often slow to realise that while oil prices over the past 10 years have risen by 907 per cent. the increase in telecommunication tariffs has been 25 per cent. Conservative hon. Members should note that fact. They should acknowledge it even if they do not applaud it. That relatively small tariff increase is due not only to Government policy but to the massive increase in labour productivity—namely, 60 per cent. over the past 10 years, an average annual increase of 6 per cent. I should be pleased if the hon. Member for Henley would tell me in which private industry there has been that sort of increase in labour productivity.

Mr. Heseltine

The first that comes to mind is agriculture.

Mr. Golding

I am pleased to hear that agriculture has done so well. Perhaps agriculture is not an industry. I rephrase my question. Which manufacturing industry has achieved such impressive labour productivity? Which employer of technical labour has achieved that sort of increase in productivity? I think that the Opposition would be forced to think first of other nationalised industries. They would be hard put to it to find an industry within the private sector which could match the increase in productivity of the telecommunications services.

It would be better for the hon. Member for Henley openly to acknowledge the achievement of the telecommunications services rather than to sneer. He must acknowledge that that labour productivity has been achieved as a result of the acceptance of changes in practices on the part of the staff and of productivity bargains.

There have been much lower price increases. In the past 10 years price increases in private industry have been approximately 90 per cent., but in telecommunications they have been about 25 per cent. The two characteristics of lower charges and higher productivity have been the hallmark of telecommunications for the past decade. It is not surprising that both staff and management get upset when they are attacked by private enterprise, which they subsidise, because the Post Office has lost money or because it is supposed to be inefficient. This is the irony of the publicity war. Private industry, subsidised by the Post Office, increasing its prices more rapidly and having a much lower level of productivity, then attacks the Post Office workers for inefficiency. It is ironic that we on this side of the House should have to put up with this state of affairs. When low prices lead to losses and when attacks are made from hon. Members opposite and from the CBI because of these losses, staff morale slumps. Morale is affected, and that is one of the incalculables when one tries to calculate the financial loss of any Government pegging of nationalised industry prices. Staff shortage can also be a consequence of low pay, which can stem from the building up of these deficits. That is a fact which the hon. Member for Henley must acknowledge.

Of course, there are problems in the postal service. I have received from Mr. Tom Jackson, the General Secretary of the Union of Post Office Workers, a note which says: The Union of Post Office Workers has recently issued a pamphlet on the future of the postal service. It is hoped that this will receive the welcome from the Corporation that it has from business and commerce. The danger is that if these proposals are not accepted the postal service will continue to deteriorate to become increasingly erratic and haphazard to the detriment of British industry and the community at large. I should like the Minister to comment on these proposals of the Union of Post Office Workers, because the union is very concerned that we should restore to Britain the very fine postal service that we once had.

The situation in the telecommunications business is, however, somewhat different, and it is about telecommunications mainly that I want to speak tonight. The hon. Member for Henley declared an interest in books. I declare an interest in telecommunications. As the Minister knows, I am an Assistant Secretary of the Post Office Engineering Union, and so I have an interest in the well-being of telecommunications. The union believes strongly, with the Select Committee on Nationalised Industries, that to have firm planning is essential, and this implies a greater freedom over tariffs than it has enjoyed for some time. It is absolutely essential for growth that we plan, and abandon the stop-start policies.

We welcome the statement in the Chancellor's speech on nationalised industry prices. We are not so keen to hear proposals to restrict public expenditure if that means that there will be restrictions once more on the development of telecommunications. One reason why we have not got the telecommunications service that we deserve in this country is the infliction of the cuts upon us by Ernest Marples in the 1950s and by others in the early 1960s.

I believe that there is a great need for massive investment in telecommunications both for modernisation and for expansion. The size of the system must be increased, and, more important, we must improve its quality. It is desirable that the massive investment be self-financed as much as possible. The Post Office should not be forced to borrow at such high rates of interest. But whether the money for investment be raised from the customer or borrowed from the taxpayer, it must be wisely spent. That means that the Government must concern themselves rather more with certain aspects of Post Office policy.

I am very disappointed with the Government in one respect. Were it not for the esteem in which I hold my hon. Friend the Under-Secretary, I should be expressing myself more forcibly. We do not seem to have made any progress towards a national telecommunications policy. The reply which I received from the Minister recently fell short of perfection, but let us not hold an inquest on that particular reply.

Let me state simply once again that we need a national telecommunications policy formulated and backed by the Government. It is no more the responsibility of the Post Office to draw up a national telecommunications policy than it is the responsibility of the British Gas Corporation to draw up energy policy. If it is important for us to have energy, transport and food policies, it is equally important for Britain, particularly in the 1980s, to have a national telecommunications policy, as the Select Committee on Nationalised Industries recommended, a policy which will work towards an integrated telecommunications system embracing telephony, data transmission and broadcasting. I warn the Minister that if we do not get a response from the Department very soon on this point we shall have to start speaking about it rather more often than we have done recently.

It is most important that we develop data transmission under public control. I went recently to a conference which was opened by the Minister and organised by the "Little Neddy" for data transmission, a valuable body which it is most important that we continue to support. The Post Office speaker put up a vigorous defence of the development of all data transmission under the control of the Post Office. Unfortunately, the enthusiasm that he generated was dissipated by the main speaker from the Department of Industry, whose attitude towards this subject was disappointing. I hope that the Minister will watch the situation very closely.

We do not want the haphazard development of private circuits, nor do we want development except under public ownership and control. That is true also of the cable network. I appreciate that this matter is being studied by the Annan Committee. It is important, however, on grounds of social and economic cost, that cable be developed by the Post Office and that we do everything to see that that development takes place.

I appreciate that I must move on as quickly as possible, but I have been urged by some of my hon. Friends to explain these subjects to them.

One subject which the hon. Member for Henley raised which I cannot avoid is the question of Plessey. It is my understanding that private manufacturing industry—including, one could almost say, Plessey in particular—has failed the nation. One failure has to be given special mention, and, if necessary, the hon. Member for Henley can go to his friends in the City for advice on the subject. It is the failure to provide international exchanges capable of satisfying the needs of customers. At present, it is understood that much needed relief could be provided to customers of international services by the installation of the Swedish Ericsson equipment. It is less costly to run. It is more reliable than British equipment. It consumes half the power. It takes up half the space, thereby saving capital and buildings compared with British equipment.

If the hon. Member for Henley visited Stag Lane, talked to the people who have worked in one building installing Plessey equipment, and compared that with the Ericsson equipment, he would know that in this respect Plessey had failed the nation. In my view, the only reason why Plessey is getting contracts is that it is a British company and the Electrical and Plumbing Trade Union rightly wants to safeguard the work of its members.

We have to be careful in acknowledging that Plessey is failing the nation. It would be better from the Post Office point of view and from the consumer point of view if Ericsson equipment was installed and if Ericsson was invited to this country to make that equipment.

The real answer, of course, if for the Post Office to manufacture its own equipment—

Mr. Bob Cryer (Keighley)

Does my hon. Friend accept that it is not the fault of the ordinary employee at Plessey that the firm is failing the nation, as he put it? It is Plessey's failure to invest sufficient money in research, design and development.

Mr. Golding

Were I to respond to that question, Mr. Deputy Speaker, you would become very anxious—

Mr. Deputy Speaker (Mr. George Thomas)

Order. Since the hon. Member for Newcastle-under-Lyme (Mr. Golding) has referred to me, let me remind him that the debate lasts one and a half hours.

Mr. Golding

I am glad to know that I have still some time left.

As I have said, the real answer is to take the telecommunications equipment manufacturing industry into public ownership, because it has failed the nation. If we cannot take it into public ownership in its entirety, we should make certain that the Post Office is responsible for the production of a substantial proportion of its own equipment.

I have spoken mostly about commercial developments. I add a few words about the attitude of the Post Office to its social responsibility. I have been very disappointed that the Post Office has not supported the voluntary scheme whereby Post Office engineers fitted telephones for the disabled in their own time. At present, people engaged in the voluntary scheme are talking about withdrawing from it because the Post Office refuses to increase its contribution of £12.50, which was fixed when the scheme was first established. I hope that the Minister will do his best to persuade the Post Office to take a different line.

I believe strongly that what is good for telecommunications is good for Britain. Telecommunications are as vital to Britain's growth as investment directly in manufacturing and in roads. They are a vital part of the infrastructure. If we hope to grow, there has to be sufficient investment. I hope that levels of investment will grow. But, as I have argued, I feel that that investment will come from self-financing rather than from compensation orders or increased borrowing powers.

12.35 a.m.

Mr. Tom King (Bridgwater)

I think that I must start by emphasising what my hon. Friend the Member for Henley (Mr. Heseltine) said about the importance of this debate and the rare chances that we get to discuss such an important issue as the whole sphere of the Post Office.

Having said that, I point out to the hon. Member for Newcastle-under-Lyme (Mr. Golding) that many back-bench Members on both sides of the House regard his performance as extremely selfish, in view of the short time available to hon. Members who have sat here for the last two and a half hours, by taking 25 minutes for his speech. The hon. Gentleman must live with his conscience in that respect.

The hon. Gentleman's opening remarks about my hon. Friend the Member for Tonbridge and Mailing (Mr. Stanley) were disgraceful. I respect the hon. Gentleman as a person. We have taken part in debates on Post Office matters on many occasions, and I know of his keen interest. I prefer to attribute what he said to the lateness of the hour and perhaps to the fact that he did not follow my hon. Friend's argument. However, it was a disgraceful slur to imply that my hon. Friend was trying to do Post Office employees out of their pension entitlements.

I have seen the hon. Gentleman stand up for the rights of Parliament and insist that orders should be properly presented. I submit that my hon. Friend was drawing attention to pensions contributions, not merely to the pensions of this year. That was the point. With respect to the Deputy Chief Whip, he got the Division because the Minister totally failed to answer what many of us as Members of Parliament—not as Conservative or Labour Members—felt was a faulty order that had been brought before the House.

If the Minister had answered the question that was put to him—he still has not answered it—we would not be pressing him so hard. I hope that the Minister also takes the House of Commons seriously and respects his responsibilities in this matter. The hon. Gentleman must deal with this point.

This order and the previous one are in a sense interlinked, because borrowing requirements necessarily follow from deficits that have been previously incurred. The Minister has not dealt with the point about how previous years' pensions contributions, which neither side is disputing should be made up, can be slipped into an order which is in consequence of its compliance with the national policy relating to limitation of prices. It is nonsense. I hope that the hon. Member for Newcastle-under-Lyme will concede that point, because it was a disgraceful slur to imply that my hon. Friend was trying to deprive people of their pensions benefits. I suggest that my hon. Friend was merely saying for the good name of Parliament that such benefits be properly accounted for and reported and that they should not be sloughed and mixed up in some slovenly way as though they were involved in the limitation of prices.

Mr. Wrigglesworth rose—

Mr. King

I intend to be brief. The hon. Gentleman has already spoken for quarter of an hour in this debate. When the hon. Member for Newcastle-under-Lyme has a chance to see my hon. Friend's speech I suggest that he may care to write apologising to him about the allusion that he made.

There are two issues interlinked here. The Minister, in his second speech on the first order, made the point that I was seeking to make: that the longer the tariff increases are delayed, the greater the deficit and the greater the need for borrowing power. Therefore, I make no apology for referring to the intervention that I made earlier: that it is a matter of urgency to adjust the tariffs. The longer a tariff is delayed, the greater that tariff increase will have to be. It is, therefore, vital that the matter is dealt with promptly.

Mr. Gregor Mackenzie

It is a great pity that the hon. Gentleman's right hon. Friend did not do something about it in November last year instead of leaving us to do it in March this year.

Mr. King

With respect, we are now in December. This is an on-going problem. The pace of inflation is quickening and the need to take action to prevent deficits is mounting.

I am sorry that the hon. Gentleman has brought up that matter again. The order relates to a deficit of £123 million. The hon. Gentleman has admitted that under his stewardship he has managed almost to triple that figure to £300 million. That makes the urgency of action all the greater. I hope that by our agency or by the Government's we can have an opportunity of returning to the whole question of the Post Office, because there is not time in this debate tonight.

Those who make some attempt to study the matter must be very worried about what is happening. We know that on the telecommunications side there is opportunity for mechanisation and that there are possibilities to counteract increases in labour, but there must be acute worry on both sides of the House about what is happening on the postal side.

Charges are mounting steadily, and the quality of service is lower than it was. This is the standard complaint from the public. They say that they have to pay more and they get less for it, and we know that this is true. The situation must be reached where postal services will suffer and the cost of the product will make it uncompetitive with an alternative service. The traffic will fall off and deficits will increase.

We have not had a serious discussion tonight, and there has been no recent debate in the House, on what the future strategy of the postal service should be. At the moment, it is on a one-way street to disaster. This must worry the Minister more than anybody else, and I think that this problem of growing deficits is appalling.

May I make one constructive point in the light of the criticism that the Minister has had to put up with? The Post Office is hard done by in one respect. It is underpaid by other Government Departments. I have always thought so, and. as the Minister knows, I was a little involved in this. The distribution of petrol coupons was left to the Post Office. The Department concerned said, "The Post Office will distribute them. Get them from the Post Office".

Then the Treasury comes along and argues about how much the Post Office will get paid for doing that. Nobody else can provide the service. The Post Office is in a unique position, and it ought to be able to strike a better bargain.

As my hon. Friend said, all we have been told is that the Post Office needs another £1,000 million. All we are told is that money is needed. That is about the depth of the argument that we have had on the case for this massive investment programme. It is five times the size of the ICI programme, yet it gets the minimum scrutiny. I hope that what has been said tonight will be reported in the right quarters and that we shall have a chance to debate these matters in full.

12.43 a.m.

Mr. Gregor Mackenzie

I listened with considerable interest and more patience to the speech of the hon. Member for Henley (Mr. Heseltine) on this order than I did on the previous one. He made some important comments and talked about the control that Parliament has over the Post Office. I recall, as I have no doubt the hon. Member for Bridgwater (Mr. King) does, that the last time we had a debate of this kind when we approved aid I said that I hoped the House of Commons would spend a little more time on Post Office affairs than it normally does.

I know that there are ample opportunities to put down Parliamentary Questions, hear evidence in Select Committees, and so on, but I still hope that we can have a Supply Day from the Opposition so that we can have a full discussion on the Post Office at a more sensible hour of the day. We can then go into the whole question of the accounts of the Post Office and talk about its strategy.

The Post Office is the largest employer of labour in the country, and one of the largest spenders of money. Without trying in any way to interfere with the normal everyday running of the Post Office, Members of Parliament should be prepared to discuss its activities at some length. That is something to which I would look forward, because I believe that the relationship between the Post Office and the Government is always a good one. Nevertheless, it is right that a Department which is always in the public eye should get much more attention in Parliament than it gets at present.

The hon. Member for Henley suggested that I had, perhaps, over-stressed the comments of my right hon. Friend the Chancellor of the Exchequer. The hon. Member for Bridgwater made a similar suggestion, as did one of my hon. Friends. But I feel strongly about this. I am anxious, as I said in the previous debate, that the Post Office should no longer be put into the sort of financial straitjacket that it has been put in during the past four years. Regardless of how unpopular it was to increase the price of stamps and regardless of how difficult it was to increase telecommunications charges, the Government acted swiftly, with a degree of courage, in putting up those prices and charges within a short time of our taking office.

My only regret, I must say to the hon. Member for Henley, who tonight has been boisterous on the subject of Post Office finances, is that if our predecessors in office had had a little more guts and had faced up to the problem of increasing postage stamp prices and telecommunications charges—as they should have done, in my view, last November—we would not have had to take up the sort of bill in March, and tonight, that we have had to take up.

Mr. Tom King

Who printed the stamps in 1970?

Mr. Mackenzie

I do not think that that has much to do with it, but perhaps it indicates that when the Opposition were in power nothing happened on this front and that there was a lack of courage by the Opposition. I realise that these are difficult decisions to take, but someone has to take them—and we took them. That action is an earnest of our intention as to how we propose to handle Post Office finances, which is in marked contrast to what happened when the Opposition were in power.

The hon. Member for Henley also asked about the report which came to the right hon. Member for Bournemouth, West (Sir J. Eden) last November. The right hon. Gentleman did not choose to publish the report. Therefore, the hon. Member for Henley should address his question on this to his right hon. Friend. I did not commission the report. I do not have any obligation to publish a report which was not commissioned by me. We shall handle the Post Office affairs in the way we want to handle them, and I do not see that I need apologise for not publishing a report which was called for by someone else and which has nothing to do with me—

Mr. Heseltine

It is not a question of merely publishing the report. It was a survey in depth of the options, and it was completed in January. I believe that it has been under discussion and under continued consideration since the present Government came to power, and it is in these circumstances that I ask what has happened to the report. Has it been put on one side and forgotten for ever, or is it still under consideration?

Mr. Mackenzie

The document to which the hon. Gentleman refers was commissioned by the Conservative Government and was brought to the attention of the then Minister at the end of last year. He did not chose to publish it. When we were elected in February we indicated to the Post Office our attitude on a whole range of problems, and we have put forward our policies. I do not feel under any obligation to give an account of what was done by my predecessor when he was in office.

The hon. Member for Henley also asked about manufacturing in the Post Office and whether any of this money would be used to take over any of the major telecommunications companies. The answer is "No." There is no provision for that. I would not want to be dishonest with the House. I have always believed that the Post Office should have manufacturing capacity of its own. Conservative Members find this concept offensive, but I have held this view for a long time. We have asked the Post Office to look at this question; we are currently thinking about whether this should be done. The Post Office should have its own manufacturing capacity, either by increasing its factory capacity or by acquiring one of the companies which operate in the United Kingdom.

As for overseas postage rates, the UPU Congress decided, against our vote, that the imbalance charges should be sharply increased, mainly to help the developing countries. This will result in a doubling of these charges to the Post Office, largely in respect of books and periodicals. The taxpayers or users of other postal services should not be asked to pay for the Book Development Council in that way.

I join the hon. Member in expressing gratitude to the postmen and postmasters, who have been going through a difficult period recently. It does not help recruitment, but the dedicated people in the Post Office have shown that they have the nation's interests at heart.

Mr. Cryer

In this context, would my hon. Friend comment on the notion that in the Post Office, as in other nationalised industries, we should be considering developing decision making down, so that, in addition to the fine service, there is some involvement in decision making, with a consequent increase in productivity, and so that people doing ordinary jobs feel that they have some degree of workers' control?

Mr. McKenzie

I take the point. This is something that we have raised with the Post Office Corporation. Worker par- ticipation cannot be imposed from the top: it has to come from the grass roots. We have told the Post Office that there should be greater participation by the workers who play such a valuable part. We have asked the trade unions concerned to present their findings to us and to the Post Office so that we can have the fullest discussion about how workers feel that they can contribute. The Post Office Engineering Union has contributed greatly through its skill and talents. We are talking not just about wages and conditions but about the valuable contribution that they can make, technically and otherwise.

I come to the problem of recruitment, to which the hon. Member for Henley referred. He will know that throughout the country there is a shortage of about 8 per cent. to 9 per cent. of Post Office workers. In some areas such as London and the Midlands this figure is as high as 27 per cent. It never surprises me that the figure should be so high. Over the years we have paid these people abysmally low wages. I see my postman delivering letters in all sorts of weather conditions, at all hours, and I can well understand the problems of attracting people to the service.

My hon. Friend the Member for Newcastle-under-Lyme (Mr. Golding) mentioned the pamphlet published by the UPW. I do not think that he would wish me to comment in too much detail upon it because it is no part of my business to interfere in negotiations taking place about pay and conditions of service. My strongly-held view is that there should be a slackening of Government involvement in pay and conditions of service negotiations. We ought to let the Post Office and the unions concerned get on with the job. We hope that they will reach a solution that is in the best interests of the country as a whole.

It is a little too early to say how valuable the increase of about £3 we have made will be in affecting Post Office recruitment. It is helping marginally, and I hope that as a result of negotiations now taking place it will assist further. It will be a difficult task to increase numbers in the Post Office.

My hon. Friend the Member for Newcastle-under-Lyme also raised the question of whether we should have an integrated national telecommunications policy. I have heard my hon. Friend speak on this subject with some eloquence. He will recall our debates during the passage of the Post Office (Borrowing) Bill in 1972. He will also concede that he was not the only one who then made eloquent pleas for an integrated national telecommunications policy. They were very good speeches. It is absurd that services with so much in common as telephony, telex, data distributions, facsimile reproduction, video are planned without regard for one another.

Mr. Tim Renton (Mid-Sussex)

We are talking about the Post Office (Borrowing Powers) Order, not about a national telecommunications system. Will the Minister give us a schedule of drawdowns on the loan and the rate of interest payable, and will he tell us whether any part of the additional loan will be used to make up deficiencies in the pension fund?

Mr. Mackenzie

I appreciate that the hon. Gentleman is new to our deliberations, but it is normal practice in debating borrowing powers orders for hon. Members to discus the whole strategy of the Post Office and to ask questions on a wide range of subjects. I am answering questions which have been put to me, and that is normal practice. I trust that the hon. Member will read some of our previous borowing powers debates. He will see that we discussed everything, from telecommunications—

Mr. Tim Renton

In an intervention in the debate on the Compensation for Limitation of Prices (Post Office) Order the Minister promised to deal with the question of pension fund deficiencies in his speech on the borrowing powers order. So far he has not done so. Time is running out, and we should like to hear what he has to say on that subject before the debate ends.

Mr. Mackenzie

I shall proceed more quickly if the hon. Gentleman allows me to make my speech in my own way.

I take the point made by my hon. Friend the Member for Newcastle-under-Lyme. It is a matter for the Post Office, and the Post Office is considering it. My hon. Friend will not expect me to say too much about a national cable network. That is for the Annan Committee, and my right hon. Friend the Home Secretary has responsibility for it.

My hon. Friend the Member for Newcastle-under-Lyme mentioned Ericsson and Plessey. That matter is exercising the mind of my right hon. Friend the Secretary of State. There are many difficult considerations here. On the one hand, we must be certain that we get the right type of equipment at the right time at the right price. On the other hand, there must be a balance between that requirement and the number of jobs to be provided. All those factors will be taken into account in reaching a decision. I appreciate that AGDT has done a lot of valuable work, and in one form or another it will have to be continued for some time.

The hon. Member for Bridgwater referred to pensions in a rather alarming way. He may not have meant it to be alarming, but it was. I emphasise that there is no cause for concern among Post Office workers. They are entitled to a pension, and they will get it. I know that the deficit is considerable, but it is not my responsibility. I feel a little hurt at having to defend what was done in days gone by, but that is what I have been constantly asked to do tonight. I did not create the deficit in the Post Office Pension Fund, and to be constantly attacked as though I were responsible is offensive to me—especially when it has been done in such a giggling way.

The hon. Gentleman has read the accounts with care and appreciates how they are framed. Each part of Post Office business has to bear its share of the deficit in the Post Office Superannuation Fund. The point I have made constantly is that had the Post Office been allowed to increase its tariffs to an economic level, to a reasonable and just level, that matter would have been taken care of.

Mr. Ian Gow (Eastbourne)

The point the hon. Gentleman is now discussing is one of very far-reaching constitutional and legal importance. If my hon. Friend the Member for Tonbridge and Mailing (Mr. Stanley) is right, as I believe he is, that it is not proper for the Secretary of State to have made the compensation order we passed earlier, it seems to me that the right hon. Gentleman may well himself be liable for the sum of £123,567,000. The Under-Secretary of State has not yet answered the point. I believe that this may well be challenged in the courts and that the Secretary of State may be liable for that sum.

Mr. Mackenzie

My right hon. Friend tells me that he does not have the money.

Mr. Heseltine

That has never stopped the right hon. Gentleman from spending it.

Mr. Mackenzie

One thing that the hon. Member for Henley did not do as a Minister was to try to raise very much, otherwise we would not be in our present difficulties. As I have said, had the Post Office been allowed a greater measure of freedom by the Conservative Government, we would not have been in the present difficulties. We raised this matter in Opposition last year on numerous occasions, and were brushed off time and again when we forecast what the consequences would be.

A number of hon. Members referred to tariff increases. I was taken aback by the approach of the hon. Member for Bridgwater. He asked whether I was going to spell out tonight in precise terms what we were going to do about increasing tariffs. Surely he does not expect me to say that the cost of stamps will be increased by so much, the cost of telecommunications by so much, and all the other services by so much. If he does, then his days as Parliamentary Private Secretary at the old Ministry of Posts and Telecommunications were wasted.

It is not part of my function, as the hon. Gentleman knows, to direct the Post Office on matters of that sort. He will not expect me, in the course of a borrowing powers debate, and without consultation with the Post Office or the Price Commission or the Post Office Users' Consultative Council, to make specific announcements of that kind any more than our predecessors did. The only assurance I can give to the Post Office, to its users, to the House and to those who work for the Post Office is that the Post Office, in accordance with what my right hon. Friend the Chancellor of the Exchequer has said in two Budget Statements, will be given—and I am glad by hon. Friend the Member for Thornaby (Mr. Wrigglesworth) mentioned this—a much greater measure of freedom than it was allowed by the Conservative Government. We intend to do that and it will be to the benefit of the Post Office, its users and those who work for it.

1.9 a.m.

Mr. Ian Gow (Eastbourne)

I wish to refer to the way in which the Undersecretary of State announced to the House at about 20 minutes past 10 o'clock that Sir William Ryland had agreed to serve for another three years as Chairman of the Post Office Corporation. It seems to me that that was a discourteous way to make the announcement, at that time of night—

It being one and a half hours after the commencement of proceedings on the Motion, Mr. Deputy Speaker put the Question, pursuant to Standing Order No. 3 (Exempted Business).

Question agreed to.

Resolved. That the Post Office (Borrowing Powers) Order 1974, a draft of which was laid before this House on 11th November, be approved.

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