HC Deb 23 October 1975 vol 898 cc878-90

11.7 p.m.

Mr. Neville Trotter (Tynemouth)

The efficiency of the Post Office is the subject of this debate, and I believe that the efficient running of this huge organisation is essential not only to the efficiency of the whole of the business and commerce of the country but to the normal life of individual citizens who use the telephone and postal systems.

We have in our Post Office the benefit of a particularly good staff. It is, therefore, all the more distressing that one feels the need to call attention to the lack of efficiency in the Post Office at this time. For long it has been held in high regard but today the public have lost confidence and the good will built up over many years has been eroded, not least by the shambles of the Post Office finances over the last few months. It has become the biggest loss-maker in the country and has given rise to the biggest price increases. In two years postal charges have doubled and the cost of telephone calls has trebled. At the same time with inflation retail prices have risen substantially, but only by 44 per cent.

In particular, the cost to doctors of changing calls from their surgeries to another doctor has risen by 750 per cent. I am told by the British Medical Association that the letter which contained that proposal took 12 days to cross London to reach its offices. As a result, the Association was not given adequate time to express its views.

No wonder that as a result of the increases the public are up in arms at the state of affairs in the Post Office, because higher charges are not accompanied by a greater efficiency. While statistics are quoted by the Post Office as to the efficiency of the normal service, it does not mention that 3 million letters at least are late in being delivered each day. It is said that every day 2 million telephone calls go wrong, but I suspect that the total is far higher. I understand that those 2 million are instances when people bother to notify the operator that they have not been able to get through. I know from experience that rather than tell the operator one often simply redials.

It is no wonder that there are doubts about the efficiency of the management of the Post Office when we read of extraordinary cases such as the telephone exchanges which apparently were vacated and abandoned by their staff in the middle of the night.

At the same time, there seems to be an extraordinary lack of sensitivity in dealings between the Post Office and the public. For example, recently the Post Office refused to accept the suggestion that Christmas cards should be posted at a special concessionary rate of 5p. It was suggested that special stamps be printed which would be valid only if used two weeks before Christmas. Not only would that have enabled many people of modest means to send Christmas cards without undue hardship but it would surely have helped the Post Office by ensuring a steadier flow of mail and reducing the Christmas peak.

The Post Office spends millions of pounds a year on public relations, but the money seems to be wasted. While the Post Office depends for its living on communications it is dismally bad in its own communicating with its customers. The image of the Post Office is such that there is an impression of complacency at the top.

The Chairman of the Post Office speaks of how great its achievement is in delivering 35 million letters a day on time, but he does not refer to the 3 million letters a day which are held up. He speaks of the problems of delivering letters and connecting telephone calls; but we are living in 1975, not 1875. Surely things which were taken for granted 75 or 100 years ago can be achieved today.

The Post Office relies on being bailed out by the taxpayer or on using its monopoly to extort higher prices, but it is becoming apparent that there is now a danger of a vicious circle developing. It is possible that there will be so great a fall in the demand for its services as a result of the enormous price increases that there will be an overall fall in its income. Why do we not know the fall in demand for its services since the increases made earlier this year and a few weeks ago? Is it a secret, or, as I suspect, is it that the Post Office does not know? I am told that the Post Office does not count the number of business letters, which is a very large proportion of the total, other than once a year, which is incredible if true.

The Minister announced two months ago that there was to be an inquiry into the Post Office. I welcome, and I believe that the public welcome, that announcement, but when are we to have details of the nature and form of the inquiry? Two months have passed and nothing has been said about that matter. Is the Post Office being difficult over the terms? Certainly it was not noticeably enthusiastic about earlier suggestions that there should be an inquiry. Could it be that there have been arguments between the Department of Industry and the Department of Prices and Consumer Protection about the form and nature of the inquiry?

I hope that the Minister will tonight give an assurance that the inquiry will be public and that the findings will be published. I hope that the inquiry will be regarded by all the Post Office staff as being constructive and will not be regarded as a witch-hunt. There is grave concern about the Post Office, and we must consider all options open to us not only in the interests of the users but in the long-term interests of the staff. The Post Office is fortunate in that it is dealing with men like Mr. Tom Jackson, whose quoted remarks show him to have a sane and responsible attitude to the problems of the Post Office.

There are many matters which, I suggest, should be considered by the inquiry. First, can the aims for the Post Office set out in the Post Office Act be reconciled between providing a commercial service and a social service? Are they irreconcilable? Perhaps they are.

Secondly, should the postal and telephone systems be run as quite separate bodies? I suggest that at present the Post Office is too large, and it may well be that there should be two separate corporations, one for posts and one for telephones.

Thirdly, have we got the best pattern of services in the changed circumstances of today? What, for instance, is the best split between first and second class mail? Sometimes we have 30 per cent. first class and sometimes 50 per cent. So far as I am aware, there has never been any statement by the Post Office about what it regards as being the optimum split from the point of view of its own efficiency and the minimisation of costs.

Those matters lead me, fourthly to the whole question of operating efficiency, labour costs, overheads and capital. The whole matter needs a searching inquiry and there must be no sacred cows.

Fifthly, the inquiry must look at the requirements of sound financial control, and sixthly, at the relationship between the Post Office and the Government.

I should like for a moment to elaborate on some points relating to operational efficiency. The Post Office Users' National Council has stated that in its opinion there is considerable scope for greater efficiency without a lowering of service. Unhappily it has reported that it sees no evidence of a realisation by the Post Office of the vital need to act in this direction.

Turning to mechanisation, we are delighted that at last union opposition has been overcome and the mechanisation programme is to proceed on the postal side. However, it is intriguing to note that the public has been conned over the last three years into using postal codes the vast majority of which have been of no use whatever to the postmen or anyone else.

The question of part-time labour plainly must be considered on the postal side. In some places part-timers are used on a substantial scale because of working practices adopted during or before the last war. They provide a valuable economic means of overcoming the peak hours that are one of the poblems of the Post Office when short periods of extra work are required. I believe that should be applicable thoughout the system and not just in some towns for historical reasons.

On overheads, I query the amount being spent on telecommunications research. I understand that the expenditure is much the same as that for building one nuclear submarine a year. Are we being too elaborate in the type of research we are carrying out? Are we aiming at over-elaborate inter-satellite communications around the world?

There is also the question of marketing. On the postal side a staggering number of people are unaware of the nature of all the services that are available to them. I do not believe that the marketing side has been effective. On the telephone side, all too many people's experience has been that the Post Office operates as a monopoly and that one must take it or leave it when it comes to marketing.

The cost of the billing of the telephone system is £38 million per year. If it was carried out at four-monthly intervals instead of quarterly there would be a saving of some £10 million per year.

There is enormous capital spending. Why must telephones be connected within houses or offices by the Post Office? Why cannot the Post Office simply provide the wiring. If one buys a gas fire one connects it up to the gas main provided by the gas board. Why cannot the same system operate with the Post Office? That would save a lage amount of capital expenditure.

In general, the Post Office has relied far too much in the past on the completely antiquated Strowger system of switching gear in its telephone exchanges. This system was originally introduced by an undertaker in America about a century ago. He managed to drum up a lot of business by installing his own automatic exchange. He must have had less difficulty providing capital than we are experiencing today in modern society. In any event, the result of our continuing with completely antiquated switchgear has meant that we are making equipment for which there is no demand in any other part of the world. This substantially and severely affects the export capability of too many of our manufacturers. Only two weeks ago in my constituency a factory closed which for years had carried on the manufacture of this antiquated equipment for which there is no demand abroad.

Poor financial control is one of the most important weaknesses of the Post Office at present. Perhaps I should declare an interest as a practising accountant. I am horrified to see year after year the Post Office's accounts qualified by distinguished auditors. Again this year there was unsatisfactory control over the Giro system, although to be fair it was to a smaller extent than in the past. Even so, there should not be unsatisfactory control in an organisation such as the Post Office or qualifications in the report of its auditors.

The accounting practice on the Giro side seems odd. Giro is shown as having made a profit of £64,000 only by writing back over £2½ million of unneeded provision which was made in the previous year against possible losses on investments. Many of us would say that the true result of Giro for the year was not a profit of £64,000 but a loss of £2½ million—a somewhat different interpretation.

It is incredible that a business of the size and importance of the Post Office should have operated for no less than 15 months without any finance director. I suspect that the lack of that vital appointment had something to do with the shambles which emerged earlier this year in the overall finances of the Post Office. It is no wonder that the losses came out six times greater than was originally thought. My profession has its uses from time to time.

Finally, I should like to deal with the Government's relationship with the Post Office. First, I comment briefly on the extraordinary situation regarding the pension fund. The last Postmaster-General, the right hon. Member for Walsall, North (Mr. Stonehouse), was responsible for setting up the Post Office pension fund. It seems that his financial judgment was very unsound in this matter. The pension fund was set up, as has now proved to be the case, with inadequate funds to the tune of hundreds of millions of pounds invested hypothetically in a complicated way in Consols, which are about the worst possible investment for a pension fund.

I believe that the Government have a real commitment to undertake the funding of the Post Office's pension scheme up to the date on which it became a separate undertaking. In this year the expenses of the Post Office would have been cut by £90 million or its income would have increased by £90 million if the Government had done that.

The Government's rôle in their relationship with the Post Office is very un- satisfactory. They must have been aware of the major troubles facing the Post Office, but did nothing. It may be said that they were not aware of those troubles. They can have it one way or the other. Either they were aware and did nothing or they were not aware. I suggest that one is nearly as bad as the other.

The Government gave advice to the Post Office on the subject of inflation and growth. As a result, the Post Office's assumptions were wildly out. Again, I suggest that the Government must accept responsibility for this unsatisfactory state of affairs.

The Post Office made substantial payments to its employees, which the Secretary of State admitted he knew were in breach of the social contract, and nothing was done about them. To a large extent, the extra financial costs of the Post Office were due to that breach of the social contract of which the Secretary of State was aware but did nothing.

The Government appear to have been badly informed and to have been as shocked as the public as the results when the whole mess became apparent. Again, they may say that it was not a shock, that they knew and took no action. A senior civil servant at the Department of Industry has said that it was not the Department's job to do the Post Office's sums. But, if the Post Office gets its sums wrong, who is to check? The Minister has power under the Post Office Act to intervene, but I understand that that power has never been used.

Some people would say that those responsible for the present state of the Post Office should be fired. Is it not also fair to say that, as the Government are partly to blame, there should be some firing there, too?

I ask the Minister to give an undertaking tonight that there will be a full review, without any holds barred, of the Post Office's affairs and that there will be no further increases in charges until that review has been completed and published. Surely the public are entitled to know that all options have been properly considered and that they are getting value for money. At present, whether rightly or wrongly, people do not believe that to be the case.

11.24 p.m.

The Minister of State, Department of Industry (Mr. Gregor Mackenzie)

The hon. Member for Tynemouth (Mr. Trotter) may believe it or not, but I am grateful to him for raising this matter tonight. It is useful to have these discussions about the Post Office.

The hon. Gentleman will be aware of my rôle. As I have said time and again in the House, I am no longer the Postmaster-General. I am the Minister of State at the Department of Industry. I have very strong views, as many hon. Members have, about the relationship between Her Majesty's Government and the chairmen of nationalised industries. I will deal with that matter later in my comments. However, it is no part of my function to run the Post Office. Indeed, I do not think that any one of us would want that.

I appreciate the comments made by the hon. Gentleman about the staff of the Post Office. They carry out a difficult job, often in very trying circumstances. That being so, it is useful from time to time to say that the staff who operate under such conditions enjoy the benefit of our support.

I was a little disappointed at parts of the hon. Gentleman's speech. He either does not understand or does not want to understand some of the difficulties of the Post Office. These are not difficulties which have simply grown up in the past year and a half. These difficulties have been faced for many years by the people dealing with these matters.

The hon. Gentleman said that the tariffs had increased at an alarming rate. He must recognise that the combined effects of an unprecedented rate of inflation and prolonged price restraint have led to very heavy losses by the Post Office. He will concede that the Conservative administration must bear full responsibility for the prolonged price restraint in the Post Office. Government subsidies needed to maintain Post Office services in the financial year ending 31st March 1975 had grown to unacceptable levels. That level of subsidisation is liable to affect morale at all levels in the industry. I am sure that the hon. Gentleman appreciates that as much as I do. We were determined, both in the national financial interest and in the more immediate interests of the industry, to get back to economic pricing. That is what the Chancellor explained in his Budget Statement.

The aim of economic pricing policies is to ensure that the consumer pays for the true costs of the goods and services that he consumes in every case where they can be sensibly identified, and that these costs should include an appropriate return on public capital invested in the industries. It was the former administration's departure from these policies which put the Post Office tariffs at an uneconomic level in the years 1971 to 1974 and created the substance of the problem of which the hon. Member complains tonight.

The Post Office, like other nationalised industries, had to catch up. The hon. Gentleman must accept that to maintain efficient services the full economic cost of providing them must be borne either by the users of these services or, in the absence of an economic pricing policy, by the taxpayer. It is the Government's view, and one which I have held in both Government and Opposition, that the user should pay, although always consistent with the social obligations of which the Post Office is conscious. I should have thought that the rôle which we now seek for the Post Office on economic pricing would have appealed to the Opposition in view of the effect it has on the level of public expenditure.

The hon. Gentleman raised one or two other issues in addition to the general problem of finance. He mentioned the number of complaints received from the medical people about the increase in the transfer call charge from 4p to 30p under the new tariffs. In the past this service was operated at an uneconomically low rate. This exceptional increase, as the hon. Gentleman described it, is justified by the need to recover the cost of making the transfers. He said that the General Medical Council had not made representations. We said to the doctors recently that, although we understand and have some sympathy with their problem, they can raise this matter with the Post Office Users' National Council and with the Post Office authorities. The Post Office has developed an alternative automatic subscriber-controlled transfer system which it advises will be cheaper for substantial users of this facility. I do not wish to say too much about it, but it is a service of which doctors will be aware. The Post Office will have noted the doctors' concern and will do something about it.

I will deal briefly with the hon. Gentleman's comments on the efficiency of the service. In an organisation as large as the Post Office, which is dependent to a large extent on transport and other services outside its control, a failure rate of even a small fraction of 1 per cent. runs into many thousands of unsatisfactory transactions. The Post Office is never complacent about the quality of its service, nor about its operating performance, and it is taking all practical steps to improve both. The hon. Gentleman will appreciate that that is a difficult task, and we must bear with the Post Office at this time.

The hon. Gentleman referred to Strowger and the Post Officer's equipment. I remember that when I was in opposition I pressed the then Minister for changes. We did not get them until 1973. I have been making speeches on the subject for many years. In considering the equipment used by the Post Office we should be conscious of jobs and the opportunity for exports. Considerable efforts are made by the Post Office, in conjunction with the industry, to improve export performance. The Post Office has made considerable efforts to improve exports to the Middle East and other countries. Decisions have taken a long time, and we must allow the Post Office, with its technical expertise, to work with the Government in deciding on equipment. I am heavily dependent on the advice of my colleagues with technical expertise. This is a matter which lies within the judgment of the Post Office.

On the subject of telecommunications, in the past financial year, in which 1.35 million telephone connections were added to the service, only 2 per cent. of local calls and 4.7 per cent. of trunk calls dialled direct by the consumer failed because of faulty equipment.

Mr. Trotter

Those are the faults reported to the exchange. I suggest that, especially with local calls, many people do not bother to report a fault but just dial again, so that the Post Office is not aware of the fault.

Mr. Mackenzie

We cannot quantify it. We cannot argue about it. I do not know how often the hon. Gentleman gets a wrong number and does nothing about it. Perhaps I am more conscious of these matters, but if I get a wrong number I let the Post Office know.

We tend to exaggerate the difficulties. The figures are impressive. The number of local calls increased this year by 6.4 per cent., the number of trunk calls by 8.2 per cent., and international calls—which are important to people who are involved in international trade—increased by 19 per cent.

The hon. Gentleman will also be pleased to learn that combined telecommunications productivity improvements resulted this year in considerable savings of over £15 million. He will also realise that the Post Office—one of the largest employers in the United Kingdom, with a huge investment programme—is particularly vulnerable to the twin hazards of high inflation—the cost of labour and interest rates.

I had hoped to say a great deal about the postal services. Suffice to say that every postal service in the world has difficulties at present. The steps taken by the Post Office in mechanisation and the recent agreements with the Post Office unions concerning the introduction of women and other matters are very helpful. Tom Jackson and his colleagues in the Union of Post Office Workers and Brian Stanley of the Post Office Engineering Union have been very responsible. The unions have always taken every possible step to help the Post Office and the consumers.

The hon. Gentleman suggests by implication that the cost of the services is pricing the Post Office out of existence. It is a fair point and one which the Post Office takes very seriously. The Post Office does not believe—and it is in the best position to make this kind of operational judgment—that that situation has been reached, and the statistics appear to bear that out. The increased postal tariffs which took effect on 17th March this year represented a weighted average increase in inland postal charges of 50 per cent. Yet in August this year the volume of traffic was down on the volume in August 1974 by only 6.3 per cent. This was, if anything, slightly smaller than the Post Office had allowed for in its calculations.

As to the most recent round of increases that the hon. Member mentioned, the Post Office estimates that letter traffic over the 12 months from the introduction of the increases will be about 3½ per cent. lower than would otherwise have been the case, but it is still too early to make even the most preliminary assessment of how traffic has actually responded since. We must all remember that, although the Post Office regrets losing traffic, whatever the cause, it would clearly be a mistake for it to try to maintain traffic levels by providing services at a loss. Indeed, one could go further and argue that some of the traffic that the Post Office is now losing would never have existed in the first place had it not been for past under-pricing forced on the Post Office by price restraint.

The hon. Member made one or two comments about the Post Office fund. No matter what was decided by the last- ever Postmaster-General, we have had some four and a half years in which something could have been done to change that decision. I remember the matter being raised by my hon. Friend who is now the Minister of State for the Civil Service, but nothing was done at that time. I came to the problem last year, and it is not unreasonable to say that I have had to give the matter some thought, as have other Ministers. How ever—

The Question having been proposed after Ten o'clock and the debate having continued for half an hour, Mr. DEPUTY SPEAKER adjourned the House without Question put, pursuant to the Standing Order.

Adourned at twenty-three minutes to Twelve o'clock.