HL Deb 27 November 1975 vol 366 cc453-70

6.13 p.m.

Lord ALPORT rose to ask Her Majesty's Government whether they will consider reconstituting the Post Office, comprising the postal and parcel services, as a Department of State and establishing the telephone and telegraph services as a separate telecommunications corporation; and whether consideration of this will be included in the terms of reference of any prospective inquiry into the present organisation of the Post Office. The noble Lord said: My Lords, my reasons for putting down this Question are partly private sentiment, and partly what I conceive to be the public interest. For one year, in the late 1950s, I occupied a most modest post in the Government as Assistant Postmaster General, under my noble friend Lord Hill of Luton. Others in your Lordships' House have also held this post; my noble friend Lord Grimston and the noble Lord, Lord Slater. I think they will agree with me that they have never lost the sense of admiration and affection for a great public service which their experience as Minister responsible for the postal services gave them; I certainly have never done so.

It it not generally realised that the Post Office is the oldest Department, or was the oldest Department, of State, except perhaps for the Exchequer. It is older than the Army or the Navy. Its origins lie in the reign of King Henry VIII. It acquired over four centuries of public service a sense of responsibility and esprit de corps not dissimilar from those of the fighting services. There were and. have no doubt, still are, Post Office families, just as there are Army and Naval families.

It was influenced by a long historic tradition which gave to it a tinge of romance, so the divisions of the sorting offices, at any rate in the late 'fifties, still retained the nomenclature of the great trunk roads along which the mail coaches carried the Royal Mail a hundred or more years ago: the Dover Road, the West Road and the North Road. Along with its traditions, it was sensitive to the importance of modern technology. In 1957, it was introducing at Norwich automatic sorting machinery; and I still feel a lift of the heart when I see the great mail trains carrying the Royal Mail, with the sorting offices on them, go out each night from the main termini to carry their letters to far destinations—even to the smallest hamlet in the United Kingdom.

My hackles have often risen during these past years when I heard the Post Office abused and criticised. To me it is a miracle of organisation that I can post a letter addressed in my illegible handwriting and even now, with such little delay, it can reach its destination among the millions of letters which our postal services handle every day. We have had—and I believe we still have—the best Post Office service in the world.

Not long ago I posted by mistake, on behalf of my elderly mother, a letter with no address on it, but just the name of the lady for whom it was intended, and without a stamp. It was duly delivered, to the complete mystification of the recipient and without, I am grateful to say, any surcharge. This was simply because a sorter in the local post office, and some postman, knew enough about local affairs to be able to guess for whom the letter was intended.

The Post Office is not only a national service whose aim is to see the mail gets through, but a local service which in many parts of the country, for instance in the Scottish Highlands, has a more intimate relationship with the public than any other organ of Government. It is a service. It is not an industry; it is not like shipbuilding or coal mining or steel making or, for that matter, telecommunications. To expect it to operate as a nationalised corporation responsive to what I believe are called "market forces", is as unrealistic as it is to expect the Army or the health services to make a profit —and the latter, at any rate, has the financial resources of the insurance contributions to rely on.

There is an immense difference between the postal, the telephone and the telecommunications services. My Question, like many others in your Lordships' House, not only invites an answer, but expresses a point of view. I believe that there are a number of arguments why the Post Office, comprehending the postal and parcels services, should be separated from the telecommunications industry covering the telephone, telex and telegram services. These are they: as I have said, the postal service and the telecommunications industry are different in kind. One is an ancient, intimate, labour-intensive, flesh and blood service available to the poorest and humblest as a means of communication to which technology has only a limited application. I. can telephone my daughter in Paris without any other human being involved. If I post a letter to her, I suspect that scores of individuals are needed to clear boxes, man the trains, fly the aircraft, crew the ships, sort the letters, sell the stamps and deliver the letter at the other end.

Secondly, the labour force of the postal and telecommunications services is about 450,000. This is far too big for efficient administration. On the whole, the Post Office Unions have been led with a remarkable sense of responsibility, for which I for one am grateful. But I believe that the huge complications of such a disparate labour force place on both the management and trade unions a strain that they should not be required to bear. Thirdly, the financial basis upon which the present Corporation was established was extremely unfair to the Post Office as a whole.

Here I rely not simply on my memory or instinct, but on a Report, No. 12, of the Post Office Users' National Council. I quote from page 5,under the heading of Pension Fund Deficiency. It says: Briefly, although Post Office employees had a non-contributory scheme whilst they were Civil Servants, from 1961 onwards the Post Office had been making payments into a ' notional 'fund. In preparation for setting up the Corporation, it was agreed between the Post Office and the Treasury that this fund should be deemed to be held in "— my Lords, mark this !— 2½ per cent. Consuls, and that the fund would produce a payment of £45 million per annum for about 25 years into the Corporation's funded scheme. Since 1969 actuarial valuations of the superannuation fund have revealed increasing deficiencies, until the deficit calculated as at September 1972 was about £1,100 million, of which 85 per cent. related to pre-1969 service. The Post Office calculates, as its current tariff proposals make clear, that the cost of funding the pre-1969 "— when they were civil servants with pensions provided out of public funds— element of the deficit will amount in the current financial year to £90 million. Let me put it bluntly. This means that every time we buy a 8½p stamp to put on a letter we are contributing to the pension liability for the non-contributory Civil Service pensions incurred before 1969 for the postal services, including of course the telecommunications staff. In fact, in 1970, if the Post Office had been allowed, as it should have been, to start with a clean sheet, £885 million or more would have been left to be found by the taxpayer.

That is not all. Over the centuries, Post Office revenues have been used to finance many strange and sometimes romantic things—Kings'mistresses, for instance. I personally do not grudge Mistress Nell Gwynne a penny, but I do grudge the Treasury the annual profit which the Post Office made during those years in the twentieth century when we made profits—and when I say "we" I am thinking back to my short incarnation as APMG. The Treasury took the profits that we made year by year, and in the name of corporate organisation foisted on the Post Office the responsibility for meeting from revenue an actuarial liability for nearly £1,000 million incurred before it became a corporation. If, say, from 1900 to 1969 the Post Office had been allowed to keep its annual profit, my guess is that it would have been the most affluent and also the most efficient organisation in the world.

I am not, of course, asking for the financial clock to be put back, but I am asking the Government to recognise that the decision of the 'sixties to turn the Post Office into a corporation had the effect of transferring the financial liability for about £1,000 million from the taxpayer to those who depend for their normal means of communication on the postal services—and let us remember that these include the poorest in the land, many of whom pay no income tax at all. They include—and I know that the noble Baroness, Lady Burton of Coventry, is to follow me in the debate—those who wish to remember separate members of their families, who may be thousands of miles away, with a cheerful Christmas card. I am doubtful whether there is any real argument today for giving a special rate for Christmas cards. I think this could detract from what is much needed—a reappraisal of the present financing and status of the postal services as a whole.

There is to be an inquiry, presided over by a distinguished university vice-chancellor. It will, I think, be the seventh inquiry since 1970 and the fact that so many inquiries have been necessary is evidence of two things, it seems to me. The first is that the present organisation of the postal services is unsatisfactory; and, secondly, that no Government have been able to make up their minds on what should be done to put it right, or have had the courage to face the fact that the decision taken in the 'sixties to turn the Post Office into a public corporation was wrong.

Between 1959 and 1969, the postal services, as opposed to the telecommunications services, made an overall loss of £22.6 million. During that period telecommunications made a profit of £306.3 million. The telecommunications profit hid the fact that to provide a national postal service of the standard necessary for the internal communications of the social and business life of this country, and to keep the charges at a reasonable level, it is necessary to give it some element of financial support. Because before 1970 the same organisation was responsible for both the postal and telecommunications services, the latter (as the money spinner) was able to provide this. Yet today, as I understand it, the telecommunications and postal services separately arc each expected to break even, taking one year with another.

If I am right in this, I would say to the Government that the only way this can be done is to reduce the standards of the postal services below an acceptable level or to raise the charges beyond an acceptable level, which would deprive a large part of our community of the essential means of social intercourse and will place a very serious additional burden on British commerce. This point has already been reached. Already, the Post Office is finding that the inexorable law of diminishing returns has begun to operate. I am quite certain in my own mind what the answer should be. The telecommunications service, with its high technological content, should be given its head, allowed to earn and keep the profits which it can certainly make, to operate as an independent corporation, financing its own research and development, and to provide us with a service of the standard we require. Twenty years ago, I remember being shown at Dollis Hill the apparatus which was to make possible STD. Contemporary advertising now tells me that it is possible to dial all over the world.

I saw a recent statement—I believe it was in the Sunday Times last weekend —of another development which has taken place. This development refers to System X: The Post Office calls it 'a fresh range of switching and associated systems using new computer-based microelectronic technology' which is to be introduced in the 1980s. If successful, it should give the Post Office a more advanced, effective and flexible network; and industry a range of attractive products for export. In essence, System X will be assembled from standard modular elements—covering switching, transmission and control. By arranging these elements or subsystems in different combinations, various services can he provided. Parts of the System will be controlled by digital processors (alias computers) with provision for small local exchanges to be controlled locally. The GEC Mark 2BL has been selected as the main processor for the system. I have not the slightest idea what all that means, any more than I had the slightest idea of the significance of those cases of transistors which Sir Gordon Bradley showed me 20 years ago as being the basis for a great international system of subscriber trunk dialling. But this I do know—the skill and inventiveness of of the British telecommunications service, working with the enterprise and genius of British industry, can give us a telecommunications service within Great Britain itself which is not only viable from the financial point of view, but efficient and modern right up to the hilt. It can also give us, as this quotation shows, an export to the world which would be immensely valuable to our economy.

Therefore, my Lords, I say this. Let us have an independent, self-financing telecommunications corporation. But let us have Her Majesty's Post Office as a quite separate organisation, enjoying a monopoly as it must, subject to the unique obligations of delivering your and my letters, parcels and Christmas cards to our front doors, unique from any other postal service in the world, giving to its sub-postmasters, its sorters, postmen, clerks behind the counter, a reasonable standard of pay and conditions of service comparable with their equivalents in other branches of Her Majesty's Service, and giving to the public, both private people and commercial companies, an alternative method of communication to the telephone which is reasonably priced, reasonably competitive, relieved of the albatross of the pensions liability which the Government should never have hung around its neck, and progressive minded as it has always been within the limits of the obligations which the law must impose necessarily upon a monopoly public service.

I believe that the change which is suggested in my Question would be widely welcomed by the Post Office management, by workers and by customers everywhere. What I am asking is: will the inquiry be allowed by its terms of reference to consider this point of view, and if it were recommended as a result of its consideration that this reorganisation should take place, would the Government be prepared to give the proposal their own serious consideration? My Lords, I beg to ask the Question standing in my name.

6.32 p.m.

Baroness BURTON of COVENTRY

My Lords, a great many people will be very grateful to the noble Lord, Lord Alport, for putting down this Question today and for what he has said. I am intending to end my remarks with the same hope that he has; that is, that the inquiry will look into the points that he has put forward today. I agree with him wholeheartedly that it is entirely unrealistic to expect the postal service part of the Post Office to contend with market forces and to make a profit, or even to pay its way. It is quite impossible, and I hope that what is said tonight by Lord Alport, with his experience, may help to bring that home to people. I was glad he mentioned the pension liability which I feel most unfairly has been placed as a burden upon all people who buy stamps today. But as he dealt with that matter, obviously I need not do so.

Earlier this year, on 19th March, we had a debate on postal charges for books and periodicals. This was initiated by the noble Lord, Lord Beaumont of Whitley. It was entirely non-Party, or all-Party, whichever term is preferred, and I think we can use that term for tonight's debate. This House is fortunate in that it contains people of much specialised knowledge, and in looking at the list of speakers in that debate on 19th March, and afterwards reading what was said, that specialised knowledge became very obvious. Those who took part in that debate were greatly indebted to the noble Lord, Lord Beaumont, not only for raising the matter but for what he said. But we did not, of course, get anywhere. And that is one of my criticisms of what happens today. A case is prepared with great care; we all appreciate that it may or may not be acceptable to the Government. But so often stereotyped answers are prepared beforehand and are read out quite irrespective of what is said in the debate. People in general, in Parliament and outside, feel that that attitude is one of the most frustrating aspects that we have to face today. It is very difficult to get a considered answer to the case made. I believe that my noble friend on the Front Bench today is determined not to give us a stereotyped answer prepared beforehand but to give us an answer to the case made.

The noble Lord, Lord Beaumont, referred to the fact that postage is now the largest single expense for many periodicals. Speakers in that debate considered that, apart from being a monopoly, the postal service was, for books and magazines, a public service—and I shall return to that point later. In the debate on 19th March I had an interest to declare and I have the same interest to declare today. As I think the House is aware, I am President of the Association of Mail Order Publishers and Chairman of its authority. In its report from 1st June to 31st August of this year, the Price Commission indicated that the level of price inflation in the nationalised industries reflected a rate greater than that now prevalent, and greater too than could be accounted for by catching up with the effects of price restraint. The Commission also warned of the dire consequences that failure to reduce this rate would have on the economy generally.

During our debate on 19th March speakers pointed out that many publications were exceptionally vulnerable to tariff increases. My noble friend Lord Strabolgi replied in effect, at col. 874 of the Official Report, that as books and periodicals were not subject to the Post Office monopoly, they should find their salvation in alternative methods of delivery. But this disregarded entirely the question as to whether alternative means could be found in time. The answer, which was repeated by the Minister in another place, reflected a grave misunderstanding of the problems of the Post Office. I thought my noble friend Lord Strabolgi had been given a most unenviable task and I did not think he was particularly happy with it, either.

Only recently, it was estimated that postal traffic, after the two increases this year, had fallen by up to 13 per cent. It is obvious to us all that, since the fixed costs of the Post Office do not reduce, the costs a locatable to the remaining units of traffic have increased. I feel that the end result of such a process must be disaster—which I think in a way was what the noble Lord, Lord Alport, was implying. It seems to me that the Government have been unable to appreciate the consequence of this policy on the small user, although it was forcefully pointed out by the Post Office Users' National Council in its report published in February 1975, when it said: Without large use by business the finances of the postal service would be even less healthy and the burden falling upon the small business user and the private user proportionately greater. Nevertheless, in spite of what we tried to say then, and in spite of urgent demands in another place to the same effect, a wide-ranging inquiry into the Post Office was refused. But at last the Government have had to give way on this.

I think the final demand came from the Post Office Users' National Council —to whom I should like to pay tribute, and to its Chairman, the noble Lord, Lord Peddie—in its report of August 1975. In common with many other people, and obviously in common with the noble Lord, Lord Alport, I greatly welcome this inquiry. I hope that among other things it will be able to consider the whole substance of the Question put forward today by Lord Alport. If it were proposed that the postal services should be a Department of State, then I believe that the question which has too often been avoided would have at last fairly and squarely to be faced, and that the inquiry should address itself to it.

What is the extent of the Social Service element in the costs of the Post Office—and I think this is what Lord Alport was after, with much more experience than I have to offer—in other words, those costs for which it receives either no, or inadequate, compensation? If this aspect is properly looked into it will no longer be possible for Ministers to reject the possibility of Treasury support by asserting that this would involve subsidising business. Business accounts for about 80 per cent. of postal traffic.

A moment ago I mentioned the opinion of POUNC. Indeed, the noble Viscount, Lord Eccles, said in the March debate at column 874 that business traffic is vital to the finances of the Post Office. Furthermore, I think we would all agree —again this follows what was said by the noble Lord, Lord Alport—that if this traffic were to be even further diminished by unnecessarily high tariffs, it would be the individual consumers who, in the end, would have a postal service that they could not afford to use. I will not refer to Christmas cards, but I noticed the other day that a writer said with regard to stamps for Christmas cards that we have now reached the stage where the Post Office cannot afford to reduce them and the public cannot afford to buy them. This is the circle into which we have now got ourselves.

I believe it is suggested that this inquiry should take a year. It seems to me vital that, during that time, the Government should take whatever steps may be necessary to ensure that further tariff increases be contained, at least to levels consistent with the performance of the economy generally. The Price Commission has warned of the necessity of ensuring this. But perhaps I can illustrate the urgency of the general point by indicating some of the damage done by the increases we have already suffered this year.

For scientific and technical publications, postage costs account generally for one-third of gross costs, and can in some cases account for 50 per cent. Not surprisingly, therefore, the mortality rate among periodicals has reached an unprecedented rate. Among those which have recently ceased publication as a direct result of postage costs are: Architect, Hotel Restaurant and Catering, Electronic Products, Industrial Buyer, Dataweek. My list is more extensive and the Minister can have it if he wishes, but I will not weary the House with it. What I have said is merely an indication. However, other periodicals such as Practical Wireless, Practical Electronics, Woman and Home, are no longer available on direct subscription. Those who are not fortunate enough to live in towns or large villages where these periodicals can be obtained stand to lose a good deal by this postal service being denied to them. It seems to me that this grim list provides sufficient answer to claims made by Ministers that publishers would have no difficulty in passing on these increased costs to subscribers. I think we have reached the stage where the increased costs cannot be passed on any further.

May I finish as I began, by thanking the noble Lord, Lord Alport, for initiating this debate, for the terms of his Question and for what he has said. I very much hope that this time the Government will be able to give us a helpful reply.

6.43 p.m.

Baroness PIKE

My Lords, I had not intended to speak in this debate. In fact, I had not anticipated that I could be in your Lordships' House tonight. However, my noble friend Lord Alport referred to the Assistant Postmasters General of the past who sat in this House, and I cannot help but remind him that I, too, had the privilege of being an Assistant Postmaster General. I think I am the only woman who has held that Office since Nell Gwynne, although there is no comparison between the roles that we played! Nevertheless, for three years I had the great privilege of being Assistant Postmaster General. Therefore, I know from my own experience not only of the efficiency and effectiveness of the Post Office, but also of the tremendously warm esteem in which it is held by anybody who has had the privilege of being part of that great organisation.

I do not wish to delay your Lordships tonight by repeating any of the points which have already been made. We are very proud of the achievements of, and of the opportunities which are being taken by, the telecommunication engineers. We believe that they have very great opportunities in the future to ensure not only that we have one of the finest telephone services but that we break new ground in that field. Also I believe that we still have one of the most efficient and effective postal services in the world.

In giving my support to all that has been said I should like to draw attention to the social content of the Post Office. As I said, I was an Assistant Postmaster General and I now have the privilege of being Chairman of the Women's Royal Voluntary Service. In my present capacity I know of the friendliness and help of great value that is given at the present time by postmen up and down the country. It is not something that you can show in a balance sheet or equate in economic terms. Nevertheless, the fact that the postman, a respected and reliable person, is going up and down the streets of this country all the time, is without price in a great many ways. The postal bus in rural districts is also providing a service that is very much needed. The post offices themselves, as well as the sub-post offices, provide a focal point that is of great value, although I am not pretending that this is something that should or could bear great weight when one is looking at the purely financial prospects of the Post Office.

I support my noble friends in what they have said tonight when I say that I believe the time has now come when we should look at divorcing the two services —the telecommunications service which is a purely mechanical service that can and must stand on its own in a world that is growing smaller, where the type of telecommunications that we envisage will be able to stand financially on their own feet, and the postal service which is giving a unique type of service to people up and down the country. Therefore, I hope that everything that has been said tonight will be warmly supported by everybody, because I believe that it is of the utmost importance to the future both of our own services and also of the communities in this country.

6.47 p.m.

Lord DENHAM

My Lords, I should like to support my noble friend Lord Alport in the suggestion incorporated in his Question. I do not know—and here I must differ slightly from my noble friend Lady Pike—whether Her Majesty's Government are aware of the extent to which the British public is dissatisfied not only with the high and ever increasing prices they are charged for postage and telephone calls, but also with what, rightly or wrongly, they consider to be the worsening service they receive in return. It may be that, as my noble friend suggests, the Post Office has become too unwieldy.

In terms of employment, at any rate, it is far and away the biggest business in the country. I understand—and the noble Lord, Lord Lovell-Davis, will correct me if I am wrong—that no fewer than four Ministers are accountable for the Post Office. The Minister of State, Department of Industry, is responsible for the Post Office as a nationalised industry. The Minister of State, Home Office, is responsible for broadcasting and regulations of the use of radio-transmitters, licences, copyright, et cetera. The Secretary of State, Home Office, is responsible for the Royal connection with postage and advising the Queen on experimental issues, et cetera. The Minister of State, Prices and Consumer Protection, is responsible for the nationalised industry prices, and their respective consumer councils, and also has responsibility generally for monopolies. This seems to be a rather scattered division of responsibility in Her Majesty's Government.

The noble Lord will be aware that there are many shades of opinion on what should be the future of the Post Office. In view of the inquiry that is to take place, I do not think we should prejudge the issue tonight; but I hope that the noble Lord, Lord Lovell-Davis, will be able to tell your Lordships that he accepts my noble friend's suggestion, supported as it is by the noble Baroness, Lady Burton of Coventry, and my noble friend Lady Pike, and that the possibility of the reconstitution of the Post Office will be within the terms of reference of the inquiry.

6.49 p.m.

Lord LOVELL-DAVIS

My Lords, in listening to this debate no doubt your Lordships' minds will have been cast back to 1969 when this House was debating the Post Office Bill which transferred the Post Office from a Government Department to a public corporation. The idea that the postal service should remain with the Crown was discussed and rejected then.

Today we are about to witness another major event in the long history of the Post Office, to which the noble Lord, Lord Alport, has so movingly referred. Noble Lords will be aware that my right honourable friend the Secretary of State for Industry has announced that M. C. F. Carter, the Vice-Chancellor of Lancaster University, has accepted his invitation to chair the Committee to review the Post Office. He has also published the terms of reference as being: to examine the performance and the main features of the organisation of the Post Office and its use of its resources and assets, and to consider whether any changes would better enable it to perform its functions under the Post Office Act 1969; to assess the policies, prospects and social significance of the postal business, including methods of financing it as a self-supporting public service; to consider whether the Post Office Act of 1969 places undue restrictions on the activities of the Post Office; and to make recommendations.

These terms allow the comprehensive review that the Post Office Users' National Council, under the very capable leadership of my noble friend Lord Peddie, has envisaged, and I think they cover much of the ground that we have covered in the debate this evening. They are drawn so as to permit a thorough and wide-ranging inquiry. I should emphasise that the Government are conscious of the fact that the Post Office faces very real and difficult problems in these inflationary times and that we do not intend the review to be either a witch hunt, on the one hand, or a whitewash, on the other. Rather we hope that the Review Committee will take a constructive look at the Post Office and its future. Now that the Committee is in 'he process of being appointed it would be wrong for the Government in any way to prejudice its investigations or to consider making any fundamental changes before the Committee has reported. However, I feel sure that this helpful debate will prove to be of considerable value to the Committee, who will undoubtedly study closely what your Lordships have argued today, together with all the evidence that will inevitably be coming its way over the next few months. I imagine that the noble Lord, Lord Alport, had this in mind when he initiated it.

The Committee will be faced with an onerous and exacting task. I am sure, however, it will also recognise the enormous task which the Post Office undertakes and the zeal and integrity of the vast majority of Post Office servants engaged upon it. I recognise, as he has said, that in initiating this debate the noble Lord, Lord Alport, had in mind the interests of the Post Office, inspired no doubt by his service there as Assistant Postmaster General. He will see from the terms of reference that it would be open to the Committee to consider the separation of the postal and telecommunications businesses and also to recommend how the separate services should be organised. Should the Committee recommend this, I can assure him that the Government will give most serious consideration to its recommendations.

The burden of the advantage if the postal services were to revert to the Crown would have to be shown, and speaking for myself I am not convinced by the case made today. It is true that they are running at a loss, but so they were in 1963, 1964, 1965, 1968 and 1969; that is, before the Post Office became a public authority. If the Committee of Review were to decide that the social significance of the postal services was such that at all costs they needed to he retained in their present form, and to recommend at the same time what would be necessary to maintain them on the basis of a self-supporting public service, would this business approach necessarily be better handled by civil servants than by a nationalised industry? It is true that whoever pays the piper calls the tune, but do we really want to get back to the situation where a Minister could be questioned in Parliament about every letter that goes astray?

The arguments for setting up a public corporation to achieve flexibility and a dynamic commercial approach apply equally to a service which is facing difficulties as to one where the future is bright; perhaps even more so because the incentive to reduce loss and wastage, to find effective means of running the service, is far greater when one is running a business than relying on the public purse. I would not underestimate the difficulties of the future. I think no one who has spoken this evening will underestimate them, but we are just beginning to see movement in the field of mechanisation and I shall be surprised if the technical ingenuity of the Post Office does not rise to the occasion with other developments.

The noble Lord, Lord Alport, referred to "System X". I must confess that I am as much in the dark as he about this but I, too, am convinced of the skill and enterprise of the telecommunications branch of the Post Office and of the British telecommunications industry. I will now turn to some of the specific points raised by noble Lords. On the question of separating the postal and telecommunications businesses into separate corporations—a matter which the Review Committee will consider—noble Lords will know this was examined during the passage of the Post Office Act and it was concluded that the most effective arrangement would be to give the two businesses a considerable measure of autonomy under the overall direction of a single board. Nevertheless, the Review Committee is free to consider and to recommend on this matter.

The noble Lord, Lord Alport, referred also to the matter of the Pension Fund. The Government have decided that for the year 1975–76 the Post Office should meet deficiency contributions from its own resources, without prejudice to a decision for future years which is still being considered by my right honourable friend the Secretary of State. I would point out that the saving to the Post Office that would be achieved by transferring this liability to the taxpayer would reduce the cost of a letter by 0.5p and the cost of a telephone call on average by less.

The noble Lord, Lord Alport, implied, if I understood him correctly, that the telecommunications business is being held back by losses in the postal business. I can assure him that there is no substance whatever in that suggestion. There is no cross-subsidisation between the businesses; the Post Office is required to prepare separate accounts for each and to agree separately their respective investment programmes with the Secretary of State for Industry.

My noble friend Lady Burton of Coventry has referred to the effects of the recent steep increases in postage rates on businesses which make heavy use of the postal services. Both the Government and the Post Office regret the need for these increases, but the inescapable fact is that without them the postal business of the Post Office, which is highly labour-intensive and therefore particularly vulnerable to inflationary pressures, would have ended this year with a massive trading deficit. This would have gone directly against the Government's policy of getting nationalised industries back to economic pricing, and so removing the need for price restraint subsidies in future years. In these circumstances, it would simply not be acceptable for the Post Office to seek to cushion one section of its customers, such as mail order firms or publishers, from the painful effects of increased charges, since the cost of doing so would fall on the remaining users of the postal services, many of whom would no doubt be in greater need of assistance than the intended beneficiaries.

Baroness BURTON of COVENTRY

My Lords, I should like to interrupt my noble friend here to raise one point. Obviously, I did not make myself clear. What T was trying to say was that because of the increase in the postal rates there had been a decrease of 13 per cent. in the postal traffic, and because there had been this decrease in the postal traffic without a corresponding decrease in the cost to the Post Office, the unit cost to other people was greater.

Lord LOVELL-DAVIS

Yes, my Lords, that may be so. But perhaps my noble friend will agree that the reduction in usage of 13 per cent. as against the increased revenue from the raised tariffs does not balance out. The revenue from increased tariffs is much greater than the loss through the loss in traffic, and I think this must be examined over a longer period to see precisely what its effect will be. My noble friend Lady Burton suggested that the present level of postage is causing some customers to make less use of the postal services, but in the view of the Government it would not be sensible for the Post Office to seek to retain a given level of traffic if that could be done only by providing services at less than cost. It is a matter of commercial judgment to get the balance right, and it is for the Post Office rather than the Government to exercise that judgment.

My Lords, my noble friend Lady Burton and the noble Baroness, Lady Pike, referred to the social needs of the Post Office services. The Post Office is very conscious of its social obligations, and has a long tradition of service to the community as a whole, as I think everyone here is aware. It is also very much guided, in all questions relating to the range of services provided, by the views of the Post Office Users' National Council and, where appropriate, of the Secretaries of State for Industry, Prices and Consumer Protection and the Home Department. So far as postal services are concerned, a particular aspect of the terms of reference of the Review Committee is the social significance of the service. I hope that will satisfy my noble friend Lady Burton and the noble Baroness, Lady Pike, to whom I must say that I am very pleased she has stayed this evening to take part in this debate, particularly as she has been to date the only woman Assistant Postmaster General. I welcome her intervention and I am sure the Committee will pay attention to her views when they read them in Hansard.

My Lords, finally may I repeat what I said at the beginning. It would be wrong for the Government to anticipate or influence the findings of the Review Committee. However, to say so in no way detracts from the importance of this fairly short debate, for which we must be grateful to the noble Lord, Lord Alport, and to those who have contributed to it. I hesitate to compare the thoughtful concern shown by your Lordships today with good compost, but I am sure it will have enriched the ground to prepare for a good harvest.

House adjourned at three minutes past seven o'clock