Postal Charges (Hansard, 31 July 1986)

§ Lord Boyd-Carpenter
My Lords, I beg leave to ask the Question standing in my name on the Order Paper.
The Question was as follows: To ask Her Majesty's Government whether they were consulted by the Post Office about its recently announced increases in postal charges by amounts substantially higher than the rate of inflation; and whether they propose to take any action in respect of this action by an organisation holding a statutory monopoly.

§ The Parliamentary Under-Secretary of State, Department of Trade and Industry (Lord Lucas of Chilworth)
My Lords, I have to apologise to my noble friend for the length of the reply but the Question raises several issues.
The postal tariffs are the responsibility of the Post Office. We were advised by the Post Office about the tariff proposals that it recently sent to the Post Office Users' National Council and the additional revenue that they would be expected to generate. This advice was in the context of our discussions with the Post Office on the three-year financial and efficiency targets for the postal business that are being announced today.
The Post Office's proposed increases for inland letters are well below the rate of inflation; lp on the first-class tariff, the first increase for over two years, and restoration of the 1 p that was cut from the second-class tariff last November. My right honourable friend the Secretary of State sees no ground for him to exercise his limited statutory powers in respect of those proposals. The only proposed increases that are higher than inflation represent a further stage in the phased elimination of the subsidy enjoyed by users of certain overseas services at the expense of the generality of users of overseas services.

§ Lord Boyd-Carpenter
My Lords, while thanking my noble friend for what is at any rate a quantitatively satisfactory reply, may I ask him how he works out that an increase of lp on 18p mail is below the rate of inflation? Is my noble friend aware that lesser mathematical minds than his would suggest that it is about 5 per cent. against the current rate of 2½ per cent.?

§ Lord Lucas of Chilworth
My Lords, regarding the first-class tariff", I am advised that if one takes a real price index of 100 in January 1981, when the tariff was 14p, in October this year if the proposed charge of 18p is taken forward the real price index will then be 91.7.

§ Lord Mellish
My Lords, is the Minister aware that they made untold millions of pounds profit last year—

Noble Lords
Order!

§ Baroness Burton of Coventry
My Lords, is the Minister aware that if we forget all the words that he has just had to give to the House, the ordinary customer now has the belief that whatever profits are made by these nationalised organisations the customer still has to pay increased prices?

§ Lord Lucas of Chilworth
My Lords, that is so; there is an increased tariff but that tariff is in real terms below the inflation rate. There is most certainly better value for the amount of money that the customers are paying. There are some 40 million pieces of mail that are now dealt with inland every day. The profits that accrue go to the benefit of both the consumer of the service and the nation at large.

§ Lord Mellish
My Lords, that is a weird set of economics. Surely they made millions of pounds profit last year? At what level do postal rates stay firm or go down? Do the Post Office simply go on making more profits every year and putting up the price every year? I understood that it was a free market: that prices came down when profits went up.

§ Lord Lucas of Chilworth
My Lords, with regard to the postal business, the profits of the Post Office were £134 million for the year 1985–86. This represents only 4½ per cent. on turnover. I do not believe that that is an excessive profit to be made.

Lord Winstanley
My Lords, the Minister told the House that POUNC were informed of these proposed increases before they took place. Is the Minister in a position to tell the House what advice POUNC offered to the Post Office Board? Can he tell the House why the Post Office Board rejected the advice that was given to them by POUNC?

§ Lord Lucas of Chilworth
My Lords, as I sought to explain in my earlier remarks and as I have sought to explain on a number of occasions, these matters are for the management of the Post Office. It is an operational matter. The Post Office receive advice from POUNC and from other quarters. It is for the management to accept or reject that advice.

§ Lord Orr-Ewing
My Lords, is it not a fact that the postal service is steadily going down in punctuality of its delivery? It is steadily being automated, we hope in order to reduce the costs. Convenient sub-post offices are being closed and Crown post offices are rare and far between. That represents a further depreciation of the service that the public receives. Surely it is now time that more wholesale automation should take place and that there should be a deep anxiety by the Post Office to make their deliveries more punctual and efficient so that they match the needs of a modern industrial economy.

§ Lord Lucas of Chilworth
My Lords, it is not true that the standard of service with regard to deliveries 983 has declined. In 1984–85, 86.3 per cent. of first-class mail was delivered on the first working day after posting. This year the figure is 87.6 per cent., and that shows an improvement.

§ Lord Mulley
My Lords, while 4.5 per cent, on turnover may seem high—and many companies would be very glad to achieve that figure—will the noble Minister tell us how much of that profit will be taken away by the Treasury and how much will be available to the Post Office for improving its services? Secondly, will the Minister care to comment on what seems to me to be the strange phenomenon that noble Lords and. indeed people elsewhere who are great advocates of the taking of all these monopolies out of what they call civil service and Government beaurocracy, nevertheless constantly, and I believe rightly, want to have parliamentary control and interference in their operation?

§ Lord Lucas of Chilworth
My Lords, to deal with Lord Mulley's first question, I point out that none of the profits goes to the Treasury. The Post Office has a negative external financing limit and therefore the money goes to invest elsewhere in the public sector with benefit to the public sector borrowing require-ment. As I have said, none goes to the Treasury. The general principle under which the Post Office works is the same for all the nationalised industries and is generally in accordance with the White Paper, Command 7131, which was published in March 1978 when the noble Lord's party was in power.

Lord Bruce of Donington
My Lords, is the noble Lord aware that we on this side of the House admire the noble Lord's vigorous defence of this highly profitable public undertaking? Further to the point raised by my noble friend Lord Mulley, will the noble Lord inform us what the profit is in ratio to the capital employed by the Post Office? That is normally recognised in industry as being a much more normal indication of profitability. In view of the attitude that the noble Lord has taken today, will he give the House an assurance that no consultations have taken place with the Post Office concerning its possible future privatisation?

§ Lord Lucas of Chilworth
My Lords, I am afraid that I do not have the figures concerning the ratio of profits to assets. I think that the noble Lord could find those figures in the annual report which was published a short while ago. So far as privatisation is concerned, I think that I have answered that question on more than one occasion over very recent weeks.

§ Lord Nugent of Guildford
My Lords, is my noble friend aware that the improved rate of next day delivery of first-class mail has not yet reached the part of the world in which I live, which is about 47 miles from here? Is he aware that, not infrequently, I receive first-class mail from London which has taken four days for delivery and that a man on foot could do it quicker? Will my noble friend ask that we should receive a share of the improved service about which he has told us?

§ Lord Lucas of Chilworth
My Lords, I am quite sure my noble friend accepts that the figure which I gave was a general and not a particular figure. I recognise, as does the Post Office, that the standard of delivery service falls short of the target and in certain areas it may fall very short of the target. The Post Office chairman is aware of this, and since the agreements on efficiency and manning that were concluded a few weeks ago one anticipates an improvement nearer to the target set across the country.

§ The Earl of Swinton
My Lords, we have spent 11 minutes on the first Question of the day. I think that the noble Lord, Lord Diamond, has been anxiously attempting to rise to his feet—

Several noble Lords
And the noble Lord, Lord Boyd-Carpenter.

§ The Earl of Swinton
My Lords, with all respect, my noble friend has had a "go". I am in your Lordships' hands. We have spent 11 minutes on this Question. I suggest that the noble Lord. Lord Diamond, asks his question and then we move on to the next Question.

§ Lord Diamond
My Lords, will the noble Lord the Minister be good enough to reconsider the answer which he gave as regards the amount of profit which the Post Office is allowed to keep? The fact that he said that the external financing limit was a negative one means—does it not?—that the Post Office does not, and I repeat "not", retain all its funds, but that part of them are passed on via the Consolidated Fund for the other purposes which the noble Lord mentioned? Is it not important that the country should understand that, of the charges made, part of them are for the benefit of those who use the Post Office service and part of them—a small part, but nevertheless a part—are for the benefit of other services?

§ Lord Lucas of Chilworth
My Lords, that is perfectly true. The Post Office does not keep all its profit. In 1986-87 the Government's target of £93 million surplus was to go in the direction which I indicated—that is, to be invested elsewhere in the public sector with a benefit to the PSBR. That would come out of the 4.5 per cent. profit on turnover to which I referred earlier.

§ Lord Boyd-Carpenter
My Lords, is my noble friend aware that the figures which he gave for deliveries are somewhat misleading inasmuch as they relate not, as he said, to the time of posting but to the time of collection which is, of course, at the discretion of the Post Office. In the light of that fact, are not his figures just as misleading on that point as his strange calculation that lp on 18p is less than 2.5 per cent?

§ Lord Lucas of Chilworth
My Lords, the time is calculated—and my noble friend is quite right—from the date stamp in the sorting office. My noble friend has addressed himself to this question on more than one occasion, but one has to have some benchmark, and that is the benchmark against which we make the measurement.