HC Deb 10 November 1975 vol 899 cc398-401W
Mr. Tom King

asked the Secretary of State for Industry if he will publish in the Official Report figures illustrating his conclusion that the substance of the problem of Post Office deficits was caused by uneconomic tariffs in the years 1971 to 1974.

Mr. Gregor Mackenzie

Post Office tariff applications between 1971 and 1974 were tailored to meet the requirements of successive stages of price restraint.

The following statements indicate for the two main businesses. Telecommunications and Posts, the extent to which the yield from price increases in the years 1971–72 to 1974–75 fell short of the amount estimated to be required, when the price proposals were formulated, simply to break even.

The amount of this shortfall reflects the operation successively of the CBI restraint

EFFECT OF PRICE RESTRAINT—TELECOMMUNICATIONS, INLAND SERVICES
Year Additional income required during year, to break even, as seen when price proposals formulated Additional income actually raised in year from price increases in that year Excess/ (Shortfall) (Column (4) minus Column (3)) Actual profit/ (loss) in year
(1) (2) (3) (4) (5) (6)
Estimate as at Amount £m. £m. £m. £m.
1971–72 … … March 1971 — — — 35
1972–73 … … March 1972 — 15 15 (34)
1973–74 … … August 1973 72 19 (53) (101)
1974–75 … … April 1974 175 87 (88) (221)
Stages in Price Restraint:
Date Description Price formula as applied to Nationalised Industries
July 1971 … CBI initiative … Increases in year to July 1972 limited to 5 per cent.
November 1972 … Price code, Stage 1 … Price freeze.
April 1973 … Price code, Stage 2 … "Allowable costs", or amount required to limit deficit to 1972–73 level.
November 1973 … Price code, Stage 3 … As stage 2.
December 1974 … Price code, Stage 4 … Allowable costs, or amount required to achieve 2 per cent. on turnover or 10 per cent. on net assets.

(Stage 4 was introduced too late to have significant effect in 1974–75.)

EFFECT OF PRICE RESTRAINT—POSTS, INLAND SERVICES
Year Additional income required during year, to break even, as seen when price proposals formulated Additional income actually raised in year from price increases in that year Excess/ (Shortfall) (Column (4) minus Column (3)) Actual profit/ (loss) in year
(1) (2) (3) (4) (5) (6)
Estimate as at Amount £m. £m. £m. £m.
1971–72 … … March 1971 — — — (8)
1972–73 … … March 1972 58 16 (42) (36)
1973–74 … … July 1973 87 27 (60) (62)
1974–75 … … April 1974 123 56 (67) (106)

policy, of the Price Codes as interpreted by the Price Commission and of Government policy as to Post Office prices, together with the delays inherent in the consultative/approval processes. The Post Office sought throughout to introduce the maximum price increases permissible within the limits operating at the time.

The statements also show that the actual deficits have generally exceeded the amount of the shortfall as described above. This is mainly because inflation proved greater than could be allowed for in the price increases.

All the figures quoted are for the inland services only, since the prices for international services have not been limited by the price codes.

Mr. Gorst

asked the Secretary of State for Industry when he expects to announce the terms and membership of the inquiry into the Post Office; and on what dates the inquiry will be started and completed.

Mr. Gregor Mackenzie

My right hon. Friend hopes to make an announcement shortly and I must ask the hon. Member to await that announcement.