Post Office (Hansard, 17 May 2000)

§ Mr. Alan Johnson

The Government are setting the Post Office a return on capital employed target of 13 per cent. in 2000–01 and this translates into an operational pre-tax profit target of £392 million in 2000–01. This target excludes the network of post offices, where the PIU report is awaited, and the non-operational interest arising from past surpluses held on the Post Office's balance sheet. This target will be subsumed within the overall post-tax profit target for the Post Office as a whole, as described in the White Paper.

As already announced, the 'dividend' that the Government effectively take out of the Post Office is set at 40 per cent. of the post-tax profits of the business as a whole. This is subject to a dividend floor payment which this year will be raised from 80 per cent. to 90 per cent. of the dividend that would be paid if the Post Office meets its overall profit target.

In order to help the Post Office to plan for the medium term, the Government are also setting an indicative financial target for 2002–03 of 13 per cent. return on capital employed (ROCE) in the Post Office's operational business, excluding the network of post offices and any non-operational interest arising from past surpluses. Return on capital employed is defined as profit before interest payable and tax, but after operating interest receivable, divided by operating capital employed.

I have set the Post Office's financial target and dividend floor for 2000–01, and the indicative financial target for 2002–03 in the light of external benchmarking, the likely regulatory environment, market expectations, the Post Office's approved Strategic Plan for 1999–2004, and other projections from the Post Office.