§ Mr. Wrigglesworth
asked the Secretary of State for Industry whether he will make a statement about the financial objective for the General Post Office's postal business.
§ Mr. Varley
In accordance with the Government's policy I have agreed with the Post Office Board a financial objective for the postal business of a return of 2 per cent. on turnover, after historic and supplementary depreciation and after 373W charging interest. The target will apply to each of the financial years 1978–79 and 1979–80.
The target for the postal business, which is labour intensive and makes only a comparatively modest call on capital investment is set as a return on turnover, rather than the return on net assets on which the target for the telecommunications business is based. This new postal business target compares with one of 2 per cent. return on total revenue account expenditure which lapsed in March 1973.
I am satisfied that the setting of a target at this level is in the best interests of everyone. It means that postal prices will be set at the minimum level consistent with sensible financial management. It provides a margin over break even, stimulus for continuing efficient management of the postal business and takes into account the determination of the business to maintain the existing quality of service and where possible to improve it.
Both the Government and the Post Office accept that the performance and efficiency of the postal business cannot be juidged solely in terms of its success in meeting a financial target. Discussions are continuing with a view to identifying measures against which it will be possible better to judge the performance of the postal business both as regards productivity and quality of service.
A financial target was announced for the national Giro in January 1976 and for the telecommunications business in December 1976.