§ Mr. Colvin
asked the Secretary of State for Industry whether he will make a statement about the financial objective for the postal business of the Post Office.
§ Mr. Adam Butler
The current financial objective for the postal business, which is a 2 per cent. return on turnover after historic and supplementary depreciation and after payment of interest, expires at the end of the financial year 1979–80. My right hon. Friend has agreed with the Post Office board that the same financial objective shall apply to each of the three financial years 1980–81 to 1982–83.
In agreeing the target my right hon. Friend has had regard to the Carter committee's view that, despite the very real competition the postal business faces from other means of communication, it should be possible for it to provide a good service without subsidy. The Post Office accepts this to be a fair and challenging target. It will also enable the postal business to meet its investment needs from profits and depreciation.
The target for the postal business has, as in the past, been set as a return on turnover, rather than as a real return on net assets, the normal form for nationalised industry financial targets, and that on which the target for the tele- 342W comunications business is based. The target is approximately equivalent to an average real rate of return of 4.3 per cent. on net assets, after depreciation and before the payment of interest over the three years concerned.
The performance and efficiency of the postal business cannot however be measured solely in terms of its success in meeting the financial objective. The Post Office board is aware that, in addition to this target being met, the Government attach great importance to improving productivity and achieving the performance aim of preventing any rise in real unit costs over the period 1977–78 to 1982–83; and most particularly to the achievement of the highest quality of service to the consumer.