A pounds 400m kick at the Post Office
Friday 01 December 1995
If ever there were an argument in favour of privatisation, it is the cynical way ministers bleed the corporate entities they control in an effort to balance the Government's books. The latest victim is the Post Office, which will have nearly pounds 400m whisked away from it in the three financial years from 1996-97.
That is the extra amount of cash the Post Office has been told to pay to the Department of Trade and Industry from its profits, above and beyond the levels it thought had been agreed a year ago. There is no doubt about the figures. The pounds 260m extra required in the first two years of the three- year period is printed in black and white in the Budget Red Book.
The Government could argue that since the Post Office is a profitable business, a higher dividend for the Exchequer - together with corporation tax - is a perfectly justifiable reward. But it would be disingenious of it to do so because, in the row that followed Michael Heseltine's decision to abandon Post Office privatisation, serious promises were made about helping the business to invest and compete.
The Post Office understood that to mean its contribution to the Government would be fixed at the then agreed levels, not jacked up by a Chancellor short of money for tax cuts. The management has been urged to use the private finance initiative as an alternative way of raising investment money. This is a notoriously slow and difficult process.
The upshot is that the Post Office is now threatening to cut costs and raise prices to offset the damage inflicted by the Government. Although most of Britain hated the idea, partial Post Office privatisation was never as bad as it was made out. It is a paradox that by behaving in this fashion, ministers only underline the importance of removing large businesses from their control. Perhaps they are kicking the Post Office around to prove the point.
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