QUERIES ON POSTAL CLEARING SERVICE

Press, Volume XCIX, Issue 29342, 22 October 1960, Page 4

QUERIES ON POSTAL CLEARING SERVICE

[Specially written for “The Press’* by “COASTER*’}

The introduction in Parliament of the Post Office Amendment Bill opens the way for the postal clearing service—now apparently to be known as a postal settlement service—which the Minister of Finance forecast in this year’s Budget As a piece of legislation the bill raises more questions than it answers.

It would appear that the bill is intended to do no more than authorise the introduction of such a scheme, for all except two important points are to be covered by later regulations. The only points which emerge clearly are that it is intended to pay no interest on settlement accounts in the Post Office and that no stamp duty will be levied on such transfers. Thus, while a full study of the pros and cons is not possible until more basic details are disclosed, some of the valid assumptions about the proposal are subject to serious criticism. In particular, it is important to consider right at the beginning where the final costs of a postal settlement system will fall. Any system for handling money transfers must involve the expenses of labour, equipment, stationery and postage, etc. This applies under the existing systems just as it will under any new system such as a postal settlement service.

No Charges Most of the support for postal clearing has made much of the fact that no charges will be made for postage, envelopes or transfer forms and that the whole cost of the scheme will be covered by the interest earned on the funds within the system. This means that the only source of income will be interest paid to the Postal Clearing Service by the Government Many people will view with concern the introduction of a new scheme, the cost of which is to be met from taxation. At the present time the costs involved in making money trensIfers are borne by the users, who after all are the people one would expect to pay for these facilities. What are these costs? Broadly, these may be summarised under the following headings:— Book-keeping: There are those who anticipate substantial economies from operating a centralised ledger record system, but it must not be overlooked that no matter how elaborate an electronic system may be, it will still involve individual handling of items to record the basic data which has to be fed into the machine. Signatures will have

to be individually checked, as will the other details on the

transfer forms to ensure that the payments are properly authenticated. There must be adequate checks to give the greatest pos- »<■

sible protection. And let it not be forgotten that the kind of equipment required for such an undertaking will be very expensive to iniall and maintain. Postage: Under the present system postage costs are borne by the persons making money transfers. It has been suggested that these charges will be carried by the postal settlement service. This is important, for instead of one mail transaction in sending a cheque between two parties, there could be three—first, the sending' of the payment form to the postal settlement service; second, the returning to the sender of his butt and up-to-date statement; and third, the sending to the recipient of his advice and up-to-date statement. It is true that to the extent that people make more than one payment on a single transfer form there would be some reduction in the number of mailings. Also, it may be decided to forward the transfer butts and ledger statements at less frequent intervals. Nevertheless, the loss of the present income from postage on money transfers, plus the higher volume of unpaid mail, would impose a heavy burden on the postal system. One might well ask why, if a special concession can be offered to one class of users, postage should be levied on other sorts of mail? Why should postage on money transfers through a postal settlement service be met by the taxpayer? Are the individuals and business firms who may use the system really needy cases deserving of charitable assistance? Indirect Costa:

At present the stamp duty on cheques contributes over £500,000 to the public purse each year and to the extent that the community changes from cheques to postal settlement the reduction in revenue would have to be recovered by higher taxes.

It has been suggested that the main object in establishing a postal settlement service is to divert funds from the private sector of the economy to the Government sector. If this occurs it will be necessary for overall private expenditure to be reduced correspondingly, unless further inflation is to be permitted. There are obviously many considerations to be taken into account before a proper assessment of the merits and demerits of a postal settlement service can be made. A much fuller disclosure of detail well before the introduction of the scheme is desirable. otherwise taxpayers may well find themselves saddled with an expensive white elephant.