THE PRESS FRIDAY, FEBRUARY 21, 1986. Post Office charges and tax

Press, 21 February 1986, Page 16

THE PRESS FRIDAY, FEBRUARY 21, 1986. Post Office charges and tax

A sizeable part of the increases in Post Office charges announced yesterday is little more than barely disguised tax-gathering. The Post Office is expected to announce soon a-profit for the year well in excessof the s3l7.million it made last {.year. Like last year, when $lOB million of thh profit ’disappeared, into. ;thq Govemment’s coffers, the profit this year will be taxed and the Post Office will be required to pay what it calls a dividend to the Government. /

Nd matter how much the Government may speak of the “user-pays” principle as justification for the latest increases, the tax rake-off from Post Office profits has nothing to do with the provision of services for users. It is an indirect tax that is applied whenever the Post Office shows a profit; and there can be littledoubt about the intention by the Government that the Post Office will always do just that. It is a curious fact that the present Minister of Finance, Mr Douglas, condemned as “a rip-off of monumental proportions” the Post Office’s 1983 profit of just $179 million. He was then, of course, on the Opposition benches. This year, he is likely to have the assistance of a similar sum in tax alone — creamed off a much, much larger profit — to balance his Budget. He is not complaining. The Government is quite entitled to reduce its deficit, or increase spending in< other areas, from the revenue it siphons off the Post Office. At the same time, an increase in charges is to be expected when increased costs make Post Office services financially marginal. The two propositions are quite separate, however, and the Government is less than candid when it attempts to blur the distinction.

The Post Office should be expected to meet the costs of capital expansion from revenues, and charges must be pitched at a level sufficient to provide for this. Whenever Government spokesmen speak of this as a justification for increased charges, however, they conveniently ignore the large sums of capital that would have been available if only the Government had not appropriated it through tax for other uses. There can be no argument that in the highly technical world of communications today the costs of equipment are high, as is the hire of the technicians to use and maintain it. Users of Post Office services, particularly telecommunications, must be prepared to foot the bill if they want the facility; and they have a corresponding right to expect value for money. Bearing in mind that, to a great extent, the Post Office is a protected monopoly, the size of the dividend demanded from the Post Office is not a measure of the efficiency of its

services. A State-owned monopoly such as the Post Office, it can.be argued, should hold its charges to a minimum,(consistent with sourjd business practice and /thereasonable' provision of. ..a, profit! to 'pay ' for capital improvements. In return, the users should be entitled to expect an -service \thftt: ; meets their needs rather than ah; organisation, that operates to suit itself. v ? The performance bf the Post Office in many areas is adequate or improving. It is under severe pressure to supply more telecommunication services and has a big programme in hand to meet this demand. The Post Office has been brushing up its savings bank services and presentation to compete with others in the field who have been putting up some very glossy shop fronts to attract custom. All this costs money; though it is not essential for all the capital cost to be met wholly from revenue each year.-Borrowing to pay for a burst of capital expenditure and repaying the capital and interest from later revenue does not, however, suit the Government’s policy this year. Interest rates are high and the Government wants to show that it can reduce its deficit. In short, the consumer will pay till it hurts, and pay now — not later. Although they JPbst . Office can earn applause for // its ? telecommunications improvements, the same applause may not be accorded the postalservices. Of course, these can be said to work well enough — better than they do in softie countries. Yet far too often the ’ postal- system seems to be overwhelmed. This area of Post Office activity requires a high intensity of labour; and the effects of this, and of new State pay rates, are certainly showing up in the new charges. , ;■ Increasing by/an average of a third the charges for posting letters and packets, whether to inland or to overseas destinations, as the Government has just done, is certain to raise a call for improved service. When Post Office charges generally were increased by an average of 7; per cent last July, postal services were hit with increases of between 10 and 15 per cent. The latest increases again fall heavily on postal services without any prospect of faster or more frequent deliveries. By the year’s end, after the introduction of the goods and services tax, it will cost 50 cents to post an airmail letter from Christchurch to Auckland, and 33 cents for surface mail. Private courier firms can reasonably expect an increase in custom. This kind of competition may be healthy, but it is not likely to help the Post Office in the long run.