10 March, 1927.]

cent. Where do you get those advertisements from?-The principal item is the advertisements in the telephone directory. There are also advertisements on books of stamps, advertisements in Post Offices, and in the Post Office Guide, and in telephone boxes, and various other small kinds of advertisements.

Sir Assheton Pownall.

395. With regard to the loss on press telegrams, I should like to put one further question. In view of the recent, and I understand definite ascertainment of this loss to be £220,000, would it not be worth while approaching the press again and reopening with them the agreement made in 1920 on which they paid only an extra 25 per cent. above the prewar rate? The Postmaster-General has had that matter under consideration, and I believe still has. Perhaps I ought to point out one thing. Invitations to increase the rates have come from certain press quarters, but it is important to draw a distinction between those newspapers which do not make much use of the service and those which do. Representations have also been made to the Postmaster-General in the contrary direction. The newspapers which would be hit by any considerable increase in press rates would be mainly the smaller provincial papers.

papers

396. Not the large London whose balance sheets are rather remarkable at times?--No.

Major Salmon.

397. Who are the best customers to you? I suppose the fewer customers we have the better at these rates. I am not quite sure what "the best customers" means.

398. Which customers pay you best? Which give you the less loss? From your £80,000 turnover how much would be provincial papers, and how much would be London papers?-The majority of that turnover would be provincial papers. 399. Therefore the people that asking you to increase the rates are those that use it least, and those that are the biggest users of your system are objecting to an increased cost? That is broadly true.

Sir Assheton Pownall

are

400. The revenue is £80,000, the loss is £220,000. Therefore the total cost is

[Continued.

£300,000. Therefore the papers are paying approximately one-fourth of the total cost of their service?-That is so.

Chairman.

401. I understood you to say in reply to a Member of the Committee that you expected this loss of £1,299,214 on the telegraph service to increase, or perhaps putting it more generally, you did not expect an improvement. Could you give us any additional information with regard to that? I thought there was a prospect of improvement?-The inland telegraph traffic has diminished by 25 per cent. since 1914, and the rate of diminution is at present accelerating.

Mr. Ellis.

402. That is actually on the figures, not taking into account any increase in population at all? That is the diminution in actual traffic, in the number of messages; and there are no indications at present that that is going to slow up.

403. If you calculated on the actual increase in population, the proportion would be somewhat more?-Yes, it would be somewhat more.

Major Salmon.

404. Is it not largely attributable to the fact that you do not give service to the public? May I put it in another way. If it is desired to send telegrams after half-past seven o'clock at night the public have no facility for sending them. Is not that an obvious reason why your business does not increase?-If it could be inferred that the ability to send telegrams after seven o'clock at night would lead the public to send substantially more messages before seven o'clock at night, I should agree. But when the offices were open till eight o'clock at night there was very little late evening telegraph traffic.

Mr. Ellis.

405. Could not something be done in the way of using the telephone service in country districts far more than it is being used even after eight o'clock? Perhaps facilities of that kind would be taken advantage of?-The difficulty is delivery, of course.

406. I mean delivery through the telephone to the person to whom the telegram is addressed. In many districts in

[Continued.

10 March, 1927.]

the country we have to accept at all times of the day delivery of telegrams. through the telephone, which are confirmed by the actual delivery of the telegram the next day. If those facilities were extended till later in the evening in country districts, surely it would be an advantage. The telephone service is open the whole time, and it would not involve the keeping open of any office in order to send messengers round?—That would be a telegraph service for telephone subscribers only.

407. In effect it would work out like that? It would have to be more than that. If you were to maintain your delivering organisation so as to be prepared to deliver by night, if the addressee of the telegram were not on the telephone that would be a very costly matter, and I feel pretty sure, an unremunerative matter. But if the service was offered only to telephone subscribers it would be a different thing.

408. You need not send the messages out to a remote district office. Dealing, for instance, with Leeds and Skipton, with which part of the country I am familiar, you could telephone all the messages from Leeds after a certain hour? Yes.

--

Major Salmon.

409. In other words, you could do what the wireless people do at the present time, and also what the cable companies do at night? I will see that the suggestion is considered.

Sir Robert Hamilton.

410. I should like to ask if you are able to say whether the Betting Act has had any appreciable effect on the number of telegrams sent ?-It is impossible to say anything very definite for the reason that I think I am right in saying-we have not yet had a flat-racing season under the betting tax.

Chairman.] I was about to say that the Betting Act was not in force at the period these accounts deal with.

Sir Robert Hamilton.] That is so.

Colonel Henderson.

411. Have you kept any statistics which show what difference, if any, there was when the last increase in charges for telegrams was made? For instance,

61421

what difference there was in the number of telegrams sent, or what increase or fall in the revenue there was when facilities were provided for telephoning telegrams, and when you subsequently provided the facility of giving a person's address by means of his telephone number? The telegraph revenue from the public was £3,900,000 in 1918-19, and was £5,900,000 in 1920. The change took place somewhere about that time.

412. Did the number of telegrams sent vary in any way? What you have told me is of no assistance unless you work out exactly what the increased charges were. I am looking at the matter from the point of view of whether you reached a point in the charges which made the service unremunerative, as you can, for instance, with spirit and wine duties. Have you considered it from that point of view?-It has been considered from that point of view. The only conclusion the Post Office experts have been able to come to is that if rates were reduced generally the deficit would increase. That is to say, there is no prospect of getting such an addition of traffic by reduction of rates as would make up for the loss of revenue by reduction of charges.

Major Salmon.

413. Not even if you were to reduce the rate over the twelve words? No. That matter was gone into last year after Sir Evelyn Murray gave evidence to this Committee. I think the conclusion arrived at was that it would take an average increase of about five words per telegram to make up the certain loss of revenue on the existing traffic over twelve words.

414. Therefore we look forward to an annual increased loss under the telegraph service? I am afraid that is so. The principal cause of the great depression in telegraph business, which is a world phenomenon, is, of course, the growth in the use of the telephone. The telephone is cutting out nearly all the short-distance telegraph traffic.

415. And there is no means of reducing expenditure in the cost of administration?-Expenditure is reduced year by year, and the administration has made great efforts to economise wherever possible. The matter is not allowed to go by default; a great deal of attention is being paid to it.

D4

10 March, 1927.]

416. Is it not somewhat due to the fact that the telegraph service is treated as an entity by itself, and that redundant staff in the telegraph service are not transferred, or are not welcomed, say, in the postal service? If you want to make a reduction in the telegraph service, would you not be able to find a means of dealing with redundant staff in that way?— So far as I am aware, there is no reason to suppose there is redundant staff in the sense of staff kept on and paid with no work to do, because as it happens the staff employed on telegraph business is a fairly elderly staff and is retiring in pretty considerable numbers on reaching the age limit. There is a fairly high vacancy rate.

417. My point is rather this. If the administrative chiefs knew there was a home found for officials in Government service there might be more acceleration in trying to reorganise and in transferring the redundant staff in one branch to the other branch where they had a home for them, say, on the postal side of the work? That is a very difficult question on which I should hesitate to express an opinion. For instance, I should hesitate to say to what extent men who have been telegraphists all their lives are capable of doing efficient work of a quite different character. Then it is necessary to mention that there are various agreements with the Post Office unions which would make a transfer of that kind very difficult.

418. Is the percentage of telegraphists large in proportion to the whole of the salaries paid under the heading of "administrative and operative expenses, salaries and wages "?-Oh, yes. The personnel charges, including pension liability, are, I think, over 75 per cent. of the total cost of telegrams.

419. Of course, the pensionable people are past praying for, but I was thinking of those actually in the department. What percentage of the number employed in the department are telegraphists ?What percentage of the total Post Office servants in the department are telegraphists?

[Continued.

correct the figure I have given if necessary. In that calculation I am excluding the engineering maintenance staff.

Sir Assheton Pownall.

421. Have you ever thought of the possibility of a zone system for telegrams similarly to what exists for telephones; that is to say, for the longer distance telegrams, which presumably cost more, charging, say, 1s. 6d. over 100 miles, and 2s. Od. over 200 miles ?-That has been considered quite recently.

422. And it has not been found possible? I think the general position is this. No alteration can be made in telegraph rates without an Act of Parliament. The Postmaster-General is giving the matter his close consideration. What the result will be I am not in a position to say.

Mr. Ellis.

423. If you do consider that, I hope you will remember that those of us who live in country districts do not get other postal facilities which people in the towns do.

So that, one way and another, we may expect to have that set off against other things. ?-But one thing that is perfectly clear about any revision of telegraph rates is that, whoever has to pay more will make himself unpleasant about it.

Colonel Henderson.

424. Is there any place in the accounts where we could see the expenditure on telephones and telegraphs separated? I mean, the expenditure with regard to maintenance, or, possibly, new works?— That appears in the sectional accounts on pages 16 and 17 for telegraphs, and pages 19 and 20 for telephones.

Chairman.] I was about to say to the Committee that the discussion so far and the questions put have ranged over a wide field, and having that in view, thought I would now put to the Com. mittee pages 12 to 23 which will cover three accounts. Questions already asked need not be repeated, but if we take those three accounts they will supply at least some of the information which is sought in the questions.

"The number of telegraphists and other manipulative workers in the basic grades in Telegraph Offices is about 88 per cent. of the total number employed in those offices: Delivery Staff is excluded.-H. N. B."

10 March, 1927.]

Mr. Briggs.

425. With regard to the item of engineering stores in stock, on page 13 of the accounts, I see you say in your explanatory note on page 7 that these stocks have not been taken at the actual value, but at cost, although, apparently, from your remarks, the actual value is known or could easily be arrived at. Could you say in a word what the difference would have been if you had taken them in at the actual value to-day instead of at the cost value?-If the stores were taken into account at to-day's buying price, and excluding the pre-war apparatus which is not required for current use, the value would be about 7 per cent. below the present figure.

426. That represents something approaching £400,000?—Yes.

427. Has that any reference in any way to the plant, or is the plant a different class of account? The plant refers to plant in situ-lines, cables, exchanges, and so forth.

428. If that stock had been taken into account at to-day's value, it would have meant an equivalent increase on the Exchequer advances on the other side, I take it? It would have meant a writing off of the depreciation in value against works, partly capital and partly main

tenance.

429. Where would it have appeared on this account?-It would have appeared partly as an increase in the value of plant, and partly as a diminution in the surplus.

Major Salmon.

430. You do not mean an increase in the value of plant?-On further consideration I think I am wrong. I think the whole of the difference would have to be charged against revenue, and there would be a diminution of the surplus.

Mr. Briggs.

431. Therefore it would have had to be met by the Exchequer on the other side? It would have shown itself as a reduction of the telephone surplus of £550,830.

432. I see in the telegraph service account on page 16 there is a provision for depreciation of £414,912. That is included before the telegraph loss is arrived at, is it not?-Oh, yes.

Sir Fredric Wise.

433. On page 19 there is an item: "Balance at credit of depreciation

[Continued.

account, £4,507,262." Would you explain that? That is a composite figure. Depreciation is charged against various kinds of plant according to their characteristics based on experience.

434. Who fixes that?-The Engineer in Chief. It is based strictly on experience. The lives of the various classes of plant are watched, and when there is a sufficient body of experience to fix a life, the life is fixed.

435. What is the percentage of the variation? What is the maximum and the minimum approximately?—I should say the minimum would be of the order of 15 years for certain types of telegraph apparatus, probably. We are speaking of telegraphs now, of course.

436. And the maximum ?-I think the longest life is 60 years for underground cable.+

Major Salmon.

437. In taking the value of stocks generally, under any head, you take those stocks at rate book prices; you do not necessarily take the actual physical stock in your Department?-Stocktaking is continuous. We do not follow the oldfashioned practice of annual stocktaking. There is continuous stocktaking going on all the year round. The value shown in the account is, of course, the book value.

438. That is to say, not the price at which you would buy them to-day, but what they were booked at ?-It represents the average cost at which these particular stores now in stock were purchased.

439 When you say the average cost, do you mean the cost at which you would purchase them to-day as against what they originally cost you?-No. The stock of any particular item probably consists of a number of separate purchases, and those purchases are averaged if the prices. vary.

440. But as a matter of fact I suppose you have in stock a quantity of old stock; old in so far as you have not used it for some time; and it might have been purchased at a dear period. Have you allowed any figure in any of your balance sheets for any of the three services for writing off the value of that stock, because it is not worth the value at which it stands in your books?-Throughout stocks are charged to works at cost.

† See Q. 520.

441. Therefore if the market has depreciated 33 per cent. the works would suffer to that extent because it was old stock bought at a dear period?-That is so. And similarly, when the market appreciates, the works cost less than they would do if stores had to be bought at the time the work is carried out.

Sir John Marriot.

442. You say that your stocktaking is continuous?—Yes.

443. How can you get your average if it is continuous?-The stocktaking is the process of ascertaining that the stocks which are on the books are actually in store. The average to which I referred was the average buying price of any kind of store of which the stock in hand was bought at different dates.

444. I find it very difficult to relate a continuous stocktaking to an average. I should have thought it was actual, and not average, if it was continuous?—I should find it impossible to relate them, because they are two different things. The stocktaking is the process of going round the stores and seeing if the stores are there. That is a continuous pro

cess.

445. That is clear enough. But what about the average?-The average is merely this. If you have a stock, let us say, of 200,000 subscribers' telephone instruments of which 100,000 were bought at a certain date at price X, and 50,000 were bought at a certain date at price Y, and 50,000 at another date at price Z; the price at which they appear in the total value of stock in hand is the weighted average of those three prices. That is a purely paper calculation; it has nothing to do with the verification of the stock.

Mr. Briggs.

446. I still do not quite follow. How, with a continuous stocktaking, can you fix a date?-The dates used for the purpose of averaging are the dates at which the store ledgers show that stores were purchased and taken into store.

447. Please do not confuse it with averages. I discard averages altogether. I am rather tender on your suggestion that the old-fashioned method had been improved by some modern method known as continuous stocktaking with which I am not acquainted.-It is the standard method, I believe, in large organisations.

[Continued.

448. I do not quite see how "continuous stocktaking can be applied to a date. How can you fix a date with continuous stocktaking?—The stocktakers go round either every day or at regular intervals. On each date they take a certain section of the stock. They see the amount which should be in stock according to the ledgers, and they see the quantities actually in stock. Continuous stocktaking requires a system of store ledgers in which quantities and prices are kept.

449. Supposing you take a continuous stock from the 1st January to the 31st December, an item you have taken into account according to your method of continuous stocktaking on the 2nd January has to be brought up to date on the 31st December, I take it, by the alteration of what has been put in or what has been taken out?-Oh, yes, issues and receipts have to be posted.

450. So that it is an actual physical stock on the 31st December?-Yes.

451. If the price is then fixed as on the 31st December, you cannot have a continuous or an average price?-You do not have continuous price fixing. Prices are fixed in Post Office practice once a year, with an interim revision of a price if a new contract has been placed at a materially different price from the book value of that item. That is to say, prices are reviewed annually, but if there is an important change in price with regard to any stock purchased during the year the price is reviewed at the time.

452. But the price can be, if you so desire, the actual price at the date of the stocktaking, not the physical stocktaking but the final balance stocktaking which is the actual date of stocktaking? -The price I have been referring to is not the market price, but the rate book or store ledger price, which is an average cost. It is the average cost of the stock actually held.

453. And you take your stock at the average cost, not at the actual?-That is so; not at what I might call current buying price.

Mr. Ellis.

454. So far as I can see the price has no relation whatever to the actual physical stocktaking. The price is an artificial price based on an average throughout the year? The pricing of the stock coincides and must mathematically coincide very closely with the actual cost to