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Telecommunications

Volume 885: debated on Monday 3 February 1975

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asked the Secretary of State for Industry if he will clarify why the level of capital expenditure on telecommunications is about £500 million per annum whereas the annual turnover is only £1,200 million.

Subject to the availability of resources, the level of investment is determined by the demand for expanded and improved services which is still very high. I am satisfied that the current level of investment is justified. Turnover is related to the level of cervices used and to pricing policies and has been affected by price restraint in recent years. But the Post Office has now referred proposals for tariff increases to the Price Commission.

asked the Secretary of State for Industry why he is securing loans for Post Office telecommunications bearing 10 to 14 per cent. interest when the return on capital investment in recent years has been only about 7 per cent.; and if he will make a statement.

The rate at which I lend money to the Post Office is governed by the National Loans Act 1968. The low current return on capital is the consequence of price restraint, for which I am paying compensation directly to the Post Office. The Government's policy of phasing out subsidies for price restraint should of course lead to higher rates of return on capital.