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Depreciation

Oral Answers to Questions — Post Office – in the House of Commons at 12:00 am on 31st July 1957.

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Photo of Mr Ness Edwards Mr Ness Edwards , Caerphilly 12:00 am, 31st July 1957

asked the Postmaster-General why he has raised the supplementary provision for depreciation for the £12,500,000 provided for in the White Paper to £18 million this year when it is estimated that a loss of £6 million will be sustained.

Photo of Mr Ernest Marples Mr Ernest Marples , Wallasey

As two of the three figures in the Question are wrong the right hon. Gentleman places me in a difficulty. The gross supplementary provision estimated to be required in 1956–57 was not £12½million, but £14 million. The loss of £6 million refers not to this year but to last year. The increase in depreciation from £14 million in 1956–57 to £18 million in 1957–58 was determined by the Post Office in accordance with the principles laid down in the 1955 White Paper—paragraph 5 (ii)of appendix 2. It takes account, of course, of the growing size and value of the system.

Photo of Mr Ness Edwards Mr Ness Edwards , Caerphilly

Is not the right hon. Gentleman aware that the reference to £12½ million in the White Paper was to the amount that was in the White Paper, and that the reference to £18 million in the Question relates to a figure which the right hon. Gentleman gave last week in an Answer to me? Will he explain how it is that in a year when he has budgeted for a profit of £1·1 million he increased his supplementary depreciation by £5½ million? Is it in order to transform the size of the surplus?

Photo of Mr Ernest Marples Mr Ernest Marples , Wallasey

It is to provide for the growing volume of assets to be replaced when they fall into disuse and disrepair. If the right hon. Gentleman will look again at the White Paper, three lines above where the figure of £12½ million is mentioned, he will see the words: To place the system on a sounder economic footing it is thus necessary to budget for a supplementary provision of £14 million. I am afraid the right hon. Gentleman has misread the White Paper.

Mr. Gresham Cooke:

Is not it ordinary commercial prudence to provide depreciation at current cost and is not my right hon. Friend to be congratulated on adopting that method?

Photo of Mr Ernest Marples Mr Ernest Marples , Wallasey

I think it only prudent to provide that the present assets when they fall into disrepair shall be replaced out of income.

Photo of Mr Ness Edwards Mr Ness Edwards , Caerphilly

Is not the right hon. Gentleman aware that we agree it is prudent to provide for the replacement of worn-out capital, but that what we object to is the fact that he takes this extra money for supplementary depreciation out of his surplus before calculating his surplus, and in that way he falsifies the accounts?

Photo of Mr Ernest Marples Mr Ernest Marples , Wallasey

If I am to provide a depreciation account, I must do it out of gross income. There is no other way of doing it, and that is precisely what we are doing.

Photo of Mr Richard Winterbottom Mr Richard Winterbottom , Sheffield, Brightside

Will the Postmaster-General agree that the complicated nature of the commercial accounts of the Post Office, especially in relation to depreciation, calls for a much more radical change in their presentation? Will he assure the House that in future the commercial accounts of the Post Office will faithfully record the transactions of the Post Office, including its relationship with State Departments?

Photo of Mr Ernest Marples Mr Ernest Marples , Wallasey

I am grateful to the hon. Gentleman for that supplementary question, because I think that the commercial accounts as they stand at present are too complicated. For that reason I called in a prominent firm of chartered accountants—there is a Question on the matter later on the Order Paper—to advise the Post Office what to do. I received its report this week, and I hope that if I accept most of it, the result will be an improvement and simplification of the accounts.

Photo of Mr Richard Winterbottom Mr Richard Winterbottom , Sheffield, Brightside

In view of the statement which he has made, will the right hon. Gentleman make available the report of the firm of chartered accountants so that hon. Members may know the opinion of experts on these complicated accounts?

Photo of Mr Ernest Marples Mr Ernest Marples , Wallasey

There is a Question on that subject later on the Order Paper.