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Printed for the Cabinet. July 1952
CONFIDENTIAL
Copy No. 72
C. (52) 242
CABINET OFFICE RECORD COPY
1st July, 1952
CABINET
CHARGES FOR OVERSEAS TELEGRAMS
MEMORANDUM BY THE POSTMASTER-GENERAL
Commonwealth telecommunications are the joint concern of the Common- wealth Governments associated in the Commonwealth Telecommunications Board. The Post Office and Cable and Wireless, Limited, under the name of the United Kingdom National Body, are jointly responsible in this country for these services, and their revenues are pooled.
2. The Treasury are the sole shareholders in Cable and Wireless, Limited, their investment being represented by the £311⁄2 million of 3 per cent. Savings Bonds issued in purchase of the shares of the old Company and a further sum of £2·6 million by way of prior holding in that Company. To provide a satisfactory return on this capital, it has been held that the Company should pay a dividend of 4 per cent. on their authorised capital of £30 million.
3. In 1950-51 the joint operating surplus of the United Kingdom National Body was £2.35 million, which allowed Cable and Wireless, Limited, to pay a dividend of 4 per cent. to the Exchequer; the proportion of this surplus due to the Post Office for its operations in this country was £330,000. In 1951-52 the surplus fell to £1.57 million, which is not enough to enable the Treasury to meet the interest on their Savings Bonds. In 1952-53 the position will be a great deal worse, as the surplus is not expected to exceed £0·75 million. (A fuller statement of the relevant figures is given in Annex A.) The main cause of this fall in the surplus is rising costs (especially salaries, wages and pensions), the effects of which were postponed by an exceptional traffic increase consequent upon hostilities in Korea.
4. Unless Cable and Wireless, Limited, pay a reasonable dividend the Treasury will, in effect, subsidise the overseas telegraph services. Moreover, under the Commonwealth pooling scheme, a United Kingdom deficit would throw an unfair burden on the Commonwealth Governments.
5. The increase in rates required is roughly one-third. I give at Annex B some typical examples of the "ordinary " rates (other rates, subject to what is said in paragraph 7 about the Commonwealth Press Rate, would be raised propor- tionately). Subject to the agreement of Colonial Governments, the Company would introduce similar increases in the Colonies. The total additional revenue accruing to the United Kingdom National Body in a full year (the first would be 1953-54) would be about £2.2 million. Even if costs do not rise further (which is improbable) this would only give us £100,000 or so above what is required.
6. Current rates are extremely low by comparison with those charged in foreign countries and have in fact remained virtually unchanged for almost a quarter of a century.
7. The position has been put to the Commonwealth Governments by the Commonwealth Telecommunications Board, who have agreed to our proposals except for the Commonwealth Press Rate. It had been proposed to raise the present rate of 1d. a word along with the rest, although we recognised that there
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