XN000022-1996-10-30 — Page 22

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The Post Office has been able to operate two additional post offices and 12 Speedpost acceptance points and to resume collection from street posting boxes on Sundays and public holidays, as I have already mentioned, while keeping postal charges level in real terms.

Whilst operating under the Operating Services Account, a stepping stone to the present Electrical and Mechanical Services trading fund, the department achieved productivity improvement in the vehicle operation by 18% and the Electrical and Mechanical Workshop operation by 12% respectively.

Also, to ensure flexibility in face of market conditions, trading funds have employed temporary staff instead of permanent ones to meet short-term increase in demand.

Delivering such productivity improvements is only possible if managers are able to make the most effective use of staff and financial resources. This may well mean changes in the deployment of staff and in their traditional ways of working. The trading fund managers are, I know, well aware of the need to consult and involve their staff as they take forward such improvements. I am sure that no one in this Council would wish to dissuade the Government in its search for improved productivity, irrespective of whether the services are operated as trading funds or traditional vote- funded departments. The key point is that trading fund managers have. and must be able to utilise, greater flexibility to deliver improved productivity.

Rate of return

I would now like to deal with the more controversial and often misunderstood question of the rate of return.

In keeping with Government's policy towards utilities, we require trading funds to achieve a target rate of return over time on its average net fixed assets. This requirement is enshrined in the Trading Funds Ordinance. The return is essentially a performance measure calculated on the cost of equity and debt capital involved in setting up the trading fund plus the market premium for a comparable investment in the private sector. We do not require trading funds to achieve this target every year, nor would it be realistic to expect them to do so, given the financial constraints that I have mentioned and the emphasis we place upon good customer service. The target is there as an objectively set benchmark for each trading fund to aim for. These targets are relatively modest and have little or no effect on fees and charges their main effect is to ensure that the trading funds generate sufficient operating surpluses for them to reinvest in new or improved services for the benefit of customers.